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:
/X/ Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / 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:
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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).
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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.
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PAGE
[LOGO]
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
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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.
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TEMPLETON GLOBAL INCOME FUND, INC.
PROXY STATEMENT
TABLE OF CONTENTS
PAGE
Information About Voting..............................................
Proposal 1: To Elect Four Directors of the Fund........................
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 .....
Introduction to Proposals 3 and 4......................................
Proposal 3: To Approve Amendments to Certain of the Fund's
Fundamental Investment Restrictions (this Proposal
involves separate votes on Sub-Proposals 3a-3f)..........
Sub-Proposal 3a: To amend the Fund's fundamental investment
restriction regarding borrowing and issuing
senior securities................................
Sub-Proposal 3b: To amend the Fund's fundamental investment
restriction regarding industry concentration.....
Sub-Proposal 3c: To amend the Fund's fundamental investment
restriction regarding investments in commodities.
Sub-Proposal 3d: To amend the Fund's fundamental investment
restriction regarding investments in real estate.
Sub-Proposal 3e: To amend the Fund's fundamental investment
restriction regarding lending ...................
Sub-Proposal 3f: To amend the Fund's fundamental investment
restriction regarding underwriting...............
Proposal 4: To Approve the Elimination of Certain of the Fund's
Fundamental Investment Restrictions.......................
Additional Information About the Fund .................................
Audit Committee........................................................
Further Information About Voting and the Meeting.......................
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.
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 three Directors expire. Frank J. Crothers, Charles B. Johnson, and Fred R.
Millsaps 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 own 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.
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
LENGTH FUND COMPLEX
OF TIME OVERSEEN BY OTHER
NAME, AGE AND ADDRESS POSITION SERVED DIRECTOR* DIRECTORSHIPS HELD
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FRANK J. CROTHERS (59) Director Since 1999 [17] None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Atlantic Equipment & Power Ltd.; 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); and director of
various other business and nonprofit organizations.
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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).
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NOMINEE FOR INDEPENDENT DIRECTOR TO SERVE UNTIL 2005 ANNUAL MEETING OF
SHAREHOLDERS:
FRANK A. OLSON (71) Director Since 2003 20 Director, Becton,
500 East Broward Blvd. Dickinson and Co. (medical
Suite 2100 technology); White
Fort Lauderdale, FL Mountains Insurance Group
33394-3091 Ltd. (holding 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).
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NOMINEE FOR INTERESTED DIRECTOR TO SERVE UNTIL 2007 ANNUAL MEETING OF
SHAREHOLDERS:
NUMBER OF
PORTFOLIOS IN
FRANKLIN
TEMPLETON
INVESTMENTS
FUND COMPLEX
LENGTH OF TIME OVERSEEN BY
NAME, AGE AND ADDRESS POSITION SERVED DIRECTOR* OTHER DIRECTORSHIPS HELD
---------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (70) Chairman Chairman of 142 None
One Franklin Parkway of the the Board since
San Mateo, CA Board, 1995 and
94403-1906 Director Director and
and Vice Vice President
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.
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INDEPENDENT DIRECTORS SERVING UNTIL 2006 ANNUAL MEETING OF SHAREHOLDERS:
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).
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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.
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INTERESTED DIRECTOR SERVING UNTIL 2006 ANNUAL MEETING OF SHAREHOLDERS:
NUMBER OF
PORTFOLIOS IN
FRANKLIN
TEMPLETON
INVESTMENTS
FUND COMPLEX
LENGTH OF TIME OVERSEEN BY
NAME, AGE AND ADDRESS POSITION SERVED DIRECTOR* OTHER DIRECTORSHIPS HELD
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**NICHOLAS F. BRADY (73) Director Since 1993 21 Director, Amerada Hess
500 East Broward Blvd. Corporation (exploration
Suite 2100 and refining of oil and
Fort Lauderdale, FL gas); and C2, Inc.
33394-3091 (operating and 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).
---------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS SERVING UNTIL 2005 ANNUAL MEETING OF SHAREHOLDERS:
EDITH E. HOLIDAY (51) Director Since 1996 94 Director, Amerada Hess
500 East Broward Blvd. Corporation (exploration
Suite 2100 and refining of oil and
Fort Lauderdale, FL gas); Beverly Enterprises,
33394-3091 Inc. (health care); H.J.
Heinz Company (processed
foods and allied products);
RTI Internationbal 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).
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NUMBER OF
PORTFOLIOS IN
FRANKLIN
TEMPLETON
INVESTMENTS
FUND COMPLEX
LENGTH OF TIME OVERSEEN BY
NAME, AGE AND ADDRESS POSITION SERVED DIRECTOR* OTHER DIRECTORSHIPS HELD
---------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (75) Director Since 1993 142 Director, White Mountains
500 East Broward Blvd. Insurance Group, Ltd.
Suite 2100 (holding company); Martek
Fort Lauderdale, FL Biosciences Corporation;
33394-3091 MedImmune, Inc.
(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).
---------------------------------------------------------------------------------------------------------
CONSTANTINE D. TSERETOPOULOS (49) Director Since 1999 20 None
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).
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* 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.
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 DIRECTOR IN THE
OF EQUITY FRANKLIN TEMPLETON
SECURITIES IN INVESTMENTS
NAME OF DIRECTOR THE FUND 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 DIRECTOR IN THE
OF EQUITY FRANKLIN TEMPLETON
SECURITIES IN INVESTMENTS
NAME OF DIRECTOR THE FUND 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 $2,000 and a fee of
$400 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 and Compensation 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 the annual shareholders' meeting. One Director attended
the Fund's last annual meeting held on February 28, 2003.
