PRE 14A

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.)

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Check the appropriate box:

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o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o Definitive Proxy Statement

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	FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC. FRANKLIN CALIFORNIA TAX-FREE TRUST FRANKLIN CAPITAL GROWTH FUND FRANKLIN CUSTODIAN FUNDS, INC. FRANKLIN GLOBAL TRUST FRANKLIN GOLD AND PRECIOUS METALS FUND FRANKLIN HIGH INCOME TRUST FRANKLIN INVESTORS SECURITIES TRUST FRANKLIN MANAGED TRUST FRANKLIN MUNICIPAL SECURITIES TRUST FRANKLIN MUTUAL SERIES FUND INC. FRANKLIN NEW YORK TAX-FREE INCOME FUND FRANKLIN NEW YORK TAX-FREE TRUST FRANKLIN REAL ESTATE SECURITIES TRUST FRANKLIN STRATEGIC MORTGAGE PORTFOLIO	FRANKLIN STRATEGIC SERIES FRANKLIN TAX-FREE TRUST FRANKLIN TEMPLETON FUND ALLOCATOR SERIES FRANKLIN TEMPLETON GLOBAL TRUST FRANKLIN TEMPLETON INTERNATIONAL TRUST FRANKLIN TEMPLETON MONEY FUND TRUST FRANKLIN VALUE INVESTORS TRUST INSTITUTIONAL FIDUCIARY TRUST THE MONEY MARKET PORTFOLIOS TEMPLETON CHINA WORLD FUND TEMPLETON DEVELOPING MARKETS TRUST TEMPLETON FUNDS, INC. TEMPLETON GLOBAL SMALLER COMPANIES FUND TEMPLETON INCOME TRUST TEMPLETON INSTITUTIONAL FUNDS, INC.
(Name of Registrant as Specified In Its Charter)
	(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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PLEASE CAST YOUR VOTE NOW!
Franklin California Tax-Free Income	Franklin Mutual Series Fund Inc.	Franklin Templeton Money Fund
Fund, Inc.	Franklin New York Tax-Free	Trust
Franklin California Tax-Free Trust	Income Fund	Franklin Value Investors Trust
Franklin Capital Growth Fund	Franklin New York Tax-Free Trust	Institutional Fiduciary Trust
Franklin Custodian Funds, Inc.	Franklin Real Estate Securities Trust	The Money Market Portfolios
Franklin Global Trust	Franklin Strategic Mortgage	Templeton China World Fund
Franklin Gold and Precious Metals	Portfolio	Templeton Developing Markets
Fund	Franklin Strategic Series	Trust
Franklin High Income Trust	Franklin Tax-Free Trust	Templeton Funds, Inc.
Franklin Investors Securities Trust	Franklin Templeton Fund Allocator	Templeton Global Smaller
Franklin Managed Trust	Series	Companies Fund
Franklin Municipal Securities Trust	Franklin Templeton Global Trust	Templeton Income Trust
Franklin Mutual Recovery Fund	Franklin Templeton International	Templeton Institutional Funds, Inc.
	Trust

Dear Shareholder:

I am writing to let you know that a special meeting of shareholders of the Franklin Templeton funds listed above will be held on March 21, 2007, to vote on several important proposals that affect each fund. Please read the enclosed materials and cast your vote on the proxy card(s).

Voting your shares immediately will help minimize additional solicitation expenses and prevent the need to make a call to you to solicit your vote.

The proposals for each fund have been carefully reviewed by the Board of Trustees/Directors of that fund. The Board members of a fund, most of whom are not affiliated with Franklin Templeton Investments, are responsible for protecting your interests as a shareholder. Each fund’s Board believes these proposals, as they relate to the fund, are in the best interests of shareholders. Your fund’s Board recommends that you vote for each of the proposals.

Voting is quick and easy. Everything you need is enclosed. To cast your vote, simply complete the proxy card(s) enclosed in this package. Be sure to sign the card(s) before mailing it (them) in the postage-paid envelope. You may also vote your shares by touch-tone telephone or through the Internet. Simply call the toll-free number or visit the web site indicated on your proxy card(s), and follow the instructions.

If you have any questions before you vote, please call [Fund Information at 1-800/DIAL BEN]. We’ll be glad to help you get your vote in quickly. Thank you for your participation in this important initiative.

The following Q&A is provided to assist you in understanding the proposals that affect your fund(s). The proposals are described in greater detail in the enclosed proxy statement. We appreciate you placing your trust in Franklin Templeton Investments and look forward to helping you achieve your financial goals.

Sincerely,

[Name]                                    

[Title]

Important information to help you understand
and vote on the proposals

Below is a brief overview of the proposals to be voted upon. The proxy statement provides more information on which proposals are to be voted upon by each fund’s shareholders. Your vote is important, no matter how large or small your holdings may be.

What proposals am I being asked to vote on?

You may be asked to vote on the following proposals:

1. To elect a Board of Trustees/Directors.

2. If your fund is not already organized as a Delaware statutory trust, to approve an agreement and plan of reorganization that provides for the reorganization of the fund to a Delaware statutory trust.

3. If your fund is already organized as a Delaware statutory trust, to approve an Amended and Restated Agreement and Declaration of Trust.

4. To approve amendments to certain fundamental investment restrictions.

5. To approve the elimination of certain fundamental investment restrictions.

6. To approve the reclassification of certain investment policies as non-fundamental. [For Franklin New York Tax-Free Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Emerging Markets Series, IFT Money Market Portfolio, Franklin Templeton Hard Currency Fund and Franklin Rising Dividends Fund only.]

7. To approve the amendment of the rights and preferences of the Class B shares of Franklin Templeton Money Fund to provide for their automatic conversion to Class A shares after eight years. [For Franklin Templeton Money Fund – Class B shares only.]

Has each fund’s Board approved the proposals that relate to that fund?

Yes. The Boards have unanimously approved the proposals and recommend that you vote to approve those that apply to your fund(s).

1. To elect a Board of Trustees/Directors.

What role does the Board play?

The Board serves as the fund shareholders’ representatives. Members of the Board have an obligation to serve the best interests of shareholders, including approving policy changes. In addition, the Board reviews fund performance, oversees fund activities, and reviews contractual arrangements with companies that provide services to the fund.

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What is the affiliation of the Boards and Franklin Templeton Investments?

Each Board is proposed to have have at least 75% of its members be “independent” and to have one or two “interested” members. Board members are determined to be “interested” by virtue of, among other things, their affiliation with the funds or with Franklin Templeton Investments as fund management. Independent Board members have no affiliation with Franklin Templeton Investments and are compensated by each individual fund whom they serve.

2. To approve an agreement and plan of reorganization - a “plan” – that provides for the reorganization of the fund to a Delaware statutory trust.

What is the purpose of the plan?

The purpose of the plan for a fund that is currently organized as either a Maryland corporation or as a Massachusetts business trust is to reorganize that fund into a newly organized Delaware statutory trust. The Boards of these funds believe that a fund operating as a Delaware statutory trust is able to simplify its operations and has more flexibility to adjust its operations to changes in competitive or regulatory conditions. In addition, the Boards of the funds believe that it may be more efficient if all of the funds within the Franklin Templeton Investments fund complex are organized as Delaware statutory trusts.

How will such a reorganization affect my fund?

It is not anticipated that the reorganization, if approved by shareholders, would affect your investment in a fund or how the fund is managed on a day-to-day basis. The reorganization of a fund will not change its Board members, officers, investment policies or strategies or any of its service providers, including investment manager(s), or their fees.

3. To approve an Amended and Restated Agreement and Declaration of Trust – a “new Declaration of Trust.”

Why is a new Declaration of Trust recommended?

The Boards of the funds that are already organized as Delaware statutory trusts believe that having such funds have substantially the same Declaration of Trust will promote efficiency and uniformity in fund administration and, for some funds, provide their Board with increased flexibility and broader authority to act to respond more quickly to changes in competitive and regulatory conditions.

Will the new Declaration of Trust change the Board’s responsibilities or obligations to my fund?

Adoption of a new Declaration of Trust will not alter the Board members’ existing duties to act with due care and in the shareholders’ interests.

4. To approve amendments to certain fundamental investment restrictions.

What are the fundamental investment restrictions?

Each fund is subject to certain investment restrictions (for example, relating to borrowing or investing in real estate) that are considered “fundamental” because they may only be changed with shareholder approval. There are generally eight fundamental investment restrictions that each fund is required to have under the Investment Company Act of 1940.

What will be the effect of the amendments to my fund’s current fundamental investment restrictions?

The purpose of the amendments is to update those restrictions that are more restrictive than is currently required and to standardize, to the extent practicable, all required fundamental investment restrictions

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across the Franklin Templeton funds. The Boards and the funds’ investment managers do not anticipate that the proposed amendments will materially change the way any fund is currently managed or operated with the exception of the proposed change to Franklin Double Tax-Free Income Fund’s policy with respect to its diversification of investments.

5. To approve the elimination of certain fundamental investment restrictions.

What are these fundamental restrictions?

Many funds are also subject to fundamental investment restrictions that were once imposed by state securities laws or other regulatory authorities that are now outdated or are no longer effective.

What will be the effect of the elimination of such investment restrictions on my fund?

The Boards and the funds’ investment managers do not anticipate that the proposed elimination will materially change the way any fund is currently managed or operated. However, it may be easier for the fund to adapt to market or industry changes in the future because these restrictions would be eliminated.

6. To approve the reclassification of certain investment policies as non-fundamental.

What are these fundamental investment policies?

Each of Franklin New York Tax-Free Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Emerging Markets Series, IFT Money Market Portfolio, Franklin Templeton Hard Currency Fund and Franklin Rising Dividends Fund has certain fundamental investment policies that are specific to the current investment strategies of that fund. However, none of these investment policies is required to be classified as fundamental.

What will be the effect of reclassifying such investment policies as non-fundamental?

Each fund intends to continue to follow these investment policies, even if reclassified as non-fundamental. However, if in the future, competitive or regulatory changes require that such a policy be modified, a fund’s Board would be able to do so without the time and expense of having to seek shareholder approval.

7. To approve the amendment of the rights and preferences of the Class B shares of Franklin Templeton Money Fund to provide for their automatic conversion to Class A shares after eight years.

What is the automatic conversion provision? (Franklin Templeton Money Fund only)

Most mutual fund Class B shares, by their terms, automatically convert into Class A shares of that fund after a certain period of time. This allows those Class B shareholders to take advantage of the lower expenses of the Class A shares. For the Franklin Templeton funds, such conversion generally occurs after eight years. However, because Franklin Templeton Money Fund was originally created without Class A shares, its Class B shares have no conversion feature. However now Class A shares have been created and the fund’s Board believes it is in the best interests of the fund’s Class B shares that their shares automatically convert to the lower cost Class A shares after eight years.

Who is MIS Corporation?

MIS Corporation is a company not affiliated with the funds or with Franklin Templeton Investments that the funds hired to call shareholders and record proxy votes. In order to hold a shareholder meeting, a

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certain percentage of a fund’s shares (often referred to as “quorum”) must be represented at the meeting. If a quorum is not attained, the meeting must adjourn to a future date. The funds may attempt to reach shareholders through multiple mailings to remind them to cast their vote. As the meeting approaches, phone calls may be made to shareholders who have not yet voted their shares so that the shareholder meeting does not have to be postponed.

How many votes am I entitled to cast?

As a shareholder, you are entitled to one vote for each share you own of a fund on the record date. The record date is January 5, 2007.

How do I vote my shares?

You can vote your shares by completing and signing the enclosed proxy card(s) and mailing it (them) in the enclosed postage-paid envelope. You may also vote by touch-tone telephone by calling the toll-free number printed on your proxy card(s) and following the recorded instructions. In addition, you may also vote through the internet by visiting www.________.com and following the on-line instructions. If you need any assistance, or have any questions regarding the proposals or how to vote your shares, please call [Fund Information at 1-800/DIAL BEN].

How do I sign the proxy card?

Individual Accounts: Shareholders should sign exactly as their names appear on the account registration shown on the card.

Joint Accounts: Either owner may sign, but the name of the person signing should conform exactly to a name shown in the registration.

All Other Accounts: The person signing must indicate his or her capacity. For example, a trustee for a trust or other entity should sign, “Ann B. Collins, Trustee.”

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Franklin California Tax-Free Income	Franklin Mutual Series Fund Inc.	Franklin Templeton Money Fund
Fund, Inc.	Franklin New York Tax-Free	Trust
Franklin California Tax-Free Trust	Income Fund	Franklin Value Investors Trust
Franklin Capital Growth Fund	Franklin New York Tax-Free Trust	Institutional Fiduciary Trust
Franklin Custodian Funds, Inc.	Franklin Real Estate Securities Trust	The Money Market Portfolios
Franklin Global Trust	Franklin Strategic Mortgage	Templeton China World Fund
Franklin Gold and Precious Metals	Portfolio	Templeton Developing Markets
Fund	Franklin Strategic Series	Trust
Franklin High Income Trust	Franklin Tax-Free Trust	Templeton Funds, Inc.
Franklin Investors Securities Trust	Franklin Templeton Fund Allocator	Templeton Global Smaller
Franklin Managed Trust	Series	Companies Fund
Franklin Municipal Securities Trust	Franklin Templeton Global Trust	Templeton Income Trust
Franklin Mutual Recovery Fund	Franklin Templeton International	Templeton Institutional Funds, Inc.
	Trust

IMPORTANT SHAREHOLDER INFORMATION

     These materials are for a Special Joint Meeting of Shareholders of the Franklin, Templeton and Mutual Series registered investment companies listed above, including their various series (the “Funds”) scheduled for March 21, 2007 at [__:00 _.m., Pacific Time]. The enclosed materials discuss several proposals (the “Proposals” or, each, a “Proposal”) to be voted on at the meeting, and contain the Notice of Special Joint Meeting, proxy statement and proxy card(s). A proxy card is, in essence, a ballot. When you vote your proxy, it tells us how you wish to vote on important issues relating to the Funds in which you are invested. If you specify a vote on all Proposals on which you are entitled to vote, your proxy will be voted as you indicate. If you specify a vote for one or more Proposals on which you are entitled to vote, but not all, your proxy will be voted as specified on such Proposals and, on the Proposal(s) for which no vote is specified, your proxy will be voted “FOR” such Proposal(s). If you simply sign, date and return the proxy card(s), but do not specify a vote on any Proposal, your proxy will be voted “FOR” all Proposals.

     We urge you to spend a few minutes reviewing the Proposals in the proxy statement. Then, please fill out and sign the proxy card(s) and return it (them) to us so that we know how you would like to vote. When shareholders return their proxies promptly, the Funds may be able to save money by not having to conduct additional solicitations, including other mailings. If you own shares of more than one Fund, you will receive a proxy card FOR EACH FUND in which you own shares. PLEASE COMPLETE, SIGN AND RETURN each proxy card you receive.

     We welcome your comments. If you have any questions, call [Fund Information at 1-800-DIAL BEN^® (1-800-342-5236)].

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, separate instructions are enclosed.

 

Franklin California Tax-Free Income	Franklin Mutual Series Fund Inc.	Franklin Templeton Money Fund
Fund, Inc.	Franklin New York Tax-Free	Trust
Franklin California Tax-Free Trust	Income Fund	Franklin Value Investors Trust
Franklin Capital Growth Fund	Franklin New York Tax-Free Trust	Institutional Fiduciary Trust
Franklin Custodian Funds, Inc.	Franklin Real Estate Securities Trust	The Money Market Portfolios
Franklin Global Trust	Franklin Strategic Mortgage	Templeton China World Fund
Franklin Gold and Precious Metals	Portfolio	Templeton Developing Markets
Fund	Franklin Strategic Series	Trust
Franklin High Income Trust	Franklin Tax-Free Trust	Templeton Funds, Inc.
Franklin Investors Securities Trust	Franklin Templeton Fund Allocator	Templeton Global Smaller
Franklin Managed Trust	Series	Companies Fund
Franklin Municipal Securities Trust	Franklin Templeton Global Trust	Templeton Income Trust
Franklin Mutual Recovery Fund	Franklin Templeton International	Templeton Institutional Funds, Inc.
	Trust

NOTICE OF SPECIAL JOINT MEETING OF SHAREHOLDERS

     A Special Joint Meeting of Shareholders (the “Meeting”) of certain U.S. registered Franklin, Templeton and Mutual Series Funds listed above (together the “Funds,” and, each, a “Fund”)¹ will be held at the Funds’ offices located at One Franklin Parkway, San Mateo, California 94403-1906 on March 21, 2007 at [__:00 _.m., Pacific Time].

During the Meeting, shareholders of the Funds will vote on the following Proposals and Sub-Proposals:

1.	To elect a Board of Trustees or Board of Directors, as appropriate, for each Fund.
2.	For the following Funds, to approve an Agreement and Plan of Reorganization that provides for the reorganization of the Fund to a Delaware statutory trust:

Franklin California Tax-Free Income	Franklin Mutual Series Fund Inc.	Institutional Fiduciary Trust
Fund, Inc.	Franklin New York Tax-Free Trust	Templeton Funds, Inc.
Franklin California Tax-Free Trust	Franklin Tax-Free Trust	Templeton Income Trust
Franklin Custodian Funds, Inc.	Franklin Value Investors Trust	Templeton Institutional Funds, Inc.
Franklin Investors Securities Trust

3. For the following Funds, to approve an Amended and Restated Agreement and Declaration of Trust:

Franklin Capital Growth Fund	Franklin Mutual Recovery Fund	Franklin Templeton Fund Allocator
Franklin Global Trust	Franklin New York Tax-Free Income	Series
Franklin Gold and Precious Metals	Fund	Franklin Templeton Global Trust
Fund	Franklin Real Estate Securities Trust	Franklin Templeton International Trust
Franklin High Income Trust	Franklin Strategic Mortgage Portfolio	Franklin Templeton Money Fund Trust
Franklin Managed Trust	Franklin Strategic Series	The Money Market Portfolios
Franklin Municipal Securities Trust

____________________
 

1 Along with Franklin Templeton Variable Insurance Products Trust, Franklin Federal Tax-Free Income Fund, Franklin Money Fund, Franklin Tax-Exempt Money Fund and Templeton Growth Fund, Inc., which are issuing separate proxy solicitation materials.

4.	For the Funds listed on Exhibit L-1, to approve amendments to certain fundamental investment restrictions of such Funds (includes eight (8) Sub-Proposals) as follows:
	(a)	To amend the fundamental investment restrictions regarding borrowing.
	(b)	To amend the fundamental investment restrictions regarding underwriting.
	(c)	To amend the fundamental investment restrictions regarding lending.
	(d)	To amend the fundamental investment restrictions regarding investments in real estate.
	(e)	To amend the fundamental investment restrictions regarding investments in commodities.
	(f)	To amend the fundamental investment restrictions regarding issuing senior securities.
	(g)	To amend the fundamental investment restrictions regarding industry concentration.
	(h)	To amend the fundamental investment restrictions regarding diversification of investments.
5.	For the Funds listed on Exhibit N-1, to approve the elimination of certain fundamental investment restrictions.
6.	For Franklin New York Tax-Free Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Emerging Markets Series, IFT Money Market Portfolio, Franklin Templeton Hard Currency Fund and Franklin Rising Dividends Fund, to approve the reclassification of certain investment policies as non-fundamental.
7.	For Franklin Templeton Money Fund (Class B shareholders only), to approve the amendment of the rights and preferences of the Class B shares to provide for their automatic conversion to Class A shares after eight years.

By Order of the Board of Trustees/Board of Directors, 

Craig S. Tyle 

Vice President 

January __, 2007

     Please sign and promptly return all of the proxy cards you receive in the enclosed self-addressed envelope regardless of the number of shares you own.

PROXY STATEMENT

TABLE OF CONTENTS

				Page
Information About Voting				1
Proposal	1:	To Elect a Board of Trustees/Directors		3
Proposal	2:	To Approve an Agreement and Plan of Reorganization that provides for the
		reorganization of the Fund to a Delaware statutory trust		32
Proposal	3:	To Approve an Amended and Restated Agreement and Declaration of Trust		36
Introduction to Proposals 4 and 5				37
Proposal	4:	To Approve Amendments to Certain of the Funds’ Fundamental Investment Restrictions
		(this Proposal involves separate votes on Sub-Proposals 4a-4h)		38
	Sub-Proposal 4a:		To amend the fundamental investment restrictions regarding borrowing	38
	Sub-Proposal 4b:		To amend the fundamental investment restrictions regarding underwriting	39
	Sub-Proposal 4c:		To amend the fundamental investment restrictions regarding lending	40
	Sub-Proposal 4d:		To amend the fundamental investment restrictions regarding investments
			in real estate	41
	Sub-Proposal 4e:		To amend the fundamental investment restrictions regarding investments in
			commodities	42
	Sub-Proposal 4f:		To amend the fundamental investment restrictions regarding issuing senior
			securities	43
	Sub-Proposal 4g:		To amend the fundamental investment restrictions regarding industry
			concentration	44
	Sub-Proposal 4h:		To amend the fundamental investment restrictions regarding diversification of
			investments	46
Proposal	5:	To Approve the Elimination of Certain Fundamental Investment Restrictions		48
Proposal	6:	To Approve the Reclassification of Certain Investment Policies as Non-Fundamental		51
Proposal	7:	To Approve the Amendment of the Rights and Preferences of the Class B Shares of Franklin
		Templeton Money Fund		53
Additional Information About the Funds				54
Audit Committees				56
Further Information About Voting and the Meeting				60

EXHIBITS

Exhibit	A	—	Nominating Committee Membership	A-1
Exhibit	B-1	—	Nominating Committee Charter for all Funds (except Franklin Mutual Series Fund Inc.
			and Franklin Mutual Recovery Fund)	B-1-1
Exhibit	B-2	—	Nominating and Corporate Governance Committee Charter for Franklin Mutual
			Series Fund Inc. and Franklin Mutual Recovery Fund	B-2-1
Exhibit	C	—	Boards and the Funds/Series to be Supervised by such Board	C-1
Exhibit	D	—	Board and Committee Fees	D-1
Exhibit	E	—	Aggregate Board Compensation	E-1
Exhibit	F	—	Additional Executive Officers	F-1
Exhibit	G	—	Form of Agreement and Plan of Reorganization	G-1
Exhibit	H-1	—	A Comparison of Governing Documents and State Law (Massachusetts)	H-1-1
Exhibit	H-2	—	A Comparison of Governing Documents and State Law (Maryland)	H-2-1
Exhibit	I	—	Form of Amended and Restated Agreement and Declaration of Trust	I-1
Exhibit	J	—	A Comparison of Governing Documents	J-1

Exhibit	K	—	Form of Amended and Restated Agreement and Declaration of Trust for Franklin Mutual
			Recovery Fund	K-1
Exhibit	L-1	—	Fundamental Investment Restrictions Proposed to be Amended	L-1-1
Exhibit	L-2	—	Text of Fundamental Investment Restrictions Proposed to be Amended	L-2-1
Exhibit	M	—	Comparison of Current and Proposed Fundamental Investment Restrictions Regarding
			Industry Concentration	M-1
Exhibit	N-1	—	Fundamental Investment Restrictions Proposed to be Eliminated	N-1-1
Exhibit	N-2	—	Text of Fundamental Investment Restrictions Proposed to be Eliminated	N-2-1
Exhibit	O	—	Proposed Resolutions for Franklin Templeton Money Fund	O-1
Exhibit	P	—	Investment Managers to the Funds	P-1
Exhibit	Q	—	Outstanding Shares as of November 30, 2006	Q-1
Exhibit	R	—	Principal Holders of Shares as of November 30, 2006	R-1
Exhibit	S	—	Audit Fee Information	S-1
Exhibit	T	—	Audit Committee Charter for Franklin Mutual Recovery Fund	T-1
Exhibit	U	—	Votes Necessary to Approve the Proposals	U-1

Franklin California Tax-Free Income	Franklin Mutual Series Fund Inc.	Franklin Templeton Money Fund
Fund, Inc.	Franklin New York Tax-Free	Trust
Franklin California Tax-Free Trust	Income Fund	Franklin Value Investors Trust
Franklin Capital Growth Fund	Franklin New York Tax-Free Trust	Institutional Fiduciary Trust
Franklin Custodian Funds, Inc.	Franklin Real Estate Securities Trust	The Money Market Portfolios
Franklin Global Trust	Franklin Strategic Mortgage	Templeton China World Fund
Franklin Gold and Precious Metals	Portfolio	Templeton Developing Markets
Fund	Franklin Strategic Series	Trust
Franklin High Income Trust	Franklin Tax-Free Trust	Templeton Funds, Inc.
Franklin Investors Securities Trust	Franklin Templeton Fund Allocator	Templeton Global Smaller Companies
Franklin Managed Trust	Series	Fund
Franklin Municipal Securities Trust	Franklin Templeton Global Trust	Templeton Income Trust
Franklin Mutual Recovery Fund	Franklin Templeton International	Templeton Institutional Funds, Inc.
	Trust

PROXY STATEMENT

tINFORMATION ABOUT VOTING

   Who is asking for my vote?

     The Boards of Trustees/Directors of the U.S. registered Franklin Templeton funds listed above (collectively, the “Funds” and, individually, a “Fund”), in connection with a Special Joint Meeting of Shareholders of the Funds to be held on March 21, 2007 (the “Meeting”), have requested your vote on several matters.

     In addition, if you are a shareholder of Franklin Templeton Money Fund or of Money Market Portfolio or Franklin Cash Reserves Portfolio (two series of Institutional Fiduciary Trust), each of which is a “feeder fund,” you are being requested to provide voting instructions to such Fund on how it should vote the shares it owns in The Money Market Portfolio, as the “master portfolio,” as more fully described below under “On what issues am I being asked to vote? – Master-Feeder Fund Structure.”

   Who is eligible to vote?

     Shareholders of record at the close of business on January 5, 2007, are entitled to be present and to vote at the Meeting or any adjourned Meeting (and, in the case of shareholders of a feeder fund, to provide voting instructions to such feeder fund). Each share of record of a Fund is entitled to one vote (and a proportionate fractional vote for each fractional share) on each matter relating to that Fund presented at the Meeting. The Notice of Special Joint Meeting, the proxy cards, voting instruction cards and the proxy statement were first mailed to shareholders of record on or about January [5,] 2007.

   On what issues am I being asked to vote?

     Shareholders are being asked to vote on the following Proposals:

1. For each Fund, to elect a Board of Trustees or Board of Directors, as applicable, of the Fund;

2. For the following Funds (that are currently organized either as Maryland corporations or Massachusetts business trusts), to approve an Agreement and Plan of Reorganization that provides for the reorganization of that Fund to a newly created Delaware statutory trust:

Franklin California Tax-Free Income	Franklin Mutual Series Fund Inc.	Institutional Fiduciary Trust
Fund, Inc.	Franklin New York Tax-Free Trust	Templeton Funds, Inc.
Franklin California Tax-Free Trust	Franklin Tax-Free Trust	Templeton Income Trust
Franklin Custodian Funds, Inc.	Franklin Value Investors Trust	Templeton Institutional Funds, Inc.
Franklin Investors Securities Trust

      (these Funds are referred to in this proxy statement as the “Non-Delaware Funds”);

3. For the following Funds (that are currently organized as Delaware statutory trusts), to approve an Amended and Restated Agreement and Declaration of Trust:

Franklin Capital Growth Fund	Franklin Mutual Recovery Fund	Franklin Templeton Fund Allocator
Franklin Global Trust	Franklin New York Tax-Free	Series
Franklin Gold and Precious Metals	Income Fund	Franklin Templeton Global Trust
Fund	Franklin Real Estate Securities Trust	Franklin Templeton International
Franklin High Income Trust	Franklin Strategic Mortgage	Trust
Franklin Managed Trust	Portfolio	Franklin Templeton Money Fund
Franklin Municipal Securities Trust	Franklin Strategic Series	Trust
		The Money Market Portfolios

     (these Funds are referred to in this proxy statement as the “original Delaware Funds”);

4.	To approve amendments to certain fundamental investment restrictions of the Funds, as more fully specified in Exhibits L-1 and L-2 to this proxy statement (includes eight (8) Sub-Proposals);
5.	To approve the elimination of certain fundamental investment restrictions of the Funds, as more fully specified in Exhibits N-1 and N-2 to this proxy statement;
6.	To approve the reclassification of certain investment policies as non-fundamental for those Funds listed under Proposal 6 in this proxy statement; and
7.	To approve amendments to the rights and preferences of the Class B shares of Franklin Templeton Money Fund to provide for the automatic conversion of such Class B shares into Class A shares after eight years.

     Master-Feeder Fund Structure. Each of Franklin Templeton Money Fund, IFT Money Market Portfolio and Franklin Cash Reserves Portfolio (individually, a “Feeder Fund” and together, the “Feeder Funds”) operates in a master-feeder arrangement in which each Feeder Fund invests all of its assets in The Money Market Portfolio (the “Master Portfolio”). As shareholders in the Master Portfolio, the Feeder Funds have been asked to vote on the proposals described in this proxy statement as they relate to the Master Portfolio. Under the Investment Company Act of 1940, as amended (the “1940 Act”), with respect to master-feeder arrangements, each Feeder Fund must vote its Master Portfolio shares in accordance with voting instructions of such Feeder Fund’s shareholders. As a result, in addition to your vote on these proposals as they relate to a Fund in which you own shares, the Boards of the Feeder Funds need your voting instructions on these matters as to how your Feeder Fund should vote its Master Portfolio shares.

     Each Feeder Fund seeks to achieve its investment objective by investing all of its assets in the Master Portfolio, which has the same investment objective as the Feeder Funds. The Master Portfolio invests directly in securities and other investments. Pursuant to the requirements of the 1940 Act applicable to master-feeder fund arrangements, the Feeder Funds’ voting rights with respect to the Master Portfolio shares that they hold must be passed through to the Feeder Funds’ own shareholders. As a result, if you are a shareholder of a Feeder Fund, you will be asked to give such Feeder Fund voting instructions as to how the Feeder Fund should vote its shares of the Master Portfolio. The other Feeder Funds of the Master Portfolio will also vote their Master Portfolio shares in accordance with the voting instructions of their respective shareholders with respect to the approval of the Proposals for the Master Portfolio.

2

   How does the Board of my Fund recommend that I vote?

     The Boards of the Funds unanimously recommend that you vote:

1.	[For all Funds] FOR the election of all nominees as Trustees or Directors, as applicable, of the Fund;
2.	[For all non-Delaware Funds] FOR the approval of an Agreement and Plan of Reorganization that provides for the reorganization of the Fund to a Delaware statutory trust;
3.	[For all original Delaware Funds] FOR the approval of an Amended and Restated Agreement and Declaration of Trust;
4.	[For each of the Funds listed on Exhibit L-1 to this proxy statement] FOR the approval of each of the proposed amendments to certain of the Fund’s fundamental investment restrictions;
5.	[For each of the Funds listed on Exhibit N-1 to this proxy statement] FOR the approval of the elimination of certain of the Fund’s fundamental investment restrictions;
6.	[For each of the Funds listed under Proposal 6 of this proxy statement] FOR the reclassification of certain fundamental investment policies as non-fundamental; and
7.	[For Class B shareholders of Franklin Templeton Money Fund] FOR the amendment of the rights and preferences of the Class B shares to provide for their automatic conversion into Class A shares after eight years.

   How do I ensure that my vote is accurately recorded?

     You may attend the Meeting and vote in person or you may complete and return the enclosed proxy card(s). If you are eligible to vote by telephone or through the Internet, separate instructions are enclosed.

     Proxy cards that are properly signed, dated and received at or prior to the Meeting will be voted as specified. If you specify a vote on any of the Proposals on which you are entitled to vote, your proxy will be voted as you indicate. However, with respect to any Proposal on which you are entitled to vote but for which you do not specify a vote, your proxy will be voted FOR that Proposal. If you simply sign, date and return the proxy card, but do not specify a vote on any of the Proposals on which you are entitled to vote, your shares will be voted FOR all Proposals on which you are entitled to vote.

   May I revoke my proxy?

     You may revoke your proxy at any time before it is voted by forwarding a written revocation or a later-dated proxy to the appropriate Fund that is received by the Fund at or prior to the Meeting, or by attending the Meeting and voting in person.

   What if my shares are held in a brokerage account?

     If your shares are held by your broker, then in order to vote in person at the Meeting, you will need to obtain a “Legal Proxy” from your broker and present it to the Inspector of Election at the Meeting. Also, in order to revoke your proxy card, you may need to forward your written revocation or a later-dated proxy to your broker rather than to the appropriate Fund. 

tTHE PROPOSALS

    PROPOSAL 1: TO ELECT A BOARD OF TRUSTEES/DIRECTORS

   How are nominees selected?

     The Board of Trustees or Directors (as applicable) of each Fund (the “Board”) has a Nominating Committee² consisting of the individuals as shown on Exhibit A to this proxy statement, none of whom is an “interested person”
____________________

2 For Franklin Mutual Series Fund Inc. and Franklin Mutual Recovery Fund, the Nominating Committee’s full name is the Nominating and Corporate Governance Committee. For purposes of this proxy statement, each such Committee is referred to simply as the “Nominating Committee.”

3

of that Fund as that term is defined in the 1940 Act. Board members who are not interested persons of a Fund are referred to as the “Independent Board Members,” and Board members who are interested persons of a Fund are referred to as the “Interested Board Members.” 

Each Fund’s Nominating Committee is responsible for selecting candidates to serve as Board members for that Fund and recommending such candidates (a) for selection and nomination as Independent Board Members by the incumbent Independent Board Members and the full Board; and (b) for selection and nomination as Interested Board Members by the full Board. In considering a candidate’s qualifications, the Nominating Committee generally considers the potential candidate’s educational background, business or professional experience, and reputation. In addition, the Nominating Committee has established as minimum qualifications for Board membership as an Independent Board Member (1) that such candidate be independent from relationships with the Fund’s investment manager(s) and other principal service providers both within the terms and the spirit of the statutory independence requirements specified under the 1940 Act and the rules thereunder, (2) that such candidate demonstrate an ability and willingness to make the considerable time commitment, including personal attendance at Board meetings, believed necessary to his or her function as an effective Board member, and (3) that such candidate have no continuing relationship as a director, officer or board member of any investment company other than those within the Franklin Templeton Investments fund complex.

     When a Fund’s Board has or expects to have a vacancy, the Nominating Committee receives and reviews information on individuals qualified to be recommended as nominees for election as Board members, including any recommendations by “Qualifying Fund Shareholders” (as defined below). Such individuals are evaluated based upon the criteria described above. To date, each Fund’s Nominating Committee has been able to identify, and expects to continue to be able to identify, from its own resources an ample number of qualified candidates. A Fund’s Nominating Committee, however, will review recommendations from Qualifying Fund Shareholders to fill vacancies on the Board if these recommendations are submitted in writing and addressed to the Nominating Committee at the Fund’s offices and are presented with appropriate background material concerning the candidate that demonstrates his or her ability to serve as a Board member, including as an Independent Board Member, of the Fund. A Qualifying Fund Shareholder is a shareholder who (i) has continuously owned of record, or beneficially through a financial intermediary, shares of the Fund having a net asset value of not less than two hundred and fifty thousand dollars ($250,000) during the 24-month period prior to submitting the recommendation; and (ii) provides a written notice to the Nominating Committee containing the following information: (a) the name and address of the Qualifying Fund Shareholder making the recommendation; (b) the number of shares of the Fund which are owned of record and beneficially by such Qualifying Fund Shareholder and the length of time that such shares have been so owned by the Qualifying Fund Shareholder; (c) a description of all arrangements and understandings between such Qualifying Fund Shareholder and any other person or persons (naming such person or persons) pursuant to which the recommendation is being made; (d) the name, age, date of birth, business address and residence address of the person or persons being recommended; (e) such other information regarding each person recommended by such Qualifying Fund Shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the U.S. Securities and Exchange Commission (“SEC”) had the nominee been nominated by the Board; (f) whether the shareholder making the recommendation believes the person recommended would or would not be an “interested person” of the Fund, as defined in the 1940 Act; and (g) the written consent of each person recommended to serve as a Board member of the Fund if so nominated and elected/appointed.

     A Fund’s Nominating Committee may amend these procedures from time to time, including the procedures relating to the evaluation of nominees and the process for submitting recommendations to the Nominating Committee.

     Each Board has adopted and approved a formal written Charter for its Nominating Committee. Copies of the Charters are attached to this proxy statement as Exhibits B-1 (for all Funds other than Franklin Mutual Series Fund Inc. and Franklin Mutual Recovery Fund) and B-2 (for Franklin Mutual Series Fund Inc. and Franklin Mutual Recovery Fund).

4

   Which Board supervises my Fund(s) and who are the nominees?

     The Franklin Templeton Funds have a number of separate Boards. Most of the nominees currently serve on several Boards. In some instances, a Fund has more than one underlying series, which are also supervised by that Fund’s Board. Shareholders of each Fund are being asked to vote only for the election of the Board Members that will supervise their Fund. Each Board, the Fund(s) that it will supervise and the nominees for such Board are listed below. We have noted by footnote which of the nominees are not presently serving on a Fund’s Board to which they have been nominated. For a complete listing of each Board and the Funds and each series thereof that it will supervise, see Exhibit C to this proxy statement.

Funds To Be Supervised by Board I

Fund	Nominees for Board I
Franklin California Tax-Free Trustab	Independent Board Nominees:
	Harris J. Ashton
Franklin Capital Growth Funda	Robert F. Carlson
	Sam L. Ginnc
	Edith E. Holiday
Franklin Global Trust	Frank W. T. LaHaye
	Frank A. Olson
Franklin Gold and Precious Metals Funda	Larry D. Thompsonc
	John B. Wilson
Franklin Municipal Securities Trusta
	Interested Board Nominees:
Franklin New York Tax-Free Trustbd	Charles B. Johnson
	Gregory E. Johnsonc
Franklin Real Estate Securities Trustb
Franklin Strategic Mortgage Portfolioabd
Franklin Tax-Free Trustad
Franklin Templeton Fund Allocator Seriesb
Franklin Templeton Global Trustb
Franklin Templeton International Trustab
Franklin Templeton Money Fund Trustd
Institutional Fiduciary Trustd
The Money Market Portfoliosbd

^a Mr. Carlson does not currently serve on this Fund’s Board.
^b Mr. Olson does not currently serve on this Fund’s Board.
^c Messrs. Ginn, Thompson and Gregory E. Johnson do not currently serve on the Boards of any of the Funds to be supervised by Board I.
^d Mr. Wilson does not currently serve on this Fund’s Board.

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Funds To Be Supervised by Board II

Fund	Nominees for Board II
Franklin California Tax-Free Income Fund, Inc.ab	Independent Board Nominees:
	Harris J. Ashton
Franklin Custodian Funds, Inc. ab	Robert F. Carlson
	Sam L. Ginnd
	Edith E. Holiday
Franklin High Income Trust ce	Frank W. T. LaHaye
	Frank A. Olson
Franklin Investors Securities Trusta	Larry D. Thompsond
	John B. Wilsond
Franklin New York Tax-Free Income Fund ab
	Interested Board Nominees:
Franklin Strategic Seriesac	Charles B. Johnson
	Rupert H. Johnson, Jr.

^a Mr. Carlson does not currently serve on this Fund’s Board.
^b Mr. LaHaye does not currently serve on this Fund’s Board.
^c Mr. Olson does not currently serve on this Fund’s Board.
^d Messrs. Ginn, Thompson and Wilson do not currently serve on the Boards of any of the Funds to be supervised by Board II, except that Mr. Wilson currently serves on the Board of Franklin Strategic Series.
^e Mr. Charles B. Johnson does not currently serve on this Fund’s Board.

Funds To Be Supervised by Board III

Fund	Nominees for Board III
Templeton China World Fund	Independent Board Nominees:
	Harris J. Ashton
Templeton Developing Markets Trust	Frank J. Crothers
	Edith E. Holiday
Templeton Global Smaller Companies Fund	David W. Niemiec
	Frank A. Olson
Templeton Income Trust	Larry D. Thompson
	Constantine D. Tseretopoulos
Templeton Institutional Funds, Inc.	Robert E. Wadea
	Interested Board Nominees:
	Charles B. Johnson
	Gregory E. Johnsonb

^a Mr. Wade does not currently serve on the Board of Templeton Institutional Funds, Inc.
^b Mr. Gregory E. Johnson does not currently serve on the Board of any Fund to be supervised by Board III.

6

Fund To Be Supervised by Board IV

Fund	Nominees for Board IV
Templeton Funds, Inc.	Independent Board Nominees:
	Harris J. Ashton
	Frank J. Crothers
	Edith E. Holiday
	David W. Niemiec
	Frank A. Olson
	Larry D. Thompson
	Constantine D. Tseretopoulos
	Robert E. Wade
	Interested Board Nominees:
	Charles B. Johnson
	Rupert H. Johnson, Jr.

Funds To Be Supervised by Board V

Fund	Nominees for Board V
Franklin Managed Trust	Independent Board Nominees:
	Frank T. Crohn
Franklin Value Investors Trust	Charles Rubens II
	Leonard Rubin
	Burton J. Greenwald
	Robert E. Wade
	Interested Board Nominee:
	William J. Lippman

Funds To Be Supervised by Board VI

Fund	Nominees for Board VI
Franklin Mutual Series Fund Inc.	Independent Board Nominees:
	Edward I. Altman
Franklin Mutual Recovery Fund	Ann Torre Bates
	Burton J. Greenwald
	Bruce A. MacPherson
	Charles Rubens II
	Leonard Rubin
	Robert E. Wade
	Interested Board Nominees:
	Gregory E. Johnsona
	Peter A. Langermana

^a Messrs. Gregory E. Johnson and Langerman do not currently serve on the Boards of the Funds to be supervised by Board VI.

7

     All of the nominees, other than Messrs. Ginn, Gregory E. Johnson and Langerman, are currently members of one or more of the Boards to which they have been nominated, except as noted in the tables above by footnote. If elected, each nominee will hold office until the next meeting of shareholders at which Board Members are elected and until his or her successor shall be elected and qualify, or until his or her earlier death, resignation or removal. All of the current nominees, other than Messrs. Ginn, Gregory E. Johnson and Langerman, are Board members of one or more Funds and other Franklin^® funds and/or Templeton^® funds. Among the current nominees, Charles B. Johnson, Gregory E. Johnson, Rupert H. Johnson, Jr., William J. Lippman and Peter A. Langerman are deemed to be Interested Board Nominees. Each nominee currently is available and has consented to serve if elected. If any of the nominees should become unavailable, the designated proxy holders will vote in their discretion for another person or persons who may be nominated as Board Members.

     Some of the nominees for a Fund, although they currently serve on the Fund’s Board, are standing for election by shareholders of that Fund for the first time. Set forth in the table below are the nominees who are standing for election by shareholders for the first time (and are not otherwise an executive officer of such Fund), the Board(s) to which they are nominated to serve and the person(s) who initially recommended them for consideration as nominees for Board membership:

Independent	Fund(s) for which Nominee is to be elected by
Board Nominees:	shareholders for the first time:	Recommended by:
Harris J. Ashton	Franklin High Income Trust	An incumbent Independent  Board Member
Robert F. Carlson	Franklin California Tax-Free Income Fund, Inc., Franklin California Tax-Free Trust, Franklin Capital Growth Fund, Franklin Custodian Funds, Inc., Franklin Gold and Precious Metals Fund, Franklin Investors Securities Trust, Franklin Municipal Securities Trust, Franklin New York Tax-Free Income Fund, Franklin New York Tax-Free Trust, Franklin Real Estate Securities Trust, Franklin Strategic Mortgage Portfolio, Franklin Strategic Series, Franklin Tax-Free Trust, Franklin Templeton Fund Allocator Series, Franklin Templeton Global Trust, Franklin Templeton International Trust, Franklin Templeton Money Fund Trust, Institutional Fiduciary Trust and The Money Market Portfolios	An incumbent Independent Board Member
Sam L. Ginn	Franklin California Tax-Free Income Fund, Inc., Franklin California Tax-Free Trust, Franklin Capital Growth Fund, Franklin Custodian Funds, Inc., Franklin Global Trust, Franklin Gold and Precious Metals Fund, Franklin High Income Trust, Franklin Investors Securities Trust, Franklin Municipal Securities Trust, Franklin New York Tax-Free Income Fund, Franklin New York Tax-Free Trust, Franklin Real Estate Securities Trust, Franklin Strategic Mortgage Portfolio, Franklin Strategic Series, Franklin Tax-Free Trust, Franklin Templeton Fund Allocator Series, Franklin Templeton Global Trust, Franklin Templeton International Trust, Franklin Templeton Money Fund Trust, Institutional Fiduciary Trust and The Money Market Portfolios	An Executive Officer of Franklin Resources, Inc.

8

Independent	Fund(s) for which Nominee is to be elected by
Board Nominees:	shareholders for the first time:	Recommended by:
Edith E. Holiday	Franklin California Tax-Free Income Fund, Inc., Franklin California Tax-Free Trust, Franklin Capital Growth Fund, Franklin Custodian Funds, Inc., Franklin Gold and Precious Metals Fund, Franklin High Income Trust, Franklin Investors Securities Trust, Franklin Municipal Securities Trust, Franklin New York Tax-Free Income Fund, Franklin New York Tax-Free Trust, Franklin Real Estate Securities Trust, Franklin Strategic Mortgage Portfolio, Franklin Strategic Series, Franklin Tax-Free Trust, Franklin Templeton Fund Allocator Series, Franklin Templeton Global Trust, Franklin Templeton International Trust, Franklin Templeton Money Fund Trust, Institutional Fiduciary Trust and The Money Market Portfolios	An incumbent Independent Board Member
	Templeton Institutional Funds, Inc.	An incumbent Interested  Board Member
Burton J. Greenwald	Franklin Managed Trust, Franklin Value Investors Trust and Franklin Mutual Series Fund Inc.	An Executive Officer of Franklin Resources, Inc.
Frank W. T. LaHaye	Franklin California Tax-Free Income Fund, Inc., Franklin Custodian Funds, Inc., Franklin High Income Trust and Franklin New York Tax-Free Income Fund	An incumbent Independent Board Member
David W. Niemiec	Templeton China World Fund, Templeton Developing Markets Trust, Templeton Funds, Inc., Templeton Global Smaller Companies Fund, Templeton Income Trust and Templeton Institutional Funds, Inc.	An incumbent Interested Board Member
Frank A. Olson	Franklin California Tax-Free Income Fund, Inc., Franklin California Tax-Free Trust, Franklin Capital Growth Fund, Franklin Custodian Funds, Inc., Franklin Global Trust, Franklin Gold and Precious Metals Fund, Franklin High Income Trust, Franklin Investors Securities Trust, Franklin Municipal Securities Trust, Franklin New York Tax-Free Income Fund, Franklin New York Tax-Free Trust, Franklin Real Estate Securities Trust, Franklin Strategic Mortgage Portfolio, Franklin Strategic Series, Franklin Tax-Free Trust, Franklin Templeton Fund Allocator Series, Franklin Templeton Global Trust, Franklin Templeton International Trust, Franklin Templeton Money Fund Trust, Institutional Fiduciary Trust, The Money Market Portfolios, Templeton Developing Markets Trust and Templeton Institutional Funds, Inc.	An incumbent Independent Board Member
Charles Rubens II	Franklin Mutual Series Fund Inc.	An incumbent Interested Board Member

9

Independent	Fund(s) for which Nominee is to be elected by
Board Nominees:	shareholders for the first time:	Recommended by:
Larry D. Thompson	Franklin California Tax-Free Income Fund, Inc., Franklin California Tax-Free Trust, Franklin Capital Growth Fund, Franklin Custodian Funds, Inc., Franklin Global Trust, Franklin Gold and Precious Metals Fund, Franklin High Income Trust, Franklin Investors Securities Trust, Franklin Municipal Securities Trust, Franklin New York Tax-Free Income Fund, Franklin New York Tax-Free Trust, Franklin Real Estate Securities Trust, Franklin Strategic Mortgage Portfolio, Franklin Strategic Series, Franklin Tax-Free Trust, Franklin Templeton Fund Allocator Series, Franklin Templeton Global Trust, Franklin Templeton International Trust, Franklin Templeton Money Fund Trust, Institutional Fiduciary Trust, The Money Market Portfolios,  Templeton China World Fund, Templeton Developing Markets Trust, Templeton Funds, Inc., Templeton Global Smaller Companies Fund, Templeton Income Trust and Templeton Institutional Funds, Inc.	An incumbent Independent Board Member
Robert E. Wade	Franklin Managed Trust, Franklin Value Investors Trust, Templeton China World Fund, Templeton Developing Market Trust, Templeton Funds, Inc., Templeton Global Smaller Companies Fund and Templeton Income Trust	An Executive Officer of Franklin Resources, Inc.
	Templeton Institutional Funds, Inc.	An incumbent Independent Board Member
John B. Wilson	Franklin Capital Growth Fund, Franklin Gold and Precious Metals Fund, Franklin Municipal Securities Trust, Franklin Real Estate Securities Trust, Franklin Strategic Series, Franklin Templeton Fund Allocator Series, Franklin Templeton Global Trust and Franklin Templeton International Trust	An Executive Officer of Franklin Resources, Inc.
	Franklin California Tax-Free Income Fund, Inc., Franklin California Tax-Free Trust, Franklin Custodian Funds, Inc., Franklin Global Trust, Franklin High Income Trust, Franklin Investors Securities Trust, Franklin New York Tax-Free Income Fund, Franklin New York Tax-Free Trust, Franklin Strategic Mortgage Portfolio, Franklin Tax-Free Trust, Franklin Templeton Money Fund Trust, Institutional Fiduciary Trust and The Money Market Portfolios	An incumbent Independent Board Member
Interested Board
Nominees:
Charles B. Johnson	Franklin High Income Trust	Executive Officers of Franklin Resources, Inc.

10

Independent	Fund(s) for which Nominee is to be elected by
Board Nominees:	shareholders for the first time:	Recommended by:
Gregory E. Johnson	Franklin California Tax-Free Trust, Franklin Capital Growth Fund, Franklin Global Trust, Franklin Gold and Precious Metals Fund, Franklin Municipal Securities Trust, Franklin New York Tax-Free Trust, Franklin Real Estate Securities Trust, Franklin Strategic Mortgage Portfolio, Franklin Tax-Free Trust, Franklin Templeton Fund Allocator Series, Franklin Templeton Global Trust, Franklin Templeton International Trust, Franklin Templeton Money Fund Trust, Institutional Fiduciary Trust, The Money Market Portfolios, Templeton China World Fund, Templeton Developing Markets Trust, Templeton Global Smaller Companies Fund, Templeton Income Trust, Templeton Institutional Funds, Inc., Franklin Mutual Series Fund Inc. and Franklin Mutual Recovery Fund	Executive Officers of Franklin Resources, Inc.

     Listed below, beside the name and year of birth of each nominee, are the Board(s) (indicated by number) on which they serve or are nominated to serve, their positions and length of service on the Board(s), their principal occupations during the past five years (their titles may have varied during that period), the number of Fund portfolios in the Franklin Templeton Investments fund complex that they oversee (if applicable) and other board memberships they hold.

     Certain nominees and current Interested Board Members hold director and/or officer positions with Franklin Resources, Inc. (“Resources”) and its affiliates. Resources is a publicly owned holding company, the principal shareholders of which are Charles B. Johnson and Rupert H. Johnson, Jr., who owned approximately [17.1%] and [14.5%], respectively, of its outstanding shares as of [September 30, 2006]. Resources, a global investment management 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 B. Johnson and Rupert H. Johnson, Jr. are brothers and are the father and uncle, respectively, of Gregory E. Johnson. There are no other family relationships among any of the Board nominees.

Independent Board Nominees:

			Number of
			Fund Portfolios
			in Franklin
			Templeton
			Investments
			Fund Complex
			Overseen or To
	Position		be Overseen
	and Board(s) to	Length of Time	by Board
Name, Year of Birth and Address	Which Nominated	Served*	Member**	Other Directorships Held
Edward I. Altman, Ph.D. (1941)	Board Member	Since 1987	7	Director, A.T.D. Inc.
101 John F. Kennedy Parkway				(financial technology and
Short Hills, NJ 07078-2789	Board VI			investment company).
Principal Occupation During Past 5 Years: Max L. Heine Professor of Finance and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University; editor and author of numerous financial publications; financial consultant; and serves on the Investment Advisory Committee of the New York State Common Retirement Fund; and formerly, Vice Director, Salomon Center, Stern School of Business, New York University.

11

			Number of
			Fund Portfolios
			in Franklin
			Templeton
			Investments
			Fund Complex
			Overseen or To
	Position		be Overseen
	and Board(s) to	Length of Time	by Board
Name, Year of Birth and Address	Which Nominated	Served*	Member**	Other Directorships Held
Harris J. Ashton (1932)	Board Member	Since 1976	143	Director, Bar-S Foods
One Franklin Parkway				(meat packing company).
San Mateo, CA 94403-1906	Boards I-IV
Principal Occupation During Past 5 Years: Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
Ann Torre Bates (1958)	Board Member	Since 1994	7	Independent Director,
101 John F. Kennedy Parkway				SLM Corporation (Sallie Mae)
Short Hills, NJ 07078-2789	Board VI			and Allied Capital Corporation
				(financial services).
Principal Occupation During Past 5 Years: Independent strategic and financial consultant; and formerly, Executive Vice President and Chief Financial Officer, NHP Incorporated (manager of multifamily housing) (1995-1997); and, prior thereto, Vice President and Treasurer, US Airways, Inc.
Robert F. Carlson (1928)	Board Member/	Since 1982	121	None
One Franklin Parkway	Nominee
San Mateo, CA 94403-1906
	Boards I and II
Principal Occupation During Past 5 Years: Vice President, senior member and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS); and formerly, member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of California; and Chief Counsel, California Department of Transportation.
Frank T. Crohn (1924)	Board Member	Since 1986	6	Formerly, Director, Unity
One Franklin Parkway				Mutual Life Insurance
San Mateo, CA 94403-1906	Board V			Company (until May 2006).
Principal Occupation During Past 5 Years: Chairman, Eastport Lobster & Fish Company; and formerly, Chief Executive Officer and Chairman, Financial Benefit Life Insurance Company (insurance and annuities) (until 1996); Chief Executive Officer, National Benefit Life Insurance Co. (insurance) (1963-1982); and Director, AmVestors Financial Corporation (until 1997).

12

			Number of
			Fund Portfolios
			in Franklin
			Templeton
			Investments
			Fund Complex
			Overseen or To
	Position		be Overseen
	and Board(s) to	Length of Time	by Board
Name, Year of Birth and Address	Which Nominated	Served*	Member**	Other Directorships Held
Frank J. Crothers (1944)	Board Member	Since 1990	20	None
500 East Broward Blvd.
Suite 2100	Boards III and
Fort Lauderdale, FL	IV
33394-3091
Principal Occupation During Past 5 Years: Chairman, Island Corporate Holdings Ltd.; Director and Vice Chairman, Caribbean Utilities Co. Ltd.; Director, Provo Power Company Ltd.; Director of various other business and nonprofit organizations; and formerly, Chairman, Atlantic Equipment & Power Ltd. (1977-2003).
Sam L. Ginn (1937)	Nominee	N/A	[118]	Director, Chevron Corporation
One Franklin Parkway				(global energy company) and
San Mateo, CA 94403-1906	Boards I and II			ICO Global Communications
				(Holdings) Limited (satellite
				company).
Principal Occupation During Past 5 Years:
Private investor; and formerly, Chairman of ther Board, Vodafone AirTouch, PLC; Chairman of the Board and Chief Executive Officer, AirTouch Communications (1993-1998) and Pacific Telesis Groups (1988-1994).
Burton J. Greenwald (1929)	Board Member	Since 2001	13	Director, Fiduciary Emerging
One Franklin Parkway				Markets Bond Fund PLC and
San Mateo, CA 94403-1906	Boards V and VI			Fiduciary International Ireland
				Limited.
Principal Occupation During Past 5 Years: Managing Director, B.J. Greenwald Associates (management consultants to the financial services industry); and formerly, Chairman, Fiduciary Trust International Funds; Executive Vice President, L.F. Rothschild Fund Management, Inc.; President and Director, Merit Mutual Funds; President, Underwriting Division and Director, National Securities & Research Corporation; Governor, Investment Company Institute and Chairman, ICI Public Information Committee.

13

			Number of
			Fund Portfolios
			in Franklin
			Templeton
			Investments
			Fund Complex
			Overseen or To
	Position		be Overseen
	and Board(s) to	Length of Time	by Board
Name, Year of Birth and Address	Which Nominated	Served*	Member**	Other Directorships Held
Edith E. Holiday (1952)	Board Member	Since 1996	143	Director, Hess Corporation
One Franklin Parkway				(formerly, Amerada Hess
San Mateo, CA 94403-1906	Boards I-IV			Corporation) (exploration and
				refining of oil and gas), H.J.
				Heinz Company (processed
				foods and allied products),
				RTI International Metals, Inc.
				(manufacture and distribution
				of titanium), Canadian National
				Railway (railroad) and White
				Mountains Insurance Group,
				Ltd. (holding company).
Principal Occupation During Past 5 Years: Director or Trustee of various companies and trusts; 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).
Frank W.T. LaHaye (1929)	Board Member/	Since 1960	123	Director, Center for
One Franklin Parkway	Nominee			Creative Land Recycling
San Mateo, CA 94403-1906				(redevelopment).
	Boards I and II
Principal Occupation During Past 5 Years: General Partner, Las Olas L.P. (Asset Management); and formerly, Chairman, Peregrine Venture Management Company (venture capital).
Bruce A. MacPherson (1930)	Board Member	Since 1974	7	None
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2789	Board VI
Principal Occupation During Past 5 Years: Retired, former Chairman, A.A. MacPherson, Inc., Canton, MA (representative for electrical manufacturers).
David W. Niemiec (1949)	Board Member	Since 2005	20	Director, Emeritus Corporation
500 East Broward Blvd.				(assisted living) and OSI
Suite 2100	Boards III and			Pharmaceuticals, Inc.
Fort Lauderdale, FL	IV			(pharmaceutical products).
33394-3091
Principal Occupation During Past 5 Years: Advisor, Saratoga Partners (private equity fund); Director, various private companies; and formerly, Managing Director, Saratoga Partners (1998-2001) and SBC Warburg Dillon Read (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc. (investment banking) (1991-1997); and Chief Financial Officer, Dillon, Read & Co. Inc. (1982-1997).

14

			Number of
			Fund Portfolios
			in Franklin
			Templeton
			Investments
			Fund Complex
			Overseen or To
	Position		be Overseen
	and Board(s) to	Length of Time	by Board
Name, Year of Birth and Address	Which Nominated	Served*	Member**	Other Directorships Held
Frank A. Olson (1932)	Board Member/	Since 2003	135	Director, Hess Corporation
One Franklin Parkway	Nominee			(formerly, Amerada Hess
San Mateo, CA 94403-1906				Corporation) (exploration
	Boards I-IV			and refining of oil and gas)
				and Sentient Jet (private
				jet service); and formerly,
				Director, Becton Dickinson
				and Company (medical
				technology), Cooper Industries,
				Inc. (electrical products and
				tools and hardware), Health
				Net, Inc. (formerly, Foundation
				Health) (integrated managed
				care), The Hertz Corporation
				(car rental), Pacific Southwest
				Airlines, The RCA Corporation,
				Unicom (formerly,
				Commonwealth Edison), UAL
				Corporation (airlines) and
				White Mountains Insurance
				Group, Ltd. (holding company).
Principal Occupation During Past 5 Years: Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer (1977-1999)); and formerly, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
Charles Rubens II (1930)	Board Member	Since 1986	13	None
One Franklin Parkway
San Mateo, CA 94403-1906	Boards V and VI
Principal Occupation During Past 5 Years: Private investor.
Leonard Rubin (1925)	Board Member	Since 1986	13	None
One Franklin Parkway
San Mateo, CA 94403-1906	Boards V and VI
Principal Occupation During Past 5 Years: Partner in LDR Equities, LLC (manages personal investments); and formerly, President, F.N.C. Textiles, Inc.; and Chairman of the Board, Carolace Embroidery Co., Inc. (until 1996).

15

			Number of
			Fund Portfolios
			in Franklin
			Templeton
			Investments
			Fund Complex
			Overseen or To
	Position		be Overseen
	and Board(s) to	Length of Time	by Board
Name, Year of Birth and Address	Which Nominated	Served*	Member**	Other Directorships Held
Larry D. Thompson (1945)	Board Member/	Since 2005	115	None
500 East Broward Blvd.	Nominee
Suite 2100
Fort Lauderdale, FL	Boards I-IV
33394-3091
Principal Occupation During Past 5 Years: Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and formerly, Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (1997-2001); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S. Department of Justice (2001-2003).
Constantine D. Tseretopoulos (1954)	Board Member	Since 1990	20	None
500 East Broward Blvd.
Suite 2100	Boards III and
Fort Lauderdale, FL	IV
33394-3091
Principal Occupation During Past 5 Years: Physician, Lyford Cay Hospital (1987-present); Director of various nonprofit organizations; and formerly, Cardiology Fellow, University of Maryland (1985-1987) and Internal Medicine Resident, Greater Baltimore Medical Center (1982-1985).
Robert E. Wade (1946)	Board Member/	Board Member	33	Director, El Oro and
One Franklin Parkway	Nominee	since 1991 and		Exploration Co., p.l.c.
San Mateo, CA 94403-1906	(Chairman of	Chairman of		(investments) and ARC
	the Board of	the Board of		Wireless Solutions, Inc.
	Franklin Mutual	Franklin Mutual		(wireless components and
	Series Fund Inc.	Series Fund Inc.		network products).
	and Franklin	and Franklin
	Mutual Recovery	Mutual Recovery
	Fund)	Fund since 2005
	Boards III-VI
Principal Occupation During Past 5 Years: Practicing attorney.

16

			Number of
			Fund Portfolios
			in Franklin
			Templeton
			Investments
			Fund Complex
			Overseen or To
	Position		be Overseen
	and Board(s) to	Length of Time	by Board
Name, Year of Birth and Address	Which Nominated	Served*	Member**	Other Directorships Held
John B. Wilson (1959)	Board Member/	Since February	99	None
One Franklin Parkway	Nominee	2006
San Mateo, CA 94403-1906
	Boards I and II
Principal Occupation During Past 5 Years: President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996- 2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (office supplies) (1992-1996); Executive Vice President – Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (1986-1990).
Interested Board Nominees:
			Number of
			Portfolios in
			Fund Complex
			Overseen or To
	Position		Be Overseen
	and Board(s) to	Length of Time	by Board
Name, Year of Birth and Address	Which Nominated	Served*	Member**	Other Directorships Held
***Charles B. Johnson (1933)	Board Member	Board Member	142	None
One Franklin Parkway	/Nominee	since 1969
San Mateo, CA	Boards I - IV
94403-1906
	Chairman of the	Chairman of the
	Board for various	Board since 1993
	Funds A
	President and	President since
	Chief Executive	1983 and
	Officer - Investment	Chief Executive
	Management for	Officer -
	various FundsB	Investment
		Management
		since 2002
	Vice President for	Vice President
	various Funds A	since 1992
Principal Occupation During Past 5 Years: Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton Investments.

17

			Number of
			Portfolios in
			Fund Complex
			Overseen or To
	Position		Be Overseen
	and Board(s) to	Length of Time	by Board
Name, Year of Birth and Address	Which Nominated	Served*	Member**	Other Directorships Held
***Gregory E. Johnson (1961)	Nominee for Boards	Not Applicable	105	Not Applicable
One Franklin Parkway	I, III and VI
San Mateo, CA
94403-1906
Principal Occupation During Past 5 Years:
President and Chief Executive Officer, Franklin Resources, Inc.; President and Director, Franklin Agency, Inc.; Vice President and Director, Franklin Advisers, Inc.; Director, Fiduciary Trust Company International; and officer and/or director of some of the other subsidiaries of Franklin Resources, Inc.
***Rupert H. Johnson, Jr. (1940)	Current Board	Board Member	126	None
One Franklin Parkway	Member of Boards	since 1978
San Mateo, CA	I, II and IV
94403-1906
	President and	President since
	Chief Executive	1989 and Chief
	Officer-Investment	Executive Officer-
	Management for	InvestmentManagement
	various Funds A	since 2002
		Vice President
		Since 1982
	Vice President for
	various Funds C
Principal Occupation During Past 5 Years:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin Templeton Distributors, Inc.; Director, Franklin Advisers, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton Investments.
***Peter A. Langerman (1955)	Nominee for Board	Not Applicable	[8]	Not Applicable
101 John F. Kennedy	VI
Parkway
Short Hills, NJ	President, and	Since 2005
07078-2702	Chief Executive
	Officer – Investment
	Management for
	Franklin Mutual
	Series Fund Inc. and
	Franklin Mutual
	Recovery Fund
Principal Occupation During Past 5 Years:
Chairman of the Board, Chief Executive Officer and President, Franklin Mutual Advisers, LLC; officer of two of the investment companies in Franklin Templeton Investments; and formerly, Director, New Jersey’s Division of Investment.

18

			Number of
			Portfolios in
			Fund Complex
			Overseen or To
	Position		Be Overseen
	and Board(s) to	Length of Time	by Board
Name, Year of Birth and Address	Which Nominated	Served*	Member**	Other Directorships Held
***William J. Lippman (1925)	Board Member	Board Member	6	None
One Parker Plaza, 9th Floor	Board V	since 1986
Fort Lee, NJ 07024-2920
	President and	President since
	Chief Executive	1986 and Chief
	Officer - Investment	Executive Officer
	Management for	- Investment
	Franklin Managed	Management
	Trust and Franklin	since 2002
	Value Investors
	Trust
Principal Occupation During Past 5 Years:
President, Franklin Advisory Services, LLC; Director, Templeton Worldwide, Inc.; and officer and/or director or trustee, as the case may be, of four of the investment companies in Franklin Templeton Investments.

*	If a Board member has served for different periods of time for different Funds, the earliest applicable date is shown.
**	We base the number of fund portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These fund portfolios have a common investment manager or affiliated investment managers, and also may share a common underwriter.
***	The 1940 Act limits the percentage of interested persons that can comprise a Fund’s Board. Messrs. Charles B. Johnson, Gregory E. Johnson, Rupert H. Johnson, Jr., Peter A. Langerman and William J. Lippman are “interested persons” of the Funds as defined by the 1940 Act due to their positions as officers and directors and shareholders of Resources, which is the parent company of the Funds’ investment managers and distributor, and their position with various Funds and/or the Funds’ investment managers.
A	Mr. Charles B. Johnson serves as Chairman of the Board and Mr. Rupert H. Johnson, Jr. serves as President and Chief Executive Officer – Investment Management for the following Funds: Franklin California Tax- Free Trust, Franklin Capital Growth Fund, Franklin Global Trust, Franklin Gold and Precious Metals Fund, Franklin Municipal Securities Trust, Franklin New York Tax-Free Trust, Franklin Real Estate Securities Trust, Franklin Strategic Mortgage Portfolio, Franklin Strategic Series, Franklin Tax-Free Trust, Franklin Templeton Fund Allocator Series, Franklin Templeton Global Trust, Franklin Templeton International Trust, Franklin Templeton Money Fund Trust, Institutional Fiduciary Trust and The Money Market Portfolios. Mr. Charles B. Johnson also serves as Chairman of the Board of Franklin Investors Securities Trust and Chairman of the Board and Vice President of each Templeton Fund. 3 Mr. Rupert H. Johnson, Jr. also serves as President and Chief Executive Officer – Investment Management for Franklin High Income Trust.
B	Mr. Charles B. Johnson serves as President and Chief Executive Officer – Investment Management for the following Funds: Franklin California Tax-Free Income Fund, Inc., Franklin Custodian Funds, Inc. and Franklin New York Tax-Free Income Fund.
C	Mr. Rupert H. Johnson, Jr. serves as Vice President of Franklin Investors Trust, Franklin Managed Trust, Franklin New York Tax-Free Income Fund, Franklin Value Investors Securities Trust and each Templeton Fund.

____________________

3 For purposes of this proxy statement, the “Templeton Funds” refer to Templeton China World Fund, Templeton Developing Markets Trust, Templeton Funds, Inc., Templeton Global Smaller Companies Fund, Templeton Income Trust and Templeton Institutional Funds, Inc.

19

   How often does a Fund’s Board meet and what are Board Members paid?

     The role of a Fund’s Board is to provide general oversight of the Fund’s business, and to ensure that the Fund is operated for the benefit of all of the Fund’s shareholders. The Boards of the Templeton Funds, Mutual Series Funds⁴, Franklin Value Investors Trust, Franklin Managed Trust and Franklin Global Trust anticipate meeting at least five times during the current fiscal year, and the Boards of the other Franklin Funds⁵ generally anticipate meeting at least nine times during the current fiscal year, and more frequently as necessary. The Boards also oversee the services furnished to the Funds by the investment managers to the Funds (together, the “Investment Managers”) and various other service providers. All of the Independent Board Members serve as Board Members of more than one Fund and, in some cases, of other Franklin Templeton funds which are not participating in the Meeting, many of which hold meetings at different dates and times.

     The Board members and management believe that having the same individuals serving on the boards of multiple 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 Board Members who can bring their experience and talents to, and effectively oversee the management of, several Funds.

     Each nominee for Board member currently in office attended at least 75% of the aggregate total number of meetings of the Board and the total number of meetings held by all committees of the Board on which the nominee for Board member served during such Fund’s most recent fiscal year. The number of meetings held by the Audit and Nominating Committees of each Fund during such Fund’s last fiscal year (ended on or before September 30, 2006) are set forth in Exhibit D to this proxy statement. None of the Funds currently has a formal policy regarding Board members’ attendance at annual shareholders’ meetings. None of the Funds held, or were required to hold, an annual meeting at which Board members were elected during its last fiscal year.

     Independent Board Members are reimbursed for expenses incurred in connection with attending Board meetings and are paid by each fund in Franklin Templeton Investments for which they serve as a Board member. Certain Interested Board Members and officers of the Funds are shareholders of Resources and may be deemed to receive indirect remuneration due to their participation in management fees and other fees received by the Investment Managers and their affiliates from the Franklin Templeton funds. The Investment Managers or their affiliates pay the salaries and expenses of the officers. Except with respect to certain Board members of the Mutual Series Funds (who are vested in a discontinued retirement plan), no Fund maintains or provides pension or retirement benefits to its Board members.

     Each Independent Board Member is compensated by each of the Funds on which he/she serves as a member of the Board. The Interested Board Members are not compensated for their services as Board members by the Funds. Generally, each Independent Board Member receives (i) a quarterly or monthly fee and/or an annual retainer and (ii) a fee for each meeting attended from each Fund for which he or she is a Board member. The current fees paid by each Fund are set forth in Exhibit D hereto. The fees payable to Independent Board Members by some of the Funds are subject to reductions resulting from fee caps limiting the amount of fees payable to Board members who serve on other Boards within the Franklin Templeton Investments fund complex. The compensation of the Independent Board Members of the Funds is established by the Independent Board Members of such Funds.

     Some Independent Board Members of Franklin Mutual Series Fund Inc. also may in the future receive payments pursuant to a retirement plan, approved in 1993, that generally provides payments to Independent Board Members who have served seven years and retire at age 70. At the time of retirement, Franklin Mutual Series Fund Inc. Independent Board Members are entitled to annual payments equal to one-half of the retainer in effect at the time of retirement; however, the plan does not cover Board members whose terms of office began in 1996 or later.
____________________

4

For purposes of this proxy statement, the “Mutual Series Funds” refer to Franklin Mutual Series Fund Inc. and Franklin Mutual Recovery Fund.

5

For purposes of this proxy statement, the “Franklin Funds” refer to all of the Funds except the Templeton Funds and the Mutual Series Funds. In addition, the Boards of the following Franklin Funds only anticipate meeting four times a year: Franklin Strategic Mortgage Portfolio, Franklin Templeton International Trust, Franklin Real Estate Securities Trust, Franklin Municipal Securities Trust, Franklin Templeton Global Trust and Franklin Templeton Fund Allocator Series.

20

     Independent Board Members serving on the Audit Committee of one or more Funds and other Franklin Templeton funds receive a flat fee of $2,000 per Audit Committee meeting attended, a portion of which is allocated to each such Fund. In addition, each Independent Board Member who serves as chairperson of the Audit Committee of one or more Funds receives an additional fee of between $5,000 and $20,000 per year ($1,250 for Franklin Mutual Series Fund Inc.), a portion of which is allocated to each Franklin Templeton fund for which they serve as Audit Committee Chairperson. Except for the Mutual Series Funds, members of a committee are not separately compensated for any committee meeting held on the day of a Board meeting.

     The following table identifies the amount each Independent Board Member received from each Fund and from the Franklin Templeton Investments fund complex as a whole during the 12 months ended September 30, 2006, as well as the estimated annual benefits, if any, upon retirement.

					Number of Boards
					within Franklin
		Pension or		Total	Templeton
		Retirement		Compensation	Investment Fund
		Benefits	Estimated	from Franklin	Complex on
	Aggregate	Accrued as	Annual	Templeton	which the Board
Independent Board	Compensation	Part of Fund	Benefits Upon	Investments Fund	Member
Member	from the Funds	Expenses	Retirement	Complex*	Serves**
Edward I. Altman, PhD.	See Exhibit E	[None]	[$31,500]1	$101,000	2
Harris J. Ashton	See Exhibit E	None	None	409,531	41
Ann Torre Bates	See Exhibit E	[None]	[$31,500]1	114,750	2
Robert F. Carlson	See Exhibit E	None	None	129,633	14
Frank T. Crohn	See Exhibit E	None	None	74,000	2
Frank J. Crothers	See Exhibit E	None	None	155,950	14
S. Joseph Fortunato***	See Exhibit E	None	None	403,624	N/A
Sam L. Ginn****	None	None	None	None	N/A
Burton J. Greenwald	See Exhibit E	None	None	158,000	4
Edith E. Holiday	See Exhibit E	None	None	422,530	42
Frank W.T. LaHaye	See Exhibit E	None	None	255,569	25
Gordon S. Macklin*****	See Exhibit E	None	None	409,527	N/A
Bruce A. MacPherson	See Exhibit E	[None]	[$31,500]1	89,000	2
Fred R. Millsaps******	See Exhibit E	None	None	61,762	N/A
David W. Niemiec	See Exhibit E	None	None	153,950	14
Frank A. Olson	See Exhibit E	None	None	358,773	29
Charles Rubens II	See Exhibit E	None	None	154,000	4
Leonard Rubin	See Exhibit E	None	None	158,000	4
Larry D. Thompson	See Exhibit E	None	None	140,750	14
Constantine D. Tseretopoulos	See Exhibit E	None	None	155,950	14
Robert E. Wade	See Exhibit E	[None]	[$60,000]1	310,621	17
John B. Wilson	See Exhibit E	None	None	81,442	14

*	Compensation received for the 12 months ended September 30, 2006.
**	We base the number of Boards on the number of U.S. registered investment companies in the Franklin Templeton Investments fund complex. This number does not include the total number of series within each investment company for which the Board members are responsible. The Franklin Templeton Investments Fund Complex currently includes 46 U.S. registered investment companies, with approximately 155 U.S. based funds or series.
***	Mr. Fortunato retired from the Board of those Funds for which he served as an Independent Board Member effective as of close of business September 5, 2006.
****	Mr. Ginn is a nominee for Independent Board Member and has not yet served on any Fund’s Board.
*****	Mr. Macklin retired from the Board of those Funds for which he served as an Independent Board Member effective as of close of business September 12, 2006.

21

******	Mr. Millsaps retired from the Board of those Funds for which he served as an Independent Board Member effective as of close of business December 31, 2005.
1	Based upon the current annual retainer.

     Board members of the Franklin funds (other than Franklin Value Investors Trust and Franklin Managed Trust) and of the Templeton funds historically have followed a policy of having substantial investments in one or more of the Franklin or Templeton funds, as is consistent with their individual financial goals. In February 1998, this policy was formalized for the Franklin funds (other than Franklin Value Investors Trust and Franklin Managed Trust) and Templeton Funds through the 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 (excluding Committee fees) 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 (excluding Committee fees) in shares of one or more Franklin funds until the value of such investments equals or exceeds five times the annual retainer and regular Board meeting fees paid such Board member. Investments in the name of family members or entities controlled by a Board member constitute fund holdings of such Board member for purposes of this policy, and a three year phase-in period applies to such investment requirements for newly elected Board members. In implementing such policy, a Board member’s fund holdings existing on February 27, 1998, are valued as of such date with subsequent investments valued at cost.

     The Boards of Franklin Value Investors Trust, Franklin Managed Trust and the Mutual Series Funds in 2006 approved substantially the same investment policy with respect to Independent Board Members’ investments in shares of those Funds. There is a phase-in provision for compliance.

     The following tables provide the dollar range of equity securities of the Funds (including the underlying series or portfolio thereof, if any) and of all funds in the Franklin Templeton Investments fund complex overseen by the Board nominees that are beneficially owned by them as of November 30, 2006:

		Aggregate Dollar Range of Equity
		Securities in all Portfolios Overseen
	Dollar Range of Equity Securities	by the Board Member in Franklin
Name of Board Member	in Fund/Fund Name6	Templeton Fund Complex
Independent Board Members:
Edward I. Altman, Ph.D	Franklin Mutual Series Fund Inc.	Over $100,000
	$50,001-$100,000/Mutual Beacon Fund
	Over $100,000/Mutual Discovery Fund
	Over $100,000/Mutual Qualified Fund
	Over $100,000/Mutual Shares Fund
	$50,001-$100,000/Franklin Mutual Recovery
	Fund
Harris J. Ashton	Franklin Custodian Funds, Inc.	Over $100,000
	$1-$10,000/Growth Fund
	Over $100,000/Income Fund
	Over $100,000/U.S. Government Securities Fund
	$10,001-$50,000/Franklin Capital Growth Fund
	Franklin Global Trust
	Over $100,000/International Smaller Companies
	Growth Fund
	Franklin Investor Securities Trust
	$1-$10,000/Adjustable U.S. Government
	Securities Fund
	$1-$10,000/Floating Rate Daily Access Fund
	Over $100,000/Limited Maturity
	U.S. Government Securities Fund
	$10,001-$50,000/Equity Income Fund

____________________

6 For any other Fund or series thereof overseen by the Board member that is not listed, the amount owned is none.

22

	Franklin Tax-Free Trust
	Over $100,000/Insured Tax-Free Income Fund
	$10,001-$50,000/Franklin Real Estate Securities
	Trust
	$1-$10,000/Templeton China World Fund
	$50,001-$100,000/Templeton Developing
	Markets Trust
	Templeton Funds, Inc.
	Over $100,000/World Fund
	Over $100,000/Foreign Fund
	Over $100,000/Templeton Global Smaller
	Companies Fund
	Templeton Income Trust
	$50,001-$100,000/Templeton Global Bond Fund
Ann Torre Bates	Franklin Mutual Series Fund Inc.	Over $100,000
	$50,001-$100,000/Mutual Shares Fund
	$50,001-$100,000/Mutual Discovery Fund
	$50,001-$100,000/Mutual European Fund
	$10,001-$50,000/Mutual Beacon Fund
	$10,001-$50,000/Mutual Qualified Fund
	$10,001-$50,000/Mutual Financial Services Fund
Robert F. Carlson	Over $100,000/Franklin High	Over $100,000
	Income Trust
	$10,001-$50,000/Franklin Real Estate Securities
	Trust
Frank J. Crohn	Franklin Value Investors Trust	Over $100,000
	Over $100,000/Balance Sheet Fund
	$50,001-$100,000/Large Cap
	Value Fund
	Over $100,000/MicroCap Value
	Fund
	$50,001-$100,000/MidCap Value Fund
	Over $100,000/Small Cap Value Fund
	$50,001-$100,000/Franklin
	Managed Trust
Frank J. Crothers	Over $100,000 [to be added]	Over $100,000
Sam L. Ginn	[to be added]	Over $100,000
Burton J. Greenwald	Over $100,000/Franklin Managed Trust	Over $100,000
	Franklin Value Investors Trust
	Over $100,000/Balance Sheet Fund
	Over $100,000/MidCap Value Fund
	Franklin Mutual Series Fund Inc.
	Over $100,000/Mutual Discovery Fund
	Over $100,000/Mutual Shares Fund
	Over $100,000/Franklin Mutual
	Recovery Fund

23

Edith E. Holiday	Franklin Custodian Funds, Inc.	Over $100,000
	$1-$10,000/Growth Fund
	$10,001-$50,000/Utilities Fund
	$10,001-$50,000/U.S. Government Securities
	Fund
	$10,001-$50,000/Franklin Capital Growth Fund
	$1-$10,000/Franklin High Income Trust
	Franklin Investors Securities Trust
	$10,001-$50,000/Adjustable U.S. Government
	Securities Fund
	$1-$10,000/Floating Rate Daily Access Fund
	$10,001-$50,000/Limited Maturity U.S.
	Government Securities Fund
	$10,001-$50,000/Equity Income Fund
	Franklin Strategic Series
	$1-$10,000/Small-Mid Cap Fund
	$10,001-$50,000/Biotechnology Discovery Fund
	Franklin Tax-Free Trust
	$10,001-$50,000/High Yield Tax-Free Income Fund
	Over $100,000/Federal
	Intermediate-Term Tax-Free Income Fund
	$10,001-$50,000/Federal Limited-Term Tax-Free
	Income Fund
	Franklin Templeton Fund Allocator Series
	$10,001-$50,000/Growth Target Fund
	$10,001-$50,000/Templeton Developing Markets
	Trust
	Templeton Funds, Inc.
	$10,001-$50,000/World Fund
	$50,001-$100,000/Foreign Fund
	Templeton Income Trust
	Over $100,000/Templeton Global Bond Fund
Frank W.T. LaHaye	Franklin California Tax-Free Trust	Over $100,000
	$1-$10,000/California Insured Tax-
	Free Income Fund
	$1-$10,000/ California Intermediate-
	Term Tax-Free Income Fund
	$10,001-$50,000/Franklin Capital Growth Fund
	$1-$10,000/Franklin Gold and
	Precious Metals Fund
	Over $100,000/Franklin High Income Trust

24

	Franklin Investors Securities Trust
	$1-$10,000/Adjustable U.S. Government Securities Fund
	$1-$10,000/Convertible Securities Fund
	$1-$10,000/Equity Income Fund
	$1-$10,000/Limited Maturity U.S. Government
	Securities Fund
	$1 - $10,000/Franklin Real Estate Securities
	Trust
	$1 - $10,000/Franklin Strategic Mortgage
	Portfolio
	Franklin Strategic Series
	$10,001-$50,000/Flex Cap Growth Fund
	$10,001-$50,000/Small-Mid Cap Fund
	Franklin Tax-Free Trust
	$1-$10,000/High Yield Tax-Free Income Fund
	$1-$10,000/Franklin Templeton International
	Trust
	$1-$10,000/Franklin Templeton Global Trust
Bruce A. MacPherson	Franklin Mutual Series Fund Inc.	Over $100,000
	Over $100,000/Mutual Discovery Fund
	Over $100,000/Mutual Beacon Fund
David W. Niemiec	Over $100,000/Templeton Global Smaller Companies Fund	Over $100,000
Frank A. Olson	Franklin Custodian Funds, Inc.	Over $100,000
	Over $100,000/Franklin Income Fund
Charles Rubens II	Franklin Managed Trust	Over $100,000
	Over $100,000/Franklin Rising Dividends Fund
	Franklin Value Investors Trust
	Over $100,000/Balance Sheet Fund
	Over $100,000/Large Cap Value Fund
	Over $100,000/MicroCap Value Fund
	Over $100,000/MidCap Value Fund
	Over $100,000/Small Cap Value Fund
	Franklin Mutual Series Fund Inc.
	Over $100,000/Mutual Beacon
	Over $100,000/Mutual Discovery
	Over $100,000/Mutual European
	Over $100,000/Mutual Qualified
	Over $100,000/Mutual Shares
	Over $100,000/Mutual Financial Services
	Over $100,000/Franklin Mutual Recovery Fund

25

Leonard Rubin	Franklin Managed Trust	Over $100,000
	Over $100,000/Franklin Rising Dividends Fund
	Franklin Value Investors Trust
	Over $100,000/Balance Sheet Fund
	Over $100,000/Large Cap Value Fund
	Over $100,000/MicroCap Value Fund
	Over $100,000/MidCap Value Fund
	Over $100,000/Small Cap Value Fund
	Franklin Mutual Series Fund Inc.
	$50,001-$100,000/Mutual Beacon Fund
	$50,001-$100,000/Mutual Discovery Fund
	Over $100,000/Mutual European Fund
	Over $100,000/Mutual Financial Services Fund
	$10,001-$50,000/Franklin Mutual Recovery Fund
Larry D. Thompson	$10,001-$50,000/Templeton Developing Markets	Over $100,000
	Trust
	Templeton Funds, Inc.
	$10,001-$50,000/Templeton World Fund
	Templeton Income Trust
	$50,001-$100,000/Templeton Global Bond Fund
Constantine D. Tseretopoulos	Over $100,000/Templeton Developing Markets	Over $100,000
	Trust
	Templeton Funds, Inc.
	Over $100,000/Templeton World Fund
	Over $100,000/Templeton Foreign Fund
Robert E. Wade	$50,001-$100,000/Franklin Managed Trust	Over $100,000
	Franklin Value Investors Trust
	$50,001-100,000/Balance Sheet Fund
	$50,001-100,000/Large Cap Value Fund
	Over $100,000/MicroCap Value Fund
	$50,001-$100,000/MidCap Value Fund
	$10,001-$50,000/Small Cap Value Fund
	Franklin Mutual Series Fund Inc.
	Over $100,000/Mutual Beacon Fund
	Over $100,000/Mutual Discovery Fund
	Over $100,000/Mutual European Fund
	Over $100,000/Mutual Shares Fund
	$50,001-$100,000/Mutual Financial Services
	Fund
	Over $100,000/Franklin Mutual Recovery Fund
	$10,001- $50,000/Templeton Developing Markets
	Trust

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John B. Wilson	$50,001-$100,000/Franklin Gold and Precious	Over $100,000
	Metals Fund
	Franklin Strategic Series
	$50,001-$100,000/Natural Resources Fund
	$10,001-$50,000/Small-Mid Cap Growth Fund
Interested Board Members
Charles B. Johnson	Over $100,000/California Tax-Free	Over $100,000
	Income Fund
	Over $100,000/Franklin Capital Growth Fund
	Franklin Custodian Funds, Inc.
	Over $100,000/DynaTech Fund
	Over $100,000/Growth Fund
	Over $100,000/Income Fund
	$50,001-$100,000/U.S. Government
	Securities Fund
	Over $100,000/Utilities Fund
	Franklin California Tax-Free Trust
	Over $100,000/Tax-Exempt Money Fund
	$50,001-$100,000/Franklin Gold and
	Precious Metals Fund
	Franklin Global Trust
	Over $100,000/Fiduciary Large
	Capitalization Growth and Income Fund
	Franklin Investors Securities Trust
	$1-$10,000/Adjustable U.S. Government
	Securities Fund
	$10,001-$50,000/Convertible Securities Fund
	Over $100,000/Floating Rate Daily
	Access Fund
	$1-$10,000/Limited Maturity U.S.
	Government Securities Fund
	$10,001-$50,000/Total Return Fund
	$10,001-$50,000/Franklin Real Estate
	Securities Trust
	Franklin Strategic Series
	$1-$10,000/Small Mid-Cap Fund
	Institutional Fiduciary Trust
	Over $100,000/Money Market Portfolio
	$10,001-$50,000/Templeton China World Fund
	Over $100,000/Templeton Developing
	Markets Trust
	Templeton Funds, Inc.
	$10,001-$50,000/Foreign Fund
	$1-$10,000/Templeton Global Smaller Companies Fund
	Templeton Income Trust $1-$10,000/Templeton Global Bond Fund

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Gregory E. Johnson	Over $100,000/Franklin California Tax-Free	Over $100,000
	Trust
	Franklin Mutual Series Fund Inc.
	Over $100,000/Mutual Discovery Fund
	$10,001-$50,000/Franklin Templeton
	International Trust
	Institutional Fiduciary Trust
	Over $100,000/[to be added]
	Over $100,000/Templeton Developing
	Markets Trust
Rupert H. Johnson, Jr.	Over $100,000/California Tax-Free	Over $100,000
	Income Fund
	Over $100,000/Franklin Capital Growth Fund
	Franklin Custodian Funds, Inc.
	Over $100,000/DynaTech Fund
	Over $100,000/Growth Fund
	Over $10,001-$50,000/Income Fund
	$1-$10,000/Utilities Fund
	Franklin California Tax-Free Trust
	Over $100,000/Tax-Exempt Money Fund
	Over $100,000/Franklin High Income Trust
	Franklin Investors Securities Trust
	$50,001-$100,000/Equity Income Fund
	Franklin Strategic Series
	Over $100,000/Aggressive Growth Fund
	Over $100,000/Small Mid-Cap Fund
	Over $100,000/Flex-Cap Growth Fund
	Over $100,000/Global Healthcare Fund
	Over $100,000/Blue Chip Fund
	Over $100,000/Biotechnology Discovery
	Fund
	$50,001-$100,000/Franklin Templeton
	International Trust
	Institutional Fiduciary Trust
	Over $100,000/Money Market Portfolio
	Templeton Funds, Inc.
	Over $100,000/Templeton World Fund
	Over $100,000/Templeton Foreign Fund
Peter A. Langerman	Franklin Mutual Series Fund Inc.	Over $100,000
	Over $100,000/Mutual Beacon Fund
	Over $100,000/Mutual Discovery Fund
	Over $100,000/Mutual European Fund
	Over $100,000/Mutual Qualified Fund
	Over $100,000/Mutual Shares Fund
	Over $100,000/Mutual Financial Services Fund
	Over $100,000/Franklin Mutual Recovery Fund

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William J. Lippman	Over $100,000/Franklin Managed Trust	Over $100,000
	Franklin Value Investors Trust
	Over $100,000/Balance Sheet Fund
	$50,001-100,000/Large Cap Value Fund
	Over $100,000/MicroCap Value Fund
	$50,001-$100,000/MidCap Value Fund
	Over $100,000/Small Cap Value Fund
	Franklin Mutual Series Fund Inc.
	$10,001-$50,000/Mutual Beacon Fund
	$10,001-$50,000/Mutual Discovery Fund
	$10,001-$50,000/Mutual European Fund
	$10,001-$50,000/Mutual Qualified Fund
	$10,001-$50,000/Mutual Shares Fund
	$10,001-$50,000/Mutual Financial Services Fund
	$10,001-$50,000/Franklin Mutual
	Recovery Fund

   Who are the Executive Officers of the Funds?

