(a)
The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(f)
Pursuant to Item 13(a)(1), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
Item
3. Audit Committee Financial Expert.
(a)(1)
The Registrant has an audit committee financial expert serving on its audit
committee.
(2)
The audit committee financial experts are Ann Torre Bates and David W. Niemiec
and they are “independent" as defined under the relevant Securities and
Exchange Commission Rules and Releases.
Principal Accountant Fees and Services.
(a) Audit Fees
The
aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant’s annual
financial statements or for services that are normally provided by the
principal accountant in connection with statutory and regulatory filings or
engagements were $50,368 for the fiscal year ended December
31, 2023 and $50,317 for the fiscal year ended December 31, 2022.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant's investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.
The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning were $70,000 for the fiscal year ended December 31, 2023 and $70,000 for the fiscal year ended December 31, 2022. The services for which these fees were paid included global access to tax platform International Tax View.
(d) All Other Fees
There were no fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4.
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant not reported in paragraphs (a)-(c) of Item 4 were $5,500 for the fiscal year ended December 31, 2023 and $171,195 for the fiscal year ended December 31, 2022. The services for which these fees were paid included fees in connection with licenses for accounting and business knowledge platform Viewpoint, for the fiscal years ended December 31, 2023 and 2022, and fees in connection with a license for employee development tool ProEdge, for the fiscal year ended December 31, 2022.
(e)
(1) The registrant’s audit committee is directly responsible for approving the
services to be provided by the auditors, including:
(i) pre-approval
of all audit and audit related services;
(ii) pre-approval
of all non-audit related services to be provided to the Fund by the auditors;
(iii) pre-approval
of all non-audit related services to be provided to the registrant by the
auditors to the registrant’s investment adviser or to any entity that controls,
is controlled by or is under common control with the registrant’s investment
adviser and that provides ongoing services to the registrant where the
non-audit services relate directly to the operations or financial reporting of
the registrant; and
(iv) establishment
by the audit committee, if deemed necessary or appropriate, as an alternative
to committee pre-approval of services to be provided by the auditors, as required
by paragraphs (ii) and (iii) above, of policies and procedures to permit such
services to be pre-approved by other means, such as through establishment of guidelines
or by action of a designated member or members of the committee; provided the
policies and procedures are detailed as to the particular service and the committee
is informed of each service and such policies and procedures do not include
delegation of audit committee responsibilities, as contemplated under the
Securities Exchange Act of 1934, to management; subject, in the case of (ii)
through (iv), to any waivers, exceptions or exemptions that may be available
under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $75,500 for the fiscal year ended December 31, 2023 and $241,195 for the fiscal year ended December 31, 2022.
(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Members
of the Audit Committee are: Ann Torre Bates,
Terrence J. Checki, David W. Niemiec, J.
Michael Luttig and Constantine D. Tseretopoulos
Item
6. Schedule of Investments. N/A
Item
7
. Disclosure
of Proxy Voting Policies and Procedures for Closed-End Management Investment
Companies.
The board of directors of the Fund has
delegated the authority to vote proxies related to the portfolio securities
held by the Fund to the Fund’s investment manager, Templeton Asset Management
Ltd.(TAML), in accordance with the Proxy Voting Policies and Procedures (Policies)
adopted by the investment manager.
RESPONSIBILITY OF THE
INVESTMENT MANAGER TO VOTE PROXIES
Templeton Global Equity
Group, a separate investment group within Franklin Templeton, comprised of
investment personnel from the SEC-registered investment advisers listed on Appendix
A (hereinafter individually an “Investment Manager” and collectively the
"Investment Managers") have delegated the administrative duties with
respect to voting proxies for securities to the Franklin Templeton Proxy Group
within Franklin Templeton Companies, LLC (the "Proxy Group"), a
wholly-owned subsidiary of Franklin Resources, Inc. Franklin Templeton Companies,
LLC provides a variety of general corporate services to its affiliates, including,
but not limited to, legal and compliance activities. Proxy duties consist of disseminating
proxy materials and analyses of issuers whose stock is owned by any client (including
both investment companies and any separate accounts managed by the Investment
Managers) that has either delegated proxy voting administrative responsibility
to the Investment Managers or has asked for information and/or recommendations
on the issues to be voted. The Investment Managers will inform Advisory Clients
that have not delegated the voting responsibility but that have requested
voting advice about the Investment Managers’ views on such proxy votes. The
Proxy Group also provides these services to other advisory affiliates of the
Investment Managers.
