SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ______________)
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
TEMPLETON DRAGON FUND, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if 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)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions 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:
<PAGE>
TEMPLETON DRAGON FUND, INC.
500 EAST BROWARD BOULEVARD
FT. LAUDERDALE, FLORIDA 33394-3091
July 19, 2000
Dear Shareholder:
We are writing to you to ask for your vote on important questions that could
affect your investment in Templeton Dragon Fund, Inc. (the "Fund"). Please
review the attached proxy statement, cast your vote, and return the enclosed
proxy card in the envelope provided.
In addition to electing directors and selecting auditors, you are being asked
to vote on a proposal submitted by a shareholder. This proposal requests that
the Board of Directors consider approving, and submitting for shareholder
approval, a proposal to convert the Fund from a closed-end fund to an open-end
fund. The Directors unanimously recommend that you vote "AGAINST" this
proposal.
The Directors believe that the best way for the Fund to pursue its investment
objective is as a closed-end fund. The Fund's investment objective is long-term
capital appreciation and the Directors continue to believe that the best way
for the Fund to pursue this objective is to continue to invest in the China
region on a company-by-company basis and hold these investments for a
sufficiently long period of time to allow them to appreciate in value. This
long-term investment philosophy and the less-liquid nature of the Chinese
securities market led to the original organization of the Fund as a closed-end
fund. The Board and management continue to believe that the closed-end fund
structure remains the best structure for the Fund.
Although the Board believes that the Fund benefits from its structure as a
closed-end fund, the Directors understand that many shareholders are concerned
about the discount to net asset value at which Fund shares trade. In this
regard, the Board adopted an open-market share repurchase program in October
1997, which authorized the Fund to purchase, from time to time, up to
approximately 10% of the Fund's outstanding shares, in open-market transactions
at the discretion of management. The Fund's repurchase program was expanded in
December 1999 to permit share repurchases on the Osaka Securities Exchange, and
most recently, in May 2000, the Board further expanded the share repurchase
program by removing the 10% limitation on share repurchases in order to give
management greater flexibility to engage in an aggressive share repurchase
program. The Board also implemented a managed distribution policy in July 1998
under which approximately 10% of the Fund's average net asset value is
distributed to Fund shareholders on an annual basis.
<PAGE>
For the reasons mentioned above and in light of the additional considerations
discussed in the accompanying proxy statement, the Directors believe that the
continued operation of the Fund as a closed-end fund is in your best long-term
interest, and unanimously recommend a vote AGAINST Proposal 3.
We appreciate your participation and prompt response in this matter and thank
you for your continued support.
/s/ Mark Mobius
Mark Mobius
PRESIDENT
<PAGE>
[FRANKLIN TEMPLETON LOGO APPEARS HERE]
TEMPLETON DRAGON FUND, INC.
IMPORTANT SHAREHOLDER INFORMATION
These materials are for the Annual Meeting of Shareholders scheduled for Monday,
August 28, 2000 at 2:00 p.m. Eastern time. They discuss the proposals 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 your Fund. If you complete and
sign the proxy, we'll vote it exactly as you tell us. If you simply sign the
proxy, we'll vote it in accordance with the Directors' recommendations on page 1
of the proxy statement.
WE URGE YOU TO SPEND A FEW MINUTES REVIEWING THE PROPOSALS IN THE PROXY
STATEMENT. THEN, FILL OUT 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/registered trademark/ (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.
<PAGE>
[FRANKLIN TEMPLETON LOGO APPEARS HERE]
TEMPLETON DRAGON FUND, INC.
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting ("Meeting") of shareholders of Templeton Dragon Fund, Inc.
(the "Fund") will be held at the Fund's offices, 500 East Broward Boulevard,
12th Floor, Ft. Lauderdale, Florida 33394-3091 on Monday, August 28, 2000 at
2:00 p.m. Eastern time.
During the Meeting, shareholders of the Fund will vote on four proposals:
1. The election of four Directors of the Fund to hold office for the terms
specified;
2. The ratification or rejection of the selection of PricewaterhouseCoopers LLP
as independent auditors of the Fund for the fiscal year ending December 31,
2000;
3. The approval or rejection of a shareholder proposal to request that the Board
of Directors consider approving, and submitting for shareholder approval, a
proposal to convert the Fund from a closed-end fund to an open-end fund; and
4. The transaction of any other business that may properly come before the
Meeting.
By order of the Board of Directors,
Barbara J. Green
SECRETARY
July 19, 2000
MANY SHAREHOLDERS HOLD SHARES 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. JAPANESE SHAREHOLDERS SHOULD BE AWARE THAT JAPAN SECURITIES CLEARING
CORPORATION MAY EXERCISE A VOTE ON PROPOSALS 1, 2 AND 4 ON YOUR BEHALF IF YOU
DO NOT RETURN A PROXY CARD.
<PAGE>
TEMPLETON DRAGON FUND, INC.
PROXY STATEMENT
- INFORMATION ABOUT VOTING
WHO IS ELIGIBLE TO VOTE?
Shareholders of record at the close of business on Thursday, June 1, 2000 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
mailed to shareholders of record on or about July 19, 2000.
ON WHAT ISSUES AM I BEING ASKED TO VOTE?
You are being asked to vote on four proposals:
1. The election of four nominees to the position of Director;
2. The ratification or rejection of the selection of PricewaterhouseCoopers
LLP as independent auditors of the Fund for the fiscal year ending
December 31, 2000;
3. The approval or rejection of a shareholder proposal to request that the
Board of Directors consider approving, and submitting for shareholder
approval, a proposal to convert the Fund from a closed-end fund to an
open-end fund; and
4. The transaction of any other business that may properly come before the
Meeting.
HOW DO THE FUND'S DIRECTORS RECOMMEND THAT I VOTE?
The Directors unanimously recommend that you vote:
1. FOR the election of the four nominees;
2. FOR the ratification of the selection of PricewaterhouseCoopers LLP as
independent auditors of the Fund;
3. AGAINST the shareholder proposal that the Board of Directors consider
approving, and submitting for shareholder approval, a proposal to convert
the Fund from a closed-end fund to an open-end fund; and
4. FOR the proxyholders to have discretion to vote on any other business
that may properly come before the Meeting.
1
<PAGE>
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 indicated. If you
simply sign and date the proxy card, but don't specify a vote for any of the
Proposals 1 through 4, your shares will be voted IN FAVOR of the nominees for
Director (Proposal 1), IN FAVOR of ratifying the selection of
PricewaterhouseCoopers LLP as independent auditors (Proposal 2), AGAINST the
shareholder proposal that the Board of Directors consider approving, and
submitting for shareholder approval, a proposal to convert the Fund from a
closed-end fund to an open-end fund (Proposal 3), and/or IN ACCORDANCE with
the discretion of the persons named in the proxy card as to any other matters
that may properly come before the Meeting (Proposal 4).
CAN 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 at or
prior to the Meeting, or by attending the Meeting and voting in person.
- THE PROPOSALS
PROPOSAL 1: ELECTION OF DIRECTORS
HOW ARE NOMINEES SELECTED?
The Board of Directors of the Fund (the "Board") has a Nominating and
Compensation Committee (the "Committee") consisting of Andrew H. Hines, Jr.,
Edith E. Holiday and Gordon S. Macklin, all of whom are independent
directors. The Committee is responsible for the selection and nomination for
appointment 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.
2
<PAGE>
WHO ARE THE NOMINEES AND DIRECTORS?
