SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ______________)
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Sec. 240.14a-12
TEMPLETON GLOBAL INCOME FUND, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
[LOGO]
FRANKLIN/R/ TEMPLETON/R/
INVESTMENTS
TEMPLETON GLOBAL INCOME FUND, INC.
IMPORTANT SHAREHOLDER INFORMATION
These materials are for the Annual Meeting of Shareholders scheduled for
February 27, 2004 at 11:00 a.m. Eastern time. The enclosed materials discuss
four proposals (the "Proposals" or, each, a "Proposal") to be voted on at the
meeting, and contain the Notice of Meeting, proxy statement and proxy card. A
proxy card is, in essence, a ballot. When you vote your proxy by signing and
returning your proxy card, it tells us how you wish to vote on important issues
relating to Templeton Global Income Fund, Inc. (the "Fund"). If you specify a
vote for all Proposals, your proxy will be voted as you indicate. If you
specify a vote for one or more Proposals, but not all, your proxy will be voted
as specified on such Proposal(s) and, on the Proposal(s) for which no vote is
specified, your proxy will be voted FOR such Proposal(s). If you simply sign
and date the proxy card, but do not specify a vote for 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 and return it to us so
that we know how you would like to vote. When shareholders return their proxies
promptly, the Fund may be able to save money by not having to conduct
additional mailings.
We welcome your comments. If you have any questions, call Fund Information
at 1-800/DIAL BEN(R) (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, a control number and
separate instructions are enclosed.
[LOGO]
FRANKLIN/R/ TEMPLETON/R/
INVESTMENTS
TEMPLETON GLOBAL INCOME FUND, INC.
NOTICE OF 2004 ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders (the "Meeting") of Templeton Global
Income Fund, Inc. (the "Fund") will be held at the Fund's offices, 500 East
Broward Boulevard, 12th Floor, Fort Lauderdale, Florida 33394-3091 on February
27, 2004 at 11:00 a.m. Eastern time.
During the Meeting, shareholders of the Fund will vote on the following
Proposals and Sub-Proposals:
1. To elect four Directors of the Fund to hold office for the terms
specified.
2. To approve an Agreement and Plan of Reorganization that provides for the
reorganization of the Fund from a Maryland corporation to a Delaware
statutory trust.
3. To approve amendments to certain of the Fund's fundamental investment
restrictions (includes six (6) Sub-Proposals):
(a) To amend the Fund's fundamental investment restriction regarding
borrowing and issuing senior securities;
(b) To amend the Fund's fundamental investment restriction regarding
industry concentration;
(c) To amend the Fund's fundamental investment restriction regarding
investments in commodities;
(d) To amend the Fund's fundamental investment restriction regarding
investments in real estate;
(e) To amend the Fund's fundamental investment restriction regarding
lending; and
(f) To amend the Fund's fundamental investment restriction regarding
underwriting.
4. To approve the elimination of certain of the Fund's fundamental
investment restrictions.
By Order of the Board of Directors,
Barbara J. Green
Secretary
January 20, 2004
Many shareholders hold shares in more than one Templeton fund and will
receive proxy material for each fund owned. Please sign and promptly return
each proxy card in the self-addressed envelope regardless of the number of
shares you own.
TEMPLETON GLOBAL INCOME FUND, INC.
PROXY STATEMENT
TABLE OF CONTENTS
Page
----
Information About Voting............................................................................ 1
Proposal 1: To Elect Four Directors of the Fund.................................................... 2
Proposal 2: To Approve an Agreement and Plan of Reorganization that provides for the Reorganization
of the Fund from a Maryland Corporation to a Delaware Statutory Trust..................... 13
Introduction to Proposals 3 and 4................................................................... 17
Proposal 3: To Approve Amendments to Certain of the Fund's Fundamental Investment Restrictions
(this Proposal involves separate votes on Sub-Proposals 3a-3f)............................ 18
Sub-Proposal 3a: To amend the Fund's fundamental investment restriction regarding borrowing and
issuing senior securities........................................................... 18
Sub-Proposal 3b: To amend the Fund's fundamental investment restriction regarding industry
concentration....................................................................... 20
Sub-Proposal 3c: To amend the Fund's fundamental investment restriction regarding investments in
commodities......................................................................... 21
Sub-Proposal 3d: To amend the Fund's fundamental investment restriction regarding investments in
real estate......................................................................... 22
Sub-Proposal 3e: To amend the Fund's fundamental investment restriction regarding lending........ 22
Sub-Proposal 3f: To amend the Fund's fundamental investment restriction regarding underwriting... 23
Proposal 4: To Approve the Elimination of Certain of the Fund's Fundamental Investment
Restrictions.............................................................................. 24
Additional Information About the Fund............................................................... 25
Audit Committee..................................................................................... 26
Further Information About Voting and the Meeting.................................................... 28
EXHIBITS
Exhibit A--Nominating Committee Charter............................................................. A-1
Exhibit B--Form of Agreement and Plan of Reorganization between Templeton Global Income Fund, Inc.
(a Maryland corporation) and Templeton Global Income Fund (a Delaware statutory trust)..... B-1
Exhibit C--A Comparison of Governing Documents and State Law........................................ C-1
Exhibit D--Fundamental Investment Restrictions Proposed to be Amended or Eliminated................. D-1
Exhibit E--Audit Committee Charter.................................................................. E-1
TEMPLETON GLOBAL INCOME FUND, INC.
PROXY STATEMENT
..INFORMATION ABOUT VOTING
Who is asking for my vote?
The Directors of Templeton Global Income Fund, Inc. (the "Fund"), in
connection with the Annual Meeting of Shareholders of the Fund to be held on
February 27, 2004 (the "Meeting"), have requested your vote on several matters.
Who is eligible to vote?
Shareholders of record at the close of business on January 2, 2004 are
entitled to be present and to vote at the Meeting or any adjourned Meeting.
Each share of record is entitled to one vote (and a proportionate fractional
vote for each fractional share) on each matter presented at the Meeting. The
Notice of Meeting, the proxy card, and proxy statement were first mailed to
shareholders of record on or about January 20, 2004.
On what issues am I being asked to vote?
You are being asked to vote on four Proposals:
1. To elect four Directors of the Fund;
2. To approve an Agreement and Plan of Reorganization that provides for the
reorganization of the Fund from a Maryland corporation to a Delaware
statutory trust;
3. To approve amendments to certain of the Fund's fundamental investment
restrictions (includes six (6) Sub-Proposals); and
4. To approve the elimination of certain of the Fund's fundamental
investment restrictions.
How do the Fund's Directors recommend that I vote?
The Directors unanimously recommend that you vote:
1. FOR the election of the four nominees as Directors of the Fund;
2. FOR the approval of an Agreement and Plan of Reorganization that
provides for the reorganization of the Fund from a Maryland corporation
to a Delaware statutory trust;
3. FOR the approval of each of the proposed amendments to certain of the
Fund's fundamental investment restrictions; and
4. FOR the approval of the elimination of certain of the Fund's fundamental
investment restrictions.
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. If you are eligible to vote by telephone or through
the Internet, a control number and 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 1 through 4, your proxy will be voted as you indicate, and any
Proposal for which no vote is specified 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 1 through 4, your shares will be voted FOR the election of all
nominees as Director (Proposal 1); FOR the approval of an Agreement and Plan of
Reorganization
that provides for the reorganization of the Fund from a Maryland corporation to
a Delaware statutory trust (Proposal 2); FOR the approval of each of the
proposed amendments to certain of the Fund's fundamental investment
restrictions (Sub-Proposals 3a-3f); and FOR the approval of the elimination of
certain of the Fund's fundamental investment restrictions (Proposal 4).
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 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.
..THE PROPOSALS
PROPOSAL 1: TO ELECT FOUR DIRECTORS OF THE FUND
How are nominees selected?
The Board of Directors of the Fund (the "Board" or the "Directors") has a
Nominating Committee (the "Committee") consisting of Frank J. Crothers, Edith
E. Holiday and Gordon S. Macklin, none of whom is an "interested person" of the
Fund as defined by the Investment Company Act of 1940, as amended (the "1940
Act"). Directors who are not interested persons of the Fund are referred to as
the "Independent Directors" and Directors who are interested persons of the
Fund are referred to as the "Interested Directors."
The Committee is responsible for selecting candidates to serve as Directors
and recommending such candidates (a) for selection and nomination as
Independent Directors by the incumbent Independent Directors and the full
Board; and (b) for selection and nomination as Interested Directors by the full
Board. In considering a candidate's qualifications, the Committee generally
considers the potential candidate's educational background, business or
professional experience, and reputation. In addition, the Committee has
established as minimum qualifications for Board membership as an Independent
Director: (1) that such candidate be independent from relationships with the
Fund's investment manager and other principal service providers both within the
terms and the spirit of the statutory independence requirements specified under
the 1940 Act, (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 mutual fund other than those within
the Franklin Templeton Investments fund complex.
When the Board has or expects to have a vacancy, the Committee receives and
reviews information on individuals qualified to be recommended to the full
Board as nominees for election as Directors, including any recommendations by
shareholders. Such individuals are evaluated based upon the criteria described
above. To date, the 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. The Committee, however, will review shareholders'
recommendations to fill vacancies on the Board if these recommendations are
submitted in writing and addressed to the Committee at the Fund's offices.
The Board has adopted and approved a formal written charter for the
Committee. A copy of the charter is attached as Exhibit A to this proxy
statement.
2
Who are the nominees and Directors?
The Board is divided into three classes. Each class has a term of three
years. Each year the term of office of one class expires. This year, the terms
of four Directors expire. Frank J. Crothers, Fred R. Millsaps and Charles B.
Johnson have been nominated for three-year terms, set to expire at the 2007
Annual Meeting of Shareholders. Frank A. Olson has been nominated for a
one-year term, set to expire at the 2005 Annual Meeting of Shareholders. These
terms continue, however, until successors are duly elected and qualified. Among
these Directors, only Charles B. Johnson is deemed to be an "interested person"
for purposes of the 1940 Act. All of the nominees are currently members of the
Board; however, Mr. Olson is standing for election by shareholders of the Fund
for the first time. An incumbent Independent Director recommended Mr. Olson for
consideration by the Committee as a nominee for Director. In addition, all of
the current nominees and Directors are also directors or trustees of other
Franklin(R) funds and/or Templeton(R) funds.
Certain Directors of the Fund 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 18.14% and
15.47%, respectively, of its outstanding shares as of August 31, 2003.
Resources, a global investment 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,
Chairman of the Board, Director and Vice President of the Fund, and Rupert H.
Johnson, Jr., Vice President of the Fund, are brothers. There are no family
relationships among any of the Directors or nominees for Director.
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 Directors. Betty P. Krahmer, whose term would have expired this
year, has advised the Fund she will retire prior to the date of the Meeting.
The Board is expected to reduce the number of Directors by one effective with
Ms. Krahmer's retirement. As a result, the Board is not requesting your vote
for a fourth nominee for a term set to expire in 2007, and the proxies being
solicited may only be voted for the four nominees listed below.
Listed below, for the nominees and Directors, are their names, ages and
addresses, as well as their positions and length of service with the Fund,
principal occupation during the past five years, the number of portfolios in
the Franklin Templeton Investments fund complex that they oversee, and any
other directorships held by the nominee or Director.
Nominees for Independent Director to serve until 2007 Annual Meeting of
Shareholders:
Number of
Portfolios in
Franklin
Templeton
Investments
Fund Complex
Length of Overseen by
Name, Age and Address Position Time Served Director* Other Directorships Held
----------------------------- -------------- ----------------- ------------------- -----------------------------
Frank J. Crothers (59) Director Since 1999 20 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
Principal Occupation During Past 5 Years:
Chairman, Ventures Resources Corporation (Vice Chairman 1996-2003); Vice Chairman, Caribbean Utilities Co.
Ltd.; Director and President, Provo Power Company Ltd.; Director, Caribbean Electric Utility Services
Corporation (Chairman until 2002); director of various other business and nonprofit organizations; and formerly,
Chairman, Atlantic Equipment & Power Ltd. (1977-2003).
--------------------------------------------------------------------------------
3
Number of
Portfolios in
Franklin
Templeton
Investments
Fund Complex
Length of Overseen by
Name, Age and Address Position Time Served Director* Other Directorships Held
---------------------------- --------------- --------------- ---------------- -------------------------------
Fred R. Millsaps (74) Director Since 1990 28 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
Principal Occupation During Past 5 Years:
Director of various business and nonprofit organizations; manager of personal investments (1978-present); and
formerly, Chairman and Chief Executive Officer, Landmark Banking Corporation (1969-1978); Financial Vice
President, Florida Power and Light (1965-1969); and Vice President, Federal Reserve Bank of Atlanta (1958-
1965).
--------------------------------------------------------------------------------------------------------------------
Nominee for Independent Director to serve until 2005 Annual Meeting of Shareholders:
Frank A. Olson (71) Director Since 2003 20 Director, Becton, Dickinson
500 East Broward Blvd. and Co. (medical technology);
Suite 2100 White Mountains Insurance
Fort Lauderdale, FL Group Ltd. (holding
33394-3091 company); and Amerada Hess
Corporation (exploration and
refining of oil and gas).
Principal Occupation During Past 5 Years:
Chairman of the Board, The Hertz Corporation (car rental) (since 1980) (Chief Executive Officer 1977-1999);
and formerly, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
--------------------------------------------------------------------------------------------------------------------
Nominee for Interested Director to serve until 2007 Annual Meeting of Shareholders:
**Charles B. Johnson (70) Chairman of Chairman of 142 None
One Franklin Parkway the Board, the Board
San Mateo, CA Director and since 1995
94403-1906 Vice and Director
President and Vice
President
since 1992
Principal Occupation During Past 5 Years:
Chairman of the Board, Member--Office of the Chairman and Director, Franklin Resources, Inc.; Vice
President, Franklin Templeton Distributors, Inc.; Director, Fiduciary Trust Company International; and officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of
46 of the investment companies in Franklin Templeton Investments.
--------------------------------------------------------------------------------------------------------------------
4
Independent Directors serving until 2006 Annual Meeting of Shareholders:
Number of
Portfolios in
Franklin
Templeton
Investments
Fund Complex
Length of Overseen by
Name, Age and Address Position Time Served Director* Other Directorships Held
---------------------------- ----------- -------------- ---------------- ---------------------------------
Harris J. Ashton (71) Director Since 1992 142 Director, Bar-S Foods
500 East Broward Blvd. (meat packing company).
Suite 2100
Fort Lauderdale, FL
33394-3091
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).
--------------------------------------------------------------------------------------------------------------------
S. Joseph Fortunato (71) Director Since 1992 143 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
Principal Occupation During Past 5 Years:
Attorney; and formerly, member of the law firm of Pitney, Hardin, Kipp & Szuch.
--------------------------------------------------------------------------------------------------------------------
Interested Director serving until 2006 Annual Meeting of Shareholders:
**Nicholas F. Brady (73) Director Since 1993 21 Director, Amerada Hess
500 East Broward Blvd. Corporation (exploration and
Suite 2100 refining of oil and gas); and
Fort Lauderdale, FL C2, Inc. (operating and
33394-3091 investment business); and
formerly, Director, H.J. Heinz
Company (processed foods
and allied products) (1987-
1988; 1993-2003).
Principal Occupation During Past 5 Years:
Chairman, Darby Overseas Investments, Ltd., Darby Emerging Markets Investments LDC and Darby
Technology Ventures Group, LLC (investment firms) (1994-present); Director, Templeton Capital Advisors Ltd.
and Franklin Templeton Investment Fund; and formerly, Chairman, Templeton Emerging Markets Investment
Trust PLC (until 2003); Secretary of the United States Department of the Treasury (1988-1993); Chairman of the
Board, Dillon, Read & Co., Inc. (investment banking) (until 1988); and U.S. Senator, New Jersey (April 1982-
December 1982).
--------------------------------------------------------------------------------------------------------------------
5
Independent Directors serving until 2005 Annual Meeting of Shareholders:
Number of
Portfolios in
Franklin
Templeton
Investments
Fund Complex
Length of Overseen by
Name, Age and Address Position Time Served Director* Other Directorships Held
----------------------------- ------------- ---------------- ------------------ ----------------------------------
Edith E. Holiday (51) Director Since 1996 96 Director, Amerada Hess
500 East Broward Blvd. Corporation (exploration and
Suite 2100 refining of oil and gas);
Fort Lauderdale, FL Beverly Enterprises, Inc.
33394-3091 (health care); H.J. Heinz
Company (processed foods and
allied products); RTI
International Metals, Inc.
(manufacture and distribution
of titanium); and Canadian
National Railway (railroad).
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).
--------------------------------------------------------------------------------------------------------------------
Gordon S. Macklin (75) Director Since 1993 142 Director, White Mountains
500 East Broward Blvd. Insurance Group, Ltd. (holding
Suite 2100 company); Martek Biosciences
Fort Lauderdale, FL Corporation; MedImmune, Inc.
33394-3091 (biotechnology);
Overstock.com (Internet
services); and Spacehab, Inc.
(aerospace services); and
formerly, Director, MCI
Communication Corporation
(subsequently known as MCI
WorldCom, Inc. and
WorldCom, Inc.)
(communications services)
(1988-2002).
Principal Occupation During Past 5 Years:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and formerly, Chairman, White
River Corporation (financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-
1992); and President, National Association of Securities Dealers, Inc. (1970-1987).
--------------------------------------------------------------------------------------------------------------------
6
Number of
Portfolios in
Franklin
Templeton
Investments
Fund Complex
Length of Overseen by
Name, Age and Address Position Time Served Director* Other Directorships Held
---------------------------- ------------- --------------- ----------------- ----------------------------
Constantine D. Director Since 1999 20 None
Tseretopoulos (49)
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
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).