The Proxy Group will
process proxy votes on behalf of, and the Investment Managers vote proxies
solely in the best interests of, separate account clients, the Investment
Managers’-managed investment company shareholders, or shareholders of funds
that have appointed Franklin Templeton International Services S.à.r.l. (“FTIS
S.à.r.l.”) as the Management Company, provided such funds or clients have
properly delegated such responsibility in writing, or, where employee benefit
plan assets subject to the Employee Retirement Income Security Act of 1974, as
amended, are involved (“ERISA accounts”), in the best interests of the plan
participants and beneficiaries (collectively, "Advisory Clients"),
unless (i) the power to vote has been specifically retained by the named
fiduciary in the documents in which the named fiduciary appointed the
Investment Managers or (ii) the documents otherwise expressly prohibit the
Investment Managers from voting proxies. The Investment Managers recognize that
the exercise of voting rights on securities held by ERISA plans for which the
Investment Managers have voting responsibility is a fiduciary duty that must be
exercised with care, skill, prudence and diligence.
In certain circumstances,
Advisory Clients are permitted to direct their votes in a solicitation pursuant
to the Investment Management Agreement. An Advisory Client that wishes to
direct its vote shall give reasonable prior written notice to the Investment
Managers indicating such intention and provide written instructions directing
the Investment Managers or the Proxy Group to vote regarding the solicitation.
Where such prior written notice is received, the Proxy Group will vote proxies
in accordance with such written notification received from the Advisory Client.
The Investment Managers
have adopted and implemented Proxy Voting Policies and Procedures (“Proxy
Policies”) that they believe are reasonably designed to ensure that proxies are
voted in the best interest of Advisory Clients in accordance with their
fiduciary duties and rule 206(4)-6 under the Investment Advisers Act of 1940.
To the extent that the Investment Managers have a subadvisory agreement with an
affiliated investment manager (the “Affiliated Subadviser”) with respect to a
particular Advisory Client, the Investment Managers may delegate proxy voting
responsibility to the Affiliated Subadviser. The Investment Managers may also
delegate proxy voting responsibility to a subadviser that is not an Affiliated
Subadviser in certain limited situations as disclosed to fund shareholders (e.g.,
where an Investment Manager to a pooled investment vehicle has engaged a subadviser
that is not an Affiliated Subadviser to manage all or a portion of the assets).
HOW THE INVESTMENT
MANAGER VOTE PROXIES
All proxies received by
the Proxy Group will be voted based upon the Investment Managers’ instructions
and/or policies. To assist it in analyzing proxies of equity securities, the
Investment Managers subscribe to Institutional Shareholder Services Inc.
("ISS"), an unaffiliated third-party corporate governance research
service that provides in-depth analyses of shareholder meeting agendas and vote
recommendations. In addition, the Investment Managers subscribe to ISS’s Proxy
Voting Service and Vote Disclosure Service. These services include receipt of
proxy ballots, custodian bank relations, account maintenance, vote execution,
ballot reconciliation, vote record maintenance, comprehensive reporting
capabilities, and vote disclosure services. Also, the Investment Managers
subscribe to Glass, Lewis & Co., LLC ("Glass Lewis"), an
unaffiliated third-party analytical research firm, to receive analyses and vote
recommendations on the shareholder meetings of publicly held U.S. companies, as
well as a limited subscription to its international research.
In making voting
decisions, the Investment Managers may consider Glass Lewis’s Proxy Voting
Guidelines, ISS’s Benchmark Policies, ISS’s Sustainability Policy, and Templeton
Global Equity Group’s (“TGEG”) custom sustainability guidelines, which reflect
what TGEG believes to be good environmental, social, and governance practices.
Although analyses provided by ISS, Glass Lewis, and/or another independent
third-party proxy service provider (each a “Proxy Service”) are thoroughly
reviewed and considered in making a final voting decision, the Investment
Managers do not consider recommendations from a Proxy Service or any third-party
to be determinative of the Investment Managers’ ultimate decision. Rather, the
Investment Managers exercise their independent judgment in making voting
decisions. As a matter of policy, the officers, directors and employees of the
Investment Managers and the Proxy Group will not be influenced by outside
sources whose interests conflict with the interests of Advisory Clients.
For ease of reference,
the Proxy Policies often refer to all Advisory Clients. However, our processes
and practices seek to ensure that proxy voting decisions are suitable for individual
Advisory Clients. In some cases, the Investment Managers’ evaluation may result
in an individual Advisory Client or Investment Manager voting differently,
depending upon the nature and objective of the fund or account, the composition
of its portfolio, whether the Investment Manager has adopted a specialty or
custom voting policy, and other factors.
