Schedule 14A Information
Proxy Statement Pursuant to Section 14(A) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material under Section 240.14a-12
Templeton Emerging Markets Income Fund
(Name of Registrant as Specified in its Charter)
Name of Person(s) Filing Proxy Statement, 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction 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:
TEMPLETON EMERGING MARKETS INCOME FUND
IMPORTANT SHAREHOLDER INFORMATION
These materials are for the Annual Meeting of Shareholders (the “Meeting”) scheduled for May 26, 2022, at 10:00 a.m., Eastern time. The enclosed materials discuss the 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, it tells us how you wish to vote on important issues relating to Templeton Emerging Markets Income Fund (the “Fund”). If you specify a vote on a Proposal, your proxy will be voted as you indicate. If you specify a vote on a Proposal, but not both Proposals, your proxy will be voted as specified on such Proposal and, on the Proposal for which no vote is specified, your proxy will be voted FOR such Proposal. If you simply sign, date and return the proxy card, but do not specify a vote on any Proposal, your proxy will be voted FOR the 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.
In light of the COVID-19 pandemic, we are urging all shareholders to take advantage of voting by mail, Internet or telephone (separate instructions are listed on the enclosed proxy card to vote by telephone or through the Internet). Additionally, while we anticipate that the Meeting will occur as planned on May 26, 2022, there is a possibility that, due to the COVID-19 pandemic, the Meeting may be postponed or the location or approach may need to be changed, including the possibility of holding a virtual meeting for the health and safety of all Meeting participants. Should this occur, we will notify you by issuing a press release and filing an announcement with the U.S. Securities and Exchange Commission as definitive additional soliciting material. If you plan to attend the Meeting in person, please note that we will be holding the Meeting in accordance with any recommended and required social distancing and safety guidelines, as applicable.
We welcome your comments. If you have any questions, call Fund Information at (800) DIAL BEN®/342-5236.
TELEPHONE AND INTERNET VOTING
For your convenience, you may be able to vote by telephone or through the Internet, 24 hours a day. If your account is eligible, instructions are enclosed.
TEMPLETON EMERGING MARKETS INCOME FUND
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders
(the “Meeting”) of Templeton Emerging Markets Income Fund (the “Fund”) will be
held at the Fund’s offices, 300 S.E. 2nd Street, Fort Lauderdale, Florida 33301-1923 on
May 26, 2022, at 10:00 a.m., Eastern time.
During
the Meeting, shareholders of the Fund will vote on the following Proposals:
1. The election of
three Trustees of the Fund to hold office for the terms specified.
2. The ratification
of the selection of PricewaterhouseCoopers LLP as the independent registered
public accounting firm for the Fund for the fiscal year ending
December 31, 2022.
By Order of the
Board of Trustees,
Lori A. Weber
Vice President and
Secretary
March 28, 2022
Please sign and
promptly return the proxy card or voting instruction form in the enclosed
self-addressed envelope regardless of the number of shares you own. If you have
any questions, call Fund Information at (800) DIAL BEN®/342-5236.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON MAY 26, 2022
The Fund’s Notice of Annual Meeting
of Shareholders, Proxy Statement and form of Proxy are available on the
Internet at https://vote.proxyonline.com/franklin/docs/tei2022.pdf. The form of
Proxy on the Internet site cannot be used to cast your vote.
TEMPLETON
EMERGING MARKETS INCOME FUND
PROXY STATEMENT
◆ INFORMATION ABOUT VOTING
Who is asking for
my vote?
The Board of Trustees of
Templeton Emerging Markets Income Fund (the “Fund”), in connection with the
Fund’s Annual Meeting of Shareholders (the “Meeting”), has requested your vote.
Who is eligible to
vote?
Shareholders of record at
the close of business on March 10, 2022, 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
statement, and the proxy card were first mailed to shareholders of record on or
about March 28, 2022.
On what issues am
I being asked to vote?
You
are being asked to vote on two Proposals:
1. The election of
three Trustees of the Fund; and
2. The ratification
of the selection of PricewaterhouseCoopers LLP (“PwC”) as the independent
registered public accounting firm for the Fund for the fiscal year ending
December 31, 2022.
How do the Fund’s
Trustees recommend that I vote?
The Trustees unanimously
recommend that you vote FOR the election of the three nominees for Trustee and
FOR the ratification of the selection of PwC as the independent registered
public accounting firm for the Fund for the fiscal year ending December 31,
2022.
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, 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 either of
the Proposals, your proxy will be voted as you indicate. If you simply sign,
date and return the proxy card, but do not specify a vote on either Proposal 1
or 2, your proxy will be voted FOR the election of all nominees for Trustee of
the Fund and FOR the ratification of the selection of PwC as the independent
registered public accounting firm for the Fund for the fiscal year ending
December 31, 2022.
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. Also, in order to revoke your proxy, you may need to forward
your written revocation or a later-dated proxy card or voting instruction form
to your broker rather than to the Fund.
May I attend the
Meeting in Person?
Shareholders of record at
the close of business on March 10, 2022 are entitled to attend the
Meeting. Eligible shareholders who intend to attend the Meeting in person will
need to bring proof of share ownership, such as a shareholder statement or a letter
from a custodian or broker-dealer confirming ownership, as of March 10,
2022, and a valid picture identification, such as a driver’s license or
passport, for admission to the Meeting. Seating is limited. Shareholders
without proof of ownership and identification will not be admitted.
In light of the
COVID-19 pandemic, we are urging all shareholders to take advantage of voting
by mail, Internet or telephone (separate instructions are listed on the
enclosed proxy card to vote by telephone or through the Internet).
Additionally, while we anticipate that the Meeting will occur as planned on
May 26, 2022, there is a possibility that, due to the COVID-19 pandemic,
the Meeting may be postponed or the location or approach may need to be
changed, including the possibility of holding a virtual meeting for the health
and safety of all Meeting participants. Should this occur, we will notify you
by issuing a press release and filing an announcement with the U.S. Securities
and Exchange Commission (“SEC”) as definitive additional soliciting material.
If you plan to attend the Meeting in person, please note that we will be
holding the Meeting in accordance with any recommended and required social
distancing and safety guidelines, as applicable.
◆ THE PROPOSALS
PROPOSAL
1: ELECTION OF TRUSTEES
How are nominees
selected?
The Board of Trustees of the
Fund (the “Board” or the “Trustees”) has a Nominating Committee consisting of
Edith E. Holiday (Chairperson), J. Michael Luttig and Larry D. Thompson, none
of whom is an “interested person” of the Fund as defined by the Investment
Company Act of 1940, as amended (the “1940 Act”). Trustees who are not
interested persons of the Fund are referred to as the “Independent Trustees,”
and Trustees who are interested persons of the Fund are referred to as the
“Interested Trustees.”
The Nominating Committee
is responsible for selecting candidates to serve as Trustees and recommending
such candidates (a) for selection and nomination as Independent Trustees
by the incumbent Independent Trustees and the full Board; and (b) for
selection and nomination as Interested Trustees by the full Board. In
considering a candidate’s qualifications, the Nominating Committee generally
considers the potential candidate’s educational background, business or
professional experience, and reputation. In addition, the Nominating Committee
has established as minimum qualifications for Board membership as an
Independent Trustee: (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 and the rules thereunder;
(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 U.S. registered investment
company other than those within the Franklin Templeton/Legg Mason fund complex
or a closed-end business development company primarily investing in non-public
entities. The Nominating Committee has not adopted any specific policy on the
issue of diversity, but will consider diversity among other factors such as
experience, education and skill sets, in its consideration of new candidates to
the Board.
Under the Fund’s
governing instruments, nominees must meet certain additional qualifications to
qualify for nomination and service as a Trustee. Nominees may be disqualified
if they engaged in disabling conduct outlined in the Fund’s Declaration of
Trust. Nominees that are associated with other investment vehicles and investment
advisers may not be eligible for nomination and service as a Trustee if the
Board finds that such associations have conflicts of interest with the
long-term best interests of the Fund, impede the ability of the nominee to
perform, or impede the free-flow of information from management. Nominees that
are acting in concert with control persons of other investment companies that
are in violation of Section 12(d)(1) of the 1940 Act shall be disqualified
from nomination and service as a Trustee.