The Board is divided into three classes, each class having a term of three
years. Each year the term of office of one class expires. This year, the
terms of four Directors are expiring. John Wm. Galbraith, Betty P. Krahmer,
Gordon S. Macklin and Fred R. Millsaps have been nominated for three-year
terms, set to expire at the 2003 Annual Meeting of Shareholders. These terms
continue, however, until successors are duly elected and qualified. 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 funds/registered trademark/ and/or Templeton funds/registered
trademark/ (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 19%
and 16%, 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, the Chairman of the Board and Vice
President of the Fund, and Rupert H. Johnson, Jr., Vice President of the
Fund. There are no family relationships among any of the Directors or
nominees for Director.
Each nominee is currently available and has consented to serve if elected. If
any of the nominees should become unavailable, the persons named in the proxy
card will vote in their discretion for another person or persons who may be
nominated as Directors.
3
<PAGE>
Listed below, for each nominee and Director, is a brief description of recent
professional experience, and ownership of shares of the Fund and shares of
the Franklin Templeton funds.
<TABLE>
<CAPTION>
SHARES
FUND SHARES BENEFICIALLY
BENEFICIALLY OWNED IN
OWNED FRANKLIN
AND % OF TOTAL TEMPLETON
OUTSTANDING FUNDS (INCLUDING
NAME, PRINCIPAL OCCUPATION SHARES AS OF THE FUND) AS OF
DURING PAST FIVE YEARS AND AGE JUNE 30, 2000 JUNE 30, 2000
-------------------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
NOMINEES TO SERVE UNTIL 2003 ANNUAL MEETING OF SHAREHOLDERS:
JOHN WM. GALBRAITH 28,105(**) 3,198,310
DIRECTOR SINCE 1995
President, Galbraith Properties, Inc. (personal investment
company); Director Emeritus, Gulf West Banks, Inc. (bank
holding company) (1995-present); director or trustee, as the
case may be, of 18 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Director, Mercantile
Bank (1991-1995), Vice Chairman, Templeton, Galbraith &
Hansberger Ltd. (1986-1992), and Chairman, Templeton Funds
Management, Inc. (1974-1991). Age 78.
BETTY P. KRAHMER 9,000(***) 141,995
DIRECTOR SINCE 1994
Director or trustee of various civic associations; director or
trustee, as the case may be, of 19 of the investment companies
in Franklin Templeton Investments; and FORMERLY, Economic
Analyst, U.S. government. Age 70.
GORDON S. MACKLIN 2,000(**) 301,534
DIRECTOR SINCE 1994
Director, Martek Biosciences Corporation, WorldCom, Inc.
(communications services), MedImmune, Inc. (biotechnology),
Overstock.com (internet services), White Mountains Insurance
Group, Ltd. (holding company) and Spacehab, Inc. (aerospace
services); director or trustee, as the case may be, of 48 of the
investment companies in Franklin Templeton Investments; 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). Age 72.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SHARES
FUND SHARES BENEFICIALLY
BENEFICIALLY OWNED IN
OWNED FRANKLIN
AND % OF TOTAL TEMPLETON
OUTSTANDING FUNDS (INCLUDING
NAME, PRINCIPAL OCCUPATION SHARES AS OF THE FUND) AS OF
DURING PAST FIVE YEARS AND AGE JUNE 30, 2000 JUNE 30, 2000
-------------------------------------------------------------------- ---------------- -----------------
<S> <C> <C>
FRED R. MILLSAPS 0 1,846,295
DIRECTOR SINCE 1994
Manager of personal investments (1978-present); director of various business
and nonprofit organizations; director or trustee, as the case may be, of 20
of the investment companies in Franklin Templeton Investments; 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). Age 71.
DIRECTORS SERVING UNTIL 2002 ANNUAL MEETING OF SHAREHOLDERS:
HARRIS J. ASHTON 500(**) 508,050
DIRECTOR SINCE 1994
Director, RBC Holdings, Inc. (bank holding company) and
Bar-S Foods (meat packing company); director or trustee, as
the case may be, of 48 of the investment companies in Franklin
Templeton Investments; and FORMERLY, President, Chief
Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers) (until 1998). Age 68.
NICHOLAS F. BRADY* 1,000(**) 60,602
DIRECTOR SINCE 1994
Chairman, Templeton Emerging Markets Investment Trust
PLC, Templeton Latin America Investment Trust PLC, Darby
Overseas Investments, Ltd. and Darby Emerging Markets
Investments LDC (investment firms) (1994-present); Director,
Templeton Global Strategy Funds, Amerada Hess Corporation
(exploration and refining of oil and gas), C2, Inc. (operating
and investment business), and H.J. Heinz Company (processed
foods and allied products); director or trustee, as the case may
be, of 19 of the investment companies in Franklin Templeton
Investments; 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). Age 70.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
SHARES
FUND SHARES BENEFICIALLY
BENEFICIALLY OWNED IN
OWNED FRANKLIN
AND % OF TOTAL TEMPLETON
OUTSTANDING FUNDS (INCLUDING
NAME, PRINCIPAL OCCUPATION SHARES AS OF THE FUND) AS OF
DURING PAST FIVE YEARS AND AGE JUNE 30, 2000 JUNE 30, 2000
--------------------------------------------------------------------- ---------------- -----------------
<S> <C> <C>
FRANK J. CROTHERS 0 7,994
DIRECTOR SINCE 1998
Chairman, Caribbean Electric Utility Services Corporation and
Atlantic Equipment & Power Ltd.; Vice Chairman, Caribbean
Utilities Co., Ltd.; President, Provo Power Corporation;
director of various other business and non-profit organizations;
and director or trustee, as the case may be, of 12 of the
investment companies in Franklin Templeton Investments.
Age 56.
S. JOSEPH FORTUNATO 100(**) 644,201
DIRECTOR SINCE 1994
Member of the law firm of Pitney, Hardin, Kipp & Szuch; and
director or trustee, as the case may be, of 50 of the investment
companies in Franklin Templeton Investments. Age 67.
CONSTANTINE D. TSERETOPOULOS 0 68,645
DIRECTOR SINCE 1998
Physician, Lyford Cay Hospital (1987-present); director of
various nonprofit organizations; director or trustee, as the case
may be, of 12 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Cardiology Fellow,
University of Maryland (1985-1987) and Internal Medicine
Intern, Greater Baltimore Medical Center (1982-1985). Age 46.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SHARES
FUND SHARES BENEFICIALLY
BENEFICIALLY OWNED IN
OWNED FRANKLIN
AND % OF TOTAL TEMPLETON
OUTSTANDING FUNDS (INCLUDING
NAME, PRINCIPAL OCCUPATION SHARES AS OF THE FUND) AS OF
DURING PAST FIVE YEARS AND AGE JUNE 30, 2000 JUNE 30, 2000
-------------------------------------------------------------------- ---------------- -----------------
<S> <C> <C>
DIRECTORS SERVING UNTIL 2001 ANNUAL MEETING OF SHAREHOLDERS:
MARTIN L. FLANAGAN* 1,345(**) 13,203
DIRECTOR AND VICE PRESIDENT SINCE 1994
President, Member--Office of the President, Chief Financial
Officer and Chief Operating Officer, Franklin Resources, Inc.;
Executive Vice President and Director, Franklin/Templeton
Investor Services, Inc.; President and Chief Financial Officer,
Franklin Mutual Advisers, LLC; Executive Vice President,
Chief Financial Officer and Director, Templeton Worldwide,
Inc.; Executive Vice President, Chief Operating Officer and
Director, Templeton Investment Counsel, Inc.; Executive Vice
President, Franklin Advisers, Inc. and Franklin Investment
Advisory Services, Inc.; Chief Financial Officer, Franklin
Advisory Services, LLC; Chairman and Director, Franklin
Templeton Services, Inc.; officer and/or director of some of the
other subsidiaries of Franklin Resources, Inc.; and officer
and/or director or trustee, as the case may be, of 52 of the
investment companies in Franklin Templeton Investments.