All conflicts of interest
will be resolved in the best interests of the Advisory Clients. The Investment
Managers are affiliates of a large, diverse financial services firm with many
affiliates and makes its best efforts to mitigate conflicts of interest.
However, as a general matter, the Investment Managers
take the position that relationships between certain affiliates that do not use
the “Franklin Templeton” name (“Independent Affiliates”) and an issuer (e.g.,
an investment management relationship between an issuer and an Independent
Affiliate) do not present a conflict of interest for an Investment Manager in
voting proxies with respect to such issuer because: (i) the Investment Managers
operate as an independent business unit from the Independent Affiliate business
units, and (ii) informational barriers exist between the Investment Managers
and the Independent Affiliate business units.
Material
conflicts of interest could arise in a variety of situations, including as a
result of the Investment Manager’s or an affiliate’s (other than an Independent
Affiliate as described above): (i) material business relationship with an issuer
or proponent, (ii) direct or indirect pecuniary interest in an issuer or proponent;
or (iii) significant personal or family relationship with an issuer or
proponent.
Material conflicts of interest are identified by the Proxy Group
based upon analyses of client, distributor, broker dealer, and vendor lists,
information periodically gathered from directors and officers, and information
derived from other sources, including public filings. The Proxy Group gathers
and analyzes this information on a best efforts basis, as much of this
information is provided directly by individuals and groups other than the Proxy
Group, and the Proxy Group relies on the accuracy of the information it
receives from such parties.
Nonetheless, even though
a potential conflict of interest between the Investment
Managers or an affiliate (other than an Independent Affiliate as described
above) and an issuer may exist: (1) the Investment Managers may vote in
opposition to the recommendations of an issuer’s management even if contrary to
the recommendations of a third-party proxy voting research provider; (2) if management
has made no recommendations, the Proxy Group may defer to the voting
instructions of the Investment Managers; and (3) with respect to shares held by
Franklin Resources, Inc. or its affiliates for their own corporate accounts,
such shares may be voted without regard to these conflict procedures.
Otherwise,
in
situations where a
material conflict of interest is identified between the Investment Managers or
one of its affiliates (other than Independent
Affiliates) and an issuer, the Proxy Group may vote consistent with the
voting recommendation of a Proxy Service or send the proxy directly to the
relevant Advisory Clients with the Investment Managers’ recommendation regarding
the vote for approval. To address certain affiliate conflict situations, the
Investment Managers will employ pass-through voting or mirror voting when
required pursuant to a fund’s governing documents or applicable law.
Where the Proxy Group
refers a matter to an Advisory Client, it may rely upon the instructions of a
representative of the Advisory Client, such as the board of directors or
trustees, a committee of the board, or an appointed delegate in the case of a
U.S. registered investment company, a conducting officer in the case of a fund
that has appointed FTIS S.à.r.l as its Management Company, the Independent
Review Committee for Canadian investment funds, or a plan administrator in the
case of an employee benefit plan. A quorum of the board of directors or
trustees or of a committee of the board can be reached by a majority of
members, or a majority of non-recused members. The Proxy Group may determine to
vote all shares held by Advisory Clients of the Investment Managers and
affiliated Investment Managers (other than Independent
Affiliates) in accordance with the instructions of one or more of the
Advisory Clients.
The Investment Managers
may also decide whether to vote proxies for securities deemed to present
conflicts of interest that are sold following a record date, but before a
shareholder meeting date. The Investment Managers may consider various factors
in deciding whether to vote such proxies, including the Investment Managers’
long-term view of the issuer’s securities for investment, or it may defer the
decision to vote to the applicable Advisory Client. The Investment Managers
also may be unable to vote, or choose not to vote, a proxy for securities
deemed to present a conflict of interest for any of the reasons outlined in the
first paragraph of the section of these policies entitled “Proxy Procedures.”
Weight Given
Management Recommendations
One of the primary
factors the Investment Managers consider when determining the desirability of
investing in a particular company is the quality and depth of that company's
management. Accordingly, the recommendation of management on any issue is a
factor that the Investment Managers consider in determining how proxies should
be voted. However, the Investment Managers do not consider recommendations from
management to be determinative of the Investment Manager's ultimate decision.
Each issue is considered on its own merits, and the Investment Managers will
not support the position of a company's management in any situation where it
determines that the ratification of management's position would adversely
affect the investment merits of owning that company's shares.