-----------------------------------------------------------------------------------------------------------
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex that a nominee for election as director would oversee if
elected or that a director currently oversees. These portfolios have a
common investment adviser or affiliated investment advisers, and also may
share a common underwriter.
** Nicholas F. Brady and Charles B. Johnson are "interested persons" of the
Fund as defined by the 1940 Act. The 1940 Act limits the percentage of
interested persons that can comprise a fund's board of directors. Mr.
Johnson is considered an interested person of the Fund due to his position
as an officer and director and major shareholder of Resources, which is the
parent company of the Fund's investment manager, and his position with the
Fund. Mr. Brady's status as an interested person results from his business
affiliations with Resources and Templeton Global Advisors Limited. On
October 1, 2003, Resources acquired all of the shares of Darby Overseas
Investments, Ltd. ("Darby Investments") and the remaining portion of the
limited partner interests not currently owned by Resources of Darby Overseas
Partners, L.P. ("Darby Partners"). Mr. Brady, formerly a shareholder of
Darby Investments and a partner of Darby Partners, will continue as Chairman
of Darby Investments, which is the corporate general partner of Darby
Partners. In addition, Darby Partners and Templeton Global Advisors Limited
are limited partners of Darby Emerging Markets Fund, L.P. ("DEMF"). Mr.
Brady will also continue to serve as Chairman of the corporate general
partner of DEMF, and Darby Partners and Darby Investments own 100% of the
stock of the general partner of DEMF. Resources also is an investor in Darby
Technology Ventures Group, LLC ("DTV") in which Darby Partners is a
significant investor and for which Darby Partners has the right to appoint a
majority of the directors. Templeton Global Advisors Limited also is a
limited partner in Darby--BBVA Latin America Private Equity Fund, L.P.
("DBVA"), a private equity fund in which Darby Partners is a significant
investor, and the general partner of which Darby Partners controls jointly
with an unaffiliated third party. Mr. Brady is also a director of Templeton
Capital Advisors Ltd. ("TCAL"), which serves as investment manager to
certain unregistered funds. TCAL and Templeton Global Advisors Limited are
both indirect subsidiaries of Resources. The remaining nominees and
Directors of the Fund are Independent Directors.
7
The following tables provide the dollar range of the equity securities of
the Fund and of all funds overseen by the Directors in the Franklin Templeton
Investments fund complex beneficially owned by the Fund's Directors as of
December 31, 2003.
Independent Directors:
Aggregate Dollar Range of Equity
Securities in all Funds Overseen by the
Dollar Range of Equity Director in the Franklin Templeton
Name of Director Securities in the Fund Investments Fund Complex
---------------------------- ---------------------- ---------------------------------------
Harris J. Ashton............ $1-$10,000 Over $100,000
Frank J. Crothers........... None Over $100,000
S. Joseph Fortunato......... $1-$10,000 Over $100,000
Edith E. Holiday............ $1-$10,000 Over $100,000
Gordon S. Macklin........... Over $100,000 Over $100,000
Fred R. Millsaps............ None Over $100,000
Frank A. Olson.............. None Over $100,000
Constantine D. Tseretopoulos None Over $100,000
Interested Directors:
Aggregate Dollar Range of Equity
Securities in all Funds Overseen by the
Dollar Range of Equity Director in the Franklin Templeton
Name of Director Securities in the Fund Investments Fund Complex
--------------------------- ---------------------- ---------------------------------------
Nicholas F. Brady........... $10,001-$50,000 Over $100,000
Charles B. Johnson.......... $10,001-$50,000 Over $100,000
How often do the Directors meet and what are they paid?
The role of the Directors is to provide general oversight of the Fund's
business and to ensure that the Fund is operated for the benefit of all
shareholders. The Directors anticipate meeting at least five times during the
current fiscal year to review the operations of the Fund and the Fund's
investment performance. The Directors also oversee the services furnished to
the Fund by Franklin Advisers, Inc., the Fund's investment manager (the
"Investment Manager"), and various other service providers. The Fund currently
pays the Independent Directors and Mr. Brady an annual retainer of $4,000 and a
fee of $500 per Board meeting attended. Directors serving on the Audit
Committee of the Fund and other investment companies in Franklin Templeton
Investments receive a flat fee of $2,000 per Audit Committee meeting attended,
a portion of which is allocated to the Fund. Members of a committee are not
compensated for any committee meeting held on the day of a Board meeting.
During the fiscal year ended August 31, 2003, there were five meetings of
the Board, three meetings of the Audit Committee, and five meetings of the
Nominating Committee. Each Director then in office attended at least 75% of the
aggregate of the total number of meetings of the Board and the total number of
meetings held by all committees of the Board on which the Director served. The
Fund does not currently have a formal policy regarding Directors' attendance at
annual shareholders' meetings. One Director attended the Fund's last annual
meeting held on February 28, 2003.
8
Certain Directors and officers of the Fund are shareholders of Resources and
may receive indirect remuneration due to their participation in management fees
and other fees received by the Investment Manager and its affiliates from the
funds in Franklin Templeton Investments. The Investment Manager or its
affiliates pay the salaries and expenses of the officers. No pension or
retirement benefits are accrued as part of Fund expenses.
Number of Boards in
Total Compensation from Franklin Templeton
Aggregate Compensation Franklin Templeton Investments Fund Complex
Name of Director from the Fund* Investments Fund Complex** on which Director Serves***
------------------------------------------------------------------------------------------------------------
Harris J. Ashton.............. $5,500 $369,700 46
Nicholas F. Brady............. 5,500 82,300 15
Frank J. Crothers............. 5,767 106,400 14
S. Joseph Fortunato........... 5,500 369,700 47
Andrew H. Hines, Jr.****...... 5,655 202,225 1
Edith E. Holiday.............. 5,500 297,707 32
Betty P. Krahmer*****......... 5,500 136,100 15
Gordon S. Macklin............. 5,500 369,700 46
Fred R. Millsaps.............. 5,655 204,225 17
Frank A. Olson******.......... 1,167 54,150 14
Constantine D. Tseretopoulos.. 5,767 104,600 14
--------
* Compensation received for the fiscal year ended August 31, 2003.
** Compensation received for the calendar year ended December 31, 2003.
*** 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 or funds within each
investment company for which the Board members are responsible. Franklin
Templeton Investments currently includes 51 registered investment
companies, with approximately 154 U.S. based funds or series.
**** Mr. Hines retired from the Board effective December 31, 2003.
***** Ms. Krahmer is not seeking re-election on this Board.
****** Mr. Olson was appointed to the Board in May 2003.
The table above indicates the total fees paid to Directors by the Fund
individually and by all of the funds in Franklin Templeton Investments. These
Directors also serve as directors or trustees of other funds in Franklin
Templeton Investments, many of which hold meetings at different dates and
times. The Directors and the Fund's management believe that having the same
individuals serving on the boards of many of the funds in Franklin Templeton
Investments 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 Directors who can more effectively oversee the
management of the funds.
Board members historically have followed a policy of having substantial
investments in one or more of the funds in Franklin Templeton Investments, as
is consistent with their individual financial goals. In February 1998, this
policy was formalized through adoption of a requirement that each board member
invest one-third of the fees received for serving as a director or trustee of a
Templeton fund in shares of one or more Templeton funds and one-third of the
fees received for serving as a director or trustee of a Franklin fund in shares
of one or more Franklin funds until the value of such investments equals or
exceeds five times the annual fees paid to 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 this policy, a board member's fund
holdings existing on February 27, 1998 were valued as of such date, with
subsequent investments valued at cost.
9
Who are the Executive Officers of the Fund?
Officers of the Fund are appointed by the Directors and serve at the
pleasure of the Board. Listed below, for the Executive Officers are their
names, ages and addresses, as well as their positions and length of service
with the Fund, and principal occupations during the past five years.
Name, Age and Address Position Length of Time Served
-----------------------------------------------------------------------------------
Charles B. Johnson Chairman of the Board, Chairman of the Board
Director and Vice since 1995 and Director
President and
Vice President since 1992
Please refer to the table "Nominee for Interested Director to serve until 2007
Annual Meeting of Shareholders" for additional information about Mr. Charles B.
Johnson.
-----------------------------------------------------------------------------------
Christopher J. Molumphy President and Chief Since 2002
(41) Executive
One Franklin Parkway Officer--Investment
San Mateo, CA Management
94403-1906
Principal Occupation During Past 5 Years:
Executive Vice President, Franklin Advisers, Inc.; and officer of six of the
investment companies in Franklin Templeton Investments.
-----------------------------------------------------------------------------------
Rupert H. Johnson, Jr. Vice President Since 1996
(63)
One Franklin Parkway
San Mateo, CA
94403-1906
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. and Franklin Investment Advisory Services,
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 49 of the investment companies
in Franklin Templeton Investments.
-----------------------------------------------------------------------------------
Harmon E. Burns (58) Vice President Since 1996
One Franklin Parkway
San Mateo, CA
94403-1906
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.;
Executive Vice President, Franklin Advisers, Inc.; Director, Franklin
Investment Advisory Services, 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 49 of the investment companies in Franklin Templeton Investments.
-----------------------------------------------------------------------------------
10
Name, Age and Address Position Length of Time Served
------------------------------------------------------------------------------
Martin L. Flanagan (43) Vice President Since 1989
One Franklin Parkway
San Mateo, CA
94403-1906
Principal Occupation During Past 5 Years:
Co-President and Chief Executive Officer, Franklin Resources, Inc.; Senior
Vice President and Chief Financial Officer, Franklin Mutual Advisers, LLC;
Executive Vice President, Chief Financial Officer and Director, Templeton
Worldwide, Inc.; Executive Vice President and Chief Operating Officer,
Templeton Investment Counsel, LLC; President and Director, Franklin
Advisers, Inc.; Executive Vice President, Franklin Investment Advisory
Services, Inc. and Franklin Templeton Investor Services, LLC; Chief
Financial Officer, Franklin Advisory Services, LLC; Chairman, Franklin
Templeton 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
49 of the investment companies in Franklin Templeton Investments.
-----------------------------------------------------------------------------
Jeffrey A. Everett (39) Vice President Since 2001
P.O. Box N-7759
Lyford Cay, Nassau
Bahamas
Principal Occupation During Past 5 Years:
President and Director, Templeton Global Advisors Limited; officer of 15 of
the investment companies in Franklin Templeton Investments; and formerly,
Investment Officer, First Pennsylvania Investment Research (until 1989).
-----------------------------------------------------------------------------
Jimmy D. Gambill (56) Senior Vice President and Since 2002
500 East Broward Blvd. Chief Executive Officer--
Suite 2100 Finance and
Fort Lauderdale, FL Administration
33394-3091
Principal Occupation During Past 5 Years:
President, Franklin Templeton Services, LLC; Senior Vice President,
Templeton Worldwide, Inc.; and officer of 51 of the investment companies in
Franklin Templeton Investments.
-----------------------------------------------------------------------------
John R. Kay (63) Vice President Since 1994
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
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 35 of the investment companies in Franklin
Templeton Investments; and formerly, Vice President and Controller, Keystone
Group, Inc.
-----------------------------------------------------------------------------
11
Name, Age and Address Position Length of Time Served
------------------------------------------------------------------------------
Murray L. Simpson (66) Vice President and Since 2000
One Franklin Parkway Assistant Secretary
San Mateo, CA
94403-1906
Principal Occupation During Past 5 Years:
Executive Vice President and General Counsel, Franklin Resources, Inc.;
officer and/or director, as the case may be, of some of the subsidiaries of
Franklin Resources, Inc. and of 51 of the investment companies in Franklin
Templeton Investments; and formerly, Chief Executive Officer and Managing
Director, Templeton Franklin Investment Services (Asia) Limited (until
2000); and Director, Templeton Asset Management Ltd. (until 1999).
-----------------------------------------------------------------------------
Barbara J. Green (56) Vice President Vice President since
One Franklin Parkway and Secretary 2000 and Secretary since
San Mateo, CA 1996
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, Inc., 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 51 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).
-----------------------------------------------------------------------------
David P. Goss (56) Vice President and Since 2000
One Franklin Parkway Assistant Secretary
San Mateo, CA
94403-1906
Principal Occupation During Past 5 Years:
Associate General Counsel, Franklin Resources, Inc.; officer and director of
one of the subsidiaries of Franklin Resources, Inc.; officer of 51 of the
investment companies in Franklin Templeton Investments; and formerly,
President, Chief Executive Officer and Director, Property Resources Equity
Trust (until 1999) and Franklin Select Realty Trust (until 2000).
-----------------------------------------------------------------------------
Michael O. Magdol (66) Vice President--AML Since 2002
600 Fifth Avenue Compliance
Rockefeller Center
New York, NY 10048-0772
Principal Occupation During Past 5 Years:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company
International; Director, FTI Banque, Arch Chemicals, Inc. and Lingnan
Foundation; and officer and/or director, as the case may be, of some of the
other subsidiaries of Franklin Resources, Inc. and of 48 of the investment
companies in Franklin Templeton Investments.
-----------------------------------------------------------------------------
12
Name, Age and Address Position Length of Time Served
--------------------------------------------------------------------------------
Kimberley H. Monasterio Treasurer and Since 2003
(40) Chief Financial Officer
One Franklin Parkway
San Mateo, CA
94403-1906
Principal Occupation During Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; and officer of 51
of the investment companies in Franklin Templeton Investments.
-----------------------------------------------------------------------------
PROPOSAL 2: TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION THAT PROVIDES
FOR THE REORGANIZATION OF THE FUND FROM A MARYLAND CORPORATION TO
A DELAWARE STATUTORY TRUST
The Directors unanimously recommend that you approve an Agreement and Plan
of Reorganization (the "Plan"), substantially in the form attached to this
proxy statement as Exhibit B, that would change the state of organization of
the Fund. This proposed change calls for the reorganization of the Fund from a
Maryland corporation into a newly formed Delaware statutory trust. This
proposed reorganization will be referred to throughout this proxy statement as
the "Reorganization." To implement the Reorganization, the Directors have
approved the Plan, which contemplates the continuation of the current business
of the Fund in the form of a new Delaware statutory trust named "Templeton
Global Income Fund" (the "DE Fund").
What will the Reorganization mean for the Fund and its shareholders?
If the Plan is approved by shareholders and the Reorganization is
implemented, the DE Fund would have the same investment objective, policies and
restrictions as the Fund (including, if approved by shareholders at the
Meeting, the same fundamental investment restrictions amended or eliminated by
Proposals 3 and 4 in this proxy statement). The Board, including any persons
elected under Proposal 1, and officers of the DE Fund would be the same as
those of the Fund, and would operate the DE Fund in essentially the same manner
as they previously operated the Fund. Thus, on the effective date of the
Reorganization, you would hold an interest in the DE Fund that is equivalent to
your then interest in the Fund. For all practical purposes, a shareholder's
investment in the Fund would not change.
Why are the Directors recommending approval of the Plan and the
Reorganization?
The Directors have determined that investment companies formed as Delaware
statutory trusts have certain advantages over investment companies organized as
Maryland corporations. Under Delaware law, investment companies are able to
simplify their operations by reducing administrative burdens. For example,
Delaware law allows greater flexibility in drafting and amending an investment
company's governing documents, which can result in greater efficiencies of
operation and savings for an investment company and its shareholders. Delaware
law also provides favorable state tax treatment. Most significantly, an
investment company formed as a Delaware statutory trust, unlike one formed as a
Maryland corporation, need not pay an organization and capitalization tax on
the aggregate par value of shares it issues to shareholders. Furthermore, as
described below, in Delaware there is a well-established body of legal
precedent in the area of corporate law that may be relevant in deciding issues
pertaining to the DE Fund. This could benefit the DE Fund and its shareholders
by, for example, making litigation involving the interpretation of provisions
in the DE Fund's governing documents less likely or, if litigation should be
initiated, less burdensome or expensive. Accordingly, the Directors believe
that it is in the best interests of the shareholders to approve the Plan.
13
How do the Maryland corporate law and the Fund's governing documents compare
to the Delaware statutory trust law and the DE Fund's governing documents?
The following summary compares certain rights and characteristics of the
shares of the Fund to the shares of the DE Fund. The summary is qualified in
its entirety by the more complete comparison of Maryland corporate law and
Delaware statutory trust law, and a comparison of the relevant provisions of
the governing documents of the Fund and the DE Fund, included in Exhibit C to
this proxy statement, which is entitled, "A Comparison of Governing Documents
and State Law."
Reorganizing the Fund from a Maryland corporation to a Delaware statutory
trust is expected to provide many benefits to the Fund and its shareholders.
Funds formed as Delaware statutory trusts under the Delaware Statutory Trust
Act (the "Delaware Act") are granted a significant amount of operational
flexibility, resulting in efficiencies of operation that translate into savings
for a fund, such as the DE Fund, and its shareholders. For example, the
Delaware Act authorizes management to take various actions without requiring
shareholder approval if permitted by the governing instrument. Additionally,
unlike Maryland corporate law, the Delaware Act permits any amendment to the
statutory trust's governing instrument without the need for a state filing,
which can reduce administrative burdens and costs.
The operations of a Delaware statutory trust formed under the Delaware Act
are governed by a declaration of trust and by-laws. The DE Fund's Agreement and
Declaration of Trust ("Declaration of Trust") and By-Laws streamline many of
the provisions in the Fund's Charter and By-Laws, and should thus lead to
enhanced flexibility in management and administration as compared to its
current operation as a Maryland corporation. As a Delaware statutory trust, the
DE Fund should also be able to adapt more quickly and cost effectively to new
developments in the mutual fund industry and the financial markets.
