In addition, the Audit Committees of the Funds pre-approve PwC’s engagement for audit-related services with the Investment Managers and certain entities controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds, which engagements relate directly to the operations and financial reporting of that Fund. There were no fees paid to PwC for these services for the twelve month periods ended September 30, 2006 and 2005.
the operations and financial reporting of the Funds. The aggregate fees for these tax services for the twelve month periods ended September 30, 2006 and 2005 were $3,961 and $4,955, respectively. The tax services for which these fees were paid included tax compliance and advice.
All Other Fees.The aggregate fees paid for products and services provided by PwC to the Funds, other than the services reported above, for the last two fiscal years are set forth inExhibit S to this proxy statement. The services for which these fees were paid included review of materials provided to the Boards in connection with the investment management contract renewal process.
In addition, the Audit Committees of the Funds pre-approve PwC’s engagement for other services with the Investment Managers and certain entities controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds, which engagements relate directly to the operations and financial reporting of the Funds. The aggregate fees paid to PwC for the twelve month periods ended September 30, 2006 and September 30, 2005 for such other services, including those reported above, were $175,861 and $5,835, respectively. The services for which these fees were paid included review of materials provided to the Boards in connection with the investment management contract renewal process and the review of the ICI transfer agent survey.
Aggregate Non-Audit Fees.The aggregate fees paid to PwC for non-audit services to the Funds for their last two fiscal years and to the Investment Managers or to any entity controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds for the twelve month periods ended September 30, 2006 and 2005 were $199,822 and $10,790, respectively.
The Audit Committees of the Funds have determined that the provision of the non-audit services, including tax-related services, that were rendered to the Investment Managers and to any entities controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds is compatible with maintaining PwC’s independence.
Audit Fee Information for Franklin Managed Trust:
Audit Fees.The aggregate fees paid to Tait Weller for professional services rendered by Tait Weller for the audit of Franklin Managed Trust’s annual financial statements or for services that are normally provided by Tait Weller in connection with statutory and regulatory filings or engagements for the last two fiscal years ended September 30, 2006 and September 30, 2005, for Franklin Managed Trust were $21,000 and $20,500, respectively.
Audit-Related Fees.There were no fees paid to Tait Weller for assurance and related services by Tait Weller that are reasonably related to the performance of the audit or review of Franklin Managed Trust’s financial statements and not reported under “Audit Fees” above for the last two fiscal years ended September 30, 2006.
In addition, the Audit Committee of Franklin Managed Trust pre-approves Tait Weller’s engagement for audit-related services with the Investment Manager for Franklin Managed Trust and certain entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to Franklin Managed Trust, which engagements relate directly to the operations and financial reporting of Franklin Managed Trust. There were no fees paid to Tait Weller for these services for the twelve month periods ended September 30, 2006 and 2005.
Tax Fees.Tait Weller did not render any tax services to Franklin Managed Trust for the last two fiscal years ended September 30, 2006 and September 30, 2005.
In addition, the Audit Committee of Franklin Managed Trust pre-approves Tait Weller’s engagement for tax services to be provided to the Investment Manager to Franklin Managed Trust and certain entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to Franklin Managed Trust, which engagements relate directly to the operations and financial reporting of Franklin Managed Trust. There were no fees paid to Tait Weller for the tax services for the twelve month periods ended September 30, 2006 and 2005.
All Other Fees.There were no additional fees paid for products and services provided by Tait Weller to Franklin Managed Trust, other than the services reported above.
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In addition, the Audit Committee of Franklin Managed Trust pre-approves Tait Weller’s engagement for other services with the Investment Manager to Franklin Managed Trust and certain entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to Franklin Managed Trust, which engagements relate directly to the operations and financial reporting of Franklin Managed Trust. There were no other fees paid to Tait Weller for the twelve month periods ended September 30, 2006 and September 30, 2005 for such other services.
Aggregate Non-Audit Fees.There were no fees paid to Tait Weller for non-audit services to Franklin Managed Trust for its last two fiscal years or to the Investment Manager to Franklin Managed Trust or to any entity controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to Franklin Managed Trust for the twelve month periods ended September 30, 2006 and 2005.
