* 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
manager or affiliated investment manager, and also may share a common underwriter.

** Charles B. Johnson and Gregory E. Johnson are “interested persons” of the Fund as defined by the 1940
Act. The 1940 Act limits the percentage of interested persons that can comprise a fund’s board of directors.
Charles B. Johnson is considered an interested person of the Fund due to his position as an officer, director
and major shareholder of Resources, which is the parent company of the Fund’s investment manager, and
his position with the Fund. Gregory E. Johnson is considered an interested person of the Fund due to his
position as an officer, director and shareholder of Resources. Charles B. Johnson is the father of Gregory E.
Johnson. The remaining Directors of the Fund are Independent Directors.

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The following tables provide the dollar range of the equity securities of the Fund and of all U.S. registered
funds in the Franklin Templeton Investments fund complex beneficially owned by the Directors as of March 16,
2012:

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 all of the Fund’s 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, and
will meet more frequently as necessary. 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’s Independent Directors constitute the sole independent Board members of 14 investment
companies in the Franklin Templeton Investments fund complex for which each Independent Director currently
is paid a $155,000 annual retainer fee, together with a $7,000 per meeting fee for attendance at each regularly
scheduled Board meeting, a portion of which fees are allocated to the Fund. To the extent held, compensation
also may be paid for attendance at specially called Board meetings. The Fund’s Lead Independent Director is
paid an annual supplemental retainer of $25,000 for service to such investment companies, a portion of which is
allocated to the Fund. Board members who serve on the Audit Committee of the Fund and such other investment
companies receive a flat fee of $3,000 per Audit Committee meeting attended in person and $2,000 per Audit
Committee telephonic meeting attended, a portion of which is allocated to the Fund. The Chairman of the Audit
Committee of the Fund and such other investment companies receives an additional fee of $15,000 per year, a

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portion of which is allocated to the Fund. Members of a committee are not separately compensated for any
committee meeting held on the day of a regularly scheduled Board meeting.

During the fiscal year ended December 31, 2011, there were five meetings of the Board, three meetings of
the Audit Committee, and three meetings of the Nominating Committee. Each Director then in office 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 Director served. The Fund does not currently have a formal policy
regarding Directors’ attendance at the annual shareholders’ meeting. No Directors attended the Fund’s last
annual meeting held on May 27, 2011.

Independent Directors are also reimbursed for expenses incurred in connection with Board meetings. The
Interested Directors and certain officers of the Fund who are shareholders of Resources are not compensated by
the Fund for their services, but may receive indirect remuneration due to their participation in management fees
and other fees received by the Investment Manager and its affiliates from the funds in Franklin Templeton
Investments. The Investment Manager or its affiliates pay the salaries and expenses of the officers and the
Interested Directors. No pension or retirement benefits are accrued as part of Fund expenses.

The table below indicates the total fees paid to the Independent Directors by the Fund individually and by
all of the funds in the Franklin Templeton Investments fund complex. These Directors also serve as directors or
trustees of other funds 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 funds in Franklin Templeton Investments enhances the ability of each fund to obtain, at a
relatively modest cost to each separate fund, the services of high caliber, experienced and knowledgeable
Independent Directors who can bring their experience and talents to, and effectively oversee the management of,
several funds.

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(4) Ms. Bates and Mr. Wade also are independent trustees of Franklin Mutual Series Funds and may, in the
future, receive payments pursuant to a discontinued retirement plan that generally provides payments to
independent board members who have served seven years or longer for such fund.

Board members historically have followed a policy of having substantial investments in one or more of the
funds in Franklin Templeton Investments, as is consistent with their individual financial goals. In February 1998,
this policy was formalized through adoption of a requirement that each Board member invest one-third of the
fees received for serving as a director or trustee of a Templeton fund (excluding committee fees) in shares of one
or more Templeton funds (which may include the Fund) until the value of such investments equals or exceeds
five times the annual retainer and regular Board meeting 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, were valued as of such date with subsequent investments valued at cost.

Who are the Executive Officers of the Fund?

Officers of the Fund are appointed by the Directors and serve at the pleasure of the Board. Listed below, for
the Executive Officers, are their names, years of birth and addresses, as well as their positions and length of
service with the Fund, and principal occupations during at least the past five years.

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How are independent auditors selected?