When the Board has or
expects to have a vacancy, the Nominating Committee receives and reviews
information on individuals qualified to be recommended to the full Board as
nominees for election as Trustees, including any recommendations by “Qualifying
Fund Shareholders” (as defined below). Such individuals are evaluated based
upon the criteria described above. To date, the Nominating 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 Nominating Committee,
however, will review recommendations from Qualifying Fund Shareholders to fill
vacancies on the Board if these recommendations are submitted in writing and
addressed to the Nominating Committee at the Fund’s offices and are presented
with appropriate background material concerning the candidate that demonstrates
his or her ability to serve as a Trustee, including as an Independent Trustee,
of the Fund. A Qualifying Fund Shareholder is a shareholder who (i) has
continuously owned of record, or beneficially through a financial intermediary,
shares of the Fund having a net asset value of not less than two hundred fifty
thousand dollars ($250,000) during the twenty-four month period prior to
submitting the recommendation; and (ii) provides a written notice to the
Nominating Committee containing the following information: (a) the name
and address of the Qualifying Fund Shareholder making the recommendation;
(b) the number of shares of the Fund which are owned of record and
beneficially by the Qualifying Fund Shareholder and the length of time that the
shares have been owned by the Qualifying Fund Shareholder; (c) a
description of all arrangements and understandings between the Qualifying Fund
Shareholder and any other person or persons (naming such person or persons)
pursuant to which the recommendation is being made; (d) the name, age,
date of birth, business address and residence address of the person or persons
being recommended; (e) such other information regarding each person
recommended by the Qualifying Fund Shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the SEC had
the nominee been nominated by the Board; (f) whether the Qualifying Fund
Shareholder making the recommendation believes the person recommended would or
would not be an “interested person” of the Fund, as defined in the 1940 Act;
and (g) the written consent of each person recommended to serve as a
Trustee of the Fund if so nominated and elected/appointed.
The Nominating Committee
may amend these procedures from time to time, including the procedures relating
to the evaluation of nominees and the process for submitting recommendations to
the Nominating Committee.
The Board has adopted
and approved a formal written charter for the Nominating Committee. A copy of
the charter is attached as Exhibit A to this proxy statement.
Who are the
nominees and Trustees?
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 Trustees expire:
Mary C. Choksi, Rupert H. Johnson, Jr. and Gregory E. Johnson. These
individuals have been nominated for three-year terms, set to expire at the 2025
Annual Meeting of Shareholders. These terms continue, however, until their
successors are duly elected and qualified. All of the nominees are currently
members of the Board. Among these nominees, Rupert H. Johnson, Jr. and Gregory
E. Johnson are deemed to be Interested Trustees. Mary C. Choksi is deemed to be
an Independent Trustee. In addition, all of the current nominees and Trustees
are also directors or trustees of other investment companies within the
Franklin Templeton/Legg Mason fund complex.
Interested Trustees of
the Fund hold director and/or officer positions with, or are principal
stockholders of, Franklin Resources, Inc. (“Resources”) and its affiliates.
Resources is a publicly owned holding company, a principal stockholder of which
is Rupert H. Johnson, Jr., who beneficially owned approximately 20.7% of its
outstanding shares as of December 31, 2021. The shares deemed to be
beneficially owned by Rupert H. Johnson, Jr. include certain shares held by a
private charitable foundation or by his spouse, of which he disclaims
beneficial ownership. Resources, a global investment management organization
operating as Franklin Templeton, 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 (“NYSE”) listed holding company
(NYSE: BEN). Rupert H. Johnson, Jr., Chairman of the Board, Trustee and Vice
President of the Fund, is the uncle of Gregory E. Johnson, a Trustee of the
Fund. There are no other family relationships among the Trustees or nominees
for Trustee.
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 to serve as
Trustees.
In
addition to personal qualities, such as integrity, in considering candidates
for the Fund Board, the Nominating Committee seeks to find persons of good
reputation whose experience and background evidence that such person has the
ability to comprehend, discuss and critically analyze materials and issues
presented, in exercising judgments and reaching informed conclusions relevant
to fulfillment of a Fund Trustee’s duties and fiduciary obligations.
Information on the business activities of the nominees and other Trustees
during the past five years and beyond appears below and it is believed that the
specific background of each Trustee evidences such ability and is appropriate
to his or her serving on the Fund’s Board. As indicated, Harris J. Ashton has
served as a chief executive officer of NYSE listed public corporations; Larry
D. Thompson and Edith E. Holiday each have legal backgrounds, including high
level legal positions with departments of the U.S. Government; David W. Niemiec
has served as a chief financial officer of a major corporation; Ann Torre Bates
has served as a chief financial officer of a major corporation and as a board
member of a number of public companies; J. Michael Luttig has fifteen
years of judicial experience as a Federal Appeals Court Judge and thirteen
years of experience as Executive Vice President and General Counsel of a major
public company; Robert E. Wade has had more than thirty years’ experience as a
solo practicing attorney; Constantine D. Tseretopoulos has professional and executive
experience as founder and Chief of Staff of a hospital; Mary C. Choksi has an
extensive background in asset management, including founding an investment
management firm; and Rupert H. Johnson, Jr. and Gregory E. Johnson are both
high ranking executive officers of Resources.
Listed below with the
business activities of the nominees and Trustees are their names and years of
birth, their positions and length of service with the Fund and the number of
portfolios in the Franklin Templeton/Legg Mason fund complex that they oversee.
Nominee
for Independent Trustee to serve until 2025 Annual Meeting of Shareholders:
Name, Year of
Birth and Address
|
Position
|
Length of
Time Served
|
Number of
Portfolios in
Franklin
Templeton/
Legg
Mason
Fund Complex
Overseen
by Trustee*
|
Other Directorships Held During
at Least the Past Five Years
|
Mary
C. Choksi (1950)
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
|
Trustee
|
Since 2016
|
121
|
Omnicom
Group Inc. (advertising and marketing communications services) (2011–present)
and White Mountains Insurance Group, Ltd. (holding company) (2017–present);
and formerly, Avis Budget Group Inc. (car rental) (2007–2020).
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Director of various
companies; and formerly, Founder and Senior Advisor, Strategic
Investment Group (investment management group) (2015–2017); Founding Partner
and Senior Managing Director, Strategic Investment Group (1987–2015);
Founding Partner and Managing Director, Emerging Markets Management LLC
(investment management firm) (1987–2011); and Loan Officer/Senior Loan
Officer/Senior Pension Investment Officer, World Bank Group (international
financial institution) (1977–1987).
|
|
Nominees
for Interested Trustee to serve until 2025 Annual Meeting of Shareholders:
|
|
|
|
|
|
**Rupert H. Johnson,
Jr. (1940)
One Franklin Parkway
San Mateo, CA 94403-1906
|
Chairman of the Board, Trustee and Vice
President
|
Chairman of the Board and Trustee since 2013
and Vice President since 1996
|
121
|
None
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Director (Vice Chairman),
Franklin Resources, Inc.; Director, Franklin Advisers, 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 certain funds in the Franklin
Templeton/Legg Mason fund complex.
|
**Gregory E. Johnson
(1961)
One Franklin Parkway
San Mateo, CA 94403-1906
|
Trustee
|
Since 2007
|
132
|
None
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Executive Chairman,
Chairman of the Board and Director, Franklin Resources, Inc.; officer and/or
director or trustee, as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of certain funds in the Franklin Templeton/Legg
Mason fund complex; Vice Chairman, Investment Company Institute; and formerly,
Chief Executive Officer (2013–2020) and President (1994–2015) Franklin
Resources, Inc.
|
Independent
Trustees serving until 2024 Annual Meeting of Shareholders:
|
|
|
|
|
Name, Year of
Birth and Address
|
Position
|
Length of
Time Served
|
Number of
Portfolios in
Franklin
Templeton/
Legg
Mason
Fund Complex
Overseen
by Trustee*
|
Other Directorships Held During
at Least the Past Five Years
|
Ann
Torre Bates (1958)
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
|
Trustee
|
Since 2008
|
30
|
Ares Capital Corporation
(specialty finance company) (2010–present), United Natural Foods, Inc.
(distributor of natural, organic and specialty foods) (2013–present), formerly,
Allied Capital Corporation (financial services) (2003–2010), SLM Corporation
(Sallie Mae) (1997–2014) and Navient Corporation (loan management, servicing
and asset recovery) (2014–2016).
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Director of various
companies; and formerly, Executive Vice President and Chief Financial
Officer, NHP Incorporated (manager of multifamily housing) (1995–1997); and
Vice President and Treasurer, US Airways, Inc. (until 1995).
|
David W. Niemiec (1949)
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
|
Trustee
|
Since 2005
|
30
|
Hess Midstream LP (oil and
gas midstream infrastructure) (2017–present).
