these Funds will be able to minimize costs and delays associated with future shareholder meetings to revise any of these investment policies, or any portion thereof, should they become outdated or inappropriate. Therefore, the Boards are recommending that each of the above listed fundamental investment policies be reclassified as non-fundamental.
Franklin Templeton Money Fund (the “F-T Money Fund”) is a money market fund, currently offering three classes of shares. The F-T Money Fund achieves its investment objective of providing investors with as high a level of current income as is consistent with the preservation of capital by investing all of its assets in The Money Market Portfolio.
The F-T Money Fund’s three existing classes of shares have been designated as Franklin Templeton Money Fund-Class B, Franklin Templeton Money Fund-Class C and Franklin Templeton Money Fund-Class R. The F-T Money Fund was established as an exchange option for shareholders of Class B, C and R shares of other Franklin Templeton funds sold subject to a contingent deferred sales charge (“CDSC”). Thus, shares of the F-T Money Fund may only be purchased in exchange for Class B, C and R shares of other Franklin Templeton funds or through the reinvestment of dividends. Each of the F-T Money Fund’s Class B, C and R shares have associated Rule 12b-1 fees and CDSCs that are the same as the Rule 12b-1 fees of Class B, C and R shares of other Franklin Templeton funds. Class B shares of the F-T Money Fund, therefore, are offered with an associated Rule 12b-1 fee of 0.65%.
Class B shares of the F-T Money Fund and of other Franklin Templeton funds (“Other FT B Shares”) are subject to a CDSC which declines over a period of seven years from 4% after the first two years of investment, to 3% for the next two years, to 2% after five years, to 1% after six years, to zero after seven years. After eight years as an investor in any combination of Class B shares in the Franklin Templeton funds, shareholders of Other FT B Shares become shareholders of Class A shares of the fund in which they are then invested, as the Class B shares held by an investor on the eighth year anniversary automatically convert into Class A shares of such fund. To the extent that a shareholder of Other FT B Shares exchanges into the F-T Money Fund’s Class B shares, the holding period while a shareholder of the F-T Money Fund’s Class B shares is added to the holding period for the Other FT B Shares to count towards the eight year conversion period. Similarly, if Class B shares of the F-T Money Fund are exchanged into Other FT B Shares, the time during which a shareholder was invested in Class B shares of the F-T Money Fund will count towards the eight-year conversion period.
The automatic conversion feature for Other FT B Shares is included as part of the rights and preferences of the Other FT B Shares either as part of constituent corporate or trust documents for the funds offering such shares or in the resolutions establishing such shares. Thus, shareholders of Other FT B Shares, which are subject to a Rule 12b-1 fee of 1.00% (for equity funds) or 0.65% (for fixed income funds), upon conversion, become shareholders of Class A shares of such funds with a maximum Rule 12b-1 fee of up to 0.35% (for equity funds) or 0.25% (for fixed income funds).
The F-T Money Fund initially was created solely as a money market fund option for shareholders of Other FT B Shares. It was not anticipated, at the time the F-T Money Fund was created, that shareholders would remain as shareholders of the F-T Money Fund beyond the eighth anniversary of becoming a Class B shareholder of a Franklin Templeton fund (the “Eighth Anniversary”). However, as the Eighth Anniversary of the initial offering of Class B shares in the Franklin Templeton funds approaches, in order to accommodate the situation where a Class B shareholder remains a Fund shareholder on the Eighth Anniversary, the F-T Money Fund has established of Class A shares, and the Board is recommending that shareholders approve modification of the rights and preferences of the Class B shares, to provide that the Class B shares automatically will convert to Class A shares no later than three months after a Class B shareholder’s Eighth Anniversary. This change would align the rights and preferences of the F-T Money Fund’s Class B shares with those of Other FT B Shares.
All Class B shareholders of the F-T Money Fund who hold Class B shares beyond the Eighth Anniversary will have their Class B shares automatically converted into Class A shares of the F-T Money Fund, following shareholder approval. Thereafter, assuming shareholder approval, all Class B shareholders of the F-T Money Fund on their Eighth Year Anniversary will become Class A shareholders of the F-T Money Fund.
Exchanges and conversions of Class B shares into Class A shares may be accomplished on a tax-free basis under the Code.
THE BOARD OF FRANKLIN TEMPLETON MONEY FUND TRUST UNANIMOUSLY RECOMMENDS
APPROVAL OF PROPOSAL 7.
uADDITIONAL INFORMATION ABOUT THE FUNDS
The Investment Managers.The Investment Managers of the Funds and their addresses are listed onExhibit P to this proxy statement. Pursuant to an investment management agreement with the Fund, the Investment Manager for a Fund (along with any sub-investment manager) manages the investment and reinvestment of that Fund’s assets. Each Investment Manager is a direct or indirect, wholly owned subsidiary of Resources.
The Administrator.The administrator of each Fund is Franklin Templeton Services, LLC (“FT Services”), with offices at One Franklin Parkway, San Mateo, California 94403-1906 and 500 East Broward Boulevard, Suite 2100, Fort Lauderdale, Florida 33394-3091. FT Services is an indirect, wholly owned subsidiary of Resources and an affiliate of the Investment Managers. Pursuant to an administration agreement, FT Services performs certain administrative functions for each Fund.