     Officers of the Funds are appointed by their respective Boards and serve at the pleasure of the Board. Listed below for the Executive Officers that are common to all or many of the Funds are their names, years of birth and addresses, as well as their positions and length of service with the Funds, and principal occupations during the past five years.

Executive Officers Common to the Funds:

Name, Address and Year of Birth	Position(s) with Funds	Length of Time Served*
Charles B. Johnson	Current Board Member for Boards I	Board member since 1969
	– IV (except for Franklin High Income
	Trust)
	Chairman of the Board of various	Chairman of the Board since 1993
	Funds **
	President and Chief Executive Officer-	President since 1983
	Investment Management for various	Chief Executive Officer – Investment
	Funds***	Management since 2002
	Vice President for various Funds**	Vice President since 1992
Please refer to the table “Interested Board Nominees” for additional information about Mr. Charles B. Johnson.
Rupert H. Johnson, Jr.	Current Board Member for Boards I,	Board member since 1983
	II and IV
	President and Chief Executive Officer	President since 1989 and Chief
	– Investment Management for various	Executive Officer–Investment
	Funds**	Management since 2002
	Vice President for various Funds****	Vice President since 1982

Please refer to the table “Interested Board Nominees” for additional information about Mr. Rupert H. Johnson, Jr. 

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Name, Address and Year of Birth	Position(s) with Funds	Length of Time Served*
James M. Davis (1952)	Chief Compliance Officer and Vice	Chief Compliance Officer since
One Franklin Parkway	President – AML Compliance	2004 and Vice President – AML
San Mateo, CA 94403-1906		Compliance since February 2006
Principal Occupation During Past 5 Years:
Director, Global Compliance, Franklin Resources, Inc.; officer of 46 of the investment companies in Franklin Templeton Investments; and formerly, Director of Compliance, Franklin Resources, Inc. (1994-2001).
Jimmy D. Gambill (1947)	Senior Vice President and Chief	Since 2002
500 East Broward Blvd.	Executive Officer – Finance and
Suite 2100	Administration
Fort Lauderdale, FL 33394-3091
Principal Occupation During Past 5 Years:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 46 of the investment companies in Franklin Templeton Investments.
David P. Goss (1947)	Vice President	Since 2000
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; officer and director of one of the subsidiaries of Franklin Resources, Inc.; and officer of 46 of the investment companies in Franklin Templeton Investments.
Barbara J. Green (1947)	Vice President	Since 2000
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During Past 5 Years:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, LLC, Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC and Templeton/Franklin Investment Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 46 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).
Karen L. Skidmore (1952)	Vice President, Secretary and/	Vice President since February 2006
One Franklin Parkway	or Assistant Secretary (with the
San Mateo, CA 94403-1906	exception of the Templeton Funds)	Secretary since April 2006
Principal Occupation During Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President and Secretary, Templeton Funds Annuity Company; and officer of 30 of the investment companies in Franklin Templeton Investments.
Steven J. Gray (1955)	Secretary of the Mutual Series Funds	Since 2005
One Franklin Parkway
San Mateo, CA 94403-1906

Principal Occupation During Past 5 Years: 

Senior Associate General Counsel, Franklin Templeton Investments; and officer of 41 of the investment companies in Franklin Templeton Investments.

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Name, Address and Year of Birth	Position(s) with Funds	Length of Time Served*
Robert C. Rosselot (1960)	Secretary of the Templeton Funds	Since 2004
500 East Broward Blvd.
Suite 2100 Fort Lauderdale, FL
33394-3091
Principal Occupation During Past 5 Years:
Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and Assistant Secretary, Templeton Investment Counsel, LLC; Vice President, Secretary and Trust Officer, Fiduciary Trust International of the South; and officer of 14 of the investment companies in Franklin Templeton Investments.
Craig S. Tyle (1960)	Vice President	Since 2005
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of 46 of the investment companies in Franklin Templeton Investments; and formerly, Partner, Shearman & Sterling, LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
Galen G. Vetter (1951)	Chief Financial Officer and Chief	Since 2004
500 East Broward Blvd.	Accounting Officer
Suite 2100
Fort Lauderdale, FL 33394-3091
Principal Occupation During Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; officer of 46 of the investment companies in Franklin Templeton Investments; and formerly, Managing Director, RSM McGladrey, Inc. (1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987 and 1991-2004).

*	If an officer has held offices for different Funds for different periods of time, the earliest applicable date is shown.
**	Mr. Charles B. Johnson serves as Chairman of the Board and Mr. Rupert H. Johnson, Jr. serves as President and Chief Executive Officer – Investment Management for the following Funds: Franklin California Tax- Free Trust, Franklin Capital Growth Fund, Franklin Global Trust, Franklin Gold and Precious Metals Fund, Franklin Municipal Securities Trust, Franklin New York Tax-Free Trust, Franklin Real Estate Securities Trust, Franklin Strategic Mortgage Portfolio, Franklin Strategic Series, Franklin Tax-Free Trust, Franklin Templeton Fund Allocator Series, Franklin Templeton Global Trust, Franklin Templeton International Trust, Franklin Templeton Money Fund Trust, Institutional Fiduciary Trust and The Money Market Portfolios. Mr. Charles B. Johnson also serves as Chairman of the Board of Franklin Investors Securities Trust and Chairman of the Board and Vice President of each Templeton Fund. Mr. Rupert H. Johnson, Jr. also serves as President and Chief Executive Officer – Investment Management for Franklin High Income Trust.
***	Mr. Charles B. Johnson serves as President and Chief Executive Officer – Investment Management for the following Funds: Franklin California Tax-Free Income Fund, Inc., Franklin Custodian Funds, Inc. and Franklin New York Tax-Free Income Fund.
****	Mr. Rupert H. Johnson, Jr. serves as Vice President of Franklin Investors Trust, Franklin Managed Trust, Franklin New York Tax-Free Income Fund, Franklin Value Investors Securities Trust and each Templeton Fund.

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Additional Executive Officers

     In addition to the common Executive Officers listed above, each Fund has additional Executive Officers which are set forth in Exhibit F – Additional Executive Officers to this proxy statement. The additional Executive Officers often serve in the same capacity for multiple Funds. If an Executive Officer has held an office for different Funds for different periods of time, the earliest applicable date is shown.

   What are the Standing Committees of the Boards?

     In addition to the Nominating Committee, each Board has a standing Audit Committee, which is discussed below in this proxy statement under “AUDIT COMMITTEES.”

Also, the Boards of the Mutual Series Funds each have a Compensation and Performance Committee (together, the “Compensation Committee”). The Compensation Committee is generally responsible for recommending compensation and meeting fees for Independent Board Members and for evaluating their Board performance. The Compensation Committee also is generally responsible for administering the provisions of the retirement plan for the Independent Board Members of Franklin Mutual Series Fund Inc., which was terminated for new Independent Board Members in November 1996, but remains applicable to Independent Board Members elected prior thereto, subject to the vesting provisions of the plan. The Compensation Committee is composed of Edward I. Altman, Ann Torre Bates, Charles Rubens II (Chair) and Robert E. Wade. The Compensation Committees met one time during the most recent fiscal year.

THE BOARD OF EACH FUND UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THE ELECTION OF EACH
OF THE NOMINEES TO THE BOARD.

PROPOSAL 2: TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION THAT PROVIDES FOR THE REORGANIZATION OF THE FUND TO A DELAWARE STATUTORY TRUST

The Board of each of the Non-Delaware Funds unanimously recommends that the shareholders of such Fund approve an Agreement and Plan of Reorganization (a “Delaware Plan”), substantially in the form attached to this Proxy Statement as Exhibit G, that would change the state and form of organization of each Non-Delaware Fund that is currently organized as a Massachusetts business trust or Maryland corporation. This proposed change calls for the reorganization of these Non-Delaware Funds into newly formed Delaware statutory trusts (each, a “DE Trust”). Each proposed reorganization will be referred to throughout this proxy statement as a “DE Reorganization.” To implement the DE Reorganizations, the Boards of the Non-Delaware Funds have approved the Delaware Plans, which contemplate the continuation of the current business of each Non-Delaware Fund in the form of a corresponding new DE Trust.

   What will the DE Reorganizations mean for the Non-Delaware Funds and their shareholders?

     If a Delaware Plan is approved by shareholders of the applicable Non-Delaware Fund and the DE Reorganization is implemented for that Non-Delaware Fund, the corresponding DE Trust would have the same investment goal(s), policies and restrictions as the Non-Delaware Fund (including, if approved by shareholders at the Meeting, any amended or eliminated fundamental investment restrictions described in Proposals 4-6 in this proxy statement). Each DE Trust’s Board, including any persons elected under Proposal 1 in this proxy statement, and the officers of the DE Trust would be the same as those of the corresponding Non-Delaware Fund, and would operate the DE Trust in essentially the same manner as they previously operated the corresponding Non-Delaware Fund. Thus, on the effective date of a DE Reorganization, you would hold an interest in the applicable DE Trust that is equivalent to your interest in the corresponding Non-Delaware Fund. For all practical purposes, a shareholder’s investment in a Non-Delaware Fund would not change.

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   Why are the Boards of the Non-Delaware Funds recommending approval of the Delaware Plans and the DE Reorganizations?

     The Boards of the Non-Delaware Funds have determined that investment companies formed as Delaware statutory trusts have certain advantages over investment companies organized as Massachusetts business trusts or Maryland corporations. Under Delaware statutory trust law, investment companies are able to simplify their operations by reducing administrative burdens. For example, the Delaware procedures allow a Delaware statutory trust to file a one-page Certificate of Trust with the State of Delaware, which rarely needs to be amended. In contrast, Massachusetts business trusts are required to file an Officer’s Certificate with The Commonwealth of Massachusetts with resolutions adopted by the Board of the particular Non-Delaware Fund each time that the Board determines to amend the Declaration of Trust (for example, to designate and create additional classes of shares of the Non-Delaware Fund or to change or eliminate classes of shares of the Non-Delaware Fund). Maryland corporations likewise must file any amendments or supplements to their articles of incorporation with the Maryland Secretary of State (for example, to increase the amount of authorized shares of stock or to designate and create additional classes or series of shares). Such filings and any related filing fees are not required in Delaware.

     Another advantage of Delaware statutory trusts compared to Massachusetts business trusts is greater certainty regarding limiting the liability of shareholders for obligations of the statutory trust or its trustees. The Delaware Statutory Trust Act (the “DSTA”) entitles shareholders to the same limitation of personal liability extended to stockholders of Delaware for-profit corporations (generally limited to the full subscription price of the stock). Moreover, Massachusetts business trust law does not explicitly provide for the separation of assets and liabilities among separate series of a Massachusetts business trust. The DSTA, by contrast, provides a mechanism so that the liabilities of a particular series are only enforceable against the assets of that series and not against the assets of the trust generally or any of its other series, and none of the liabilities of the trust generally or any of the other series are enforceable against the assets of that series.

     Funds organized as Delaware statutory trusts also have greater flexibility in structuring shareholder voting rights and shareholder meetings. For example, under Maryland law, certain fund transactions, such as mergers, certain reorganizations and liquidations, are subject to mandatory shareholder votes, some of which may require a super-majority vote. The DSTA allows a fund to provide in its governing documents that each of these types of transactions may go forward with only trustee approval; all are subject, however, to any special voting requirements of the 1940 Act. Finally, Maryland corporate law imposes more stringent record date, notice, quorum and adjournment provisions than the DSTA, which may cause shareholder meetings to be more costly and may make obtaining any necessary shareholder approvals more difficult.

     Most of the Franklin Templeton funds are now or are likely to become Delaware statutory trusts. To the extent that the boards and management of the Franklin Templeton funds, including the Boards and management of the Funds, have to deal with the law of a single state, rather than the laws of many states, efficiencies may be achieved, both in terms of reduced costs in determining the requirements of law in unique circumstances and the certainty of operating routinely in a familiar regulatory environment.

     Finally, Delaware has a well-established body of legal precedent in the area of corporate law that may be relevant in deciding issues pertaining to a Delaware statutory trust. This could benefit a DE Trust and its shareholders by, for example, making litigation involving the interpretation of provisions in the DE Trust’s governing instruments less likely or, if litigation should be initiated, less burdensome or expensive. Exhibits H-1 and H-2 to this proxy statement include a more complete description of the advantages of the Delaware statutory trust form of organization and the differences from Massachusetts business trusts and Maryland corporations.

   What are the procedures and consequences of the DE Reorganizations?

     Upon completion of a DE Reorganization, the DE Trust will continue the business of the corresponding Non-Delaware Fund with the same investment goals and policies as those existing on the date of the DE Reorganization (including those approved in Proposals 4-6 of this proxy statement), and will hold the same portfolio of securities previously held by the corresponding Non-Delaware Fund. Each DE Trust will be operated under substantially identical overall management, investment management, distribution and administrative arrangements as those of the

33

corresponding Non-Delaware Fund. As the successor to the Non-Delaware Fund’s operations, the corresponding DE Trust will adopt the Non-Delaware Fund’s registration statement under the federal securities laws with amendments to show the new Delaware statutory trust structure.

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

     The applicable Board may terminate the Delaware Plan and abandon the DE Reorganization at any time prior to the effective date of the DE Reorganization if it determines that proceeding with the DE Reorganization is inadvisable and not in the best interests of Fund shareholders. If a DE Reorganization is not approved by shareholders of a Non-Delaware Fund, or if the applicable Board abandons the DE Reorganization, the Non-Delaware Fund will continue to operate as a Massachusetts business trust or Maryland corporation, as applicable. If a DE Reorganization is approved by shareholders, it is expected to be completed no later than four months after the end of the applicable Non-Delaware Fund’s fiscal year in which shareholders approve the DE Reorganization.

   What effect will the DE Reorganizations have on the current investment management agreements?

     As a result of the DE Reorganizations, each DE Trust will be subject to a new investment management agreement or agreements between the DE Trust and the Investment Manager(s) (and, if applicable, a new sub-investment management agreement or agreements). The new agreement(s) will be substantially identical to the current agreement(s) with the Investment Manager(s) (and sub-investment manager(s), if applicable).

   What effect will the DE Reorganizations have on the shareholder servicing agreements and distribution plans?

     Each DE Trust will enter into agreements with Franklin Templeton Investor Services, LLC for transfer agency, dividend disbursing, shareholder servicing and accounting services. These new agreements will be substantially identical to the agreements currently in place for the corresponding Non-Delaware Fund. Franklin Templeton Distributors, Inc. will serve as the distributor for the shares of each DE Trust under a separate distribution agreement that will be substantially identical to the distribution agreement currently in effect for the corresponding Non-Delaware Fund.

     As of the effective date of each DE Reorganization, the applicable DE Trust will have distribution plans under Rule 12b-1 of the 1940 Act relating to the distribution of the classes of shares that are substantially identical to the distribution plans currently in place for the corresponding classes of shares of the corresponding Non-Delaware Fund.

   What is the effect of shareholder approval of a Delaware Plan?

     Under the 1940 Act, the shareholders of an investment company must elect trustees and approve the initial investment management agreement for a fund. Theoretically, if a Delaware Plan is approved for a Non-Delaware Fund and that Non-Delaware Fund is reorganized as a DE Trust, the shareholders of that Non-Delaware Fund as a DE Trust would need to vote on these two items in order to comply with the 1940 Act.

     In order to comply with these requirements and consistent with SEC guidance, shareholder approval of a Delaware Plan will also constitute, for purposes of the 1940 Act, shareholder approval of: (1) the election of the Board members of a Non-Delaware Fund who are in office on the effective date of the DE Reorganization

34

(including, if elected, any new Board nominee(s)) as trustees of the corresponding DE Trust; and (2) the new investment management agreement(s) (and, if applicable, sub-investment management agreement(s)) for the DE Trust that are substantially identical to the agreements currently in place for that Non-Delaware Fund.

     If a Delaware Plan is approved by a Non-Delaware Fund’s shareholders, then this initial shareholder approval for the new DE Trust will be arranged by the Non-Delaware Fund (1) purchasing one share of each series of the corresponding DE Trust; (2) as sole shareholder, voting “FOR” the election of Board members and the initial investment management agreement(s) (and, if applicable, sub-investment management agreement(s)); and (3) then redeeming its shares, all prior to the completion of the DE Reorganization. These actions will enable a 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 each DE Trust?

     Each DE Trust was formed as a Delaware statutory trust on October 18, 2006, pursuant to Delaware law. Each DE Trust is authorized to issue an unlimited number of shares of beneficial interest, without par value, of the same series and classes, if any, as the corresponding Non-Delaware Fund.

     As of the effective date of each DE Reorganization, shares of the respective series and classes of a Non-Delaware Fund and the corresponding DE Trust will: (1) have similar distribution and redemption rights; (2) be fully paid and non-assessable; (3) have similar conversion rights; and (4) have no preemptive or subscription rights. Shares of the respective classes of a DE Trust and the corresponding Non-Delaware Fund will have similar voting and liquidation rights and have one vote per share and a proportionate fractional vote for each fractional share. Neither a DE Trust nor the corresponding Non-Delaware Fund provides for cumulative voting in the election of its Board members. A DE Trust also will have the same fiscal year as the corresponding Non-Delaware Fund.

   Who will bear the expenses of the DE Reorganizations?

     Since the DE Reorganizations will benefit the Non-Delaware Funds and their shareholders, the Board of each Non-Delaware Fund has authorized that the expenses incurred in the applicable DE Reorganization, including the costs associated with soliciting proxies, shall be paid by the corresponding Non-Delaware Fund, whether or not the DE Reorganization is approved by shareholders or completed.

   Are there any tax consequences for shareholders?

     Each DE 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 DE Reorganization is completed. Generally, the basis and holding period of your shares in a DE Trust will be the same as the basis and holding period of your shares in the corresponding Non-Delaware Fund. Consummation of each DE Reorganization is subject to receipt of a legal opinion from the law firm of Stradley Ronon Stevens & Young, LLP, counsel to the corresponding DE Trust and Non-Delaware Fund, that, under the Code, the exchange of assets of the Non-Delaware Fund for the shares of the DE Trust, the transfer of such shares to the shareholders of the Non-Delaware Fund and the dissolution of the Non-Delaware Fund pursuant to the Delaware Plan will not give rise to the recognition of a gain or loss for federal income tax purposes to the Non-Delaware Fund, the DE Trust or either of their shareholders.

   What is the effect of my voting “For” a Delaware Plan?

     By voting “FOR” your Non-Delaware Fund’s Delaware Plan, you will be agreeing to become a shareholder of a mutual fund organized as a Delaware statutory trust, with Board members, investment management agreement(s), distribution plans and other service arrangements that are substantially identical to those in place for the Non-Delaware Fund.

THE BOARDS OF THE NON-DELAWARE FUNDS UNANIMOUSLY RECOMMEND
A VOTE “FOR” PROPOSAL 2

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PROPOSAL 3: TO APPROVE AN AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST

     The Boards of each of the original Delaware Funds unanimously recommend that the shareholders of such Funds approve an Amended and Restated Agreement and Declaration of Trust (a “New Declaration”) for such Fund, substantially in the form attached to this proxy statement as Exhibit I. Each original Delaware Fund was formed as a Delaware statutory trust pursuant to a trust instrument (each, a “Current Declaration”); however, other Franklin Templeton funds that either recently have been created as Delaware statutory trusts or that have recently been (or will in the future be) reorganized into new Delaware statutory trusts have adopted Agreements and Declarations of Trust substantially similar to the New Declaration. The New Declaration is a more modern trust instrument.

   Why are the Boards recommending approval of the New Declaration?

     The Boards of the original Delaware Funds believe that there are advantages to adopting the New Declaration for each of those Funds. First, adopting an agreement and declaration of trust that is substantially identical for all Franklin Templeton funds that are Delaware statutory trusts would promote uniformity of fund administration and therefore could make fund compliance, legal interpretation and corporate governance less burdensome and costly for the original Delaware Funds and their shareholders.

     The New Declaration is also intended to give the Board of an original Delaware Fund more flexibility and, subject to applicable requirements of the 1940 Act and Delaware law, broader authority to act. This increased flexibility may allow the Board to react more quickly to changes in competitive and regulatory conditions and, as a consequence, may allow the original Delaware Funds to operate in a more efficient and economical manner. To the extent that the boards and management of all Franklin Templeton funds, including the Boards and management of the original Delaware Funds, analyze and interpret substantially similar governing documents, rather than multiple and varied governing documents, efficiencies may be achieved, both in terms of reduced costs in determining the requirements of law in unique circumstances and the certainty of operating routinely in a familiar trust environment.

     Adoption of the New Declaration will not alter in any way the Board members’ existing fiduciary obligations to act with due care and in the shareholders’ interests.

   How do the Current Declarations compare to the New Declaration?

     A comparison of some of the more significant provisions of the New Declaration and the Current Declarations is included in Exhibit J to this proxy statement, which is entitled “A Comparison of Governing Documents.” The New Declaration amends the Current Declarations in a number of ways, including (i) the expanded ability of the Board of Trustees, subject to applicable federal and state law, to approve the liquidation or reorganization of the Trust or a Fund without shareholder approval, (ii) changing the vote required by shareholders to approve certain matters, and (iii) clarification of the limitation of liability for the Trust’s officers and agents and the Trust’s ability to indemnify its agents. The comparison attached as Exhibit J summarizes some of the more significant amendments to the Current Declarations effected by the New Declaration.⁷ In addition to the changes described above and in Exhibit J, there are other substantive and stylistic differences between the New Declaration and the Current Declarations. The discussion above and in Exhibit J is qualified in its entirety by reference to the New Declaration itself, a form of which is attached as Exhibit I to this proxy statement.

     Adoption of the New Declaration will not result in any changes in any of the original Delaware Funds’ officers or Board members (except as elected pursuant to Proposal 1 in this proxy statement), in the investment goals, policies or strategies described in the original Delaware Funds’ current prospectuses and statements of additional information, in the original Delaware Funds’ service providers or in the fees or expenses incurred by the original Delaware Funds. If this Proposal is not approved for an original Delaware Fund, then that original Delaware Fund’s Current Declaration will remain unchanged and in effect.
____________________

7 Although it contains many of the same provisions as the New Declaration for the open-end Funds, the proposed New Declaration for Franklin Mutual Recovery Fund contains several additional and alternative provisions due to its structure as a closed-end interval fund. The New Declaration for Franklin Mutual Recovery Fund is included as Exhibit K to this proxy statement

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THE BOARD OF EACH ORIGINAL DELAWARE FUND UNANIMOUSLY RECOMMENDS
A VOTE “FOR” PROPOSAL 3

INTRODUCTION TO PROPOSALS 4 AND 5

     Since the time when many of the Funds were created, certain legal and regulatory requirements applicable to investment companies have changed.⁸ As a result, many of the Funds are subject to a number of fundamental investment restrictions that (i) are more restrictive than those required under present law; (ii) are no longer required by the federal securities laws, interpretations of the SEC, or state securities laws and regulations, as preempted by the National Securities Markets Improvement Act of 1996 (“NSMIA”); (iii) were adopted in response to regulatory, business or industry conditions that no longer exist; or (iv) vary only slightly (and not substantively) from what are now considered to be the standard forms of investment restrictions for the Franklin Templeton funds. Under the 1940 Act, “fundamental” investment restrictions may be changed or eliminated only if shareholders approve such action. The Funds’ Boards are recommending that shareholders approve the amendment or elimination of certain fundamental investment restrictions for the Funds principally to (i) update or eliminate those investment restrictions that are more restrictive than is currently required, are no longer required under the federal securities laws or are not required to be treated as “fundamental;” and (ii) conform and standardize each Fund’s fundamental investment restrictions to those of the most recently created Franklin Templeton funds and across substantially all Franklin Templeton funds.

     The Boards and the Investment Managers believe that there are several advantages to revising the Funds’ fundamental investment restrictions at this time. First, by reducing the total number of fundamental investment restrictions and/or updating their language now, the Funds may be able to minimize the costs and delays associated with obtaining future shareholder approval to revise fundamental investment restrictions that have become outdated or inappropriate. Second, the Boards and the Investment Managers believe that an Investment Manager’s ability to manage a Fund’s assets in a changing investment environment may be enhanced because the Fund, to the extent it is currently subject to more restrictive or outdated restrictions, will have greater investment management flexibility to respond to market, industry, regulatory or technical changes by seeking Board, rather than shareholder, approval when necessary to revise certain investment restrictions or strategies. Finally, the standardized fundamental investment restrictions are expected to enable the Funds and their service providers to more efficiently and more easily monitor portfolio compliance across the entire Franklin Templeton fund complex and help avoid conflicts among restrictions whose language varies only slightly from one to another.

     The proposed standardized fundamental investment restrictions cover those areas for which the 1940 Act requires the Funds to have fundamental restrictions and are substantially similar to the fundamental investment restrictions of other Franklin Templeton funds that have recently amended their fundamental investment restrictions or have recently been created. Except as discussed below, the proposed standardized investment restrictions will not affect any Fund’s investment goal or its current principal investment strategies. The Boards and the Investment Managers anticipate that the proposed changes in the fundamental investment restrictions will not materially change the manner in which the Funds are currently managed and operated, except as described below under Sub-Proposal 4h with respect to Franklin Double Tax-Free Income Fund, one series of Franklin Tax-Free Trust. Although the proposed amendments will give some Funds greater flexibility to respond to possible future investment opportunities, the Boards and the Investment Managers also do not anticipate that the changes, individually or in the aggregate, will result in a material change in the current level of investment risk associated with an investment in a Fund at this time.

     However, should an Investment Manager believe that the way a Fund is managed in the future should be modified, the Investment Manager would continue to request Board approval of any such material modification. In addition, any necessary or appropriate modifications to the risk disclosures to shareholders, including amending the Fund’s prospectus and statement of additional information (“SAI”), would be made.

     If a Sub-Proposal within Proposal 4 or Proposal 5 is not approved by shareholders of a Fund, the current fundamental investment
restriction(s) to which such Sub-Proposal or Proposal relates will remain in effect for that Fund. Whether or not shareholders of one Fund approve a Sub-Proposal under Proposal 4 or Proposal 5 will not affect whether such Sub-Proposal or Proposal 5 is approved for another Fund.
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8 For purposes of the discussion in Proposals 4, 5 and 6, the term “Fund” means each separate series (if any) of a Fund.

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PROPOSAL 4: TO APPROVE AMENDMENTS TO CERTAIN OF THE FUNDS’ FUNDAMENTAL INVESTMENT RESTRICTIONS (this Proposal involves separate votes on Sub-Proposals 4a–4h)

Each Fund’s existing fundamental investment restrictions that are proposed to be amended are listed in Exhibit L-1, which is entitled “Fundamental Investment Restrictions Proposed to be Amended,” with the text of the current restrictions set forth in Exhibit L-2 to this proxy statement. Shareholders of each applicable Fund are requested to vote separately on each Sub-Proposal in Proposal 4 that is applicable to their Fund. Any Sub-Proposal that is approved by shareholders of a Fund will be effective for that Fund as of the date that shareholders are notified that the change will be made through either (a) a supplement to such Fund’s prospectus and/or SAI or (b) revisions to such documents at the time of the annual update to the Fund’s registration statement, reflecting such changes to the Fund’s fundamental investment restrictions. The Boards of the applicable Funds unanimously recommend a vote “FOR” each Sub-Proposal.

Sub-Proposal 4a: To amend the fundamental investment restrictions regarding borrowing.

     The 1940 Act imposes certain limitations on the borrowing activities of investment companies. In addition, a fund’s borrowing limitations must be fundamental. The 1940 Act 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, under certain circumstances, might have a claim to the fund’s assets that would take precedence over the claims of shareholders upon redemption or liquidation.

     Under the 1940 Act, an open-end fund may borrow up to 33 1/3% of its total assets (including the amount borrowed) from banks and may borrow up to an additional 5% of its total assets for temporary purposes from any other person. Generally, a loan is considered temporary if it is repaid within sixty days. Funds typically borrow money to meet redemptions or for other short-term cash needs in order to avoid forced, unplanned sales of portfolio securities. This technique allows a fund greater flexibility by allowing its investment manager to buy and sell portfolio securities primarily for investment or tax considerations, rather than for cash flow considerations.

The proposed, standardized fundamental investment restriction regarding borrowing is as follows:

[A Fund may not:] Borrow money, except to the extent permitted by the 1940 Act, or any rules, exemptions or interpretations thereunder that may be adopted, granted or issued by the SEC.

   What effect will amending the current borrowing restrictions have on the Funds?

     The current investment restrictions of the Funds relating to borrowing generally either (i) are substantially the same as the proposed standardized investment restriction on borrowing set forth above; or (ii) limit the amount of money that may be borrowed by a Fund to a certain percentage of that Fund’s total assets that might be different from the 1940 Act percentage and/or the purposes for which the Fund may borrow money. For example, the investment restrictions of some Funds provide that the Funds may only borrow money for temporary or emergency purposes in order to meet shareholder redemption requests. The proposed investment restriction would prohibit borrowing money, except to the extent permitted by the 1940 Act or any rule, exemption or interpretation thereunder issued by the SEC. By so amending the investment restriction, a Fund would not be unnecessarily limited if its Investment Manager determines that borrowing is in the best interests of the Fund and its shareholders.

     The proposed investment restriction would also permit certain Funds, which are otherwise currently limited as to the entities from whom they may borrow, to borrow money from affiliated investment companies or other affiliated entities. In September 1999, the SEC granted an exemptive order to the Franklin Templeton funds permitting the Funds to borrow money from other Franklin Templeton funds (the “Inter-Fund Lending and Borrowing Order”). Some current investment restrictions regarding borrowing do not allow a Fund to take advantage of the relief granted in the Inter-Fund Lending and Borrowing Order. The proposed borrowing restriction would permit a Fund, under certain circumstances and in accordance with the Inter-Fund Lending and Borrowing Order, to borrow money from other Franklin Templeton funds at rates that are more favorable than the rates that the Fund would receive if it borrowed from banks or other lenders. The proposed borrowing restriction would also permit a Fund to borrow from other affiliated entities, such as its Investment Manager, under emergency market

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conditions that might prompt a significant increase in redemptions should the SEC permit investment companies to engage in such borrowing in the future, such as it did in response to the emergency market conditions that existed immediately after the events of September 11, 2001.

     Finally, some Funds’ investment restrictions regarding borrowing include a provision that such Fund will not make any additional investments while the Fund’s borrowings exceed 5% of its total assets. Many Funds used to include this language because of comments from the SEC Staff regarding a fund’s ability to reserve the right to borrow money and the possibility of a fund’s engaging in transactions involving leverage.”⁹ However, such comments are generally no longer given by the SEC Staff, and the fact that a Fund is not subject to this type of restriction does not mean that a Fund will in fact engage in transactions involving leverage. Currently, none of the Funds intend to use leverage as part of their investment strategies.

     Because the proposed borrowing restriction would provide certain Funds with additional borrowing flexibility, to the extent that a Fund uses such flexibility in the future, the Fund may be subject to some additional costs and risks inherent in borrowing, such as reduced total return and increased volatility. The additional costs and risks to which the Funds may be exposed are limited, however, by the borrowing limitations imposed by the 1940 Act (principally Section 18 thereof) and any rule, exemption or interpretation thereof that may be applicable. In addition, no Fund currently anticipates changing its current policy with respect to its borrowing activities.

     For many Funds, their current fundamental investment restriction relating to borrowing is combined with restrictions relating to mortgaging, pledging or hypothecating the Funds’ assets and/or issuing senior securities. The adoption of this Sub-Proposal by a Fund would result in the separation of these investment restrictions for a Fund. The restrictions on issuing senior securities are recommended to be amended. (See Sub-Proposal 4f below.) The restrictions on mortgaging, pledging or hypothecating a Fund’s assets are recommended to be eliminated. (See Proposal 5 below.)

Sub-Proposal 4b: To amend the fundamental investment restrictions regarding underwriting.

     Under the 1940 Act, a Fund’s policy concerning underwriting is required to be fundamental. Under the federal securities laws, a person or company generally is considered to be an underwriter if the person or company participates in the public distribution of securities of other issuers, which involves purchasing the securities from the issuer with the intention of re-selling the securities to the public. From time to time, an investment company may purchase securities in a private transaction for investment purposes and later sell or redistribute the securities to institutional investors. Under these or other circumstances, the Fund could possibly be considered to be within the technical definition of an underwriter under the federal securities laws. SEC Staff interpretations have clarified, however, that re-sales of privately placed securities by institutional investors, such as the Funds, do not necessarily make the institutional investor an underwriter in these circumstances. In addition, under certain circumstances, a Fund may be deemed to be an underwriter of its own securities.

The proposed standardized fundamental investment restriction regarding underwriting is as follows:

[A 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.

   What effect will amending the current underwriting restriction have on the Funds?

     The Funds’ current fundamental investment restrictions relating to underwriting prohibit the Funds from acting as underwriters. Some of these investment restrictions make it clear that a Fund may sell portfolio securities that the Fund owns and that the Fund may sell its own shares but not be deemed to be an underwriter.

     The proposed fundamental investment restriction relating to underwriting is substantially similar to the current investment restrictions by prohibiting each Fund from engaging in underwriting. The proposed investment restriction, however, clarifies that a Fund may re-sell portfolio securities that the Fund owns and that it may also sell its own shares. It is not anticipated that the adoption of the proposed investment restriction would involve additional material risk to any Fund or affect the way any Fund is currently managed or operated.
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9 A Fund’s use of leverage could include a Fund’s borrowing of money to purchase additional securities without being required to make payment until a later time.

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     For some of the Funds, their current fundamental investment restriction relating to underwriting is combined with other investment restrictions, including investment restrictions relating to issuing senior securities and/or investing in illiquid or restricted securities. The adoption of this Sub-Proposal would result in the separation of the Funds’ underwriting restriction from these other fundamental investment restrictions, including any investment restriction relating to issuing senior securities. (See Sub-Proposal 4f below.) The fundamental investment restrictions on purchasing restricted and illiquid securities are recommended to be eliminated. (See Proposal 5 below.)

Sub-Proposal 4c: To amend the fundamental investment restrictions regarding lending.

     Under the 1940 Act, a fund must describe, and designate as fundamental, its policy with respect to making loans. In addition to a loan of cash, the term “loan” may, under certain circumstances, be deemed to include certain transactions and investment-related practices. Among those transactions and practices are the lending of portfolio securities, the purchase of certain debt instruments and entering into repurchase agreements.¹⁰

Under SEC Staff interpretations, lending by an investment company, under certain circumstances, may also give rise to issues relating to the issuance of senior securities. To the extent that a Fund enters into lending transactions under these limited circumstances, the Fund will continue to be subject to the limitations imposed under the 1940 Act regarding the issuance of senior securities. (See Sub-Proposal 4f below.)

The proposed, standardized fundamental investment restriction regarding lending is as follows:

[A Fund may not:] Make loans if, as a result, more than 33 1/3% of its total assets would be lent to other persons, including other investment companies to the extent permitted by the 1940 Act or any rules, exemptions or interpretations thereunder that may be adopted, granted or issued by the SEC. This limitation does not apply to (1) the lending of portfolio securities, (2) the purchase of debt securities, other debt instruments, loan participations and/or engaging in direct corporate loans in accordance with its investment goals and policies, and (3) repurchase agreements to the extent the entry into a repurchase agreement is deemed to be a loan.

What effect will amending the current lending restrictions have on the Funds?

     The Funds’ current investment restrictions regarding lending generally prohibit the Funds from making loans, except that most of the Funds may purchase debt securities, enter into repurchase agreements and lend their portfolio securities. While generally all Funds’ current investment restrictions permit the purchase of certain debt securities, some Funds may not invest in certain types of debt securities sold in private placement transactions, loan participations or engage in direct corporate loans, even if such investments would otherwise be consistent with the Fund’s investment goal and policies. In addition, the lending restrictions for a few Funds, such as Franklin U.S. Government Securities Fund, and the various Funds within Franklin Strategic Series, either do not permit the lending of portfolio securities or impose limitations or conditions on a Fund’s ability to lend portfolio securities.

     The proposed standardized fundamental investment restriction on lending, rather than prohibiting lending to other persons, places an overall limit on such lending and provides that the Funds may not make loans if, as a result, more than 33 1/3% of its total assets would be lent to other persons (including other investment companies as permitted by the 1940 Act and any exemptions therefrom). The proposed standardized restriction also standardized the list of exclusions from the restriction. Excluded from the new proposed lending restriction are (1) the lending of portfolio securities; (2) the purchase of debt securities, other debt instruments, loan participations and/or engaging in direct corporate loans in accordance with a Fund’s investment goals and policies; and (3) repurchase agreements to the extent the entry into a repurchase agreement is deemed to be a loan. The proposed investment restriction provides some of the Funds with greater flexibility by permitting them to invest in non-publicly distributed debt securities, loan participations and direct corporate loans. It should be noted that, to the extent that these investments are illiquid, each Fund (other than Franklin Mutual Recovery Fund, which is a closed-end fund) has a non-fundamental

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10 A repurchase agreement involves a Fund’s purchase of certain high-quality, liquid obligations with a simultaneous agreement by the seller of those securities to repurchase them at the original purchase price plus accrued interest.

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investment restriction, consistent with the SEC Staff’s current position on illiquid securities, which prohibits such open-end Fund from investing more than 15% of its net assets (10% for the money market funds) in illiquid securities (the “Illiquid Securities Restriction”).¹¹

By permitting lending up to a stated percentage, the proposed fundamental investment restriction also extends to all Funds additional flexibility to make loans to other persons, including affiliated investment companies, as contemplated by the Inter-Fund Lending and Borrowing Order discussed above under “Sub-Proposal 4a: To amend the fundamental investment restrictions regarding borrowing.” These lending transactions may include terms that are more favorable than those which would otherwise be available from lending institutions. Under some of the current investment restrictions, some Funds may not be able to take advantage of the relief granted in the Inter-Fund Lending and Borrowing Order to make loans to other Funds. However, in no event would a Fund be able to loan more than one-third (1/3) of its total assets. This additional lending ability may also permit a Fund to take advantage of investment strategies or instruments developed in the future which may be considered by the SEC Staff to constitute a “loan.”

Because the proposed lending restriction would provide some Funds with greater flexibility to invest in non-publicly distributed debt securities, loan participations and other direct corporate loans, such Funds may be exposed to additional risks associated with such securities, including general illiquidity, greater price volatility and the possible lack of publicly available information about issuers of privately placed debt obligations and loan counterparties. However, these risks will be somewhat offset by the non-fundamental Illiquid Securities Restriction. Thus, the Boards and the Investment Managers believe that the risks posed by these investments should be relatively modest. In addition, to the extent a Fund that currently may not lend its portfolio securities or is limited in doing so, begins or expands its portfolio lending activities, such Fund would benefit from any income generated by such lending but would also be subject to the risks associated with securities lending, including the risks of delay in recovery or loss of rights in collateral in the event of a default or insolvency of the borrower of the securities.

Sub-Proposal 4d: To amend the fundamental investment restrictions regarding investments in real estate.

     Under the 1940 Act, a fund’s restriction regarding investments in real estate must be fundamental. The 1940 Act does not prohibit an investment company from investing in real estate, either directly or indirectly. The current fundamental investment restrictions relating to real estate generally prohibit the Funds from investing in real estate, although most Funds may invest in marketable securities secured by real estate or interests therein or issued by companies or other entities which invest in real estate or interests therein.

The proposed standardized fundamental investment restriction regarding investing in real estate is as follows:

[A Fund may not:] Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from (i) purchasing or selling securities or instruments secured by real estate or interests therein, securities or instruments representing interests in real estate or securities or instruments of issuers that invest, deal or otherwise engage in transactions in real estate or interests therein, and (ii) making, purchasing or selling real estate mortgage loans.

What effect will amending the current real estate restrictions have on the Funds?

     The proposed standardized investment restriction would permit the Funds to continue to invest in marketable securities secured by real estate or interests therein. In addition, the proposed investment restriction would expand and clarify each Fund’s ability to invest in securities or other instruments of issuers that invest, deal or otherwise engage in transactions in real estate or interests therein, including real estate limited partnership interests, and real estate related securities or instruments for which there is a limited or no market. The proposed restriction would also permit a Fund to hold and sell real estate acquired by the Fund as a result of owning a security or other instrument.

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11 An “illiquid security” is one that cannot be sold by a Fund within seven days for a price that approximates the value that the Fund has placed on that security on its books.

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     Modifying the Funds’ real estate restrictions may increase a Fund’s exposure to certain risks inherent to investments in real estate, such as relative illiquidity, difficulties in valuation and greater price volatility, to the extent that a Fund invests or increases its investments in real estate related securities. Under the proposed standardized real estate restriction, a Fund will not be limited to investments in “marketable” securities secured by real estate or interests therein, which would permit the Fund to invest in illiquid real estate related securities (to the extent it is not already permitted to do so). To the extent that these instruments are illiquid, they will be subject to the Illiquid Securities Restriction (except Franklin Mutual Recovery Fund, which is not limited as to its investments in illiquid securities). However, it is not currently intended that any Fund would materially change its investment strategies as they relate to real estate or interests therein. Thus, it is not currently anticipated that the proposed amendments to the investment restrictions relating to real estate would involve additional material risk at this time to any Fund.

     Some current fundamental investment restrictions relating to real estate are combined with fundamental investment restrictions relating to investing in commodities, other investment companies, and/or investments in oil, gas and other mineral development programs. The adoption of this Sub-Proposal would result in separating a Fund’s restriction regarding investments in real estate from these other fundamental investment restrictions, including any fundamental investment restriction on investments in commodities. (See Sub-Proposal 4e below.) The restrictions on investing in other investment companies and on investing in oil, gas and mineral development programs are recommended to be eliminated. (See Proposal 5 below.)

Sub-Proposal 4e: To amend the fundamental investment restrictions regarding investments in commodities.

     Under the 1940 Act, a fund’s investment policy relating to the purchase and sale of commodities must be fundamental. The most common types of commodities are physical commodities such as wheat, cotton, rice and corn. Under the federal securities and commodities laws, certain financial instruments such as futures contracts and options thereon, including currency futures, stock index futures or interest rate futures, may, under limited circumstances, also be considered to be commodities. Funds typically invest in futures contracts and related options on these and other types of commodity contracts for hedging purposes, to implement a tax or cash management strategy, or to enhance returns.

     The proposed standardized fundamental investment restriction regarding investments in commodities is as follows:

[A Fund may not:] Purchase or sell physical commodities, unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from (i) engaging in transactions involving currencies and futures contracts and options thereon or (ii) investing in securities or other instruments that are secured by physical commodities or [with respect to Franklin Gold and Precious Metals Fund only] (iii) investing in gold bullion and foreign currency in the form of gold coins.

What effect will amending the current commodities restriction have on the Funds?

     A few Funds have a fundamental investment restriction that prohibits them from investing in commodities or commodity contracts, including in some instances, financial futures contracts (and options thereon). However, for many of the Funds, the current fundamental investment restriction regarding commodities provides that the Funds may not purchase or sell commodity contracts, except “financial futures” (such as futures contracts with respect to securities and securities indices) and related options.

     The proposed fundamental investment restriction relating to commodities clarifies the ability of the Funds to engage in currency and financial futures contracts and related options and to invest in securities or other instruments that are secured by physical commodities. Notwithstanding the flexibility provided by the proposed fundamental investment restriction, each Fund is subject to limitations established from time to time by the applicable Board regarding the use of derivatives. The Investment Managers are not currently seeking to change any Fund’s current use of futures contracts or related options. Thus, it is not currently anticipated that the proposed amendments to the investment restrictions relating to commodities would involve any change in current investment strategies or additional material risk at this time. However, it is anticipated that some Investment Managers may, in

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the future, request the applicable Board to approve amendments to certain Funds’ non-fundamental policies with respect to investments in derivatives contracts, including futures. The Funds’ disclosures to shareholders would then be amended to reflect any additional use of such derivatives, including any additional risks.

     Many of the current fundamental investment restrictions relating to commodities are combined with fundamental investment restrictions relating to investments in real estate, other investment companies, and/or oil, gas and other mineral development programs. The adoption of this Sub-Proposal would result in separating the Funds’ investment restrictions regarding commodity contracts from these other fundamental investment restrictions, including the fundamental investment restriction relating to investments in real estate. (See Sub-Proposal 4d above.) The restrictions on investing in other investment companies and on investing in oil, gas and other mineral development programs are proposed to be eliminated. (See Proposal 5 below.)

Sub-Proposal 4f: To amend the fundamental investment restrictions regarding issuing senior securities.

     The 1940 Act requires a Fund to have an investment policy describing its ability to issue 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 fund’s ability to use leverage. In general, leverage occurs when a fund 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 an open-end fund under certain conditions to engage in a number of types of transactions that might otherwise be considered to create “senior securities,” for example, 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). According to SEC Staff interpretations, when engaging in these types of transactions, in order to avoid creating a senior security, an open-end fund must either (i) mark on its books or its custodian’s books, or segregate with its custodian bank, cash or other liquid securities to cover its future obligations; or (ii) otherwise cover such obligation, in accordance with guidance from the SEC. This procedure limits the amount of a fund’s assets that may be invested in these types of transactions and the fund’s exposure to the risks associated with senior securities.

     The proposed, standardized fundamental investment restriction regarding issuing senior securities is as follows:

[A Fund may not:] Issue senior securities, except to the extent permitted by the 1940 Act or any rules, exemptions or interpretations thereunder that may be adopted, granted or issued by the SEC.

What effect will amending the current senior securities restriction have on the Funds?

     The current fundamental investment restrictions relating to issuing senior securities for all Funds generally prohibit a Fund from issuing senior securities; however, many Funds exclude from this prohibition certain portfolio investments or strategies, such as futures contracts, short sales, reverse repurchase agreements and permitted borrowings.

     The proposed restriction would permit a Fund to issue senior securities as permitted under the 1940 Act or any relevant rule, exemption or interpretation thereunder issued by the SEC. The proposed restriction also would clarify that the Funds may, provided that certain conditions are met, engage in those types of transactions that have been interpreted by the SEC Staff as not constituting senior securities, such as covered reverse repurchase transactions, futures, permitted borrowings, short sales and the other investments and strategies previously carved out by the SEC.

     None of the Funds has any present intention of changing its current investment strategies regarding transactions that may be interpreted as resulting in the issuance of senior securities. Therefore, the Boards do not anticipate that amending the current restriction will result in additional material risk to any Fund. Any additional risks to which a Fund may be exposed would also be limited by the restrictions on issuing senior securities imposed by the 1940 Act and any rule, exemption or interpretation thereof that may be applicable. Also, notwithstanding the flexibility provided by the proposed fundamental investment restriction, each Fund is subject to limitations established from time to time by the applicable Board regarding the use of derivatives.

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     The current fundamental investment restriction relating to issuing senior securities for some of the Funds is combined with restrictions relating to underwriting, purchasing securities on margin and/or engaging in short sales. The adoption of this Sub-Proposal would result in the separation of a Fund’s senior securities restriction from these other fundamental investment restrictions, including the fundamental investment restriction relating to underwriting. (See Sub-Proposal 4b above.) The restrictions on purchasing securities on margin and engaging in short sales are recommended to be eliminated. (See Proposal 5 below.)

Sub-Proposal 4g: To amend the fundamental investment restrictions regarding industry concentration.

     Under the 1940 Act, a fund’s policy regarding concentration of investments in the securities of companies in any particular industry must be fundamental. The SEC Staff takes the position that a 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 certain tax-exempt securities) in any particular industry. An investment company is not permitted to concentrate its investments in any particular industry unless it discloses its intention to do so, and the SEC Staff generally takes the position that a fund may not reserve the right to concentrate its investments in the future.

     The proposed, standardized fundamental investment restriction regarding industry concentration for those Funds that do not have, and the Boards are not recommending that they have, a policy to concentrate in any particular industry (the “non-concentrating Funds”) is as follows:

[A Fund may not:] Invest more than 25% of the Fund’s net assets in securities of issuers in any one 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) or [for money market funds only,] certificates of deposit, bankers’ acceptances and other similar obligations of domestic banks.

     However, as more fully discussed below for certain Funds that have or are recommended to have a policy allowing each such Fund to concentrate its investments in one or more industries, (the “concentrating Funds”), the applicable Boards are recommending the adoption or modification of the concentrating Funds’ industry concentration policies.¹²

For the non-concentrating Funds, what effect will amending the current industry concentration restriction have on those Funds?

     The proposed standardized concentration restriction for the non-concentrating Funds is substantially the same as most non-concentrating Funds’ current restrictions, except that (i) it modifies and standardizes the asset measure (from “total assets” to “net assets” in some instances) by which concentration is assessed; and (ii) it expressly references, in a manner consistent with current SEC Staff policy, the categories of investments that are excepted from coverage of the restriction.

     The proposed standardized investment restriction would expressly exempt from the 25% limitation those securities issued or guaranteed as to principal or interest by the U.S. government or any of its agencies or instrumentalities, and the securities of other investment companies, consistent with SEC Staff policy. In addition, for those Funds that are operated as money market funds under Rule 2a-7 of the 1940 Act (the “Money Market Funds”), the standardized investment restriction would also exclude bank obligations, such as bankers’ acceptances and certificates of deposit, from such concentration policy, as permitted by SEC Staff guidance. Finally, consistent with SEC Staff interpretations and guidance, for purposes of the standardized investment restriction as it applies to tax-free income funds, governments or their political subdivisions that issue tax-exempt municipal securities held by a Fund are not deemed to be members of any industry.

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12 The concentrating Funds are Franklin Mutual Financial Services Fund, Franklin Real Estate Securities Fund, Franklin Global Real Estate Fund, Franklin Biotechnology Discovery Fund, Franklin Global Health Care Fund, Franklin Natural Resources Fund, Franklin Floating Rate Daily Access Fund, Franklin Utilities Fund, Franklin Gold and Precious Metals Fund, Franklin Technology Fund and Franklin Global Communications Fund.

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For the concentrating Funds, what effect will amending the current industry concentration restriction have on such Funds?

     For most of the concentrating Funds, other than Franklin Global Communications Fund, the applicable Boards are recommending that such Funds’ fundamental investment restrictions regarding industry concentration be amended to (i) standardize, to the extent possible, such restrictions with the proposed form of restriction recommended for each of the non-concentrating Funds; (ii) clarify that, in abnormal market conditions (i.e., where a Fund takes a temporary defensive position), the Fund may deviate from its concentration policy; and (iii) standardize and clarify the scope of each concentrating Fund’s restriction by clarifying that “concentration” means investing more than 25% of the concentrating Fund’s net assets in securities of companies operating in one industry or group of related industries. In addition, it is proposed that each concentrating Fund provide examples of the relevant industries or companies within the Fund’s designated industry for illustration purposes only. Such examples are not intended to be part of the fundamental investment restriction. It is also not intended that any of the proposed amendments would change the way in which any of these concentrating Funds is managed or the focus of their investments. A chart comparing each concentrating Fund’s current concentration policy and the proposed concentration policies is attached to this proxy statement as Exhibit M.

     Franklin Global Communications Fund. The Franklin Global Communications Fund’s current fundamental investment restriction regarding concentration (the “Current Policy”) is as follows:

[The Global Communications Fund may not]: concentrate in any industry, except that the Fund will invest at least 25% of total assets in the equity and debt securities issued by domestic and foreign companies in the utilities industries.

     The Current Policy originally was adopted by the Global Communications Fund in 1992 when the Fund was created as the Franklin Global Utilities Fund. In recognition of the changes to the utilities industry, the expansion of the communications industries beyond telephone service and the market for the securities of companies within those industries, in November 1999, the Fund’s name was changed to Franklin Global Communications Fund and the Fund’s investment strategies were similarly changed to reflect the expanding universe of available investments within the broader utilities/communications industries and to reflect a growing trend towards investments in communications companies. However, the Fund continued to adhere to the Current Policy.

     As the utilities and communications industries have continued to evolve, the Investment Manager is now recommending that the Current Policy for the Fund be amended to read as follows to reflect the broader range of companies in the communication industries that have evolved in recent years and to eliminate the Fund’s current requirement to invest at least 25% of total assets in utilities companies:

[The Franklin Global Communications Fund may not]: [I]nvest more than 25% of the Fund’s net assets in securities of issuers in any one 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), except that, under normal market conditions, the Fund will invest more than 25% of its net assets in the securities issued by domestic and foreign companies operating in the communications industries.¹

¹Although not part of the Fund’s fundamental investment restrictions, for illustration purposes, such industries currently include, but are not limited to, telecommunications and other communication services, distribution and provision of information and other content, and the sale, manufacture and/or distribution of communications equipment and components.

     In addition, if Proposal 5 is approved, any current fundamental investment restrictions relating to investments in other investment companies for the Funds will be eliminated. The proposed restrictions on industry concentration for both non-concentrating and concentrating Funds will make explicit that such investments in other investment companies are exempt from a Fund’s concentration restriction. Even with this modified restriction, however, each Fund would continue to remain subject to the limitations on a Fund’s investments in other investment companies as set forth in the 1940 Act, the rules thereunder, its prospectus and any exemptive orders issued by the SEC. In general, absent such rules or orders from the SEC, the 1940 Act would prohibit a Fund from becoming a more than 3% shareholder of another investment company, investing more than 5% of its total assets in any one investment company and investing more than 10% of its total assets in other investment companies overall (except in the case of certain fund of funds and master-feeder arrangements).

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Sub-Proposal 4h: To amend the fundamental investment restrictions regarding diversification of investments.

     The 1940 Act requires each investment company to recite in its registration statement such investment company’s status as either a “diversified” or “nondiversified” fund. If a Fund is “diversified,” it may not purchase the securities of any one issuer if, at the time of purchase, with respect to 75% of the Fund’s total assets, more than 5% of its total assets would be invested in the securities of that issuer, or the Fund would own or hold more than 10% of the outstanding voting securities of that issuer. Up to 25% of a Fund’s total assets may be invested without regard to these limitations. Under the 1940 Act, these limitations do not apply to securities issued or guaranteed as to principal or interest by the U.S. government or any of its agencies or instrumentalities, or to the securities of other investment companies.

     Diversified Funds: All of the Funds listed on Exhibit L-1 as having diversification restrictions that are recommended to be amended, except those discussed below in the section entitled “Non-Diversified Funds,” currently have one or more fundamental investment restrictions that relate to their status as being “diversified” funds (including reiterating the diversification requirements applicable to regulated investment companies (“RICs”), as more fully discussed below). For these diversified Funds (hereafter referred to as the “Diversified Funds”), the applicable Boards are recommending adoption of the standardized fundamental investment restriction regarding diversification of investments (set forth below) to replace all current restrictions addressing diversification.

     In addition, the following Funds originally were operated as non-diversified, but are being operated as “diversified” Funds. Therefore, based upon the recommendations of these Funds’ Investment Managers, it is recommended that each of these Funds adopt the standardized investment restriction regarding diversification as a fundamental policy in lieu of any existing restrictions regarding diversification and be operated going forward as fully diversified Funds.

Franklin California Intermediate-Term Tax-Free Income Fund	Franklin Florida Insured Tax-Free Income Fund	Franklin New York Intermediate-Term Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund	Franklin Maryland Tax-Free Income Fund	Franklin New York Insured Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free Income Fund		Franklin New York Tax-Exempt Money Fund

     The proposed, standardized fundamental investment restriction regarding diversification of investments is as follows:

[A 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, whether registered or excluded from registration under Section 3(c) of the 1940 Act) 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.¹

¹For each Money Market Fund: The Fund will be considered to have satisfied this restriction if it is in compliance with Rule 2a-7(c)(4) and (c)(5) under the 1940 Act (or any successor rule thereto).

     Non-Diversified Funds: The Franklin Templeton Hard Currency Fund and Franklin New York Limited Term Tax-Free Income Fund (the “Non-Diversified Funds”) have declared fundamental policies of being non-diversified. While the Non-Diversified Funds are not subject to the 1940 Act’s diversification requirements, in order to obtain the favorable tax treatment afforded RICs under the Internal Revenue Code of 1986, as amended (the “Code”), the Non-Diversified Funds are required to comply with the diversification requirements for RICs under Subchapter M of the Code. Accordingly, these Funds have adopted fundamental investment restrictions that were intended to track some or all of the requirements of Subchapter M of the Code. The requirements of Subchapter M of the Code are applicable to all investment companies that wish to be eligible for the favorable tax treatment afforded RICs; they need not be adopted by investment companies as part of their investment restrictions. The Boards are recommending that these fundamental investment restrictions that attempt to track the tax diversification

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requirements of the Code be eliminated to avoid the instance where the Code or its regulations are changed or amended, but a Fund is unable to adapt to or comply with such changes or amendments without incurring additional delays and expenses by having to seek further approval from shareholders.

     Franklin Double Tax-Free Income Fund: Franklin Double Tax-Free Income Fund has declared a fundamental policy of being diversified and has operated as diversified since its inception. However, for the past several years, the Double Tax-Free Income Fund has had a very high concentration of investments that are greater than 5% of the Fund’s assets in any one issuer. (For a diversified fund, all investments greater than 5% in any one issuer may not exceed, in the aggregate, 25% of the Fund’s assets). As of ________, 2006, such holdings in excess of 5% comprised 24.78% of the Fund’s assets. This high concentration is due to the fact that the Double Tax-Free Fund’s investments are focused in Puerto Rico, the Virgin Islands, the Mariana Islands and Guam. Puerto Rico comprises by far the largest part of that bond market, and the largest issuer in Puerto Rico is the Commonwealth itself. For diversification purposes, the Commonwealth of Puerto Rico is often considered a single issuer.

     Because of the limited number of issuers suitable for the Double Tax-Free Income Fund outside of Puerto Rico, the Investment Manager has begun to experience constraints on its ability to purchase suitable investments for the Fund. Therefore, such Fund’s Board is recommending that the Double Tax-Free Income Fund change its status from “diversified” to “non-diversified.” By changing to a non-diversified fund, the Double Tax-Free Income Fund would be permitted to increase the amount of its investments that are greater than 5% in any one issuer to up to 50% of its assets rather than the 25% limit imposed upon diversified funds. The Double Tax-Free Income Fund will also continue to comply with the diversification requirements of Subchapter M of the Code applicable to RICs.

What effect will amending the current diversification restrictions have on the Diversified Funds?

     The Diversified Funds all generally have fundamental investment restrictions prohibiting (i) investments of more than 5% of the Fund’s assets in securities of any one issuer (exclusive of U.S. government securities) (the “5% limitation”); and (ii) the purchase of more than 10% of any class of voting securities of any one company (the “10% limitation”). In addition, such restrictions usually have applied the 5% and 10% limitations to only 75% of the Fund’s assets.

     While most Diversified Funds’ fundamental investment restrictions regarding diversification are substantively the same or very similar to the proposed standardized investment restriction, for some Funds, the current fundamental investment restrictions regarding diversification of investments, in some cases, are more restrictive than the requirements of the 1940 Act. First, some current diversification restrictions apply the 5% and 10% limitations to 100% of the Fund’s assets, rather than to 75% of total assets as permitted by the 1940 Act. Second, some current 5% and 10% limitations do not exclude securities of other investment companies or U.S. government securities, as permitted by the 1940 Act. Finally, some 10% limitations apply to any class of securities, not solely voting securities, as provided by the 1940 Act.

     The proposed fundamental investment restriction regarding diversification for each Diversified Fund, as well as for each of those Funds that intend to be operated going forward as diversified Funds, follows the 5% and 10% limitations set forth in the 1940 Act. In addition, the proposed fundamental investment restriction would exclude from such 5% and 10% limitations securities issued by other investment companies (whether registered or unregistered under the 1940 Act). The proposed investment restriction regarding diversification (together with the proposed elimination of the current fundamental investment restriction prohibiting investments in other investment companies applicable to some of the Funds as discussed in Proposal 5 below), would permit a Fund to invest cash held at the end of the day in money market funds or other short-term investments (such as unregistered money market funds) without regard to the 5% and 10% limitations. The Funds, together with the other Franklin Templeton funds, obtained an exemptive order from the SEC (the “Cash Sweep Order”) that permits the Franklin Templeton funds to invest their uninvested cash in one or more registered Franklin Templeton money market funds and in unregistered money market funds sponsored by Franklin Templeton Investments.

     In conjunction with the Cash Sweep Order, the Funds also received a no-action letter from the SEC Staff allowing Funds that are diversified to treat an investment in unregistered money market funds as an investment in the securities of investment companies for purposes of the 1940 Act’s diversification requirements (the “1999 Letter”). In addition, during 2006, the SEC adopted rules under the 1940 Act that provide relief for cash sweep arrangements into affiliated and unaffiliated money market funds subject to conditions that are very similar (but not

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identical) to the Cash Sweep Order and the 1999 Letter. The Funds may in the future decide to rely on these new SEC rules in lieu of the Cash Sweep Order should they believe it to be appropriate and advisable. Amending the Diversified Funds’ current investment restrictions regarding diversification (and eliminating the current investment restriction regarding investments in other investment companies as discussed in Proposal 5 below) would enable all Diversified Funds to take advantage of the investment opportunities presented by the Cash Sweep Order and the 1999 Letter as well as the recent rules adopted by the SEC.

     For those Funds that have stated previously their policy to be non-diversified but have in fact been operating as diversified Funds, the proposed investment restriction will give them the same policy on diversification as proposed for the Diversified Funds.

     The proposed standardized fundamental investment restriction regarding diversification of investments is consistent with the definition of a diversified investment company under the 1940 Act and the Cash Sweep Order issued by the SEC. In addition, the proposed investment restriction would provide the applicable Funds with greater investment flexibility consistent with the provisions of the 1940 Act and future rules or SEC interpretations. Other than permitting certain Funds to take advantage of the Cash Sweep Order and the 1999 Letter, it is not currently anticipated that the adoption of the proposed restriction would change the way the Funds are managed.

What effect will amending the current diversification restrictions have on the Non-Diversified Funds?

     Because the Non-Diversified Funds will continue to operate as non-diversified funds under the 1940 Act and intend to continue to comply with the requirements of Subchapter M of the Code (which is applicable to all RICs, diversified, as well as non-diversified, funds), it is expected that the proposed elimination of the fundamental diversification requirements as described above will not have any effect on the Non-Diversified Funds.

What effect will changing Franklin Double Tax-Free Income Fund’s status from “diversified” to “non-diversified” have on such Fund?

     If the proposal to change the status of the Franklin Double Tax-Free Income Fund to a non-diversified fund from a diversified fund is approved by shareholders, it is expected that such Fund will invest a greater portion of its assets in a fewer number of issuers. As a result, the Double Tax-Free Income Fund may be more sensitive to economic, business, political or other changes affecting similar issuers or securities, which may result in greater fluctuation in the value of the Double Tax-Free Income Fund’s shares. However, the Double Tax-Free Income Fund intends to continue to meet the tax diversification requirements applicable to RICs as discussed above.

EACH BOARD UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE “FOR” SUB-PROPOSALS 4a–4h.

PROPOSAL 5: TO APPROVE THE ELIMINATION OF CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS.

     The fundamental investment restrictions that are recommended to be eliminated are set forth in Exhibits N-1 and N-2, which are entitled “Franklin Templeton Funds Fundamental Investment Restrictions Recommended to be Eliminated” and “Text of Fundamental Investment Restrictions Recommended to be Eliminated,” respectively. If a Fund’s shareholders approve Proposal 5 with respect to that Fund, the elimination of those investment restrictions will be effective for that Fund as of the date that shareholders are notified that the change will be made through either (a) a supplement to such Fund’s prospectus and/or SAI or (b) revisions to such documents at the time of the annual update to the Fund’s registration statement.

Why are the Boards recommending that certain fundamental investment restrictions be eliminated, and what effect will their elimination have on a Fund?

     Certain fundamental investment restrictions of many of the Funds (e.g., purchasing securities on margin, engaging in short sales and pledging, mortgaging or hypothecating assets) are either restatements of restrictions that are already included within the 1940 Act or are more restrictive than current SEC Staff interpretations. The other fundamental investment restrictions recommended to be eliminated were originally adopted to comply with

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various state securities laws and regulations (e.g., investments in other investment companies, investments in oil, gas or mineral interests and management ownership of portfolio securities). Due to the passage of NSMIA, these fundamental investment restrictions are no longer required by law. Furthermore, some of these state law limitations relate to matters otherwise covered by the 1940 Act or current SEC Staff interpretations thereof. The discussion that follows and Exhibit N-1 indicate which of the restrictions to be eliminated are either already addressed by the 1940 Act (or SEC interpretations thereof) or have been preempted by NSMIA.

     Accordingly, the Investment Managers recommend, and the Boards have determined to recommend to shareholders, that to the extent a Fund is subject to one or more of these twelve investment restrictions (referred to in this Proposal 5 as the “Restrictions”), such Restrictions be eliminated.

Which twelve (12) Restrictions are recommended to be eliminated?

     There are currently twelve Restrictions that are proposed to be eliminated. The exact language of the Restrictions has been included in Exhibit N-2, which is entitled “Text of Fundamental Investment Restrictions Recommended to be Eliminated.” The following is a brief summary of the Restrictions.

Pledging, Mortgaging or Hypothecating Assets

     Certain of the Funds, as identified on Exhibit N-1, currently have a fundamental investment restriction that prohibits them from pledging, mortgaging or hypothecating their assets for any purpose, except for some Funds to secure certain borrowings (often borrowings for only temporary or emergency purposes or to meet redemptions) and then generally only up to a certain amount of the Fund’s assets. For many of the Funds, the restriction on mortgaging, pledging or hypothecating assets is combined with the Fund’s fundamental investment restriction on borrowing. The adoption of this Proposal would result in the separation of these two restrictions; the Boards are proposing to amend the fundamental investment restriction on borrowing. (See Sub-Proposal 4a above.)

This fundamental investment restriction may limit the ability of a Fund to enter into certain transactions that may be considered to involve the pledge of a Fund’s portfolio securities. For example, in connection with entering into certain swap, mortgage dollar roll or futures transactions, the Fund’s obligations to perform under such contracts may be considered to involve the pledge of the Fund’s assets. Current 1940 Act restrictions on issuing senior securities and borrowing will continue to limit the ability of a Fund to pledge or mortgage its assets.

Three Years of Continuous Operation

     Certain of the Funds, as identified on Exhibit N-1, currently have a fundamental investment restriction relating to investments in newer companies that limits such Funds’ ability to invest, or otherwise prohibits investments, in the securities of issuers which have been in continuous operation for less than three years. This restriction was based upon state securities laws that have been preempted by NSMIA.

Warrants

     Certain of the Funds, as identified on Exhibit N-1, currently have a fundamental investment restriction that limits the Funds’ investments in warrants, whether or not the warrant is listed on the New York Stock Exchange or the American Stock Exchange. A warrant entitles an investor to purchase a specified amount of stock at a specified price and is effective for a period of time normally ranging from a number of years to perpetuity. These fundamental investment restrictions on warrants were based on state securities laws that have since been preempted by NSMIA.

Purchasing Securities on Margin and Engaging in Short Sales

     The 1940 Act does not require a Fund to adopt a fundamental investment restriction regarding purchasing securities on margin or engaging in short sales, except to the extent that these transactions may result in the creation of senior securities (as described more fully above in Sub-Proposal 4f). Certain of the Funds, as identified on Exhibit N-1, have a fundamental investment restriction that generally prohibits the Fund from (i) purchasing securities on margin (although certain Funds specify that they may make margin payments in connection with

49

futures and options or may purchase securities on a when-issued or delayed-delivery basis); and (ii) engaging in short sales of securities, although certain Funds permit short sales to the extent disclosed in those Funds’ prospectuses or short sales “against the box.”

Current 1940 Act provisions on issuing senior securities, engaging in short sales and purchasing on margin, together with the proposed fundamental investment restriction on senior securities as described above, will continue to limit the ability of a Fund to purchase securities on margin and engage in short sales. Therefore, the Investment Managers do not anticipate that deleting the current restrictions will result in additional material risk to a Fund or change the manner in which any Fund is managed at this time.

Illiquid and Restricted Securities

     Certain of the Funds, as identified on Exhibit N-1, currently have a fundamental investment restriction that prohibits or limits their investments in illiquid and/or restricted securities including, in some instances, securities of foreign issuers that are not listed on a recognized U.S. or foreign securities exchange. “Restricted securities” generally include (i) securities that have not been registered under the Securities Act of 1933, as amended, and therefore may only be resold to certain institutional investors under certain circumstances, and (ii) securities that are subject to other contractual restrictions on resale. A restricted security that is not readily marketable at a price approximately equal to the value placed on such security by a Fund may be considered illiquid. Because the Boards of these Funds have determined to adopt the non-fundamental Illiquid Securities Restriction which, consistent with the SEC Staff’s current position on illiquid securities, prohibits a Fund from investing more than 15% (10% in the case of a Money Market Fund) of its net assets in illiquid securities, the Boards are recommending that such Funds’ current fundamental investment restrictions relating to illiquid and restricted securities be eliminated.

Joint Trading Accounts

     Two Funds, the Foreign Equity Series and the Emerging Markets Series of Templeton Institutional Funds, Inc., have a fundamental investment restriction relating to joint trading accounts that prohibits such Funds’ participation on a joint or a joint and several basis in any trading account in securities. Because Section 12(a)(2) of the 1940 Act prohibits a mutual fund from participating in a joint trading account unless allowed by rule or exemptive order, the current fundamental restriction is unnecessary.

Investment in Other Investment Companies

     Certain of the Funds, as identified on Exhibit N-1, currently have fundamental investment restrictions that prohibit such Funds from investing in other investment companies or unnecessarily limit such Funds’ investments in other investment companies. Upon elimination of this restriction, a Fund would remain subject to the restrictions under Section 12(d) of the 1940 Act, and any rules thereunder, relating to the Fund’s ability to invest in other investment companies, including open-end and closed-end investment companies, except where the Franklin Templeton funds have received an exemption from such restrictions. (The 1940 Act restrictions generally specify that a Fund, other than certain fund of funds and master/feeder arrangements, may not purchase more than 3% of another fund’s total outstanding voting stock, invest more than 5% of its total assets in another fund’s securities or have more than 10% of its total assets invested in securities of all other funds, although the SEC’s rules do permit a Fund to invest in money market mutual funds without regards to such limitations.) In addition, eliminating certain of these current restrictions on investments in other investment companies would enable the applicable Funds to take advantage of the investment opportunities presented by the Cash Sweep Order or the new rules adopted by the SEC (discussed in Sub-Proposal 4h above), which provide relief from the 1940 Act restrictions relating to investments in other registered and unregistered investment companies in certain limited circumstances.

Management Ownership of Securities

     Certain Funds, as identified on Exhibit N-1 to this proxy statement, currently have a fundamental investment restriction that prohibits such Funds from investing in companies in which certain affiliated persons of the Fund have an ownership interest. This restriction was based on state law provisions that have been preempted by NSMIA.

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In addition, the 1940 Act provisions addressing conflicts of interest would continue to apply to the Funds and would limit certain principal transactions between a Fund and a portfolio company in which the Fund or its affiliates hold a significant interest.

Principal Transactions with Management

     As identified in Exhibit N-1 to this proxy statement, certain Funds currently have a fundamental investment restriction that prohibits such Funds from purchasing from or selling to the Fund’s officers and Board members (or any firm of which any officer or Board member is a member) as principal any securities, although some Funds may deal with their officers, Board members or their firms as brokers and pay a customary brokerage commission. This restriction was based on state blue sky regulations that have been preempted by NSMIA. In addition, the 1940 Act and the rules thereunder have extensive provisions governing transactions in portfolio securities between a Fund and its affiliates, including officers and Board members, which are more carefully tailored to ensure that any such transactions are in the best interests of the Fund.

Investing in Put and Call Options

     As identified in Exhibit N-1 to this proxy statement, certain Funds currently have fundamental investment restrictions that prohibit such Funds from investing in options, including puts, calls, straddles, spreads or any combination thereof, or that limit a Fund’s ability to invest in such instruments. These restrictions were based upon state blue sky regulations that have been preempted by NSMIA.

Oil and Gas Programs

     As identified in Exhibit N-1 to this proxy statement, certain Funds currently have a fundamental investment restriction that prohibits the Funds from investing in interests in oil, gas or other mineral exploration or development programs. These fundamental investment restrictions regarding oil and gas programs were based on state securities laws that had been adopted by a few jurisdictions, but have since been preempted by NSMIA.

Investing for Purposes of Exercising Control

     As identified in Exhibit N-1 to this proxy statement, certain Funds currently have a fundamental investment restriction that prohibits the Funds from investing in issuers for the purpose of exercising control. The 1940 Act does not require, and applicable state law no longer requires, that a Fund adopt a fundamental investment restriction prohibiting it from investing in any company for the purpose of exercising control or management. However, each Fund remains subject to the diversification requirements of Sub-Chapter M of the Code, and for those Funds that are “diversified” (as described in Sub-Proposal 4h above), the diversification requirements of the 1940 Act also limit the amount of an issuer’s voting securities that a Fund may acquire.

What are the risks, if any, in eliminating the Restrictions?

     The Boards and the Investment Managers do not anticipate that eliminating the Restrictions will result in any additional material risk to the Funds at this time. None of the Funds currently intends to change its present investment practices as a result of eliminating the Restrictions, except to the extent that a Fund may take advantage of the Cash Sweep Order or invest in other money market funds for cash management purposes.

THE BOARD OF EACH FUND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE “FOR” PROPOSAL 5.

PROPOSAL 6: TO APPROVE THE RECLASSIFICATION OF CERTAIN INVESTMENT POLICIES AS NON-FUNDAMENTAL

     Each of the Funds listed below has one or more investment policies that have been designated as fundamental by that Fund, meaning that such policies may not be changed or modified without shareholder approval. However, none of these investment policies are required by the federal securities laws to be treated as fundamental and, as

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more fully discussed below, the applicable Boards are recommending that such investment policies be reclassified as “non-fundamental,” meaning that such policies may be changed by the applicable Fund’s Board without shareholder approval.

The investment policies which are recommended to be reclassified as “non-fundamental” are as follows:

Fund	Investment Policy
Franklin New York Tax-Free Income Fund	The Fund also, as a fundamental policy, normally invests at least 65% of its total assets in securities that pay interest free from New York City personal income taxes, and at least 65% of its total assets in New York municipal securities. [Note: Reclassifying this policy will not affect the Fund’s policy of investing at least 80% of its total assets in securities that pay interest free from federal income taxes, including the federal alternative minimum tax, and New York State personal income taxes.]
Franklin Limited Maturity U.S. Government Securities Fund	As a fundamental policy, the Fund normally invests at least 65% of its net assets in U.S. government securities. [Note: Reclassifying this investment policy will not affect that Fund’s policy to invest at least 80% of its net assets in securities with a dollar-weighted average maturity of less than 10 years and issued or guaranteed by the U.S. government, its agencies or instrumentalities.]
Emerging Markets Series	Emerging Markets Series may invest up to 100% of its total assets in emerging markets. At least 65% of its total assets will be invested in issuers located in at least three different countries. As a fundamental investment policy, Emerging Markets Series may invest up to 100% of its total assets in U.S. government securities. [Note: Reclassifying this investment policy will not affect the Fund’s policy that, under normal market conditions, the Fund invests at least 80% of its net assets in securities issued by “emerging market companies,” as defined in its prospectus.]
IFT Money Market Portfolio	The Fund will invest primarily in various types of money market instruments, such as U.S. government and federal agency obligations, certificates of deposit, bankers’ acceptances, time deposits of major financial institutions, high grade commercial paper, high grade short-term corporate obligations, taxable municipal securities and repurchase agreements (secured by U.S. government securities) and may seek its objectives by investing all or substantially all of its assets in an open-end management investment company with the same investment objectives and policies. The Fund will invest 100% of its assets in securities with remaining maturities of 397 days or less, or in another open-end management investment company that has the same fundamental investment policy. [Note: Reclassifying this policy will not affect the Fund’s intention to continue to comply with the provisions of Rule 2a-7 under the 1940 Act which currently requires the Fund to comply substantially with all of the foregoing policies.]

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Franklin Templeton Hard Currency Fund

[The Fund will not:] Buy common stocks, preferred stocks, warrants or other equity securities, or buy municipal bonds or industrial revenue bonds. [Note: Reclassifying this policy will not affect the Fund’s policy of investing at least 80% of its net assets in investments denominated in “hard currencies.”]

Franklin Rising Dividends Fund

The Fund will normally invest at least 65% of its total assets in securities of companies that meet all of these criteria. This is a fundamental policy, which means it may not be changed without shareholder approval. The Fund’s investments are primarily in companies that have:   l consistently increased dividends in at least 8 out of the past 10 years and have not decreased dividends during that time   l increased dividends at least 100% over the past 10 years l reinvested earnings, and paid out less than 65% of current earnings in dividends (except for utility companies)   l either long-term debt that is no more than 50% of total capitalization (except for utility companies) or senior debt that has been rated  investment grade by at least one of the major bond rating agencies   l attractive prices, with prices at the time of purchase either in the lower half of the stock’s price/earnings ratio range for the past 10 years or less than the average current market price/earnings ratio of the stocks comprising the Standard & Poor’s(R) 500 Stock Index.   [Note: Reclassifying this policy will not affect the Fund’s current intention to follow this policy in making its investment decisions.]

     The Investment Managers for the above listed Funds do not currently intend to deviate from any of the investment policies listed above. In particular, for the Franklin Rising Dividend Fund, the investment policy listed above is integral to such Fund’s investment philosophy. However, as with other fundamental investment restrictions recommended to be eliminated as discussed above, the applicable Boards and Investment Managers believe that these Funds will be able to minimize costs and delays associated with future shareholder meetings to revise any of these investment policies, or any portion thereof, should they become outdated or inappropriate. Therefore, the Boards are recommending that each of the above listed fundamental investment policies be reclassified as non-fundamental.

THE BOARD OF EACH FUND UNANIMOUSLY RECOMMENDS
A VOTE “FOR” PROPOSAL 6.

PROPOSAL 7: TO APPROVE THE AMENDMENT OF THE RIGHTS AND PREFERENCES OF THE CLASS B SHARES OF FRANKLIN TEMPLETON MONEY FUND

     Franklin Templeton Money Fund (the “F-T Money Fund”) is a money market fund, currently offering three classes of shares. The F-T Money Fund achieves its investment objective of providing investors with as high a level of current income as is consistent with the preservation of capital by investing all of its assets in The Money Market Portfolio.

     The F-T Money Fund’s three existing classes of shares have been designated as Franklin Templeton Money Fund-Class B, Franklin Templeton Money Fund-Class C and Franklin Templeton Money Fund-Class R. The F-T Money Fund was established as an exchange option for shareholders of Class B, C and R shares of other Franklin

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Templeton funds sold subject to a contingent deferred sales charge (“CDSC”). Thus, shares of the F-T Money Fund may only be purchased in exchange for Class B, C and R shares of other Franklin Templeton funds or through the reinvestment of dividends. Each of the F-T Money Fund’s Class B, C and R shares have associated Rule 12b-1 fees and CDSCs that are the same as the Rule 12b-1 fees of Class B, C and R shares of other Franklin Templeton funds. Class B shares of the F-T Money Fund, therefore, are offered with an associated Rule 12b-1 fee of 0.65%.

     Class B shares of the F-T Money Fund and of other Franklin Templeton funds (“Other FT B Shares”) are subject to a CDSC which declines over a period of seven years from 4% after the first two years of investment, to 3% for the next two years, to 2% after five years, to 1% after six years, to zero after seven years. After eight years as an investor in any combination of Class B shares in the Franklin Templeton funds, shareholders of Other FT B Shares become shareholders of Class A shares of the fund in which they are then invested, as the Class B shares held by an investor on the eighth year anniversary automatically convert into Class A shares of such fund. To the extent that a shareholder of Other FT B Shares exchanges into the F-T Money Fund’s Class B shares, the holding period while a shareholder of the F-T Money Fund’s Class B shares is added to the holding period for the Other FT B Shares to count towards the eight year conversion period. Similarly, if Class B shares of the F-T Money Fund are exchanged into Other FT B Shares, the time during which a shareholder was invested in Class B shares of the F-T Money Fund will count towards the eight-year conversion period.

     The automatic conversion feature for Other FT B Shares is included as part of the rights and preferences of the Other FT B Shares either as part of constituent corporate or trust documents for the funds offering such shares or in the resolutions establishing such shares. Thus, shareholders of Other FT B Shares, which are subject to a Rule 12b-1 fee of 1.00% (for equity funds) or 0.65% (for fixed income funds), upon conversion, become shareholders of Class A shares of such funds with a maximum Rule 12b-1 fee of up to 0.35% (for equity funds) or 0.25% (for fixed income funds).

     The F-T Money Fund initially was created solely as a money market fund option for shareholders of Other FT B Shares. It was not anticipated, at the time the F-T Money Fund was created, that shareholders would remain as shareholders of the F-T Money Fund beyond the eighth anniversary of becoming a Class B shareholder of a Franklin Templeton fund (the “Eighth Anniversary”). However, as the Eighth Anniversary of the initial offering of Class B shares in the Franklin Templeton funds approaches, in order to accommodate the situation where a Class B shareholder remains a Fund shareholder on the Eighth Anniversary, the F-T Money Fund has established of Class A shares, and the Board is recommending that shareholders approve modification of the rights and preferences of the Class B shares, to provide that the Class B shares automatically will convert to Class A shares no later than three months after a Class B shareholder’s Eighth Anniversary. This change would align the rights and preferences of the F-T Money Fund’s Class B shares with those of Other FT B Shares.

     The modifications to the rights and preferences of the F-T Money Fund’s Class B shares requires the adoption by such Class B shareholders of a resolution, setting forth such amended rights and preferences. Exhibit O to this proxy statement sets forth the proposed language of the resolution.

     All Class B shareholders of the F-T Money Fund who hold Class B shares beyond the Eighth Anniversary will have their Class B shares automatically converted into Class A shares of the F-T Money Fund, following shareholder approval. Thereafter, assuming shareholder approval, all Class B shareholders of the F-T Money Fund on their Eighth Year Anniversary will become Class A shareholders of the F-T Money Fund.

     Exchanges and conversions of Class B shares into Class A shares may be accomplished on a tax-free basis under the Code.

THE BOARD OF FRANKLIN TEMPLETON MONEY TRUST UNANIMOUSLY RECOMMENDS
APPROVAL OF PROPOSAL 7.

uADDITIONAL INFORMATION ABOUT THE FUNDS

     The Investment Managers. The Investment Managers of the Funds and their addresses are listed on Exhibit P to this proxy statement. Pursuant to an investment management agreement with the Fund, the Investment Manager for a Fund (along with any sub-investment manager) manages the investment and reinvestment of that Fund’s assets. Each Investment Manager is a direct or indirect, wholly owned subsidiary of Resources.

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     The Administrator. The administrator of each Fund is Franklin Templeton Services, LLC (“FT Services”), with offices at One Franklin Parkway, San Mateo, California 94403-1906 and 500 East Broward Boulevard, Suite 2100, Fort Lauderdale, Florida 33394-3091. FT Services is an indirect, wholly owned subsidiary of Resources and an affiliate of the Investment Managers. Pursuant to an administration agreement, FT Services performs certain administrative functions for each Fund.

     The Underwriter. The underwriter for the Funds is Franklin/Templeton Distributors, Inc., One Franklin Parkway, San Mateo, California 94403-1906.

     The Transfer Agent. The transfer agent and shareholder servicing agent for the Funds is Franklin Templeton Investor Services, LLC, [100 Fountain Parkway, St. Petersburg, Florida 33716-1205].

     The Custodians. The custodian for each Franklin Fund and Mutual Series Fund is Bank of New York, Mutual Funds Division, 100 Church Street, New York, New York 10286. The custodian for each Templeton Fund participating in the Meeting is JPMorgan Chase Bank, MetroTech Center, Brooklyn, New York 11245.

     Pending Litigation. Resources, certain of its subsidiaries and certain funds, current and former officers, employees, and directors/ trustees have been named in multiple lawsuits in different courts alleging violations of various federal securities and state laws and seeking, among other relief, monetary damages, restitution, removal of fund trustees, directors, advisers, administrators and distributors, rescission of management contracts and 12b-1 plans, and/or attorneys’ fees and costs. Specifically, the lawsuits claim breach of duty with respect to alleged arrangements to permit market timing and/or late trading activity.

     The majority of these lawsuits duplicate, in whole or in part, the allegations asserted in regulatory matters that were previously settled and disclosed in Resources’ public filings, including: the February 4, 2004 Massachusetts Administrative Complaint concerning one instance of market timing; and the SEC’s findings regarding market timing in its August 2, 2004 Order. The lawsuits are styled as class actions, or derivative actions on behalf of either the named funds, including many of the Funds, or Resources. To date, more than 400 similar lawsuits against at least 19 different mutual fund companies, among other defendants, have been filed in federal district courts throughout the country. Because these cases involve common questions of fact, the Judicial Panel on Multidistrict Litigation (the “Judicial Panel”) ordered the creation of a multidistrict litigation in the United States District Court for the District of Maryland, entitled “In re Mutual Funds Investment Litigation” (the “MDL”). The Judicial Panel then transferred similar cases from different districts to the MDL for coordinated or consolidated pretrial proceedings, where they remain pending.

     Additional information about these lawsuits is disclosed in Part I., Item 3 Legal Proceedings of Resources’ Form 10-K, as well as on Resources’ website at franklintempleton.com, under “Statement on Current Industry Issues.”

     Other Matters. Each Fund’s audited financial statements and annual report for its last completed fiscal year, and any subsequent semi-annual report to shareholders are available free of charge. To obtain a copy, please call 1-800/DIAL BEN^® (1-800-342-5236) or forward a written request to Franklin Templeton Investor Services, LLC, P.O. Box 33030, St. Petersburg, Florida 33733-8030.

     [Shareholders Sharing the Same Address. If two or more shareholders share the same address, only one copy of this proxy statement is being delivered to that address, unless the Fund(s) have received contrary instructions from one or more of the shareholders at that shared address. Upon written or oral request, the Funds will deliver promptly a separate copy of this proxy statement to a shareholder at a shared address. Please call 1-800/DIAL BEN^® (1-800-342-5236) or forward a written request to Franklin Templeton Investor Services, LLC, P.O. Box 33030, St. Petersburg, Florida 33733-8030, if you would like to (1) receive a separate copy of this proxy statement; (2) receive your annual reports or proxy statements separately in the future; or (3) request delivery of a single copy of annual reports or proxy statements if you are currently receiving multiple copies at a shared address.]

