(a)
The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(f)
Pursuant to Item 13(a)(1), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
Item
3. Audit Committee Financial Expert.
(a)(1)
The Registrant has an audit committee financial expert serving on its audit
committee.
(2)
The audit committee financial expert are Ann Torre Bates and David W. Niemiec
and they are “independent" as defined under the relevant Securities and
Exchange Commission Rules and Releases.
Principal Accountant Fees and Services. N/A
Members
of the Audit Committee are: Ann Torre Bates, David W. Niemiec and Constantine
D. Tseretopoulos
Item
6. Schedule of Investments. N/A
Item
7
. Disclosure
of Proxy Voting Policies and Procedures for Closed-End Management Investment
Companies.
The board of directors of the Fund has
delegated the authority to vote proxies related to the portfolio securities
held by the Fund to the Fund’s investment manager Templeton Asset Management
Ltd. (Asset Management) in accordance with the Proxy Voting Policies and
Procedures (Policies) adopted by the investment manager.
The
investment manager has delegated its administrative duties with respect to the
voting of proxies for securities to the Proxy Group within Franklin Templeton
Companies, LLC (Proxy Group), an affiliate and wholly owned subsidiary of
Franklin Resources, Inc. All proxies received by the Proxy Group will be voted
based upon the investment manager’s instructions and/or policies. The investment
manager votes proxies solely in the best interests of the Fund and its
shareholders.
To
assist it in analyzing proxies of equity securities, the investment manager
subscribes to Institutional Shareholder Services, Inc. (ISS), an unaffiliated
third-party corporate governance research service that provides in-depth
analyses of shareholder meeting agendas, vote recommendations, vote execution
services, ballot reconciliation services, recordkeeping and vote disclosure
services. In addition, the investment manager subscribes to Glass, Lewis &
Co., LLC (Glass Lewis), an unaffiliated third-party analytical research firm,
to receive analyses and vote recommendations on the shareholder meetings of
publicly held U.S. companies, as well as a limited subscription to its
international research. Also, the investment manager has a supplemental
subscription to Egan-Jones Proxy Services (Egan-Jones), an unaffiliated third
party proxy advisory firm, to receive analyses and vote recommendations.
Although analyses provided by ISS, Glass Lewis, Egan-Jones, and/or another
independent third party proxy service provider (each a Proxy Service) are
thoroughly reviewed and considered in making a final voting decision, the
investment manager does not consider recommendations from a Proxy Service or
any third party to be determinative of the investment manager's ultimate
decision. Rather, the investment manager exercises its independent judgment in
making voting decisions. For most proxy proposals, the investment manager’s
evaluation should result in the same position being taken for all Funds. In
some cases, however, the evaluation may result in a Fund voting differently,
depending upon the nature and objective of the Fund, the composition of its
portfolio and other factors. As a matter of policy, the officers,
directors/trustees and employees of the investment manager and the Proxy Group
will not be influenced by outside sources whose interests conflict with the
interests of the Fund and its shareholders. Efforts are made to resolve all
conflicts in the best interests of the investment manager’s clients. Material
conflicts of interest are identified by the Proxy Group based upon analyses of
client, distributor, broker-dealer and vendor lists, information periodically
gathered from directors and officers, and information derived from other
sources, including public filings. In situations where a material conflict of
interest is identified, the Proxy Group may vote consistent with the voting
recommendation of a Proxy Service; or send the proxy directly to the Fund's
board or a committee of the board with the investment manager's recommendation
regarding the vote for approval.
Where a
material conflict of interest has been identified, but the items on which the
investment manager’s vote recommendations differ from a Proxy Service and
relate specifically to (1) shareholder proposals regarding social or
environmental issues, (2) “Other Business” without describing the matters that
might be considered, or (3) items the investment manager wishes to vote in
opposition to the recommendations of an issuer’s management, the Proxy Group
may defer to the vote recommendations of the investment manager rather than
sending the proxy directly to the Fund's board or a board committee for
approval.
To avoid
certain potential conflicts of interest, the investment manager will employ
echo voting or pass-through voting, if possible, in the following instances:
(1) when the Fund invests in an underlying fund in reliance on any one of
Sections 12(d)(1)(F) or (G) of the 1940 Act, the rules thereunder, or pursuant
to a SEC exemptive order thereunder; (2) when the Fund invests uninvested cash
in affiliated money market funds pursuant to the rules under the 1940 Act or
any exemptive orders thereunder (“cash sweep arrangement”); or (3) when
required pursuant to the Fund’s governing documents or applicable law. Echo
voting means that the investment manager will vote the shares in the same
proportion as the vote of all of the other holders of the underlying fund's shares.
