SCHEDULE 14A
(RULE 14A-101) INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TEMPLETON EMERGING MARKETS FUND, INC.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
--------------------------------------------------------------------
Name of Person(s) Filing Proxy Statement, other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11(s)(2).
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[LOGO]
TEMPLETON EMERGING MARKETS FUND, INC.
IMPORTANT SHAREHOLDER INFORMATION
These materials are for the Annual Meeting of Shareholders scheduled for August
26, 2002 at 4:00 p.m. Eastern time. The enclosed materials discuss four
proposals (the "Proposals" or, each, a "Proposal") to be voted on at the
meeting, and contain your Proxy Statement and proxy card. A proxy card is, in
essence, a ballot. When you vote your proxy, it tells us how you wish to vote on
important issues relating to Templeton Emerging Markets Fund, Inc. (the "Fund").
If you specify a vote for all four Proposals, your proxy will be voted as you
indicate. If you specify a vote for one or more Proposals, but not all, your
proxy will be voted as specified on such Proposals and, on the Proposal(s) for
which no vote is specified, will be voted FOR such Proposal(s). If you simply
sign and date the proxy card, but do not specify a vote for any Proposal, your
proxy will be voted FOR all Proposals.
WE URGE YOU TO SPEND A FEW MINUTES REVIEWING THE PROPOSALS IN THE PROXY
STATEMENT. THEN, PLEASE FILL OUT AND SIGN THE PROXY CARD AND RETURN IT TO US SO
THAT WE KNOW HOW YOU WOULD LIKE TO VOTE. WHEN SHAREHOLDERS RETURN THEIR PROXIES
PROMPTLY, THE FUND MAY BE ABLE TO SAVE MONEY BY NOT HAVING TO CONDUCT ADDITIONAL
MAILINGS.
WE WELCOME YOUR COMMENTS. IF YOU HAVE ANY QUESTIONS, CALL FUND INFORMATION AT
1-800/DIAL BEN(R) (1-800-342-5236).
TELEPHONE AND INTERNET VOTING
FOR YOUR CONVENIENCE, YOU MAY BE ABLE TO VOTE BY TELEPHONE OR THROUGH THE
INTERNET, 24 HOURS A DAY. IF YOUR ACCOUNT IS ELIGIBLE, A CONTROL NUMBER AND
SEPARATE INSTRUCTIONS ARE ENCLOSED.
[LOGO]
TEMPLETON EMERGING MARKETS FUND, INC.
NOTICE OF 2002 ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders (the "Meeting") of Templeton Emerging Markets
Fund, Inc. (the "Fund") will be held at the Fund's offices, 500 East Broward
Boulevard, 12th Floor, Fort Lauderdale, Florida 33394-3091 on August 26, 2002 at
4:00 p.m. Eastern time.
During the Meeting, shareholders of the Fund will vote on four Proposals:
1. To elect five Directors of the Fund to hold office for the terms
specified.
2. To approve an Agreement and Plan of Reorganization that provides for the
reorganization of the Fund from a Maryland corporation to a Delaware
business trust.
3. To approve amendments to certain of the Fund's fundamental investment
restrictions (includes five (5) Sub-Proposals):
(a) To amend the Fund's fundamental investment restriction regarding
borrowing and issuing senior securities;
(b) To amend the Fund's fundamental investment restriction regarding
industry concentration;
(c) To amend the Fund's fundamental investment restriction regarding
investments in commodities;
(d) To amend the Fund's fundamental investment restriction regarding
investments in real estate; and
(e) To amend the Fund's fundamental investment restriction regarding
lending.
4. To approve the elimination of certain of the und's fundamental
investment restrictions.
By Order of the Board of Directors,
Barbara J. Green,
SECRETARY
June , 2002
-------------
MANY SHAREHOLDERS HOLD SHARS IN MORE THAN ONE TEMPLETON FUND AND WILL RECEIVE
PROXY MATERIAL FOR EACH FUND OWNED. PLEASE SIGN AND PROMPTLY RETURN EACH PROXY
CARD IN THE SELF-ADDRESSED ENVELOPE REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
TABLE OF CONTENTS
PAGE
PROXY STATEMENT
Information About Voting.................................................. 1
Proposal 1: To Elect Five Directors of the Fund
to Hold Office for the Terms Specified........................ 3
Proposal 2: To Approve an Agreement and Plan of
Reorganization that provides for the
Reorganization of the Fund from a
Maryland Corporation to a Delaware
Business Trust.................................................14
Introduction to Proposals 3 and 4..........................................19
Proposal 3: To Approve Amendments to Certain of
the Fund's Fundamental Investment
Restrictions (this Proposal involves
separate votes on Sub-Proposals 3a-3e).......................20
Sub-Proposal 3a: To amend the Fund's
fundamental investment
restriction regarding
borrowing and issuing
senior securities...........................20
Sub-Proposal 3b: To amend the Fund's
fundamental investment
restriction regarding
industry concentration......................22
Sub-Proposal 3c: To amend the Fund's
fundamental investment
restriction regarding
investments in commodities..................23
Sub-Proposal 3d: To amend the Fund's
fundamental investment
restriction regarding
investments in real estate..................25
Sub-Proposal 3e: To amend the Fund's
fundamental investment
restriction regarding lending.............. 26
Proposal 4: To Approve the Elimination of Certain of
the Fund's Fundamental Investment Restrictions.................28
Information About the Fund.................................................31
Further Information About Voting and the Meeting...........................33
EXHIBITS
Exhibit A: Form of Agreement and Plan of Reorganization between
Templeton Emerging Markets Fund, Inc. (a Maryland
corporation) and Templeton Emerging Markets Fund (a
Delaware business trust) .......................................A-1
Exhibit B: A Comparison of Governing Documents and State Law...............B-1
Exhibit C: Fundamental Investment Restrictions Proposed to be
Amended or Eliminated...........................................C-1
TEMPLETON EMERGING MARKETS FUND, INC.
PROXY STATEMENT
INFORMATION ABOUT VOTING
WHO IS ELIGIBLE TO VOTE?
Shareholders of record at the close of business on May 31, 2002 are entitled to
be present and to vote at the Meeting or any adjourned Meeting. Each share of
record is entitled to one vote on each matter presented at the Meeting. The
Notice of Meeting, the proxy card, and the Proxy Statement were first mailed to
shareholders of record on or about June ___________ , 2002.
ON WHAT ISSUES AM I BEING ASKED TO VOTE?
You are being asked to vote on four Proposals:
1. To elect five Directors of the Fund to hold office for the terms
specified;
2. To approve an Agreement and Plan of Reorganization that provides for the
reorganization of the Fund from a Maryland corporation to a Delaware
business trust;
3. To approve amendments to certain of the Fund's fundamental investment
restrictions (includes five (5) Sub-Proposals); and
4. To approve the elimination of certain of the Fund's fundamental
investment restrictions.
HOW DO THE FUND'S DIRECTORS RECOMMEND THAT I VOTE?
The Directors unanimously recommend that you vote:
1. FOR the election of five Directors of the Fund to hold office for the
terms specified;
2. FOR the approval of an Agreement and Plan of Reorganization that
provides for the reorganization of the Fund from a Maryland
corporation to a Delaware business trust;
3. FOR the approval of each of the proposed amendments to certain of the
Fund's fundamental investment restrictions; and
4. FOR the approval of the elimination of certain of the Fund's fundamental
investment restrictions.
HOW DO I ENSURE THAT MY VOTE IS ACCURATELY RECORDED?
You may attend the Meeting and vote in person or you may complete and return the
enclosed proxy card. If you are eligible to vote by telephone or through the
Internet, a control number and separate instructions are enclosed.
Proxy cards that are properly signed, dated and received at or prior to the
Meeting will be voted as specified. If you specify a vote for any of the
Proposals 1 through 4, your proxy will be voted as you indicate, and any
Proposal for which no vote is specified will be voted FOR that Proposal. If you
simply sign, date and return the proxy card, but do not specify a vote for any
of the Proposals 1 through 4, your shares will be voted as follows: FOR the
election of all nominees for Director (Proposal 1); FOR the approval of an
Agreement and Plan of Reorganization that provides for the reorganization of the
Fund from a Maryland corporation to a Delaware business trust (Proposal 2); FOR
the approval of each of the proposed amendments to certain of the Fund's
fundamental investment restrictions (Sub-Proposals 3a-3e); and FOR the approval
of the elimination of certain of the Fund's fundamental investment restrictions
(Proposal 4).
MAY I REVOKE MY PROXY?
You may revoke your proxy at any time before it is voted by forwarding a written
revocation or a later-dated proxy to the Fund that is received by the Fund at or
prior to the Meeting, or by attending the Meeting and voting in person.
PROPOSAL 1: TO ELECT FIVE DIRECTORS OF THE FUND TO HOLD OFFICE FOR THE TERMS
SPECIFIED
HOW ARE NOMINEES SELECTED?
The Board of Directors of the Fund (the "Board" or the "Directors") has a
Nominating and Compensation Committee (the "Committee") consisting of Andrew H.
Hines, Jr., Chairman, Frank J. Crothers, Edith E. Holiday and Gordon S. Macklin,
none of whom is an "interested person" as defined by the Investment Company Act
of 1940, as amended (the "1940 Act"). Directors who are not interested persons
of the Fund are referred to as the "Independent Directors." The Committee is
responsible for the selection and nomination of candidates to serve as Directors
of the Fund. The Committee will review shareholders' nominations to fill
vacancies on the Board if these nominations are submitted in writing and
addressed to the Committee at the Fund's offices. However, the Committee expects
to be able to identify from its own resources an ample number of qualified
candidates.
WHO ARE THE NOMINEES AND DIRECTORS?
The Board is divided into three classes. Each class has a term of three years.
Each year the term of office of one class expires. This year, the terms of five
Directors expire. Harris J. Ashton, Nicholas F. Brady, Frank J. Crothers, S.
Joseph Fortunato and Edith E. Holiday have been nominated for three-year terms,
set to expire at the 2005 Annual Meeting of Shareholders. These terms continue,
however, until successors are duly elected and qualified. Among these Directors,
only Nicholas F. Brady is deemed to be an "interested person" for purposes of
the 1940 Act. Directors who are "interested persons" are referred to as the
"Interested Directors." All of the nominees are currently members of the Board.
In addition, all of the current nominees and Directors are also directors or
trustees of other Franklin(R) funds and/or Templeton(R) funds (collectively, the
"Franklin Templeton funds").
Certain Directors of the Fund hold director and/or officer positions with
Franklin Resources, Inc. ("Resources") and its affiliates. Resources is a
publicly owned holding company, the principal shareholders of which are Charles
B. Johnson and Rupert H. Johnson, Jr., who own approximately 17.6% and 14.5%,
respectively, of its outstanding shares. Resources, a global investment
organization operating as Franklin Templeton Investments, is primarily engaged,
through various subsidiaries, in providing investment management, share
distribution, transfer agent and administrative services to a family of
investment companies. Resources is a New York Stock Exchange, Inc. ("NYSE")
listed holding company (NYSE: BEN). Charles E. Johnson, Vice President of the
Fund, is the son and nephew, respectively, of brothers Charles B. Johnson,
Chairman of the Board, Director and Vice President of the Fund, and Rupert H.
Johnson, Jr., Vice President of the Fund. There are no other family
relationships among any of the Directors or nominees for Director.
Each nominee currently is available and has consented to serve if elected. If
any of the nominees should become unavailable, the designated proxy holders will
vote in their discretion for another person or persons who may be nominated as
Director.
Listed below, for each nominee and Director, are their name, age and address, as
well as their position and length of service with the Fund, principal occupation
during the past five years, the number of portfolios in the Franklin Templeton
Investments fund complex that they oversee, and any other directorships held by
the Director.
NOMINEES FOR INDEPENDENT DIRECTOR TO SERVE UNTIL 2005 ANNUAL MEETING OF
SHAREHOLDERS:
NUMBER OF
PORTFOLIOS IN
FRANKLIN
TEMPLETON
INVESTMENTS
FUND COMPLEX
LENGTH OF TIME OVERSEEN BY
NAME, AGE AND ADDRESS POSITION SERVED DIRECTOR* OTHER DIRECTORSHIPS HELD
------------------------- ------------------- -------------------- ------------------ --------------------------------
HARRIS J. ASHTON (69) Director Since 1992 133 Director, RBC Holdings, Inc.
500 East Broward Blvd. (bank holding company) and
Suite 2100 Bar-S Foods (meat packing
Fort Lauderdale, FL company).
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, President, Chief Executive Officer
and Chairman of the Board, General Host Corporation (nursery and craft centers)
(until 1998).
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FRANK J. CROTHERS (57) Director Since 1999 17 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Caribbean Electric Utility Services Corporation and Atlantic Equipment
& Power Ltd.; Vice Chairman, Caribbean Utilities Co., Ltd.; and Director and
President, Provo Power Company Ltd.; director of various other business and
nonprofit organizations.
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S. JOSEPH FORTUNATO (69) Director Since 1992 134 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Member of the law firm of Pitney, Hardin, Kipp & Szuch.
----------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (50) Director Since 1996 82 Director, Amerada Hess
500 East Broward Blvd. Corporation (exploration and
Suite 2100 refining of oil and gas);
Fort Lauderdale, FL Hercules Incorporated
33394-3091 (chemicals, fibers and
resins); Beverly Enterprises,
Inc. (health care); H.J. Heinz
Company (processed foods and
allied products); RTI
International Metals, Inc.
(manufacture and distribution
of titanium); Digex
Incorporated (web hosting
provider); and Canadian
National Railway (railroad).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Assistant to the President of the
United States and Secretary of the Cabinet (1990-1993); General Counsel to the
United States Treasury Department (1989-1990); and Counselor to the Secretary
and Assistant Secretary for Public Affairs and Public Liaison-United States
Treasury Department (1988-1989).
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NOMINEE FOR INTERESTED DIRECTOR TO SERVE UNTIL 2005 ANNUAL MEETING OF
SHAREHOLDERS:
**NICHOLAS F. BRADY (72) Director Since 1993 63 Director, Amerada Hess
500 East Broward Blvd. Corporation (exploration and
Suite 2100 refining of oil and gas); C2,
Fort Lauderdale, FL Inc. (operating and investment
33394-3091 business); and H.J. Heinz
Company (processed foods and
allied products).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Templeton Emerging Markets Investment Trust PLC, Darby Overseas
Investments, Ltd. and Darby Emerging Markets Investments LDC (investment firms)
(1994-present); Director, Templeton Capital Advisors Ltd., and Franklin
Templeton Investment Fund; and FORMERLY, Secretary of the United States
Department of the Treasury (1988-1993); Chairman of the Board, Dillon, Read &
Co., Inc. (investment banking) (until 1988); and U.S. Senator, New Jersey (April
1982-December 1982).
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INDEPENDENT DIRECTORS SERVING UNTIL 2004 ANNUAL MEETING OF SHAREHOLDERS:
NUMBER OF
PORTFOLIOS IN
FRANKLIN
TEMPLETON
INVESTMENTS
FUND COMPLEX
LENGTH OF TIME OVERSEEN BY
NAME, AGE AND ADDRESS POSITION SERVED DIRECTOR* OTHER DIRECTORSHIPS HELD
------------------------- ------------------- -------------------- ------------------ --------------------------------
ANDREW H. HINES, JR.(79) Director Since 1990 28 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Consultant, Triangle Consulting Group; and Executive-in-Residence, Eckerd
College (1991-present); and FORMERLY, Chairman and Director, Precise Power
Corporation (1990-1997); Director, Checkers Drive-In Restaurant, Inc.
(1994-1997); and Chairman of the Board and Chief Executive Officer, Florida
Progress Corporation (holding company in the energy area) (1982-1990) and
director of various of its subsidiaries.
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CONSTANTINE D. Director Since 1999 18 None
TSERETOPOULOS (48)
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Physician, Lyford Cay Hospital (1987-present); and director of various nonprofit
organizations; and FORMERLY, Cardiology Fellow, University of Maryland
(1985-1987) and Internal Medicine Resident, Greater Baltimore Medical Center
(1982-1985).
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INTERESTED DIRECTORS SERVING UNTIL 2004 ANNUAL MEETING OF SHAREHOLDERS:
NUMBER OF
PORTFOLIOS IN
FRANKLIN
TEMPLETON
INVESTMENTS
FUND COMPLEX
LENGTH OF TIME OVERSEEN BY
NAME, AGE AND ADDRESS POSITION SERVED DIRECTOR* OTHER DIRECTORSHIPS HELD
------------------------- ------------------- -------------------- ------------------ --------------------------------
**HARMON E. BURNS (57) Director and Vice Director since 33 None
One Franklin Parkway President 1992 and Vice
San Mateo, CA 94403-1906 President since
1996
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources,
Inc.; Vice President and Director, Franklin Templeton Distributors, Inc.;
Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment
Advisory Services, Inc.; officer and/or director or trustee, as the case may be,
of most of the other subsidiaries of Franklin Resources, Inc.; and officer of 51
of the investment companies in Franklin Templeton Investments.
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**CHARLES B. JOHNSON (69) Chairman of the Chairman of the 133 None
One Franklin Parkway Board, Director Board since 1995
San Mateo, CA 94403-1906 and Vice and Director and
President Vice President
since 1992
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Chief Executive Officer, Member - Office of the Chairman
and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; officer
and/or director or trustee, as the case may be, of most of the other
subsidiaries of Franklin Resources, Inc.; and officer of 48 of the investment
companies in Franklin Templeton Investments.
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INDEPENDENT DIRECTORS SERVING UNTIL 2003 ANNUAL MEETING OF SHAREHOLDERS:
NUMBER OF
PORTFOLIOS IN
FRANKLIN
TEMPLETON
INVESTMENTS
FUND COMPLEX
LENGTH OF TIME OVERSEEN BY
NAME, AGE AND ADDRESS POSITION SERVED DIRECTOR* OTHER DIRECTORSHIPS HELD
------------------------- ------------------- -------------------- ------------------ --------------------------------
BETTY P. KRAHMER (72) Director Since 1990 22 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or trustee of various civic associations; and FORMERLY, Economic
Analyst, U.S. government.
----------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (74) Director Since 1993 133 Director, White Mountains
500 East Broward Blvd. Insurance Group, Ltd.; Martek
Suite 2100 Biosciences Corporation;
Fort Lauderdale, FL WorldCom, Inc. (communications
33394-3091 services); MedImmune, Inc.
