From the April 2004 issue of Investment Advisor • Subscribe!

Taking Steps

To answer questions about allegations of unethical practices involving Franklin Templeton, the company directs inquirers to a statement on the company's Web site (www.franklintempleton.com/retail/jsp_cm/home/MF_trading_practices.jsp). The following is an excerpt from that statement.

Working with regulators. Franklin Resources is working with a number of government regulators who are looking into matters involving frequent trading policies and practices and other industry concerns.

The Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts has filed an administrative complaint against Franklin Resources, Inc., and certain of its subsidiaries, alleging a violation of the Massachusetts Uniform Securities Act in 2001. The Company is confident that no investors in the mutual fund were harmed by the investment.

In early February 2004, the Staff of the SEC informed the Company that it intended to recommend that the SEC authorize a civil injunctive action against Franklin Advisers, Inc. and Gregory Johnson, who is president and co-chief executive officer of Franklin Resources, Inc. The Company was recently informed that the Staff of the Securities and Exchange Commission no longer intends to recommend that the SEC authorize a civil action against Gregory Johnson. The Company continues discussions with the Staff of the SEC in an effort to resolve the issues raised with respect to Franklin Advisers, Inc.

The Company understands that the SEC's investigation with respect to Franklin Advisers, Inc. is focused on the activities that are the subject of the Massachusetts administrative proceeding relating to events in 2001 and other instances of alleged market timing by a limited number of third parties that ended in 2000.

It is important to reiterate that this is an SEC Staff recommendation; the SEC has not filed a complaint or taken any action against Franklin Advisers, Inc. at this time.

In addition, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas from various regulators to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas.

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