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
TOTAL BOARDS IN
COMPENSATION FRANKLIN
FROM TEMPLETON
FRANKLIN INVESTMENTS
TEMPLETON FUND
AGGREGATE INVESTMENTS COMPLEX ON
COMPENSATION FUND WHICH DIRECTOR
NAME OF DIRECTOR FROM THE FUND* COMPLEX** SERVES***
-------------------------------------------------------------------------------
Harris J. Ashton $5,500 $[] 46
Nicholas F. Brady 5,500 [] 15
Frank J. Crothers 5,767 [] 14
S. Joseph Fortunato 5,500 [] 47
Andrew H. Hines, Jr.**** 5,655 [] 1
Edith E. Holiday 5,500 [] 30
Betty P. Krahmer 5,500 [] 15
Gordon S. Macklin 5,500 [] 46
Fred R. Millsaps 5,655 [] 17
Frank A. Olson***** 1,167 [] 14
Constantine D. Tseretopoulos 5,767 [] 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 [149] U.S. based funds or series.
**** Mr. Hines retired from the Board effective December 31, 2003.
***** 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.
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, Director and Chairman of the Board
Vice President since 1995 and Director 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 (41) President and Chief Executive Since 2002
One Franklin Parkway Officer--Investment Management
San Mateo, CA
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. (63) 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.;
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.
----------------------------------------------------------------------------------------------------------------------
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 Administration
Fort Lauderdale, FL
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.
----------------------------------------------------------------------------------------------------------------------
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 2000
One Franklin Parkway and Secretary and Secretary since 1996
San Mateo, CA
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 Assistant Since 2000
One Franklin Parkway 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 Compliance Since 2002
600 Fifth Avenue
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.
----------------------------------------------------------------------------------------------------------------------
KIMBERLEY H. MONASTERIO (40) Treasurer and Since 2003
One Franklin Parkway Chief Financial Officer
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.
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 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).
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.
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 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 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 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.
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, 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.)
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 (1) 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
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
deleting the current restriction will result in additional material risk to the
Fund at this time.
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 deleting 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 deleting 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.
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. 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. The
correspondence will then be given directly 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 consists
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 $[.................] for the fiscal year
ended August 31, 2003 and $[ ] 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 $[ ] for the fiscal year ended August 31, 2003 and $[
____________ ] for the fiscal year ended August 31, 2002. The services for which
theses fees were paid included the semi annual review of shareholder reports and
internal control testing and evaluation.
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. [No such services were
provided for the fiscal years ended August 31, 2003 and August 31, 2002.]
TAX FEES. The aggregate fees paid to PwC for professional services rendered
by PwC for tax compliance, tax advice and tax planning were $[ .........] for
the fiscal year ended August 31, 2003 and $[ ] for the fiscal year ended August
31, 2002. The services for which these fees were paid included tax return
services.
In addition, the Audit Committee pre-approves PwC's engagement for tax
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. [No such services were provided
for the fiscal years ended August 31, 2003 and August 31, 2002.]
ALL OTHER FEES. The aggregate fees billed for products and services
provided by PwC, other than the services reported above, were $[ ___________ ]
for the fiscal year ended August 31, 2003 and $[ ____________ ] for the fiscal
year ended August 31, 2002. The services for which these fees were paid included
fund profitability analysis review.
In addition, the Audit Committee pre-approves PwC's engagement for other
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. [No such services were provided
for the fiscal years ended August 31, 2003 and 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
Frank A. Olson
Constantine D. Tseretopoulos
? 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 ___________________, a professional proxy solicitation firm, to
solicit proxies from brokers, banks, other institutional holders and individual
shareholders at an anticipated cost of approximately $________ to $________,
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 ____________
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
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.
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
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.
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.
PAGE
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 ("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
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PAGE
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.
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
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PAGE
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;
(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
B-3
PAGE
(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 JP Morgan 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;
(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.
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PAGE
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.
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:
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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
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GOVERNING A Delaware statutory trust (a A Maryland corporation is created
DOCUMENTS/ "DST") is formed by a governing by filing articles of incorporation
GOVERNING BODY instrument and the filing of a with the Maryland State
certificate of trust with the Department of Assessments and
Delaware Secretary of State Taxation ("MSDAT"). The
("Secretary of State"). The Maryland law governing
Delaware law governing a DST is corporations is referred to in this
referred to in this analysis as analysis as "Maryland Law."
the "Delaware Act."
A DST is an unincorporated A corporation is incorporated under
association organized under the Maryland Law. A corporation's
Delaware Act whose operations are operations are governed by its
governed by its governing charter and by-laws, and its
instrument (which may consist of business and affairs are managed by
one or more instruments). Its or under the direction of a board of
business and affairs are managed directors (the "board" or "board of
by or under the direction of one directors" or collectively, the
or more trustees. "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 Templeton Global Income Fund, Inc.,
DST, Templeton Global Income Fund a Maryland corporation, is referred
(the "Trust"), is comprised of an to in this analysis as the
agreement and declaration of trust "Corporation." The Corporation is
("Declaration") and by-laws governed by its Articles of Incorporation,
("By-Laws"). The Trust's as amended and supplemented ("Charter")
governing body is a board of and by-laws ("By-Laws") and the Corporation's
trustees (the "board" or "board of governing body is a board of directors.
trustees" or collectively, the
"trustees").
The board is dividend into three The board is dividend into three classes:
classes, with the term of office Class I, Class II, and Class III and, at
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of one class expiring each year. each annual meeting of stockholders, one
At ech annual meeting of share- class of directors is elected. Thus, at
holders, the successor to the each annual election, the directors chosen
class of trustees whose terms to succeed those whose terms are expiring
shall then expire shall be elected shall be elected for a term expiring at
to hold office for a term expiring the time of the third succeeding annual
at the third succeeding annual meeting of stockholders, or thereafter in
meeting. Each trustee shall hold each case when their respective successors
office for his or her applicable are elected and qualified.
term or until such trustee's
earlier death, resignation, re-
moval or inability otherwise
to serve.
DESIGNATION OF Under the Delaware Act, the Equity securities of a corporation
OWNERSHIP SHARES ownership interests in a DST are are generally denominated as shares
OR INTERESTS denominated as "beneficial of stock. Record owners of shares
interests" and are held by of stock are stockholders.