Age 40.
ANDREW H. HINES, JR. 0 58,443
DIRECTOR SINCE 1994
Consultant, Triangle Consulting Group; Executive-in-Residence,
Eckerd College (1991-present); director or trustee, as the case may be, of 20
of the investment companies in Franklin Templeton Investments; 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. Age 77.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SHARES
FUND SHARES BENEFICIALLY
BENEFICIALLY OWNED IN
OWNED FRANKLIN
AND % OF TOTAL TEMPLETON
OUTSTANDING FUNDS (INCLUDING
NAME, PRINCIPAL OCCUPATION SHARES AS OF THE FUND) AS OF
DURING PAST FIVE YEARS AND AGE JUNE 30, 2000 JUNE 30, 2000
----------------------------------------------------------------------- ---------------- -----------------
<S> <C> <C>
EDITH E. HOLIDAY 100(**) 18,195
DIRECTOR SINCE 1996
Director, Amerada Hess Corporation (exploration and refining of oil and gas)
(1993-present), Hercules Incorporated (chemicals, fibers and resins)
(1993-present), Beverly Enterprises, Inc. (health care) (1995-present), H.J.
Heinz Company (processed foods and allied products) (1994-present) and RTI
International Metals, Inc. (manufacture and distribution of titanium) (July
1999-present); director or trustee, as the case may be, of 26 of the
investment companies in Franklin Templeton Investments; 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). Age 48.
CHARLES B. JOHNSON* 14,604(**) 22,617,159
CHAIRMAN SINCE 1995 AND VICE PRESIDENT SINCE 1994
Chairman of the Board, Chief Executive Officer, Member--
Office of the Chairman and Director, Franklin Resources, Inc.;
Chairman of the Board and Director, Franklin Investment
Advisory Services, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Franklin/Templeton Investor
Services, Inc. and Franklin Templeton Services, Inc.; officer
and/or director or trustee, as the case may be, of most of the
other subsidiaries of Franklin Resources, Inc. and of 49 of the
investment companies in Franklin Templeton Investments. Age
67.
</TABLE>
------------------------
* Nicholas F. Brady, Martin L. Flanagan, and Charles B. Johnson are
"interested persons" as defined by the Investment Company Act of 1940, as
amended (the "1940 Act"). The 1940 Act limits the percentage of interested
persons that can comprise a fund's board of directors. Mr. Johnson is an
interested person due to his ownership interest in Resources, his
employment affiliation with Resources and his position with the Fund. Mr.
Flanagan is an interested person due to his employment affiliation with
Resources 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 Emerging Markets Investments
LDC, 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. The remaining nominees and
Directors of the Fund are not interested persons (the "Independent
Directors").
** Less than 1%.
*** Less than 1%. Of the shares indicated, Mrs. Krahmer beneficially owns
1,000 shares for her own account. Of the remainder, beneficial ownership
may be attributable to Mrs. Krahmer by virtue of her husband's ownership of
4,000 shares through a retirement account, and the ownership of 4,000
shares held in trust for the benefit of Mrs. Krahmer's children for which
her husband serves as trustee.
8
<PAGE>
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 $400 per Board meeting attended.
Directors serving on the Audit Committee of the Fund and other investment
companies 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 compensated for any committee meeting
held on the day of a Board meeting.
During the fiscal year ended December 31, 1999, there were five meetings of
the Board, four meetings of the Audit Committee, and five meetings of the
Nominating and Compensation Committee. Each of the Directors attended at
least 75% of the total number of meetings of the Board and the total number
of meetings held by all committees of the Board on which the Director served.
There was 100% attendance at the meetings of the Audit Committee and the
Nominating and Compensation Committee.
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 the 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.
9
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE NUMBER OF BOARDS WITHIN
COMPENSATION FRANKLIN TEMPLETON FUNDS TOTAL COMPENSATION FROM
NAME OF DIRECTOR FROM THE FUND* ON WHICH DIRECTOR SERVES** FRANKLIN TEMPLETON FUNDS***
-------------------------------- ---------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Harris J. Ashton $4,000 48 $363,165
Nicholas F. Brady 4,000 19 138,700
Frank J. Crothers 4,181 12 72,400
S. Joseph Fortunato 4,000 50 363,238
John Wm. Galbraith 4,101 18 144,200
Andrew H. Hines, Jr. 4,095 20 203,700
Edith E. Holiday 4,000 26 237,265
Betty P. Krahmer 4,000 19 138,700
Gordon S. Macklin 4,000 48 363,165
Fred R. Millsaps 4,087 20 201,700
Constantine D. Tseretopoulos 4,086 12 70,400
</TABLE>
------------------------
* Compensation received for the fiscal year ended December 31, 1999.
** 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 52 registered investment companies, with approximately
157 U.S. based funds or series.
*** For the calendar year ended December 31, 1999.
The table above indicates the total fees paid to Directors by the Fund
individually and by all of the Franklin Templeton funds. These Directors also
serve as directors or trustees of other investment companies in Franklin
Templeton Investments, 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 Franklin Templeton funds
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 Franklin Templeton funds, 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 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 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 such policy, a board member's
fund holdings existing on February 27, 1998, are valued as of such date with
subsequent investments valued at cost.
10
<PAGE>
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, is a brief
description of recent professional experience:
<TABLE>
<CAPTION>
NAME AND OFFICES PRINCIPAL OCCUPATION
WITH THE FUND DURING PAST FIVE YEARS AND AGE
----------------------------- ----------------------------------------------------------------
<S> <C>
CHARLES B. JOHNSON See Proposal 1, "Election of Directors."
CHAIRMAN SINCE 1995 AND
VICE PRESIDENT SINCE 1994
J. MARK MOBIUS Portfolio Manager of various Templeton advisory affiliates;
PRESIDENT SINCE 1994 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; 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). Age 63.
RUPERT H. JOHNSON, JR. Vice Chairman, Member--Office of the Chairman and
VICE PRESIDENT SINCE 1996 Director, Franklin Resources, Inc.; Executive Vice President
and Director, Franklin Templeton Distributors, Inc.; Director,
Franklin Advisers, Inc., Franklin Investment Advisory
Services, Inc. and Franklin/Templeton Investor 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 52
of the investment companies in Franklin Templeton
Investments. Age 59.
HARMON E. BURNS Vice Chairman, Member--Office of the Chairman and
VICE PRESIDENT SINCE 1996 Director, Franklin Resources, Inc.; Executive Vice President
and Director, Franklin Templeton Distributors, Inc.;
Executive Vice President, Franklin Advisers, Inc.; Director,
Franklin Investment Advisory Services, Inc., Franklin/
Templeton Investor Services, Inc. and Franklin Templeton
Services, Inc.; and officer and/or director or trustee, as the
case may be, of most of the other subsidiaries of Franklin
Resources, Inc. and of 52 of the investment companies in
Franklin Templeton Investments. Age 55.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NAME AND OFFICES PRINCIPAL OCCUPATION
WITH THE FUND DURING PAST FIVE YEARS AND AGE
------------------------------ ----------------------------------------------------------------
<S> <C>
CHARLES E. JOHNSON President, Member--Office of the President and Director,
VICE PRESIDENT SINCE 1996 Franklin Resources, Inc.; Senior Vice President, Franklin
Templeton Distributors, Inc.; President and Director,
Templeton Worldwide, Inc. and Franklin Advisers, Inc.;
Director, Templeton Investment Counsel, Inc.; President,
Franklin Investment Advisory Services, Inc.; officer and/or
director of some of the other subsidiaries of Franklin
Resources, Inc.; and officer and/or director or trustee, as the
case may be, of 33 of the investment companies in Franklin
Templeton Investments. Age 44.