Moreover, to the extent provisions in the DE Fund's Declaration of Trust and
By-Laws are addressed by rules and principles established under Delaware
corporate law and the laws governing other Delaware business entities (such as
limited partnerships and limited liability companies), the Delaware courts may
look to such other laws to help interpret provisions of the DE Fund's
Declaration of Trust and By-Laws. Applying this body of law to the operation of
the DE Fund should prove beneficial because these laws are extensively
developed and business-oriented. In addition, Delaware's Chancery Court is
dedicated to business law matters, which means that the judges tend to be more
specialized and better versed in the nuances of the law that will be applied to
the DE Fund. These legal advantages tend to make more certain the resolution of
legal controversies and help to reduce legal costs resulting from uncertainty
in the law.
Shares of the DE Fund and the Fund each have one vote per full share and a
proportionate fractional vote for each fractional share. Both the DE Fund and
the Fund provide for noncumulative voting in the election of their
trustees/directors and provide for a classified board consisting of three
classes of trustees/directors, with staggered terms. Like the Fund, the DE Fund
intends to hold annual shareholder meetings. Special meetings of shareholders
may be called at any time by the DE Fund Board, by the chairperson of the DE
Fund Board or by the president of the DE Fund for the purpose of taking action
upon any matter deemed by the DE Fund Board to be necessary or desirable. To
the extent permitted by the 1940 Act, a special meeting of the shareholders for
the purpose of electing trustees may also be called by the chairperson of the
DE Fund Board, or shall be called by the president or any vice-president of the
DE Fund at the request of shareholders holding not less than 10% of the DE
Fund's shares, provided that the shareholders requesting such meeting shall
have paid the DE Fund the reasonably estimated cost of preparing and mailing
the notice of the meeting. With respect to shareholder inspection rights of a
fund's books and records, the Fund and the DE Fund each provide certain
inspection rights to its shareholders at least to the extent required by
applicable law.
While shareholders of the DE Fund will have similar distribution and voting
rights as they currently have as shareholders of the Fund, there are certain
differences. The organizational structures differ in record date parameters for
determining shareholders entitled to notice, to vote and to a distribution and
differ in the
14
proportion of shares required to vote on certain matters, such as mergers,
dissolution, and amendment to charter documents. In addition, the By-Laws that
govern the operation of the DE Fund contain a provision which requires that
notice be given to the DE Fund by a shareholder in advance of a shareholder
meeting to enable a shareholder to present a proposal at any such meeting.
Failure to satisfy the requirements of this advance notice provision will mean
that a shareholder may not be able to present a proposal at a meeting. The
details of that new advance notice provision are included in Exhibit C and its
operation is described under "Further Information About Voting and the
Meeting-Shareholder Proposals" below.
Under Maryland corporation law, the shareholders of the Fund are not subject
to any personal liability for any claims against, or liabilities of, the Fund
solely by reason of being or having been a shareholder of the Fund. Under the
Delaware Act, shareholders of the DE Fund will be entitled to the same
limitation of personal liability as is extended to shareholders of a private
corporation organized for profit under the General Corporation Law of the State
of Delaware.
What are the consequences and procedures of the Reorganization?
Upon completion of the Reorganization, the DE Fund will continue the
business of the Fund and will have the same investment objective, policies and
investment restrictions as those of the Fund existing on the date of the
Reorganization, and will hold the same portfolio of securities then held by the
Fund. The DE Fund will be operated under substantially identical overall
management, investment management, and administrative arrangements as those of
the Fund. As the successor to the Fund's operations, the DE Fund will adopt the
Fund's notification of registration under the 1940 Act.
The DE Fund was created solely for the purpose of becoming the successor
organization to, and carrying on the business of, the Fund. To accomplish the
Reorganization, the Plan provides that the Fund will transfer all of its
portfolio securities and any other assets, subject to its liabilities, to the
DE Fund. In exchange for these assets and liabilities, the DE Fund will issue
shares of the DE Fund to the Fund, which will then distribute those shares pro
rata to you as a shareholder of the Fund. Through this procedure, you will
receive exactly the same number and dollar amount of shares of the DE Fund as
you held in the Fund immediately prior to the Reorganization. You will retain
the right to any declared but undistributed dividends or other distributions
payable on the shares of the Fund that you may have had as of the effective
date of the Reorganization. As soon as practicable after the date of the
Reorganization, the Fund will be dissolved and cease its existence.
The Directors may terminate the Plan and abandon the Reorganization at any
time prior to the effective date of the Reorganization if they determine that
proceeding with the Reorganization is inadvisable. If the Reorganization is not
approved by shareholders of the Fund, or if the Directors abandon the
Reorganization, the Fund will continue to operate as a Maryland corporation. If
the Reorganization is approved by shareholders, it is expected to be completed
in 2004.
What effect will the Reorganization have on the current investment management
agreement?
As a result of the Reorganization, the DE Fund will be subject to a new
investment management agreement between the DE Fund and the Investment Manager.
The new investment management agreement will be substantially identical to the
current investment management agreement between the Investment Manager and the
Fund.
What effect will the Reorganization have on the current shareholder servicing
agreements?
The DE Fund will enter into an agreement with Franklin Templeton Services,
LLC for administration services that is substantially identical to the Fund
Administration Agreement currently in place for the Fund. The Fund will assign
to the DE Fund the Fund's service and transfer agency agreements with Mellon
Investor Services LLC (which provide for certain financial, administrative,
transfer agency and fund accounting services).
15
What is the effect of shareholder approval of the Plan?
Under the 1940 Act, the shareholders of a fund must elect trustees and
approve the initial investment management agreement for the fund.
Theoretically, if the Plan is approved and the Fund is reorganized to a
Delaware statutory trust, the shareholders would need to vote on these two
items for the DE Fund. In fact, the DE Fund must obtain shareholder approval of
these items or it will not comply with the 1940 Act. However, the Directors
have determined that it is in the best interests of the shareholders to avoid
the considerable expense of another shareholder meeting to obtain these
approvals after the Reorganization. Therefore, the Directors have determined
that approval of the Plan will constitute, for purposes of the 1940 Act,
shareholder approval of: (1) the election of the Directors of the Fund who are
in office at the time of the Reorganization as Trustees of the DE Fund; and (2)
a new investment management agreement between the DE Fund and the Investment
Manager, which is substantially identical to the investment management
agreement currently in place for the Fund.
Prior to the Reorganization, if the Plan is approved by shareholders, the
officers will cause the Fund, as the sole shareholder of the DE Fund, to vote
its share FOR the matters specified above. This action will enable the DE Fund
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 the DE Fund?
The DE Fund was formed as a Delaware statutory trust on December 2, 2003
pursuant to the Delaware Act. The DE Fund has authorized an unlimited number of
shares of beneficial interest without par value. As of the effective date of
the Reorganization, outstanding shares of the DE Fund will be fully paid,
nonassessable, freely transferable, and will have no preemptive or subscription
rights. The DE Fund also has the same fiscal year as the Fund.
Who will bear the expenses of the Reorganization?
Since the Reorganization will benefit the Fund and its shareholders, the
Board has authorized that expenses incurred in the Reorganization shall be paid
by the Fund, whether or not the Reorganization is approved by shareholders.
Are there any tax consequences for shareholders?
The 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
Reorganization is completed. Generally, the basis and holding period of your
shares in the DE Fund will be the same as the basis and holding period of your
shares in the Fund. Consummation of the Reorganization is subject to receipt of
a legal opinion from the law firm of Stradley Ronon Stevens & Young, LLP,
counsel to the DE Fund and the Fund, that under the Internal Revenue Code of
1986, as amended, the Reorganization will not give rise to the recognition of
income, gain or loss for federal income tax purposes to the Fund, the DE Fund,
or their shareholders.
What if I choose to sell my shares at any time?
You may continue to trade your shares of the Fund on the NYSE or Pacific
Exchange, Inc. (the "PCX") until the close of trading on the business day
before the effective date of the Reorganization. The shares of the DE Fund will
be listed on the NYSE and the PCX just as shares of the Fund historically have
been listed. Consequently, upon the effectiveness of the Reorganization you may
trade, on the NYSE or the PCX, the shares of the DE Fund you receive in the
Reorganization. The market value of your shares will not be affected by the
Reorganization except to the extent that market forces affect the value of the
shares, as currently occurs.
16
What is the effect of my voting "FOR" the Plan?
By voting "FOR" the Plan, you will be agreeing to become a shareholder of a
closed-end fund organized as a Delaware statutory trust, with trustees, an
investment management agreement, and other service arrangements that are
substantially identical to those in place for the Fund.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 2.
INTRODUCTION TO PROPOSALS 3 AND 4
The Fund is subject to a number of fundamental investment restrictions that
(1) are more restrictive than those required under present law; (2) are no
longer required; or (3) were adopted in response to regulatory, business or
industry conditions that no longer exist. Under the 1940 Act, "fundamental"
investment restrictions may be changed or eliminated only if shareholders
approve such action. The Board is recommending that shareholders approve the
amendment or elimination of certain of the Fund's fundamental investment
restrictions principally to (1) update those current investment restrictions
that are more restrictive than is required under the federal securities laws;
and (2) conform the Fund's fundamental investment restrictions to those of the
majority of the funds in Franklin Templeton Investments. In general, the
proposed restrictions would (1) simplify, modernize and standardize the
fundamental investment restrictions that are required to be stated by a fund
under the 1940 Act; and (2) eliminate those fundamental investment restrictions
that are no longer required by the federal securities laws, interpretations of
the U.S. Securities and Exchange Commission ("SEC") or state securities law, as
preempted by the National Securities Markets Improvement Act of 1996 ("NSMIA").
After the Fund was organized as a Maryland corporation in 1988, certain
legal and regulatory requirements applicable to investment companies changed.
For example, certain restrictions imposed by state laws and regulations were
preempted by NSMIA and, therefore, are no longer applicable to investment
companies. As a result, the Fund currently is subject to certain fundamental
investment restrictions that are either more restrictive than is required under
current law, or which are no longer required at all.
The Board believes there are several distinct advantages to revising the
Fund's fundamental investment restrictions at this time. First, by reducing the
total number of investment restrictions that can be changed only by a
shareholder vote, the Board and the Investment Manager believe that the Fund
will be able to minimize the costs and delays associated with holding future
shareholders' meetings to revise fundamental investment restrictions that have
become outdated or inappropriate. Second, the Board and the Investment Manager
also believe that the Investment Manager's ability to manage the Fund's assets
in a changing investment environment will be enhanced because the Fund will
have greater investment management flexibility to respond to market, industry,
regulatory or technical changes by seeking Board approval only when necessary
to revise certain investment restrictions. Finally, the standardized
fundamental investment restrictions are expected to enable the Fund to more
efficiently and more easily monitor portfolio compliance.
The proposed standardized fundamental investment restrictions cover those
areas for which the 1940 Act requires the Fund to have fundamental restrictions
and are substantially similar to the fundamental investment restrictions of
other funds in Franklin Templeton Investments that have recently amended their
investment restrictions. The proposed standardized restrictions will not affect
the Fund's investment goal or its current principal investment strategies.
Although the proposed amendments will give the Fund greater flexibility to
respond to possible future investment opportunities, the Board does 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 the Fund, nor does the Board anticipate that the proposed changes
in fundamental investment restrictions will materially change the manner in
which the Fund is currently managed and operated. However, the Board may change
or modify the way the Fund is managed in the future, as contemplated by the
proposed
17
amendments to, or elimination of, the applicable investment restrictions.
Should the Board in the future modify materially the way the Fund is managed to
take advantage of such increased flexibility, the Fund will make the necessary
disclosures to shareholders.
PROPOSAL 3: TO APPROVE AMENDMENTS TO CERTAIN OF THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS (this Proposal involves separate votes on
Sub-Proposals 3a - 3f)
The Fund's existing fundamental investment restrictions, together with the
recommended changes to the investment restrictions, are detailed in Exhibit D,
which is entitled, "Fundamental Investment Restrictions Proposed to be Amended
or Eliminated." Shareholders are requested to vote separately on each
Sub-Proposal in Proposal 3. Any Sub-Proposal that is approved by shareholders
will be effective upon shareholder approval.
Sub-Proposal 3a: To amend the Fund's fundamental investment restriction
regarding borrowing and issuing senior securities.
The 1940 Act requires investment companies to impose certain limitations on
borrowing activities and a fund's borrowing limitations must be fundamental.
The 1940 Act also requires the Fund to have an investment policy describing its
ability to issue senior securities. The Fund currently has one fundamental
investment restriction covering both activities. Management proposes that such
policies be amended and set forth in two separate policies as further described
below.
The Fund's current investment restriction also limits the Fund's ability to
pledge its assets. Currently the Fund may not pledge its assets for any
purpose, except in order to secure any permissible borrowings. The 1940 Act
does not require this type of fundamental investment restriction.
Borrowing. 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. Under the 1940 Act, a closed-end fund may engage in
borrowings (not limited to borrowings from banks) if immediately after such
borrowings, the aggregate of such borrowings is in an amount that is not more
than 33 1/3% of its total assets (or lesser amounts, depending on the form of
borrowing). Closed-end funds typically enter into line of credit agreements
with banks or issue a class of preferred stock or other debt obligations in
order to leverage the fund--that is, to invest the borrowings in securities
that are expected to yield a higher return than the cost of borrowing.
What effect will amending the current borrowing restriction have on the Fund?
The Fund's current investment restriction relating to borrowing prohibits
the Fund from borrowing money, except that the Fund may borrow from a bank (1)
for temporary or emergency purposes or (2) to finance the repurchase of its
shares and tender offers, in amounts up to 30% of its total assets (not
including the amount borrowed). In addition, the Fund may not purchase
additional portfolio securities while borrowings exceed 5% of the value of its
total assets.
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 and would eliminate the restriction
regarding the Fund's ability to pledge its assets. In addition, the Fund's
policy that the Fund may borrow up to 30% of its total assets from banks for
temporary or emergency purposes or to finance share repurchases or tender
offers would be eliminated. By so amending the investment restriction, the Fund
would not unnecessarily limit the Investment Manager if the Investment Manager
determines that borrowing is in the best interests of the Fund and its
shareholders. As a general matter, Section 18 of the 1940 Act limits a fund's
18
borrowings to not more than 33 1/3% of the fund's total assets, which would
provide the Fund will greater flexibility than the current restriction. If this
proposed fundamental policy is approved, the Fund would be permitted to borrow
for leveraging purposes and would not be prohibited from purchasing additional
portfolio securities if its borrowings exceeded 5% of the value of its total
assets. As a result, the Fund would be subject, to a greater degree, to the
risks associated with borrowing, as described below.
The proposed restriction would also permit the Fund to borrow money from
affiliated investment companies or other affiliated entities. In September
1999, the SEC granted an exemptive order to the Fund, together with other funds
in Franklin Templeton Investments, permitting the Fund to borrow money from
other funds in Franklin Templeton Investments (the "Inter-Fund Lending and
Borrowing Order"). The proposed borrowing restriction would permit the Fund,
under certain circumstances and in accordance with the Inter-Fund Lending and
Borrowing Order, to borrow money from other funds in Franklin Templeton
Investments 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 the Fund to borrow from other affiliated
entities, such as the Investment Manager, under emergency market conditions
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.
Issuing 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 limits a closed-end fund's ability to issue 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.
The senior securities issued by a closed-end fund may often be a class of
preferred stock. A closed-end fund is required to maintain a 300% asset
coverage on senior securities after deducting for any dividend, distribution or
repurchase of its shares, except only a 200% asset coverage is needed on
preferred stock of the fund after deducting for dividends paid. SEC Staff
interpretations also allow a 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, a fund must mark
on its books, or segregate with its custodian bank, cash or other liquid
securities to cover its future obligations, in order to avoid the creation of a
senior security. 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. Consequently, a closed-end fund would not be
deemed to issue a senior security that requires the 300% asset coverage if it
follows these segregation procedures described above.
What effect will amending the current senior securities restriction have on
the Fund?
The current fundamental investment restriction relating to senior securities
prohibits the Fund from issuing senior securities, except as provided in the
Fund's current fundamental restriction on borrowing and issuing senior
securities.
The proposed restriction would permit the Fund to issue senior securities as
permitted under the 1940 Act and any relevant rule, exemption, or
interpretation issued by the SEC. The proposed restriction also would clarify
that the Fund 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.
The Fund has no present intention of changing its current investment
strategies regarding transactions that may be interpreted as resulting in the
issuance of senior securities. Moreover, if this sub-proposal is approved, the
Fund will be able to issue preferred stock, commercial paper, or other forms of
leverage, although it has no
19
present intention to do so. Therefore, the Board does not anticipate that
amending the current restriction will result in additional material risk to the
Fund at this time. However, the Fund may initiate the use of these strategies
in the future to the extent described in the proposed new restriction. To the
extent the Fund does engage in such strategies in the future, it would be
subject to the risks associated with leveraging, including reduced total
returns and increased volatility, as more fully described below.
What are some of the risks associated with borrowing and issuance of senior
securities?
Because borrowing or the issuance of senior securities will subject the Fund
to additional costs, the Fund would only borrow or issue senior securities when
the Investment Manager believes that the cost of carrying the assets to be
acquired through leverage would be lower than the Fund's expected return on its
longer-term portfolio investments. Should this differential narrow, the Fund
would realize less of a positive return, with the additional risk that, during
periods of adverse market conditions, the market value of the Fund's entire
portfolio holdings (including those acquired through leverage) may decline far
in excess of incremental returns the Fund may have achieved in the interim.
