B-1 STATEMENT OF ADDITIONAL INFORMATION Dated May 1 ...

The following describes the standard procedures that are to be followed with respect to carrying outInvestment Manager's proxy policy:1. The Proxy Group will identify all Advisory Clients, maintain a list of those clients, and indicatethose Advisory Clients who have delegated proxy voting authority to the Investment Manager.The Proxy Group will periodically review and update this list.2. All relevant information in the proxy materials received (e.g., the record date of the meeting) willbe recorded immediately by the Proxy Group in a database to maintain control over suchmaterials.3. The Proxy Group will review and compile information on each proxy upon receipt of anyagendas, materials, reports, recommendations from RiskMetrics and/or Glass Lewis, or otherinformation. The Proxy Group will then forward this information to the appropriate researchanalyst and/or legal counsel for review and voting instructions.4. In determining how to vote, Investment Manager's analysts and relevant portfolio manager(s) willconsider the General Proxy Voting Guidelines set forth above, their in-depth knowledge of thecompany, any readily available information and research about the company and its agenda items,and the recommendations put forth by RiskMetrics, Glass Lewis, or other independent third partyproviders of proxy services.5. The Proxy Group is responsible for maintaining the documentation that supports InvestmentManager's voting position. Such documentation may include, but is not limited to, anyinformation provided by RiskMetrics, Glass Lewis, or other proxy service providers, and,especially as to non-routine, materially significant or controversial matters, memorandadescribing the position it has taken. Additionally, the Proxy Group may include documentationobtained from the research analyst, portfolio manager, legal counsel and/or the Proxy ReviewCommittee.6. After the proxy is completed but before it is returned to the issuer and/or its agent, the ProxyGroup may review those situations including special or unique documentation to determine thatthe appropriate documentation has been created, including conflict of interest screening.7. The Proxy Group will attempt to submit Investment Manager's vote on all proxies to RiskMetricsfor processing at least three days prior to the meeting for U.S. securities and 10 days prior to themeeting for foreign securities. However, in certain foreign jurisdictions it may be impossible toreturn the proxy 10 days in advance of the meeting. In these situations, the Proxy Group will useits best efforts to send the proxy vote to RiskMetrics in sufficient time for the vote to beprocessed.8. The Proxy Group will file Powers of Attorney in all jurisdictions that require such documentationon a best efforts basis.9. The Proxy Group prepares reports for each Advisory Client that has requested a record of votescast. The report specifies the proxy issues that have been voted for the Advisory Client during therequested period and the position taken with respect to each issue. The Proxy Group sends onecopy to the Advisory Client, retains a copy in the Proxy Group’s files and forwards a copy toeither the appropriate portfolio manager or the client service representative. While manyAdvisory Clients prefer quarterly or annual reports, the Proxy Group will provide reports for anytimeframe requested by an Advisory Client.10. If the Franklin Templeton Services, LLC Fund Treasury Department learns of a vote on amaterial event that will affect a security on loan from a proprietary registered investmentcompany, the Fund Treasury Department will notify Investment Manager and obtain instructionsB-113