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Advisor, Saratoga Partners
(private equity fund); and formerly, Managing Director, Saratoga
Partners (1998–2001) and SBC Warburg Dillon Read (investment banking)
(1997–1998); Vice Chairman, Dillon, Read & Co. Inc. (investment
banking) (1991–1997); and Chief Financial Officer, Dillon, Read &
Co. Inc. (1982–1997).
|
Larry D. Thompson (1945)
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
|
Trustee
|
Since 2005
|
121
|
Graham Holdings Company
(education and media organization) (2011–2021); The Southern Company (energy
company) (2014–2020; previously 2010–2012) and Cbeyond, Inc. (business
communications provider) (2010–2012).
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Director of various
companies; Counsel, Finch McCranie, LLP (law firm) (2015–present); John A.
Sibley Professor of Corporate and Business Law, University of Georgia School
of Law (2015–present; previously 2011–2012); and formerly, Independent
Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles
and commercial vehicles) (2017–2020); Executive Vice President—Government
Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc. (consumer
products) (2012–2014); Senior Vice President—Government Affairs, General
Counsel and Secretary, PepsiCo, Inc. (2004–2011); Senior Fellow of The
Brookings Institution (2003–2004); Visiting Professor, University of Georgia
School of Law (2004); and Deputy Attorney General, U.S. Department of Justice
(2001–2003).
|
Robert E. Wade (1946)
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
|
Trustee
|
Since 2006
|
30
|
El Oro Ltd (investments)
(2003–2019).
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Attorney at law engaged in
private practice as a sole practitioner (1972–2008) and member of various
boards.
|
|
Independent
Trustees serving until 2023 Annual Meeting of Shareholders:
|
Harris J. Ashton (1932)
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
|
Trustee
|
Since 1993
|
120
|
Bar-S Foods (meat packing
company) (1981–2010).
|
|
|
Principal
Occupation During at Least the 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).
|
Edith E. Holiday (1952)
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
|
Lead Independent Trustee
|
Trustee
since 1996
and Lead Independent
Trustee
since 2007
|
121
|
Hess Corporation
(exploration of oil and gas) (1993–present), Santander Consumer USA Holdings,
Inc. (consumer finance) (2016–present); Santander Holdings USA (holding
company) (2019–present); and formerly, Canadian National Railway
(railroad) (2001–2021), White Mountains Insurance Group, Ltd. (holding
company) (2004–May 2021), RTI International Metals, Inc. (manufacture and
distribution of titanium) (1999–2015) and H.J. Heinz Company (processed foods
and allied products) (1994–2013).
|
|
Principal
Occupation During at Least the 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).
|
J. Michael Luttig (1954)
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
|
Trustee
|
Since 2009
|
121
|
Boeing Capital Corporation
(aircraft financing) (2006–2010).
|
|
|
Principal
Occupation During at Least the Past 5 Years:
|
|
Private investor; and formerly,
Counselor and Senior Advisor to the Chairman, CEO, and Board of Directors, of
The Boeing Company (aerospace company), and member of the Executive Council
(May 2019–January 1, 2020); Executive Vice President, General Counsel and
member of the Executive Council, The Boeing Company (2006–2019); and Federal
Appeals Court Judge, United States Court of Appeals for the Fourth Circuit
(1991–2006).
|
|
|
|
|
|
Name, Year of
Birth and Address
|
Position
|
Length of
Time Served
|
Number of
Portfolios in
Franklin
Templeton/
Legg
Mason
Fund Complex
Overseen
by Trustee*
|
Other Directorships Held During
at Least the Past Five Years
|
Constantine D. Tseretopoulos (1954) 300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
|
Trustee
|
Since 1999
|
20
|
None
|
|
|
Principal
Occupation During at Least the Past 5 Years:
|
|
Physician, Chief of Staff,
owner and operator of the Lyford Cay Hospital (1987–present); director of
various nonprofit organizations; and formerly, Cardiology Fellow,
University of Maryland (1985–1987); and Internal Medicine Resident, Greater
Baltimore Medical Center (1982–1985).
|
* We base
the number of portfolios on each separate series of the U.S. registered
investment companies within the Franklin Templeton/Legg Mason fund complex.
These portfolios have a common investment manager or affiliated investment
manager, and also may share a common underwriter.
** Rupert H. Johnson,
Jr. and Gregory E. 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 trustees. Rupert H. Johnson, Jr. is considered an
interested person of the Fund due to his position as an officer, director and
major shareholder of Resources, which is the parent company of the Fund’s
investment manager, and his position with the Fund. Gregory E. Johnson is considered
an interested person of the Fund due to his position as an officer, director
and shareholder of Resources. Rupert H. Johnson, Jr. is the uncle of Gregory E.
Johnson. The remaining Trustees of the Fund are Independent Trustees.
The
following tables provide the dollar range of the equity securities of the Fund
and of all U.S. registered funds in the Franklin Templeton/Legg Mason fund
complex beneficially owned by the Trustees as of March 10, 2022:
Independent
Trustees:
Name of Trustee
|
Dollar Range of Equity
Securities in the Fund(1)
|
Aggregate Dollar Range of Equity
Securities in All Funds in the
Franklin Templeton/Legg Mason
Fund
Complex
|
Harris
J. Ashton..................................................................................................
|
$1—$10,000
|
Over $100,000
|
Ann
Torre Bates.................................................................................................
|
$10,001—$50,000
|
Over $100,000
|
Mary C. Choksi..................................................................................................
|
None
|
Over $100,000
|
Edith E. Holiday.................................................................................................
|
$1—$10,000
|
Over $100,000
|
J. Michael Luttig................................................................................................
|
$1—$10,000
|
Over $100,000
|
David W. Niemiec.............................................................................................
|
None
|
Over $100,000
|
Larry D. Thompson...........................................................................................
|
$1—$10,000
|
Over $100,000
|
Constantine D.
Tseretopoulos..........................................................................
|
None
|
Over $100,000
|
Robert E. Wade..................................................................................................
|
$10,001—$50,000
|
Over $100,000
|
Interested
Trustees:
Name of Trustee
|
Dollar Range of Equity
Securities in the Fund(1)
|
Aggregate Dollar Range of Equity
Securities in All Funds in the
Franklin Templeton/Legg Mason
Fund
Complex
|
Rupert
H. Johnson, Jr..................................................................
|
None
|
Over $100,000
|
Gregory
E. Johnson.....................................................................
|
None
|
Over $100,000
|
(1) Dollar range based on NYSE closing price on
March 10, 2022.
How often do the
Trustees meet and what are they paid?
The role of the Trustees is
to provide general oversight of the Fund’s business and to ensure that the Fund
is operated for the benefit of all of the Fund’s shareholders. The Trustees
anticipate meeting at least five times during the current fiscal year to review
the operations of the Fund and the Fund’s investment performance, and will meet
more frequently as necessary. The Trustees 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’s Independent
Trustees also serve as independent Board members of up to 11 other Templeton
investment companies in the Franklin Templeton/Legg Mason fund complex. As of
January 1, 2018, each Independent Trustee is paid a $245,000 annual
retainer fee, together with a $7,000 per meeting fee for attendance at each
regularly scheduled Board meeting, a portion of which fees are allocated to the
Fund. To the extent held, compensation also may be paid for attendance at
specially called Board meetings. The Fund’s Lead Independent Trustee is paid an
annual supplemental retainer of $50,000 for service to such investment
companies, a portion of which is allocated to the Fund. Board members who serve
on the Audit Committee of the Fund and such other investment companies receive
a $10,000 annual retainer fee, together with a $3,000 fee per Audit Committee
meeting attended, a portion of which is allocated to the Fund. David W.
Niemiec, who serves as Chairman of the Audit Committee of the Fund and such
other investment companies, receives an additional $15,000, for a total
retainer fee of $25,000 per year, a portion of which is allocated to the Fund.
During the fiscal year
ended December 31, 2021, there were six meetings of the Board, five
meetings of the Audit Committee, and three meetings of the Nominating
Committee. Each Trustee 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 Trustee served. The Fund does
not currently have a formal policy regarding Trustees’ attendance at the annual
shareholders’ meeting. No Trustees attended the Fund’s last annual meeting held
on May 27, 2021.
Independent Trustees are
also reimbursed for expenses incurred in connection with attending Board
meetings. The Interested Trustees and certain officers of the Fund who are
shareholders of Resources are not compensated by the Fund for their services,
but 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 within Franklin Templeton. The Investment Manager or its affiliates
pay the salaries and expenses of the officers and the Interested Trustees. No
pension or retirement benefits are accrued as part of Fund expenses.