The Underwriter.The underwriter for the Funds is Franklin/Templeton Distributors, Inc., One Franklin Parkway, San Mateo, California 94403-1906.
The Transfer Agent.The transfer agent and shareholder servicing agent for the Funds is Franklin Templeton Investor Services, LLC, with offices at One Franklin Parkway, San Mateo, California 94403-1906 and 100 Fountain Parkway, St. Petersburg, Florida 33716-1205.
The Custodians.The custodian for each Franklin Fund and Mutual Series Fund is Bank of New York, Mutual Funds Division, 100 Church Street, New York, New York 10286. The custodian for each Templeton Fund participating in the Meeting is JPMorgan Chase Bank, MetroTech Center, Brooklyn, New York 11245.
Pending Litigation. Resources, certain of its subsidiaries and certain Franklin Templeton mutual funds, current and former officers, employees, and Resources and/or Fund directors/ trustees have been named in multiple lawsuits in different courts alleging violations of various federal securities and state laws and seeking, among other relief, monetary damages, restitution, removal of fund trustees, directors, advisers, administrators and distributors, rescission of management contracts and 12b-1 plans, and/or attorneys’ fees and costs. Specifically, the lawsuits claim breach of duty with respect to alleged arrangements to permit market timing and/or late trading activity.
The majority of these lawsuits duplicate, in whole or in part, the allegations asserted in regulatory matters that were previously settled and disclosed in Resources’ public filings, including: the February 4, 2004 Massachusetts Administrative Complaint concerning one instance of market timing; and the SEC’s findings regarding market timing in its August 2, 2004 Order. The lawsuits are styled as class actions, or derivative actions on behalf of either the named funds, including many of the Funds, or Resources. To date, more than 400 similar lawsuits against at least 19 different mutual fund companies, among other defendants, have been filed in federal district courts throughout the country. Because these cases involve common questions of fact, the Judicial Panel on Multidistrict Litigation (the “Judicial Panel”) ordered the creation of a multidistrict litigation in the United States District Court for the District of Maryland, entitled “In re Mutual Funds Investment Litigation” (the “MDL”). The Judicial Panel then transferred similar cases from different districts to the MDL for coordinated or consolidated pretrial proceedings, where they remain pending.
Additional information about these lawsuits is disclosed in Part I., Item 3 Legal Proceedings of Resources’ Form 10-K, as well as on Resources’ website at franklintempleton.com, under “Statement on Current Industry Issues.”
Other Matters.Each Fund’s audited financial statements and annual report for its last completed fiscal year, and any subsequent semi-annual report to shareholders, are available free of charge. To obtain a copy, please call 1-800/DIAL BEN® (1-800-342-5236) or forward a written request to Franklin Templeton Investor Services, LLC, P.O. Box 33030, St. Petersburg, Florida 33733-8030.
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Principal Shareholders.The outstanding shares and classes of the Funds as of November 30, 2006, are set forth inExhibit Q.
From time to time, the number of shares held in “street name” accounts of various securities dealers for the benefit of their clients may exceed 5% of the total shares outstanding of any class or Fund. To the knowledge of the Funds’ management, as of November 30, 2006, there were no other entities, except as set forth inExhibit R, owning beneficially more than 5% of the outstanding shares of any class of any Fund.
In addition, to the knowledge of the Funds’ management, as of November 30, 2006 and except as noted above under Proposal 1, no nominee or Board member of a Fund owned 1% or more of the outstanding shares of that Fund.
Contacting the Boards.If a shareholder wishes to send a communication to the Board of a Fund, such correspondence should be in writing and addressed to the Board of that Fund at the Fund’s offices as follows: for the Franklin Funds, One Franklin Parkway, San Mateo, California 94403-1906, Attention: Secretary, and, for the Templeton Funds, 500 East Broward Boulevard, Suite 2100, Fort Lauderdale, Florida 33394-3091, Attention: Secretary. The correspondence will be given to the appropriate Board for review and consideration.
uAUDIT COMMITTEES
Audit Committee and Independent Registered Public Accounting Firm. Each Fund’s Audit Committee is responsible for the appointment, compensation and retention of the Fund’s independent registered public accounting firm (“auditors”), including evaluating their independence, recommending the selection of the Fund’s auditors to the full Board and meeting with such auditors to consider and review matters relating to the Fund’s financial reports and internal auditing. The members of the Audit Committees for the Funds are set forth below. All of the members of the Audit Committees are Independent Board Members.