(biotechnology); Overstock.com
(Internet services); and
Spacehab, Inc. (aerospace
services).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and
FORMERLY, Chairman, White River Corporation (financial services) (until 1998)
and Hambrecht & Quist Group (investment banking) (until 1992); and President,
National Association of Securities Dealers, Inc. (until 1987).
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FRED R. MILLSAPS (73) Director Since 1990 28 None
500 East Broward
Blvd. Suite 2100,
Fort Lauderdale, FL
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various business and nonprofit organizations; and manager of
personal investments (1978-present); and FORMERLY, Chairman and Chief Executive
Officer, Landmark Banking Corporation (1969-1978); Financial Vice President,
Florida Power and Light (1965-1969); and Vice President, Federal Reserve Bank of
Atlanta (1958-1965).
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* We base the number of portfolios on each separate series of the registered
investment companies comprising the Franklin Templeton Investments fund
complex. These portfolios have a common investment adviser or affiliated
investment advisers, and may also share a common underwriter.
** Nicholas F. Brady, Harmon E. Burns, and Charles B. Johnson are "interested
persons" of the Fund as defined by the 1940 Act. The 1940 Act limits the
percentage of interested persons that can comprise a fund's board of
directors. Mr. Johnson is considered an interested person of the Fund due
to his position as an officer and director and major shareholder of
Resources, which is the parent company of the Fund's Investment Manager, and
his position with the Fund. Mr. Burns' status as an interested person
results from his position as an officer and director of Resources, which is
the parent company of the Fund's Investment Manager and his position with
the Fund. Mr. Brady's status as an interested person results from his
business affiliations with Resources and Templeton Global Advisors Limited.
Mr. Brady and Resources are both limited partners of Darby Overseas
Partners, L.P. ("Darby Overseas"). Mr. Brady is Chairman and shareholder of
Darby Overseas Investments, Ltd., which is the corporate general partner of
Darby Overseas. In addition, Darby Overseas and Templeton Global Advisors
Limited are limited partners of Darby Emerging Markets Fund, L.P. ("DEMF").
Mr. Brady serves as Chairman of the corporate general partner of DEMF, and
Darby Overseas and its general partner own 100% of the stock of the general
partner of DEMF. Mr. Brady is also a director of Templeton Capital Advisors
Ltd. ("TCAL"), which serves as investment manager to certain unregistered
funds. TCAL and Templeton Global Advisors Limited are both indirect
subsidiaries of Resources. The remaining nominees and Directors of the Fund
are Independent Directors.
The following tables provide the dollare range of the equity securities of the
Fund and of funds in Franklin Templeton Investments beneficially owned by the
Fund's Directors as of March 31, 2002.
INDEPENDENT DIRECTORS
AGGREGATE DOLLAR RANGE
OF EQUITY SECURITIES
IN ALL FUNDS OVERSEEN
BY THE DIRECTOR
DOLLAR RANGE OF IN THE FRANKLIN
EQUITY SECURITIES TEMPLETON INVESTMENTS
NAME OF DIRECTOR IN THE FUND FUND COMPLEX
-------------------------------------------------------------------------------
Harris J. Ashton $1 - $10,000 Over $100,000
Frank J. Crothers None Over $100,000
S. Joseph Fortunato $1 - $10,000 Over $100,000
Andrew H. Hines, Jr. $1 - $10,000 Over $100,000
Edith E. Holiday $1 - $10,000 Over $100,000
Betty P. Krahmer $10,001-$50,000 Over $100,000
Gordon S. Macklin $10,001-$50,000 Over $100,000
Fred R. Millsaps None Over $100,000
Constantine D. Tseretopoulos None Over $100,000
INTERESTED DIRECTORS
AGGREGATE DOLLAR RANGE
OF EQUITY SECURITIES
IN ALL FUNDS OVERSEEN
BY THE DIRECTOR
DOLLAR RANGE OF IN THE FRANKLIN
EQUITY SECURITIES TEMPLETON INVESTMENTS
NAME OF DIRECTOR IN THE FUND FUND COMPLEX
-------------------------------------------------------------------------------
Nicholas F. Brady $10,001-$50,000 Over $100,000
Harmon E. Burns None Over $100,000
Charles B. Johnson $10,001-$50,000 Over $100,000
HOW OFTEN DO THE DIRECTORS MEET AND WHAT ARE THEY PAID?
The role of the Directors is to provide general oversight of the Fund's
business, and to ensure that the Fund is operated for the benefit of
shareholders. The Directors anticipate meeting at least five times during the
current fiscal year to review the operations of the Fund and the Fund's
investment performance. The Directors also oversee the services furnished to the
Fund by Templeton Asset Management Ltd. - Hong Kong Branch, the Fund's
investment manager (the "Investment Manager"), and various other service
providers. The Fund currently pays the Independent Directors and Mr. Brady an
annual retainer of $2,000 and a fee of $200 per Board meeting attended.
Directors serving on the Audit Committee of the Fund and other funds in Franklin
Templeton Investments receive a flat fee of $2,000 per Audit Committee meeting
attended, a portion of which is allocated to the Fund. Members of a committee
are not separately compensated for any committee meeting held on the day of a
Board meeting.
During the fiscal year ended August 31, 2001, there were five meetings of the
Board, three meetings of the Audit Committee, and four meetings of the
Nominating and Compensation Committee. Each Director then in office attended at
least 75% of the aggregate number of meetings of the Board and of the
committee(s) of the Board on which the Director served.
Certain Directors and officers of the Fund are shareholders of Resources and may
receive indirect remuneration due to their participation in management fees and
other fees received by the Investment Manager and its affiliates from Franklin
Templeton funds. The Investment Manager or its affiliates pay the salaries and
expenses of the officers. No pension or retirement benefits are accrued as part
of Fund expenses.
TOTAL
COMPENSATION NUMBER OF
FROM BOARDS IN THE
FRANKLIN FRANKLIN TEMPLETON
AGGREGATE TEMPLETON INVESTMENTS
COMPENSATION INVESTMENTS FUND COMPLEX
FROM FUND ON WHICH
NAME OF DIRECTOR THE FUND/1/ COMPLEX/2/ EACH SERVES/3/
-------------------------------------------------------------------------------
Harris J. Ashton $3,000 $353,221 48
Nicholas F. Brady 2,800 134,500 18
Frank J. Crothers 3,013 92,000 14
S. Joseph Fortunato 3,000 352,380 49
Andrew H. Hines, Jr. 3,024 201,500 19
Edith E. Holiday 3,000 254,670 28
Betty P. Krahmer 3,000 134,500 18
Gordon S. Macklin 3,000 353,221 48
Fred R. Millsaps 3,022 201,500 19
Constantine D. Tseretopoulos 3,026 94,500 15
(1) Compensation received for the fiscal year ended August 31, 2001.
(2) For the calendar year ended December 31, 2001.
(3) We base the number of boards on the number of registered investment
companies in Franklin Templeton Investments. This number does not include
the total number of series or funds within each investment company for
which the board members are responsible. Franklin Templeton Investments
currently includes 53 registered investment companies, with approximately
155 U.S. based funds or series.
The table above indicates the total fees paid to Directors by the Fund
individually and by all of the funds in Franklin Templeton Investments. These
Directors also serve as directors or trustees of other investment companies that
are part of the Franklin Templeton Investments fund complex, many of which hold
meetings at different dates and times. The Directors and the Fund's management
believe that having the same individuals serving on the boards of many of the
funds in Franklin Templeton Investments enhances the ability of each fund to
obtain, at a relatively modest cost to each separate fund, the services of high
caliber, experienced and knowledgeable Independent Directors who can more
effectively oversee the management of the funds.
Board members historically have followed a policy of having substantial
investments in one or more of the funds in Franklin Templeton Investments, as is
consistent with their individual financial goals. In February 1998, this policy
was formalized through adoption of a requirement that each board member invest
one-third of the fees received for serving as a director or trustee of a
Templeton fund in shares of one or more Templeton funds and one-third of the
fees received for serving as a director or trustee of a Franklin fund in shares
of one or more Franklin funds, until the value of such investments equals or
exceeds five times the annual fees paid to such board member. Investments in the
name of family members or entities controlled by a board member constitute fund
holdings of such board member for purposes of this policy, and a three-year
phase-in period applies to such investment requirements for newly elected board
members. In implementing this policy, a board member's fund holdings existing on
February 27, 1998, were valued as of such date with subsequent investments
valued at cost.
WHO ARE THE EXECUTIVE OFFICERS OF THE FUND?
Officers of the Fund are appointed by the Directors and serve at the pleasure of
the Board. Listed below, for each Executive Officer are their name, age and
address, as well as their position and length of service with the Fund, and
principal occupation during the past five years.
NAME, AGE AND ADDRESS POSITION LENGTH OF TIME SERVED
-------------------------------------------------------------------------------
CHARLES B. JOHNSON Chairman of the Chairman of the Board
Board, Director since 1995 and Director
and Vice President and Vice President
since 1992
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Please refer to the table "Interested Directors serving until 2004 Annual
Meeting of Shareholders" for information about Mr. Charles B. Johnson.
-------------------------------------------------------------------------------
MARK MOBIUS (65) President Since 1987
Two Exchange Square
39th Floor
Suite 3905-08
Hong Kong
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Portfolio Manager of various Templeton advisory affiliates; Managing Director,
Templeton Asset Management Ltd.; Executive Vice President and Director,
Templeton Global Advisors Limited; officer of eight of the investment companies
in Franklin Templeton Investments; officer and/or director, as the case may be,
of some of the subsidiaries of Franklin Resources, Inc.; and FORMERLY,
President, International Investment Trust Company Limited (investment manager of
Taiwan R.O.C. Fund) (1986-1987); and Director, Vickers da Costa, Hong Kong
(1983-1986).
-------------------------------------------------------------------------------
RUPERT H. JOHNSON, JR. (61) Vice President Since 1996
One Franklin Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources,
Inc.; Vice President and Director, Franklin Templeton Distributors, Inc.;
Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services,
Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or
director or trustee, as the case may be, of most of the other subsidiaries of
Franklin Resources, Inc. and of 51 of the investment companies in Franklin
Templeton Investments.
-------------------------------------------------------------------------------
HARMON E. BURNS Director and Director since 1992 and
Vice President Vice President since
1996
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Please refer to the table "Interested Directors serving until 2004 Annual
Meeting of Shareholders" for information about Mr. Harmon E. Burns.
-------------------------------------------------------------------------------
NAME, AGE AND ADDRESS POSITION LENGTH OF TIME SERVED
-------------------------------------------------------------------------------
MARTIN L. FLANAGAN (41) Vice President Since 1989
One Franklin Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Member - Office of the President, Chief Financial Officer and Chief
Operating Officer, Franklin Resources, Inc.; Senior Vice President and Chief
Financial Officer, Franklin Mutual Advisers, LLC; Executive Vice President,
Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice
President and Chief Operating Officer, Templeton Investment Counsel, LLC;
Executive Vice President and Director, Franklin Advisers, Inc.; Executive Vice
President, Franklin Investment Advisory Services, Inc., and Franklin Templeton
Investor Services, LLC; Chief Financial Officer, Franklin Advisory Services,
LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director of
some of the other subsidiaries of Franklin Resources, Inc. and of 52 of the
investment companies in Franklin Templeton Investments.
-------------------------------------------------------------------------------
CHARLES E. JOHNSON (45) Vice President Since 1996
One Franklin Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Member - Office of the President and Director, Franklin Resources,
Inc.; Senior Vice President, Franklin Templeton Distributors, Inc.; President
and Director, Templeton Worldwide, Inc. and Franklin Advisers, Inc.; Chairman of
the Board, President and Director, Franklin Investment Advisory Services, Inc.;
and officer and/or director of some of the other subsidiaries of Franklin
Resources, Inc. and of 34 of the investment companies in Franklin Templeton
Investments.
-------------------------------------------------------------------------------
JEFFREY A. EVERETT (38) Vice President Since 2001
P.O. Box N-7759
Lyford Cay, Nassau
Bahamas
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Templeton Global Advisors Limited; officer of 18 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Investment
Officer, First Pennsylvania Investment Research (until 1989).
-------------------------------------------------------------------------------
JOHN R. KAY (61) Vice President Since 1994
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Templeton Worldwide, Inc.; Assistant Vice President, Franklin
Templeton Distributors, Inc.; Senior Vice President, Franklin Templeton
Services, LLC; officer of 23 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Vice President and Controller, Keystone Group, Inc.
-------------------------------------------------------------------------------
NAME, AGE AND ADDRESS POSITION LENGTH OF TIME SERVED
-------------------------------------------------------------------------------
MURRAY L. SIMPSON (64) Vice President Since 2000
One Franklin Parkway and Assistant
San Mateo, CA Secretary
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer
and/or director of some of the subsidiaries of Franklin Resources, Inc.; officer
of 53 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Chief Executive Officer and Managing Director, Templeton Franklin
Investment Services (Asia) Limited (until 2000); and Director, Templeton Asset
Management Ltd. (until 1999).
-------------------------------------------------------------------------------
BARBARA J. GREEN (54) Vice President and Vice President since
One Franklin Parkway Secretary 2000 and Secretary
San Mateo, CA since 1996
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President and Deputy General Counsel, Franklin Resources, Inc.; and Senior
Vice President, Templeton Worldwide, Inc.; officer of 53 of the investment
companies in Franklin Templeton Investments; and formerly, Deputy Director,
Division of Investment Management, Executive Assistant and Senior Advisor to the
Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S.
Securities and Exchange Commission (1986-1995); Attorney, Rogers & Wells (until
1986); and Judicial Clerk, U.S. District Court (District of Massachusetts)
(until 1979).
-------------------------------------------------------------------------------
DAVID P. GOSS (55) Vice President and Since 2000
One Franklin Parkway Assistant Secretary
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; President, Chief Executive
Officer and Director, Property Resources, Inc. and Franklin Properties, Inc.;
officer and/or director of some of the other subsidiaries of Franklin Resources,
Inc.; officer of 53 of the investment companies in Franklin Templeton
Investments; and FORMERLY, President, Chief Executive Officer and Director,
Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust
(until 2000).
-------------------------------------------------------------------------------
MICHAEL O. MAGDOL (65) Vice President - Since May 2002
600 5th Avenue AML Compliance
Rockefeller Center
New York, NY 10048-0772
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Financial Officer and Director, Fiduciary Trust Company
International; and officer of 40 of the investment companies in Franklin
Templeton Investments.
-------------------------------------------------------------------------------
BRUCE S. ROSENBERG (40) Treasurer Since 2000
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; and officer of 19 of the
investment companies in Franklin Templeton Investments.
-------------------------------------------------------------------------------
PROPOSAL 2: TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION THAT PROVIDES FOR
THE REORGANIZATION OF THE FUND FROM A MARYLAND CORPORATION TO A
DELAWARE BUSINESS TRUST
The Directors unanimously recommend that you approve an Agreement and Plan of
Reorganization (the "DBT Plan"), substantially in the form attached to this
Proxy Statement as EXHIBIT A, that would change the state and form of
organization of the Fund. This proposed change calls for the reorganization of
the Fund from a Maryland corporation into a newly formed Delaware business
trust. This proposed reorganization will be referred to throughout this Proxy
Statement as the "DBT Reorganization." To implement the DBT Reorganization, the
Directors have approved the DBT Plan, which contemplates the continuation of the
current business of the Fund in the form of a new Delaware business trust named
"Templeton Emerging Markets Fund" (the "Trust").
WHAT WILL THE DBT REORGANIZATION MEAN FOR THE FUND AND ITS SHAREHOLDERS?
If the DBT Plan is approved by shareholders and the DBT Reorganization is
implemented, the Trust would have the same investment objective, policies and
restrictions as the Fund (including, if approved by shareholders at the Meeting,
any amended or eliminated fundamental investment restrictions described in
Proposals 3 and 4 of this Proxy Statement). The Board, including any persons
elected under Proposal 1, and officers of the Trust would be the same as those
of the Fund, and would operate the Trust in essentially the same manner as they
previously operated the Fund. Thus, on the effective date of the DBT
Reorganization, you would hold an interest in the Trust that is equivalent to
your then interest in the Fund. For all practical purposes, a shareholder's
investment in the Fund would not change.
WHY ARE THE DIRECTORS RECOMMENDING APPROVAL OF THE DBT PLAN AND THE DBT
REORGANIZATION?
The Directors have determined that investment companies formed as Delaware
business trusts have certain advantages over investment companies organized as
Maryland corporations. Under Delaware law, investment companies are able to
simplify their operations by reducing administrative burdens. For example,
Delaware law allows greater flexibility in drafting and amending an investment
company's governing documents, which can result in greater efficiencies of
operation and savings for an investment company and its shareholders. Delaware
law also provides favorable state tax treatment. Most significantly, an
investment company formed as a Delaware business trust, unlike one formed as a
Maryland corporation, need not pay an organization and capitalization tax on the
aggregate par value of shares it issues to shareholders. Furthermore, there is a
well-established body of legal precedent in the area of corporate law that may
be relevant in deciding issues pertaining to the Trust. This could benefit the
Trust and its shareholders by, for example, making litigation involving the
interpretation of provisions in the Trust's governing documents less likely or,
if litigation should be initiated, less burdensome or expensive. Accordingly,
the Directors believe that it is in the best interests of the shareholders to
approve the DBT Plan.
HOW DO THE MARYLAND CORPORATE LAW, AND THE FUND'S GOVERNING DOCUMENTS, COMPARE
TO THE DELAWARE BUSINESS TRUST LAW, AND THE TRUST'S GOVERNING DOCUMENTS?
Reorganizing the Fund from a Maryland corporation to a Delaware business trust
is expected to provide many benefits to the Fund and its shareholders. As a
Delaware business trust formed under the Delaware business trust law, with its
operations governed by a Declaration of Trust and By-Laws (that streamline many
of the provisions in the Fund's Amended and Restated Articles of Incorporation
and By-Laws), the Trust should enjoy enhanced flexibility in management and
administration as compared to its current operation as a Maryland corporation.
It should be able to adapt more quickly and cost effectively to new developments
in the fund industry and the financial markets. Moreover, to the extent
provisions in the Trust's Declaration of Trust and By-Laws are addressed by
rules and principles established under Delaware corporation law and the laws
governing other Delaware business entities (such as limited partnerships and
limited liability companies), the Delaware courts may look to such other laws to
help interpret provisions of the Trust's Declaration of Trust and By-Laws.