Indeed, any such leveraging tends to magnify market exposure and can result in
higher than expected losses to the Fund.
Because the investment risk associated with investment assets purchased with
funds obtained through a borrowing or the issuance of senior securities would
be borne solely by the holders of the Fund's shares, adverse movements in the
price of the Fund's portfolio holdings would have a more severe effect on the
Fund's net asset value than if the Fund were not leveraged. Leverage creates
risks for shareholders in the Fund, including the likelihood of greater
volatility of the Fund's net asset value and the market price of its shares,
and the risk that fluctuations in interest rates on borrowings or in the
dividend rates on any preferred stock may affect the return to shareholders. If
the income from the securities purchased with such funds is not sufficient to
cover the cost of leverage, the net income of the Fund would be less than if
leverage had not been used, and therefore the amount available for distribution
to shareholders as dividends will be reduced. In such an event, the Fund may
nevertheless determine to maintain its leveraged position in order to avoid
capital losses on securities purchased with the leverage.
Also, if the asset coverage for borrowings or other senior securities of the
Fund declines below the limits specified in the 1940 Act, the Fund may be
required to sell a portion of its investments when it may not be advantageous
to do so. In the extreme, sales of investments required to meet asset coverage
tests imposed by the 1940 Act could also cause the Fund to lose its status as a
regulated investment company. If the Fund were unable to make adequate
distributions to shareholders because of asset coverage or other restrictions,
it could fail to qualify as a regulated investment company for federal income
tax purposes and, even if it did not fail to so qualify, it could become liable
for income and excise tax on the portion of its earnings which are not
distributed on a timely basis in accordance with applicable provisions of the
Internal Revenue Code of 1986, as amended.
The Fund's willingness to borrow money and issue new securities for
investment purposes, and the amount it will borrow or issue, will depend on
many factors, the most important of which are investment outlook, market
conditions and interest rates. Successful use of a leveraging strategy depends
on the Investment Manager's ability to predict correctly interest rates and
market movements, and there is no assurance that a leveraging strategy will be
successful during any period in which it is employed.
Sub-Proposal 3b: To amend the Fund's fundamental investment restriction
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 or group of
industries. An investment company is not permitted to concentrate its
investments in any particular industry or group of industries unless it
discloses its intention to do so.
20
What effect will amending the current industry concentration restriction have
on the Fund?
The current fundamental investment restriction regarding industry
concentration prohibits the Fund from investing 25% or more of the total value
of its assets in a particular industry.
The proposed concentration policy is substantially the same as the Fund's
current policy, except that (1) it modifies the Fund's asset measure (from
"total assets" to "net assets") by which concentration is assessed; (2) it
slightly increases (from "25% or more" to "more than 25%") the numerical limit
on permissible investments; and (3) 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 restriction
reflects a more modernized approach to industry concentration, and provides the
Fund with investment flexibility that ultimately is expected to help the Fund
respond to future legal, regulatory, market or technical changes. In addition,
the Board may from time to time establish guidelines regarding industry
classifications.
The proposed restriction would expressly exempt from the 25% limitation,
those securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities, and the securities of other investment
companies, consistent with SEC Staff policy. The proposed restriction thus
clarifies the types of U.S. government securities in which the Fund may invest.
In addition, although the Fund has always been permitted to invest in other
investment companies, the proposed restriction now makes explicit that such
investments are exempted from the Fund's concentration policy. Even with this
modified restriction, however, the 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 and any exemptive orders issued by the SEC. In general, absent
such rules or orders from the SEC, the 1940 Act would prohibit the Fund from
investing more than 5% of its total assets in any one investment company and
more than 10% of its total assets in other investment companies overall.
Sub-Proposal 3c: To amend the Fund's fundamental investment restriction
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.
What effect will amending the current commodities restriction have on the
Fund?
The current fundamental investment restriction on commodities states that
the Fund may not purchase or sell commodities or commodity contracts, except
futures contracts on debt securities, stock and bond indices and foreign
currencies. In addition, the Fund may purchase securities secured by
commodities and securities of companies which invest or deal in commodities.
The Fund's current fundamental investment restriction relating to commodities
is combined with a fundamental investment restriction relating to investments
in real estate. The adoption of this Sub-Proposal would result in separating
the Fund's restriction regarding commodity contracts from this other
fundamental investment restriction.
The proposed investment restriction relating to commodities clarifies that
the Fund has the ability to engage in currencies and financial futures
contracts (in addition to those listed in the current fundamental restriction)
and related options and to invest in securities or other instruments that are
secured by physical commodities, but not to invest directly in physical
commodities. Notwithstanding the flexibility provided by the proposed
fundamental investment restriction, the Fund is subject to guidelines
established by the Board regarding the use of derivatives. Under these
guidelines, currently no more than 5% of the Fund's assets may be invested in,
or exposed to,
21
options and swap agreements (as measured at the time of investment). The use of
futures contracts can involve substantial risks and, therefore, the Fund would
only invest in such futures contracts where the Investment Manager believes
such investments are advisable and then only to the extent permitted by the
guidelines established by the Board. It is not currently intended that the Fund
would materially change these guidelines or its use of futures contracts,
forward currency contracts and related options. Thus, it is not currently
anticipated that the proposed amendments to the investment restriction relating
to commodities would involve additional material risk at this time.
Sub-Proposal 3d: To amend the Fund's fundamental investment restriction
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
Fund's current fundamental investment restriction relating to real estate
prohibits the Fund from investing in real estate and interests in real estate,
with two limited exceptions. The first exception permits the Fund to invest in
securities secured by real estate. The second exception permits the Fund to
invest in securities issued by companies that invest or deal in real estate. As
noted above, the Fund's current fundamental investment restriction relating to
real estate is combined with the Fund's fundamental investment restriction
relating to investment in commodities. The adoption of this Sub-Proposal would
result in the creation of a separate real estate restriction and a separate
restriction for commodities.
What effect will amending the current real estate restriction have on the
Fund?
The proposed restriction would permit the Fund to continue to invest in the
two types of real estate investments in which the Fund may currently invest;
however, the proposed restriction clarifies that the Fund may invest in
securities secured by interests in real estate and in securities of issuers
dealing in interests in real estate. In addition, the proposed restriction
would permit the Fund to hold and sell real estate acquired by the Fund as a
result of owning a security or other instrument.
Modifying the Fund's real estate restriction may expose the Fund to certain
risks inherent to these investments, such as relative illiquidity, difficulties
in valuation, and greater price volatility. In addition, like other investments
of this kind in developing countries, these investments are subject to risk of
forfeiture due to governmental action. However, it is not currently intended
that the 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 restriction relating to real estate
would involve additional material risk at this time.
Sub-Proposal 3e: To amend the Fund's fundamental investment restriction
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
"loans" may, under certain circumstances, be deemed to include certain
transactions and investment-related practices. Among those transactions and
practices are lending of portfolio securities, entering into repurchase
agreements and the purchase of certain debt instruments. If a fund adopts a
fundamental policy that prohibits lending, the fund may still invest in debt
securities, enter into securities lending transactions and enter into
repurchase agreements if it provides an exemption from the general prohibition.
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 the 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 3a above.)
22
What effect will amending the current lending restriction have on the Fund?
The Fund's current investment restriction regarding lending prohibits the
Fund from making loans, except that the Fund may (1) lend its portfolio
securities and (2) enter into repurchase agreements. In addition, the Fund has
a fundamental investment policy of investing at least 65% of its total assets
in one or more types of debt investments, including (i) debt securities that
are issued or guaranteed as to interest and principal by the U.S. government,
its agencies, authorities or instrumentalities; (ii) debt obligations issued or
guaranteed by a foreign sovereign government or one of its agencies or
political subdivisions; (iii) debt obligations issued or guaranteed by
supra-national organizations, which are chartered to promote economic
development and are supported by various governments and governmental entities;
(iv) U.S. and foreign corporate debt securities and preferred equity
securities; and (v) debt obligations of U.S. or foreign banks, savings and loan
associations and bank holding companies.
The proposed fundamental investment restriction is substantially similar to
the Fund's current investment restriction regarding lending; however, the
proposed investment restriction incorporates the Fund's ability to invest in
debt securities and clarifies its ability to invest in loan participations and
direct corporate loans. The proposed fundamental investment restriction also
provides the Fund with additional flexibility to make loans to affiliated
investment companies by permitting the Fund to take advantage of the Inter-Fund
Lending and Borrowing Order described above. The proposed investment
restriction permits the Fund, under certain conditions, to lend cash to other
funds in Franklin Templeton Investments at rates higher than those that the
Fund would receive if the Fund loaned cash to banks through short-term lending
transactions such as repurchase agreements. Management anticipates that this
additional flexibility to lend cash to affiliated investment companies would
allow additional investment opportunities, and could enhance the Fund's ability
to respond to changes in market, industry or regulatory conditions.
Sub-Proposal 3f: To amend the Fund's fundamental investment restriction
regarding underwriting.
Under the 1940 Act, the 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 another issuer with the intention of
re-selling the securities to the public. In addition, under certain
circumstances, the Fund may be deemed to be an underwriter of its own
securities. The proposed restriction would make clear that the Fund has the
ability to sell its own securities, should it ever choose to do so.
What effect will amending the current underwriting restriction have on the
Fund?
The Fund's current fundamental investment restriction relating to
underwriting prohibits the Fund from acting as an underwriter except in
connection with the disposition of portfolio securities it owns. The current
investment restriction does not provide any clarification regarding whether the
Fund may sell its own shares in those limited circumstances where the Fund
might be deemed to be an underwriter.
The proposed restriction relating to underwriting is substantially similar
to the Fund's current investment restriction by generally prohibiting the Fund
from engaging in underwriting except when disposing of securities it owns. The
proposed investment restriction, however, clarifies that the Fund may sell its
own securities. It is not anticipated that the adoption of the proposed
restriction would involve additional material risk to the Fund at this time or
affect the way the Fund is currently managed or operated.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" SUB-PROPOSALS 3a-3f
23
PROPOSAL 4: TO APPROVE THE ELIMINATION OF CERTAIN OF THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS
The Fund's current investment restrictions, together with those recommended
to be eliminated, are detailed in Exhibit D, which is entitled "Fundamental
Investment Restrictions Proposed to be Amended or Eliminated." If shareholders
approve Proposal 4, the elimination of such investment restrictions will be
effective upon shareholder approval.
Why is the Board recommending that certain fundamental investment
restrictions be eliminated, and what effect will their elimination have on
the Fund?
Certain of the Fund's fundamental investment restrictions are either
restatements of restrictions that are already included within the 1940 Act or
other applicable laws and regulations or are more restrictive than current SEC
Staff interpretations. These restrictions include those relating to purchasing
securities on margin, making short sales of securities and diversification of
Fund investments.
The other fundamental investment restriction of the Fund, relating to
investing in non-publicly traded securities or securities that are restricted
as to disposition, was originally adopted to comply with state securities laws
and regulations. Due to the passage of NSMIA, this fundamental investment
restriction is no longer required by law. As a result, the Fund is no longer
legally required to adopt or maintain such investment restriction.
Accordingly, the Investment Manager has recommended, and the Board has
determined, that these four restrictions (referred to in this Proposal 4 as the
"Restrictions") be eliminated and that their elimination is consistent with the
federal securities laws. By reducing the total number of investment
restrictions that can be changed only by a shareholder vote, the Board believes
that the Fund will be able to reduce the costs and delays associated with
holding future shareholder meetings for the purpose of revising fundamental
investment restrictions that become outdated or inappropriate. Elimination of
the Restrictions would also enable the Fund to be managed in accordance with
the current requirements of the 1940 Act, without being constrained by
additional and unnecessary limitations. The Board believes that the elimination
of the Restrictions is in the best interest of the Fund's shareholders as it
will provide the Fund with increased flexibility to pursue its investment goal
and will enhance the Investment Manager's ability to manage the Fund's assets
in a changing investment environment.
Which four (4) Restrictions is the Board recommending that the Fund eliminate?
The Fund currently is subject to four Restrictions that are no longer
required by law and were adopted primarily in response to regulatory, business
or industry conditions that no longer exist. The exact language of the
Restrictions has been included in Exhibit D, which is entitled "Fundamental
Investment Restrictions Proposed to be Amended or Eliminated."
Purchasing Securities on Margin
The 1940 Act does not require the Fund to adopt a fundamental investment
restriction regarding purchasing securities on margin, except to the extent
that these transactions may result in the creation of senior securities (as
described more fully in Sub-Proposal 3a above). The Fund's current fundamental
investment restriction prohibits the Fund from purchasing securities on margin
(except for such short term credits as may be necessary for the clearance of
transactions and the maintenance of margin with respect to futures contracts).
Current 1940 Act provisions on issuing senior securities and purchasing
securities on margin, together with the proposed fundamental investment
restriction on senior securities, will limit the ability of the Fund to
purchase securities on margin. Therefore, the Investment Manager does not
anticipate that eliminating the current restriction will result in additional
material risk to the Fund at this time.
24
Engaging in Short Sales
The 1940 Act does not require the Fund to adopt a fundamental investment
restriction regarding engaging in short sales, except to the extent that these
transactions may result in the creation of senior securities (as described more
fully in Sub-Proposal 3a above). The Fund's current fundamental investment
restriction prohibits the Fund from engaging in short sales of securities or
maintaining a short position.
Current 1940 Act provisions on issuing senior securities and engaging in
short sales, together with the proposed fundamental investment restriction on
senior securities, will limit the ability of the Fund to engage in short sales.
Therefore, the Investment Manager does not anticipate that eliminating the
current restriction will result in additional material risk to the Fund at this
time.
Investing in Non-Publicly Traded or Restricted Securities
The 1940 Act does not require, and applicable state law no longer requires,
that the Fund adopt a fundamental investment restriction limiting its
investments in non-publicly traded securities or securities that are restricted
as to disposition or otherwise are not readily marketable. However, the Fund
generally has not invested significantly in illiquid securities. Therefore, the
Investment Manager does not anticipate that eliminating the current restriction
will result in additional material risk to the Fund at this time.
IRS Diversification Requirements
The Fund's current fundamental investment restriction limiting the Fund's
investment in securities of any one issuer is a general restatement of the
investment diversification requirements imposed by the Internal Revenue Code of
1986, as amended (the "Code"), on all regulated investment companies. Neither
the Code nor the 1940 Act requires that a fund adopt a fundamental investment
restriction restating the Code's diversification requirements for investment
companies. If this fundamental investment restriction is eliminated, the Fund
will continue to be subject to the Code's diversification requirements.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" PROPOSAL 4
..ADDITIONAL INFORMATION ABOUT THE FUND
The Investment Manager. The Investment Manager of the Fund is Franklin
Advisers, Inc., a California corporation with offices at One Franklin Parkway,
San Mateo, California 94403-1906. Pursuant to an investment management
agreement, the Investment Manager manages the investment and reinvestment of
Fund assets. The Investment Manager is a wholly owned subsidiary of Resources.
The Administrator. The administrator of the Fund is Franklin Templeton
Services, LLC ("FT Services"), with offices at 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
Manager. Pursuant to an administration agreement, FT Services performs certain
administrative functions for the Fund.
The Transfer Agent. The transfer agent, registrar and dividend disbursement
agent for the Fund is Mellon Investor Services LLC, 85 Challenger Road,
Ridgefield Park, New Jersey 07660.
The Custodian. The custodian for the Fund is JPMorgan Chase Bank, MetroTech
Center, Brooklyn, New York 11245.
Other Matters. The Fund's last audited financial statements and annual
report for the fiscal year ended August 31, 2003, are available free of charge.
To obtain a copy, please call 1-800/DIAL BEN(R) (1-800-342-5236) or forward a
written request to Franklin Templeton Investor Services, LLC, P.O. Box 33030,
St. Petersburg, Florida 33733-8030.
25
Principal Shareholders. As of January 2, 2004, the Fund had 129,586,836
shares of common stock, $0.01 par value ("shares"), outstanding and total net
assets of $1,161,885,742.40. The Fund's shares are listed on the NYSE (NYSE:
GIM) and on the PCX. 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. To the knowledge of the Fund's
management, as of January 2, 2004, there were no other entities holding
beneficially or of record more than 5% of the Fund's outstanding shares. In
addition, to the knowledge of the Fund's management, as of January 2, 2004, no
nominee or Director of the Fund owned 1% or more of the outstanding shares of
the Fund, and the Directors and officers of the Fund owned, as a group, less
than 1% of the outstanding shares of the Fund.
Contacting the Board of Directors. If a shareholder wishes to send a
communication to the Board of Directors, such correspondence should be in
writing and addressed to the Board of Directors at the Fund's offices, 500 East
Broward Blvd., Suite 2100, Fort Lauderdale, Florida 33394-3091, Attention:
Secretary. The correspondence will then be given to the Board for their review
and consideration.
..AUDIT COMMITTEE
Audit Committee and Independent Auditors. The Fund's Audit Committee is
responsible for the selection of the Fund's independent auditors, including
evaluating their independence, and meeting with such auditors to consider and
review matters relating to the Fund's financial reports and internal
accounting. The Audit Committee also reviews the maintenance of the Fund's
records and the safekeeping arrangements of the Fund's custodian. The Audit
Committee is comprised of Messrs. Millsaps (Chairman), Crothers, Olson and
Tseretopoulos, all of whom are Independent Directors and also are considered to
be "independent" as that term is defined by the NYSE's listing standards.