The table below
indicates the total fees paid to the Independent Trustees by the Fund
individually and by all of the funds in the Franklin Templeton/Legg Mason fund
complex. These Trustees also serve as directors or trustees of other funds in
Franklin Templeton, many of which hold meetings at different dates and times.
The Trustees and the Fund’s management believe that having the same individuals
serving on the boards of multiple
funds
in Franklin Templeton 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 Trustees who can bring their
experience and talents to, and effectively oversee the management of, several
funds.
|
|
|
|
Name of Trustee
|
Aggregate
Compensation
from the Fund(1)
|
Total Compensation from
Franklin Templeton/
Legg Mason
Fund Complex(2)
|
Number of Boards within
Franklin Templeton/
Legg Mason
Fund Complex
on which Trustee Serves(3)
|
Harris
J. Ashton.............................................................................
|
$ 2,836
|
$ 640,317
|
35
|
Ann
Torre Bates(4).........................................................................
|
$ 3,057
|
$ 654,070
|
14
|
Mary C. Choksi.............................................................................
|
$ 2,843
|
$ 684,367
|
36
|
Edith E. Holiday............................................................................
|
$ 3,380
|
$ 774,000
|
36
|
J. Michael Luttig...........................................................................
|
$ 3,075
|
$ 706,001
|
36
|
David W. Niemiec........................................................................
|
$ 3,207
|
$ 603,878
|
14
|
Larry D. Thompson......................................................................
|
$ 2,853
|
$ 684,000
|
36
|
Constantine D.
Tseretopoulos.....................................................
|
$ 3,065
|
$ 309,001
|
12
|
Robert E. Wade(4)..........................................................................
|
$ 2,856
|
$ 556,317
|
14
|
(1) Compensation received for the fiscal year
ended December 31, 2021.
(2) Compensation received for the 12 months
ended December 31, 2021.
(3) We base the number of boards on the
number of U.S. registered investment companies in the Franklin Templeton/Legg
Mason 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. The Franklin Templeton/Legg Mason fund complex includes 55 U.S.
registered investment companies, with approximately 300 U.S. based funds or
series.
(4) Ms. Bates and Mr. Wade also are
independent trustees of Franklin Mutual Series Funds and may, in the future,
receive payments pursuant to a discontinued retirement plan that generally
provides payments to independent board members who have served seven years or
longer for such fund.
Board
members historically have followed a policy of having substantial investments
in one or more of the funds within Franklin Templeton, as is consistent with
their individual financial goals. This policy was formalized in February 1998,
and revised in May 2019, through the adoption of a requirement that each Board
member annually invest one-third of the fees received for serving as a director
or trustee of a Templeton fund (excluding committee fees) in shares of one or
more Templeton funds (which may include the Fund) until the value of such
investments equals or exceeds three times the annual retainer and regular Board
meeting 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 such policy, a Board member’s fund holdings existing on
February 27, 1998, were valued as of such date with subsequent investments
valued at cost. All of the current members of the Board, including the Fund’s
nominees, are compliant with this policy.
Who are the
Executive Officers of the Fund?
Officers of the Fund are
appointed by the Trustees and serve at the pleasure of the Board. Listed below,
for the Executive Officers, are their names, years of birth and addresses, as
well as their positions and length of service with the Fund, and principal
occupations during at least the past five years.
|
|
|
Name, Year of
Birth and Address
|
Position
|
Length of Time Served
|
Rupert
H. Johnson, Jr.
|
Chairman of the Board,
Trustee and
Vice
President
|
Chairman of the Board and
Trustee
since 2013 and
Vice President since 1996
|
|
Please
refer to the table “Nominees for Interested Trustee to serve until 2025
Annual Meeting of Shareholders” for additional information about
Mr. Rupert H. Johnson, Jr.
|
Alison E. Baur (1964)
One Franklin Parkway
San Mateo, CA 94403-1906
|
Vice President and
Assistant
Secretary
|
Since 2012
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Deputy General Counsel,
Franklin Templeton; and officer of some of the other subsidiaries of Franklin
Resources, Inc. and of certain funds in the Franklin Templeton/Legg Mason
fund complex.
|
Breda M. Beckerle (1958)
280 Park Avenue
New York, NY 10017
|
Chief Compliance Officer
|
Since 2020
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Chief Compliance Officer,
Fiduciary Investment Management International, Inc., Franklin Advisers, Inc.,
Franklin Mutual Advisers, LLC, Franklin Templeton Institutional, LLC; and
officer of certain funds in the Franklin Templeton/Legg Mason fund complex.
|
Steven J. Gray (1955)
One Franklin Parkway
San Mateo, CA 94403-1906
|
Vice President and Assistant Secretary
|
Since 2009
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Senior Associate General
Counsel, Franklin Templeton; Vice President, FASA, LLC; Assistant Secretary,
Franklin Distributors, LLC; and officer of certain funds in the Franklin
Templeton/Legg Mason fund complex.
|
Michael Hasenstab (1973)
One Franklin Parkway
San Mateo, CA 94403-1906
|
President and Chief
Executive
Officer—Investment Management
|
Since 2018
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Executive Vice President,
Franklin Advisers, Inc.; and officer of some of the other subsidiaries of
Franklin Resources, Inc. and of certain funds in the Franklin Templeton/Legg
Mason fund complex.
|
Matthew T. Hinkle (1971)
One Franklin Parkway
San Mateo, CA 94403-1906
|
Chief Executive Officer—
Finance and Administration
|
Since 2017
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Senior Vice President,
Franklin Templeton Services, LLC; officer of certain funds in the Franklin
Templeton/Legg Mason fund complex; and formerly, Vice President,
Global Tax (2012–April 2017) and Treasurer/Assistant Treasurer, Franklin
Templeton (2009–2017).
|
Susan Kerr (1949)
620 Eighth Avenue
New York, NY 10018
|
Vice President—
AML
Compliance
|
Since July 2021
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Senior Compliance Analyst, Franklin
Templeton; Chief Anti-Money Laundering Compliance Officer, Legg
Mason & Co., or its affiliates; Anti Money Laundering Compliance
Officer; Senior Compliance Officer, LMIS; and officer of certain funds in the
Franklin Templeton/Legg Mason fund complex.
|
Christopher Kings (1974)
One Franklin Parkway
San Mateo, CA 94403-1906
|
Chief Financial Officer,
Chief
Accounting Officer and Treasurer
|
Since January 2022
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Treasurer, U.S. Fund Administration &
Reporting; and officer of certain funds in the Franklin Templeton/Legg Mason
fund complex.
|
Navid J. Tofigh (1972)
One Franklin Parkway
San Mateo, CA 94403-1906
|
Vice President and
Assistant
Secretary
|
Since 2015
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Senior Associate General
Counsel, Franklin Templeton; and officer of certain funds in the Franklin
Templeton/Legg Mason fund complex.
|
Craig S. Tyle (1960)
One Franklin Parkway
San Mateo, CA 94403-1906
|
Vice President and
Assistant
Secretary
|
Since 2005
|
|
Principal
Occupation During at Least the Past 5 Years:
|
General Counsel and
Executive Vice President, Franklin Resources, Inc.; and officer of some of
the other subsidiaries of Franklin Resources, Inc. and of certain funds in
the Franklin Templeton/Legg Mason fund complex.
|
Lori A. Weber (1964)
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
|
Vice President and
Secretary
|
Vice President since 2011 and Secretary since
2013
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Senior Associate General
Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.;
Vice President and Secretary, Templeton Investment Counsel, LLC; and officer
of certain funds in the Franklin Templeton/Legg Mason fund complex.
|
|
|
|
Name, Year of Birth and
Address
|
Position
|
Length of Time Served
|
Christine Zhu (1975)
One Franklin Parkway
San Mateo, CA 94403-1906
|
Vice President
|
Since 2018
|
|
Principal
Occupation During at Least the Past 5 Years:
|
Vice President, Franklin
Advisers, Inc.; and officer of certain funds in the Franklin Templeton/Legg
Mason fund complex.
|
PROPOSAL 2: RATIFICATION
OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
How are
independent auditors selected?
