Members of the Audit Committee are: Mary C. Choksi, J. Michael
Luttig and Larry D. Thompson.
Item
6. Schedule of Investments. N/A
Item 7
. Disclosure of Proxy
Voting Policies and Procedures for Closed-End Management Investment Companies.
The board of trustees of the Fund has delegated the
authority to vote proxies related to the portfolio securities held by the Fund
to the Fund's investment manager, Franklin Advisers, Inc. in accordance with
the Proxy Voting Policies and Procedures (Policies) adopted by the investment
manager.
RESPONSIBILITY OF THE INVESTMENT MANAGER TO VOTE PROXIES
Franklin Advisers, Inc. (hereinafter the
"Investment Manager") has delegated its administrative duties with respect
to voting proxies for securities to the Proxy Group within Franklin Templeton
Companies, LLC (the "Proxy Group"), a wholly-owned subsidiary of
Franklin Resources, Inc. Franklin Templeton Companies, LLC provides a variety
of general corporate services to its affiliates, including, but not limited to,
legal and compliance activities. Proxy duties consist of analyzing proxy
statements of issuers whose stock is owned by any client (including both
investment companies and any separate accounts managed by the Investment Manager)
that has either delegated proxy voting administrative responsibility to the
Investment Manager or has asked for information and/or recommendations on the
issues to be voted. The Investment Manager will inform Advisory Clients that have
not delegated the voting responsibility but that have requested voting advice
about the Investment Manager's views on such proxy votes. The Proxy Group also
provides these services to other advisory affiliates of the Investment Manager.
The Proxy Group will process proxy votes on behalf of,
and the Investment Manager votes proxies solely in the best interests of,
separate account clients, the Investment Manager-managed investment company
shareholders, or shareholders of funds that have appointed Franklin Templeton
International Services S.à.r.l. (“FTIS S.à.r.l.”) as the Management Company,
provided such funds or clients have properly delegated such responsibility in
writing, or, where employee benefit plan assets subject to the Employee
Retirement Income Security Act of 1974, as amended, are involved (“ERISA
accounts”), in the best interests of the plan participants and beneficiaries
(collectively, "Advisory Clients"), unless (i) the power to vote has
been specifically retained by the named fiduciary in the documents in which the
named fiduciary appointed the Investment Manager or (ii) the documents
otherwise expressly prohibit the Investment Manager from voting proxies. The
Investment Manager recognizes that the exercise of voting rights on securities
held by ERISA plans for which the Investment Manager has voting responsibility
is a fiduciary duty that must be exercised with care, skill, prudence and
diligence.
In certain circumstances, Advisory Clients are permitted
to direct their votes in a solicitation pursuant to the Investment Management
Agreement. An Advisory Client that wishes to direct its vote shall give
reasonable prior written notice to the Investment Manager indicating such
intention and provide written instructions directing the Investment Manager or
the Proxy Group to vote regarding the solicitation. Where such prior written
notice is received, the Proxy Group will vote proxies in accordance with such written
notification received from the Advisory Client.
The Investment Manager has adopted and implemented Proxy
Voting Policies and Procedures (“Proxy Policies”) that it believes are
reasonably designed to ensure that proxies are voted in the best interest of
Advisory Clients in accordance with its fiduciary duties and rule 206(4)-6
under the Investment Advisers Act of 1940. To the extent that the Investment
Manager has a subadvisory agreement with an affiliated investment manager (the
“Affiliated Subadviser”) with respect to a particular Advisory Client, the
Investment Manager may delegate proxy voting responsibility to the Affiliated
Subadviser. The Investment Manager may also delegate proxy voting
responsibility to a subadviser that is not an Affiliated Subadviser in certain
limited situations as disclosed to fund shareholders (e.g., where an Investment
Manager to a pooled investment vehicle has engaged a subadviser that is not an
Affiliated Subadviser to manage all or a portion of the assets).
*
Rule 38a-1 under the Investment Company
Act of 1940 (“1940 Act”) and Rule 206(4)-7 under the Investment Advisers Act of
1940 (“Advisers Act”) (together the “Compliance Rule”) require registered
investment companies and registered investment advisers to, among other things,
adopt and implement written policies and procedures reasonably designed to
prevent violations of the federal securities laws (“Compliance Rule Policies
and Procedures”).