MARK G. HOLOWESKO President, Templeton Global Advisors Limited; Chief
VICE PRESIDENT SINCE 1994 Investment Officer, Global Equity Group; Executive Vice
President and Director, Templeton Worldwide, Inc.; officer of
19 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Investment Administrator,
RoyWest Trust Corporation (Bahamas) Limited (1984-1985).
Age 40.
MARTIN L. FLANAGAN See Proposal 1, "Election of Directors."
VICE PRESIDENT AND DIRECTOR
SINCE 1994
SAMUEL J. FORESTER, JR. Managing Director, Templeton Worldwide, Inc.; Vice
VICE PRESIDENT SINCE 1994 President and Director, Templeton Global Income Portfolio
Ltd.; Director, Closed Joint-Stock Company Templeton and
Templeton Trust Services Pvt. Ltd.; officer of 10 of the
investment companies in Franklin Templeton Investments;
and FORMERLY, President, Templeton Global Bond Managers, a
division of Templeton Investment Counsel, Inc., Founder and
Partner, Forester, Hairston Investment Management, Inc.
(1989-1990), Managing Director (Mid-East Region), Merrill
Lynch, Pierce, Fenner & Smith Inc. (1987-1988), and Advisor
for Saudi Arabian Monetary Agency (1982-1987). Age 52.
JOHN R. KAY Vice President, Templeton Worldwide, Inc.; Assistant Vice
VICE PRESIDENT SINCE 1994 President, Franklin Templeton Distributors, Inc.; officer of 24
of the investment companies in Franklin Templeton
Investments; and FORMERLY, Vice President and Controller,
Keystone Group, Inc. Age 59.
MURRAY L. SIMPSON Executive Vice President and General Counsel, Franklin
VICE PRESIDENT AND Resources, Inc.; officer and/or director of some of the
ASSISTANT SECRETARY subsidiaries of Franklin Resources, Inc.; officer of 53 of the
SINCE FEBRUARY 2000 investment companies in Franklin Templeton Investments;
and FORMERLY, Chief Executive Officer and Managing Director,
Templeton Franklin Investment Services (Asia) Limited (until
January 2000) and Director, Templeton Asset Management
Ltd. (until 1999). Age 63.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NAME AND OFFICES PRINCIPAL OCCUPATION
WITH THE FUND DURING PAST FIVE YEARS AND AGE
----------------------------- ----------------------------------------------------------------
<S> <C>
BARBARA J. GREEN Vice President and Deputy General Counsel, Franklin
VICE PRESIDENT SINCE Resources, Inc.; Senior Vice President, Templeton Worldwide,
FEBRUARY 2000 AND Inc. and Templeton Global Investors, Inc.; officer of some of
SECRETARY SINCE 1996 the other subsidiaries of Franklin Resources, Inc. and 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).
Age 52.
DAVID P. GOSS Counsel, Franklin Resources, Inc.; President, Chief Executive
VICE PRESIDENT AND Officer and Director, Franklin Select Realty Trust, Property
ASSISTANT SECRETARY Resources, Inc., Property Resources Equity Trust; Franklin
SINCE FEBRUARY 2000 Real Estate Management, Inc. and Franklin Properties, Inc.;
officer and 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,
Franklin Real Estate Income Fund and Franklin
Advantage Real Estate Income Fund (until 1996).
Age 53.
ELIZABETH M. KNOBLOCK General Counsel, Secretary and Senior Vice President,
VICE PRESIDENT-COMPLIANCE Templeton Investment Counsel, Inc.; Senior Vice President,
SINCE 1996 Templeton Global Investors, Inc.; officer of other subsidiaries
of Franklin Resources, Inc. and of 23 of the investment
companies in Franklin Templeton Investments; and FORMERLY,
Vice President and Associate General Counsel, Kidder
Peabody & Co. Inc. (1989-1990), Assistant General Counsel,
Gruntal & Co., Inc. (1988), Vice President and Associate
General Counsel, Shearson Lehman Hutton Inc. (1988), Vice
President and Assistant General Counsel, E.F. Hutton & Co.
Inc. (1986-1988), and Special Counsel, Division of Investment
Management, U.S. Securities and Exchange Commission
(1984-1986). Age 45.
JAMES R. BAIO Certified Public Accountant; Senior Vice President,
TREASURER SINCE 1994 Templeton Worldwide, Inc., Templeton Global Investors, Inc.
and FTTrust Company; officer of 20 of the
investment companies in Franklin Templeton
Investments; and FORMERLY, Senior Tax Manager,
Ernst & Young (certified public accountants)
(1977-1989). Age 46.
</TABLE>
13
<PAGE>
PROPOSAL 2: RATIFICATION OR REJECTION OF INDEPENDENT AUDITORS
HOW ARE INDEPENDENT AUDITORS SELECTED?
The Board has a standing Audit Committee consisting of Messrs. Galbraith,
Hines and Millsaps, all of whom are Independent Directors. 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.
WHICH INDEPENDENT AUDITORS DID THE BOARD SELECT?
Upon the recommendation of the Audit Committee, the Board selected the firm
of PricewaterhouseCoopers LLP, 333 Market Street, San Francisco, CA 94105, as
auditors of the Fund for the current fiscal year. PricewaterhouseCoopers LLP
has examined and reported on the fiscal year-end financial statements, dated
December 31, 1999, and certain related U.S. Securities and Exchange
Commission filings. You are being asked to ratify the Board's selection of
PricewaterhouseCoopers LLP for the current fiscal year. Services to be
performed by the auditors include examining and reporting on the fiscal
year-end financial statements of the Fund and certain related filings with
the U.S. Securities and Exchange Commission.
McGladrey & Pullen, LLP resigned as auditors of the Fund on August 13, 1999.
McGladrey & Pullen, LLP served as the Fund's auditors from the Fund's
inception through the fiscal year ended December 31, 1998. There have not
been any disputes or disagreements with McGladrey & Pullen, LLP on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedures, nor have McGladrey & Pullen, LLP's reports on
the financial statements for the last two years contained an adverse opinion
or a disclaimer of opinion, or been qualified or modified as to uncertainty,
audit scope, or accounting principles. H&R Block, a public company, acquired
certain assets of McGladrey & Pullen, LLP on August 2, 1999. Following its
acquisition by a public company, McGladrey & Pullen, LLP elected to not
continue servicing clients in the mutual fund business. As a result, the
partners and professional staff who were previously responsible for auditing
the Fund's financial statements became associated with PricewaterhouseCoopers
LLP. The selection of PricewaterhouseCoopers LLP as auditors of the Fund for
the fiscal year ended December 31, 1999 was recommended by the Audit
Committee and approved by the Board on July 21, 1999. The selection was then
ratified by the Fund's shareholders at the 1999 Annual Meeting of
Shareholders.
14
<PAGE>
Neither the firm of PricewaterhouseCoopers LLP nor any of its members have
any material direct or indirect financial interest in the Fund.
Representatives of PricewaterhouseCoopers LLP 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.
PROPOSAL 3: SHAREHOLDER PROPOSAL THAT THE BOARD CONSIDER APPROVING, AND
SUBMITTING FOR SHAREHOLDER APPROVAL, A PROPOSAL TO CONVERT THE
FUND FROM A CLOSED-END FUND TO AN OPEN-END FUND
WHAT IS BEING CONSIDERED UNDER THIS ITEM?
At the Meeting, a shareholder of the Fund will ask you to vote on his
proposal that the Board consider approving, and submitting for approval at a
future shareholder meeting, a proposal to convert the Fund from a closed-end
fund to an open-end fund. THE DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE
AGAINST THIS PROPOSAL.