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Principal Shareholders. The outstanding shares and classes of the Funds as of November 30, 2006, are set forth in Exhibit Q.

     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 of any class or Fund. To the knowledge of the Funds’ management, as of November 30, 2006, there were no entities, except as set forth in Exhibit R, owning beneficially more than 5% of the outstanding shares of any class of any Fund.

     In addition, to the knowledge of the Funds’ management, as of November 30, 2006 and except as noted above under Proposal 1, no nominee or Board member of a Fund owned 1% or more of the outstanding shares of that Fund, and the Board members and officers of that Fund owned, as a group, less than 1% of the outstanding shares of that Fund.

     Contacting the Boards. If a shareholder wishes to send a communication to the Board of a Fund, such correspondence should be in writing and addressed to the Board of that Fund at the Fund’s offices as follows: for the Franklin Funds, One Franklin Parkway, San Mateo, California 94403-1906, Attention: Secretary, and, for the Templeton Funds, 500 East Broward Boulevard, Suite 2100, Fort Lauderdale, Florida 33394-3091, Attention: Secretary. The correspondence will be given to the appropriate Board for review and consideration.

uAUDIT COMMITTEES

     Audit Committee and Independent Registered Public Accounting Firm. Each Fund’s Audit Committee is responsible for the appointment, compensation and retention of the Fund’s independent registered public accounting firm (“auditors”), including evaluating their independence, recommending the selection of the Fund’s auditors to the full Board and meeting with such auditors to consider and review matters relating to the Fund’s financial reports and internal auditing. The members of the Audit Committees for the Funds are set forth below. All of the members of the Audit Committees are Independent Board Members.

Fund(s)	Audit Committee Members
Franklin California Tax-Free Income Fund, Franklin Custodian	Harris J. Ashton
Funds, Inc. and Franklin New York Tax-Free Income Fund	Edith E. Holiday (Chairperson)
	Frank A. Olson
Franklin California Tax-Free Trust	Harris J. Ashton
	Edith E. Holiday
	Frank W. T. LaHaye (Chairperson)
	John B. Wilson
Franklin Capital Growth Fund and Franklin Gold and Precious Metals	Edith E. Holiday
Fund	Frank W. T. LaHaye (Chairperson)
	Frank A. Olson
	John B. Wilson
Franklin Global Trust, Franklin Real Estate Securities Trust, Franklin	Robert F. Carlson
Templeton Fund Allocator Series and Franklin Templeton Global Trust	Edith E. Holiday
	Frank W. T. LaHaye (Chairperson)
	John B. Wilson
Franklin High Income Trust, Franklin New York Tax-Free Trust,	Robert F. Carlson
Franklin Templeton Money Fund Trust, Institutional Fiduciary Trust	Edith E. Holiday
and The Money Market Portfolios	Frank W. T. LaHaye (Chairperson)
Franklin Investors Securities Trust and Franklin Tax-Free Trust	Edith E. Holiday
	Frank W. T. LaHaye (Chairperson)
	Frank A. Olson

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Franklin Managed Trust and Franklin Value Investors Trust	Frank T. Crohn (Chairperson)
	Burton J. Greenwald
	Charles Rubens II
	Leonard Rubin
	Robert E. Wade
Franklin Municipal Securities Trust, Franklin Strategic Series and	Edith E. Holiday
Franklin Templeton International Trust	Frank W. T. LaHaye (Chairperson)
	John B. Wilson
Franklin Strategic Mortgage Portfolio	Harris J. Ashton
	Edith E. Holiday
	Frank W. T. LaHaye (Chairperson)
Franklin Mutual Series Fund Inc. and Franklin Mutual Recovery Fund	Edward I. Altman
	Ann Torre Bates (Chairperson)
	Robert E. Wade
Templeton China World Fund, Templeton Developing Market Trust,	Frank J. Crothers
Templeton Funds, Inc., Templeton Global Smaller Companies Fund,	David W. Niemiec
Templeton Income Trust and Templeton Institutional Funds, Inc.	Frank A. Olson (Chairperson)
	Constantine D. Tseretopoulos

     Selection of Auditors. The Audit Committee and the Board of each Fund, other than Franklin Managed Trust and the Mutual Series Funds, have selected the firm of PricewaterhouseCoopers LLP (“PwC”) as auditors of the Fund for its current fiscal year. The Audit Committee and the Board of Franklin Managed Trust have selected the firm of Tait, Weller & Baker LLP (“Tait Weller”) as auditors of Franklin Managed Trust for its current fiscal year. The Audit Committee and Board of each of the Mutual Series Funds have selected the firm of Ernst & Young LLP (“E&Y”) as auditors of those Funds for their current fiscal year. Representatives of PwC, E&Y and Tait Weller 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.

Audit Fee Information for all Funds other than Franklin Managed Trust and the Mutual Series Funds

     Audit Fees. The aggregate fees paid to PwC for professional services rendered by PwC for the audit of the Funds’ annual financial statements or for services that are normally provided by PwC in connection with statutory and regulatory filings or engagements for the last two fiscal years (ended on or before September 30, 2006) for the Funds are set forth in Exhibit S to this proxy statement.

     Audit-Related Fees. There were no fees paid to PwC for assurance and related services by PwC that are reasonably related to the performance of the audit or review of the Funds’ financial statements and not reported under “Audit Fees” above for the last two fiscal years (ended on or before September 30, 2006).

     In addition, the Audit Committees of the Funds pre-approve PwC’s engagement for audit-related services with the Investment Managers and certain entities controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds, which engagements relate directly to the operations and financial reporting of that Fund. There were no fees paid to PwC for these services for the twelve month periods ended September 30, 2006 and 2005.

     Tax Fees. The aggregate fees paid to PwC for tax compliance, tax advice or tax planning services (“tax services”) to the Funds for the last two fiscal years (ended on or before September 30, 2006) are set forth in Exhibit S to this proxy statement. The tax services for which these fees were paid included tax compliance.

In addition, the Audit Committees of the Funds pre-approve PwC’s engagement for tax services to be provided to the Investment Managers and certain entities controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds, which engagements relate directly to

57

the operations and financial reporting of the Funds. The aggregate fees for these tax services for the twelve month periods ended September 30, 2006 and 2005 were $3,961 and $4,955, respectively. The tax services for which these fees were paid included tax compliance and advice.

     All Other Fees. The aggregate fees paid for products and services provided by PwC to the Funds, other than the services reported above, for the last two fiscal years are set forth in Exhibit S to this proxy statement. The services for which these fees were paid included review of materials provided to the Boards in connection with the investment management contract renewal process.

     In addition, the Audit Committees of the Funds pre-approve PwC’s engagement for other services with the Investment Managers and certain entities controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds, which engagements relate directly to the operations and financial reporting of the Funds. The aggregate fees paid to PwC for the twelve month periods ended September 30, 2006 and September 30, 2005 for such other services, including those reported above, were $175,861 and $5,835, respectively. The services for which these fees were paid included review of materials provided to the Boards in connection with the investment management contract renewal process and the review of the ICI transfer agent survey.

     Aggregate Non-Audit Fees. The aggregate fees paid to PwC for non-audit services to the Funds for their last two fiscal years and to the Investment Managers or to any entity controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds for the twelve month periods ended September 30, 2006 and 2005 were $199,822 and $10,790, respectively.

     The Audit Committees of the Funds have determined that the provision of the non-audit services, including tax-related services, that were rendered to the Investment Managers and to any entities controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds is compatible with maintaining PwC’s independence.

Audit Fee Information for Franklin Managed Trust:

     Audit Fees. The aggregate fees paid to Tait Weller for professional services rendered by Tait Weller for the audit of Franklin Managed Trust’s annual financial statements or for services that are normally provided by Tait Weller in connection with statutory and regulatory filings or engagements for the last two fiscal years ended September 30, 2006 and September 30, 2005, for Franklin Managed Trust were $21,000 and $20,500, respectively.

     Audit-Related Fees. There were no fees paid to Tait Weller for assurance and related services by Tait Weller that are reasonably related to the performance of the audit or review of Franklin Managed Trust’s financial statements and not reported under “Audit Fees” above for the last two fiscal years ended September 30, 2006.

     In addition, the Audit Committee of Franklin Managed Trust pre-approves Tait Weller’s engagement for audit-related services with the Investment Manager for Franklin Managed Trust and certain entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to Franklin Managed Trust, which engagements relate directly to the operations and financial reporting of Franklin Managed Trust. There were no fees paid to Tait Weller for these services for the twelve month periods ended September 30, 2006 and 2005.

     Tax Fees. Tait Weller did not render any tax services to Franklin Managed Trust for the last two fiscal years ended September 30, 2006 and September 30, 2005. 

In addition, the Audit Committee of Franklin Managed Trust pre-approves Tait Weller’s engagement for tax services to be provided to the Investment Manager to Franklin Managed Trust and certain entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to Franklin Managed Trust, which engagements relate directly to the operations and financial reporting of Franklin Managed Trust. There were no fees paid to Tait Weller for the tax services for the twelve month periods ended September 30, 2006 and 2005.

     All Other Fees. There were no additional fees paid for products and services provided by Tait Weller to Franklin Managed Trust, other than the services reported above.

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In addition, the Audit Committee of Franklin Managed Trust pre-approves Tait Weller’s engagement for other services with the Investment Manager to Franklin Managed Trust and certain entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to Franklin Managed Trust, which engagements relate directly to the operations and financial reporting of Franklin Managed Trust. There were no other fees paid to Tait Weller for the twelve month periods ended September 30, 2006 and September 30, 2005 for such other services.

     Aggregate Non-Audit Fees. There were no fees paid to Tait Weller for non-audit services to Franklin Managed Trust for its last two fiscal years or to the Investment Manager to Franklin Managed Trust or to any entity controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to Franklin Managed Trust for the twelve month periods ended September 30, 2006 and 2005.

     The Audit Committee of Franklin Managed Trust has determined that the provision of the non-audit services, including tax-related services, that were rendered to the Investment Manager of Franklin Managed Trust and to any entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to Franklin Managed Trust is compatible with maintaining Tait Weller’s independence.

Audit Fee Information for the Mutual Series Funds:

     Audit Fees. The aggregate fees paid to E&Y for professional services rendered by E&Y for the audit of the Mutual Series Funds’ annual financial statements or for services that are normally provided by E&Y in connection with statutory and regulatory filings or engagements for the last two fiscal years (ended on or before September 30, 2006) for the Mutual Series Funds are set forth in Exhibit S to this proxy statement.

     Audit-Related Fees. There were no fees paid to E&Y for assurance and related services by E&Y that are reasonably related to the performance of the audit or review of the Mutual Series Funds’ financial statements and not reported under “Audit Fees” above for the last two fiscal years (ended on or before September 30, 2006).

     In addition, the Audit Committees of the Mutual Series Funds pre-approve E&Y’s engagement for audit-related services with the Investment Manager for the Mutual Series Funds and certain entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to the Mutual Series Funds, which engagements relate directly to the operations and financial reporting of the Mutual Series Funds. There were no fees paid to E&Y for these services for the twelve month periods ended September 30, 2006 and 2005.

     Tax Fees. E&Y did not render any tax services to any Mutual Series Fund for the last two fiscal years (ended on or before September 30, 2006).

In addition, the Audit Committees of the Mutual Series Funds pre-approve E&Y’s engagement for tax services to be provided to the Investment Manager to the Mutual Series Funds and certain entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to the Mutual Series Funds, which engagements relate directly to the operations and financial reporting of the Mutual Series Funds. The aggregate fees for these tax services for the twelve month periods ended September 30, 2006 and 2005 were $29,167 and $50,000, respectively. The tax services for which these fees were paid included tax compliance and advice.

     All Other Fees. There were no additional fees paid for products and services provided by E&Y to the Mutual Series Funds, other than the services reported above, for the last two fiscal years.

     In addition, the Audit Committees of the Mutual Series Funds pre-approve E&Y’s engagement for other services with the Investment Manager to the Mutual Series Funds and certain entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to the Mutual Series Funds, which engagements relate directly to the operations and financial reporting of the Mutual Series Funds. The aggregate fees paid to E&Y for the twelve month periods ended September 30, 2006 and September 30, 2005 for such other services and not reported above were $199,802 and $0, respectively. The services for which these fees were paid included review of materials provided to the applicable Boards in connection with the investment management contract renewal process.

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     Aggregate Non-Audit Fees. The aggregate fees paid to E&Y for non-audit services to the Mutual Series Funds for their last two fiscal years and to the Investment Manager to the Mutual Series Funds or to any entity controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to the Mutual Series Funds for the twelve month periods ended September 30, 2006 and 2005 were $228,969 and $50,000, respectively.

     The Audit Committees of the Mutual Series Funds have determined that the provision of the non-audit services, including tax-related services, that were rendered to the Investment Manager of the Mutual Series Funds and to any entities controlling, controlled by, or under common control with such Investment Managers that provide ongoing services to the Mutual Series Funds is compatible with maintaining E&Y’s independence.

     Audit Committee Report. The following information is required by the SEC’s rules to be provided for all closed-end funds. Of the Funds participating in the Meeting, Franklin Mutual Recovery Fund is the only closed-end fund.

     The Board of Franklin Mutual Recovery Fund has adopted and approved a formal written charter for its Audit Committee, which sets forth the Audit Committee’s responsibilities. A copy of the charter is attached as Exhibit T to this proxy statement.

     As required by its charter, Franklin Mutual Recovery Fund’s Audit Committee reviewed the Fund’s audited financial statements and met with Fund management, as well as with E&Y, the Fund’s auditors, to discuss the financial statements.

     The Franklin Mutual Recovery Fund Audit Committee received the written disclosures and the letter from E&Y required by Independence Standards Board Standard No. 1. The Audit Committee also received the report of E&Y regarding the results of their audit. In connection with their review of the financial statements and the auditors’ report, the members of the Audit Committee discussed with a representative of E&Y, E&Y’s independence, as well as the following: the auditors’ responsibilities in accordance with generally accepted auditing standards; the auditors’ responsibilities for information prepared by management that accompanies the Fund’s audited financial statements and any procedures performed and the results; the initial selection of, and whether there were any changes in, significant accounting policies or their application; management’s judgments and accounting estimates; whether there were any significant audit adjustments; whether there were any disagreements with management; whether there was any consultation with other accountants; whether there were any major issues discussed with management prior to the auditors’ retention; whether the auditors encountered any difficulties in dealing with management in performing the audit; and the auditors’ judgments about the quality of the Fund’s accounting principles.

     Based on its review and discussions with management and Franklin Mutual Recovery Fund’s auditors, the Audit Committee did not become aware of any material misstatements or omissions in the financial statements. Accordingly, the Audit Committee recommended to the Board that the audited financial statements be included in the Fund’s Annual Report to Shareholders for the fiscal year ended March 31, 2006 for filing with the U.S. Securities and Exchange Commission.

FRANKLIN MUTUAL RECOVERY FUND 

AUDIT COMMITTEE 

Edward I. Altman 

Ann Torre Bates (Chair) 

Robert E. Wade 

     Audit Committee Pre-Approval Policies and Procedures. As of the date of this proxy statement, no Audit Committee has adopted written pre-approval policies and procedures. As a result, all such services described above and provided by PwC, E&Y or Tait Weller must be directly pre-approved by the applicable Audit Committee(s).

uFURTHER INFORMATION ABOUT VOTING AND THE MEETING

     Solicitation of Proxies. Your vote is being solicited by the Boards. The cost of soliciting proxies, including the fees of a proxy soliciting agent, will be borne by the Funds, [pro rata based upon ______]. The Funds reimburse brokerage firms and others for their expenses in forwarding proxy material to the beneficial owners and soliciting

60

them to execute proxies. The Funds expect that the solicitation will be primarily by mail. In addition to solicitation by mail, certain officers and representatives of a Fund or its affiliates and certain financial services firms and their representatives, who will receive no extra compensation for their services, may solicit proxies by telephone, telegram or personally.

     MIS Corporation, a subsidiary of Automatic Data Processing, Inc. (the “Solicitor”), has been engaged to assist in the solicitation of proxies, at an estimated cost of $___________. As the date of the Meeting approaches, certain Fund shareholders may receive a telephone call from a representative of the Solicitor if their votes have not yet been received. Authorization to permit the Solicitor to execute proxies may be obtained by telephonic instructions from shareholders of the Funds. Proxies that are obtained telephonically will be recorded in accordance with the procedures set forth below. The Boards believe that these procedures are reasonably designed to ensure that both the identity of the shareholder casting the vote and the voting instructions of the shareholder are accurately determined.

     In all cases where a telephonic proxy is solicited, the Solicitor representative is required to ask for each shareholder’s full name and address and to confirm that the shareholder has received the proxy materials in the mail. If the shareholder is a corporation or other entity, the Solicitor representative is required to ask for the person’s title and confirmation that the person is authorized to direct the voting of the shares. If the information solicited agrees with the information provided to the Solicitor, then the Solicitor may ask for the shareholder’s instructions on the Proposals. Although the Solicitor representative is permitted to answer questions about the process, he or she is not permitted to recommend to the shareholder how to vote, other than to read any recommendation set forth in the proxy statement. The Solicitor will record the shareholder’s instructions on the card. Within 72 hours, the shareholder will be sent a letter or mailgram to confirm his or her vote and asking the shareholder to call the Solicitor immediately if his or her instructions are not correctly reflected in the confirmation.

     If a shareholder wishes to participate in the Meeting, but does not wish to give a proxy by telephone, the shareholder may still submit the proxy card(s) originally sent with the proxy statement or attend in person.

The Funds intend to pay all costs associated with the solicitation and the Meeting.

     Voting by Broker-Dealers. The Funds expect that, before the Meeting, broker-dealer firms holding shares of the Funds 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 Funds understand that broker-dealers may vote on Proposal 1, Election of a Board of Trustees/ Directors, 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. For each Fund or series thereof, except as set forth below, holders of 40% of the outstanding shares of the Fund (or if the proposal is to be voted upon by a series thereof separately, holders of 40% of that series), present in person or represented by proxy, constitutes a quorum at the Meeting for purposes of acting upon the Proposals applicable to such Fund (or series thereof). For Franklin California Tax-Free Income Fund, Inc., Franklin Custodian Funds, Inc., Franklin Mutual Recovery Fund, Franklin Mutual Series Fund Inc., Templeton Funds, Inc., Templeton Income Trust and Templeton Institutional Funds, Inc., holders of a majority of the outstanding shares of the Fund (or if the proposal is to be voted upon by a series thereof separately, then a majority of the outstanding shares of that series), present in person or represented by proxy constitutes a quorum at the Meeting for purpose of acting upon the Proposals applicable to such Fund (or series thereof). 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 will all be counted as shares present and entitled to vote for purposes of determining whether the required quorum of shares exists.

     Method of Tabulation. The vote required to approve each Proposal and the effects of abstentions and broker non-votes on each Proposal is set forth in Exhibit U to this proxy statement. For the Master Portfolio, whether or not a Proposal is approved by its shareholders will be determined by reference to the shares outstanding of the various Feeder Funds. Feeder Fund shareholders who do not provide voting instructions to their Feeder Fund will

61

not affect the Feeder Fund’s votes at the Meeting with respect to the Master Portfolio. The percentage of a Feeder Fund’s votes representing Feeder Fund shareholders not providing voting instructions will be voted by such Feeder Fund’s Board or officers in the same proportion as the Fund shareholders who provide voting instructions.

     Generally however, abstentions and broker non-votes will be treated as votes present at the Meeting, but will not be treated as votes cast, and therefore may have the same effect as a vote “against” a proposal that requires an affirmative majority vote of outstanding shares or of shares present and entitled to vote at the Meeting.  

     Simultaneous Meetings. The Meeting is to be held at the same time as a meeting of shareholders of Franklin Templeton Variable Insurance Products Trust, Franklin Money Fund, Franklin Tax-Exempt Money Fund, Franklin Federal Tax-Free Income Fund and Templeton Growth Fund, Inc. If any shareholder at the Meeting objects to the holding of simultaneous meetings and moves for an adjournment of the Meeting to a time promptly after the simultaneous meetings, the persons designated as proxies will vote in favor of such adjournment.

     Adjournment. The Meeting as to any Fund may be adjourned from time to time for any reason whatsoever by vote of the holders of a majority of the shares present (in person or by proxy and entitled to vote at the Meeting), whether or not quorum is present. Such authority to adjourn the Meeting may be used in the event that a quorum is not present at the Meeting, or in the event that a quorum is present but sufficient votes have not been received to approve a Proposal, or for any other reason consistent with applicable state law and the Fund’s By-Laws, including to allow for the further solicitation of proxies. Any adjournment may be made with respect to any business which might have been transacted at the Meeting, and any adjournment will not delay or otherwise affect the effectiveness and validity of any business transacted at the Meeting prior to adjournment. Unless otherwise instructed by a shareholder granting a proxy, the persons designated as proxies may use their discretionary authority to vote as instructed by management of the Funds on questions of adjournment and on any other proposals raised at the Meeting to the extent permitted by the SEC’s proxy rules, including proposals for which management of such Funds did not have timely notice, as set forth in the SEC’s proxy rules.

     Shareholder Proposals. The Funds are not required and do not intend to hold regular annual meetings of shareholders. A shareholder who wishes to submit a proposal for consideration for inclusion in a Fund’s proxy statement for the next meeting of shareholders of that Fund should send his or her written proposal to such Fund’s offices: for all Franklin Funds – One Franklin Parkway, San Mateo, California 94403-1906, Attention: Secretary; for all Templeton Funds - 500 East Broward Boulevard, Suite 2100, Fort Lauderdale, Florida 33394-3091, Attention: Secretary; and for all Mutual Series Funds – 101 John F. Kennedy Parkway, Short Hills, New Jersey 07078-2702, Attention: Secretary, so that it is received within a reasonable time in advance of such meeting in order to be included in the appropriate Fund’s proxy statement and proxy card relating to that meeting and presented at the meeting. A shareholder proposal may be presented at a meeting of shareholders only if such proposal concerns a matter that may be properly brought before the meeting under applicable federal proxy rules, state law, and the applicable Fund’s governing instruments.

     Submission of a proposal by a shareholder does not guarantee that the proposal will be included in the Fund’s proxy statement or presented at the meeting.

     No business other than the matters described above is expected to come before the Meeting, but should any other matter requiring a vote of shareholders arise, including any questions as to an adjournment or postponement of the Meeting, the persons designated as proxies named on the enclosed proxy card will vote on such matters in accordance with the views of management.

By Order of the Boards of Trustees/Directors, 

Craig S. Tyle, Vice President 

January __, 2007

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EX-99.A

EXHIBIT A

NOMINATING COMMITTEE MEMBERSHIP

Fund	Nominating Committee Members
Franklin California Tax-Free Income Fund, Inc., Franklin	Edith E. Holiday
Custodian Funds, Inc. and Franklin New York Tax-Free	Harris J. Ashton
Income Fund	Frank A. Olson
Franklin California Tax-Free Trust, Franklin Strategic	Harris J. Ashton
Series and Franklin Templeton International Trust	Edith E. Holiday
	Frank W. T. LaHaye
	John B. Wilson
Franklin Capital Growth Fund, Franklin Gold and Precious	Frank W. T. LaHaye
Metals Fund and Franklin Municipal Securities Trust	Harris J. Ashton
	Edith E. Holiday
	Frank A. Olson
	John B. Wilson
Franklin Global Trust	Harris J. Ashton
	Robert F. Carlson
	Edith E. Holiday
	Frank W. T LaHaye
	Frank A. Olson
	John B. Wilson
Franklin High Income Trust	Robert F. Carlson
	Edith E. Holiday
	Frank W. T. LaHaye
Franklin Investors Securities Trust and Franklin Tax-Free	Harris J. Ashton
Trust	Edith E. Holiday
	Frank W. T. LaHaye
	Frank A. Olson
Franklin Managed Trust and Franklin Value Investors Trust	Frank T. Crohn
	Burton J. Greenwald
	Charles Rubens II
	Leonard Rubin
	Robert E. Wade
Franklin Mutual Recovery Fund and Franklin Mutual	Burton J. Greenwald
Series Fund Inc.	Bruce A. MacPherson (Chairperson)
	Leonard Rubin
	Robert E. Wade
Franklin New York Tax-Free Trust and The Money Market	Harris J. Ashton
Portfolios	Robert F. Carlson
	Edith E. Holiday
	Frank W. T. LaHaye
Franklin Real Estate Securities Trust	Harris J. Ashton
	Robert F. Carlson
	Edith E. Holiday
	Frank W. T LaHaye
	John B. Wilson

A-1

Fund	Nominating Committee Members
Franklin Strategic Mortgage Portfolio	Harris J. Ashton
	Edith E. Holiday
	Frank W. T. LaHaye
Franklin Templeton Fund Allocator Series and Franklin	Harris J. Ashton
Templeton Global Trust	Robert F. Carlson
	Edith E. Holiday
	Frank W. T. LaHaye
	John B. Wilson
Franklin Templeton Money Fund Trust and Institutional	Harris J. Ashton
Fiduciary Trust	Robert F. Carlson
	Edith E. Holiday
	Frank W. T LaHaye
	Frank A. Olson
Templeton China World Fund, Templeton Developing	Frank J. Crothers
Markets Trust, Templeton Funds, Inc., Templeton Global	Edith E. Holiday (Chairman)
Smaller Companies Fund, Templeton Income Trust and	Frank A. Olson
Templeton Institutional Funds, Inc.

A-2

EX-99.B-1

EXHIBIT B-1

NOMINATING COMMITTEE CHARTER
(For all Funds except Franklin Mutual Series Fund Inc. and
Franklin Mutual Recovery Fund)

I. The Committee.

     The Nominating Committee (the “Committee”) is a committee of, and established by, the Board of Directors/Trustees of the Fund (the “Board”). The Committee consists of such number of members as set by the Board from time to time and its members shall be selected by the Board. The Committee shall be comprised entirely of “independent members.” For purposes of this Charter, independent members shall mean members who are not interested persons of the Fund (“Disinterested Board members”) as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”).

II. Board Nominations and Functions.

     1. The Committee shall make recommendations for nominations for Disinterested Board members on the Board to the incumbent Disinterested Board members and to the full Board. The Committee shall evaluate candidates’ qualifications for Board membership and the independence of such candidates from the Fund’s investment manager and other principal service providers. Persons selected must be independent in terms of both the letter and the spirit of the 1940 Act. The Committee shall also consider the effect of any relationships beyond those delineated in the 1940 Act that might impair independence; e.g., business, financial or family relationships with investment managers or service providers.

     2. The Committee also shall evaluate candidates’ qualifications and make recommendations for “interested” members on the Board to the full Board.

     3. The Committee may adopt from time to time specific, minimum qualifications that the Committee believes a candidate must meet before being considered as a candidate for Board membership and shall comply with any rules adopted from time to time by the U.S. Securities and Exchange Commission regarding investment company nominating committees and the nomination of persons to be considered as candidates for Board membership.

     4. The Committee shall review shareholder recommendations for nominations to fill vacancies on the Board if such recommendations are submitted in writing and addressed to the Committee at the Fund’s offices. The Committee shall adopt, by resolution, a policy regarding its procedures for considering candidates for the Board, including any recommended by shareholders.

III. Committee Nominations and Functions.

     The Committee shall make recommendations to the full Board for nomination for membership on all committees of the Board.

IV. Other Powers and Responsibilities.

1. The Committee shall meet at least once each year or more frequently in open or executive sessions. The Committee may invite members of management, counsel, advisers and others to attend its meetings as it deems appropriate. The Committee shall have separate sessions with management and others, as and when it deems appropriate.

     2. The Committee shall have the resources and authority appropriate to discharge its responsibilities, including authority to retain special counsel and other experts or consultants at the expense of the Fund.

     3. The Committee shall report its activities to the Board and make such recommendations as the Committee may deem necessary or appropriate.

     4. A majority of the members of the Committee shall constitute a quorum for the transaction of business at any meeting of the Committee. The action of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the action of the Committee. The Committee may meet in person or by telephone, and the Committee may act by written consent, to the extent permitted by law and by the Fund’s by-laws. In the event of any inconsistency between this Charter and the Fund’s organizational documents, the provisions of the Fund’s organizational documents shall be given precedence.

5. The Committee shall review this Charter at least annually and recommend any changes to the full Board.

B-1-1

EX-99.B-2

EXHIBIT B-2

FRANKLIN MUTUAL SERIES FUND/FRANKLIN MUTUAL RECOVERY FUND
Nominating and Corporate Governance Committee Charter

     This Charter has been adopted by the Board of Directors of Franklin Mutual Series Fund Inc./Franklin Mutual Recovery Fund (the “Fund”) to govern its Nominating and Corporate Governance Committee (the “Committee”), which shall have the purposes, goals, responsibilities, authority and specific powers described herein.

I. The Committee.

     The Nominating and Corporate Governance Committee (the “Committee”) is a committee of, and established by, the Board of Directors of the Fund (the “Board”). The Committee consists of such number of members as set by the Board from time to time and its members shall be selected by the Board. The Committee shall be comprised entirely of “independent members” or “Disinterested Board members,” which for purposes of this Charter shall mean members who are not “interested persons” of the Fund as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”). A member of the Committee shall be selected by the Board of Directors to serve as the Committee’s chairperson. The Committee may delegate any portion of its authority to a subcommittee comprised solely of its members.

II. Board Size, Composition and Nominations.

     1. The Committee shall (a) evaluate from time to time the appropriate size of the Board of Directors and recommend any increase or decrease with respect thereto, (b) recommend any changes in the composition (including the relative relationship of interested to Disinterested Board members) of the Board of Directors so as to best reflect the objectives of the 1940 Act, the Fund and the Board of Directors, (c) establish processes for developing candidates for Disinterested Board members and for the conducting of searches with respect thereto, and (d) recommend to the independent directors (i) a slate of Disinterested Board members to be elected at Fund shareholders meetings, or (ii) nominees to fill Disinterested Board member vacancies on the Board of Directors, where and when appropriate.

     2. The Committee shall identify, research, recruit and evaluate the qualifications of candidates for nomination for Disinterested Board members to serve on the Board, and make recommendations with respect thereto. Persons selected must be independent in terms of both the letter and the spirit of the 1940 Act. Consistent with the Fund’s governance best practices, the Committee shall also consider the effect of any relationships beyond those delineated in the 1940 Act that might impair independence, such as business, financial or family relationships with investment managers, employees or service providers of the Fund.

3. The Committee shall also evaluate candidates’ qualifications, and make recommendations to the full Board, for positions as “interested” members on the Board.

4. The Committee shall review shareholder recommendations for nominations to fill vacancies on the Board if such recommendations are properly submitted to the Committee or the Fund. The Committee shall adopt, by resolution, policies regarding its procedures for considering candidates for the Board, including any recommended by shareholders.

     5. The Committee shall consider and recommend to the independent directors or the Board, as appropriate, procedures for implementing changes required by statute, regulatory bodies and case law relating to the nomination, election or solicitation process with regard to election of directors.

III. Other Board Committees.

     1. The Committee shall make recommendations to the full Board as regards nomination for membership on all committees of the Board and shall review committee assignments at least annually.

B-2-1

     2. The Committee shall review as necessary the responsibilities of any committees of the Board, whether there is a continuing need for each committee, whether there is a need for additional committees of the Board, and whether committees should be combined or reorganized. The Committee shall make recommendations for any such action to the independent directors or the full Board, as appropriate.

IV. Corporate Governance.

     1. The Committee shall review proposed changes in, and where appropriate propose changes with respect to, the Fund’s governing instruments, including, but not limited to, its certificate of incorporation and bylaws, as such documents relate to corporate governance matters.

     2. The Committee shall periodically review Fund corporate governance procedures and shall recommend any appropriate changes to the full Board.

     3. The Committee shall initiate consideration, and otherwise be available to consider, issues relating to the respective roles entrusted to the Fund’s adviser, the Fund, the Board of Directors and the independent directors.

4. The Committee shall review persons who are under consideration to act as legal counsel to the Disinterested Board members and their qualifications to serve or continue to serve as “independent legal counsel” under applicable SEC rules, and shall make recommendations to the independent directors with regard thereto. The Committee shall monitor the performance of legal counsel employed by the Fund and by the Disinterested Board members.

V. Other Powers and Responsibilities.

1. The Committee shall meet at least twice each year or more frequently in open or executive sessions. The Committee may invite members of management, counsel, advisers and others to attend its meetings as it deems appropriate. The Committee shall have separate sessions with management and others, as and when it deems appropriate. A majority of the members of the Committee shall constitute a quorum for the transaction of business at any meeting of the Committee. The action of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the action of the Committee. The Committee may meet in person or by telephone, and the Committee may act by written consent, to the extent permitted by law and by the Fund’s by-laws. In the event of any inconsistency between this Charter and the Fund’s organizational documents, the provisions of the Fund’s organizational documents shall be given precedence.

2. The Committee shall have the resources and authority appropriate to discharge its responsibilities. The Committee shall have the sole authority to retain and terminate any search firm to be used to identify Disinterested Board member candidates, including the sole authority to approve such search firms’ fees, at the expense of the Fund and other retention terms. The Committee may also retain counsel of its choice and other advisers which the Committee deems necessary, at the expense of the Fund.

     3. The Committee shall report is activities to the Board and make such recommendations as the Committee may deem necessary or appropriate.

4. The Committee shall review this Charter at least annually and recommend any changes to the full Board. The Committee shall annually conduct a performance evaluation of the Committee and report the evaluation results to the Board of Directors.

[ADDITIONAL PROVISION FOR MUTUAL SERIES RECOVERY FUND CHARTER

     The Committee shall comply with any rules of any stock exchange, if any, applicable to nominating committees of closed-end funds whose shares are registered thereon.]

B-2-2

EX-99.C

EXHIBIT C

BOARDS AND THE FUNDS/SERIES TO BE
SUPERVISED BY SUCH BOARDS

Funds to be Supervised by Board I

Fund and Series	Nominees for Board I
Franklin California Tax-Free Trustab	Independent Board Nominees:
Franklin California Insured Tax-Free Income Fund	Harris J. Ashton
Franklin California Intermediate-Term Tax-Free Income Fund	Robert F. Carlson
Franklin California Limited-Term Tax-Free Income Fund	Sam L. Ginnc
Franklin California Tax-Exempt Money Fund	Edith E. Holiday
	Frank W. T. LaHaye
Franklin Capital Growth Funda	Frank A. Olson
	Larry D. Thompsonc
Franklin Global Trust	John B. Wilson
Fiduciary Large Capitalization Growth and Income Fund
Fiduciary Small Capitalization Equity Fund	Interested Board Nominees:
Franklin International Smaller Companies Growth Fund	Charles B. Johnson
Franklin Templeton Core Fixed Income Fund	Gregory E. Johnsonc
Franklin Templeton Core Plus Fixed Income Fund
Franklin Templeton Emerging Market Debt Opportunities Fund
Franklin Templeton High Income Fund
Franklin Gold and Precious Metals Funda
Franklin Municipal Securities Trusta
Franklin California High Yield Municipal Fund
Franklin Tennessee Municipal Bond Fund
Franklin New York Tax-Free Trustbd
Franklin New York Insured Tax-Free Income Fund
Franklin New York Intermediate-Term Tax-Free Income Fund
Franklin New York Limited-Term Tax-Free Income Fund
Franklin New York Tax-Exempt Money Fund
Franklin Real Estate Securities Trustb
Franklin Real Estate Securities Fund
Franklin Strategic Mortgage Portfolioabd
Franklin Tax-Free Trustad
Franklin Alabama Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Double Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free Income Fund
Franklin Federal Limited-Term Tax-Free Income Fund
Franklin Florida Insured Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin High Yield Tax-Free Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin Massachusetts Insured Tax-Free Income Fund

C-1

Fund and Series
Franklin Michigan Insured Tax-Free Income Fund
Franklin Minnesota Insured Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin New Jersey Tax-Free Income Fund
Franklin North Carolina Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Templeton Fund Allocator Seriesb
Franklin Templeton Conservative Target Fund
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
Franklin Templeton Global Trustb
Franklin Templeton Hard Currency Fund
Franklin Templeton International Trustab
Templeton Foreign Smaller Companies Fund
Templeton Global Long-Short Fund
Franklin Templeton Money Fund Trustd
Franklin Templeton Money Fund
Institutional Fiduciary Trustd
Franklin Templeton Money Fund
Franklin Cash Reserves Fund
Franklin Structured Large Cap Core Equity Fund
Franklin Structured Large Cap Growth Equity Fund
Money Market Portfolio
The Money Market Portfoliosbd
The Money Market Portfolio
a Mr. Carlson does not currently serve on this Fund’s Board.
b Mr. Olson does not currently serve on this Fund’s Board.
c Messrs. Ginn, Thompson and Gregory E. Johnson do not currently serve on the Boards of any of the Funds to be supervised by Board I.
d Mr. Wilson does not currently serve on this Fund’s Board.
Funds to be Supervised by Board II
Fund and Series	Nominees for Board II
Franklin California Tax-Free Income Fund, Inc. ab	Independent Board Nominees:
	Harris J. Ashton
Franklin Custodian Funds, Inc. ab	Robert F. Carlson
Franklin DynaTech Fund	Sam L. Ginnd
Franklin Growth Fund	Edith E. Holiday
Franklin Income Fund	Frank W. T. LaHaye

C-2

Fund and Series	Nominees for Board II
Franklin U.S. Government Securities Fund	Frank A. Olson
	Larry D. Thompsond
	John B. Wilsond
Franklin High Income Trust ce
Franklin High Income Fund	Interested Board Nominees:
	Charles B. Johnson
Franklin Investors Securities Trusta	Rupert H. Johnson, Jr.
Franklin Adjustable U.S. Government Securities Fund
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Limited Maturity U.S. Government Fund Securities
Franklin Low Duration Total Return Fund
Franklin Total Return Fund
Franklin New York Tax-Free Income Fund ab
Franklin Strategic Seriesac
Franklin Aggressive Growth Fund
Franklin Biotechnology Discovery Fund
Franklin Blue Chip Fund
Franklin Flex Cap Growth Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II
Franklin Strategic Income Fund
Franklin Technology Fund
Franklin U.S. Long-Short Fund
a Mr. Carlson does not currently serve on this Fund’s Board.
b Mr. LaHaye does not currently serve on this Fund’s Board.
c Mr. Olson does not currently serve on this Fund’s Board.
d Messrs. Ginn, Thompson and Wilson do not currently serve on the Boards of any of the Funds to be supervised by Board II,    except that Mr. Wilson currently serves on the Board of Franklin Strategic Series.
e Mr. Charles B. Johnson does not currently serve on this Fund’s Board.
Funds to be Supervised by Board III
Fund and Series	Nominees for Board III
Templeton China World Fund	Independent Board Nominees:
	Harris J. Ashton
Templeton Developing Market Trust	Frank J. Crothers
	Edith E. Holiday
Templeton Global Smaller Companies Fund	David W. Niemiec
	Frank A. Olson
Templeton Income Trust	Larry D. Thompson
Templeton Global Bond Fund	Constantine D. Tseretopoulos
	Robert E. Wadea
Templeton Institutional Funds, Inc.
Emerging Market Series	Interested Board Nominees:
Foreign Equity Series	Charles B. Johnson
Foreign Smaller Companies Series	Gregory E. Johnsonb

C-3

^a Mr. Wade does not currently serve on the Board of Templeton Institutional Funds, Inc. 

^b Mr. Gregory E. Johnson does not currently serve on the Board of any Fund to be supervised by Board III. 

Fund to be Supervised by Board IV
Fund and Series	Nominees for Board IV
Templeton Funds, Inc.	Independent Board Nominees:
Templeton Foreign Fund	Harris J. Ashton
Templeton World Fund	Frank J. Crothers
	Edith E. Holiday
	David W. Niemiec
	Frank A. Olson
	Larry D. Thompson
	Constantine D. Tseretopoulos
	Robert E. Wade
	Interested Board Nominees:
	Charles B. Johnson
	Rupert H. Johnson, Jr.
Funds to be Supervised by Board V
Fund and Series	Nominees for Board V
Franklin Managed Trust	Independent Board Nominees:
Franklin Rising Dividends Fund	Frank T. Crohn
	Charles Rubens, II
Franklin Value Investors Trust	Leonard Rubin
Franklin Balance Sheet Investment Fund	Burton J. Greenwald
Franklin Large Cap Value Fund	Robert E. Wade
Franklin MicroCap Value Fund
Franklin MidCap Value Fund	Interested Board Nominee:
Franklin Small Cap Value Fund	William J. Lippman
Funds to be Supervised by Board VI
Fund and Series	Nominees for Board VI
Franklin Mutual Series Fund Inc.	Independent Board Nominees:
Mutual Beacon Fund	Edward I. Altman
Mutual Discovery Fund	Ann Torre Bates
Mutual European Fund	Burton J. Greenwald
Mutual Financial Services Fund	Bruce A. MacPherson
Mutual Qualified Fund	Leonard Rubin
Mutual Shares Fund	Charles Rubens, II
	Robert E. Wade
Franklin Mutual Recovery Fund
	Interested Board Nominee:
	Gregory E. Johnsona
	Peter A. Langermana
a Messrs. Gregory E. Johnson and Langerman do not currently serve on the Boards of the Funds to be supervised by Board VI.

C-4

EX-99.D

EXHIBIT D

BOARD AND COMMITTEE FEES

     The following table identifies the compensation that the Funds pay their Independent Board Members and the number of standing committee meetings held during the most recent fiscal year (for fiscal years ended on or before September 30, 2006).

Fund	Quarterly  Fee	Annual Fee	Meeting Fee	Number of   Board   Meetings   Held During   Most Recent    Fiscal Year	Number  of Audit  Committee  Meetings  Held During  Most Recent  Fiscal Year	Number of  Nominating  Committee  Meetings  Held During  Most Recent  Fiscal Year
Franklin California Tax-Free Income Fund, Inc.	$4,840*	N/A	$1,645*		2	9
Franklin California Tax-Free Trust	$2,915*	N/A	$780*		3	8
Franklin Capital Growth Fund	$2,010*	N/A	$630*		3	8
Franklin Custodian Funds, Inc.	$5,525*	N/A	$1,830*		5	8
Franklin Global Trust	$820*	N/A	$400*		3	8
Franklin Gold and Precious Metals Fund	$535*	N/A	$185*		3	8
Franklin High Income Trust	$3,030*	N/A	$990*		3	8
Franklin Investors Securities Trust	$2,885*	N/A	$860*		4	6
Franklin Managed Trust	$2,000	N/A	$1,075		5	1
Franklin Municipal Securities Trust	$1,050*	N/A	$600*		3	8
Franklin Mutual Recovery Fund	N/A	$7,500 (except chairman receives $15,000)	$5,000** ($2,000 for Special Board Meetings)		7	1
Franklin Mutual Series Fund	N/A	$52,500 (exceptchairman receives $105,000)	$5,000** ($2,000 for Special Board Meetings)		7	7
Franklin New York Tax-Free Income Fund	$3,395*	N/A	$1,150*		3	8
Franklin New York Tax-Free Trust	$765*	N/A	$255*		5	8
Franklin Real Estate Securities Trust	$680*	N/A	$200*		3	8
Franklin Strategic Mortgage Portfolio	$820*	N/A	$500*		5	8

D-1

Fund	Quarterly  Fee	Annual Fee	Meeting Fee	Number of   Board   Meetings  Held During Most Recent  Fiscal Year	Number  of Audit  Committee  Meetings  Held During  Most Recent  Fiscal Year	Number of  Nominating  Committee  Meetings  Held During  Most Recent  Fiscal Year
Franklin Strategic Series	$4,725*	N/A	$1,350*		3	8
Franklin Tax-Free Trust	$5,145*	N/A	$1,590*		3	9
Franklin Templeton Fund Allocator Series	$155*	N/A	$110*		4	7
Franklin Templeton Global Trust	$180*	N/A	$150*		4	6
Franklin Templeton International Trust	$920*	N/A	$400*		4	6
Franklin Templeton Money Fund Trust	No Fee	No Fee	No Fee		3	8
Franklin Value Investors Trust	$8,000	N/A	$3,925		4	1
Institutional Fiduciary Trust	$1,085*	N/A	$275*		3	8
The Money Market Portfolios	No Fee	No Fee	No Fee		3	8
Templeton China World Fund	N/A	$2,000	$200		3	3
Templeton Developing Markets Trust	N/A	$10,160	$1,100		3	5
Templeton Funds, Inc.	N/A	$24,000	$1,800		3	3
Templeton Global Smaller Companies Fund	N/A	$8,000	$400		3	3
Templeton Income Trust	N/A	$2,000	$200		3	3
Templeton Institutional Funds, Inc.	N/A	$13,924	$900		3	7

     * The actual fees paid to the Independent Board Members of these Funds, including fees for attending Board meetings, are based upon a fee schedule applicable to all Franklin Funds (excluding Franklin Managed Trust and Franklin Value Investors Trust) for those Boards on which they serve. Such fees are subject to reduction as a result of fee caps limiting the total amount of fees payable to Independent Board Members serving on Boards of multiple Franklin Funds. For the amount actually paid to each Independent Board Member by a Franklin Fund for the 12-month period ended September 30, 2006, please see Exhibit E to this proxy statement.

** Independent Board Members of Franklin Mutual Series Fund Inc. and Franklin Mutual Recovery Fund receive a total of $5,000 for a joint meeting of such Funds, the payment of which is allocated to each Fund and series thereof based upon average net assets.

D-2

EX-99.E

EXHIBIT E

AGGREGATE INDEPENDENT BOARD MEMBER COMPENSATION
FROM EACH FUND FOR THE 12-MONTH PERIOD
ENDED SEPTEMBER 30, 2006

Fund	Harris J. Ashton	Robert F. Carlson	Frank J. Crothers	S. Joseph Fortunato1	Edith E. Holiday	Frank W. T. LaHaye	Gordon S. Macklin2
Franklin California Tax-Free Income Fund, Inc.	$28,431	--	--	$25,686	$29,367	--	$28,431
Franklin California Tax-Free Trust	$14,328	--	--	$12,916	$0	$14,393	$14,328
Franklin Capital Growth Fund	$10,495	--	--	$9,417	$10,490	$10,382	$10,494
Franklin Custodian Funds, Inc.	$32,921	--	--	$29,838	$36,596	--	$32,934
Franklin Global Trust	$2,378	$3,529	--	$1,949	$2,377	$2,312	$2,378
Franklin Gold and Precious Metals Fund	$2,926	--	--	$2,620	$2,925	$2,996	$2,926
Franklin High Income Trust	--	$21,303	--	$14,441	$16,103	$16,031	--
Franklin Investors Securities Trust	$15,181	--	--	$13,663	$16,948	$17,478	$15,180
Franklin Municipal Securities Trust	$5,069	--	--	$4,336	$5,067	$5,131	$5,069
Franklin New York Tax-Free Income Fund	$18,381	--	--	$16,464	$18,721	--	$18,381
Franklin New York Tax-Free Trust	$4,100	$7,419	--	$3,674	$4,124	$5,353	$4,100
Franklin Real Estate Securities Trust	$2,714	$3,898	--	$2,553	$2,807	$2,926	$2,714
Franklin Strategic Mortgage Portfolio	$4,049	--	--	$3,434	$4,046	$4,650	$4,035
Franklin Strategic Series	$23,079	--	--	$20,750	$24,382	$26,681	$23,079
Franklin Tax-Free Trust	$27,223	--	--	$26,482	$29,213	$32,719	$27,222
Franklin Templeton Fund Allocator Series	$1,066	$2,421	--	$935	$1,584	$3,436	$1,066
Franklin Templeton Global Trust	$1,013	$3,342	--	$845	$1,081	$1,086	$1,013
Franklin Templeton International Trust	$4,040	--	--	$5,800	$4,198	$4,157	$4,040
Franklin Templeton Money Fund Trust	$0	$0	--	$0	$0	$0	$0
Institutional Fiduciary Trust	$5,313	$7,208	--	$4,804	$5,311	$5,969	$5,313
The Money Market Portfolios	$0	$0	--	$0	$0	$0	$0
Templeton China World Fund	$3,300	--	$3,335	$3,300	$3,300	--	$3,300
Templeton Developing Markets Trust	$15,642	--	$15,978	$15,649	$15,649	--	$15,649
Templeton Funds, Inc.	$35,884	--	$38,107	$35,901	$35,901	--	$35,901
Templeton Global Smaller Companies Fund	$11,000	--	$11,088	$11,000	$11,000	--	$11,000
Templeton Income Trust	$3,300	--	$3,458	$3,300	$3,300	--	$3,300
Templeton Institutional Funds, Inc.	$18,402	--	$19,128	$18,408	$18,408	--	$18,408

____________________

1	Mr. Fortunato retired from the Boards on which he served effective as of the close of business September 5, 2006.
2	Mr. Macklin retired from the Boards on which he served effective as of the close of business September 12, 2006.

E-1

Fund	Fred R. Millsaps3	David W. Niemiec	Frank A. Olson	Larry D. Thompson	Constantine D. Tseretopoulos	John B. Wilson	Robert E. Wade
Franklin California Tax-Free Income Fund, Inc.	--	--	$24,969	--	--	--	--
Franklin California Tax-Free Trust	--	--	--	--	--	$0	--
Franklin Capital Growth Fund	--	--	$13,775	--	--	$9,273	--
Franklin Custodian Funds, Inc.	--	--	$42,739	--	--	--	--
Franklin Global Trust	--	--	$3,520	--	--	$3,535	--
Franklin Gold and Precious Metals Fund	--	--	$3,842	--	--	$2,626	--
Franklin High Income Trust	--	--	--	--	--	--	--
Franklin Investors Securities Trust	--	--	$21,505	--	--	--	--
Franklin Municipal Securities Trust	--	--	$6,653	--	--	$4,717	--
Franklin New York Tax-Free Income Fund	--	--	$16,044	--	--	--	--
Franklin New York Tax-Free Trust	--	--	--	--	--	--	--
Franklin Real Estate Securities Trust	--	--	--	--	--	$2,401	--
Franklin Strategic Mortgage Portfolio	--	--	--	--	--	--	--
Franklin Strategic Series	--	--	--	--	--	$21,974	--
Franklin Tax-Free Trust	--	--	$35,782	--	--	--	--
Franklin Templeton Fund Allocator Series	--	--	--	--	--	$3,569	--
Franklin Templeton Global Trust	--	--	--	--	--	$950	--
Franklin Templeton International Trust	--	--	--	--	--	$3,299	--
Franklin Templeton Money Fund Trust	--	--	$0	--	--	--	--
Institutional Fiduciary Trust	--	--	$6,984	--	--	--	--
The Money Market Portfolios	--	--	--	--	--	--	--
Templeton China World Fund	--	$3,325	$3,335	$3,100	$3,335	--	$1,742
Templeton Developing Markets Trust	--	$16,344	$15,978	$17,034	$15,978	--	$9,900
Templeton Funds, Inc.	--	$38,406	$38,107	$39,802	$38,107	--	$23,375
Templeton Global Smaller Companies Fund	--	$11,059	$11,088	$10,600	$11,088	--	$6,050
Templeton Income Trust	--	$3,405	$3,458	$3,100	$3,457	--	$1,742
Templeton Institutional Funds, Inc.	--	$19,440	$19,128	$20,434	$19,128	--	--

____________________

³ Mr. Millsaps retired from the Boards on which he served effective as of the close of business December 31, 2005.

Fund	Edward I. Altman	Ann Torre Bates	Frank T. Crohn	Burton J. Greenwald	Bruce A. MacPherson	Charles Rubens, II	Leonard Rubin	Robert E. Wade
Franklin Managed Trust	--	--	$17,006	$15,375	--	$15,375	$15,375	$15,375
Franklin Mutual Recovery Fund	$11,692	$11,772	--	$7,669	$7,669	$7,646	$7,669	$19,256
Franklin Mutual Series Fund Inc.	$89,308	$102,978	--	$81,331	$81,331	$77,354	$81,331	$152,744
Franklin Value Investors Trust	--	--	$56,994	$53,625	--	$53,625	$53,625	$53,625

     The mark “- -“ indicates that the individual did not serve on such Fund’s Board during the 12-months ended September 30, 2006.

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EX-99.F

EXHIBIT F

ADDITIONAL EXECUTIVE OFFICERS

Name, Year of Birth and Address	Position	Funds	Length of Time Served
Sheila Amoroso (1959) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Franklin California Tax-Free Income Fund, Inc., Franklin California Tax-Free Trust, Franklin Municipal Securities Trust, Franklin New York Tax-Free Income Fund, Franklin New York Tax-Free Trust and Franklin Tax-Free Trust	Since 1999
Principal Occupation During Past 5 Years: Senior Vice President, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton Investments.
Mark Boyadjian (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Franklin Investors Securities Trust	Since 2003
Principal Occupation During Past 5 Years: Senior Vice President, Franklin Advisers, Inc.; and officer of two of the investment companies in Franklin Templeton Investments.
Philippe Brugere-Trelat (1949) 101 John F. Kennedy Parkway Short Hills, NJ 07078-2789	Vice President	Mutual Series Funds	Since 2005
Principal Occupation During Past 5 Years: Vice President, Franklin Mutual Advisers, LLC; Portfolio Manager of Eurovest SA (French registered Investment Company, Sicav); and officer of two of the investment companies in Franklin Templeton Investments.
Rafael R. Costas, Jr. (1965) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Franklin California Tax-Free Income Fund, Inc., Franklin California Tax-Free Trust, Franklin Municipal Securities Trust, Franklin New York Tax-Free Income Fund, Franklin New York Tax-Free Trust and Franklin Tax-Free Trust	Since 1999
Principal Occupation During Past 5 Years: Senior Vice President, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton Investments.
Michael J. Embler (1964) 101 John F. Kennedy Parkway Short Hills, NJ 07078-2789	Senior Vice President and Chief Investment Officer	Mutual Series Funds	Since 2005
Principal Occupation During Past 5 Years: Senior Vice President and Chief Investment Officer, Franklin Mutual Advisers, LLC; and officer of two of the investment companies in Franklin Templeton Investments.

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Name, Year of Birth and Address	Position	Funds	Length of Time Served
Jeffrey A. Everett (1964) P.O. Box N-7759 Lyford Cay, Nassau, Bahamas	President and Chief Executive Officer - Investment Management   Vice President	Templeton Global Smaller Companies Fund       Templeton Income Trust, Templeton Institutional Funds, Inc., Templeton Developing Markets Trust and Templeton China World Fund	Since 2005       Since 2001
Principal Occupation During Past 5 Years: President and Director, Templeton Global Advisors Limited; and officer of 14 of the investment companies in Franklin Templeton Investments.
Laura Fergerson (1962) One Franklin Parkway San Mateo, CA 94403-1906	Treasurer	All Franklin Funds	Since 2004
Principal Occupation During Past 5 Years: Vice President, Franklin Templeton Services, LLC; officer of 30 of the investment companies in Franklin Templeton Investments; and formerly, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
Edward B. Jamieson (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Franklin Global Trust and Franklin Strategic Series	Since 2000
Principal Occupation During Past 5 Years: President and Director, Franklin Advisers, Inc.; officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of four of the investment companies in Franklin Templeton Investments.
John R. Kay (1940) 500 East Broward Blvd. Suite 2100  Fort Lauderdale, FL 33394-3091	Vice President	All Templeton Funds	Since 1994
Principal Occupation During Past 5 Years: Vice President, Templeton Worldwide, Inc.; Assistant Vice President, Franklin Templeton Distributors, Inc.; Senior Vice President, Franklin Templeton Services, LLC; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 32 of the investment companies in Franklin Templeton Investments; and formerly, Vice President and Controller, Keystone Group, Inc.
Mark Mobius (1936) 17th Floor, The Chater House 8 Connaught Road Central Hong Kong	President and Chief Executive Officer - Investment Management Vice President	Templeton Developing Markets Trust Templeton China World Fund Templeton Institutional Funds, Inc.	President since 1991 and Chief Executive Officer - Investment Management since 2002 President since 1993 and Chief Executive Officer - Investment Management since 2002 Vice President since 1993

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Name, Year of Birth and Address	Position	Funds	Length of Time Served
Principal Occupation During Past 5 Years: Portfolio Manager of various Templeton advisory affiliates; Managing Director, Templeton Asset Management Ltd.; Executive Vice President and Director, Templeton Global Advisors Limited; and officer and/or director, as the case may be, of some of the subsidiaries of Franklin Resources, Inc. and of six of the investment companies in Franklin Templeton Investments; and formerly, President, International Investment Trust Company Limited (investment manager of Taiwan R.O.C. Fund) (1986-1987); and Director, Vickers da Costa, Hong Kong (1983-1986).
Christopher J. Molumphy (1962) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Franklin Global Trust and Franklin Strategic Series	Since 2000
Principal Occupation During Past 5 Years: Executive Vice President, Franklin Advisers, Inc.; and officer of six of the investment companies in Franklin Templeton Investments.
Gary P. Motyl (1952) 500 East Broward Blvd. Suite 2100 Fort Lauderdale, FL 33394- 3091	President and Chief Executive Officer - Investment Management	Templeton Institutional Funds, Inc.	Since 2005
Principal Occupation During Past 5 Years: President, Templeton Investment Counsel, LLC; and officer and/or director of other subsidiaries of Franklin Resources, Inc.
Gregory R. Seward (1956) 500 East Broward Blvd. Suite 2100  Fort Lauderdale, FL 33394-3091	Treasurer	All Templeton Funds and Mutual Series Funds	Since 2004 for the Templeton Funds and since December 2005 for the Mutual Series Funds
Principal Occupation During Past 5 Years: Vice President, Franklin Templeton Services, LLC; officer of 16 of the investment companies in Franklin Templeton Investments; and formerly, Vice President, JPMorgan Chase (2000-2004) and American General Financial Group (1991-2000).
Thomas Walsh (1961) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Franklin California Tax-Free Income Fund, Inc., Franklin California Tax-Free Trust, Franklin Municipal Securities Trust, Franklin New York Tax-Free Income Fund, Franklin New York Tax-Free Trust and Franklin Tax- Free Trust	Since 1999
Principal Occupation During Past 5 Years: Senior Vice President, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton Investments.

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EX-99.G

EXHIBIT G

FORM OF
AGREEMENT AND PLAN OF REORGANIZATION

     This Agreement and Plan of Reorganization (“Agreement”) is made as of this ___ day of ________, 2007 by and between __________________________, a [Massachusetts business trust/Maryland corporation] (the “Fund”), and ______________________________, a Delaware statutory trust (the “DE Trust”) (the Fund and the DE Trust are hereinafter collectively referred to as the “parties”).

     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 DE Trust at the closing provided for in Section 2 (hereinafter referred to as the “Closing”) all of the Fund’s then-existing assets (the “Assets”). In consideration thereof, the DE Trust agrees at the Closing (i) to assume and pay when due all obligations and liabilities of the Fund, existing on or after the Effective Date of the Reorganization (as defined in Section 2 hereof), whether absolute, accrued, contingent or otherwise, including all fees and expenses in connection with this Agreement, which fees and expenses shall, in turn, include, without limitation, costs of legal advice, accounting, printing, mailing, proxy solicitation and transfer taxes, if any (collectively, the “Liabilities”), such Liabilities to become the obligations and liabilities of the DE Trust; and (ii) to deliver to the Fund in accordance with paragraph (b) of this Section 1, full and fractional shares of each series and class of shares of beneficial interest, without par value, of the DE Trust, equal in number to the number of full and fractional shares of the corresponding series and class of shares of beneficial interest, without par value, of the Fund outstanding at the time of calculation of the Fund’s net asset value (“NAV”) on the business day immediately preceding the Effective Date of the Reorganization. The reorganization contemplated hereby is intended to qualify as a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (“Code”). The Fund shall distribute to the Fund’s shareholders the shares of the DE Trust in accordance with this Agreement and the resolutions of the Board of [Trustees][Directors] of the Fund (the “Board of [Trustees][Directors]”) authorizing the transactions contemplated by this Agreement.

           (b) In order to effect the delivery of shares described in Section 1(a)(ii) hereof, the DE Trust will establish an open account for each shareholder of the Fund and, on the Effective Date of the Reorganization, will credit to such account full and fractional shares of beneficial interest, [par value $0._] [without par value], of the corresponding series and class of the DE Trust equal to the number of full and fractional shares of [beneficial interest][common stock] such shareholder holds in the corresponding series and class of the Fund at the time of calculation of the Fund’s NAV on the business day immediately preceding the Effective Date of the Reorganization. Fractional shares of the DE Trust will be carried to the third decimal place. At the time of calculation of the Fund’s NAV on the business day immediately preceding the Effective Date of the Reorganization, the net asset value per share of each series and class of shares of the DE Trust shall be deemed to be the same as the net asset value per share of each corresponding series and class of shares of the Fund. On the Effective Date of the Reorganization, each certificate representing shares of a series and class of the Fund will be deemed to represent the same number of shares of the corresponding series and class of the DE Trust. Simultaneously with the crediting of the shares of the DE Trust to the shareholders of record of the Fund, the shares of the Fund held by such shareholders shall be cancelled. Each shareholder of the Fund will have the right to deliver their share certificates of the Fund to the DE Trust in exchange for share certificates of the DE Trust. However, a shareholder need not deliver such certificates to the DE Trust unless the shareholder so desires.

           (c) As soon as practicable after the Effective Date of the Reorganization, the Fund shall take all necessary steps under [Massachusetts][Maryland] law to effect a complete dissolution of the Fund.

           (d) The expenses of entering into and carrying out this Agreement will be borne by the Fund to the extent not paid by its investment manager.

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2. Closing and Effective Date of the Reorganization.

           The Closing shall consist of (i) the conveyance, transfer and delivery of the Assets to the DE Trust in exchange for the assumption and payment, when due, by the DE Trust, of the Liabilities of the Fund; and (ii) the issuance and delivery of the DE Trust’s shares in accordance with Section 1(b), together with related acts necessary to consummate such transactions. Subject to receipt of all necessary regulatory approvals and the final adjournment of the meeting of shareholders of the Fund at which this Agreement is considered and approved, the Closing shall occur on such date as the officers of the parties may mutually agree (“Effective Date of the Reorganization”).

3. Conditions Precedent.

           The obligations of the Fund and the DE Trust to effectuate the transactions 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 Board of [Trustees][Directors] to be necessary and appropriate as a result of this Agreement, shall have been filed with the Commission; (ii) the DE 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 statutory trust shall have been filed with the Commission and the DE Trust shall have expressly adopted such amended Form N-8A as its own for purposes of the 1940 Act;

(c) Each party shall have received an opinion of Stradley Ronon Stevens & Young, LLP, Philadelphia, Pennsylvania, to the effect that, assuming the reorganization contemplated hereby is carried out in accordance with this Agreement, the laws of [The Commonwealth of Massachusetts][the State of Maryland] and the State of Delaware, and in accordance with customary representations provided by the parties in a certificate(s) delivered to Stradley Ronon Stevens & Young, LLP, the reorganization contemplated by this Agreement qualifies as a “reorganization” under Section 368 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 DE Trust or the shareholders of the Fund or the DE Trust;

(d) The Fund shall have received an opinion of Stradley Ronon Stevens & Young, LLP, dated the Effective Date of the Reorganization, addressed to and in form and substance reasonably satisfactory to the Fund, to the effect that (i) the DE Trust is a statutory trust duly formed, in good standing and having a legal existence under the laws of the State of Delaware; (ii) this Agreement and the transactions contemplated thereby and the execution and delivery of this Agreement have been duly authorized and approved by all requisite statutory trust action of the DE Trust and this Agreement is a legal, valid and binding agreement of the DE Trust in accordance with its terms; and (iii) the shares of the DE Trust to be issued in the reorganization, upon issuance thereof in accordance with this Agreement, will have been validly issued and fully paid and will be nonassessable by the DE Trust;

(e) The DE Trust shall have received the opinion of Stradley Ronon Stevens & Young, LLP, dated the Effective Date of the Reorganization, addressed to and in form and substance reasonably satisfactory to the DE Trust, to the effect that: (i) the Fund is [MA: duly authorized to exercise all of the powers in its Declaration of Trust and to transact business under the laws of the Commonwealth of Massachusetts][MD:duly incorporated, legally existing and in good standing under the laws of the State of Maryland]; and (ii) this Agreement and the transactions

G-2

contemplated hereby and the execution and delivery of this Agreement have been duly authorized and approved by all requisite [trust][corporate] action of the Fund and this Agreement is a legal, valid and binding agreement of the Fund in accordance with its terms;

(f) The shares of the DE Trust are eligible for offering to the public in those states of the United States in which the shares of the Fund are currently eligible for offering to the public so as to permit the issuance and delivery by the DE Trust of the shares contemplated by this Agreement to be consummated;

(g) This Agreement and the transactions contemplated hereby shall have been duly adopted and approved by the appropriate action of the Board of [Trustees][Directors] and the shareholders of the Fund;

(h) The shareholders of the Fund shall have voted to direct the Fund to vote, and the Fund shall have voted, as sole shareholder of each series and class of the Fund, to:

(1) Elect as Trustees of the DE Trust the following individuals: [nominee names]; and

(2) Approve an Investment Management Agreement between [name of relevant Franklin Templeton investment manager] (“Investment Manager”) and the DE Trust, which is substantially identical to the then-current Investment Management Agreement between Investment Manager and the Fund [and approval of the sub-investment management agreement(s) with [name of relevant sub-investment manager(s)] on behalf of the Fund];

(i) The Trustees of the DE Trust shall have duly adopted and approved this Agreement and the transactions contemplated hereby, including authorization of the issuance and delivery by the DE Trust of shares of the DE Trust on the Effective Date of the Reorganization and the assumption by the DE Trust of the Liabilities of the Fund in exchange for the Assets of the Fund pursuant to the terms and provisions of this Agreement, and shall have taken the following actions at a meeting duly called for such purposes:

(1) Approval of the Investment Management Agreement [and sub-investment management agreement(s)] described in paragraph (h)(2) of this Section 3 between Investment Manager and the DE Trust;

(2) Approval of the assignment to the DE Trust of the custody agreement(s), as amended to date, between _________________and the Fund;

(3) Selection of [PricewaterhouseCoopers LLP][Ernst &Young LLP] as the DE Trust’s independent auditors for the fiscal year ending _______________, 200_;

(4) Approval of a fund administration agreement with [Franklin Templeton Services, LLC];

(5) Approval of a distribution agreement between the DE Trust and [Franklin/Templeton Distributors, Inc.];

(6) Approval of a form of dealer agreement between the DE Trust and [Franklin/Templeton Distributors, Inc.], including any amendment(s) to the form of dealer agreement;

(7) Approval of distribution plans by the DE Trust pursuant to Rule 12b-1 under the 1940 Act relating to each of Class A, Class B, Class C and Class R (or their equivalents);

(8) Approval of the multiple class plan(s) pursuant to Rule 18f-3;

(9) Approval of a transfer agent and shareholder services agreement with [Franklin Templeton Investor Services, LLC];

(10) Authorization of the issuance by the DE Trust of one share of each series and class of the DE Trust to the Fund in consideration for the payment of $1.00 for each such share for the purpose of enabling the Fund to vote on the matters referred to in paragraph (h) of this Section 3, and the subsequent redemption of such shares, all prior to the Effective Date of the Reorganization; and

(11) Submission of the matters referred to in paragraph (h) of this Section 3 to the Fund as sole shareholder of each series and class of the DE Trust.

           At any time prior to the Closing, any of the foregoing conditions may be waived or amended, or any additional terms and conditions may be fixed, by the Board of [Trustees][Directors], if, in the judgment of such Board, such waiver, amendment, term or condition will not affect in a materially adverse way the benefits intended to be accorded the shareholders of the Trust under this Agreement.

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4. Dissolution of the Fund.

      Promptly following the consummation of the distribution of each series and class of shares of the DE Trust to holders of the corresponding series and class of shares of the Fund under this Agreement, the officers of the Fund shall take all steps necessary under [Massachusetts][Maryland] law to dissolve its [business trust][corporate] status, including publication of any necessary notices to creditors, receipt of any necessary pre-dissolution clearances from [The Commonwealth of Massachusetts][the State of Maryland], and filing for record with the Secretary of [the Commonwealth of Massachusetts of a Certificate of Termination][State of Maryland of Articles of Dissolution].

5. Termination.

      The Board of [Trustees][Directors] 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 such Board, the facts and circumstances make proceeding with this Agreement inadvisable.

6. Entire Agreement.

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

7. Further Assurances; Other Agreements.

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

           [Massachusetts business trusts only] The parties acknowledge and agree that this Agreement has been made and executed on behalf of the Fund and is not executed or made by the officers or Trustees of the Fund individually, but only as officers and Trustees under the Fund’s [Agreement and] Declaration of Trust, and that the obligations of the Fund hereunder are not binding upon any of the Trustees, officers or shareholders of the Fund individually, but bind only the estate of the Fund.

8. 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.

9. 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.

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     IN WITNESS WHEREOF, the Fund and the DE Trust have each caused this Agreement and Plan of Reorganization to be executed on its behalf by its Chairman, President or a Vice President and attested by its Secretary or an Assistant Secretary, all as of the day and year first-above written.

		______________________________ (a Massachusetts business trust)
		(a Maryland corporation)
Attest:
By:	/s/	By:	/s/
Name:		Name:
Title:		Title:
		______________________________ (a Delaware statutory trust)
Attest:
By:	/s/	By:	/s/
Name:		Name:
Title:		Title:

G-5

EX-99.H-1

EXHIBIT H-1

COMPARISON OF MASSACHUSETTS AND DELAWARE GOVERNING INSTRUMENTS
AND STATE LAW

     The following is only a discussion of certain principal differences between the governing documents for each existing Massachusetts business trust (each an “Acquired Trust”) and its successor Delaware statutory trust (each an “Acquiring Trust”), and is not a complete description of the Acquired or Acquiring Trusts’ governing documents. Further information about each Acquired Trust’s current trust structure is contained in each Acquired Trust’s prospectus and governing documents and in relevant state law.

Organization and Capital Structure

     Each Acquired Trust is a Massachusetts business trust (an “MBT”). An MBT is an unincorporated business association organized under a Massachusetts statute governing business trusts (the “Massachusetts Statute”). Each Acquired Trust’s operations are governed by its respective Declaration of Trust (the “MA Declaration”) and its By-Laws (the “MA By-Laws”), both as they may have been amended from time to time. The business and affairs of each Acquired Trust are managed under the supervision of its respective Board of Trustees.

     The shares of beneficial interest of Franklin California Tax-Free Trust, Franklin New York Tax-Free Trust, Franklin Tax-Free Trust and Institutional Tax Free Trust each have no par value. The shares of beneficial interest of Franklin Investors Securities Trust, Franklin Value Investors Trust, Franklin Templeton Variable Insurance Products Trust and Templeton Income Trust each have a par value of $0.01 per share. Each MA Declaration authorizes an unlimited number of shares, which may be divided into separate and distinct series or classes.

     Each Acquiring Trust is a Delaware statutory trust (a “DST”). A DST is an unincorporated association organized under the Delaware Statutory Trust Act (the “Delaware Act”). Like an MBT, each Acquiring Trust’s operations are governed by its Declaration of Trust (the “DE Declaration”) and its By-Laws (its “DE By-Laws”), and its business and affairs are managed under the supervision of its Board of Trustees.

     Each Acquiring Trust’s shares of beneficial interest are issued without par value. Each DE Declaration authorizes an unlimited number of shares, which may be divided into separate and distinct series or classes. These series and classes will have the rights, powers and duties set forth in each DE Declaration or as specified in resolutions of each Acquiring Trust’s Board of Trustees. Each Acquiring Trust’s series and classes are identical to those of its corresponding Acquired Trust.

Meetings of Shareholders and Voting Rights

     Neither the MA Declarations nor the MA By-Laws require an Acquired Trust to hold an annual shareholders’ meeting. Rather, each Acquired Trust’s Board of Trustees decides whether and when shareholder meetings will be held.

     Except for Templeton Income Trust, each MA Declaration provides that, except when a larger quorum is required by applicable law, 40% of the outstanding shares entitled to vote shall constitute a quorum at a shareholders’ meeting. Templeton Income Trust’s By-Laws provide that a majority of the outstanding shares entitled to vote shall constitute a quorum at a shareholders’ meeting. Each MA Declaration provides that shareholders are entitled to one vote for each whole share that they own, and a proportionate fractional vote for each fractional share that they hold. Each Acquired Trust’s shareholders shall vote separately by series, except to the extent required by the Investment Company Act of 1940, as amended (the “1940 Act”), or when its Trustees have determined that the matter affects only the interests of shareholders of some, but not all, series of shares, in which case only the shareholders of the affected series shall be entitled to vote. Subject to the foregoing requirements for voting shares separately by series, when a quorum is present at a meeting, a majority of the shares voted shall decide any questions and a plurality of votes shall elect a trustee, except when a larger vote is required by any provision of an Acquired Trust’s governing documents or by applicable law.

     Each MA Declaration provides that shareholders shall have the power to vote only on: (1) the election of trustees; (2) the termination of the Acquired Trust or any of its series; (3) whether or not a court action should be brought derivatively or as a class action on behalf of the Acquired Trust or the shareholders; or (4) such additional matters as

H-1-1

may be required by the MA Declaration, the MA By-Laws, the Acquired Trust’s registration with the U.S. Securities and Exchange Commission, any state or as the trustees may consider necessary or desirable. In addition, Templeton Income Trust’s MA Declaration provides that shareholders shall have the power to vote on: (1) the approval of any advisory agreement; (2) the amendment of its MA Declaration; (3) the merger, consolidation or sale of assets of the Trust; and (4) the re-domestication of the Trust. There is no cumulative voting in the election of trustees under any MA Declaration.

     The Delaware Act does not require annual shareholders’ meetings. Each set of DE By-Laws authorizes the calling of a shareholders’ meeting by the Board, the chairperson of the Board or by the president of the Trust to take action on any matter deemed necessary or desirable by the Board of Trustees. A shareholder meeting for the purpose of electing trustees may also be called by the chairperson of the Board of Trustees, and shall be called by the president or any vice-president at the request of holders of 10% or more of the outstanding shares if the requesting shareholders pay the reasonably estimated cost of preparing and mailing the notice. No meeting may be called at the request of shareholders to consider any matter that is substantially the same as a matter voted upon at a shareholders’ meeting held during the preceding twelve (12) months, unless requested by holders of a majority of all outstanding shares entitled to vote at such meeting.

     Each DE Declaration generally provides that each full share of an Acquiring Trust is entitled to one vote and each fractional share is entitled to a fractional vote. All shares of an Acquiring Trust entitled to vote on a matter shall vote in the aggregate without differentiation between shares of separate series or classes. With respect to any matter that affects only the interests of some but not all series or classes, or where otherwise required by the 1940 Act, only the shareholders of the affected series or classes shall be entitled to vote on the matter.

     Each DE Declaration provides that forty percent (40%) of the outstanding shares of the Acquiring Trust (or a series or class, as applicable), entitled to vote at a meeting, which are present in person or represented by proxy, shall constitute a quorum at the meeting, except when there is a legal requirement for a larger quorum. Subject to any legal requirements for a different vote, in all matters other than the election of trustees, shareholders may approve a proposal by a majority of votes cast. Trustees are elected by a plurality of votes cast. Where a separate vote by series or class is required, these voting requirements apply to those separate votes. There is no cumulative voting for any matter.

Liability of Shareholders

     The Massachusetts Statute does not include an express provision relating to the limitation of liability of the beneficial owners of an MBT. Each MA Declaration provides that no shareholder shall be subject to any personal liability whatsoever to any person in connection with property of its Acquired Trust or the acts, obligations or affairs of the Trust. Each MA Declaration further provides that, if any shareholder is made a party to any suit or proceeding to enforce any such liability of its Acquired Trust, he or she shall not be held to any personal liability. Each Acquired Trust shall indemnify and hold each shareholder harmless from and against all claims and liabilities to which such shareholder may become subject by reason of being or having been a shareholder, and shall reimburse the shareholder for all legal and other expenses reasonably incurred by him in connection with any such claim or liability.

     Consistent with the Delaware Act, each DE Declaration provides that no Acquiring Trust shareholder, as such, shall be subject to any personal liability whatsoever to any person in connection with the property, acts, obligations or affairs of the Acquiring Trust. However, each Acquiring Trust’s Board of Trustees may cause any shareholder to pay for charges of its Acquiring Trust’s custodian or transfer, dividend disbursing, shareholder servicing or similar agent for services provided to that shareholder that are beyond the customary services provided for the benefit of all shareholders.

Liability Among Series

     The Massachusetts Statute does not contain statutory provisions addressing series or class liability with respect to multi-series or multi-class investment companies. Each MA Declaration provides that the assets and liabilities of a particular series shall be separate from any other series. All persons extending credit to, contracting with, or having any claim against a particular series of an Acquired Trust shall look only to the assets of that particular series for payment of the credit, contract or claim.

     Each DE Declaration also provides that each series of its Acquiring Trust shall be separate and distinct from any other series of the Acquiring Trust and shall hold and account for the assets and liabilities belonging to any series separately from the assets and liabilities of the Acquiring Trust or any other series. Each class of a series of an Acquiring Trust shall be separate and distinct from any other class of that series.

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Dividends and Distributions

     Each MA Declaration provides that each shareholder of a series is entitled to receive a series’ distributions of income and capital gains in the manner, at the time and on the terms set by its Acquired Trust’s Board of Trustees. Each DE Declaration provides that the shareholders of any series or class of its Acquiring Trust shall be entitled to receive dividends and distributions when, if and as declared by its Board of Trustees. The right of an Acquiring Trust’s shareholders to receive dividends or other distributions on shares of any class may be set forth in a plan adopted by the Acquiring Trust’s Board of Trustees pursuant to the 1940 Act. For both MBTs and DSTs, dividends and distributions may be paid in cash, kind or in shares of the respective Trust, and the respective Boards may retain such amounts as they may deem necessary or desirable for the conduct of the respective Trust’s affairs.

Election of Trustees; Terms; Removal

     Each MA Declaration provides that, except in the event of death, resignation or removal, each Acquired Trust trustee shall hold office until the next meeting of shareholders called for the purpose of electing trustees and until his or her successor is elected and qualified. The MA Declarations for each of the Institutional Fiduciary Trust, Templeton Income Trust and Franklin New York Tax-Free Trust provide that their Trustees may also be removed in the event of court declared incompetency or bankruptcy.

     Under each DE Declaration, each trustee of an Acquiring Trust shall hold office for the earlier of (1) the lifetime of the Acquiring Trust; (2) the trustee’s earlier death, resignation, removal, retirement or inability otherwise to serve; or (3) the next meeting of shareholders called for the purpose of electing trustees and the election and qualification of his or her successor. Under each DE Declaration, any trustee may be removed, with or without cause, by its Acquiring Trust’s Board of Trustees, by action of a majority of the trustees then in office, or by the vote of the shareholders at any meeting called for that purpose.

     There is no cumulative voting for the election of trustees of the MBTs or DSTs. The governing instruments for both the MBTs or DSTs provide a mechanism for the respective Boards to fill vacancies.

Liability of Trustees and Officers; Indemnification

     The Massachusetts Statute does not include an express provision limiting the liability of the trustees of an MBT. Each MA Declaration provides that no trustee, officer, employee or agent of the Acquired Trust shall be subject to any personal liability whatsoever, except that the trustees are not protected from any liability to which they may be subject as a result of their bad faith, willful misfeasance, gross negligence or reckless disregard in discharging their duties to their Acquired Trust or its shareholders. Claimants may only look to the property of an Acquired Trust for satisfaction of claims arising in connection with the affairs of the Acquired Trust. If any trustee, officer, employee or agent of an Acquired Trust is made a party to any suit or proceeding to enforce any such claim, he or she shall not be held to any personal liability.

     Each MA Declaration provides that every person who is, or has been, a trustee or officer of an Acquired Trust shall be indemnified by the Acquired Trust to the fullest extent permitted by law. This indemnification covers all liability and expenses reasonably incurred or paid in connection with any proceeding in which he or she becomes involved because of being or having been a trustee or officer. Each set of MA By-Laws further provides, however, that no indemnification shall be provided to a trustee or officer: (1) for any liability to the Acquired Trust or the shareholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties of the office; (2) for any matter where the trustee or officer has been finally adjudged to be liable in the performance of his or her duty to the Acquired Trust unless a legal determination has been made that the person was not liable because he or she engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties of the office; or (3) in the event of a settlement resulting in a payment by a trustee or officer, unless there has been a determination that the trustee or officer did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties of the office. In addition, the MA Declarations for Franklin Templeton Variable Insurance Products Trust and Franklin Value Investors Trust provide that no indemnification shall be provided to a trustee or officer for any matter where the trustee or officer has been finally adjudged to be liable because he or she improperly received a personal benefit.

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     Each DE Declaration provides that any person who is or was a trustee, officer, employee or other agent of an Acquiring Trust shall be liable to the Acquiring Trust and its shareholders only for (1) any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing, or (2) for the person’s own willful misfeasance, bad faith, gross negligence or reckless disregard of the person’s duties. Except in these instances, these persons shall not be responsible or liable for any act or omission of any other agent of an Acquiring Trust or its investment adviser or principal underwriter to the fullest extent that limitations of liability are permitted by the Delaware Act. Moreover, except in these instances, none of these persons, when acting in their respective capacity as such, shall be personally liable to any other person, other than an Acquiring Trust or its shareholders, for any act, omission or obligation of the Acquiring Trust or any trustee thereof.

     Each Acquiring Trust shall indemnify, to the fullest extent permitted under applicable law, any of these persons who are a party to any proceeding because the person is or was an agent of the Acquiring Trust. These persons shall be indemnified against any expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with the proceeding if the person acted in good faith or, in the case of a criminal proceeding, had no reasonable cause to believe that the conduct was unlawful. The termination of any proceeding by judgment, settlement or otherwise shall not in itself create a presumption that the person did not act in good faith or that the person had reasonable cause to believe that the conduct was unlawful. There shall nonetheless be no indemnification for a person’s own willful misfeasance, bad faith, gross negligence or reckless disregard of the person’s duties.

Preemptive, Dissenter’s and other Rights

     Each MA Declaration provides that its Acquired Trust shareholders are not entitled to any preference, preemptive, appraisal, conversion or exchange rights. Each DE Declaration provides that no shareholder shall have any preemptive or other right to subscribe for new or additional authorized but unissued shares or other securities issued by its Acquiring Trust or any series thereof.

Amendments to Organizational Documents

     Except for the Templeton Income Trust MA Declaration, each MA Declaration may be amended by an instrument in writing signed by a majority of the trustees. The Templeton Income Trust MA Declaration may be amended by an instrument in writing signed by a majority of the outstanding shares or by a majority of the trustees with the consent of the majority of outstanding shares. Except for the Templeton Income Trust Board of Trustees, each Acquired Trust Board of Trustees may amend its MA Declaration in its sole discretion, and without the need for a shareholder vote, in order to add, delete, replace or modify any provisions relating to the shares of the Acquired Trust if the trustees determine that the action is consistent with the fair and equitable treatment of all shareholders or that shareholder approval is not otherwise required by the 1940 Act or other applicable law. The Templeton Income Trust MA Declaration permits its Board of Trustees to amend the MA Declaration without the need for a shareholder vote: (1) in order to change the name of the Trust; (2) to supply any omission or to cure, correct or supplement any ambiguous, defective or inconsistent provision; or (3) if the trustees deem it necessary to conform the MA Declaration to the requirements of applicable federal laws. Each set of MA By-Laws may be amended or repealed, or new MA By-Laws may be adopted, by: (1) the vote of a majority of the outstanding shares; or (2) the Acquired Trust’s Board of Trustees. However, no set of MA By-Laws may be amended, adopted or repealed by the trustees if there is a legal requirement for a vote of shareholders.

     Each DE Declaration may be amended or restated at any time by a written instrument signed by a majority of its Acquiring Trust’s Board of Trustees and, if legally required, by approval of the amendment by shareholders. Each set of DE By-Laws may be amended, restated or repealed or new By-Laws may be adopted by the affirmative vote of a majority of shareholders of the respective Acquiring Trust or by a majority of the respective Acquiring Trust’s Board of Trustees.

Inspection Rights

     Except for the Templeton Income Trust’s MA By-Laws, each set of MA By-Laws provides that the minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder at any reasonable time during regular business hours for a purpose reasonably related to the shareholder’s interests. The Templeton Income Trust’s MA By-Laws provide that the trustees shall determine whether and to what extent, and at what times

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and places, and under what conditions and regulations the accounts and books of the Trust shall be open for inspection by shareholders. No shareholder has any right to inspect any account or book or document of the Templeton Income Trust except as conferred by laws or authorized by the trustees or by resolution of the shareholder.

     Each set of DE By-Laws provides that, upon reasonable written demand to an Acquiring Trust, a shareholder may inspect certain information as to the governance and affairs of its respective Acquiring Trust for any purpose reasonably related to the shareholder’s interest as a shareholder. However, reasonable standards governing the information and documents to be furnished and the time and location of furnishing them (including limitations as to regular business hours), may be established by the Board or, if the Board has not done so, by the president, any vice-president or the secretary. In addition, each set of DE By-Laws also authorizes its respective Board or, in case the Board does not act, the president, any vice president or the secretary, to keep confidential from shareholders for a reasonable period of time any information that the Board or the officer reasonably believes to be in the nature of trade secrets or other information that the Board or the officer in good faith believes: (1) would not be in the best interests of the respective Acquiring Trust to disclose; (2) could damage the respective Acquiring Trust; or (3) that the respective Acquiring Trust is required by law or by agreement with a third party to keep confidential.

Dissolution and Termination

     Each MA Declaration provides that its Acquired Trust or any of its series may be terminated by: (1) the affirmative vote of the holders of not less than two-thirds of the outstanding shares of the Trust or series, as applicable; or (2) except for Templeton Income Trust, by the Trustees by written notice to shareholders. The Templeton Income Trust MA Declaration permits its Trustees to terminate the Trust only with the consent of not less than two-thirds of the Trust’s shareholders. After termination of an Acquired Trust or any series and any final distribution to shareholders, the respective Board of Trustees must wind up the affairs of the applicable Acquired Trust or series.

     Under each DE Declaration, the respective Acquiring Trust, or one of its series or classes, may be dissolved by a majority of votes cast of the Acquiring Trust, series or class, as applicable, or at the discretion of its respective Board of Trustees at any time there are no outstanding shares or upon prior written notice to the Acquiring Trust’s, series’ or class’ shareholders. When an Acquiring Trust or one of its series has dissolved, its Board shall pay or make reasonable provision to pay all known claims and obligations, including those that are contingent, conditional and unmatured. Each DE Declaration further provides that any remaining assets of a dissolved Acquiring Trust or series shall be distributed to the shareholders of the respective Trust or series, as applicable, ratably according to the number of outstanding shares of the respective Trust or series held of record by the shareholders on the dissolution distribution date.

Derivative Actions

     The MA Declarations do not specifically address derivative actions other than the specific provision on shareholder voting regarding derivative actions described above.

     Under the Delaware Act, a shareholder may bring a derivative action if trustees with authority to do so have refused to bring the action or if a demand upon the trustees to bring the action is not likely to succeed. A shareholder may bring a derivative action only if the shareholder is a shareholder at the time the action is brought and (1) was a shareholder at the time of the transaction complained about, or (2) acquired the status of shareholder by operation of law or an Acquiring Trust’s governing instrument from a person who was a shareholder at the time of the transaction.

     A shareholder’s right to bring a derivative action may also be subject to additional standards and restrictions set forth in an Acquiring Trust’s governing instrument. Each DE Declaration provides that a shareholder may bring a derivative action on behalf of its respective Acquiring Trust only if the shareholder first makes a pre-suit demand upon its respective Board of Trustees to bring the action, unless the pre-suit demand is excused. A pre-suit demand shall only be excused if a majority of the respective Board of Trustees, or a majority of any committee established to consider the merits of the action, has a material personal financial interest in the action at issue. A trustee shall not be deemed to have a material personal financial interest in an action by virtue of receiving payment for serving on the respective Board of Trustees of an Acquiring Trust or of one or more other investment companies with the same or an affiliated investment advisor or underwriter.