The Board has a standing Audit Committee currently comprised of David W. Niemiec (Chairman), Ann
Torre Bates, Frank J. Crothers and Constantine D. Tseretopoulos, all of whom are Independent Directors and
considered to be “independent” as that term is defined by the NYSE’s listing standards. The Audit Committee is
responsible for the appointment, compensation and retention of the Fund’s independent registered public
accounting firm (“independent auditors”), including evaluating their independence, recommending the selection
of the Fund’s independent auditors to the full Board, and meeting with such independent auditors to consider and
review matters relating to the Fund’s financial reports and internal auditing.

Which independent auditors did the Board select?

The Audit Committee and the Board have selected the firm of PricewaterhouseCoopers LLP (“PwC”) as the
independent auditors for the Fund for the current fiscal year. PwC has examined and reported on the fiscal
year-end financial statements dated December 31, 2011, and certain related SEC filings. You are being asked to
ratify the Board’s selection of PwC for the current fiscal year ending December 31, 2012. Services to be
performed by the independent auditors include examining and reporting on the fiscal year-end financial
statements of the Fund and certain related filings with the SEC.

The selection of PwC as the independent auditors for the Fund for the fiscal year ending December 31,
2012, was recommended by the Audit Committee and approved by the Board on February 28, 2012. PwC’s
reports on the financial statements of the Fund for the fiscal years for which it has served as auditors did not
contain an adverse opinion or a disclaimer of opinion, nor were qualified or modified as to uncertainty, audit
scope or accounting principles.

The Audit Committee and the Board have been advised by PwC that neither PwC nor any of its members
have any material direct or indirect financial interest in the Fund. 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 $43,996 for the fiscal year ended December 31, 2011, and
$41,987 for the fiscal year ended December 31, 2010.

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 not reported under “Audit Fees” above were $6,552 for the fiscal year ended December 31, 2011,
and $6,270 for the fiscal year ended December 31, 2010. The services for which these fees were paid included
attestation services.

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In addition, the Audit Committee pre-approves PwC’s engagement for audit-related services to be provided
to the Investment Manager and certain entities controlling, controlled by, or under common control with the
Investment Manager that provide ongoing services to the Fund, which engagements relate directly to the
operations and financial reporting of the Fund. For the fiscal years ended December 31, 2011, and December 31,
2010, there were no fees paid to PwC for such 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 the fiscal years ended December 31, 2011, and December 31, 2010.

In addition, the Audit Committee pre-approves PwC’s engagement for tax services to be provided to the
Investment Manager and certain entities controlling, controlled by, or under common control with the Investment
Manager that provide ongoing services to the Fund, which engagements relate directly to the operations and
financial reporting of the Fund. The fees for these services were $100,000 for the fiscal year ended December 31,
2011, and $35,000 for the fiscal year ended December 31, 2010. The services for which these fees were paid
included technical tax consultation for capital gain tax reporting to foreign governments and derivative
instruments.

All Other Fees. The aggregate fees paid for products and services provided by PwC to the Fund, other
than the services reported above, were $0 for the fiscal year ended December 31, 2011 and $441 for the fiscal
year ended December 31, 2010. The services for which these fees were paid included review of materials
provided to the Board in connection with the investment management contract renewal process.

In addition, the Audit Committee pre-approves PwC’s engagement for other services to be provided to the
Investment Manager and certain entities controlling, controlled by, or under common control with the Investment
Manager that provide ongoing services to the Fund, which engagements relate directly to the operations and
financial reporting of the Fund. The fees for these services were $0 for the fiscal year ended December 31, 2011,
and $144,359 for the fiscal year ended December 31, 2010. The services for which these fees were paid included
review of materials provided to the Board in connection with the investment management contract renewal
process.

Aggregate Non-Audit Fees. The aggregate fees paid to PwC for non-audit services provided by PwC to
the Fund, to the Investment Manager or to any entity controlling, controlled by, or under common control with
the Investment Manager that provides ongoing services to the Fund were $106,552 for the fiscal year ended
December 31, 2011, and $186,070 for the fiscal year ended December 31, 2010. The aggregate non-audit fees for
the fiscal year ended December 31, 2011, include the amounts shown under Audit-Related Fees ($6,552); Tax
Fees (including services provided to the Investment Manager and its control entities ($100,000)) and All Other
Fees (including services provided to the Investment Manager and its control entities ($0)).