THE DIRECTORS BELIEVE THAT THE FUND'S INVESTMENT OBJECTIVE IS MOST LIKELY TO
BE REALIZED IN A CLOSED-END STRUCTURE. A CLOSED-END FUND CAN KEEP ITS ASSETS
INVESTED TOWARD MEETING ITS GOALS. BECAUSE AN OPEN-END FUND IS REQUIRED TO
REDEEM ITS SHARES AT ANY TIME, IT MUST KEEP ON HAND CASH OR SECURITIES THAT
CAN BE READILY SOLD TO RAISE CASH. THE DIRECTORS CONTINUE TO BELIEVE THAT THE
BEST WAY FOR THE FUND TO PURSUE LONG-TERM CAPITAL APPRECIATION IS TO CONTINUE
TO FOLLOW THE INVESTMENT MANAGER'S INVESTMENT APPROACH: TO INVEST IN THE
CHINA REGION ON A COMPANY-BY-COMPANY BASIS AND HOLD THESE INVESTMENTS FOR A
SUFFICIENTLY LONG PERIOD OF TIME TO ALLOW THEM TO APPRECIATE IN VALUE. THE
INVESTMENT MANAGER'S INVESTMENT PHILOSOPHY AND THE LESS-LIQUID NATURE OF THE
CHINESE SECURITIES MARKET LED TO THE ORIGINAL ORGANIZATION OF THE FUND AS A
CLOSED-END FUND. THE BOARD AND MANAGEMENT CONTINUE TO BELIEVE THAT THE
CLOSED-END STRUCTURE REMAINS THE BEST STRUCTURE FOR THE FUND.
FURTHER, THE DIRECTORS BELIEVE THAT THE SUPPOSED BENEFIT OF OPEN-ENDING THE
FUND--AN IMMEDIATE GAIN TO SHAREHOLDERS WHO REDEEM THEIR FUND SHARES--WOULD
HAVE NEGATIVE CONSEQUENCES FOR THOSE WHO REMAIN SHAREHOLDERS OF THE FUND.
WHAT ARE THE DIFFERENCES BETWEEN A CLOSED-END FUND AND AN OPEN-END FUND?
Closed-end funds are not obliged to redeem their shares and, typically, do
not engage in the continuous sale of new shares. Closed-end funds thus
operate with a relatively fixed
15
<PAGE>
capitalization. The stock of closed-end funds ordinarily is traded on a
securities exchange. In fact, the Fund's shares since inception have been
traded on the NYSE and are also listed on the Osaka Securities Exchange.
In contrast, open-end funds, commonly referred to as "mutual funds," issue
redeemable shares. The holders of redeemable shares have the right to
surrender their shares to the mutual fund at any time and obtain in return
the net asset value of the shares (less any redemption fee charged by the
fund or contingent deferred sales charge imposed by the fund's distributor).
The cash outflows from redemptions eventually would drain the investment
capital from a fund. Most mutual funds seek to offset this by raising new
capital from the sale of new shares to investors on a continuous basis.
However, given the uncertainties arising out of this process, a mutual fund
is likely to experience more volatility in the size of its asset base than is
normally the case for closed-end funds.
WHAT IS THE SHAREHOLDER PROPOSAL?
The Fund has been informed by Mr. Morris Scheffler, 59 Flower Road, Valley
Stream, NY 11581, a shareholder who claims beneficial ownership of
approximately 1,213 shares of the Fund as of March 30, 2000, that Mr.
Scheffler expects to present the following proposal:
RESOLVED, that the Stockholders of the Fund assembled in annual meeting,
in person and by proxy, hereby request that the Board of Directors take
the steps necessary to convert the Fund to an open-end fund.
Mr. Scheffler has requested that the following statement be included in the
proxy statement in support of his proposal:
REASONS: The Fund has consistently sold at a discount from net asset
value. As of the N.Y. Times, Sunday, March 19, 2000 the net asset value
of the Fund was $12.53, the market price was $8.87 representing a
discount of 29.13%.
By converting to an open-end fund the net asset value of the Fund would
be the market price thus realizing actual value for the Stockholders.
16
<PAGE>
WHAT IS THE RECOMMENDATION OF THE DIRECTORS?
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THIS
PROPOSAL.
WHY DO THE DIRECTORS UNANIMOUSLY RECOMMEND A VOTE AGAINST THIS PROPOSAL?
The Directors recommend a vote AGAINST the shareholder proposal for the
following reasons, which are discussed in more detail below:
/bullet/ CHANGING THE FUND'S STRUCTURE WOULD REQUIRE A MAJOR CHANGE IN THE
FUND'S INVESTMENT STRATEGY THAT WOULD NOT BE IN THE BEST INTERESTS
OF THE FUND AND ITS SHAREHOLDERS;
/bullet/ MARKET AND ECONOMIC CONDITIONS IN CHINA AND HONG KONG MAKE
CONVERTING TO AN OPEN-END FUND INAPPROPRIATE AT THIS TIME;
/bullet/ THE LEVEL OF THE FUND'S DISCOUNT TO NET ASSET VALUE AND PERFORMANCE
HAVE BEEN IN THE SAME RANGE AS THOSE OF COMPARABLE CLOSED-END FUNDS;
/bullet/ THE FUND'S EXPENSES ARE LIKELY TO INCREASE IF THE FUND IS CONVERTED
TO AN OPEN-END FUND;
/bullet/ SIGNIFICANT TAX CONSEQUENCES FOR THE FUND AND ITS SHAREHOLDERS
LIKELY WOULD RESULT FROM CONVERSION TO AN OPEN-END FUND;
/bullet/ THE FUND WOULD LOSE ITS LISTING ON THE NYSE IF IT CONVERTED TO AN
OPEN-END FUND; AND
/bullet/ FUND SHAREHOLDERS WOULD LOSE THE CURRENT ABILITY TO REINVEST
DIVIDENDS AND DISTRIBUTIONS AT FAVORABLE RATES UNDER CERTAIN
CIRCUMSTANCES.
17
<PAGE>
1. CONVERSION TO AN OPEN-END FUND WOULD REQUIRE CHANGES TO THE FUND'S
PORTFOLIO STRUCTURE AND INVESTMENT STRATEGY THAT ARE NOT IN THE BEST
INTERESTS OF THE FUND AND ITS SHAREHOLDERS.
The Fund was originally established as a closed-end fund because of its
investment objective: seeking long-term appreciation by investing in China
Companies.1 The long-term nature of the Fund's investment program was
described in the Fund's prospectus dated September 21, 1994. Presumably, most
shareholders have invested in Fund shares because of this program.2
The Investment Manager's approach to investing the Fund's assets is to
purchase shares of companies that are perceived to have potential to benefit
from the anticipated growth and opening of the Chinese markets and from
continuing economic integration in Asia. Realizing the full benefit of these
investments is a long-term process, and the Fund has been in existence for
fewer than six years.
The closed-end structure facilitates the Investment Manager's ability to
invest the Fund's assets in accordance with the Fund's long-term investment
objective. As a closed-end fund, the Fund can keep all of its assets working
toward its investment goals. This gives the Investment Manager the
flexibility to invest in less liquid securities that present attractive
long-term opportunities. Converting the Fund to an open-end fund would
require the Fund to focus on short-term considerations to anticipate and
facilitate redemptions. Of course, setting aside a portion of the Fund's
assets to redeem shares reduces the asset base that can be deployed to
realize the Fund's primary goals. In addition, if the Fund is converted to an
open-end fund, the Investment Manager may be forced to sell portfolio
securities before their full potential has been reached in order to raise
cash to meet redemptions as they arise. This short-term focus would be
disruptive to the Fund's "buy and hold" investment program and, therefore, is
not, in management's judgment, in the best interests of the Fund and its
shareholders. On the other hand, as a closed-end fund, the Fund does not have
to maintain cash reserves or sell off investments to meet redemption requests
and is protected from the necessity of selling its investments at a time when
market prices are temporarily depressed.
