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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section.240-14a-11(c) or
Section.240-14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
FRANKLIN UNIVERSAL TRUST
(Name of Registrant as Specified in its Charter)
FRANKLIN UNIVERSAL TRUST
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary material.
[ ] 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:
FRANKLIN UNIVERSAL TRUST
IMPORTANT SHAREHOLDER INFORMATION
We have enclosed important information about your Fund's Annual Shareholders'
Meeting scheduled for Thursday, February 16, 2006, at 2:00 p.m., Pacific time.
These materials discuss the proposal (the "Proposal") to be voted on at the
meeting, and contain the Notice of Meeting, 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 Franklin Universal Trust (the
"Fund"). If you complete, sign and return the proxy card, we'll vote it as you
indicated. If you simply sign, date and return the proxy card, but do not
specify a vote on the Proposal, your proxy will be voted FOR the Proposal.
WE URGE YOU TO SPEND A FEW MINUTES REVIEWING THE PROPOSAL IN THE PROXY
STATEMENT. THEN, PLEASE FILL OUT AND SIGN THE PROXY CARD AND RETURN IT TO US SO
THAT WE KNOW HOW YOU WOULD LIKE TO VOTE. WHEN SHAREHOLDERS RETURN THEIR PROXIES
PROMPTLY, THE FUND MAY BE ABLE TO SAVE MONEY BY NOT HAVING TO CONDUCT ADDITIONAL
MAILINGS. RETURNING YOUR PROXY CARD DOES NOT PRECLUDE YOU FROM ATTENDING THE
MEETING OR LATER CHANGING YOUR VOTE PRIOR TO ITS BEING CAST.
WE WELCOME YOUR COMMENTS. IF YOU HAVE ANY QUESTIONS, CALL FUND INFORMATION AT
1-800/DIAL BEN(R) (1-800/342-5236).
TELEPHONE AND INTERNET VOTING
FOR YOUR CONVENIENCE, YOU MAY BE ABLE TO VOTE BY TELEPHONE OR THROUGH THE
INTERNET, 24 HOURS A DAY. IF YOUR ACCOUNT IS ELIGIBLE, SEPARATE INSTRUCTIONS ARE
ENCLOSED.
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FRANKLIN UNIVERSAL TRUST
NOTICE OF 2006 ANNUAL SHAREHOLDERS' MEETING
The Annual Shareholders' Meeting (the "Meeting") of Franklin Universal Trust
(the "Fund") will be held at the Fund's offices, One Franklin Parkway, San
Mateo, California 94403, on Thursday, February 16, 2006, at 2:00 p.m., Pacific
time.
During the Meeting, shareholders of the Fund will vote on the following
proposals:
o The election of a Board of Trustees of the Fund.
o Such other matters as may properly come before the Meeting.
The Board of Trustees has fixed December 16, 2005, as the record date for the
determination of shareholders entitled to vote at the Meeting.
By Order of the Board of Trustees,
Steven J. Gray
SECRETARY
San Mateo, California
Dated: January 12, 2006
PLEASE SIGN AND PROMPTLY RETURN YOUR PROXY CARD IN THE SELF-ADDRESSED ENVELOPE
(OR RETURN YOUR PROXY BY TELEPHONE OR THROUGH THE INTERNET, IF YOU ARE ELIGIBLE
TO DO SO) REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
This page intentionally left blank.
FRANKLIN UNIVERSAL TRUST
PROXY STATEMENT
o INFORMATION ABOUT VOTING
WHO IS ASKING FOR MY VOTE?
The Trustees of Franklin Universal Trust (the "Fund"), in connection with the
Fund's Annual Meeting of Shareholders (the "Meeting"), have requested your
vote.
WHO IS ELIGIBLE TO VOTE?
Shareholders of record at the close of business on December 16, 2005, are
entitled to be present and to vote at the Meeting or any adjourned Meeting.
Each share of record is entitled to one vote (and a proportionate fractional
vote for each fractional share) on each matter presented at the Meeting. The
Notice of Meeting, the proxy card, and the proxy statement were first mailed
to shareholders of record on or about January 12, 2006.
ON WHAT ISSUE AM I BEING ASKED TO VOTE?
You are being asked to vote on one Proposal:
o The election of ten nominees to the position of Trustee.
HOW DO THE FUND'S TRUSTEES RECOMMEND THAT I VOTE?
The Trustees unanimously recommend that you vote FOR the election of the ten
nominees as Trustees.
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, 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 the Proposal,
your proxy will be voted as you indicate. If you simply sign, date and return
the proxy card, but don't specify a vote on the Proposal, your shares will be
voted FOR the election of the ten nominees for Trustee.
MAY I REVOKE MY PROXY?
You may revoke your proxy at any time before it is voted by forwarding a
written revocation or a later-dated proxy to the Fund that is received by the
Fund at or prior to the Meeting, or by attending the Meeting and voting in
person.
WHAT IF MY SHARES ARE HELD IN A BROKERAGE ACCOUNT?
If your shares are held by your broker, then in order to vote in person at
the Meeting, you will need to obtain a "Legal Proxy" from your broker and
present it to the Inspector of Election at the Meeting.
o THE PROPOSAL: ELECTION OF TRUSTEES
HOW ARE NOMINEES SELECTED?
The Board of Trustees of the Fund (the "Board" or the "Trustees") has a
Nominating Committee consisting of Harris J. Ashton, Robert F. Carlson,
S. Joseph Fortunato, Edith E. Holiday, Frank W.T. LaHaye, Gordon S.
Macklin, Chairman, and Frank A. Olson, none of whom is an "interested
person" of the Fund as defined by the Investment Company Act of 1940, as
amended (the "1940 Act"). Trustees who are not interested persons of the
Fund are referred to as "Independent Trustees," and Trustees who are
interested persons of the Fund are referred to as "Interested Trustees."
The Nominating Committee is responsible for selecting candidates to serve as
Trustees and recommending such candidates (a) for selection and nomination as
Independent Trustees by the incumbent Independent Trustees and the full
Board; and (b) for selection and nomination as Interested Trustees by the
full Board. In considering a candidate's qualifications, the Nominating
Committee generally considers the potential candidate's educational
background, business or professional experience, and reputation. In addition,
the Nominating Committee has established as minimum qualifications for Board
membership as an Independent Trustee (1) that such candidate be independent
from relationships with the Fund's investment manager and other principal
service providers both within the terms and the spirit of the statutory
independence requirements specified under the 1940 Act and the rules
thereunder, (2) that such candidate demonstrate an ability and willingness to
make the considerable time commitment, including personal attendance at Board
meetings, believed necessary to his or her function as an effective Board
member, and (3) that such candidate have no continuing relationship as a
director, officer or board member of any investment company other than those
within the Franklin Templeton Investments fund complex.