The Audit Committee has determined that the provision of the non-audit services that were rendered to the
Investment Manager and to any entities controlling, controlled by, or under common control with the Investment
Manager that provide ongoing services to the Fund is compatible with maintaining PwC’s independence.

Audit Committee Pre-Approval Policies and Procedures. As of the date of this proxy statement, the Audit
Committee has not adopted written 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.

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Audit Committee Charter. The Board has adopted and approved a formal written charter for the Audit
Committee which sets forth the Audit Committee’s responsibilities. A copy of the charter was included in the
Fund’s proxy statement for its 2011 Annual Meeting of Shareholders.

As required by the charter, the Audit Committee reviewed the Fund’s audited financial statements and met
with management, as well as with PwC, the Fund’s independent auditors, to discuss the financial statements.

Audit Committee Report. The Audit Committee received the written disclosures and the letter from PwC
required by the applicable requirements of the Public Company Accounting Oversight Board regarding PwC’s
communications with the Audit Committee concerning independence. The Audit Committee also received the
report of PwC regarding the results of their audit. In connection with the Audit Committee’s review of the
financial statements and PwC’s report, the members of the Audit Committee discussed with a representative of
PwC, PwC’s independence, as well as the following: PwC’s responsibilities in accordance with generally
accepted auditing standards; PwC’s 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 PwC’s retention; whether the auditors encountered any
difficulties in dealing with management in performing the audit; and PwC’s judgments about the quality of the
Fund’s accounting principles.

Based on its review and discussions with management and PwC, 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 December 31, 2011, for filing with the SEC.

15

With respect to investment risk, the Board receives regular written reports describing and analyzing the
investment performance of the Fund. In addition, the portfolio managers of the Fund meet regularly with the
Board to discuss portfolio performance, including investment risk. To the extent that the Fund changes a
particular investment strategy that could have a material impact on the Fund’s risk profile, the Board generally is
consulted with respect to such change. To the extent that the Fund invests in certain complex securities, including
derivatives, the Board receives periodic reports containing information about exposure of the Fund to such
instruments. In addition, the Investment Manager’s investment risk personnel meet regularly with the Board to
discuss a variety of issues, including the impact on the Fund of the investment in particular securities or
instruments, such as derivatives.

With respect to valuation, the Fund’s administrator provides regular written reports to the Board that enable
the Board to monitor the number of fair valued securities in the Fund’s portfolio, the reasons for the fair
valuation and the methodology used to arrive at the fair value. Such reports also include information concerning
illiquid securities within the Fund’s portfolio. The Board also reviews dispositional analysis information on the
sale of securities that require special valuation considerations such as illiquid or fair valued securities. In
addition, the Fund’s Audit Committee reviews valuation procedures and results with the Fund’s independent
auditors in connection with such Committee’s review of the results of the audit of the Fund’s year-end financial
statements.

With respect to compliance risks, the Board receives regular compliance reports prepared by the Investment
Manager’s compliance group and meets regularly with the Fund’s Chief Compliance Officer (“CCO”) to discuss
compliance issues, including compliance risks. In accordance with SEC requirements, the Independent Directors
meet regularly in executive session with the CCO and the CCO prepares and presents an annual written
compliance report to the Board. The Fund’s Board adopts compliance policies and procedures for the Fund and
approves such procedures for the Fund’s service providers. The compliance policies and procedures are
specifically designed to detect and prevent violations of the federal securities laws.

The Investment Manager periodically provides an enterprise risk management presentation to the Board to
describe the way in which risk is managed on a complex-wide level. The presentation covers such areas as
investment risk, reputational risk, personnel risk, and business continuity risk.

Board Structure. Seventy-five percent or more of the Fund’s Board members consist of Independent
Directors who are not deemed to be “interested persons” by reason of their relationship with the Fund’s
management or otherwise as provided under the 1940 Act. While the Chairman of the Board is an interested
person, the Board is also served by a Lead Independent Director. The Lead Independent Director, together with
independent counsel, reviews proposed agendas for Board meetings and generally acts as a liaison with Fund
management with respect to questions and issues raised by the Independent Directors. The Lead Independent
Director also presides at separate meetings of Independent Directors held in advance of each scheduled Board
meeting where various matters, including those being considered at such Board meeting, are discussed. It is
believed such structure and activities assure that proper consideration is given at Board meetings to matters
deemed important to the Fund and its shareholders.