------------------------
1 China Companies are defined in the Fund's prospectus as equity securities
of companies (i) organized under the laws of, or with a principal office
in, the People's Republic of China ("China" or the "PRC") or Hong Kong, or
the principal business activities of which are conducted in China or Hong
Kong, or for which the principal equity securities trading market is in
China or Hong Kong, and (ii) that derive at least 50% of their revenues
from goods or services sold or produced, or have at least 50% of their
assets, in China or Hong Kong.
2 In this regard, it is worthy of note that a proposal submitted by a
shareholder at the 1998 Annual Meeting of Shareholders to convert the Fund
from a closed-end fund to an open-end fund only garnered the support of
14.22% of the Fund's then outstanding shares, which was less than a
majority of the shares voting.
18
<PAGE>
2. SIGNIFICANT MARKET DEVELOPMENTS AND ECONOMIC CONDITIONS IN CHINA AND
HONG KONG MAKE CONVERTING TO AN OPEN-END FUND PARTICULARLY INAPPROPRIATE
AT THIS TIME.
As described more fully in the Fund's prospectus, investing in emerging
markets like China involves risks arising out of market and currency
volatility, unexpected economic, social, and political developments, and the
relatively small size and lesser liquidity of the markets involved. In China
and Hong Kong, recent political and economic events have created
uncertainties and increased volatility in the securities markets. For
example, United States-China relations, China-Taiwan relations, the political
and economic future of China, including its agreement with the U.S.
concerning membership in the World Trade Organization and its recent trade
pact with the European Union, the incorporation of Hong Kong into China, and
the recent upheavals in certain Asian economies and securities markets, are
all significant factors that create an unpredictable and volatile marketplace
and increase market volatility for Chinese securities. In addition, foreign
investors in securities listed on Chinese exchanges are restricted to buying
"B" shares, which may only be owned by foreign investors and are less liquid
than might otherwise be the case. The Directors have considered these factors
in deciding how to address the discount and the Board continues to believe
that the Fund's closed-end structure is particularly well suited to investing
in the China region.
3. THE BOARD OF DIRECTORS HAS TAKEN ACTION TO ADDRESS THE FUND'S DISCOUNT TO
NET ASSET VALUE AND THE BOARD REGULARLY CONSIDERS WHETHER FURTHER MEASURES
ARE FEASIBLE AND IN THE FUND'S BEST INTEREST.
Although the Board believes that the Fund benefits from its structure as a
closed-end fund, the Directors understand that many shareholders are
concerned about the discount to net asset value at which Fund shares trade.
In this regard, the Board has implemented a managed distribution policy and
also adopted an open-market share repurchase program, which was recently
expanded.
OPEN-MARKET SHARE REPURCHASE PROGRAM. In October 1997, the Board adopted an
open-market share repurchase program to help reduce the Fund's discount.
Under the share repurchase program adopted in 1997, the Fund was authorized
to repurchase, from time to time, up to a maximum of 5.4 million shares of
the Fund's common stock in open-market transactions, at the discretion of
management (approximately 10% of the shares outstanding at the time the
program was initially implemented). At the time the share repurchase program
was adopted, the Fund's discount was approximately 20.33%. The Board adopted
the share repurchase program because it believed that this program would
benefit the Fund
19
<PAGE>
and its shareholders. In December 1999, the Board of Directors authorized
management to extend the Fund's share repurchase program to also permit share
repurchases on the Osaka Securities Exchange, and most recently, in May 2000,
the Board of Directors approved the expansion of the share repurchase program
by removing the 10% limitation on share repurchases in order to give
management greater flexibility to engage in an aggressive share repurchase
program in further efforts to address the Fund's discount to net asset value.
As of June 30, 2000, the Fund has repurchased 2,810,700 shares.
MANAGED DISTRIBUTION POLICY. In July 1998, the Board of Directors approved
the implementation of a managed distribution policy under which approximately
10% of the Fund's average net asset value would be distributed to Fund
shareholders on an annual basis. Under this distribution policy, the Fund
makes quarterly distributions to Fund shareholders equal to 2.5% of the
Fund's net asset value at the close of the NYSE on the Friday prior to each
distribution's declaration date. If the total amount distributed exceeds the
Fund's aggregate net investment income and net realized capital gains with
respect to a given year, the excess amount distributed generally will
constitute a return of capital to shareholders. The Fund was granted an order
from the Securities and Exchange Commission on February 9, 1999 that permits
the Fund to use realized capital gains when making the quarterly
distributions, which began under this policy on September 15, 1998. The Board
believes that the managed distribution policy benefits shareholders by
providing a regular payout from the Fund while still preserving for the Fund
the benefits of its closed-end structure. In addition, there is evidence
indicating that, over the long-term, funds with managed distribution policies
enjoy a more favorable market price in relation to net asset value than do
comparable funds without a managed distribution policy.
The Fund's Directors regularly review whether the Fund is managed and
operated in a manner consistent with the best interests of the Fund and its
shareholders. This review includes periodic consideration of measures to
reduce the discount, such as the possibility of tender offers or conversion
of the Fund into an open-end fund. The Board has not adopted these or any of
the other measures considered to date because the Board believes that those
measures, unlike the share repurchase program and the managed distribution
policy, would have a negative impact on the Fund's portfolio management,
expense ratio and shareholders.
20
<PAGE>
4. THE LEVEL OF THE FUND'S DISCOUNT TO NET ASSET VALUE AND PERFORMANCE IS
IN THE SAME RANGE AS THAT OF COMPARABLE CLOSED-END FUNDS.(3)
Although the Fund's shares have generally traded at a discount since the
fourth calendar quarter of 1994, the Fund is trading at a discount comparable
to other closed-end funds investing in the China region. As of June 30, 2000,
among U.S. registered closed-end funds that primarily invest in China,
discounts ranged from -25.8% to -29.3%. The Fund's discount as of that date
was -25.8%. Since the Fund's inception, the premium/discount from net asset
value has ranged from a low of -34.5% on April 14, 2000 to a high of +6.7% on
September 23, 1994. The average weekly discount to net asset value from
inception to June 30, 2000 was -17.95%.
Since inception, the net asset value per share has ranged from a low of $7.99
on September 4, 1998 to a high of $22.06 on August 8, 1997, with an average
weekly net asset value per share of $14.12. The market value per share from
inception has ranged from a low of $5.75 on September 4, 1998 to a high of
$17.50 on August 15, 1997, with an average weekly market value of $11.60.
5. THE FUND'S EXPENSES ARE LIKELY TO INCREASE IF THE FUND IS CONVERTED TO
AN OPEN-END FUND.
Shareholders who desire to sell their Fund shares today can do so on the
NYSE. If the Fund, however, were to adopt an open-end format, shareholders
could only sell their shares through redemption. If the Fund were to
experience substantial redemptions, as a much smaller fund, it might have a
higher expense ratio. In order to protect against this possibility, the Fund
would be required to engage in a continuous public offering intended at a
minimum to offset redemptions. This, in turn, would subject the Fund to
further expenses and a corresponding reduction in the Fund's return to
shareholders. For example, in order to market the Fund's shares effectively,
it would be necessary for the Fund to conform generally to sales practices of
competing dealer-sold funds. For this reason, the Directors would likely
recommend that shareholders approve the adoption of a distribution plan in
accordance with Rule 12b-1 under the 1940 Act. Currently, Rule 12b-1 fees for
the open-end investment companies in the Franklin Templeton funds range from
an annual rate of 0.25% to 1.0% of a fund's average net assets.
------------------------
3 Premium/discount information provided by Lipper/registered trademark/,
Inc., June, 2000.