When the Board has or expects to have a vacancy, the Nominating Committee
receives and reviews information on individuals qualified to be recommended
to the full Board as nominees for election as Trustees, including any
recommendations by "Qualifying Fund Shareholders" (as defined below). Such
individuals are evaluated based upon the criteria described above. To date,
the Nominating Committee has been able to identify, and expects to continue
to be able to identify, from its own resources an ample number of qualified
candidates. The Nominating Committee will, however, review recommendations
from Qualifying Fund Shareholders to fill vacancies on the Board if these
recommendations are submitted in writing and addressed to the Nominating
Committee at the Fund's offices and are presented with appropriate background
material concerning the candidate that demonstrates his or her ability to
serve as a Trustee, including as an Independent Trustee, of the Fund. A
Qualifying Fund Shareholder is a shareholder who (i) has continuously owned
of record, or beneficially through a financial intermediary, shares of the
Fund having a net asset value of not less than two hundred and fifty thousand
dollars ($250,000) during the twenty-four month period prior to submitting
the recommendation; and (ii) provides a written notice to the Nominating
Committee containing the following information: (a) the name and address of
the Qualifying Fund Shareholder making the recommendation; (b) the number of
shares of the Fund which are owned of record and beneficially by such
Qualifying Fund Shareholder and the length of time that such shares have been
so owned by the Qualifying Fund Shareholder; (c) a description of all
arrangements and understandings between such Qualifying Fund Shareholder and
any other person or persons (naming such person or persons) pursuant to which
the recommendation is being made; (d) the name, age, date of birth, business
address and residence address of the person or persons being recommended; (e)
such other information regarding each person recommended by such Qualifying
Fund Shareholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the U.S. Securities and Exchange
Commission ("SEC") had the nominee been nominated by the Board; (f) whether
the shareholder making the recommendation believes the person recommended
would or would not be an "interested person" of the Fund, as defined in the
1940 Act; and (g) the written consent of each person recommended to serve as
a Trustee of the Fund if so nominated and elected/appointed.
The Nominating Committee may amend these procedures from time to time,
including the procedures relating to the evaluation of nominees and the
process for submitting recommendations to the Nominating Committee.
The Board has adopted and approved a formal written charter for the
Nominating Committee. A copy of the charter was attached as "Appendix A" to
the proxy statement for the Fund's 2005 Annual Shareholders' Meeting.
WHO ARE THE NOMINEES?
Harris J. Ashton, Robert F. Carlson, S. Joseph Fortunato, Edith E.
Holiday, Edward B. Jamieson, Charles B. Johnson, Rupert H. Johnson, Jr.,
Frank W.T. LaHaye, Gordon S. Macklin, and Frank A. Olson have been
nominated to be Trustees of the Fund, to hold office until the next
Annual Shareholders' Meeting, and until their successors are duly elected
and qualified to serve. Among the nominees, Edward B. Jamieson, Charles
B. Johnson and Rupert H. Johnson, Jr. are deemed to be "interested
persons" of the Fund for purposes of the 1940 Act. All of the nominees are
currently members of the Board; however, Mr. Olson is standing for
election by shareholders of the Fund for the first time. An incumbent
Independent Trustee nominated Mr. Olson for consideration by the
Nominating Committee as nominee for Trustee. In addition, all of the
nominees are also directors and/or trustees of other investment companies
within the Franklin Templeton Investments fund complex.
Certain Trustees 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 owned approximately
17.52% and 14.87%, respectively, of its outstanding shares as of November
30, 2005. Resources, a global investment management organization
operating as Franklin Templeton Investments, is primarily engaged,
through its 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 B. Johnson,
Chairman of the Board and Trustee of the Fund, and Rupert H. Johnson,
Jr., Trustee and Senior Vice President of the Fund, are brothers.
Each nominee is currently available and has consented to serve if elected. If
any of the nominees should become unavailable, the designated proxy holders
will vote in their discretion for another person or persons who may be
nominated as Trustees.
Listed below, for each nominee, is his or her name, year of birth and
address, as well as position and length of service with the Fund, a brief
description of recent professional experience, the number of portfolios in
the Franklin Templeton Investments fund complex that he or she oversees, and
other directorships held.
NOMINEES FOR INDEPENDENT TRUSTEE
----------------------------------------------------------------
NUMBER OF
PORTFOLIOS
IN FUND
NAME, YEAR OF LENGTH COMPLEX OTHER
BIRTH AND OF TIME OVERSEEN DIRECTORSHIPS
ADDRESS POSITION SERVED BY TRUSTEE* HELD
----------------------------------------------------------------
Harris J. Trustee Since 140 Director, Bar-S
Ashton (1932) 1988 Foods (meat
One Franklin packing
Parkway company).
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc.
(bank holding company) (until 2002); and President, Chief Executive Officer
and Chairman of the Board, General Host Corporation (nursery and craft
centers) (until 1998).
----------------------------------------------------------------
Robert F. Trustee Since 56 None
Carlson (1928) 2000
One Franklin
Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, senior member and past President, Board of Administration,
California Public Employees Retirement Systems (CALPERS); and FORMERLY,
member and Chairman of the Board, Sutter Community Hospitals; member,
Corporate Board, Blue Shield of California; and Chief Counsel, California
Department of Transportation.
---------------------------------------------------------------
S. Joseph Trustee Since 141 None
Fortunato 1989
(1932)
One Franklin
Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney,
Hardin, Kipp & Szuch (until 2002) (Consultant (2003)).
---------------------------------------------------------------
Edith E. Trustee Since 136 Director,
Holiday (1952) 2004 Amerada Hess
One Franklin Corporation
Parkway (exploration
San Mateo, CA and refining
94403-1906 of oil and
gas), H.J.
Heinz Company
(processed
foods and
allied
products), RTI
International
Metals, Inc.
(manufacture
and
distribution
of titanium),
Canadian
National
Railway
(railroad),
and White
Mountains
Insurance
Group, Ltd.
(holding
company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; 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).
---------------------------------------------------------------
Frank W.T. Trustee Since 114 Director, The
LaHaye (1929) 1988 Creative Center
One Franklin for Land
Parkway Recycling
San Mateo, CA (brownfield
94403-1906 redevelopment).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and
FORMERLY, Chairman, Peregrine Venture Management Company
(venture capital).
---------------------------------------------------------------
Gordon S. Trustee Since 140 Director,
Macklin (1928) 1993 Martek
One Franklin Biosciences
Parkway Corporation,
San Mateo, CA MedImmune, Inc.
94403-1906 (biotechnology),
and
Overstock.com
(Internet
services); and
FORMERLY,
Director, MCI
Communication
Corporation
(subsequently
known as MCI
WorldCom, Inc.
and WorldCom,
Inc.)
(communications
services)
(1988-2002),
White Mountains
Insurance
Group, Ltd.
(holding
company)
(1987-2004) and
Spacehab, Inc.
(aerospace
services)
(1994-2003).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Deputy Chairman,
White Mountains Insurance Group, Ltd. (holding company)
(2001-2004); Chairman, White River Corporation (financial
services) (1993-1998) and Hambrecht & Quist Group (investment
banking) (1987-1992); and President, National Association of
Securities Dealers, Inc. (1970-1987).