Selection of Independent Auditors. The Audit Committee and the Board
selected the firm of PricewaterhouseCoopers LLP ("PwC") as independent auditors
of the Fund for the current fiscal year. Representatives of PwC 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 Fees. The aggregate fees paid to PwC for professional services
rendered by PwC for the audit of the Fund's annual financial statements or for
services that are normally provided by PwC in connection with statutory and
regulatory filings or engagements were $45,477 for the fiscal year ended August
31, 2003 and $46,102 for the fiscal year ended August 31, 2002.
Audit-Related Fees. The aggregate 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 Fund's financial statements and not reported under
"Audit Fees" above were $3,222 for the fiscal year ended August 31, 2003 and
$1,496 for the fiscal year ended August 31, 2002. The services for which these
fees were paid included the semi-annual review of shareholder reports, internal
control testing and evaluation and services in connection with the Fund's
contract renewal.
In addition, the Audit Committee pre-approves PwC's engagement for
audit-related services with the Investment Manager and certain entities
controlling, controlled by, or under common control with the Investment Manager
that provide ongoing services to the Fund, which engagements relate directly to
the operations and financial reporting of the Fund. The fees for these services
were $426,460 for the fiscal year ended August 31, 2003 and $284,400 for the
fiscal year ended August 31, 2002.
Tax Fees. PwC did not render any tax compliance, tax advice or tax planning
services for the fiscal year ended August 31, 2003 or for the fiscal year ended
August 31, 2002.
PwC did not render any tax services to the Investment Manager or certain
entities controlling, controlled by, or under common control with the
Investment Manager that provide ongoing services to the Fund, which
26
engagements relate directly to the operations and financial reporting of the
Fund for the fiscal year ended August 31, 2003 or for the fiscal year ended
August 31, 2002.
All Other Fees. PwC did not bill for other products and services, other
than the services reported above, for the fiscal year ended August 31, 2003 or
for the fiscal year ended August 31, 2002.
PwC did not render other services to the Investment Manager or entities
controlling, controlled by, or under common control with the Investment Manager
that provide ongoing services to the Fund, which engagements relate directly to
the operations and financial reporting of the Fund for the fiscal year ended
August 31, 2003 or for the fiscal year ended August 31, 2002.
Audit Committee Pre-Approval Policies and Procedures. As of the date of
this Proxy Statement, the Audit Committee has not adopted pre-approval policies
and procedures. As a result, all services provided by PwC must be directly
pre-approved by the Audit Committee.
Aggregate Non-Audit Fees. PwC did not render any non-audit services to the
Fund, to the Investment Manager or to any entity controlling, controlled by, or
under common control with the Investment Manager that provides ongoing services
to the Fund for the fiscal year ended August 31, 2003 or for the fiscal year
ended August 31, 2002.
Audit Committee Report. The Board has adopted and approved a formal written
charter for the Audit Committee, which sets forth the Audit Committee's
responsibilities. A copy of the charter is attached as Exhibit E to this proxy
statement.
As required by the charter, the Audit Committee reviewed the Fund's audited
financial statements and met with management, as well as with PwC, the Fund's
independent auditors, to discuss the financial statements.
The Audit Committee received the written disclosures and the letter from PwC
required by Independence Standards Board Standard No. 1. The Audit Committee
also received the report of PwC 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
PwC, their 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 discussions with management and the 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 August 31, 2003 for filing
with the U.S. Securities and Exchange Commission.
AUDIT COMMITTEE
Fred R. Millsaps (Chairman)
Frank J. Crothers
Andrew H. Hines, Jr.
Frank A. Olson
Constantine D. Tseretopoulos
27
..FURTHER INFORMATION ABOUT VOTING AND THE MEETING
Solicitation of Proxies. Your vote is being solicited by the Board of
Directors of the Fund. The cost of soliciting proxies, including the fees of a
proxy soliciting agent, is borne by the Fund. The Fund reimburses brokerage
firms and others for their expenses in forwarding proxy material to the
beneficial owners and soliciting them to execute proxies. In addition, the Fund
has retained Georgeson Shareholder Communications, Inc. ("Georgeson
Shareholder"), a professional proxy solicitation firm, to solicit proxies from
brokers, banks, other institutional holders and individual shareholders at an
anticipated cost of approximately $73,000 to $93,400, including out-of-pocket
expenses. The Fund expects that the solicitation would be primarily by mail,
but may also include telephone, facsimile, electronic or other means of
communication. You may receive a telephone call from Georgeson Shareholder
asking you to vote. The Fund does not reimburse Directors and officers of the
Fund, or regular employees and agents of the Investment Manager involved in the
solicitation of proxies. The Fund intends to pay all costs associated with the
solicitation and the Meeting.
Voting by Broker-Dealers. The Fund expects that, before the Meeting,
broker-dealer firms holding shares of the Fund in "street name" for their
customers and beneficial owners 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
Fund understands that NYSE Rules permit the broker-dealers to vote on Proposal
1 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. A majority of the shares entitled to vote--present in person or
represented by proxy--constitutes a quorum at the Meeting. 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. Proposal 1, the election of Directors, requires the
affirmative vote of the holders of a plurality of the Fund's shares present and
voting on the Proposal at the Meeting. Proposal 2, to approve an Agreement and
Plan of Reorganization that provides for the reorganization of the Fund from a
Maryland corporation to a Delaware statutory trust, requires the affirmative
vote of a majority of the Fund's outstanding shares. Proposal 3, to approve
amendments to certain fundamental investment restrictions (including six (6)
Sub-Proposals), and Proposal 4, to approve the elimination of certain of the
Fund's fundamental investment restrictions, each require the affirmative vote
of the lesser of: (i) more than 50% of the outstanding shares of the Fund; or
(ii) 67% or more of the outstanding shares of the Fund present at the Meeting,
if the holders of more than 50% of the outstanding shares are present or
represented by proxy.
Abstentions and broker non-votes will be treated as votes present at the
Meeting, but will not be treated as votes cast. Abstentions and broker
non-votes, therefore, will have no effect on Proposal 1, which requires a
plurality of the Fund's shares present and voting, but will have the same
effect as a vote "against" Proposal 2, Sub-Proposals 3a-3f, and Proposal 4.
Simultaneous Meetings. The Meeting is to be held at the same time as the
annual meeting of shareholders of Templeton Emerging Markets Income Fund, Inc.
If any shareholder at the Meeting objects to the holding of a simultaneous
meeting and moves for an adjournment of the Meeting to a time promptly after
the simultaneous meeting, the persons designated as proxies will vote in favor
of such adjournment.
Adjournment. The holders of a majority of shares entitled to vote at the
Meeting and present in person or by proxy, whether or not sufficient to
constitute a quorum, or any officer present entitled to preside or act as
28
Secretary of the Meeting may adjourn the Meeting. 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 to permit further solicitation of proxies or
for any other reason consistent with Maryland law and the Fund's Articles of
Incorporation and By-Laws. 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 Fund 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
the Fund did not have timely notice, as set forth in the SEC's proxy rules and
the Fund's proxy statement for the 2003 annual meeting.
Shareholder Proposals. The shareholder vote on Proposal 2, the matter
concerning the proposed reorganization of the Fund from a Maryland corporation
to a Delaware statutory trust, will dictate the requirements relating to
shareholder proposals for the 2005 Annual Meeting of Shareholders. This section
describes those requirements.
Submission of Shareholder Proposals to the DE Fund. If Proposal 2 is
approved by shareholders, the Fund will be reorganized as the DE Fund, and the
DE Fund's By-Laws, in addition to the proxy rules under the federal securities
laws, will govern shareholder proposals. The DE Fund anticipates that the 2005
Annual Meeting of Shareholders will be held on or about February 25, 2005. A
shareholder who wishes to submit a proposal for consideration for inclusion in
the DE Fund's proxy statement for the 2005 Annual Meeting of Shareholders must
send such written proposal to the DE Fund's offices at 500 East Broward
Boulevard, Suite 2100, Fort Lauderdale, Florida 33394-3091, Attention:
Secretary, so that it is received no later than September 22, 2004 in order to
be included in the DE Fund's proxy statement and proxy card relating to that
meeting and presented at the meeting.
A shareholder of the DE Fund who has not submitted a written proposal for
inclusion in the proxy statement by September 22, 2004, as set forth above, may
nonetheless present a proposal at the DE Fund's 2005 Annual Meeting of
Shareholders if such shareholder notifies the DE Fund, at the DE Fund's
offices, of such proposal not earlier than September 28, 2004 and not later
than October 28, 2004. If a shareholder fails to give notice within these
dates, then the matter shall not be eligible for consideration at the
shareholders' meeting. If, notwithstanding the effect of the foregoing notice
provisions, a shareholder proposal is acted upon at the 2005 Annual Meeting of
Shareholders, the persons designated as proxies for the 2005 Annual Meeting of
Shareholders may exercise discretionary voting power with respect to any
shareholder proposal not received by the DE Fund at the DE Fund's offices by
December 6, 2004. A shareholder proposal may be presented at the 2005 Annual
Meeting of Shareholders only if such proposal concerns a matter that may be
properly brought before the meeting under applicable federal proxy rules and
state law.
Submission of a proposal by a shareholder does not guarantee that the
proposal will be included in the DE Fund's proxy statement or presented at the
meeting.
In addition to the requirements set forth above, a shareholder must comply
with the following:
1. A shareholder intending to present a proposal must (i) be entitled to
vote at the meeting; (ii) comply with the notice procedures set forth
herein; and (iii) have been a shareholder of record at the time the
shareholder's notice was received by the DE Fund.
2. Each notice regarding nominations for the election of Trustees shall set
forth (i) the name, age, business address and, if known, residence
address of each nominee proposed in such notice; (ii) the principal
occupation or employment of each such nominee; (iii) the number of
outstanding shares of the DE Fund which are beneficially owned by each
such nominee; and (iv) all such other information regarding each such
nominee that would have been required to be included in a proxy
statement filed pursuant to the proxy rules of the SEC, had each nominee
been nominated by the Trustees of the DE Fund. In addition, the
shareholder making such nomination shall promptly provide any other
information reasonably requested by the DE Fund.
29
3. Each notice regarding business proposals shall set forth as to each
matter: (i) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the
meeting; (ii) the name and address, as they appear on the DE Fund's
books, of the shareholder proposing such business; (iii) the number of
outstanding shares of the DE Fund which are beneficially owned by the
shareholder; (iv) any material interest of the shareholder in such
business; and (v) all such other information regarding each such matter
that would have been required to be included in a proxy statement filed
pursuant to the proxy rules of the SEC, had each such matter been
proposed by the Trustees of the DE Fund.
Submission of Shareholder Proposals to the Fund. If Proposal 2 is not
approved by shareholders, the Fund will remain a Maryland corporation, and the
proxy rules under the federal securities laws alone will continue to govern
shareholder proposals. The Fund anticipates that the 2005 Annual Meeting of
Shareholders will be held on or about February 25, 2005. A shareholder who
wishes to submit a proposal for consideration for inclusion in the Fund's proxy
statement for the 2005 Annual Meeting of Shareholders must send such written
proposal to the Fund's offices at 500 East Broward Boulevard, Suite 2100, Fort
Lauderdale, Florida 33394-3091, Attention: Secretary, so that it is received no
later than September 22, 2004 in order to be included in the Fund's proxy
statement and proxy card relating to that meeting and presented at the meeting.
A shareholder of the Fund who has not submitted a written proposal for
inclusion in the Fund's proxy statement by September 22, 2004, as described
above, may nonetheless present a proposal at the Fund's 2005 Annual Meeting of
Shareholders if such shareholder notifies the Fund, at the Fund's offices, of
such proposal by December 6, 2004. If a shareholder fails to give notice by
this date, then the persons designated as proxies for the 2005 Annual Meeting
of Shareholders may exercise discretionary voting power with respect to any
such proposal.
A shareholder proposal may be presented at the 2005 Annual Meeting of
Shareholders only if such proposal concerns a matter that may be properly
brought before the meeting under applicable federal proxy rules and state law.
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.
By Order of the Board of Directors,
Barbara J. Green
Secretary
January 20, 2004
30
EXHIBIT A
NOMINATING COMMITTEE CHARTER
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.
1. The Committee shall make recommendations to the full Board for nomination
for membership on all committees of the Board.
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 full Board.
3. The Committee shall, on an annual basis, review the performance of the
Disinterested Board members.
A-1
IV. 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.
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.
ADDITIONAL STATEMENT FOR CLOSED-END FUNDS ONLY
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.
A-2
EXHIBIT B
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN TEMPLETON GLOBAL INCOME FUND, INC. AND
TEMPLETON GLOBAL INCOME FUND
This Agreement and Plan of Reorganization ("Agreement") is made as of this
day of , 200 by and between Templeton Global Income Fund, Inc., a
Maryland corporation (the "Fund"), and Templeton Global Income Fund, a Delaware
statutory trust (the "Trust") (the Fund and the 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 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 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 Trust; and (ii) to
deliver to the Fund in accordance with paragraph (b) of this Section 1, full
and fractional shares of beneficial interest, without par value, of the Trust,
equal in number to the number of full and fractional shares of common stock,
$0.01 par value per share, of the Fund outstanding at the close of regular
trading on the New York Stock Exchange, Inc. ("NYSE") 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 (the "Code"). The Fund shall distribute to the Fund's shareholders the
shares of the Trust in accordance with this Agreement and the resolutions of
the Board of Directors of the Fund (the "Board of 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 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, without par value,
of the Trust equal to the number of full and fractional shares of common stock
such shareholder holds in the Fund at the close of regular trading on the NYSE
on the business day immediately preceding the Effective Date of the
Reorganization. Fractional shares of the Trust will be carried to the fourth
decimal place. At the close of regular trading on the NYSE on the business day
immediately preceding the Effective Date of the Reorganization, the net asset
value per share of the shares of the Trust shall be deemed to be the same as
the net asset value per share of the common stock of the Fund. On the Effective
Date of the Reorganization, each certificate representing shares of the Fund
will be deemed to represent the same number of shares of the Trust.
Simultaneously with the crediting of the shares of the Trust to the
shareholders of record of the Fund, the shares of the Fund held by such
shareholders shall be cancelled. Shareholders of the Fund will have the right
to deliver their share certificates of the Fund to the Trust in exchange for
share certificates of the Trust. However, a shareholder need not deliver such
certificates to the 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 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.
B-1
2. Closing and Effective Date of the Reorganization.
The Closing shall consist of (i) the conveyance, transfer and delivery of
the Assets to the Trust in exchange for the assumption and payment, when due,
by the Trust, of the Liabilities of the Fund; and (ii) the issuance and
delivery of the Trust's shares in accordance with Section 1(b), together with
related acts necessary to consummate such transactions. The Closing shall occur
either on (a) the business day immediately following the later of the 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,
or (b) such later date as the parties may mutually agree ("Effective Date of
the Reorganization").
3. Conditions Precedent.
The obligations of the Fund and the 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) Such approvals from the NYSE and the Pacific Exchange, Inc. ("PCX")
as may be necessary to permit the parties to carry out the transactions
contemplated by this Agreement shall have been received;
(c) (i) an amendment of the Form N-8A Notification of Registration ("Form
N-8A") filed pursuant to Section 8(a) of the Investment Company Act of 1940,
as amended (the "1940 Act"), reflecting the change in legal form of the Fund
to a Delaware statutory trust shall have been filed with the Commission and
the Trust shall have expressly adopted such amended Form N-8A as its own for
purposes of the 1940 Act; (ii) a registration statement on Form 8-A ("8-A
Registration Statement") under the Securities Exchange Act of 1934, as
amended, shall have been filed with the Commission and the NYSE by the
Trust; (iii) a Technical Original Listing Application shall have been filed
with the NYSE, and a listing application shall have been filed with the PCX
by the Trust; and (iv) the 8-A Registration Statement filed with the
Commission relating to the Trust shall have become effective, and no
stop-order suspending the effectiveness of the 8-A 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
suspending the effectiveness of the 8-A 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));
(d) 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 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 Trust or the shareholders of the Fund or the Trust;
(e) 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 Trust is a statutory trust duly formed, validly existing, and
in good standing 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 Trust and this Agreement has been
duly executed and delivered by the Trust and is a legal, valid and binding
agreement of the Trust in accordance with its terms; and (iii) the shares of
the Trust to be issued in the reorganization have been duly authorized and,
upon issuance thereof in accordance with this Agreement, will have been
validly issued and fully paid and will be nonassessable by the Trust;
B-2
(f) The 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 Trust, to the
effect that: (i) the Fund is duly incorporated, validly existing, and in
good standing under the laws of the State of Maryland; (ii) the Fund is a
closed-end investment company of the management type registered under the
1940 Act; and (iii) this Agreement and the transactions contemplated hereby
and the execution and delivery of this Agreement have been duly authorized
and approved by all requisite corporate action of the Fund and this
Agreement has been duly executed and delivered by the Fund and is a legal,
valid and binding agreement of the Fund in accordance with its terms;
(g) The shares of the Trust are eligible for offering to the public in
those states of the United States and jurisdictions 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 Trust of the shares contemplated by this
Agreement to be consummated;
(h) This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the appropriate action of the Board of
Directors and the shareholders of the Fund;
(i) The shareholders of the Fund shall have voted to direct the Fund to
vote, and the Fund shall have voted, as sole shareholder of the Trust, to:
(1) Elect as Trustees of the Trust the following individuals:
Nominees to serve as Trustees until the 2007 Annual Meeting of
Shareholders--Messrs. Frank J. Crothers, Fred R. Millsaps and Charles B.
Johnson; Nominees to serve as Trustees until the 2006 Annual Meeting of
Shareholders--Messrs. Harris J. Ashton, Nicholas F. Brady and S. Joseph
Fortunato; and Nominees to serve as Trustees until the 2005 Annual
Meeting of Shareholders--Ms. Edith E. Holiday and Messrs. Gordon S.