HOW THE INVESTMENT MANAGER VOTES PROXIES
All proxies received by the Proxy Group will be voted
based upon the Investment Manager's instructions and/or policies. To assist it
in analyzing proxies of equity securities, the Investment Manager subscribes to
Institutional Shareholder Services Inc. ("ISS"), an unaffiliated
third-party corporate governance research service that provides in-depth analyses
of shareholder meeting agendas and vote recommendations. In addition, the
Investment Manager subscribes to ISS’s Proxy Voting Service and Vote Disclosure
Service. These services include receipt of proxy ballots, custodian bank
relations, account maintenance, vote execution, ballot reconciliation, vote
record maintenance, comprehensive reporting capabilities, and vote disclosure
services. Also, the Investment Manager
subscribes to Glass, Lewis & Co., LLC ("Glass
Lewis"), an unaffiliated third-party analytical research firm, to receive
analyses and vote recommendations on the shareholder meetings of publicly held
U.S. companies, as well as a limited subscription to its international
research. Although analyses provided by ISS, Glass Lewis, and/or another independent
third-party proxy service provider (each a “Proxy Service”) are thoroughly
reviewed and considered in making a final voting decision, the Investment Manager
does not consider recommendations from a Proxy Service or any third-party to be
determinative of the Investment Manager's ultimate decision. Rather, the
Investment Manager exercises its independent judgment in making voting decisions.
As a matter of policy, the officers, directors and employees of the Investment
Manager and the Proxy Group will not be influenced by outside sources whose
interests conflict with the interests of Advisory Clients.
For ease of reference, the Proxy Policies often refer to
all Advisory Clients. However, our processes and practices seek to ensure that
proxy voting decisions are suitable for individual Advisory Clients. In some
cases, the investment manager’s evaluation may result in an individual Advisory
Client or Investment Manager voting differently, depending upon the nature and
objective of the fund or account, the composition of its portfolio, whether the
Investment Manager has adopted a specialty or custom voting policy, and other
factors.
Circumstances Where the Investment Manager May Generally
Rely on the Recommendations of a Proxy Service
Certain of the Investment Manager’s clients’ accounts
are separate accounts or funds (or a portion thereof) that follow a smart beta
strategy, are passively managed to track a particular securities index, or
employ a quantitative strategy. These accounts include certain client accounts
managed by Franklin Templeton Investment Solutions (“FTIS”), a business unit of
the Investment Manager that are managed systematically to either (i) track a
specified securities index (including but not limited to exchange traded funds
(“ETFs”)) or (ii) seek to achieve other stated investment objectives.
In the case of accounts managed to track an index, the
primary criteria for determining whether a security should be included (or
continue to be included) in an investment portfolio is whether such security is
a representative component of the securities index that the account is seeking
to track. For other systematically-managed accounts that do not track a
specific index, FTIS’s proprietary methodologies rely on a combination of
quantitative, qualitative, and behavioral analysis rather than fundamental
security research and analyst coverage that an actively-managed portfolio would
ordinarily employ. Accordingly, absent client direction, in light of the high
number of positions held by such accounts and the considerable time and effort
that would be required to review proxy statements and ISS or Glass Lewis
recommendations, the Investment Manager may review ISS’s non-US Benchmark
guidelines, ISS’s specialty guidelines (in particular, ISS’s Sustainability
guidelines), or Glass Lewis’s US guidelines ( the “the ISS and Glass Lewis
Proxy Voting Guidelines”) and determine, consistent with the best interest of
its clients, to provide standing instructions to the Proxy Group to vote
proxies according to the recommendations of ISS or Glass Lewis.
The Investment Manager, however, retains the ability to
vote a proxy differently than ISS or Glass Lewis recommends if the Investment
Manager determines that it would be in the best interests of Advisory Clients
(for example, where an issuer files additional solicitation materials after a
Proxy Service has issued its voting recommendations but sufficiently before the
vote submission deadline and these materials would reasonably be expected to
affect the Investment Manager’s voting determination).