-------------------------------------------------------------
Frank A. Olson Trustee Since 101 Director, White
(1932) June Mountains
One Franklin 2005 Insurance Group,
Parkway Ltd. (holding
San Mateo, CA company),
94403-1906 Amerada Hess
Corporation
(exploration and
refining of oil
and gas) and
Sentient Jet
(private jet
service); and
FORMERLY, Director,
Becton Dickinson
and Company
(medical technology),
Cooper Industries,
Inc. (electrical
products and tools
and hardware),
Health Net, Inc.
(formerly,
Foundation Health)
(integrated
managed care),
The Hertz
Corporation,
Pacific Southwest
Airlines, The RCA
Corporation,
Unicom (formerly,
Commonwealth
Edison) and UAL
Corporation
(airlines).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000)
(Chairman of the Board (1980-2000) and Chief Executive Officer (1977-1999));
and FORMERLY, Chairman of the Board, President and Chief Executive Officer,
UAL Corporation (airlines).
-------------------------------------------------------------
NOMINEES FOR INTERESTED TRUSTEE
----------------------------------------------------------------
NUMBER OF
PORTFOLIOS
IN FUND
NAME, YEAR OF LENGTH COMPLEX OTHER
BIRTH AND OF TIME OVERSEEN DIRECTORSHIPS
ADDRESS POSITION SERVED BY TRUSTEE* HELD
----------------------------------------------------------------
**Edward B. Trustee, Trustee 1 None
Jamieson President and
(1948) and Chief President
One Executive since 1993
Franklin Officer - and Chief
Parkway Investment Executive
San Mateo, Management Officer
CA -Investment
94403-1906 Management
since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Advisers, Inc.; and officer and/or
trustee, as the case may be, of other subsidiaries of Franklin
Resources, Inc. and of four of the investment companies in
Franklin Templeton Investments.
----------------------------------------------------------------
**Charles Trustee Trustee 140 None
B. Johnson and since 1988
(1933) Chairman and
One of the Chairman
Franklin Board of the
Parkway Board
San Mateo, since 1993
CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and
Director, Franklin Resources, Inc.; Vice President, Franklin
Templeton Distributors, Inc.; Director, Fiduciary Trust
Company International; and officer and/or director or trustee,
as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of 42 of the investment companies
in Franklin Templeton Investments.
---------------------------------------------------------------
**Rupert H. Trustee Trustee 124 None
Johnson, and Senior and Senior
Jr. (1940) Vice Vice
One President President
Franklin since 1988
Parkway
San Mateo,
CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director,
Franklin Resources, Inc.; Vice President and Director,
Franklin Templeton Distributors, Inc.; Director, Franklin
Advisers, Inc.; Senior Vice President, Franklin Advisory
Services, LLC; and officer and/or director or trustee, as the
case may be, of some of the other subsidiaries of Franklin
Resources, Inc. and of 45 of the investment companies in
Franklin Templeton Investments.
---------------------------------------------------------------
*We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment adviser or
affiliated investment advisers, and also may share a common underwriter.
**Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be
interested persons of the Trust under the federal securities laws due to
their positions as officers and directors and major shareholders of Franklin
Resources, Inc., which is the parent company of the Trust's adviser and
distributor. Edward B. Jamieson is considered to be an interested person of
the Trust under the federal securities laws due to his position as an
officer of Franklin Advisers, Inc., which is the Trust's adviser.
Board members historically have followed a policy of having substantial
investments in one or more of the funds in Franklin Templeton Investments, as
is consistent with their individual financial goals. In February 1998, this
policy was formalized through adoption of a requirement that each board
member invest one-third of 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 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, were valued as of
such date with subsequent investments valued at cost.
The following tables provide the dollar range of equity securities of the
Fund and of all funds overseen by the Trustees in the Franklin Templeton
Investments fund complex beneficially owned by the Trustees as of December
31, 2005.
INDEPENDENT TRUSTEES
--------------------------------------------------------------------
AGGREGATE DOLLAR
RANGE OF EQUITY
SECURITIES IN
ALL FUNDS
OVERSEEN BY THE
TRUSTEE IN THE
FRANKLIN
DOLLAR RANGE OF EQUITY TEMPLETON FUND
NAME OF TRUSTEE SECURITIES IN THE FUND COMPLEX
--------------------------------------------------------------------
Harris J. Ashton $1 - $10,000 Over $100,000
--------------------------------------------------------------------
Robert F. Carlson None Over $100,000
--------------------------------------------------------------------
S. Joseph Fortunato $10,001 - $50,000 Over $100,000
--------------------------------------------------------------------
Edith E. Holiday None Over $100,000
--------------------------------------------------------------------
Frank W.T. LaHaye $10,001 - $50,000 Over $100,000
--------------------------------------------------------------------
Gordon S. Macklin $10,001 - $50,000 Over $100,000
--------------------------------------------------------------------
Frank A. Olson None Over $100,000
--------------------------------------------------------------------
INTERESTED TRUSTEES
--------------------------------------------------------------------
AGGREGATE DOLLAR
RANGE OF EQUITY
SECURITIES IN
ALL FUNDS
OVERSEEN BY THE
TRUSTEE IN THE
FRANKLIN
DOLLAR RANGE OF EQUITY TEMPLETON FUND
NAME OF TRUSTEE SECURITIES IN THE FUND COMPLEX
--------------------------------------------------------------------
Edward B. Jamieson None Over $100,000
--------------------------------------------------------------------
Charles B. Johnson $1 - $10,000 Over $100,000
--------------------------------------------------------------------
Rupert H. Johnson, Jr. $1 - $10,000 Over $100,000
--------------------------------------------------------------------
HOW OFTEN DO THE TRUSTEES MEET AND WHAT ARE THEY PAID?
The role of the Trustees is to provide general oversight of the Fund's
business, and to ensure that the Fund is operated for the benefit of all
shareholders. The Trustees anticipate meeting at least 11 times during the
current fiscal year to review the operations of the Fund and the Fund's
investment performance. The Trustees also oversee the services furnished to
the Fund by Franklin Advisers, Inc., the Fund's investment manager (the
"Investment Manager"), and various other service providers. The Fund pays the
Independent Trustees $305 per quarter plus $100 per meeting attended,
effective as of April 1, 2005, and such fees are subject to reductions
resulting from fee caps. Also effective as of April 1, 2005, the Independent
Trustees are paid an additional flat fee of $5,000 as a general retainer, a
portion of which is allocated to the Fund. Board members who serve on the
Audit Committee of the Fund and other Franklin Templeton funds are paid a
flat fee of $2,000 per Audit Committee meeting attended on a day on which a
Board meeting is not held, a portion of which is allocated to the Fund.
Effective as of April 1, 2005, Mr. LaHaye, who serves as Chairman of the
Audit Committee of the Fund, as well as the Audit Committees of certain other
Franklin funds, receives an additional flat fee of $20,000 per year, a
portion of which is allocated to the Fund. Members of a committee are not
compensated for any committee meeting held on a day of a Board meeting.
During the fiscal year ended August 31, 2005, there were 11 meetings of the
Board, five meetings of the Nominating Committee, and five meetings of the
Audit Committee. Each of the Trustees, except Mr. Macklin, attended at least
75% of the aggregate 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
Trustee served.