Applying this body of law to the operation of the Trust should prove beneficial
because these laws are extensively developed and business-oriented. In addition,
Delaware's Chancery Court is dedicated to business law matters, which means that
the judges tend to be more specialized and better versed in the nuances of the
law that will be applied to the Trust. These legal advantages tend to make more
certain the resolution of legal controversies and help to reduce legal costs
resulting from uncertainty in the law.
A comparison of the Delaware business trust law and the Maryland General
Corporation law, and a comparison of the relevant provisions of the governing
documents of the Trust and the Fund, are included in EXHIBIT B to this Proxy
Statement, which is entitled, "A COMPARISON OF GOVERNING DOCUMENTS AND STATE
LAW." In this connection, we note that the By-Laws which will govern the
operation of the Trust if this Proposal 2 is approved by shareholders and the
DBT Reorganization is completed, contain a provision which requires that notice
be given to the Trust by a shareholder in advance of a shareholder meeting to
enable a shareholder to present a proposal at any such meeting. Failure to
satisfy the requirements of this advance notice provision will mean that a
shareholder may not be able to present a proposal at a meeting. The details of
that new advance notice provision are included in EXHIBIT B and its operation is
described under "FURTHER INFORMATION ABOUT VOTING AND THE MEETING - SHAREHOLDER
PROPOSALS" below.
WHAT ARE THE CONSEQUENCES AND PROCEDURES OF THE DBT REORGANIZATION?
As noted above, upon completion of the DBT Reorganization, the Trust will
continue the business of the Fund with the same investment objective, policies
and investment restrictions as exist on the date of the DBT Reorganization, and
will hold the same portfolio of securities then held by the Fund. The Trust will
operate under substantially identical overall management, investment management,
and administrative arrangements as those of the Fund.
The Trust was formed solely for the purpose of becoming the successor
organization to, and carrying on the business of, the Fund. As the successor to
the Fund's operations, the Trust will adopt the Fund's notification of
registration under the 1940 Act. To accomplish the DBT Reorganization, the DBT
Plan provides that the Fund will transfer all of its portfolio securities and
any other assets, subject to its liabilities, to the Trust. In exchange for
these assets and liabilities, the Trust will issue shares of beneficial interest
in the Trust to the Fund, which, in turn, will distribute those shares pro rata
to you. Through this procedure, you will receive exactly the same number and
dollar amount of shares of the Trust as shares of the Fund ("Fund Shares") owned
by you immediately prior to the effectiveness of the DBT Reorganization, and the
net asset value of each share of the Trust will be the same as that of the Fund.
In addition, you will retain the right to any declared but undistributed
dividends or other distributions payable on Fund Shares that you may have had on
the effective date of the DBT Reorganization. As soon as practicable after the
effective date of the DBT Reorganization, the Fund will be dissolved and cease
its corporate existence.
The Directors may terminate the DBT Plan and abandon the DBT Reorganization at
any time prior to the effective date of the DBT Reorganization if they determine
that such actions are in the best interests of the Fund's shareholders. If the
DBT Plan is not approved by shareholders or the Directors abandon the DBT
Reorganization, the Fund will continue to operate as a corporation under the
laws of the State of Maryland. If the DBT Reorganization is approved by
shareholders, it is expected to be completed in the fall of 2002.
WHAT EFFECT WILL THE DBT REORGANIZATION HAVE ON THE CURRENT INVESTMENT
MANAGEMENT AGREEMENT?
In connection with the implementation of the DBT Reorganization, the Trust will
enter into an investment management agreement with Templeton Asset Management
Ltd. - Hong Kong Branch, the Trust's investment manager (the "Investment
Manager"). This investment management agreement will be substantially identical
to the current investment management agreement between the manager and the Fund.
Thus, it is anticipated that, other than a change in contracting party and the
date of the agreement, there will be no material change in the essential terms
of the investment management agreement because of the DBT Reorganization.
WHAT EFFECT WILL THE DBT REORGANIZATION HAVE ON THE CURRENT SHAREHOLDER
SERVICING AGREEMENTS?
The Trust will enter into an agreement for administration services with Franklin
Templeton Services, LLC ("FT Services") that is substantially identical to the
Fund Administration Agreement currently in place between the Fund and FT
Services. The Fund will assign to the Trust the Fund's service and transfer
agency agreement with Mellon Investor Services, LLC (which provide for certain
financial, administrative, transfer agency and fund accounting services).
Consequently, shareholders of the Trust should receive the same quality of
services they have received as shareholders of the Fund.
WHAT IS THE EFFECT OF SHAREHOLDER APPROVAL OF THE DBT PLAN?
Under the 1940 Act, the shareholders of an investment company are entitled to
vote on the election of directors or trustees and the initial approval of the
investment management agreement for the investment company. Thus, if the DBT
Plan is approved, shareholders of the Trust would need to elect Trustees/1/ and
approve an investment management agreement or the Trust would not be in
compliance with the 1940 Act. For investment companies that have already
commenced operations and have public shareholders, these matters typically must
be submitted to shareholders for their consideration at a meeting specially
called for that purpose. In the case of a reorganization such as that
contemplated by this Proposal 2, a meeting could not be called until after the
completion of the transaction, because only then would there exist public
shareholders of the Trust who could vote. Such a procedure would be both
impractical and expensive. Therefore, in accordance with standard practice and
announced positions of the staff of the U.S. Securities and Exchange Commission
("SEC"), the Directors have determined that it is in the best interests of the
shareholders to avoid the considerable expense of another shareholder meeting to
obtain these approvals following completion of the DBT Reorganization. Thus, the
Directors have determined that shareholder approval of the DBT Plan
substantially in the form contained in EXHIBIT A would, for purposes of the 1940
Act, constitute shareholder approval of: (1) the election, as Trustees of the
Trust, of the Directors of the Fund who are in office at the time of the DBT
Reorganization, including those Directors elected at this Meeting pursuant to
Proposal 1; and (2) a new investment management agreement between the Trust and
the Investment Manager, which is substantially identical to the investment
management agreement currently in effect between the Fund and the Investment
Manager. Mechanically, this will be accomplished, prior to the effectiveness of
the DBT Reorganization, by issuing a single share of beneficial interest in the
Trust to the Fund, and having the Fund vote on these matters as sole shareholder
of the Trust.
In summary, to implement the special voting procedures described above, prior to
the completion of the DBT Reorganization, the officers will cause the Fund,
which will have the status of initial sole shareholder of the Trust, to vote its
share of the Trust FOR the election of the Trustees of the Trust and approval of
the investment management agreement as specified above. This action will enable
the Trust to satisfy the requirements of the 1940 Act without involving the time
and expense of a shareholder meeting. If approved by shareholders of the Fund
and not abandoned by the Directors, the DBT Reorganization will be completed as
soon as reasonably practicable after the Meeting.
WHAT IS THE CAPITALIZATION AND STRUCTURE OF THE TRUST?
The Trust was formed as a business trust on May __, 2002 pursuant to Delaware
law. The Trust has authorized an unlimited number of shares of beneficial
interest without par value. As of the effective date of the DBT Reorganization,
outstanding shares of the Trust will have the same dividend rights as those of
the Fund immediately prior to the effective date of the DBT Reorganization and
will be fully paid, nonassessable, freely transferable, and will have no
preemptive or subscription rights. Shares of the Trust and the Fund have the
same voting and liquidation rights and have one vote per full share. Both the
Trust and Fund provide for noncumulative voting in the election of their
Trustees/Directors and provide for a classified board consisting of three
classes of Trustees/Directors, with Staggered terms. Each class of
Trustees/Directors remains in office for three years and until their successors
are elected and qualify with the term of office of one class expiring each year.
The Trust also has the same fiscal year as the Fund.
ARE THERE ANY TAX CONSEQUENCES FOR SHAREHOLDERS?
The DBT Reorganization is designed to be tax-free for federal income tax
purposes so that you will not experience a taxable gain or loss when the DBT
Reorganization is completed. Generally, the basis and holding period of your
shares in the Trust will be the same as the basis and holding period of your
shares in the Fund. Consummation of the DBT Reorganization is subject to receipt
of a legal opinion from the law firm of Stradley Ronon Stevens & Young, LLP,
counsel to the Trust and the Fund, that under the Internal Revenue Code of 1986,
as amended, the exchange of assets of the Fund for the shares of the Trust, the
transfer of such shares to the shareholders of the Fund, and the liquidation and
dissolution of the Fund pursuant to the DBT Plan, will not give rise to the
recognition of a gain or loss for federal income tax purposes to the Fund, the
Trust, or either of their shareholders.
WHAT IF I CHOOSE TO SELL MY SHARES AT ANY TIME?
You may continue to trade your Fund Shares on the NYSE or Pacific Exchange, Inc.
(the "PXC") until the close of trading on the business day before the effective
date of the DBT Reorganization. The shares of the Trust will be listed on the
NYSE and the PXC just as Fund Shares historically have been listed.
Consequently, upon the effectiveness of the DBT Reorganization you may trade, on
the NYSE or the PXC the shares of the Trust you receive in the DBT
Reorganization. The value of your shares will not be affected by the DBT
Reorganization except to the extent that market forces affect the value of the
shares, as currently occurs.
WHAT IS THE EFFECT OF MY VOTING "FOR" THE DBT PLAN?
By voting "FOR" the DBT Plan, you will be agreeing to become a shareholder of an
investment company that has been formed as a Delaware business trust, with the
Trustees, investment management, and other service arrangements that are
substantially identical to those in place for the Fund.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 2
INTRODUCTION TO PROPOSALS 3 AND 4
WHY IS THE BOARD RECOMMENDING THE AMENDMENT OR ELIMINATION OF CERTAIN OF THE
FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS?
The Fund is subject to certain "fundamental" investment restrictions that govern
the Fund's investment activities. Under the 1940 Act, "fundamental" investment
restrictions may be changed or eliminated only if shareholders approve such
action. The Board is recommending that shareholders approve the amendment or
elimination of certain of the Fund's fundamental investment restrictions
principally because such fundamental investment restrictions are more
restrictive than is required under the federal securities laws and their
amendment or elimination would provide the Fund with greater investment
flexibility to meet its investment objective. The proposed restrictions not only
satisfy current federal regulatory requirements, but generally are formulated to
provide the Fund with the flexibility to respond to future legal, regulatory,
market or technical changes. The proposed changes would not affect the Fund's
investment objective.
After the Fund was organized as a Maryland corporation in 1987, certain legal
and regulatory requirements applicable to investment companies changed. For
example, certain restrictions imposed by state laws and regulations were
preempted by the National Securities Markets Improvement Act of 1996 ("NSMIA")
and, therefore, are no longer applicable to investment companies. As a result,
the Fund currently is subject to certain fundamental investment restrictions
that are either more restrictive than required under current law or which are no
longer required at all. For this reason, the Board is recommending that the
Fund's shareholders approve the amendment or elimination of certain of the
Fund's current fundamental investment restrictions in order to provide the Fund
with a more modernized list of restrictions that will enable the Fund to operate
more efficiently and to more easily monitor compliance with its investment
restrictions.
The Board does not anticipate that the proposed amendments to, or the
elimination of, certain of the Fund's restrictions, individually or in the
aggregate, will materially affect the way the Fund is managed or will result in
a material change in the level of investment risk associated with an investment
in the Fund. Should the Board determine at a later date that a material
modification to an investment policy that would be permitted under the changed
restrictions is appropriate for the Fund, notice of any such change would be
provided to shareholders. However, the Board believes that the proposed changes
are in the best interests of the Fund and its shareholders as they will
modernize the subject investment restrictions and should enhance the Fund's
ability to achieve its investment objective.
PROPOSAL 3: TO APPROVE AMENDMENTS TO CERTAIN OF THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS (THIS PROPOSAL INVOLVES SEPARATE VOTES ON
SUB-PROPOSALS 3A - 3E)
The Fund's current investment restrictions that are the subject of this Proposal
3, together with the recommended changes to those restrictions, are detailed in
EXHIBIT C, which is entitled, "FUNDAMENTAL INVESTMENT RESTRICTIONS PROPOSED TO
BE AMENDED OR ELIMINATED." Shareholders are requested to vote separately on each
Sub-Proposal in Proposal 3. Any Sub-Proposal that is approved by shareholders
will be effective immediately.
SUB-PROPOSAL 3A: TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING BORROWING AND ISSUING SENIOR SECURITIES.
The 1940 Act imposes certain limits on investment companies with respect to
borrowing money and issuing senior securities, and a fund's policies concerning
the borrowing of money and the issuance of senior securities must be
fundamental. A "senior security," which includes certain borrowings, is, in
essence, an obligation of the Fund with respect to its earnings or assets that
takes precedence over the claims of the Fund's shareholders regarding the same
earnings or assets. The 1940 Act's limitations are designed to protect
shareholders and their investments by restricting a fund's ability to subject
its assets to the claims of creditors or senior security holders who would be
entitled to dividends or rights on liquidation of the Fund that would have to be
discharged before the claims of shareholders. Consistent with that policy, the
1940 Act generally limits the ability of a closed-end investment company, like
the Fund, from leveraging its assets by borrowing money or through the issuance
of senior securities.
In summary, under the 1940 Act, a closed-end fund may leverage its assets by
borrowing or through the issuance of debt instruments or preferred stock. In the
case of a senior security that is in the form of a borrowing or the issuance of
debt, the Fund, among other requirements, must have assets equal to at least
300% of the amount borrowed or the amount of the debt issue immediately after
the borrowing or issuance of debt. In determining whether it meets the 300%
asset coverage requirement, the Fund is permitted to include as an asset the
amount borrowed or the amount of the debt instrument. In the case of a senior
security that is in the form of an issue of preferred stock, among other
requirements, the asset coverage requirement is 200% of the amount of the
preferred stock issued. As in the case of a borrowing or debt issue, the amount
of the preferred stock issue is included as an asset for purposes of the asset
coverage requirement. So long as the borrowing continues or the debt issue or
preferred stock is outstanding, a fund may not pay dividends or make
distributions or repurchase its common stock if that action would reduce asset
coverage below the required amount.
In addition, in accordance with SEC staff interpretations under the 1940 Act,
closed-end funds may engage in a number of types of transactions that might be
considered to raise "senior security" or "leveraging" concerns if the funds do
not meet certain collateral requirements designated by the SEC staff. These
collateral requirements are designed to protect shareholders by ensuring that
when an obligation from one of these "leverage-type transactions" comes due,
liquid assets of the fund sufficient to discharge the obligation are readily
available in a segregated account of the fund. The collateralization requirement
limits a fund's ability to engage in those types of transactions and thereby
limits a fund's exposure to risk associated with them. In very general terms, an
investment company is considered to be leveraging when it enters into securities
transactions without being required to make payment until a later point in time.
The leverage-type transactions identified by the SEC staff as presenting senior
security concerns include, among others, short sales, certain options and
futures transactions, and reverse repurchase agreements. Among these, short
sales are currently the subject of a fundamental restriction that the Board is
proposing to eliminate under Proposal 4 of this Proxy Statement.
WHAT EFFECT WILL AMENDING THE CURRENT BORROWING AND SENIOR SECURITIES
RESTRICTION HAVE ON THE FUND?
The proposed borrowing and senior securities restriction set forth in EXHIBIT C
is intended to modernize the Fund's investment restriction, and to clarify that
the Fund may borrow money, issue senior securities or engage in "leverage-type
transactions" in accordance with the limits established under the 1940 Act, or
any SEC order, rule, regulation or staff interpretation thereof.
The proposed restriction is designed to reflect all current regulatory
requirements and is formulated to provide the Fund with enhanced flexibility to
respond to future legal, regulatory or market changes. This enhanced flexibility
would be achieved by eliminating certain operational limitations set forth in
the Fund's current fundamental restriction. That restriction currently prohibits
the Fund from issuing senior securities or borrowing money except that the Fund
may borrow from a bank (i) for temporary or emergency purposes, or (ii) to
finance repurchase of its shares, in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the amount
borrowed), and may also pledge its assets to secure such borrowings. Although
the proposed restriction does not specifically carve out these enumerated
activities, the Fund would continue to be permitted to engage in them, because
these activities are all permissible under the 1940 Act and interpretations of
the SEC staff.
The proposed borrowing and senior securities restriction set forth in EXHIBIT C
would provide the Fund with greater borrowing and leveraging flexibility, and
would permit the Fund to engage in a broader range of leverage-type
transactions. The Fund may therefore be subject to additional costs and risks if
it engages in practices that would be permissible under this modified policy.
BORROWING AND ISSUANCE OF SENIOR SECURITIES. For example, the Fund could borrow
money or issue senior securities, such as preferred stock, for investment
purposes when the manager believes that it is appropriate to expand the Fund's
investments beyond its existing holdings. Because borrowing or the issuance of
senior securities will subject the Fund to additional costs, the Fund would only
borrow or issue senior securities when the manager believes that the cost of
carrying the assets to be acquired through leverage would be lower than the
Fund's expected return on its longer-term portfolio investments. Should this
differential narrow, the Fund would realize less of a positive return, with the
additional risk that, during periods of adverse market conditions, the market
value of the Fund's entire portfolio holdings (including those acquired through
leverage) may decline far in excess of incremental returns the Fund may have
achieved in the interim. Indeed, any such leveraging tends to magnify market
exposure and can result in higher than expected losses to the Fund.
Because the investment risk associated with investment assets purchased with
funds obtained through a borrowing or the issuance of senior securities would be
borne solely by the holders of the Fund's shares, adverse movements in the price
of the Fund's portfolio holdings would have a more severe effect on the Fund's
net asset value than if the Fund were not leveraged. Leverage creates risks for
shareholders in the Fund, including the likelihood of greater volatility of the
Fund's net asset value and the market price of its shares, and the risk that
fluctuations in interest rates on borrowings or in the dividend rates on any
preferred stock may affect the return to shareholders. If the income from the
securities purchased with such funds is not sufficient to cover the cost of
leverage, the net income of the Fund would be less than if leverage had not been
used, and therefore the amount available for distribution to shareholders as
dividends will be reduced. In such an event, the Fund may nevertheless determine
to maintain its leveraged position in order to avoid capital losses on
securities purchased with the leverage.