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 The Chater House, 17th Floor, 8 Connaught

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Solicitation of Proxies. Your vote is being solicited by the Directors. 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 reasonable 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 would be primarily by mail, but also may
include telephone, facsimile, electronic 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 Directors and officers of the Fund, or regular employees and agents of
the Investment Manager involved in the solicitation of proxies. The Fund intends to pay all costs associated with
the solicitation and the Meeting.

Voting by Broker-Dealers. The Fund expects that, before the Meeting, broker-dealer firms holding shares
of the Fund in “street name” for their customers will request voting instructions from their customers and
beneficial owners. If these instructions are not received by the date specified in the broker-dealer firms’ proxy
solicitation materials, the Fund understands that current NYSE Rules permit the broker-dealers to vote on the
Proposals on behalf of their customers and beneficial owners. Certain broker-dealers may exercise discretion
over shares held in their name for which no instructions are received by voting these shares in the same
proportion as they vote shares for which they received instructions.

Quorum. A majority of the Fund’s shares entitled to vote—present in person or represented by proxy—
constitutes a quorum at the Meeting. The shares over which broker-dealers have discretionary voting power, the
shares that represent “broker non-votes” (i.e., shares held by brokers or nominees as to which (i) instructions
have not been received from the beneficial owners or persons entitled to vote and (ii) the broker or nominee does
not have discretionary voting power on a particular matter), and the shares whose proxies reflect an abstention on
any item will all be counted as shares present and entitled to vote for purposes of determining whether the
required quorum of shares exists.

Method of Tabulation. Provided a quorum is present or represented at the Meeting, Proposal 1, the
election of Directors, requires the affirmative vote of the holders of a plurality of the Fund’s shares present (in
person or represented by proxy) and voting on the proposal at the Meeting. Proposal 2, ratification of the
selection of the independent registered public accounting firm, requires the affirmative vote of a majority of the
votes cast. Abstentions and broker non–votes will be treated as votes present at the Meeting, but will not be
treated as votes cast and, therefore, will not be counted for purposes of obtaining approval of either proposal.

Adjournment. The holders of a majority of shares entitled to vote at the Meeting and present in person or
by proxy, whether or not sufficient to constitute a quorum, or any officer present entitled to preside or act as
Secretary of the Meeting may adjourn the Meeting. Such authority to adjourn the Meeting may be used in the
event that a quorum is not present at the Meeting or in the event that a quorum is present but sufficient votes have
not been received to approve the Proposals or to permit further solicitation of proxies or for any other reason
consistent with Maryland law and the Fund’s Articles of Incorporation and By-Laws. Unless otherwise instructed
by a shareholder granting a proxy, the persons designated as proxies may use their discretionary authority to vote
as instructed by management of the Fund on questions of adjournment and on 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 and the Fund’s proxy statement for the
2011 annual meeting.

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     Shareholder Proposals. The Fund anticipates that its 2013 Annual Meeting of Shareholders will be held on or about May 31, 2013. A shareholder who wishes to submit a proposal for consideration for inclusion in the Fund’s proxy statement for the 2013 Annual Meeting of Shareholders must send such written proposal to the Fund’s offices, at 300 S.E. 2^nd Street, Fort Lauderdale, Florida 33301-1923, Attention: Secretary, so that it is received no later than December 17, 2012, in order to be included in the Fund’s proxy statement and proxy card relating to that meeting and presented at the meeting.

     A shareholder of the Fund who has not submitted a written proposal for inclusion in the Fund’s proxy statement by December 17, 2012, as described above, may nonetheless present a proposal at the Fund’s 2013 Annual Meeting of Shareholders if such shareholder notifies the Fund in writing, at the Fund’s offices, of such proposal by February 28, 2013. If a shareholder fails to give notice by this date, then the persons designated as proxies for the 2013 Annual Meeting of Shareholders may exercise discretionary voting power with respect to any such proposal.

     A shareholder proposal may be presented at the 2013 Annual Meeting of Shareholders only if such proposal concerns a matter that may be properly brought before the meeting under applicable federal proxy rules and state law.

     Submission of a proposal by a shareholder does not guarantee that the proposal will be included in the Fund’s proxy statement or presented at the meeting.

March 30, 2012

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