The Audit Committee of Franklin Managed Trust has determined that the provision of the non-audit services, including tax-related services, that were rendered to the Investment Manager of Franklin Managed Trust and to any entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to Franklin Managed Trust is compatible with maintaining Tait Weller’s independence.
Audit Fee Information for the Mutual Series Funds:
Audit Fees.The aggregate fees paid to E&Y for professional services rendered by E&Y for the audit of the Mutual Series Funds’ annual financial statements or for services that are normally provided by E&Y in connection with statutory and regulatory filings or engagements for the last two fiscal years (ended on or before September 30, 2006) for the Mutual Series Funds are set forth inExhibit S to this proxy statement.
Audit-Related Fees.There were no fees paid to E&Y for assurance and related services by E&Y that are reasonably related to the performance of the audit or review of the Mutual Series Funds’ financial statements and not reported under “Audit Fees” above for the last two fiscal years (ended on or before September 30, 2006).
In addition, the Audit Committees of the Mutual Series Funds pre-approve E&Y’s engagement for audit-related services with the Investment Manager for the Mutual Series Funds and certain entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to the Mutual Series Funds, which engagements relate directly to the operations and financial reporting of the Mutual Series Funds. There were no fees paid to E&Y for these services for the twelve month periods ended September 30, 2006 and 2005.
Tax Fees.E&Y did not render any tax services to any Mutual Series Fund for the last two fiscal years (ended on or before September 30, 2006).
In addition, the Audit Committees of the Mutual Series Funds pre-approve E&Y’s engagement for tax services to be provided to the Investment Manager to the Mutual Series Funds and certain entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to the Mutual Series Funds, which engagements relate directly to the operations and financial reporting of the Mutual Series Funds. The aggregate fees for these tax services for the twelve month periods ended September 30, 2006 and 2005 were $29,167 and $50,000, respectively. The tax services for which these fees were paid included tax compliance and advice.
All Other Fees. There were no additional fees paid for products and services provided by E&Y to the Mutual Series Funds, other than the services reported above, for the last two fiscal years.
In addition, the Audit Committees of the Mutual Series Funds pre-approve E&Y’s engagement for other services with the Investment Manager to the Mutual Series Funds and certain entities controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to the Mutual Series Funds, which engagements relate directly to the operations and financial reporting of the Mutual Series Funds. The aggregate fees paid to E&Y for the twelve month periods ended September 30, 2006 and September 30, 2005 for such other services and not reported above were $199,802 and $0, respectively. The services for which these fees were paid included review of materials provided to the applicable Boards in connection with the investment management contract renewal process.
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Aggregate Non-Audit Fees.The aggregate fees paid to E&Y for non-audit services to the Mutual Series Funds for their last two fiscal years and to the Investment Manager to the Mutual Series Funds or to any entity controlling, controlled by, or under common control with such Investment Manager that provide ongoing services to the Mutual Series Funds for the twelve month periods ended September 30, 2006 and 2005 were $228,969 and $50,000, respectively.
The Audit Committees of the Mutual Series Funds have determined that the provision of the non-audit services, including tax-related services, that were rendered to the Investment Manager of the Mutual Series Funds and to any entities controlling, controlled by, or under common control with such Investment Managers that provide ongoing services to the Mutual Series Funds is compatible with maintaining E&Y’s independence.
Audit Committee Report.The following information is required by the SEC’s rules to be provided for all closed-end funds. Of the Funds participating in the Meeting, Franklin Mutual Recovery Fund is the only closed-end fund.
The Board of Franklin Mutual Recovery Fund has adopted and approved a formal written charter for its Audit Committee, which sets forth the Audit Committee’s responsibilities. A copy of the charter is attached asExhibit T to this proxy statement.
As required by its charter, Franklin Mutual Recovery Fund’s Audit Committee reviewed the Fund’s audited financial statements and met with Fund management, as well as with E&Y, the Fund’s auditors, to discuss the financial statements.