With respect to instances when a Franklin Templeton U.S. registered investment
company invests in an underlying fund in reliance on any one of Sections
12(d)(1)(F) or (G) of the 1940 Act, the rules thereunder, or pursuant to an SEC
exemptive order thereunder, and there are no other unaffiliated shareholders
also invested in the underlying fund, the investment manager will vote in
accordance with the recommendation of such investment company’s board of
trustees or directors. In addition, to avoid certain potential conflicts of
interest, and where required under a fund’s governing documents or applicable
law, the investment manager will employ pass-through voting when a Franklin
Templeton U.S. registered investment company invests in an underlying fund in reliance
on Section 12(d)(1)(E) of the 1940 Act, the rules thereunder, or pursuant to an
SEC exemptive order thereunder. In “pass-through voting,” a feeder fund will
solicit voting instructions from its shareholders as to how to vote on the
master fund’s proposals.
The
recommendation of management on any issue is a factor that the investment
manager considers in determining how proxies should be voted. However, the
investment manager does not consider recommendations from management to be
determinative of the investment manager’s ultimate decision. As a matter of
practice, the votes with respect to most issues are cast in accordance with the
position of the company's management. Each issue, however, is considered on its
own merits, and the investment manager will not support the position of the
company's management in any situation where it deems that the ratification of
management’s position would adversely affect the investment merits of owning
that company’s shares.
Engagement
with issuers. The investment manager believes that engagement with issuers is
important to good corporate governance and to assist in making proxy voting
decisions. The investment manager may engage with issuers to discuss specific
ballot items to be voted on in advance of an annual or special meeting to
obtain further information or clarification on the proposals. The investment
manager may also engage with management on a range of environmental, social or
corporate governance issues throughout the year.
Investment
manager’s proxy voting policies and principles The investment
manager has adopted general proxy voting guidelines, which are summarized
below. These guidelines are not an exhaustive list of all the issues that may
arise and the investment manager cannot anticipate all future situations. In
all cases, each proxy and proposal (including both management and shareholder
proposals) will be considered based on the relevant facts and circumstances on
a case-by-case basis.
Board
of directors. The investment manager supports an independent,
diverse board of directors, and prefers that key committees such as audit,
nominating, and compensation committees be comprised of independent directors.
The investment manager supports boards with strong risk management oversight.
The investment manager will generally vote against management efforts to
classify a board and will generally support proposals to declassify the board
of directors. The investment manager will consider withholding votes from
directors who have attended less than 75% of meetings without a valid reason.
While generally in favor of separating Chairman and CEO positions, the
investment manager will review this issue as well as proposals to restore or
provide for cumulative voting on a case-by-case basis, taking into consideration
factors such as the company’s corporate governance guidelines or provisions and
performance. The investment manager generally will support non-binding
shareholder proposals to require a majority vote standard for the election of
directors; however, if these proposals are binding, the investment manager will
give careful review on a case-by-case basis of the potential ramifications of
such implementation.
In the
event of a contested election, the investment manager will review a number of
factors in making a decision including management’s track record, the company’s
financial performance, qualifications of candidates on both slates, and the
strategic plan of the dissidents and/or shareholder nominees.
Ratification
of auditors of portfolio companies. The investment manager will
closely scrutinize the independence, role and performance of auditors. On a
case-by-case basis, the investment manager will examine proposals relating to
non-audit relationships and non-audit fees. The investment manager will also
consider, on a case-by-case basis, proposals to rotate auditors, and will vote
against the ratification of auditors when there is clear and compelling
evidence of a lack of independence, accounting irregularities or negligence.
The investment manager may also consider whether the ratification of auditors
has been approved by an appropriate audit committee that meets applicable
composition and independence requirements.
Management
and director compensation. A company’s equity-based compensation
plan should be in alignment with the shareholders’ long-term interests. The
investment manager believes that executive compensation should be directly
linked to the performance of the company. The investment manager evaluates
plans on a case-by-case basis by considering several factors to determine
whether the plan is fair and reasonable, including the ISS quantitative model
utilized to assess such plans and/or the Glass Lewis evaluation of the plans.