All conflicts of interest will be resolved in the best
interests of the Advisory Clients. The Investment Manager is an affiliate of a
large, diverse financial services firm with many affiliates and makes its best
efforts to mitigate conflicts of interest. However, as a
general matter, the Investment Manager takes the position that relationships
between certain affiliates acquired as a result of the Legg Mason transaction
that do not use the “Franklin Templeton” name (“Legg Mason Affiliates”) and an
issuer (e.g., an investment management relationship between an issuer and a
Legg Mason Affiliate) do not present a conflict of interest for the Investment
Manager in voting proxies with respect to such issuer because: (i) the Investment
Manager operates as an independent business unit from the Legg Mason Affiliate
business units, and (ii) informational barriers exist between the Investment
Manager and the Legg Mason Affiliate business units. Franklin Templeton
employees are under an obligation to bring any conflicts of interest, including
conflicts of interest which may arise because of an attempt by a Legg Mason
Affiliate business unit or officer or employee to influence proxy voting by the
Investment Manager to the attention of Franklin Templeton’s Compliance.
Material conflicts of interest
could arise in a variety of situations, including as a result of the Investment
Manager’s or an affiliate’s (other than a Legg Mason Affiliate as described
above): (i) material business relationship with an issuer or proponent, (ii)
direct or indirect pecuniary interest in an issuer or proponent; or (iii) significant
personal or family relationship with an issuer or proponent.
Material conflicts of interest are identified by the
Proxy Group based upon analyses of client, distributor, broker dealer, and
vendor lists, information periodically gathered from directors and officers,
and information derived from other sources, including public filings. The Proxy
Group gathers and analyzes this information on a best efforts basis, as much of
this information is provided directly by individuals and groups other than the Proxy
Group, and the Proxy Group relies on the accuracy of the information it
receives from such parties.
Nonetheless, even though a potential conflict of
interest between the Investment Manager or an affiliate
(other than a Legg Mason Affiliate as described above) and an issuer may
exist: (1) the Investment Manager may vote in opposition to the recommendations
of an issuer’s management even if contrary to the recommendations of a
third-party proxy voting research provider; (2) if management has made no recommendations,
the Proxy Group may defer to the voting instructions of the Investment Manager;
and (3) with respect to shares held by Franklin Resources, Inc. or its
affiliates for their own corporate accounts, such shares may be voted without
regard to these conflict procedures.
Otherwise, in
situations
where a material conflict of interest is identified between the Investment
Manager or one of its affiliates (other than Legg Mason
Affiliates) and an issuer, the Proxy Group may vote consistent with the
voting recommendation of a Proxy Service or send the proxy directly to the
relevant Advisory Clients with the Investment Manager’s recommendation
regarding the vote for approval.
Where the Proxy Group refers a matter to an Advisory
Client, it may rely upon the instructions of a representative of the Advisory
Client, such as the board of directors or trustees, a committee of the board,
or an appointed delegate in the case of a U.S. registered investment company, a
conducting officer in the case of a fund that has appointed FTIS S.à.r.l as its
Management Company, the Independent Review Committee for Canadian investment
funds, or a plan administrator in the case of an employee benefit plan. A
quorum of the board of directors or trustees or of a committee of the board can
be reached by a majority of members, or a majority of non-recused members. The
Proxy Group may determine to vote all shares held by Advisory Clients of the
Investment Manager and affiliated Investment Managers (other
than Legg Mason Affiliates) in accordance with the instructions of one or
more of the Advisory Clients.
The Investment Manager may also decide whether to vote
proxies for securities deemed to present conflicts of interest that are sold
following a record date, but before a shareholder meeting date. The Investment
Manager may consider various factors in deciding whether to vote such proxies,
including the Investment Manager’s long-term view of the issuer’s securities
for investment, or it may defer the decision to vote to the applicable Advisory
Client. The Investment Manager also may be unable to vote, or choose not to
vote, a proxy for securities deemed to present a conflict of interest for any
of the reasons outlined in the first paragraph of the section of these policies
entitled “Proxy Procedures.”
Where a material conflict of interest has been
identified, but the items on which the Investment Manager’s vote recommendations
differ from a Proxy Service relate specifically to (1) shareholder proposals
regarding social or environmental issues, (2) “Other Business” without
describing the matters that might be considered, or (3) items the Investment
Manager wishes to vote in opposition to the recommendations of an issuer’s
management, the Proxy Group may defer to the vote recommendations of the
Investment Manager rather than sending the proxy directly to the relevant
Advisory Clients for approval.