The Investment Managers
believe that engagement with issuers is important to good corporate governance
and to assist in making proxy voting decisions. The Investment Managers may
engage with issuers to discuss specific ballot items to be voted on in advance
of an annual or special meeting to obtain further information or clarification
on the proposals. The Investment Managers may also engage with management on a
range of environmental, social or corporate governance issues throughout the
year.
The Proxy Group is part
of the Franklin Templeton Companies, LLC Legal Department and is overseen by legal
counsel. Full-time staff members and support staff (which includes individuals
that are employees of affiliates of Franklin Templeton Companies, LLC) are
devoted to proxy voting administration and oversight and providing support and
assistance where needed. On a daily basis, the Proxy Group will review each
proxy upon receipt as well as any agendas, materials and recommendations that
they receive from a Proxy Service or other sources. The Proxy Group maintains a
record of all shareholder meetings that are scheduled for companies whose
securities are held by the Investment Managers’ managed funds and accounts. For
each shareholder meeting, a member of the Proxy Group will consult with the
research analyst that follows the security and provide the analyst with the
agenda, analyses of one or more Proxy Services, recommendations and any other
information provided to the Proxy Group. Except in situations identified as
presenting material conflicts of interest, the Investment Managers’ research
analyst and relevant portfolio manager(s) are responsible for making the final
voting decision based on their review of the agenda, analyses of one or more
Proxy Services, proxy statements, their knowledge of the company and any other
information publicly available.
In situations where the
Investment Managers have not responded with vote recommendations to the Proxy
Group by the deadline date, the Proxy Group may vote consistent with the vote
recommendations of a Proxy Service. Except in cases where the Proxy Group is voting
consistent with the voting recommendation of a Proxy Service, the Proxy Group
must obtain voting instructions from the Investment Managers’ research analysts,
relevant portfolio manager(s), legal counsel and/or the Advisory Client prior
to submitting the vote. In the event that an account holds a security that an
Investment Manager did not purchase on its behalf, and the Investment Manager
does not normally consider the security as a potential investment for other
accounts, the Proxy Group may vote consistent with the voting recommendations
of a Proxy Service or take no action on the meeting.
The Proxy Group is fully
cognizant of its responsibility to process proxies and maintain proxy records
as may be required by relevant rules and regulations. In addition, the
Investment Managers understand their fiduciary duty to vote proxies and that
proxy voting decisions may affect the value of shareholdings. Therefore, the
Investment Manager will generally attempt to process every proxy it receives
for all domestic and foreign securities. However, there may be situations in
which the Investment Managers may be unable to successfully vote a proxy, or
may choose not to vote a proxy, such as where: (i) a proxy ballot was not
received from the custodian bank; (ii) a meeting notice was received too late;
(iii) there are fees imposed upon the exercise of a vote and it is determined
that such fees outweigh the benefit of voting; (iv) there are legal
encumbrances to voting, including blocking restrictions in certain markets that
preclude the ability to dispose of a security if an Investment Manager votes a
proxy or where the Investment Manager is prohibited from voting by applicable
law, economic or other sanctions, or other regulatory or market requirements,
including but not limited to, effective Powers of Attorney; (v) additional documentation
or the disclosure of beneficial owner details is required; (vi) the Investment
Managers held shares on the record date but has sold them prior to the meeting
date; (vii) the Advisory Client held shares on the record date, but the
Advisory Client closed the account prior to the meeting date; (viii) a proxy
voting service is not offered by the custodian in the market; (ix) due to
either system error or human error, the Investment Managers’ intended vote is
not correctly submitted; (x) the Investment Managers believe it is not in the
best interest of the Advisory Client to vote the proxy for any other reason not
enumerated herein; or (xi) a security is subject to a securities lending or
similar program that has transferred legal title to the security to another
person.
Even if the Investment
Managers use reasonable efforts to vote a proxy on behalf of its Advisory
Clients, such vote or proxy may be rejected because of (a) operational or
procedural issues experienced by one or more third parties involved in voting
proxies in such jurisdictions; (b) changes in the process or agenda for the
meeting by the issuer for which the Investment Managers do not have sufficient
notice; or (c) the exercise by the issuer of its discretion to reject the vote
of the Investment Managers. In addition, despite the best efforts of the Proxy
Group and its agents, there may be situations where the Investment Managers’
votes are not received, or properly tabulated, by an issuer or the issuer’s
agent.