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EX-99.H-2

EXHIBIT H-2

COMPARISON OF MARYLAND AND DELAWARE
GOVERNING INSTRUMENTS AND STATE LAW

     The following is only a discussion of certain principal differences between the governing document for each existing Maryland corporation (each an “Acquired Fund”) and its successor Delaware statutory trust (each an “Acquiring Trust”), and is not a complete description of the Acquired Funds’ and the Acquiring Trusts’ governing documents. Further information about each Acquired Fund’s current corporate structure is contained in the Acquired Fund’s prospectus and governing documents and in relevant state law.

Organization and Capital Structure

     Each Acquired Fund is incorporated under the Maryland General Corporation Law (the “Maryland Statute”). Each Acquired Fund’s operations are governed by its Articles of Incorporation, as amended or supplemented from time to time (the “Charter”), and its by-laws (the “MD By-Laws”). The business and affairs of each Acquired Fund are managed under the supervision of its respective Board of Directors.

     The shares of common stock issued by each Acquired Fund have a par value of $0.01 per share, except for Franklin Mutual Series Fund Inc. and Templeton Funds, Inc., the shares of which have a par value of $0.001 per share and $1.00 per share, respectively. Each Acquired Fund’s Charter authorizes a fixed number of shares, which the Acquired Fund’s Board of Directors may increase or decrease by amending the Charter. Each Acquired Fund’s shares may be divided into separate and distinct series and/or classes.

     Each Acquiring Trust is a Delaware statutory trust (a “DST”). A DST is an unincorporated association organized under the Delaware Statutory Trust Act (the “Delaware Act”). Each Acquiring Trust’s operations are governed by its Declaration of Trust (the “DE Declaration”) and its by-laws (the “DE By-Laws”), and its business and affairs are managed under the supervision of its respective Board of Trustees.

     Each Acquiring Trust’s shares of beneficial interest are issued without par value. Each DE Declaration authorizes an unlimited number of shares, which may be divided into separate and distinct series or classes. These series and classes will have the rights, powers and duties set forth in each DE Declaration or as specified in resolutions of each Acquiring Trust’s Board of Trustees. Each Acquiring Trust’s series and classes are identical to those of its corresponding Acquired Fund.

Meetings of Shareholders and Voting Rights

     Neither the Charters nor the MD By-Laws require an Acquired Fund to hold an annual shareholders’ meeting. Each of the MD By-Laws provides that a shareholders’ meeting must be held when certain actions are required to be taken by shareholders under the 1940 Act, or at other times as may be determined by an Acquired Fund’s Board of Directors.

     Each of the MD By-Laws provides that, except when a larger quorum is required by applicable law, the holders of a majority of the stock of the Acquired Fund entitled to vote at a shareholders’ meeting shall constitute a quorum. Each Charter provides that shareholders are entitled to one vote for each full share of stock that they hold, and a proportionate fractional vote for each fractional share of stock that they hold. Each Charter also provides that shareholders of a particular series or class shall have exclusive voting rights with respect to any matter submitted to a vote of shareholders that affects only the holders of that series or class, in accordance with applicable law.

     Each of the MD By-Laws provides that, in addition to those matters upon which shareholders are entitled to vote under relevant law, shareholders have the power to vote on any matter submitted to a vote of shareholders by the Board of Directors. Subject to any legal requirements for a different vote, in all matters other than the election of directors, shareholders may approve a proposal by a majority of votes cast. Directors are elected by a plurality of votes cast. There is no cumulative voting for any matter.

     The Delaware Act does not require annual shareholders’ meetings. Each of the DE By-Laws authorizes the calling of a shareholders’ meeting by the Board, the chairperson of the Board or by the president of the Trust to take action on any matter deemed necessary or desirable by the Board of Trustees. A shareholder meeting for the

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purpose of electing trustees may also be called by the chairperson of the Board of Trustees, and shall be called by the president or any vice-president at the request of holders of 10% or more of the outstanding shares if the shareholders pay the reasonably estimated cost of preparing and mailing the notice. No meeting may be called at the request of shareholders to consider any matter that is substantially the same as a matter voted upon at a shareholders’ meeting held during the preceding twelve (12) months, unless requested by holders of a majority of all outstanding shares entitled to vote at such meeting.

     Each DE Declaration generally provides that each full share of an Acquiring Trust is entitled to one vote and each fractional share is entitled to a fractional vote. All shares of an Acquiring Trust entitled to vote on a matter shall vote in the aggregate without differentiation between shares of separate series or classes. With respect to any matter that affects only the interests of some but not all series or classes, or where otherwise required by the 1940 Act, only the shareholders of the affected series or classes shall be entitled to vote on the matter.

     Each DE Declaration provides that forty percent (40%) of the outstanding shares of the Acquiring Trust (or a series or class, as applicable), entitled to vote at a meeting, which are present in person or represented by proxy, shall constitute a quorum at the meeting, except when there is a legal requirement for a larger quorum. Subject to any legal requirements for a different vote, in all matters other than the election of trustees, shareholders may approve a proposal by a majority of votes cast. Trustees are elected by a plurality of votes cast. Where a separate vote by series or class is required, these voting requirements apply to those separate votes. There is no cumulative voting for any matter.

Liability of Shareholders

     Neither the Charters nor the MD By-Laws contain specific provisions with regard to the liability of shareholders of an Acquired Fund. The Maryland Statute provides that a shareholder of a Maryland corporation generally is not obligated to the Acquired Fund or its creditors with respect to the stock, except to the extent that the consideration for the stock has not been paid, or liability is imposed under certain provisions of the Maryland Statute.

     Consistent with the Delaware Act, each DE Declaration provides that no Acquiring Trust shareholder, as such, shall be subject to any personal liability whatsoever to any person in connection with the property, acts, obligations or affairs of the Acquiring Trust. However, each Acquiring Trust’s Board of Trustees may cause any shareholder to pay for charges of its Acquiring Trust’s custodian or transfer, dividend disbursing, shareholder servicing or similar agent for services provided to that shareholder that are beyond the customary services provided for the benefit of all shareholders.

Liability Among Series

     Each Charter provides that the allocation of assets and liabilities among the series or classes of stock, as applicable, of the Acquired Fund will be determined by the Board of Directors in accordance with the provisions of the Charter and applicable law. The Maryland Statute provides that, in the case of a Maryland corporation registered as an investment company under the 1940 Act that has established multiple series or classes of stock, liabilities of a particular series or class are only enforceable against the assets of that series or class, and not against the assets of the Acquired Fund generally or any other series or class of stock.

     Each DE Declaration also provides that each series of its Acquiring Trust shall be separate and distinct from any other series of the Acquiring Trust and shall hold and account for the assets and liabilities belonging to any series separately from the assets and liabilities of the Acquiring Trust or any other series. Each class of a series of an Acquiring Trust shall be separate and distinct from any other class of that series.

Dividends and Distributions

     Each Charter provides that dividends and distributions may be paid to shareholders of each series or class, as applicable, of an Acquired Fund in such amounts as may be declared from time to time by the Board of Directors.

     Each DE Declaration also provides that the shareholders of any series or class of its Acquiring Trust shall be entitled to receive dividends and distributions when, if and as declared by its Board of Trustees. The right of an Acquiring Trust’s shareholders to receive dividends or other distributions on shares of any class may be set forth in a

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plan adopted by the Acquiring Trust’s Board of Trustees pursuant to the 1940 Act. Dividends and distributions may be paid in cash, in kind or in shares of the respective Trust, and the respective Board may retain such amounts as it may deem necessary or desirable for the conduct of the respective Trust’s affairs.

Election of Trustees; Terms; Removal

     Each Charter and/or MD By-Laws provides that each director of an Acquired Fund shall serve until the director’ssuccessor is duly elected and qualified, except in the event of the director’s death, resignation, removal or the earlier termination of the director’s term of office. Each Charter and/or MD By-Laws, other than those of Franklin Mutual Series Fund Inc., Templeton Funds, Inc. and Templeton Institutional Funds, Inc., provides that directors may be removed, with or without cause by a vote of the shareholders, or, with cause, by the Board. The MD By-Laws of Franklin Mutual Series Fund Inc. only provide for removal of directors for cause by a vote of shareholders. The MD By-Laws of Templeton Funds, Inc. and Templeton Institutional Funds, Inc. each provide that directors may be removed, with or without cause, by a vote of shareholders.

     Under each DE Declaration, each trustee of an Acquiring Trust shall hold office for the earlier of (1) the lifetime of the Acquiring Trust; (2) the trustee’s earlier death, resignation, removal, retirement or inability otherwise to serve; or (3) the next meeting of shareholders called for the purpose of electing trustees and the election and qualification of his or her successor. Under each DE Declaration, any trustee may be removed, with or without cause, by its Acquiring Trust’s Board of Trustees, by action of a majority of the trustees then in office, or by the vote of the shareholders at any meeting called for that purpose.

     There is no cumulative voting for the election of trustees of an Acquiring Trust or the directors of an Acquired Fund. The governing instruments for each Acquiring Trust and each Acquired Fund each provide a mechanism for the respective Boards to fill vacancies.

Liability of Trustees and Officers; Indemnification

     None of the Charters contain provisions expressly limiting the liability of the directors of an Acquired Fund, except for Templeton Funds, Inc. and Templeton Institutional Funds, Inc. The Charters of Templeton Funds, Inc. and Templeton Institutional Funds, Inc. each provide that no director or officer will be subject to personal liability to the Acquired Fund or its shareholders for monetary damages, except: (i) where the director or officer received an improper benefit of money, property or services; or (ii) to the extent that a judgment or other final adjudication adverse to the director or officer is entered based upon a finding that the director’s or officer’s action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. In addition, the Maryland Statute provides that a director of a Maryland corporation who performs his or her duties in accordance with certain standards of conduct is immune from liability. The standards of conduct set forth in the Maryland Statute provide that a director shall perform his or her duties: (1) in good faith; (2) in a manner he or she reasonably believes to be in the best interests the corporation; and (3) with the care that an ordinarily prudent person in a like position would use under similar circumstances.

     Each Charter and/or MD By-Laws provides that an Acquired Fund shall indemnify its directors, officers and representatives to the extent permitted by law. The Maryland Statute authorizes indemnification of directors and officers of a Maryland corporation with regard to any threatened, pending or completed legal action, suit or proceeding. Under the Maryland Statute, indemnification is mandatory if a director or officer has been successful on the merits or otherwise in the defense of any proceeding covered by the Maryland Statute. Mandatory indemnification covers all reasonable expenses incurred. Under the Maryland Statute, indemnification is permissive unless it is established that: (1) the act or omission of the director of officer was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; (2) the director or officer actually received an improper personal benefit in money, property or services; or (3) in the case of a criminal proceeding, the director or officer had reasonable cause to believe his or her conduct was unlawful. However, if the proceeding was a derivative action, no indemnification will be made if the individual is adjudged to be liable to the corporation unless approved by a court, except that an individual may not be indemnified in circumstances where the individual is adjudged to be liable on the basis of improper receipt of personal benefits.

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     Each DE Declaration provides that any person who is or was a trustee, officer, employee or other agent of an Acquiring Trust shall be liable to the Acquiring Trust and its shareholders only for (1) any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing, or (2) for the person’s own willful misfeasance, bad faith, gross negligence or reckless disregard of the person’s duties. Except in these instances, these persons shall not be responsible or liable for any act or omission of any other agent of an Acquiring Trust or its investment adviser or principal underwriter to the fullest extent that limitations of liability are permitted by the Delaware Act. Moreover, except in these instances, none of these persons, when acting in their designated capacity, shall be personally liable to any other person, other than an Acquiring Trust or its shareholders, for any act, omission or obligation of the Acquiring Trust or any trustee thereof.

     Each Acquiring Trust shall indemnify, to the fullest extent permitted under applicable law, any of these persons who are a party to any proceeding because the person is or was an agent of the Acquiring Trust. These persons shall be indemnified against any expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with the proceeding if the person acted in good faith or, in the case of a criminal proceeding, had no reasonable cause to believe that the conduct was unlawful. The termination of any proceeding by judgment, settlement or otherwise shall not in itself create a presumption that the person did not act in good faith or that the person had reasonable cause to believe that the conduct was unlawful. There shall nonetheless be no indemnification for a person’s own willful misfeasance, bad faith, gross negligence or reckless disregard of the person’s duties.

Preemptive, Dissenter’s and other Rights

     Each Charter provides that no shareholder of the Acquired Fund will be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of securities of the Acquired Fund. Each DE Declaration provides that no shareholder shall have any preemptive or other right to subscribe for new or additional authorized but unissued shares or other securities issued by the Acquiring Trust or any series thereof.

Amendments to Organizational Documents

     Each Charter may be amended at any time by a vote of a majority of an Acquired Fund’s Board of Directors and, if legally required, by approval of the amendment by shareholders. Each of the MD By-Laws may be amended, or new by-laws may be adopted, by a vote of the majority of the Acquired Fund’s Board of Directors. The MD By-Laws of each Acquired Fund, other than Franklin Mutual Series Fund Inc., also may be amended by a vote of the majority of the shares of stock of the Acquired Fund present and voting at a meeting of the shareholders of the Acquired Fund.

     Each DE Declaration may be amended or restated at any time by a written instrument signed by a majority of its Acquiring Trust’s Board of Trustees and, if legally required, by approval of the amendment by shareholders. Each of the DE By-Laws may be amended, restated, or repealed or new by-laws may be adopted by the affirmative vote of a majority of the votes cast at a shareholders’ meeting called for that purpose where a quorum is present, or by a majority of the respective Acquiring Trust’s Board of Trustees.

Inspection Rights

     A shareholder of an Acquired Fund may, during normal business hours, inspect and copy the by-laws, minutes, annual reports and certain other corporate documents on file at the Acquired Fund’s principal office. In addition, the Maryland Statute provides that any person who has held at least five percent (5%) of any class of a corporation’s stock for at least six (6) months is entitled to request certain other documents relating to the corporation’s affairs. The corporation shall prepare and make such information available within twenty (20) days after a qualifying shareholder request is made.

     Each of the DE By-Laws provides that, upon reasonable written demand to an Acquiring Trust, a shareholder may inspect certain information as to the governance and affairs of its Acquiring Trust for any purpose reasonably related to the shareholder’s interest as a shareholder. However, reasonable standards governing the information and documents to be furnished and the time and location of furnishing them (including limitations as to regular business hours) may be established by the Board or, if the Board has not done so, by the president, any vice-president or the secretary. In addition, each of the DE By-Laws also authorizes its respective Board or, in case the Board does

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not act, the president, any vice president or the secretary, to keep confidential from shareholders for a reasonable period of time any information that the Board or the officer reasonably believes to be in the nature of trade secrets or other information that the Board or the officer in good faith believes: (1) would not be in the best interests of the respective Acquiring Trust to disclose; (2) could damage the respective Acquiring Trust; or (3) that the respective Acquiring Trust is required by law or by agreement with a third party to keep confidential.

Dissolution and Termination

     Each Charter provides that the duration of the Acquired Fund shall be perpetual. Under the Maryland Statute, the board of directors of a Maryland corporation may dissolve the corporation by resolution of a majority of the board of directors that declares that the dissolution is advisable. A vote of two-thirds of all votes entitled to be cast on the proposed dissolution is required to approve the dissolution. In addition, the Maryland Statute provides that shareholders of a corporation entitled to cast at least twenty-five percent (25%) of all the votes that may be cast in the election of directors may petition a court of equity for an involuntary dissolution of the corporation on certain enumerated grounds set forth in the Maryland Statute (including, among other things, fraudulent actions by the directors or failure of the shareholders to elect directors).

     Under each DE Declaration, the respective Acquiring Trust, or one of its series or classes, may be dissolved by a majority of votes cast of the Acquiring Trust, series or class, as applicable, or at the discretion of its respective Board of Trustees at any time there are no outstanding shares or upon prior written notice to the Acquiring Trust’s, series’ or class’ shareholders. When an Acquiring Trust or one of its series has dissolved, the Board shall pay or make reasonable provision to pay all known claims and obligations, including those that are contingent, conditional and unmatured. Each DE Declaration further provides that any remaining assets of a dissolved Acquiring Trust or series shall be distributed to the shareholders of the respective Trust or series, as applicable, ratably according to the number of outstanding shares of the respective Trust or series held of record by the shareholders on the dissolution distribution date.

Derivative Actions

None of the Charters nor the MD By-Laws contain specific provisions with regard to derivative actions.

Maryland courts recognize derivative actions even in the absence of a specific statute or court rule. Under Maryland law, in order to bring a derivative action, a stockholder (or his predecessor if he became a stockholder by operation of law) must be a stockholder: (1) at the time of the acts or omissions complained about; (2) at the time the action is brought and (3) until the completion of the litigation. A derivative action may be brought by a stockholder if a demand upon the board of directors to bring the action is improperly refused or if a request upon the board of directors would be futile.

     Under the Delaware Act, a shareholder may bring a derivative action if trustees with authority to do so have refused to bring the action or if a demand upon the trustees to bring the action is not likely to succeed. A shareholder may bring a derivative action only if the shareholder is a shareholder at the time the action is brought and (1) was a shareholder at the time of the transaction complained about, or (2) acquired the status of shareholder by operation of law or an Acquiring Trust’s governing instrument from a person who was a shareholder at the time of the transaction.

     A shareholder’s right to bring a derivative action may also be subject to additional standards and restrictions set forth in an Acquiring Trust’s governing instrument. Each DE Declaration provides that a shareholder may bring a derivative action on behalf of its respective Acquiring Trust only if the shareholder first makes a pre-suit demand upon its respective Board of Trustees to bring the action, unless the pre-suit demand is excused. A pre-suit demand shall only be excused if a majority of the respective Board of Trustees, or a majority of any committee established to consider the merits of the action, has a material personal financial interest in the action at issue. A trustee shall not be deemed to have a material personal financial interest in an action by virtue receiving payment for serving on the respective Board of Trustees of an Acquiring Trust or of one or more other investment companies with the same or an affiliated investment advisor or underwriter.

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EX-99.I

EXHIBIT I

COMPLEX-WIDE FORM OF

AMENDED AND RESTATED

AGREEMENT AND DECLARATION OF TRUST

of

 [NAME OF FUND] 
a Delaware Statutory Trust

(Original Agreement and Declaration of Trust was adopted __________; 
current Amended and Restated Agreement and Declaration of Trust 
adopted __________.)

I-1

TABLE OF CONTENTS
				Page
I.	NAME; OFFICES; REGISTERED AGENT; DEFINITIONS			4
	1.	Name		4
	2.	Offices of the Trust		4
	3.	Registered Agent and Registered Office		4
	4.	Definitions		4
II.	PURPOSE OF TRUST			6
III.	SHARES			8
	1.	Division of Beneficial Interest		8
	2.	Ownership of Shares		9
	3.	Sale of Shares		9
	4.	Status of Shares and Limitation of Personal Liability		10
	5.	Power of Board of Trustees to Make Tax Status Election		10
	6.	Establishment and Designation of Series and Classes		10
		(a)	Assets Held with Respect to a Particular Series	11
		(b)	Liabilities Held with Respect to a Particular Series or Class	11
		(c)	Dividends, Distributions and Redemptions	12
		(d)	Voting	12
		(e)	Equality	12
		(f)	Fractions	12
		(g)	Exchange Privilege	12
		(h)	Combination of Series or Classes	12
		(i)	Dissolution or Termination	13
	7.	Indemnification of Shareholders		13
IV.	THE BOARD OF TRUSTEES			13
	1.	Number, Election, Term, Removal and Resignation		13
	2.	Trustee Action by Written Consent Without a Meeting		14
	3.	Powers; Other Business Interests; Quorum and Required Vote		14
		(a)	Powers	14
		(b)	Other Business Interests	15
		(c)	Quorum and Required Vote	15
	4.	Payment of Expenses by the Trust		15
	5.	Payment of Expenses by Shareholders		15
	6.	Ownership of Trust Property		15
	7.	Service Contracts		16

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V.	SHAREHOLDERS’ VOTING POWERS AND MEETINGS			16
	1.	Voting Powers		16
	2.	Quorum and Required Vote		17
	3.	Shareholder Action by Written Consent Without a Meeting		17
	4.	Record Dates		17
	5.	Additional Provisions		18
VI.	NET ASSET VALUE; DISTRIBUTIONS; REDEMPTIONS; TRANSFERS			18
	1.	Determination of Net Asset Value, Net Income and Distributions		18
	2.	Redemptions at the Option of a Shareholder		19
	3.	Redemptions at the Option of the Trust		20
	4.	Transfer of Shares		20
VII.	LIMITATION OF LIABILITY AND INDEMNIFICATION OF AGENT			20
	1.	Limitation of Liability		20
	2.	Indemnification		21
		(a)	Indemnification by Trust	21
		(b)	Exclusion of Indemnification	21
		(c)	Required Approval	22
		(d)	Advancement of Expenses	22
		(e)	Other Contractual Rights	22
		(f)	Fiduciaries of Employee Benefit Plan	22
	3.	Insurance		22
	4.	Derivative Actions		22
VIII.	CERTAIN TRANSACTIONS			22
	1.	Dissolution of Trust or Series		22
	2.	Merger or Consolidation; Conversion; Reorganization		23
		(a)	Merger or Consolidation	23
		(b)	Conversion	24
		(c)	Reorganization	24
	3.	Master Feeder Structure		25
	4.	Absence of Appraisal or Dissenters’ Rights		25
IX.	AMENDMENTS			25
	1.	Amendments Generally		25
X.	MISCELLANEOUS			25
	1.	References; Headings; Counterparts		25
	2.	Applicable Law		25
	3.	Provisions in Conflict with Law or Regulations		25
	4.	Statutory Trust Only		26
	5.	Use of the Names “Franklin,” “Templeton,” “Fiduciary Trust,” and/or “Institutional Fiduciary Trust”		26

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AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST

OF

[NAME OF FUND]

     THIS AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST is made as of this _______ day of _________________, 2006, by the Trustees hereunder, and by the holders of Shares issued or to be issued by [Name of Fund] (the “Trust”) hereunder, and (i) incorporates herein and makes a part of this Amended and Restated Agreement and Declaration of Trust the resolutions of the Board of Trustees of the Trust adopted prior to the dates set forth above, pursuant to Article ___, Section ___ of the original Agreement and Declaration of Trust dated _________, as amended or restated to date (the “Original Declaration of Trust”), regarding the establishment and designation of Series and/or Classes of the Shares of the Trust, and any amendments or modifications to such resolutions adopted through the date hereof, as of the date of the adoption of each such resolution, and (ii) amends and restates the Original Declaration of Trust pursuant to Article ___, Section ___, of such Original Declaration of Trust, as hereinafter provided.

WITNESSETH:

     WHEREAS this Trust was formed to carry on the business of an open-end management investment company as defined in the 1940 Act; and

WHEREAS this Trust is authorized to divide its Shares into two or more Classes, to issue its Shares in separate Series, to divide Shares of any Series into two or more Classes and to issue Classes of the Trust or the Series, if any, all in accordance with the provisions hereinafter set forth; and

WHEREAS the Trustees have agreed to manage all property coming into their hands as trustees of a Delaware statutory trust in accordance with the provisions of the Delaware Statutory Trust Act, as amended from time to time, and the provisions hereinafter set forth;

NOW, THEREFORE, the Trustees hereby declare that:

(i) the Original Declaration of Trust is amended and restated in its entirety in the manner hereinafter set forth;

(ii) the Trustees will hold all cash, securities and other assets that they may from time to time acquire in any manner as Trustees hereunder IN TRUST and will manage and dispose of the same upon the following terms and conditions for the benefit of the holders from time to time of Shares created hereunder as hereinafter set forth; and

(iii) this Declaration of Trust and the By-Laws shall be binding in accordance with their terms on every Trustee, by virtue of having become a Trustee of the Trust, and on every Shareholder, by virtue of having become a Shareholder of the Trust, pursuant to the terms of the Original Declaration of Trust and/or this Declaration of Trust and the By-Laws.

I.

NAME; OFFICES; REGISTERED AGENT; DEFINITIONS

     1. Name. This Trust shall be known as “[Name of Fund]” and the Board of Trustees shall conduct the business of the Trust under that name, or any other name as it may from time to time designate.

     2. Offices of the Trust. The Board may at any time establish offices of the Trust at any place or places where the Trust intends to do business.

     3. Registered Agent and Registered Office. The name of the registered agent of the Trust and the address of the registered office of the Trust are as set forth in the Trust’s Certificate of Trust.

     4. Definitions. Whenever used herein, unless otherwise required by the context or specifically provided:

(a) “1940 Act” shall mean the Investment Company Act of 1940 and the rules and regulations thereunder, all as adopted or amended from time to time;

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          (b) “Affiliate” shall have the same meaning as “affiliated person” as such term is defined in the 1940 Act when used with reference to a specified Person, as defined below.

          (c) “Board of Trustees” shall mean the governing body of the Trust, that is comprised of the number of Trustees of the Trust fixed from time to time pursuant to Article IV hereof, having the powers and duties set forth herein;

(d) “By-Laws” shall mean By-Laws of the Trust, as amended or restated from time to time in accordance with Article VIII therein. Such By-Laws may contain any provision not inconsistent with applicable law or this Declaration of Trust, relating to the governance of the Trust;

(e) “Certificate of Trust” shall mean the certificate of trust of the Trust filed on ________________ with the office of the Secretary of State of the State of Delaware as required under the Delaware Statutory Trust Act, as such certificate has been or shall be amended or restated from time to time;

(f) “Class” shall mean each class of Shares of the Trust or of a Series of the Trust established and designated under and in accordance with the provisions of Article III hereof or Article ____ of the Original Declaration of Trust;

(g) “Code” shall mean the Internal Revenue Code of 1986 and the rules and regulations thereunder, all as adopted or amended from time to time;

(h) “Commission” shall have the meaning given that term in the 1940 Act;

(i) “DSTA” shall mean the Delaware Statutory Trust Act (12 Del. C. § 3801, etseq.), as amended from time to time;

(j) “Declaration of Trust” shall mean this Amended and Restated Agreement and Declaration of Trust, including resolutions of the Board of Trustees of the Trust that have been adopted prior to the date of this document, or that may be adopted hereafter, regarding the establishment and designation of Series and/or Classes of Shares of the Trust, and any amendments or modifications to such resolutions, as of the date of the adoption of each such resolution;

(k) “General Liabilities” shall have the meaning given it in Article III, Section 6(b) of this Declaration of Trust;

(l) “Interested Person” shall have the meaning given that term in the 1940 Act;

(m) “Investment Adviser” or “Adviser” shall mean a Person, as defined below, furnishing services to the Trust pursuant to any investment advisory or investment management contract described in Article IV, Section 7(a) hereof;

(n) “National Financial Emergency” shall mean the whole or any part of any period during (i) which an emergency exists as a result of which disposal by the Trust of securities or other assets owned by the Trust is not reasonably practicable; (ii) which it is not reasonably practicable for the Trust fairly to determine the net asset value of its assets; or (iii) such other period as the Commission may by order permit for the protection of investors;

(o) “Person” shall mean a natural person, partnership, limited partnership, limited liability company, trust, estate, association, corporation, organization, custodian, nominee or any other individual or entity in its own or any representative capacity, in each case, whether domestic or foreign, and a statutory trust or a foreign statutory or business trust;

(p) “Principal Underwriter” shall have the meaning given that term in the 1940 Act;

(q) “Series” shall mean each Series of Shares established and designated under and in accordance with the provisions of Article III hereof, or Article ___, Section ___ of the Original Declaration of Trust;

(r) “Shares” shall mean the transferable shares of beneficial interest into which the beneficial interest in the Trust have been or shall be divided from time to time, and shall include fractional and whole Shares;

(s) “Shareholder” shall mean a record owner of Shares pursuant to the By-Laws;

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          (t) “Trust” shall mean [Name of Fund], the Delaware statutory trust formed hereby and by filing of the Certificate of Trust with the office of the Secretary of State of the State of Delaware;

(u) “Trust Property” shall mean any and all property, real or personal, tangible or intangible, which is owned or held by or for the account of the Trust, or one or more of any Series thereof, including, without limitation, the rights referenced in Article X, Section 5 hereof; and

(v) “Trustee” or “Trustees” shall mean each Person who signs this Declaration of Trust as a trustee and all other Persons who may, from time to time, be duly elected or appointed, qualified and serving on the Board of Trustees in accordance with the provisions hereof and the By-Laws, so long as such signatory or other Person continues in office in accordance with the terms hereof and the By-Laws. Reference herein to a Trustee or the Trustees shall refer to such Person or Persons in such Person’s or Persons’ capacity as a trustee or trustees hereunder and under the By-Laws.

II.

PURPOSE OF TRUST

     The purpose of the Trust is to conduct, operate and carry on the business of a registered management investment company registered under the 1940 Act, directly, or if one or more Series is established hereunder, through one or more Series, investing primarily in securities, and to exercise all of the powers, rights and privileges granted to, or conferred upon, a statutory trust formed under the DSTA, including, without limitation, the following powers:

(a) To hold, invest and reinvest its funds, and in connection therewith, to make any changes in the investment of the assets of the Trust, to hold part or all of its funds in cash, to hold cash uninvested, to subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold, pledge, sell, assign, mortgage, transfer, exchange, distribute, write options on, lend or otherwise deal in or dispose of contracts for the future acquisition or delivery of fixed income or other securities, and securities or property of every nature and kind, including, without limitation, all types of bonds, debentures, stocks, shares, units of beneficial interest, preferred stocks, negotiable or non-negotiable instruments, obligations, evidences of indebtedness, money market instruments, certificates of deposit or indebtedness, bills, notes, mortgages, commercial paper, repurchase or reverse repurchase agreements, bankers’ acceptances, finance paper, and any options, certificates, receipts, warrants, futures contracts or other instruments representing rights to receive, purchase or subscribe for the same, or evidencing or representing any other rights or interests therein or in any property or assets, and other securities of any kind, as the foregoing are issued, created, guaranteed, or sponsored by any and all Persons, including, without limitation, states, territories, and possessions of the United States and the District of Columbia and any political subdivision, agency, or instrumentality thereof, any foreign government or any political subdivision of the U.S. Government or any foreign government, or any international instrumentality, or by any bank or savings institution, or by any corporation or organization organized under the laws of the United States or of any state, territory, or possession thereof, or by any corporation or organization organized under any foreign law, or in “when issued” contracts for any such securities;

(b) To exercise any and all rights, powers and privileges with reference to or incident to ownership or interest, use and enjoyment of any of such securities and other instruments or property of every kind and description, including, but without limitation, the right, power and privilege to own, vote, hold, purchase, sell, negotiate, assign, exchange, lend, transfer, mortgage, hypothecate, lease, pledge or write options with respect to or otherwise deal with, dispose of, use, exercise or enjoy any rights, title, interest, powers or privileges under or with reference to any of such securities and other instruments or property, the right to consent and otherwise act with respect thereto, with power to designate one or more Persons, to exercise any of said rights, powers, and privileges in respect of any of said instruments, and to do any and all acts and things for the preservation, protection, improvement and enhancement in value of any of such securities and other instruments or property;

(c) To sell, exchange, lend, pledge, mortgage, hypothecate, lease or write options with respect to or otherwise deal in any property rights relating to any or all of the assets of the Trust or any Series, subject to any requirements of the 1940 Act;

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          (d) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property; and to execute and deliver proxies or powers of attorney to such Person or Persons as the Trustees shall deem proper, granting to such Person or Persons such power and discretion with relation to securities or property as the Trustees shall deem proper;

(e) To exercise powers and right of subscription or otherwise which in any manner arise out of ownership of securities and/or other property;

(f) To hold any security or property in a form not indicating that it is trust property, whether in bearer, unregistered or other negotiable form, or in its own name or in the name of a custodian or subcustodian or a nominee or nominees or otherwise or to authorize the custodian or a subcustodian or a nominee or nominees to deposit the same in a securities depository, subject in each case to proper safeguards according to the usual practice of investment companies or any rules or regulations applicable thereto;

(g) To consent to, or participate in, any plan for the reorganization, consolidation or merger of any corporation or issuer of any security which is held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by such corporation or issuer; and to pay calls or subscriptions with respect to any security held in the Trust;

(h) To join with other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper;

(i) To compromise, arbitrate or otherwise adjust claims in favor of or against the Trust or any matter in controversy, including but not limited to claims for taxes;

(j) To enter into joint ventures, general or limited partnerships and any other combinations or associations;

(k) To endorse or guarantee the payment of any notes or other obligations of any Person; to make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof;

(l) To purchase and pay for entirely out of Trust Property such insurance as the Board of Trustees may deem necessary or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust or payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, Investment Advisers, Principal Underwriters, or independent contractors of the Trust, individually against all claims and liabilities of every nature arising by reason of holding Shares, holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such Person as Trustee, officer, employee, agent, Investment Adviser, Principal Underwriter, or independent contractor, to the fullest extent permitted by this Declaration of Trust, the By-Laws and by applicable law;

(m) To adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust;

(n) To purchase or otherwise acquire, own, hold, sell, negotiate, exchange, assign, transfer, mortgage, pledge or otherwise deal with, dispose of, use, exercise or enjoy, property of all kinds;

(o) To buy, sell, mortgage, encumber, hold, own, exchange, rent or otherwise acquire and dispose of, and to develop, improve, manage, subdivide, and generally to deal and trade in real property, improved and unimproved, and wheresoever situated; and to build, erect, construct, alter and maintain buildings, structures, and other improvements on real property;

(p) To borrow or raise moneys for any of the purposes of the Trust, and to mortgage or pledge the whole or any part of the property and franchises of the Trust, real, personal, and mixed, tangible or intangible, and wheresoever situated;

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          (q) To enter into, make and perform contracts and undertakings of every kind for any lawful purpose, without limit as to amount;

(r) To issue, purchase, sell and transfer, reacquire, hold, trade and deal in stocks, Shares, bonds, debentures and other securities, instruments or other property of the Trust, from time to time, to such extent as the Board of Trustees shall, consistent with the provisions of this Declaration of Trust, determine; and to re-acquire and redeem, from time to time, its Shares or, if any, its bonds, debentures and other securities;

(s) To engage in and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or otherwise, any actions, suits, proceedings, disputes, claims, and demands relating to the Trust, and out of the assets of the Trust to pay or to satisfy any debts, claims or expenses incurred in connection therewith, including those of litigation, and such power shall include without limitation the power of the Trustees or any appropriate committee thereof, in the exercise of their or its good faith business judgment, to dismiss any action, suit, proceeding, dispute, claim, or demand, derivative or otherwise, brought by any Person, including a Shareholder in the Shareholder’s own name or the name of the Trust, whether or not the Trust or any of the Trustees may be named individually therein or the subject matter arises by reason of business for or on behalf of the Trust;

(t) To exercise and enjoy, in Delaware and in any other states, territories, districts and United States dependencies and in foreign countries, all of the foregoing powers, rights and privileges, and the enumeration of the foregoing powers shall not be deemed to exclude any powers, rights or privileges so granted or conferred; and

(u) In general, to carry on any other business in connection with or incidental to its trust purposes, to do everything necessary, suitable or proper for the accomplishment of such purposes or for the attainment of any object or the furtherance of any power hereinbefore set forth, either alone or in association with others, and to do every other act or thing incidental or appurtenant to, or growing out of, or connected with, its business or purposes, objects or powers.

     The Trust shall not be limited to investing in obligations maturing before the possible dissolution of the Trust or one or more of its Series. Neither the Trust nor the Board of Trustees shall be required to obtain any court order to deal with any assets of the Trust or take any other action hereunder.

     The foregoing clauses shall each be construed as purposes, objects and powers, and it is hereby expressly provided that the foregoing enumeration of specific purposes, objects and powers shall not be held to limit or restrict in any manner the powers of the Trust, and that they are in furtherance of, and in addition to, and not in limitation of, the general powers conferred upon the Trust by the DSTA and the other laws of the State of Delaware or otherwise; nor shall the enumeration of one thing be deemed to exclude another, although it be of like nature, not expressed.

 III.

SHARES

1. Division of Beneficial Interest.

          (a) The beneficial interest in the Trust shall be divided into Shares, each Share [without/with] a par value[ of $_.___]. The number of Shares in the Trust authorized under the Original Declaration of Trust and authorized hereunder, and of each Series and Class as may be established from time to time, is unlimited. The Board of Trustees may authorize the division of Shares into separate Classes of Shares and into separate and distinct Series of Shares and the division of any Series into separate Classes of Shares in accordance with the 1940 Act. As of the effective date of this Declaration of Trust, any new Series and Classes shall be established and designated pursuant to Article III, Section 6 hereof. If no separate Series or Classes of Series shall be established, the Shares shall have the rights, powers and duties provided for herein and in Article III, Section 6 hereof to the extent relevant and not otherwise provided for herein, and all references to Series and Classes shall be construed (as the context may require) to refer to the Trust.

(i) The fact that the Trust shall have one or more established and designated Classes of the Trust, shall not limit the authority of the Board of Trustees to establish and designate additional Classes of the Trust. The fact that one or more Classes of the Trust shall have initially been established and designated without any specific establishment or designation of a Series (i.e., that all Shares of

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the Trust are initially Shares of one or more Classes) shall not limit the authority of the Board of Trustees to later establish and designate a Series and establish and designate the Class or Classes of the Trust as Class or Classes, respectively, of such Series.

(ii)

The fact that a Series shall have initially been established and designated without any specific establishment or designation of Classes (i.e., that all Shares of such Series are initially of a single Class) shall not limit the authority of the Board of Trustees to establish and designate separate Classes of said Series. The fact that a Series shall have more than one established and designated Class, shall not limit the authority of the Board of Trustees to establish and designate additional Classes of said Series.

            (b) The Board of Trustees shall have the power to issue authorized, but unissued Shares of beneficial interest of the Trust, or any Series and Class thereof, from time to time for such consideration paid wholly or partly in cash, securities or other property, as may be determined from time to time by the Board of Trustees, subject to any requirements or limitations of the 1940 Act. The Board of Trustees, on behalf of the Trust, may acquire and hold as treasury shares, reissue for such consideration and on such terms as it may determine, or cancel, at its discretion from time to time, any Shares reacquired by the Trust. The Board of Trustees may classify or reclassify any unissued Shares of beneficial interest or any Shares of beneficial interest of the Trust or any Series or Class thereof, that were previously issued and are reacquired, into one or more Series or Classes that may be established and designated from time to time. Notwithstanding the foregoing, the Trust and any Series thereof may acquire, hold, sell and otherwise deal in, for purposes of investment or otherwise, the Shares of any other Series of the Trust or Shares of the Trust, and such Shares shall not be deemed treasury shares or cancelled.

            (c) Subject to the provisions of Section 6 of this Article III, each Share shall entitle the holder to voting rights as provided in Article V hereof. Shareholders shall have no preemptive or other right to subscribe for new or additional authorized, but unissued Shares or other securities issued by the Trust or any Series thereof. The Board of Trustees may from time to time divide or combine the Shares of the Trust or any particular Series thereof into a greater or lesser number of Shares of the Trust or that Series, respectively. Such division or combination shall not materially change the proportionate beneficial interests of the holders of Shares of the Trust or that Series, as the case may be, in the Trust Property at the time of such division or combination that is held with respect to the Trust or that Series, as the case may be.

            (d) Any Trustee, officer or other agent of the Trust, and any organization in which any such Person has an economic or other interest, may acquire, own, hold and dispose of Shares of beneficial interest in the Trust or any Series and Class thereof, whether such Shares are authorized but unissued, or already outstanding, to the same extent as if such Person were not a Trustee, officer or other agent of the Trust; and the Trust or any Series may issue and sell and may purchase such Shares from any such Person or any such organization, subject to the limitations, restrictions or other provisions applicable to the sale or purchase of such Shares herein and the 1940 Act.

2. Ownership of Shares. The ownership of Shares shall be recorded on the books of the Trust kept by the Trust or by a transfer or similar agent for the Trust, which books shall be maintained separately for the Shares of the Trust and each Series and each Class thereof that has been established and designated. No certificates certifying the ownership of Shares shall be issued except as the Board of Trustees may otherwise determine from time to time. The Board of Trustees may make such rules not inconsistent with the provisions of the 1940 Act as it considers appropriate for the issuance of Share certificates, the transfer of Shares of the Trust and each Series and Class thereof, if any, and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent, as the case may be, shall be conclusive as to who are the Shareholders of the Trust and each Series and Class thereof and as to the number of Shares of the Trust and each Series and Class thereof held from time to time by each such Shareholder.

3. Sale of Shares. Subject to the 1940 Act and applicable law, the Trust may sell its authorized but unissued Shares of beneficial interest to such Persons, at such times, on such terms, and for such consideration as the Board of Trustees may from time to time authorize. Each sale shall be credited to the individual purchaser’s account in the form of full or fractional Shares of the Trust or such Series thereof (and Class thereof, if any), as the purchaser may select, at the net asset value per Share, subject to Section 22 of the 1940 Act, and the rules and regulations adopted thereunder; provided, however, that the Board of Trustees may, in its sole discretion, permit the Principal

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Underwriter to impose a sales charge upon any such sale. Every Shareholder by virtue of having become a Shareholder shall be deemed to have expressly assented and agreed to the terms of this Declaration of Trust and to have become bound as a party hereto.

     4. Status of Shares and Limitation of Personal Liability. Shares shall be deemed to be personal property giving to Shareholders only the rights provided in this Declaration of Trust, the By-Laws, and under applicable law. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust Property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders as partners. Subject to Article VIII, Section 1 hereof, the death, incapacity, dissolution, termination, or bankruptcy of a Shareholder during the existence of the Trust and any Series thereof shall not operate to dissolve the Trust or any such Series, nor entitle the representative of any deceased, incapacitated, dissolved, terminated or bankrupt Shareholder to an accounting or to take any action in court or elsewhere against the Trust, the Trustees or any such Series, but entitles such representative only to the rights of said deceased, incapacitated, dissolved, terminated or bankrupt Shareholder under this Declaration of Trust. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust, shall have any power to bind personally any Shareholder, nor, except as specifically provided herein, to call upon any Shareholder for the payment of any sum of money other than such as the Shareholder may at any time personally agree to pay. Each Share, when issued on the terms determined by the Board of Trustees, shall be fully paid and nonassessable. As provided in the DSTA, Shareholders shall be entitled to the same limitation of personal liability as that extended to stockholders of a private corporation organized for profit under the General Corporation Law of the State of Delaware.

     5. Power of Board of Trustees to Make Tax Status Election. The Board of Trustees shall have the power, in its discretion, to make such elections as to the tax status of the Trust and any Series as may be permitted or required under the Code, without the vote of any Shareholder.

     6. Establishment and Designation of Series and Classes. The establishment and designation of any Series or Class shall be effective, without the requirement of Shareholder approval, upon the adoption of a resolution by not less than a majority of the then Board of Trustees, which resolution shall set forth such establishment and designation and may provide, to the extent permitted by the DSTA, for rights, powers and duties of such Series or Class (including variations in the relative rights and preferences as between the different Series and Classes) otherwise than as provided herein. Each such resolution shall be incorporated herein upon adoption, and the resolutions that have been adopted prior to _____, 200__ regarding the establishment and designation of Series and/ or Classes of Shares of the Trust pursuant to Article ___ of the Original Declaration of Trust, and any amendments or modifications to such resolutions through the date hereof, are hereby incorporated herein as of the date of their adoption. Any such resolution may be amended by a further resolution of a majority of the Board of Trustees, and if Shareholder approval would be required to make such an amendment to the language set forth in this Declaration of Trust, such further resolution shall require the same Shareholder approval that would be necessary to make such amendment to the language set forth in this Declaration of Trust. Each such further resolution shall be incorporated herein by reference upon adoption.

     Each Series shall be separate and distinct from any other Series, separate and distinct records on the books of the Trust shall be maintained for each Series, and the assets and liabilities belonging to any such Series shall be held and accounted for separately from the assets and liabilities of the Trust or any other Series. Each Class of the Trust shall be separate and distinct from any other Class of the Trust. Each Class of a Series shall be separate and distinct from any other Class of the Series. As appropriate, in a manner determined by the Board of Trustees, the liabilities belonging to any such Class shall be held and accounted for separately from the liabilities of the Trust, the Series or any other Class and separate and distinct records on the books of the Trust for the Class shall be maintained for this purpose. Subject to Article II hereof, each such Series shall operate as a separate and distinct investment medium, with separately defined investment objectives and policies.

     Shares of each Series (and Class where applicable) established and designated pursuant to this Section 6, or Article __, Section __ of the Original Declaration of Trust shall have the following rights, powers and duties, unless otherwise provided to the extent permitted by the DSTA, in the resolution establishing and designating such Series or Class:

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           (a) Assets Held with Respect to a Particular Series. All consideration received by the Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof from whatever source derived, including, without limitation, any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably be held with respect to that Series for all purposes, subject only to the rights of creditors with respect to that Series, and shall be so recorded upon the books of account of the Trust. Such consideration, assets, income, earnings, profits and proceeds thereof, from whatever source derived, including, without limitation, any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds, in whatever form the same may be, are herein referred to as “assets held with respect to” that Series. In the event that there are any assets, income, earnings, profits and proceeds thereof, funds or payments which are not readily identifiable as assets held with respect to any particular Series (collectively “General Assets”), the Board of Trustees, or an appropriate officer as determined by the Board of Trustees, shall allocate such General Assets to, between or among any one or more of the Series in such manner and on such basis as the Board of Trustees, in its sole discretion, deems fair and equitable, and any General Asset so allocated to a particular Series shall be held with respect to that Series. Each such allocation by or under the direction of the Board of Trustees shall be conclusive and binding upon the Shareholders of all Series for all purposes.

      (b) Liabilities Held with Respect to a Particular Series or Class. The assets of the Trust held with respect to a particular Series shall be charged with the liabilities, debts, obligations, costs, charges, reserves and expenses of the Trust incurred, contracted for or otherwise existing with respect to such Series. Such liabilities, debts, obligations, costs, charges, reserves and expenses incurred, contracted for or otherwise existing with respect to a particular Series are herein referred to as “liabilities held with respect to” that Series. Any liabilities, debts, obligations, costs, charges, reserves and expenses of the Trust which are not readily identifiable as being liabilities held with respect to any particular Series (collectively “General Liabilities”) shall be allocated by the Board of Trustees, or an appropriate officer as determined by the Board of Trustees, to and among any one or more of the Series in such manner and on such basis as the Board of Trustees in its sole discretion deems fair and equitable. Each allocation of liabilities, debts, obligations, costs, charges, reserves and expenses by or under the direction of the Board of Trustees shall be conclusive and binding upon the Shareholders of all Series for all purposes. All Persons who have extended credit that has been allocated to a particular Series, or who have a claim or contract that has been allocated to any particular Series, shall look exclusively to the assets of that particular Series for payment of such credit, claim, or contract. In the absence of an express contractual agreement so limiting the claims of such creditors, claimants and contract providers, each creditor, claimant and contract provider shall be deemed nevertheless to have impliedly agreed to such limitation.

      Subject to the right of the Board of Trustees in its discretion to allocate General Liabilities as provided herein, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Series, whether such Series is now authorized and existing pursuant to the Original Declaration of Trust, or is hereafter authorized and existing pursuant to this Declaration of Trust, shall be enforceable against the assets held with respect to that Series only, and not against the assets of any other Series or the Trust generally and none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Trust generally or any other Series thereof shall be enforceable against the assets held with respect to such Series. Notice of this limitation on liabilities between and among Series has been set forth in the Certificate of Trust filed in the Office of the Secretary of State of the State of Delaware pursuant to the DSTA, and having given such notice in the Certificate of Trust, the statutory provisions of Section 3804 of the DSTA relating to limitations on liabilities between and among Series (and the statutory effect under Section 3804 of setting forth such notice in the Certificate of Trust) are applicable to the Trust and each Series.

      Liabilities, debts, obligations, costs, charges, reserves and expenses related to the distribution of, and other identified expenses that should or may properly be allocated to, the Shares of a particular Class may be charged to and borne solely by such Class. The bearing of expenses solely by a particular Class of Shares may be appropriately reflected (in a manner determined by the Board of Trustees) and may affect the net asset value attributable to, and the dividend, redemption and liquidation rights of, such Class. Each allocation of liabilities, debts, obligations, costs, charges, reserves and expenses by or under the direction of the Board of Trustees shall be conclusive and binding upon the Shareholders of all Classes for all purposes. All Persons who have extended

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credit that has been allocated to a particular Class, or who have a claim or contract that has been allocated to any particular Class, shall look, and may be required by contract to look, exclusively to that particular Class for payment of such credit, claim, or contract.

(c) Dividends, Distributions and Redemptions. Notwithstanding any other provisions of this Declaration of Trust, including, without limitation, Article VI hereof, no dividend or distribution including, without limitation, any distribution paid upon dissolution of the Trust or of any Series with respect to, nor any redemption of, the Shares of any Series or Class of such Series shall be effected by the Trust other than from the assets held with respect to such Series, nor, except as specifically provided in Section 7 of this Article III, shall any Shareholder of any particular Series otherwise have any right or claim against the assets held with respect to any other Series or the Trust generally except, in the case of a right or claim against the assets held with respect to any other Series, to the extent that such Shareholder has such a right or claim hereunder as a Shareholder of such other Series. The Board of Trustees shall have full discretion, to the extent not inconsistent with the 1940 Act, to determine which items shall be treated as income and which items as capital; and each such determination and allocation shall be conclusive and binding upon the Shareholders.

   (d) Voting. All Shares of the Trust entitled to vote on a matter shall vote in the aggregate without differentiation between the Shares of the separate Series, if any, or separate Classes, if any; provided that (i) with respect to any matter that affects only the interests of some but not all Series, then only the Shares of such affected Series, voting separately, shall be entitled to vote on the matter, (ii) with respect to any matter that affects only the interests of some but not all Classes, then only the Shares of such affected Classes, voting separately, shall be entitled to vote on the matter; and (iii) notwithstanding the foregoing, with respect to any matter as to which the 1940 Act or other applicable law or regulation requires voting, by Series or by Class, then the Shares of the Trust shall vote as prescribed in such law or regulation.

   (e) Equality. Each Share of any particular Series shall be equal to each other Share of such Series (subject to the rights and preferences with respect to separate Classes of such Series).

   (f) Fractions. A fractional Share of a Series shall carry proportionately all the rights and obligations of a whole Share of such Series, including rights with respect to voting, receipt of dividends and distributions, redemption of Shares and dissolution of the Trust or that Series.

   (g) Exchange Privilege. The Board of Trustees shall have the authority to provide that the holders of Shares of any Series shall have the right to exchange said Shares for Shares of one or more other Series in accordance with such requirements and procedures as may be established by the Board of Trustees, and in accordance with the 1940 Act.

(h) Combination of Series or Classes.

   (i) The Board of Trustees shall have the authority, without the approval, vote or consent of the Shareholders of any Series, unless otherwise required by applicable law, to combine the assets and liabilities held with respect to any two or more Series into assets and liabilities held with respect to a single Series; provided that upon completion of such combination of Series, the interest of each Shareholder, in the combined assets and liabilities held with respect to the combined Series shall equal the interest of each such Shareholder in the aggregate of the assets and liabilities held with respect to the Series that were combined.

   (ii) The Board of Trustees shall have the authority, without the approval, vote or consent of the Shareholders of any Series or Class, unless otherwise required by applicable law, to combine, merge or otherwise consolidate the Shares of two or more Classes of Shares of a Series with and/or into a single Class of Shares of such Series, with such designation, preference, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, terms and conditions of redemption and other characteristics as the Trustees may determine; provided, however, that the Trustees shall provide written notice to the affected Shareholders of any such transaction.

   (iii) The transactions in (i) and (ii) above may be effected through share-for-share exchanges, transfers or sales of assets, Shareholder in-kind redemptions and purchases, exchange offers, or any other method approved by the Trustees.

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     (i) Dissolution or Termination. Any particular Series shall be dissolved upon the occurrence of the applicable dissolution events set forth in Article VIII, Section 1 hereof. Upon dissolution of a particular Series, the Trustees shall wind up the affairs of such Series in accordance with Article VIII Section 1 hereof and thereafter, rescind the establishment and designation thereof. The Board of Trustees shall terminate any particular Class and rescind the establishment and designation thereof: (i) upon approval by a majority of votes cast at a meeting of the Shareholders of such Class, provided a quorum of Shareholders of such Class are present, or by action of the Shareholders of such Class by written consent without a meeting pursuant to Article V, Section 3; or (ii) at the discretion of the Board of Trustees either (A) at any time there are no Shares outstanding of such Class, or (B) upon prior written notice to the Shareholders of such Class; provided, however, that upon the rescission of the establishment and designation of any particular Series, every Class of such Series shall thereby be terminated and its establishment and designation rescinded. Each resolution of the Board of Trustees pursuant to this Section 6(i) shall be incorporated herein by reference upon adoption.

     7. Indemnification of Shareholders. No shareholder as such shall be subject to any personal liability whatsoever to any Person in connection with Trust Property or the acts, obligations or affairs of the Trust. If any Shareholder or former Shareholder shall be exposed to liability, charged with liability, or held personally liable, for any obligations or liability of the Trust, by reason of a claim or demand relating exclusively to his or her being or having been a Shareholder of the Trust or a Shareholder of a particular Series thereof, and not because of such Shareholder’s actions or omissions, such Shareholder or former Shareholder (or, in the case of a natural person, his or her heirs, executors, administrators, or other legal representatives or, in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified out of the assets of the Trust or out of the assets of such Series thereof, as the case may be, against all loss and expense, including without limitation, attorneys’ fees, arising from such claim or demand; provided, however, such indemnity shall not cover (i) any taxes due or paid by reason of such Shareholder’s ownership of any Shares and (ii) expenses charged to a Shareholder pursuant to Article IV, Section 5 hereof.

IV.

THE BOARD OF TRUSTEES

1. Number, Election, Term, Removal and Resignation.

         (a) The initial Board of Trustees shall be comprised of the Trustees entering into this Declaration of Trust on the date first written above, who shall hold office until the initial holder of a Share executes a consent in writing to elect a Board of Trustees that holds office in accordance with paragraph (c) of this Section 1. The initial Trustees shall (i) execute and file or cause to be filed the Certificate of Trust with the office of the Secretary of State of the State of Delaware and (ii) adopt the By-Laws. In accordance with Section 3801 of the DSTA, each Trustee shall become a Trustee and be bound by this Declaration of Trust and the By-Laws when such Person signs this Declaration of Trust as a trustee and/or is duly elected or appointed, qualified and serving on the Board of Trustees in accordance with the provisions hereof and the By-Laws, so long as such signatory or other Person continues in office in accordance with the terms hereof.

        (b) The number of Trustees constituting the entire Board of Trustees may be fixed from time to time by the vote of a majority of the then Board of Trustees; provided, however, that the number of Trustees shall in no event be less than one (1) nor more than fifteen (15). The number of Trustees shall not be reduced so as to shorten the term of any Trustee then in office.

        (c) Each Trustee shall hold office for the lifetime of the Trust or until such Trustee’s earlier death, resignation, removal, retirement or inability otherwise to serve, or, if sooner than any of such events, until the next meeting of Shareholders called for the purpose of electing Trustees or consent of Shareholders in lieu thereof for the election of Trustees, and until the election and qualification of his or her successor.

        (d) Any Trustee may be removed, with or without cause, by the Board of Trustees, by action of a majority of the Trustees then in office, or by vote of the Shareholders at any meeting called for that purpose.

        (e) Any Trustee may resign at any time by giving written notice to the secretary of the Trust or to a meeting of the Board of Trustees. Such resignation shall be effective upon receipt, unless specified to be effective at some later time.

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     2. Trustee Action by Written Consent Without a Meeting. To the extent not inconsistent with the provisions of the 1940 Act, any action that may be taken at any meeting of the Board of Trustees or any committee thereof may be taken without a meeting and without prior written notice if a consent or consents in writing setting forth the action so taken is signed by the Trustees having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all Trustees on the Board of Trustees or any committee thereof, as the case may be, were present and voted. Written consents of the Trustees may be executed in one or more counterparts. A consent transmitted by electronic transmission (as defined in Section 3806 of the DSTA) by a Trustee shall be deemed to be written and signed for purposes of this Section. All such consents shall be filed with the secretary of the Trust and shall be maintained in the Trust’s records.

3. Powers; Other Business Interests; Quorum and Required Vote.

          (a) Powers. Subject to the provisions of this Declaration of Trust, the business of the Trust (including every Series thereof) shall be managed by or under the direction of the Board of Trustees, and such Board of Trustees shall have all powers necessary or convenient to carry out that responsibility. The Board of Trustees shall have full power and authority to do any and all acts and to make and execute any and all contracts and instruments that it may consider necessary or appropriate in connection with the operation and administration of the Trust (including every Series thereof). The Board of Trustees shall not be bound or limited by present or future laws or customs with regard to investments by trustees or fiduciaries, but, subject to the other provisions of this Declaration of Trust and the By-Laws, shall have full authority and absolute power and control over the assets and the business of the Trust (including every Series thereof) to the same extent as if the Board of Trustees was the sole owner of such assets and business in its own right, including such authority, power and control to do all acts and things as it, in its sole discretion, shall deem proper to accomplish the purposes of this Trust. Without limiting the foregoing, the Board of Trustees may, subject to the requisite vote for such actions as set forth in this Declaration of Trust and the By-Laws: (1) adopt By-Laws not inconsistent with applicable law or this Declaration of Trust; (2) amend, restate and repeal such By-Laws, subject to and in accordance with the provisions of such By-Laws; (3) fill vacancies on the Board of Trustees in accordance with this Declaration of Trust and the By-Laws; (4) elect and remove such officers and appoint and terminate such agents as it considers appropriate, in accordance with this Declaration of Trust and the By-Laws; (5) establish and terminate one or more committees of the Board of Trustees pursuant to the By-Laws; (6) place Trust Property in custody as required by the 1940 Act, employ one or more custodians of the Trust Property and authorize such custodians to employ sub-custodians and to place all or any part of such Trust Property with a custodian or a custodial system meeting the requirements of the 1940 Act; (7) retain a transfer agent, dividend disbursing agent, a shareholder servicing agent or administrative services agent, or any number thereof or any other service provider as deemed appropriate; (8) provide for the issuance and distribution of shares of beneficial interest in the Trust or other securities or financial instruments directly or through one or more Principal Underwriters or otherwise; (9) retain one or more Investment Adviser(s); (10) re-acquire and redeem Shares on behalf of the Trust and transfer Shares pursuant to applicable law; (11) set record dates for the determination of Shareholders with respect to various matters, in the manner provided in Article V, Section 4 of this Declaration of Trust; (12) declare and pay dividends and distributions to Shareholders from the Trust Property, in accordance with this Declaration of Trust and the By-Laws; (13) establish, designate and redesignate from time to time, in accordance with the provisions of Article III, Section 6 hereof, any Series or Class of the Trust or of a Series; (14) hire personnel as staff for the Board of Trustees or, for those Trustees who are not Interested Persons of the Trust, the Investment Adviser, or the Principal Underwriter, set the compensation to be paid by the Trust to such personnel, exercise exclusive supervision of such personnel, and remove one or more of such personnel, at the discretion of the Board of Trustees; (15) retain special counsel, other experts and/or consultants for the Board of Trustees, for those Trustees who are not Interested Persons of the Trust, the Investment Adviser, or the Principal Underwriter, and/or for one or more of the committees of the Board of Trustees, set the compensation to be paid by the Trust to such special counsel, other experts and/or consultants, and remove one or more of such special counsel, other experts and/or consultants, at the discretion of the Board of Trustees; (16) engage in and prosecute, defend, compromise, abandon, or adjust, by arbitration, or otherwise, any actions, suits, proceedings, disputes, claims, and demands relating to the Trust, and out of the assets of the Trust to pay or to satisfy any debts, claims or expenses incurred in connection therewith, including those of litigation, and such power shall include, without limitation, the power of the Trustees, or any appropriate committee thereof, in the exercise of their or its good faith business judgment, to dismiss any action, suit, proceeding, dispute, claim or demand, derivative or otherwise, brought by any person, including a shareholder in its own name or in the name of the Trust, whether or not the Trust or any of the

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Trustees may be named individually therein or the subject matter arises by reason of business for or on behalf of the Trust; and (17) in general delegate such authority as it considers desirable to any Trustee or officer of the Trust, to any committee of the Trust, to any agent or employee of the Trust or to any custodian, transfer, dividend disbursing, shareholder servicing agent, Principal Underwriter, Investment Adviser, or other service provider.

          The powers of the Board of Trustees set forth in this Section 3(a) are without prejudice to any other powers of the Board of Trustees set forth in this Declaration of Trust and the By-Laws. Any determination as to what is in the best interests of the Trust or any Series or Class thereof and its Shareholders made by the Board of Trustees in good faith shall be conclusive. In construing the provisions of this Declaration of Trust, the presumption shall be in favor of a grant of power to the Board of Trustees.

         (b) Other Business Interests. The Trustees shall devote to the affairs of the Trust (including every Series thereof) such time as may be necessary for the proper performance of their duties hereunder, but neither the Trustees nor the officers, directors, shareholders, partners or employees of the Trustees, if any, shall be expected to devote their full time to the performance of such duties. The Trustees, or any Affiliate, shareholder, officer, director, partner or employee thereof, or any Person owning a legal or beneficial interest therein, may engage in, or possess an interest in, any business or venture other than the Trust or any Series thereof, of any nature and description, independently or with or for the account of others. None of the Trust, any Series thereof or any Shareholder shall have the right to participate or share in such other business or venture or any profit or compensation derived therefrom.

         (c) Quorum and Required Vote. At all meetings of the Board of Trustees, a majority of the Board of Trustees then in office shall be present in person in order to constitute a quorum for the transaction of business. A meeting at which a quorum is initially present may continue to transact business notwithstanding the departure of Trustees from the meeting, if any action taken is approved by at least a majority of the required quorum for that meeting. Subject to Article III, Sections 1 and 6 of the By-Laws and except as otherwise provided herein or required by applicable law, the vote of not less than a majority of the Trustees present at a meeting at which a quorum is present shall be the act of the Board of Trustees.

     4. Payment of Expenses by the Trust. Subject to the provisions of Article III, Section 6 hereof, an authorized officer of the Trust shall pay or cause to be paid out of the principal or income of the Trust or any particular Series or Class thereof, or partly out of the principal and partly out of the income of the Trust or any particular Series or Class thereof, and charge or allocate the same to, between or among such one or more of the Series or Classes that may be established or designated pursuant to Article III, Section 6 hereof, as such officer deems fair, all expenses, fees, charges, taxes and liabilities incurred by or arising in connection with the maintenance or operation of the Trust or a particular Series or Class thereof, or in connection with the management thereof, including, but not limited to, the Trustees’ compensation and such expenses, fees, charges, taxes and liabilities associated with the services of the Trust’s officers, employees, Investment Adviser(s), Principal Underwriter, auditors, counsel, custodian, sub-custodian, transfer agent, dividend disbursing agent, shareholder servicing agent, and such other agents or independent contractors and such other expenses, fees, charges, taxes and liabilities as the Board of Trustees may deem necessary or proper to incur.

     5. Payment of Expenses by Shareholders. The Board of Trustees shall have the power, as frequently as it may determine, to cause any Shareholder to pay directly, in advance or arrears, an amount fixed from time to time by the Board of Trustees or an officer of the Trust for charges of the Trust’s custodian or transfer, dividend disbursing, shareholder servicing or similar agentwhich are not customarily charged generally to the Trust, a Series or a Class, where suchservicesareprovided to such Shareholderindividually, rather than to all Shareholders collectively, by setting off such amount due from such Shareholder from the amount of (i) declared but unpaid dividends or distributions owed such Shareholder, or (ii) proceeds from the redemption by the Trust of Shares from such Shareholder pursuant to Article VI hereof.

6. Ownership of Trust Property. Legal title to all of the Trust Property shall at all times be vested in the Trust, except that the Board of Trustees shall have the power to cause legal title to any Trust Property to be held by or in the name of any Person as nominee, on such terms as the Board of Trustees may determine, in accordance with applicable law.

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     7. Service Contracts.     

(a) Subject to this Declaration of Trust, the By-Laws and the 1940 Act, the Board of Trustees may, at any time and from time to time, contract for exclusive or nonexclusive investment advisory or investment management services for the Trust or for any Series thereof with any corporation, trust, association or other organization, including any Affiliate; and any such contract may contain such other terms as the Board of Trustees may determine, including without limitation, delegation of authority to the Investment Adviser to determine from time to time without prior consultation with the Board of Trustees what securities and other instruments or property shall be purchased or otherwise acquired, owned, held, invested or reinvested in, sold, exchanged, transferred, mortgaged, pledged, assigned, negotiated, or otherwise dealt with or disposed of, and what portion, if any, of the Trust Property shall be held uninvested and to make changes in the Trust’s or a particular Series’ investments, or to engage in such other activities, including administrative services, as may specifically be delegated to such party.

   (b) The Board of Trustees may also, at any time and from time to time, contract with any Person, including any Affiliate, appointing it or them as the exclusive or nonexclusive placement agent, distributor or Principal Underwriter for the Shares of beneficial interest of the Trust or one or more of the Series or Classes thereof, or for other securities or financial instruments to be issued by the Trust, or appointing it or them to act as the administrator, fund accountant or accounting agent, custodian, transfer agent, dividend disbursing agent and/or shareholder servicing agent for the Trust or one or more of the Series or Classes thereof.

   (c) The Board of Trustees is further empowered, at any time and from time to time, to contract with any Persons, including any Affiliates, to provide such other services to the Trust or one or more of its Series, as the Board of Trustees determines to be in the best interests of the Trust, such Series and its Shareholders.

   (d) None of the following facts or circumstances shall affect the validity of any of the contracts provided for in this Article IV, Section 7, or disqualify any Shareholder, Trustee, employee or officer of the Trust from voting upon or executing the same, or create any liability or accountability to the Trust, any Series thereof or the Shareholders, provided that the establishment of and performance of each such contract is permissible under the 1940 Act, and provided further that such Person is authorized to vote upon such contract under the 1940 Act:

(i)

the fact that any of the Shareholders, Trustees, employees or officers of the Trust is a shareholder, director, officer, partner, trustee, employee, manager, Adviser, placement agent, Principal Underwriter, distributor, or Affiliate or agent of or for any Person, or for any parent or Affiliate of any Person, with which any type of service contract provided for in this Article IV, Section 7 may have been or may hereafter be made, or that any such Person, or any parent or Affiliate thereof, is a Shareholder or has an interest in the Trust, or

(ii)

the fact that any Person with which any type of service contract provided for in this Article IV, Section 7 may have been or may hereafter be made also has such a service contract with one or more other Persons, or has other business or interests.

   (e) Every contract referred to in this Section 7 is required to comply with this Declaration of Trust, the By-Laws, the 1940 Act, other applicable law and any stipulation by resolution of the Board of Trustees.

V.

SHAREHOLDERS’ VOTING POWERS AND MEETINGS

     1. Voting Powers. Subject to the provisions of Article III, Section 6 hereof, the Shareholders shall have the power to vote only (i) on such matters required by this Declaration of Trust, the By-Laws, the 1940 Act, other applicable law and any registration statement of the Trust filed with the Commission, the registration of which is effective; and (ii) on such other matters as the Board of Trustees may consider necessary or desirable. Subject to Article III hereof, the Shareholder of record (as of the record date established pursuant to Section 4 of this Article V) of each Share shall be entitled to one vote for each full Share, and a fractional vote for each fractional Share. Shareholders shall not be entitled to cumulative voting in the election of Trustees or on any other matter.

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2. Quorum and Required Vote.

(a) Forty percent (40%) of the outstanding Shares entitled to vote at a Shareholders’ meeting, which are present in person or represented by proxy, shall constitute a quorum at the Shareholders’ meeting, except when a larger quorum is required by this Declaration of Trust, the By-Laws, applicable law or the requirements of any securities exchange on which Shares are listed for trading, in which case such quorum shall comply with such requirements. When a separate vote by one or more Series or Classes is required, forty percent (40%) of the outstanding Shares of each such Series or Class entitled to vote at a Shareholders’ meeting of such Series or Class, which are present in person or represented by proxy, shall constitute a quorum at the Shareholders’ meeting of such Series or Class, except when a larger quorum is required by this Declaration of Trust, the By-Laws, applicable law or the requirements of any securities exchange on which Shares of such Series or Class are listed for trading, in which case such quorum shall comply with such requirements.

          (b) Subject to the provisions of Article III, Section 6(d), when a quorum is present at any meeting, a majority of the votes cast shall decide any questions and a plurality shall elect a Trustee, except when a larger vote is required by any provision of this Declaration of Trust or the By-Laws or by applicable law. Pursuant to Article III, Section 6(d) hereof, where a separate vote by Series and, if applicable, by Class is required, the preceding sentence shall apply to such separate votes by Series and Classes.

          (c) Abstentions and broker non-votes will be treated as votes present at a Shareholders’ meeting; abstentions and broker non-votes will not be treated as votes cast at such meeting. Abstentions and broker non-votes, therefore (i) will be included for purposes of determining whether a quorum is present; and (ii) will have no effect on proposals that require a plurality for approval, or on proposals requiring an affirmative vote of a majority of votes cast for approval.

     3. Shareholder Action by Written Consent Without a Meeting. Any action which may be taken at any meeting of Shareholders may be taken without a meeting if a consent or consents in writing setting forth the action so taken is or are signed by the holders of a majority of the Shares entitled to vote on such action (or such different proportion thereof as shall be required by law, the Declaration of Trust or the By-Laws for approval of such action) and is or are received by the secretary of the Trust either: (i) by the date set by resolution of the Board of Trustees for the shareholder vote on such action; or (ii) if no date is set by resolution of the Board, within 30 days after the record date for such action as determined by reference to Article V, Section 4(b) hereof. The written consent for any such action may be executed in one or more counterparts, each of which shall be deemed an original, and all of which when taken together shall constitute one and the same instrument. A consent transmitted by electronic transmission (as defined in the DSTA) by a Shareholder or by a Person or Persons authorized to act for a Shareholder shall be deemed to be written and signed for purposes of this Section. All such consents shall be filed with the secretary of the Trust and shall be maintained in the Trust’s records. Any Shareholder that has given a written consent or the Shareholder’s proxyholder or a personal representative of the Shareholder or its respective proxyholder may revoke the consent by a writing received by the secretary of the Trust either: (i) before the date set by resolution of the Board of Trustees for the shareholder vote on such action; or (ii) if no date is set by resolution of the Board, within 30 days after the record date for such action as determined by reference to Article V, Section 4(b) hereof.

4. Record Dates.

          (a) For purposes of determining the Shareholders entitled to notice of, and to vote at, any meeting of Shareholders, the Board of Trustees may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Trustees, and which record date shall not be more than one hundred and twenty (120) days nor less than ten (10) days before the date of any such meeting. A determination of Shareholders of record entitled to notice of or to vote at a meeting of Shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Trustees may fix a new record date for the adjourned meeting and shall fix a new record date for any meeting that is adjourned for more than sixty (60) days from the date set for the original meeting. For purposes of determining the Shareholders entitled to vote on any action without a meeting, the Board of Trustees may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Trustees, and which record date shall not be more than thirty (30) days after the date upon which the resolution fixing the record date is adopted by the Board of Trustees.

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(b)	If the Board of Trustees does not so fix a record date:
(i)	the record date for determining Shareholders entitled to notice of, and to vote at, a meeting of Shareholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
(ii)	the record date for determining Shareholders entitled to vote on any action by consent in writing without a meeting of Shareholders, (1) when no prior action by the Board of Trustees has been taken, shall be the day on which the first signed written consent setting forth the action taken is delivered to the Trust, or (2) when prior action of the Board of Trustees has been taken, shall be at the close of business on the day on which the Board of Trustees adopts the resolution taking such prior action.

          (c) For the purpose of determining the Shareholders of the Trust or any Series or Class thereof who are entitled to receive payment of any dividend or of any other distribution of assets of the Trust or any Series or Class thereof (other than in connection with a dissolution of the Trust or a Series, a merger, consolidation, conversion, reorganization, or any other transactions, in each case that is governed by Article VIII of the Declaration of Trust), the Board of Trustees may:

(i)	from time to time fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than sixty (60) days before the date for the payment of such dividend and/or such other distribution;
(ii)	adopt standing resolutions fixing record dates and related payment dates at periodic intervals of any duration for the payment of such dividend and/or such other distribution; and/or
(iii)	delegate to an appropriate officer or officers of the Trust the determination of such periodic record and/or payments dates with respect to such dividend and/or such other distribution.

Nothing in this Section shall be construed as precluding the Board of Trustees from setting different record dates for different Series or Classes.

     5. Additional Provisions. The By-Laws may include further provisions for Shareholders’ votes, meetings and related matters.

VI.

NET ASSET VALUE; DISTRIBUTIONS;
REDEMPTIONS; TRANSFERS

1. Determination of Net Asset Value, Net Income and Distributions.

          (a) Subject to Article III, Section 6 hereof, the Board of Trustees shall have the power to determine from time to time the offering price for authorized, but unissued, Shares of beneficial interest of the Trust or any Series or Class thereof, respectively, that shall yield to the Trust or such Series or Class not less than the net asset value thereof, in addition to any amount of applicable sales charge to be paid to the Principal Underwriter or the selling broker or dealer in connection with the sale of such Shares, at which price the Shares of the Trust or such Series or Class, respectively, shall be offered for sale, subject to any other requirements or limitations of the 1940 Act.

          (b) Subject to Article III, Section 6 hereof, the Board of Trustees may, subject to the 1940 Act, prescribe and shall set forth in the By-Laws, this Declaration of Trust or in a resolution of the Board of Trustees such bases and time for determining the net asset value per Share of the Trust or any Series or Class thereof, or net income attributable to the Shares of the Trust or any Series or Class thereof or the declaration and payment of dividends and distributions on the Shares of the Trust or any Series or Class thereof, as it may deem necessary or desirable, and such dividends and distributions may vary between the Classes to reflect differing allocations of the expenses of the Trust between such Classes to such extent and for such purposes as the Trustees may deem appropriate.

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(c) The Shareholders of the Trust or any Series or Class, if any, shall be entitled to receive dividends and distributions, when, if and as declared by the Board of Trustees with respect thereto, provided that with respect to Classes, such dividends and distributions shall comply with the 1940 Act. The right of Shareholders to receive dividends or other distributions on Shares of any Class may be set forth in a plan adopted by the Board of Trustees and amended from time to time pursuant to the 1940 Act. No Share shall have any priority or preference over any other Share of the Trust with respect to dividends or distributions paid in the ordinary course of business or distributions upon dissolution of the Trust made pursuant to Article VIII, Section 1 hereof; provided however, that

(i)	if the Shares of the Trust are divided into Series thereof, no Share of a particular Series shall have any priority or preference over any other Share of the same Series with respect to dividends or distributions paid in the ordinary course of business or distributions upon dissolution of the Trust or of such Series made pursuant to Article VIII, Section 1 hereof;
(ii)	if the Shares of the Trust are divided into Classes thereof, no Share of a particular Class shall have any priority or preference over any other Share of the same Class with respect to dividends or distributions paid in the ordinary course of business or distributions upon dissolution of the Trust made pursuant to Article VIII, Section 1 hereof; and
(iii)	if the Shares of a Series are divided into Classes thereof, no Share of a particular Class of such Series shall have any priority or preference over any other Share of the same Class of such Series with respect to dividends or distributions paid in the ordinary course of business or distributions upon dissolution of such Series made pursuant to Article VIII, Section 1 hereof.

All dividends and distributions shall be made ratably among all Shareholders of the Trust, a particular Class of the Trust, a particular Series, or a particular Class of a Series from the Trust Property held with respect to the Trust, such Series or such Class, respectively, according to the number of Shares of the Trust, such Series or such Class held of record by such Shareholders on the record date for any dividend or distribution; provided however, that

(iv)

if the Shares of the Trust are divided into Series thereof, all dividends and distributions from the Trust Property and, if applicable, held with respect to such Series, shall be distributed to each Series thereof according to the net asset value computed for such Series and within such particular Series, shall be distributed ratably to the Shareholders of such Series according to the number of Shares of such Series held of record by such Shareholders on the record date for any dividend or distribution; and

(v)

if the Shares of the Trust or of a Series are divided into Classes thereof, all dividends and distributions from the Trust Property and, if applicable, held with respect to the Trust or such Series, shall be distributed to each Class thereof according to the net asset value computed for such Class and within such particular Class, shall be distributed ratably to the Shareholders of such Class according to the number of Shares of such Class held of record by such Shareholders on the record date for any dividend or distribution.

Dividends and distributions may be paid in cash, in kind or in Shares.

          (d) Before payment of any dividend there may be set aside out of any funds of the Trust, or the applicable Series thereof, available for dividends such sum or sums as the Board of Trustees may from time to time, in its absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Trust, or any Series thereof, or for such other lawful purpose as the Board of Trustees shall deem to be in the best interests of the Trust, or the applicable Series, as the case may be, and the Board of Trustees may abolish any such reserve in the manner in which the reserve was created.

     2. Redemptions at the Option of a Shareholder. Unless otherwise provided in the prospectus of the Trust relating to the Shares, as such prospectus may be amended from time to time:

(a) The Trust shall purchase such Shares as are offered by any Shareholder for redemption upon the presentation of a proper instrument of transfer together with a request directed to the Trust or a Person designated by the Trust that the Trust purchase such Shares and/or in accordance with such other procedures for redemption as the Board of Trustees may from time to time authorize. If certificates have been issued to a Shareholder, any

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request for redemption by such Shareholder must be accompanied by surrender of any outstanding certificate or certificates for such Shares in form for transfer, together with such proof of the authenticity of signatures as may reasonably be required on such Shares and accompanied by proper stock transfer stamps, if applicable.

          (b) The Trust shall pay for such Shares the net asset value thereof (excluding any applicable redemption fee or sales load), in accordance with this Declaration of Trust, the By-Laws, the 1940 Act and other applicable law. Payments for Shares so redeemed by the Trust shall be made in cash, except payment for such Shares may, at the option of the Board of Trustees, or such officer or officers as it may duly authorize in its complete discretion, be made in kind or partially in cash and partially in kind. In case of any payment in kind, the Board of Trustees, or its authorized officers, shall have absolute discretion as to what security or securities of the Trust or the applicable Series shall be distributed in kind and the amount of the same; and the securities shall be valued for purposes of distribution at the value at which they were appraised in computing the then current net asset value of the Shares, provided that any Shareholder who cannot legally acquire securities so distributed in kind shall receive cash to the extent permitted by the 1940 Act. Shareholders shall bear the expenses of in-kind transactions, including, but not limited to, transfer agency fees, custodian fees and costs of disposition of such securities.

          (c) Payment by the Trust for such redemption of Shares shall be made by the Trust to the Shareholder within seven days after the date on which the redemption request is received in proper form and/or such other procedures authorized by the Board of Trustees are complied with; provided, however, that if payment shall be made other than exclusively in cash, any securities to be delivered as part of such payment shall be delivered as promptly as any necessary transfers of such securities on the books of the several corporations whose securities are to be delivered practicably can be made, which may not necessarily occur within such seven-day period. In no case shall the Trust be liable for any delay of any corporation or other Person in transferring securities selected for delivery as all or part of any payment in kind.

          (d) The obligations of the Trust set forth in this Section 2 are subject to the provision that such obligations may be suspended or postponed by the Board of Trustees (1) during any time the New York Stock Exchange (the “Exchange”) is closed for other than weekends or holidays; (2) if permitted by the rules of the Commission, during periods when trading on the Exchange is restricted; or (3) during any National Financial Emergency. The Board of Trustees may, in its discretion, declare that the suspension relating to a National Financial Emergency shall terminate, as the case may be, on the first business day on which the Exchange shall have reopened or the period specified above shall have expired (as to which, in the absence of an official ruling by the Commission, the determination of the Board of Trustees shall be conclusive).

          (e) The right of any Shareholder of the Trust or any Series or Class thereof to receive dividends or other distributions on Shares redeemed and all other rights of such Shareholder with respect to the Shares so redeemed, except the right of such Shareholder to receive payment for such Shares, shall cease at the time the purchase price of such Shares shall have been fixed, as provided above.

     3. Redemptions at the Option of the Trust. At the option of the Board of Trustees the Trust may, from time to time, without the vote of the Shareholders, but subject to the 1940 Act, redeem Shares or authorize the closing of any Shareholder account, subject to such conditions as may be established from time to time by the Board of Trustees.

4. Transfer of Shares. Shares shall be transferable in accordance with the provisions of the By-Laws.

VII.

 LIMITATION OF LIABILITY 
AND INDEMNIFICATION OF AGENT

1. Limitation of Liability.

          (a) For the purpose of this Article, “Agent” means any Person who is or was a Trustee, officer, employee or other agent of the Trust or is or was serving at the request of the Trust as a trustee, director, officer, employee or other agent of another foreign or domestic corporation, partnership, joint venture, trust or other

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enterprise; “Proceeding” means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative; and “Expenses” include without limitation attorneys’ fees and any expenses of establishing a right to indemnification under this Article.

          (b) An Agent shall be liable to the Trust and to any Shareholder for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing, for such Agent’s own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Agent (such conduct referred to herein as “Disqualifying Conduct”), and for nothing else.

          (c) Subject to subsection (b) of this Section 1 and to the fullest extent that limitations on the liability of Agents are permitted by the DSTA, the Agents shall not be responsible or liable in any event for any act or omission of any other Agent of the Trust or any Investment Adviser or Principal Underwriter of the Trust.

          (d) No Agent, when acting in its respective capacity as such, shall be personally liable to any Person, other than the Trust or a Shareholder to the extent provided in subsections (b) and (c) of this Section 1, for any act, omission or obligation of the Trust or any Trustee thereof.

          (e) Each Trustee, officer and employee of the Trust shall, in the performance of his or her duties, be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel, or upon reports made to the Trust by any of its officers or employees or by the Investment Adviser, the Principal Underwriter, any other Agent, selected dealers, accountants, appraisers or other experts or consultants selected with reasonable care by the Trustees, officers or employees of the Trust, regardless of whether such counsel or expert may also be a Trustee. The officers and Trustees may obtain the advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust, the By-Laws, applicable law and their respective duties as officers or Trustees. No such officer or Trustee shall be liable for any act or omission in accordance with such advice, records and/or reports and no inference concerning liability shall arise from a failure to follow such advice, records and/or reports. The officers and Trustees shall not be required to give any bond hereunder, nor any surety if a bond is required by applicable law.

          (f) The failure to make timely collection of dividends or interest, or to take timely action with respect to entitlements, on the Trust’s securities issued in emerging countries, shall not be deemed to be negligence or other fault on the part of any Agent, and no Agent shall have any liability for such failure or for any loss or damage resulting from the imposition by any government of exchange control restrictions which might affect the liquidity of the Trust’s assets or from any war or political act of any foreign government to which such assets might be exposed, except, in the case of a Trustee or officer, for liability resulting from such Trustee’s or officer’s Disqualifying Conduct.

          (g) The limitation on liability contained in this Article applies to events occurring at the time a Person serves as an Agent whether or not such Person is an Agent at the time of any Proceeding in which liability is asserted.

          (h) No amendment or repeal of this Article shall adversely affect any right or protection of an Agent that exists at the time of such amendment or repeal.

2. Indemnification.

          (a) Indemnification by Trust. The Trust shall indemnify, out of Trust Property, to the fullest extent permitted under applicable law, any Person who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that such Person is or was an Agent of the Trust, against Expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such Proceeding if such Person acted in good faith or in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such Person was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction or plea of nolo contendere or its equivalent shall not of itself create a presumption that the Person did not act in good faith or that the Person had reasonable cause to believe that the Person’s conduct was unlawful.

          (b) Exclusion of Indemnification. Notwithstanding any provision to the contrary contained herein, there shall be no right to indemnification for any liability arising by reason of the Agent’s Disqualifying Conduct. In respect of any claim, issue or matter as to which that Person shall have been adjudged to be liable in the

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performance of that Person’s duty to the Trust or the Shareholders, indemnification shall be made only to the extent that the court in which that action was brought shall determine, upon application or otherwise, that in view of all the circumstances of the case, that Person was not liable by reason of that Person’s Disqualifying Conduct.

          (c) Required Approval. Any indemnification under this Article shall be made by the Trust if authorized in the specific case on a determination that indemnification of the Agent is proper in the circumstances by (i) a final decision on the merits by a court or other body before whom the proceeding was brought that the Agent was not liable by reason of Disqualifying Conduct (including, but not limited to, dismissal of either a court action or an administrative proceeding against the Agent for insufficiency of evidence of any Disqualifying Conduct) or, (ii) in the absence of such a decision, a reasonable determination, based upon a review of the facts, that the Agent was not liable by reason of Disqualifying Conduct, by (1) the vote of a majority of a quorum of the Trustees who are not (x) “interested persons” of the Trust as defined in Section 2(a)(19) of the 1940 Act, (y) parties to the proceeding, or (z) parties who have any economic or other interest in connection with such specific case (the “disinterested, non-party Trustees”); or (2) by independent legal counsel in a written opinion.

          (d) Advancement of Expenses. Expenses incurred by an Agent in defending any Proceeding may be advanced by the Trust before the final disposition of the Proceeding on receipt of an undertaking by or on behalf of the Agent to repay the amount of the advance if it shall be determined ultimately that the Agent is not entitled to be indemnified as authorized in this Article; provided, that at least one of the following conditions for the advancement of expenses is met: (i) the Agent shall provide a security for his undertaking, (ii) the Trust shall be insured against losses arising by reason of any lawful advances, or (iii) a majority of a quorum of the disinterested, non-party Trustees of the Trust, or an independent legal counsel in a written opinion, shall determine, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the Agent ultimately will be found entitled to indemnification.

          (e) Other Contractual Rights. Nothing contained in this Article shall affect any right to indemnification to which Persons other than Trustees and officers of the Trust or any subsidiary thereof may be entitled by contract or otherwise.

          (f) Fiduciaries of Employee Benefit Plan. This Article does not apply to any Proceeding against any trustee, investment manager or other fiduciary of an employee benefit plan in that Person’s capacity as such, even though that Person may also be an Agent of the Trust as defined in Section 1 of this Article. Nothing contained in this Article shall limit any right to indemnification to which such a trustee, investment manager, or other fiduciary may be entitled by contract or otherwise which shall be enforceable to the extent permitted by applicable law other than this Article.

     3. Insurance. To the fullest extent permitted by applicable law, the Board of Trustees shall have the authority to purchase with Trust Property, insurance for liability and for all Expenses reasonably incurred or paid or expected to be paid by an Agent in connection with any Proceeding in which such Agent becomes involved by virtue of such Agent’s actions, or omissions to act, in its capacity or former capacity with the Trust, whether or not the Trust would have the power to indemnify such Agent against such liability.

     4. Derivative Actions. Subject to the requirements set forth in Section 3816 of the DSTA, a Shareholder or Shareholders may bring a derivative action on behalf of the Trust only if the Shareholder or Shareholders first make a pre-suit demand upon the Board of Trustees to bring the subject action unless an effort to cause the Board of Trustees to bring such action is excused. A demand on the Board of Trustees shall only be excused if a majority of the Board of Trustees, or a majority of any committee established to consider the merits of such action, has a material personal financial interest in the action at issue. A Trustee shall not be deemed to have a material personal financial interest in an action or otherwise be disqualified from ruling on a Shareholder demand by virtue of the fact that such Trustee receives remuneration from his or her service on the Board of Trustees of the Trust or on the boards of one or more investment companies with the same or an affiliated investment adviser or underwriter.

VIII.

CERTAIN TRANSACTIONS

1. Dissolution of Trust or Series. The Trust and each Series shall have perpetual existence, except that the Trust (or a particular Series) shall be dissolved:

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          (a) With respect to the Trust, (i) upon the vote of the holders of not less than a majority of the Shares of the Trust cast, or (ii) at the discretion of the Board of Trustees either (A) at any time there are no Shares outstanding of the Trust, or (B) upon prior written notice to the Shareholders of the Trust; or

(b) With respect to a particular Series, (i) upon the vote of the holders of not less than a majority of the Shares of such Series cast, or (ii) at the discretion of the Board of Trustees either (A) at any time there are no Shares outstanding of such Series, or (B) upon prior written notice to the Shareholders of such Series; or

(c) With respect to the Trust (or a particular Series), upon the occurrence of a dissolution or termination event pursuant to any other provision of this Declaration of Trust (including Article VIII, Section 2) or the DSTA; or

(d) With respect to any Series, upon any event that causes the dissolution of the Trust.

