EXHIBIT 99.E
TAML
Settlement Agreement
Settlement Agreement, dated as of March 20, 2003 (the "Agreement"), by
and among President and Fellows of Harvard College ("Harvard University"),
Harvard Management Company, Inc. ("Harvard Management"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇" and, collectively with Harvard University and Harvard Management, the
"Harvard Parties"), and ▇▇▇▇▇▇▇▇▇ Asset Management Ltd. ("TAML").
R E C I T A L S:
- - - - - - - -
WHEREAS, TAML, an indirect wholly-owned subsidiary of Franklin
Resources, Inc. ("FRK"), is the investment manager for each of ▇▇▇▇▇▇▇▇▇ China
World Fund, Inc. ("China World") and ▇▇▇▇▇▇▇▇▇ Dragon Fund, Inc. ("Dragon");
WHEREAS, Harvard University is the Beneficial Owner (as defined below)
of approximately 30.3% of the outstanding shares of common stock of China World
and of approximately 14.0% of the outstanding shares of common stock of Dragon;
WHEREAS, Harvard Management is wholly controlled by Harvard University
and is the investment advisor to Harvard University's endowment, and ▇▇▇▇▇▇▇ is
a vice-president of Harvard Management and manages that portion of Harvard
University's endowment that is invested in China World and Dragon; and
WHEREAS, the parties wish to set forth their understanding and
agreement with respect to the settlement of the Current Litigation (as defined
below) and related matters.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Certain Defined Terms. For purposes of this Agreement:
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
"Affiliate" and "Associate" shall have the respective meanings set
forth in Rule 12b-2 promulgated by the SEC (as defined below) under the 1934
Act.
"Beneficial Owner" and "Beneficially Own" shall have the meanings as
set forth in Rule 13d-3 promulgated by the SEC (as defined below) under the 1934
Act.
"Current Litigation" shall mean the matter pending in the United States
District Court for the District of Maryland, Northern Division (Case No. JFM
03-CV-275),
captioned "▇▇▇▇▇▇▇▇▇ China World Fund, Inc., ▇▇▇▇▇▇▇▇▇ Dragon Fund, Inc., and
▇▇▇▇▇▇▇▇▇ Asset Management Ltd., plaintiffs, v. President and Fellows of Harvard
College, Harvard Management Company, Inc., and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, defendants",
including the claims, counterclaims and affirmative defenses that have been
asserted therein.
"FT Closed-End Fund" shall mean:
(i) each of the entities listed on Schedule I hereto, and
(ii) each closed-end fund or other similar fund or pooled investment
vehicle first organized, advised or managed by TAML or by any TAML
Affiliate (as defined below) on or after the date hereof, the common
equity interests in which are not freely redeemable by the fund or
investment vehicle upon demand by interest holders;
provided, however, that the term "FT Closed-End Fund" shall not include China
World or Dragon (including any successor thereto in any reorganization thereof,
including any change in organizational form); provided, however, that the term
"FT Closed-End Fund" shall not include any fund or other investment vehicle, not
initially sponsored by TAML or by any TAML Affiliate, that for the first time is
advised or managed by TAML or any TAML Affiliate after the date hereof if, at
the time such fund or other investment vehicle begins to be advised or managed
by TAML or any TAML Affiliate, Harvard University, Harvard Management, or
▇▇▇▇▇▇▇, as the case may be, or any entity wholly owned or controlled or advised
by any of them or any combination of them, already Beneficially Owns more than
two percent (2%) of the voting equity securities of such fund or investment
vehicle. TAML may, but shall not be required to, hereafter update Schedule I
hereto on its own initiative, and none of the Harvard Parties shall be relieved
of any obligations hereunder based on the failure of TAML to so update such
Schedule I; provided, however, that within seven (7) business days after the
Harvard Parties' written request therefor, TAML shall provide to the Harvard
Parties an updated written list of FT Closed-End Funds as of the date of the
Harvard Parties' written request and provided further that the Harvard Parties
collectively shall not make more than six (6) such requests for such an updated
list in any calendar year. For the purposes of this definition, the term "TAML
Affiliate" shall mean any and all Affiliates of TAML other than any entity that
becomes an Affiliate of TAML after the date hereof except as a result of (X) the
organization of such entity as part of an internal reorganization of or within
the Franklin ▇▇▇▇▇▇▇▇▇ group that does not directly or indirectly involve any
transaction by any of the entities in the Franklin ▇▇▇▇▇▇▇▇▇ group with an
unaffiliated third party, or (Y) a direct or indirect acquisition, merger or
other business combination by or involving the Franklin ▇▇▇▇▇▇▇▇▇ group that
does not result in a change of control of such group or a change of the ultimate
parent of TAML.