The Investment Managers
or their affiliates may, on behalf of one or more of the proprietary registered
investment companies advised by the Investment Managers or their affiliates, make
efforts to recall any security on loan where the Investment Manager or its
affiliates (a) learn of a vote on an event that may materially affect a
security on loan and (b) determine that it is in the best interests of such
proprietary registered investment companies to recall the security for voting
purposes. The ability to timely recall shares is not entirely within the
control of the Investment Managers. Under certain circumstances, the recall of
shares in time for such shares to be voted may not be possible due to
applicable proxy voting record dates or other administrative considerations.
There may be instances in
certain non-U.S. markets where split voting is not allowed. Split voting occurs
when a position held within an account is voted in accordance with two
differing instructions. Some markets and/or issuers only allow voting on an
entire position and do not accept split voting. In certain cases, when more
than one Franklin Templeton investment manager has accounts holding shares of
an issuer that are held in an omnibus structure, the Proxy Group will seek
direction from an appropriate representative of the Advisory Client with
multiple Investment Managers (such as a conducting officer of the Management
Company in the case of a SICAV), or the Proxy Group will submit the vote based
on the voting instructions provided by the Investment Manager with accounts
holding the greatest number of shares of the security within the omnibus
structure.
If several issues are
bundled together in a single voting item, the Investment Managers will assess
the total benefit to shareholders and the extent that such issues should be
subject to separate voting proposals.
PROCEDURES FOR
MEETINGS INVOLVING FIXED INCOME SECURITIES & PRIVATELY HELD ISSUERS
From time to time,
certain custodians may process events for fixed income securities through their
proxy voting channels rather than corporate action channels for administrative
convenience. In such cases, the Proxy Group will receive ballots for such
events on the ISS voting platform. The Proxy Group will solicit voting
instructions from the Investment Managers for each account or fund involved. If
the Proxy Group does not receive voting instructions from the Investment Managers,
the Proxy Group will take no action on the event. The Investment Managers may
be unable to vote a proxy for a fixed income security, or may choose not to
vote a proxy, for the reasons described under the section entitled “Proxy
Procedures.”
In the rare instance
where there is a vote for a privately held issuer, the decision will generally
be made by the relevant portfolio managers or research analysts.
The Proxy Group will
monitor such meetings involving fixed income securities or privately held issuers
for conflicts of interest in accordance with these procedures. If a fixed
income or privately held issuer is flagged as a potential conflict of interest,
the Investment Managers may nonetheless vote as it deems in the best interests
of its Advisory Clients. The Investment Managers will report such decisions on
an annual basis to Advisory Clients as may be required.
These Proxy Policies
apply to accounts managed by personnel within
Templeton Global Equity Group, which includes
the following Investment Managers:
Franklin Templeton
Investment Management Limited (FTIML)
Franklin Templeton
Investments Corp. (FTIC)
Templeton Asset
Management Ltd. (TAML)
Templeton Global Advisors
Limited
Templeton Investment
Counsel, LLC
The following Proxy Policies apply to FTIML, FTIC, and TAML only:
HOW THE INVESTMENT
MANAGERS VOTE PROXIES
Certain of the Investment
Managers’ separate accounts or funds (or a portion thereof) are included under
Franklin Templeton Investment Solutions (“FTIS”), a separate investment group
within Franklin Templeton, and employ a quantitative strategy.
For such accounts, FTIS’s
proprietary methodologies rely on a combination of quantitative, qualitative,
and behavioral analysis rather than fundamental security research and analyst
coverage that an actively managed portfolio would ordinarily employ.
Accordingly, absent client direction, in light of the high number of positions
held by such accounts and the considerable time and effort that would be
required to review proxy statements and ISS or Glass Lewis recommendations, the
Investment Manager may review ISS’s non-US Benchmark guidelines, ISS’s
specialty guidelines (in particular, ISS’s Sustainability guidelines), or Glass
Lewis’s US guidelines (the “the ISS and Glass Lewis Proxy Voting Guidelines”)
and determine, consistent with the best interest of its clients, to provide
standing instructions to the Proxy Group to vote proxies according to the
recommendations of ISS or Glass Lewis.
The Investment Manager,
however, retains the ability to vote a proxy differently than ISS or Glass
Lewis recommends if the Investment Manager determines that it would be in the
best interests of Advisory Clients (for example, where an issuer files
additional solicitation materials after a Proxy Service has issued its voting
recommendations but sufficiently before the vote submission deadline and these
materials would reasonably be expected to affect the Investment Manager’s
voting determination).