The Franklin Mutual Recovery Fund Audit Committee received the written disclosures and the letter from E&Y required by Independence Standards Board Standard No. 1. The Audit Committee also received the report of E&Y regarding the results of their audit. In connection with their review of the financial statements and the auditors’ report, the members of the Audit Committee discussed with a representative of E&Y, E&Y’s independence, as well as the following: the auditors’ responsibilities in accordance with generally accepted auditing standards; the auditors’ responsibilities for information prepared by management that accompanies the Fund’s audited financial statements and any procedures performed and the results; the initial selection of, and whether there were any changes in, significant accounting policies or their application; management’s judgments and accounting estimates; whether there were any significant audit adjustments; whether there were any disagreements with management; whether there was any consultation with other accountants; whether there were any major issues discussed with management prior to the auditors’ retention; whether the auditors encountered any difficulties in dealing with management in performing the audit; and the auditors’ judgments about the quality of the Fund’s accounting principles.
Based on its review and discussions with management and Franklin Mutual Recovery Fund’s auditors, the Audit Committee did not become aware of any material misstatements or omissions in the financial statements. Accordingly, the Audit Committee recommended to the Board that the audited financial statements be included in the Fund’s Annual Report to Shareholders for the fiscal year ended March 31, 2006 for filing with the U.S. Securities and Exchange Commission.
| FRANKLIN MUTUAL RECOVERY FUND |
| AUDIT COMMITTEE |
| |
| Edward I. Altman |
| Ann Torre Bates (Chair) |
| Robert E. Wade |
Audit Committee Pre-Approval Policies and Procedures.As of the date of this proxy statement, no Audit Committee has adopted written pre-approval policies and procedures. As a result, all such services described above and provided by PwC, E&Y or Tait Weller must be directly pre-approved by the applicable Audit Committee(s).
uFURTHER INFORMATION ABOUT VOTING AND THE MEETING
Solicitation of Proxies.Your vote is being solicited by the Boards. The cost of soliciting proxies, including the fees of a proxy soliciting agent, will be borne by the Funds, [pro rata based upon ______]. The Funds reimburse brokerage firms and others for their expenses in forwarding proxy material to the beneficial owners and soliciting
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them to execute proxies. The Funds expect that the solicitation will be primarily by mail. In addition to solicitation by mail, certain officers and representatives of a Fund or its affiliates and certain financial services firms and their representatives, who will receive no extra compensation for their services, may solicit proxies by telephone, telegram or personally.
MIS Corporation, a subsidiary of Automatic Data Processing, Inc. (the “Solicitor”), has been engaged to assist in the solicitation of proxies, at an estimated cost of $___________. As the date of the Meeting approaches, certain Fund shareholders may receive a telephone call from a representative of the Solicitor if their votes have not yet been received. Authorization to permit the Solicitor to execute proxies may be obtained by telephonic instructions from shareholders of the Funds. Proxies that are obtained telephonically will be recorded in accordance with the procedures set forth below. The Boards believe that these procedures are reasonably designed to ensure that both the identity of the shareholder casting the vote and the voting instructions of the shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the Solicitor representative is required to ask for each shareholder’s full name and address and to confirm that the shareholder has received the proxy materials in the mail. If the shareholder is a corporation or other entity, the Solicitor representative is required to ask for the person’s title and confirmation that the person is authorized to direct the voting of the shares. If the information solicited agrees with the information provided to the Solicitor, then the Solicitor may ask for the shareholder’s instructions on the Proposals. Although the Solicitor representative is permitted to answer questions about the process, he or she is not permitted to recommend to the shareholder how to vote, other than to read any recommendation set forth in the proxy statement. The Solicitor will record the shareholder’s instructions on the card. Within 72 hours, the shareholder will be sent a letter or mailgram to confirm his or her vote and asking the shareholder to call the Solicitor immediately if his or her instructions are not correctly reflected in the confirmation.
If a shareholder wishes to participate in the Meeting, but does not wish to give a proxy by telephone, the shareholder may still submit the proxy card(s) originally sent with the proxy statement or attend in person.
The Funds intend to pay all costs associated with the solicitation and the Meeting.