Also, if the asset coverage for borrowings or other senior securities of the
Fund declines below the limits specified in the 1940 Act, the Fund may be
required to sell a portion of its investments when it may not be advantageous to
do so. In the extreme, sales of investments required to meet asset coverage
tests imposed by the 1940 Act could also cause the Fund to lose its status as a
regulated investment company. In addition, if the Fund were unable to make
adequate distributions to shareholders because of asset coverage or other
restrictions, it could fail to qualify as a regulated investment company for
federal income tax purposes and, even if it did not fail to so qualify, it could
become liable for income and excise tax on the portion of its earnings which are
not distributed on a timely basis in accordance with applicable provisions of
the Internal Revenue Code of 1986, as amended.
The Fund's willingness to borrow money and issue new securities for investment
purposes, and the amount it will borrow or issue, will depend on many factors,
the most important of which are investment outlook, market conditions and
interest rates. Successful use of a leveraging strategy depends on the manager's
ability to predict correctly interest rates and market movements, and there is
no assurance that a leveraging strategy will be successful during any period in
which it is employed.
LEVERAGE-TYPE TRANSACTIONS. As recited in the Fund's Prospectus, the Fund is
currently authorized to engage in certain investment practices that constitute
"leverage-type transactions," subject to certain limitations. That authority
would be preserved and expanded under the proposed amendment to the Fund's
restriction. Among the leverage-type transactions in which the Fund would be
authorized to engage under the proposed restriction are transactions involving
futures, options thereon and similar derivative instruments. These instruments
could be used in an attempt to protect Fund assets, implement a cash or tax
management strategy or enhance Fund returns. With derivatives, the manager often
would be attempting to predict whether an underlying investment will increase or
decrease in value at some future time.
Derivatives and similar instruments generally involve costs, may be volatile and
may involve a small investment relative to the risk assumed. Their successful
use will depend on the manager's ability to predict market movements. Risks
include delivery failure, default by the other party and the inability to close
out a position because the trading market becomes illiquid. Therefore, these
instruments will be utilized only if the manager determines that such
investments are advisable.
The above notwithstanding, the Board does not anticipate that the Fund would be
exposed to any additional risk if the current restriction is amended, because
the Fund has no present intention of changing its current investment practices
with respect to borrowing money or issuing senior securities. In addition, even
if the Fund were to engage in "leverage-type transactions," the SEC staff's
collateralization requirements and other applicable regulatory limitations
should help to mitigate the investment risks attendant to them.
SUB-PROPOSAL 3B: TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING INDUSTRY CONCENTRATION.
Under the 1940 Act, an investment company's policy regarding concentration of
investments in the securities of companies in any particular industry or group
of industries must be fundamental. The SEC staff takes the position that an
investment company "concentrates" its investments if it invests more than 25% of
its "net" assets (exclusive of certain items such as cash, U.S. government
securities, securities of other investment companies, and tax-exempt securities)
in any particular industry or group of industries. An investment company is not
permitted to concentrate its investments in any particular industry or group of
industries unless it discloses its intention to do so.
WHAT EFFECT WILL AMENDING THE CURRENT RESTRICTION REGARDING INDUSTRY
CONCENTRATION HAVE ON THE FUND?
The proposed concentration policy set forth in EXHIBIT C to this Proxy Statement
is substantially the same as the Fund's current policy, except that the proposed
policy would (i) modify the Fund's asset measure (from "total assets" to "net
assets") by which concentration is assessed; (ii) slightly increase (from "25%
or more" to "more than 25%") the numerical limit on permissible investments; and
(iii) expressly reference, in a manner consistent with current SEC staff policy,
the categories of investments that are excepted from coverage of the
restriction. Consistent with the Fund's current restriction, the proposed
restriction would preserve the Fund's authority, without limit, to purchase the
securities of any issuer pursuant to the exercise of rights distributed to the
Fund by such issuer. The proposed restriction reflects a more modernized
approach to industry concentration, and provides the Fund with investment
flexibility that ultimately is expected to help the Fund respond to future
legal, regulatory, market or technical changes.
The proposed restriction would expressly exempt from the 25% limitation, those
securities issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, and the securities of other investment companies, consistent
with current SEC staff policy. The Fund is currently authorized to invest in
U.S. government securities, but those investments generally are permissible only
when the Fund's assets are not invested in emerging markets equity securities or
for temporary defensive purposes. In addition, although the Fund is not
currently prevented from making investments in other investment companies, the
proposed restriction would make explicit that any such investments are exempted
from the Fund's concentration policy. Even if the Fund were to make investments
in investment company securities under this modified restriction, however, the
Fund would continue to remain subject to the limitations on such investments as
set forth in the 1940 Act. In brief, absent special relief from the SEC, the
1940 Act would prohibit the Fund from investing more than 5% of its total assets
in any one investment company and more than 10% of its total assets in other
investment companies overall.
The adoption of the proposed restriction is not expected to change materially
the way in which the Fund currently is managed. The Fund does not typically
invest a significant proportion of its assets in U.S. government securities or
those issued by its agencies or instrumentalities. Moreover, without SEC relief,
the Fund would be limited in its investments in other investment companies as it
is currently pursuant to applicable law.
SUB-PROPOSAL 3C: TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING INVESTMENTS IN COMMODITIES.
Under the 1940 Act, a fund's investment policy relating to the purchase and sale
of commodities must be fundamental. The substance of the Fund's current
investment policy regarding commodities is set forth in EXHIBIT C. At present,
that policy is combined with the Fund's fundamental policy relating to purchase
of real estate; the latter policy is proposed to be modified under Sub-Proposal
3d, set forth below. Management is proposing to separate the fundamental
restrictions relating to these two practices for purposes of clarity and to
facilitate administration of the Fund's compliance program. If shareholders do
not approve both Sub-Proposals 3c and 3d, the current policy respecting the
investment practice that is the subject of the rejected Sub-Proposal will be
preserved and the current fundamental restriction will be reformulated
accordingly.
The most common types of commodities are physical commodities such as wheat,
cotton, rice and corn. Under the federal securities and commodities laws,
certain futures contracts and options thereon are considered to be commodity
interests. Financial futures contracts such as those related to currencies,
stock indices or interest rates, also may be considered to be commodity
interests. If the Fund buys a financial futures contract, it obtains the right
to receive (or, if the Fund sells the contract, the Fund is obligated to pay)
the cash difference between the contract price for an underlying asset or index
and the future market price, if the future market price is higher. If the future
market price is lower, the Fund is obligated to pay (or, if the Fund sold the
contract, the Fund is entitled to receive) the amount of the decrease. Funds
typically seek to invest in such financial futures contracts and options related
to such contracts for hedging or investment purposes.
WHAT EFFECT WILL AMENDING THE COMMODITIES RESTRICTION HAVE ON THE FUND?
Under the Fund's current fundamental restriction relating to commodities, the
Fund is permitted to purchase and sell (i) futures contracts on stock indices
and foreign currencies, (ii) securities which are secured by commodities and
(iii) securities of companies which invest or deal in commodities. Consistent
with the investment practices noted in the restriction and as described in more
detail in the Fund's Prospectus, the Fund currently has the authority to enter
into foreign currency futures contracts (and forward foreign currency exchange
contracts) as well as purchase put or call options on foreign currency in order
to hedge against foreign currency exchange risk. As set forth in the Prospectus,
the Fund is subject to certain limitations on the amount of assets it can devote
to these transactions, the amount of margin deposits to which it can become
subject in connection with futures contracts, as well as other limits. In
addition, subject to certain other express limits, the Fund may seek to increase
its investment returns or may hedge all or a portion of its portfolio
investments through transactions involving stock index futures (and stock
options).
The proposed commodities restriction set forth in EXHIBIT C states that the
prohibition on purchases and sales covers commodities, but does not prevent the
Fund from engaging in transactions involving futures contracts and options
thereon or investing in securities that are secured by physical commodities.
This makes clear that the Fund would have the flexibility, consistent with
federal securities and commodities laws, to engage in transactions involving
futures contracts and related options. The proposed restriction also would make
clear, and in some instances expand, the Fund's authority to make investments in
such transactions and related options for investment purposes as well as hedging
purposes. The proposed restriction does not otherwise limit the types of
financial agreements and instruments that can be used in hedging transactions.
Thus, the proposed restriction would continue to enable the Fund to engage,
consistent with its investment objective, in transactions that are described in
the Fund's Prospectus.
Under the terms of the modified restriction, the Fund would be permitted to
engage in transactions involving various financial agreements and instruments,
including forward foreign currency contracts, options on foreign currencies,
futures contracts and options on futures for hedging or investment purposes.
Among these are foreign currency exchange transactions which the Fund may
conduct either on a spot (I.E., cash) basis at the spot rate prevailing in the
foreign currency exchange market, or through entering into forward contracts to
purchase or sell foreign currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date, which
is individually negotiated and privately traded by currency traders and their
customers. Although forward contracts will be used primarily to protect the Fund
from adverse currency movements, they also involve the risk of loss in the event
that anticipated currency movements are not accurately predicted.
Other transactions include the purchasing and writing of put and call options on
foreign currencies for the primary purpose of protecting against declines in the
U.S. dollar value of foreign currency-denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchanges rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs.
The Fund would also be permitted to buy and sell financial futures contracts,
index futures contracts, foreign currency futures contracts and options on any
of the foregoing. A financial futures contract is an agreement between two
parties to buy or sell a specified debt security at a set price on a future
date. An index futures contract is an agreement to take or make delivery of an
amount of cash based on the difference between the value of the index at the
beginning and at the end of the contract period. A futures contract on a foreign
currency is an agreement to buy or sell a specified amount of a currency for a
set price on a future date. These instruments can present significant investment
risk to the Fund if the manager does not accurately predict the fluctuations in,
as the case may be, interest rates, currency values or the market to which the
financial instrument is tied.
Using these financial agreements and similar instruments for hedging, and
particularly for investment purposes, can involve substantial risks, and they
will be utilized only if the manager determines that such investments are
advisable. The adoption of this restriction is not expected to affect the way
the Fund is currently managed (as disclosed in the Fund's Prospectus) and,
therefore, it is not currently anticipated that the proposed restriction will
expose the Fund to any additional material risk.
SUB-PROPOSAL 3D: TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING INVESTMENTS IN REAL ESTATE.
Under the 1940 Act, a fund's investment policy relating to the purchase of real
estate must be fundamental. The substance of the Fund's current investment
restriction regarding real estate is set forth on EXHIBIT C. As noted above in
connection with Sub-Proposal 3c (relating to investments in commodities), the
Fund's current fundamental restriction relating to real estate is combined with
its investment restriction relating to commodities. Management is proposing to
separate the two fundamental restrictions for purposes of clarity and to
facilitate administration of the Fund's compliance program. As noted above, if
Shareholders do not approve both Sub-Proposals 3c and 3d, the current policy
respecting the investment practice that is the subject of the rejected
Sub-Proposal will be preserved and the current fundamental investment
restriction will be reformulated accordingly.
WHAT EFFECT WILL AMENDING THE CURRENT RESTRICTION REGARDING INVESTMENTS IN REAL
ESTATE HAVE ON THE FUND?
The proposed fundamental restriction, set forth on EXHIBIT C, is substantially
similar to the current restriction in that it would permit the Fund to invest in
securities secured by real estate or invest in securities of companies that
invest in or deal in real estate to the extent consistent with the Fund's
investment objective. It would continue to generally prohibit buying and selling
real estate.
The only noteworthy change is the proposed reformulation of language to ensure
the Fund's ability to invest in real estate investment trusts (REITs) and
similar instruments. The current restriction's prohibition on buying and selling
"interests in real estate" could be inappropriately construed to prohibit such
investments. Investing in REITs has gained in popularity and the number of REITs
available for investment by funds and other institutional investors has grown
dramatically. The proposed change would clarify that the Fund is not prohibited
from investing in them. It is not anticipated that the proposed restriction
would pose any additional risk to the Fund because the proposed restriction is
designed principally to clarify the current restriction and, in any event, the
Fund does not currently anticipate altering its present investment program.
SUB-PROPOSAL 3E: TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING LENDING.
Under the 1940 Act, a fund must describe and designate as fundamental, its
policy with respect to "making loans to other persons." In addition to a loan of
cash, the term "loans" may, under certain circumstances, be deemed to include
certain other transactions and investment related practices. Among those
transactions and practices are lending of portfolio securities, entering into
repurchase agreements and the purchase of certain debt instruments. The Fund's
current fundamental restriction prohibits the Fund from making loans, but
specifically carves out repurchase agreements from its prohibition. Thus, the
current restriction may be construed to prevent the Fund from engaging in the
transactions and practices that the SEC may consider to be loans, even if such
activities would otherwise be consistent with the Fund's investment objective
and policies.
WHAT EFFECT WILL AMENDING THE CURRENT LENDING RESTRICTION HAVE ON THE FUND?
The proposed restriction would preserve the Fund's authority to enter into
repurchase agreements (to the extent they are deemed loans) and would provide
the Fund with greater lending flexibility. In addition to the authority the Fund
already has to invest in debt instruments, the modified restriction would
expressly permit the Fund, consistent with investment objectives, to invest in
loan participations and direct corporate loans, which, under certain
circumstances, may be deemed to be loans. For several reasons, these investments
recently have become more common for investment companies. Under the applicable
law in some developing markets, loan financing of certain enterprises offer
certain advantages over equity investments, especially for foreign investors,
such as the Fund. For example, loan financing may be more flexible than equity
investments in markets where the equity capital contributed by foreign investors
is fixed and may not be changed without regulatory approvals. In addition,
payments of interest and principal on loans are sometimes entitled to priority
of repayment and may not be subject to withholding taxes. Moreover, the proceeds
of loan payments are sometimes more easily converted to foreign currency than
dividend distributions.
The proposed restriction also would explicitly permit the Fund to lend its
portfolio securities. Securities lending is a practice that has become common in
the mutual fund industry and involves the temporary loan of portfolio securities
to parties who use the securities for the settlement of other securities
transactions. The collateral delivered to the Fund in connection with such a
transaction is then invested to provide the Fund with additional income it might
not otherwise have.
The proposed restriction would, in addition, provide the Fund with the
flexibility to make cash loans to affiliated investment companies under an SEC
exemptive order issued to the investment companies within Franklin Templeton
Investments. The proposed restriction permits the Fund, subject to certain
conditions, to lend cash to other Franklin or Templeton funds at rates higher
than those which the Fund would receive if the Fund were to loan cash to banks
through short-term lendings such as repurchase agreements. The Board anticipates
that this additional flexibility to lend cash to affiliated investment companies
would provide the Fund additional investment opportunities and would enhance the
Fund's ability to respond to changes in market, industry or regulatory
conditions.
Because the proposed lending restriction would provide the Fund with greater
flexibility to invest in loan participations and direct corporate loans, and to
engage in securities lending, the Fund may be exposed to some additional risks
associated with these practices. In the case of investments in loan
participations and direct corporate loans, these risks would include the risk of
general illiquidity and greater price volatility, as well as the lack of
publicly available information about issuers of privately placed debt
obligations and loan counterparties. In the case of securities lending, these
risks include the possibility that a borrower fails to return the securities to
the Fund when demanded or required to be returned.
The Fund does not intend currently to change its investment practices as a
result of the adoption of the proposed restriction. Therefore, it is not
anticipated that the adoption of the proposed restrictions would expose the Fund
to risks beyond those to which the Fund is currently subject.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" SUB-PROPOSALS 3A - 3E
PROPOSAL 4: TO APPROVE THE ELIMINATION OF CERTAIN OF THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS
The Fund's current investment restrictions that are proposed to be eliminated
are detailed in EXHIBIT C, which is entitled "FUNDAMENTAL INVESTMENT
RESTRICTIONS PROPOSED TO BE AMENDED OR ELIMINATED." If shareholders approve
Proposal 4, it will be effective immediately.
WHY IS THE BOARD RECOMMENDING THAT CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS
BE ELIMINATED, AND WHAT EFFECT WILL THEIR ELIMINATION HAVE ON THE FUND?
Some of the Fund's fundamental investment restrictions were originally derived
from state law and regulation. Due to the passage of NSMIA, and changes in SEC
staff positions, these fundamental restrictions are either no longer required by
law or are no longer relevant to the operation of the Fund. In view of these
changes in law and regulation, the Fund need not adopt or maintain investment
restrictions relating to purchasing securities on margin, short sales or
investments in non-publicly traded, restricted or illiquid securities. The Board
has determined that eliminating these three restrictions (referred to in this
Proposal 4 as the "Restrictions") is consistent with the federal securities
laws. By reducing the total number of investment restrictions that can be
changed only by a shareholder vote, the Board believes that the Fund will be
able to reduce the costs and delays associated with holding future shareholder
meetings for the purpose of revising fundamental policies that become outdated
or inappropriate. The Board believes that the elimination of the Restrictions is
in the best interest of the Fund's shareholders as it will provide the Fund with
increased flexibility to pursue its investment objective.
WHICH THREE (3) RESTRICTIONS ARE THE BOARD RECOMMENDING THAT THE FUND ELIMINATE?
The Fund currently is subject to three Restrictions that are no longer required
by law and were adopted primarily in response to regulatory, business or
industry conditions that no longer exist. Accordingly, the manager has
recommended, and the Board has determined, that the Restrictions be eliminated.
Elimination of the Restrictions would enable the Fund to be managed in
accordance with the current requirements of the 1940 Act, without being
constrained by additional and unnecessary limitations. The Directors believe
that the manager's ability to manage the Fund's assets in a changing investment
environment will be enhanced, and that investment management opportunities will
be increased, by these changes. The exact language of the Restrictions has been
included in EXHIBIT C, which is entitled "FUNDAMENTAL INVESTMENT RESTRICTIONS
PROPOSED TO BE AMENDED OR ELIMINATED."
PURCHASE SECURITIES ON MARGIN. The Fund's Prospectus contains a fundamental
policy that prohibits the Fund from purchasing securities on margin. However,
that policy expressly permits the Fund to use short-term credits necessary for
clearance of transactions and to maintain margin with respect to futures
contracts. This restriction was originally adopted at the Fund's inception
because applicable state law required investment companies to expressly recite
in their prospectuses that purchasing securities on margin was prohibited. After
the passage of NSMIA, funds are no longer required to include in their
prospectuses a fundamental policy expressly prohibiting these types of
investment activities.