The following Proxy
Policies apply to FTIC only:
RESPONSIBILITY OF THE
INVESTMENT MANAGERS TO VOTE PROXIES
To the extent that the
Investment Manager has a subadvisory agreement with an affiliated investment
manager (the “Affiliated Subadviser”) with respect to a particular Advisory
Client or the Investment Manager chooses securities for an Advisory Client’s
portfolios that are recommended by an Affiliated Subadviser, the Investment
Manager may delegate proxy voting responsibility to the Affiliated Subadviser
or vote proxies in accordance with the Affiliated Subadviser’s recommendations.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
.
(a)(1)
As of February 26, 2024, the portfolio managers of the Fund are as follows:
Nicholas
Chui, CFA,
has
been a lead portfolio manager of the Fund since May 2023. He joined Franklin
Templeton in April 2023. Prior to joining Franklin Templeton, Mr. Chui was a portfolio
manager focused on China and Asia equity strategies and a research pod leader
at BlackRock.
Erik
Mok, CFA,
has
been a portfolio manager of the Fund since 2020. He joined Franklin Templeton in
1998.
(a)(2)
This section reflects information about the portfolio managers as of the fiscal
year ended December 31, 2023.
The
following table shows the number of other accounts managed by each portfolio
manager and the total assets in the accounts managed within each category:
|
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Number of Other Registered Investment Companies Managed |
Assets of Other Registered Investment Companies Managed |
Number of Other Pooled Investment Vehicles Managed1 |
Assets of Other Pooled Investment Vehicles Managed |
Number of Other Accounts Managed1 |
Assets of Other Accounts Managed |
|
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|
|
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|
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|
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The various pooled investment vehicles and accounts listed are
managed by a team of investment professionals. Accordingly, the individual manager
listed would not be solely responsible for managing such listed amounts.
Portfolio managers that provide
investment services to the Fund may also provide services to a variety of other
investment products, including other funds, institutional accounts and private
accounts. The advisory fees for some of such other products and accounts may be
different than that charged to the Fund but does not include performance
based compensation. This may result in fees that are higher (or lower) than the
advisory fees paid by the Fund. As a matter of policy, each fund or account is
managed solely for the benefit of the beneficial owners thereof. As discussed
below, the separation of the trading execution function from the portfolio
management function and the application of objectively based trade allocation
procedures help to mitigate potential conflicts of interest that may arise as a
result of the portfolio managers managing accounts with different advisory fees.
Conflicts.
The
management of multiple funds, including the Fund, and accounts may also give
rise to potential conflicts of interest if the funds and other accounts have
different objectives, benchmarks, time horizons, and fees as the portfolio
manager must allocate his or her time and investment ideas across multiple
funds and accounts. The investment manager seeks to manage such competing
interests for the time and attention of portfolio managers by having portfolio
managers focus on a particular investment discipline. Most other accounts
managed by a portfolio manager are managed using the same investment strategies
that are used in connection with the management of the Fund. Accordingly,
portfolio holdings, position sizes, and industry and sector exposures tend to
be similar across similar portfolios, which may minimize the potential for
conflicts of interest. As noted above, the separate management of the trade
execution and valuation functions from the portfolio management process also
helps to reduce potential conflicts of interest. However, securities
selected for funds or accounts other than the Fund may outperform the securities
selected for the Fund. Moreover, if a portfolio manager identifies a limited
investment opportunity that may be suitable for more than one fund or other
account, the Fund may not be able to take full advantage of that
opportunity due to an allocation of that opportunity across all eligible funds
and other accounts. The investment manager seeks to manage such potential conflicts
by using procedures intended to provide a fair allocation of buy and sell
opportunities among funds and other accounts.
The structure of a portfolio manager’s
compensation may give rise to potential conflicts of interest. A portfolio
manager’s base pay and bonus tend to increase with additional and more complex
responsibilities that include increased assets under management. As such, there
may be a relationship between a portfolio manager’s marketing or sales efforts
and his or her bonus.
Finally, the management of
personal accounts by a portfolio manager may give rise to potential conflicts
of interest. While the funds and the investment manager have adopted a code of
ethics which they believe contains provisions designed to prevent a wide range
of prohibited activities by portfolio managers and others with respect to their
personal trading activities, there can be no assurance that the code of ethics
addresses all individual conduct that could result in conflicts of interest.
The investment
manager and the Fund have adopted certain compliance procedures that are
designed to address these, and other, types of conflicts. However, there is no
guarantee that such procedures will detect each and every situation where a
conflict arises.
Compensation.
The
investment manager seeks to maintain a compensation program that is
competitively positioned to attract, retain and motivate top-quality investment
professionals. Portfolio managers receive a base salary, a cash incentive bonus
opportunity, an equity compensation opportunity, and a benefits package.