The Fund does not currently have a formal policy regarding Trustees'
attendance at the annual shareholders' meeting. None of the Trustees attended
the Fund's last annual meeting held on February 16, 2005.
Certain Trustees and officers of the Fund are shareholders of Resources and
may receive indirect remuneration due to their participation in the
management fees and other fees received from the Franklin Templeton funds by
the Investment Manager and its affiliates. 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.
NUMBER OF
TOTAL BOARDS
COMPENSATION WITHIN
FROM FRANKLIN
FRANKLIN TEMPLETON
AGGREGATE TEMPLETON INVESTMENTS ON
COMPENSATION INVESTMENTS WHICH
FROM THE FUND EACH TRUSTEE
NAME OF TRUSTEE FUND* COMPLEX** SERVES***
-----------------------------------------------------------------
Harris J. Ashton $1,584 $404,038 42
Robert F. Carlson $4,152 $128,795 15
S. Joseph Fortunato $3,500 $406,036 43
Edith E. Holiday $2,060 $403,749 41
Frank W.T. LaHaye $3,579 $221,070 26
Gordon S. Macklin $1,509 $379,002 42
Frank A. Olson $ 409 $231,486 27
*For the fiscal year ended August 31, 2005.
**For the calendar year ended December 31, 2005.
***We base the number of boards on the number of U.S. registered investment
companies in the Franklin Templeton Investments fund complex. 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 U.S. registered investment companies, with
approximately 156 U.S. based funds or series.
The table above indicates the aggregate compensation paid to the Independent
Trustees by the Fund individually and by all of the funds in Franklin
Templeton Investments. These Trustees also serve as directors or trustees of
other funds in Franklin Templeton Investments, many of which hold meetings at
different dates and times. The Trustees and the Fund's management believe
that having the same individuals serving on the boards of many of the funds
in Franklin Templeton Investments enhances the ability of each fund to
obtain, at a relatively modest cost to each separate fund, the services of
high caliber, experienced and knowledgeable Independent Trustees who can more
effectively oversee the management of the funds.
WHO ARE THE EXECUTIVE OFFICERS OF THE FUND?
Officers of the Fund are appointed by the Trustees and serve at the pleasure
of the Board. Listed below, for each Executive Officer, are his or her name,
year of birth, address, a brief description of his or her recent professional
experience, and his or her position and length of service with the Fund:
----------------------------------------------------------
NAME, YEAR OF POSITION LENGTH OF TIME SERVED
BIRTH AND ADDRESS
----------------------------------------------------------
Edward B. Trustee, Trustee and
Jamieson (1948) President and President since 1993
One Franklin Chief Executive and Chief Executive
Parkway Officer - Officer -Investment
San Mateo, CA Investment Management since 2002
94403-1906 Management
Please refer to the table "Nominees for Interested
Trustee" for additional information about Mr. Edward B.
Jamieson.
----------------------------------------------------------
Charles B. Trustee and Trustee since 1988
Johnson (1933) Chairman of the and Chairman of the
One Franklin Board Board since 1993
Parkway
San Mateo, CA
94403-1906
Please refer to the table "Nominees for Interested
Trustee" for additional information about Mr. Charles B.
Johnson.
----------------------------------------------------------
Rupert H. Trustee and Trustee and Senior
Johnson, Jr. Senior Vice Vice President since
(1940) President 1988
One Franklin
Parkway
San Mateo, CA
94403-1906
Please refer to the table "Nominees for Interested
Trustee" for additional information about Mr. Rupert H.
Johnson, Jr.
----------------------------------------------------------
Harmon E. Burns Vice President Since 1988
(1945)
One Franklin
Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and
Director, Franklin Resources, Inc.; Vice President and
Director, Franklin Templeton Distributors, Inc.;
Executive Vice President, Franklin Advisers, Inc.; and
officer and/or director or trustee, as the case may be,
of some of the other subsidiaries of Franklin Resources,
Inc. and of 45 of the investment companies in Franklin
Templeton Investments.
----------------------------------------------------------
James M. Davis Chief Since 2004
(1952) Compliance
One Franklin Officer
Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.;
officer of 47 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Director of
Compliance, Franklin Resources, Inc. (1994-2001).
----------------------------------------------------------
Laura Fergerson Treasurer Since 2004
(1962)
One Franklin
Parkway
San Mateo,
CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 31
of the investment companies in Franklin Templeton Investments;
and FORMERLY, Director and member of Audit and
Valuation Committees, Runkel Funds, Inc. (2003-2004);
Assistant Treasurer of most of the investment companies in
Franklin Templeton Investments (1997-2003); and Vice President,
Franklin Templeton Services, LLC (1997-2003).
----------------------------------------------------------
Jimmy D. Gambill Senior Vice Since 2002
(1947) President and
500 East Broward Chief Executive
Blvd. Officer -
Suite 2100 Fort Finance and
Lauderdale, FL Administration
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior
Vice President, Templeton Worldwide, Inc.; and officer
of 47 of the investment companies in Franklin Templeton
Investments.
---------------------------------------------------------
David P. Goss Vice President Since 2000
(1947)
One Franklin
Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments;
officer and director of one of the subsidiaries of Franklin Resources,
Inc.; officer of 47 of the investment companies in Franklin Templeton
Investments; and FORMERLY, President, Chief Executive Officer
and Director, Property Resources Equity Trust (until 1999)
and Franklin Select Realty Trust (until 2000).
---------------------------------------------------------
Steven J. Gray Secretary Since October 2005
(1955)
One Franklin
Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer of
33 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Chief Legal Counsel, Atlas Advisers, Inc. (until 2000).
---------------------------------------------------------
Barbara J. Green Vice President Since 2000
(1947)
One Franklin
Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary,
Franklin Resources, Inc.; Secretary and Senior Vice
President, Templeton Worldwide, Inc.; Secretary,
Franklin Advisers, Inc., Franklin Advisory Services,
LLC, Franklin Investment Advisory Services, LLC,
Franklin Mutual Advisers, LLC, Franklin Templeton
Alternative Strategies, Inc., Franklin Templeton
Investor Services, LLC, Franklin Templeton Services,
LLC, Franklin Templeton Distributors, Inc., Templeton
Investment Counsel, LLC, and Templeton/Franklin
Investment Services, Inc.; and officer of some of the
other subsidiaries of Franklin Resources, Inc. and of
47 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).
---------------------------------------------------------
Craig S. Tyle Vice President Since October 2005
(1960)
One Franklin
Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin
Resources, Inc.; officer of 47 of the investment
companies in Franklin Templeton Investments; and
FORMERLY, Partner, Shearman & Sterling, LLP
(2004-2005); and General Counsel, Investment Company
Institute (ICI) (1997-2004).
---------------------------------------------------------
Galen G. Vetter Chief Since 2004
(1951) Financial
500 East Broward Officer and
Blvd. Chief
Suite 2100 Fort Accounting
Lauderdale, FL Officer
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer
of 47 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Managing Director, RSM McGladrey, Inc. (1999-2004);
and Partner, McGladrey & Pullen, LLP (1979-1987 and 1991-2004).