"beneficial owners." However, Generally, equity securities that
there is flexibility as to how a have voting rights and are entitled
governing instrument refers to to the residual assets of the
"beneficial interests" and corporation, after payment of
"beneficial owners" and the liabilities, are referred to as
governing instrument may identify "common stock."
"beneficial interests" and
"beneficial owners" as "shares" and
"shareholders," respectively.
The Trust's beneficial interests, The Corporation's equity securities
without par value, are designated as are shares of common stock, par
"shares" and its beneficial owners value $0.01 per share, and the
are designated as "shareholders." owners of such stock are
This analysis will use the "share" "stockholders."
and "shareholder" terminology.
AMENDMENTS TO The Delaware Act provides broad Under Maryland Law, amendments
GOVERNING flexibility as to the manner of to the charter must generally be
DOCUMENTS amending and/or restating the approved by the board and by the
governing instrument of a DST. affirmative vote of two-thirds of all
Amendments to the Declaration that votes entitled to be cast (unless the
do not change the information in charter requires amendment by a
the DST's certificate of trust are higher or lesser proportion of the
not required to be filed with the voting stock, but not less than a
Secretary of State. majority of the shares outstanding).
DECLARATION OF TRUST CHARTER
The Declaration provides that The Charter provides that the
amendments and./or restatements Charter may be amended, altered,
of the Declaration may generally repealed, or added to upon the vote
be made at any time by the board of the holders of a majority of the
of trustees, by a vote of a shares outstanding and entitled to
majority of the trustees present vote thereon, except that the amendment
at a meeting at which a quorum is or repeal of provisions pertaining to
present, without approval of the fixing the number of directors and the
shareholders. Amendments or a classification of the board, the
repeal of certain provisions, how- removal of directors, the merger or
ever, require approval of the board consolidation of the Corporation, sale
of trustees, as set forth above, of all or substantially all of the
and the affirmative vote of assets of the Corporation, dissolution
holders of at least two-thirds or liquidation of the Corporation, or
(66 2/3%) if the outstanding amendments to the Charter require the
shares entitled to vote, unless affirmative vote of the holders of at
such action has previously been least 75% of all shares then entitled
approved, adopted or authorized to vote, unless such action was previously
by the affirmative vote of at approved, adopted or authorized by the
least two-thirds (66 2/3%) of vote of two-thirds of the total number of
the board of trustees, in which directors fixed in accordance with the
case the affirmative "vote of a By-Laws.
majority of the outstanding voting
securities," as defined in the
Investment Company Act of 1940, as
amended (the "1940 Act"), of the
Trust entitled to vote at a
meeting at which a quorum is
present, shall be required. Such
provisions included those per-
taining to the number, classes,
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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, Under Maryland Law, after the
restated or repealed or new By- organizational meeting, the power
Laws may be adopted by the to adopt, alter or repeal the by-laws
affirmative vote of a majority of is vested in the stockholders, except
the outstanding securities (as to the extent that the charter or by-
defined in the 1940 Act). laws vest such power in the board.
The By-Laws may also be amended,
restated or repealed or new The By-Laws may be adopted, amended or
By-Laws may be adopted by the repealed by "vote of the holders of a
board of trustees, by a vote of a majority of the [Corporation's] stock"
majority of the trustees present (as defined in the 1940 Act); EXCEPT,
at a meeting at which a quorum is however, that the amendement of
present. provisions pertaining to the fixing
of the number of directors and the
CERTIFICATE OF TRUST classification of the board and the
Pursuant to the Declaration, removal of directors require the affirm-
amendments and/or restatements of ative vote of the holders of 75% of the
the certificate of trust shall be Corporation's shares, unless such action
made at any time by the board of had previously been approved, adopted or
trustees, without approval of the authorized by the affirmative vote of
shareholders, to correct any two-thirds of the total number of directors
inaccuracy contained therein. Any fixed by the By-Laws, in which case the
such amendments/restatements of affirmative vote of a majority of the
the certificate of trust must be outstanding shares is required. Directors
executed by at least one (1) may adopt, amend or repeal By-Laws except
trustee and filed with the the provisions relating to the directors'
Secretary of State in order to authority to address shares price discounts
become effective. (not inconsistent with any By-Law
adopted, amended or repealed by
stockholders) by majority vote of
all of the directors in office, subject
to applicable law.
PREEMPTIVE Under the Delaware Act, a Under Maryland Law, a
RIGHTS AND governing instrument may contain stockholder does not have
REDEMPTION any provision relating to the rights, preemptive rights unless the charter
OF SHARES duties and obligations of the expressly grants such rights.
shareholders. Unless otherwise
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 The Corporation does not provide
shareholder shall have the stockholders with preemptive
preemptive or other right to rights.
subscribe for new or additional
shares or other securities issued
by the Trust
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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 The Trust shall have pertetual SEE VOTING RIGHTS, MEETINGS,
AND TERMINATION existence unless dissolved: (i) upon NOTICE, QUORUM, RECORD DATES AND
EVENTS approval of the board of trustees, PROXIES--STOCKHOLDER VOTE for the
and the affirmative vote of the Maryland Law as to the stockholder
holders of at least 75% of the shares vote required to voluntarily dissolve
entitled to vote to approve, adopt or a corporation.
authorize such transaction unless
such action has been previously Depending on the grounds for
approved by the affirmative vote of involuntary dissolution, under
at least two-thirds (66 2/3%) of Maryland Law (i) stockholders
the board of trustees, in which entitled to cast at least 25% of all
case the affirmative "vote of a the votes entitled to be cast in the
majority of the outstanding voting election of directors; (ii) any
securities," as defined in the 1940 stockholder entitled to vote in the
Act, of the Trust entitled to election of directors; or (iii) any
vote at the meeting at which a stockholder or creditor of the
quorum is present, shall be required: corporation, may petition a court of
(ii) upon the sale, conveyance and equity to dissolve the corporation.
transfer of all of the assets of the
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 Under Maryland Law, a corporation
DISSOLUTION OR that has dissolved shall first pay or that has voluntarily dissolved shall
TERMINATION make reasonable provision to pay pay, satisfy and discharge the
all known claims and obligations, existing debts and obligations of the
including those that are contingent, corporation, including necessary
conditional and unmatured, and all expenses of liquidation, before
known claims and obligations for distributing the remaining assets to
which the claimant is unknown. the stockholders.