21
<PAGE>
Legal, accounting and registration costs would be incurred by the Fund to
convert to an open-end fund. The Investment Manager estimates that these
conversion costs would be approximately $835,000. Furthermore, a continuous
public offering would require the Fund to maintain, on an ongoing basis, a
current registration under federal securities laws, which involves additional
costs. The Fund would also incur printing costs and other expenses in
connection with maintaining a current prospectus. If the continuous offering
were not successful in raising substantial new assets for the Fund, and
redemptions were significantly more than new sales, the Fund's expense ratio
likely would increase from its current level, as fixed costs would be paid
out of a smaller asset base.
6. SIGNIFICANT TAX CONSEQUENCES FOR THE FUND AND ITS SHAREHOLDERS MAY
RESULT FROM CONVERSION TO AN OPEN-END FUND.
If the Fund were to convert to an open-end structure, the need to sell
portfolio securities to meet redemption requests may have adverse tax
consequences to shareholders remaining in the Fund. In the event of a very
large amount of redemptions, the Fund might be required to sell appreciated
securities to meet redemption requests, and capital and/or ordinary gains
might be generated. This would increase the amount of taxable distributions
to remaining shareholders and net realized capital gains would be allocated
among a smaller base of remaining shareholders. This would have two negative
consequences. First, remaining shareholders would recognize and pay taxes on
a greater amount of capital gain than would otherwise be the case. Secondly,
the Fund may need to sell additional portfolio securities to fund the
required distribution of realized capital gains, thereby further reducing the
size of the Fund and possibly causing the realization of additional net
capital gains.
If, on the other hand, the Fund were required to sell depreciated securities
to meet redemption requests, the Fund would incur a loss, which might
otherwise have been avoided had the Fund been able to retain the securities
pending realization of their investment potential. Moreover, losses realized
on the sale of a security generally reduce amounts distributable to
shareholders. In either event, if the Fund were required to dispose of a
significant amount of its assets to satisfy very large redemption requests,
it may be unable to satisfy certain diversification requirements applicable
for tax purposes.
7. THE FUND WOULD LOSE ITS LISTING ON THE NYSE IF IT IS CONVERTED TO AN
OPEN-END FUND.
If the Fund converts to an open-end fund, its shares would be delisted from
the NYSE. The Investment Manager has advised the Board that the loss of the
NYSE listing could be disadvantageous for the Fund because some investors,
particularly foreign investors and
22
<PAGE>
certain institutional investors (such as pension funds that are subject to
restrictions on the amount of their portfolio that can be invested in
non-listed securities), are believed to consider a listing on the NYSE to be
an important factor in their decision to buy or retain shares of the Fund.
Delisting would save the Fund the annual NYSE fees of approximately $48,000,
but as an open-end company, the Fund would pay federal and state registration
and notification fees on sales of new shares, which could offset or even
exceed that savings.
8. FUND SHAREHOLDERS WOULD LOSE THE CURRENT ABILITY TO REINVEST DIVIDENDS
AND DISTRIBUTIONS AT FAVORABLE RATES UNDER CERTAIN CIRCUMSTANCES.
Shareholders of the Fund currently have the option of participating in the
Fund's Dividend Reinvestment and Cash Purchase Plan. This Plan permits
shareholders to elect to reinvest their dividends and distributions on a
different basis than would be the case if the Fund converted to an open-end
structure. When shares of the Fund are trading at a discount from net asset
value, cash distributions paid by the Fund are generally reinvested through
the purchase of additional shares at market prices. There is no direct charge
to shareholders for reinvesting dividends and capital gains distributions,
since the Plan Agent's fees are paid by the Fund. In addition, shareholders
may make voluntary cash payments of at least $100 each, up to a total of
$5,000 per month, to purchase additional shares of the Fund at market prices
through the Plan. There is a $5.00 service charge from each voluntary cash
payment. Whenever shares are purchased on the NYSE or otherwise on the
open-market, each participant pays a pro rata portion of trading fees.
Trading fees for purchasing shares through the Plan are expected to be less
than the usual brokerage charges for individual transactions, because the
Plan Agent purchases shares for all participants in blocks, which should
result in lower trading fees for each individual participant. Thus, the Plan
permits a participating shareholder to benefit by purchasing additional
shares at a discount, and this buying activity may tend to lessen any
discount. At times when the Fund's shares are trading at a premium over their
net asset value, the Fund will issue new shares at the higher of net asset
value or 95% of the then current market price. There are no trading fees for
shares issued directly by the Fund. In contrast, as an open-end fund, all
dividends and distributions would be reinvested at net asset value.
WHAT ADDITIONAL MEASURES WOULD NEED TO BE TAKEN IN CONNECTION WITH CONVERSION
TO AN OPEN-END FUND?
If the shareholder proposal is approved by shareholders, the Directors would,
consistent with Maryland law, consider adopting a resolution declaring it
advisable to approve and present to shareholders a proposed amendment to the
Fund's Articles of Incorporation to
23
<PAGE>
convert the Fund to an open-end investment company. After consideration of
all the surrounding circumstances, however, the Board may continue to hold
its view that the Fund's best interests are served by the Fund continuing as
a closed-end fund, and may therefore determine to take no further action to
convert the Fund to an open-end investment company.
In the event that shareholders vote, at a future meeting, to convert the Fund
from a closed-end fund to an open-end fund, a number of additional actions
would need to be taken not only to effect the conversion of the Fund to an
open-end investment company, but also to allow the Fund to operate
effectively as an open-end investment company. These actions would include
amending the Fund's Articles of Incorporation and reviewing carefully the
investment objective and policies of the Fund to ensure that they conform to
investment objectives and policies applicable to open-end investment
companies.
The Directors also would consider the adoption of a distribution agreement
and a distribution plan. In the event the Directors approve a distribution
plan for the Fund, shareholder approval for the plan also would be required.
The Investment Manager would likely recommend that Franklin Templeton
Distributors, Inc., an affiliate of the Investment Manager and principal
underwriter for the Franklin Templeton open-end funds, serve as principal
underwriter for the shares of the Fund.
If the Directors believe that immediately following a conversion to open-end
status there would likely be significant redemptions of shares that would
disrupt long-term portfolio management of the Fund and dilute the interests
of the remaining shareholders, the Directors may determine to impose a
temporary redemption fee. Imposition of a redemption fee may deter certain
redemptions and would compensate remaining long-term shareholders for the
costs of the liquidation of a significant percentage of the Fund's portfolio.
The Fund would notify shareholders in writing before the imposition of any
temporary redemption fee.
The Directors also would consider whether the Fund should reserve the right
to meet redemptions by delivering portfolio securities rather than paying
redemption proceeds in cash.
THE DIRECTORS BELIEVE THAT THE CONTINUED OPERATION OF THE FUND AS A
CLOSED-END FUND IS IN YOUR BEST LONG-TERM INTEREST, AND UNANIMOUSLY RECOMMEND
A VOTE AGAINST THIS PROPOSAL.
24
<PAGE>
PROPOSAL 4: OTHER BUSINESS
The Directors know of no other business to be presented at the Meeting.
However, if any additional matters should be properly presented, proxies will
be voted or not voted as specified. Proxies reflecting no specification will
be voted in accordance with the judgment of the persons named in the proxy.
Because the Fund did not have notice of any such matters before June 29,
2000, the persons named as proxies may exercise their discretionary voting
power with respect to any matter presented at the Meeting.
- INFORMATION ABOUT THE FUND
THE INVESTMENT 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, Inc. ("FT Services") with offices at 777 Mariners Island Boulevard,
San Mateo, California 94404. FT Services is an indirect, wholly owned
subsidiary of Resources. Pursuant to an administration agreement, FT Services
performs certain administrative functions for the Fund. In addition, FT
Services has entered into a Japanese shareholder servicing and administration
agreement with Nomura Asset Management U.S.A. Inc. ("NAM-USA"), formerly
Nomura Capital Management, Inc., under which NAM-USA performs certain
administrative functions in Japan, subject to FT Services' supervision.