Macklin, Constantine D. Tseretopoulos and Frank A. Olson; and
(2) Approve an Investment Management Agreement between Franklin
Advisers, Inc. ("FAI") and the Trust which is substantially identical to
the then-current Investment Management Agreement, as amended and
restated to date, between FAI and the Fund; and
(j) The Trustees of the Trust shall have duly adopted and approved this
Agreement and the transactions contemplated hereby and shall have taken the
following actions at a meeting duly called for such purposes:
(1) Approval of the Investment Management Agreement described in
paragraph (i)(2) of this Section 3 between FAI and the Trust;
(2) Approval of the assignment to the Trust of the Restated Custody
Agreement, dated February 29, 1988, as amended to date, between The
Chase Manhattan Bank, N.A. (now JPMorgan Chase Bank), and the Fund;
(3) Selection of PricewaterhouseCoopers LLP as the Trust's
independent auditors for the fiscal year ending August 31, 2004;
(4) Approval of a Fund Administration Agreement between the Trust and
Franklin Templeton Services, LLC;
(5) Approval of the assignment to the Trust of the Service Agreement
dated January 2, 1992, between Mellon Securities Trust Company and the
Fund and the Fund's Successor Stock Transfer Agent Agreement between the
Fund and Chemical Mellon Shareholder Services (now Mellon Investor
Services LLC);
(6) Approval of the assignment to the Trust of the Fund's Plan Agent
Agreement with Mellon Securities Trust Company, as amended;
B-3
(7) Authorization of the issuance by the Trust, prior to the
Effective Date of the Reorganization, of one share of beneficial
interest of the Trust to the Fund in consideration for the payment of
$1.00 for such share for the purpose of enabling the Fund to vote on the
matters referred to in paragraph (i) of this Section 3;
(8) Submission of the matters referred to in paragraph (h) of this
Section 3 to the Fund as sole shareholder of the Trust; and
(9) Authorization of the issuance and delivery by the Trust of shares
of the Trust on the Effective Date of the Reorganization and the
assumption by the Trust of the Liabilities of the Fund in exchange for
the Assets of the Fund pursuant to the terms and provisions of this
Agreement.
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 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 Fund under this Agreement.
4. Dissolution of the Company.
Promptly following the consummation of the distribution of the shares of the
Trust to holders of shares of common stock of the Fund under this Agreement,
the officers of the Fund shall take all steps necessary under Maryland law to
dissolve its corporate status, including publication of any necessary notices
to creditors, receipt of any necessary pre-dissolution clearances from the
State of Maryland, and filing for record with the State Department of
Assessments and Taxation of Maryland of Articles of Dissolution.
5. Termination.
The Board of 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.
The Fund and the Trust shall take such further action as may be necessary or
desirable and proper to consummate the transactions contemplated hereby.
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.
B-4
IN WITNESS WHEREOF, the Fund and the 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.
TEMPLETON GLOBAL INCOME FUND, INC.
(a Maryland corporation)
Attest:
By: ---------------------------------- By: ----------------------------------
Name: Name:
Title: Title:
TEMPLETON GLOBAL INCOME FUND
(a Delaware statutory trust)
Attest:
By: ---------------------------------- By: ----------------------------------
Name: Name:
Title: Title:
B-5
EXHIBIT C
A COMPARISON OF GOVERNING DOCUMENTS AND STATE LAW
A Comparison of:
The Law Governing Delaware Statutory Trusts and
The Charter Documents of Templeton Global Income Fund Under Such Law
With
The Law Governing Maryland Corporations and
The Charter Documents of Templeton Global Income Fund, Inc. Under Such Law
Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
Governing A Delaware statutory trust (a "DST") is formed by a A Maryland corporation is created by filing articles
Documents/ governing instrument and the filing of a certificate of incorporation with the Maryland State
Governing Body of trust with the Delaware Secretary of State Department of Assessments and Taxation
("Secretary of State"). The Delaware law governing a ("MSDAT"). The Maryland law governing
DST is referred to in this analysis as the "Delaware corporations is referred to in this analysis as
Act." "Maryland Law."
A DST is an unincorporated association organized A corporation is incorporated under Maryland Law.
under the Delaware Act whose operations are governed A corporation's operations are governed by its
by its governing instrument (which may consist of one charter and by-laws, and its business and affairs are
or more instruments). Its business and affairs are managed by or under the direction of a board of
managed by or under the direction of one or more directors (the "board" or "board of directors" or
trustees. collectively, the "directors"). No public filing of the
by-laws is required.
If a DST is, becomes, or will become prior to or
within 180 days following its first issuance of
beneficial interests, a registered investment company
under the Investment Company Act of 1940, as amended
(the "1940 Act"), such DST is not required to have a
trustee who is a resident of Delaware or who has a
principal place of business in Delaware provided that
notice that the DST is or will become an investment
company is set forth in the DST's certificate of
trust and the DST has a registered office and a
registered agent for service of process in Delaware.
The governing instrument for the DST, Templeton Templeton Global Income Fund, Inc., a Maryland
Global Income Fund (the "Trust"), is comprised of an corporation, is referred to in this analysis as the
agreement and declaration of trust ("Declaration") "Corporation." The Corporation is governed by its
and by-laws ("By-Laws"). The Trust's governing body Articles of Incorporation, as amended and
is a board of trustees (the "board" or "board of supplemented ("Charter"), and by-laws ("By-Laws")
trustees" or collectively, the "trustees"). and the Corporation's governing body is a board of
directors.
The board is divided into three classes, with the The board is divided into three classes: Class I, Class
term of office of one class expiring each year. At II, and Class III and, at each annual meeting of
each annual meeting of shareholders, the successors stockholders, one class of directors is elected. Thus,
to the class of trustees whose term shall then expire at each annual election, the directors chosen to
shall be elected to hold office for a term expiring succeed those whose terms are expiring shall be
at the third succeeding annual meeting. Each trustee elected for a term expiring at the time of the third
shall hold office for his or her applicable term or succeeding annual meeting of stockholders, or
until such trustee's earlier death, resignation, thereafter in each case when their respective
removal or inability otherwise to serve. successors are elected and qualified.
C-1
Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
Designation of Under the Delaware Act, the ownership interests in a Equity securities of a corporation are generally
Ownership Shares DST are denominated as "beneficial interests" and are denominated as shares of stock. Record owners of
or Interests held by "beneficial owners." However, there is shares of stock are stockholders. Generally, equity
flexibility as to how a governing instrument refers securities that have voting rights and are entitled to
to "beneficial interests" and "beneficial owners" and the residual assets of the corporation, after payment
the governing instrument may identify "beneficial of liabilities, are referred to as "common stock."
interests" and "beneficial owners" as "shares" and
"shareholders," respectively.
The Trust's beneficial interests, without par value, The Corporation's equity securities are shares of
are designated as "shares" and its beneficial owners common stock, par value $0.01 per share, and the
are designated as "shareholders." This analysis will owners of such stock are "stockholders."
use the "share" and "shareholder" terminology.
Amendments to The Delaware Act provides broad flexibility as to the Under Maryland Law, amendments to the charter
Governing manner of amending and/or restating the governing must generally be approved by the board and by the
Documents instrument of a DST. Amendments to the Declaration affirmative vote of two-thirds of all votes entitled to
that do not change the information in the DST's be cast (unless the charter requires amendment by a
certificate of trust are not required to be filed higher or lesser proportion of the voting stock, but
with the Secretary of State. not less than a majority of the shares outstanding).
Declaration of Trust Charter
The Declaration provides that amendments and/or The Charter provides that the Charter may be
restatements of the Declaration may generally be made amended, altered, repealed, or added to upon the
at any time by the board of trustees, by a vote of a vote of the holders of a majority of the shares
majority of the trustees present at a meeting at outstanding and entitled to vote thereon, except that
which a quorum is present, without approval of the the amendment or repeal of provisions pertaining to
shareholders. Amendments or a repeal of certain fixing the number of directors and the classification
provisions, however, require approval of the board of of the board, the removal of directors, the merger or
trustees, as set forth above, and the affirmative consolidation of the Corporation, sale of all or
vote of holders of at least two-thirds (66 2/3%) of substantially all of the assets of the Corporation,
the outstanding shares entitled to vote, unless such dissolution or liquidation of the Corporation, or
action has previously been approved, adopted or amendments to the Charter require the affirmative
authorized by the affirmative vote of at least vote of the holders of at least 75% of all shares then
two-thirds (66 2/3%) of the board of trustees, in entitled to vote, unless such action was previously
which case the affirmative "vote of a majority of the approved, adopted or authorized by the vote of two-
outstanding voting securities," as defined in the thirds of the total number of directors fixed in
1940 Act, of the Trust entitled to vote at a meeting accordance with the By-Laws.
at which a quorum is present, shall be required. Such
provisions include those pertaining to the number,
classes, election, term, removal, resignation,
quorum, powers, required vote and action by written
consent of the board of trustees; shareholders'
voting power, quorum, required vote, action by
written consent and record dates; limitation of
liability and indemnification of agents of the Trust;
transactions such as the dissolution, merger,
consolidation, conversion, reorganization and
reclassification of the Trust to an open-end company
and amendments of the Declaration.
By-Laws By-Laws
The By-Laws may be amended, restated or repealed or Under Maryland Law, after the organizational
new By-Laws may be adopted by the affirmative "vote meeting, the power to adopt, alter or repeal the by-
of a majority of the outstanding securities" (as laws is vested in the stockholders, except to the
defined in the 1940 Act). The By-Laws may also be extent that the charter or by-laws vest such power in
amended, restated or repealed or new By-Laws may be the board.
adopted by the board of trustees, by a vote of a
majority of the trustees present at a meeting at The By-Laws may be adopted, amended or repealed
which a quorum is present. by "vote of the holders of a majority of the
[Corporation's] stock" (as defined in the 1940 Act);
Certificate of Trust except, however, that the amendment of provisions
Pursuant to the Declaration, amendments and/or pertaining to the fixing of the number of directors
restatements of the certificate of trust shall be and the classification of the board and the removal
made at any time by the board of trustees, without of directors require the affirmative vote of the
approval of the shareholders, to correct any
inaccuracy contained therein.
C-2
Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
Any such amendments/restatements of the certificate holders of 75% of the Corporation's shares, unless
of trust must be executed by at least one (1) trustee such action had previously been approved, adopted
and filed with the Secretary of State in order to or authorized by the affirmative vote of two-thirds of
become effective. the total number of directors fixed by the By-Laws,
in which case the affirmative vote of a majority of
the outstanding shares is required. Directors may
adopt, amend or repeal any By-Law except the
provision relating to the directors' authority to
address share price discounts (not inconsistent with
any By-Law adopted, amended or repealed by
stockholders) by majority vote of all of the directors
in office, in accordance with applicable law.
Preemptive Rights Under the Delaware Act, a governing instrument may Under Maryland Law, a stockholder does not have
and Redemption of contain any provision relating to the rights, duties preemptive rights unless the charter expressly grants
Shares and obligations of the shareholders. Unless otherwise such rights.
provided in the governing instrument, a shareholder
shall have no preemptive right to subscribe to any
additional issue of shares or another interest in a
DST.
The Declaration provides that no shareholder shall The Corporation does not provide stockholders with
have the preemptive or other right to subscribe for preemptive rights.
new or additional shares or other securities issued
by the Trust.
The Trust has the right at its option and at any
time, subject to the 1940 Act and other applicable
law, to repurchase shares of any shareholder under
certain circumstances 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 the Declaration, the
By-Laws and other applicable law.
Dissolution and The Trust shall have perpetual existence unless See Voting Rights, Meetings, Notice, Quorum,
Termination Events dissolved: (i) upon approval of the board of Record Dates and Proxies--Stockholder Vote for
trustees, and the affirmative vote of the holders of the Maryland Law as to the stockholder vote
at least 75% of the shares entitled to vote to required to voluntarily dissolve a corporation.
approve, adopt or authorize such transaction unless
such action has been previously approved by the Depending on the grounds for involuntary
affirmative vote of at least two-thirds (66 2/3%) of dissolution, under Maryland Law (i) stockholders
the board of trustees, in which case the affirmative entitled to cast at least 25% of all the votes entitled
"vote of a majority of the outstanding voting to be cast in the election of directors; (ii) any
securities," as defined in the 1940 Act, of the Trust stockholder entitled to vote in the election of
entitled to vote at the meeting at which a quorum is directors; or (iii) any stockholder or creditor of the
present, shall be required; (ii) upon the sale, corporation, may petition a court of equity to
conveyance and transfer of all of the assets of the dissolve the corporation.
Trust to another entity; or (iii) upon the occurrence
of a dissolution or termination event pursuant to any
provision of the Delaware Act.
Liquidation upon Under the Delaware Act, a DST that has dissolved Under Maryland Law, a corporation that has
Dissolution or shall first pay or make reasonable provision to pay voluntarily dissolved shall pay, satisfy and discharge
Termination all known claims and obligations, including those the existing debts and obligations of the corporation,
that are contingent, conditional and unmatured, and including necessary expenses of liquidation, before
all known claims and obligations for which the distributing the remaining assets to the stockholders.
claimant is unknown. Any remaining assets shall be
distributed to the shareholders or as otherwise
provided in the governing instrument.
The Declaration provides that any remaining assets of
the dissolved Trust shall be distributed ratably to
the shareholders according to the number of
outstanding shares held of record by the several
shareholders on the date for such dissolution
distribution.
C-3
Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
Voting Rights, Under the Delaware Act, the governing instrument may
Meetings, Notice, set forth any provision relating to trustee and
Quorum, Record shareholder voting rights, including the withholding
Dates and Proxies of such rights from certain trustees or shareholders.
If voting rights are granted, the governing
instrument may contain any provision relating to
meetings, notice requirements, written consents,
record dates, quorum requirements, voting by proxy
and any other matter pertaining to the exercise of
voting rights. The governing instrument may also
provide for the establishment of record dates for
allocations and distributions by the DST.
One Vote Per Share One Vote Per Share
The Declaration provides that each outstanding share Under Maryland Law, unless a corporation's charter
is entitled to one vote and each outstanding provides for a greater or lesser number of votes per
fractional share is entitled to a fractional vote. share, or limits or denies voting rights, each
outstanding share of stock is entitled to one vote on
each matter submitted to a vote at a meeting of
stockholders. A corporation may issue fractional
shares of stock.
The Charter provides that each outstanding share of
stock is entitled to one vote and each outstanding
fractional share of stock is entitled to a fractional
vote.
Shareholders' Meetings Stockholders' Meetings
While the Delaware Act does not mandate annual Under Maryland Law, every corporation must hold
shareholders' meetings, the By-Laws require annual an annual stockholders' meeting to elect directors
meetings for the election of trustees and the and transact other business, except that the charter or
transaction of other business. The By-Laws also by-laws of a corporation registered under the 1940
authorize the calling of a special meeting (i) when Act may provide that an annual meeting is not
deemed necessary or desirable by the board of required in any year in which the election of
trustees or (ii) to the extent permitted by the 1940 directors is not required by the 1940 Act. Maryland
Act, by the chairperson of the board, or at the Law authorizes, and permits the charter and by-laws
request of holders of 10% of the outstanding shares to authorize, certain persons to call special meetings
if such shareholders pay the reasonably estimated of stockholders.
cost of preparing and mailing the notice thereof, for
the purpose of electing trustees. However, no special The By-Laws require annual meetings of
meeting may be called at the request of shareholders stockholders for the election of directors and the
to consider any matter that is substantially the same transaction of other business. The By-Laws also
as a matter voted upon at a shareholders' meeting authorize the calling of a special meeting, unless
held during the preceding twelve (12) months, unless otherwise "prescribed" by statute or the Charter, by
requested by holders of a majority of all outstanding resolution of the board or the president, and shall be
shares entitled to vote at such meeting. called by the president or the secretary upon the
written request of a majority of the directors or at the
Under the By-Laws, shareholder proposals may be written request of stockholders owning 10% "in
presented at an annual shareholders' meeting if amount of the entire capital stock" of the
brought by a shareholder who (i) is entitled to vote Corporation then issued and outstanding, if the
at the meeting; (ii) complies with the notice stockholders requesting such meeting pay the
procedures set forth in the By-Laws; and (iii) was a reasonably estimated cost of preparing and mailing
shareholder of record at the time such notice is the notice thereof. However, no special meeting will
received by the secretary of the Trust. The be called at the request of stockholders to consider
shareholder's notice must be in writing and delivered any matter that is substantially the same as a matter
to the secretary of the Trust not less than one voted upon at a stockholders' special meeting held
hundred twenty (120) days nor more than one hundred during the preceding 12 months, unless requested by
fifty (150) days prior to the date of any such the holders of a majority of all outstanding shares
meeting. Each such notice given by a shareholder must entitled to vote at such meeting.
include certain information set forth in the By-Laws
and as reasonably requested by the Trust. At the
annual meeting, the appropriate officer may, if the
facts warrant, determine and declare to such meeting
that a proposal was not made in accordance with the
procedure in the By-Laws, and, if the officer should
so determine, shall so declare to the meeting, and
the defective proposal shall be disregarded and laid
over for action at the next succeeding annual meeting
of the shareholders taking place thirty (30) days or
more thereafter.