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 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.
VOTING RIGHTS, Under the Delaware Act, the
MEETINGS, governing instrument may set forth
NOTICE, QUORUM, any provision relating to trustee and
RECORD DATES shareholder voting rights, including
AND PROXIES the withholding 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.
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ONE VOTE PER SHARE ONE VOTE PER SHARE
The Declaration greater or lesser Under Maryland Law, unless a
numberof votes provides that each corporation's charter provides for a
outstanding share is entitled to per share, or limits or denies voting
one vote and each outstanding rights, each outstanding share of
fractional share is entitled to stock is entitled to one vote on each
a fractional vote. 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 Under Maryland Law, every
mandate annual shareholders' corporation must hold an annual
meetings, the By-Laws require stockholders' meeting to elect
annual meetings for election directors and transact other
of trustees and the transactions business, except that the charter or
of other business. The By-Laws by-laws of a corporation registered
authorize the calling of a under the 1940 Act may provide
shareholders' meeting: (i) when that an annual meeting is not
deemed necessary or desirable by required in any year in which the
the board of trustees; or (ii) to election of directors is not required
the extent permitted by the 1940 by the 1940 Act. Maryland Law
Act,by the chairperson of the authorizes, and permits the charter
board, or at the request of and by-laws to authorize, certain
holders of 10% of the outstanding persons to call special meetings of
shares if such shareholders pay stockholders.
the reasonably estimated cost of
preparing and mailing the notice The By-Laws require annual meetings
thereof, for the purpose of of stockholders for the election of
electing trustees. However, no directors and the transaction of other
special meeting may be called business. The By-Laws also authorize
at the request of shareholders to the calling of a special meeting,
consider any matter that is unless otherwise "prescribed" by statue
substantially the same as a matter or the Charter, by resolution of the board
voted upon at a shareholders' or the president, and shall be called by
meeting held during the preceding the president or the secretary upon the
twelve (12) months, unless written request of a majority of the
requested by holders of a majority directors or at the written request of
of all outstanding shares entitled stockholders owning 10% "in amount of
to vote at such meeting. the entire capital stock" of the
Corporation then issued and
Under the By-Laws, shareholder outstanding, if the stockholders
proposals may be presented at an requesting such meeting pay the
annual shareholders' meeting if reasonably estimated cost of
brought by a shareholder who (i) preparing and mailing the notice
is entitled to vote at the meeting; thereof. However, no special
(ii) complies with the notice meeting will be called at the request
procedures set forth in the By-Laws; of stockholders to consider any
and (iii) was a shareholder of matter that is substantially the same
record at the time such notice is as a matter voted upon at a
received by the secretary of the stockholders' special meeting held
Trust. The shareholder's notice must during the preceding 12 months,
be in writing and delivered to the unless requested by the holders of
secretary of the Trust not less a majority of all outstanding shares
than one hundred twenty (120) days entitled to vote at such meeting.
nor more than one hundred fifty
(150) days prior to the date of
any such meeting. Each such
notice given by a shareholder must
include certain information set
forth in the By-Laws and as
reasonably requested by the Trust.
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At the annual meeting, the
approprite 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.
RECORD DATES RECORD DATES
As set forth above, the Delaware Under Maryland Law, unless the
Act authorizes the governing by-laws otherwise provide, the
instrument of a DST to set forth any board may set a record date, which
provision relating to record dates. date must be set within the
parameters outlined by the
Maryland statute, for determining
stockholders entitled to notice of a
meeting, vote at a meeting, receive
dividends or be allotted other rights.
In order to determine the share- In order to determine the
holders entitled to notice of,and stockholders entitled to notice of,
to vote at, a shareholders' and to vote at, a stockholders'
meeting, the Declaration authorizes meeting, the By-Laws authorize the
the board of trustees to fix a board of directors to fix a record
record date. The record date may date not less than ten (10) nor more
not precede the date on which it is than ninety (90) days prior to the
fixed by the board and it may not date of the meeting or prior to the
be more than one hundred and twenty last day on which the consent or
(120) days nor less than ten (10) dissent of stockholders may be
days before the date of the effectively expressed for any
shareholders' meeting. The By-Laws purpose without a meeting.
provide that notice of a share- If the board does not fix a record
holders' meeting shall be given to date, the record date shall be the
shareholders entitled to vote at later of the close of business on the
such meeting not less than ten (10) day on which notice of the meeting
nor more than one hundred and is mailed or the 30th day before the
twenty (120) days before the date meeting, except if all stockholders
of the meeting. waive notice, the record date is the
close of business on the 10th day
To determine the shareholders next preceding the day the meeting
entitled to vote on any action is held.
without a meeting, 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 thirty (30) days after
the date on which it is fixed by the
board.
Pursuant to the Declaration, if the
board of trustees does not fix a
record date: (a) the record date for
determining shareholders entitled to
notice of, and to vote at, a meeting
will be the day before the date 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
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the board of trustees adopts the
resolution taking such prior action.
To determine the shareholders of the To determine the stockholders
Trust entitled to a dividend or any entitled to a dividend, any other
other distribution of assets of distribution, or delivery of
the Trust the Declaration authorizes evidences of rights or other interests
the board of trustees to fix a from the Corporation, the By-Laws
record date. The record date may authorize the board to fix a record
not precede the date on which it is date not exceeding ninety (90) days
fixed by the board nor may it be preceding the date fixed for the
more than sixty (60) days before the payment of the dividend or
date such dividend or distribution distribution or delivery of the
is to be paid. evidences.