---------------------------------------------------------
o ADDITIONAL INFORMATION ABOUT THE FUND
THE INVESTMENT MANAGER. The Investment Manager is Franklin Advisers, Inc., a
California corporation, whose principal address is One Franklin Parkway, San
Mateo, CA 94403. The Investment Manager is a wholly-owned subsidiary of
Resources.
THE ADMINISTRATOR. The administrator of the Fund is Franklin Templeton
Services, LLC ("FT Services"), whose principal address is also One Franklin
Parkway, San Mateo, CA 94403. Under an agreement with Advisers, FT Services
performs certain administrative functions, such as portfolio recordkeeping,
for the Fund. FT Services is an indirect, wholly-owned subsidiary of
Resources.
THE TRANSFER AGENT. The transfer agent, registrar and dividend disbursement
agent for the Fund is PFPC Inc., 4400 Computer Drive, Westborough, MA 01850.
THE CUSTODIAN. Bank of New York, Mutual Funds Division, 90 Washington Street,
New York, NY 10286, acts as custodian of the Fund's securities and other
assets.
REPORTS TO SHAREHOLDERS AND FINANCIAL STATEMENTS. The Fund's last audited
financial statements and annual report for the fiscal year ended August 31,
2005, are available free of charge. To obtain a copy, please call 1-800/DIAL
BEN(R) (1-800/342-5236) or forward a written request to Franklin Templeton
Investor Services, LLC, P.O. Box 997151, Sacramento, CA 95899-9983.
PRINCIPAL SHAREHOLDERS. As of December 16, 2005, the Fund had 27,924,293.784
shares outstanding and total net assets of $195,449,519.60. The Fund's shares
are listed on the NYSE (symbol: FT). 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 December 16, 2005, 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:
--------------------------------------------------------------
AMOUNT AND
NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OUTSTANDING
BENEFICIAL OWNER OWNERSHIP SHARES
--------------------------------------------------------------
Financial & Investment 1,822,891/1 6.53/2
Management Group, Ltd.,
111 Cass Street, Traverse
City, MI 49684
--------------------------------------------------------------
1. The nature of beneficial ownership is shared voting and dispositive power
as reported on Schedule 13G, filed with the U.S. Securities and Exchange
Commission as of January 28, 2005.
2. As reported on Schedule 13G, filed with the U.S. Securities and Exchange
Commission as of January 28, 2005.
In addition, to the knowledge of the Fund's management, as of December 16,
2005, no Trustee of the Fund owned 1% or more of the outstanding shares of
the Fund, and the officers and Trustees of the Fund owned, as a group, less
than 1% of the outstanding shares of the Fund.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. U.S. securities law
require that the Fund's Trustees, officers and shareholders owning more than
10% of outstanding shares, as well as affiliated persons of its Investment
Manager, report their ownership of the Fund's shares and any changes in that
ownership. Specific due dates for these reports have been established and the
Fund is required to report in this proxy statement any failure to file by
these dates during the fiscal year ended August 31, 2005. All of the filing
dates of these reports were met. In making this disclosure, the Fund relied
upon the written representations of the persons affected and copies of their
relevant filings.
CONTACTING THE BOARD OF TRUSTEES. If a shareholder wishes to send a
communication to the Board, such correspondence should be in writing and
addressed to the Board of Trustees at the Fund's offices, One Franklin
Parkway, San Mateo, California 94403. The correspondence will then be given
to the Board for their review and consideration.
o AUDIT COMMITTEE
The Board has a standing Audit Committee currently consisting of Messrs.
LaHaye (Chairman), Fortunato, and Carlson, all of whom are Independent
Trustees and also are considered to be "independent" as that term is defined
by the NYSE's listing standards. The Fund's Audit Committee is responsible
for the appointment, compensation and retention of the Fund's independent
registered public accounting firm (auditors), including evaluating their
independence, recommending the selection of the Fund's auditors to the full
Board, and meeting with such auditors to consider and review matters relating
to the Fund's financial reports and internal accounting.
SELECTION OF AUDITORS. The Audit Committee and the Board have selected the
firm of PricewaterhouseCoopers LLP ("PwC") as auditors of the Fund for the
current fiscal year. Representatives of PwC are not expected to be present at
the Meeting, but will have the opportunity to make a statement if they wish,
and will be available should any matter arise requiring their presence.
AUDIT FEES. The aggregate fees paid to PwC for professional services rendered
by PwC for the audit of the Fund's annual financial statements or for
services that are normally provided by PwC in connection with statutory and
regulatory filings or engagements were $16,480 for the fiscal year ended
August 31, 2005, and $20,816 for the fiscal year ended August 31, 2004.
AUDIT-RELATED FEES. The aggregate fees paid to PwC for assurance and related
services rendered by PwC to the Fund that are reasonably related to the
performance of the audit or review of the Fund's financial statements and are
not reported under "Audit Fees" above were $16,000 for the fiscal year ended
August 31, 2005, and $12,500 for the fiscal year ended August 31, 2004. The
services for which these fees were paid included attestation services.
The aggregate fees paid to PwC for assurance and related services rendered by
PwC to the Investment Manager and any entity controlling, controlled by or
under common control with the Investment Manager that provides ongoing
services to the Fund that are reasonably related to the performance of the
audit of its financial statements were $0 for the fiscal year ended August
31, 2005, and $48,579 for the fiscal year ended August 31, 2004. The services
for which these fees were paid included attestation services.
TAX FEES. There were no fees paid to PwC for professional services rendered
by PwC to the Fund for tax compliance, tax advice and tax planning for fiscal
years ended August 31, 2005, and August 31, 2004.
The aggregate fees paid to PwC for professional services rendered by PwC to
the Investment Manager and any entity controlling, controlled by or under
common control with the Investment Manager that provides ongoing services to
the Fund for tax compliance, tax advice and tax planning were $19,591 for the
fiscal year ended August 31, 2005, and $0 for the fiscal year ended August
31, 2004. The services for which these fees were paid included tax compliance
and advice.
ALL OTHER FEES. The aggregate fees paid to PwC for products and services
rendered by PwC to the Fund not reported in previous paragraphs were $0 for
the fiscal year ended August 31, 2005, and $109 for the fiscal year ended
August 31, 2004. The services for which these fees were paid included review
of materials provided to the fund Board in connection with the investment
management contract renewal process.
The aggregate fees paid to PwC for products and services rendered by PwC to
the Investment Manager and any entity controlling, controlled by or under
common control with the Investment Manager that provides ongoing services to
the Fund not reported in previous paragraphs were $0 for the fiscal year
ended August 31, 2005, and $99,891 for the fiscal year ended August 31, 2004.
The services for which these fees were paid included review of materials
provided to the Fund's Board in connection with the investment management
contract renewal process.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES. As of the date of this
proxy statement, the Audit Committee has not adopted pre-approval policies
and procedures. As a result, all such services described above and provided
by PwC must be directly pre-approved by the Audit Committee.