Under the 1940 Act, however, the purchase of securities on margin is
specifically prohibited. As a general matter, therefore, elimination of this
restriction should not have any impact on the day-to-day management of the Fund.
Its elimination would: (i) not change the Fund's current inability to purchase
securities on margin; (ii) continue to permit the Fund to engage in the
activities currently excepted from the restriction; and (iii) permit the Fund,
going forward, to easily and efficiently respond to any future changes in
regulations or future interpretations of the 1940 Act.
SHORT SALES. The Fund's Prospectus currently prohibits the Fund from selling
securities short or maintaining a short position. A short sale is the sale of a
security that is later purchased or borrowed from a broker or other institution
to complete the sale. A short sale is "against the box" if the Fund owns, or has
the right to obtain, securities identical to those sold short.
Following the passage of NSMIA, applicable law no longer requires funds to
declare a fundamental policy concerning short selling. Under the 1940 Act, the
Fund may engage in short sales of securities provided it establishes a
segregated account that contains the same security that is the subject of the
short sale (the above-described short sale "against the box"), or other liquid
assets in an amount sufficient to discharge the liability created by the short
sale. If the Fund did not establish a segregated account with adequate
collateral, the short sale might be deemed to create a senior security, which
would be prohibited under the 1940 Act.
Eliminating this restriction on short sales would provide the Fund with the
flexibility to enter into short sales in the limited instances that are
interpreted by the SEC staff as not constituting the issuance of senior
securities under the federal securities laws. The Fund's use of short sales
could pose certain risks, including potential losses if the market price of the
security sold short increases between the date when the Fund enters into the
short position and the date when the Fund closes the short position. However,
because the Fund does not currently intend to enter into short sales or maintain
short positions, eliminating this restriction is not expected to affect the
day-to-day management of the Fund.
NON-PUBLICLY TRADED, RESTRICTED AND ILLIQUID SECURITIES. Since its inception,
the Fund has been subject to a fundamental investment restriction that prohibits
the Fund from investing more than 25% of it total assets in non-publicly traded,
restricted and illiquid securities. Prior to NSMIA, some state laws required
funds to adopt restrictive policies concerning such investments. Following the
passage of NSMIA, those state restrictions are no longer required.
In addition, neither the 1940 Act nor the SEC staff imposes limits on the
percentage of closed-end fund assets invested in non-publicly traded, restricted
and illiquid securities primarily because the day-to-day operations of a
closed-end fund do not typically require the quick disposition of portfolio
securities to raise cash. As a consequence, in general, maintaining a minimum
proportion of Fund assets in liquid securities is not a compelling operational
concern. The above notwithstanding, at the Fund's inception, management
determined that it was appropriate for the Fund to limit the Fund's exposure to
non-publicly traded, restricted and illiquid securities. Accordingly, the Fund
adopted a non-fundamental policy - one that can be changed by Board action alone
- limiting to 15% the proportion of total Fund assets that could be allocated to
those investments. The risks attendant to investments in these securities
identified in the Fund's Prospectus are: (i) the absence of a public market for
these securities, (ii) the potential registration costs to be borne by the Fund
should restricted securities need to be registered for sale, (iii) the greater
risk of loss on sales of such securities, and (iv) the lack of public
information and other regulatory requirements intended to provide investor
protection respecting these securities.
Because of the existence of the Fund's current non-fundamental policy to limit
the Fund's investments in non-publicly traded, restricted and illiquid
securities to 15% of total assets, the elimination of the Fund's current
fundamental policy related to these investments is expected to have little, if
any, impact on Fund operations and, thus, is not expected to increase the risks
to which shareholders might otherwise become subject. As a non-fundamental
policy, however, the Board could change this voluntary restriction at any time
without seeking shareholder approval. Should the Board change the restriction
and management increase its investments in these securities, the Fund would
become subject to a potential increase in the risks (to the extent they remain
relevant in a particular market) outlined above commensurate with the scope of
expanded investment exposure. At present, though, the Board does not anticipate
changing the current non-fundamental restriction, and accordingly does not
expect a material change in the day-to-day operations of the Fund if
Shareholders approve the elimination of this restriction.
WHAT ARE THE RISKS, IF ANY, OF ELIMINATING THE RESTRICTIONS?
The Board does not anticipate that eliminating the Restrictions will result in
additional material risk to the Fund. Although the Fund's Restrictions, as
drafted, are no longer legally required, the Fund's ability to engage in these
practices will continue to be subject to the limitations of the 1940 Act, or any
rule, SEC staff interpretation, or any exemptive orders granted under the 1940
Act. Moreover, the Fund does not currently intend to change its present
investment practices following the elimination of the Restrictions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" PROPOSAL 4
INFORMATION ABOUT THE FUND
THE MANAGER. The Investment Manager of the Fund is Templeton Asset Management
Ltd. - Hong Kong Branch, a Singapore company with a branch office at Two
Exchange Square, Hong Kong. Pursuant to an investment management agreement, the
Investment Manager manages the investment and reinvestment of Fund assets. The
Investment Manager is an indirect, wholly owned subsidiary of Resources.
THE ADMINISTRATOR. The administrator of the Fund is Franklin Templeton Services,
LLC ("FT Services") with offices at One Franklin Parkway, San Mateo, California
94403-1906. FT Services is an indirect, wholly owned subsidiary of Resources.
Pursuant to an administration agreement, FT Services provides certain
administrative functions and facilities for the Fund.
THE TRANSFER AGENT. The transfer agent, registrar and dividend disbursement
agent for the Fund is Mellon Investor Services LLC, 85 Challenger Road, Overpeck
Centre, Ridgefield Park, New Jersey 07660.
THE CUSTODIAN. The custodian for the Fund is JPMorgan Chase Bank, MetroTech
Center, Brooklyn, New York 11245.
OTHER MATTERS. The Fund's last audited financial statements and annual report,
dated August 31, 2001 and its latest semi-annual report dated February 28, 2002,
are available free of charge. To obtain a copy, please call 1-800/DIAL BEN(R)
(1-800-342-5236) or forward a written request to Franklin Templeton Investor
Services, LLC, P.O. Box 33030, St. Petersburg, Florida 33733-8030.
As of May 31, 2002, the Fund had 17,656,437 shares outstanding and total net
assets of $175,173,974. The Fund's shares are listed on the NYSE (Symbol: EMF)
and on the Pacific Exchange, Inc. From time to time, the number of shares held
in "street name" accounts of various securities dealers for the benefit of their
clients may exceed 5% of the total shares outstanding. To the knowledge of the
Fund's management, as of May 31, 2002, there were no other entities holding
beneficially or of record more than 5% of the Fund's outstanding shares.
In addition, to the knowledge of the Fund's management, as of May 31, 2002, no
nominee or Director of the Fund owned 1% or more of the outstanding shares of
the Fund, and the Directors and officers of the Fund owned, as a group, less
than 1% of the outstanding shares of the Fund.
AUDIT COMMITTEE
The Board has a standing Audit Committee consisting of Messrs. Millsaps
(Chairman), Crothers, Hines and Tseretopoulos, all of whom are Independent
Directors and also are considered to be "independent" as that term is defined by
the NYSE's listing standards. The Audit Committee reviews the maintenance of the
Fund's records and the safekeeping arrangements of the Fund's custodian, reviews
both the audit and non-audit work of the Fund's independent auditors, and
submits a recommendation to the Board as to the selection of independent
auditors.
SELECTION OF INDEPENDENT AUDITORS. Upon the recommendation of the Audit
Committee, the Board selected the firm of PricewaterhouseCoopers LLP ("PwC") as
independent auditors of the Fund for the current fiscal year. Representatives of
PwC are not expected to be present at the Meeting, but will have the opportunity
to make a statement if they wish, and will be available should any matter arise
requiring their presence, including responding to appropriate questions.
AUDIT FEES. The aggregate fees paid to PwC in connection with the annual audit
of the Fund's financial statements for the fiscal year ended August 31, 2001
were $18,085.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. [PwC did not
render any services with respect to financial information systems design and
implementation during the fiscal year ended August 31, 2001 to the Fund or
entities affiliated with the Fund that provide services to the Fund.]
ALL OTHER FEES. [The aggregate fees billed for all other non-audit services,
including fees for tax-related services, rendered by PwC to the Fund or entities
affiliated with the Fund that provide services to the Fund for the fiscal year
ended August 31, 2001 were $[ _________________________ ]. The Audit Committee
of the Fund has determined that provision of these non-audit services is
compatible with maintaining the independence of PwC.]
AUDIT COMMITTEE REPORT. The Board has adopted and approved a formal written
charter for the Audit Committee, which sets forth the Audit Committee's
responsibilities. The charter was filed with the proxy statement for the Fund's
2001 Annual Meeting of Shareholders.
As required by the charter, the Audit Committee reviewed the Fund's audited
financial statements and met with management, as well as with PwC, the Fund's
independent auditors, to discuss the financial statements.
The Audit Committee received the written disclosures and the letter from PwC
required by Independence Standards Board No. 1. The Audit Committee also
received the report of PwC regarding the results of their audit. In connection
with its review of the financial statements and the auditors' report, the
members of the Audit Committee discussed with a representative of PwC, their
independence, as well as the following: the auditors' responsibilities in
accordance with generally accepted auditing standards; the auditors'
responsibilities for information prepared by management that accompanies the
Fund's audited financial statements and any procedures performed and the
results; the initial selection of, and whether there were any changes in,
significant accounting policies or their application; management's judgments and
accounting estimates; whether there were any significant audit adjustments;
whether there were any disagreements with management; whether there was any
consultation with other accountants; whether there were any major issues
discussed with management prior to the auditors' retention; whether the auditors
encountered any difficulties in dealing with management in performing the audit;
and the auditors' judgments about the quality of the company's accounting
principles.
Based on its discussions with management and the Fund's auditors, the Audit
Committee did not become aware of any material misstatements or omissions in the
financial statements. Accordingly, the Audit Committee recommended to the Board
that the audited financial statements be included in the Fund's Annual Report to
Shareholders for the fiscal year ended August 31, 2001 for filing with the U.S.
Securities and Exchange Commission.
AUDIT COMMITTEE
Fred R. Millsaps, (Chairman)
Frank J. Crothers
Andrew H. Hines, Jr.
Constantine D. Tseretopoulos
FURTHER INFORMATION ABOUT VOTING AND THE MEETING
SOLICITATION OF PROXIES. Your vote is being solicited by the Board. The cost of
soliciting proxies, including the fees of a proxy soliciting agent, is borne by
the Fund. The Fund reimburses brokerage firms and others for their expenses in
forwarding proxy material to the beneficial owners and soliciting them to
execute proxies. The Fund has engaged Georgeson Shareholder Communications, Inc.
("Georgeson Communication") to solicit proxies from brokers, banks, other
institutional holders and individual shareholders at an anticipated cost of
[$47,239], including out-of-pocket expenses. The Fund expects that the
solicitation will be primarily by mail, but also may include telephone, telecopy
or oral solicitations. If the Fund does not receive your proxy by a certain
time, you may receive a telephone call from Georgeson Shareholder asking you to
vote. The Fund does not reimburse Directors and officers of the Fund, or regular
employees and agents of the Investment Manager involved in the solicitation of
proxies. The Fund intends to pay all costs associated with the solicitation and
the Meeting.
VOTING BY BROKER-DEALERS. The Fund expects that, before the Meeting,
broker-dealer firms holding shares of the Fund in "street name" for their
customers will request voting instructions from their customers and beneficial
owners. If these instructions are not received by the date specified in the
broker-dealer firms' proxy solicitation materials, the Fund understands that
NYSE Rules permit the broker-dealers to vote on Proposal 1 on behalf of their
customers and beneficial owners. Certain broker-dealers may exercise discretion
over shares held in their name for which no instructions are received by voting
these shares in the same proportion as they vote shares for which they received
instructions.
QUORUM. A majority of the shares entitled to vote --present in person or
represented by proxy--constitutes a quorum at the Meeting. The shares over which
broker-dealers have discretionary voting power, the shares that represent
"broker non-votes" (I.E., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power on a particular matter), and the shares whose proxies reflect an
abstention on any item will all be counted as shares present and entitled to
vote for purposes of determining whether the required quorum of shares exists.
METHODS OF TABULATION. Proposal 1, the election of Directors, requires the
affirmative vote of the holders of a plurality of the Fund's shares present and
voting on the Proposal at the Meeting. Proposal 2, to approve an Agreement and
Plan of Reorganization that provides for the reorganization of the Fund from a
Maryland corporation to a Delaware business trust, requires the affirmative vote
of the majority of all the shares entitled to be cast on the matter (all of the
outstanding shares of the Fund on the record date are entitled to vote on
Proposal 2). The approval of the Sub-Proposals 3a-3e and Proposal 4 requires the
affirmative vote of the lesser of (i) more than 50% of the outstanding voting
securities of the Fund, or (ii) 67% or more of the voting securities of the Fund
present at the Meeting, if the holders of more than 50% of the outstanding
voting securities are present or represented by proxy. If a quorum is present, a
majority of the Fund shares voted shall be required to approve other business
properly presented at the Meeting, except as otherwise required by express
provisions of applicable statutes or by provisions of the Fund's Amended and
Restated Articles of Incorporation or By-Laws.
Abstentions and broker non-votes will be treated as votes present at the
Meeting, but will not be treated as votes cast. Abstentions and broker
non-votes, therefore, will have no effect on Proposal 1, which requires a
plurality of the Fund's shares present and voting, but will have the same effect
as a vote "against" Proposal 2, Sub-Proposals 3a-3e, and Proposal 4.
ADJOURNMENT. 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, the Meeting may be adjourned with respect to some or all of
the Proposals to permit further solicitation of proxies. The presiding officer
of the Fund for the Meeting, the secretary of the Meeting, or the persons
designated as proxies may adjourn the Meeting to permit further solicitation of
proxies or for other reasons consistent with Maryland law and the Fund's Amended
and Restated Articles of Incorporation and By-Laws. Unless otherwise instructed
by a shareholder granting a proxy, the persons designated as proxies may use
their discretionary authority to vote as instructed by management of the Fund on
questions of adjournment.
SHAREHOLDER PROPOSALS. The shareholder vote on Proposal 2, the matter concerning
the proposed reorganization of the Fund from a Maryland corporation to a
Delaware business trust, will dictate the requirements relating to shareholder
proposals for the 2003 Annual Meeting of Shareholders. This section describes
those requirements.
SUBMISSION OF SHAREHOLDER PROPOSALS TO THE TRUST. If Proposal 2 is approved by
the shareholders, the Fund will be reorganized as the Trust, and the Trust's
By-Laws, in addition to the proxy rules under the federal securities laws, will
govern shareholder proposals. The Trust anticipates that the 2003 Annual Meeting
of Shareholders will be held on or before [ ], 2003. A shareholder who wishes to
submit a proposal for consideration for inclusion in the Trust's proxy statement
for the 2003 Annual Meeting of Shareholders must send such written proposal to
the Trust's offices, at 500 East Broward Boulevard, Suite 2100, Fort Lauderdale,
Florida 33394-3091, Attention: Secretary, no later than [ ] in order to be
included in the Trust's proxy statement and proxy card relating to that meeting
and presented at the meeting.
A shareholder of the Trust who has not submitted a written proposal for
inclusion in the proxy statement by [ ], as set forth above, may nonetheless
present a proposal at the Trust's 2003 Annual Meeting of Shareholders if such
shareholder notifies the Trust, at the Trust's offices, of such proposal not
earlier than [ ] and not later than [ ____ ]. If a shareholder fails to give
notice within these dates, then the persons designated as proxies for the 2003
Annual Meeting of Shareholders may exercise discretionary voting power with
respect to any such proposal. A shareholder proposal may be presented at the
2003 Annual Meeting of Shareholders only if such proposal concerns a matter that
may be properly brought before the meeting under applicable federal proxy rules
and state law.
Submission of a proposal by a shareholder does not guarantee that the proposal
will be included in the Trust's proxy statement or presented at the meeting.
In addition to the requirements set forth above, a shareholder must comply with
the following:
I. A shareholder intending to present a proposal must (i) be entitled to vote at
the meeting; (ii) comply with the notice procedures set forth herein; and (iii)
have been a shareholder of record at the time the shareholder's notice was
received by the Trust.
II. Each notice regarding nominations for the election of Trustees shall set
forth (i) the name, age, business address and, if known, residence address of
each nominee proposed in such notice; (ii) the principal occupation or
employment of each such nominee; (iii) the number of outstanding shares of the
Trust which are beneficially owned by each such nominee; and (iv) all such other
information regarding each such nominee that would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the SEC had
each such nominee been nominated by the Trustees of the Trust. In addition, the
shareholder making such nomination shall promptly provide any other information
reasonably requested by the Trust.
III. Each notice regarding business proposals shall set forth as to each matter:
(i) a brief description of the business desired to be brought before the meeting
and the reasons for conducting such business at the meeting; (ii) the name and
address, as they appear on the Trust's books, of the shareholder proposing such
business; (iii) the number of outstanding shares of the Trust which are
beneficially owned by the shareholder; (iv) any material interest of the
shareholder in such business; and (v) all such other information regarding each
such matter that would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the SEC had each such matter been proposed
by the Trustees of the Trust.
SUBMISSION OF SHAREHOLDER PROPOSALS TO THE FUND. If Proposal 2 is not approved
by the shareholders, the Fund will remain a Maryland corporation, and the proxy
rules under the federal securities laws alone will continue to govern
shareholder proposals. The Fund anticipates that the 2003 Annual Meeting of
Shareholders will be held on or before []. A shareholder who wishes to submit a
proposal for consideration for inclusion in the Fund's proxy statement for the
2003 Annual Meeting of Shareholders must send such written proposal to the
Fund's offices, at 500 East Broward Boulevard, Suite 2100 Fort Lauderdale,
Florida 33394-3091, Attention: Secretary, no later than [ ______ ] in order to
be included in the Fund's proxy statement and proxy card relating to that
meeting and presented at the meeting.
A shareholder of the Fund who has not submitted a written proposal for inclusion
in the Fund's proxy statement by [ ____ ], as described above, may nonetheless
present a proposal at the Fund's 2003 Annual Meeting of Shareholders if such
shareholder notifies the Fund, at the Fund's offices, of such proposal by [
_____________ ]. If a shareholder fails to give notice by this date, then the
persons designated as proxies for the 2003 Annual Meeting of Shareholders may
exercise discretionary voting power with respect to any such proposal.