     Upon dissolution of the Trust (or a particular Series, as the case may be), the Board of Trustees shall (in accordance with Section 3808 of the DSTA) pay or make reasonable provision to pay all claims and obligations of the Trust and/or each Series (or the particular Series, as the case may be), including all contingent, conditional or unmatured claims and obligations known to the Trust, and all claims and obligations which are known to the Trust, but for which the identity of the claimant is unknown. If there are sufficient assets held with respect to the Trust and/or each Series of the Trust (or the particular Series, as the case may be), such claims and obligations shall be paid in full and any such provisions for payment shall be made in full. If there are insufficient assets held with respect to the Trust and/or each Series of the Trust (or the particular Series, as the case may be), such claims and obligations shall be paid or provided for according to their priority and, among claims and obligations of equal priority, ratably to the extent of assets available therefor. Any remaining assets (including, without limitation, cash, securities or any combination thereof) held with respect to the Trust and/or each Series of the Trust (or the particular Series, as the case may be) shall be distributed to the Shareholders of the Trust and/or each Series of the Trust (or the particular Series, as the case may be) ratably according to the number of Shares of the Trust and/or such Series thereof (or the particular Series, as the case may be) held of record by the several Shareholders on the date for such dissolution distribution; provided, however, that if the Shares of the Trust or a Series are divided into Classes thereof, any remaining assets (including, without limitation, cash, securities or any combination thereof) held with respect to the Trust or such Series, as applicable, shall be distributed to each Class of the Trust or such Series according to the net asset value computed for such Class and within such particular Class, shall be distributed ratably to the Shareholders of such Class according to the number of Shares of such Class held of record by the several Shareholders on the date for such dissolution distribution. Upon the winding up of the Trust in accordance with Section 3808 of the DSTA and its termination, any one (1) Trustee shall execute, and cause to be filed, a certificate of cancellation, with the office of the Secretary of State of the State of Delaware in accordance with the provisions of Section 3810 of the DSTA.

2. Merger or Consolidation; Conversion; Reorganization.

          (a) Merger or Consolidation. Pursuant to an agreement of merger or consolidation, the Board of Trustees, by vote of a majority of the Trustees, may cause the Trust to merge or consolidate with or into one or more statutory trusts or “other business entities” (as defined in Section 3801 of the DSTA) formed or organized or existing under the laws of the State of Delaware or any other state of the United States or any foreign country or other foreign jurisdiction. Any such merger or consolidation shall not require the vote of the Shareholders unless such vote is required by the 1940 Act; provided however, that the Board of Trustees shall provide at least thirty (30) days’ prior written notice to the Shareholders of such merger or consolidation. By reference to Section 3815(f) of the DSTA, any agreement of merger or consolidation approved in accordance with this Section 2(a) may, without a Shareholder vote, unless required by the 1940 Act, the requirements of any securities exchange on which Shares are listed for trading or any other provision of this Declaration of Trust or the By-Laws, effect any amendment to this Declaration of Trust or the By-Laws or effect the adoption of a new governing instrument if the Trust is the surviving or resulting statutory trust in the merger or consolidation, which amendment or new governing instrument shall be effective at the effective time or date of the merger or consolidation. In all respects not governed by the DSTA, the 1940 Act, other applicable law or the requirements of any securities exchange on which Shares are listed for trading, the Board of Trustees shall have the power to prescribe additional procedures necessary or appropriate to accomplish a merger or consolidation, including the power to create one or more separate statutory trusts to which all or any part of the assets, liabilities, profits or losses of the Trust may be transferred and to provide for

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the conversion of Shares into beneficial interests in such separate statutory trust or trusts. Upon completion of the merger or consolidation, if the Trust is the surviving or resulting statutory trust, any one (1) Trustee shall execute, and cause to be filed, a certificate of merger or consolidation in accordance with Section 3815 of the DSTA.

           (b) Conversion. The Board of Trustees, by vote of a majority of the Trustees, may cause (i) the Trust to convert to an “other business entity” (as defined in Section 3801 of the DSTA) formed or organized under the laws of the State of Delaware as permitted pursuant to Section 3821 of the DSTA; (ii) the Shares of the Trust or any Series to be converted into beneficial interests in another statutory trust (or series thereof) created pursuant to this Section 2 of this Article VIII, or (iii) the Shares to be exchanged under or pursuant to any state or federal statute to the extent permitted by law. Any such statutory conversion, Share conversion or Share exchange shall not require the vote of the Shareholders unless such vote is required by the 1940 Act; provided however, that the Board of Trustees shall provide at least thirty (30) days’ prior written notice to the Shareholders of the Trust of any conversion of Shares of the Trust pursuant to Subsections (b)(i) or (b)(ii) of this Section 2 or exchange of Shares of the Trust pursuant to Subsection (b)(iii) of this Section 2, and at least thirty (30) days’ prior written notice to the Shareholders of a particular Series of any conversion of Shares of such Series pursuant to Subsection (b)(ii) of this Section 2 or exchange of Shares of such Series pursuant to Subsection (b)(iii) of this Section 2. In all respects not governed by the DSTA, the 1940 Act, other applicable law or the requirements of any securities exchange on which Shares are listed for trading, the Board of Trustees shall have the power to prescribe additional procedures necessary or appropriate to accomplish a statutory conversion, Share conversion or Share exchange, including the power to create one or more separate statutory trusts to which all or any part of the assets, liabilities, profits or losses of the Trust may be transferred and to provide for the conversion of Shares of the Trust or any Series thereof into beneficial interests in such separate statutory trust or trusts (or series thereof).

           (c) Reorganization. The Board of Trustees, by vote of a majority of the Trustees, may cause the Trust to sell, convey and transfer all or substantially all of the assets of the Trust (“sale of Trust assets”) or all or substantially all of the assets associated with any one or more Series (“sale of such Series’ assets”), to another trust, statutory trust, partnership, limited partnership, limited liability company, corporation or other association organized under the laws of any state, or to one or more separate series thereof, or to the Trust to be held as assets associated with one or more other Series of the Trust, in exchange for cash, shares or other securities (including, without limitation, in the case of a transfer to another Series of the Trust, Shares of such other Series) with such sale, conveyance and transfer either (a) being made subject to, or with the assumption by the transferee of, the liabilities associated with the Trust or the liabilities associated with the Series the assets of which are so transferred, as applicable, or (b) not being made subject to, or not with the assumption of, such liabilities. Any such sale, conveyance and transfer shall not require the vote of the Shareholders unless such vote is required by the 1940 Act; provided however, that the Board of Trustees shall provide at least thirty (30) days’ prior written notice to the Shareholders of the Trust of any such sale of Trust assets, and at least thirty (30) days prior written notice to the Shareholders of a particular Series of any sale of such Series’ assets. Following such sale of Trust assets, the Board of Trustees shall distribute such cash, shares or other securities ratably among the Shareholders of the Trust (giving due effect to the assets and liabilities associated with and any other differences among the various Series the assets associated with which have been so sold, conveyed and transferred, and due effect to the differences among the various Classes within each such Series). Following a sale of such Series’ assets, the Board of Trustees shall distribute such cash, shares or other securities ratably among the Shareholders of such Series (giving due effect to the differences among the various Classes within each such Series). If all of the assets of the Trust have been so sold, conveyed and transferred, the Trust shall be dissolved; and if all of the assets of a Series have been so sold, conveyed and transferred, such Series and the Classes thereof shall be dissolved. In all respects not governed by the DSTA, the 1940 Act or other applicable law, the Board of Trustees shall have the power to prescribe additional procedures necessary or appropriate to accomplish such sale, conveyance and transfer, including the power to create one or more separate statutory trusts to which all or any part of the assets, liabilities, profits or losses of the Trust may be transferred and to provide for the conversion of Shares into beneficial interests in such separate statutory trust or trusts.

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     3. Master Feeder Structure. If permitted by the 1940 Act, the Board of Trustees, by vote of a majority of the Trustees, and without a Shareholder vote, may cause the Trust or any one or more Series to convert to a master feeder structure (a structure in which a feeder fund invests all of its assets in a master fund, rather than making investments in securities directly) and thereby cause existing Series of the Trust to either become feeders in a master fund, or to become master funds in which other funds are feeders.

     4. Absence of Appraisal or Dissenters’ Rights. No Shareholder shall be entitled, as a matter of right, to relief as a dissenting Shareholder in respect of any proposal or action involving the Trust or any Series or any Class thereof.

IX.

AMENDMENTS

     1. Amendments Generally. This Declaration of Trust may be restated and/or amended at any time by an instrument in writing signed by not less than a majority of the Board of Trustees and, to the extent required by this Declaration of Trust, the 1940 Act or the requirements of any securities exchange on which Shares are listed for trading, by approval of such amendment by the Shareholders in accordance with Article III, Section 6 hereof and Article V hereof. Any such restatement and/or amendment hereto shall be effective immediately upon execution and approval or upon such future date and time as may be stated therein. The Certificate of Trust shall be restated and/or amended at any time by the Board of Trustees, without Shareholder approval, to correct any inaccuracy contained therein. Any such restatement and/or amendment of the Certificate of Trust shall be executed by at least one (1) Trustee and shall be effective immediately upon its filing with the office of the Secretary of State of the State of Delaware or upon such future date as may be stated therein.

X.

MISCELLANEOUS

     1. References; Headings; Counterparts. In this Declaration of Trust and in any restatement hereof and/or amendment hereto, references to this instrument, and all expressions of similar effect to “herein,” “hereof” and “hereunder,” shall be deemed to refer to this instrument as so restated and/or amended. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this instrument. Whenever the singular number is used herein, the same shall include the plural; and the neuter, masculine and feminine genders shall include each other, as applicable. Any references herein to specific sections of the DSTA, the Code or the 1940 Act shall refer to such sections as amended from time to time or any successor sections thereof. This instrument may be executed in any number of counterparts, each of which shall be deemed an original.

     2. Applicable Law. This Declaration of Trust is created under and is to be governed by and construed and administered according to the laws of the State of Delaware and the applicable provisions of the 1940 Act and the Code. The Trust shall be a Delaware statutory trust pursuant to the DSTA, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a statutory trust.

3. Provisions in Conflict with Law or Regulations.

           (a) The provisions of this Declaration of Trust are severable, and if the Board of Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the Code, the DSTA, or with other applicable laws and regulations, the conflicting provision shall be deemed not to have constituted a part of this Declaration of Trust from the time when such provisions became inconsistent with such laws or regulations; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration of Trust or render invalid or improper any action taken or omitted prior to such determination.

           (b) If any provision of this Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration of Trust in any jurisdiction.

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     4. Statutory Trust Only. It is the intention of the Trustees to create hereby a statutory trust pursuant to the DSTA, and thereby to create the relationship of trustee and beneficial owners within the meaning of the DSTA between, respectively, the Trustees and each Shareholder. It is not the intention of the Trustees to create a general or limited partnership, limited liability company, joint stock association, corporation, bailment, or any form of legal relationship other than a statutory trust pursuant to the DSTA. Nothing in this Declaration of Trust shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association.

5. Use of the Names “Franklin,” “Templeton,” “Fiduciary Trust,” and/or “Institutional Fiduciary Trust”. The Board of Trustees expressly agrees and acknowledges that the names “Franklin,” “Templeton,” “Fiduciary Trust,” and “Institutional Fiduciary Trust” are the sole property of Franklin Resources, Inc. (“FRI”). FRI has granted to the Trust a non-exclusive license to use such names as part of the name of the Trust now and in the future. The Board of Trustees further expressly agrees and acknowledges that the non-exclusive license granted herein may be terminated by FRI if the Trust ceases to use FRI or one of its Affiliates as Investment Adviser or to use other Affiliates or successors of FRI for such purposes. In such event, the nonexclusive license may be revoked by FRI and the Trust shall cease using the names “Franklin,” “Templeton,” “Fiduciary Trust,” “Institutional Fiduciary Trust” or any name misleadingly implying a continuing relationship between the Trust and FRI or any of its Affiliates, as part of its name unless otherwise consented to by FRI or any successor to its interests in such names.

     The Board of Trustees further understands and agrees that so long as FRI and/or any future advisory Affiliate of FRI shall continue to serve as the Trust’s Investment Adviser, other registered open- or closed-end investment companies (“funds”) as may be sponsored or advised by FRI or its Affiliates shall have the right permanently to adopt and to use the names “Franklin”, “Templeton,” “Fiduciary Trust” and/or “Institutional Fiduciary Trust” in their names and in the names of any series or Class of shares of such funds.

     IN WITNESS WHEREOF, the Trustees named below do hereby make and enter into this Agreement and Declaration of Trust as of the date first written above.

, Trustee	, Trustee
, Trustee	, Trustee
, Trustee	, Trustee
, Trustee	, Trustee
, Trustee	, Trustee

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EX-99

EXHIBIT J

A COMPARISON OF GOVERNING INSTRUMENTS

     This Exhibit compares some of the more significant provisions of the New Declaration with the Current Declarations. Some of the changes noted in this Exhibit have already been made in the Current Declarations for certain Funds, but are included in this comparison in order to highlight significant changes for those Funds that do not already have these new provisions. This is only a summary of the significant changes included in the New Declaration.  

1. Shareholder Investments

Issuing and Reacquiring Shares

     Many of the Current Declarations do not contain provisions – or contain only brief provisions – specifically addressing the various forms of consideration for which new Shares may be issued, or the treatment of reacquired Shares. The New Declaration provides that the Trustees shall have the power to issue Shares of the Trust, or any series and class, for consideration paid wholly or partly in cash, securities or other property. The Trust may also reacquire and hold Shares as treasury Shares, reissue reacquired Shares for such consideration and on such terms as the Trustees may determine, or cancel reacquired Shares. The Trustees may classify or reclassify any Shares that are reacquired. The Trust and any series may also acquire, hold, sell and otherwise deal in, for purposes of investment or otherwise, the Shares of any other series of the Trust, and such Shares shall not be deemed treasury Shares or cancelled. 

Redemptions In Kind

     Many of the Current Declarations do not specifically address the Trust’s ability to redeem shares in kind. The New Declaration provides that, at the option of the Trustees or officers authorized by the Trustees, redemptions may be made in kind or partially in cash and partially in kind. The Trustees or the authorized officers shall have absolute discretion as to what securities of the Trust (or the applicable series) shall be distributed in kind and in what amounts. The securities shall be valued for purposes of distribution at the value at which they were appraised in computing the then-current net asset value of the Shares, provided that any Shareholder who cannot legally acquire the securities to be distributed in kind shall receive cash to the extent permitted by the 1940 Act. Shareholders shall bear the expenses of in kind transactions including transfer agency fees, custodian fees and costs of disposition of such securities. While both the Current Declarations and the New Declarations provide that redemptions in cash shall be made within seven days, the New Declaration provides that, for redemptions made all or partly in kind, the securities shall be delivered as promptly as possible after taking into account any necessary transfers of the securities on the books of the issuer companies, which may not necessarily occur within the seven-day period. 

Separation of Assets and Liabilities

     Consistent with the DSTA, the New Declaration specifically provides that each series of the Trust shall be separate and distinct from any other series of the Trust, shall maintain separate and distinct records on the books of the Trust, and shall hold and account for the assets and liabilities belonging to the series separately from the assets and liabilities of the Trust or any other series. Each class of a series shall also be separate and distinct from any other class of the series. The New Declaration further provides that the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series shall only be enforceable against the assets held with respect to that series, and not against the assets of any other series or the Trust generally. Similarly, none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Trust generally or any other series shall be enforceable against the assets held with respect to a series.

Some of the Current Declarations do not specifically address this point, although it is already provided for under the DSTA and in the Trust’s Certificate of Trust filed with the State of Delaware. The Current Declaration for Franklin Mutual Recovery Fund (“Mutual Recovery”) further require that contracts allocated to a particular series provide that the contracting party look only to the assets of that series for any claim under the contract. The New Declaration for Mutual Recovery does not have this requirement.

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Dividends and Distributions

     The New Declaration has certain provisions relating to dividends and distributions that are not specifically provided for in some of the Current Declarations. Among these are provisions in the New Declaration that dividends and distributions may vary between the classes to reflect differing allocations of the expenses of the Trust between the classes. The New Declaration also provides that the right of Shareholders to receive dividends or other distributions on Shares of any class may be set forth in a plan adopted by the Trustees pursuant to the 1940 Act. Under the New Declaration, dividends and distributions may be paid in cash, kind or in Shares. Before payment of any dividend, the Trustees may set aside out of any funds available for dividends a reserve fund to meet contingencies, for equalizing dividends, for repairing or maintaining Trust property, or for such other lawful purpose that the Trustees deem to be in the best interests of the Trust. The Trustees may also abolish any such reserve in the same manner that the reserve was created. 

Record Dates for Dividends and Distributions

     Many of the Current Declarations provide that, for the purpose of determining the Shareholders who are entitled to receive payment of any dividend or distribution, the Trustees may fix a record date, which shall be prior to the payment date of the dividend or distribution. The New Declaration provides that, for the purpose of determining the Shareholders who are entitled to receive a dividend or distribution (other than in connection with a dissolution of the Trust or a series, a merger, consolidation, conversion, reorganization, or similar transactions), the Trustees may: (i) fix a record date, whichshall not precede the date that the resolution fixing the record date is adopted, and which shall not be more than 60 days before the payment date of the dividend or distribution; (ii) adopt standing resolutions fixing record dates and related payment dates at periodic intervals of any duration; and/or (iii) delegate to appropriate officers the determination of the periodic record or payment dates of the dividend or distribution. 

Closing Shareholder Accounts

     Many of the Current Declarations provide that the Trust shall have the right, at its option, to redeem Shares of any Shareholder: (i) if the Shareholder owns Shares of a series having an aggregate net asset value of less than an amount determined by the Trustees prior to the acquisition of the Shares; (ii) if the Shareholder owns Shares of a series greater than a percentage of the outstanding Shares of that series determined by the Trustees; or (iii) if the Shareholder owns Shares greater than a percentage of the outstanding Shares of the Trust or any series determined by the Trustees. The New Declaration provides that, subject to the 1940 Act, the Trustees may authorize the closing of any Shareholder account, subject to such conditions as may be established by the Trustees. 

Appraisal and Dissenters’ Rights

     The New Declaration contains a provision not included in some of the Current Declarations (including Mutual Recovery) explicitly stating that no Shareholder has a right to relief as a dissenting Shareholder for any Trust action or proposal.

2. Dissolution and Combinations of Trusts, Series and Classes

Termination of the Trust

     Many of the Current Declarations provide that the Trust may be terminated at any time by vote of a majority of the Shares of each series entitled to vote, voting separately by series, or by the Trustees by written notice to the Shareholders. The New Declaration (except for Mutual Recovery)provides that the Trust shall be dissolved: (i) upon the vote of not less than a majority of the Shares of the Trust cast at a meeting where a quorum is present; (ii) at the discretion of the Trustees, either (A) at any time there are no Shares outstanding of the Trust, or (B) upon prior written notice to the Shareholders of the Trust; or (iii) upon the occurrence of a dissolution or termination event pursuant to any other provisions of the New Declaration, including a merger, consolidation, conversion or reorganization of the Trust into another entity or pursuant to any other provision of the New Declaration or the DSTA. 

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Dissolution of Series and Classes

     Many of the Current Declarations provide that series and classes may only be dissolved by the Trustees when there are no Shares outstanding, or that a series may be terminated by the vote of a majority of the Shares of that series or by the Trustees by written notice to the Shareholders of that series. The New Declaration provides that a series shall be dissolved upon the occurrence of certain dissolution events, including a merger, consolidation, conversion or reorganization of the series into another entity. In addition, the Trustees may terminate any particular series or class: (i) upon approval by a majority of votes cast¹ at a meeting where a quorum of Shareholders of the series or class are present, or by action of the Shareholders of the series or class by written consent without a meeting; or (ii) at the discretion of the Trustees, either (A) at any time there are no Shares of the series or class outstanding, or (B) upon prior written notice to the Shareholders of the series or class. When a series is dissolved, every class of that series is also deemed to be dissolved; when a Trust is dissolved, every series of that Trust is also deemed to be dissolved. Each resolution of the Trustees on these matters is considered to be incorporated by reference into the New Declaration upon adoption. 

Combination of Assets and Liabilities

     Many of the Current Declarations provide that the Trustees shall have the authority, without the approval of Shareholders (unless otherwise required by applicable law), to combine the assets and liabilities of two or more series into assets and liabilities of a single series. The New Declaration contains a similar provision, but also requires that, upon the completion of the combination, the interest of each Shareholder in the assets and liabilities of the combined series must equal the Shareholder’s aggregate interest in the assets and liabilities of the individual series that were combined.

     The Current Declaration for Mutual Recovery provides that such a combination of shares may not materially affect the rights of Shares. The New Declaration for Mutual Recovery does not have this condition.

Mergers, Consolidations, Conversions and Reorganizations

     Under many of the Current Declarations, a merger, consolidation, Share conversion or Share exchange must be authorized by vote of a majority of the outstanding Shares of the Trust, as a whole, or any affected series. The New Declaration (except for Mutual Recovery)provides that the Trustees, by vote of a majority of the Trustees, may cause the Trust to merge or consolidate with one or more statutory trusts or other business entities. Any merger or consolidation shall not require a Shareholder vote unless required by the 1940 Act. The Trustees must provide at least 30 days’ prior written notice to Shareholders of the merger or consolidation. Any agreement of merger or consolidation may, without a Shareholder vote (unless required by applicable law), affect any amendment to the New Declaration or the Trust’s by-laws or affect the adoption of a new governing instrument if the Trust is the surviving or resulting statutory trust in the merger or consolidation, and these amendment or new governing instrument shall be effective at the effective time or date of the merger or consolidation.

     The New Declaration (except for Mutual Recovery) also provides that the Trustees, by vote of a majority of the Trustees, may cause: (i) the Trust to convert to another business entity formed or organized under the laws of the State of Delaware; (ii) the Shares of the Trust or any series to be converted into beneficial interests in another Trust (or series) created pursuant to the New Declaration, or (iii) the Shares to be exchanged under or pursuant to any state or federal statute to the extent permitted by law. A statutory conversion, Share conversion or Share exchange does not require a Shareholder vote unless required by the 1940 Act. The Trustees must provide at least 30 days’ prior written notice to Shareholders of any conversion or exchange of Shares.

The New Declaration (except for Mutual Recovery) further states that the Trustees, by vote of a majority of the Trustees, may cause the Trust to sell, convey and transfer all or substantially all of the assets of the Trust or all or substantially all of the assets of a series, to: (i) another trust, statutory trust, partnership, limited partnership, limited liability company, corporation or other association organized under the laws of any state; (ii) one or more separate series of those entities; or (iii) to another series of the Trust. These sales, conveyances or transfers may be in exchange for cash, shares or other securities (including, Shares of another series of the Trust). The sale, conveyance or transfer may be made either: (i) subject to the assumption of the liabilities of the Trust or series whose assets are

____________________

1 For Mutual Recovery, this requires a vote of a majority of outstanding Shares. (Art. VIII, Sec. 2(a)).

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being transferred; or (ii) not subject to the assumption of such liabilities. Any such sale, conveyance and transfer shall not require the vote of the Shareholders unless required by the 1940 Act. The Trustees shall provide at least 30 days’ prior written notice to Shareholders of any such sale of assets. (Art. VIII, Sec. 2(c)).

     Finally, the New Declaration provides that the Board of Trustees shall have the authority, without Shareholder approval (unless otherwise required by applicable law), to combine, merge or otherwise consolidate the Shares of two or more classes of Shares of a series into a single class of Shares of the series. The single class shall have the designation, preference, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, terms and conditions of redemption and other characteristics as the Trustees may determine. The Trustees must provide written notice to the affected Shareholders of the transaction. These transactions may be effected through share-for-share exchanges, transfers or sales of assets, Shareholder in kind redemptions and purchases, exchange offers, or any other method approved by the Trustees.

3. Shareholder Meetings and Voting

Record Dates for Shareholders’ Meetings

     Many of the Current Declarations provide that, to determine the Shareholders of any series (or class) who are entitled to vote at a Shareholders’ meeting, the Trustees may fix a record date that is not more than 90 days before the Shareholders’ meeting. The New Declaration provides that, to determine the Shareholders entitled to notice of, and to vote at, any Shareholders’ meeting, the Trustees may fix a future record date that is not more than 120 days nor less than 10 days before the meeting. The New Declaration further provides that in order to determine the Shareholders entitled to vote on any action without a meeting, the Trustees may fix a future record date that is not more than 30 days after the date of the resolution fixing the record date. A determination of Shareholders entitled to notice of, or to vote at, a Shareholders’ meeting shall apply to any adjournment of the meeting, although the Board of Trustees may fix a new record date for the adjourned meeting. The Board must fix a new record date for any meeting that is adjourned for more than 60 days from the date of the original meeting.

Voting by Series and Class

     Many of the Current Declarations provide that all Shares of the Trust entitled to vote on a matter shall vote separately by series or, if applicable, by class. That is, the Shareholders of each series (or class) have the right to approve or disapprove matters affecting the Trust and each respective series (or class) as if the series (or classes) were separate companies. There are exceptions to these voting provisions, such as allowing the Trust’s Shares to be voted in the aggregate if required or permitted by the 1940 Act.

     The New Declaration, by contrast, provides that all Shares of the Trust entitled to vote on a matter shall vote in the aggregate without differentiation between the Shares of the separate series, if any, or separate classes, if any. If the 1940 Act or other applicable law or regulation requires voting by series or by class, then the Shares of the Trust shall vote as required by the law or regulation.

4. Trustees

Trust and Trustee Powers

     The New Declaration for Mutual Recovery has expanded the enumerated list of specific powers of the Trust and the Trustees, although these powers were implicit in the broad delegation of powers to the Trust and the Trustees under the Current Declaration.

Delegation of Trustee Powers

     Some of the Current Declarations provide that the Board of Trustees may delegate its authority to: (i) any officer of the Trust; (ii) any committee of the Trust; (iii) any agent or employee of the Trust; or (iv) any custodian, transfer, dividend disbursing, shareholder servicing agent, Principal Underwriter, Investment Adviser, or other service provider. These Current Declarations limit this delegation to the extent authorized and in accordance with the Current Declaration, the Trust’s by-laws or applicable law. The New Declaration also permits the Board to delegate authority to these persons or entities, as well as to any Trustee. It also removes the somewhat redundant limitation that delegation not be contrary to applicable law or the governing instruments.

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Removal of Trustees

     Many of the Current Declarations provide that a majority of Trustees may remove a Trustee with or without cause. A Trustee may also be removed at any meeting of Shareholders by a vote of two-thirds of the outstanding Shares of a Trust. A meeting of Shareholders for the purpose of electing or removing one or more Trustees may be called: (i) by the Trustees upon their own vote; or (ii) upon the demand of Shareholders owning 10% or more of the Shares of the Trust in the aggregate. The New Declaration provides that any Trustee may be removed, with or without cause, by the Board, by action of a majority of the Trustees then in office, or by the vote of Shareholders at any meeting called for that purpose.²

5. Shareholder and Agent Liability and Indemnification

Shareholder Liability

     The New Declaration states that, as provided in the DSTA, Shareholders shall be entitled to the same limitation of personal liability as that extended to stockholders of a private corporation organized for profit under the General Corporation Law of the State of Delaware (such corporate stockholders are typically only potentially liable for payment of the unpaid portion of any stock, which would be unlikely to occur in the context of investment companies). The New Declaration further provides that no Shareholder as such shall be subject to any personal liability to any person in connection with Trust property or the acts, obligations or affairs of the Trust. Some of the Current Declarations did not specifically address these points, although they were already provided for under the DSTA.

Indemnification of Shareholders

     Certain Current Declarations do not have a provision that is included in the New Declaration withholding indemnification from a Shareholder who becomes subject to a claim because of the Shareholder’s own actions or omissions (other than where the claim relates exclusively to his or her having been a Shareholder of the Trust), or for: (i) any taxes due or paid by reason of the Shareholder’s ownership of any Shares; or (ii) expenses charged to a Shareholder.

Trustee/Agent Liability

     Some of the Current Declarations provide that anything issued, executed or done by the Trustees in connection with the Trust shall be conclusively deemed to have been issued, executed or done by them only in their capacity as Trustees, and no Trustee shall be personally liable as a result. The New Declaration provides that an agent (including a past or present officer or Trustee) shall be liable to the Trust or to any Shareholder only for: (i) any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing; or (ii) such agent’s own willful misfeasance, bad faith or gross negligence, or reckless disregard of the agent’s duties (such conduct is often referred as “disqualifying conduct”), and for nothing else. The New Declaration further provides no agent of the Trust, when acting in such capacity, shall be personally liable to any person (other than the Trust or a Shareholder) for any act, omission or obligation of the Trust or any Trustee.

The New Declaration also provides that the Trustees and officers of the Trust shall be protected from liability for actions taken in good faith reliance on the Trust’s records and accounts, an opinion of counsel, reports of the investment adviser or principal underwriter of the Trust, or other experts selected by the Trustees with reasonable care, even if the expert or counsel is a Trustee. In addition, an agent of the Trust shall not be deemed negligent for failure to collect dividends or interest on emerging market securities or for imposition of exchange controls by a foreign government.

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2 For Mutual Recovery Fund, a Trustee may be removed with or without cause only by the vote of 75% of the Shares entitled to vote.

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Indemnification of Agents

     Certain Current Declarations do not have provisions that are included in the New Declaration making indemnification available to an agent if the agent acted in good faith or, in the case of a criminal proceeding, had no reasonable cause to believe the agent’s conduct was unlawful. The termination of any proceeding by judgment, order, settlement, conviction or plea of nolo contendere or its equivalent shall not of itself create a presumption that the agent did not act in good faith or that the agent had reasonable cause to believe that the conduct was unlawful. If the agent is found to be liable in the performance of his or her duty to the Trust or the Shareholders, indemnification shall be made only to the extent that the applicable court determines that, in view of all the circumstances, the agent was not liable by reason of disqualifying conduct. The Trust must determine that indemnification of the agent is proper under the circumstances by: (i) a final decision on the merits by a court or other applicable body that the agent was not liable by reason of disqualifying conduct (including, but not limited to, dismissal of the case against the agent for insufficiency of evidence of any disqualifying conduct); or (ii) in the absence of such a decision, a reasonable determination, based upon a review of the facts, that the agent was not liable by reason of disqualifying conduct, by (A) the vote of a majority of a quorum of the Trustees who are not (1) “interested persons” of the Trust as defined by the 1940 Act, (2) parties to the proceeding, or (3) parties who have any economic or other interest in connection with the specific case; or (B) by a written opinion of independent legal counsel.  

Advancement of Expenses

     Certain Current Declarations do not have a provision that is included in the New Declaration permitting expenses incurred by an agent in defending any proceeding to be advanced by the Trust before the final disposition of the proceeding upon receipt of an undertaking by the agent to repay the advance if it is ultimately determined that the agent is not entitled to be indemnified. In addition, one of the following conditions for the advancement of expenses must be met: (i) the agent must provide a security for his or her undertaking; (ii) the Trust must be insured against losses arising from the advance; or (iii) a majority of a quorum of the disinterested, non-party Trustees, or an independent legal counsel in a written opinion, must determine, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the agent ultimately will be found entitled to indemnification.  

6. Other Items

Amendments to Governing Instruments

     Some of the Current Declarations provided that before adopting any amendment to the Current Declaration without Shareholder approval, the Trustees are required to determine that the amendment is consistent with the fair and equitable treatment of all Shareholders or that Shareholder approval is not otherwise required by the 1940 Act or other applicable law. If Shares have been issued, Shareholder approval is required to adopt any amendments to the Current Declaration that will adversely affect to a material degree the rights and preferences of the Shares of any series (or class) or to increase or decrease the par value of the Shares of any series (or class). The New Declarations do not have similar requirements.

     Under many of the Current Declarations, shareholder approval of amendments requires the affirmative vote of a majority of the outstanding shares of the Trust. Under the New Declaration, shareholder approval of amendments requires the affirmative vote of a majority of votes cast at a meeting at which a quorum is present.³

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3 For Mutual Recovery, an amendment of certain provisions of the New Declaration requires approval of two-thirds of the Shares entitled to vote, unless two-thirds of the Trustees have approved the amendment, and other amendments require the affirmative vote of a majority of the outstanding Shares of the Trust.

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Derivative Actions

     Certain Current Declarations do not have a provision that is included in the New Declaration requiring Shareholders to first make a pre-suit demand upon the Trustees before bringing a derivative action on behalf of the Trust, unless an effort to cause the Trustees to bring the action is excused. A demand on the Trustees shall only be excused if a majority of the Trustees, or a majority of any committee established to consider the merits of the action, has a material personal financial interest in the action. A Trustee shall not be deemed to have a material personal financial interest in an action or otherwise be disqualified from ruling on a Shareholder demand by virtue of the Trustee receiving remuneration for his or her service on the Board or on the boards of one or more investment companies with the same or an affiliated investment adviser or underwriter.

Use of Names

     Some of the Current Declarations have provisions by which the Board of Trustees expressly agrees and acknowledges that the names “Franklin,” and “Templeton” are the sole property of Franklin Resources, Inc. (“FRI”). The New Declaration adds “Fiduciary Trust” and “Institutional Fiduciary Trust” to this list.

Master-Feeder Structure

     The New Declaration contains a provision not included in some of the Current Declarations that, if permitted by the 1940 Act, the Board of Trustees (subject in some cases to shareholder approval) may convert the Trust to a master-feeder structure.

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EX-99.K

Exhibit K

     SECOND AMENDED AND RESTATED

AGREEMENT AND DECLARATION OF TRUST

of

FRANKLIN MUTUAL RECOVERY FUND
a Delaware Statutory Trust

     (Original Agreement and Declaration of Trust was adopted January 31, 2003;
Amended and Restated Agreement and Declaration of Trust was adopted May 8, 2003;
Second Amended and Restated Agreement and Declaration of Trust adopted _________.)

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TABLE OF CONTENTS
			Page
I.	NAME; OFFICES; REGISTERED AGENT; DEFINITIONS			5
	1.	Name		5
	2.	Offices of the Trust		5
	3.	Registered Agent and Registered Office		5
	4.	Definitions		5
II.	PURPOSE OF TRUST			6
III.	SHARES			9
	1.	Division of Beneficial Interest		9
	2.	Ownership of Shares		10
	3.	Sale of Shares		10
	4.	Status of Shares and Limitation of Personal Liability		10
	5.	Power of Board of Trustees to Make Tax Status Election		11
	6.	Establishment and Designation of Series and Classes		11
	7.	Indemnification of Shareholders		14
IV.	THE BOARD OF TRUSTEES			14
	1.	Number, Election, Term, Removal and Resignation		14
	2.	Trustee Action by Written Consent Without a Meeting		14
	3.	Powers; Other Business Interests; Quorum and Required Vote		15
	4.	Payment of Expenses by the Trust		16
	5.	Payment of Expenses by Shareholders		16
	6.	Ownership of Trust Property		16
	7.	Service Contracts		16
V.	SHAREHOLDERS’ VOTING POWERS AND MEETINGS			17
	1.	Voting Powers		17
	2.	Quorum and Required Vote		18
	3.	Shareholder Action by Written Consent Without a Meeting		18
	4.	Record Dates		18
	5.	Additional Provisions		19
VI.	NET ASSET VALUE; DISTRIBUTIONS; REPURCHASES; TRANSFERS			19
	1.	Determination of Net Asset Value, Net Income and Distributions		19
	2.	Repurchase of Shares With Shareholder Consent		21
	3.	Repurchase of Shares Without Shareholder Consent		21
	4.	Transfer of Shares		21
VII.	LIMITATION OF LIABILITY AND INDEMNIFICATION OF AGENT			21
	1.	Limitation of Liability		21
	2.	Indemnification		22
	3.	Insurance		23
	4.	Derivative Actions		23
VIII.	CERTAIN TRANSACTIONS			24
	1.	Vote Required		24
	2.	Dissolution of Trust or Series		24
	3.	Merger or Consolidation; Conversion; Reorganization		25
	4.	Reclassification of the Trust		26
	5.	Principal Holder Transactions		26
	6.	Master Feeder Structure		26
	7.	Absence of Appraisal or Dissenters’ Rights		27

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IX.	AMENDMENTS		27
	1.	Amendments Generally	27
	2.	Special Amendments	27
X.	MISCELLANEOUS		27
	1.	References; Headings; Counterparts	27
	2.	Applicable Law	27
	3.	Provisions in Conflict with Law or Regulations	27
	4.	Statutory Trust Only	28
	5.	Use of the Names “Franklin,” “Templeton,” “Fiduciary Trust,” and/or “Institutional Fiduciary Trust”	28

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SECOND AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST

OF

FRANKLIN MUTUAL RECOVERY FUND

     THIS SECOND AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST is made as of this _______ day of _________________, 2007, by the Trustees hereunder, and by the holders of Shares issued or to be issued by Franklin Mutual Recovery Fund (the “Trust”) hereunder, and (i) incorporates herein and makes a part of this Second Amended and Restated Agreement and Declaration of Trust the resolutions of the Board of Trustees of the Trust adopted prior to the dates set forth above, pursuant to Article III, Section 6 of the Amended and Restated Agreement and Declaration of Trust dated May 8, 2003, as amended or restated to date (the “A&R Declaration”), regarding the establishment and designation of Series and/or Classes of the Shares of the Trust, and any amendments or modifications to such resolutions adopted through the date hereof, as of the date of the adoption of each such resolution, and (ii) amends and restates the A&R Declaration pursuant to Article IX of such A&R Declaration, as hereinafter provided.

WITNESSETH:

     WHEREAS the Trust was formed on February 4, 2003 by the filing of a Certificate of Trust with the office of the Secretary of State of the State of Delaware pursuant to an Agreement and Declaration of Trust, dated as of January 31, 2003 (the “Original Declaration”);

WHEREAS the Original Declaration was replaced by the A&R Declaration;

WHEREAS the Trust was formed to carry on the business of a closed-end management investment company as defined in the 1940 Act;

WHEREAS the Trust is authorized to divide its Shares into two or more Classes, to issue its Shares in separate Series, to divide Shares of any Series into two or more Classes and to issue Classes of the Trust or the Series, if any, all in accordance with the provisions hereinafter set forth;

WHEREAS the Trustees have agreed to manage all property coming into their hands as trustees of a Delaware statutory trust in accordance with the provisions of the Delaware Statutory Trust Act, as amended from time to time, and the provisions hereinafter set forth;

WHEREAS the Board of Trustees desires to clarify certain provisions in the A&R Declaration; and

WHEREAS pursuant to the provisions of the A&R Declaration, the Board of Trustees desires to amend and restate the A&R Declaration in the manner hereinafter set forth.

NOW, THEREFORE, the Trustees hereby declare that:

(i) the A&R Declaration is amended and restated in its entirety in the manner hereinafter set forth;

     (ii) the Trustees will hold all cash, securities and other assets that they may from time to time acquire in any manner as Trustees hereunder IN TRUST and will manage and dispose of the same upon the following terms and conditions for the benefit of the holders from time to time of Shares created hereunder as hereinafter set forth; and

(iii) this Declaration of Trust and the By-Laws shall be binding in accordance with their terms on every Trustee, by virtue of having become a Trustee of the Trust, and on every Shareholder, by virtue of having become a Shareholder of the Trust, pursuant to the terms of the A&R Declaration and/or this Declaration of Trust and the By-Laws.

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I.

NAME; OFFICES; REGISTERED AGENT; DEFINITIONS

     1. Name. This Trust shall be known as “Franklin Mutual Recovery Fund” and the Board of Trustees shall conduct the business of the Trust under that name, or any other name as it may from time to time designate.

     2. Offices of the Trust. The Board may at any time establish offices of the Trust at any place or places where the Trust intends to do business.

     3. Registered Agent and Registered Office. The name of the registered agent of the Trust and the address of the registered office of the Trust are as set forth in the Trust’s Certificate of Trust.

4. Definitions. Whenever used herein, unless otherwise required by the context or specifically provided:

(a) “1940 Act” shall mean the Investment Company Act of 1940 and the rules and regulations thereunder, all as adopted or amended from time to time;

          (b) “Affiliate” shall have the same meaning as “affiliated person” as such term is defined in the 1940 Act when used with reference to a specified Person, as defined below.

          (c) “Board of Trustees” or “Board” shall mean the governing body of the Trust, that is comprised of the number of Trustees of the Trust fixed from time to time pursuant to Article IV hereof, having the powers and duties set forth herein;

          (d) “By-Laws” shall mean By-Laws of the Trust, as amended or restated from time to time in accordance with Article VIII therein. Such By-Laws may contain any provision not inconsistent with applicable law or this Declaration of Trust, relating to the governance of the Trust;

          (e) “Certificate of Trust” shall mean the certificate of trust of the Trust filed on February 4, 2003 with the office of the Secretary of State of the State of Delaware as required under the Delaware Statutory Trust Act, as such certificate has been or shall be amended or restated from time to time;

          (f) “Class” shall mean each class of Shares of the Trust or of a Series of the Trust established and designated under and in accordance with the provisions of Article III hereof or Article III, Section 6 of the A&R Declaration;

          (g) “Code” shall mean the Internal Revenue Code of 1986 and the rules and regulations thereunder, all as adopted or amended from time to time;

          (h) “Commission” shall have the meaning given that term in the 1940 Act; 

          (i) “DSTA” shall mean the Delaware Statutory Trust Act (12 Del. C. § 3801, et seq.), as amended from time to time;

          (j) “Declaration of Trust” shall mean this Second Amended and Restated Agreement and Declaration of Trust, including resolutions of the Board of Trustees of the Trust that have been adopted prior to the date of this document, or that may be adopted hereafter, regarding the establishment and designation of Series and/or Classes of Shares of the Trust, and any amendments or modifications to such resolutions, as of the date of the adoption of each such resolution;

          (k) “General Liabilities” shall have the meaning given it in Article III, Section 6(b) of this Declaration of Trust;

          (l) “Interested Person” shall have the meaning given that term in the 1940 Act;

          (m) “Investment Adviser” or “Adviser” shall mean a Person, as defined below, furnishing services to the Trust pursuant to any investment advisory or investment management contract described in Article IV, Section 7(a) hereof;

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          (n) “National Financial Emergency” shall mean the whole or any part of any period during (i) which an emergency exists as a result of which disposal by the Trust of securities or other assets owned by the Trust is not reasonably practicable; (ii) which it is not reasonably practicable for the Trust fairly to determine the net asset value of its assets; or (iii) such other period as the Commission may by order permit for the protection of investors;

          (o) “Person” shall mean a natural person, partnership, limited partnership, limited liability company, trust, estate, association, corporation, organization, custodian, nominee or any other individual or entity in its own or any representative capacity, in each case, whether domestic or foreign, and a statutory trust or a foreign statutory or business trust;

          (p) “Principal Underwriter” shall have the meaning given that term in the 1940 Act;

          (q) “Series” shall mean each Series of Shares established and designated under and in accordance with the provisions of Article III hereof, or in accordance with the applicable provisions of the Original Declaration and the A&R Declaration;

          (r) “Shares” shall mean the transferable shares of beneficial interest into which the beneficial interest in the Trust have been or shall be divided from time to time, and shall include fractional and whole Shares;

          (s) “Shareholder” shall mean a record owner of Shares pursuant to the By-Laws;

          (t) “Trust” shall mean Franklin Mutual Recovery Fund, the Delaware statutory trust formed under the Original Declaration and by filing of the Certificate of Trust with the office of the Secretary of State of the State of Delaware;

          (u) “Trust Property” shall mean any and all property, real or personal, tangible or intangible, which is owned or held by or for the account of the Trust, or one or more of any Series thereof, including, without limitation, the rights referenced in Article X, Section 5 hereof;

          (v) “Trustee” or “Trustees” shall mean each Person who signs this Declaration of Trust as a trustee and all other Persons who may, from time to time, be duly elected or appointed, qualified and serving on the Board of Trustees in accordance with the provisions hereof and the By-Laws, so long as such signatory or other Person continues in office in accordance with the terms hereof and the By-Laws. Reference herein to a Trustee or the Trustees shall refer to such Person or Persons in such Person’s or Persons’ capacity as a trustee or trustees hereunder and under the By-Laws; and

          (w) “vote of a majority of the outstanding voting securities” shall have the meaning provided under Subsection 2(a)(42) of the 1940 Act or any successor provision thereof, which Subsection, as of the date hereof, is as follows: the vote, at a meeting of the Shareholders, (i) of sixty-seven percent (67%) or more of the voting securities present in person or represented by proxy at such meeting, if the holders of more than fifty percent (50%) of the outstanding voting securities of the Trust are present or represented by proxy; or (ii) of more than fifty percent (50%) of the outstanding voting securities of the Trust, whichever is the less.

II.

PURPOSE OF TRUST

     The purpose of the Trust is to conduct, operate and carry on the business of a registered management investment company registered under the 1940 Act, directly, or if one or more Series is established hereunder, through one or more Series, investing primarily in securities, and to exercise all of the powers, rights and privileges granted to, or conferred upon, a statutory trust formed under the DSTA, including, without limitation, the following powers:

          (a) To hold, invest and reinvest its funds, and in connection therewith, to make any changes in the investment of the assets of the Trust, to hold part or all of its funds in cash, to hold cash uninvested, to subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold, pledge, sell, assign, mortgage, transfer, exchange, distribute, write options on, lend or otherwise deal in or dispose of contracts for the

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future acquisition or delivery of fixed income or other securities, and securities or property of every nature and kind, including, without limitation, all types of bonds, debentures, stocks, shares, units of beneficial interest, preferred stocks, negotiable or non-negotiable instruments, obligations, evidences of indebtedness, money market instruments, certificates of deposit or indebtedness, bills, notes, mortgages, commercial paper, repurchase or reverse repurchase agreements, bankers’ acceptances, finance paper, and any options, certificates, receipts, warrants, futures contracts or other instruments representing rights to receive, purchase or subscribe for the same, or evidencing or representing any other rights or interests therein or in any property or assets, and other securities of any kind, as the foregoing are issued, created, guaranteed, or sponsored by any and all Persons, including, without limitation, states, territories, and possessions of the United States and the District of Columbia and any political subdivision, agency, or instrumentality thereof, any foreign government or any political subdivision of the U.S. Government or any foreign government, or any international instrumentality, or by any bank or savings institution, or by any corporation or organization organized under the laws of the United States or of any state, territory, or possession thereof, or by any corporation or organization organized under any foreign law, or in “when issued” contracts for any such securities;

(b) To exercise any and all rights, powers and privileges with reference to or incident to ownership or interest, use and enjoyment of any of such securities and other instruments or property of every kind and description, including, but without limitation, the right, power and privilege to own, vote, hold, purchase, sell, negotiate, assign, exchange, lend, transfer, mortgage, hypothecate, lease, pledge or write options with respect to or otherwise deal with, dispose of, use, exercise or enjoy any rights, title, interest, powers or privileges under or with reference to any of such securities and other instruments or property, the right to consent and otherwise act with respect thereto, with power to designate one or more Persons, to exercise any of said rights, powers, and privileges in respect of any of said instruments, and to do any and all acts and things for the preservation, protection, improvement and enhancement in value of any of such securities and other instruments or property;

          (c) To sell, exchange, lend, pledge, mortgage, hypothecate, lease or write options with respect to or otherwise deal in any property rights relating to any or all of the assets of the Trust or any Series, subject to any requirements of the 1940 Act;

          (d) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property; and to execute and deliver proxies or powers of attorney to such Person or Persons as the Trustees shall deem proper, granting to such Person or Persons such power and discretion with relation to securities or property as the Trustees shall deem proper;

          (e) To exercise powers and right of subscription or otherwise which in any manner arise out of ownership of securities and/or other property;

          (f) To hold any security or property in a form not indicating that it is trust property, whether in bearer, unregistered or other negotiable form, or in its own name or in the name of a custodian or subcustodian or a nominee or nominees or otherwise or to authorize the custodian or a subcustodian or a nominee or nominees to deposit the same in a securities depository, subject in each case to proper safeguards according to the usual practice of investment companies or any rules or regulations applicable thereto;

          (g) To consent to, or participate in, any plan for the reorganization, consolidation or merger of any corporation or issuer of any security which is held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by such corporation or issuer; and to pay calls or subscriptions with respect to any security held in the Trust;

(h) To join with other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper;

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          (i) To compromise, arbitrate or otherwise adjust claims in favor of or against the Trust or any matter in controversy, including but not limited to claims for taxes;

          (j) To enter into joint ventures, general or limited partnerships and any other combinations or associations;

          (k) To endorse or guarantee the payment of any notes or other obligations of any Person; to make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof;

          (l) To purchase and pay for entirely out of Trust Property such insurance as the Board of Trustees may deem necessary or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust or payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, Investment Advisers, Principal Underwriters, or independent contractors of the Trust, individually against all claims and liabilities of every nature arising by reason of holding Shares, holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such Person as Trustee, officer, employee, agent, Investment Adviser, Principal Underwriter, or independent contractor, to the fullest extent permitted by this Declaration of Trust, the By-Laws and by applicable law;

          (m) To adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust;

          (n) To purchase or otherwise acquire, own, hold, sell, negotiate, exchange, assign, transfer, mortgage, pledge or otherwise deal with, dispose of, use, exercise or enjoy, property of all kinds;

          (o) To buy, sell, mortgage, encumber, hold, own, exchange, rent or otherwise acquire and dispose of, and to develop, improve, manage, subdivide, and generally to deal and trade in real property, improved and unimproved, and wheresoever situated; and to build, erect, construct, alter and maintain buildings, structures, and other improvements on real property;

          (p) To borrow or raise moneys for any of the purposes of the Trust, and to mortgage or pledge the whole or any part of the property and franchises of the Trust, real, personal, and mixed, tangible or intangible, and wheresoever situated;

          (q) To enter into, make and perform contracts and undertakings of every kind for any lawful purpose, without limit as to amount;

          (r) To issue, purchase, sell and transfer, re-acquire, hold, trade and deal in stocks, Shares, bonds, debentures and other securities, instruments or other property of the Trust, from time to time, to such extent as the Board of Trustees shall, consistent with the provisions of this Declaration of Trust, determine; and to re-acquire and repurchase, from time to time, its Shares or, if any, its bonds, debentures and other securities;

          (s) To engage in and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or otherwise, any actions, suits, proceedings, disputes, claims, and demands relating to the Trust, and out of the assets of the Trust to pay or to satisfy any debts, claims or expenses incurred in connection therewith, including those of litigation, and such power shall include without limitation the power of the Trustees or any appropriate committee thereof, in the exercise of their or its good faith business judgment, to dismiss any action, suit, proceeding, dispute, claim, or demand, derivative or otherwise, brought by any Person, including a Shareholder in the Shareholder’s own name or the name of the Trust, whether or not the Trust or any of the Trustees may be named individually therein or the subject matter arises by reason of business for or on behalf of the Trust;

          (t) To exercise and enjoy, in Delaware and in any other states, territories, districts and United States dependencies and in foreign countries, all of the foregoing powers, rights and privileges, and the enumeration of the foregoing powers shall not be deemed to exclude any powers, rights or privileges so granted or conferred; and

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          (u) In general, to carry on any other business in connection with or incidental to its trust purposes, to do everything necessary, suitable or proper for the accomplishment of such purposes or for the attainment of any object or the furtherance of any power hereinbefore set forth, either alone or in association with others, and to do every other act or thing incidental or appurtenant to, or growing out of, or connected with, its business or purposes, objects or powers.

     The Trust shall not be limited to investing in obligations maturing before the possible dissolution of the Trust or one or more of its Series. Neither the Trust nor the Board of Trustees shall be required to obtain any court order to deal with any assets of the Trust or take any other action hereunder.

     The foregoing clauses shall each be construed as purposes, objects and powers, and it is hereby expressly provided that the foregoing enumeration of specific purposes, objects and powers shall not be held to limit or restrict in any manner the powers of the Trust, and that they are in furtherance of, and in addition to, and not in limitation of, the general powers conferred upon the Trust by the DSTA and the other laws of the State of Delaware or otherwise; nor shall the enumeration of one thing be deemed to exclude another, although it be of like nature, not expressed.

III.

SHARES

1. Division of Beneficial Interest.

(a) The beneficial interest in the Trust shall be divided into Shares, each Share without a par value. The number of Shares in the Trust authorized under the Original Declaration, the A&R Declaration and hereunder, and of each Series and Class as may be established from time to time, is unlimited. The Board of Trustees may authorize the division of Shares into separate Classes of Shares and into separate and distinct Series of Shares and the division of any Series into separate Classes of Shares in accordance with the 1940 Act. As of the effective date of this Declaration of Trust, any new Series and Classes shall be established and designated pursuant to Article III, Section 6 hereof. If no separate Series or Classes of Series shall be established, the Shares shall have the rights, powers and duties provided for herein to the extent relevant and not otherwise provided for herein, and all references to Series and Classes shall be construed (as the context may require) to refer to the Trust.
	(i)	The fact that the Trust shall have one or more established and designated Classes of the Trust, shall not limit the authority of the Board of Trustees to establish and designate additional Classes of the Trust. The fact that one or more Classes of the Trust shall have initially been established and designated without any specific establishment or designation of a Series (i.e., that all Shares of the Trust are initially Shares of one or more Classes) shall not limit the authority of the Board of Trustees to later establish and designate a Series and establish and designate the Class or Classes of the Trust as Class or Classes, respectively, of such Series.
	(ii)	The fact that a Series shall have initially been established and designated without any specific establishment or designation of Classes (i.e., that all Shares of such Series are initially of a single Class) shall not limit the authority of the Board of Trustees to establish and designate separate Classes of said Series. The fact that a Series shall have more than one established and designated Class, shall not limit the authority of the Board of Trustees to establish and designate additional Classes of said Series.
(b) The Board of Trustees shall have the power to issue authorized, but unissued Shares of beneficial interest of the Trust, or any Series and Class thereof, from time to time for such consideration paid wholly or partly in cash, securities or other property, as may be determined from time to time by the Board of Trustees, subject to any requirements or limitations of the 1940 Act. The Board of Trustees, on behalf of the Trust, may acquire and hold as treasury shares, reissue for such consideration and on such terms as it may determine, or cancel, at its discretion from time to time, any Shares reacquired by the Trust. The Board of Trustees may classify or reclassify any unissued Shares of beneficial interest or any Shares of beneficial

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interest of the Trust or any Series or Class thereof, that were previously issued and are reacquired, into one or more Series or Classes that may be established and designated from time to time. Notwithstanding the foregoing, the Trust and any Series thereof may acquire, hold, sell and otherwise deal in, for purposes of investment or otherwise, the Shares of any other Series of the Trust or Shares of the Trust, and such Shares shall not be deemed treasury shares or cancelled.

          (c) Subject to the provisions of Section 6 of this Article III, each Share shall entitle the holder to voting rights as provided in Article V hereof. Shareholders shall have no preemptive or other right to subscribe for new or additional authorized, but unissued Shares or other securities issued by the Trust or any Series thereof. The Board of Trustees may from time to time divide or combine the Shares of the Trust or any particular Series thereof into a greater or lesser number of Shares of the Trust or that Series, respectively. Such division or combination shall not materially change the proportionate beneficial interests of the holders of Shares of the Trust or that Series, as the case may be, in the Trust Property at the time of such division or combination that is held with respect to the Trust or that Series, as the case may be.

          (d) Any Trustee, officer or other agent of the Trust, and any organization in which any such Person has an economic or other interest, may acquire, own, hold and dispose of Shares of beneficial interest in the Trust or any Series and Class thereof, whether such Shares are authorized but unissued, or already outstanding, to the same extent as if such Person were not a Trustee, officer or other agent of the Trust; and the Trust or any Series may issue and sell and may purchase such Shares from any such Person or any such organization, subject to the limitations, restrictions or other provisions applicable to the sale or purchase of such Shares herein and the 1940 Act.

2. Ownership of Shares. The ownership of Shares shall be recorded on the books of the Trust kept by the Trust or by a transfer or similar agent for the Trust, which books shall be maintained separately for the Shares of the Trust and each Series and each Class thereof that has been established and designated. No certificates certifying the ownership of Shares shall be issued except as the Board of Trustees may otherwise determine from time to time. The Board of Trustees may make such rules not inconsistent with the provisions of the 1940 Act as it considers appropriate for the issuance of Share certificates, the transfer of Shares of the Trust and each Series and Class thereof, if any, and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent, as the case may be, shall be conclusive as to who are the Shareholders of the Trust and each Series and Class thereof and as to the number of Shares of the Trust and each Series and Class thereof held from time to time by each such Shareholder.

3. Sale of Shares. Subject to the 1940 Act and applicable law, the Trust may sell its authorized but unissued Shares of beneficial interest to such Persons, at such times, on such terms, and for such consideration as the Board of Trustees may from time to time authorize. Each sale shall be credited to the individual purchaser’s account in the form of full or fractional Shares of the Trust or such Series thereof (and Class thereof, if any), as the purchaser may select, at the net asset value per Share, subject to Section 22 of the 1940 Act, and the rules and regulations adopted thereunder; provided, however, that the Board of Trustees may, in its sole discretion, permit the Principal Underwriter to impose a sales charge upon any such sale. Every Shareholder by virtue of having become a Shareholder shall be deemed to have expressly assented and agreed to the terms of this Declaration of Trust and to have become bound as a party hereto.

     4. Status of Shares and Limitation of Personal Liability. Shares shall be deemed to be personal property giving to Shareholders only the rights provided in this Declaration of Trust, the By-Laws, and under applicable law. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust Property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders as partners. Subject to Article VIII, Section 2 hereof, the death, incapacity, dissolution, termination, or bankruptcy of a Shareholder during the existence of the Trust and any Series thereof shall not operate to dissolve the Trust or any such Series, nor entitle the representative of any deceased, incapacitated, dissolved, terminated or bankrupt Shareholder to an accounting or to take any action in court or elsewhere against the Trust, the Trustees or any such Series, but entitles such representative only to the rights of said deceased, incapacitated, dissolved, terminated or bankrupt Shareholder under this Declaration of Trust. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust, shall have any power to bind personally any Shareholder, nor, except as specifically provided herein, to call upon any Shareholder for the payment of any sum

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of money other than such as the Shareholder may at any time personally agree to pay. Each Share, when issued on the terms determined by the Board of Trustees, shall be fully paid and nonassessable. As provided in the DSTA, Shareholders shall be entitled to the same limitation of personal liability as that extended to stockholders of a private corporation organized for profit under the General Corporation Law of the State of Delaware.

     5. Power of Board of Trustees to Make Tax Status Election. The Board of Trustees shall have the power, in its discretion, to make such elections as to the tax status of the Trust and any Series as may be permitted or required under the Code, without the vote of any Shareholder.

     6. Establishment and Designation of Series and Classes. The establishment and designation of any Series or Class shall be effective, without the requirement of Shareholder approval, upon the adoption of a resolution by not less than a majority of the then Board of Trustees, which resolution shall set forth such establishment and designation and may provide, to the extent permitted by the DSTA, for rights, powers and duties of such Series or Class (including variations in the relative rights and preferences as between the different Series and Classes) otherwise than as provided herein. Each such resolution shall be incorporated herein upon adoption, and the resolutions that have been adopted prior to _____, 2007 regarding the establishment and designation of Series and/or Classes of Shares of the Trust pursuant to Article III, Section 6 of the A&R Declaration and/or the applicable provisions of the Original Declaration, and any amendments or modifications to such resolutions through the date hereof, are hereby incorporated herein as of the date of their adoption. Any such resolution may be amended by a further resolution of a majority of the Board of Trustees, and if Shareholder approval would be required to make such an amendment to the language set forth in this Declaration of Trust, such further resolution shall require the same Shareholder approval that would be necessary to make such amendment to the language set forth in this Declaration of Trust. Each such further resolution shall be incorporated herein by reference upon adoption.

     Each Series shall be separate and distinct from any other Series, separate and distinct records on the books of the Trust shall be maintained for each Series, and the assets and liabilities belonging to any such Series shall be held and accounted for separately from the assets and liabilities of the Trust or any other Series. Each Class of the Trust shall be separate and distinct from any other Class of the Trust. Each Class of a Series shall be separate and distinct from any other Class of the Series. As appropriate, in a manner determined by the Board of Trustees, the liabilities belonging to any such Class shall be held and accounted for separately from the liabilities of the Trust, the Series or any other Class and separate and distinct records on the books of the Trust for the Class shall be maintained for this purpose. Subject to Article II hereof, each such Series shall operate as a separate and distinct investment medium, with separately defined investment objectives and policies.

     Shares of each Series (and Class where applicable) established and designated pursuant to this Section 6, Article III, Section 6 of the A&R Declaration or the applicable provisions of the Original Declaration shall have the following rights, powers and duties, unless otherwise provided to the extent permitted by the DSTA, in the resolution establishing and designating such Series or Class:

          (a) Assets Held with Respect to a Particular Series. All consideration received by the Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof from whatever source derived, including, without limitation, any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably be held with respect to that Series for all purposes, subject only to the rights of creditors with respect to that Series, and shall be so recorded upon the books of account of the Trust. Such consideration, assets, income, earnings, profits and proceeds thereof, from whatever source derived, including, without limitation, any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds, in whatever form the same may be, are herein referred to as “assets held with respect to” that Series. In the event that there are any assets, income, earnings, profits and proceeds thereof, funds or payments which are not readily identifiable as assets held with respect to any particular Series (collectively “General Assets”), the Board of Trustees, or an appropriate officer as determined by the Board of Trustees, shall allocate such General Assets to, between or among any one or more of the Series in such manner and on such basis as the Board of Trustees, in its sole discretion, deems

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fair and equitable, and any General Asset so allocated to a particular Series shall be held with respect to that Series. Each such allocation by or under the direction of the Board of Trustees shall be conclusive and binding upon the Shareholders of all Series for all purposes.

          (b) Liabilities Held with Respect to a Particular Series or Class. The assets of the Trust held with respect to a particular Series shall be charged with the liabilities, debts, obligations, costs, charges, reserves and expenses of the Trust incurred, contracted for or otherwise existing with respect to such Series. Such liabilities, debts, obligations, costs, charges, reserves and expenses incurred, contracted for or otherwise existing with respect to a particular Series are herein referred to as “liabilities held with respect to” that Series. Any liabilities, debts, obligations, costs, charges, reserves and expenses of the Trust which are not readily identifiable as being liabilities held with respect to any particular Series (collectively “General Liabilities”) shall be allocated by the Board of Trustees, or an appropriate officer as determined by the Board of Trustees, to and among any one or more of the Series in such manner and on such basis as the Board of Trustees in its sole discretion deems fair and equitable. Each allocation of liabilities, debts, obligations, costs, charges, reserves and expenses by or under the direction of the Board of Trustees shall be conclusive and binding upon the Shareholders of all Series for all purposes. All Persons who have extended credit that has been allocated to a particular Series, or who have a claim or contract that has been allocated to any particular Series, shall look exclusively to the assets of that particular Series for payment of such credit, claim, or contract. In the absence of an express contractual agreement so limiting the claims of such creditors, claimants and contract providers, each creditor, claimant and contract provider shall be deemed nevertheless to have impliedly agreed to such limitation.

     Subject to the right of the Board of Trustees in its discretion to allocate General Liabilities as provided herein, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Series, whether such Series is now authorized and existing pursuant to the Original Declaration or the A&R Declaration, or is hereafter authorized and existing pursuant to this Declaration of Trust, shall be enforceable against the assets held with respect to that Series only, and not against the assets of any other Series or the Trust generally and none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Trust generally or any other Series thereof shall be enforceable against the assets held with respect to such Series. Notice of this limitation on liabilities between and among Series has been set forth in the Certificate of Trust filed in the Office of the Secretary of State of the State of Delaware pursuant to the DSTA, and having given such notice in the Certificate of Trust, the statutory provisions of Section 3804 of the DSTA relating to limitations on liabilities between and among Series (and the statutory effect under Section 3804 of setting forth such notice in the Certificate of Trust) are applicable to the Trust and each Series.

     Liabilities, debts, obligations, costs, charges, reserves and expenses related to the distribution of, and other identified expenses that should or may properly be allocated to, the Shares of a particular Class may be charged to and borne solely by such Class. The bearing of expenses solely by a particular Class of Shares may be appropriately reflected (in a manner determined by the Board of Trustees) and may affect the net asset value attributable to, and the dividend, repurchase and liquidation rights of, such Class. Each allocation of liabilities, debts, obligations, costs, charges, reserves and expenses by or under the direction of the Board of Trustees shall be conclusive and binding upon the Shareholders of all Classes for all purposes. All Persons who have extended credit that has been allocated to a particular Class, or who have a claim or contract that has been allocated to any particular Class, shall look, and may be required by contract to look, exclusively to that particular Class for payment of such credit, claim, or contract.

          (c) Dividends, Distributions and Repurchases. Notwithstanding any other provisions of this Declaration of Trust, including, without limitation, Article VI hereof, no dividend or distribution including, without limitation, any distribution paid upon dissolution of the Trust or of any Series with respect to, nor any repurchase of, the Shares of any Series or Class of such Series shall be effected by the Trust other than from the assets held with respect to such Series, nor, except as specifically provided in Section 7 of this Article III, shall any Shareholder of any particular Series otherwise have any right or claim against the assets held with respect to any other Series or the Trust generally except, in the case of a right or claim against the assets held with respect to any other Series, to the extent that such Shareholder has such a right or claim hereunder

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as a Shareholder of such other Series. The Board of Trustees shall have full discretion, to the extent not inconsistent with the 1940 Act, to determine which items shall be treated as income and which items as capital; and each such determination and allocation shall be conclusive and binding upon the Shareholders.
(d)  Voting. All Shares of the Trust entitled to vote on a matter shall vote in the aggregate without differentiation between the Shares of the separate Series, if any, or separate Classes, if any; provided that (i) with respect to any matter that affects only the interests of some but not all Series, then only the Shares of such affected Series, voting separately, shall be entitled to vote on the matter, (ii) with respect to any matter that affects only the interests of some but not all Classes, then only the Shares of such affected Classes, voting separately, shall be entitled to vote on the matter; and (iii) notwithstanding the foregoing, with respect to any matter as to which the 1940 Act or other applicable law or regulation requires voting, by Series or by Class, then the Shares of the Trust shall vote as prescribed in such law or regulation.
(e)  Equality. Each Share of any particular Series shall be equal to each other Share of such Series (subject to the rights and preferences with respect to separate Classes of such Series).
(f)  Fractions. A fractional Share of a Series shall carry proportionately all the rights and obligations of a whole Share of such Series, including rights with respect to voting, receipt of dividends and distributions, repurchases of Shares and dissolution of the Trust or that Series.
(g)  Exchange Privilege. The Board of Trustees shall have the authority to provide that the holders of Shares of any Series shall have the right to exchange said Shares for Shares of one or more other Series in accordance with such requirements and procedures as may be established by the Board of Trustees, and in accordance with the 1940 Act.
(h)  Combination of Series or Classes.
	(i)	The Board of Trustees shall have the authority, without the approval, vote or consent of the Shareholders of any Series, unless otherwise required by applicable law, to combine the assets and liabilities held with respect to any two or more Series into assets and liabilities held with respect to a single Series; provided that upon completion of such combination of Series, the interest of each Shareholder, in the combined assets and liabilities held with respect to the combined Series shall equal the interest of each such Shareholder in the aggregate of the assets and liabilities held with respect to the Series that were combined.
	(ii)	The Board of Trustees shall have the authority, without the approval, vote or consent of the Shareholders of any Series or Class, unless otherwise required by applicable law, to combine, merge or otherwise consolidate the Shares of two or more Classes of Shares of a Series with and/or into a single Class of Shares of such Series, with such designation, preference, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, terms and conditions of repurchase and other characteristics as the Trustees may determine; provided, however, that the Trustees shall providewritten notice to the affected Shareholders of any such transaction.
	(iii)	The transactions in (i) and (ii) above may be effected through share-for-share exchanges, transfers or sales of assets, Shareholder in-kind repurchases and purchases, exchange offers, or any other method approved by the Trustees.
(i)  Dissolution or Termination. Any particular Series shall be dissolved upon the occurrence of the applicable dissolution events set forth in Article VIII, Section 1 hereof. Upon dissolution of a particular Series, the Trustees shall wind up the affairs of such Series in accordance with Article VIII, Section 1 hereof and thereafter, rescind the establishment and designation thereof. The Board of Trustees shall terminate any particular Class and rescind the establishment and designation thereof: (i) upon approval by a majority of votes cast at a meeting of the Shareholders of such Class, provided a quorum of Shareholders of such Class are present, or by action of the Shareholders of such Class by written consent without a meeting pursuant to Article V, Section 3; or (ii) at the discretion of the Board of Trustees either (A) at any time there are no Shares outstanding of such Class, or (B) upon prior written notice to the Shareholders of such Class; provided,

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however, that upon the rescission of the establishment and designation of any particular Series, every Class of such Series shall thereby be terminated and its establishment and designation rescinded. Each resolution of the Board of Trustees pursuant to this Section 6(i) shall be incorporated herein by reference upon adoption.

     7. Indemnification of Shareholders. No shareholder as such shall be subject to any personal liability whatsoever to any Person in connection with Trust Property or the acts, obligations or affairs of the Trust. If any Shareholder or former Shareholder shall be exposed to liability, charged with liability, or held personally liable, for any obligations or liability of the Trust, by reason of a claim or demand relating exclusively to his or her being or having been a Shareholder of the Trust or a Shareholder of a particular Series thereof, and not because of such Shareholder’s actions or omissions, such Shareholder or former Shareholder (or, in the case of a natural person, his or her heirs, executors, administrators, or other legal representatives or, in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified out of the assets of the Trust or out of the assets of such Series thereof, as the case may be, against all loss and expense, including without limitation, attorneys’ fees, arising from such claim or demand; provided, however, such indemnity shall not cover (i) any taxes due or paid by reason of such Shareholder’s ownership of any Shares and (ii) expenses charged to a Shareholder pursuant to Article IV, Section 5 hereof.

IV.

THE BOARD OF TRUSTEES

1. Number, Election, Term, Removal and Resignation.

          (a) In accordance with Section 3801 of the DSTA, each Trustee shall become a Trustee and be bound by this Declaration of Trust and the By-Laws when such Person signs this Declaration of Trust as a trustee and/or is duly elected or appointed, qualified and serving on the Board of Trustees in accordance with the provisions hereof and the By-Laws, so long as such signatory or other Person continues in office in accordance with the terms hereof.

          (b) The number of Trustees constituting the entire Board of Trustees may be fixed from time to time by the vote of a majority of the then Board of Trustees; provided, however, that the number of Trustees shall in no event be less than one (1) nor more than fifteen (15). The number of Trustees shall not be reduced so as to shorten the term of any Trustee then in office.

          (c) Each Trustee shall hold office for the lifetime of the Trust or until such Trustee’s earlier death, resignation, removal, retirement or inability otherwise to serve, or, if sooner than any of such events, until the next meeting of Shareholders called for the purpose of electing Trustees or consent of Shareholders in lieu thereof for the election of Trustees, and until the election and qualification of his or her successor.

          (d) Any Trustee may be removed, with or without cause, by the Board or Trustees, by action of a majority of the Trustees then in office, or by the Shareholders, upon the vote of the holders of 75% of the Shares entitled to vote.

          (e) Any Trustee may resign at any time by giving written notice to the secretary of the Trust or to a meeting of the Board of Trustees. Such resignation shall be effective upon receipt, unless specified to be effective at some later time.

     2. Trustee Action by Written Consent Without a Meeting. To the extent not inconsistent with the provisions of the 1940 Act, any action that may be taken at any meeting of the Board of Trustees or any committee thereof may be taken without a meeting and without prior written notice if a consent or consents in writing setting forth the action so taken is signed by the Trustees having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all Trustees on the Board of Trustees or any committee thereof, as the case may be, were present and voted. Written consents of the Trustees may be executed in one or more counterparts. A consent transmitted by electronic transmission (as defined in Section 3806 of the DSTA) by a Trustee shall be deemed to be written and signed for purposes of this Section. All such consents shall be filed with the secretary of the Trust and shall be maintained in the Trust’s records.

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3. Powers; Other Business Interests; Quorum and Required Vote.

          (a) Powers. Subject to the provisions of this Declaration of Trust, the business of the Trust (including every Series thereof) shall be managed by or under the direction of the Board of Trustees, and such Board of Trustees shall have all powers necessary or convenient to carry out that responsibility. The Board of Trustees shall have full power and authority to do any and all acts and to make and execute any and all contracts and instruments that it may consider necessary or appropriate in connection with the operation and administration of the Trust (including every Series thereof). The Board of Trustees shall not be bound or limited by present or future laws or customs with regard to investments by trustees or fiduciaries, but, subject to the other provisions of this Declaration of Trust and the By-Laws, shall have full authority and absolute power and control over the assets and the business of the Trust (including every Series thereof) to the same extent as if the Board of Trustees was the sole owner of such assets and business in its own right, including such authority, power and control to do all acts and things as it, in its sole discretion, shall deem proper to accomplish the purposes of this Trust. Without limiting the foregoing, the Board of Trustees may, subject to the requisite vote for such actions as set forth in this Declaration of Trust and the By-Laws: (1) adopt By-Laws not inconsistent with applicable law or this Declaration of Trust; (2) amend, restate and repeal such By-Laws, subject to and in accordance with the provisions of such By-Laws; (3) fill vacancies on the Board of Trustees in accordance with this Declaration of Trust and the By-Laws; (4) elect and remove such officers and appoint and terminate such agents as it considers appropriate, in accordance with this Declaration of Trust and the By-Laws; (5) establish and terminate one or more committees of the Board of Trustees pursuant to the By-Laws; (6) place Trust Property in custody as required by the 1940 Act, employ one or more custodians of the Trust Property and authorize such custodians to employ sub-custodians and to place all or any part of such Trust Property with a custodian or a custodial system meeting the requirements of the 1940 Act; (7) retain a transfer agent, dividend disbursing agent, a shareholder servicing agent or administrative services agent, or any number thereof or any other service provider as deemed appropriate; (8) provide for the issuance and distribution of shares of beneficial interest in the Trust or other securities or financial instruments directly or through one or more Principal Underwriters or otherwise; (9) retain one or more Investment Adviser(s); (10) repurchase Shares on behalf of the Trust and transfer Shares pursuant to applicable law; (11) set record dates for the determination of Shareholders with respect to various matters, in the manner provided in Article V, Section 4 of this Declaration of Trust; (12) declare and pay dividends and distributions to Shareholders from the Trust Property, in accordance with this Declaration of Trust and the By-Laws; (13) establish, designate and redesignate from time to time, in accordance with the provisions of Article III, Section 6 hereof, any Series or Class of the Trust or of a Series; (14) hire personnel as staff for the Board of Trustees or, for those Trustees who are not Interested Persons of the Trust, the Investment Adviser, or the Principal Underwriter, set the compensation to be paid by the Trust to such personnel, exercise exclusive supervision of such personnel, and remove one or more of such personnel, at the discretion of the Board of Trustees; (15) retain special counsel, other experts and/or consultants for the Board of Trustees, for those Trustees who are not Interested Persons of the Trust, the Investment Adviser, or the Principal Underwriter, and/or for one or more of the committees of the Board of Trustees, set the compensation to be paid by the Trust to such special counsel, other experts and/or consultants, and remove one or more of such special counsel, other experts and/or consultants, at the discretion of the Board of Trustees; (16) engage in and prosecute, defend, compromise, abandon, or adjust, by arbitration, or otherwise, any actions, suits, proceedings, disputes, claims, and demands relating to the Trust, and out of the assets of the Trust to pay or to satisfy any debts, claims or expenses incurred in connection therewith, including those of litigation, and such power shall include, without limitation, the power of the Trustees, or any appropriate committee thereof, in the exercise of their or its good faith business judgment, to dismiss any action, suit, proceeding, dispute, claim or demand, derivative or otherwise, brought by any person, including a shareholder in its own name or in the name of the Trust, whether or not the Trust or any of the Trustees may be named individually therein or the subject matter arises by reason of business for or on behalf of the Trust; and (17) in general delegate such authority as it considers desirable to any Trustee or officer of the Trust, to any committee of the Trust, to any agent or employee of the Trust or to any custodian, transfer, dividend disbursing, shareholder servicing agent, Principal Underwriter,  Investment Adviser, or other service provider.

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     The powers of the Board of Trustees set forth in this Section 3(a) are without prejudice to any other powers of the Board of Trustees set forth in this Declaration of Trust and the By-Laws. Any determination as to what is in the best interests of the Trust or any Series or Class thereof and its Shareholders made by the Board of Trustees in good faith shall be conclusive. In construing the provisions of this Declaration of Trust, the presumption shall be in favor of a grant of power to the Board of Trustees.

          (b) Other Business Interests. The Trustees shall devote to the affairs of the Trust (including every Series thereof) such time as may be necessary for the proper performance of their duties hereunder, but neither the Trustees nor the officers, directors, shareholders, partners or employees of the Trustees, if any, shall be expected to devote their full time to the performance of such duties. The Trustees, or any Affiliate, shareholder, officer, director, partner or employee thereof, or any Person owning a legal or beneficial interest therein, may engage in, or possess an interest in, any business or venture other than the Trust or any Series thereof, of any nature and description, independently or with or for the account of others. None of the Trust, any Series thereof or any Shareholder shall have the right to participate or share in such other business or venture or any profit or compensation derived therefrom.

          (c) Quorum and Required Vote. At all meetings of the Board of Trustees, a majority of the Board of Trustees then in office shall be present in person in order to constitute a quorum for the transaction of business. A meeting at which a quorum is initially present may continue to transact business notwithstanding the departure of Trustees from the meeting, if any action taken is approved by at least a majority of the required quorum for that meeting. Subject to Article III, Sections 1 and 6 of the By-Laws and except as otherwise provided herein or required by applicable law, the vote of not less than a majority of the Trustees present at a meeting at which a quorum is present shall be the act of the Board of Trustees.

     4. Payment of Expenses by the Trust. Subject to the provisions of Article III, Section 6 hereof, an authorized officer of the Trust shall pay or cause to be paid out of the principal or income of the Trust or any particular Series or Class thereof, or partly out of the principal and partly out of the income of the Trust or any particular Series or Class thereof, and charge or allocate the same to, between or among such one or more of the Series or Classes that may be established or designated pursuant to Article III, Section 6 hereof, as such officer deems fair, all expenses, fees, charges, taxes and liabilities incurred by or arising in connection with the maintenance or operation of the Trust or a particular Series or Class thereof, or in connection with the management thereof, including, but not limited to, the Trustees’ compensation and such expenses, fees, charges, taxes and liabilities associated with the services of the Trust’s officers, employees, Investment Adviser(s), Principal Underwriter, auditors, counsel, custodian, sub-custodian, transfer agent, dividend disbursing agent, shareholder servicing agent, and such other agents or independent contractors and such other expenses, fees, charges, taxes and liabilities as the Board of Trustees may deem necessary or proper to incur.

     5. Payment of Expenses by Shareholders. The Board of Trustees shall have the power, as frequently as it may determine, to cause any Shareholder to pay directly, in advance or arrears, an amount fixed from time to time by the Board of Trustees or an officer of the Trust for charges of the Trust’s custodian or transfer, dividend disbursing, shareholder servicing or similar agent which are not customarily charged generally to the Trust, a Series or a Class, where such services are provided to such Shareholder individually, rather than to all Shareholders collectively, by setting off such amount due from such Shareholder from the amount of (i) declared but unpaid dividends or distributions owed such Shareholder, or (ii) proceeds from the repurchase by the Trust of Shares from such Shareholder pursuant to Article VI hereof.

6. Ownership of Trust Property. Legal title to all of the Trust Property shall at all times be vested in the Trust, except that the Board of Trustees shall have the power to cause legal title to any Trust Property to be held by or in the name of any Person as nominee, on such terms as the Board of Trustees may determine, in accordance with applicable law.

7. Service Contracts.

(a) Subject to this Declaration of Trust, the By-Laws and the 1940 Act, the Board of Trustees may, at any time and from time to time, contract for exclusive or nonexclusive investment advisory or investment management services for the Trust or for any Series thereof with any corporation, trust, association or other organization, including any Affiliate; and any such contract may contain such other terms as the

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Board of Trustees may determine, including without limitation, delegation of authority to the Investment Adviser to determine from time to time without prior consultation with the Board of Trustees what securities and other instruments or property shall be purchased or otherwise acquired, owned, held, invested or reinvested in, sold, exchanged, transferred, mortgaged, pledged, assigned, negotiated, or otherwise dealt with or disposed of, and what portion, if any, of the Trust Property shall be held uninvested and to make changes in the Trust’s or a particular Series’ investments, or to engage in such other activities, including administrative services, as may specifically be delegated to such party.
(b) The Board of Trustees may also, at any time and from time to time, contract with any Person, including any Affiliate, appointing it or them as the exclusive or nonexclusive placement agent, distributor or Principal Underwriter for the Shares of beneficial interest of the Trust or one or more of the Series or Classes thereof, or for other securities or financial instruments to be issued by the Trust, or appointing it or them to act as the administrator, fund accountant or accounting agent, custodian, transfer agent, dividend disbursing agent and/or shareholder servicing agent for the Trust or one or more of the Series or Classes thereof.
(c) The Board of Trustees is further empowered, at any time and from time to time, to contract with any Persons, including any Affiliates, to provide such other services to the Trust or one or more of its Series, as the Board of Trustees determines to be in the best interests of the Trust, such Series and its Shareholders.
(d) None of the following facts or circumstances shall affect the validity of any of the contracts provided for in this Article IV, Section 7, or disqualify any Shareholder, Trustee, employee or officer of the Trust from voting upon or executing the same, or create any liability or accountability to the Trust, any Series thereof or the Shareholders, provided that the establishment of and performance of each such contract is permissible under the 1940 Act, and provided further that such Person is authorized to vote upon such contract under the 1940 Act:
	(i)	the fact that any of the Shareholders, Trustees, employees or officers of the Trust is a shareholder, director, officer, partner, trustee, employee, manager, Adviser, placement agent, Principal Underwriter, distributor, or Affiliate or agent of or for any Person, or for any parent or Affiliate of any Person, with which any type of service contract provided for in this Article IV, Section 7 may have been or may hereafter be made, or that any such Person, or any parent or Affiliate thereof, is a Shareholder or has an interest in the Trust, or
	(ii)	the fact that any Person with which any type of service contract provided for in this Article IV, Section 7 may have been or may hereafter be made also has such a service contract with one or more other Persons, or has other business or interests.
(e) Every contract referred to in this Section 7 is required to comply with this Declaration of Trust, the By-Laws, the 1940 Act, other applicable law and any stipulation by resolution of the Board of Trustees.

V.

SHAREHOLDERS’ VOTING POWERS AND MEETINGS

     1. Voting Powers. Subject to the provisions of Article III, Section 6 hereof, the Shareholders shall have the power to vote only (i) on such matters required by this Declaration of Trust, the By-Laws, the 1940 Act, other applicable law and any registration statement of the Trust filed with the Commission, the registration of which is effective; and (ii) on such other matters as the Board of Trustees may consider necessary or desirable. Subject to Article III hereof, the Shareholder of record (as of the record date established pursuant to Section 4 of this Article V) of each Share shall be entitled to one vote for each full Share, and a fractional vote for each fractional Share. Shareholders shall not be entitled to cumulative voting in the election of Trustees or on any other matter.

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2. Quorum and Required Vote.

     (a) A majority of the Shares entitled to vote at a Shareholders’ meeting, which are present in person or represented by proxy, shall constitute a quorum at the Shareholders’ meeting, except when a larger quorum is required by applicable law or the requirements of any securities exchange on which Shares are listed for trading, in which case such quorum shall comply with such requirements. When a separate vote by one or more Series or Classes is required, a majority of the Shares of each such Series or Class entitled to vote at a Shareholders’ meeting of such Series or Class, which are present in person or represented by proxy, shall constitute a quorum at the Shareholders’ meeting of such Series or Class, except when a larger quorum is required by applicable law or the requirements of any securities exchange on which Shares of such Series or Class are listed for trading, in which case such quorum shall comply with such requirements.

     (b) Subject to any provision of this Declaration of Trust, the By-Laws, the 1940 Act or other applicable law that requires a different vote: (1) in all matters other than the election of Trustees, the affirmative “vote of a majority of the outstanding voting securities” (as defined herein) of the Trust entitled to vote at a Shareholders’ meeting at which a quorum is present, shall be the act of the Shareholders; and (2) Trustees shall be elected by not less than a plurality of the votes cast of the holders of Shares entitled to vote present in person or represented by proxy at a Shareholders’ meeting at which a quorum is present. Pursuant to Article III, Section 7(d) hereof, where a separate vote by Series and, if applicable, by Classes is required, the preceding sentence shall apply to such separate votes by Series and Classes.

     (c) Abstentions and broker non-votes will be treated as votes present at a Shareholders’ meeting; abstentions and broker non-votes will not be treated as votes cast at such meeting. Abstentions and broker non-votes, therefore (i) will be included for purposes of determining whether a quorum is present; and (ii) will have no effect on proposals that require a plurality for approval, or on proposals requiring an affirmative vote of a majority of votes cast for approval.

     3. Shareholder Action by Written Consent Without a Meeting. Any action which may be taken at any meeting of Shareholders may be taken without a meeting if a consent or consents in writing setting forth the action so taken is or are signed by the holders of a majority of the Shares entitled to vote on such action (or such different proportion thereof as shall be required by law, the Declaration of Trust or the By-Laws for approval of such action) and is or are received by the secretary of the Trust either: (i) by the date set by resolution of the Board of Trustees for the shareholder vote on such action; or (ii) if no date is set by resolution of the Board, within 30 days after the record date for such action as determined by reference to Article V, Section 4(b) hereof. The written consent for any such action may be executed in one or more counterparts, each of which shall be deemed an original, and all of which when taken together shall constitute one and the same instrument. A consent transmitted by electronic transmission (as defined in the DSTA) by a Shareholder or by a Person or Persons authorized to act for a Shareholder shall be deemed to be written and signed for purposes of this Section. All such consents shall be filed with the secretary of the Trust and shall be maintained in the Trust’s records. Any Shareholder that has given a written consent or the Shareholder’s proxyholder or a personal representative of the Shareholder or its respective proxyholder may revoke the consent by a writing received by the secretary of the Trust either: (i) before the date set by resolution of the Board of Trustees for the shareholder vote on such action; or (ii) if no date is set by resolution of the Board, within 30 days after the record date for such action as determined by reference to Article V, Section 4(b) hereof.

4. Record Dates.

     (a) For purposes of determining the Shareholders entitled to notice of, and to vote at, any meeting of Shareholders, the Board of Trustees may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Trustees, and which record date shall not be more than one hundred and twenty (120) days nor less than ten (10) days before the date of any such meeting. A determination of Shareholders of record entitled to notice of or to vote at a meeting of Shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Trustees may fix a new record date for the adjourned meeting and shall fix a new record date for any meeting that is adjourned for more than sixty (60) days from the date set for the original meeting. For purposes of determining the Shareholders entitled to vote on any action without a meeting, the Board of Trustees may fix

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a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Trustees, and which record date shall not be more than thirty (30) days after the date upon which the resolution fixing the record date is adopted by the Board of Trustees.

(b) If the Board of Trustees does not so fix a record date:

(i)

the record date for determining Shareholders entitled to notice of, and to vote at, a meeting of Shareholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

(ii)

the record date for determining Shareholders entitled to vote on any action by consent in writing without a meeting of Shareholders, (1) when no prior action by the Board of Trustees has been taken, shall be the day on which the first signed written consent setting forth the action taken is delivered to the Trust, or (2) when prior action of the Board of Trustees has been taken, shall be at the close of business on the day on which the Board of Trustees adopts the resolution taking such prior action.

      (c) For the purpose of determining the Shareholders of the Trust or any Series or Class thereof who are entitled to receive payment of any dividend or of any other distribution of assets of the Trust or any Series or Class thereof (other than in connection with a dissolution of the Trust or a Series, a merger, consolidation, conversion, reorganization, or any other transactions, in each case that is governed by Article VIII of the Declaration of Trust), the Board of Trustees may:

(i)	from time to time fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than sixty (60) days before the date for the payment of such dividend and/or such other distribution;
(ii)	adopt standing resolutions fixing record dates and related payment dates at periodic intervals of any duration for the payment of such dividend and/or such other distribution; and/or
(iii)	delegate to an appropriate officer or officers of the Trust the determination of such periodic record and/or payments dates with respect to such dividend and/or such other distribution.

