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

The Proxy Review Committee may independently review proxies that are identified as presentingmaterial conflicts of interest; determine the appropriate action to be taken in such situations (includingwhether to defer to an independent third party or refer a matter to an Advisory Client); report the resultsof such votes to Investment Manager’s clients as may be requested; and recommend changes to the ProxyVoting Policies and Procedures as appropriate.The Proxy Review Committee will also decide whether to vote proxies for securities deemed to presentconflicts of interest that are sold following a record date, but before a shareholder meeting date. TheProxy Review Committee may consider various factors in deciding whether to vote such proxies,including Investment Manager’s long-term view of the issuer’s securities for investment, or it may deferthe decision to vote to the applicable Advisory Client.Where a material conflict of interest has been identified, but the items on which the InvestmentManager’s vote recommendations differ from Glass Lewis, RiskMetrics, or another independent thirdparty provider of proxy services relate specifically to (1) shareholder proposals regarding social orenvironmental issues or political contributions, (2) “Other Business” without describing the matters thatmight be considered, or (3) items the Investment Manager wishes to vote in opposition to therecommendations of an issuer’s management, the Proxy Group may defer to the vote recommendations ofthe Investment Manager rather than sending the proxy directly to the relevant Advisory Clients forapproval.To avoid certain potential conflicts of interest, the Investment Manager will employ echo voting, ifpossible, in the following instances: (1) when a Franklin Templeton investment company invests in anunderlying fund in reliance on any one of Sections 12(d)(1)(E), (F), or (G) of the Investment CompanyAct of 1940, as amended, or pursuant to an SEC exemptive order; (2) when a Franklin Templetoninvestment company invests uninvested cash in affiliated money market funds pursuant to an SECexemptive order (“cash sweep arrangement”); or (3) when required pursuant to an account’s governingdocuments or applicable law. Echo voting means that the Investment Manager will vote the shares in thesame proportion as the vote of all of the other holders of the fund’s shares.Weight Given Management RecommendationsOne of the primary factors Investment Manager considers when determining the desirability of investingin a particular company is the quality and depth of that company's management. Accordingly, therecommendation of management on any issue is a factor that Investment Manager considers indetermining how proxies should be voted. However, Investment Manager does not considerrecommendations from management to be determinative of Investment Manager's ultimate decision. As amatter of practice, the votes with respect to most issues are cast in accordance with the position of thecompany's management. Each issue, however, is considered on its own merits, and Investment Managerwill not support the position of a company's management in any situation where it determines that theratification of management's position would adversely affect the investment merits of owning thatcompany's shares.THE PROXY GROUPThe Proxy Group is part of the Franklin Templeton Companies, LLC Legal Department and is overseenby legal counsel. Full-time staff members are devoted to proxy voting administration and providingsupport and assistance where needed. On a daily basis, the Proxy Group will review each proxy uponreceipt as well as any agendas, materials and recommendations that they receive from RiskMetrics, GlassLewis, or other sources. The Proxy Group maintains a log of all shareholder meetings that are scheduledfor companies whose securities are held by Investment Manager's managed funds and accounts. For eachshareholder meeting, a member of the Proxy Group will consult with the research analyst that follows thesecurity and provide the analyst with the meeting notice, agenda, RiskMetrics and/or Glass Lewisanalyses, recommendations and any other available information. Except in situations identified aspresenting material conflicts of interest, Investment Manager's research analyst and relevant portfolioB-117