QUORUM FOR SHAREHOLDERS' MEETING QUORUM FOR STOCKHOLDERS' MEETING
To transact business at a Under Maryland Law, unless the
shareholders' meeting, the charter or Maryland Law provides
Declaration provides that a otherwise, in order to constitute a
majority of the outstanding quorum for a meeting, there must
shares entitled to vote at the be present in person or by proxy,
meeting, which are present in stockholders entitled to cast a
person or represented by proxy, majority of all the votes entitled to
shall constitute a quorum at such be cast at the meeting.
meeting, except when a larger
quorum is required by the To transact business at a meeting,
applicable law or the requirements the By-Laws provide that a majority
of any securities exchange on which of the outstanding shares entitled to
such shares are listed for trading, vote, which are present in person or
in which case such quorum shall represented by proxy, shall
comply with such requirements. constitute a quorum at a
SHAREHOLDER VOTE STOCKHOLDER VOTE
The Declaration provides that, Under Maryland Law, for most
subject to any provision of the stockholder actions, unless the
Declaration, the By-Laws, or charter or Maryland Law provides
applicable law that requires a otherwise, a majority of all votes
different vote: (i) in all matters cast at a meeting at which a quorum
other than the election of trustees, is present is required to approve any
the affirmative "vote of a majority matter. Actions such as (i)
of the outstanding voting securities" amendments to the corporation's
(as defined in the 1940 Act) of the charter, (ii) mergers, (iii)
Trust entitled to vote at a consolidations, (iv) statutory share
shareholders' meeting at which a exchanges, (v) transfers of assets
quorum is present, shall be the act and (vi) dissolutions require the
of the shareholders; and (ii) affirmative vote of two-thirds of all
trustees shall be elected not less votes entitled to be cast on the
than by a plurality of the votes matter unless the charter provides
cast of the holders of outstanding for a lesser proportion which may
shares entitled to vote present in not be less than a majority of all
person or represented by proxy at votes entitled to be cast on the
a shareholders' meeting at which a matter. Unless the charter or by-laws
quorum is present. 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 to elect directors
at the annual meeting and to fill any
vacancy resulting from an increase in the
number of directorson the board (adopted
by vote of the stockholders) as well as
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fill any then existng 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
statues, 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
questions brought before such meeting.
SHAREHOLDER VOTE ON CERTAIN SHAREHOLDER VOTE ON CERTAIN
TRANSACTIONS TRANSACTIONS
Under the Declaration, in order Under the Charter, in order to con-
consummate a dissolution, merger summate a merger, consolidation, sale of
consolidation, conversion, reorg- all or substantially all of the assets,
anization or reclassification, such or the liquidation or dissolution of the
transaction shall be approved in Corporation, such transaction shall be
the following manner: approved in the following manner:
The transaction must be be The transaction must be be approved by
approved by a majority of the the favorable vote of at least 75% of
trustees present at a meeting at the outstanding shares entitled to vote,
which a quorum is present, and the unless such action has been previously
affirmative vote of the holders approved by the affirmative vote of
of at least 75% of the outstanding two-thrids of the total number of
shares entitled to vote, unless directors fixed prusuant to the By-Laws,
such action has been previously in which case the transaction must be
approved, adopted or authorized approved by the affirmative vote of
by the affirmative vote of at a majority of all the votes entitled
least two-thirds (66 2/3%) of to be case on the matter, for purposes
the board of trustees, in which of Maryland Law.
case the affirmative "vote of a
majority of the outstanding
voting securities" (as defined
in the 1940 Act) of the Trust
entitled to vote at a share-
holders' meeting at which a
quorum is present shall be
required.
CUMULATIVE VOTING CUMULATIVE VOTING
The Declaration provides that Maryland Law provides that the
shareholders are not entitled to charter may authorize cumulative
cumulate their votes on any matter. 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 Under Maryland Law, a
otherwise provided in the governing stockholder may sign a writing
instrument of a DST, on any matter authorizing another person to act as
that is to be voted on by the a proxy or may transmit such
trustees or the shareholders, the authorization by telegram, cable-
trustees or shareholders (as gram, datagram, electronic mail, or
applicable) may vote in person or any other electronic or telephonic means.
by proxy and such proxy may be
granted in writing, by means of
"electronic transmission" (as
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defined in the Delaware Act) or
as otherwise permitted by
applicable law. Under the Delaware
Act, the term "electronic
transmission" is defined as any
form of communication not directly
involving the physical transmission
of paper that creates a record that
may be retained, retrieved and
reviewed by a recipient thereof
and that may be directly reproduced
in paper form by such a recipient
through an automated process.
The By-Laws permit a shareholder The By-Laws require a proxy to be
to authorize another person to act as executed in writing by the
proxy by the following methods: stockholder or by a duly authorized
execution of a written instrument or attorney-in-fact. Unless a proxy
by "electronic transmission" (as provides otherwise, it is not valid
defined in the Delaware Act), more than 11 months after its date.
telephonic, computerized, A proxy is revocable by the person
telecommunications or another executing it or by his or her
reasonable alternative to the personal representatives or assigns.
execution of a written instrument. A proxy with respect to stock held
Unless a proxy provides otherwise, in the name of two or more persons
it is not valid more than 11 months will be valid if executed by one of
after its date. In addition, the By- them, unless before it is exercised
Laws provide that the revocability the Corporation receives specific
of a proxy that states on its face that written notice to the contrary from
it is irrevocable shall be governed any one of them. A proxy
by the provisions of the general purporting to be executed by or on
corporation law of the State of behalf of a stockholder shall be
Delaware. deemed valid unless it is challenged
at or prior to its exercise.
ACTION BY WRITTEN CONSENT ACTION BY WRITTEN CONSENT
Under the Delaware Act, unless Maryland Law provides that any
otherwise provided in the governing action required or permitted to be
instrument of a DST, on any matter taken at a stockholders' meeting
that is to be voted on by the trustees may be taken without a meeting, if
or the shareholders, such action a unanimous written consent is
may be taken without a meeting, signed by each stockholder entitled
without prior notice and without a to vote on the matter.
vote if a 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 The By-Laws provide that any action
shareholders to take action with- to be taken by stockholders may
out a meeting and without prior be taken without a meeting if: (1)
notice if written consents setting all stockholders entitled to vote
forth the action taken are signed on the matter consent to the action
by the holders of all shares in writing; (2) all stockholders
entitled to vote on that action. entitled to notice of the meeting
A consent transmitted by but not entitled to vote at it sign
"electronic transmission" (as a written waiver of any right to
defined in the Delaware Act) by a dissent; and (3) the consents and
shareholder or by a person(s) waivers are filed with the records
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authorized to act for a shareholder of stockholders meetings.
shall be deemed to be written and
signed for purposes of this
provision.