The Board has a standing
Audit Committee currently comprised of David W. Niemiec (Chairman), Ann Torre
Bates, J. Michael Luttig and Constantine D. Tseretopoulos, all of whom are
Independent Trustees and considered to be “independent” as that term is defined
by the NYSE’s listing standards. The Audit Committee is responsible for the
appointment, compensation and retention of the Fund’s independent registered
public accounting firm (“independent auditors”), including evaluating their
independence, recommending the selection of the Fund’s independent auditors to
the full Board, and meeting with such independent auditors to consider and
review matters relating to the Fund’s financial reports and internal controls.
Which independent
auditors did the Board select?
The Audit Committee and the
Board have selected the firm of PricewaterhouseCoopers LLP (“PwC”) as the
independent auditors for the Fund for the current fiscal year. PwC has examined
and reported on the fiscal year-end financial statements dated
December 31, 2021, and certain related SEC filings. You are being asked to
ratify the Board’s selection of PwC for the current fiscal year ending
December 31, 2022. Services to be performed by the independent auditors
include examining and reporting on the fiscal year-end financial statements of
the Fund and certain related filings with the SEC.
The selection of PwC as
the independent auditors for the Fund for the fiscal year ending
December 31, 2022, was recommended by the Audit Committee and approved by
the Board on February 28, 2022. PwC’s reports on the financial statements
of the Fund for the fiscal years for which it has served as auditors did not
contain an adverse opinion or a disclaimer of opinion, nor were qualified or
modified as to uncertainty, audit scope or accounting principles.
The Audit Committee and
the Board have been advised by PwC that neither PwC nor any of its members have
any material direct or indirect financial interest in the Fund. 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 to respond
to appropriate questions.
◆ AUDITOR INFORMATION
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 $66,392
for the fiscal year ended December 31, 2021, and $69,727 for the fiscal
year ended December 31, 2020.
Audit-Related
Fees. There
were no fees paid to PwC for assurance and related services rendered by PwC to
the Fund that are reasonably related to the performance of the audit of the
Fund’s financial statements and not reported under “Audit Fees” above for the
fiscal years ended December 31, 2021, and December 31, 2020.
In addition, the Audit
Committee pre-approves PwC’s engagement for audit-related services to be
provided to the Investment Manager and any entity controlling, controlled by,
or under common control with the Investment Manager that provides ongoing
services to the Fund, which engagements relate directly to the operations and
financial reporting of the Fund. For the fiscal years ended December 31,
2021, and December 31, 2020, there were no fees paid to PwC for such
services.
Tax Fees. There were no fees paid to PwC
for professional services rendered by PwC to the Fund for tax compliance, tax
advice and tax planning for the fiscal years ended December 31, 2021, and
December 31, 2020.
In addition, the Audit
Committee pre-approves PwC’s engagement for tax services to be provided to the
Investment Manager and any entity controlling, controlled by, or under common
control with the Investment Manager that provides ongoing services to the Fund,
which engagements relate directly to the operations and financial reporting of
the Fund. For the fiscal years ended December 31, 2021, and December 31,
2020, there were no fees paid to PwC for such services.
All Other Fees. The aggregate fees paid to PwC
for products and services rendered by PwC to the Fund, other than the services
reported above, were $192 for the fiscal year ended December 31, 2021, and
$0 for the fiscal year ended December 31, 2020. The services for which
these fees were paid included review of materials provided to the Fund Board in
connection with the investment management contract renewal process.
In addition, the Audit Committee
pre-approves PwC’s engagement for other services to be provided to the
Investment Manager and any entity controlling, controlled by, or under common
control with the Investment Manager that provides ongoing services to the Fund,
which engagements relate directly to the operations and financial reporting of
the Fund. The aggregate fees paid to PwC for such services were $55,000 for the
fiscal year ended December 31, 2021, and $49,800 for the fiscal year ended
December 31, 2020. The services for which these fees were paid included
issuance of an Auditors’ Certificate for South Korean regulatory shareholder
disclosures, professional fees in connection with determining the feasibility
of a U.S. direct lending structure, professional services relating to the
readiness assessment over Greenhouse Gas Emissions and Energy, and assets under
management certification.
Aggregate
Non-Audit Fees.
The aggregate fees paid to PwC for non-audit services rendered by PwC to the
Fund or to the Investment Manager and to any entity controlling, controlled by,
or under common control with the Investment Manager that provides ongoing
services to the Fund were $55,192 for the fiscal year ended December 31,
2021, and $49,800 for the fiscal year ended December 31, 2020.
The Audit Committee has
considered whether the provision of the non-audit services that were rendered
to the Investment Manager and to any entity controlling, controlled by, or
under common control with the Investment Manager that provides ongoing services
to the Fund is compatible with maintaining PwC’s independence.
Audit Committee
Pre-Approval Policies and Procedures. As of the date of this proxy statement, the
Audit Committee has not adopted written pre-approval policies and
procedures within the meaning of
Rule 2-01(c)(7)(i)
of Regulation S-X. As a result, the services described above that are subject
to Audit Committee pre-approval and provided by PwC must be directly
pre-approved by the Audit Committee or by a designated member of the Audit
Committee pursuant to delegated authority.
Audit Committee
Charter. 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 B 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.
Audit Committee
Report. The
Audit Committee received the written disclosures and the letter(s) from PwC
mandated by the applicable requirements of the Public Company Accounting
Oversight Board (“PCAOB”) regarding PwC’s communications with the Audit
Committee concerning independence. The Audit Committee also received the report
of PwC regarding the results of their audit. In connection with the Audit
Committee’s review of the financial statements and PwC’s report, the members of
the Audit Committee discussed with a representative of PwC, PwC’s independence,
as well as the matters required to be discussed by the applicable requirements
of the PCAOB and the SEC, including, but not limited to, the following: PwC’s
responsibilities in accordance with generally accepted auditing standards;
PwC’s 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 the auditors encountered any
difficulties in dealing with management in performing the audit; and PwC’s
judgments about the quality of the Fund’s accounting principles.
Based on its review and
discussions with management and PwC, the Audit Committee did not become aware
of any material misstatements or omissions in the Fund’s 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 December 31, 2021, for filing with the SEC.
AUDIT COMMITTEE
David W. Niemiec
(Chairman)
Ann Torre Bates
J. Michael Luttig
Constantine D.
Tseretopoulos
◆ ADDITIONAL INFORMATION ABOUT THE FUND’S BOARD OF
TRUSTEES
Board Role in Risk
Oversight. The
Board, as a whole, considers risk management issues as part of its general
oversight responsibilities throughout the year at regular Board meetings,
through regular reports that have been developed by management in consultation
with the Board and its counsel. These reports address certain investment,
valuation and compliance matters. The Board also may receive special written
reports or presentations on a variety of risk issues (e.g., COVID-19 related
issues), either upon the Board’s request or upon
the
Investment Manager’s initiative. In addition, the Audit Committee of the Board
meets regularly with the Investment Manager’s internal audit group to review
reports on their examinations of functions and processes within Franklin
Templeton that affect the Fund.
With respect to
investment risk, the Board receives regular written reports describing and
analyzing the investment performance of the Fund. In addition, the portfolio
managers of the Fund meet regularly with the Board to discuss portfolio
performance, including investment risk. To the extent that the Fund changes a
particular investment strategy that could have a material impact on the Fund’s
risk profile, the Board generally is consulted with respect to such change. To
the extent that the Fund invests in certain complex securities, including
derivatives, the Board receives periodic reports containing information about
exposure of the Fund to such instruments. In addition, the Investment Manager’s
investment risk personnel meet regularly with the Board to discuss a variety of
issues, including the impact on the Fund of the investment in particular
securities or instruments, such as derivatives and commodities, if applicable.
With respect to
valuation, the Fund’s administrator provides regular written reports to the
Board that enable the Board to monitor the number of investments fair valued by
management appraisal in the Fund’s portfolio, the reasons for such fair
valuation and the methodology used to arrive at the fair value. Such reports
also include information concerning illiquid investments within the Fund’s
portfolio. The Board also reviews dispositional analysis information on the
sale of investments that require special valuation considerations such as
illiquid or certain fair valued investments. In addition, the Fund’s Audit
Committee reviews valuation procedures and results with the Fund’s independent
auditors in connection with the Committee’s review of the results of the audit
of the Fund’s year-end financial statements.
With respect to compliance
risks, the Board receives regular compliance reports prepared by the Investment
Manager’s compliance group and meets regularly with the Fund’s Chief Compliance
Officer (“CCO”) to discuss compliance issues, including compliance risks. In
accordance with SEC rules, the Independent Trustees meet regularly in executive
session with the CCO and the CCO prepares and presents an annual written
compliance report to the Board. The Fund’s Board adopts compliance policies and
procedures for the Fund and approves these procedures for the Fund’s service
providers. The compliance policies and procedures are specifically designed to
detect and prevent violations of the federal securities laws.