Nothing in this Section shall be construed as precluding the Board of Trustees from setting different record dates for different Series or Classes.

     5. Additional Provisions. The By-Laws may include further provisions for Shareholders’ votes, meetings and related matters.

VI.

NET ASSET VALUE; DISTRIBUTIONS;
REPURCHASES; TRANSFERS

1. Determination of Net Asset Value, Net Income and Distributions.

           (a) Subject to Article III, Section 6 hereof, the Board of Trustees shall have the power to determine from time to time the offering price for authorized, but unissued, Shares of beneficial interest of the Trust or any Series or Class thereof, respectively, that shall yield to the Trust or such Series or Class not less than the net asset value thereof, in addition to any amount of applicable sales charge to be paid to the Principal Underwriter or the selling broker or dealer in connection with the sale of such Shares, at which price the Shares of the Trust or such Series or Class, respectively, shall be offered for sale, subject to any other requirements or limitations of the 1940 Act.

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      (b) Subject to Article III, Section 6 hereof, the Board of Trustees may, subject to the 1940 Act, prescribe and shall set forth in the By-Laws, this Declaration of Trust or in a resolution of the Board of Trustees such bases and time for determining the net asset value per Share of the Trust or any Series or Class thereof, or net income attributable to the Shares of the Trust or any Series or Class thereof or the declaration and payment of dividends and distributions on the Shares of the Trust or any Series or Class thereof, as it may deem necessary or desirable, and such dividends and distributions may vary between the Classes to reflect differing allocations of the expenses of the Trust between such Classes to such extent and for such purposes as the Trustees may deem appropriate.

      (c) The Shareholders of the Trust or any Series or Class, if any, shall be entitled to receive dividends and distributions, when, if and as declared by the Board of Trustees with respect thereto, provided that with respect to Classes, such dividends and distributions shall comply with the 1940 Act. The right of Shareholders to receive dividends or other distributions on Shares of any Class may be set forth in a plan adopted by the Board of Trustees and amended from time to time pursuant to the 1940 Act. No Share shall have any priority or preference over any other Share of the Trust with respect to dividends or distributions paid in the ordinary course of business or distributions upon dissolution of the Trust made pursuant to Article VIII, Section 1 hereof; provided however, that

(i)	if the Shares of the Trust are divided into Series thereof, no Share of a particular Series shall have any priority or preference over any other Share of the same Series with respect to dividends or distributions paid in the ordinary course of business or distributions upon dissolution of the Trust or of such Series made pursuant to Article VIII, Section 1 hereof;
(ii)	if the Shares of the Trust are divided into Classes thereof, no Share of a particular Class shall have any priority or preference over any other Share of the same Class with respect to dividends or distributions paid in the ordinary course of business or distributions upon dissolution of the Trust made pursuant to Article VIII, Section 1 hereof; and
(iii)	if the Shares of a Series are divided into Classes thereof, no Share of a particular Class of such Series shall have any priority or preference over any other Share of the same Class of such Series with respect to dividends or distributions paid in the ordinary course of business or distributions upon dissolution of such Series made pursuant to Article VIII, Section 1 hereof.

All dividends and distributions shall be made ratably among all Shareholders of the Trust, a particular Class of the Trust, a particular Series, or a particular Class of a Series from the Trust Property held with respect to the Trust, such Series or such Class, respectively, according to the number of Shares of the Trust, such Series or such Class held of record by such Shareholders on the record date for any dividend or distribution; provided however, that

(iv)

if the Shares of the Trust are divided into Series thereof, all dividends and distributions from the Trust Property and, if applicable, held with respect to such Series, shall be distributed to each Series thereof according to the net asset value computed for such Series and within such particular Series, shall be distributed ratably to the Shareholders of such Series according to the number of Shares of such Series held of record by such Shareholders on the record date for any dividend or distribution; and

(v)

if the Shares of the Trust or of a Series are divided into Classes thereof, all dividends and distributions from the Trust Property and, if applicable, held with respect to the Trust or such Series, shall be distributed to each Class thereof according to the net asset value computed for such Class and within such particular Class, shall be distributed

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ratably to the Shareholders of such Class according to the number of Shares of such Class held of record by such Shareholders on the record date for any dividend or distribution. 

Dividends and distributions may be paid in cash, in kind or in Shares.

      (d) Before payment of any dividend there may be set aside out of any funds of the Trust, or the applicable Series thereof, available for dividends such sum or sums as the Board of Trustees may from time to time, in its absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Trust, or any Series thereof, or for such other lawful purpose as the Board of Trustees shall deem to be in the best interests of the Trust, or the applicable Series, as the case may be, and the Board of Trustees may abolish any such reserve in the manner in which the reserve was created.

2. Repurchase of Shares With Shareholder Consent.

      (a) The Trust may repurchase Shares on the open market or such Shares as are tendered by any Shareholder for repurchase pursuant to a repurchase offer or tender offer, if any, made by the Trust periodically or from time to time, upon the presentation by the Shareholder of a proper instrument of transfer together with a request directed to the Trust, its transfer agent or other duly authorized agent, that the Trust repurchase such Shares, or in accordance with such other procedures for repurchase as the Board of Trustees may from time to time authorize; and the Trust will pay therefore a price that meets the requirements of Section 23 of the 1940 Act, and the rules and regulations adopted thereunder, and that is in accordance with the terms of such repurchase offer, tender offer, this Declaration of Trust, the By-Laws and other applicable law. The obligations of the Trust set forth in this Section 2 are subject to the provision that such obligations may be suspended or postponed under the circumstances provided in the 1940 Act or other applicable law, and such suspension or postponement may thereafter be terminated, by the Board of Trustees, by the vote required under the 1940 Act or other applicable law.

      (b) The repurchase price may in any case or cases be paid wholly or partly in kind if the Board of Trustees determines that such payment is advisable in the interest of the Trust or the applicable Series. Subject to the foregoing, the fair value, selection and quantity of securities or other property of the Trust or the applicable Series so paid or delivered as all or part of the repurchase price shall be determined by or under authority of the Board of Trustees. Subject to applicable law, the Trust or the applicable Series shall not be liable for any delay of any corporation or other Person in transferring securities or other property selected for delivery as all or part of any payment in kind.

     3. Repurchase of Shares Without Shareholder Consent. The Trust shall have the right at its option and at any time, subject to the 1940 Act and other applicable law, to repurchase Shares of any Shareholder at a price that meets the requirements of Section 23 of the 1940 Act, and the rules and regulations adopted thereunder, and that is in accordance with the terms of this Declaration of Trust, the By-Laws and other applicable law: (a) if at such time, such Shareholder owns Shares having an aggregate net asset value of less than an amount determined from time to time by the Trustees; or (b) to the extent that such Shareholder owns Shares equal to or in excess of a percentage of the Shares determined from time to time by the Trustees.

4. Transfer of Shares. Shares shall be transferable in accordance with the provisions of the By-Laws.

VII.

LIMITATION OF LIABILITY
AND INDEMNIFICATION OF AGENT

1. Limitation of Liability.

      (a) For the purpose of this Article, “Agent” means any Person who is or was a Trustee, officer, employee or other agent of the Trust or is or was serving at the request of the Trust as a trustee, director, officer, employee or other agent of another foreign or domestic corporation, partnership, joint venture, trust

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or other enterprise; “Proceeding” means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative; and “Expenses” include without limitation attorneys’ fees and any expenses of establishing a right to indemnification under this Article.

      (b) An Agent shall be liable to the Trust and to any Shareholder for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing, for such Agent’s own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Agent (such conduct referred to herein as “Disqualifying Conduct”), and for nothing else.

      (c) Subject to subsection (b) of this Section 1 and to the fullest extent that limitations on the liability of Agents are permitted by the DSTA, the Agents shall not be responsible or liable in any event for any act or omission of any other Agent of the Trust or any Investment Adviser or Principal Underwriter of the Trust.

      (d) No Agent, when acting in its respective capacity as such, shall be personally liable to any Person, other than the Trust or a Shareholder to the extent provided in subsections (b) and (c) of this Section 1, for any act, omission or obligation of the Trust or any Trustee thereof.

      (e) Each Trustee, officer and employee of the Trust shall, in the performance of his or her duties, be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel, or upon reports made to the Trust by any of its officers or employees or by the Investment Adviser, the Principal Underwriter, any other Agent, selected dealers, accountants, appraisers or other experts or consultants selected with reasonable care by the Trustees, officers or employees of the Trust, regardless of whether such counsel or expert may also be a Trustee. The officers and Trustees may obtain the advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust, the By-Laws, applicable law and their respective duties as officers or Trustees. No such officer or Trustee shall be liable for any act or omission in accordance with such advice, records and/or reports and no inference concerning liability shall arise from a failure to follow such advice, records and/or reports. The officers and Trustees shall not be required to give any bond hereunder, nor any surety if a bond is required by applicable law.

      (f) The failure to make timely collection of dividends or interest, or to take timely action with respect to entitlements, on the Trust’s securities issued in emerging countries, shall not be deemed to be negligence or other fault on the part of any Agent, and no Agent shall have any liability for such failure or for any loss or damage resulting from the imposition by any government of exchange control restrictions which might affect the liquidity of the Trust’s assets or from any war or political act of any foreign government to which such assets might be exposed, except, in the case of a Trustee or officer, for liability resulting from such Trustee’s or officer’s Disqualifying Conduct.

      (g) The limitation on liability contained in this Article applies to events occurring at the time a Person serves as an Agent whether or not such Person is an Agent at the time of any Proceeding in which liability is asserted.

      (h) No amendment or repeal of this Article shall adversely affect any right or protection of an Agent that exists at the time of such amendment or repeal.

2. Indemnification.

      (a) Indemnification by Trust. The Trust shall indemnify, out of Trust Property, to the fullest extent permitted under applicable law, any Person who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that such Person is or was an Agent of the Trust, against Expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such Proceeding if such Person acted in good faith or in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such Person was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction or plea of nolo contendere or its equivalent shall not of itself create a presumption that the Person did not act in good faith or that the Person had reasonable cause to believe that the Person’s conduct was unlawful.

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      (b) Exclusion of Indemnification. Notwithstanding any provision to the contrary contained herein, there shall be no right to indemnification for any liability arising by reason of the Agent’s Disqualifying Conduct. In respect of any claim, issue or matter as to which that Person shall have been adjudged to be liable in the performance of that Person’s duty to the Trust or the Shareholders, indemnification shall be made only to the extent that the court in which that action was brought shall determine, upon application or otherwise, that in view of all the circumstances of the case, that Person was not liable by reason of that Person’s Disqualifying Conduct.

      (c) Required Approval. Any indemnification under this Article shall be made by the Trust if authorized in the specific case on a determination that indemnification of the Agent is proper in the circumstances by (i) a final decision on the merits by a court or other body before whom the proceeding was brought that the Agent was not liable by reason of Disqualifying Conduct (including, but not limited to, dismissal of either a court action or an administrative proceeding against the Agent for insufficiency of evidence of any Disqualifying Conduct) or, (ii) in the absence of such a decision, a reasonable determination, based upon a review of the facts, that the Agent was not liable by reason of Disqualifying Conduct, by (1) the vote of a majority of a quorum of the Trustees who are not (x) “interested persons” of the Trust as defined in Section 2(a)(19) of the 1940 Act, (y) parties to the proceeding, or (z) parties who have any economic or other interest in connection with such specific case (the “disinterested, non-party Trustees”); or (2) by independent legal counsel in a written opinion.

      (d) Advancement of Expenses. Expenses incurred by an Agent in defending any Proceeding may be advanced by the Trust before the final disposition of the Proceeding on receipt of an undertaking by or on behalf of the Agent to repay the amount of the advance if it shall be determined ultimately that the Agent is not entitled to be indemnified as authorized in this Article; provided, that at least one of the following conditions for the advancement of expenses is met: (i) the Agent shall provide a security for his undertaking, (ii) the Trust shall be insured against losses arising by reason of any lawful advances, or (iii) a majority of a quorum of the disinterested, non-party Trustees of the Trust, or an independent legal counsel in a written opinion, shall determine, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the Agent ultimately will be found entitled to indemnification.

      (e) Other Contractual Rights. Nothing contained in this Article shall affect any right to indemnification to which Persons other than Trustees and officers of the Trust or any subsidiary thereof may be entitled by contract or otherwise.

      (f) Fiduciaries of Employee Benefit Plan. This Article does not apply to any Proceeding against any trustee, investment manager or other fiduciary of an employee benefit plan in that Person’s capacity as such, even though that Person may also be an Agent of the Trust as defined in Section 1 of this Article. Nothing contained in this Article shall limit any right to indemnification to which such a trustee, investment manager, or other fiduciary may be entitled by contract or otherwise which shall be enforceable to the extent permitted by applicable law other than this Article.

     3. Insurance. To the fullest extent permitted by applicable law, the Board of Trustees shall have the authority to purchase with Trust Property, insurance for liability and for all Expenses reasonably incurred or paid or expected to be paid by an Agent in connection with any Proceeding in which such Agent becomes involved by virtue of such Agent’s actions, or omissions to act, in its capacity or former capacity with the Trust, whether or not the Trust would have the power to indemnify such Agent against such liability.

     4. Derivative Actions. Subject to the requirements set forth in Section 3816 of the DSTA, a Shareholder or Shareholders may bring a derivative action on behalf of the Trust only if the Shareholder or Shareholders first make a pre-suit demand upon the Board of Trustees to bring the subject action unless an effort to cause the Board of Trustees to bring such action is excused. A demand on the Board of Trustees shall only be excused if a majority of the Board of Trustees, or a majority of any committee established to consider the merits of such action, has a material personal financial interest in the action at issue. A Trustee shall not be deemed to have a material personal financial interest in an action or otherwise be disqualified from ruling on a Shareholder demand by virtue of the fact that such Trustee receives remuneration from his or her service on the Board of Trustees of the Trust or on the boards of one or more investment companies with the same or an affiliated investment adviser or underwriter.

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VIII.

CERTAIN TRANSACTIONS

1. Vote Required.

      (a) Notwithstanding any other provision of this Declaration of Trust to the contrary and subject to the exceptions provided in this Article VIII, each of the transactions described in this Article VIII (other than transactions with respect to a particular Series) shall require the approval of the Board of Trustees and the affirmative vote of the holders of not less than 75% of the Shares entitled to vote to approve, adopt or authorize such transaction unless such action has been previously approved, adopted or authorized by the affirmative vote of two-thirds (66 2/3%) of the Board of Trustees, in which case the Shareholder vote set forth in Article V, Section 2(b)(1) shall be required.

      (b) Notwithstanding any other provision of this Declaration of Trust to the contrary, each of the transactions described in this Article VIII with respect to a particular Series shall require the approval of the Board of Trustees and the affirmative vote of the holders of not less than 75% of the Shares of that Series entitled to vote to approve, adopt or authorize such transaction unless such transaction has been previously approved, adopted or authorized by the affirmative vote of two-thirds (66 2/3%) of the Board of Trustees, in which case the “affirmative vote of a majority of the outstanding voting securities” (as defined herein) of the particular Series entitled to vote at a Shareholders’ meeting of such Series at which a quorum is present, shall be required.

2. Dissolution of Trust or Series. The Trust and each Series shall have perpetual existence, except that the Trust (or a particular Series) shall be dissolved:

      (a) With respect to the Trust or a particular Series, upon the vote of the Board of Trustees and the Shareholders of the Trust or the particular Series, as applicable, as set forth in Section 1 of this Article VIII; or

(b) With respect to the Trust or a particular Series, upon the occurrence of a dissolution or termination event pursuant to any other provision of this Declaration of Trust or the DSTA; or

(c) With respect to any Series, upon any event that causes the dissolution of the Trust.

Upon dissolution of the Trust (or a particular Series, as the case may be), the Trustees shall (in accordance with Section 3808 of the DSTA) pay or make reasonable provision to pay all claims and obligations of the Trust and/or each Series (or the particular Series, as the case may be), including all contingent, conditional or unmatured claims and obligations known to the Trust, and all claims and obligations which are known to the Trust, but for which the identity of the claimant is unknown. If there are sufficient assets held with respect to the Trust and/or each Series of the Trust (or the particular Series, as the case may be), such claims and obligations shall be paid in full and any such provisions for payment shall be made in full. If there are insufficient assets held with respect to the Trust and/or each Series of the Trust (or the particular Series, as the case may be), such claims and obligations shall be paid or provided for according to their priority and, among claims and obligations of equal priority, ratably to the extent of assets available therefor. Any remaining assets (including, without limitation, cash, securities or any combination thereof) held with respect to the Trust and/or each Series of the Trust (or the particular Series, as the case may be) shall be distributed to the Shareholders of the Trust and/or each Series of the Trust (or the particular Series, as the case may be) ratably according to the number of Shares of the Trust and/or such Series thereof (or the particular Series, as the case may be) held of record by the several Shareholders on the date for such dissolution distribution; provided, however, that if the Shares of a Series are divided into Classes thereof, any remaining assets (including, without limitation, cash, securities or any combination thereof) held with respect to such Series shall be distributed to each Class of such Series according to the net asset value computed for such Class and within such particular Class, shall be distributed ratably to the Shareholders of such Class according to the number of Shares of such Class held of record by the several Shareholders on the date for such dissolution distribution. Upon the winding up of the Trust in accordance with Section 3808 of the DSTA and its termination, any one (1) Trustee shall execute, and cause to be filed, a certificate of cancellation, with the office of the Secretary of State of the State of Delaware in accordance with the provisions of Section 3810 of the DSTA.

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3. Merger or Consolidation; Conversion; Reorganization.

      (a) Merger or Consolidation. Pursuant to an agreement of merger or consolidation, the Board of Trustees may cause the Trust to merge or consolidate with or into one or more statutory trusts or “other business entities” (as defined in Section 3801 of the DSTA) formed or organized or existing under the laws of the State of Delaware or any other state or the United States or any foreign country or other foreign jurisdiction. Any such merger or consolidation shall require approval by vote of the Board of Trustees and Shareholders as set forth in Section 1 of this Article VIII. By reference to Section 3815(f) of the DSTA, any agreement of merger or consolidation approved in accordance with this Section 3(a) may, without a Shareholder vote, unless required by the 1940 Act or the requirements of any securities exchange on which Shares are listed for trading, effect any amendment to this Declaration of Trust or the By-Laws or effect the adoption of a new governing instrument if the Trust is the surviving or resulting statutory trust in the merger or consolidation, which amendment or new governing instrument shall be effective at the effective time or date of the merger or consolidation. In all respects not governed by the DSTA, the 1940 Act, other applicable law or the requirements of any securities exchange on which Shares are listed for trading, the Board of Trustees shall have the power to prescribe additional procedures necessary or appropriate to accomplish a merger or consolidation, including the power to create one or more separate statutory trusts to which all or any part of the assets, liabilities, profits or losses of the Trust may be transferred and to provide for the conversion of Shares into beneficial interests in such separate statutory trust or trusts. Upon completion of the merger or consolidation, if the Trust is the surviving or resulting statutory trust, any one (1) Trustee shall execute, and cause to be filed, a certificate of merger or consolidation in accordance with Section 3815 of the DSTA.

      (b) Conversion. The Board of Trustees may cause (i) the Trust to convert to an “other business entity” (as defined in Section 3801 of the DSTA) formed or organized under the laws of the State of Delaware as permitted pursuant to Section 3821 of the DSTA; (ii) the Shares of the Trust or any Series to be converted into beneficial interests in another statutory trust (or series thereof) created pursuant to this Section 3 of this Article VIII, or (iii) the Shares to be exchanged under or pursuant to any state or federal statute to the extent permitted by law. Any such statutory conversion, Share conversion or Share exchange shall require approval by vote of the Board of Trustees and the Shareholders of the Trust or the particular Series, as applicable, as set forth in Section 1 of this Article VIII; provided, however, that in all respects not governed by the DSTA, the 1940 Act, other applicable law or the requirements of any securities exchange on which Shares are listed for trading, the Board of Trustees shall have the power to prescribe additional procedures necessary or appropriate to accomplish a statutory conversion, Share conversion or Share exchange, including the power to create one or more separate statutory trusts to which all or any part of the assets, liabilities, profits or losses of the Trust may be transferred and to provide for the conversion of Shares of the Trust or any Series thereof into beneficial interests in such separate statutory trust or trusts (or series thereof).

      (c) Reorganization. The Board of Trustees may cause the Trust to sell, convey and transfer all or substantially all of the assets of the Trust (“sale of Trust assets”) or all or substantially all of the assets associated with any one or more Series (“sale of such Series’ assets”), to another trust, statutory trust, partnership, limited partnership, limited liability company, corporation or other association organized under the laws of any state, or to one or more separate series thereof, or to the Trust to be held as assets associated with one or more other Series of the Trust, in exchange for cash, shares or other securities (including, without limitation, in the case of a transfer to another Series of the Trust, Shares of such other Series) with such sale, conveyance and transfer either (a) being made subject to, or with the assumption by the transferee of, the liabilities associated with the Trust or the liabilities associated with the Series the assets of which are so transferred, as applicable, or (b) not being made subject to, or not with the assumption of, such liabilities. Any such sale, conveyance and transfer shall require approval by vote of the Board of Trustees and the Shareholders of the Trust or the particular Series, as applicable, as set forth in Section 1 of this Article VIII. Following such sale of Trust assets, the Board of Trustees shall distribute such cash, shares or other securities ratably among the Shareholders of the Trust (giving due effect to the assets and liabilities associated with and any other differences among the various Series the assets associated with which have been so sold, conveyed and transferred, and due effect to the differences among the various Classes within each such Series). Following a sale of such Series’ assets, the Board of Trustees shall distribute such cash, shares or other securities ratably among the Shareholders of such Series (giving due effect to the differences among

K-25

the various Classes within each such Series). If all of the assets of the Trust have been so sold, conveyed and transferred, the Trust shall be dissolved. In all respects not governed by the DSTA, the 1940 Act, other applicable law or the requirements of any securities exchange on which Shares are listed for trading, the Board of Trustees shall have the power to prescribe additional procedures necessary or appropriate to accomplish such sale, conveyance and transfer, including the power to create one or more separate statutory trusts to which all or any part of the assets, liabilities, profits or losses of the Trust may be transferred and to provide for the conversion of Shares into beneficial interests in such separate statutory trust or trusts.

     4. Reclassification of the Trust. The Board of Trustees may cause the Trust to be converted from a “closed-end company” to an “open-end company” (as those terms are defined, respectively, in Sections 5(a)(2) and 5(a)(1) of the 1940 Act). Such reclassification of the Trust shall require approval by vote of the Board of Trustees and Shareholders as set forth in Section 1 of this Article VIII.

5. Principal Holder Transactions.

      (a) The following transactions shall require approval by vote of the Board of Trustees and Shareholders as set forth in Section 1 of this Article VIII:

(i)	Issuance of any securities of the Trust to any Principal Holder (as defined below) for cash; or
(ii)	Sale, lease, or exchange to the Trust, in exchange for securities of the Trust, of any assets of any Principal Holder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such aggregate amount, all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period).

      (b) For purposes of this Section 5, the term “Principal Holder” shall mean any Person or group (within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934, as amended (the “1934 Act”)), that is the beneficial owner, directly or indirectly, of more than ten percent (10%) of the Shares of the Trust and shall include any affiliate or associate, as such terms are defined in clause (2) below, of a Principal Holder, but shall not include FRI or any affiliated person of FRI. For the purposes of this Section 5, in addition to the Shares which a Principal Holder beneficially owns directly, a Principal Holder shall be deemed to be the beneficial owner of any Shares (1) which the Principal Holder has the right to acquire pursuant to any agreement or upon exercise of conversion rights or warrants, or otherwise or (2) which are beneficially owned, directly or indirectly (including Shares deemed owned through application of clause (1) above), by any other Person or group with which the Principal Holder or its “affiliate” or “associate,” as those terms are defined in Rule 12b-2, or any successor rule, under the 1934 Act, has any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting, or disposing of Shares, or which is its “affiliate” or “associate” as so defined. For purposes of this Section 5, calculation of the total Shares of the Trust shall not include Shares deemed owned through application of clause (1) above.

      (c) The Board of Trustees shall have the power and duty to determine for the purposes of this Section 5, on the basis of information known to the Trust whether (i) a Person or group beneficially owns more than ten percent (10%) of the Shares, (ii) a corporation, person or entity is an “affiliate” or “associate” (as defined above) of another, and (iii) the assets being acquired or leased by or to the Trust have an aggregate fair market value of less than $1,000,000 (as defined above). Any such determination shall be conclusive and binding for all purposes of this Section 5 in the absence of manifest error.

     6. Master Feeder Structure. If permitted by the 1940 Act, the Board of Trustees, by vote of a majority of the Trustees, and without a Shareholder vote, may cause the Trust or any one or more Series to convert to a master feeder structure (a structure in which a feeder fund invests all of its assets in a master fund, rather than making investments in securities directly) and thereby cause existing Series of the Trust to either become feeders in a master fund, or to become master funds in which other funds are feeders. Any such conversion shall require approval by vote of the Board of Trustees and/or the Shareholders of the Trust or the particular Series, as applicable, as set forth in Section 1 of this Article VIII.

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     7. Absence of Appraisal or Dissenters’ Rights. No Shareholder shall be entitled, as a matter of right, to relief as a dissenting Shareholder in respect of any proposal or action involving the Trust or any Series or any Class thereof.

IX.

AMENDMENTS

1. Amendments Generally. Subject to the provisions of Section 3(a) of Article VIII and Section 2 of this Article IX, this Declaration of Trust may be restated and/or amended at any time, by an instrument in writing, by action of the Board of Trustees, without approval of the Shareholders. The Certificate of Trust shall be restated and/ or amended at any time by the Board of Trustees, without Shareholder approval, to correct any inaccuracy contained therein. Any such restatement and/or amendment of the Certificate of Trust shall be executed by at least one (1) Trustee and shall be effective immediately upon its filing with the office of the Secretary of State of the State of Delaware or upon such future date as may be stated therein.

     2. Special Amendments. Notwithstanding any other provision of this Declaration of Trust or the By-Laws, the amendment or repeal of Article IV, Sections 1, 2 and 3, Article V, Article VII, Article VIII and this Article IX of this Declaration of Trust shall require the approval of the Board of Trustees and the affirmative vote of holders of at least two-thirds (66 2/3%) of the Shares entitled to vote, unless such action has previously been approved, adopted or authorized by the affirmative vote of two-thirds (66 2/3%) of the Board of Trustees, in which case the Shareholder vote set forth in Article V, Section 2(b)(1) shall be required.

X.

MISCELLANEOUS

     1. References; Headings; Counterparts. In this Declaration of Trust and in any restatement hereof and/or amendment hereto, references to this instrument, and all expressions of similar effect to “herein,” “hereof” and “hereunder,” shall be deemed to refer to this instrument as so restated and/or amended. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this instrument. Whenever the singular number is used herein, the same shall include the plural; and the neuter, masculine and feminine genders shall include each other, as applicable. Any references herein to specific sections of the DSTA, the Code or the 1940 Act shall refer to such sections as amended from time to time or any successor sections thereof. This instrument may be executed in any number of counterparts, each of which shall be deemed an original.

     2. Applicable Law. This Declaration of Trust is created under and is to be governed by and construed and administered according to the laws of the State of Delaware and the applicable provisions of the 1940 Act and the Code. The Trust shall be a Delaware statutory trust pursuant to the DSTA, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a statutory trust.

3. Provisions in Conflict with Law or Regulations.

      (a) The provisions of this Declaration of Trust are severable, and if the Board of Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the Code, the DSTA, or with other applicable laws and regulations, the conflicting provision shall be deemed not to have constituted a part of this Declaration of Trust from the time when such provisions became inconsistent with such laws or regulations; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration of Trust or render invalid or improper any action taken or omitted prior to such determination.

      (b) If any provision of this Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration of Trust in any jurisdiction.

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     4. Statutory Trust Only. It is the intention of the Trustees to create hereby a statutory trust pursuant to the DSTA, and thereby to create the relationship of trustee and beneficial owners within the meaning of the DSTA between, respectively, the Trustees and each Shareholder. It is not the intention of the Trustees to create a general or limited partnership, limited liability company, joint stock association, corporation, bailment, or any form of legal relationship other than a statutory trust pursuant to the DSTA. Nothing in this Declaration of Trust shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association.

5. Use of the Names “Franklin,” “Templeton,” “Fiduciary Trust,” and/or “Institutional Fiduciary Trust”. The Board of Trustees expressly agrees and acknowledges that the names “Franklin,” “Templeton,” “Fiduciary Trust,” and “Institutional Fiduciary Trust” are the sole property of Franklin Resources, Inc. (“FRI”). FRI has granted to the Trust a non-exclusive license to use such names as part of the name of the Trust now and in the future. The Board of Trustees further expressly agrees and acknowledges that the non-exclusive license granted herein may be terminated by FRI if the Trust ceases to use FRI or one of its Affiliates as Investment Adviser or to use other Affiliates or successors of FRI for such purposes. In such event, the nonexclusive license may be revoked by FRI and the Trust shall cease using the names “Franklin,” “Templeton,” “Fiduciary Trust,” “Institutional Fiduciary Trust” or any name misleadingly implying a continuing relationship between the Trust and FRI or any of its Affiliates, as part of its name unless otherwise consented to by FRI or any successor to its interests in such names.

     The Board of Trustees further understands and agrees that so long as FRI and/or any future advisory Affiliate of FRI shall continue to serve as the Trust’s Investment Adviser, other registered open- or closed-end investment companies (“funds”) as may be sponsored or advised by FRI or its Affiliates shall have the right permanently to adopt and to use the names “Franklin,” “Templeton,” “Fiduciary Trust” and/or “Institutional Fiduciary Trust” in their names and in the names of any series or Class of shares of such funds.

     IN WITNESS WHEREOF, the Trustees named below do hereby make and enter into this Agreement and Declaration of Trust as of the date first written above.

, Trustee	, Trustee
, Trustee	, Trustee
, Trustee	, Trustee
, Trustee	, Trustee
, Trustee

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EX-99.L-1

EXHIBIT L-1

FUNDAMENTAL INVESTMENT RESTRICTIONS RECOMMENDED TO BE AMENDED AS DESCRIBED IN PROPOSAL 4

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin California Tax-Free Income Fund, Inc.
Franklin California Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin California Tax-Free Trust
Franklin California Insured Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin California Intermediate-Term Tax-Free	1).	Borrowing
Income Fund	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin California Limited-Term Tax-Free Income	1).	Lending	1).	Borrowing
Fund	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
	4).	Concentration
	5).	Diversification of Investments
Franklin California Tax-Exempt Money Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Capital Growth Fund
	1).	Borrowing	1).	Underwriting
	2).	Lending	2).	Concentration
	3).	Investments in Real Estate	3).	Diversification of Investments
	4).	Investments in Commodities
	5).	Issuing Senior Securities

L-1-1

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin Custodian Funds, Inc.
Franklin DynaTech Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Growth Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin U.S. Government Securities Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Utilities Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Global Trust
Franklin Large Capitalization Growth and Income	1).	Lending	1).	Borrowing
Fund	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments
Franklin Small Capitalization Equity Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments

L-1-2

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin Global Real Estate Fund	1).	Underwriting	1).	Borrowing
	2).	Lending	2).	Issuing Senior Securities
	3).	Investments in Real Estate	3).	Diversification of Investments -
	4).	Investments in Commodities		Non-diversified
	5).	Concentration
Franklin Templeton Core Fixed Income Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments
Franklin International Smaller Companies Growth	1).	Borrowing	1).	Underwriting
Fund	2).	Lending	2).	Concentration
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Diversification of Investments
Franklin Templeton Core Plus Fixed Income Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments –
				Non-diversified
Franklin Templeton Emerging Market Debt	1).	Lending	1).	Borrowing
Opportunities Fund	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments –
				Non-diversified
Franklin Templeton High Income Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments
Franklin Gold and Precious Metals Fund
	1).	Borrowing	1).	Underwriting
	2).	Lending	2).	Diversification of Investments
	3).	Investments in Real Estate
	4).	Investments in Commodities –
		special conditions
	5).	Issuing Senior Securities
	6).	Concentration
Franklin High Income Trust
Franklin High Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments

L-1-3

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin Investors Securities Trust
Franklin Adjustable U.S. Government Securities Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Balanced Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
			3).	Investments in Commodities
			4).	Issuing Senior Securities
			5).	Concentration
			6).	Diversification of Investments
Franklin Convertible Securities Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
	4).	Concentration
	5).	Diversification of Investments
Franklin Equity Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Floating Rate Daily Access Fund	1).	Borrowing	1).	Underwriting
	2).	Lending	2).	Diversification of Investments
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Concentration
Franklin Limited Maturity U.S. Government	1).	Borrowing
Securities Fund	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Low Duration Total Return Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments
Franklin Real Return Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments

L-1-4

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin Total Return Fund	1).	Borrowing	1).	Underwriting
	2).	Lending	2).	Concentration
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Diversification of Investments
Franklin Managed Trust
Franklin Rising Dividends Fund	1).	Borrowing	1).	Underwriting
	2).	Lending	2).	Concentration
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Diversification of Investments
Franklin Municipal Securities Trust
Franklin California High Yield Municipal Fund	1).	Borrowing	1).	Diversification of Investments
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Franklin Tennessee Municipal Bond Fund	1).	Borrowing	1).	Diversification of Investments
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Franklin Mutual Recovery Fund
	1).	Underwriting	1).	Borrowing
	2).	Lending	2).	Issuing Senior Securities
	3).	Investments in Real Estate	3).	Diversification of Investments
	4).	Investments in Commodities
	5).	Concentration
Franklin Mutual Series Fund Inc.
Mutual Beacon Fund	1).	Borrowing	1).	Underwriting
	2).	Lending
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Concentration
	7).	Diversification of Investments
Mutual Discovery Fund	1).	Borrowing	1).	Underwriting
	2).	Lending
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Concentration
	7).	Diversification of Investments

L-1-5

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Mutual European Fund	1).	Borrowing	1).	Underwriting
	2).	Lending
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Concentration
	7).	Diversification of Investments
Mutual Financial Services Fund	1).	Borrowing	1).	Underwriting
	2).	Lending
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Concentration
	7).	Diversification of Investments
Mutual Qualified Fund	1).	Borrowing	1).	Underwriting
	2).	Lending
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Concentration
	7).	Diversification of Investments
Mutual Shares Fund	1).	Borrowing	1).	Underwriting
	2).	Lending
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Concentration
	7).	Diversification of Investments
Franklin New York Tax-Free Income Fund
	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin New York Tax-Free Trust
Franklin New York Insured Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin New York Intermediate-Term Tax-Free	1).	Borrowing
Income Fund	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments

L-1-6

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin New York Limited-Term Tax-Free Income	1).	Borrowing
Fund	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
		– Non-diversified1
Franklin New York Tax-Exempt Money Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Real Estate Securities Trust
Franklin Real Estate Securities Fund	1).	Borrowing	1).	Diversification of Investments
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Franklin Strategic Mortgage Portfolio
	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Strategic Series
Franklin Aggressive Growth Fund	1).	Borrowing	1).	Underwriting
	2).	Lending	2).	Concentration
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Diversification of Investments
Franklin Biotechnology Discovery Fund	1).	Borrowing	1).	Diversification of Investments –
	2).	Underwriting		Non-diversified
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration

____________________

¹ Only the Fund’s fundamental investment restriction that prohibits the Fund from owning more than 10% of the voting securities of any one issuer is recommended to be eliminated. It is not proposed that such Fund’s status as a non-diversified investment company be changed.

L-1-7

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin Blue Chip Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Flex Cap Growth Fund	1).	Borrowing	1).	Diversification of Investments
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Franklin Global Communications Fund	1).	Borrowing	1).	Diversification of Investments
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Franklin Global Health Care Fund	1).	Borrowing	1).	Diversification of Investments –
	2).	Underwriting		Non-diversified
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Franklin Natural Resources Fund	1).	Borrowing	1).	Diversification of Investments
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Franklin Small Cap Growth Fund II	1).	Borrowing	1).	Underwriting
	2).	Lending
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Concentration
	7).	Diversification of Investments
Franklin Small-Mid Cap Growth Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments

L-1-8

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin Strategic Income Fund	1).	Borrowing	1).	Diversification of Investments
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Franklin Technology Fund	1).	Borrowing	1).	Underwriting
	2).	Lending	2).	Diversification of Investments
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Concentration
Franklin U.S. Long-Short Fund	1).	Borrowing	1).	Underwriting
	2).	Lending	2).	Concentration
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Diversification of Investments
Franklin Tax-Free Trust
Franklin Alabama Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Arizona Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Colorado Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Connecticut Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments

L-1-9

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin Double Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Federal Intermediate-Term Tax-Free	1).	Borrowing
Income Fund	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Federal Limited-Term Tax-Free	1).	Lending	1).	Borrowing
Income Fund	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
	4).	Diversification of Investments	4).	Concentration
Franklin Florida Insured Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Florida Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Georgia Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin High Yield Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments

L-1-10

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin Insured Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Kentucky Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Louisiana Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Maryland Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Massachusetts Insured Tax-Free Income	1).	Borrowing
Fund	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Michigan Insured Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Minnesota Insured Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments

L-1-11

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin Missouri Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin New Jersey Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin North Carolina Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Ohio Insured Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Oregon Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Pennsylvania Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Virginia Tax-Free Income Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments

L-1-12

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin Templeton Fund Allocator Series
Franklin Templeton Conservative Target Fund	1).	Borrowing	1).	Diversification of Investments
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Franklin Templeton Corefolio Allocation Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments
Franklin Templeton Founding Funds Allocation	1).	Lending	1).	Borrowing
Fund	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments
Franklin Templeton Growth Target Fund	1).	Borrowing	1).	Diversification of Investments
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Franklin Templeton Moderate Target Fund	1).	Borrowing	1).	Diversification of Investments
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Franklin Templeton Perspectives Allocation Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments
Franklin Templeton 2015 Retirement Target Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
			3).	Investments in Commodities
			4).	Issuing Senior Securities
			5).	Concentration
			6).	Diversification of Investments
Franklin Templeton 2025 Retirement Target Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
			3).	Investments in Commodities
			4).	Issuing Senior Securities
			5).	Concentration
			6).	Diversification of Investments
Franklin Templeton 2035 Retirement Target Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
			3).	Investments in Commodities
			4).	Issuing Senior Securities
			5).	Concentration
			6).	Diversification of Investments

L-1-13

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin Templeton 2045 Retirement Target Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
			3).	Investments in Commodities
			4).	Issuing Senior Securities
			5).	Concentration
			6).	Diversification of Investments
Franklin Templeton Global Trust
Franklin Templeton Hard Currency Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
		– Non-diversified2
Franklin Templeton International Trust
Templeton Foreign Smaller Companies Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Templeton Global Long-Short Fund	1).	Borrowing	1).	Underwriting
	2).	Lending	2).	Concentration
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Diversification of Investments
Franklin Templeton Money Fund Trust
Franklin Templeton Money Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Value Investors Trust
Franklin Balance Sheet Investment Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments

____________________

² Only the Fund’s investment restriction that relates to Subchapter M diversification requirements is recommended to be eliminated. It is not proposed that such Fund’s status as a non-diversified investment company be changed.

L-1-14

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
Franklin Large Cap Value Fund	1).	Borrowing	1).	Underwriting
	2).	Lending
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Concentration
	7).	Diversification of Investments
Franklin MicroCap Value Fund	1).	Borrowing	1).	Diversification of Investments
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Franklin MidCap Value Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments
Franklin Small Cap Value Fund	1).	Borrowing	1).	Diversification of Investments
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
Institutional Fiduciary Trust
Franklin Cash Reserves Fund	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Franklin Structured Large Cap Core Equity	1).	Borrowing	1).	Underwriting
Fund	2).	Lending	2).	Concentration
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Diversification of Investments
Franklin Structured Large Cap Growth Equity	1).	Borrowing	1).	Underwriting
Fund	2).	Lending	2).	Concentration
	3).	Investments in Real Estate
	4).	Investments in Commodities
	5).	Issuing Senior Securities
	6).	Diversification of Investments
Money Market Portfolio	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments

L-1-15

	FUNDAMENTAL INVESTMENT RESTRICTIONS TO BE AMENDED		FUNDAMENTAL INVESTMENT RESTRICTIONS TO REMAIN UNCHANGED
The Money Market Portfolios
The Money Market Portfolio	1).	Borrowing
	2).	Underwriting
	3).	Lending
	4).	Investments in Real Estate
	5).	Investments in Commodities
	6).	Issuing Senior Securities
	7).	Concentration
	8).	Diversification of Investments
Templeton Developing Markets Trust
	1).	Lending	1).	Borrowing
	2).	Investments in Commodities	2).	Underwriting
			3).	Investments in Real Estate
			4).	Issuing Senior Securities
			5).	Concentration
			6).	Diversification of Investments
Templeton China World Fund
	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
	3).	Investments in Commodities	3).	Issuing Senior Securities
			4).	Concentration
			5).	Diversification of Investments –
				Non-diversified
Templeton Funds, Inc.
Templeton Foreign Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
			3).	Issuing Senior Securities
			4).	Investments in Commodities
			5).	Concentration
			6).	Diversification of Investments
Templeton World Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
			3).	Issuing Senior Securities
			4).	Investments in Commodities
			5).	Concentration
			6).	Diversification of Investments
Templeton Global Smaller Companies Fund
	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Underwriting
			3).	Issuing Senior Securities
			4).	Investments in Commodities
			5).	Concentration
			6).	Diversification of Investments
Templeton Income Trust
Templeton Global Bond Fund	1).	Lending	1).	Borrowing
	2).	Investments in Real Estate	2).	Issuing Senior Securities
			3).	Underwriting
			4).	Investments in Commodities
			5).	Concentration
			6).	Diversification of Investments –
				Non-diversified

L-1-16

	FUNDAMENTAL INVESTMENT  RESTRICTIONS TO BE AMENDED	FUNDAMENTAL INVESTMENT  RESTRICTIONS TO REMAIN  UNCHANGED
Templeton Institutional Funds, Inc.
Emerging Markets Series	1). Borrowing
	2). Underwriting
	3). Lending
	4). Investments in Real Estate
	5). Investments in Commodities
	6). Issuing Senior Securities
	7). Concentration
	8). Diversification of Investments
Foreign Equity Series	1). Borrowing
	2). Underwriting
	3). Lending
	4). Investments in Real Estate
	5). Investments in Commodities
	6). Issuing Senior Securities
	7). Concentration
	8). Diversification of Investments
Foreign Smaller Companies Series	1). Lending	1). Borrowing
	2). Investments in Real Estate	2). Underwriting
	3). Investments in Commodities	3). Issuing Senior Securities
	4). Concentration
	5). Diversification of Investments

L-1-17

EX-99.L-2

EXHIBIT L-2

TEXT OF FUNDAMENTAL INVESTMENT RESTRICTIONS RECOMMENDED TO BE AMENDED
AS DESCRIBED IN PROPOSAL 4.

Borrowing

Current Fundamental Investment Restriction (The Fund may not . . .)	Fund
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).	Franklin Capital Growth Fund, Franklin International Smaller Companies Growth Fund, Franklin Structured Large Cap Core Equity Fund, Franklin Structured Large Cap Growth Equity Fund, Franklin Floating Rate Daily Access Fund
Borrow money, except that the Fund may borrow money from banks or affiliated investment companies to the extent permitted by the Investment Company Act of 1940, as amended (1940 Act), or any exemptions therefrom which may be granted by the SEC, or 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).	Franklin Gold and Precious Metals Fund, Franklin Rising Dividends Fund, Franklin Aggressive Growth Fund, Franklin Small Cap Growth Fund II, Franklin Technology Fund, Templeton Global Long-Short Fund
Borrow money in excess of 5% of the value of the Fund’s total assets, and then only as a temporary measure for extraordinary or emergency purposes.	Franklin High Income Fund, Franklin Strategic Income Fund
Borrow money, except that the Fund may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 30% of the value of the Fund’s total assets (including the amount borrowed).	Franklin Total Return Fund
Borrow money, except from banks in order to meet redemption requests that might otherwise require the untimely disposition of portfolio securities or for other temporary or emergency (but not investment) purposes, in an amount up to 10% of the value of the Fund’s total assets (including the amount borrowed) based on the lesser of cost or market, less liabilities (not including the amount borrowed) at the time the borrowing is made. While borrowings exceed 5% of the Fund’s total assets, the Fund will not make any additional investments.	Franklin Real Estate Securities Fund, Franklin Flex Cap Growth Fund
Borrow money (does not preclude the Fund from obtaining such short-term credit as may be necessary for the clearance of purchases and sales of its portfolio securities), except in the form of reverse repurchase agreements or from banks in order to meet redemption requests that might otherwise require the untimely disposition of portfolio securities or for other temporary or emergency (but not investment) purposes, in an amount up to 10% of the value of the Fund’s total assets (including the amount borrowed) based on the lesser of cost or market, less liabilities (not including the amount borrowed) at the time the borrowing is made. While borrowings exceed 5% of the Fund’s total assets, the Fund will not make any additional investments.	Franklin Small-Mid Cap Growth Fund, Franklin Global Health Care Fund
Borrow money, except in the form of reverse repurchase agreements or from banks in order to meet redemption requests that might otherwise require the untimely disposition of portfolio securities or for other temporary or emergency (but not investment) purposes, in an amount up to 10% of the value of the Fund’s total assets (including the amount borrowed) based on the lesser of cost or market, less liabilities (not including the amount borrowed) at the time the borrowing is made, and except to facilitate portfolio transactions in which the Fund is permitted to engage to the extent such transactions may be deemed to constitute borrowing under this restriction. While borrowings exceed 5% of the Fund’s total assets, the Fund will not make any additional investments.	Franklin Biotechnology Discovery Fund

L-2-1

Borrow money, except that the Fund may borrow money from banks or other persons in privately arranged transactions that are not intended to be publicly distributed, or affiliated investment companies, to the extent permitted by the Investment Company Act of 1940, as amended (1940 Act), or any exemptions therefrom which may be granted by the U.S. Securities and Exchange Commission (SEC), or 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).	Franklin U.S. Long-Short Fund
Borrow money, except from banks, in order to meet redemption requests that might otherwise require the untimely disposition of portfolio securities or for other temporary or emergency (not leveraging) purposes in an amount up to 15% of the value of the Fund’s total assets (including the amount borrowed) based on the lesser of cost or market, less liabilities (not including the amount borrowed) at the time the borrowing is made. While borrowings exceed 5% of the Fund’s total assets, the Fund will not make any additional investments.	Franklin Balance Sheet Investment Fund
Borrow money, except that the Fund may borrow money from banks or affiliated investment companies to the extent permitted by the 1940 Act, or any exemptions therefrom which may be granted by the 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).	Franklin Large Cap Value Fund
Borrow money, except in the form of reverse repurchase agreements or from banks in order to meet redemption requests or for other temporary or emergency purposes in an amount up to 15% of the value of the Fund’s total assets (including the amount borrowed) based on the lesser of cost or market, less liabilities (not including the amount borrowed) at the time the borrowing is made. While borrowings exceed 5% of the Fund’s total assets, the Fund will not make any additional investments.	Franklin MicroCap Value Fund
Borrow money, except that the Fund may borrow money in a manner consistent with the Fund’s investment goal and policies in an amount not exceeding 33 1/3% of the value of the Fund’s total assets (including the amount borrowed). The Fund may borrow in connection with short-sales and short-sales “against the box,” and the Fund may borrow from banks, other Franklin Templeton funds or other persons to the extent permitted by applicable law.	Franklin Small Cap Value Fund
Borrow money, except that a Fund may borrow money from banks in an amount not exceeding 33 1/3% of the value of its total assets (including the amount borrowed).	(TIFI) Foreign Equity Series, Emerging Markets Series
Borrow money [or mortgage or pledge any of its assets]*, except that borrowings for temporary or emergency purposes may be made in the amount up to 5% of the total asset value.	Franklin California Tax-Free Income Fund, Inc., Franklin Dynatech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund, Franklin New York Tax-Free Income Fund
Borrow money [or mortgage or pledge any of its assets]*, except that borrowings (and a pledge of assets thereof) for temporary or emergency purposes may be made from banks in any amount up to 5% of the total asset value. Secured temporary borrowings may take the form of a reverse repurchase agreement, pursuant to which the Fund would sell portfolio securities for cash and simultaneously agree to repurchase them at a specified date for the same amount of cash plus an interest component.	Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund
Borrow money [or mortgage or pledge any of the assets of the Trust]*, except that borrowings (and a pledge of assets therefor) for temporary or emergency purposes may be made from banks in an amount up to 5% of total asset value.	Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund,

L-2-2

	Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Cash Reserves Fund
Borrow money [or mortgage or pledge any of the assets of the Trust]*, except that borrowings (and a pledge of assets therefor) for temporary or emergency purposes may be made from banks in an amount up to 20% of total asset value.	Franklin Adjustable U.S. Government Securities Fund
Borrow money [or mortgage or pledge any of its assets]*, except that borrowings (and a pledge of assets therefor) for temporary or emergency purposes may be made from banks in any amount up to 5% of the total asset value.	Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund, (IFT) Money Market Portfolio
Borrow money [or mortgage or pledge any of its assets]*, except that borrowings (and a pledge of assets thereof) for temporary or emergency purposes may be made from banks in any amount up to 5% of the total asset value. Secured temporary borrowings may take the form of a reverse repurchase agreement, pursuant to which the Fund would sell portfolio securities for cash and simultaneously agree to repurchase them at a specified date for the same amount of cash plus an interest component.	Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund
Borrow money [or mortgage or pledge any of its assets]*, except that borrowings (and a pledge of assets therefor) for temporary or emergency purposes may be made from banks in an amount up to 20% of its total asset value. The Fund will not purchase additional portfolio securities while borrowings in excess of 5% of its total assets are outstanding.	Franklin Strategic Mortgage Portfolio
Borrow money [or mortgage or pledge any of its assets]*, except in the form of reverse repurchase agreements or from banks for temporary or emergency purposes in an amount up to 33% of the value of the Fund’s total assets (including the amount borrowed) based on the lesser of cost or market, less liabilities (not including the amount borrowed) at the time the borrowing is made. While borrowings exceed 5% of the Fund’s total assets, the Fund will not make any additional investments.	Franklin Global Communications Fund, Franklin Natural Resources Fund
Borrow money [or mortgage or pledge any of its assets]*, except it may borrow up to 15% of its total assets (including the amount borrowed) to meet redemption requests that might otherwise require the untimely disposition of portfolio securities or for other temporary or emergency purposes and may pledge its assets in connection with these borrowings. The Fund may borrow from banks, other Franklin Templeton Funds or other persons to the extent permitted by applicable law. The Fund will not make any additional investments while borrowings exceed 5% of its total assets.	Franklin Blue Chip Fund

 L-2-3

Borrow money [or mortgage or pledge any of its assets]*, except it may borrow up to 33 1/3% of its total assets (including the amount borrowed) to meet redemption requests that might otherwise require the untimely disposition of portfolio securities or for other temporary or emergency purposes and may pledge its assets in connection with these borrowings. Each Fund may (a) borrow in connection with short sales and “short sales against the box”; (b) borrow from banks or other persons to the extent permitted by applicable law; (c) enter into reverse repurchase agreements; (d) obtain short-term credit necessary for the clearance of purchases and sales of its portfolio securities; and (e) make margin payments in connection with futures, options and currency transactions.	Franklin Templeton Conservative Target Fund, Franklin Templeton Moderate Target Fund, Franklin Templeton Growth Target Fund
Borrow money, except from banks for temporary or emergency (not leveraging) purposes in an amount up to 33 1/3% of the value of the Fund’s total assets (including the amount borrowed) based on the lesser of cost or market, less liabilities (not including the amount borrowed) at the time the borrowing is made. While borrowings exceed 5% of the Fund’s total assets, the Fund will not make any additional investments.	Franklin Templeton Hard Currency Fund
Borrow money [or mortgage or pledge any of its assets]*, except that borrowings (and a pledge of assets therefore) for extraordinary or emergency purposes may be made from banks in any amount up to 5% of the total asset value.	Franklin Templeton Money Fund
Borrow money [or mortgage or pledge any of its assets]*, except that borrowings (and a pledge of assets therefor) for temporary or emergency purposes may be made from banks in any amount up to 5% of the Money Fund’s total asset value and up to 10% of the U.S. Securities Fund’s total asset value.	(TMMP) The Money Market Portfolio
Borrow money or utilize leverage in excess of the maximum permitted by the Investment Company Act of 1940, as amended (1940 Act), which is currently 33 1/3% of total assets (including 5% for emergency or other short-term purposes).	Mutual Beacon Fund, Mutual Financial Services Fund, Mutual Qualified Fund, Mutual Shares Fund, Mutual Discovery Fund, Mutual European Fund
Borrow money, except for temporary or emergency (but not investment) purposes from banks and only in an amount up to 10% of the value of the assets. While borrowings exceed 5% of the Fund’s total assets, it will not make any additional investments.	Templeton Foreign Smaller Companies Fund

____________________

* The fundamental investment restriction regarding pledging or mortgaging a Fund’s assets is recommended to be eliminated.

Underwriting

Current Fundamental Investment Restriction (The Fund may not . . .)

Fund

Act as underwriter of securities issued by other persons, except insofar as the Fund may be technically deemed an underwriter under federal securities laws in connection with the disposition of portfolio securities.

Franklin California Tax-Free Income Fund, Inc., Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin Dynatech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund, Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Franklin New York Tax-Free Income Fund, Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund,

L-2-4

	Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund, Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund, Franklin Strategic Mortgage Portfolio, (TMMP) The Money Market Portfolio
Act as underwriter of securities issued by other persons except insofar as the Fund may technically be deemed an underwriter under the federal securities laws in connection with the disposition of portfolio securities, except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies as the Fund.	Franklin Adjustable U.S. Government Securities Fund, Franklin Templeton Money Fund, Franklin Cash Reserves Fund
Underwrite or engage in the agency distributions of securities of other issuers, except insofar as the Fund may be technically deemed an underwriter in connection with the disposition of securities in its portfolio.	(FHIT) Franklin High Income Fund
Act as underwriter of securities issued by other persons, except insofar as the Fund may be technically deemed an underwriter under the federal securities laws in connection with the disposition of portfolio securities, except that, in the case of the Tennessee Fund, all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies as the Fund.	Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund
Act as an underwriter except to the extent that, in connection with the disposition of portfolio securities, it may be deemed to be an underwriter under applicable securities laws.	Franklin Mutual Recovery Fund
Underwrite securities of other issuers (does not preclude the Fund from obtaining such short-term credit as may be necessary for the clearance of purchases and sales of its portfolio securities), except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies as the Fund.	Franklin Real Estate Securities Fund
Underwrite securities of other issuers.	Franklin Biotechnology Discovery Fund
Underwrite securities of other issuers (does not preclude the Fund from obtaining such short-term credit as may be necessary for the clearance of purchases and sales of its portfolio securities).	Franklin Global Communications Fund

L-2-5

Underwrite securities of other issuers (does not preclude the Fund from obtaining such short-term credit as may be necessary for the clearance of purchases and sales of its portfolio securities); except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies as the Fund.	Franklin Natural Resources Fund
Underwrite securities of other issuers, except insofar as the Fund may be technically deemed an underwriter in connection with the disposition of securities in its portfolio; except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goals and policies as the Fund.	Franklin Strategic Income Fund
Underwrite securities of other issuers, except insofar as the Fund may be technically deemed an underwriter under the federal securities laws in connection with the disposition of portfolio securities. This does not preclude the Fund from obtaining short-term credit necessary for the clearance of purchases and sales of its portfolio securities.	Franklin Blue Chip Fund
Underwrite securities of other issuers, except insofar as the Fund may be technically deemed an underwriter under the federal securities laws in connection with the disposition of portfolio securities.	Franklin Templeton Conservative Target Fund, Franklin Templeton Moderate Target Fund, Franklin Templeton Growth Target Fund, (FTIT) Templeton Foreign Smaller Companies Fund, Franklin Balance Sheet Investment Fund
Underwrite the securities of other issuers.	Franklin Templeton Hard Currency Fund
Underwrite securities of other issuers, except insofar as the Fund may be technically deemed an underwriter under the federal securities laws in connection with the disposition of portfolio securities. (This does not preclude the Fund from obtaining such short-term credit as may be necessary for the clearance of purchases and sales of its portfolio securities.)	Franklin Small Cap Value Fund, Franklin MicroCap Value Fund
Act as underwriter of securities issued by other persons, except insofar as the Trust may technically be deemed an underwriter under the federal securities laws in connection with the disposition of portfolio securities, except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objectives and policies as the Fund.	(IFT) Money Market Portfolio
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 or in connection with investments in other investment companies.	Franklin Global Real Estate Fund
Underwrite securities of other issuers (does not preclude the Fund from obtaining such short-term credit as may be necessary for the clearance of purchases and sales of its portfolio securities).	Franklin Flex Cap Growth Fund
Underwrite securities of other issuers.	Franklin Small-Mid Cap Growth Fund, Franklin Global Health Care Fund
Act as an underwriter.	(TIFI) Foreign Equity Series, Emerging Markets Series

L-2-6

Lending

Current Fundamental Investment Restriction (The Fund may not . . .)	Fund
Lend any funds or other assets, except by the purchase of a portion of an issue of publicly distributed bonds, debentures, notes or other debt securities, or to the extent the entry into a repurchase agreement may be deemed a loan. Although such loans are not presently intended, this prohibition will not preclude the Fund from loaning securities to securities dealers or other institutional investors if at least 102% cash collateral is pledged and maintained by the borrower provided such security loans may not be made if, as a result, the aggregate of such loans exceeds 10% of the value of the Fund’s total assets at the time of the most recent loan.	Franklin California Tax-Free Income Fund, Inc., Franklin New York Tax-Free Income Fund
Make loans, except through the purchase of debt securities which are either publicly distributed or customarily purchased by institutional investors, or to the extent the entry into a repurchase agreement may be deemed a loan. Although such loans are not presently intended, this prohibition will not preclude the Fund from loaning portfolio securities to broker-dealers or other institutional investors if at least 102% cash collateral is pledged and maintained by the borrower; provided such portfolio security loans not be made if, as a result, the aggregate of such loans exceeds 10% of the value of the Fund’s total assets at the time of the most recent loan.	Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund
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 goals 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.	Franklin California Limited-Term Tax-Free Income Fund, Franklin Capital Growth Fund, (FGT) Franklin Templeton High Income Fund, Franklin Large Capitalization Growth and Income Fund, Franklin Small Capitalization Equity Fund, Franklin Templeton Core Fixed Income Fund, Franklin International Smaller Companies Growth Fund, Franklin Templeton Core Plus Fixed Income Fund, Franklin Gold and Precious Metals Fund, Franklin Real Return Fund, Franklin Floating Rate Daily Access Fund, Franklin Rising Dividends Fund, Franklin Federal Limited-Term Tax-Free Income Fund, Franklin Aggressive Growth Fund, Franklin Small Cap Growth Fund II, Franklin Technology Fund, Franklin U.S. Long-Short Fund, Franklin Templeton Founding Funds Allocation Fund, Franklin Templeton Corefolio Allocation Fund, Franklin Templeton Perspectives Allocation Fund, Templeton Global Long-Short Fund, Franklin Large Cap Value Fund, Franklin MidCap Value Fund, Franklin Structured Large Cap Core Equity Fund, Franklin Structured Large Cap Growth Equity Fund, Franklin Global Real Estate Fund, Franklin Templeton Emerging Market Debt Opportunities Fund
Lend any funds or other assets, except by the purchase of publicly distributed bonds, debentures, notes, to-be-announced securities or other debt securities and except that securities of any Fund, other than the U.S. Government Securities Fund, may be loaned to broker-dealers or other institutional investors as discussed under “Loans of portfolio securities.” For additional information relating to this policy see discussion under “Loan Participations” and “Illiquid Securities” [in the Funds’ Statement of Additional Information].	Franklin Dynatech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund
Make loans, except (a) through the purchase of debt securities in accordance with the investment objective and policies of the Portfolio, (b) to the extent the entry into a repurchase agreement is deemed to be a loan, or (c) by the loan of its portfolio securities in accordance with the policies described below.	Franklin Templeton Money Fund, (IFT) Money Market Portfolio

L-2-7

Make loans to other persons except on a temporary basis in connection with the delivery or receipt of portfolio securities which have been bought or sold, or by the purchase of bonds, debentures or similar obligations which have been publicly distributed or of a character usually acquired by institutional investors or through loans of the Fund’s portfolio securities, or to the extent the entry into a repurchase agreement may be deemed a loan.	(FHIT) Franklin High Income Fund, Franklin Strategic Income Fund
Lend any funds or other assets, except by the purchase of publicly distributed bonds, debentures, notes or other debt securities and except that securities of the Fund may be loaned to securities dealers or other institutional investors if at least 102% cash collateral is pledged and maintained by the borrower, provided such loans may not be made if, as a result, the aggregate of such loans exceeds 10% of the value of the Fund’s total assets at the time of the most recent loan. The entry into repurchase agreements is not considered a loan for purposes of this restriction.	Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Franklin Adjustable U.S. Government Securities Fund
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 goals and policies, and (c) to the extent the entry into a repurchase agreement is deemed to be a loan.	Franklin Total Return Fund
Make loans, except by engaging in repurchase transactions and except through the purchase of readily marketable debt securities which are either publicly distributed or customarily purchased by institutional investors. Although such loans are not presently intended, this prohibition will not preclude the Fund from loaning portfolio securities to broker-dealers or other institutional investors if at least 102% cash collateral is pledged and maintained by the borrower, provided such portfolio security loans may not be made if, as a result, the aggregate of such loans exceeds 10% of the value of the Fund’s total assets at the time of the most recent loan.	Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund
Make loans, except to the extent the purchase of debt obligations of any type are considered loans and except that the series may lend portfolio securities to qualified institutional investors in compliance with requirements established from time to time by the Securities and Exchange Commission (SEC) and the securities exchanges on which such securities are traded.	Mutual Beacon Fund, Mutual Financial Services Fund, Mutual Qualified Fund, Mutual Shares Fund, Mutual Discovery Fund, Mutual European Fund
Make loans, except through the purchase of debt securities which are customarily purchased by institutional investors, including the municipal securities described above, or to the extent the entry into a repurchase agreement may be deemed a loan. Although such loans are not presently intended, this prohibition will not preclude the Fund from loaning portfolio securities to broker-dealers or other institutional investors if at least 102% cash collateral is pledged and maintained by the borrower; provided such portfolio security loans may not be made if, as a result, the aggregate of such loans exceeds 10% of the value of the Fund’s total assets at the time of the most recent loan.	Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund
Make loans, except through the purchase of readily marketable debt securities which are either publicly distributed or customarily purchased by institutional investors. Although such loans are not presently intended, this prohibition will not preclude the Fund from loaning portfolio securities to broker-dealers or other institutional investors if at least 102% cash collateral is pledged and maintained by the borrower; provided such portfolio security loans may not be made if, as a result, the aggregate of such loans exceeds 10% of the value of the Fund’s total assets at the time of the most recent loan.	Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund,

L-2-8

	Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund
Make loans to other persons, except by the purchase of bonds, debentures or similar obligations which are publicly distributed or of a character usually acquired by institutional investors or through loans of the Fund’s portfolio securities, or to the extent the entry into a repurchase agreement may be deemed a loan.	Franklin Real Estate Securities Fund, Franklin Flex Cap Growth Fund, Franklin Small-Mid Cap Growth Fund, Franklin Biotechnology Discovery Fund, Franklin Global Health Care Fund, Franklin Global Communications Fund, Franklin Natural Resources Fund, (FTIT) Templeton Foreign Smaller Companies Fund
Lend any funds or other assets, except by the purchase of bonds, debentures, notes, or other debt securities as described in its prospectus; and except that securities of the Fund may be loaned to qualified broker-dealers or other institutional investors if at least 102% cash collateral is pledged and maintained by the borrower, provided such loans may not be made if, as a result, the aggregate of such loans exceeds 10% of the value of the Fund’s total assets at the time of the most recent loan. Also, the entry into repurchase agreements is not considered a loan for purposes of this restriction.	Franklin Strategic Mortgage Portfolio
Loan money, except as is consistent with the Fund’s investment objective, and except that the Fund may (a) buy a portion of an issue of publicly distributed bonds, debentures, notes and other evidences of indebtedness, (b) enter into repurchase agreements, (c) lend its portfolio securities, and (d) participate in an interfund lending program with other Franklin Templeton Funds to the extent permitted by the Investment Company Act of 1940, as amended (1940 Act) and any rules or orders thereunder.	Franklin Blue Chip Fund, Franklin Templeton Conservative Target Fund, Franklin Templeton Moderate Target Fund, Franklin Templeton Growth Target Fund
Make loans to others except through the purchase of debt obligations referred to in the prospectus and the entry into repurchase agreements and portfolio lending agreements, provided that the value of securities subject to such lending agreements may not exceed 30% of the value of the Fund’s total assets. Any loans of portfolio securities will be made according to guidelines established by the U.S. Securities and Exchange Commission (SEC) and the board of trustees, including maintenance of collateral of the borrower equal at all times to at least the current market value of the securities loaned.	Franklin Templeton Hard Currency Fund
Make loans to others except through the purchase of debt obligations and the entry into repurchase agreements and portfolio lending agreements, provided that the value of securities subject to such lending agreements may not exceed 25% of the value of the Fund’s total assets. Any loans of portfolio securities will be made according to guidelines established by the Securities and Exchange Commission (SEC) and the board, including maintenance of collateral of the borrower equal at all times to at least 102% of the current market value of the securities loaned.	Franklin Balance Sheet Investment Fund
Make loans to other persons, except by the purchase of debt obligations, or through loans of the Fund’s portfolio securities, or to the extent the entry into a repurchase agreement or similar transaction may be deemed a loan.	Franklin MicroCap Value Fund

L-2-9

Loan money, except as consistent with the Fund’s investment goal, and except that the Fund may (a) purchase a portion of an issue of publicly distributed bonds, debentures, notes and other evidences of indebtedness, (b) enter into repurchase agreements, (c) lend its portfolio securities, and (d) participate in an interfund lending program with other Franklin Templeton funds to the extent permitted by the 1940 Act and any rules or orders thereunder.	Franklin Small Cap Value Fund
Make loans, except (a) through the purchase of debt securities in accordance with the investment goal and policies of the Fund, (b) to the extent the entry into a repurchase agreement is deemed to be a loan, or (c) by the loan of its portfolio securities in accordance with the policies described below.	Franklin Cash Reserves Fund
Make loans, except (a) through the purchase of debt securities in accordance with the investment goals and policies of the Fund, (b) to the extent the entry into a repurchase agreement is deemed to be a loan, or (c) by the loan of its portfolio securities in accordance with the policies described below.	(TMMP) The Money Market Portfolio
Loan money apart from the purchase of a portion of an issue of publicly distributed bonds, debentures, notes and other evidences of indebtedness, although a Fund may buy from a bank or broker-dealer U.S. government obligations with a simultaneous agreement by the seller to repurchase them within no more than seven days at the original purchase price plus accrued interest and loan its portfolio securities.	(TIFI) Foreign Equity Series, Emerging Markets Series
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 goals and policies, and (c) to the extent the entry into a repurchase agreement is deemed to be a loan. The Funds may also make loans to investment companies to the extent permitted by the 1940 Act or any exemptions therefrom which may be granted by the SEC.	(TIFI) Foreign Smaller Companies Series, Franklin Convertible Securities Fund
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 goals 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 investment companies to the extent permitted by the 1940 Act or any rules or exemptions or interpretations thereunder that may be adopted, granted or issued by the SEC.	Templeton World Fund, (TFI) Templeton Foreign Fund, Templeton Global Smaller Companies Fund, Templeton Global Bond Fund, Franklin Low Duration Total Return Fund, Franklin Mutual Recovery Fund, Templeton China World Fund, Templeton Developing Markets Trust, Franklin Balanced Fund, Franklin Templeton 2015 Retirement Target Fund, Franklin Templeton 2025 Retirement Target Fund, Franklin Templeton 2035 Retirement Target Fund, Franklin Templeton 2045 Retirement Target Fund

Real Estate

Current Fundamental Investment Restriction (The Fund may not . . .)	Fund
Acquire, lease or hold real estate, except such as may be necessary or advisable for the maintenance of its offices.	Franklin California Tax-Free Income Fund, Inc., Franklin Dynatech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund, Franklin New York Tax-Free Income Fund

L-2-10

Acquire, lease or hold real estate, except such as may be necessary or advisable for the maintenance of its offices and provided that this limitation shall not prohibit the purchase of municipal and other debt securities secured by real estate or interests therein.	Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund, Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund, Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund
Acquire, lease or hold real estate, provided that this limitation shall not prohibit the purchase of municipal and other debt securities secured by real estate or interests therein.	(TMMP) The Money Market Portfolio, (IFT) Money Market Portfolio, Franklin Cash Reserves Fund
Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from (i) purchasing or selling securities secured by real estate or interest therein or securities issued by companies that invest, deal or otherwise engage in transactions in real estate or interests therein, and (ii) making, purchasing or selling real estate mortgage loans.	Franklin California Limited-Term Tax-Free Income Fund, (FGT) Franklin Templeton High Income Fund, Franklin Large Capitalization Growth and Income Fund, Franklin Small Capitalization Equity Fund, Franklin Templeton Core Fixed Income Fund, Franklin Templeton Core Plus Fixed Income Fund, Franklin Real Return Fund, Franklin Federal Limited-Term Tax-Free Income Fund, Franklin Templeton Founding Funds Allocation Fund, Franklin Templeton Corefolio Allocation Fund, Franklin Templeton Perspectives Allocation Fund, Franklin MidCap Value Fund, Franklin Templeton Emerging Market Debt Opportunities Fund

L-2-11

Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from (i) purchasing or selling securities secured by real estate or interests therein or securities of issuers that invest, deal or otherwise engage in transactions in real estate or interests therein, and (ii) making, purchasing or selling real estate mortgage loans.	Franklin Low Duration Total Return Fund, Franklin Balanced Fund, Franklin Templeton 2015 Retirement Target Fund, Franklin Templeton 2025 Retirement Target Fund, Franklin Templeton 2035 Retirement Target Fund, Franklin Templeton 2045 Retirement Target Fund
Buy or sell real estate (other than interests in real estate investment trusts).	(FHIT) Franklin High Income Fund
Acquire, lease or hold real estate. This Restriction does not prevent a Fund from investing in REITs if they meet the investment goal and policies of the Fund. The Equity Fund, as noted in the prospectus, may invest up to 5% of its net assets in REITs.	Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund
Acquire, lease or hold real estate.	Franklin Adjustable U.S. Government Securities Fund
Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from investing in issuers which invest, deal, or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein.	Franklin Mutual Recovery Fund
Invest directly in real estate, except that the Fund could own real estate directly as a result of a default on debt securities it owns.	Franklin Real Estate Securities Fund, Franklin Global Real Estate Fund
Acquire, lease, or hold real estate. (This limitation does not preclude investments in securities collateralized by real estate or interests therein.)	Franklin Strategic Mortgage Portfolio
Invest directly in real estate, real estate limited partnerships or illiquid securities issued by real estate investment trusts; the Fund may, however, invest in marketable securities issued by real estate investment trusts.	Franklin Flex Cap Growth Fund, Franklin Small-Mid Cap Growth Fund, Franklin Global Health Care Fund, Franklin Global Communications Fund
Invest directly in real estate, real estate limited partnerships or illiquid securities issued by real estate investment trusts (the Fund may, however, invest up to 10% of its assets in marketable securities issued by real estate investment trusts.	Franklin Natural Resources Fund
Buy or sell real estate (other than interests in real estate investment trusts).	Franklin Strategic Income Fund
Buy or sell real estate or securities of real estate investment trusts.	Franklin Templeton Hard Currency Fund
Invest directly in real estate or real estate limited partnerships (although the Fund may invest in real estate investment trusts).	(FTIT) Templeton Foreign Smaller Companies Fund
Acquire, lease or hold real estate, including real estate limited partnerships, provided that this limitation shall not prohibit the purchase of municipal and other debt securities secured by real estate or interests therein.	Franklin Templeton Money Fund
Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from purchasing or selling securities secured by real estate or interests therein or securities of issuers that invest, deal or otherwise engage in transactions in real estate or interests therein.	Templeton China World Fund, Templeton Global Bond Fund
Purchase or sell real estate, unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from purchasing or selling securities secured by real estate or interests therein or securities of issuers that invest, deal or otherwise engage in transactions in real estate or interests therein.	Templeton World Fund, (TFI) Templeton Foreign Fund
Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from purchasing or selling securities secured by real estate or interests therein or securities of issuers that invest, deal or otherwise engage in transactions in real estate or interests therein.	Templeton Global Smaller Companies Fund

L-2-12

Purchase or sell real estate, except that the Fund may purchase or sell securities of real estate investment trusts.	Franklin Capital Growth Fund, Franklin Floating Rate Daily Access Fund, Franklin Total Return Fund, Franklin Rising Dividends Fund, Franklin Small Cap Growth Fund II, Franklin U.S. Long-Short Fund, Templeton Global Long-Short Fund, Franklin Large Cap Value Fund, Franklin Gold and Precious Metals Fund
Purchase or sell real estate, except that the Fund may buy or sell securities of real estate investment trusts.	Franklin International Smaller Companies Growth Fund, Franklin Aggressive Growth Fund, Franklin Technology Fund
Invest directly in interests in real estate. This restriction does not preclude investments in marketable securities of issuers engaged in these activities.	Franklin Blue Chip Fund
Invest directly in interests in real estate, except that the Fund could own real estate directly as a result of a default on debt securities it owns. This restriction does not preclude investments in marketable securities of issuers engaged in these activities.	Franklin Templeton Conservative Target Fund, Franklin Templeton Moderate Target Fund, Franklin Templeton Growth Target Fund
Invest directly in interests in real estate. This restriction does not preclude investments in marketable securities of issuers engaged in such activities.	Franklin Small Cap Value Fund
Purchase or sell real estate, except that the Fund may purchase or sell securities of real estate investment trusts and purchase, hold or sell real estate acquired as a result of ownership of securities or other instruments.	(TIFI) Foreign Smaller Companies Series, Franklin Convertible Securities Fund
Purchase or sell real estate, except that the Fund may buy or sell securities of real estate investment trusts.	Franklin Structured Large Cap Core Equity Fund, Franklin Structured Large Cap Growth Equity Fund
Purchase or sell real estate.	Franklin Biotechnology Discovery Fund
Invest in real estate or mortgages on real estate (although a 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); or purchase or sell commodity contracts (except futures contracts as described in this SAI).	(TIFI) Foreign Equity Series, Emerging Markets Series
Purchase or sell real estate. Debt or equity securities issued by companies engaged in the real estate businesses are not considered real estate for purposes of this restriction. First mortgage loans and other direct obligations secured by real estate are not considered real estate for purposes of this restriction.	Mutual Beacon Fund, Mutual Financial Services Fund, Mutual Qualified Fund, Mutual Shares Fund, Mutual Discovery Fund, Mutual European Fund
Buy or sell real estate. (Does not preclude investments in marketable securities of issuers engaged in such activities.)	Franklin Balance Sheet Investment Fund
Invest directly in interests in real estate, including limited partnership interests. (This restriction does not preclude investments in marketable securities of issuers engaged in such activities.)	Franklin MicroCap Value Fund

Commodities

Current Fundamental Investment Restriction (The Fund may not . . .)	Fund
Invest in commodities and commodity contracts.	Franklin California Tax-Free Income Fund, Inc., Franklin New York Tax-Free Income Fund, Franklin California Insured Tax-Free Income Fund,

L-2-13

Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund, Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund, Franklin Templeton Money Fund, (IFT) Money Market Portfolio, Franklin Cash Reserves Fund, Franklin Dynatech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund, (TMMP) The Money Market Portfolio, Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Franklin Adjustable U.S. Government Securities Fund, Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund

Purchase or sell commodities as defined in the Commodity Exchange Act, as amended, and the rules and regulations thereunder, unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from engaging in transactions involving future contracts and options thereon or investing in securities that are secured by physical commodities.