BOARD OF TRUSTEES. The Declaration BOARD OF DIRECTORS. The By-Laws
also authorizes the board of trustees also provide that, except as
or any committee of the board of otherwise required by statute, the
trustees to take action without a board or any committee of the
meeting and without prior written board may act by written consent
notice if written consents setting signed by all the members of the
forth the action taken are executed board or committee, respectively, if
by trustees having not less than the consent is filed with the minutes
the minimum number of votes of the proceedings of the board or
necessary to take that action at committee.
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.
REMOVAL OF The governing instrument of a DST Under Maryland Law, unless
TRUSTEES/ may contain any provision relating otherwise provided in the charter, a
DIRECTORS to the removal of trustees; provided director may generally be removed
however, that there shall at all times with or without cause by the vote of
be at least one trustee of the DST. a majority of all the votes entitled to
be cast generally for the election of
directors unless (i) such director is
elected by a certain class or series,
(ii) the charter provides for
cumulative voting or (iii) the board
is classified.
Under the Declaration, any trustee Under the Charter, a director may be
may be removed, with or without remove with or without cause but only
cause, by the shareholders, upon by action of the stockholders taken
the vote of the holders of at by the holders of at least two-thirds
least 75% of the shares entitled of the shares entitled to vote in an
to vote. 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 Subject to the 1940 Act, vacancies Under Maryland Law, stockholders
BOARD OF on the board of trustees may be may elect persons to fill vacancies
TRUSTEES/ filled by a majority vote of the that result from the removal of
DIRECTORS trustee(s) then in office, regardless directors. Unless the charter or by-
of the number and even if less than laws provide otherwise, a majority
a quorum. However, a shareholders' of the directors in office, whether or
meeting shall be called to elect not comprising a quorum, may fill
trustees if required by the 1940 vacancies that result from any cause
Act. except an 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 Under the By-Laws, directors may
become vacant, an authorized officer increase or decrease their number;
of the investment adviser shall if the number is increased, the
serve as the sole remaining trustee, added directors may be elected by a
subject to the provisions of the majority of directors then in office.
1940 Act, and shall, as soon as For other vacancies, the directors then in
practicable, fill all of the then in office (though less than quorum)
vacancies on the board. Thereupon, shall continue to act and may by
the investment adviser shall resign majority vote fill any vacancy until
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Delaware Statutory Trust Maryland Corporation
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as trustee and a shareholders' the next meeting of stockholders,
meeting shall be called to elect subject to the 1940 Act.
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 Under the Delaware Act, except to The stockholders of a corporation
LIABILITY the extent otherwise provided in are not liable for the obligations of
the governing instrument of a DST, the corporation.
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.
TRUSTEE/DIRECTOR/ Subject to the provisions in the Maryland Law requires a director to
AGENT LIABILITY governing instrument, the Delaware perform his or her duties in good
Act provides that a trustee or any faith, in a manner he or she
other person managing the DST, reasonably believes to be in the best
when acting in such capacity, will interests of the corporation and with
not be personally liable to any the care that an ordinarily prudent
person other than the DST or a person in a like position would use
shareholder of the DST for any act, under similar circumstances. A
omission or obligation of the DST director who performs his or her
or any trustee. To the extent that duties in accordance with this
at law or in equity, a trustee has standard has no liability to the
duties (including fiduciary duties) corporation, its stockholders or to
and liabilities to the DST and its third persons by reason of being or
shareholders, such duties and having been a director. A
liabilities may be expanded or corporation may include in its
restricted by the governing charter a provision expanding or
instrument. 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 The Charter provides that no
person who is or was a trustee, director or officer shall be
officer, employee or other agent of personally liable to the Corporation
the Trust or is or was serving at the or its stockholders for monetary
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Delaware Statutory Trust Maryland Corporation
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request of the Trust as a trustee, damages except: (i) a director or
director, officer, employee or other officer is liable for the amount of
agent of another corporation, any improper benefit or profit he or
partnership, joint venture, trust or she receives; and (ii) where a
other enterprise (an "Agent") will judgment or other final adjudication
be liable to the Trust and to any adverse to the director or officer is
shareholder solely for such Agent's entered in a proceeding based on a
own willful misfeasance, bad faith, finding that such person's action, or
gross negligence or reckless failure to act, was the result of
disregard of the duties involved in active and deliberate dishonesty and
the conduct of such Agent (such was material to the cause of action
conduct referred to as adjudicated in the proceeding. The
"Disqualifying Conduct"). Subject Charter further provides that no
to the preceding sentence, Agents director or officer will be protected
will not be liable for any act or from liability to the Corporation
omission of any other Agent or any or its stockholders arising from
investment adviser or principal from such director's or officer's
underwriter of the Trust. No Agent, Disqualifying Conduct.
when acting in such capacity, 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 Unless limited by its charter,
restrictions contained in the Maryland Law requires a
governing instrument of a DST, the corporation to indemnify a director
Delaware Act authorizes a DST to who has been successful, on the
indemnify and hold harmless any elements or otherwise, in the
trustee, shareholder or other person defense of any proceeding to which
from and against any and all claims such person was a party because of
and demands. such person's service in such
capacity, against reasonable
expenses incurred in connection
with the proceeding.