A shareholder proposal may be presented at the 2003 Annual Meeting of
Shareholders only if such proposal concerns a matter that may be properly
brought before the meeting under applicable federal proxy rules and state law.
Submission of a proposal by a shareholder does not guarantee that the proposal
will be included in the Fund's proxy statement or presented at the Meeting.
By Order of the Board of Directors,
Barbara J. Green,
SECRETARY
June , 2002
--------------
TLEMF PROXY XX/02
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN TEMPLETON EMERGING MARKETS FUND, INC.
AND TEMPLETON EMERGING MARKETS FUND
This Agreement and Plan of Reorganization ("Agreement") is made as of this
____ day of _________, 2002 by and between TEMPLETON EMERGING MARKETS FUND, a
Delaware business trust ("Trust"), and TEMPLETON EMERGING MARKETS FUND, INC., a
Maryland corporation ("Fund") (the Trust and the Fund are hereinafter
collectively referred to as the "parties").
In consideration of the mutual promises contained herein, and intending to
be legally bound, the parties hereto agree as follows:
1. PLAN OF REORGANIZATION.
(a) Upon satisfaction of the conditions precedent described in Section 3
hereof, the Fund will convey, transfer and deliver to the Trust at the
closing provided for in Section 2 (hereinafter referred to as the
"Closing") all of the Fund's then-existing assets. In consideration
thereof, the Trust agrees at the Closing (i) to assume and pay when
due, to the extent that there exist Fund obligations and liabilities
on or after the Effective Date of the Reorganization (as defined in
Section 2 hereof), all of such obligations and liabilities, whether
absolute, accrued, contingent or otherwise, including all fees and
expenses in connection with the Agreement, which fees and expenses
shall, in turn, include, without limitation, costs of legal advice,
accounting, printing, mailing, proxy solicitation and transfer taxes,
if any, such obligations and liabilities of the Fund to become the
obligations and liabilities of the Trust; and (ii) to deliver, in
accordance with paragraph (b) of this Section 1, full and fractional
shares of beneficial interest, without par value, of the Trust, equal
in number to the number of full and fractional shares of common stock,
$.01 par value per share, of the Fund outstanding immediately prior to
the Effective Date of the Reorganization. The reorganization
contemplated hereby is intended to qualify as a reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended ("Code"). The Fund shall distribute to its shareholders the
shares of the Trust in accordance with this Agreement and the
resolutions of the Board of Directors of the Fund authorizing the
transactions contemplated by this Agreement.
(b) In order to effect the delivery of shares described in Section 1(a)(ii)
hereof, the Trust will establish an open account for each shareholder
of the Fund and, on the Effective Date of the Reorganization, will
credit to such account full and fractional shares of beneficial
interest, without par value, of the Trust equal to the number of full
and fractional shares such shareholder holds in the Fund at the close
of regular trading on the New York Stock Exchange, Inc. ("NYSE") on
the business day immediately preceding the Effective Date of the
Reorganization; fractional shares of the Trust will be carried to the
third decimal place. At the start of regular trading on the NYSE on
the Effective Date of the Reorganization, the net asset value per
share of shares of the Trust shall be deemed to be the same as the net
asset value per share of the common stock of the Fund at the close of
regular trading on the NYSE on the business day immediately preceding
the Effective Date of the Reorganization. On the Effective Date of the
Reorganization, each certificate representing shares of the Fund will
be deemed to represent the same number of shares of the Trust.
Simultaneously with the crediting of the shares of the Trust to the
shareholders of record of the Fund, the shares of common stock of the
Fund held by such shareholder shall be cancelled. Each shareholder of
the Fund will have the right to deliver their share certificates of
the Fund in exchange for share certificates of the Trust. However, a
shareholder need not deliver such certificates to the Trust unless the
shareholder so desires.
(c) As soon as practicable after the Effective Date of the Reorganization,
the Fund shall take all necessary steps under Maryland law to effect a
complete dissolution of the Fund.
(d) The expenses of entering into and carrying out the Agreement will be
borne by the Fund.
2. CLOSING AND EFFECTIVE DATE OF THE REORGANIZATION.
The Closing shall consist of (i) the conveyance, transfer and delivery of
the Fund's assets to the Trust, in exchange for the assumption and payment, when
due, by the Trust of the Fund's obligations and liabilities; and (ii) the
issuance and delivery of the Trust's shares in accordance with Section 1(b),
together with related acts necessary to consummate such transactions. The
Closing shall occur either on (a) the business day immediately following the
later of the receipt of all necessary regulatory approvals and the final
adjournment of the meeting of shareholders of the Fund at which this Agreement
is considered and approved, or (b) such later date as the parties may mutually
agree ("Effective Date of the Reorganization").
3. CONDITIONS PRECEDENT.
The obligations of the Fund and the Trust to effectuate the transactions
hereunder shall be subject to the satisfaction of each of the following
conditions:
(a) Such approvals from the NYSE and Pacific Exchange, Inc.("PCX") as may
be necessary to permit the parties to carry out the transactions
contemplated by this Agreement shall have been received;
(b) (i) an amendment to the Fund's Notification of Registration on Form
N-8A ("Form N-8A") filed pursuant to Section 8(a) of the Investment
Company Act of 1940, as amended ("1940 Act"), containing such
amendments to the Form N-8A as are determined by the trustees of the
Trust (each, a "Trustee") to be necessary and appropriate as a result
of the transactions contemplated by this Agreement, shall have been
filed with the U.S. Securities and Exchange Commission ("Commission");
(ii) the Trust shall have expressly adopted as its own such Form N-8A,
as so amended, for purposes of the 1940 Act; (iii) a registration
statement on Form 8-A ("8-A Registration Statement") under the
Securities Exchange Act of 1934, as amended, shall have been filed
with the Commission and the NYSE by the Trust; (iv) a Technical
Original Listing Application shall have been filed with the NYSE, and
a listing application shall have been filed with the PCX, by the
Trust; and (v) the 8-A Registration Statement filed with the
Commission relating to the Trust shall have become effective, and no
stop-order suspending the effectiveness of the 8-A Registration
Statement shall have been issued, and no proceeding for that purpose
shall have been initiated or threatened by the Commission (other than
any such stop-order, proceeding or threatened proceeding which shall
have been withdrawn or terminated);
(c) Each party shall have received an opinion of Stradley, Ronon, Stevens &
Young, LLP, Philadelphia, Pennsylvania, to the effect that, assuming
the reorganization contemplated hereby is carried out in accordance
with this Agreement, the laws of the States of Delaware and Maryland,
and in accordance with customary representations provided by the
parties in a certificate(s) delivered to Stradley, Ronon, Stevens &
Young, LLP, the reorganization contemplated by this Agreement
qualifies as a "reorganization" under Section 368 of the Code, and
thus will not give rise to the recognition of income, gain or loss for
federal income tax purposes to the Fund, the Trust or the shareholders
of the Fund or the Trust;
(d) The Fund shall have received an opinion of Stradley, Ronon, tevens &
Young, LLP, dated the Effective Date of the Reorganization, addressed
to and in form and substance reasonably satisfactory to the Fund, to
the effect that: (i) the Trust is duly formed as a business trust
under the laws of the State of Delaware; (ii) this Agreement and the
transactions contemplated thereby and the execution and delivery of
this Agreement have been duly authorized and approved by all requisite
action of the Trust and this Agreement has been duly executed and
delivered by the Trust and is a legal, valid and binding agreement of
the Trust in accordance with its terms; and (iii) the shares of the
Trust to be issued in the reorganization have been duly authorized
and, upon issuance thereof in accordance with this Agreement, will
have been validly issued and fully paid and will be nonassessable by
the Trust;
(e) The Trust shall have received the opinion of Stradley, Ronon, Stevens &
Young, LLP, dated the Effective Date of the Reorganization, addressed
to and in form and substance reasonably satisfactory to the Trust, to
the effect that: (i) the Fund is duly organized and validly existing
under the laws of the State of Maryland; (ii) the Fund is a closed-end
investment company of the management type registered under the 1940
Act; and (iii) this Agreement and the transactions contemplated hereby
and the execution and delivery of this Agreement have been duly
authorized and approved by all requisite corporate action of the Fund
and this Agreement has been duly executed and delivered by the Fund
and is a legal, valid and binding agreement of the Fund in accordance
with its terms;
(f) The shares of the Trust are eligible for offering to the public in
those states of the United States and jurisdictions in which the
shares of the Fund are currently eligible for offering to the public
so as to permit the issuance and delivery by the Trust of the shares
contemplated by this Agreement to be consummated;
(g) This Agreement and the transactions contemplated hereby shall have been
duly adopted and approved by the appropriate action of the board of
directors of the Fund (the "Board of Directors") and the shareholders
of the Fund;
(h) The shareholders of the Fund shall have voted to direct the Fund to
vote, and the Fund shall have voted, as sole shareholder of the Trust,
to:
(1) Elect as Trustees of the Trust the following individuals: Nominees
to serve as Trustees until the 2005 Annual Meeting of
Shareholders - Messrs. Harris J. Ashton, Nicholas F. Brady, Frank
J. Crothers and S. Joseph Fortunato and Ms. Edith E. Holiday;
Nominees to serve as Trustees until the 2004 Annual Meeting of
Shareholders - Messrs. Harmon E. Burns, Andrew H. Hines, Jr.,
Charles B. Johnson and Constantine D. Tseretopoulos; and Nominees
to serve as Trustees until the 2003 Annual Meeting of
Shareholders - Messrs. Gordon S. Macklin and Fred R. Millsaps and
Ms. Betty P. Krahmer; and
(2) Approve an Investment Management Agreement between Templeton Asset
Management Ltd. ("TAML") and the Trust, which is substantially
identical to the then-current Investment Management Agreement
between TAML and the Fund;
(i) The Trustees of the Trust shall have duly adopted and approved this
Agreement and the transactions contemplated hereby and shall have
taken the following actions at a meeting duly called for such
purposes:
(1) Approval of the Investment Management Agreement described in
paragraph (h)(2) of this Section 3 hereof for the Trust;
(2) Approval of the assignment to the Trust of the Fund's Custody
Agreement dated February 1, 1987 (the "Custody Agreement"), with
The Chase Manhattan Bank, N.A. (now JPMorgan Chase Bank),
including the Amendment dated May 10, 1996; Amendment, effective
as of May 21, 1998; Amendment dated March 2, 1998; Amendment No.
2 dated July 23, 1998; and Amendment No. 3 dated May 1, 2001;
(3) Selection of PricewaterhouseCoopers LLP as the Trust's independent
auditors for the fiscal year ending August 31, 2002;
(4) Approval of an Administration Agreement between the Trust and
Franklin Templeton Services, LLC;
(5) Approval of the assignment to the Trust of the Service Agreement
between the Fund and Mellon Securities Trust Company, dated
January 2, 1992; the Fund's Successor Stock Transfer Agent
Agreement dated February 2, 1995 with Chemical Mellon Shareholder
Services (now Mellon Investor Services LLC); and the Fund's Plan
Agent Agreement with Mellon Securities Trust Company, dated March
15, 1998;
(6) Authorization of the issuance by the Trust, prior to the Effective
Date of the Reorganization, of one share of beneficial interest
of the Trust to the Fund in consideration for the payment of
$1.00 for the purpose of enabling the Fund to vote on the matters
referred to in paragraph (h) of this Section 3 hereof;
(7) Submission of the matters referred to in paragraph (h) of this
Section 3 to the Fund as sole shareholder of the Trust; and
(8) Authorization of the issuance and delivery by the Trust of its
shares on the Effective Date of the Reorganization and the
assumption by the Trust of the obligations and liabilities of the
Fund in exchange for the assets of the Fund pursuant to the terms
and provisions of this Agreement.
At any time prior to the Closing, any of the foregoing conditions may be
waived or amended, or any additional terms and conditions may be fixed, by the
Board of Directors of the Fund, if, in the judgment of such Board, such waiver,
amendment, term or condition will not affect in a materially adverse way the
benefits intended to be accorded the shareholders of the Fund under this
Agreement.
4. DISSOLUTION OF THE FUND.
Promptly following the consummation of the distribution of the Trust shares
to holders of Fund common stock under the Agreement, the officers of the Fund
shall take all steps necessary under Maryland law to dissolve its corporate
status, including publication of any necessary notices to creditors, receipt of
any necessary pre-dissolution clearances from the State of Maryland, and filing
for record with the State Department of Assessments and Taxation of Maryland of
Articles of Dissolution.
5. TERMINATION.
The Board of Directors may terminate this Agreement and abandon the
reorganization contemplated hereby, notwithstanding approval thereof by the
shareholders of the Fund, at any time prior to the Effective Date of the
Reorganization if, in the judgment of such Board, the facts and circumstances
make proceeding with this Agreement inadvisable.
6. ENTIRE AGREEMENT.
This Agreement embodies the entire agreement between the parties hereto and
there are no agreements, understandings, restrictions or warranties among the
parties hereto other than those set forth herein or herein provided for.
7. FURTHER ASSURANCES.
The Fund and the Trust shall take such further action as may be necessary
or desirable and proper to consummate the transactions contemplated hereby.
8. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
9. GOVERNING LAW.
This Agreement and the transactions contemplated hereby shall be governed
by and construed and enforced in accordance with the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Trust and the Fund have each caused this Agreement
and Plan of Reorganization to be executed on its behalf by its Chairman,
President or a Vice President and attested by its Secretary or an Assistant
Secretary, all as of the day and year first-above written.
TEMPLETON EMERGING MARKETS FUND, INC.
(a Maryland corporation)
Attest: By:
--------------------------------- -----------------------------------
Name: Name:
Title: Title:
TEMPLETON EMERGING MARKETS FUND
(a Delaware business trust)
Attest: By:
-------------------------------- ------------------------------------
Name: Name:
Title: Title:
EXHIBIT B
A COMPARISON OF GOVERNING DOCUMENTS AND STATE LAW
A COMPARISON OF:
THE LAW GOVERNING DELAWARE BUSINESS TRUSTS AND
THE CHARTER DOCUMENTS OF TEMPLETON EMERGING MARKETS FUND UNDER SUCH LAW
WITH
THE LAW GOVERNING MARYLAND CORPORATIONS AND
THE CHARTER DOCUMENTS OF TEMPLETON EMERGING MARKETS FUND, INC. UNDER SUCH LAW
DELAWARE BUSINESS TRUST MARYLAND CORPORATION
--------------------------------------------------------------------------------------------------------------
GOVERNING A Delaware statutory business trust A Maryland corporation is created by filing
DOCUMENTS/ (a "DBT") is formed by a governing of articles of incorporation with the Maryland State
GOVERNING instrument and the filing of a Department of Assessments and Taxation ("MSDAT").
BODY certificate of trust with the The Maryland law governing corporations is
Delaware Secretary of State referred to in this analysis as "Maryland Law."
("Secretary of State").The Delaware
law governing a DBT is referred to in
this analysis as the "Delaware Act."
A DBT is an unincorporated association A corporation is incorporated under the Maryland
organized under the Delaware Act whose Law. A corporation's operations are governed by
operations are governed by its governing its charter and by-laws, and its business and
instrument (which may consist of one or affairs are managed by or under the direction of a
more instruments). Its business and board of directors (the "board" or "board of
affairs are managed by or under the directors" or collectively, the "directors"). No
direction of one or more trustees. public filing of the by-laws is made.
The governing instrument for the DBT, Templeton Emerging Markets Fund, Inc., a Maryland
Templeton Emerging Markets Fund (the corporation, is referred to in this analysis as the
"Trust"), is comprised of an agreement "Corporation." The Corporation is governed by its
and declaration of trust ("Declaration") charter ("Charter") and by-laws ("By-Laws") and the
and by-laws ("By-Laws"). The Trust's Corporation's governing body is a board of directors.
governing body is a board of trustees
(the "board" or "board of trustees" or
collectively, the "trustees").
DESIGNATION Under the Delaware Act, the ownership Equity securities of a corporation are generally
OF OWNERSHIP interests in a DBT are denominated as denominated as shares of stock. Record owners of
SHARES OR "beneficial interests" and are held by shares of stock are stockholders. Generally, equity
INTERESTS "beneficial owners." However, there is securities that have voting rights and are entitled to
flexibility as to how a governing the residual assets of the corporation, after payment
instrument refers to "beneficial of liabilities, are referred to as "common stock."
interests" and "beneficial owners" and
the governing instrument may identify
"beneficial interests" and "beneficial
owners" as "shares" and "shareholders,"
respectively.
The Trust's beneficial interests, without The Corporation's equity securities are shares of
par value, are designated as "shares" and common stock, par value $0.01 per share, and the
its beneficial owners are designated as owners of such stock are "stockholders."
"shareholders." This analysis will use the
"share" and "shareholder" terminology.
AMENDMENTS GOVERNING INSTRUMENT CHARTER
TO GOVERNING The Delaware Act provides broad flexibility Under Maryland Law, with certain exceptions,
DOCUMENTS with respect to the provisions of the amendments to the charter must be approved by the
governing instrument of a DBT for amending board and by the affirmative vote of two-thirds of
and/or restating such governing instrument. all votes entitled to be cast (unless the charter
permits amendment by a higher or lesser proportion
DECLARATION OF TRUST of the voting stock, but not less than a majority
The Declaration provides that amendments of the shares outstanding).
and/or restatements of the Declaration may
generally be made at any time by the board The Charter provides that the Charter may be
of trustees, by a vote of a majority of the amended, altered, repealed, or added to upon vote
trustees present at a meeting at which a of holders of a majority of the shares outstanding
quorum is present, without approval of the and entitled to vote thereon, except that the
shareholders. Amendments or a repeal of amendment or repeal of provisions pertaining to
certain provisions, however, require the merger or consolidation of the Corporation,
approval of the board of trustees, as set sale of all or substantially all of the assets of
forth above, and the affirmative vote of the Corporation, dissolution or liquidation
holders of at least two-thirds (66 2/3%) of require the affirmative vote of the holders of at
the outstanding shares entitled to vote, least 75% of the shares then entitled to vote on
unless such action has previously been the matter.
approved by the affirmative vote of two-
thirds (66 2/3%) of the board of trustees,
in which case the affirmative "vote of a
majority of the outstanding voting securities",
as defined in the Investment Company Act of
1940 and the rules and regulations thereunder,
as amended (the "1940 Act"), of the Trust
entitled to vote at a meeting at which a
quorum is present, shall be required. Such
provisions include those pertaining to the
number, classes, election, term, removal,
resignation, quorum, powers, required
vote and action by written consent of the
board of trustees; shareholders' voting power,
quorum, required vote, action by written consent
and record dates; limitation of liability and
indemnification of agents of the Trust;
transactions such as the dissolution, merger,
consolidation, conversion, reorganization
and reclassification of the Trust to an
open-end company and amendments of the
Declaration.