Portfolio manager compensation is reviewed annually, and the level of
compensation is based on individual performance, the salary range for a portfolio
manager’s level of responsibility and Franklin Templeton guidelines. Portfolio
managers are provided no financial incentive to favor one fund or account over
another. Each portfolio manager’s compensation consists of the following three
elements:
Base salary
Each
portfolio manager is paid a base salary.
Annual bonus
Annual
bonuses are structured to align the interests of the portfolio manager with
those of the Fund’s shareholders. Each portfolio manager is eligible to receive
an annual bonus. Bonuses generally are split between cash (50% to 65%) and
restricted shares of Resources stock (17.5% to 25%) and mutual fund shares
(17.5% to 25%). The deferred equity-based compensation is intended to build a
vested interest of the portfolio manager in the financial performance of both
Resources and mutual funds advised by the investment manager. The bonus plan is
intended to provide a competitive level of annual bonus compensation that is
tied to the portfolio manager achieving consistently strong investment performance,
which aligns the financial incentives of the portfolio manager and Fund
shareholders. The Chief Investment Officer of the investment manager and/or
other officers of the investment manager, with responsibility for the Fund,
have discretion in the granting of annual bonuses to portfolio managers in
accordance with Franklin Templeton guidelines. The following factors are
generally used in determining bonuses under the plan:
•
Investment
performance.
Primary consideration is given to the historic investment
performance over the 1, 3 and 5 preceding years of all accounts managed by the
portfolio manager. The pre-tax performance of each fund managed is measured
relative to a relevant peer group and/or applicable benchmark as appropriate.
•
Non-investment
performance
. The more qualitative contributions of the portfolio manager
to the investment manager’s business and the investment management team,
including professional knowledge, productivity, responsiveness to client needs
and communication, are evaluated in determining the amount of any bonus award.
•
Responsibilities.
The
characteristics and complexity of funds managed by the portfolio manager are
factored in the investment manager’s appraisal.
Additional long-term
equity-based compensation
Portfolio managers may also be awarded
restricted shares or units of Resources stock or restricted shares or units of
one or more mutual funds. Awards of such deferred equity-based compensation
typically vest over time, so as to create incentives to retain key talent.
Benefits
Portfolio
managers also participate in benefit plans and programs available generally to
all employees of the investment manager.
Ownership
of Fund shares.
The
investment manager has a policy of encouraging portfolio managers to invest in
the funds they manage. Exceptions arise when, for example, a fund is closed to
new investors or when tax considerations or jurisdictional constraints cause
such an investment to be inappropriate for the portfolio manager. The following
is the dollar range of Fund shares beneficially owned by the portfolio managers
(such amounts may change from time to time):
|
|
Dollar Range of
Fund Shares Beneficially Owned |
|
|
|
|
|
|
Note:
Because the portfolio manager is a foreign national, they do not hold shares in
this U.S. registered fund, however they own shares in other similar Franklin
Templeton funds managed by them, registered offshore and appropriate for
foreign nationals.
Item
9. Purchases of Equity Securities by Closed-End Management Investment Company
and Affiliated Purchasers
.
|
|
|
|
|
|
|
|
Total
Number of Shares Purchased |
Average
Price Paid per Share |
Total
Number of Shares Purchased as Part of Publicly Announced Plans or Program |
Maximum
Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased
Under the Plans or Programs |
Month
#1 (7/1/23 - 7/31/23) |
|
|
|
|
Month
#2 (8/1/23 - 8/31/23) |
|
|
|
|
Month
#3 (9/1/23 - 9/30/23) |
|
|
|
|
Month
#4 (10/1/23 - 10/31/23) |
|
|
|
|
Month
#5 (11/1/23 - 11/30/23) |
|
|
|
|
Month
#6 (12/1/23 – 12/31/23) |
|
|
|
|
|
|
|
|
|
|
a
On November 14, 2023, the
Fund announced a tender offer to purchase for cash up to 25 percent of its
issued and outstanding common shares (33,804,143 shares), each without par
value. The tender period commenced on November 21, 2023 and expired at 5:00
p.m. Eastern time on December 20, 2023. The Fund accepted 8,451,035 shares for
cash payment at a price equal to $9.05 per share. This purchase price was 98%
of the Fund’s NAV per share of $9.23 as of the close of regular trading on the
NYSE on December 21, 2023.