The investment manager will generally oppose plans that have the potential to
be excessively dilutive, and will almost always oppose plans that are
structured to allow the repricing of underwater options, or plans that have an
automatic share replenishment “evergreen” feature. The investment manager will
generally support employee stock option plans in which the purchase price is at
least 85% of fair market value, and when potential dilution is 10% or less.
Severance
compensation arrangements will be reviewed on a case-by-case basis, although
the investment manager will generally oppose “golden parachutes” that are
considered to be excessive. The investment manager will normally support
proposals that require a percentage of directors’ compensation to be in the
form of common stock, as it aligns their interests with those of shareholders.
The
investment manager will review non-binding say-on-pay proposals on a
case-by-case basis, and will generally vote in favor of such proposals unless
compensation is misaligned with performance and/or shareholders’ interests, the
company has not provided reasonably clear disclosure regarding its compensation
practices, or there are concerns with the company’s remuneration practices.
Anti-takeover
mechanisms and related issues. The investment manager generally
opposes anti-takeover measures since they tend to reduce shareholder rights.
However, as with all proxy issues, the investment manager conducts an
independent review of each anti-takeover proposal. On occasion, the investment
manager may vote with management when the research analyst has concluded that
the proposal is not onerous and would not harm the Fund or its shareholders’
interests. The investment manager generally supports proposals that require
shareholder rights’ plans (“poison pills”) to be subject to a shareholder vote
and will closely evaluate such plans on a case-by-case basis to determine
whether or not they warrant support. In addition, the investment manager will
generally vote against any proposal to issue stock that has unequal or
subordinate voting rights. The investment manager generally opposes any
supermajority voting requirements as well as the payment of “greenmail.” The
investment manager generally supports “fair price” provisions and confidential
voting. The investment manager will review a company’s proposal to
reincorporate to a different state or country on a case-by-case basis taking
into consideration financial benefits such as tax treatment as well as
comparing corporate governance provisions and general business laws that may
result from the change in domicile.
Changes
to capital structure. The investment manager realizes that a
company's financing decisions have a significant impact on its shareholders,
particularly when they involve the issuance of additional shares of common or
preferred stock or the assumption of additional debt. The investment manager
will review, on a case-by-case basis, proposals by companies to increase
authorized shares and the purpose for the increase. The investment manager will
generally not vote in favor of dual-class capital structures to increase the
number of authorized shares where that class of stock would have superior
voting rights. The investment manager will generally vote in favor of the
issuance of preferred stock in cases where the company specifies the voting,
dividend, conversion and other rights of such stock and the terms of the
preferred stock issuance are deemed reasonable. The investment manager will
review proposals seeking preemptive rights on a case-by-case basis.
Mergers
and corporate restructuring. Mergers and acquisitions will be
subject to careful review by the research analyst to determine whether they
would be beneficial to shareholders. The investment manager will analyze
various economic and strategic factors in making the final decision on a merger
or acquisition. Corporate restructuring proposals are also subject to a
thorough examination on a case-by-case basis.
Environmental
and social issues. The investment manager considers environmental
and social issues alongside traditional financial measures to provide a more
comprehensive view of the value, risk and return potential of an investment.
Companies may face significant financial, legal and reputational risks
resulting from poor environmental and social practices, or negligent oversight
of environmental or social issues. Franklin Templeton’s “Responsible Investment
Principles and Policies” describes the investment manager’s approach to
consideration of environmental, social and governance issues within the
investment manager’s processes and ownership practices.
The
investment manager will review shareholder proposals on a case-by-case basis
and may support those that serve to enhance value or mitigate risk, are drafted
appropriately, and do not disrupt the course of business or require a
disproportionate or inappropriate use of company resources. In the investment
manager’s experience, those companies that are managed well are often effective
in dealing with the relevant environmental and social issues that pertain to
their business. As such, the investment manager will generally give management
discretion with regard to environmental and social issues. However, in cases
where management and the board have not demonstrated adequate efforts to
mitigate material environmental or social risks, have engaged in inappropriate
or illegal conduct, or have failed to adequately address current or emergent
risks that threaten shareholder value, the investment manager may choose to
support well-crafted shareholder proposals that serve to promote or protect
shareholder value. This may include seeking appropriate disclosure regarding
material environmental and social issues.