BY-LAWS BY-LAWS
The By-Laws may be amended, restated or repealed Under Maryland law, after the organizational
or new by-laws may be adopted by the affirmative meeting, the power to adopt, alter or repeal the
"vote of a majority of the outstanding voting by-laws is vested in the stockholders, except to
securities" (as defined in the 1940 Act) of the the extent that the charter or by-laws vest such
Trust. The By-Laws may also be amended, restated power in the board.
or repealed or new by-laws may be adopted by the
board of trustees, by a vote of a majority of the The By-Laws may be adopted, amended or repealed by
trustees present at a meeting at which a quorum is "vote of the holders of a majority of the
present. [Corporation's] stock" (as defined in the 1940
Act), which is generally the lesser of at least a
Pursuant to the Declaration, amendments and/or majority of the outstanding shares or 67% of the
restatements of the certificate of trust shall be shares present or represented in a meeting if more
made at any time by the board of trustees, without than 50% of the outstanding shares are present or
approval of the shareholders, to correct any represented at the meeting; except that provisions
inaccuracy contained therein. Any such in the By-Laws regarding increasing/decreasing
amendments/restatements of the Certificate of number of directors and removal of directors may
Trust must be executed by at least one (1) trustee be amended only by the vote of the holders of 75%
and filed with the Secretary of State in order to of the common stock, unless the amendment is
become effective. approved by the affirmative vote of two-thirds of
the total number of directors fixed by the By-Laws,
in which case the affirmative vote of a majority
of the outstanding shares is required. Directors
may adopt, amend or repeal By-Laws (not
inconsistent with any By-Law adopted, amended or
repealed by stockholders), except a provision
regarding Board actions in case shares trade on an
exchange at a discount from net asset value, by
majority vote of all of directors in office, subject
to applicable law.
PREEMPTIVE Under the Delaware Act, a governing instrument Under Maryland Law, the charter may provide
RIGHTS AND may contain any provision relating to the rights, shareholders with the preemptive right to subscribe
REPURCHASE duties and obligations of the shareholders. to any or all additional issues of stock or any
OF SHARES securities of the corporation convertible into
The Declaration provides that no shareholder additional issues of stock. The charter may also
shall have the preemptive or other right to define or limit the preemptive rights of stockholders
subscribe for new or additional shares or to acquire additional stock or securities in the
other securities issued by the Trust. corporation.
The Trust has the right at its option and at The Corporation does not provide shareholders with
any time, subject to the 1940 Act and other the preemptive right to subscribe to additional
applicable the law, to repurchase shares issues of stock or other securities of the
of any shareholder under certain circumstances Corporation.
at a price that meets the requirements of Section
23 of the 1940 Act, and the rules and regulations
adopted thereunder, and that is in accordance with
the terms of the Declaration, the By-Laws and
other applicable law.
LIQUIDATION A DBT that has dissolved shall first pay or make A corporation that has voluntarily dissolved shall
RIGHTS reasonable provision to pay all known claims and pay, satisfy and discharge the existing debts and
UPON obligations, including those that are contingent, obligations of the corporation, including necessary
DISSOLUTION conditional and unmatured, and all known claims expenses of liquidation, before distributing the
and obligations for which the claimant is unknown. remaining assets to the stockholders.
Any remaining assets shall be distributed to the
shareholders or as otherwise provided in the
governing instrument.
The Declaration provides that any assets remaining
after payment or the reasonable provision for
payment of all claims and obligations of the Trust
shall be distributed to the shareholders ratably
according to the number of outstanding shares held
by the several shareholders on the record date
for such dissolution distribution.
VOTING RIGHTS Under the Delaware Act, the governing instrument
MEETINGS, may set forth any provision relating to trustee
NOTICE, and shareholder voting rights, including the
QUORUM, withholding of such rights from certain trustees
RECORD DATES or shareholders. If voting rights are granted, the
AND PROXIES governing instrument may contain any provision
relating to meetings, notice requirements, written
consents, record dates, quorum requirements, voting
by proxy and any other matter pertaining to the
exercise of voting rights. The governing instrument
may also provide for the establishment of record
dates for allocations and distributions by the DBT.
ONE VOTE PER SHARE ONE VOTE PER SHARE
The Declaration provides that each outstanding Unless a corporation's charter provides for a
share is entitled to one vote and each outstanding greater or lesser number of votes per share, or
fractional share is entitled to a fractional vote. limits or denies voting rights, each outstanding
share of stock is entitled to one vote on each
matter submitted to a vote at a meeting of
stockholders. A corporation may issue fractional
shares of stock.
The Charter provides that each outstanding share
of stock is entitled to one vote and each outstanding
fractional share of stock is entitled to a fractional
vote.
SHAREHOLDERS' MEETINGS STOCKHOLDERS' MEETINGS
Although the Delaware Act does not mandate annual Under Maryland Law, every corporation must hold an
shareholders' meetings, the By-Laws require annual annual stockholders' meeting to elect directors
meetings for the election of trustees and the and transact other business, except that the
transaction of other business. The By-Laws also charter or by-laws of a corporation registered
authorize the calling of a special meeting under the 1940 Act may provide that an annual
(i) when deemed necessary or desirable by the meeting is not required in any year in which the
board of trustees or (ii) to the extent permitted election of directors is not required by the 1940
by the 1940 Act, by the chairperson of the board, Act. Maryland Law authorizes, and permits the
or at the request of holders of 10% of the charter and By-Laws to authorize, certain persons
outstanding shares if such shareholders pay the to call special meetings of stockholders.
reasonably estimated cost of preparing and mailing
the notice thereof, for the purpose of electing The By-Laws require annual meetings for the
trustees or filling vacancies on the board. election of directors and the transaction of other
However, no special meeting may be called at the business. The By-Laws also authorize the calling
request of shareholders to consider any matter of a special meeting, unless otherwise
that is substantially the same as a matter voted "prescribed" by statute or the Charter, upon the
upon at a shareholders' meeting held during the written request of a majority of the directors, or
preceding twelve (12) months, unless requested by by the president, or at the written request of
holders of a majority of all outstanding shares stockholders owning 10% "in amount of the entire
entitled to vote at such meeting. capital stock" of the Corporation then issued and
outstanding, if the stockholders requesting such
Under the By-Laws, shareholder proposals may be meeting pay the reasonably estimated cost of
presented at an annual shareholders' meeting if preparing and mailing the notice thereof. However,
brought by a shareholder who (i) is entitled to no special meeting will be called at the request
vote at the meeting; (ii) complies with the notice of stockholders to consider any matter that is
procedures set forth in the By-Laws; and (iii) was substantially the same as a matter voted upon at a
a shareholder of record at the time such notice is stockholders' special meeting held during the
received by the secretary of the Trust. The preceding 12 months, unless requested by holders
shareholder's notice must be in writing and of a majority of all outstanding shares entitled
delivered to the Trust not less than one hundred to vote at such meeting.
twenty (120) days nor more than one hundred fifty
(150) days prior to the date of any such meeting.
Each such notice given by a shareholder must include
certain information set forth in the By-Laws and as
reasonably requested by the Trust. At the annual
meeting, the appropriate officer may, if the
facts warrant, determine and declare to such
meeting that a proposal was not made in accordance
with the procedure in the By-Laws, and, if the
officer should so determine, shall so declare
to the meeting, and the defective proposal shall
be disregarded and laid over for action at the
next succeeding special or annual meeting of the
shareholders taking place thirty (30) days or
more thereafter.
RECORD DATES RECORD DATES
In order to determine the shareholders entitled Under Maryland law, unless the by-laws otherwise
to notice of, and to vote at, a shareholders' provide, the board may set a record date, which
meeting, the Declaration authorizes the board of date must be set within the parameters outlined by
trustees to fix a record date. The record date the Maryland statute, for determining stockholders
may not precede the date on which it is fixed by entitled to notice of a meeting, vote at a meeting,
the board and it may not be more than one hundred receive dividends or be allotted other rights.
twenty (120) days, nor less than ten (10) days,
before the date of the shareholders' meeting. The In order to determine the stockholders entitled to
By-Laws provide that notice of a shareholders' notice of, and to vote at, a stockholders' meeting,
meeting shall be given to shareholders not more the By-Laws authorize the board of directors to fix a
than one hundred twenty (120) days nor less than record date not less than ten (10), nor more than
ten (10) days before the date of the meeting. ninety (90), days prior to the date of the meeting
or prior to the last day on which the consent or dissent
To determine the shareholders entitled to vote of stockholders may be effectively expressed for any
on any action WITHOUT A MEETING, the Declaration purpose without a meeting.
authorizes the board of trustees to fix a record
date. The record date may not precede the date on If the board does not fix a record date, the record
which it is fixed by the board nor may it be more date shall be the later of the close of business on
than thirty (30) days after the date on which it the day on which notice of the meeting is mailed
is fixed by the board. or the 30th day before the meeting, except if all
stockholders waive notice, the record date is the
To determine the shareholders entitled to a close of business on the 10th day next preceding the
dividend or any other distribution from the Trust, day the meeting is held.
the Declaration authorizes the board of trustees
to fix a record date. The record date may not To determine the stockholders entitled to a dividend,
precede the date on which it is fixed by the board any other distribution, or delivery of evidences of rights
nor may it be more than sixty (60) days before the or interests from the Corporation, the By-Laws authorize
date such dividend or distribution is to be paid. the board to fix a record date not exceeding ninety
(90) days preceding the date fixed for the payment of the
Pursuant to the Declaration, if the board of dividend or distribution or delivery of the evidences.
trustees does not fix a record date:
(a) the record date for determining shareholders
entitled to notice of, and to vote at, a meeting
will be the day before the date on which notice is
given or, if notice is waived, on the day before
the date of the meeting; (b) the record date for
determining shareholders entitled to vote on any
action by consent in writing without a meeting,
(i) when no prior action by the board of trustees
has been taken, shall be the day on which the first
signed written consent is delivered to the Trust,
or (ii) when prior action of the board of trustees
has been taken, shall be the day on which the board
of trustees adopts the resolution taking such
prior action.
QUORUM FOR SHAREHOLDERS' MEETING QUORUM FOR STOCKHOLDERS' MEETING
To transact business at a meeting, the Declaration Under Maryland Law, unless the charter or Maryland
provides that a majority of the outstanding shares Law provides otherwise, in order to constitute a
entitled to vote, which are present in person or quorum for a meeting, there must be present in
represented by proxy, shall constitute a quorum at person or by proxy, stockholders entitled to cast
a shareholders' meeting, except when a larger a majority of all the votes entitled to be cast at
quorum is required by applicable law or any the meeting.
securities exchange on which such shares are
listed for trading, in which case such quorum To transact business at a meeting, the By-Laws
shall comply with such requirements. provide that a majority of the outstanding shares
entitled to vote, which are present in personor
represented by proxy, shall constitute a quorum
at a stockholders' meeting.
SHAREHOLDER VOTE STOCKHOLDER VOTE
The Declaration provides that, subject to any Under Maryland law, for most stockholder actions,
provision of the Declaration, the By-Laws or unless the charter or Maryland Law provides
applicable law that requires a different vote: otherwise, a majority of all votes cast at a
(i) in all matters other than the election of meeting at which a quorum is present is required
trustees, the affirmative "vote of a majority of to approve any matter. Actions such as (i)
the outstanding voting securities" (as defined in amendments to the corporation's charter, (ii)
the 1940 Act) of the Trust entitled to vote at a mergers, (iii) consolidations, (iv) statutory
shareholders' meeting at which a quorum is share exchanges, (v) transfers of assets and (vi)
present, shall be the act of the shareholders; and dissolutions require the affirmative vote of
(ii) trustees shall be elected by a plurality of two-thirds of all votes entitled to be cast on the
the votes cast of the holders of outstanding matter unless the charter provides for a lesser
shares entitled to vote present in person or proportion which may not be less than a majority
represented by proxy at a shareholders' meeting at of all votes entitled to be cast on the matter.
which a quorum is present. Unless the charter or by-laws require a greater
vote, a plurality of all votes cast at a meeting
at which a quorum is present is required to elect
a director.
ELECTION OF DIRECTORS.
Under the By-Laws, at a stockholders' meeting at
which a quorum is present, a plurality of the
votes cast of the holders of outstanding shares
entitled to vote, shall be required to elect
directors at the annual meeting, to fill any
vacancy resulting from an increase in the number
of directors on the board (adopted by vote of the
stockholders) or to fill any other then existing
vacancies on the board.
OTHER MATTERS FOR WHICH THE VOTE IS NOT EXPRESSLY
DESIGNATED OTHERWISE. For all other matters, other
than any matter for which the Charter expressly
provides for a different vote, the affirmative vote
of the holders of a majority of the total number
of shares cast at a stockholders' meeting at which
a quorum is present, shall be the act of the
stockholders.
SHAREHOLDER VOTE ON CERTAIN TRANSACTIONS STOCKHOLDER VOTE ON CERTAIN TRANSACTIONS
---------------------------------------- ----------------------------------------
Under the Declaration, in order for the Trust to Under the Charter, in order to consummate a
consummate a dissolution, merger, consolidation, merger, consolidation, sale of all or
conversion, reorganization or reclassification, substantially all of the assets, or the
such transaction shall be approved in the liquidation or dissolution of the Corporation,
following manner: such transaction shall be approved in the
The transaction must be approved by the vote of a following manner:
majority of the trustees present at a meeting at
which a quorum is present, and the affirmative The transaction must be approved by the favorable
vote of the holders of 75% of the outstanding vote of at least 75% of the outstanding shares
shares entitled to vote, unless such action has entitled to vote, unless such action has been
been previously approved by the affirmative vote previously approved by the affirmative vote of
of 66 2/3% of the board of trustees, in which case two-thirds of the total number of directors fixed
the affirmative "vote of a majority of the pursuant to the By-Laws, in which case the
outstanding voting securities" (as defined in the transaction must be approved by the affirmative
1940 Act) of the Trust entitled to vote at a vote of a majority of all the votes entitled to be
shareholders' meeting at which a quorum is present cast on the matter, for purposes of Maryland Law.
shall be required.
CUMULATIVE VOTING CUMULATIVE VOTING
The Declaration provides that shareholders are not Maryland law provides that the charter may
entitled to cumulate their votes on any matter. authorize cumulative voting for the election of
the directors and if the charter does not so
provide, then the stockholders are not entitled
to cumulative voting rights.
The Charter and By-Laws do not have any provisions
as to whether stockholders are entitled to cumulate
their votes on any matter and consequently, the
stockholders are not entitled to cumulate their
votes on any matter.
PROXIES PROXIES
The By-Laws authorize the Trust to accept proxies Maryland Law permits a stockholder to authorize
by execution of a written instrument or by another person to act as a proxy and sets forth
electronic, telephonic, computerized, acceptable methods of transmitting such authorization.
telecommunications or another reasonable Unless a proxy provides otherwise, it is authorization.
alternative to the execution of a written Unless a proxy provides otherwise, it is not valid
instrument. Unless a proxy provides otherwise, more than 11 months after its date. The proxy is
it is not valid more than 11 months after its revocable unless certain statutory requirements are met.
date. In addition, the By-Laws provide that the
revocability of a proxy that states on its face The By-Laws provide that stockholders may vote by proxy
that it is irrevocable shall be governed by the and provide the acceptable method of transmitting and
provisions of the general corporation law of executing a proxy.
the State of Delaware.
ACTION BY WRITTEN CONSENT ACTION BY WRITTEN CONSENT
The Declaration also authorizes shareholders to Maryland Law provides that any action required or
take action without a meeting and without prior permitted to be taken at a stockholders' meeting
notice if written consents setting forth the may be taken without a meeting, if a unanimous
action taken are signed by the holders of all written consent is signed by each stockholder
outstanding shares entitled to vote on entitled to vote on the matter.
that action.
The Declaration also authorizes the board of The By-Laws authorize stockholders to take action
trustees or any committee of the board of trustees without a meeting if all stockholders entitled to
to take action without a meeting and without prior vote consent in writing and all stockholders
written notice if written consents setting forth entitled to notice of the meeting, but not
the action taken are executed by trustees having entitled to vote, sign a written waiver of any
the number of votes necessary to take that action right to dissent.
at a meeting at which the entire board of trustees
or any committee thereof, is present and voting. The By-Laws provide that the board or any
committee of the board may act by written consent
signed by all the members of the board or
committee, respectively.
REMOVAL OF The governing instrument of a DBT may contain any Under Maryland Law, unless otherwise provided in
TRUSTEES/ provision relating to the removal of trustees; the charter, a director may generally be removed
DIRECTORS provided however, that there shall at all times be with or without cause by the vote of a majority of
at least one trustee of the DBT. all the votes entitled to be cast generally for
the election of directors unless (i) such director is
Under the Declaration, any trustee may be removed, elected by a certain class or series, (ii) the charter
with or without cause, by the Shareholders, upon provides for cumulative voting or (iii) the board is
the vote of the holders of 75% of the outstanding classified.
shares entitled to vote.
Under the Charter, a director may be removed with
or without cause by holders of 75% of shares then
entitled to vote in an election of directors and a
stockholders' meeting may be called for such purpose
if requested in writing by not less than 10% of o
utstanding shares of the Corporation.
VACANCIES ON Vacancies in any class of trustees may be filled Under Maryland law stockholders may elect persons
BOARD OF by a majority vote of the trustees then in office, to fill vacancies that result from the removal of
TRUSTEES/ regardless of the number and even if less than a directors. Unless the charter or by-laws provide
DIRECTORS quorum, unless a special meeting of shareholders otherwise, a majority of the directors in office,
is called for the purpose of filling such whether or not comprising a quorum, may fill vacancies
vacancies, which case, such vacancies shall be that result from any cause except an increase in the
filled in the same manner as an election of number of directors. A majority of the entire board of
trustees. directors may fill vacancies that result from an
increase in the number of directors.