AGGREGATE NON-AUDIT FEES. The aggregate fees paid to PwC for non-audit
services to the Fund, and to the Investment Manager and any entity
controlling, controlled by, or under common control with the Investment
Manager that provides ongoing services to the Fund, were $16,000 and $19,591,
respectively, for the fiscal year ended August 31, 2005, and $12,609 and
$148,470, respectively, for the fiscal year ended August 31, 2004.
AUDIT COMMITTEE REPORT. The Board has adopted and approved a revised formal
written charter for the Audit Committee, which sets forth the Audit
Committee's responsibilities. A copy of the charter is attached as "Appendix
A" to this proxy statement.
As required by the charter, the Audit Committee reviewed the Fund's audited
financial statements and met with management, as well as with PwC, the Fund's
auditors, to discuss the financial statements.
The Audit Committee received the written disclosures and the letter from PwC
required by Independence Standards Board Standard No. 1. The Audit Committee
also received the report of PwC regarding the results of their audit. In
connection with their review of the financial statements and the auditors'
report, the members of the Audit Committee discussed with a representative of
PwC, PwC's independence, as well as the following: the auditors'
responsibilities in accordance with generally accepted auditing standards;
the auditors' responsibilities for information prepared by management that
accompanies the Fund's audited financial statements and any procedures
performed and the results; the initial selection of, and whether there were
any changes in, significant accounting policies or their application;
management's judgments and accounting estimates; whether there were any
significant audit adjustments; whether there were any disagreements with
management; whether there was any consultation with other accountants;
whether there were any major issues discussed with management prior to the
auditors' retention; whether the auditors encountered any difficulties in
dealing with management in performing the audit; and the auditors' judgments
about the quality of the Fund's accounting principles.
Based on its review and discussions with management and the Fund's auditors,
the Audit Committee did not become aware of any material misstatements or
omissions in the financial statements.
Accordingly, the Audit Committee recommended to the Board that the audited
financial statements be included in the Fund's Annual Report to Shareholders
for the fiscal year ended August 31, 2005, for filing with the U.S.
Securities and Exchange Commission.
THE AUDIT COMMITTEE
Frank W.T. LaHaye (Chairman)
S. Joseph Fortunato
Robert F. Carlson
o FURTHER INFORMATION ABOUT VOTING AND THE MEETING
SOLICITATION OF PROXIES. Your vote is being solicited by the Trustees of the
Fund. The cost of soliciting these proxies will be 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. In addition, the Fund may retain a professional proxy solicitation
firm to assist with any necessary solicitation of proxies. The Fund expects
that the solicitation will be primarily by mail, but also may include
telephone, telecopy, electronic, oral, or other means of communication. If
the Fund does not receive your proxy by a certain time you may receive a
telephone call from a proxy soliciting agent asking you to vote. If
professional proxy solicitors are retained, it is expected that soliciting
fees would be approximately $5,000, plus expenses. The Fund does not
reimburse Trustees and officers of the Fund, or regular employees and agents
of the Investment Manager involved in the solicitation of proxies. The Fund
intends to pay all costs associated with the solicitation and the Meeting.
VOTING BY BROKER-DEALERS. The Fund expects that, before the Meeting,
broker-dealer firms holding shares of the Fund in "street name" for their
customers will request voting instructions from their customers and
beneficial owners. If these instructions are not received by the date
specified in the broker-dealer firms' proxy solicitation materials, the Fund
understands that NYSE rules permit the broker-dealers to vote on the Proposal
to be considered at the Meeting on behalf of their customers and beneficial
owners. Certain broker-dealers may exercise discretion over shares held in
their name for which no instructions are received by voting those shares in
the same proportion as they vote shares for which they received instructions.
QUORUM. Forty percent of the shares entitled to vote -- present in person or
represented by proxy -- constitutes a quorum at the Meeting. The shares over
which broker-dealers have discretionary voting power, the shares that
represent "broker non-votes" (i.e., shares held by brokers or nominees as to
which (i) instructions have not been received from the beneficial owners or
persons entitled to vote and (ii) the broker or nominee does not have
discretionary voting power on a particular matter), and the shares whose
proxies reflect an abstention on any item are all counted as shares present
and entitled to vote for purposes of determining whether the required quorum
of shares exists.
REQUIRED VOTE. Provided that a quorum is present, the election of Trustees
requires that the ten nominees receiving the greatest number of votes be
elected. All voting rights are non-cumulative, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of such Trustees if they choose to do so, and in such event, the holders
of the remaining shares voting will not be able to elect any Trustees.
Abstentions and broker non-votes will be treated as votes not cast and,
therefore, will not be counted for purposes of obtaining approval of the
Proposal. The Fund does not anticipate receiving any broker non-votes.
ADJOURNMENT. Whether or not a quorum is present at the Meeting, the Meeting
may be adjourned by vote of the majority of the shares represented at the
Meeting, either in person or by proxy. In the event that a quorum is present,
but sufficient votes have not been received to approve the Proposal, the
persons named as proxies may propose one or more adjournments of the Meeting
to permit the further solicitation of proxies. If the Meeting is adjourned,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless
the adjournment is for more than 60 days from the date set for the original
Meeting, in which case the Board of Trustees shall set a new date. At any
adjourned Meeting, the Fund may transact any business which might have been
transacted at the original Meeting. 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, and any other proposals raised at the
Meeting to the extent permitted by the SEC's proxy rules, including proposals
for which management of the Fund did not have timely notice, as set forth in
the SEC's proxy rules.
SHAREHOLDER PROPOSALS. The Fund anticipates that its next annual meeting of
shareholders will be held on or about February 15, 2007. Shareholder
proposals to be presented at the next annual meeting must be received at the
Fund's offices, One Franklin Parkway, San Mateo, California 94403, Attention:
Secretary, no later than September 8, 2006, in order to be considered for
inclusion in the Fund's proxy statement and proxy card relating to that
meeting and presented at that 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 2007
Annual Shareholders' Meeting without including the proposal in the Fund's
proxy statement must notify the Fund at the Fund's offices of such proposal
by November 22, 2006. 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 2007 Annual Shareholders' Meeting may exercise discretionary voting power
with respect to any such proposal.
No business other than the matters described above is expected to come before
the Meeting, but should any other matter requiring a vote of shareholders
arise, including any question as to an adjournment or postponement of the
Meeting, the designated proxy holders will vote on such matters in accordance
with the views of management.
By order of the Board of Trustees,
Steven J. Gray
SECRETARY
Dated: January 12, 2006
San Mateo, California
Appendix A
AUDIT COMMITTEE CHARTER
I. THE COMMITTEE.
The Audit Committee ("Committee") is a committee of, and established by, the
Board of Directors/Trustees of the Fund (the "Board"). The Committee shall
consist of such number of members as set by the Board from time to time, but in
no event less than three, and its members shall be selected by the Board. The
Committee shall be comprised entirely of "independent" members, as defined in
Item 3(a)(2) of SEC Form N-CSR ("Disinterested Board members"). Members shall be
financially literate, meaning that each member is able to read and understand
fundamental financial statements, including the Fund's balance sheet and income
statement. At least one member of the Committee shall be designated by the Board
as an "audit committee financial expert," as defined in Item 3(b) of SEC Form
N-CSR, unless the Board determines that the Fund does not have an audit
committee financial expert on the Committee.
