<DOCUMENT>
<TYPE>EX-99.77E LEGAL
<SEQUENCE>4
<FILENAME>regmatters.txt
<DESCRIPTION>REG MATTER
<TEXT>
REGULATORY MATTERS

As part of various investigations by a number of federal, state, and
foreign regulators and governmental entities, relating to certain
practices in the mutual fund industry, including late trading, market
timing and marketing support payments to securities dealers who sell
fund shares, Franklin Resources, Inc. and certain of its subsidiaries
(collectively, the "Company"), entered into settlements with certain
of those regulators.

Specifically, the Company entered into settlements with the
Securities and Exchange Commission ("SEC") concerning market timing
(the "August 2, 2004 SEC Order") and marketing support payments to
securities dealers who sell fund shares (the "December 13, 2004 SEC
Order") and with the California Attorney General's Office ("CAGO")
concerning marketing support payments to securities dealers who sell
fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an
Independent Distribution Consultant ("IDC") to develop separate plans
for the distribution of the respective settlement monies. The CAGO
approved the distribution plan pertaining to the distribution of the
monies owed under the CAGO settlement agreement, and in March 2005,
the disbursement of monies to the relevant funds in accordance with
the terms and conditions of that settlement was completed.

On June 23, 2006, the SEC approved the IDC's proposed plan of
distribution arising from the December 13, 2004 SEC Order. The fund
recorded the settlement as other income and disbursement of the
settlement monies to the designated funds in accordance with the
terms and conditions of the SEC's order and the plan was completed in
September 2006.

The IDC has also completed a proposed Plan of Distribution under the
August 2, 2004 SEC Order resolving the SEC's market timing
investigation and has submitted that plan to the SEC staff, where it
is under review. The SEC has announced the following expected
schedule with respect to the market timing Plan of Distribution. The
SEC anticipates that Notice of the Plan will be published on or after
November 15, 2006. After publication and comment, the proposed
Distribution Plan will be submitted to the SEC for approval. When the
SEC approves the proposed Distribution Plan, with modifications as
appropriate, distributions will begin pursuant to that Plan.

In addition, the Company, as well as most of the mutual funds within
Franklin Templeton Investments and certain current or former
officers, directors, and/or employees, have been named in private
lawsuits (styled as shareholder class actions, or as derivative
actions on behalf of either the named funds or Franklin Resources,
Inc.) relating to the industry practices referenced above, as well as
to allegedly excessive advisory fees, commissions, and/or 12b-1 fees.
The lawsuits were filed in different courts throughout the country.
Many of those suits are now pending in a multi-district litigation in
the United States District Court for the District of Maryland.

The Company and fund management strongly believe that the claims made
in each of the private lawsuits referenced above are without merit
and intend to defend against them vigorously. The Company cannot
predict with certainty the eventual outcome of these lawsuits, nor
whether they will have a material negative impact on the Company. If
it is determined that the Company bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Trust, it
is committed to making the Trust or its shareholders whole, as
appropriate.



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</DOCUMENT>