Maryland Law permits a corporation
to indemnify a director, officer,
employee or agent who is a party
or threatened to be a party, by
reason of service in that capacity,
to any threatened, pending or
completed action, suit or proceeding,
against judgments, penalties, fines,
settlements and reasonable expenses
unless it is established that: (i)
the act or omission of such person was
material to the matter giving rise to
the proceeding, and was committed
in bad faith or was the result of
active and deliberate dishonesty;
(ii) such person actually received an
improper personal benefit; or (iii)
such person had reasonable cause to
believe that the act or omission was
unlawful. However, if the
proceeding is a derivative suit or
was brought by the corporation, the
corporation may not indemnify a
person who has been adjudged to be
liable to the corporation.
Corporations are authorized to
advance payment of reasonable
expenses upon compliance with
certain requirements.
Pursuant to the Declaration, the The By-Laws provide that the
Trust will indemnify any Agent Corporation will indemnify its: (i)
who was or is a party or is directors to the fullest extent that
threatened to be made a party to indemnification of directors is
any proceeding by reason of such permitted by Maryland Law; (ii)
Agent's capacity, against attorneys' officers to the same extent as its
fees and other certain expenses, directors and to such further extent
judgments, fines, settlements and as is consistent with law; and (iii)
other amounts incurred in directors and officers who, while
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Delaware Statutory Trust Maryland Corporation
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connection with such proceeding if serving as directors or officers,
such Agent acted in good faith or in also serve at the request of the
the case of a criminal proceeding, Corporation as a director, officer,
had no reasonable cause to believe partner, trustee, employee, agent or
such Agent's conduct was fiduciary of another corporation,
unlawful. However, there is no partnership, joint venture, trust,
right to indemnification for any other enterprise or employee benefit
liability arising from the Agent's plan to the fullest extent consistent
Disqualifying Conduct. As to any with law. This indemnification (and
matter for which such Agent is other rights) provided by the By-Laws
found to be liable in the will continue as to persons who
performance of such Agent's duty have ceased to be a director or
to the Trust or its shareholders, officer, includes the advance of
indemnification will be made only reasonable exepneses subject to
to the extent that the court in certain conditions, and will inure
which that action was brought to the benefit of the heirs, executors
determines that in view of all the and administrators of such persons
circumstances of the case, the Agent but, such persons will not be
was not liablie by reason of such protected against any liability to the
Agent's Disqualifying Conduct. Note Corporation or its stockholders
that the Securities Act of 1933, as arising from his or her Disqualifying
amended (the "1933 Act"), in the Conduct. The Corporation may indemnify
opinion of the U.S. Securities and and advance reasonable expenses to its
Exchange Commission ("SEC"), and officers or directors of the
the 1940 Act also limit the ability Corporation as may be provided by
of the Trust to indemnify an Agent. the board of directors or by
contract, subject to any limitations
Expenses incurred by an Agent in imposed by the 1940 Act. The By-
defending any proceeding may be Laws permit the board of directors
advanced by the Trust before the to make such additional provisions
final disposition of the proceeding for the indemnification and
on receipt of an undertaking by or advancement of expenses to directors,
on behalf of the Agent to repay the officers, employees and agents, as
amount of the advance if it is are consistent with the law. The
ultimately determined that the indemnification provided by the
Agent is not entitled to By-Laws is not exclusive of any
indemnification by the Trust. 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 Under Maryland Law, a corporation
the right of a DST to purchase may purchase insurance on behalf
insurance on behalf of its trustees of any person who is or was a
or other persons. director, officer, employee or agent
against any liability asserted against
and incurred by such person in any
such capacity whether or not the
corporation would have the power
to indemnify such person against
such liability.
However, as the policy of the The By-Laws authorize the
Delaware Act is to give maximum Corporation to purchase insurance
effect to the principle of freedom on behalf of any person who is or
of contract and to the enforce- was a director, officer, employee or
ability of governing instruments, agent of the Corporation or who,
the Declaration authorizes the board while a director, officer, employee,
of trustees, to the fullest extent or agent of the Corportion, is or was
permitted by applicable law, to serving at the request of the
purchase with Trust assets, Corporation as a director, officers,
insurance for liability and for all partner, trustee, employee, or
expenses of an Agent in connection agent of another foreign or
with any proceeding in which such domestic corporation, partnership,
Agent becomes involved by virtue joint venture, trust, other
of such Agent's actions, or enterprise, or employee benefit
omissions to act, in its capacity plan against any liability
or former capacity with the Trust, asserted against and incurred by
whether or not the Trust would such person in any such capacity
have the power to indemnify such or arising out of such persons
Agent against such liability. position. However, no insurance
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Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
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.
SHAREHOLDER Under the Delaware Act, except to Under Maryland Law, a
RIGHT OF the extent otherwise provided in the stockholder may inspect, during
INSPECTION governing instrument and subject to usual business hours, the
reasonable standards established by corporation's by-laws, stockholder
the trustees, each shareholder has proceeding minutes, annual
the right, upon reasonable demand statements of affairs and voting
for any purpose reasonably related trust agreements and, if the
to the shareholder's interest as a corporation is not an open-end
shareholder, to obtain from the DST investment company, a statement
certain information regarding the showing all stock and securities
governance and affairs of the DST. issued by the corporation for a
period of not more than the previous
To the extent permitted by 12 months. In addition, stockholders
Delaware law and the By-Laws, a who have individually or together
shareholder, upon reasonable been holders of at least 5% of the
written demand to the Trust for any outstanding stock of any class for
purpose reasonably related to such at least 6 months, may inspect
shareholder's interest as a and copy the corporation's
shareholder, may inspect certain books of account, its stock ledger
information as to the governance and its statement of affairs.
and affairs of the Trust during
regular business hours. However, The Charter grants stockholders
reasonable standards governing, inspection rights only to the extent
without limitation, the information provided by Maryland Law. Such
and documents to be furnished and rights are subject to reasonable
the time and location of furnishing regulations of the board of directors
the same, will be established by the not contrary to Maryland Law.
