Statement on Current Industry Issues

An update from Franklin Templeton Investments concerning the Ontario Securities Commission (OSC) settlement agreement

On June 30, 2005, the OSC approved the Plans for the Distribution by five mutual fund companies of amounts that those companies agreed to distribute for the benefit of "affected investors" under settlements relating to "frequent trading market timing".

The Plans (which were prepared under the oversight of an independent consultant and have been approved by Staff and the Chair and a Vice-Chair of the OSC) can be found on the OSC's website at www.osc.gov.on.ca.

In September 2005, Franklin Templeton Investments Corp. distributed settlement cheques to the affected investors. Distributions to underlying unitholders for omnibus accounts were processed in December 2005. In January 2006, a subsequent follow-up was initiated for affected investors with uncashed settlement payments as outlined in the FTIC Plan of Distribution.

Any outstanding payments can be claimed by affected investors until June 1, 2011 at which time any remaining settlement monies will be paid to the Relevant Funds. After such payments, no further claims may be made in respect of such funds by any person.

If you require further information, please contact your current financial advisor or Franklin Templeton Investments Corp. at 1.866.210.4497.

Background

Settlement agreement with the OSC:

On March 3, 2005, Franklin Templeton Investments Corp. (FTIC) announced that a panel of the Ontario Securities Commission (OSC) had approved FTIC's agreement with the Staff of the OSC that resolved the issues resulting from the OSC's investigation concerning frequent trading market timing activity.

Under the terms of the settlement agreement, FTIC agreed to pay C$49.1 million to be distributed to investors in certain funds managed by FTIC that experienced frequent trading market timing activities between February 1999 and February 2003.

Franklin Templeton's Commitment:

FTIC is, and always has been, fully committed to protecting the best interests of our investors and the investing public. Consistent with that, we maintain strict policies with regard to trading practices.

We support strict compliance with, and the enforcement of, laws and policies regarding the trading of mutual funds. We do not permit late trading. The vast majority of mutual fund trades in Canada are processed through FundSERV, a transaction forwarding system. All trades must be submitted by 4 p.m. ET to receive the day's closing price. Orders submitted after the close are automatically executed at the next day's price. We take active measures in our efforts to detect and to the extent possible, prevent frequent trading market timing strategies in our funds. FTIC has been very proactive in our efforts to monitor trading activity in our funds on a daily basis. We are fully committed to policies that protect the best interests of all our shareholders, and we are committed to improving those policies as needed.

At FTIC we continue to be actively collaborating with the Canadian financial services community to develop best practices that ensure transparency and compliance at every level of our organization, and the larger industry in which we operate.