The
Board previously authorized an open-market share repurchase program pursuant to
which the Fund may purchase, from time to time, Fund shares in open-market
transactions, at the discretion of management. Effective February 26, 2013, the
Board approved a modification to the Fund’s previously announced open-market
share repurchase program to authorize the Fund to repurchase up to 10% of the
Fund’s shares outstanding in open market transactions as of that date, at the
discretion of management. Since the inception of the program, the Fund had
repurchased a total of 9,335,184 shares.
Item
10
. Submission
of Matters to a Vote of Security Holders.
There have been no changes to the procedures by which
shareholders may recommend nominees to the Registrant's Board of Directors that
would require disclosure herein.
Item
11. Controls and Procedures.
(a)
Evaluation of
Disclosure Controls and Procedures. The Registrant maintains disclosure
controls and procedures that are designed to provide reasonable assurance that
information required to be disclosed in the Registrant’s filings under the
Securities Exchange Act of 1934, as amended, and the Investment Company Act of
1940 is recorded, processed, summarized and reported within the periods
specified in the rules and forms of the Securities and Exchange Commission.
Such information is accumulated and communicated to the Registrant’s management,
including its principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure. The Registrant’s
management, including the principal executive officer and the principal financial
officer, recognizes that any set of controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives.
Within
90 days prior to the filing date of this Shareholder Report on Form N-CSRS, the
Registrant had carried out an evaluation, under the supervision and with the participation
of the Registrant’s management, including the Registrant’s principal executive
officer and the Registrant’s principal financial officer, of the effectiveness
of the design and operation of the Registrant’s disclosure controls and
procedures. Based on such evaluation, the Registrant’s principal executive
officer and principal financial officer concluded that the Registrant’s disclosure
controls and procedures are effective.
(b)
Changes in
Internal Controls. There have been no changes in the Registrant’s
internal control over financial reporting that occurred during the period
covered by this report that has materially affected, or is reasonably likely to
materially affect the internal control over financial reporting.
Item 12. Disclosure of Securities Lending
Activities for Closed-End Management Investment Company.
Securities lending agent
The board of trustees has
approved the Fund’s participation in a securities lending program. Under the
securities lending program, JP Morgan Chase Bank serves as the Fund’s
securities lending agent.
The securities lending agent is responsible for the
implementation and administration of the Funds’ securities lending program.
Pursuant to the respective Securities Lending Agreements with the Fund, the
securities lending agent performs a variety of services, including (but not limited
to) the following:
o Trade finding, execution and settlement
o Settlement
monitoring and controls, reconciliations, corporate actions and recall
management
o Collateral management and valuation information
o Invoice management and billing from counterparties
For the fiscal year ended December 31, 2023, the
income earned by the Fund as well as the fees and/or compensation paid by the
Fund in dollars pursuant to a securities lending agreement between the Trust
with respect to the Fund and the Securities Lending Agent were as follows
(figures may differ from those shown in shareholder reports due to time of
availability and use of estimates):
Gross income earned by the Fund
from securities lending activities |
|
Fees and/or compensation paid by the Fund
for securities lending activities and related services |
|
Fees paid to Securities Lending Agent from revenue
split |
|
Fees paid for any cash collateral management service
(including fees deducted from a pooled cash collateral reinvestment vehicle)
not included in a revenue split |
|
Administrative fees not included in a revenue split |
|
Indemnification fees not included in a revenue
split |
|
Rebate (paid to borrower) |
|
Other fees not included above |
|
Aggregate fees/compensation paid by the Fund
for securities lending activities |
|
Net income from securities lending activities |
|
Item
13. Recovery of Erroneously Awarded Compensation.
(a)(2)
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Christopher
Kings, Chief Executive Officer - Finance and Administration, and Jeffrey White,
Chief Financial Officer, Chief Accounting Officer and Treasurer
(a)(2)(1)
There were no written solicitations to purchase securities under Rule 23c-1
under the Act sent or given during the period covered by the report by or on
behalf of the Registrant to 10 or more persons.
(a)(2)(2)
There was no change in the Registrant’s independent public accountant during
the period covered by the report.
(b)
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Christopher
Kings, Chief Executive Officer - Finance and Administration, and Jeffrey White,
Chief Financial Officer, Chief Accounting Officer and Treasurer
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Templeton
Dragon Fund, Inc.
By SCHRISTOPHER
KINGS _________________
Chief
Executive Officer - Finance and Administration
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
By SCHRISTOPHER
KINGS _________________
Chief
Executive Officer - Finance and Administration
By SJEFFREY WHITE______________________
Chief
Financial Officer, Chief Accounting Officer and Treasurer