"Other Settlement Agreements" shall mean, collectively, (i) that
certain settlement agreement dated the date hereof between the Harvard Parties
and China World, as the same may be amended and in effect from time to time and
(ii) that certain
settlement agreement dated the date hereof between the Harvard Parties and
Dragon, as the same may be amended and in effect from time to time (the "Dragon
Settlement Agreement").
"SEC" shall mean the United States Securities and Exchange Commission.
Section 2. Authority and Enforceability.
(a) Each of the Harvard Parties represents and warrants as follows:
(i) such party has all requisite power and authority to execute
and deliver the Agreement and to perform its obligations hereunder;
(ii) the execution, delivery and performance of the Agreement by
such party has been duly authorized by all necessary action on the part of such
party;
(iii) the Agreement has been duly and validly executed and
delivered by such party and (assuming the due authorization, execution and
delivery thereof by the other parties hereto) constitutes the legal, valid and
binding obligation of such party, enforceable against such party in accordance
with its terms, subject to general principles of equity, statutory limitations
and judicially-imposed public policy constraints; and
(iv) the execution and delivery by such party of the Agreement and
the performance by such party of its obligations hereunder will not conflict
with, constitute a default under or violate (A) any of the terms, conditions or
provisions of the organizational documents of such party (if such party is not a
natural person), (B) any of the terms, conditions or provisions of any material
document, agreement or other instrument to which such party is a party or by
which it is bound, or (C) any judgment, writ, injunction, decree, order or
ruling of any court or governmental authority binding on such party.
(b) TAML represents and warrants as follows:
(i) it has all requisite power and authority to execute and
deliver the Agreement and to perform its obligations hereunder;
(ii) the execution, delivery and performance of the Agreement by
TAML has been duly authorized by all necessary action on the part of TAML;
(iii) the Agreement has been duly and validly executed and
delivered by TAML and (assuming the due authorization, execution and delivery
thereof by the other parties hereto) constitutes the legal, valid and binding
obligation of TAML, enforceable against TAML in accordance with its terms,
subject to general principles of equity, statutory limitations and
judicially-imposed public policy constraints; and
(iv) the execution and delivery by TAML of the Agreement and the
performance by TAML of its obligations hereunder will not conflict with,
constitute a default under or violate (A) any of the terms, conditions or
provisions of the organizational documents of TAML, (B) any of the terms,
conditions or provisions of any material document, agreement or other instrument
to which TAML is a party or by which it is bound, or (C) any judgment, writ,
injunction, decree, order or ruling of any court or governmental authority
binding on TAML.
Section 3. No Share Acquisitions. Unless otherwise specifically agreed in
writing between one or more of the Harvard Parties, on the one hand, and TAML,
on the other hand, each of the Harvard Parties agrees that from the date hereof
and perpetually thereafter it will not (and will not advise, assist or encourage
others to), directly or indirectly, acting individually or in concert with
others, in any manner, acquire, offer or propose to acquire, solicit an offer to
sell or agree to acquire, by purchase or otherwise, any direct or indirect
beneficial interest in any securities of any FT Closed-End Fund (including,
without limitation, any direct or indirect interest in any rights, warrants or
options to acquire, or in any securities convertible into or exchangeable for,
any securities of any FT Closed-End Fund) or any derivative instrument that
provides the economic benefits or other indicia of ownership of any such
securities; provided, however, that it will not be considered a violation of
this Section 3 if (i) the Harvard Party acquires an indirect interest in any
securities of an FT Closed-End Fund (not as a result of an investment decision
by the Harvard Party to acquire an interest in such securities) but does not as
a result become a Beneficial Owner of such securities (and does not otherwise
have investment discretion over such securities), or (ii) securities of an FT
Closed-End Fund are acquired by an investment adviser or other person acting in
a similar capacity for a Harvard Party and (A) the Harvard Party did not know of
the planned acquisition in advance of its occurrence, (B) the Harvard Party
becomes a Beneficial Owner of the securities as a result of such acquisition,
and (C) the Harvard Party instructs the investment adviser or other person to
promptly dispose of such securities when portfolio management personnel of such
Harvard Party have actual knowledge that the acquisition has occurred; provided,
further, that each of the Harvard Parties shall apprise any person or entity
currently serving as an investment adviser, or in any similar capacity, to it,
and each person becoming an investment adviser, or beginning to act in any
similar capacity, to it during the period of four years from the date hereof, of
the obligations and restrictions of such Harvard Party arising under this
Section 3.