The Investment Manager
periodically provides an enterprise risk management presentation to the Board
to describe the way in which risk is managed on a complex-wide level. The
presentation covers such areas as investment risk, reputational risk, personnel
risk, and business continuity risk.
Board Structure. Seventy-five percent or more
of the Fund’s Board members consist of Independent Trustees who are not deemed
to be “interested persons” by reason of their relationship with the Fund’s
management or otherwise as provided under the 1940 Act. While the Chairman of
the Board is an interested person, the Board is also served by a Lead
Independent Trustee. The Lead Independent Trustee, together with independent
counsel, reviews proposed agendas for Board meetings and generally acts as a
liaison with Fund management with respect to questions and issues raised by the
Independent Trustees. The Lead Independent Trustee also presides at separate
meetings of Independent Trustees held in advance of each scheduled Board
meeting where various matters, including those being considered at such Board
meeting, are discussed. It is believed such structure and activities assure
that proper consideration is given at Board meetings to matters deemed
important to the Fund and its shareholders.
◆ 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 300 S.E. 2nd Street, Fort Lauderdale, Florida 33301-1923. FT
Services is an indirect, wholly owned subsidiary of Resources and an affiliate
of the Investment Manager. Pursuant to a subcontract for administrative
services, FT Services performs certain administrative functions for the Fund.
JPMorgan Chase & Co. (“JPMC”), 270 Park Avenue, New York, NY 10017,
has an agreement with FT Services to provide certain sub-administrative
services for the Fund.
The Transfer
Agent. The
transfer agent, registrar and dividend disbursement agent for the Fund is
American Stock Transfer & Trust Company, LLC, 6201 15th Avenue,
Brooklyn, NY 11219.
The Custodian. The custodian for the Fund is
JPMorgan Chase Bank, 270 Park Avenue, New York, New York 10017-2070.
Other Financial
Information. The
Fund’s latest audited financial statements and annual report for the fiscal
year ended December 31, 2021, are available free of charge. To obtain a
copy, please call (800) DIAL BEN®/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 March 10, 2022, the Fund had 47,988,730 shares outstanding and total
net assets of $345,017,151.43. The Fund’s shares are listed on the NYSE
(NYSE: TEI). To the knowledge of the Fund’s management, as of March 10,
2022, there were no entities holding beneficially or of record more than 5% of
the Fund’s outstanding shares, except as shown in the following table:
|
|
|
Name and
Address of Beneficial Ownership
|
Amount and Nature
of Beneficial Ownership
|
Percent of
Outstanding Shares
|
First
Trust Portfolios LP......................................................................................................
|
7,295,034 *
|
15.20 %
|
120
East Liberty Drive
Suite 400
Wheaton, IL 60187
|
|
|
* The nature of
beneficial ownership is shared dispositive power as reported on Schedule 13G
filed with the SEC on January 12, 2022.
In addition, to the
knowledge of the Fund’s management, as of March 10, 2022, no nominee or
Trustee of the Fund owned 1% or more of the outstanding shares of the Fund, and
the Trustees and officers of the Fund owned, as a group, less than 1% of the
outstanding shares of the Fund.
Contacting the
Board of Trustees. If
a shareholder wishes to send a communication to the Board, such correspondence
should be in writing and addressed to the Board of Trustees at the Fund’s
offices, 300 S.E. 2nd Street, Fort Lauderdale, Florida 33301-1923,
Attention: Secretary. The correspondence will be given to the Board for review
and consideration.
◆ FURTHER INFORMATION ABOUT VOTING AND THE MEETING
Solicitation of
Proxies. Your
vote is being solicited by the Trustees. 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 reasonable expenses in
forwarding proxy material to the beneficial owners and soliciting them to
execute proxies. In addition, the Fund may retain a professional proxy
solicitation firm to assist with any necessary solicitation of proxies. The
Fund expects that the solicitation would be primarily by mail, but also may
include telephone, facsimile, electronic or other means of communication. If
the Fund does not receive your proxy by a certain time, you may receive a telephone
call from a proxy soliciting agent asking you to vote. If professional proxy
solicitors are retained, it is expected that soliciting fees would be
approximately $5,000, plus expenses. The Fund does not reimburse Trustees 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 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 current NYSE Rules permit the
broker-dealers to vote on the Proposals 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 Fund’s shares entitled to vote at the Meeting—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 at the Meeting for purposes of determining whether the
required quorum of shares exists.
Method of
Tabulation. Provided
a quorum is present or represented at the Meeting, Proposal 1, the election of
Trustees, requires the affirmative vote of a plurality of the Fund’s shares
present in person or represented by proxy and voting on the Proposal at the
Meeting. This means that the Trustee nominees receiving the largest number of
votes will be elected to fill the available positions, and a nominee may be
elected even if he or she received the affirmative vote of less than a majority
of the outstanding shares of the Fund voting. Proposal 2, ratification of the
selection of the independent auditors, requires the affirmative vote of
(i) sixty-seven percent (67%) or more of the voting securities present in
person or represented by proxy at the Meeting, if the holders of more than
fifty percent (50%) of the outstanding voting securities of the Fund are
present or represented by proxy; or (ii) more than fifty percent (50%) of
the outstanding voting securities of the Fund, whichever is less. 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, but may have the effect of an “against” vote on
Proposal 2. Broker non-votes are not expected since these are routine
proposals.
Simultaneous
Meetings. The
Meeting is to be held at the same time as the annual meeting of shareholders of
Templeton Dragon Fund, Inc. If any shareholder at the Meeting objects to the
holding of simultaneous meetings and moves for an adjournment of the Meeting to
a time promptly after the simultaneous meetings, the persons designated as
proxies will vote in favor of such adjournment.
Adjournment.
The
Chairman of the Board, the president of the Fund in the absence of the Chairman
of the Board, or any vice president or other authorized officer of the Fund, in
the absence of the president, or the holders of a majority of the shares
present (in person or by proxy) and entitled to vote at the Meeting, may
adjourn the Meeting from time to time. 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 the Proposals, or for any other reason consistent with Delaware law and
the Fund’s By-Laws, including to allow for the further solicitation of proxies.
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 2021 annual meeting. If the Meeting is postponed or adjourned
and a new record date is set, any proxy received from a shareholder with
respect to the original record date will remain in full force and effect with
respect to shares held by the shareholder on the new record date, unless
explicitly revoked. No proxy shall be valid after the expiration of eleven
(11) months from the date of the proxy, unless otherwise expressly
provided in the proxy.
Shareholder
Proposals. The
Fund anticipates that its 2023 Annual Meeting of Shareholders will be held on
or about May 25, 2023. A shareholder who wishes to submit a proposal for
consideration for inclusion in the Fund’s proxy statement for the 2023 Annual
Meeting of Shareholders must send such written proposal to the Fund’s offices
at 300 S.E. 2nd Street, Fort Lauderdale, Florida 33301-1923,
Attention: Secretary, so that it is received no later than November 28,
2022 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 November 28, 2022, as described above,
may nonetheless present a proposal at the Fund’s 2023 Annual Meeting of
Shareholders if such shareholder notifies the Fund in writing at the Fund’s
offices, of such proposal not earlier than December 26, 2022 and not later
than January 25, 2023. 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 2023 Annual Meeting of
Shareholders, the persons designated as proxies for the 2023 Annual Meeting of
Shareholders may exercise discretionary voting power with respect to any
shareholder proposal not received by the Fund at the Fund’s offices by
February 11, 2023. A shareholder proposal may be presented at the 2023
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. In addition to the requirements set forth above, a shareholder must
comply with the following (which is qualified in its entirety by the Fund’s
governing instruments):
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 in this proxy
statement and in the Fund’s By-Laws; and (iii) have been a shareholder of
record, with proof of such ownership or holding reasonably satisfactory to the
Fund to be provided by such record owner or nominee holder, at the time the
shareholder’s notice was received by the Secretary of the Fund.
2. A notice
regarding a nomination for the election of a Trustee 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 Fund which are beneficially owned by each such nominee; (iv) all such
other information regarding each such nominee as would have been required to be
included in a proxy
statement filed pursuant
to the proxy rules of the SEC had each such nominee been nominated by the
Trustees of the Fund; (v) whether such shareholder believes each such
nominee is or will be an “interested person” of the Fund (as defined in the
1940 Act), (vi) the written and signed consent of each such person to be
nominated, to be named as a nominee and to serve as a Trustee if elected, and (vii) requirement
to complete, execute, and return to the Fund within 5 business days of receipt,
the Fund’s form of trustee questionnaire and any supplemental information
reasonably requested by the Fund. In addition, the shareholder making such nomination
shall promptly provide any other information reasonably requested by the Fund.