Voting by Broker-Dealers.The Funds expect that, before the Meeting, broker-dealer firms holding shares of the Funds 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 Funds understand that broker-dealers may vote on Proposal 1, Election of a Board of Trustees/ Directors, 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.For each Fund or series thereof, except as set forth below, holders of 40% of the outstanding shares of the Fund (or if the proposal is to be voted upon by a series thereof separately, holders of 40% of that series), present in person or represented by proxy, constitutes a quorum at the Meeting for purposes of acting upon the Proposals applicable to such Fund (or series thereof). For Franklin California Tax-Free Income Fund, Inc., Franklin Custodian Funds, Inc., Franklin Mutual Recovery Fund, Franklin Mutual Series Fund Inc., Templeton Funds, Inc., Templeton Income Trust and Templeton Institutional Funds, Inc., holders of a majority of the outstanding shares of the Fund (or if the proposal is to be voted upon by a series thereof separately, then a majority of the outstanding shares of that series), present in person or represented by proxy constitutes a quorum at the Meeting for purpose of acting upon the Proposals applicable to such Fund (or series thereof). The shares over which broker-dealers have discretionary voting power, the shares that represent “broker non-votes” (i.e., shares held by brokers or nominees as to which (i) instructions have not been received from the beneficial owners or persons entitled to vote and (ii) the broker or nominee does not have discretionary voting power on a particular matter), and the shares whose proxies reflect an abstention on any item will all be counted as shares present and entitled to vote for purposes of determining whether the required quorum of shares exists.
Method of Tabulation.The vote required to approve each Proposal and the effects of abstentions and broker non-votes on each Proposal is set forth inExhibit U to this proxy statement. For the Master Portfolio, whether or not a Proposal is approved by its shareholders will be determined by reference to the shares outstanding of the various Feeder Funds. Feeder Fund shareholders who do not provide voting instructions to their Feeder Fund will
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not affect the Feeder Fund’s votes at the Meeting with respect to the Master Portfolio. The percentage of a Feeder Fund’s votes representing Feeder Fund shareholders not providing voting instructions will be voted by such Feeder Fund’s Board or officers in the same proportion as the Fund shareholders who provide voting instructions.
Generally however, abstentions and broker non-votes will be treated as votes present at the Meeting, but will not be treated as votes cast, and therefore may have the same effect as a vote “against” a proposal that requires an affirmative majority vote of outstanding shares or of shares present and entitled to vote at the Meeting.
Simultaneous Meetings.The Meeting is to be held at the same time as a meeting of shareholders of Franklin Templeton Variable Insurance Products Trust, Franklin Money Fund, Franklin Tax-Exempt Money Fund, Franklin Federal Tax-Free Income Fund and Templeton Growth 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 Meeting as to any Fund may be adjourned from time to time for any reason whatsoever by vote of the holders of a majority of the shares present (in person or by proxy and entitled to vote at the Meeting), whether or not quorum is present. Such authority to adjourn the Meeting may be used in the event that a quorum is not present at the Meeting, or in the event that a quorum is present but sufficient votes have not been received to approve a Proposal, or for any other reason consistent with applicable state law and the Fund’s By-Laws, including to allow for the further solicitation of proxies. Any adjournment may be made with respect to any business which might have been transacted at the Meeting, and any adjournment will not delay or otherwise affect the effectiveness and validity of any business transacted at the Meeting prior to adjournment. 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 Funds 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 such Funds did not have timely notice, as set forth in the SEC’s proxy rules.
Shareholder Proposals.The Funds are not required and do not intend to hold regular annual meetings of shareholders. A shareholder who wishes to submit a proposal for consideration for inclusion in a Fund’s proxy statement for the next meeting of shareholders of that Fund should send his or her written proposal to such Fund’s offices: for all Franklin Funds – One Franklin Parkway, San Mateo, California 94403-1906, Attention: Secretary; for all Templeton Funds - 500 East Broward Boulevard, Suite 2100, Fort Lauderdale, Florida 33394-3091, Attention: Secretary; and for all Mutual Series Funds – 101 John F. Kennedy Parkway, Short Hills, New Jersey 07078-2702, Attention: Secretary, so that it is received within a reasonable time in advance of such meeting in order to be included in the appropriate Fund’s proxy statement and proxy card relating to that meeting and presented at the meeting. A shareholder proposal may be presented at a meeting of shareholders only if such proposal concerns a matter that may be properly brought before the meeting under applicable federal proxy rules, state law, and the applicable Fund’s governing instruments.
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.
No business other than the matters described above is expected to come before the Meeting, but should any other matter requiring a vote of shareholders arise, including any questions as to an adjournment or postponement of the Meeting, the persons designated as proxies named on the enclosed proxy card will vote on such matters in accordance with the views of management.
| By Order of the Boards of Trustees/Directors, |
| | |
| Craig S. Tyle,Vice President |
January __, 2007
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