To avoid certain potential conflicts of interest, the
Investment Manager will employ echo voting or pass-through voting, if possible,
in the following instances: (1) when a Franklin Templeton U.S. registered
investment company invests in an underlying fund in reliance on any one of Sections
12(d)(1)(F), or (G) of the Investment Company Act of 1940, as amended, (“1940
Act”), the rules thereunder, or pursuant to a U.S. Securities and Exchange
Commission (“SEC”) exemptive order thereunder; (2) when a Franklin Templeton
U.S. registered investment company invests uninvested cash in affiliated money
market funds pursuant to the rules under the 1940 Act or any exemptive orders
thereunder (“cash sweep arrangement”); or (3) when required pursuant to the
fund’s governing documents or applicable law. Echo voting means that the
Investment Manager will vote the shares in the same proportion as the vote of
all other holders of the fund’s shares. With respect to instances when a
Franklin Templeton U.S. registered investment company invests in an underlying
fund in reliance on any one of Sections 12(d)(1)(F) or (G) of the 1940 Act, the
rules thereunder, or pursuant to an SEC exemptive order thereunder, and there
are no other unaffiliated shareholders also invested in the underlying fund,
the Investment Manager will vote in accordance with the recommendation of such
investment company’s board of trustees or directors. In addition, to avoid
certain potential conflicts of interest, and where required under a fund’s
governing documents or applicable law, the Investment Manager will employ
pass-through voting when a Franklin Templeton U.S. registered investment
company invests in an underlying fund in reliance on Section 12(d)(1)(E) of the
1940 Act, the rules thereunder, or pursuant to an SEC exemptive order thereunder.
In “pass-through voting,” a feeder fund will solicit voting instructions from
its shareholders as to how to vote on the master fund’s proposals. If a
Franklin Templeton investment company becomes a holder of more than 25% of the
shares on a non-affiliated fund, as a result of a decrease in the outstanding
shares of the non-affiliated fund, then the Investment Manager will vote the
shares in the same proportion as the vote of all other holders of the
non-affiliated fund.
In addition, with respect to an open-ended collective
investment scheme formed as a Société d'Investissement à capital variable
(SICAV), in accordance with Luxembourg law, if one sub-fund (the “Acquirer”)
has invested in another sub-fund of the SICAV (the “Target”), then the voting
rights attached to the shares of the Target will be suspended for voting
purposes as long as they are held by the Acquirer. Similarly, in accordance
with Canadian law, Canadian mutual funds that are invested in another
proprietary mutual fund are prohibited from voting the units of the underlying
fund.
Weight Given Management Recommendations
One of the primary factors the Investment Manager considers
when determining the desirability of investing in a particular company is the
quality and depth of that company's management. Accordingly, the recommendation
of management on any issue is a factor that the Investment Manager considers in
determining how proxies should be voted. However, the Investment Manager does
not consider recommendations from management to be determinative of the
Investment Manager's ultimate decision. Each issue is considered on its own
merits, and the Investment Manager will not support the position of a company's
management in any situation where it determines that the ratification of management's
position would adversely affect the investment merits of owning that company's
shares.
The Investment Manager believes that engagement with issuers
is important to good corporate governance and to assist in making proxy voting
decisions. The Investment Manager may engage with issuers to discuss specific
ballot items to be voted on in advance of an annual or special meeting to
obtain further information or clarification on the proposals. The Investment
Manager may also engage with management on a range of environmental, social or
corporate governance issues throughout the year.
The Proxy Group is part of the Franklin Templeton Companies,
LLC Legal Department and is overseen by legal counsel. Full- time staff members
and support staff (which includes individuals that are employees of affiliates
of Franklin Templeton Companies, LLC) are devoted to proxy voting
administration and oversight and providing support and assistance where needed.
