Settlement Summary

On August 2, 2004, the SEC instituted administrative proceedings against Franklin Advisers, Inc. (the "Order"). Pursuant to the Order, and as part of the related settlement of that proceeding, Franklin was required to pay $30 million in disgorgement and a $20 million civil penalty, for a total of $50 million (the "Fair Fund"). The allegations in the Order involved excessive market timing activity in several of the Franklin Templeton ("FT") mutual funds.

The Order also provided for the appointment of an Independent Distribution Consultant ("IDC") who was required to develop a plan (henceforth referred to as the "Distribution Plan") to distribute the Fair Fund to the eligible shareholders of the FT mutual funds fairly and proportionately, according to a methodology developed in consultation with Franklin and the independent trustees and directors of the affected FT funds and acceptable to the staff of the SEC.

To achieve the objective of "fairly and proportionately" allocating the Fair Fund, the IDC adopted the following principles to guide development of this Distribution Plan:

Principle 1:	The fairest way to apportion the Fair Fund among the affected FT mutual funds is on the basis of the relative theoretical adverse economic impact that market timing trading activity could have caused to each affected FT mutual fund.
Principle 2:	The fairest way to apportion the Fair Fund among the affected Shareholders is on the basis of each affected Shareholder's relative holding of an affected FT mutual fund during the period in which market timing trading occurred in the FT mutual fund.
Principle 3:	The fairest way to apportion the Fair Fund is on the basis of data analyzed using objective criteria.
Principle 4:	Development and implementation of this Distribution Plan should proceed without unnecessary economic waste. Accordingly, the IDC imposed the standard of commercial reasonableness whenever possible to comply with the Order, the SEC's Fair Fund Rules, and other applicable requirements.

The Distribution Plan's methodology identifies 20 FT mutual funds (the "Affected Funds") whose shareholders may be eligible to participate in the distribution according to the terms of the Distribution Plan if they held their shares within the time period that the market timing activity occurred (the "Eligible Period"). The 20 Affected Funds are the Class A shares of:

Fund Name	Settlement Date Range
Franklin CA Growth Fund	07/30/98 - 09/12/00
Franklin California Tax-Free Income Fund	02/13/97 - 12/15/00
Franklin Convertible Securities Fund	09/07/00 - 09/07/00
Franklin Federal Tax-Free Income Fund	12/31/96 - 12/01/00
Franklin Gold and Precious Metals Fund	04/04/00 - 09/11/00
Franklin Growth and Income Fund	04/03/00 - 09/11/00
Franklin Growth Fund	04/10/00 - 08/16/00
Franklin Insured Tax-Free Income Fund	04/04/00 - 09/15/00
Franklin New York Tax-Free Income Fund	04/11/00 - 08/22/00
Franklin Real Estate Securities Fund	05/16/00 - 09/13/00
Franklin Small Cap Growth Fund	04/03/00 - 10/18/01
Mutual Discovery Fund	04/03/00 - 09/06/00
Mutual European Fund	04/03/00 - 08/31/00
Templeton Developing Markets Trust	04/03/00 - 09/14/00
Templeton Foreign Fund	04/03/00 - 09/11/00
Templeton Foreign Smaller Companies Fund	05/11/00 - 09/11/00
Templeton Global Opportunities Trust	04/03/00 - 09/14/00
Templeton Global Smaller Companies Fund	04/03/00 - 09/11/00
Templeton Growth Fund	04/03/00 - 09/14/00
Templeton World Fund	04/03/00 - 09/14/00

If you have any questions regarding the Franklin settlement or the Distribution Plan, please refer to the Frequently Asked Questions section of this website for additional information, or refer to the Contact Information section of this website for details on how to contact the Fund Administrator.