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 powers 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 Under the Delaware Act, a Under Maryland Law, in order to
ACTIONS shareholder may bring a derivative bring a derivative action, a
action if trustees with authority to stockholder (or his or her
do so have refused to bring the predecessor if he or she became a
action or if a demand upon the stockholder by operation of law)
trustees to bring the action is not must be a stockholder (a) at the
likely to succeed. A shareholder time of the acts or omissions
may bring a derivative action only complained about, (b) at the time
if the shareholder is a shareholder the action is brought, and (c) until
at the time the action is brought the completion of the litigation. A
and: (i) was a shareholder at the derivative action may be brought by
time of the transaction complained a stockholder if (i) a demand upon
about or (ii) acquired the status the board of directors to bring the
of shareholder by operation of action is improperly refused or (ii) a
law of pursuant to the governing request upon the board of directors
instrument from a person who was would be futile.
a shareholder at the time of the
transaction. A shareholder's right Under Maryland Law, a director of
to bring a derivative action may be an investment company who "is not
subject to such additional standards an interested person, as defined by
and restrictions, if any, as are set the 1940 Act, shall be deemed to be
forth in the governing instrument. independent and disinterested when
making any determination or taking
any action as a director."
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Delaware Statutory Trust Maryland Corporation
------------------------ --------------------
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 The Corporation is a closed-end
INVESTMENT management investment company management investment company
COMPANY under the 1940 Act. under the 1940 Act.
CLASSIFICATION
C-15
PAGE
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, Issue senior securities, Borrow money, except to the
Issuing Senior borrow money or pledge extent permitted by the 1940 Act
Securities and its assets, except that or any rules, exemptions or
Pledging Assets the Fund may borrow from interpretations thereunder that
a bank (i) for temporary may be adopted, granted or issued
or emergency purposes, or by the SEC.
(ii) to finance repurchase
of its shares and to
finance tneder offers, in
amounts not exceeding 30%
(taken at the lower cost
or current value) of its
total assets (not including
the amount borrowed), and
may also pledge its assets
to secure such borrowings.
The Fund will not purchase
additional portfolio
securities while borrrowings
exceeds 5% of the value of
its total assets.
3b Industry Invest 25% or more of the Invest more than 25% of its net
Concentration total value of its assets assets in securities of issuers in
in a particular 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 commodities, unless acquired as a
that it may purchase or result of ownership of securities
sell futures contracts on or other instruments and provided
debt securities, on stock that this restriction does not
and bond indices and prevent the Fund from engaging
foreign currencies, in transactions involving
securities which are currencies and futures contracts
secured by commodities, and options thereon or investing
and securities of companies in securities or other instruments
which invest or deal in that are secured by physical
commodities. commodities.
3d Real Estate Buy or sell real estate or Purchase or sell real estate unless
interests in real estate, acquired as a result of ownership
except that it may purchase of securities or other instruments
and sell securities which and provided that this restriction
are secured by real estate does not prevent the Fund from
and securities of companies purchasing or selling securities
which invest or deal in secured by real estate or interests
real estate. therein or securities of issuers that
invest, deal or otherwise engage
in transactions in real estate or
interests therein.
D-1
PAGE
CURRENT
FUNDAMENTAL PROPOSED FUNDAMENTAL
PROPOSAL OR INVESTMENT INVESTMENT RESTRICTION INVESTMENT RESTRICTION
SUB-PROPOSAL RESTRICTION THE FUND MAY NOT: THE FUND MAY NOT:
------------ ----------------- --------------------------- -------------------------------------
3e Lending Make loans, except that the Make loans to other persons except
Fund may lend portfolio (a) through the lending of its
securities with an portfolio securities, (b) through the
aggregate market value of purchase of debt securities, loan
not more than one-third of participations and/or engaging in
its total assets and may direct corporate loans in
enter into repurchase accordance with its investment
agreements to the extent goals and policies, and (c) to the
permitted under applicable extent the entry into a repurchase
law. 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 rules or exemptions or
interpretations thereunder that may
be adopted, granted or issued by
the SEC.
3f Underwriting Act as an underwriter Act as an underwriter except to the
except to the extent that, extent the Fund may be deemed to
in connection with the be an underwriter when disposing
disposition of portfolio of securities it owns or when
securities, it may be selling its own shares.
deemed to be an under-
writer under applicable
laws.
4 Margin Purchase securities on Proposed to be Eliminated.*
margin, 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 Proposed to be Eliminated.*
securities or maintain
a short position.
4 Non-Publicly Invest in securities which Proposed to be Eliminated.*
Traded, are not publicly traded
Restriced and or which cannot be readily
Illiquid resold because of legal or
Securities 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.
------------------------
* Note: The Fund will still be subject to the fundamental investment
restrictions on issuing senior securities described in Sub-Proposal 3(a) above.
D-2
PAGE
CURRENT
FUNDAMENTAL PROPOSED FUNDAMENTAL
PROPOSAL OR INVESTMENT INVESTMENT RESTRICTION INVESTMENT RESTRICTION
SUB-PROPOSAL RESTRICTION THE FUND MAY NOT: THE FUND MAY NOT:
------------ ----------------- --------------------------- -------------------------------------
4 IRS Purchase the securities Proposed to be Eliminated.
Diversification of any one issuer (other
than the U.S. Government NOTE: The Fund intendst to continue
or any ot its agencies or to comply with all applicable
instrumentalities or diversification requirements for
securities of other regulated investment companies set
investment companies) if forth in the Internal Revenue Code
immediately after such of 1986, as amended.
investment (a) more than
5% of the value of the
Fund's total assets would
be invested in 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.
D-3
PAGE
EXHIBIT D
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.
E-1
PAGE
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.
(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
E-2
PAGE
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 auditor's 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.
(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
E-3
PAGE
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.
(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.
(f) 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
PAGE
TLGIM PROXY 01/04
PAGE
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.
(CONTINUED, AND TO BE SIGNED ON THE OTHER SIDE)
FOLD AND DETACH HERE
PLEASE MARK 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: Frank J. Crothers, Charles B. Johnson,
listed (except as AUTHORITY Fred R. Millsaps and 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
[ ] [ ] [ ]
I PLAN TO ATTEND THE MEETING. YES NO
[ ] [ ]
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