On a daily basis, the Proxy Group will review each proxy upon receipt as well
as any agendas, materials and recommendations that they receive from a Proxy
Service or other sources. The Proxy Group maintains a record of all shareholder
meetings that are scheduled for companies whose securities are held by the
Investment Manager's managed funds and accounts. For each shareholder meeting,
a member of the Proxy Group will consult with the research analyst that follows
the security and provide the analyst with the agenda, analyses of one or more
Proxy Services, recommendations and any other information provided to the Proxy
Group. Except in situations identified as presenting material conflicts of
interest, the Investment Manager's research analyst and relevant portfolio
manager(s) are responsible for making the final voting decision based on their
review of the agenda, analyses of one or more Proxy Services, proxy statements,
their knowledge of the company and any other information publicly available.
In situations where the Investment Manager has not
responded with vote recommendations to the Proxy Group by the deadline date,
the Proxy Group may vote consistent with the vote recommendations of a Proxy
Service. Except in cases where the Proxy Group is voting consistent with the
voting recommendation of a Proxy Service, the Proxy Group must obtain voting
instructions from the Investment Manager's research analyst, relevant portfolio
manager(s), legal counsel and/or the Advisory Client prior to submitting the
vote. In the event that an account holds a security that the Investment Manager
did not purchase on its behalf, and the Investment Manager does not normally
consider the security as a potential investment for other accounts, the Proxy
Group may vote consistent with the voting recommendations of a Proxy Service or
take no action on the meeting.
The Proxy Group is fully cognizant of its responsibility
to process proxies and maintain proxy records as may be required by relevant
rules and regulations. In addition, the Investment Manager understands its
fiduciary duty to vote proxies and that proxy voting decisions may affect the
value of shareholdings. Therefore, the Investment Manager will generally
attempt to process every proxy it receives for all domestic and foreign securities.
However, there may be situations in which the Investment Manager may be unable
to successfully vote a proxy, or may choose not to vote a proxy, such as where:
(i) a proxy ballot was not received from the custodian bank; (ii) a meeting
notice was received too late; (iii) there are fees imposed upon the exercise of
a vote and it is determined that such fees outweigh the benefit of voting; (iv)
there are legal encumbrances to voting, including blocking restrictions in
certain markets that preclude the ability to dispose of a security if the
Investment Manager votes a proxy or where the Investment Manager is prohibited from
voting by applicable law, economic or other sanctions, or other regulatory or
market requirements, including but not limited to, effective Powers of
Attorney; (v) additional documentation or the disclosure of beneficial owner
details is required; (vi) the Investment Manager held shares on the record date
but has sold them prior to the meeting date; (vii) the Advisory Client held shares
on the record date, but the Advisory Client closed the account prior to the
meeting date; (viii) a proxy voting service is not offered by the custodian in
the market; (ix) due to either system error or human error, the Investment Manager’s
intended vote is not correctly submitted; (x) the Investment Manager believes
it is not in the best interest of the Advisory Client to vote the proxy for any
other reason not enumerated herein; or (xi) a security is subject to a
securities lending or similar program that has transferred legal title to the
security to another person.
Even if the Investment Manager uses reasonable efforts to
vote a proxy on behalf of its Advisory Clients, such vote or proxy may be
rejected because of (a) operational or procedural issues experienced by one or
more third parties involved in voting proxies in such jurisdictions; (b)
changes in the process or agenda for the meeting by the issuer for which the
Investment Manager does not have sufficient notice; or (c) the exercise by the
issuer of its discretion to reject the vote of the Investment Manager. In
addition, despite the best efforts of the Proxy Group and its agents, there may
be situations where the Investment Manager’s votes are not received, or
properly tabulated, by an issuer or the issuer’s agent.
The Investment Manager or its affiliates may, on behalf
of one or more of the proprietary registered investment companies advised by
the Investment Manager or its affiliates, determine to use its best efforts to
recall any security on loan where the Investment Manager or its affiliates (a)
learn of a vote on a material event that may affect a security on loan and (b)
determine that it is in the best interests of such proprietary registered
investment companies to recall the security for voting purposes. The Investment
Manager will not generally make such efforts on behalf of other Advisory
Clients or notify such Advisory Clients or their custodians that the Investment
Manager or its affiliates has learned of such a vote.