NAM-USA is an affiliate of Nomura International (Hong Kong) Limited, an
initial underwriter of the Fund's shares. NAM-USA has offices at 180 Maiden
Lane, 26th Floor, New York, New York 10038.
THE TRANSFER AGENT. The transfer agent, registrar and dividend
disbursement agent for the Fund is ChaseMellon Shareholder Services,
L.L.C., 85 Challenger Road, Overpeck Centre, Ridgefield Park, New Jersey
07660.
THE CUSTODIAN. The custodian for the Fund is The Chase Manhattan Bank,
MetroTech Center, Brooklyn, New York 11245.
OTHER MATTERS. The Fund's last audited financial statements and annual
report, dated December 31, 1999, are available free of charge. To obtain a
copy, please call 1-800/DIAL BEN/registered trademark/ or forward a written
request to Franklin/Templeton Investor Services, Inc., P.O. Box 33030, St.
Petersburg, Florida 33733-8030.
25
<PAGE>
As of June 1, 2000, the Fund had 52,859,893 shares outstanding and total net
assets of $583,346,143. The Fund's shares are listed on the NYSE (Symbol:
TDF) and on the Osaka Securities Exchange (Symbol: 8683). 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 June 1, 2000,
there were no other entities holding beneficially or of record more than 5%
of the Fund's outstanding shares, except as shown in the following table:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OUTSTANDING SHARES
-------------------------------------- ------------------------- -------------------
<S> <C> <C>
FMR Corp. 3,226,500(1) 6.103%(2)
Edward C. Johnson, 3rd
Abigail P. Johnson
82 Devonshire Street
Boston, MA 02109
</TABLE>
------------------------
1 The nature of beneficial ownership is sole dispositive power as reported
on Schedule 13G filed with the U. S. Securities and Exchange Commission on
February 14, 2000.
2 As reported on Schedule 13G dated and filed with the SEC on February 14,
2000.
In addition, to the knowledge of the Fund's management, as of June 1, 2000,
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.
- FURTHER INFORMATION ABOUT VOTING AND
THE SHAREHOLDERS' MEETING
SOLICITATION OF PROXIES. Your vote is being solicited by the Board of
Directors of the Fund. 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 Shareholder Communications Corporation to solicit proxies from
brokers, banks, other institutional holders and individual shareholders at an
anticipated cost, including out-of-pocket expenses, ranging between $42,000
to $98,750. The Fund expects that the solicitation would 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 Shareholder Communications Corporation 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.
26
<PAGE>
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, as well as the Japan Securities Clearing Corporation ("JSCC")
holding shares of the Fund for its beneficial owners, 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' or JSCC's proxy solicitation materials, the Fund understands that NYSE
Rules permit the broker-dealers and JSCC to vote on Proposals 1, 2 and 4 on
behalf of their customers and beneficial owners. With regard to Proposals 1,
2 and 4, 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 and JSCC 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 are all 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, ratification of the
selection of the independent auditors, requires the affirmative vote of a
majority of the Fund's shares present and voting on the Proposal at the
Meeting. Proposal 3, the shareholder proposal that the Board of Directors
consider approving, and submitting for shareholder approval, a proposal to
convert the Fund from a closed-end fund to an open-end fund, requires the
affirmative vote of a majority of the Fund's shares present and voting on the
Proposal at the Meeting. Proposal 4, for the proxyholders to have discretion
to vote on any other business that may properly come before the Meeting or
any adjournments thereof, requires the affirmative vote of a majority of the
Fund's shares present and voting on the Proposal at the Meeting. Abstentions
and broker non-votes will be treated as votes not cast and, therefore, will
not be counted for purposes of obtaining approval of each Proposal.
ADJOURNMENT. In the event that a quorum is not present at the Meeting, the
Meeting will be adjourned to permit further solicitation of proxies. In the
event that a quorum is present, but sufficient votes have not been received
to approve one or more of the Proposals, the
27
<PAGE>
persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies with respect to those Proposals.
The persons named as proxies will vote in their discretion on questions of
adjournment those shares for which proxies have been received that grant
discretionary authority to vote on matters that may properly come before the
Meeting.
SHAREHOLDER PROPOSALS. The Fund anticipates that its next annual meeting will
be held in August 2001. Shareholder proposals to be presented at the next
annual meeting must be received at the Fund's offices, 500 East Broward
Boulevard, Ft. Lauderdale, Florida 33394-3091, Attn: Secretary, no later than
March 21, 2001 in order to be included in the Fund's proxy statement and
proxy card relating to that meeting and presented at the meeting. Submission
of a proposal by a shareholder does not guarantee that the proposal will be
included in the proxy statement. A shareholder who wishes to make a proposal
at the 2001 Annual Meeting of Shareholders without including the proposal in
the Fund's proxy statement should notify the Fund, at the Fund's offices, of
such proposal by June 4, 2001. If a shareholder fails to give notice by this
date, then the persons named as proxies in the proxies solicited by the Board
for the 2001 Annual Meeting of Shareholders may exercise discretionary voting
power with respect to any such proposal.
By order of the Board of Directors,
Barbara J. Green
SECRETARY
July 19, 2000
28
<PAGE>
TLTDF PROXY 7/00
<PAGE>
TEMPLETON DRAGON FUND, INC.
ANNUAL MEETING OF SHAREHOLDERS - AUGUST 28, 2000
The undersigned hereby revokes all previous proxies for his/her shares and
appoints BARBARA J. GREEN, SAMUEL J. FORESTER, JR. and BRUCE S. ROSENBERG, and
each of them, proxies of the undersigned with full power of substitution to vote
all shares of Templeton Dragon Fund, Inc. (the" Fund") that the undersigned is
entitled to vote at the Fund's Annual Meeting to be held at 500 East Broward
Blvd., 12th Floor, Ft. Lauderdale, Florida at 2:00 p.m., Eastern time, on the
28th day of August 2000, including any adjournments thereof, upon matters set
forth below.
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 DIRECTORS) AND 2, AGAINST PROPOSAL 3, AND WITHIN
THE DISCRETION OF THE PROXYHOLDERS AS TO ANY OTHER MATTER PURSUANT TO PROPOSAL
4.
(CONTINUED, AND TO BE SIGNED ON THE OTHER SIDE)
FOLD AND DETACH HERE
<PAGE>
Please mark your ballot as
indicated in this example [ ]
<TABLE>
<S> <C> <C>
Proposal 1 - Election of Directors.
FOR all nominees WITHHOLD Nominees: JOHN WM. GALBRAITH, BETTY P. KRAHMER,
listed (except as AUTHORITY GORDON S. MACKLIN AND FRED R. MILLSAPS
marked to the right) to vote for all
nominees listed
[ ] [ ] To withhold authority to vote for any individual
nominee, write that nominee's name on the line
below.
------------------------------------------------------------
</TABLE>
Proposal 2 - Ratification of the selection of PricewaterhouseCoopers LLP as
independent auditors for the Fund for the fiscal year ending December 31, 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST PROPOSAL 3.
Proposal 3 - To request that the Board of Directors consider approving, and
submitting for shareholder approval, a proposal to convert the Fund from a
closed-end fund to an open-end fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Proposal 4 - In their discretion, the Proxyholders are authorized to vote upon
such other matters that may properly come before the Meeting or any adjournments
thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I PLAN TO ATTEND THE MEETING. YES NO
[ ] [ ]
SIGNATURE(S): DATED , 2000
--------------------------------------------- -------
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