The
investment manager will consider supporting a shareholder proposal seeking
disclosure and greater board oversight of lobbying and corporate political
contributions if the investment manager believes that there is evidence of
inadequate oversight by the company’s board, if the company’s current
disclosure is significantly deficient, or if the disclosure is notably lacking
in comparison to the company’s peers.
Governance
matters. The investment manager generally supports the right of
shareholders to call special meetings and act by written consent. However, the
investment manager will review such shareholder proposals on a case-by-case
basis in an effort to ensure that such proposals do not disrupt the course of
business or require a disproportionate or inappropriate use of company
resources.
Proxy
access. In cases where the investment manager is satisfied with
company performance and the responsiveness of management, it will generally
vote against shareholder proxy access proposals not supported by management. In
other instances, the investment manager will consider such proposals on a
case-by-case basis, taking into account factors such as the size of the
company, ownership thresholds and holding periods, nomination limits (e.g.,
number of candidates that can be nominated), the intentions of the shareholder
proponent, and shareholder base.
Global
corporate governance. Many of the tenets discussed above are
applied to the investment manager's proxy voting decisions for international
investments. However, the investment manager must be flexible in these
worldwide markets. Principles of good corporate governance may vary by country,
given the constraints of a country’s laws and acceptable practices in the
markets. As a result, it is on occasion difficult to apply a consistent set of
governance practices to all issuers. As experienced money managers, the
investment manager's analysts are skilled in understanding the complexities of
the regions in which they specialize and are trained to analyze proxy issues
germane to their regions.
The
investment manager will generally attempt to process every proxy it receives
for all domestic and foreign securities. However, there may be situations in
which the investment manager may be unable to successfully vote a proxy, or may
choose not to vote a proxy, such as where: (i) a proxy ballot was not received
from the custodian bank; (ii) a meeting notice was received too late; (iii)
there are fees imposed upon the exercise of a vote and it is determined that
such fees outweigh the benefit of voting; (iv) there are legal encumbrances to
voting, including blocking restrictions in certain markets that preclude the
ability to dispose of a security if the investment manager votes a proxy or
where the investment manager is prohibited from voting by applicable law,
economic or other sanctions, or other regulatory or market requirements, including
but not limited to, effective Powers of Attorney; (v) additional documentation
or the disclosure of beneficial owner details is required; (vi) the investment
manager held shares on the record date but has sold them prior to the meeting
date; (vii) a proxy voting service is not offered by the custodian in the
market; (viii) due to either system error or human error, the investment
manager’s intended vote is not correctly submitted; (ix) the investment manager
believes it is not in the best interest of the Fund or its shareholders to vote
the proxy for any other reason not enumerated herein; or (x) a security is
subject to a securities lending or similar program that has transferred legal
title to the security to another person.
In some
non-U.S. jurisdictions, even if the investment manager uses reasonable efforts
to vote a proxy on behalf of the Fund, such vote or proxy may be rejected
because of (a) operational or procedural issues experienced by one or more
third parties involved in voting proxies in such jurisdictions; (b) changes in
the process or agenda for the meeting by the issuer for which the investment
manager does not have sufficient notice; or (c) the exercise by the issuer of
its discretion to reject the vote of the investment manager. In addition,
despite the best efforts of the Proxy Group and its agents, there may be
situations where the investment manager's votes are not received, or properly
tabulated, by an issuer or the issuer's agent.
The
investment manager or its affiliates may, on behalf of one or more of the
proprietary registered investment companies advised by the investment manager
or its affiliates, determine to use its best efforts to recall any security on
loan where the investment manager or its affiliates (a) learn of a vote on a
material event that may affect a security on loan and (b) determine that it is
in the best interests of such proprietary registered investment companies to
recall the security for voting purposes.
Procedures
for meetings involving fixed income securities & privately held issuers.
From time to time, certain custodians may process events for
fixed income securities through their proxy voting channels rather than
corporate action channels for administrative convenience. In such cases, the
Proxy Group will receive ballots for such events on the ISS voting platform.
The Proxy Group will solicit voting instructions from the investment manager
for each Fund involved. If the Proxy Group does not receive voting instructions
from the investment manager, the Proxy Group will take no action on the event.
The investment manager may be unable to vote a proxy for a fixed income
security, or may choose not to vote a proxy, for the reasons described above.
In the
rare instance where there is a vote for a privately held issuer, the decision
will generally be made by the relevant portfolio managers or research analysts.
The
Proxy Group will monitor such meetings involving fixed income securities or
privately held issuers for conflicts of interest in accordance with these procedures.