There may be instances in certain non-U.S. markets where
split voting is not allowed. Split voting occurs when a position held within an
account is voted in accordance with two differing instructions. Some markets
and/or issuers only allow voting on an entire position and do not accept split
voting. In certain cases, when more than one Franklin Templeton Investment
Manager has accounts holding shares of an issuer that are held in an omnibus
structure, the Proxy Group will seek direction from an appropriate
representative of the Advisory Client with multiple Investment Managers (such
as a conducting officer of the Management Company in the case of a SICAV), or
the Proxy Group will submit the vote based on the voting instructions provided
by the Investment Manager with accounts holding the greatest number of shares
of the security within the omnibus structure.
The Investment Manager may vote against an agenda item
where no further information is provided, particularly in non-U.S. markets. For
example, if "Other Business" is listed on the agenda with no further
information included in the proxy materials, the Investment Manager may vote
against the item as no information has been provided prior to the meeting in
order to make an informed decision. The Investment Manager may also enter a
"withhold" vote on the election of certain directors from time to
time based on individual situations, particularly where the Investment Manager
is not in favor of electing a director and there is no provision for voting
against such director.
If several issues are bundled together in a single
voting item, the Investment Manager will assess the total benefit to shareholders
and the extent that such issues should be subject to separate voting proposals.
The following describes the standard procedures that are
to be followed with respect to carrying out the Investment Manager's proxy
policy:
1. The Proxy Group will identify all Advisory Clients,
maintain a list of those clients, and indicate those Advisory Clients who have
delegated proxy voting authority in writing to the Investment Manager. The
Proxy Group will periodically review and update this list. If the agreement
with an Advisory Client permits the Advisory Client to provide instructions to
the Investment Manager regarding how to vote the client’s shares, the
Investment Manager will make a best-efforts attempt to vote per the Advisory
Client’s instructions.
2. All relevant information in the proxy materials
received (e.g., the record date of the meeting) will be recorded promptly by
the Proxy Group to maintain control over such materials.
3. The Proxy Group will review and compile information
on each proxy upon receipt of any agendas, materials, reports, recommendations
from a Proxy Service, or other information. The Proxy Group will then forward (or
otherwise make available) this information to the appropriate research analyst
for review and voting instructions.
4. In determining how to vote, the Investment Manager's
analysts and relevant portfolio manager(s) will consider their in-depth knowledge
of the company, any readily available information and research about the
company and its agenda items, and the recommendations of a Proxy Service.
5. The Proxy Group is responsible for maintaining the
documentation that supports the Investment Manager’s voting decision. Such
documentation may include, but is not limited to, any information provided by a
Proxy Service and, with respect to an issuer that presents a potential conflict
of interest, any board or audit committee memoranda describing the position it
has taken. Additionally, the Proxy Group may include documentation obtained
from the research analyst, portfolio manager and/or legal counsel; however, the
relevant research analyst may, but is not required to, maintain additional documentation
that was used or created as part of the analysis to reach a voting decision,
such as certain financial statements of an issuer, press releases, or notes
from discussions with an issuer’s management.
6. After the proxy is completed but before it is
returned to the issuer and/or its agent, the Proxy Group may review those
situations including special or unique documentation to determine that the
appropriate documentation has been created, including conflict of interest
screening. If the Proxy Group learns that an issuer has filed additional
solicitation materials sufficiently prior to the submission deadline, the Proxy
Group will disseminate this information to the Investment Manager so that the
Investment Manager may consider this information and determine whether it is
material to its voting decision.
7. The Proxy Group will make every effort to submit the
Investment Manager's vote on all proxies to ISS by the cut-off date. However,
in certain foreign jurisdictions or instances where the Proxy Group did not
receive sufficient notice of the meeting, the Proxy Group will use its best
efforts to send the voting instructions to ISS in time for the vote to be processed.
8. With respect to proprietary products, the Proxy Group
will file Powers of Attorney in all jurisdictions that require such
documentation on a best efforts basis; the Proxy Group does not have authority
to file Powers of Attorney on behalf of other Advisory Clients. On occasion,
the Investment Manager may wish to attend and vote at a shareholder meeting in person.
In such cases, the Proxy Group will use its best efforts to facilitate the
attendance of the designated Franklin Templeton employee by coordinating with
the relevant custodian bank.