C-4
Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
Record Dates Record Dates
As set forth above, the Delaware Act authorizes the Under Maryland Law, unless the by-laws otherwise
governing instrument of a DST to set forth any provide, the board may set a record date, which date
provision relating to record dates. must be set within the parameters outlined by the
Maryland statute, for determining stockholders
In order to determine the shareholders entitled to entitled to notice of a meeting, vote at a meeting,
notice of, and to vote at, a shareholders' meeting, receive dividends or be allotted other rights.
the Declaration authorizes the board of trustees to
fix a record date. The record date may not precede In order to determine the stockholders entitled to
the date on which it is fixed by the board and it may notice of, and to vote at, a stockholders' meeting, the
not be more than one hundred and twenty (120) days By-Laws authorize the board of directors to fix a
nor less than ten (10) days before the date of the record date not less than ten (10) nor more than
shareholders' meeting. The By-Laws provide that ninety (90) days prior to the date of the meeting or
notice of a shareholders' meeting shall be given to prior to the last day on which the consent or dissent
shareholders entitled to vote at such meeting not of stockholders may be effectively expressed for any
less than ten (10) nor more than one hundred and purpose without a meeting. If the board does not fix
twenty (120) days before the date of the meeting. a record date, the record date shall be the later of the
close of business on the day on which notice of the
To determine the shareholders entitled to vote on any meeting is mailed or the 30th day before the
action without a meeting, the Declaration authorizes meeting, except if all stockholders waive notice, the
the board of trustees to fix a record date. The record date is the close of business on the 10th day
record date may not precede the date on which it is next preceding the day the meeting is held.
fixed by the board nor may it be more than thirty
(30) days after the date on which it is fixed by the To determine the stockholders entitled to a dividend,
board. any other distribution, or delivery of evidences of
rights or other interests from the Corporation, the
Pursuant to the Declaration, if the board of trustees By-Laws authorize the board to fix a record date not
does not fix a record date: (a) the record date for exceeding ninety (90) days preceding the date fixed
determining shareholders entitled to notice of, and for the payment of the dividend or distribution or
to vote at, a meeting will be the day before the date delivery of the evidences.
on which notice is given or, if notice is waived, on
the day before the date of the meeting; (b) the
record date for determining shareholders entitled to
vote on any action by consent in writing without a
meeting, (i) when no prior action by the board of
trustees has been taken, shall be the day on which
the first signed written consent is delivered to the
Trust, or (ii) when prior action of the board of
trustees has been taken, shall be the day on which
the board of trustees adopts the resolution taking
such prior action.
To determine the shareholders of the Trust entitled
to a dividend or any other distribution of assets of
the Trust, the Declaration authorizes the board of
trustees to fix a record date. The record date may
not precede the date on which it is fixed by the
board nor may it be more than sixty (60) days before
the date such dividend or distribution is to be paid.
Quorum for Shareholders' Meeting Quorum for Stockholders' Meeting
To transact business at a shareholders' meeting, the Under Maryland Law, unless the charter or
Declaration provides that a majority of the Maryland Law provides otherwise, in order to
outstanding shares entitled to vote at the meeting, constitute a quorum for a meeting, there must be
which are present in person or represented by proxy, present in person or by proxy, stockholders entitled
shall constitute a quorum at such meeting, except to cast a majority of all the votes entitled to be cast
when a larger quorum is required by applicable law or at the meeting.
the requirements of any securities exchange on which
such shares are listed for trading, in which case To transact business at a meeting, the By-Laws
such quorum shall comply with such requirements. provide that a majority of the outstanding shares
entitled to vote, which are present in person or
represented by proxy, shall constitute a quorum at a
stockholders' meeting.
Shareholder Vote Stockholder Vote
The Declaration provides that, subject to any Under Maryland Law, for most stockholder actions,
provision of the Declaration, the By-Laws or unless the charter or Maryland Law provides
applicable law that requires a different vote: (i) in otherwise, a majority of all votes cast at a meeting
all matters other than the election of trustees, the at which a quorum is present is required to approve
affirmative "vote of a majority of the outstanding any matter. Actions such as (i) amendments to the
voting securities" (as defined in the 1940 Act)
C-5
Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
of the Trust entitled to vote at a shareholders' corporation's charter, (ii) mergers, (iii)
meeting at which a quorum is present, shall be the consolidations, (iv) statutory share exchanges, (v)
act of the shareholders; and (ii) trustees shall be transfers of assets and (vi) dissolutions require the
elected by not less than a plurality of the votes affirmative vote of two-thirds of all votes entitled to
cast of the holders of outstanding shares entitled to be cast on the matter unless the charter provides for
vote present in person or represented by proxy at a a lesser proportion which may not be less than a
shareholders' meeting at which a quorum is present. majority of all votes entitled to be cast on the matter.
Unless the charter or by-laws require a greater vote,
a plurality of all votes cast at a meeting at which a
quorum is present is required to elect a director.
Election of Directors. Under the By-Laws, at a
stockholders' meeting at which a quorum is present,
a plurality of the votes cast shall be required to elect
directors at the annual meeting and to fill any
vacancy resulting from an increase in the number of
directors on the board (adopted by vote of the
stockholders) as well as fill any then existing
vacancies on the Board.
Other matters for which the vote is not expressly
designated otherwise. For all other matters, other than
any specific matter for which applicable statutes, the
Charter or By-Laws expressly provides for a different
vote, a majority of the votes cast, at a stockholders'
meeting at which a quorum is present, shall decide
any question brought before such meeting.
Shareholder Vote on Certain Transactions Stockholder Vote on Certain Transactions
Under the Declaration, in order for the Trust to Under the Charter, in order to consummate a merger,
consummate a dissolution, merger, consolidation, consolidation, sale of all or substantially all of the
conversion, reorganization or reclassification, such assets, or the liquidation or dissolution of the
transaction shall be approved in the following manner: Corporation, such transaction shall be approved in
the following manner:
The transaction must be approved by the vote of a
majority of the trustees present at a meeting at The transaction must be approved by the
which a quorum is present, and the affirmative vote favorable vote of at least 75% of the outstanding
of the holders of at least 75% of the outstanding shares entitled to vote, unless such action has been
shares entitled to vote, unless such action has been previously approved by the affirmative vote of
previously approved, adopted or authorized by the two-thirds of the total number of directors fixed
affirmative vote of at least two-thirds (66 2/3%) of pursuant to the By-Laws, in which case the
the board of trustees, in which case the affirmative transaction must be approved by the affirmative
"vote of a majority of the outstanding voting vote of a majority of all the votes entitled to be
securities" (as defined in the 1940 Act) of the cast on the matter, for purposes of Maryland Law.
Trust entitled to vote at a shareholders' meeting at
which a quorum is present shall be required.
Cumulative Voting Cumulative Voting
The Declaration provides that shareholders are not Maryland Law provides that the charter may
entitled to cumulate their votes on any matter. authorize cumulative voting for the election of the
directors and if the charter does not so provide, then
the stockholders are not entitled to cumulative voting
rights.
The Charter and By-Laws do not have any
provisions as to whether stockholders are entitled to
cumulate their votes on any matter and
consequently, the stockholders are not entitled to
cumulate their votes on any matter.
Proxies Proxies
Under the Delaware Act, unless otherwise provided in Under Maryland Law, a stockholder may sign a
the governing instrument of a DST, on any matter that writing authorizing another person to act as a proxy
is to be voted on by the trustees or the or may transmit such authorization by telegram,
shareholders, the trustees or shareholders (as cablegram, datagram, electronic mail, or any other
applicable) may vote in person or by proxy and such electronic or telephonic means.
proxy may be granted in writing, by means of
C-6
Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
"electronic transmission" (as defined in the Delaware The By-Laws require a proxy to be executed in
Act) or as otherwise permitted by applicable law. writing by the stockholder or by a duly authorized
Under the Delaware Act, the term "electronic attorney-in-fact. Unless a proxy provides otherwise,
transmission" is defined as any form of communication it is not valid more than 11 months after its date. A
not directly involving the physical transmission of proxy is revocable by the person executing it or by
paper that creates a record that may be retained, his or her personal representatives or assigns. A
retrieved and reviewed by a recipient thereof and proxy with respect to stock held in the name of two
that may be directly reproduced in paper form by such or more persons will be valid if executed by one of
a recipient through an automated process. them, unless before it is exercised the Corporation
receives specific written notice to the contrary from
The By-Laws permit a shareholder to authorize another any one of them. A proxy purporting to be executed
person to act as proxy by the following methods: by or on behalf of a stockholder shall be deemed
execution of a written instrument or by "electronic valid unless it is challenged at or prior to its exercise.
transmission" (as defined in the Delaware Act),
telephonic, computerized, telecommunications or
another reasonable alternative to the execution of a
written instrument. Unless a proxy provides
otherwise, it is not valid more than 11 months after
its date. In addition, the By-Laws provide that the
revocability of a proxy that states on its face that
it is irrevocable shall be governed by the provisions
of the general corporation law of the State of
Delaware.
Action by Written Consent Action by Written Consent
Under the Delaware Act, unless otherwise provided in Maryland Law provides that any action required or
the governing instrument of a DST, on any matter that permitted to be taken at a stockholders' meeting may
is to be voted on by the trustees or the be taken without a meeting, if a unanimous written
shareholders, such action may be taken without a consent is signed by each stockholder entitled to
meeting, without prior notice and without a vote if a vote on the matter.
written consent(s), setting forth the action taken,
is signed by the trustees or shareholders (as
applicable) having the minimum number of votes that
would be necessary to take such action at a meeting
at which all trustees or interests in the DST (as
applicable) entitled to vote on such action were
present and voted. Unless otherwise provided in the
governing instrument, a consent transmitted by
"electronic transmission" (as defined in the Delaware
Act) by a trustee or shareholder (as applicable) or
by a person authorized to act for a trustee or
shareholder (as applicable) will be deemed to be
written and signed for this purpose.
Shareholders Stockholders
The Declaration authorizes shareholders to take The By-Laws provide that any action to be taken
action without a meeting and without prior notice if by stockholders may be taken without a meeting if:
written consents setting forth the action taken are (1) all stockholders entitled to vote on the matter
signed by the holders of all shares entitled to vote consent to the action in writing; (2) all stockholders
on that action. A consent transmitted by "electronic entitled to notice of the meeting but not entitled to
transmission" (as defined in the Delaware Act) by a vote at it sign a written waiver of any right to
shareholder or by a person(s) authorized to act for a dissent; and (3) the consents and waivers are filed
shareholder shall be deemed to be written and signed with the records of stockholder meetings.
for purposes of this provision.
Board of Trustees Board of Directors
The Declaration also authorizes the board of trustees The By-Laws also provide that, except as otherwise
or any committee of the board of trustees to take required by statute, the board or any committee of
action without a meeting and without prior written the board may act by written consent signed by all
notice if written consents setting forth the action the members of the board or committee,
taken are executed by trustees having not less than respectively, if the consent is filed with the minutes
the minimum number of votes necessary to take that of the proceedings of the board or committee.
action at a meeting at which all trustees or any
committee thereof, as applicable, are present and
voting. A consent transmitted by "electronic
transmission" (as defined in the Delaware Act) by a
trustee shall be deemed to be written and signed for
purposes of this provision.
C-7
Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
Removal of Trustees/ The governing instrument of a DST may contain Under Maryland Law, unless otherwise provided in
Directors any provision relating to the removal of the charter, a director may generally be removed
trustees; provided however, that there shall with or without cause by the vote of a majority of all
at all times be at least one trustee of the the votes entitled to be cast generally for the election
DST. of directors unless (i) such director is elected by a
certain class or series, (ii) the charter provides for
Under the Declaration, any trustee may be cumulative voting or (iii) the board is classified.
removed, with or without cause, by the
shareholders, upon the vote of the holders of Under the Charter, a director may be removed with
at least 75% of the shares entitled to vote. or without cause, but only by action of the
stockholders taken by the holders of at least two-
thirds of the shares then entitled to vote in an
election of Directors.
A stockholders' meeting shall be called for such
purpose by the board if requested in writing by
holders of not less than 10% of outstanding shares of
the Corporation.
Vacancies on Board Subject to the 1940 Act, vacancies on the Under Maryland Law, stockholders may elect
of Trustees/ Directors board of trustees may be filled by a majority persons to fill vacancies that result from the removal
vote of the trustee(s) then in office, of directors. Unless the charter or by-laws provide
regardless of the number and even if less otherwise, a majority of the directors in office,
than a quorum. However, a shareholders' whether or not comprising a quorum, may fill
meeting shall be called to elect trustees if vacancies that result from any cause except an
required by the 1940 Act. increase in the number of directors. A majority of
the entire board of directors may fill vacancies that
result from an increase in the number of directors.
In the event all trustee offices become Under the By-Laws, directors may increase or
vacant, an authorized officer of the decrease their number; if the number is increased,
investment adviser shall serve as the sole the added directors may be elected by a majority of
remaining trustee, subject to the provisions directors then in office. For other vacancies, the
of the 1940 Act and shall, as soon as directors then in office (though less than quorum)
practicable, fill all of the vacancies on the shall continue to act and may by majority vote fill
board. Thereupon, the investment adviser any vacancy until the next meeting of stockholders,
shall resign as trustee and a shareholders' subject to the 1940 Act.
meeting shall be called to elect trustees.
The number of directors may also be increased or
decreased by vote of stockholders at any meeting
called for the purpose and if the vote is to increase
the number, stockholders will vote by plurality to
elect the directors to fill the new vacancies as well as
any then existing vacancies. The By-Laws further
provide that "[a]ny vacancy may be filled by the
[s]tockholders at any meeting thereof."
Shareholder Liability Under the Delaware Act, except to the extent The stockholders of a corporation are not liable for
otherwise provided in the governing the obligations of the corporation.
instrument of a DST, shareholders of a DST
are entitled to the same limitation of
personal liability extended to shareholders
of a private corporation organized for profit
under the General Corporation Law of the
State of Delaware (such shareholders are
generally not liable for the obligations of
the corporation).
Under the Declaration, shareholders are
entitled to the same limitation of personal
liability as that extended to shareholders of
a private corporation organized for profit
under the General Corporation Law of the
State of Delaware. However, the board of
trustees may cause any shareholder to pay for
charges of the trust's custodian or transfer,
dividend disbursing, shareholder servicing or
similar agent for services provided to such
shareholder.
C-8
Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
Trustee/ Subject to the provisions in the governing Maryland Law requires a director to perform his or
Director/Agent instrument, the Delaware Act provides that a trustee her duties in good faith, in a manner he or she
Liability or any other person managing the DST, when acting in reasonably believes to be in the best interests of the
such capacity, will not be personally liable to any corporation and with the care that an ordinarily
person other than the DST or a shareholder of the DST prudent person in a like position would use under
for any act, omission or obligation of the DST or any similar circumstances. A director who performs his
trustee. To the extent that at law or in equity, a or her duties in accordance with this standard has no
trustee has duties (including fiduciary duties) and liability to the corporation, its stockholders or to
liabilities to the DST and its shareholders, such third persons by reason of being or having been a
duties and liabilities may be expanded or restricted director. A corporation may include in its charter a
by the governing instrument. provision expanding or limiting the liability of its
directors and officers for money damages to the
corporation or its stockholders, provided however,
that liability may not be limited to the extent the
person has received an improper benefit or profit in
money, property or services or where such person
has been actively and deliberately dishonest.
The Declaration provides that any person who is or The Charter provides that no director or officer shall
was a trustee, officer, employee or other agent of be personally liable to the Corporation or its
the Trust or is or was serving at the request of the stockholders for monetary damages except: (i) a
Trust as a trustee, director, officer, employee or director or officer is liable for the amount of any
other agent of another corporation, partnership, improper benefit or profit he or she receives; and (ii)
joint venture, trust or other enterprise (an "Agent") where a judgment or other final adjudication adverse
will be liable to the Trust and to any shareholder to the director or officer is entered in a proceeding
solely for such Agent's own willful misfeasance, bad based on a finding that such person's action, or
faith, gross negligence or reckless disregard of the failure to act, was the result of active and deliberate
duties involved in the conduct of such Agent (such dishonesty and was material to the cause of action
conduct referred to as "Disqualifying Conduct"). adjudicated in the proceeding. The Charter further
Subject to the preceding sentence, Agents will not be provides that no director or officer will be protected
liable for any act or omission of any other Agent or from liability to the Corporation or its stockholders
any investment adviser or principal underwriter of arising from such director's or officer's
the Trust. No Agent, when acting in such capacity, Disqualifying Conduct.
shall be personally liable to any person (other than
the Trust or its shareholders as described above) for
any act, omission or obligation of the Trust or any
trustee.
Indemnification Subject to such standards and restrictions contained Unless limited by its charter, Maryland Law requires
in the governing instrument of a DST, the Delaware a corporation to indemnify a director who has been
Act authorizes a DST to indemnify and hold harmless successful, on the elements or otherwise, in the
any trustee, shareholder or other person from and defense of any proceeding to which such person was
against any and all claims and demands. a party because of such person's service in such
capacity, against reasonable expenses incurred in
Pursuant to the Declaration, the Trust will indemnify connection with the proceeding.
any Agent who was or is a party or is threatened to
be made a party to any proceeding by reason of such Maryland Law permits a corporation to indemnify a
Agent's capacity, against attorneys' fees and other director, officer, employee or agent who is a party or
certain expenses, judgments, fines, settlements and threatened to be a party, by reason of service in that
other amounts incurred in connection with such capacity, to any threatened, pending or completed
proceeding if such Agent acted in good faith or in action, suit or proceeding, against judgments,
the case of a criminal proceeding, had no reasonable penalties, fines, settlements and reasonable expenses
cause to believe such Agent's conduct was unlawful. unless it is established that: (i) the act or omission of
However, there is no right to indemnification for any such person was material to the matter giving rise to
liability arising from the Agent's Disqualifying the proceeding, and was committed in bad faith or
Conduct. As to any matter for which such Agent is was the result of active and deliberate dishonesty; (ii)
found to be liable in the performance of such Agent's such person actually received an improper personal
duty to the Trust or its shareholders, benefit; or (iii) such person had reasonable cause to
indemnification will be made only to the extent that believe that the act or omission was unlawful.
the court in which that action was brought determines However, if the proceeding is a derivative suit or was
that in view of all the circumstances of the case, brought by the corporation, the corporation may not
the Agent was not liable by reason of such Agent's indemnify a person who has been adjudged to be
Disqualifying Conduct. Note that the Securities Act liable to the corporation. Corporations are authorized
of 1933, as amended (the "1933 Act"), in the opinion to advance payment of reasonable expenses upon
of the U.S. Securities and Exchange Commission compliance with certain requirements.