II. PURPOSES OF THE COMMITTEE.
The function of the Committee is to be directly responsible for overseeing
the Fund's accounting and auditing processes, which shall include the
appointment, compensation, retention and oversight of the work of the Fund's
independent registered public accounting firm ("auditors") engaged (including
resolution of disagreements between management and the auditors regarding
financial reporting) for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Fund. It is
management's responsibility to maintain appropriate systems for accounting and
internal controls. It is the auditors' responsibility to plan and carry out an
audit in accordance with the standards of the Public Company Accounting
Oversight Board and to report directly to the Committee. It is not the duty of
the Committee to plan or conduct audits or to determine that the Fund's
financial statements are complete and in accordance with generally accepted
accounting principles; it is the responsibility of the auditors to conduct
audits and the responsibility of management to prepare the Fund's financial
statements in accordance with generally accepted accounting principles.
In giving its recommendations to the Board with respect to the Fund's
financial statements, the Committee will rely on:
1) management's representation that such financial statements
have been prepared with integrity and objectivity and in
conformity with generally accepted accounting principles,
2) the report of the Fund's auditors with respect to such
financial statements.
Consistent with such allocation of functions, the purposes of the Committee
are:
(a) To oversee the Fund's accounting and financial reporting policies and
practices and its internal controls, and to obtain, where it deems appropriate,
reports on internal controls of service providers to the Fund;
(b) To oversee the quality, objectivity and integrity of the Fund's
financial statements and the independent audit thereof;
(c) To act as a liaison between the Fund's auditors and the Board; and
(d) To consider such other matters as it deems appropriate in carrying out
its purpose and any other matters that may be assigned to it by the Board.
In addition, the Committee shall serve as the Fund's Qualified Legal
Compliance Committee ("QLCC") pursuant to Section 205 of the SEC's Standards of
Professional Conduct for Attorneys (the "Standards"). In this capacity, the
Committee is required to adopt and maintain written procedures for the
confidential receipt, retention and consideration of any report of evidence of a
material violation. "Evidence of a material violation" means credible evidence,
based upon which it would be unreasonable, under the circumstances, for a
prudent and competent attorney not to conclude that it is reasonably likely that
a material violation of an applicable U.S. federal or state securities law, a
material breach of fiduciary (or similar duty) to the Fund arising under U.S.
federal or state law, or a similar material violation of any U.S. federal or
state law has occurred, is ongoing, or is about to occur.
III. POWERS AND DUTIES.
The Committee shall have the following powers and duties to carry out its
purposes:
(a) To select the auditors, subject to approval both by the Board and by a
separate vote of the Disinterested Board members, and, in connection therewith,
to evaluate the independence and qualifications of the auditors in accordance
with applicable federal securities laws and regulations and the rules and
standards of the Independence Standards Board and American Institute of
Certified Public Accountants.
(b) To be directly responsible for approving the services to be provided
by, and the compensation of, 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 by
the auditors to the Fund's investment adviser or to any entity
that controls, is controlled by or is under common control with
the Fund's investment adviser and that provides ongoing services
to the Fund where the non-audit services relate directly to the
operations or financial reporting of the Fund; and
(iv) establishment by the 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.
(c) To meet with the auditors, including private meetings, as necessary to
(i) review the arrangements for and scope of the annual audit and any special
audits; (ii) discuss any matters or concerns relating to the Fund's financial
statements, including any recorded and/or unrecorded adjustments to such
statements recommended by the auditors, or other results of audits; (iii)
consider the auditors' comments with respect to the Fund's financial, accounting
and reporting policies, procedures and internal controls and management's
responses thereto; and (iv) to review the form of opinion the auditors propose
to render.
(d) To receive and consider reports from the auditors:
(i) as required by generally accepted accounting standards; and
(ii) annually and by update as required by SEC Regulation S-X,
regarding: (w) all critical accounting policies and practices
of the Fund to be used; (x) alternative treatments within
generally accepted accounting principles for policies and
practices related to material items that have been discussed
with management of the Fund, including ramifications of the
use of such alternative disclosures and treatments, and the
treatment preferred by the auditors; (y) other material
written communications between the auditors and management of
the Fund, such as any management letter or schedule of
unadjusted differences; and (z) all non-audit services
provided to any entity in an investment company complex, as
defined in SEC Regulation S-X, that were not pre-approved by
the Committee pursuant to SEC Regulation S-X.
(e) To consider the effect upon the Fund of any changes in accounting
principles or practices proposed by management or the auditors.
(f) In considering the independence of the auditors, to request from, and
discuss with, the auditors a written statement, and other reports as necessary,
describing all relationships between the auditors and the Fund, the Fund's
investment adviser and service providers, and other entities advised or serviced
by, including any entities controlling, controlled by or under common control
with, the investment adviser or any other service providers to the Fund that, in
the auditors' judgment, could be thought to bear upon the auditors'
independence; to receive and consider, if applicable, periodic reports from the
auditors regarding whether the provision of non-audit services is compatible
with maintaining the auditors' independence; and to request from the auditors a
certificate that they are independent auditors under the Federal securities laws
and are in compliance with all standards adopted by the Independence Standards
Board.
(g) To require that the auditors regularly provide timely information to
the Committee with respect to new rules and pronouncements by applicable
regulatory and accounting standards agencies, along with an explanation of how
such developments may affect the Fund's financial statements and accounting
principles and practices.
(h) To review, at such times and in the manner deemed appropriate by the
Committee, the results of the annual audit of, and the report of the auditors on
the Fund's annual financial statements, including footnotes and any significant
audit findings.
(i) To consider any reports of difficulties that may have arisen during
the course of the audit, including any limitations of the scope of the audit,
and management's response thereto.
(j) To review certifications of the Fund's Chief Executive Officer -
Finance and Administration, and Chief Financial Officer and Chief Accounting
Officer concerning (i) all significant deficiencies and material weaknesses in
the design or operation of internal controls over financial reporting which are
reasonably likely to adversely affect the Fund's ability to record, process,
summarize and report financial information; and (ii) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the Fund's internal controls over financial reporting , and for any
other purposes the Committee deems appropriate, as required by ss. 302 of the
Sarbanes-Oxley Act.
(k) To inform the chief legal officer ("CLO") and chief executive officer
("CEO") of the Fund (or the equivalents thereof) of any report of evidence of a
material violation by the Fund, its officers, directors/trustees, employees (if
any), or agents (collectively, "affiliates"). In connection therewith, the
Committee shall:
(i) determine whether an investigation is necessary regarding
any report of evidence of a material violation by the Fund or its
affiliates;
(ii) if the Committee determines such an investigation is necessary or
appropriate, (A) notify the Board; (B) initiate an investigation,
which may be conducted by either the CLO or by outside attorneys;
and (C) retain such additional expert personnel as the Committee
deems necessary to assist in the investigation;
(iii) at the conclusion of any such investigation, (A) recommend by a
majority vote, that the Fund implement an appropriate response
(as defined in Section 205.2(b) of the Standards) to evidence of
a material violation, and (B) inform the CLO and the CEO and the
Board of the results of such investigation and the appropriate
remedial measures to be adopted;
(iv) acting by majority vote, take all other appropriate action,
including the authority to notify the SEC in the event the Fund
fails in any material respect to implement an appropriate
response that the Committee has recommended the Fund to take; and
(v) otherwise respond to evidence of a material violation.