9. The Proxy Group prepares reports for each separate
account client that has requested a record of votes cast. The report specifies
the proxy issues that have been voted for the Advisory Client during the requested
period and the position taken with respect to each issue. The Proxy Group sends
one copy to the Advisory Client, retains a copy in the Proxy Group’s files and
forwards a copy to either the appropriate portfolio manager or the client
service representative. While many Advisory Clients prefer quarterly or annual
reports, the Proxy Group will provide reports for any timeframe requested by an
Advisory Client.
10. If the Franklin Templeton Services, LLC Global Trade
Services learns of a vote that may affect a security on loan from a proprietary
registered investment company, Global Trade Services will notify the Investment
Manager. If the Investment Manager decides that the vote is material and it
would be in the best interests of shareholders to recall the security, the
Investment Manager will advise Global Trade Services to contact the lending
agent in an effort to retrieve the security. If so requested by the Investment
Manager, Global Trade Services shall use its best efforts to recall any
security on loan and will use other practicable and legally enforceable means
to ensure that the Investment Manager is able to vote proxies for proprietary
registered investment companies with respect to such loaned securities.
However, there can be no guarantee that the securities can be retrieved for
such purposes. Global Trade Services will advise the Proxy Group of all recalled
securities. Many Advisory Clients have entered into securities lending
arrangements with agent lenders to generate additional revenue. Under normal
circumstances, the Investment Manager will not make efforts to recall any
security on loan for voting purposes on behalf of other Advisory Clients or
notify such clients or their custodians that the Investment Manager or its affiliates
have learned of such a vote.
11. The Proxy Group participates in Franklin Templeton
Investment’s Business Continuity and Disaster Preparedness programs. The Proxy
Group will conduct disaster recovery testing on a periodic basis in an effort
to ensure continued operations of the Proxy Group in the event of a disaster.
Should the Proxy Group not be fully operational, then the Proxy Group may
instruct ISS to vote all meetings immediately due per the recommendations of
the appropriate third-party proxy voting service provider.
12. The Proxy Group, in conjunction with legal staff
responsible for coordinating Fund disclosure, on a timely basis, will file all
required Form N-PXs, with respect to proprietary U.S. registered investment
companies, disclose that each U.S.-registered fund’s proxy voting record is
available on the Franklin Templeton web site, and will make available the information
disclosed in each fund’s Form N-PX as soon as is reasonably practicable after
filing Form N-PX with the SEC. The Proxy Group will work with legal staff in
other jurisdictions, as needed, to help support required proxy voting disclosure
in such markets.
13. The Proxy Group, in conjunction with legal staff
responsible for coordinating Fund disclosure, will ensure that all required
disclosure about proxy voting of the proprietary U.S. registered investment
companies is made in such clients’ disclosure documents.
14. The Proxy Group is subject to periodic review by
Internal Audit and compliance groups.
15. The Investment Manager will review the guidelines of
each Proxy Service, with special emphasis on the factors they use with respect
to proxy voting recommendations.
16. The Proxy Group will update the proxy voting policies
and procedures as necessary for review and approval by legal, compliance,
investment officers, and/or other relevant staff.
17. The Proxy Group will familiarize itself with the procedures
of ISS that govern the transmission of proxy voting information from the Proxy
Group to ISS and periodically review how well this process is functioning. The
Proxy Group, in conjunction with the compliance department, will conduct periodic
due diligence reviews of each Proxy Service via on-site visits or by written
questionnaires. As part of the periodic due diligence process, the Investment
Manager assesses the adequacy and quality of each Proxy Service’s staffing and
personnel to ensure each Proxy Service has the capacity and competency to
adequately analyze proxy issues and the ability to make proxy voting
recommendations based on materially accurate information. In the event the
Investment Manager discovers an error in the research or voting recommendations
provided by a Proxy Service, it will take reasonable steps to investigate the
error and seek to determine whether the Proxy Service is taking reasonable
steps to reduce similar errors in the future. In addition, the Investment Manager
assesses the robustness of Proxy Service’s policies regarding (1) ensuring proxy
voting recommendations are based on current and accurate information, and (2)
identifying and addressing any conflicts of interest. The Investment Manager
also considers the independence of each Proxy Service on an on-going basis.
18. The Proxy Group will investigate, or cause others to
investigate, any and all instances where these Procedures have been violated or
there is evidence that they are not being followed. Based upon the findings of
these investigations, the Proxy Group, if practicable, will recommend
amendments to these Procedures to minimize the likelihood of the reoccurrence
of non-compliance.