A notice regarding a nomination for the election of a Trustee must provide the
information listed herein for each person or persons to be nominated, together
with any persons to be designated as a proposed substitute nominee in the event
that a proposed nominee is unwilling or unable to serve, including by reason of
any disqualification.
3. A notice
regarding a business proposal shall set forth in writing 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 Fund’s books, of the
shareholder proposing such business; (iii) the number of shares of the
Fund which are beneficially owned by the shareholder; (iv) any material
interest of the shareholder in such business; (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 Fund; and (vi) the
Board may request that the shareholder provide, within five business days of
delivery of such demand, written verification demonstrating the accuracy of any
information submitted by the shareholder relating to their nomination or
proposal, as well as a written update of any such information. If the
shareholder fails to provide such written verification or written update within
such period, the information as to which written verification or a written
update was requested may be deemed not to have been provided in accordance with
the Fund’s By-Laws.
For purposes of the
requirements directly above, shares “beneficially owned” shall mean all shares
that such person is deemed to beneficially own pursuant to Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934 and which the shareholder has
the right to acquire pursuant to any agreement or upon exercise of conversion
rights or warrants, or otherwise (including any derivative or short positions,
profit interests, options or similar rights, and borrowed or loaned shares).
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
Trustees,
Lori A. Weber
Vice President and
Secretary
March 28, 2022
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.
The Committee shall make recommendations to the full Board for nomination for membership on all committees of the Board.
IV. Other Powers and Responsibilities.
1. The Committee shall meet at least once 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.
EXHIBIT B
FRANKLIN TEMPLETON
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”).1 The Committee shall consist of such number of members as set by the Board from time to time, but in no event fewer than three (NYSE-listed Funds only), and its members shall be selected by the Board. The Committee shall be comprised entirely of members who satisfy the requirements for independence set out in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934 (the “1934 Act”) (“Disinterested Board members”).2 Each member of the Committee must be financially literate, as such qualification is interpreted by the Board in its business judgment, or must become financially literate within a reasonable period of time after his or her appointment to the Committee. At least one member of the Committee must be an “audit committee financial expert,” as determined by the Board and as defined in Item 3(b) of U.S. Securities and Exchange Commission (“SEC”) Form N-CSR. The Committee will make recommendations to the Board for its approval with respect to such audit committee financial expert determinations at least annually.
If a Committee member of an NYSE-listed Fund simultaneously serves on the audit committee of more than three public companies, the Board must determine that such simultaneous service would not impair the ability of such member to effectively serve on the Fund’s Committee. When a member serves on multiple boards in the same fund complex, such service will be counted as one board for these purposes (NYSE-listed Funds only).
II. Purposes of the Committee.
The function of the Committee is to assist Board oversight of the Fund’s financial statements and accounting and auditing processes, which shall include being directly responsible for the appointment, compensation, retention and oversight of the work of the Fund’s independent registered public accounting firm (“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
1 This document serves as the Charter for the Committee of certain U.S. registered investment companies within Franklin Templeton, and each series thereof as applicable (a “Fund”), including the Franklin, Templeton and New Jersey/Alternative Strategies Funds, as well as Franklin Templeton ETF Trust, Franklin ETF Trust, Franklin Templeton Trust, Legg Mason ETF Investment Trust, and ActiveShares® ETF Trust. Exchange-listed Funds are included on Appendix A.
2 Each member of the Committee may not, other than in his or her capacity as a member of the Committee, the Board, or any other Board committee: (A) accept directly or indirectly any consulting, advisory, or other compensatory fee from the Fund or any subsidiary thereof, provided that, unless the rules of the applicable national securities exchange or national securities association provide otherwise, compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Fund (provided that such compensation is not contingent in any way on continued service); or (B) be an “interested person” of the Fund as defined in section 2(a)(19) of the Investment Company Act of 1940.
attest services for the Fund. It is management’s responsibility to prepare the Fund’s financial statements in accordance with generally accepted accounting principles (“GAAP”) and to maintain appropriate systems for accounting and internal controls.
It is the auditors’ responsibility to express an opinion on the Fund’s financial statements, to plan and carry out an audit in accordance with the standards of the SEC and the Public Company Accounting Oversight Board (“PCAOB”) and to report directly to the Committee. It is not the duty of the Committee to plan or conduct audits or to determine that the Fund’s financial statements are complete and in accordance with GAAP.
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 or, as appropriate, assist Board oversight of the quality, objectivity and integrity of the Fund’s financial statements and the independent audit thereof;
(c) To oversee or, as appropriate, assist Board oversight of the Fund’s compliance with legal and regulatory requirements (primarily as they relate to the Fund’s accounting and financial reporting, internal control over financial reporting and independent audits);
(d) To approve prior to appointment the engagement of the Fund’s auditors and, in connection therewith, to review and evaluate the auditors’ qualifications, independence and performance, taking into account the opinions of management;
(e) To act as a liaison between the Fund’s auditors and the Board;
(f) to prepare, or authorize the preparation of, the disclosure required by Item 407(d)(3)(i) of Regulation S-K (the “Audit Committee Report”) for inclusion in the Fund’s annual proxy statement (NYSE- and NYSE American-listed Funds only); and
(g) 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 Appearing and Practicing before the Commission in the Representation of an Issuer (the “Standards”). In this capacity, the Committee is required to adopt and maintain written procedures for the confidential receipt, retention and consideration of any report of evidence of a material violation. “Evidence of a material violation” means credible evidence, based upon which it would be unreasonable, under the circumstances, for a prudent and competent attorney not to conclude that it is reasonably likely that a material violation of an applicable U.S. federal or state securities law, a material breach of fiduciary (or similar) duty to the Fund arising under U.S. federal or state law, or a similar material violation of any U.S. federal or state law has occurred, is ongoing, or is about to occur.
III. Powers and Duties.
The Committee shall have the following powers and duties to carry out its purposes:
(a) To select the auditors, subject to approval both by the Board and by a separate vote of the Disinterested Board members, and, in connection therewith, to evaluate the independence and qualifications of the auditors in accordance with applicable federal securities laws and regulations and the rules and standards of the PCAOB.
(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 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) 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:
(A) establishment by the Committee of policies and procedures to pre-approve such services, 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 1934 Act), to management; or
(B) delegation by the Committee to one or more designated members of the Committee who are Disinterested Board members of authority to pre-approve such services, provided the Committee is informed of the decisions of any member pursuant to such delegated authority no later than its next scheduled meeting;
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, accounting and reporting 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 meet to review and discuss the Fund’s annual audited financial statements with management and the auditors, including reviewing the Fund’s disclosures under “Management’s Discussion of Fund Performance” (“MDFP”) in its annual shareholder report (All Funds). To meet to review and discuss the Fund’s semi-annual financial statements with management, including reviewing the Fund’s MDFP disclosures in its semi-annual shareholder report, as applicable (NYSE-listed Funds and New Jersey/Alternative Strategies Funds only). Such meetings may be telephonic.
(e) To consider the effect upon the Fund of any changes in accounting principles or practices proposed by management or the auditors.
(f) To receive and consider reports from the auditors:
(i) as required by generally accepted accounting standards, including Auditing Standard (“AS”) No. 1301 (Communications with Audit Committees);
(ii) annually and by update as required by SEC Regulation S-X, regarding:
(A) all critical accounting policies and practices of the Fund to be used;
(B) all alternative treatments within GAAP 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;
(C) other material written communications between the auditors and management of the Fund, such as any management letter or schedule of unadjusted differences; and
(D) 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;
(iii) at least annually regarding the auditors’ internal quality-control procedures; and
(iv) at least annually regarding any material issues raised by the most recent internal quality-control review, or peer review, of the auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the auditors, and any steps taken to deal with any such issues.
(g) To review (i) major issues regarding accounting principles and financial statement presentations, including any significant changes in the Fund’s selection or application of accounting principles, and major issues as to the adequacy of the Fund’s internal controls and any special audit steps adopted in light of material control deficiencies; and (ii) analyses prepared by management and/or the auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements.