("SEC"), and the 1940 Act also limit the ability of
the Trust to indemnify an Agent.
C-9
Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
Expenses incurred by an Agent in defending any The By-Laws provide that the Corporation will
proceeding may be advanced by the Trust before the indemnify its: (i) directors to the fullest extent that
final disposition of the proceeding on receipt of an indemnification of directors is permitted by
undertaking by or on behalf of the Agent to repay the Maryland Law; (ii) officers to the same extent as its
amount of the advance if it is ultimately determined directors and to such further extent as is consistent
that the Agent is not entitled to indemnification by with law; and (iii) directors and officers who, while
the Trust. serving as directors or officers, also serve at the
request of the Corporation as a director, officer,
partner, trustee, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan to the
fullest extent consistent with law. This
indemnification (and other rights) provided by the
By-Laws will continue as to persons who have
ceased to be a director or officer, includes the
advance of reasonable expenses subject to certain
conditions, and will inure to the benefit of the heirs,
executors and administrators of such persons, but
such persons will not be protected against any
liability to the Corporation or its stockholders arising
from his or her Disqualifying Conduct. The
Corporation may indemnify, and advance reasonable
expenses to, its employees and agents who are not
officers or directors of the Corporation as may be
provided by the board of directors or by contract,
subject to any limitations imposed by the 1940 Act.
The By-Laws permit the board of directors to make
such additional provisions for the indemnification
and advancement of expenses to directors, officers,
employees and agents, as are consistent with the law.
The indemnification provided by the By-Laws is not
exclusive of any other right, with respect to
indemnification or otherwise, to which those seeking
indemnification may be entitled under any insurance
or other agreement or resolution of stockholders or
disinterested directors or otherwise.
Insurance The Delaware Act is silent as to the right of a DST Under Maryland Law, a corporation may purchase
to purchase insurance on behalf of its trustees or insurance on behalf of any person who is or was a
other persons. director, officer, employee or agent against any
liability asserted against and incurred by such person
However, as the policy of the Delaware Act is to give in any such capacity whether or not the corporation
maximum effect to the principle of freedom of would have the power to indemnify such person
contract and to the enforceability of governing against such liability.
instruments, the Declaration authorizes the board of
trustees, to the fullest extent permitted by The By-Laws authorize the Corporation to purchase
applicable law, to purchase with Trust assets, insurance on behalf of any person who is or was a
insurance for liability and for all expenses of an director, officer, employee or agent of the
Agent in connection with any proceeding in which such Corporation or who, while a director, officer,
Agent becomes involved by virtue of such Agent's employee, or agent of the Corporation, is or was
actions, or omissions to act, in its capacity or serving at the request of the Corporation as a
former capacity with the Trust, whether or not the director, officer, partner, trustee, employee, or agent
Trust would have the power to indemnify such Agent of another foreign or domestic corporation,
against such liability. partnership, joint venture, trust, other enterprise, or
employee benefit plan against any liability asserted
against and incurred by such person in any such
capacity or arising out of such person's position.
However, no insurance may be purchased which
would indemnify any director or officer against any
liability to the Corporation or its stockholders arising
from such person's Disqualifying Conduct.
C-10
Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
Shareholder Right of Under the Delaware Act, except to the extent Under Maryland Law, a stockholder may inspect,
Inspection otherwise provided in the governing instrument during usual business hours, the corporation's by-
and subject to reasonable standards established laws, stockholder proceeding minutes, annual
by the trustees, each shareholder has the right, statements of affairs, voting trust agreements and, if
upon reasonable demand for any purpose reasonably the corporation is not an open-end investment
related to the shareholder's interest as a company, a statement showing all stock and
shareholder, to obtain from the DST certain securities issued by the corporation for a period of
information regarding the governance and affairs not more than the previous 12 months. In addition,
of the DST. stockholders who have individually or together been
holders of at least 5% of the outstanding stock of any
To the extent permitted by Delaware law and the class for at least 6 months, may inspect and copy the
By-Laws, a shareholder, upon reasonable written corporation's books of account, its stock ledger and
demand to the Trust for any purpose reasonably its statement of affairs.
related to such shareholder's interest as a
shareholder, may inspect certain information as The Charter grants stockholders inspection rights
to the governance and affairs of the Trust during only to the extent provided by Maryland Law. Such
regular business hours. However, reasonable rights are subject to reasonable regulations of the
standards governing, without limitation, the board of directors not contrary to Maryland Law.
information and documents to be furnished and the
time and location of furnishing the same, will be
established by the board or any officer to whom
such power is delegated in the By-Laws. In
addition, as permitted by the Delaware Act, the
By-Laws also authorize the board or an officer to
whom such power is delegated in the By-Laws, to
keep confidential from shareholders for such
period of time as deemed reasonable any
information that the board or such officer in
good faith believes would not be in the best
interest of the Trust to disclose or that could
damage the Trust or that the Trust is required by
law or by agreement with a third party to keep
confidential.
Derivative Actions Under the Delaware Act, a shareholder may bring a Under Maryland Law, in order to bring a derivative
derivative action if trustees with authority to action, a stockholder (or his or her predecessor if he
do so have refused to bring the action or if a or she became a stockholder by operation of law)
demand upon the trustees to bring the action is must be a stockholder (a) at the time of the acts or
not likely to succeed. A shareholder may bring a omissions complained about, (b) at the time the
derivative action only if the shareholder is a action is brought, and (c) until the completion of the
shareholder at the time the action is brought litigation. A derivative action may be brought by a
and: (i) was a shareholder at the time of the stockholder if (i) a demand upon the board of
transaction complained about or (ii) acquired the directors to bring the action is improperly refused or
status of shareholder by operation of law or (ii) a request upon the board of directors would be
pursuant to the governing instrument from a futile.
person who was a shareholder at the time of the
transaction. A shareholder's right to bring a Under Maryland Law, a director of an investment
derivative action may be subject to such company who "is not an interested person, as
additional standards and restrictions, if any, as defined by the 1940 Act, shall be deemed to be
are set forth in the governing instrument. independent and disinterested when making any
determination or taking any action as a director."
The Declaration provides that, subject to the
requirements set forth in the Delaware Act, a
shareholder may bring a derivative action on
behalf of the Trust only if the shareholder first
makes 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 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.
Management The Trust is a closed-end management investment The Corporation is a closed-end management
Investment Company company under the 1940 Act. investment company under the 1940 Act.
Classification
C-11
EXHIBIT D
FUNDAMENTAL INVESTMENT RESTRICTIONS PROPOSED
TO BE AMENDED OR ELIMINATED
CURRENT FUNDAMENTAL PROPOSED FUNDAMENTAL
PROPOSAL OR INVESTMENT INVESTMENT RESTRICTION INVESTMENT RESTRICTION
SUB-PROPOSAL RESTRICTION The Fund may not: The Fund may not:
------------ --------------------- ----------------------------------- ----------------------------------
3a Borrowing, Issuing Issue senior securities, borrow Borrow money, except to the
Senior Securities and money or pledge its assets, extent permitted by the 1940 Act
Pledging Assets except that the Fund may borrow or any rules, exemptions or
from a bank (i) for temporary or interpretations thereunder that
emergency purposes, or (ii) to may be adopted, granted or
finance repurchase of its shares issued by the SEC.
and to finance tender offers, in
amounts not exceeding 30% Issue senior securities, except to
(taken at the lower of cost or the extent permitted by the 1940
current value) of its total assets Act or any rules, exemptions or
(not including the amount interpretations thereunder that
borrowed), and may also pledge may be adopted, granted or
its assets to secure such issued by the SEC.
borrowings. The Fund will not
purchase additional portfolio
securities while borrowings
exceed 5% of the value of its
total assets.
3b Industry Invest 25% or more of the total Invest more than 25% of its net
Concentration value of its assets in a particular assets in securities of issuers in
industry. 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).
3c Commodities Buy or sell commodities or Purchase or sell physical
commodity contracts, except that commodities, unless acquired as
it may purchase and sell futures a result of ownership of
contracts on debt securities, on securities or other instruments
stock and bond indices and and provided that this restriction
foreign currencies, securities does not prevent the Fund from
which are secured by engaging in transactions
commodities, and securities of involving currencies and futures
companies which invest or deal contracts and options thereon or
in commodities. investing in securities or other
instruments that are secured by
physical commodities.
D-1
CURRENT FUNDAMENTAL PROPOSED FUNDAMENTAL
PROPOSAL OR INVESTMENT INVESTMENT RESTRICTION INVESTMENT RESTRICTION
SUB-PROPOSAL RESTRICTION The Fund may not: The Fund may not:
------------ ------------ ------------------------------------ -----------------------------------
3d Real Estate Buy or sell real estate or interests Purchase or sell real estate unless
in real estate, except that it may acquired as a result of ownership
purchase and sell securities of securities or other instruments
which are secured by real estate and provided that this restriction
and securities of companies does not prevent the Fund from
which invest or deal in real purchasing or selling securities
estate. secured by real estate or interests
therein or securities of issuers
which invest, deal, or otherwise
engage in transactions in real
estate or interests therein.
3e Lending Make loans, except that the Fund Make loans to other persons
may lend portfolio securities except (a) through the lending of
with an aggregate market value its portfolio securities, (b)
of not more than one-third of its through the purchase of debt
total assets and may enter into securities, loan participations
repurchase agreements to the and/or engaging in direct
extent permitted under corporate loans in accordance
applicable law. 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
exemptions therefrom which
may be granted by the SEC.
3f Underwriting Act as an underwriter except to Act as an underwriter except to
the extent that, in connection the extent the Fund may be
with the disposition of portfolio deemed to be an underwriter
securities, it may be deemed to when disposing of securities it
be an underwriter under owns or when selling its own
applicable securities laws. shares.
4 Margin Purchase securities on margin, Proposed to be eliminated.*
except such short-term credits as
may be necessary for clearance
of transactions and the
maintenance of margin with
respect to futures contracts.
4 Short Sales Make short sales of securities or Proposed to be eliminated.*
maintain a short position.
D-2
CURRENT FUNDAMENTAL PROPOSED FUNDAMENTAL
PROPOSAL OR INVESTMENT INVESTMENT RESTRICTION INVESTMENT RESTRICTION
SUB-PROPOSAL RESTRICTION The Fund may not: The Fund may not:
------------ ------------------- ---------------------------------- -------------------------------
4 Non-Publicly Invest in securities which are not Proposed to be eliminated.
Traded, Restricted publicly traded or which cannot
and Illiquid be readily resold because of legal
Securities or contractual restrictions
("restricted securities") or which
are not otherwise readily
marketable (including
repurchase agreements having
more than seven days remaining
to maturity, equipment lease
certificates, equipment trust
certificates, conditional sales
contracts, and over-the-counter
options) if, regarding all such
securities, more than 15% of its
total assets (taken at current
value) would be invested in such
securities.
4 IRS Diversification Purchase the securities of any Proposed to be eliminated.
one issuer (other than the U.S.
Government or any of its Note: The Fund intends to
agencies or instrumentalities or continue to comply with all
securities of other investment applicable diversification
companies) if immediately after requirements for regulated
such investment (a) more than investment companies set forth
5% of the value of the Fund's in the Internal Revenue Code of
total assets would be invested in 1986, as amended.
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 50% of the value of
the Fund's total assets may be
invested without regard to such
5% and 10% limitations.
--------
* Note: The Fund will still be subject to the fundamental investment
restriction on issuing senior securities described in Sub-Proposal 3(a) above.
D-3
EXHIBIT E
AUDIT COMMITTEE CHARTER
I. The Committee.
The Audit Committee ("Committee") is a committee of, and established by, the
Board of Directors/Trustees of the Fund (the "Board"). 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. 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 auditors ("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.
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 has occurred, is ongoing, or is about to occur.
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 of the auditors in accordance with
applicable law.
E-1
(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
to the Fund 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) To investigate improprieties or suspected improprieties in Fund
operations.
(g) In considering the independence of the auditors, to request from 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
obtain and consider periodic reports from the auditors regarding whether the
provision of non-audit services is compatible with maintaining the auditors'
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.
E-2
(h) To review the experience and qualifications of the senior members of
the auditors' team and the quality control procedures of the auditors.
(i) 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.
(j) 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.
(k) To consider management's evaluation of the Fund's disclosure controls
and procedures in connection with certifications of the Fund's Chief
Executive Officer--Finance and Administration and Chief Financial Officer
concerning (i) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Fund's ability to record,
process, summarize and report financial data and have identified for the
Fund's auditors any material weaknesses in internal controls; 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, and for any
other purposes the Committee deems appropriate.
(l) 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").
(m) To determine whether an investigation is necessary regarding any
report of evidence of a material violation by the Fund or its affiliates.
(n) If the Committee determines such an investigation is necessary or
appropriate, (i) to notify the Board; (ii) to initiate an investigation,
which may be conducted by either the CLO or by outside attorneys; and (iii)
to retain such additional expert personnel as the Committee deems necessary
to assist in the investigation.
(o) At the conclusion of any such investigation, (i) to 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 (ii) to inform the CLO and the CEO and the Board of the results of such
investigation and the appropriate remedial measures to be adopted.
(p) Acting by majority vote, to take all other appropriate action,
including the authority to notify the SEC in the event the Fund fails in any
material respect to implement an appropriate response that the Committee has
recommended the Fund to take.
(q) To 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. 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; and
(ii) the confidential, anonymous submission by employees of the Fund or the
Fund's adviser of concerns regarding questionable accounting or auditing
matters.
E-3
(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.
(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.
(e) The Committee shall review this Charter annually, or more frequently if
it chooses, and recommend any changes to the Board.
ADDITIONAL STATEMENT FOR CLOSED-END FUNDS ONLY
The Committee shall comply with rules of the New York Stock Exchange, Inc.
and the U.S. Securities and Exchange Commission applicable to closed-end funds,
including (i) the preparation of the Audit Committee Disclosure Report required
to be included in the Fund's annual proxy statement; and (ii) the review and
discussion of Fund financial statements and management policies in accordance
with applicable Corporate Governance Rules of the New York Stock Exchange, Inc.
E-4
TLGIM PROXY 01/04
TEMPLETON GLOBAL INCOME FUND, INC.
ANNUAL MEETING OF SHAREHOLDERS - FEBRUARY 27, 2004
The undersigned hereby revokes all previous proxies for his/her shares and
appoints BARBARA J. GREEN, ROBERT C. ROSSELOT and LORI A. WEBER, and each of
them, proxies of the undersigned with full power of substitution to vote all
shares of Templeton Global Income Fund, Inc. (the "Fund") that the undersigned
is entitled to vote at the Fund's Annual Meeting of Shareholders (the "Meeting")
to be held at 500 East Broward Blvd., 12th Floor, Fort Lauderdale, Florida 33394
at 11:00 a.m., Eastern time, on the 27th day of February, 2004, 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. IT WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY SHALL BE VOTED FOR PROPOSALS
1 (INCLUDING ALL NOMINEES FOR DIRECTOR) 2, 3 (INCLUDING SIX (6) SUB-PROPOSALS)
AND 4. 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.
I PLAN TO ATTEND THE MEETING. YES NO
[ ] [ ]
(CONTINUED, AND TO BE SIGNED ON THE OTHER SIDE)
FOLD AND DETACH HERE
PLEASE MARK YOUR VOTES
AS INDICATED IN THIS
EXAMPLE [X]
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSALS 1 THROUGH 4.
Proposal 1 - Election of Directors.
FOR all nominees WITHHOLD Nominees: 01 Frank J. Crothers, 02 Charles B. Johnson,
listed (except as AUTHORITY 03 Fred R. Millsaps and 04 Frank A. Olson
marked to the right) to vote for all
nominees listed
[ ] [ ] TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE LINE
BELOW.
------------------------------------------------------------
Proposal 2 - To approve an Agreement and Plan of Reorganization that provides
for the Reorganization of the Fund from a Maryland corporation to a Delaware
statutory trust.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Proposal 3 - To approve amendments to certain of the Fund's fundamental
investment restrictions (includes six (6) Sub-Proposals):
Sub-Proposal 3a. To amend the Fund's fundamental investment restriction
regarding borrowing and issuing senior securities.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Sub-Proposal 3b. To amend the Fund's fundamental investment restriction
regarding industry concentration.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Sub-Proposal 3c. To amend the Fund's fundamental investment restriction
regarding investments in commodities.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Sub-Proposal 3d. To amend the Fund's fundamental investment restriction
regarding investments in real estate.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Sub-Proposal 3e. To amend the Fund's fundamental investment restriction
regarding lending.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Sub-Proposal 3f. To amend the Fund's fundamental investment restriction
regarding underwriting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Proposal 4 - To approve the elimination of certain of the Fund's fundamental
investment restrictions.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
SIGNATURE(S): DATED: , 2004
------------------------------------------ -----------
Please sign exactly as your name appears on this Proxy. If signing for estates,
trusts or corporations, title or capacity should be stated. If shares are held
jointly, each holder should sign.
FOLD AND DETACH HERE