19. At least annually, the Proxy Group will verify that:
a. A sampling of proxies received by Franklin
Templeton Investments has been voted in a manner consistent with the Proxy
Voting Policies and Procedures;
b. A sampling of proxies received by Franklin
Templeton Investments has been voted in accordance with the instructions of the
Investment Manager;
c. Adequate disclosure has been made to clients and
fund shareholders about the procedures and how proxies were voted in markets where
such disclosures are required by law or regulation; and
d. Timely filings were made with applicable regulators,
as required by law or regulation, related to proxy voting.
The Proxy Group is responsible for maintaining
appropriate proxy voting records. Such records will include, but are not
limited to, a copy of all materials returned to the issuer and/or its agent,
the documentation described above, listings of proxies voted by issuer and by
client, each written client request for proxy voting policies/records and the
Investment Manager’s written response to any client request for such records,
and any other relevant information. The Proxy Group may use an outside service
such as ISS to support this recordkeeping function. All records will be
retained in either hard copy or electronic format for at least five years, the
first two of which will be on-site. Advisory Clients may request copies of
their proxy voting records by calling the Proxy Group collect at
1-954-527-7678, or by sending a written request to: Franklin Templeton
Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention:
Proxy Group. The Investment Manager does not disclose to third parties (other
than ISS) the proxy voting records of its Advisory Clients, except to the
extent such disclosure is required by applicable law or regulation or court
order. Advisory Clients may review the Investment Manager's proxy voting
policies and procedures on-line at www.franklintempleton.com and may request
additional copies by calling the number above. For U.S. proprietary registered
investment companies, an annual proxy voting record for the period ending June
30 of each year will be posted to www.franklintempleton.com no later than
August 31 of each year. For proprietary Canadian mutual fund products, an
annual proxy voting record for the period ending June 30 of each year will be
posted to www.franklintempleton.ca no later than August 31 of each year. For
proprietary Australian mutual fund products, an annual proxy voting record for
the period ending June 30 of each year will be posted to
www.franklintempleton.com.au
no later than
September 30 of each year. The Proxy Group will periodically review the web
site posting and update the posting when necessary. In addition, the Proxy
Group is responsible for ensuring that the proxy voting policies, procedures
and records of the Investment Manager are available as required by law and is
responsible for overseeing the filing of such U.S. registered investment
company voting records with the SEC.
PROCEDURES FOR MEETINGS INVOLVING FIXED INCOME
SECURITIES & PRIVATELY HELD ISSUERS
From time to time, certain custodians may process events
for fixed income securities through their proxy voting channels rather than
corporate action channels for administrative convenience. In such cases, the
Proxy Group will receive ballots for such events on the ISS voting platform. The
Proxy Group will solicit voting instructions from the Investment Manager for
each account or fund involved. If the Proxy Group does not receive voting
instructions from the Investment Manager, the Proxy Group will take no action
on the event. The Investment Manager may be unable to vote a proxy for a fixed
income security, or may choose not to vote a proxy, for the reasons described
under the section entitled “Proxy Procedures.”
In the rare instance where there is a vote for a
privately held issuer, the decision will generally be made by the relevant
portfolio managers or research analysts.
The Proxy Group will monitor such meetings involving
fixed income securities or privately held issuers for conflicts of interest in
accordance with these procedures. If a fixed income or privately held issuer is
flagged as a potential conflict of interest, the Investment Manager may
nonetheless vote as it deems in the best interests of its Advisory Clients. The
Investment Manager will report such decisions on an annual basis to Advisory
Clients as may be required.
The ISS proxy voting guidelines can be found at:
https://www.issgovernance.com/policy-gateway/voting-policies/
.
The Glass Lewis proxy voting guidelines can be found at:
https://www.glasslewis.com/voting-policies-current/
.
Item
8. Portfolio Managers of Closed-End Management Investment Companies.
N/A
Item
9. Purchases of Equity Securities by Closed-End Management Investment Company
and
Affiliated
Purchasers. N/A
Item
10. Submission of Matters to a Vote of Security Holders.
There
have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Trustees that would require disclosure
herein.