(h) In considering the independence of the auditors:
(i) at least annually to receive from the auditors a formal 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 that, in the auditors’ judgment, could be thought to bear upon the auditors’ independence;
(ii) to receive and consider, if applicable, periodic reports from the auditors regarding whether the provision of non-audit services (including tax services) is compatible with maintaining the auditors’ independence;
(iii) to request from the auditors a written affirmation that they are independent auditors under the federal securities laws and standards adopted by the PCAOB; and
(iv) to discuss with the auditors any disclosed relationships or services that may impact the objectivity, impartial judgment, and independence of the auditors and for taking, or recommending that the Board take, appropriate action to oversee the independence 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 the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Fund.
(k) To consider any reports of audit problems or difficulties that may have arisen during the course of the audit, including any limitations of the scope of the audit, and management’s response thereto.
(l) To review communications from the Fund’s Chief Executive Officer – Finance and Administration, and Chief Financial Officer and Chief Accounting Officer concerning (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Fund’s ability to record, process, summarize and report financial information; 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 over financial reporting, and to review requested communications from management for any other purposes the Committee deems appropriate.
(m) In connection with the preparation of the Audit Committee Report (NYSE and NYSE American-listed Funds only):
(i) to review and discuss the audited financial statements of the Fund with management;
(ii) to discuss with the auditors the matters required to be discussed by the applicable requirements of the PCAOB and the SEC;
(iii) to receive the written disclosures and the letter(s) from the auditors required by applicable requirements of the PCAOB regarding the auditor’s communications with the Committee concerning independence (referred to in paragraph (h) above), and discuss with the auditors the auditor’s independence; and
(iv) based on the review and discussions referred to in paragraphs (i) through (iii) above, to recommend to the Board that the audited financial statements be included in the Fund’s annual report on Form N-CSR for the last fiscal year for filing with the SEC.
(n) To review and discuss, as appropriate, the Fund’s earnings press releases (including the type and presentation of information to be included therein, paying particular attention to any use of “pro forma,” or “adjusted” non-GAAP, information), as well as any financial information and earnings guidance provided to analysts and rating agencies. (NYSE-listed Funds only)
(o) To review and discuss the Fund’s processes with respect to risk assessment and risk management.
(p) To set clear policies relating to the hiring by entities within Franklin Templeton of employees or former employees of the auditors.
(q) To evaluate, as either part of the full Board or as a Committee, its performance at least annually.
(r) To review potential conflict of interest situations where appropriate in connection with the Fund’s ongoing review of all related party transactions.
(s) 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”). In connection therewith, the Committee shall:
(i) determine whether an investigation is necessary regarding any report of evidence of a material violation by the Fund or its affiliates;
(ii) if the Committee determines such an investigation is necessary or appropriate, (A) notify the Board; (B) initiate an investigation, which may be conducted by either the CLO or by outside attorneys; and (C) retain such additional expert personnel as the Committee deems necessary to assist in the investigation;
(iii) at the conclusion of any such investigation, (A) recommend by a majority vote, that the Fund implement an appropriate response (as defined in Section 205.2(b) of the Standards) to evidence of a material violation, and (B) inform the CLO and the CEO and the Board of the results of such investigation and the appropriate remedial measures to be adopted;
(iv) acting by majority vote, 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; and
(v) 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, as may be necessary to fulfill its responsibilities. 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 meet separately, periodically, with management and with the auditors.
(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 relating to the Fund; and (ii) the confidential, anonymous submission by employees of the Fund or Franklin Resources, Inc. and its subsidiaries of concerns regarding questionable accounting or auditing matters.
(c) The Committee shall have the authority to engage special or independent counsel, experts and other advisers as and when it determines necessary to carry out its duties.
(d) The Fund must provide for appropriate funding, as determined by the Committee in its capacity as a Committee of the Board, 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 (under paragraph (c) above); and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
(e) 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.
(f) The Committee shall report its activities to the Board, including any issues that arise with respect to the quality or integrity of the Fund’s financial statements, the Fund’s compliance with legal or regulatory requirements, or the qualifications, performance and independence of the Fund’s auditors, and make such recommendations as the Committee may deem necessary or appropriate.
(g) The Committee shall review and assess the adequacy of this Charter annually, or more frequently if it chooses, and recommend any changes to the Board. The Board shall adopt and approve this Charter and may amend it on its own motion.
(h) The Committee shall meet jointly with the Audit Committees of the other Funds within the Franklin Templeton Fund complex as may be appropriate, including to attend presentations and review proposals and other matters of common concern to all such Audit Committees.
(i) Pursuant to delegated authority from the Board, and at the request of the applicable investment manager of the Fund (the “Investment Manager”), the Committee, or an appointed delegate of the Committee as applicable, shall provide proxy voting instructions as a representative of the Fund to the Investment Manager in certain situations where the Investment Manager has identified a material conflict of interest between the Investment Manager or one of its affiliates and an issuer (i.e., the Committee or its appointed delegate will approve or disapprove the Investment Manager’s voting recommendation).
(j) To the extent applicable to the Fund, the Committee shall comply with such other rules of the applicable national securities exchanges and the SEC applicable to exchange-listed funds, as such may be adopted and amended from time to time. (Exchange-listed Funds only)
Appendix A
Amended as of October 1, 2021
EXCHANGE-LISTED FUNDS
Funds listed on New York Stock Exchange LLC (“NYSE-listed Funds”)
Franklin Universal Trust
Templeton Dragon Fund, Inc.
Templeton Emerging Markets Fund
Templeton Emerging Markets Income Fund
Templeton Global Income Fund
Fund listed on NYSE American LLC (“NYSE American-listed Fund”)
Franklin Limited Duration Income Trust
Funds listed on NYSE Arca, Inc.
Franklin ETF Trust
Franklin Liberty Short Duration U.S. Government ETF
Franklin Templeton ETF Trust
Franklin FTSE Asia ex Japan ETF
Franklin FTSE Australia ETF
Franklin FTSE Brazil ETF
Franklin FTSE Canada ETF
Franklin FTSE China ETF
Franklin FTSE Europe ETF
Franklin FTSE Europe Hedged ETF
Franklin FTSE France ETF
Franklin FTSE Germany ETF
Franklin FTSE Hong Kong ETF
Franklin FTSE India ETF
Franklin FTSE Italy ETF
Franklin FTSE Japan ETF
Franklin FTSE Japan Hedged ETF
Franklin FTSE Latin America ETF
Franklin FTSE Mexico ETF
Franklin FTSE Russia ETF
Franklin FTSE Saudi Arabia ETF
Franklin FTSE South Africa ETF
Franklin FTSE South Korea ETF
Franklin FTSE Switzerland ETF
Franklin FTSE Taiwan ETF
Franklin FTSE United Kingdom ETF
Franklin Liberty Federal Intermediate Tax-Free Bond Opportunities ETF
Franklin Liberty Federal Tax-Free Bond ETF
Franklin Liberty Investment Grade Corporate ETF
Franklin Liberty Systematic Style Premia ETF
Franklin Liberty Ultra Short Bond ETF
Franklin Liberty U.S. Core Bond ETF
Franklin Liberty U.S. Low Volatility ETF
Franklin Liberty U.S. Treasury Bond ETF
Franklin LibertyQ Emerging Markets ETF
Franklin LibertyQ Global Dividend ETF
Franklin LibertyQ Global Equity ETF
Franklin LibertyQ International Equity Hedged ETF
Funds listed on Cboe BZX Exchange, Inc.
Franklin Templeton ETF Trust
Franklin Disruptive Commerce ETF
Franklin Exponential Data ETF
Franklin Genomic Advancements ETF
Franklin Intelligent Machines ETF
Franklin Liberty High Yield Corporate ETF
Franklin Liberty International Aggregate Bond ETF
Franklin Liberty Senior Loan ETF
Franklin LibertyQ U.S. Equity ETF
Franklin LibertyQ U.S. Mid Cap Equity ETF
Franklin LibertyQ U.S. Small Cap Equity ETF
Legg Mason ETF Investment Trust
Legg Mason International Low Volatility High Dividend ETF
ActiveShares® ETF Trust
ClearBridge Focus Value ESG ETF
Funds listed on The Nasdaq Stock Market LLC
Legg Mason ETF Investment Trust
ClearBridge All Cap Growth ESG ETF
ClearBridge Dividend Strategy ESG ETF
ClearBridge Large Cap Growth ESG ETF
Western Asset Short Duration Income ETF
Western Asset Total Return ETF
Legg Mason Global Infrastructure ETF
Legg Mason Low Volatility High Dividend ETF
Legg Mason Small-Cap Quality Value ETF
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