Franklin California Limited-Term Tax-Free Income Fund, (FGT) Franklin Templeton High Income Fund, Franklin Large Capitalization Growth and Income Fund, Franklin Small Capitalization Equity Fund, Franklin Templeton Core Fixed Income Fund, Franklin Templeton Core Plus Fixed Income Fund, Franklin Real Return Fund, Franklin Low Duration Total Return Fund, Franklin Mutual Recovery Fund, Franklin Federal Limited-Term Tax-Free Income Fund, Franklin Templeton Founding Funds Allocation Fund, Franklin Templeton Corefolio Allocation Fund, Franklin Templeton Perspectives Allocation Fund, Franklin MidCap Value Fund, Templeton China World Fund, Templeton Developing Markets Trust, Franklin Global Real Estate Fund, Franklin Templeton Emerging Market Debt Opportunities Fund

L-2-14

Purchase or sell commodities, commodity contracts (except in conformity with regulations of the Commodities Futures Trading Commission such that the series would not be considered a commodity pool). Securities or other instruments backed by commodities are not considered commodities or commodity contracts for purposes of this restriction.	Mutual Beacon Fund, Mutual Financial Services Fund, Mutual Qualified Fund, Mutual Shares Fund, Mutual Discovery Fund, Mutual European Fund
Invest in commodities and commodity contracts, except the Fund may enter into commodities contracts for hedging purposes. (Futures and related options are not considered to be within the meaning of “commodity contracts, for purposes of this restriction.)	Franklin Strategic Mortgage Portfolio
Buy or sell commodities or commodity contracts, except that the Fund may enter into financial futures contracts, options thereon, and forward contracts.	Franklin Blue Chip Fund
Purchase or sell commodities or commodity contracts; except that the Fund may enter into interest rate and financial futures contracts, options thereon, and forward contracts	Franklin Small Cap Value Fund
Buy or sell commodities or commodity contracts.	(FHIT) Franklin High Income Fund
Purchase or sell commodities, except that the Fund 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.	Franklin Capital Growth Fund, Franklin Floating Rate Daily Access Fund, Franklin Total Return Fund, Franklin Rising Dividends Funds, Franklin Small Cap Growth Fund II, Franklin U.S. Long-Short Fund, Templeton Global Long-Short Fund, Franklin Large Cap Value Fund
Purchase or sell commodities.	Franklin Biotechnology Discovery Fund, Franklin Natural Resources Fund, Franklin Templeton Conservative Target Fund, Franklin Templeton Growth Target Fund, Franklin Templeton Moderate Target Fund
Invest in commodities and commodity contracts (except that the Fund may engage in financial futures, including stock index futures, and options on stock index futures).	Franklin Flex Cap Growth Fund, Franklin Small-Mid Cap Growth Fund, Franklin Global Communications Fund, Franklin Global Health Care Fund
Invest in commodities and commodity contracts, except that the Fund may invest in financial futures and related options on futures with respect to securities and securities indices.	Franklin Real Estate Securities Fund
Invest in commodities or commodities contracts or interests (other than publicly-traded equity securities), except that the Fund may enter into contracts for hedging purposes and make margin deposits in connection therewith.	(FTIT) Templeton Foreign Smaller Companies Fund
Purchase or sell commodities, except that the Fund may purchase or sell currencies, may enter into futures contracts on securities, currencies, indices or any other financial instruments, and may purchase and sell options on such futures contracts.	Franklin International Smaller Companies Growth Fund, Franklin Convertible Securities Fund
Purchase or sell commodities, except that the Fund 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, and may also invest in gold bullion and foreign currency in the form of gold coins.	Franklin Gold and Precious Metals Fund
Purchase or sell commodities, except that the Fund may purchase or sell currencies, may enter into forward contracts and futures contracts on securities, currencies, and other indices or any other financial instruments, and may purchase and sell options on such futures contracts.	Franklin Aggressive Growth Fund, Franklin Technology Fund
Purchase or sell commodities, except that the Fund 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 futures contracts.	(TIFI) Foreign Smaller Companies Series

L-2-15

Purchase or sell commodities, except that the Fund may enter into financial futures contracts, options thereon, and forward contracts.	Franklin Structured Large Cap Core Equity Fund, Franklin Structured Large Cap Growth Equity Fund
Purchase or sell commodity contracts (except futures contracts as described in this SAI).	(TIFI) Foreign Equity Series, Emerging Markets Series
Purchase or sell commodities or commodity futures contracts or financial futures contracts.	Franklin Balance Sheet Investment Fund
Purchase or sell commodities or commodity futures contracts or financial futures contracts; or invest in put, call, straddle or spread options on financial or other futures contracts or stock index futures contracts.	Franklin MicroCap Value Fund
Buy or sell commodities, except that the Fund may buy or sell currencies, may enter into futures contracts on securities, currencies or other indices or any other financial instruments, and may buy or sell options on such futures contracts.	Franklin Strategic Income Fund
Buy or sell commodities, except that the Fund may buy or sell currencies, may enter into futures contracts on securities, currencies, securities and other indices or any other financial instruments, and may buy and sell options on such futures contracts.	Franklin Templeton Hard Currency Fund

Senior Securities

Current Fundamental Investment Restriction (The Fund may not . . .)	Fund
Issue securities senior to the Fund’s presently authorized shares of beneficial interest, 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.	Franklin Capital Growth Fund, Franklin International Smaller Companies Growth Fund, Franklin Gold and Precious Metals Fund, Franklin Rising Dividends Fund, Franklin Aggressive Growth Fund, Franklin Small Cap Growth Fund II, Franklin Technology Fund, Franklin U.S. Long-Short Fund, Templeton Global Long-Short Fund, Franklin Large Cap Value Fund, Franklin Structured Large Cap Core Equity Fund, Franklin Structured Large Cap Growth Equity Fund, Franklin Floating Rate Daily Access Fund
Issue senior securities, as defined in the 1940 Act, except that this restriction will not prevent the Fund from entering into repurchase agreements or making borrowings, mortgages and pledges as permitted by [other] restrictions.	Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Franklin Strategic Mortgage Portfolio
Issue senior securities, as defined in the 1940 Act, except that this restriction will not prevent the Fund from entering into repurchase agreements or making borrowings, mortgages and pledges as permitted by restriction #1 [relating to borrowing].	Franklin Adjustable U.S. Government Securities Fund
Issue securities senior to the Fund’s presently authorized shares of beneficial interest. Except that this restriction shall not be deemed to prohibit the Fund from (a) making any permitted borrowings, mortgages or pledges, or (b) entering into options, futures contracts, forward contracts or repurchase transactions.	Franklin Total Return Fund
Issue securities senior to its stock in excess of the maximum permitted by the Investment Company Act of 1940, as amended (1940 Act), which is currently 33 1/3% of total assets (including 5% for emergency or other short-term purposes).	Mutual Beacon Fund, Mutual Financial Services Fund, Mutual Qualified Fund, Mutual Shares Fund, Mutual Discovery Fund, Mutual European Fund
Issue securities senior to the Fund’s presently authorized shares of beneficial interest, except that the Fund may borrow as permitted by these restrictions.	Franklin Blue Chip Fund, Franklin Templeton Conservative Target Fund, Franklin Templeton Moderate Target Fund, Franklin Templeton Growth Target Fund
Issue senior securities, as defined in the Investment Company Act of 1940, as amended (1940 Act), except that this restriction shall not be deemed to prohibit the Fund from (i) making any permitted borrowings, mortgages or pledges or (ii) entering into repurchase transactions.	Franklin Balance Sheet Investment Fund

L-2-16

Issue senior securities, as defined in the 1940 Act, except that this restriction shall not be deemed to prohibit the Fund from (i) making any permitted borrowings, mortgages or pledges or (ii) entering into repurchase transactions or engage in the short sales of securities, except short sales “against the box,” if the cash or securities deposited in the segregated account with the Fund’s custodian to collateralize its short positions in the aggregate exceed 25% of the Fund’s net assets.	Franklin MicroCap Value Fund
Issue securities senior to the Fund’s presently authorized shares of beneficial interest.	Franklin Small Cap Value Fund
Issue senior securities except as set forth in [the Fund’s investment restriction relating to borrowing money.]	(TIFI) Foreign Equity Series, Emerging Markets Series
Issue senior securities.	Franklin California Tax-Free Income Fund, Inc., Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin U.S. Government Securities Fund, Franklin Utilities Fund, Franklin High Income Fund, Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund, Franklin New York Tax-Free Income Fund, Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund, Franklin Real Estate Securities Fund, Franklin Flex Cap Growth Fund, Franklin Biotechnology Discovery Fund, Franklin Global Communications Fund, Franklin Global Health Care Fund, Franklin Natural Resources Fund, Franklin Small-Mid Cap Growth Fund, Franklin Strategic Income Fund, Franklin Alabama Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin Florida Insured Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Templeton Hard Currency Fund,

L-2-17

Templeton Foreign Smaller Companies Fund, (TMMF) The Money Market Portfolio, (IFT) The Money Market Portfolio, Franklin Templeton Money Fund, Franklin Cash Reserves Fund

Concentration

Current Fundamental Investment Restriction (The Fund may not . . .)	Fund
Invest more than 25% of assets in securities of any industry. For purposes of this limitation, tax-exempt securities issued by governments or political subdivisions of governments are not considered to be part of any industry.	Franklin California Tax-Free Income Fund, Inc., Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin New York Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund
Invest more than 25% of the Fund’s net assets in securities of issuers in any one industry; although for purposes of this limitation, tax exempt securities and U.S. government obligations, as well as securities of other investment companies, are not considered to be a part of any industry.	Franklin California Limited-Term Tax-Free Income Fund
Invest more than 25% of the value of the Fund’s total assets in one particular industry.	(FHIT) Franklin High Income Fund
Invest more than 25% of its assets in securities of any industry, although for purposes of this limitation, U.S. government obligations are not considered to be part of any industry. This prohibition does not apply where the Fund’s policies, as described in the prospectus, state otherwise, and further does not apply to the extent that the Fund invests all of its assets in another registered investment company having the same investment objective and policies.	Franklin Templeton Money Fund, (IFT) Money Market Portfolio
Invest more than 25% of the value of its assets in a particular industry (except that U.S. government securities are not considered an industry and except that Financial Services will invest more than 25% of its assets in the financial services industry).	Mutual Beacon Fund, Mutual Financial Services Fund, Mutual Qualified Fund, Mutual Shares Fund, Mutual Discovery Fund, Mutual European Fund
Invest more than 25% of its assets in securities of any industry; although for purposes of this limitation, tax-exempt securities and U.S. government obligations are not considered to be part of any industry.	Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund,

L-2-18

	Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund
Invest more than 25% of the Fund’s assets (at the time of the most recent investment) in any single industry, except that the Fund will concentrate its investments in real estate securities, and except that, to the extent this restriction is applicable, all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies as the Fund.	Franklin Real Estate Securities Fund
Invest more than 25% of the Fund’s assets (at the time of the most recent investment) in any single industry.	Franklin Flex Cap Growth Fund, Franklin Small Cap Value Fund, Franklin Small-Mid Cap Growth Fund, (FTIT) Templeton Foreign Smaller Companies Fund, Franklin Large Cap Value Fund
Invest more than 25% of the Fund’s assets (at the time of the most recent investment) in any industry, except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies as the Fund.	Franklin Small Cap Growth Fund II, Franklin Blue Chip Fund, (TIFI) Foreign Smaller Companies Series
Concentrate its investments in any industry except that the Fund will invest at least 25% of its total assets in equity securities of biotechnology companies.	Franklin Biotechnology Discovery Fund
Concentrate in any industry except that the Fund will invest at least 25% of total assets in the group of health care industries consisting of pharmaceuticals, biotechnology, health care services, medical supplies and medical technology.	Franklin Global Health Care Fund
Concentrate in any industry, except that the Fund will invest at least 25% of total assets in the equity and debt securities issued by domestic and foreign companies in the utilities industries	Franklin Global Communications Fund
Concentrate in any industry, except that under normal circumstances the Fund will invest at least 25% of total assets in the securities issued by domestic and foreign companies operating within the natural resources sector; except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies as the Fund.	Franklin Natural Resources Fund
[The Fund] [c]oncentrates its investments in equity securities of companies in the technology sector, including companies expected to benefit from the development, advancement, and use of technology.	Franklin Technology Fund
Invest more than 25% of the value of the Fund’s total assets in one particular industry; except that, to the extent this restriction is applicable, all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goals and policies as the Fund.	Franklin Strategic Income Fund
Invest more than 25% of its assets in the securities of issuers in any industry, provided that there shall be no limitation on the purchase of securities issued or guaranteed by the U.S. government, its agencies or instrumentalities. Securities issued by a foreign government, its agencies and instrumentalities, or by supranational organizations, are considered one industry for concentration purposes.	Franklin Templeton Hard Currency Fund
Invest more than 25% of the Fund’s assets (at the time of the most recent investment) in any single industry.	Franklin Balance Sheet Investment Fund, Franklin MicroCap Value Fund

L-2-19

Invest more than 25% of its assets in securities of any industry, except that this policy is inapplicable where the Fund’s policies, as described in its current prospectus, state otherwise, and further does not apply to the extent that the Fund invests all or substantially all of its assets in another registered investment company having the same investment objective and policies. For purposes of this limitation, U.S. government obligations are not considered to be part of any industry.	Franklin Cash Reserves Fund
Invest more than 25% of its assets in securities of any industry, although for purposes of this limitation, U.S. government obligations are not considered to be part of any industry. This prohibition does not apply where the policies of the Fund as described in Part A specify otherwise.	(TMMP) The Money Market Portfolio
Invest more than 25% of its total assets in a single industry. The SEC considers each foreign government to be a separate industry.	(TIFI) Foreign Equity Series
Invest more than 25% of its total assets in a single industry. The SEC considers each foreign government to be a separate industry. Emerging Markets Series may invest in any industry although it will not concentrate (invest more than 25% of its total assets) in any one industry.	Emerging Markets Series
(Growth, DynaTech, Income and Utilities Fund also have policies that concentration of investments in a single industry may not exceed 25% of their assets, except that Utilities Fund will concentrate its investments in the utilities industry).	Franklin Dynatech Fund, Franklin Income Fund, Franklin Growth Fund, Franklin Utilities Fund
The Fund may concentrate (invest more than 25% of total assets) in securities of issuers engaged in mining, processing, or dealing in gold, or other precious metals.	Franklin Gold and Precious Metals Fund
Invest more than 25% of its total assets in the securities of issuers in any one industry; provided that this limitation shall not apply with respect to obligations issued or guaranteed by the U.S. government or by its agencies or instrumentalities; and provided further that the Fund will invest more than 25% and may invest up to 100% of its assets in securities of issuers in the industry group consisting of financial institutions and their holding companies, including commercial banks, thrift institutions, insurance companies and finance companies.	Franklin Floating Rate Daily Access Fund
Invest more than 25% of assets in securities of any industry, except that, in the case of the Tennessee Fund, to the extent this restriction is applicable, all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies as the Fund. For purposes of this limitation, municipal securities and U.S. government obligations are not considered to be part of any industry. Municipal securities issued to finance non-governmental business activities generally are not considered exempt from taxation under federal law. As such, these securities, if purchased by a Fund, will be subject to the prohibition in investment restriction number 10 against concentrating in an industry.	Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund
Concentrate its investments in any particular industry or group of industries.	Franklin U.S. Government Securities Fund, Franklin Equity Income Fund, Franklin Convertible Securities Fund, Franklin Adjustable U.S. Government Securities Fund, Franklin Limited Maturity U.S. Government Securities Fund, Franklin Global Real Estate Fund, Franklin Mutual Recovery Fund, Franklin Strategic Mortgage Portfolio, Franklin Templeton Conservative Target Fund, Franklin Templeton Moderate Target Fund, Franklin Templeton Growth Target Fund

L-2-20

Diversification

Current Fundamental Investment Restriction (The Fund may not . . .)	Fund
Purchase the securities of any issuer which would result in owning more than 10% of the voting securities of such issuer. As a fundamental policy, the Insured and Money Funds will not buy a security if, with respect to 75% of their total assets, more than 5% would be in the securities of a single issuer. This limitation does not apply to investments issued or guaranteed by the U.S. government or its instrumentalities.	Franklin California Insured Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund
Purchase the securities of any issuer which would result in owning more than 10% of the voting securities of such issuer. As a fundamental policy, the Fund will not buy a security if more than 5% of the value of its total assets would be in the securities of any single issuer. This limitation does not apply to investments issued or guaranteed by the U.S. government or its instrumentalities. For this purpose, each political subdivision, agency, or instrumentality, each multi-state agency of which a state is a member, and each public authority that issues private activity bonds on behalf of a private entity, is considered a separate issuer. Escrow-secured or pre-refunded bonds are not generally considered an obligation of the original municipality when determining diversification. For securities backed only by the assets or revenues of a particular instrumentality, facility or subdivision, the entity is considered the issuer.	Franklin California Tax-Free Income Fund, Inc.
Purchase the securities of any issuer which would result in owning more than 10% of the voting securities of such issuer.	Franklin California Intermediate-Term Tax-Free Income Fund
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, whether registered or excluded from registration under Section 3(c) of the 1940 Act) 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. As a fundamental policy, the Limited-Term Fund will not buy a security if, with respect to 75% of its total assets, more than 5% would be in the securities of a single issuer. This limitation does not apply to investments issued or guaranteed by the U.S. government or its instrumentalities.	Franklin California Limited-Term Tax-Free Income Fund
Purchase the securities of any issuer which would result in owning more than 10% of the voting securities of such issuer. As a fundamental policy, the Fund will not buy a security if more than 5% of the value of its total assets would be in the securities of any single issuer. See “Diversification” [in its SAI].	Franklin New York Tax-Free Income Fund
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, whether registered or excluded from registration under Section 3(c) of the 1940 Act) 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. As a fundamental policy, the Fund will not buy a security if, with respect to 75% of its total assets, more than 5% would be in securities of any single issuer (with the exception of obligations of the U.S. government).	Franklin Federal Limited-Term Tax-Free Income Fund

L-2-21

Buy the securities of any issuer which would result in owning more than 10% of the voting securities of such issuer.	Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund
Invest more than 5% of the value of the gross assets of a Fund in the securities of any one issuer, but this limitation does not apply to investments in securities issued or guaranteed by the U.S. government or its instrumentalities. Purchase the securities of any issuer which would result in any Fund owning more than 10% of the outstanding voting securities of an issuer.	Franklin Dynatech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund
Buy 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. With respect to the Fund’s fundamental investment restriction 7, securities of other investment companies include those that are either registered or excluded from registration under Section 3(c) of the 1940 Act.	Franklin International Smaller Companies Growth Fund
Purchase securities, if the purchase would cause the Fund at that time to have more than 5% of the value of its total assets invested in the securities of any one company or to own more than 10% of the voting securities of any one company (except obligations issued or guaranteed by the U.S. government).	(FHIT) Franklin High Income Fund
Invest more than 5% of the value of the gross assets of the Fund in the securities of any one issuer, but this limitation does not apply to investments in securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. Purchase the securities of any issuer which would result in owning more than 10% of any class of the outstanding voting securities of such issuer. To the extent permitted by exemptions granted under the Investment Company Act of 1940, as amended (1940 Act), the Funds may invest in shares of money market funds managed by the manager or its affiliates.	Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund
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.	Franklin Convertible Securities Fund, Franklin Rising Dividends Fund, Franklin Small Cap Growth Fund II, Franklin U.S. Long-Short Fund, Templeton Global Long-Short Fund
Invest more than 5% of the value of the gross assets of the Fund in the securities of any one issuer, but this limitation does not apply to investments in securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies of the Fund. Purchase the securities of any issuer which would result in owning more than 10% of any class of the outstanding voting securities of such issuer, except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies of the Fund. To the extent permitted by exemptions granted under the 1940 Act, the Fund may invest in shares of one or more money market funds managed by Franklin Advisers, Inc. or its affiliates.	Franklin Adjustable U.S. Government Securities Fund

L-2-22

Purchase the securities of any one issuer (other than the U.S. government or any of its agencies or instrumentalities), 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 such Fund’s total assets may be invested without regard to such 5% and 10% limitations.	Franklin Total Return Fund, Mutual Beacon Fund, Mutual Financial Services Fund, Mutual Qualified Fund, Mutual Shares Fund, Mutual Discovery Fund, Mutual European Fund
Purchase the securities of any issuer which would result in owning more than 10% of the voting securities of such issuer, except with respect to the Florida Fund, which will not purchase a security, if as a result: i) more than 25% of its total assets would be invested in the securities of a single issuer or ii) with respect to 50% of its total assets, more than 5% of its assets would be invested in the securities of a single issuer. All of the Funds, except the Florida Fund, are diversified funds. As a fundamental policy, none of the diversified Funds will buy a security if, with respect to 75% of its total assets, more than 5% would be in securities of any single issuer (with the exception of obligations of the U.S. government).	Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund
Purchase the securities of any issuer which would result in owning more than 10% of the voting securities of such issuer, except with respect to the Maryland Fund, which will not purchase a security, if as a result: i) more than 25% of its total assets would be invested in the securities of a single issuer or ii) with respect to 50% of its total assets, more than 5% of its assets would be invested in the securities of a single issuer. All of the Funds, except the Maryland Fund, are diversified funds. As a fundamental policy, none of the diversified Funds will buy a security if, with respect to 75% of its total assets, more than 5% would be in securities of any single issuer (with the exception of obligations of the U.S. government).	Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund
Purchase the securities of any issuer which would result in owning more than 10% of the voting securities of such issuer, except with respect to the Connecticut and Federal Intermediate Term Funds, each of which will not purchase a security, if as a result: i) more than 25% of its total assets would be invested in the securities of a single issuer or ii) with respect to 50% of its total assets, more than 5% of its assets would be invested in the securities of a single issuer. All of the Funds, except the Connecticut and Federal Intermediate Term Funds, are diversified funds. As a fundamental policy, none of the diversified Funds will buy a security if, with respect to 75% of its total assets, more than 5% would be in securities of any single issuer (with the exception of obligations of the U.S. government).	Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund
Invest more than 5% of the value of its total assets in the securities of any one issuer, but this limitation does not apply to investments in securities issued or guaranteed by the U.S. government, its agencies or instrumentalities. Purchase the securities of any issuer which would result in owning more than 10% of any class of the outstanding voting securities of such issuer.	Franklin Strategic Mortgage Portfolio
Buy 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 such Fund’s total assets may be invested without regard to such 5% and 10% limitations.	Franklin Aggressive Growth Fund, Franklin Structured Large Cap Core Equity Fund, Franklin Structured Large Cap Growth Equity Fund

L-2-23

Purchase the securities of any one issuer (other than obligations of the U.S., its agencies or instrumentalities) if immediately thereafter, and as a result of the purchase, the Fund would (a) have invested more than 5% of the value of its total assets in the securities of the issuer, or (b) hold more than 10% of any voting class of the securities of any one issuer.	Franklin Small-Mid Cap Growth Fund
Have invested as of the last day of any fiscal quarter (or other measuring period used for purposes of determining compliance with Subchapter M of the Internal Revenue Code) (a) more than 25% of its total assets in the securities of any one issuer, or (b) with respect to 50% of the Fund’s total assets, more than 5% of its total assets in the obligations of any one issuer, except for cash and cash items and securities issued or guaranteed by the U.S. government, its agencies or instrumentalities.	Franklin Templeton Hard Currency Fund
Purchase the securities of any one issuer (other than cash, cash items and obligations of the U.S. government) if immediately thereafter and as a result of the purchase, with respect to 75% of its total assets, the Fund would (a) have invested more than 5% of the value of its total assets in the securities of the issuer, or (b) hold more than 10% of any or all classes of the outstanding voting securities of any one issuer.	(FTIT) Templeton Foreign Smaller Companies Fund
Have invested as of the last day of any fiscal quarter (i) more than 25% of its total assets in the securities of any one issuer, or (ii) with respect to 50% of the Fund’s total assets, more than 5% of its total assets in the obligations of any one issuer, except for securities issued or guaranteed by the U.S. government, its agencies or instrumentalities. Purchase more than 10% of the voting securities, or more than 10% of any class of securities, of any issuer. For purposes of this restriction, all outstanding fixed-income securities of an issuer are considered as one class.	Franklin Balance Sheet Investment Fund
The Fund may not purchase the securities of any one issuer (other than obligations of the U.S. government, its agencies or instrumentalities) if, immediately thereafter, more than 5% of the value of its total assets would be invested in the securities of any one issuer with respect to 75% of the Fund’s total assets (pursuant to an operating policy on diversification adopted by the board of trustees of the Fund and to comply with requirements under Rule 2a-7 under the Investment Company Act of 1940 (1940 Act), the 5% limitation applies to the Portfolio’s total assets and is more restrictive than the Fund’s fundamental policy), or more than 10% of the outstanding voting securities of any one issuer would be owned by the Fund, except that this policy does not apply to the extent all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objectives and policies as the Fund.	(IFT) Money Market Portfolio
The Fund: (a) may not buy a security if, with respect to 75% of its total assets, more than 5% would be invested in the securities of any one issuer, and (b) may not invest in a security if the Fund would own more than 10% of the outstanding voting securities of any one issuer. These limitations do not apply to obligations issued or guaranteed by the U.S. government or its instrumentalities. In accordance with procedures adopted pursuant to Rule 2a-7 under the Investment Company Act of 1940 (1940 Act), the Money Fund will not invest more than 5% of the Money Fund’s total assets in Eligible Securities of a single issuer, other than U.S. government securities. As a money market fund, the Fund must follow certain procedures required by federal securities laws that may be more restrictive than some of the Fund’s other policies or investment restrictions. With respect to diversification, these procedures require that the Fund not invest more than 5% of its total assets in securities of a single issuer, other than U.S. government securities, although it may invest up to 25% of its total assets in securities of a single issuer that are rated in the highest rating category for a period of up to three business days	(TMMP) The Money Market Portfolio

L-2-24

after purchase. The Fund also must not invest more than (a) the greater of 1% of its total assets or $1 million in securities issued by a single issuer that are rated in the second highest rating category; and (b) 5% of its total assets in securities rated in the second highest rating category. These procedures are fundamental policies of the Fund.
Purchase any security (other than obligations of the U.S. government, its agencies or instrumentalities) if, as a result, as to 75% of the Fund’s total assets (i) more than 5% of the Fund’s total assets would then be invested in securities of any single issuer, or (ii) the Fund would then own more than 10% of the voting securities of any single issuer.	(TIFI) Foreign Equity Series
Purchase any security (other than obligations of the U.S. government, its agencies or instrumentalities) if, as a result, as to 75% of the Fund’s total assets (i) more than 5% of the Fund’s total assets would then be invested in securities of any single issuer, or (ii) the Fund would then own more than 10% of the voting securities of any single issuer. With respect to 75% of its total assets, Emerging Markets Series may only invest up to 5% of its total assets in securities issued by any one company or foreign government. Emerging Markets Series may invest any amount of its assets in U.S. government securities.	Emerging Markets Series
As a money market fund, the Fund must follow certain procedures required by federal securities laws that may be more restrictive than some of the Fund’s other policies or investment restrictions. With respect to diversification, these procedures require that the Fund not invest more than 5% of its total assets in securities of a single issuer, other than U.S. government securities, although it may invest up to 25% of its total assets in securities of a single issuer that are rated in the highest rating category for a period of up to three business days after purchase. The Fund also must not invest more than (a) the greater of 1% of its total assets or $1 million in securities issued by a single issuer that are rated in the second highest rating category; and (b) 5% of its total assets in securities rated in the second highest rating category. These procedures are fundamental policies of the Fund, except to the extent that the Fund invests all of its assets in another registered investment company with the same investment objective and substantially similar policies as the Fund.	Franklin Templeton Money Fund, Franklin Cash Reserves Fund
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.	Franklin Large Cap Value Fund, Foreign Smaller Companies Series
As a diversified fund, with respect to 75% of its total assets, the Fund may not invest more than 5% in any one issuer nor may it own more than 10% of the outstanding voting securities of any one issuer, except that this restriction does not apply to cash, cash items (including receivables), government securities, and securities of other investment companies. All or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies as the Fund.	Franklin Blue Chip Fund

L-2-25

EX-99.M

     EXHIBIT M

COMPARISON OF CURRENT AND PROPOSED FUNDAMENTAL
INVESTMENT RESTRICTIONS REGARDING INDUSTRY CONCENTRATION (SEE PROPOSAL 4)

Fund Name	Current Fundamental Concentration Restriction	Proposed Fundamental Concentration Restriction
Mutual Financial Services Fund	[The Fund may not]: Invest more than 25% of the value of its assets in a particular industry (except that U.S. government securities are not considered an industry and except that Financial Services will invest more than 25% of its assets in the financial services industry).	[The Fund may not]: Invest more than 25% of the Fund’s net assets in securities of issuers in any one 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), except that, under normal market conditions, the Fund will invest more than 25% of its net assets in the securities issued by companies operating in the financial services industry.1
		1Although not part of the Fund’s fundamental investment restriction, for illustration purposes, such industries currently include, but are not limited to, banking, savings and loans, credit cards, securities brokerage, sub-prime lending, investment management and insurance.
Franklin Real Estate Securities Fund	Invest more than 25% of the Fund’s assets (at the time of the most recent investment) in any single industry, except that the Fund will concentrate its investments in real estate securities, and except that, to the extent this restriction is applicable, all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies as the Fund.	[The Fund may not]: Invest more than 25% of the Fund’s net assets in securities of issuers in any one 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), except that, under normal market conditions, the Fund will invest more than 25% of its net assets in the securities issued by companies operating within the real estate industry and related industries.1 Same as above
Franklin Global Real Estate Fund	None	1Although not part of the Fund’s fundamental investment restriction, for illustration purposes, such companies currently include, but not are limited to, real estate investment trusts, real estate operating or service companies, homebuilders, real estate developers and lodging providers.
Franklin Biotechnology Discovery Fund	Concentrate its investments in any industry except that the Fund will invest at least 25% of its total assets in equity securities of biotechnology companies.	[The Fund may not]: Invest more than 25% of the Fund’s net assets in securities of issuers in any one 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), except that, under normal market conditions, the Fund will invest more than 25% of its net assets in the securities issued by companies operating within the biotechnology industries.1
		1 Although not part of the Fund’s fundamental investment restriction, for illustration purposes, such companies currently include, but are not limited to, those involved in biotechnology research, development, and manufacture, the distribution of various biotechnological or biomedical products, services and processes and the application and development of biotechnology in areas such as health care, pharmaceuticals and agriculture.

M-1

Franklin Global Health Care Fund	Concentrate in any industry except that the Fund will invest at least 25% of total assets in the group of health care industries consisting of pharmaceuticals, biotechnology, health care services, medical supplies and medical technology.	[The Fund may not]: Invest more than 25% of the Fund’s net assets in securities of issuers in any one 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), except that, under normal market conditions, the Fund will invest more than 25% of its net assets in the securities issued by domestic and foreign companies operating within the health care industry and related industries. 1 1 Although not part of the Fund’s fundamental investment restriction, for illustration purposes, such industries currently include, but are not limited to, pharmaceuticals, biotechnology, health care services, medical supplies and medical technology.
Franklin Global Communications Fund	Concentrate in any industry, except that the Fund will invest at least 25% of total assets in the equity and debt securities issued by domestic and foreign companies in the utilities industries. The Fund has a fundamental investment policy of investing at least 25% of its total assets in industries of the utilities sector. The utilities sector includes the communications industries.	[The Fund may not]: Invest more than 25% of the Fund’s net assets in securities of issuers in any one 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), except that, under normal market conditions, the Fund will invest more than 25% of its net assets in securities issued by domestic and foreign companies operating in the communications industries.1 1 Although not part of the Fund’s fundamental investment restriction, for illustration purposes, such industries currently include, but are not limited to, telecommunications and other communication services, distribution and provision of information and other content, and the sale, manufacture and/or distribution of communications equipment and components.
Franklin Natural Resources Fund	Concentrate in any industry, except that under normal circumstances the Fund will invest at least 25% of total assets in the securities issued by domestic and foreign companies operating within the natural resources sector; except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies as the Fund;	[The Fund may not]: Invest more than 25% of the Fund’s net assets in securities of issuers in any one 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), except that, under normal market conditions, the Fund will invest more than 25% of its net assets in the securities issued by domestic and foreign companies operating within the natural resources industries.1 1 Although not part of the Fund’s fundamental investment restriction, for illustration purposes, such industries currently include, but are not limited to, integrated oil, oil and gas exploration and production, gold and other precious metals, steel and iron ore production, energy services and technology, base metal production, forest products, farming products, paper products, chemicals, building materials, coal, alternative energy sources and environmental services.

M-2

Franklin Utilities Fund	Utilities Fund also has policies that concentration of investments in a single industry may not exceed 25% of its assets, except that Utilities Fund will concentrate its investments in the utilities industry. As a fundamental policy, the Fund’s assets may be invested in securities of an issuer engaged in the public utilities industry, or held in cash or cash equivalents.	[The Fund may not]: Invest more than 25% of the Fund’s net assets in securities of issuers in any one 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), except that, under normal market conditions, the Fund will invest more than 25% of its net assets in the securities issued by companies operating in the utilities industries.1 1 Although not part of the Fund’s fundamental investment restriction, for illustration purposes, such industries currently include, but are not limited to, electricity, natural gas, water, and communication services.
Franklin Gold and Precious Metals Fund	The Fund may concentrate (invest more than 25% of total assets) in securities of issuers engaged in mining, processing, or dealing in gold, or other precious metals.	[The Fund may not]: Invest more than 25% of the Fund’s net assets in securities of issuers in any one 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), except that, under normal market conditions, the Fund will invest more than 25% of its net assets in the securities issued by companies engaged in the mining, processing or dealing in gold or other precious metals.
Franklin Technology Fund	[The Fund] [c]oncentrates its investments in equity securities of companies in the technology sector, including companies expected to benefit from the development, advancement, and use of technology.	[The Fund may not]: Invest more than 25% of the Fund’s net assets in securities of issuers in any one 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), except that, under normal market conditions, the Fund will invest more than 25% of its net assets in the securities issued by companies operating within the technology industries.1 1 Although not part of the Fund’s fundamental investment restriction, for illustration purposes, such industries currently include, but are not limited to, computer software; information technology services, computing hardware, peripherals and components; telecommunications; health technology and biotechnology; and aerospace and defense technologies.

M-3

EX-99.N-1

EXHIBIT N-1

FUNDAMENTAL INVESTMENT RESTRICTIONS RECOMMENDED TO BE ELIMINATED AS DISCUSSED IN PROPOSAL 5

	ELIMINATE
	ADDRESSED BY THE 1940 ACT OR SEC		PREEMPTED BY NSMIA
	STAFF INTERPRETATIONS
Franklin California Tax-Free Income   Fund, Inc.
Franklin California Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin California Tax-Free Trust
Franklin California Insured Tax-Free Income	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin California Intermediate-Term Tax-	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Free Income Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin California Tax-Exempt Money Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Custodian Funds, Inc.
Franklin DynaTech Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers

N-1-1

	ELIMINATE
	ADDRESSED BY THE 1940 ACT OR SEC		PREEMPTED BY NSMIA
	STAFF INTERPRETATIONS
Franklin Growth Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers
Franklin Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers
Franklin U.S. Government Securities Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers
Franklin Utilities Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers
Franklin High Income Trust
Franklin High Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
			3).	Management Ownership of Securities
Franklin Investors Securities Trust
Franklin Adjustable U.S. Government	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Securities Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers

N-1-2

	ELIMINATE
	ADDRESSED BY THE 1940 ACT OR SEC		PREEMPTED BY NSMIA
	STAFF INTERPRETATIONS
Franklin Equity Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers
Franklin Limited Maturity U.S. Government	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Securities Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers
Franklin Municipal Securities Trust
Franklin California High Yield Municipal	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Tennessee Municipal Bond Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Managemen	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Mutual Series Fund, Inc.
Mutual Beacon Fund	1).	Sell Short and Use Margin	1).	Invest in Oil, Gas or Mineral Interests
Mutual Discovery Fund	1).	Sell Short and Use Margin	1).	Invest in Oil, Gas or Mineral Interests
Mutual European Fund	1).	Sell Short and Use Margin	1).	Invest in Oil, Gas or Mineral Interests
Mutual Financial Services Fund	1).	Sell Short and Use Margin	1).	Invest in Oil, Gas or Mineral Interests
Mutual Qualified Fund	1).	Sell Short and Use Margin	1).	Invest in Oil, Gas or Mineral Interests
Mutual Shares Fund	1).	Sell Short and Use Margin	1).	Invest in Oil, Gas or Mineral Interests

N-1-3

	ELIMINATE
	ADDRESSED BY THE 1940 ACT OR SEC		PREEMPTED BY NSMIA
	STAFF INTERPRETATIONS
Franklin New York Tax-Free Income Fund
	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin New York Tax-Free Trust
Franklin New York Insured Tax-Free Income	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin New York Intermediate-Term Tax	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Free Income Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin New York Limited-Term Tax-Free	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Income Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin New York Tax-Exempt Money Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Real Estate Securities Trust
Franklin Real Estate Securities Fund	1).	Sell Short and Use Margin	1).	Invest to Exercise Control
	2).	Invest in Restricted or Illiquid Securities	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers

N-1-4

	ELIMINATE
	ADDRESSED BY THE 1940 ACT OR SEC		PREEMPTED BY NSMIA
	STAFF INTERPRETATIONS
Franklin Strategic Mortgage Portfolio
	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers
Franklin Strategic Series
Franklin Biotechnology Discovery Fund	1).	Invest in Restricted or Illiquid Securities	1).	Invest to Exercise Control
			2).	Invest in Other Investment Companies
Franklin Blue Chip Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest in Oil, Gas or Mineral Interests
Franklin Flex Cap Growth Fund	1).	Sell Short and Use Margin	1).	Invest to Exercise Control
	2).	Invest in Restricted or Illiquid Securities	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers
Franklin Global Communications Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers
Franklin Global Health Care Fund	1).	Sell Short and Use Margin	1).	Invest to Exercise Control
	2).	Invest in Restricted or Illiquid Securities	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers
Franklin Natural Resources Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Oil, Gas or Mineral Interests
			5).	Unseasoned Issuers

N-1-5

	ELIMINATE
	ADDRESSED BY THE 1940 ACT OR SEC		PREEMPTED BY NSMIA
	STAFF INTERPRETATIONS
Franklin Small-Mid Cap Growth Fund	1).	Sell Short and Use Margin	1).	Invest to Exercise Control
	2).	Invest in Restricted or Illiquid Securities	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Unseasoned Issuers
Franklin Strategic Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
Franklin Tax-Free Trust
Franklin Alabama Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Arizona Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Colorado Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Connecticut Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests

N-1-6

	ELIMINATE
	ADDRESSED BY THE 1940 ACT OR SEC		PREEMPTED BY NSMIA
	STAFF INTERPRETATIONS
Franklin Double Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Federal Intermediate-Term Tax-Free	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Income Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Florida Insured Tax-Free Income	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Florida Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Georgia Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin High Yield Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests

N-1-7

	ELIMINATE
	ADDRESSED BY THE 1940 ACT OR SEC		PREEMPTED BY NSMIA
	STAFF INTERPRETATIONS
Franklin Insured Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Kentucky Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Louisiana Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Maryland Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Massachusetts Insured Tax-Free	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Income Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Michigan Insured Tax-Free Income	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests

N-1-8

	ELIMINATE
	ADDRESSED BY THE 1940 ACT OR SEC		PREEMPTED BY NSMIA
	STAFF INTERPRETATIONS
Franklin Minnesota Insured Tax-Free Income	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Missouri Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin New Jersey Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin North Carolina Tax-Free Income	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
Fund	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Ohio Insured Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Oregon Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interest

N-1-9

	ELIMINATE
	ADDRESSED BY THE 1940 ACT OR SEC		PREEMPTED BY NSMIA
	STAFF INTERPRETATIONS
Franklin Pennsylvania Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Virginia Tax-Free Income Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Franklin Templeton Fund Allocator Series
Franklin Templeton Conservative Target Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest in Oil, Gas or Mineral Interests
Franklin Templeton Growth Target Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest in Oil, Gas or Mineral Interests
Franklin Templeton Moderate Target Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest in Oil, Gas or Mineral Interests
Franklin Templeton International Trust
Templeton Foreign Smaller Companies Fund	1).	Sell Short and Use Margin	1).	Invest to Exercise Control
	2).	Invest in Restricted or Illiquid Securities	2).	Invest in Other Investment Companies
			3).	Management Ownership of Securities
			4).	Invest in Oil, Gas or Mineral Interests
			5).	Unseasoned Issuers
Franklin Templeton Global Trust
Franklin Templeton Hard Currency Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
			3).	Invest in Oil, Gas or Mineral Interests
			4).	Unseasoned Issuers
Franklin Templeton Money Fund Trust
Franklin Templeton Money Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests

N-1-10

	ELIMINATE
	ADDRESSED BY THE 1940 ACT OR SEC		PREEMPTED BY NSMIA
	STAFF INTERPRETATIONS
Franklin Value Investors Trust
Franklin Balance Sheet Investment Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Invest in Warrants
Franklin MicroCap Value Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Principal Transactions with Management	3).	Management Ownership of Securities
			4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			6).	Invest in Warrants
Franklin Small Cap Value Fund			1).	Invest in Oil, Gas or Mineral Interests
Institutional Fiduciary Trust
Franklin Cash Reserves Fund	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with  Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
Money Market Portfolio	1).	Mortgage, Pledge of Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests
			[6).	Unseasoned Issuers]
The Money Market Portfolios
The Money Market Portfolio	1).	Mortgage, Pledge or Hypothecate	1).	Invest to Exercise Control
	2).	Sell Short and Use Margin	2).	Invest in Other Investment Companies
	3).	Invest in Restricted or Illiquid Securities	3).	Management Ownership of Securities
	4).	Principal Transactions with Management	4).	Invest in Put and Call Options
			5).	Invest in Oil, Gas or Mineral Interests

N-1-11

	ELIMINATE
	ADDRESSED BY THE 1940 ACT OR SEC		PREEMPTED BY NSMIA
	STAFF INTERPRETATIONS
Templeton Institutional Funds, Inc.
Emerging Markets Series	1).	Sell Short and Use Margin	1).	Invest in Other Investment Companies
	2).	Invest in Restricted or Illiquid Securities	2).	Management Ownership of Securities
	3).	Maintain a Joint Trading Account	3).	Invest in Oil, Gas or Mineral Interests
			4).	Unseasoned Issuers
			5).	Invest in Warrants
Foreign Equity Series	1).	Sell Short and Use Margin	1).	Invest in Other Investment Companies
	2).	Maintain a Joint Trading Account	2).	Management Ownership of Securities
			3).	Invest in Oil, Gas or Mineral Interests
			4).	Unseasoned Issuers
			5).	Invest in Warrants

N-1-12

EX-99.N-2

EXHIBIT N-2

TEXT OF FUNDAMENTAL INVESTMENT RESTRICTIONS RECOMMENDED TO BE ELIMINATED AS
DISCUSSED IN PROPOSAL 5

Mortgaging, Pledging or Hypothecating
Fundamental Investment Restriction Recommended to be Eliminated (The Fund may not…)	Fund
Mortgage or pledge any of its assets, except that borrowing for temporary or emergency purposes may be made in the amount up to 5% of the total asset value.	Franklin California Tax-Free Income Fund, Inc., Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund, Franklin New York Tax-Free Income Fund
Mortgage or pledge any of its assets, except it may pledge its assets in connection with [permissible] borrowings.	Franklin Blue Chip Fund
Mortgage or pledge any of its assets, except that borrowings (and a pledge of assets thereof) for temporary or emergency purposes may be made from banks in any amount up to 5% of the total asset value.	Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund, Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Cash Reserves Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund, (IFT) Money Market Portfolio, (TMMP) The Money Market Portfolio, Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund, Franklin Templeton Money Fund
Mortgage or pledge any of the assets of the Fund, except that borrowings (and a pledge of assets therefor) for temporary or emergency purposes may be made from banks in an amount up to 20% of total asset value.	Franklin Adjustable U.S. Government Securities Fund, Franklin Strategic Mortgage Portfolio
Mortgage or pledge any of its assets, except in the form of reverse repurchase agreements or from banks for temporary or emergency purposes in an amount up to 33% of the value of the Fund’s total assets (including the amount borrowed) based on the lesser of cost or market, less liabilities (not including the amount borrowed) at the time the borrowing is made.	Franklin Global Communications Fund, Franklin Natural Resources Fund
Mortgage or pledge any of its assets, except it may pledge its assets in connection with [permissible] borrowings.	Franklin Templeton Conservative Target Fund, Franklin Templeton Moderate Target Fund, Franklin Templeton Growth Target Fund

N-2-1

Pledge, hypothecate, mortgage or otherwise encumber its assets, except in an amount up to 33 1/3% of the value of its total assets, but only to secure borrowings for temporary or emergency purposes provided that the deposit or payment of initial or variation margin in connection with transactions in options and futures shall not be treated as a pledge of assets hereunder.	Franklin Templeton Hard Currency Fund
Pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure borrowings for temporary or emergency purposes and permissible options, short selling or other hedging transactions.	Franklin Balance Sheet Investment Fund
Pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure borrowings to meet redemption requests or for temporary or emergency purposes and permissible options, short selling or other hedging transactions.	Franklin MicroCap Value Fund
Pledge or hypothecate any of the Fund’s assets.	Franklin High Income Fund
Pledge or hypothecate any of the Fund’s assets; except that the Fund may enter into financial futures and options on financial futures as discussed.	Franklin Strategic Income Fund

Purchasing Securities on Margin and Engaging in Short Sales
Fundamental Investment Restriction Recommended to be Eliminated (The Fund may not…)	Fund
Buy any securities on “margin” or sell any securities “short.”	Franklin California Tax-Free Income Fund, Inc., Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund, Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Franklin Adjustable U.S. Government Securities Fund, Franklin New York Tax-Free Income Fund,
Buy any securities on margin or sell any securities short, except that it may use such short-term credits as are necessary for the clearance of transactions.	Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund, Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund, Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund,

N-2-2

	Franklin High Yield Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund, Franklin Templeton Money Fund, Money Market Portfolio, The Money Market Portfolio, Franklin Cash Reserves Fund
Except as may be described in the prospectus, engage in short sales, purchase securities on margin or maintain a net short position. [The term prospectus as referenced in this restriction includes the Fund’s SAI.]	Mutual Beacon Fund, Mutual Financial Services Fund, Mutual Qualified Fund, Mutual Shares Fund, Mutual Discovery Fund, Mutual European Fund
Buy any securities on “margin” or sell any securities “short,” except for any delayed-delivery or when-issued securities as described in the prospectus.	Franklin Strategic Mortgage Portfolio
Effect short sales, unless at the time the Fund owns securities equivalent in kind and amount to those sold (which will normally be for deferring recognition of gains or losses for tax purposes).	Franklin Natural Resources Fund
Sell securities short or buy on margin.	Franklin Strategic Income Fund
Sell securities short or buy securities on margin, provided that the deposit or payment of initial or variation margin in connection with transactions in options and futures shall not be treated as the purchase of securities on margin hereunder.	Franklin Templeton Hard Currency Fund
Engage in the short sales of securities, except short sales “against the box,” if the cash or securities deposited in the segregated account with the Fund’s custodian to collateralize its short positions in the aggregate exceed 25% of the Fund’s net assets.   Purchase securities on margin. (Does not preclude the Fund from obtaining such short-term credit as may be necessary for the clearance of purchases and sales of its portfolio securities.)	Franklin Balance Sheet Investment Fund
Purchase on margin or sell short (but a Fund may make margin payments in connection with options on securities or securities indices and foreign currencies; futures contracts and related options; and forward contracts and related options).	Foreign Equity Series, Emerging Markets Series
Sell securities short or buy on margin.	Franklin High Income Fund
Maintain a margin account with a securities dealer.   Effect short sales, unless at the time the Fund owns securities equivalent in kind and amount to those sold (which will normally be for deferring recognition of gains or losses for tax purposes). (Although the Fund may engage in short sales if it owns securities equivalent in kind and amount to the securities sold short, the Fund does not currently intend to employ this investment technique.)	Franklin Real Estate Securities Fund
Maintain a margin account with a securities dealer. Effect short sales, unless at the time the Fund owns securities equivalent in kind and amount to those sold (which will normally be for deferring recognition of gains or losses for tax purposes).	Franklin Flex Cap Growth Fund

N-2-3

Maintain a margin account with a securities dealer. Effect short sales, unless at the time the Fund owns securities equivalent in kind and amount to those sold (which will normally be for deferring recognition of gains or losses for tax purposes). The Fund does not currently intend to employ this investment technique.	Franklin Global Communications Fund, Franklin Global Health Care Fund, Franklin Small-Mid Cap Growth Fund
Maintain a margin account with a securities dealer, except that the Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities. Effect short sales, unless at the time the Fund owns securities equivalent in kind and amount to those sold.	Templeton Foreign Smaller Companies Fund
Purchase securities on margin. (This does not preclude the Fund from obtaining such short-term credit as may be necessary for the clearance of purchases and sales of its portfolio securities.)	Franklin MicroCap Value Fund

Investments in Restricted or Illiquid Securities
Fundamental Investment Restriction Recommended to be Eliminated (The Fund may not…)	Fund
Invest more than 15% of its assets in illiquid securities.	Franklin Biotechnology Discovery Fund
Invest more than 5% of its assets in securities with legal or contractual restrictions on resale (although the Fund may invest in such securities to the extent permitted under the federal securities laws) or which are not readily marketable, if more than 15% of the Fund’s total assets would be invested in such companies.	Franklin Global Communications Fund
Invest more than 5% of its assets in illiquid securities with legal or contractual restrictions on resale (although the Fund may invest in Rule 144A restricted securities to the full extent permitted under the federal securities laws); except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies as the Fund.	Franklin Natural Resources Fund
Invest more than 10% of its assets in securities with legal or contractual restrictions on resale (although the Fund may invest in such securities to the extent permitted under the federal securities laws) or which are not readily marketable.	Franklin Flex Cap Growth Fund
Invest more than 10% of its assets in securities with legal or contractual restrictions on resale (although the Fund may invest in such securities to the extent permitted under the federal securities laws, for example, transactions between the Fund and Qualified Institutional Buyers subject to Rule 144A under the Securities Act of 1933) or which are not readily marketable.	Franklin Small-Mid Cap Growth Fund, Franklin Global Health Care Fund
Invest more than 10% of its assets in securities with legal or contractual restrictions on resale.	Franklin New York Tax-Exempt Money Fund
Purchase securities in private placements or in other transactions for which there are legal or contractual restrictions on resale.	Franklin California Tax-Free Income Fund, Inc., Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin New York Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin Florida Insured Tax-Free Income Fund

N-2-4

Purchase securities in private placements or in other transactions, for which there are legal or contractual restrictions on resale and which are not readily marketable, or enter into a repurchase agreement with more than seven days to maturity if, as a result, more than 10% of the total assets of the Fund would be invested in such securities or repurchase agreements, except that, to the extent this restriction is applicable, the Fund may purchase, in private placements, shares of another registered investment company having the same investment objective and policies as the Fund.	Franklin Cash Reserves Fund, Money Market Portfolio
Purchase securities, in private placements or in other transactions, for which there are legal or contractual restrictions on resale and are not readily marketable, or enter into a repurchase agreement with more than seven days to maturity if, as a result, more than 10% of the total assets of the Fund would be invested in such securities or repurchase agreements.	The Money Market Portfolio
Purchase securities in private placements or in other transactions, for which there are legal or contractual restrictions on resale, except that, to the extent this restriction is applicable, the Fund may purchase, in private placements shares of another registered investment company having the same investment objective and policies as the Fund.	Franklin Templeton Money Fund
Emerging Markets may invest up to 15% of its net assets in foreign securities that are not listed on a recognized U.S. or foreign securities exchange, including up to 10% of its total assets in restricted securities, securities that are not readily marketable, repurchase agreements with more than seven days to maturity, and over-the-counter options bought by the Fund.	Emerging Markets Series
Invest more than 10% of the value of its total assets in illiquid securities with legal or contractual restrictions on resale (although the Fund may invest in such securities to the extent permitted under the federal securities laws) or which are not readily marketable, except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies as the Fund.	Franklin Real Estate Securities Fund
Purchase illiquid securities, including illiquid securities which, at the time of acquisition, could be disposed of publicly by the Fund only after registration under the Securities Act of 1933, as amended (1933 Act), if as a result more than 10% of its net assets would be invested in such illiquid securities.	Templeton Foreign Smaller Companies Fund
Purchase or hold the securities of any issuer if, as a result, in the aggregate, more than 10% of the value of the Fund’s total assets would be invested in securities that are subject to legal or contractual restrictions on resale (restricted securities), in securities that are not readily marketable (including over-the-counter options) or in repurchase agreements maturing in more than seven days.	Franklin Balance Sheet Investment Fund

N-2-5

Invest to Exercise Control
Fundamental Investment Restriction Recommended to be Eliminated (The Fund may not…)	Fund
Invest in companies for the purpose of exercising control or management.	Franklin California Tax-Free Income Fund, Inc., Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund, Franklin High Income Fund, Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Franklin New York Tax-Free Income Fund, Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund, Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund, Franklin Strategic Mortgage Portfolio, Franklin California High Yield Municipal Fund
Invest in any issuer for purposes of exercising control or management, except that, to the extent this restriction is applicable, all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies as the Fund.	Franklin Adjustable U.S. Government Securities Fund, Franklin Real Estate Securities Fund, Franklin Templeton Money Fund, Money Market Portfolio, Franklin Cash Reserves Fund
Invest in companies for the purpose of exercising control or management, except that, to the extent this restriction is applicable, all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies as the Fund.	Franklin Tennessee Municipal Bond Fund
Invest in securities for the purpose of exercising management or control of the issuer.	Franklin Flex Cap Growth Fund, Franklin Small-Mid Cap Growth Fund, Franklin Biotechnology Discovery Fund, Franklin Global Health Care Fund, Franklin Global Communications Fund, Templeton Foreign Smaller Companies Fund
Invest in securities for the purpose of exercising management or control of the issuer; except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies as the Fund.	Franklin Natural Resources Fund, Franklin MicroCap Value Fund

N-2-6

Invest in securities for the purpose of exercising management or control of the issuer, except that, to the extent this restriction is applicable, all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goals and policies as the Fund.	Franklin Strategic Income Fund
Invest in companies for the purpose of exercising control.	Franklin Templeton Hard Currency Fund
Invest in any issuer for purposes of exercising control or management.	Franklin Balance Sheet Investment Fund, The Money Market Portfolio

Investments in Other Investment Companies
Fundamental Investment Restriction Recommended to be Eliminated (The Fund may not…)	Fund
Invest in the securities of other investment companies, except to the extent permitted by the 1940 Act, or pursuant to any exemptions therefrom, including any exemption permitting the Fund to invest in shares of one or more money market funds managed by the manager or its affiliates, or except that securities of another investment company may be acquired pursuant to a plan of reorganization, merger, consolidation or acquisition.	Templeton Foreign Smaller Companies Fund
Invest in other open-end investment companies except as permitted by the 1940 Act.	Foreign Equity Series, Emerging Markets Series
Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization; except to the extent the Fund invests its uninvested daily cash balances in shares of Franklin California Tax Exempt Money Fund and other tax-exempt money market funds in Franklin Templeton Investments provided i) its purchases and redemptions of such money market fund shares may not be subject to any purchase or redemption fees, ii) its investments may not be subject to duplication of management fees, nor to any charge related to the expense of distributing the Fund’s shares (as determined under Rule 12b-1, as amended under the federal securities laws) and iii) aggregate investments by the Fund in any such money market fund do not exceed (A) the greater of (i) 5% of the Fund’s total net assets or (ii) $2.5 million, or (B) more than 3% of the outstanding shares of any such money market fund.	Franklin California Tax-Free Income Fund, Inc., Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund
Purchase securities of other investment companies, except in connection with a merger, consolidation or reorganization; except to the extent the Fund invests its uninvested daily cash balances in shares of Franklin Tax Exempt Money Fund and other tax-exempt money market funds in Franklin Templeton Investments provided i) its purchases and redemptions of such money market fund shares may not be subject to any purchase or redemption fees, ii) its investments may not be subject to duplication of management fees, nor to any charge related to the expense of distributing the Fund’s shares (as determined under Rule 12b-1, as amended under the federal securities laws) and iii) aggregate investments by the Fund in any such money market fund do not exceed (A) the greater of (i) 5% of the Fund’s total net assets or (ii) $2.5 million, or (B) more than 3% of the outstanding shares of any such money market fund.	Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-FreeIncome Fund

N-2-7

Purchase securities of other investment companies; except to the extent each Fund invests its uninvested daily cash balances in shares of the Franklin Money Fund and other money market funds in Franklin Templeton Investments provided (i) its purchases and redemptions of such money market fund shares may not be subject to any purchase or redemption fees, (ii) its investments may not be subject to duplication of management fees, nor to any charge related to the expense of distributing each Fund’s shares (as determined under Rule 12b-1, as amended, under the federal securities laws) and (iii) provided aggregate investments by a Fund in any such money market Fund do not exceed (A) the greater of (i) 5% of each Fund’s total net assets or (ii) $2.5 million, or (B) more than 3% of the outstanding shares of any such money market fund.	Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund
Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition, reorganization; provided that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies as the Fund.	Franklin Templeton Money Fund, Franklin Cash Reserves Fund
Invest in the securities of another investment company, except securities acquired in connection with a merger, consolidation or reorganization; except to the extent the Fund invests its uninvested daily cash balances in shares of the Franklin Money Fund and other money market funds in the Franklin Templeton funds provided (i) its purchases and redemptions of such money market Fund shares may not be subject to any purchase or redemption fees, (ii) its investments may not be subject to duplication of management fees, nor to any charge related to the expense of distributing the Fund’s shares (as determined under Rule 12b-1, as amended under the federal securities laws), and (iii) aggregate investments by the Fund in any such money market Fund do not exceed (a) the greater of (i) 5% of the Fund’s total net assets or (ii) $2.5 million, or (b) more than 3% of the outstanding shares of any such money market fund.	Franklin High Income Fund, Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund
Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization; except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies as the Fund or except to the extent the Fund invests its uninvested daily cash balances in shares of the Franklin Money Fund and other money market fund in Franklin Templeton Investments provided (i) the purchases and redemptions of such money fund shares may not be subject to any purchase or redemption fees, (ii) the investments may not be subject to duplication of management fees, nor to any charge related to the expense of distributing the Fund’s shares (as determined under Rule 12b-1 under federal securities laws), and (iii) aggregate investments by the Fund in any such money fund do not exceed (A) the greater of (i) 5% of the Fund’s total net assets or (ii) $2.5 million, or (B) more than 3% of the outstanding shares of any such money fund.	Franklin Adjustable U.S. Government Securities Fund

N-2-8

Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition, or reorganization, provided that, in the case of the Tennessee Fund, all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies as the Fund. To the extent permitted by exemptions which may be granted under the Investment Company Act of 1940, as amended, the Fund may invest in shares of one or more money market funds managed by the Fund’s investment manager or its affiliates.	Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund
Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization; except to the extent the Fund invests its uninvested daily cash balances in shares of Franklin New York Tax-Exempt Money Fund and other tax exempt money market funds in Franklin Templeton Investments provided (i) its purchases and redemptions of such money market fund shares may not be subject to any purchase or redemption fees, (ii) its investments may not be subject to duplication of management fees, nor to any charge related to the expense of distributing the Fund’s shares (as determined under Rule 12b-1, as amended under the federal securities laws) and (iii) aggregate investments by the Fund in any such money market fund do not exceed (A) the greater of (i) 5% of the Fund’s total net assets or (ii) $2.5 million, or (B) more than 3% of the outstanding shares of any such money market fund.	Franklin New York Tax-Free Income Fund
Buy securities of other investment companies, except in connection with a merger, consolidation, acquisition, or reorganization, except that the Intermediate Fund may invest in shares of one or more money market funds managed by Franklin Advisers, Inc., to the extent permitted by exemptions granted under the Investment Company Act of 1940, and except to the extent the Insured Fund invests its uninvested daily cash balances in shares of Franklin New York Tax-Exempt Money Fund and other tax-exempt money market funds in Franklin Templeton Investments provided i) its purchases and redemptions of such money market fund shares may not be subject to any purchase or redemption fees, ii) its investments may not be subject to duplication of management fees, nor to any charge related to the expense of distributing the Fund’s shares (as determined under Rule 12b-1, as amended under the federal securities laws) and iii) provided aggregate investments by the Insured Fund in any such money market fund do not exceed (A) the greater of (i) 5% of the Fund’s total net assets or (ii) $2.5 million, or (B) more than 3% of the outstanding shares of any such money market fund.	Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund
Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization, except to the extent permitted by exemptions which may be granted under the Investment Company Act of 1940, which allows the Fund to invest in shares of one or more investment companies, of the type generally referred to as money market funds, managed by Franklin Advisers, Inc. or its affiliates.	Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund

N-2-9

Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization. To the extent permitted by exemptions which may be granted under the Investment Company Act of 1940, the Federal Intermediate-Term Fund may invest in shares of one or more investment companies, of the type generally referred to as money market funds, managed by Franklin Advisers, Inc. or its affiliates.	Franklin Federal Intermediate-Term Tax-Free Income Fund
Invest in the securities of other investment companies, except to the extent permitted by the Investment Company Act of 1940, as amended (1940 Act), or other applicable state law, and except in connection with a merger, consolidation, acquisition or reorganization. To the extent permitted by exemptions granted under the 1940 Act, the Fund may invest in shares of one or more money market funds managed by the manager or its affiliates.	Franklin Real Estate Securities Fund, Franklin Strategic Mortgage Portfolio
Invest in the securities of other investment companies, except where there is no commission other than the customary brokerage commission or sales charge, or except that securities of another investment company may be acquired pursuant to a plan of reorganization, merger, consolidation or acquisition, and except where the Fund would not own, immediately after the acquisition, securities of other investment companies which exceed in the aggregate i) more than 3% of the issuer’s outstanding voting stock, ii) more than 5% of the Fund’s total assets and iii) together with the securities of all other investment companies held by the Fund, exceed, in the aggregate, more than 10% of the Fund’s total assets. To the extent permitted by exemptions granted under the 1940 Act, the Fund may invest in shares of one or more money market funds managed by the manager or its affiliates.	Franklin Small-Mid Cap Growth Fund, Franklin Global Communications Fund, Franklin Natural Resources Fund, Franklin Flex Cap Growth Fund
Invest in the securities of other investment companies, except in accordance with the federal securities laws. To the extent permitted by exemptions granted under the Investment Company Act of 1940, as amended (1940 Act), the Fund may invest in shares of one or more money market funds managed by Franklin Advisers, Inc. (Advisers) or its affiliates.	Franklin Biotechnology Discovery Fund
Invest in the securities of other investment companies, except where there is no commission other than the customary brokerage commission or sales charge, or except that securities of another investment company may be acquired pursuant to a plan of reorganization, merger, consolidation or acquisition, and except where the Fund would not own, immediately after the acquisition, securities of the investment companies which exceed in the aggregate (i) more than 3% of the issuer’s outstanding voting stock, (ii) more than 5% of the Fund’s total assets and (iii) together with the securities of all other investment companies held by the Fund, exceed, in the aggregate, more than 10% of the Fund’s total assets. The Fund may invest in shares of one or more money market funds managed by Advisers or its affiliates consistent with the terms of the exemptive order issued by the SEC.	Franklin Global Health Care Fund

N-2-10

Invest in the securities of other investment companies, except where there is no commission other than the customary brokerage commission or sales charge, or except that securities of another investment company may be acquired pursuant to a plan of reorganization, merger, consolidation or acquisition; provided that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goals and policies as the Fund. To the extent permitted by exemptions granted under the Investment Company Act of 1940, as amended (1940 Act), the Fund may invest in shares of one or more money market funds managed by the manager or its affiliates.	Franklin Strategic Income Fund
Invest in securities of other investment companies, except as they may be acquired as part of a merger, consolidation or acquisition of assets.	Franklin Templeton Hard Currency Fund
Invest in the stock of any investment company if a purchase of such stock would result in the Fund and affiliates of the Fund owning together more than 3% of the total outstanding stock of such investment company.	Franklin Balance Sheet Investment Fund
Invest in the securities of other investment companies, except where there is no commission other than the customary brokerage commission or sales charge, or except that securities of another investment company may be acquired pursuant to a plan of reorganization, merger, consolidation or acquisition; or except further that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies as the Fund. Pursuant to available exemptions from the 1940 Act, the Fund may invest in shares of one or more money market funds managed by Advisory Services or its affiliates.	Franklin MicroCap Value Fund
Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition, or reorganization.	The Money Market Portfolio
Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization; provided that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies as the Fund.	Money Market Portfolio

N-2-11

Management Ownership of Securities
Fundamental Investment Restriction Recommended to be Eliminated (The Fund may not…)	Fund
Retain securities of any issuer if, to the knowledge of the Fund, one or more of its officers, trustees, or investment manager [administrator4] own beneficially more than one-half of 1% of the securities of such issuer and all such officers and trustees together own beneficially more than 5% of such securities; except that, in the case of Franklin Tennessee Municipal Bond Fund, to the extent this restriction is applicable, all or substantially all of the assets of such Fund may be invested in another registered investment company having the same investment goal and policies as the Fund, or except as permitted under its investment restriction regarding the purchase of shares of money market funds managed by the Fund’s investment manager or its affiliates.	Franklin California Tax-Free Income Fund, Inc., Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund, Franklin New York Tax-Free Income Fund, Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Franklin Adjustable U.S. Government Securities Fund, Franklin Strategic Mortgage Portfolio, Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Insured Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund, Franklin Templeton Money Fund, Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund, Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund, The Money Market Portfolio, Money Market Portfolio, Franklin Cash Reserves Fund
Purchase the securities of any company in which any officer, trustee, or director of the Fund or its investment manager owns more than ½ of 1% of the outstanding securities and in which all of the officers, trustees, and directors of the Fund and its investment manager as a group, own more than 5% of such securities.	Franklin High Income Fund

____________________ 

⁴  With respect to Franklin Strategic Mortgage Portflio only. 

N-2-12

Purchase or retain securities of any issuer if, to the knowledge of the Fund, one or more of the officers or trustees of the Fund, or its investment adviser, own beneficially more than one-half of 1% of the securities of such issuer and all such officers and trustees together own beneficially more than 5% of such securities, except that, with respect to Franklin Real Estate Securities Fund and Franklin Strategic Income Fund, to the extent this restriction is applicable, all or substantially all of the assets of such Fund may be invested in another registered investment company having the same investment goal and policies as the Fund, or except as permitted under its investment restriction regarding the purchase of shares of money market funds managed by the manager or its affiliates.	Franklin Real Estate Securities Fund, Franklin Small-Mid Cap Growth Fund, Franklin Global Health Care Fund, Franklin Global Communications Fund, Franklin Natural Resources Fund, Franklin Strategic Income Fund, Franklin Flex Cap Growth Fund
Purchase or retain in the Fund’s portfolio any security if any officer, trustee or security holder of the issuer is at the same time an officer, trustee or employee of the Trust or of its investment advisor and such person owns beneficially more than 1/2 of 1% of the securities, and if all such persons owning more than 1/2 of 1% own more than 5% of the outstanding securities of the issuer.	Templeton Foreign Smaller Companies Fund
Invest in securities of any company if, to the knowledge of the Fund, any officer, director or trustee of the Fund or the investment advisor owns more than 0.5% of the outstanding securities of such company and such officers, directors and trustees (who own more than 0.5%) in the aggregate own more than 5% of the outstanding securities of such company.	Franklin Balance Sheet Investment Fund
Invest in securities of any issuer if any officer, director or trustee of the Fund or the investment advisor owns beneficially more than one-half of 1% of the outstanding securities of such issuer and all such officers, directors and trustees together own beneficially more than 5% of such securities.	Franklin MicroCap Value Fund
Purchase or retain securities of any company in which directors or officers of Templeton Institutional Funds, Inc. or a Fund’s 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.	Foreign Equity Series, Emerging Markets Series

Principal Transactions with Management
Fundamental Investment Restriction Recommended to be Eliminated (The Fund may not…)	Fund
Purchase from or sell to the Fund’s officers and trustees, or any firm of which any officer or trustee is a member, as principal, any securities, but may deal with such persons or firms as brokers and pay a customary brokerage commission.	Franklin California Tax-Free Income Fund, Inc., Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund, Franklin New York Tax-Free Income Fund, Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund, Franklin Adjustable U.S. Government Securities Fund, Franklin Flex Cap Growth Fund, Franklin Strategic Mortgage Portfolio, Franklin Real Estate Securities Fund, Franklin Small-Mid Cap Growth Fund, Franklin Global Health Care Fund, Franklin Global Communications Fund, Franklin Natural Resources Fund, Franklin Strategic Income Fund, Franklin Balance Sheet Investment Fund, Franklin MicroCap Value Fund

N-2-13

Purchase securities from or sell to the Fund’s officers and trustees, or any firm of which any officer or trustee is a member, as principal. Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund, Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Templeton Money Fund, Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund, Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund, Money Market Portfolio, The Money Market Portfolio, Franklin Cash Reserves Fund

Writing/Purchasing Put and Call Options
Fundamental Investment Restriction Recommended to be Eliminated (The Fund may not…)	Fund
Invest in excess of 5% of its total assets in options unrelated to the Fund’s transactions in futures, including puts, calls, straddles, spreads, or any combination thereof.	Franklin Flex Cap Growth Fund, Franklin Small-Mid Cap Growth Fund, Franklin Global Communications Fund, Franklin Global Health Care Fund, Franklin Real Estate Securities Fund
Invest in put, call, straddle or spread options on financial or other futures contracts or stock index futures contracts.	Franklin Balance Sheet Investment Fund
Invest in put, call, straddle or spread options on financial or other futures contracts or stock index futures contracts.	Franklin MicroCap Value Fund
Invest in puts, calls, straddles, spreads or any combination thereof. The Fund may, however, write covered call options listed for trading on a national securities exchange and purchase call options to the extent necessary to cancel call options previously written. At present there are no options listed for trading on a national securities exchange covering the types of securities which are appropriate for investment by the Fund and, therefore, there are no option transactions available for the Fund.	Franklin California Tax-Free Income Fund, Inc., Franklin New York Tax-Free Income Fund, Franklin U.S. Government Securities Fund

N-2-14

Invest in puts, calls, straddles, spreads, or any combination thereof, except that it may purchase, hold, and dispose of “obligations with puts attached” in accordance with its investment policies.	Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund, Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund, Franklin Cash Reserves Fund
Invest in puts, calls, straddles, spreads or any combination thereof. The Fund may, however, write covered call options listed for trading on a national securities exchange and purchase call options to the extent necessary to cancel call options previously written.	Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund
Invest in puts, calls, straddles, spreads, or any combination thereof, except that it may purchase, hold, and dispose of “obligations with puts attached” or write covered call options in accordance with its stated investment policies.	Money Market Portfolio, The Money Market Portfolio, Franklin Templeton Money Fund
Invest in puts, calls, straddles, spreads or any combination thereof; however, Franklin Equity Income Fund may write call options which are listed for trading on a national securities exchange and purchase put options on securities in its portfolio. Franklin Equity Income Fund may also purchase call options to the extent necessary to cancel call options previously written and may purchase listed call options provided that the value of the call options purchased will not exceed 5% of the Fund’s net assets. Franklin Equity Income Fund may also purchase call and put options on stock indices for defensive hedging purposes. (Franklin Equity Income Fund will comply with the California Corporate Securities Rules as they pertain to prohibited investments.) At present, there are no options listed for trading on a national securities exchange covering the types of securities which are appropriate for investment by Franklin Limited Maturity U.S. Government Securities Fund and, therefore, there are no option transactions available for that Fund.	Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund
Invest in puts, calls, straddles, spreads or any combination thereof.	Franklin Adjustable U.S. Government Securities Fund, Franklin Strategic Mortgage Portfolio
Invest in puts, calls, straddles, spreads, or any combination thereof, except that the Fund may buy, hold, and dispose of puts on municipal securities in accordance with its investment policies.	Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund

N-2-15

Investing in Oil, Gas or Mineral Interests
Fundamental Investment Restriction Recommended to be Eliminated (The Fund may not…)	Fund
Lease or acquire any interests, including interest issued by limited partnerships (other than publicly traded equity securities) in oil, gas, or other mineral exploration or development programs.	Franklin Flex Cap Growth Fund, Franklin Small-Mid Cap Growth Fund, Franklin Global Communications Fund, Franklin Global Health Care Fund, Franklin Real Estate Securities Fund
Invest in leases with respect to any oil, gas or other mineral exploration or development programs.	Templeton Foreign Smaller Companies Fund
Buy or sell interests in oil, gas or mineral exploration or development programs or leases. (Does not preclude investments in marketable securities of issuers engaged in such activities.)	Franklin Balance Sheet Investment Fund
Invest directly in interests in oil, gas or other mineral leases, exploration or development programs, including limited partnership interests. This restriction does not preclude investments in marketable securities of issuers engaged in such activities.	Franklin MicroCap Value Fund, Franklin Blue Chip Fund, Franklin Templeton Conservative Target Fund, Franklin Templeton Moderate Target Fund, Franklin Templeton Growth Target Fund, Franklin Small Cap Value Fund
Buy or sell oil and gas interests.	Franklin Templeton Hard Currency Fund
Invest in interests (other than debentures or equity stock interests) in oil, gas or other mineral exploration or development programs.	Foreign Equity Series, Emerging Markets Series
Invest in interests in oil, gas, or other mineral exploration or development programs.	Franklin California Tax-Free Income Fund, Inc., Franklin New York Tax-Free Income Fund, Franklin California Insured Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income Fund, Franklin California Tax-Exempt Money Fund, Franklin California High Yield Municipal Fund, Franklin Tennessee Municipal Bond Fund, Franklin Florida Insured Tax-Free Income Fund, Franklin Insured Tax-Free Income Fund, Franklin Massachusetts Insured Tax-Free Income Fund, Franklin Michigan Insured Tax-Free Income Fund, Franklin Minnesota Insured Tax-Free Income Fund, Franklin Ohio Insured Tax-Free Income Fund, Franklin Alabama Tax-Free Income Fund, Franklin Florida Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund, Franklin Kentucky Tax-Free Income Fund, Franklin Louisiana Tax-Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin Missouri Tax-Free Income Fund, Franklin North Carolina Tax-Free Income Fund, Franklin Virginia Tax-Free Income Fund, Franklin Arizona Tax-Free Income Fund, Franklin Colorado Tax-Free Income Fund, The Money Market Portfolio, Franklin Cash Reserves Fund, Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund, Franklin Equity Income Fund,Franklin Connecticut Tax-Free Income Fund, Franklin Double Tax-Free Income Fund, Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund, Franklin New Jersey Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin Pennsylvania Tax-Free Income Fund, Franklin Templeton Money Fund, Money Market Portfolio, Franklin Limited Maturity U.S. Government Securities Fund, Franklin Adjustable U.S. Government Securities Fund, Franklin New York Insured Tax-Free Income Fund, Franklin New York Intermediate-Term Tax-Free Income Fund, Franklin New York Limited-Term Tax-Free Income Fund, Franklin New York Tax-Exempt Money Fund, Franklin Strategic Mortgage Portfolio

N-2-16

Purchase or sell oil and gas interests. Debt or equity securities issued by companies engaged in the oil or gas businesses are not considered oil or gas interests for purposes of this restriction.	Mutual Beacon Fund, Mutual Financial Services Fund, Mutual Qualified Fund, Mutual Shares Fund, Mutual Discovery Fund, Mutual European Fund
Invest directly in interests in oil, gas or other mineral leases, exploration or development programs.	Franklin Natural Resources Fund
Unseasoned Issuers
Fundamental Investment Restriction Recommended to be Eliminated (The Fund may not…)	Fund
Purchase any securities issued by a corporation which has not been in continuous operation for three years, but such period may include the operation of a predecessor.	Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin Utilities Fund, Franklin U.S. Government Securities Fund, Franklin Equity Income Fund, Franklin Limited Maturity U.S. Government Securities Fund
Purchase any securities issued by a corporation which has not been in continuous operation for three years, but such period may include the operation of a predecessor, except that, to the extent this restriction is applicable, all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies of the Fund.	Franklin Adjustable U.S. Government Securities Fund
Invest in securities which have a record of less than three years continuous operation, including the operations of any predecessor companies, if more than 5% of the Fund’s total assets would be invested in such companies except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies as the Fund. (This limitation does not apply to issuers of real estate investment trusts.)	Franklin Real Estate Securities Fund
Purchase any securities issued by a corporation which has not been in continuous operation for three years, but such period may include the operation of a predecessor. (This limitation does not apply to issuers of collateralized mortgage obligations.)	Franklin Strategic Mortgage Portfolio
Invest more than 10% of its assets in securities of companies which have a record of less than three years continuous operation, including the operations of any predecessor companies.	Franklin Global Communications Fund
Invest more than 10% of its assets in securities of companies which have a record of less than three years continuous operation, including the operations of any predecessor companies; except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objective and policies as the Fund.	Franklin Natural Resources Fund
Buy the securities of any issuer having less than three years’ continuous operations (or any predecessors) if such purchase would cause the value of the Fund’s investments in all such issuers to exceed 5% of the value of its total assets.	Franklin Templeton Hard Currency Fund
Invest more than 5% of total assets in companies which have a record of less than three years continuous operation, including the operations of any predecessor companies.	Templeton Foreign Smaller Companies Fund

N-2-17

Invest more than 5% of its total assets in the securities of companies (including predecessors) that have been in continuous operation for less than three years, except that this policy is inapplicable to the extent all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment objectives and policies as the Fund.	(IFT) Money Market Portfolio
Invest more than 5% of the value of the Fund’s total assets in securities of issuers which have been in continuous operation less than three years.	Foreign Equity Series, Emerging Markets Series
Invest more than 10% of its assets in securities which have a record of less than three years continuous operation, including the operations of any predecessor companies, if more than 5% of the Fund’s total assets would be invested in such companies.	Franklin Flex Cap Growth Fund
Invest more than 10% of its assets in securities which have a record of less than three years continuous operation, including the operations of any predecessor companies, if more than 10% of the Fund’s total assets would be invested in such companies.	Franklin Global Health Care Fund, Franklin Small-Mid Cap Growth Fund
Investing in Warrants
Fundamental Investment Restriction Recommended to be Eliminated (The Fund may not…)	Fund
Invest in warrants (valued at the lower of cost or market) in excess of 5% of the value of the Fund’s net assets. No more than 2% of the value of the Fund’s net assets may be invested in warrants (valued at the lower of cost or market) which are not listed on the New York or American Stock Exchanges.	Franklin Balance Sheet Investment Fund
Invest directly in warrants (valued at the lower of cost or market) in excess of 5% of the value of the Fund’s net assets. No more than 2% of the value of the Fund’s net assets may be invested in warrants (valued at the lower of cost or market) which are not listed on the New York or American Stock Exchanges.	Franklin MicroCap Value Fund
Invest more than 5% of its total assets 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 a Fund in units or attached to securities are not included in this restriction.	Foreign Equity Series, Emerging Markets Series
Joint Trading Accounts
Fundamental Investment Restriction Recommended to be Eliminated (The Fund may not…)	Fund
Participate on a joint or a joint and several basis in any trading account in securities.	Foreign Equity Series, Emerging Markets Series

N-2-18

EX-99.O

EXHIBIT O

PROPOSED RESOLUTIONS FOR
FRANKLIN TEMPLETON MONEY FUND TRUST

WHEREAS, the Board of Trustees have determined to create an additional class of shares of the Franklin Templeton Money Fund (the “F-T Money Fund”) to be designated as “Class A” shares of the F-T Money Fund; and

WHEREAS, the Board of Trustees wish to provide for the automatic conversion of the F-T Money Fund’s shares designated as “Class B” into Class A shares of the F-T Money Fund on substantially the same items and conditions as the Class B shares of other Franklin Templeton funds convert into Class A shares of their respective Funds;

NOW, THEREFORE, BE IT RESOLVED, that the provisions relating to the rights and preferences of the Class B shares of the F-T Money Fund (both issued and outstanding and to be issued in the future) be, and they hereby are, subject to prior shareholder approval as provided for herein, amended to provide for their automatic conversion into Class A shares as follows; and it was further

RESOLVED, that with respect to each Class B share of the F-T Money Fund:

(a) Other than shares described in this section (a) each Class B share of the F-T Money Fund shall be converted automatically, and without any action or choice on the part of the holder thereof, into Class A shares of the Fund on the Conversion Date. The term “Conversion Date” means a date set forth in the Prospectus of the Fund that is no later than three months after either (i) the date on which the eighth anniversary of the date of issuance of the shares occurs, or (ii) any such other anniversary date as may be determined by the Board of Trustees of the Trust and set forth in the Prospectus of the Fund; provided that any such other anniversary date determined by the Board of Trustees of the Trust shall be a date that will occur prior to the anniversary date set forth in clause (i) and any such other date theretofore determined by the Board of Trustees of the Trust pursuant to this clause (ii); but further provided that, subject to the provisions of the next sentence, for any Class B shares of the Fund acquired through an exchange, or through a series of exchanges, as permitted by the Trust and as provided in the Prospectus of the Fund, from another investment company or series of an investment company, including the Trust (an “eligible investment company”), the Conversion Date shall be the conversion date applicable to the shares of the eligible investment company originally subscribed for in lieu of the Conversion Date of any shares acquired through exchange if such eligible investment company issuing the shares originally subscribed for had a conversion feature, but not later than the Conversion Date determined under (i) above. For the purpose of calculating the holding period required for conversion, the date of issuance of a Class B share of the Fund shall mean (i) in the case of a Class B share of the Fund obtained by the holder thereof through an original subscription to the Trust, the date of the issuance of such Class B share of the Fund, or (ii) in the case of a Class B share of the Fund obtained by the holder thereof through an exchange, or through a series of exchanges, from an eligible investment company, the date of issuance of the share of the eligible investment company to which the holder originally subscribed.

     (b) Each Class B share of the Fund (i) purchased through the automatic reinvestment of a dividend or distribution with respect to the Class B shares of the Fund or the corresponding class of any other investment company or series of an investment company issuing such class of shares, or (ii) issued pursuant to an exchange privilege granted by the Fund in an exchange or series of exchanges for shares originally purchased through the automatic reinvestment of a dividend or distribution with respect to shares of an eligible investment company, shall be segregated in a separate sub-account on the share records of the Fund for each of the holders of record thereof. On any Conversion Date, a number of the shares held in the separate sub-account of the holder of record of the share or shares being converted, calculated in accordance with the next following sentence, shall be converted automatically, and without any action or choice on the part of the holder, into shares of Class A of the Fund. The number of shares in the holder’s separate sub-account so converted shall (i) bear the same ratio to the total number of shares maintained in the separate sub-account on the Conversion Date (immediately prior to conversion) as the number of shares of the holder converted on the Conversion Date pursuant to section (a) hereof bears to the total number of Class B shares of the holder on the Conversion Date (immediately prior to conversion) after subtracting the shares then maintained in the holder’s separate sub-account, or (ii) be such other number as may be calculated in such other manner as may be determined by the Board of Trustees of the Trust and set forth in the Prospectus of the Fund.

O-1

     (c) The number of Class A shares of the Fund into which a Class B share is converted pursuant to sections (a) and (b) hereof shall equal the number (including for this purpose fractions of a share) obtained by dividing the net asset value per share of the Class B shares for purposes of sales and redemptions thereof on the Conversion Date by the net asset value per share of the Class A shares for purposes of sales and redemptions thereof on the Conversion Date.

     (d) On the Conversion Date, the Class B shares converted into shares of Class A will no longer be deemed outstanding and the rights of the holders thereof (except the right to (i) receive the number of shares of Class A into which Class B shares have been converted, (ii) receive declared but unpaid dividends to the Conversion Date or such other date set forth in the Prospectus of the Fund and (iii) vote converting shares of the Fund held as of any record date occurring on or before the Conversion Date and theretofore set with respect to any meeting held after the Conversion Date) will cease. Certificates representing Class A shares of the Fund resulting from the conversion need not be issued until certificates representing Class B shares converted, if issued, have been received by the Fund or its agent duly endorsed for transfer.

     (e) The automatic conversion of the Class B shares of the Fund into Class A shares of the Fund, as set forth in sections (a) and (b) hereof, may also be suspended by action of the Board of Trustees of the Trust at any time that the Board of Trustees determines such suspensions to be appropriate.

O-2

EX-99.P

EXHIBIT P

FRANKLIN TEMPLETON INVESTMENT MANAGER AND SUB-ADVISER INFORMATION

Fund/Series	Investment Manager	Sub-Adviser
Franklin California Tax-Free Income Fund, Inc.	Franklin Advisers, Inc.1	N/A
Franklin California Tax-Free Income Fund
Franklin California Tax-Free Trust
Franklin California Insured Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin California Intermediate-Term Tax-Free	Franklin Advisers, Inc.1	N/A
Income Fund
Franklin California Limited-Term Tax-Free Income	Franklin Advisers, Inc.1	N/A
Fund
Franklin California Tax-Exempt Money Fund	Franklin Advisers, Inc.1	N/A
Franklin Capital Growth Fund	Franklin Advisers, Inc.1	N/A
Franklin Custodian Funds, Inc.
Franklin DynaTech Fund	Franklin Advisers, Inc.1	N/A
Franklin Growth Fund	Franklin Investment	N/A
	Advisory Services, LLC2
Franklin Income Fund	Franklin Advisers, Inc.1	N/A
Franklin U.S. Government Securities Fund	Franklin Advisers, Inc.1	N/A
Franklin Utilities Fund	Franklin Advisers, Inc.1	N/A
Franklin Global Trust
Fiduciary Large Capitalization Growth and Income	Fiduciary International, Inc.3	N/A
Fund
Fiduciary Small Capitalization Equity Fund	Fiduciary International, Inc.3	Franklin Templeton
		Institutional, LLC4
Franklin Global Real Estate Fund	Franklin Templeton	N/A
	Institutional, LLC4
Franklin International Smaller Companies Growth	Franklin Advisers, Inc.1	Franklin Templeton
Fund		Institutional, LLC4
Franklin Templeton Core Fixed Income Fund	Fiduciary International, Inc.3	Franklin Templeton
		Institutional, LLC4
Franklin Templeton Core Plus Fixed Income Fund	Fiduciary International, Inc.3	Franklin Templeton
		Institutional, LLC4
Franklin Templeton Emerging Market Debt	Franklin Templeton	N/A
Opportunities Fund	Investment Management
	Limited5
Franklin Templeton High Income Fund	Fiduciary International, Inc.3	Franklin Advisers, Inc.1
Franklin Gold and Precious Metals Fund	Franklin Advisers, Inc.1	N/A
Franklin High Income Trust	Franklin Advisers, Inc.1	N/A
Franklin High Income Fund

P-1

Fund/Series	Investment Manager	Sub-Adviser
Franklin Investors Securities Trust
Franklin Adjustable U.S. Government Securities Fund	Franklin Advisers, Inc.1	N/A
Franklin Balanced Fund	Franklin Advisers, Inc.1	N/A
Franklin Convertible Securities Fund	Franklin Advisers, Inc.1	N/A
Franklin Equity Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Floating Rate Daily Access Fund	Franklin Advisers, Inc.1	N/A
Franklin Limited Maturity U.S. Government Securities	Franklin Advisers, Inc.1	N/A
Fund
Franklin Low Duration Total Return Fund	Franklin Advisers, Inc.1	N/A
Franklin Real Return Fund	Franklin Advisers, Inc.1	N/A
Franklin Total Return Fund	Franklin Advisers, Inc.1	N/A
Franklin Managed Trust
Franklin Rising Dividends Fund	Franklin Advisory Services,	N/A
	LLC6
Franklin Municipal Securities Trust
Franklin California High Yield Municipal Fund	Franklin Advisers, Inc.1	N/A
Franklin Tennessee Municipal Bond Fund	Franklin Advisers, Inc.1	N/A
Franklin Mutual Recovery Fund	Franklin Mutual Advisers,	N/A
	LLC7
Franklin Mutual Series Fund Inc.
Mutual Beacon Fund	Franklin Mutual Advisers,	N/A
	LLC7
Mutual Discovery Fund	Franklin Mutual Advisers,	Franklin Templeton
	LLC7	Investment
		Management
		Limited5
Mutual European Fund	Franklin Mutual Advisers,	N/A
	LLC7
Mutual Financial Services Fund	Franklin Mutual Advisers,	N/A
	LLC7
Mutual Qualified Fund	Franklin Mutual Advisers,	Franklin Templeton
	LLC7	Investment
		Management
		Limited5
Mutual Shares Fund	Franklin Mutual Advisers,	N/A
	LLC7
Franklin New York Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin New York Tax-Free Trust
Franklin New York Insured Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin New York Intermediate-Term Tax-Free	Franklin Advisers, Inc.1	N/A
Income Fund
Franklin New York Limited-Term Tax-Free Income	Franklin Advisers, Inc.1	N/A
Fund
Franklin New York Tax-Exempt Money Fund	Franklin Advisers, Inc.1	N/A
Franklin Real Estate Securities Trust
Franklin Real Estate Securities Fund	Franklin Advisers, Inc.1	N/A

P-2

Fund/Series	Investment Manager	Sub-Adviser
Franklin Strategic Mortgage Portfolio	Franklin Advisers, Inc.1	N/A
Franklin Strategic Series
Franklin Aggressive Growth Fund	Franklin Advisers, Inc.1	N/A
Franklin Biotechnology Discovery Fund	Franklin Advisers, Inc.1	N/A
Franklin Blue Chip Fund	Franklin Advisers, Inc.1	N/A
Franklin Flex Cap Growth Fund	Franklin Advisers, Inc.1	N/A
Franklin Global Communications Fund	Franklin Advisers, Inc.1	N/A
Franklin Global Health Care Fund	Franklin Advisers, Inc.1	N/A
Franklin Natural Resources Fund	Franklin Advisers, Inc.1	N/A
Franklin Small-Mid Cap Growth Fund	Franklin Advisers, Inc.1	N/A
Franklin Small Cap Growth Fund II	Franklin Advisers, Inc.1	N/A
Franklin Strategic Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Technology Fund	Franklin Advisers, Inc.1	N/A
Franklin U.S. Long-Short Fund	Franklin Advisers, Inc.1	N/A
Franklin Tax-Free Trust
Franklin Alabama Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Arizona Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Colorado Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Connecticut Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Double Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Federal Intermediate-Term Tax-Free Income	Franklin Advisers, Inc.1	N/A
Fund
Franklin Federal Limited-Term Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Florida Insured Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Florida Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Georgia Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin High Yield Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Insured Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Kentucky Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Louisiana Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Maryland Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Massachusetts Insured Tax-Free Income	Franklin Advisers, Inc.1	N/A
Fund	Franklin Advisers, Inc.1	N/A
Franklin Michigan Insured Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Minnesota Insured Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Missouri Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin New Jersey Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin North Carolina Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Ohio Insured Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Oregon Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Pennsylvania Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A
Franklin Virginia Tax-Free Income Fund	Franklin Advisers, Inc.1	N/A

P-3

Fund/Series	Investment Manager	Sub-Adviser
Franklin Templeton Fund Allocator Series
Franklin Templeton Conservative Target Fund	Franklin Advisers, Inc.1	N/A
Franklin Templeton Corefolio Allocation Fund	N/A	N/A
Franklin Templeton Founding Funds Allocation Fund	N/A	N/A
Franklin Templeton Growth Target Fund	Franklin Advisers, Inc.1	N/A
Franklin Templeton Moderate Target Fund	Franklin Advisers, Inc.1	N/A
Franklin Templeton Perspectives Allocation Fund	N/A	N/A
Franklin Templeton 2015 Retirement Target Fund	Franklin Advisers, Inc.1	N/A
Franklin Templeton 2025 Retirement Target Fund	Franklin Advisers, Inc.1	N/A
Franklin Templeton 2035 Retirement Target Fund	Franklin Advisers, Inc.1	N/A
Franklin Templeton 2045 Retirement Target Fund	Franklin Advisers, Inc.1	N/A
Franklin Templeton Global Trust
Franklin Templeton Hard Currency Fund	Franklin Advisers, Inc.1	N/A
Franklin Templeton International Trust
Templeton Foreign Smaller Companies Fund	Franklin Advisers, Inc.1	Templeton Investment
		Counsel, LLC8 &
		Franklin Templeton
		Investment
		Management Limited5
Templeton Global Long-Short Fund	Franklin Advisers, Inc.1	Templeton Global
		Advisors Limited9 &
		Franklin Templeton
		Investment
		Management Limited5
Franklin Templeton Money Fund Trust	N/A	N/A
Franklin Templeton Money Fund
Franklin Value Investors Trust
Franklin Balance Sheet Investment Fund	Franklin Advisory Services,	N/A
	LLC6
Franklin Large Cap Value Fund	Franklin Advisory Services,	N/A
	LLC6
Franklin MicroCap Value Fund	Franklin Advisory Services,	N/A
	LLC6
Franklin MidCap Value Fund	Franklin Advisory Services,	N/A
	LLC6
Franklin Small Cap Value Fund	Franklin Advisory Services,	N/A
	LLC6
Institutional Fiduciary Trust
Franklin Cash Reserves Fund	N/A	N/A
Franklin Structured Large Cap Core Equity Fund	Franklin Advisers, Inc.1	N/A
Franklin Structured Large Cap Growth Equity Fund	Franklin Advisers, Inc.1	N/A
Money Market Portfolio	N/A	N/A
The Money Market Portfolios
The Money Market Portfolio	Franklin Advisers, Inc.1	N/A
Templeton China World Fund	Templeton Asset	N/A
	Management Ltd.10
Templeton Developing Markets Trust	Templeton Asset	N/A
	Management Ltd.10

P-4

Fund/Series	Investment Manager	Sub-Adviser
Templeton Funds, Inc.
Templeton Foreign Fund	Templeton Global Advisors	N/A
	Limited9
Templeton World Fund	Templeton Global Advisors	N/A
	Limited9
Templeton Global Smaller Companies Fund	Templeton Investment	Franklin Templeton
	Counsel, LLC8	Investment
		Management Limited5
Templeton Income Trust
Templeton Global Bond Fund	Franklin Advisers, Inc.1	N/A
Templeton Institutional Funds, Inc.
Emerging Markets Series	Templeton Asset	N/A
	Management Ltd.10
Foreign Equity Series	Templeton Investment	N/A
	Counsel, LLC8
Foreign Smaller Companies Series	Templeton Investment	Franklin Templeton
	Counsel, LLC8	Investment
		Management Limited5
Franklin Templeton Non-U.S. Core Equity Series	Franklin Templeton	Franklin Templeton
	Alternative Strategies, Inc.11	Institutional, LLC4 &
		Templeton Investment
		Counsel, LLC8

Footnote
Reference	Adviser	Address
1	Franklin Advisers, Inc.	One Franklin Parkway
		San Mateo, CA 94403-1906
2	Franklin Investment Advisory Services, LLC	One Franklin Parkway
		San Mateo, CA 94403-1906
3	Fiduciary International, Inc.	600 Fifth Avenue
		New York, NewYork 10020-2302
4	Franklin Templeton Institutional, LLC	600 Fifth Avenue,
		New York, NY 10020
5	Franklin Templeton Investment Management Limited	The Adelphi Building
		1-11 John Adam Street
		London WC2N 6HT
6	Franklin Advisory Services, LLC	One Parker Plaza
		Ninth Floor
		Fort Lee, New Jersey 07024
7	Franklin Mutual Advisers, LLC	101 John F. Kennedy Parkway
		Short Hills, NJ 07078
8	Templeton Investment Counsel, LLC	500 East Broward Blvd.
		Fort Lauderdale, FL 33394
9	Templeton Global Advisors Limited	Lyford Cay
		Nassau, Bahamas
10	Templeton Asset Management Ltd.	7 Temasek Blvd.
		Suntec Tower One
		#38-03
		Singapore 038987
11	Franklin Templeton Alternative Strategies, Inc.	One Franklin Parkway
		San Mateo, CA 94403

P-5

EX-99.Q

EXHIBIT Q

OUTSTANDING SHARES AS OF NOVEMBER 30, 2006

Fund	Number of Outstanding Shares
Franklin California Tax-Free Income Fund, Inc.
Franklin California Tax-Free Income Fund
Class A Shares		1,730,846,566.05
Class B Shares		42,433,305.80
Class C Shares		80,992,970.91
Advisor Class Shares		10,918,681.14
Total		1,865,191,523.91
Franklin California Tax-Free Trust
Franklin California Insured Tax-Free Income Fund
Class A Shares		141,936,507.39
Class B Shares		5,233,955.40
Class C Shares		10,662,415.37
Total		157,832,878.16
Franklin California Intermediate-Term Tax-Free Income Fund
Class A Shares		39,425,235.85
Class C Shares		2,387,733.84
Total		41,812,969.69
Franklin California Limited-Term Tax-Free Income Fund
Total		1,088,543.67
Franklin California Tax-Exempt Money Fund
Total		661,888,929.33
Franklin Capital Growth Fund
Class A Shares		74,774,737.14
Class B Shares		5,742,398.50
Class C Shares		11,729,272.83
Class R Shares		2,827,094.84
Advisor Class Shares		31,258,839.33
Total		126,332,342.65
Franklin Custodian Funds, Inc.
Franklin DynaTech Fund
Class A Shares		21,718,396.64
Class B Shares		700,001.07
Class C Shares		2,727,333.29
Total		25,145,731.01
Franklin Growth Fund
Class A Shares		43,204,681.02
Class B Shares		3,195,201.26
Class C Shares		7,263,428.36

Q-1

Fund	Number of Outstanding Shares
Class R Shares		977,300.25
Advisor Class Shares		7,063,230.68
Total		61,703,841.58
Franklin Income Fund
Class A Shares		10,789,757,398.40
Class B Shares		1,448,073,352.15
Class B1 Shares		176,281,795.49
Class C Shares		4,895,587,399.17
Class R Shares		76,111,840.22
Advisor Class Shares		1,617,629,544.88
Total		19,003,441,330.30
Franklin U.S. Government Securities Fund
Class A Shares		814,504,462.85
Class B Shares		58,654,125.73
Class C Shares		65,397,833.62
Class R Shares		11,358,256.41
Advisor Class Shares		60,994,713.58
Total		1,010,909,392.19
Franklin Utilities Fund
Class A Shares		147,804,669.65
Class B Shares		10,198,297.30
Class C Shares		30,325,261.38
Class R Shares		2,268,707.86
Advisor Class Shares		6,138,794.94
Total		196,735,731.12
Franklin Global Trust
Fiduciary Large Capitalization Growth and Income Fund
Total		13,263,184.16
Fiduciary Small Capitalization Equity Fund
Total		1,458,090.34
Franklin Global Real Estate Fund
Class A Shares		986, 859.00
Class C Shares		158,983.13
Advisor Class Shares		1,364,564.38
Total		2,510,406.51
Franklin International Smaller Companies Growth Fund
Total		1,398,303.61
Franklin Templeton Core Fixed Income Fund
Total		2,469,641.98
Franklin Templeton Core Plus Fixed Income Fund
Total		9,252,400.24

Q-2

Fund	Number of Outstanding Shares
Franklin Templeton Emerging Market Debt Opportunities Fund
Total		3,891,388.06
Franklin Templeton High Income Fund
Total		715,577.11
Franklin Gold and Precious Metals Fund
Class A Shares		28,665,987.82
Class B Shares		1,974,884.02
Class C Shares		7,007,539.82
Advisor Class Shares		1,926,439.02
Total		39,574,850.69
Franklin High Income Trust
Franklin High Income Fund
Class A Shares		1,039,733,134.90
Class B Shares		84,380,638.10
Class C Shares		172,586,275.98
Class R Shares		7,404,235.12
Advisor Class Shares		20,057,755.25
Total		1,324,162,039.35
Franklin Investors Securities Trust
Franklin Adjustable U.S. Government Securities Fund
Class A Shares		41,118,453.85
Class C Shares		3,976,024.50
Total		45,094,478.34
Franklin Balanced Fund
Class A Shares		1,670,905.44
Class C Shares		25,901.42
Class R Shares		1,000.00
Advisor Class Shares		27,967.25
Total		1,725,774.11
Franklin Convertible Securities Fund
Class A Shares		41,811,280.83
Class C Shares		15,935,108.35
Total		57,746,389.19
Franklin Equity Income Fund
Class A Shares		32,631,839.55
Class B Shares		2,274,190.76
Class C Shares		7,600,711.63
Class R Shares		827,244.39
Total		43,333,986.33