Under the By-Laws, directors may increase or decrease
their number; if the number is increased, the added
directors may be elected by a majority of directors
in office. For other vacancies, the directors then
in office (though less than quorum) may continue
to act and may by majority vote fill any vacancy until
the next meeting of stockholders, subject to the 1940 Act.
The number of directors may also be increased or decreased
by vote of stockholders at any meeting called for the
purpose and if the vote is to increase the number,
stockholders will vote by plurality to elect the directors
to fill the new vacancies as well as any then existing
vacancies.
SHAREHOLDER Under the Delaware Act, except to the extent The stockholders of a corporation are not liable
LIABILITY otherwise provided in the governing instrument of for the obligations of the corporation.
a DBT, shareholders of a DBT are entitled to the
same limitation of personal liability extended
to shareholders of a private corporation organized
for profit under the general corporation law of
the State of Delaware.
Under the Declaration, shareholders are entitled to
the same limitation of personal liability as that
extended to shareholders of a private corporation
organized for profit under the general corporate
law of the State of Delaware. However, the board of
trustees may cause any shareholder to pay for charges
of the trust's custodian or transfer, dividend
disbursing, shareholder servicing or similar
agent for services provided to such shareholder.
TRUSTEE/ Subject to the provisions in the governing Maryland Law requires a director to perform his or
DIRECTOR instrument, the Delaware Act provides that a her duties in good faith, in a manner he or she
LIABILITY trustee or any other person managing the DBT, when reasonably believes to be in the best interests of
acting in such capacity, will not be personally the corporation and with the care that an
liable to any person other than the DBT or a ordinarily prudent person in a like position would
shareholder of the DBT for any act, omission or use under similar circumstances. A director who
obligation of the DBT or any trustee. To the performs his or her duties in accordance with this
extent that at law or in equity, a trustee has standard has no liability to the corporation, its
duties (including fiduciary duties) and stockholders or to third persons by reason of
liabilities to the DBT and its shareholders, such being or having been a director. A corporation may
duties and liabilities may be expanded or include in its charter a provision expanding or
restricted by the governing instrument. limiting the liability of its directors and
officers for money damages to the corporation or
The Declaration provides that any person who is or its stockholders, provided however, that liability
was a trustee, officer, employee or other agent of may not be limited to the extent the person has
the Trust or is or was serving at the request of received an improper benefit or profit in money,
the Trust as a trustee, director, officer, property or services or where such person has been
employee or other agent of another corporation, actively and deliberately dishonest.
partnership, joint venture, trust or other
enterprise (an "Agent") will be liable to the The Charter expressly provides that no director or
Trust and to any shareholder solely for such officer shall be protected from liability to the
Agent's own willful misfeasance, bad faith, gross Corporation and its stockholders to which such
negligence or reckless disregard of the duties person would otherwise be subject by reason of
involved in the conduct of such Agent (such willful misfeasance, bad faith, gross negligence
conduct referred to as "Disqualifying Conduct"). or reckless disregard of the duties involved in
Subject to the preceding sentence, Agents will not the conduct of such person's office.
be liable for any act or omission of any other
Agent or any investment adviser or principal
underwriter of the Trust. No Agent, when acting in
such capacity, shall be personally liable to any
person (other than the Trust or its shareholders
as described above) for any act, omission or
obligation of the Trust or any trustee.
INDEMNIFICATION Subject to such standards and restrictions Unless limited by its charter, Maryland Law
contained in the governing instrument of a DBT, requires a corporation to indemnify a director or
the Delaware Act authorizes a DBT to indemnify officer who has successfully defended a proceeding
and hold harmless any trustee, shareholder or to which such person was a party because of such
other person from and against any and all claims person's service in such capacity, against reasonable
and demands. expenses incurred in connection with the proceeding.
Pursuant to the Declaration, the Trust will
indemnify any Agent who was or is a party or is Maryland Law permits a corporation to indemnify a
threatened to be made a party to any proceeding by director, officer, employee or agent who is a
reason of such Agent's capacity, against party or threatened to be a party, by reason of
attorneys' fees and other certain expenses, service in that capacity, to any threatened,
judgments, fines, settlements and other amounts pending or completed action, suit or proceeding,
incurred in connection with such proceeding if against judgments, penalties, fines, settlements
such Agent acted in good faith or in the case of a and reasonable expenses unless it is established
criminal proceeding, had no reasonable cause to that (i) the act or omission of such person was
believe such Agent's conduct was unlawful. material to the matter giving rise to the
However, there is no right to indemnification for proceeding, and was committed in bad faith or was
any liability arising from the Agent's the result of active and deliberate dishonesty;
Disqualifying Conduct. As to any matter for which (ii) such person actually received an improper
such Agent is found to be liable in the personal benefit; or (iii) such person had
performance of such Agent's duty to the Trust or reasonable cause to believe that the act or
its shareholders indemnification will be made only omission was unlawful. This permissible
to the extent that the court in which that action indemnification obligation may become mandatory or
was brought determines that in view of all the may be prohibited through a corporation's charter,
circumstances of the case, the Agent was not by-laws, a board resolution or another agreement.
liable by reason of such Agent's Disqualifying However, if the proceeding is a derivative suit,
Conduct. the corporation may not indemnify a person who has
been adjudged to be liable to the corporation.
Expenses incurred by an Agent in defending any Corporations are authorized to advance payment of
proceeding may be advanced by the Trust before the reasonable expenses.
final disposition of the proceeding on receipt of
an undertaking by or on behalf of the Agent to The Charter provides that the Corporation shall,
repay the amount of the advance if it is to the full extent permitted by Maryland Law,
ultimately determined that the Agent is not indemnify all persons whom it may indemnify under
entitled to indemnification by the Trust. Maryland Law. However, no director or officer
shall be protected from liability to the Corporation
or its stockholders to which such person would
otherwise be subject by reason of willful misfeasance,
bad faith, grossnegligence or recklessdisregard of the
duties involved in the conduct of his office.
The By-Laws provide that, to the fullest extent permitted
by Maryland Law, any current or former director or officer
seeking indemnification shall be entitled to the advancement
of reasonable expenses from the Corporation. The Corporation
may advance expenses to officers, employees and agents.
INSURANCE The Delaware Act is silent as to the right of a A corporation may purchase insurance on behalf of
DBT to purchase insurance on behalf of its any person who is or was a director, officer,
trustees or other persons. However, as the policy employee or agent against any liability asserted
of the Delaware Act is to give maximum effect to against and incurred by such person in any such
the principle of freedom of contract and to the capacity whether or not the corporation would have
enforceability of governing instruments, the the power to indemnify such person against such
Declaration authorizes the board of trustees, to liability.
the fullest extent permitted by applicable law, to
purchase with Trust assets, insurance for The By-Laws authorize the Corporation to purchase
liability and for all expenses of an Agent in insurance on behalf of any person who is or was a
connection with any proceeding in which such Agent director, officer, employee or agent against any
becomes involved by virtue of such Agent's liability asserted against and incurred by such
actions, or omissions to act, in its capacity or person in any such capacity. However, no insurance
former capacity with the Trust, whether or not the may be purchased which would indemnify any
Trust would have the power to indemnify such Agent director or officer against any liability to the
gainst such liability. Corporation or its stockholders to which such
person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
person's office.
SHAREHOLDER Under the Delaware Act, except to the extent Under Maryland Law, a stockholder may inspect,
RIGHT OF otherwise provided in the governing instrument during usual business hours, the corporation's
INSPECTION and subject to reasonable standards established by-laws, stockholder proceeding minutes, annual
by the trustees, each shareholder has the right, statements of affairs, voting trust agreements
upon reasonable demand for any purpose reasonably and, if the corporation is not an open-end investment
related to the shareholder's interest as a company, a statement showing all stock
shareholder, to obtain from the DBT certain and securities issued by the corporation for the
information regarding the governance and affairs previous 12 months. In addition, stockholders who of the
of the DBT. have individually or together been holders of at
least 5% of the outstanding stock of any class for
Under the Declaration, a shareholder, upon at least 6 months, may inspect the corporation's
reasonable written demand to the Trust for any books of accounts, its stock ledger and its
purpose reasonably related to such shareholder's statement of affairs. Although not expressly
interest as a shareholder, may inspect certain required by the Maryland statute, Maryland courts
information as to the governance and affairs of have engrafted a proper purpose requirement upon
the Trust during regular business hours. However, this statutory right.
reasonable standards governing, without
limitation, the information and documents to be The Charter grants stockholders inspection rights
furnished and the time and location of furnishing only to the extent provided by Maryland Law. Such
the same, will be established by the board or any rights are subject to reasonable regulations of
officer to whom such power is delegated in the the board of directors not contrary to Maryland
By-Laws. In addition, as permitted by the Delaware
Law. Act, the By-Laws also authorize the board or
an officer to whom the board delegates such powers
to keep confidential from shareholders for such
period of time as deemed reasonable any information
that the board or such officer in good faith believes
would not be in the best interest of the Trust to
disclose or that could damage the Trust or that the
Trust is required by law or by agreement with a
3rd party to keep confidential.
DERIVATIVE Under the Delaware Act, a shareholder may bring a Under Maryland Law, in order to bring a derivative
ACTIONS derivative action if trustees with authority to do action, a stockholder (or his predecessor if he
so have refused to bring the action or if a demand became a stockholder by operation of law) must be
upon the trustees to bring the action is not a stockholder (a) at the time of the acts or
likely to succeed. A shareholder may bring a omissions complained about; (b) at the time the
derivative action only if the shareholder is a action is brought and (c) until the completion of
shareholder at the time the action is brought and: the litigation. A derivative action may be brought
(i) was a shareholder at the time of the by a stockholder if (i) a demand upon the board of
transaction complained about or (ii) acquired the directors to bring the action is improperly
status of shareholder by operation of law or refused or (ii) a request upon the board of
pursuant to the governing instrument from a person directors would be futile.
who was a shareholder at the time of the
transaction. A shareholder's right to bring a Under Maryland Law, a director of an investment
derivative action may be subject to such company who "is not an interested person, as
additional standards and restrictions, if any, as defined by the Investment Company Act of 1940,
are set forth in the governing instrument. shall be deemed to be independent and
disinterested when making any determination or
The Declaration provides that, subject to the taking any action as a director."
requirements set forth in the Delaware Act, a
shareholder may bring a derivative action on
behalf of the Trust only if the shareholder first
makes a pre-suit demand upon the board of trustees
to bring the subject action unless an effort to
cause the board of trustees to bring such action
is excused. A demand on the board of trustees
shall only be excused if a majority of the board
of trustees, or a majority of any committee
established to consider the merits of such action,
has a material personal financial interest in the
action at issue. A trustee shall not be deemed to
have a material personal financial interest in an
action or otherwise be disqualified from ruling on
a shareholder demand by virtue of the fact that
such trustee receives remuneration from his
service on the board of trustees of the Trust or
on the boards of one or more investment companies
with the same or an affiliated investment advisor
or underwriter.
EXHIBIT C
FUNDAMENTAL INVESTMENT RESTRICTIONS PROPOSED
TO BE AMENDED OR ELIMINATED
INVESTMENT CURRENT FUNDAMENTAL PROPOSED FUNDAMENTAL
PROPOSAL OR INVESTMENT INVESTMENT RESTRICTION INVESTMENT RESTRICTION
SUB-PROPOSAL RESTRICTION THE FUND MAY NOT: THE FUND MAY NOT:
------------------ ----------------------------------------------------------------- ------------------------------------------
3a Borrowing and Issue senior securities, borrow money or Borrow money or issue senior securities,
Issuing Senior pledge its assets, except that the Fund except to the extent permitted by the
Securities may borrow from a bank (i) for temporary 1940 Act or any rules, exemptions or
or emergency purposes, or (ii) to interpretetions thereunder that may be
finance repurchase of its shares, in adopted, granted or issued by the SEC.
amounts not exceeding 5% (taken at the
lower of cost or current value) of its
total assets (not including the amount
borrowed), and may also pledge its
assets to secure such borrowings.
------------------ --------------------- --------------------------------------------- ------------------------------------------
3b Industry Invest 25% or more of the total value of Invest more than 25% of its net assets
Concentration its assets in a particular industry; in securities of issuers in any one
provided however, that the foregoing industry; provided that this limitation
restriction shall not be deemed to (i) shall not apply with respect to
prohibit the Fund from purchasing the securities issued or guaranteed by the
securities of any issuer pursuant to the U.S. government or by its agencies or
exercise of rights distributed to the instrumentalities or securities of other
Fund by the issuer. investment companies and (ii) shall not
be deemed to prohibit the Fund from
purchasing the securities of any issuer
pursuant to the exercise of rights
distributed to the Fund by the issuer.
------------------ --------------------- --------------------------------------------- ------------------------------------------
3c Commodities Buy or sell commodities or commodity Purchase or sell commodities as defined
contracts . . . , except that it may in the Commodity Exchange Act, as
purchase and sell futures contracts on amended, and the rules and regulations
stock indices and foreign currencies, thereunder, unless acquired as a result
securities which are secured by . . . of ownership of securities or other
commodities, and securities of instruments and provided that this
companies which invest or deal in . . . restriction does not prevent the Fund
commodities. from engaging in transactions involving
futures contracts and options thereon or
investing in securities that are secured
by physical commodities.
------------------ --------------------- --------------------------------------------- ------------------------------------------
3d Real Estate Buy or sell . . . real estate or Purchase or sell real estate unless
interests in real estate, except that it acquired as a result of ownership of
may purchase . . . securities which are securities or other instruments and
secured by real estate . . . and provided that this restriction does not
securities of companies which invest or prevent the Fund from investing in
deal in real estate . . . issuers which invest, deal, or otherwise
engage in transactions in real estate
or interests therein, or investing in
securities that are secured by real estate
or interests therein.
------------------ --------------------- --------------------------------------------- ------------------------------------------
3e Lending Make loans, except through repurchase Make loans to other persons except (a)
agreements to the extent permitted through the lending of its portfolio
under applicable law. securities, (b) through the purchase of
debt securities, loan participations
and/or engaging in direct corporate
loans in accordance with its investment
objectives and policies, and (c) to the
extent the entry into a repurchase agreement
is deemed to be a loan. The Fund may also
make loans to other investment companies
to the extent permitted by the 1940 Act
or any exemptions therefrom which may be
granted by the SEC.
------------------ --------------------- --------------------------------------------- ------------------------------------------
4 Margin Purchase securities on margin, except Proposed to be eliminated.
such short-term credits as may be
necessary for clearance of
transactions and the maintenance of
margin with respect to futures
contracts.
------------------ --------------------- --------------------------------------------- ------------------------------------------
4 Short Sales Make short sales of securities or Proposed to be eliminated.
maintain a short position.
------------------ --------------------- --------------------------------------------- ------------------------------------------
4 Non-Publicly Invest in securities which are not Proposed to be eliminated.
Traded, Restricted publicly traded, which cannot be
and Illiquid readily resold because of legal or
Securities contractual restrictions or which are
not otherwise readily marketable
(including repurchase agreements
having more than seven days
remaining to maturity) if,
regarding all such securities, more
than 25% of its total assets (taken
at current value) would be invested
in such securities.
1 The members of the board of a Delaware business trust are referred to as
Trustees.
TEMPLETON EMERGING MARKETS FUND, INC.
ANNUAL MEETING OF SHAREHOLDERS - AUGUST 26, 2002
The undersigned hereby revokes all previous proxies for his/her shares and
appoints BARBARA J. GREEN, BRUCE S. ROSENBERG and LORI A. WEBER, and each of
them, proxies of the undersigned with full power of substitution to vote all
shares of Templeton Emerging Markets Fund, Inc. (the "Fund") that the
undersigned is entitled to vote at the Fund's Annual Meeting of Shareholders
(the "Meeting") to be held at 500 East Broward Blvd., 12th Floor, Ft.
Lauderdale, Florida 33394 at 4:00 p.m., Eastern time, on the 26th day of August
2002, including any postponements or adjournments thereof, upon the matters set
forth below and instructs them to vote upon any matters that may properly be
acted upon at the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY SHALL BE VOTED FOR PROPOSALS
1 (INCLUDING ALL NOMINEES FOR DIRECOTRSE) 2, 3 (INCLUDING 5 SUB-PROPOSALS) AND
4. IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING TO BE VOTED ON, THE
PROXY HOLDERS WILL VOTE, ACT AND CONSENT ON THOSE MATTERS IN ACCORDANCE WITH THE
VIEWS OF MANAGEMENT.
(CONTINUED, AND TO BE SIGNED ON THE OTHER SIDE)
FOLD AND DETACH HERE
PLEASE MARK VOTES AS
INDICATED IN THIS
EXAMPLE [X]
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSALS 1 THROUGH 4.
FOR ALL
Proposal 1 - Election of Directors.
FOR all nominees WITHHOLD Nominees: Harris J. Ashton, Nicholas F. Brady,
Listed (except as AUTHORITY Frank J. Crothers, S. Joseph Fortunato and
marked to the right) to vote for all Edith E. Holiday
nominees listed
[ ] [ ] TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE LINE
BELOW.
------------------------------------------------------------
Proposal 2 - To approve an Agreement and Plan of Reorganization that provides
for the reorganization of the Fund from a Maryland corporation to
a Delaware business trust.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Proposal 3 - To approve amendments to certain of the Fund's fundamental
investment restrictions (includes five (5) Sub-Proposals):
3a. To amend the Fund's fundamental investment restriction
regarding borrowing and issuing senior securities.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3b. To amend the Fund's fundamental investment restriction
regarding industry concentration.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3c. To amend the Fund's fundamental investment restriction
regarding investments in commodities.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3d. To amend the Fund's fundamental investment restriction
regarding investments in real estate.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3e. To amend the Fund's fundamental investment restriction
regarding lending.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Proposal 4 - To approve the elimination of certain of the Fund's fundamental
investment restrictions.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I PLAN TO ATTEND THE MEETING. YES NO
[ ] [ ]
SIGNATURE(S): DATED , 2002
------------------------------------------ -----------
Please sign exactly as your name appears on this proxy. If signing for estates,
trusts or corporations, title or capacity should be stated. If shares are held
jointly, each holder should sign.
FOLD AND DETACH HERE