IV. OTHER FUNCTIONS AND PROCEDURES OF THE COMMITTEE.
(a) The Committee shall meet at least twice each year or more frequently, in
open or executive sessions, as may be necessary to fulfill its responsibilities.
The Committee shall meet as frequently as circumstances require with (i) the
auditors as provided in III (c), above; and (ii) management's internal audit
department to review and discuss internal audit functions and reports. The
Committee may invite members of management, the auditors, counsel, advisers and
others to attend its meetings as it deems appropriate. The Committee shall have
separate sessions with the auditors, management and others, as and when it deems
appropriate.
(b) The Committee shall establish procedures for (i) the receipt,
retention and treatment of complaints received by the Fund or the Fund's adviser
regarding accounting, internal accounting controls, or accounting matters
relating to the Fund; and (ii) the confidential, anonymous submission by
employees of the Fund or the Fund's adviser, administrator, principal
underwriter or any other provider of accounting related services for the Fund,
of concerns regarding questionable accounting or auditing matters.
(c) The Committee shall have the authority to engage special counsel,
experts and advisers as and when it determines necessary to carry out its duties
and the Fund must provide for appropriate funding, as determined by the
Committee, for payment of (i) compensation to any auditors engaged for the
purpose of preparing or issuing an audit report or performing other audit,
review or attest services for the Fund; (ii) compensation to any advisers
employed by the Committee; and (iii) ordinary administrative expenses of the
Committee that are necessary or appropriate in carrying out its duties.
(d) The Committee shall have unrestricted access to the Fund's management
and management of the Fund's adviser, including, but not limited to, their chief
executive officer(s), chief financial officer(s), internal auditors and any
other executives and financial officers.
(e) The Committee shall report its activities to the Board and make such
recommendations as the Committee may deem necessary or appropriate.
(f) The Committee shall review and assess the adequacy of this Charter
annually, or more frequently if it chooses, and recommend any changes to the
Board.
ADDITIONAL STATEMENTS FOR CLOSED-END FUNDS ONLY
(The provisions set forth in Appendix A hereto are intended to cover
specific requirements and wording mandated by applicable Stock Exchange
listing requirements.)
In addition to the purposes set forth above, the purposes of the Committee
include:
(a) preparation of the Audit Committee Disclosure Report required to be
included in the Fund's annual proxy statement; and
(b) the assistance of oversight, as either part of the full Board or as a
Committee, of the Fund's compliance with legal and regulatory requirements.
In addition to the powers and duties set forth above, the Committee shall
have the following powers and duties to carry out its purposes:
(a) To obtain and review a report by the auditors, at least annually,
describing:
(i) All relationships between the auditors and the Fund, the Fund's
adviser, and any control affiliate of the adviser that provides
ongoing services to the Fund;
(ii) Any material issues raised by the most recent internal
quality-control review, or peer review, of the auditors, or by any
inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or
more independent audits carried out by the auditors, and any steps
taken to deal with any such issues; and
(iii) The auditors' internal quality-control procedures;
(b) To discuss generally, to the extent the Fund issues any earnings press
releases or any financial information and earnings guidance provided to analysts
and rating agencies, any such releases or information and guidance;
(c) To discuss in a general manner, as either part of the full Board or as
a Committee, the Fund's processes with respect to risk assessment and risk
management;
(d) To review and approve, as either part of the full Board or as a
Committee, clear policies relating to the hiring by entities within Franklin
Templeton Investments of employees or former employees of the auditors;
(e) To evaluate, as either part of the full Board or as a Committee, its
performance at least annually; and
(f) Upon appointment of a member (i) to the Committee or (ii) to the
audit committee of another public company, who simultaneously serves on the
audit committees of three or more public companies, to request the Board to
determine that such simultaneous service would not impair the ability of such
member to effectively serve on the Committee.
The Committee shall comply with such other rules of the New York Stock
Exchange, Inc., the American Stock Exchange and the U.S. Securities and Exchange
Commission applicable to closed-end funds, as such may be adopted and amended
from time to time.
PROXY
FRANKLIN UNIVERSAL TRUST
ANNUAL SHAREHOLDERS' MEETING - FEBRUARY 16, 2006
The undersigned hereby revokes all previous proxies for his or her shares and
appoints Barbara J. Green, David P. Goss, Steven J. Gray and Craig S. Tyle, and
each of them, proxies of the undersigned with full power of substitution to vote
all shares of Franklin Universal Trust (the "Fund") that the undersigned is
entitled to vote at the Fund's Annual Shareholders' Meeting (the "Meeting") to
be held at One Franklin Parkway, Building 920, San Mateo, CA 94403 at 2:00 p.m.,
Pacific Time, on February 16, 2006, including any postponements or adjournments
thereof, upon the matter set forth on the reverse side, and instructs them to
vote upon any other matters that may properly be acted upon at the Meeting.
THE BOARD OF TRUSTEES OF THE FUND SOLICITS THIS PROXY. IT WILL BE VOTED AS
SPECIFIED ON THE REVERSE. IF NO SPECIFICATION IS MADE, THIS PROXY SHALL BE VOTED
FOR THE PROPOSAL (INCLUDING ALL NOMINEES FOR TRUSTEE). IF ANY OTHER MATTERS
PROPERLY COME BEFORE THE MEETING TO BE VOTED ON, THE PROXY HOLDERS WILL VOTE,
ACT AND CONSENT ON THOSE MATTERS IN ACCORDANCE WITH THE VIEWS OF MANAGEMENT.
MANAGEMENT IS NOT AWARE OF ANY SUCH MATTERS.
IMPORTANT: PLEASE SEND IN YOUR PROXY TODAY.
YOU ARE URGED TO DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY. THIS WILL SAVE
THE EXPENSE OF FOLLOW-UP LETTERS TO SHAREHOLDERS WHO HAVE NOT RESPONDED.
SEE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE
REVERSE REVERSE
SIDE SIDE
[ X ] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR ALL NOMINEES.
1. Proposal: Election of Trustees.
NOMINEES: (01) Harris J. Ashton,(02) Robert F. Carlson,
(03) S. Joseph Fortunato, (04) Edith E. Holiday,
(05) Edward B. Jamieson,(06) Charles B. Johnson,
(07) Rupert H. Johnson, Jr.,(08) Frank W.T. LaHaye,
(09) Gordon S. Macklin, (10) Frank A. Olson
FOR WITHHOLD
ALL [ ] [ ] FROM
NOMINEES ALL
NOMINEES
[ ]
---------------------------------------------
(INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name in the
space provided above).
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
NOTE: Please sign exactly as your name
appears on this proxy. If signing for
estates, trusts, or corporations, your
title or capacity should be stated. If
shares are held jointly, each holder
must sign.
Signature: Date: Signature: Date:
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