Q-3

Fund	Number of Outstanding Shares
Franklin Floating Rate Daily Access Fund
Class A Shares		170,446,077.19
Class B Shares		5,974,182.96
Class C Shares		38,039,833.04
Advisor Class Shares		4,332,373.85
Total		218,792,467.04
Franklin Limited Maturity U.S. Government Securities Fund
Class A Shares		21,011,021.44
Advisor Class Shares		2,298,219.04
Total		23,309,240.48
Franklin Low Duration Total Return Fund
Class A Shares		208,391.45
Franklin Real Return Fund
Class A Shares		3,133,341.85
Advisor Class Shares		1,771,371.72
Total		4,904,713.57
Franklin Total Return Fund
Class A Shares		41,935,163.36
Class B Shares		2,123,605.53
Class C Shares		4,807,988.00
Class R Shares		3,139,269.79
Advisor Class Shares		22,574,810.92
Total		74,580,837.60
Franklin Managed Trust
Franklin Rising Dividends Fund
Class A Shares		49,960,125.15
Class B Shares		7,977,519.52
Class C Shares		16,124,800.21
Class R Shares		1,365,913.41
Advisor Class Shares		846,553.97
Total		76,274,912.26
Franklin Municipal Securities Trust
Franklin California High Yield Municipal Fund
Class A Shares		116,112,839.31
Class B Shares		2,711,790.32
Class C Shares		22,251,736.69
Advisor Class Shares		13,259.93
Total		141,089,626.25
Franklin Tennessee Municipal Bond Fund
Class A Shares		14,018,243.58

Q-4

Fund	Number of Outstanding Shares
Franklin Mutual Recovery Fund
Class A Shares		9,746,206.54
Class B Shares		318,359.57
Class C Shares		4,771,281.88
Advisor Class Shares		7,461,902.23
Total		22,297,750.32
Franklin Mutual Series Fund Inc.
Mutual Beacon Fund
Class A Shares		119,567,846.74
Class B Shares		11,485,884.78
Class C Shares		46,220,179.02
Class Z Shares		216,773,941.46
Total		394,047,852.00
Mutual Discovery Fund
Class A Shares		191,079,746.95
Class B Shares		8,985,105.90
Class C Shares		71,110,679.49
Class R Shares		5,556,649.24
Class Z Shares		126,645,365.36
Total		403,377,546.93
Mutual European Fund
Class A Shares		36,713,951.74
Class B Shares		2,502,424.82
Class C Shares		11,684,823.43
Class Z Shares		38,795,356.39
Total		89,696,556.39
Mutual Financial Services Fund
Class A Shares		22,107,305.65
Class B Shares		1,905,118.24
Class C Shares		9,029,979.63
Class Z Shares		8,490,394.12
Total		41,532,797.63
Mutual Qualified Fund
Class A Shares		42,847,275.64
Class B Shares		3,366,589.66
Class C Shares		18,362,366.67
Class Z Shares		181,367,920.93
Total		245,944,152.90
Mutual Shares Fund
Class A Shares		238,244,472.15
Class B Shares		24,670,082.58
Class C Shares		86,797,420.14
Class R Shares		6,666,490.92
Class Z Shares		413,116,362.16
Total		69,494,827.94

Q-5

Fund	Number of Outstanding Shares
Franklin New York Tax-Free Income Fund
Class A Shares		372,599,423.61
Class B Shares		16,831,508.17
Class C Shares		21,407,257.93
Advisor Class Shares		4,050,039.79
Total		414,888,229.50
Franklin New York Tax-Free Trust
Franklin New York Insured Tax-Free Income Fund
Class A Shares		28,517,550.59
Class C Shares		3,868,193.54
Total		32,385,744.13
Franklin New York Intermediate-Term Tax-Free Income Fund
Class A Shares		20,029,022.71
Class C Shares		1,107,030.91
Total		21,136,053.61
Franklin New York Limited-Term Tax-Free Income Fund
Total		810,781.24
Franklin New York Tax-Exempt Money Fund
Total		61,352,792.04
Franklin Real Estate Securities Trust
Franklin Real Estate Securities Fund
Class A Shares		27,519,742.38
Class B Shares		2,179,770.34
Class C Shares		5,866,342.20
Advisor Class Shares		1,631,072.76
Total		35,565,854.92
Franklin Strategic Mortgage Portfolio
Total		29,782,040.32
Franklin Strategic Series
Franklin Aggressive Growth Fund
Class A Shares		5,957,261.29
Class B Shares		1,009,167.37
Class C Shares		1,686,174.88
Class R Shares		402,561.47
Advisor Class Shares		4,493,718.83
Total		13,548,883.84
Franklin Biotechnology Discovery Fund
Total		7,944,936.15

Q-6

Fund	Number of Outstanding Shares
Franklin Blue Chip Fund
Class A Shares		9,747,978.22
Class B Shares		1,236,030.50
Class C Shares		2,063,283.24
Class R Shares		326,372.83
Total		13,373,664.78
Franklin Flex Cap Growth Fund
Class A Shares		47,478,378.97
Class B Shares		3,157,069.67
Class C Shares		9,157,861.77
Class R Shares		1,993,640.44
Advisor Class Shares		7,020,458.16
Total		68,807,409.01
Franklin Global Communications Fund
Class A Shares		5,816,360.28
Class B Shares		304,790.37
Class C Shares		985,477.00
Total		7,106,598.65
Franklin Global Health Care Fund
Class A Shares		4,300,414.89
Class B Shares		515,730.46
Class C Shares		1,157,588.28
Total		5,973,733.63
Franklin Natural Resources Fund
Class A Shares		11,559,298.90
Class C Shares		726,024.33
Advisor Class Shares		1,166,467.28
Total		13,451,790.40
Franklin Small Cap Growth Fund II
Class A Shares		41,581,553.67
Class B Shares		7,190,986.40
Class C Shares		10,225,961.54
Class R Shares		441,972.21
Advisor Class Shares		23,383,678.04
Total		82,824,151.86
Franklin Small-Mid Cap Growth Fund
Class A Shares		140,998,268.70
Class B Shares		833,468.35
Class C Shares		17,089,703.33
Class R Shares		2,947,255.30
Advisor Class Shares		17,981,747.76
Total		179,850,443.45

Q-7

Fund	Number of Outstanding Shares
Franklin Strategic Income Fund
Class A Shares		118,513,943.74
Class B Shares		10,112,256.43
Class C Shares		33,663,231.86
Class R Shares		4,464,103.17
Advisor Class Shares		5,192,121.04
Total		171,945,656.24
Franklin Technology Fund
Class A Shares		5,613,175.21
Class B Shares		692,453.13
Class C Shares		1,682,629.15
Class R Shares		799,161.68
Advisor Class Shares		486,158.00
Total		9,273,577.16
Franklin U.S. Long-Short Fund
Total		1,991,089.19
Franklin Tax-Free Trust
Franklin Alabama Tax-Free Income Fund
Class A Shares		21,186,952.26
Class C Shares		3,303,209.47
Total		24,490,161.73
Franklin Arizona Tax-Free Income Fund
Class A Shares		81,962,803.42
Class B Shares		1,907,551.65
Class C Shares		4,981,276.81
Total		88,851,631.88
Franklin Colorado Tax-Free Income Fund
Class A Shares		34,433,965.64
Class C Shares		4,066,923.32
Total		38,500,888.96
Franklin Connecticut Tax-Free Income Fund
Class A Shares		26,654,966.86
Class C Shares		4,558,942.58
Total		31,213,909.44
Franklin Double Tax-Free Income Fund
Class A Shares		33,810,577.34
Class C Shares		4,696,713.95
Total		38,507,291.29
Franklin Federal Intermediate-Term Tax-Free Income Fund
Class A Shares		51,098,503.44
Class C Shares		2,510,157.53
Total		53,608,660.96

Q-8

Fund	Number of Outstanding Shares
Franklin Federal Limited-Term Tax-Free Income Fund
Total		2,140,226.92
Franklin Florida Insured Tax-Free Income Fund
Total		16,009,220.12
Franklin Florida Tax-Free Income Fund
Class A Shares		125,988,988.48
Class B Shares		5,095,891.28
Class C Shares		11,951,865.26
Total		143,036,745.02
Franklin Georgia Tax-Free Income Fund
Class A Shares		18,113,121.28
Class C Shares		4,027,778.45
Total		22,140,899.73
Franklin High Yield Tax-Free Income Fund
Class A Shares		478,230,756.35
Class B Shares		20,454,190.85
Class C Shares		66,717,012.84
Advisor Class Shares		2,881,031.19
Total		568,282,991.23
Franklin Insured Tax-Free Income Fund
Class A Shares		145,551,206.09
Class B Shares		6,956,057.60
Class C Shares		11,380,368.46
Total		163,887,632.06
Franklin Kentucky Tax-Free Income Fund
Total		12,559,361.02
Franklin Louisiana Tax-Free Income Fund
Class A Shares		18,145,771.35
Class C Shares		2,196,753.68
Total		20,342,525.03
Franklin Maryland Tax-Free Income Fund
Class A Shares		33,968,148.40
Class C Shares		5,843,087.20
Total		39,811,235.60
Franklin Massachusetts Insured Tax-Free Income Fund
Class A Shares		38,093,463.16
Class C Shares		4,923,117.20
Total		43,016,580.35

Q-9

Fund	Number of Outstanding Shares
Franklin Michigan Insured Tax-Free Income Fund
Class A Shares		102,502,849.90
Class B Shares		3,790,465.86
Class C Shares		10,171,079.73
Total		116,464,395.49
Franklin Minnesota Insured Tax-Free Income Fund
Class A Shares		44,127,016.34
Class C Shares		5,221,117.16
Total		49,348,133.50
Franklin Missouri Tax-Free Income Fund
Class A Shares		48,585,275.18
Class C Shares		5,584,758.38
Total		54,170,033.56
Franklin New Jersey Tax-Free Income Fund
Class A Shares		80,141,935.96
Class B Shares		6,038,251.86
Class C Shares		12,374,679.04
Total		98,554,866.86
Franklin North Carolina Tax-Free Income Fund
Class A Shares		48,127,511.71
Class C Shares		9,047,136.60
Total		57,174,648.30
Franklin Ohio Insured Tax-Free Income Fund
Class A Shares		75,558,884.13
Class B Shares		4,176,785.47
Class C Shares		10,942,408.43
Total		90,678,078.03
Franklin Oregon Tax-Free Income Fund
Class A Shares		56,193,071.39
Class C Shares		7,243,874.11
Total		63,436,945.50
Franklin Pennsylvania Tax-Free Income Fund
Class A Shares		70,469,654.14
Class B Shares		4,211,085.56
Class C Shares		9,291.774.09
Total		83,972,513.78
Franklin Virginia Tax-Free Income Fund
Class A Shares		41,193,856.21
Class C Shares		4,698,878.00
Total		45,892,734.21

Q-10

Fund	Number of Outstanding Shares
Franklin Templeton Fund Allocator Series
Franklin Templeton Conservative Target Fund
Class A Shares		14,214,049.92
Class B Shares		488,783.82
Class C Shares		5,592,439.12
Class R Shares		1,065,277.57
Advisor Class Shares		110,814.48
Total		21,471,364.91
Franklin Templeton Corefolio Allocation Fund
Class A Shares		31,549,773.89
Class B Shares		5,402,012.43
Class C Shares		11,657,120.29
Class R Shares		175,495.65
Advisor Class Shares		207,959.45
Total		48,992,361.72
Franklin Templeton Founding Funds Allocation Fund
Class A Shares		480,113,785.72
Class B Shares		53,207,247.53
Class C Shares		246,324,836.08
Class R Shares		1,621,347.68
Advisor Class Shares		1,456,188.92
Total		782,832,405.93
Franklin Templeton Growth Target Fund
Class A Shares		19,995,544.45
Class B Shares		536,575.96
Class C Shares		7,635,380.26
Class R Shares		1,636,108.05
Advisor Class Shares		294,135.38
Total		30,097,744.09
Franklin Templeton Moderate Target Fund
Class A Shares		27,992,102.90
Class B Shares		802,536.18
Class C Shares		9,546,726.06
Class R Shares		2,196,796.42
Advisor Class Shares		444,056.65
Total		40,982,218.21
Franklin Templeton Perspectives Allocation Fund
Class A Shares		14,013,320.96
Class C Shares		5,133,600.40
Class R Shares		114,420.95
Advisor Class Shares		146,549.32
Total		19,407,891.37

Q-11

Fund	Number of Outstanding Shares
Franklin Templeton 2015 Retirement Target Fund
Class A Shares		126,786.87
Class C Shares		4,320.55
Class R Shares		1,000.00
Advisor Class Shares		1,847.90
Total		133,955.32
Franklin Templeton 2025 Retirement Target Fund
Class A Shares		151,885.62
Class C Shares		4,848.59
Class R Shares		1,245.22
Advisor Class Shares		1,028.94
Total		153,140.42
Franklin Templeton 2035 Retirement Target Fund
Class A Shares		102,389.52
Class C Shares		4,846.23
Class R Shares		2,044.06
Advisor Class Shares		5,294.93
Total		114,574.71
Franklin Templeton 2045 Retirement Target Fund
Class A Shares		105,974.45
Class C Shares		3,194.63
Class R Shares		1,054.81
Advisor Class Shares		1,057.86
Total		111,281.74
Franklin Templeton Global Trust
Franklin Templeton Hard Currency Fund
Class A Shares		35,161,010.35
Advisor Class Shares		4,379,236.15
Total		39,540,246.50
Franklin Templeton International Trust
Templeton Foreign Smaller Companies Fund
Class A Shares		15,338,759.93
Class B Shares		340,607.44
Class C Shares		1,368,969.02
Advisor Class Shares		1,742,541.18
Total		18,778,230.02
Templeton Global Long-Short Fund
Class A Shares		11,064,773.96
Class B Shares		2,678,933.69
Advisor Class Shares		290,984.16
Total		14,034,691.80

Q-12

Fund	Number of Outstanding Shares
Franklin Templeton Money Fund Trust
Franklin Templeton Money Fund
Class B Shares		40,303,836.86
Class C Shares		58,638,437.10
Class R Shares		2,137,243.58
Total		101,079,517.54
Franklin Value Investors Trust
Franklin Balance Sheet Investment Fund
Class A Shares		63,822,287.26
Class B Shares		1,853,875.23
Class C Shares		2,038,719.48
Class R Shares		753,100.81
Advisor Class Shares		4,793,657.87
Total		73,261,640.65
Franklin Large Cap Value Fund
Class A Shares		11,005,192.04
Class B Shares		1,332,681.28
Class C Shares		3,890,868.71
Class R Shares		468,157.19
Advisor Class Shares		121,959.45
Total		16,818,858.67
Franklin MicroCap Value Fund
Class A Shares		11,408,917.51
Advisor Class Shares		155,128.18
Total		11,564,045.69
Franklin MidCap Value Fund
Class A Shares		3,943,780.92
Class C Shares		862,272.18
Class R Shares		39,521.24
Advisor Class Shares		67,837.14
Total		4,913,411.48
Franklin Small Cap Value Fund
Class A Shares		15,592,217.68
Class B Shares		1,808,751.43
Class C Shares		5,604,181.60
Class R Shares		1,311,626.37
Advisor Class Shares		1,282,566.90
Total		25,599,343.98
Institutional Fiduciary Trust
Franklin Cash Reserves Fund
Total		143,024,489.00
Franklin Structured Large Cap Core Equity Fund
Total		275,889.20

Q-13

Fund	Number of Outstanding Shares
Franklin Structured Large Cap Growth Equity Fund
Total		252,938.92
Money Market Portfolio
Total		3,717,774,051.75
The Money Market Portfolios
The Money Market Portfolio
Total		5,826,613,185.24
Templeton China World Fund
Class A Shares		11,206,802.52
Class B Shares		604,386.95
Class C Shares		4,617,512.73
Advisor Class Shares		9,550,472.39
Total		25,979,174.60
Templeton Developing Markets Trust
Class A Shares		166,161,794.43
Class B Shares		1,905,643.37
Class C Shares		16,817,939.51
Class R Shares		1,339,226.17
Advisor Class Shares		15,225,050.78
Total		201,449,654.26
Templeton Funds, Inc.
Templeton Foreign Fund
Class A Shares		1,026,192,482.03
Class B Shares		17,525,504.97
Class C Shares		113,308,600.03
Class R Shares		16,579,053.89
Advisor Class Shares		167,753,884.94
Total		1,341,359,525.86
Templeton World Fund
Class A Shares		469,154,475.18
Class B Shares		3,525,090.73
Class C Shares		23,063,535.95
Advisor Class Shares		7,967,505.23
Total		503,710,607.09
Templeton Global Smaller Companies Fund
Class A Shares		139,039,986.81
Class B Shares		1,002,930.30
Class C Shares		8,980,879.70
Advisor Class Shares		8,649,906.33
Total		157,673,703.15

Q-14

Fund	Number of Outstanding Shares
Templeton Income Trust
Templeton Global Bond Fund
Class A Shares		199,000,555.41
Class C Shares		49,242,092.17
Advisor Class Shares		51,468,063.53
Total		299,710,711.10
Templeton Institutional Funds, Inc.
Emerging Markets Series		135,949,701.69
Foreign Equity Series
Primary Shares		257,960,839.67
Foreign Smaller Companies Series		7,363,791.92

Q-15

EX-99.R

EXHIBIT R

PRINCIPAL HOLDER OF SHARES AS OF NOVEMBER 30, 2006

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin California Tax Free Income Fund, Inc.
Franklin California Tax-Free Income Fund	Frederick J. Hanshaw	3,556,889.59	32.58
Advisor Class shares	Garden Grove, CA 92843-4929
	Ann L. Johnson	6449,182.67	5.95
	Trst 1999 Ann L. Johnson Marital Tr
	DTD 6/29/99
	Hillsborough, CA 94010-6739
Franklin California Tax-Free Trust
Franklin California Tax-Exempt Money Fund	Rupert H. Johnson, Jr. Tr	106,802,754.10	16.17
	Rupert H Johnson, Jr. Trste
	DTD 03/13/96
	C/O Franklin
	One Franklin Parkway
	San Mateo, CA 94403-1906
Franklin Capital Growth Fund
Franklin Capital Growth Fund	Guardian Group Pensions GIAC	189,821.49	6.71
Class R shares	1560 Valley Center Parkway Ste 100
	Bethlehem, PA 18017-2275
	Franklin Templeton Bank & Trust Co	182,225.27	6.45
	Special Devices Incorporated
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
Franklin Capital Growth Fund	Corefolio	1,716,175.75	5.49
Advisor Class shares	FT 529 College Savings Plan
	500 E Broward Boulevard 13 FL
	Fort Lauderdale, FL 33394-3091
	Age Newborn-8 Years	5,983,502.03	19.14
	FT 529 College Savings Plan
	500 E Broward Boulevard 13 FL
	Fort Lauderdale, FL 33394-3091
	Age 9-12 Years	2,499,902.74	8.00
	FT 529 College Savings Plan
	500 E Broward Boulevard 13 FL
	Fort Lauderdale, FL 33394-3091
	Franklin Templeton Corefolio	14,316,851.05	45.80
	Allocation Fund
	FT Fund Allocator Series
	500 E Broward Boulevard 13 FL
	Fort Lauderdale, FL 33394-3091

R-1

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Custodian Funds
Franklin Growth Fund	Guardian Group Pensions GIAC	352,452.08	36.06
Class R shares	1560 Valley Center Parkway Ste 100
	Bethlehem, PA 18017-2275
Franklin Growth Fund	Corefolio	499,172.69	7.07
Advisor Class shares	FT 529 College Savings Plan
	500 E Broward Boulevard 13 FL
	Fort Lauderdale, FL 33394-3091
	Franklin Templeton Corefolio	4,149,320.61	58.75
	Allocation Fund
	FT Fund Allocator Series
	500 E Broward Boulevard 13 FL
	Fort Lauderdale, FL 33394-3091
	Nationwide Trust Company	694,473.87	9.83
	FBO Franklin Templeton PS 401K
	Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255
Franklin Income Fund	Hartford Life Insurance Co	8,121,910.71	10.67
Class R shares	Separate Account
	Attn UIT Operations
	P.O. Box 2999
	Hartford, CT 06104-2999
Franklin Income Fund	Franklin Templeton Founding Funds	1,401,078,024.59	86.61
Advisor Class shares	Allocation Fund
	500 E Broward Boulevard 13 FL
	Fort Lauderdale, FL 33394-3091
Franklin U.S. Government Securities Fund	Trustlynx & Co	990,941.10	8.72
Class R shares	Company 00L37
	P.O. Box 173736
	Denver, CO 80217-3736
Franklin U.S. Government Securities Fund	Master Trust Bank of Japan	26,277,136.44	43.08
Advisor Class shares	Operational Service for Investment
	Trust Section
	Trustee & Agency Service Division
	2-11-3 Hamamatsucho Minato-Ku
	Tokyo, Japan 105-8579
	Age 13-16 Years	4,546,442.12	7.45
	FT 529 College Savings Plan
	500 E Broward Boulevard Floor 13
	Fort Lauderdale, FL 33394-3091
	Conservative Target Fund	4,750,076.99	7.79
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Moderate Target Fund	8,401,582.41	13.77
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907

R-2

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Utilities Fund	ING Insurance & Annuity Co	354,258.00	15.61
Class R shares	Separate Account F
	151 Farmington Ave
	Hartford, CT 06156-0001
	Transamerica Life Insurance Co	1,036,226.62	5.67
	Retirement Services – Separate
	Accounts
	P.O. Box 30368
	Los Angeles, CA 90030-0368
Franklin Utilities Fund	State Street Bank and Trust Co	2,196,402.76	35.78
Advisor Class shares	Trst Southern California Edison Co
	Stock Savings Plus Plan
	105 Rosemont Ave
	Westwood, MA 02090-2318
Franklin Global Real Estate Fund	Franklin Advisers, Inc.	498,000.000	50.46
Class A shares	One Franklin Parkway
	San Mateo, CA 94403-1906
Franklin International Smaller Companies Growth	Franklin Advisers, Inc.	200,000.00	14.30
Fund	One Franklin Parkway
Advisor Class shares	San Mateo, CA 94403-1906
	Franklin Mutual Advisors Inc.	111,532.46	7.98
	One Franklin Parkway
	San Mateo, CA 94403-1906
Franklin Templeton Core Plus Fixed Income Fund	Wells Fargo Bank NA FBO	1,125,433.61	12.16
Advisor Class shares	FBO BVU
	12767907
	P.O. Box 1533
	Minneapolis, MN 55480-1533
	Ellard Co	5,408,161.17	58.45
	C/O Fiduciary Trust Company Intl
	P.O. Box 3199
	Church Street Station
	New York, NY 10008
	Citibank NA	1,145,579.16	12.38
	CUST Berkshire Farm Center &
	Services
	111 Wall Street
	New York, NY 10005-3509

R-3

Fund Name/Class	Name and Address of Account	Share Amount	Percentage (%)
Franklin Templeton Emerging Market Debt	Franklin Advisers, Inc.	500,000.00	12.85
Opportunities Fund	One Franklin Parkway
Advisor Class shares	San Mateo, CA 94403-1906
	Vallee & Co FBO 61	270,512.81	6.95
	C/O M&I Trust Co NA
	Attn Mutual Funds
	11270 W Park Place Ste 400 PP
	Milwaukee, WI 53224-3623
	The Doctors’ Company	2,413,127.41	62.01
	An Interinsurance Exchange
	185 Greenwood Road
	Napa, CA 94558-6270
	Pennington Medical Foundation	444,700.19	11.43
	6400 Perkins Road
	Baton Rouge, LA 70808-4124
Franklin Templeton High Income Fund	Ellard & Co	351,715.72	49.15
	C/O Fiduciary Trust Company Intl
	P.O. Box 3199
	Church Street Station
	New York, NY 10008-3199
	Saxon Co	363,861.38	50.85
	FBO 12-35-040-3896476
	P.O. BOX 7780-1888
	Philadelphia, PA 19182-0001
Franklin Gold and Precious Metals Fund
Franklin Gold and Precious Metals Fund	The Northern Tr Co Trste	1,542,162.55	5.38
Class A shares	FBO A G Edwards Ret & P/S/P
	P.O. Box 92994
	Chicago, IL 60675-2994
Franklin Gold and Precious Metals Fund	Conservative Target Fund	187,667.68	9.74
Advisor Class shares	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Moderate Target Fund	452,710.82	23.50
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Growth Target Fund	571,415.97	29.66
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907

R-4

Fund Name/Class	Name and Address of Account	Share Amount	Percentage  (%)
Franklin High Income Trust
Franklin High Income Fund	MFS Heritage Trust Company	1,129,491.01	15.25
Class R shares	FBO Certain Company Benefits Plans
	P.O. Box 55824
	Boston, MA 02205-5824
	MetLife Target Maturity Portfolio	568,701.14	7.68
	2 Montgomery Street
	Jersey City, NJ 07302-3802
	Reliance Trust Trste	604,525.76	8.16
	FBO MetLife RP
	2 Montgomery Street
	Jersey City, NJ 07302-3802
Franklin High Income Fund	Keybank NA	1,135,314.11	5.66
Advisor Class shares	FBO ASM Intl
	P.O. Box 94871
	Cleveland, OH, 44101-4871
Franklin Balanced Fund	Franklin Advisers, Inc.	1,497,000.00	89.59
Class A shares	One Franklin Parkway
	San Mateo, CA 94403-1906
Franklin Balanced Fund	LPL Financial Services	2,028.32	7.83
Class C shares	9785 Towne Centre Drive
	San Diego, CA 92121-1968
	LPL Financial Services	2,451.45	9.46
	9785 Towne Centre Drive
	San Diego, CA 92121-1968
	FTB&T  CUST for the IRA of	2,778.78	10.73
	Maureen Butler
	Long Beach, NY 11561-1507
Franklin Balanced Fund	Franklin Advisers, Inc.	1,000.00	100.00
Class R shares	One Franklin Parkway
	San Mateo, CA 94403-1906
Franklin Balanced Fund	Muschott Fam Rev Liv Tr	5,188.68	18.55
Advisor Class shares	Alan E. Muschott
	And Terri K. Muschott Trste
	02/08/04
	Menlo Park, CA 94025-6269
	Felicelli Rev Tr	4,672.90	16.71
	Frank M. Felicelli
	And Jane E. Felicelli Trste
	05/08/98
	Danville, CA 94526-2922
	Perks Fam Liv Tr	15,267.87	54.59
	Edward D. Perks
	and Maggie P. Perks Trste
	DTD 04/19/2006
	Alamo, CA 94507-2249

R-5

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Equity Income Fund	Franklin Templeton Bank & Trust Co	49,291.38	5.96
Class R shares	Process Plus Retirement Savings
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
	Franklin Templeton Bank & Trust Co	51,008.60	6.17
	The P/DMT Combined PS Pln & Tr
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
	Franklin Templeton Bank & Trust Co	49,681.20	6.01
	PECO II Inc Associates
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village CO, 80111-5002
	Franklin Templeton Bank & Trust Co	48,383.90	5.85
	Terayon Communications Systems
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
Franklin Floating Rate Daily Access Fund	Franklin Advisers, Inc.	374,623.87	6.29
Class B shares	One Franklin Parkway
	San Mateo, CA 94403-1906
Franklin Floating Rate Daily Access Fund	US Bank	833,429.82	19.31
Advisor Class shares	FBO Iron Market Opportunity Fund
	1555 N River Center Drive Ste 210
	P.O. Box 1787
	Milwaukee, WI 53201-1787
	Franklin Advisers, Inc.	374,749.50	8.68
	One Franklin Parkway
	San Mateo, CA 94403-1906
	UMBSC CO	361,701.54	8.38
	FBO Wels Income Fund PRI USD
	P.O. Box 419260
	Kansas City, MO 64141-6260
Franklin Limited Maturity U.S. Government	Franklin Stable Value	1,172,415.30	51.12
Securities Fund	FT 529 College Savings Plan
Advisor Class shares	500 E Broward Boulevard Floor 13
	Fort Lauderdale, FL 33394-3091
Franklin Low Duration Total Return Fund	Franklin Advisers, Inc.	500,000.00	41.44
Class A shares	One Franklin Parkway
	San Mateo, CA 94403-1906
Franklin Total Return Fund	Hartford Life Insurance Co	763,272.39	24.38
Class R shares	Separate Account
	Attn UIT Operations
	P.O. Box 2999
	Hartford, CT 06104-2999
	PIMS Prudential Retirement	301,313.50	9.63
	As Nominee for the TTEE CUST Pl 002
	Brodart Retirement Plan
	500 Arch Street
	Williamsport, PA 17701

R-6

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Total Return Fund	Conservative Target Fund	2,587,883.68	11.49
Advisor Class shares	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Moderate Target Fund	4,330,126.81	19.22
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Growth Target Fund	1,591,135.32	7.06
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Age 13-16 Years	1,491,234.60	6.62
	FT 529 College Savings Plan
	500 E Broward Boulevard Floor 13
	Fort Lauderdale, FL 33394-3091
Franklin Managed Trust
Franklin Rising Dividends Fund	State Street Bank and Trust	2,810,051.53	5.62
Class A shares	FBO ADP 401K Daily Valuation
	Product A
	105 Rosemont Avenue
	Westwood, MA 02090-2318
Franklin Rising Dividends Fund	Nationwide Trust Company	752,534.58	88.89
Advisor Class shares	FBO Franklin Templeton PS 401K
	Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255
Franklin Municipal Securities Trust
Franklin California High YieldMunicipal Fund	Franklin Advisers, Inc.	949.67	7.16
Advisor Class shares	One Franklin Parkway
	San Mateo, CA 94403-1906
	Avon S. Puri	1,432.15	10.73
	And Avneet K. Puri
	JT Ten
	Santa Clara, CA 95054-1303
	Thielemann Fam Tr	10,887.12	82.11
	Uwe K. Thielemann
	And Sieglinde Thielemann Trste
	DTD 11/02/93
	San Mateo, CA 94403-2641
Franklin Mutual Series Fund, Inc.
Mutual Discovery Fund	John Hancock Life Insurance Co	13,676,321.78	7.16
Class A shares	250 Bloor Street E. 7E Floor
	Toronto, Ontario
	Canada M4W 1E5

R-7

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Mutual Discovery Fund	ING National Trust	555,980.50	10.01
Class R shares	151 Farmington Ave
	Hartford, CT 06156-0001
	ING Insurance & Annuity Co	1,444,600.21	26.00
	Separate Account F
	151 Farmington Ave
	Hartford, CT 06156-0001
	Hartford Life Insurance Co	495,107.86	8.91
	Separate Account
	Attn UIT Operations
	P.O. Box 2999
	Hartford, CT 06104-2999
Mutual European Fund	Growth Target Fund	2,248,340.38	5.80
Class Z shares	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
Mutual Qualified Fund	Transamerica Life Insurance Co	2,658,465.15	6.20
Class A shares	1150 S Olive Street Ste T-10-05
	Los Angeles, CA 90015
Mutual Shares Fund	Transamerica Life Insurance Co	696,793.84	10.45
Class R shares	1150 S Olive Street Ste T-10-05
	Los Angeles, CA 90015
	ING Insurance & Annuity Co	889,352.23	13.34
	Separate Account F
	151 Farmington Avenue
	Hartford, CT 06156-0001
	Franklin Templeton Founding Funds	136,330,211.73	33.00
	Allocation Fund
	FT Fund Allocator Series
	500 E Broward Boulevard 13 FL
	Fort Lauderdale, FL 33394-3091
Mutual Beacon Fund	John Hancock Life Insurance Co	21,699,905.34	18.15
Class A shares	601 Congress Street
	Boston, MA 02210-2804
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Income Fund	SEI Private Trust Company	308,943.79	7.63
Advisor Class shares	C/O HSBC
	Attn Mutual Fund Administrator
	1 Freedom Valley Drive
	Oaks, PA 19456-1499
Franklin New York Tax-Free Trust
Franklin New York Limited-Term Tax-Free Income	Franklin Advisers, Inc.	250,000.000	30.83
Fund	One Franklin Parkway
Class A shares	San Mateo, CA 94403-1906

R-8

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Real Estate Securities Trust
Franklin Real Estate Securities Fund	Transamerica Life Insurance Co	3,402,689.02	12.36
Class A shares	1150 S Olive Street Ste T-10-05
	Los Angeles, CA 90015
Franklin Real Estate Securities Fund	Conservative Target Fund	203,684.56	12.49
Advisor Class shares	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Moderate Target Fund	538,209.60	33.00
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Growth Target Fund	598,410.30	36.69
	F/T Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
Franklin Strategic Mortgage Portfolio	Conservative Target Fund	2,295,188.22	7.73
Class A shares	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Moderate Target Fund	4,055,642.04	13.67
	F/T Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
Franklin Strategic Series
Franklin Aggressive Growth Fund	Franklin Templeton Bank & Trust Co	21,414.71	5.32
Class R shares	Kendeco Tool Crib 401K Plan
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
	Safeco Investment Services Inc	168,394.40	41.83
	Attn Life Finance SEP Accts
	P.O. Box 34690
	Seattle, WA 98124-1690
	Franklin Templeton Bank & Trust Co	34,772,.91	8.64
	Heartlab Inc.
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002

R-9

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Aggressive Growth Fund	Conservative Target Fund	347,061.47	7.72
Advisor Class shares	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Moderate Target Fund	1,017,222.31	22.64
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Growth Target Fund	1,156,970.66	25.75
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Nationwide Trust Company	1,600,575.46	35.62
	FBO Franklin Templeton PS 401K
	Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255
Franklin Blue Chip Fund	Nationwide Trust Company	624,271.81	6.40
Class A shares	FBO Franklin Templeton PS 401K
	Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255
Franklin Blue Chip Fund	Stanton Trust Company N A Trste	27,966.84	8.57
Class R shares	FBO Cross Telecom Corp 401K Plan
	3405 Annapolis Lane N Ste 100
	Minneapolis, MN 55447-5343
	Franklin Templeton Bank & Trust Co	17,826.89	5.40
	Prince Industries Inc
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
	Franklin Templeton Bank & Trust Co	40,595.91	12.44
	KABA MAS Corp
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002

R-10

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Flex Cap Growth Fund	Transamerica Life Insurance Co	633,357.40	31.77
Class R shares	1150 S Olive Street Ste T-10-05
	Los Angeles, CA 90015
	AST Trust Company	122,239.93	6.13
	FBO Burnet Realty 401 A
	Agnt Retirement Pln
	P.O. Box 52129
	Phoenix, AZ 85072-2129
	American United Life Insurance	127,067.29	6.37
	Company
	Group Retirement Annuity
	Separate Accts Administration 1002C
	P.O. Box 1995
	Indianapolis, IN 46206-9102
Franklin Flex Cap Growth Fund	Franklin Templeton Perspectives	1,960,676.25	27.93
Advisor Class shares	Allocation Fund
	FT Fund Allocator Series
	500 E Broward Boulevard 13th Floor
	Fort Lauderdale, FL 33394-3091
	Conservative Target Fund	526,442.06	7.50
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Moderate Target Fund	1,435,951.85	20.45
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Growth Target Fund	1,675,681.99	23.87
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
Franklin Natural Resources Fund	Conservative Target Fund	134,067.11	11.49
Advisor Class shares	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Moderate Target Fund	413,878.78	35.48
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Growth Target Fund	434,238.60	37.23
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
Franklin Small Cap Growth Fund II	State Street Bank & Tr Co TTEE	2,087,202.30	5.02
Class A shares	FBO First Energy Savings Plan
	105 Rosemont Avenue
	Westwood, MA  02090-2318

R-11

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Small Cap Growth Fund II	Reliance Trust Company Custodian	43,058.29	9.74
Class R shares	FBO Autumn Corporation
	P.O. Box 48449
	Atlanta, GA 30362-1449
	EMJAYCO CUST	38,005.28	8.60
	FBO Brown Brothers Plumbing and
	Heating
	401K Pln 90H10
	P.O. Box 17910
	Milwaukee, WI 53217-0909
	Franklin Templeton Bank & Trust Co	23,859.84	5.40
	Kendeco Tool Crib 401K Plan
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
	EMJAY Corporation TTEE	30,002.09	6.79
	FBO The CapFinancial Group Inc
	401K Plan
	C/O Fascore
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
	Reliance Trust Company	65,879.55	14.91
	CUST Neurosurgery & Spine
	Associates
	Employee Savings Plan
	P.O. Box 48529
	Atlanta, GA 30362-1529
Franklin Small Cap Growth Fund II	Conservative Target Fund	1,773,514.92	7.58
Advisor Class shares	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Moderate Target Fund	4,702,631.83	20.11
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Growth Target Fund	5,507,894.18	23.55
	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907

R-12

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Small-Mid Cap Growth Fund	AMFO and Co	609,662.00	20.69
Class R shares	Attn Employee Benefits
	P.O. Box 419692
	Kansas City, MO 64141-6692
	MG Trust Company CUST FBO	169,098.68	5.74
	City of Breensboro 457 Plan
	700 17th Street, Ste 300
	Denver, CO  80202
	ING Insurance & Annuity Co	168,806.79	5.73
	Separate Account F
	151 Farmington Avenue
	Hartford, CT 06156-0001
Franklin Small-Mid Cap Growth Fund	Age Newborn- 8 Years	1,764,463.52	9.81
Advisor Class shares	FT 529 College Savings Plan
	500 E Broward Boulevard Floor 13
	Fort Lauderdale, FL 33394-3091
Franklin Strategic Income Fund	American United Life Insurance	1,171,490.62	26.24
Class R shares	Company
	Group Retirement Annuity
	Separate Accts Administration 1002C
	P.O. Box 1995
	Indianapolis, IN 46206-9102
	MFS Heritage Trust Company	786,742.46	17.62
	FBO Certain Company Benefits Plans
	P.O. Box 55824
	Boston, MA 02205-5824
Franklin Strategic Income Fund	Growth & Income	420,388.86	8.10
Advisor Class shares	FT 529 College Savings Plan
	500 E Broward Boulevard Floor 13
	Fort Lauderdale, FL 33394-3091
	Age 9-12 Years	784,477.48	15.11
	FT 529 College Savings Plan
	500 E Broward Boulevard Floor 13
	Fort Lauderdale, FL 33394-3091
	Age 13-16 Years	1,431,187.78	27.56
	FT 529 College Savings Plan
	500 E Broward Boulevard Floor 13
	Fort Lauderdale, FL 33394-3091
	Age 17-20 Years	759,888.19	14.64
	FT 529 College Savings Plan
	500 E Broward Boulevard Floor 13
	Fort Lauderdale, FL 33394-3091

R-13

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Technology Fund	Capital Bank & Trust Company TTEE	73,380.26	9.18
Class R shares	FBO Vacation Resorts
	International 401K PSP
	C/O Planpremier FASCORP
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111
	Reliance Trust Company	116,298.09	14.55
	CUST Hughes Associates Inc. 401K
	PSP
	P.O. Box 48529
	Atlanta, GA 30362-1529
	Franklin Templeton Bank & Trust Co	175,695.88	21.99
	Terayon Communications Systems
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
Franklin Technology Fund	Rafael R. Costas, Jr.	47,236.52	9.72
Advisor Class shares	San Francisco, CA 94115-1218
	Donald G. Taylor	64,794.72	13.33
	And Gigo H. Lee-Taylor
	JT Ten
	Ridgewood, NJ 07450-3011
	Burns Fam Tr	55,155.36	11.35
	Harmon E. Burns
	And Susan T. Burns Trste
	DTD 04/25/96
	Atherton, CA 94207-4016
Franklin Tax-Free Trust
Franklin High Yield Tax-Free Income Fund	Peter D. Jones	154,126.84	5.35
Advisor Class shares	St. Petersburg, FL 33716-1205
Franklin Kentucky Tax-Free Income Fund	Unified Trust Co NA Omnibus Trust	972,008.88	7.74
Class A shares	2353 Alexandria Drive Ste 100
	Lexington, KY 40504-3208
Franklin Templeton Fund Allocator Series
Franklin Templeton Conservative Target Fund	Hartford Life Insurance Co	187,550.59	22.43
Class A shares	FBO HLIC Separate Acct TK Series
	Attn UIT Operations
	P.O. Box 2999
	Hartford, CT 06104-2999
Franklin Templeton Conservative Target Fund	Ben Turec or Jill Turec	58,511.14	5.49
Class R shares	FBO Turec Advertising Assoc P/S Pln
	9272 Olive Boulevard
	St. Louis, MO 63132-3204
Franklin Templeton Conservative Target Fund	Nationwide Trust Company	108,878.37	98.25
Advisor Class shares	FBO Franklin Templeton PS 401K Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255

R-14

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Templeton Corefolio Allocation Fund	FTB&T CUST for the Rollover IRA	9,389.64	5.35
Class R shares	of Clayton B. Murray
	Hibbing, MN 55746-1324
	FTB&T CUST for the Rollover IRA	32,976.83	18.79
	of Christita Fry
	Succasunna, NJ 07876-2016
	FTB&T CUST for the Rollover IRA	23,167.43	13.20
	of Nancy H. Apmann
	Rocklin, CA 9576-4606
Franklin Templeton Corefolio Allocation Fund	FTB&T CUST for the Rollover IRA	17,216.95	8.28
Advisor Class shares	of Ronald C. Mayer
	Miami Beach, FL 33140-0594
Franklin Templeton Growth Target Fund	Hartford Life Insurance Co	934,065.71	29.68
Class A shares	FBO HLIC Separate Acct TK Series
	Attn UIT Operations
	P.O. Box 2999
	Hartford, CT 06104-2999
Franklin Templeton Growth Target Fund	Franklin Templeton Bank & Trust Co	100,292.23	6.13
Class R shares	Halron Oil Co Inc Retirement Sav Pln
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
	Franklin Templeton Bank & Trust Co	120.94	5.57
	Childrens Home Society of Florida
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
Franklin Templeton Growth Target Fund	Nationwide Trust Company	281,601.55	95.74
Advisor Class shares	FBO Franklin Templeton PS 401K
	Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255
Franklin Templeton Moderate Target Fund	Hartford Life Insurance Co	7,132,590.40	25.48
Class A shares	FBO HLIC Separate Acct TK Series
	Attn UIT Operations
	P.O. Box 2999
	Hartford, CT 06104-2999

R-15

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Templeton Moderate Target Fund	Franklin Templeton Bank & Trust Co	113,252.39	5.16
Class R shares	Infra-Metals Co
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
	Franklin Templeton Bank & Trust Co	142,885.93	6.50
	Childrens Home Society of Florida
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
Franklin Templeton Moderate Target Fund	Nationwide Trust Company	425,523.68	95.83
Advisor Class shares	FBO Franklin Templeton PS 401K
	Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255
Franklin Templeton Perspectives Allocation Fund	FTB&T CUST for the Rollover IRA	9,436.31	8.25
Class R shares	of Lon Wilson
	Bronx, NY 10451-2615
	FTB&T CUST for the Rollover IRA	11,121.57	9.72
	of Errol V. Marshall
	Palm Coast, FL 32137-3009
	FTB&T CUST for the Rollover IRA	13,915.77	12.16
	of Paul J. Malatesta
	North Wales, PA 19454-2669
	Donald Downey	9,144.18	7.99
	and Jamie Daugherty Trste
	Stones River Hospital 401K Pln
	324 Doolittle Road
	Woodbury, TN 37190-1139
	FTB&T CUST for the Rollover IRA	7,382.70	6.45
	of Daniel T. Fenley
	Costa Mesa, CA 92626-2041
	D. Scott Kimbro Trste	6,878.88	6.01
	Kimbro Oil Company
	2200 Clifton Avenue
	Nashville, TN 37203-1914
	Jeffrey D. Egelston	8,112.04	7.09
	and Judith K. Todd
	and Gail Bilbrey Trste
	Pacesetters Inc. 401K Pln
	2511 Highway 111 N
	Cookeville, TN 38506-8683

R-16

Fund Name/Class	Name and Address of Account	Share Amount	Percentage   (%)
Franklin Templeton Perspectives Allocation Fund	Christopher J. Molumphy	11,013.08	7.51
Advisor Class shares	Portola Valley, CA 94028-8068
	Joan Joyce Lakocy	7,895.77	5.39
	Garden City, KS 67846-4566
	Crowford P. Cragun	28,011.28	19.11
	and Joyce B. Cragun
	JT Ten
	Draper, UT 84020-8258
	Daniel A Nuckles	9,341.54	6.37
	and Jennifer L. Nuckles
	JT Ten
	Danville, CA 94506-4755
Franklin Templeton 2015 Retirement Target Fund	Franklin Advisers, Inc.	97,000.00	76.51
Class A shares	One Franklin Parkway
	San Mateo, CA 94403-1906
	FTB&T CUST for the IRA of	12,921.29	10.19
	William James Grosskopf IRA
	Suttons Bay, MI 49682-9623
Franklin Templeton 2015 Retirement Target Fund	Raymond James Assoc Inc	617.76	14.30
Class C shares	FBO Boyd IRA
	880 Carillon Parkway
	St Petersburg, FL 33716
	Franklin Advisers, Inc.	1,000.00	23.15
	One Franklin Parkway
	San Mateo, CA 94403-1906
	FTB&T CUST for the IRA of	1,090.73	25.25
	Janet L. Johnson
	Saint Cloud, MN 56304-1406
	FTB&T CUST for the IRA of	992.60	22.97
	Gary S. Johnson
	Saint Cloud, MN 56304-1406
	FTB&T CUST for the 403B of	557.44	12.90
	Monroe Community College
	FBO Janet B. Zinck
	Henrietta, NY 14467-9605
Franklin Templeton 2015 Retirement Target Fund	Franklin Advisers, Inc.	1,000.00	100.0
Class R shares	One Franklin Parkway
	San Mateo, CA 94403-1906
Franklin Templeton 2015 Retirement Target Fund	Franklin Advisers, Inc.	1,000.00	54.12
Advisor Class shares	One Franklin Parkway
	San Mateo, CA 94403-1906
	FTB&T CUST for the Rollover IRA	837.99	45.35
	Of Danilo Dumpit
	Hayward, CA 94544-8306

R-17

Fund Name/Class	Name and Address of Account	Share Amount	Percentage (%)
Franklin Templeton 2025 Retirement Target Fund	Franklin Advisers, Inc.	97,000.00	63.88
Class A shares	One Franklin Parkway
	San Mateo, CA 94403-1906
	NFS LLC FEBO	28,491.62	18.76
	WM Financial Services Inc
	NSPS Christopher F. Ofsanko
	Pasadena, CA  91104
Franklin Templeton 2025 Retirement Target Fund	Franklin Advisers, Inc.	1,000.00	20.62
Class C shares	One Franklin Parkway
	San Mateo, CA 94403-1906
	FTB&T CUST for the Roth IRA of	588.82	12.14
	John Stavropoulos
	Wilmington, NC 28409-4559
	FTB&T CUST for the Rollover IRA	686.95	14.17
	of Lelia R. Perdue
	Wedowee, AL 36278-7744
Franklin Templeton 2025 Retirement Target Fund	Franklin Advisers, Inc.	1,000.00	80.31
Class R shares	One Franklin Parkway
	San Mateo, CA 94403-1906
	FTB&T CUST for the ERISA 403B of	245.22	19.69
	Sierra Adoption Services
	FBO Elizabeth D. Collins
	Davis, CA  95618-4385
Franklin Templeton 2025 Retirement Target Fund	Franklin Advisers, Inc.	1,000.00	97.19
Advisor Class shares	One Franklin Parkway
	San Mateo, CA 94403-1906
Franklin Templeton 2035 Retirement Target Fund	Franklin Advisers, Inc.	97,000.00	94.74
Class A shares	One Franklin Parkway
	San Mateo, CA 94403-1906
Franklin Templeton 2035 Retirement Target Fund	Franklin Advisers, Inc.	1,000.00	20.63
Class C shares	One Franklin Parkway
	San Mateo, CA 94403-1906
	FTB&T CUST for the IRA of	1,134.05	23.40
	Cecilia R. Rhodes
	Grass Valley, CA 95945-7461
	FTB&T CUST for Roth IRA of	2,454.86	50.66
	Jon Holmes
	Aberdeen, SD  57401-2589
Franklin Templeton 2035 Retirement Target Fund	Franklin Advisers, Inc.	1,000.00	48.92
Class R shares	One Franklin Parkway
	San Mateo, CA 94403-1906
	FTB&T CUST for the ERISA 403B of	930.88	45.54
	Japanese Cultural Comm Ctr of Northern
	California
	FBO Ken Maeshiro
	San Francisco, CA  94112-2938

R-18

Fund Name/Class	Name and Address of Account	Share Amount	Percentage  (%)
Franklin Templeton 2035 Retirement Target Fund	Franklin Advisers, Inc.	1,000.00	18.89
Advisor Class shares	One Franklin Parkway
	San Mateo, CA 94403-1906
	FTB&T CUST for the Roth IRA of	1,195.18	22.57
	Greg J. Biagini
	San Francisco, CA 94121-3526
	FTB&T CUST for the Rollover IRA of	385.12	7.27
	Danilo Dumpit
	Hayward, CA 94544-8306
	FTB&T CUST for the Rollover IRA of	2,302.24	43.48
	Thanh S. Do
	Elk Grove, CA 95624-1267
Franklin Templeton 2045 Retirement Target Fund	Franklin Advisers, Inc.	97,000.00	91.53
Class A shares	One Franklin Parkway
	San Mateo, CA 94403-1906
Franklin Templeton 2045 Retirement Target Fund	FTB&T CUST for the ROTH IRA of	206.52	6.46
Class C shares	Kay L. Cosby
	Dallas, TX 75206-2823
Franklin Templeton 2045 Retirement Target Fund	Franklin Advisers, Inc.	1,000.00	94.80
Class R shares	One Franklin Parkway
	San Mateo, CA 94403-1906
Franklin Templeton 2045 Retirement Target Fund	Franklin Advisers, Inc.	1,000.00	94.53
Advisor Class shares	One Franklin Parkway
	San Mateo, CA 94403-1906
	FTB&T CUST for the Rollover IRA	53.23	5.03
	of Tiffany K. Schlueter
	Saint Petersburg, FL 33716-3479
Franklin Templeton Global Trust
Franklin Templeton Hard Currency Fund	Genworth Financial Trust Co	4,264,695.08	12.13
Class A shares	FBO Genworth Financial Asset
	Management
	3200 N Central Avenue Ste 612
	Phoenix, AZ 85012-2426
Franklin Templeton Hard Currency Fund	Dengel Co	357,507.66	8.16
Advisor Class shares	C/O Fiduciary Trust CO Intl
	P.O. Box 3199
	Church Street Station
	New York, NY 10208
Franklin Templeton International Trust
Templeton Foreign Smaller Companies Fund	John Hancock Life Insurance Co	3,227,848.16	21.04
Class A shares	RPS SEG Funds & Accounting ET-7
	601 Congress Street
	Boston, MA 02210-2804

R-19

Fund Name/Class	Name and Address of Account	Share Amount	Percentage  (%)
Franklin Templeton Money Fund Trust
Franklin Templeton Money Fund	MG Trust Trste	133,162.37	6.25
Class R shares	Stadia Capital LLC
	700 17th Street, Ste 300
	Denver, CO 80202-3531
		115,528.26	5.43
	MG Trust Company CUST FBO
	Midlands Cardiology Group P C SAF
	700 17th Street, Ste 300
	Denver, CO 80202-3531
	MG Trust Trste	155,253.10	7.29
	FBO Apt Advanced Polymer
	Technology Corp
	401K P/S Pln
	R O Cardosi or James Sacco Trste
	700 17th Street Ste 300
	Denver, CO 80202-3531
	MG Trust Trste	326,669.71	15.34
	FBO Master Financial Inc. 401K Pln
	700 17th Street Ste 300
	Denver, CO 80202-3531
	Ben Turec or Jill Turec	139,416.41	6.55
	FBO Turec Advertising Assoc P/S Pln
	9272 Olive Boulevard
	St. Louis, MO 63132-3204
	Union Bank of CA NA TTEE	218,325.82	10.25
	Trst Bertha Abess Childrens Center
	401K PSP
	Attn Mutual Funds Dept
	P.O. Box 85484
	San Diego, CA 92186-5484
Franklin Value Investors Trust
Franklin Balance Sheet Investment Fund	John Hancock Life Insurance Co	8,243,213.74	12.92
Class A shares	RPS SEG Funds & Accounting ET-7
	601 Congress Street
	Boston, MA 02210-2804
	Nationwide Trust Company	3,696,440.22	5.79
	C/O IPO Portfolio Accounting
	P.O. Box 182029
	Columbus, OH 43218-2029
Franklin Balance Sheet Investment Fund	ING National Trust	100,031.33	13.28
Class R shares	151 Farmington Avenue
	Hartford, CT 06156-0001
	ING Insurance & Annuity Co	289,943.25	38.50
	Separate Account F
	151 Farmington Avenue
	Hartford, CT 06156-0001
	Delaware Charter Guarantee Trust	84,420.77	11.21
	FBO Various Qualified Plans
	Attn RIS NPIO Trade Desk
	711 High Street
	Des Moines, IA 50309-2732

R-20

Fund Name/Class	Name and Address of Account	Share Amount	Percentage (%)
Franklin Large Cap Value Fund	Union Bank Tr	55,610.94	11.88
Class R shares	FBO TS People’s Bank & Tr 401K PS
	P.O. Box 85484
	San Diego, CA 92186-5484
	Franklin Templeton Bank & Trust Co	48,689.99	10.40
	Modern Poured Walls Inc
	401K Pln
	C/O Fascore LLC
	8515 E Orchard Road 2T2
	Greenwood Village, CO 80111-5002
Franklin Large Cap Value Fund	Nationwide Trust Company	93,119.64	76.35
Advisor Class shares	FBO Franklin Templeton PS 401K
	Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255
	FTB&T CUST for the Rollover IRA of	10,655.38	8.74
	Charles Rubens II
	Scarsdale, NY 10583-2112
Franklin MicroCap Value Fund	Nationwide Trust Company	116,699.67	75.23
Advisor Class shares	FBO Franklin Templeton PS 401K
	Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255
	FTB&T CUST for the Rollover IRA of	8,086.70	5.21
	Charles Rubens II
	Scarsdale, NY 10583-2112
Franklin MidCap Value Fund	Albert J. Malwitz	27,439.81	69.43
Class R shares	Donald E. Hacke FBO Arlington
	Fastener Company Inc 401 K PSP
	1032 W. Northwest Highway
	Barrington, IL  60010-2338
	MG Trust Company CUST FBO	2,654.62	6.72
	Mark S. Maxwell DO
	Denver, CO 80202-3531
	Ken Caviness	2,486.47	6.29
	and Rodney Spriggs & Steve Wilcox
	Trste
	Vintage Stock Safe Harbor 401K Pln
	202 E. 32nd Street
	Joplin, MO 64804-3802
	A G Edwards Sons Inc	2,265.80	5.73
	Westosha Vet Hospital
	Profit Sharing Plan
	A C 6510-0636
	1 North Jefferson
	St. Louis, MO 63103

R-21

Fund Name/Class	Name and Address of Account	Share Amount	Percentage  (%)
Franklin MidCap Value Fund	Daniel A. Nuckles	3,472.61	5.12
Advisor Class shares	and Jennifer L Nuckles
	JT Ten
	Danville, CA 94506-4755
	Robert E. Wade	4,944.21	7.29
	Belvidere, NJ 07823-0215
	Margaret McGee	4,676.81	6.89
	Secaucus, NJ 07094-1746
	Bernerd L. Buckley	5,915.62	8.72
	Saint Helena, CA 94574-1271
	FTB&T CUST for the Rollover IRA of	10,056.13	14.82
	Charles Rubens II
	Scarsdale, NY 10583-2112
	William J. Lippman	6,904.07	10.18
	Fort Lee, NJ 07024-5353
	Frank T Crohn Tr	4,896.16	7.22
	Frank T Crohn Trste
	DTD 06/05/90
	Rhinebeck, NY 12572-2538
	Margaret A. Saunders Fam Tr	9,076.83	13.38
	Margaret A Saunders Trste
	DTD 11/01/93
	Portland, OR 97232-1145
Franklin Small Cap Value Fund	Nationwide Trust Company	214,131.51	16.70
Advisor Class shares	FBO Franklin Templeton PS 401K
	Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255
Institutional Fiduciary Trust
Franklin Cash Reserves Fund	Franklin Templeton Bank & Trust Co	7,834,813.64	5.50
Class A Shares	NMB USA Inc
	C/O Fascore LLC
	8515 E. Orchard Road 2T2
	Greenwood Village, CO 80111-5002
Franklin Structured Large Cap Core Equity Fund	Franklin Advisers, Inc.	247,760.20	89.80
	One Franklin Parkway
	San Mateo, CA 94403-1906
	Anne and Edward Jamieson Rev Tr	28,129.00	10.20
	Hillsborough, CA 94010-6829

R-22

Fund Name/Class	Name and Address of Account	Share Amount	Percentage  (%)
Franklin Structured Large Cap Growth Equity	Franklin Advisers, Inc.	228,906.51	90.50
Fund	One Franklin Parkway
	San Mateo, CA 94403-1906
	Gregory E. Johnson	24,032.41	9.50
	San Mateo, CA 94403-1906
Money Market Portfolio	Franklin Resources Inc.	339,170,213.47	9.15
Class A Shares	One Franklin Parkway
	San Mateo, CA 94403-1906
	Franklin Advisers, Inc.	348,677,141.14	9.41
	One Franklin Parkway
	San Mateo, CA 94403-1906
	Franklin Advisers, Inc.	192,943,377.15	5.20
	One Franklin Parkway
	San Mateo, CA  94403-1906
	T International SEC Fund	272,160,714.79	7.34
	FT Variable Insurance Products Tr
	RC Q10/2
	3310 Quality Drive
	Rancho Cordova, CA 95670-7313
The Money Market Portfolios
The Money Market Portfolio	IFT Money Market Portfolio FD-140	3,723,478,781.81	64.19
	10600 White Rock Road
	Rancho Cordova, CA 95670-6032
	Franklin Money Fund	1,861,200,507.75	32.08
	10600 White Rock Road
	Rancho Cordova, CA 95670-6032
Templeton China World Fund
Templeton China World Fund	Growth Target Fund	540,012.61	5.65
Advisor Class shares	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
Templeton Developing Markets Trust
Templeton Developing Markets Trust	State Street Bank & Trust CUST	17,129,813.80	10.31
Class A shares	FBO Citigroup
	401K Pln
	105 Rosemont Avenue
	Westwood, MA 02090-2318

R-23

Fund Name/Class	Name and Address of Account	Share Amount	Percentage  (%)
Templeton Developing Markets Trust	Safeco Investment Services Inc	150,135.07	11.21
Class R shares	Attn Life Finance Sep Accts
	P.O. Box 34690
	Seattle, WA 98124-1690
	Delaware Charter Guarantee Trust	99,608.82	7.44
	FBO Various Qualified Plans
	Attn RIS NPIO Trade Desk
	711 High Street
	Des Moines, IA 50303-0001
	DCGT as TTEE and or CUST	90,980.81	6.79
	FBO Principal Financial Group
	OMNIB
	US Qualified
	Attn NPIO Trade Desk
	711 High Street
	Des Moines, IA 50303
	MFS Heritage Trust Company	147,415.03	11.01
	FBO Certain Company Benefit Plans
	P.O. Box 55824
	Boston, MA 02205-5824
Templeton Developing Markets Trust	Nationwide Trust Company	1,567,993.75	10.30
Advisor Class shares	FBO Franklin Templeton PS 401K
	Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255
Templeton Funds, Inc.
Templeton Foreign Fund	Guardian Group Pensions GIAC	1,645,909.15	9.93
Class R shares	1560 Valley Center Parkway Ste 100
	Bethlehem, PA 18017-2275
	ING National Trust	1,040,254.35	6.27
	151 Farmington Avenue
	Hartford, CT 06156-0001
	ING Insurance & Annuity Co	1,009,882.81	6.63
	Separate Account F
	151 Farmington Avenue
	Hartford, CT 06156-0001
Templeton World Fund	Nationwide Trust Company	1,080,993.97	13.57
Advisor Class shares	FBO Franklin Templeton
	PS 401K Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255
	Nationwide Trust Company
	FBO Legg Mason
	PS & 401K Plan	1,326,963.17	16.65
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255

R-24

Fund Name/Class	Name and Address of Account	Share Amount	Percentage  (%)
Templeton Foreign Fund	Standard Insurance Co	752,357.95	5.81
Advisor Class shares	Attn Separate Account A/P11D
	1100 SW Sixth Avenue
	Portland, OR 97204-1020
	The Equitable Life Assurance	10,376,051.70	6.19
	Society SA 191 for the ADA
	Templeton Foreign Fund
	Alliance Capital
	500 Plaza Drive 6th Floor
	Secaucus, NJ 07094-3619
	SEI Private Trust Company	8,508,144.79	5.07
	C O Harris Bank ID940
	Attn Mutual Fund Administration
	One Freedom Valley Drive
	Oaks, PA 19456
Templeton Global Smaller Companies Fund
Templeton Global Smaller Companies Fund	Ellard & Co	1,997,618.86	22.86
Advisor Class shares	C O Fiduciary Trust Company Intl
	P.O. Box 3199
	Church Street Station
	New York, NY 10008
	Nationwide Trust Company	1,678,456.89	19.40
	FBO Franklin Templeton PS 401K
	Plan
	DTD 10/01/81
	98 San Jacinto Boulevard Ste 1100
	Austin, TX 78701-4255
Templeton Income Trust
Templeton Global Bond Fund	Conservative Target Fund	3,304,112.43	6.42
Advisor Class shares	FT Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Moderate Target Fund	5,826,964.49	11.32
	F/T Fund Allocator
	960 Park Place 4th Floor
	San Mateo, CA 94403-1907
	Bowen David & Co	5,714,793.89	11.10
	C/O Fiduciary Trust Co
	175 Federal Street
	P.O. Box 55806
	Boston, MA 02205-5806

R-25

Fund Name/Class	Name and Address of Account	Share Amount	Percentage  (%)
Templeton Institutional Funds, Inc.
Emerging Market Series	New York State Common	30,441,783.27	22.39
	Retirement Fund
	Alfred E Smith State Office
	Building Sixth Floor
	Albany, NY 12236-0001
	The Northern Trust Co	10,780,944.10	7.93
	FBO Accenture LLP
	Profit Sharing & 401K Trust
	P.O. Box 92994
	Chicago, IL 60675-2994
	Permanent University Fund	7,880,085.91	5.80
	of the State of Texas
	C/O UTIMCO
	401 Congress Avenue Ste 2800
	Austin, TX 78701-3794
	Commonwealth of Pennsylvania	16,043,918.70	11.80
	State Employees Retirement System
	30 N Third Street
	P.O. Box 1147
	Harrisburg, PA 17108-1147
	National Financial Services Corp	17,625,338.34	12.96
	for the Exclusive Benefit of Our
	Customers
	1 World Financial Center
	200 Liberty Street
	New York, NY 10281-1003
Foreign Smaller Companies Series	Wilmington Trust Company CUST	1,926,141.31	26.16
Institutional Class Shares	with W L Gore Assoc Hong Kong
	Lmtd
	C/O Mutual Funds
	P.O. Box 8882
	Wilmington, DE 19899-8882
	New York Life Trust Co	508,162.51	6.90
	169 Lackawanna Avenue
	Parsippany, NJ 07054-1007
	Wilmington Trust Company INC	1,224,914.38	16.63
	W Future Value Inc.
	C/O Mutual Funds
	P.O. Box 8882
	Wilmington, DE 19899-8882

R-26

EX-99.S

EXHIBIT S

AUDIT FEE INFORMATION

Fees Billed by PricewaterhouseCoopers, LLP:¹

					Aggregate
Trust Name/		Audit		All Other	Non-Audit
Fiscal year Ended	Audit Fees	Related Fees	Tax Fees	Fees	Fees
Franklin California Tax-Free Income Fund, Inc.
3/31/06	$72,675	$0	$0	$0	0
3/31/05	72,500	0	0	0	0
Franklin California Tax-Free Trust
6/30/06	83,871	0	0	1,778	1,778
6/30/05	80,311	0	0	0	0
Franklin Capital Growth Fund
6/30/06	41,057	0	0	886	886
6/30/05	37,028	0	0	0	0
Franklin Custodian Funds, Inc.
9/30/06	339,046	0	0	30,073	30,073
9/30/05	241,951	0	0	0	0
Franklin Global Trust
7/31/06	133,991	0	0	187	187
7/31/05	123,683	0	0	0	0
Franklin Gold and Precious Metals Fund
7/31/06	31,800	0	0	565	565
7/31/05	22,164	0	0	0	0
Franklin High Income Trust
5/31/06	44,281	0	0	1,592	1,592
5/31/05	67,393	0	0	0	0
Franklin Investors Securities Trust
10/31/05	194,231	0	0	0	0
10/31/04	206,830	0	0	2,084	2,084
Franklin Municipal Securities Trust
5/31/06	37,016	0	0	752	752
5/31/05	33,727	0	0	0	0
Franklin New York Tax-Free Income Fund
5/31/06	73,632	0	0	2,752	2,752
5/31/05	69,033	0	0	0	0
Franklin New York Tax-Free Trust
9/30/06	76,282	0	0	375	375
9/30/05	52,973	0	0	0	0
Franklin Real Estate Securities Trust
4/30/06	20,908	0	0	638	638
4/30/05	19,603	0	0	0	0
Franklin Strategic Mortgage Portfolio
9/30/06	22,559	0	0	183	183
9/30/05	16,453	0	0	0	0
Franklin Strategic Series
4/30/06	328,367	0	0	8,667	8,667
4/30/05	295,846	0	0	0	0
Franklin Tax-Free Trust
2/28/06	532,957	0	20,000	0	20,000
2/28/05	504,416	0	0	0	0

____________________

¹ A portion of each Fund’s audit fees is based upon its relative net asset size within the Franklin Templeton funds or relative complexity. Therefore, any material difference between the audit fees of a Fund for its last two fiscal years may be the result of a material increase or decrease in that Fund’s net assets or complexity.

S-1

					Aggregate
Trust Name/		Audit		All Other	Non-Audit
Fiscal year Ended	Audit Fees	Related Fees	Tax Fees	Fees	Fees
Franklin Templeton Fund Allocator Series
12/31/05	75,785	0	0	0	0
12/31/04	70,251	0	0	0	0
Franklin Templeton Global Trust
10/31/05	21,905	0	0	0	0
10/31/04	21,534	0	0	127	127
Franklin Templeton International Trust
10/31/05	59,746	0	0	0	0
10/31/04	58,362	0	0	408	408
Franklin Templeton Money Fund Trust
6/30/06	13,273	0	0	47	47
6/30/05	13,093	0	0	0	0
Franklin Value Investors Trust
10/31/05	134,481	0	0	0	0
10/31/04	127,666	0	0	3,108	3,108
Institutional Fiduciary Trust
6/30/06	63,222	0	0	2,362	2,362
6/30/05	58,914	0	0	0	0
The Money Market Portfolios
6/30/06	29,049	0	0	3,315	3,315
6/30/05	31,169	0	0	0	0
Templeton China World Fund
8/31/06	33,578	0	0	286	286
8/31/05	23,376	0	0	0	0
Templeton Developing Markets Trust
12/31/05	71,099	0	0	0	0
12/31/04	70,000	0	0	1,622	1,622
Templeton Funds, Inc.
8/31/06	265,100	0	0	15,923	15,923
8/31/05	219,693	0	0	0	0
Templeton Global Smaller Companies Fund
8/31/06	57,898	0	0	664	664
8/31/05	40,840	0	0	0	0
Templeton Income Trust
8/31/06	74,462	0	0	1,194	1,194
8/31/05	66,143	0	0	0	0
Templeton Institutional Funds, Inc.
12/31/05	215,505	0	0	0	0
12/31/04	208,478	0	0	4,683	4,683

S-2

Fees Billed by Ernst & Young, LLP:
					Aggregate
Trust Name/		Audit		All Other	Non-Audit
Fiscal year Ended	Audit Fees	Related Fees	Tax Fees	Fees	Fees
Franklin Mutual Series Fund Inc.
12/31/05	355,000	0	0	0	0
12/31/04	298,000	0	0	0	0
Franklin Mutual Recovery Fund
3/31/06	64,000	0	0	0	0
3/31/05	50,000	0	0	0	0

S-3

EX-99.T

EXHIBIT T

AUDIT COMMITTEE CHARTER

FRANKLIN MUTUAL RECOVERY FUND

Adopted October 18, 2004

I. The Committee.

     The Audit Committee (“Committee”) is a committee of, and established by, the Board of Directors (the “Board”) of Franklin Mutual Recovery Fund (“Fund”). The Committee shall consist of such number of members as set by the Board from time to time, and its members shall be selected by the Board. The Committee shall be comprised entirely of “independent” members, as defined in Item 3(a)(2) of SEC Form N-CSR (“Disinterested Board members”). Members shall be financially literate, meaning that each member is able to read and understand fundamental financial statements, including the Fund’s balance sheet and income statement. At least one member of the Committee shall be designated by the Board as an “audit committee financial expert,” as defined in Item 3(b) of SEC Form N-CSR, unless the Board determines that the Fund does not have an audit committee financial expert on the Committee.

II. Purposes of the Committee.

     The function of the Committee is to be directly responsible for overseeing the Fund’s accounting and auditing processes, which shall include the appointment, compensation, retention and oversight of the work of the Fund’s independent registered public accounting firm (“auditors”) engaged (including resolution of disagreements between management and the auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Fund. It is management’s responsibility to maintain appropriate systems for accounting and internal controls. It is the auditors’ responsibility to plan and carry out a proper audit and to report directly to the Committee. It is not the duty of the Committee to plan or conduct audits or to determine that the Fund’s financial statements are complete and in accordance with generally accepted accounting principles; that is the responsibility of management and the Fund’s auditors.

     In giving its recommendations to the Board with respect to the Fund’s financial statements, the Committee will rely on:

     1) management’s representation that such financial statements have been prepared with integrity and objectivity and in conformity with generally accepted accounting principles,

2) the report of the Fund’s independent public accountants with respect to such financial statements.

     Consistent with such allocation of functions, the purposes of the Committee are:

a. To oversee the Fund’s accounting and financial reporting policies and practices and its internal controls, and to obtain, where it deems appropriate, reports on internal controls of service providers to the Fund;

b. To oversee the quality and objectivity of the Fund’s financial statements and the independent audit thereof;

c. To act as a liaison between the Fund’s independent auditors and the Board; and

d. To consider such other matters as it deems appropriate in carrying out its purpose and any other matters that may be assigned to it by the Board.

     In addition, the Committee shall serve as the Fund’s Qualified Legal Compliance Committee (“QLCC”) pursuant to Section 205 of the SEC’s Standards of Professional Conduct for Attorneys (the “Standards”). In this capacity, the Committee is required to adopt and maintain written procedures for the confidential receipt, retention and consideration of any report of evidence of a material violation. “Evidence of a material violation” means credible evidence, based upon which it would be unreasonable, under the circumstances, for a prudent and competent attorney not to conclude that it is reasonably likely that a material violation of an applicable U.S. federal or state securities law, a material breach of fiduciary (or similar duty) to the Fund arising under U.S. federal or state law, or a similar material violation of any U.S. federal or state law.

T-1

III. Powers and Duties.

The Committee shall have the following powers and duties to carry out its purposes:

     (a) To select the auditors, subject to approval both by the Board and by a separate vote of the Disinterested Board members, and, in connection therewith, to evaluate the independence and qualifications of the auditors in accordance with applicable federal securities laws and regulations and the rules and standards of the Independence Standards Board and American Institute of Certified Public Accountants.

     (b) To be directly responsible for approving the services to be provided by, and the compensation of, the auditors, including:

(i) pre-approval of all audit and audit related services;

(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;

(iii) pre-approval of all non-audit related services to be provided by the auditors to the Fund’s investment adviser or to any entity that controls, is controlled by or is under common control with the Fund’s investment adviser and that provides ongoing services to the Fund where the non-audit services relate directly to the operations or financial reporting of the Fund; and

(iv) establishment by the Committee, if deemed necessary or appropriate, as an alternative to Committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the Committee; provided the policies and procedures are detailed as to the particular service and the Committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.

     (c) To meet with the auditors, including private meetings, as necessary to (i) review the arrangements for and scope of the annual audit and any special audits; (ii) discuss any matters or concerns relating to the Fund’s financial statements, including any recorded and/or unrecorded adjustments to such statements recommended by the auditors, or other results of audits; (iii) consider the auditors’ comments with respect to the Fund’s financial policies, procedures and internal controls and management’s responses thereto, and (iv) to review the form of opinion the auditors propose to render.

(d) To receive and consider reports from the auditors:

(i) as required by generally accepted accounting standards, and

          (ii) annually and by update as required by SEC Regulation S-X, regarding: (w) all critical accounting policies and practices of the Fund to be used; (x) alternative treatments within generally accepted accounting principles for policies and practices related to material items that have been discussed with management of the Fund, including ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the auditors; (y) other material written communications between the auditors and management of the Fund, such as any management letter or schedule of unadjusted differences, and (z) all non-audit services provided to any entity in an investment company complex, as defined in SEC Regulation S-X, that were not pre-approved by the Committee pursuant to SEC Regulation S-X.

     (e) To consider the effect upon the Fund of any changes in accounting principles or practices proposed by management or the auditors.

     (f) In considering the independence of the auditors, to request from, and discuss with, the auditors a written statement, and other reports as necessary, describing all relationships between the auditors and the Fund, the Fund’s investment adviser and service providers, and other entities advised or serviced by, including any entities controlling, controlled by or under common control with, the investment adviser or any other service providers to the Fund; to receive and consider, if applicable, periodic reports from the auditors regarding whether the provision of non-audit services is compatible with maintaining the auditor’s independence, and to request from the auditors a certificate that they are independent auditors under the Federal securities laws and are in compliance with all standards adopted by the Independence Standards Board.

T-2

     (g) To require that the auditors regularly provide timely information to the Committee with respect to new rules and pronouncements by applicable regulatory and accounting standards agencies, along with an explanation of how such developments may affect the Fund’s financial statements and accounting principles and practices.

     (h) To review, at such times and in the manner deemed appropriate by the Committee, the results of the annual audit and financial statements, and the report of the auditors’ audit of the Fund’s annual financial statements, including footnotes and any significant audit findings.

     (i) To consider any reports of difficulties that may have arisen during the course of the audit, including any limitations of the scope of the audit, and management’s response thereto.

     (j) To review certifications of the Fund’s Chief Executive Officer - Finance and Administration and Chief Financial Officer and Chief Accounting Officer concerning (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Fund’s ability to record, process, summarize and report financial information, and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund’s internal controls over financial reporting, and for any other purposes the Committee deems appropriate, as required by § 302 of the Sarbanes-Oxley Act.

     (k) To inform the chief legal officer (“CLO”) and chief executive officer (“CEO”) of the Fund (or the equivalents thereof) of any report of evidence of a material violation by the Fund, its officers, directors/trustees, employees (if any), or agents (collectively, “affiliates”). In connection therewith, the Committee shall: 

(i) determine whether an investigation is necessary regarding any report of evidence of a material violation by the Fund or its affiliates; 

(ii) if the Committee determines such an investigation is necessary or appropriate, (A) to notify the Board; (B) to initiate an investigation, which may be conducted by either the CLO or by outside attorneys; and (C) to retain such additional expert personnel as the Committee deems necessary to assist in the investigation; 

(iii) at the conclusion of any such investigation, (A) recommend by a majority vote, that the Fund implement an appropriate response (as defined in Section 205.2(b) of the Standards) to evidence of a material violation, and (B) inform the CLO and the CEO and the Board of the results of such investigation and the appropriate remedial measures to be adopted; 

(iv) acting by majority vote, take all other appropriate action, including the authority to notify the SEC in the event the Fund fails in any material response to implement an appropriate response that the Committee has recommended the Fund to take; and 

(v) otherwise respond to evidence of a material violation.

IV. Other Functions and Procedures of the Committee.

     (a) The Committee shall meet at least twice each year or more frequently, in open or executive sessions, as may be necessary to fulfill its responsibilities. The Committee shall meet as frequently as circumstances require with (i) the auditors as provided in III(c), above, and (ii) management’s internal audit department to review and discuss internal audit functions and reports. The Committee may invite members of management, the auditors, counsel, advisers and others to attend its meetings as it deems appropriate. The Committee shall have separate sessions with the auditors, management and others, as and when it deems appropriate.

     (b) The Committee shall establish procedures for (i) the receipt, retention and treatment of complaints received by the Fund or the Fund’s adviser regarding accounting, internal accounting controls, or accounting matters relating to the Fund, and (ii) the confidential, anonymous submission by employees of the Fund or such Fund’s adviser, principal underwriter, administrator or other provider of accounting related services of concerns regarding questionable accounting or auditing matters.

     (c) The Committee shall have the authority to engage special counsel, experts and advisers as and when it determines necessary to carry out its duties and the Fund must provide for appropriate funding, as determined by the Committee, for payment of (i) compensation to any auditors engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Fund; (ii) compensation to any advisers employed by the Committee, and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

T-3

     (d) The Committee shall have unrestricted access to the Fund’s management and management of the Fund’s adviser, including, but not limited to, their chief executive officer(s), chief financial officer(s), internal auditors and any other executives and financial officers.

     (e) The Committee shall report its activities to the Board and make such recommendations as the Committee may deem necessary or appropriate.

     (f) The Committee shall review this Charter annually, or more frequently if it chooses, and recommend any changes to the Board.

T-4

EX-99.U

EXHIBIT U

VOTES NECESSARY TO APPROVE THE PROPOSAL

Proposal	Fund	Vote Needed
Proposal 1 – To elect a Board of	All Funds	Plurality (voting by Fund as a whole)
Trustees/Directors
Proposal 2 – To approve	Franklin California Tax-Free Income	The affirmative vote of the lesser of
an Agreement and Plan of	Fund, Inc., Franklin Custodian	(i) more than 50% of the outstanding
Reorganization that provides for	Funds, Inc., Franklin Mutual Series	shares of the Fund (or series, if
the reorganization of the Fund to a	Fund Inc., Templeton Funds, Inc. and	applicable) or (ii) 67% or more of
Delaware statutory trust.	Templeton Institutional Funds, Inc.	the outstanding shares of the Fund
		(or series if applicable) present at
		the meeting, if the holders of more
		than 50% of the Fund’s (or series’)
		outstanding shares are present or
		represented by proxy (a “1940 Act
		Majority Vote”) (voting by Fund as a
		whole and not by series)
	Franklin California Tax-Free Trust,	Majority of the outstanding shares
	Franklin Investors Securities Trust,	(voting by Fund and by series
	Franklin New York Tax-Free Trust,	thereof, if any)
	Franklin Tax-Free Trust, Franklin
	Value Investors Trust, Institutional
	Fiduciary Trust and Templeton
	Income Trust
Proposal 3 – To approve an	Franklin Capital Growth Fund,	Majority of the shares voted (voting
Amended and Restated Agreement	Franklin Global Trust, Franklin	separately by series thereof, if any,
and Declaration of Trust	Gold and Precious Metals Fund,	for a Fund)
	Franklin High Income Trust,
	Franklin Managed Trust, Franklin
	Municipal Securities Trust, Franklin
	New York Tax-Free Income Fund,
	Franklin Real Estate Securities
	Trust, Franklin Strategic Mortgage
	Portfolio, Franklin Strategic Series,
	Franklin Templeton Fund Allocator
	Series, Franklin Templeton
	Global Trust, Franklin Templeton
	International Trust, Franklin
	Templeton Money Fund Trust
	The Money Market Portfolios,	1940 Act Majority Vote
	Franklin Mutual Recovery Fund

U-1

Proposal 4 – To approve	All Funds listed on Exhibit L-1	1940 Act Majority Vote (voting by
amendments to certain fundamental		series)
investment restrictions (include eight
(8) sub-proposals)
Proposal 5 - To approve the	All Funds listed on Exhibit N-1	1940 Act Majority Vote (voting by
elimination of certain fundamental		series)
investment restrictions
Proposal 6 – To approve the	Franklin New York Tax-Free Income	1940 Act Majority Vote (voting by
reclassification of certain	Fund, Franklin Limited Maturity	series)
fundamental investment policies as	U.S. Government Securities Fund,
non-fundamental	Emerging Markets Series, IFT
	Money Market Portfolio, Franklin
	Templeton Hard Currency Fund,
	Franklin Rising Dividends Fund,
	Franklin U.S. Long-Short Fund and
	Templeton Global Long-Short Fund
Proposal 7 – To approve the	Franklin Templeton Money Fund	Majority of the Class B shares voted
amendment of the rights and
preferences of the Class B shares
to provide for their automatic
conversion to Class A shares after
eight years

U-2

                            FRANKLIN TEMPLETON INVESTMENTS

	MIS EDITS:      # OF CHANGES	/	PRF 1	PRF 2
LABEL BELOW FOR MIS USE ONLY! PO# FRANKLIN TEMPLETON COMPLEXWIDE FORMS CALL - SINGLES COMMON FRONT FOR 40 BACKS ORIGINAL 12-04-06 KD MATT (FRANKLIN TEMPLETON BOARD 1 FC SINGLE 2007 MM)	OK TO PRINT AS IS* _________________ *By signing this form you are authorizing MIS to print this form in its current state.
	SIGNATURE OF PERSON AUTHORlZING PRINTING       DATE

THREE EASY WAYS TO VOTE
To vote by Telephone		To vote by Internet		To vote by Mail
1)	Read the proxy statement and have the Proxy Card at hand.	1)	Read the proxy statement and have the Proxy Card at hand.	1)	Read the Proxy Statement.
2)	Call 1-888-221-0697.	2)	Go to www.proxyweb.com	2)	Check the appropriate boxes on the reverse side.
3)	Follow the recorded instructions.	3)	Follow the on-line directions.	3)	Sign and date the proxy card.
				4)	Return the proxy card in the envelope provided.
IF YOU VOTE BY TELEPHONE OR INTERNET, DO NOT MAIL YOUR CARD.

FRANKLIN TEMPLETON INVESTMENTS
PROXY FOR THE SPECIAL JOINT MEETING OF SHAREHOLDERS
MARCH 21,2007

FUND NAME PRINTS HERE
The undersigned hereby revokes all previous proxies for his/her shares and appoints CRAIG S. TYLE, BARBARA J. GREEN, STEVEN J. GRAY, ROBERT C. ROSSELOT, and KAREN L. SKIDMORE, and each of them, proxies of the undersigned with full power of substitution to vote all shares of the above referenced Fund (the “Fund”), that the undersigned is entitled to vote at the Special Joint Meeting of Shareholders (the “Meeting”) to be held at One Franklin Parkway, San Mateo, California 94403-1906 at __:__ _.m., Pacific time, on the 2l^st day of March, 2007, including any postponements or adjournments thereof, upon the matters set forth below and instructs them to vote upon any matters that may properly be acted upon at the Meeting.
This Proxy is solicited on behalf of the Board of [Directors] [Trustees]. It will be voted as specified. If no specification is made, this Proxy will be voted FOR the Proposals including all nominees for [director] [trustee]. If any other matters properly come before the Meeting to be voted on, the proxy holders will vote, act and consent on those matters in accordance with the views of management.

 

Dated  , 2007 

Signature(s) (Joint owners)	(Sign in the Box)
Note: Please sign this proxy exactly as your name (or names) appears on this card. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation, this signature should be that of an authorized officer who should state his or her title.

LABEL BELOW FOR MIS USE ONLY!
PO#
FRANKLIN TEMPLETON COMPLEXWIDE
FORMS CALL - SINGLES
BOARD 1
BACK 1 OF 40 BACKS MO1ORIGINAL 12-01-06 KD
MATT (FRANKLIN TEMPLETON COMPLEXWIDE FC SINGLE
2007 MM)

Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS.  x

1.	To Elect a Board of Trustees/Directors.
	[to change as needed]				FOR ALL	WITHHOLD ALL	FOR ALL EXCEPT*
	(01)  Harris J. Ashton (02)  Robert F. Carlson (03)  Edith E. Holiday		(04)  Frank W. T. LaHaye                      (05)  Frank A. Olson (06)  Larry D. Thompson	(07)  John B. Wilson (08)  Charles B. Johnson (09)  Gregory E. Johnsonc	o	o		1.
	* To withhold authority to vote for any individual nominee(s), write the number(s) of the Nominee(s) below:
					FOR	AGAINST	ABSTAIN
2.	To Approve an Agreement and Plan of Reorganization that provides for the reorganization of the Fund to a Delaware statutory trust.				o	o	o	2.
4.	To Approve Amendments to Certain of the Fund's Fundamental Investment Restrictions regarding:
	Sub-Proposal 4a.	Borrowing			o	o	o	4a.
	Sub-Proposal 4b.	Underwriting			o	o	o	4b.
	Sub-Proposal 4c.	Lending			o	o	o	4c.
	Sub-Proposal 4d.	Investments in real estate			o	o	o	4d.
	Sub-Proposal 4e.	Investments in commodities			o	o	o	4e.
	Sub-Proposal 4f.	Issuing senior securities			o	o	o	4f.
	Sub-Proposal 4g.	Concentration			o	o	o	4g.
	Sub-Proposal 4h.	Diversification of investments			o	o	o	4h.
5.	To Approve the Elimination of Certain Fundamental Investment Restrictions.				o	o	o	5.

.PLEASE SIGN AND DATE ON THE REVERSE SIDE.

PLEASE VOTE YOUR FORM TODAY!

VOTING INSTRUCTION FORM VOTING INSTRUCTION FORM

FUND NAME PRINTS HERE VOTING INSTRUCTION FORM FOR
SPECIAL MEETING OF SHAREHOLDERS ON BEHALF OF
THE MONEY MARKET PORTFOLIOS
TO BE HELD MARCH 21, 2007

The above-referenced Fund hereby requests voting instructions from you in connection with a solicitation of proxies by the Board of Trustees of The Money Market Portfolios (the “Master Portfolio”). This Voting Instruction Form, if properly executed, will be used by the Fund to vote its shares of the Master Portfolio in the manner directed by you, as designated on reverse, at the Special Joint Meeting of Shareholders on March 21, 2007 and at any adjournments thereof. IF THIS VOTING INSTRUCTION FORM IS SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE FUND WILL TREAT IT AS AN INSTRUCTION TO VOTE “FOR” EACH PROPOSAL RELATING TO THE MASTER PORTFOLIO.

If you fail to return this Voting Instruction Form or return it unsigned, the Fund will vote all shares attributable to your investment in the Fund in proportion to all voting instructions for the Fund actually received from Fund shareholders.

Voting Instruction Form must be signed and dated below.
Dated ___________________ , 2007
Signature(s) (if held jointly)	(Please sign in box)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS VOTING INSTRUCTION FORM. All joint owners should sign. When signing as executor, administrator, attorney, trustee or guardian or as custodian for a minor, please give full title as such. If a corporation, please sign in  full corporate name and indicate the signer’s office. If a partner, please sign in the partnership name.

Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS.  x

1.	To Elect a Board of Trustees.				FOR ALL	WITHHOLD ALL	FOR ALL EXCEPT*
	(01)  Harris J. Ashton (02)  Robert F. Carlson (03)  Sam L. Ginn (04)  Edith E. Holiday		(05)  Frank W. T. LaHaye                          (06)  Frank A. Olson (07)  Larry D. Thompson	(08)  John B. Wilson (09)  Charles B. Johnson (10)  Gregory E. Johnson	o	o	o	1.
	* To withhold authority to vote for any individual nominee(s), write the number(s) of the Nominee(s) below:
					FOR	AGAINST	ABSTAIN
2.	To Approve an Amended and Restated Agreement and Declaration of Trust for The Money Market Portfolios.				o	o	o	2.
3.	To Approve Amendments to Certain of the Fund's Fundamental Investment Restrictions (this Proposal involves separate votes on Sub-Proposals 3a-3h)
	Sub-Proposal 3a.	Borrowing			o	o	o	3a.
	Sub-Proposal 3b.	Underwriting			o	o	o	3b.
	Sub-Proposal 3c.	Lending			o	o	o	3c.
	Sub-Proposal 3d.	Investments in real estate			o	o	o	3d.
	Sub-Proposal 3e.	Investments in commodities			o	o	o	3e.
	Sub-Proposal 3f.	Issuing senior securities			o	o	o	3f.
	Sub-Proposal 3g.	Industry Concentration			o	o	o	3g.
	Sub-Proposal 3h.	Diversification of investments			o	o	o	3h.
4.	To Approve the Elimination of Certain Fundamental Investment Restrictions.				o	o	o	4.

.PLEASE SIGN AND DATE ON THE REVERSE SIDE.