| Fund(s) | | | | Audit Committee Members |
| Franklin California Tax-Free Income Fund, Inc., Franklin Custodian | | Harris J. Ashton |
| Funds, Inc. and Franklin New York Tax-Free Income Fund | | Edith E. Holiday (Chairperson) |
| | | Frank A. Olson |
| |
| Franklin California Tax-Free Trust | | Harris J. Ashton |
| | | Edith E. Holiday |
| | | Frank W. T. LaHaye (Chairperson) |
| | | John B. Wilson |
| |
| Franklin Capital Growth Fund and Franklin Gold and Precious Metals | | Edith E. Holiday |
| Fund | | Frank W. T. LaHaye (Chairperson) |
| | | Frank A. Olson |
| | | John B. Wilson |
| |
| Franklin Global Trust, Franklin Real Estate Securities Trust, Franklin | | Robert F. Carlson |
| Templeton Fund Allocator Series and Franklin Templeton Global Trust | | Edith E. Holiday |
| | | Frank W. T. LaHaye (Chairperson) |
| | | John B. Wilson |
| |
| Franklin High Income Trust, Franklin New York Tax-Free Trust, | | Robert F. Carlson |
| Franklin Templeton Money Fund Trust, Institutional Fiduciary Trust | | Edith E. Holiday |
| and The Money Market Portfolios | | Frank W. T. LaHaye (Chairperson) |
| |
| Franklin Investors Securities Trust and Franklin Tax-Free Trust | | Edith E. Holiday |
| | | Frank W. T. LaHaye (Chairperson) |
| | | Frank A. Olson |
| |
| Franklin Managed Trust and Franklin Value Investors Trust | | Frank T. Crohn (Chairperson) |
| | | Burton J. Greenwald |
| | | Charles Rubens II |
| | | Leonard Rubin |
| | | Robert E. Wade |
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| Fund(s) | | | | Audit Committee Members |
| Franklin Municipal Securities Trust, Franklin Strategic Series and | | Edith E. Holiday |
| Franklin Templeton International Trust | | Frank W. T. LaHaye (Chairperson) |
| | | John B. Wilson�� |
| |
| Franklin Strategic Mortgage Portfolio | | Harris J. Ashton |
| | | Edith E. Holiday |
| | | Frank W. T. LaHaye (Chairperson) |
| |
| Franklin Mutual Series Fund Inc. and Franklin Mutual Recovery Fund | | Edward I. Altman |
| | | Ann Torre Bates (Chairperson) |
| | | Robert E. Wade |
| |
| Templeton China World Fund, Templeton Developing Market Trust, | | Frank J. Crothers |
| Templeton Funds, Inc., Templeton Global Smaller Companies Fund, | | David W. Niemiec |
| Templeton Income Trust and Templeton Institutional Funds, Inc. | | Frank A. Olson (Chairperson) |
| | | Constantine D. Tseretopoulos |
Selection of Auditors.The Audit Committee and the Board of each Fund, other than Franklin Managed Trust and the Mutual Series Funds, have selected the firm of PricewaterhouseCoopers LLP (“PwC”) as auditors of the Fund for its current fiscal year. The Audit Committee and the Board of Franklin Managed Trust have selected the firm of Tait, Weller & Baker LLP (“Tait Weller”) as auditors of Franklin Managed Trust for its current fiscal year. The Audit Committee and the Board of each of the Mutual Series Funds have selected the firm of Ernst & YoungLLP (“E&Y”) as auditors of those Funds for their current fiscal year. Representatives of PwC, Tait Weller and E&Y are not expected to be present at the Meeting, but will have the opportunity to make a statement if they wish, and will be available should any matter arise requiring their presence.
Audit Fee Information for all Funds other than Franklin Managed Trust and the Mutual Series Funds:
Audit Fees.The aggregate fees paid to PwC for professional services rendered by PwC for the audit of the Funds’ annual financial statements or for services that are normally provided by PwC in connection with statutory and regulatory filings or engagements for the last two fiscal years (ended on or before September 30, 2006) for the Funds are set forth inExhibit S to this proxy statement.
Audit-Related Fees.There were no fees paid to PwC for assurance and related services by PwC that are reasonably related to the performance of the audit or review of the 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 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.
Tax Fees.The aggregate fees paid to PwC for tax compliance, tax advice or tax planning services (“tax services”) to the Funds for the last two fiscal years (ended on or before September 30, 2006) are set forth inExhibit S to this proxy statement. The tax services for which these fees were paid included tax compliance.
In addition, the Audit Committees of the Funds pre-approve PwC’s engagement for tax services to be provided to 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 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.
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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 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 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 were 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 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.
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 2005 for such other services.
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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 $0 and $199,802, respectively. The services for which these fees were paid included financial due diligence.
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 $29,167 and $249,802, 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.
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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. To the extent the solicitation costs can be identified for a particular Fund, such costs will be paid by such Fund. Otherwise the costs are borne across all Funds based upon the number of shareholder accounts. The Funds reimburse brokerage firms and others for their expenses in forwarding proxy material to the beneficial owners and soliciting 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 $4 million. 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
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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 the 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, (ii) the broker or nominee has voted such shares in their discretion on Proposal 1, but (iii) the broker or nominee does not have discretionary voting power on other matters), 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 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 Feeder 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.
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Simultaneous Meetings.The Meeting is to be held at the same time as a meeting of shareholders of certain other Franklin Templeton funds. 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. 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 cards 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 5, 2007
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