If a fixed income or privately held issuer is flagged as a potential conflict
of interest, the investment manager may nonetheless vote as it deems in the
best interests of the Fund. The investment manager will report such decisions
on an annual basis to the Fund board as may be required.
Shareholders
may view the complete Policies online at franklintempleton.com. Alternatively,
shareholders may request copies of the Policies free of charge by calling the
Proxy Group collect at (954) 527-7678 or by sending a written request to:
Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL
33301-1923, Attention: Proxy Group. Copies of the Fund’s proxy voting records
are available online at franklintempleton.com and posted on the SEC website at
www.sec.gov. The proxy voting records are updated each year by August 31 to
reflect the most recent 12-month period ended June 30.
Item
8. Portfolio Managers of Closed-End Management Investment Companies
. N/A
Item
9. Purchases of Equity Securities by Closed-End Management Investment Company
and Affiliated Purchasers
.
|
|
|
|
|
|
|
|
Total
Number of Shares Purchased 1 |
Average
Price Paid per Share |
Total
Number of Shares Purchased as Part of Publicly Announced Plans or Program |
Maximum
Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased
Under the Plans or Programs |
Month
#1 (1/1/20 - 1/31/20) |
|
|
|
|
Month
#2 (2/1/20 - 2/29/20) |
|
|
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|
Month
#3 (3/1/20 - 3/31/20) |
|
|
|
|
Month
#4 (4/1/20 - 4/30/20) |
|
|
|
|
Month
#5 (5/1/20 - 5/31/20) |
|
|
|
|
Month
#6 (6/1/20 - 6/30/20) |
|
|
|
|
|
|
|
|
|
|
The Board
previously authorized an open-market share repurchase program pursuant to which
the Fund may purchase, from time to time, Fund shares in open-market
transactions, at the discretion of management. Effective February 26, 2013, the
Board approved a modification to the Fund’s previously announced open-market
share repurchase program to authorize the Fund to repurchase up to 10% of the
Fund’s shares outstanding in open market transactions as of that date, at the
discretion of management. Since the inception of the program, the Fund had
repurchased a total of 9,335,184 shares.
Item
10
. Submission
of Matters to a Vote of Security Holders.
There have been no changes to the procedures by which
shareholders may recommend nominees to the Registrant's Board of Directors that
would require disclosure herein.
Item
11. Controls and Procedures.
(a) Evaluation
of Disclosure Controls and Procedures. The Registrant maintains
disclosure controls and procedures that are designed to provide reasonable
assurance that information required to be disclosed in the Registrant’s filings
under the Securities Exchange Act of 1934, as amended, and the Investment
Company Act of 1940 is recorded, processed, summarized and reported within the periods
specified in the rules and forms of the Securities and Exchange Commission.
Such information is accumulated and communicated to the Registrant’s
management, including its principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding required
disclosure. The Registrant’s management, including the principal executive
officer and the principal financial officer, recognizes that any set of
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives.
Within
90 days prior to the filing date of this Shareholder Report on Form N-CSRS, the
Registrant had carried out an evaluation, under the supervision and with the
participation of the Registrant’s management, including the Registrant’s
principal executive officer and the Registrant’s principal financial officer,
of the effectiveness of the design and operation of the Registrant’s disclosure
controls and procedures. Based on such evaluation, the Registrant’s principal
executive officer and principal financial officer concluded that the
Registrant’s disclosure controls and procedures are effective.
(b) Changes
in Internal Controls. During the period covered by this report, a
third-party service provider commenced performing certain accounting and
administrative services for the Registrant that are subject to Franklin
Templeton’s oversight.
Item 12. Disclosure of Securities Lending
Activities for Closed-End Management Investment Company. N/A
(a)(2)
Certifications pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief
Executive Officer - Finance and Administration, and Robert G. Kubilis, Chief
Financial Officer and Chief Accounting Officer
(b)
Certifications pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer -
Finance and Administration, and Robert G. Kubilis, Chief Financial Officer and
Chief Accounting Officer
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Templeton
Dragon Fund, Inc.
By
S\MATTHEW T. HINKLE___________
Chief Executive Officer –
Finance and Administration
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
By
S\MATTHEW T. HINKLE__________
Chief Executive Officer –
Finance and Administration
By
S\ROBERT G. KUBILIS__________
Chief Financial Officer
and
Chief Accounting Officer