Section 4. Standstill. Each of the Harvard Parties agrees that for a period
of four years from and after the date hereof, it will not (and will not advise,
assist or encourage others to), directly or indirectly, acting individually or
in concert with others, in any manner:
(i) make, or in any way participate in, any shareholder proposal
or nomination with respect to any FT Closed-End Fund or FRK, or seek to advise
or influence in any manner whatsoever any person or entity with respect to any
shareholder proposal or nomination with respect to any FT Closed-End Fund or
FRK, in each case, including, but not limited to, any proposal relating to the
election of directors,
the adoption or termination of any investment advisory contract, any change in a
fundamental policy, classification, or sub-classification, any change in
structure, any change in organizational documents, or any matter that requires a
stockholder vote, including, but not limited to, pursuant to Section 13 of the
1940 Act, including any precatory or advisory proposal with respect to any of
the foregoing;
(ii) make, or in any way participate in, any "solicitation" of
"proxies" to vote (as such terms are used in the proxy rules of the SEC
promulgated pursuant to Section 14 of the ▇▇▇▇ ▇▇▇) any securities of any FT
Closed-End Fund or FRK, or advise or seek to influence in any manner whatsoever
any person or entity with respect to the voting of any securities of any FT
Closed-End Fund or FRK;
(iii) form, join or in any way participate in a "group" (within
the meaning of Section 13(d)(3) of the ▇▇▇▇ ▇▇▇) with respect to any voting
securities of any FT Closed-End Fund or FRK;
(iv) otherwise act to seek to propose to any FT Closed-End Fund or
FRK or any of their respective management, board of directors, officers or
stockholders, any merger, business combination, restructuring, recapitalization,
charter amendment or any other change to any other organizational document,
change in policy, change in classification or subclassification, change in
investment manager, or other transaction or similar matter, or otherwise seek to
control, change or influence the management, board of directors (or similar
body) or the policies of any FT Closed-End Fund or FRK, including any precatory
or advisory proposal with respect to any of the foregoing;
(v) hold any securities of any FT Closed-End Fund or FRK with the
purpose or effect of changing or influencing control of such issuer, or in
connection with or as a participant in any transaction having that purpose or
effect, including any transaction subject to Rule 13d-3(b) under the 1934 Act;
(vi) make any request or proposal to amend, waive or terminate any
provision of this Section 4;
(vii) provide any advice or enter into any discussions,
negotiations, arrangements or understandings with any third party with respect
to any of the foregoing; or
(viii) announce an intention to take, or enter into any
arrangement or understanding with others to take, any of the actions restricted
or prohibited under clauses (i) through (vii) of this Section 4.
Section 5. Press Release; Public Statement. The Harvard Parties and TAML
agree that immediately following the execution of this Agreement, Harvard
University, Harvard Management, and TAML shall issue a joint press release
regarding the terms of this Agreement in the form attached as Schedule II
hereto. Except for such press release,
no party hereto (or their agents, representatives or designees) shall make any
public statement (including any statement to the media) regarding this Agreement
or any of the Other Settlement Agreements or the settlements contemplated hereby
or thereby; provided, however, that the foregoing shall not preclude (a)
communications or disclosures required of a party hereto by law, regulatory
bodies with appropriate jurisdiction, or stock exchange rules or regulations, or
(b) the delivery by any party hereto of a copy of such press release, this
Agreement or the Other Settlement Agreements to any person. The parties hereto
acknowledge and agree that any communication or disclosure made pursuant to
clause (a) of the immediately preceding sentence shall not disparage any other
party hereto or this Agreement or any of the Other Settlement Agreements.
Notwithstanding the foregoing, the obligations and limitations on each of the
parties hereto arising under this Section 5 with respect to the Dragon
Settlement Agreement shall be terminated if, only to the extent that and for so
long as the corresponding obligations and limitations on the parties to the
Dragon Settlement Agreement arising under Section 6 thereof (or any successor
section thereto) are terminated pursuant to the terms of Section 3(d)(ii) - (iv)
of the Dragon Settlement Agreement (or any successor provisions thereto). TAML
agrees that it will support (and will not take any action in derogation of) the
proposals to open-end China World submitted or to be submitted by the Board of
Directors of China World to the shareholders of China World at the 2003 Annual
Meeting of Shareholders of China World.
Section 6. Termination of Litigation; Covenant not to ▇▇▇.
(a) Each of the Harvard Parties and TAML hereby agrees to dismiss the
Current Litigation (the "Dismissed Claims") without prejudice. Within three
business days after the execution of this Agreement, the parties hereto shall
cause a Stipulation of Dismissal without Prejudice (or such other appropriate
document), substantially in the form attached as Schedule III hereto, to be
executed and filed with the court in the Current Litigation.
(b) Subject to paragraph (d) of this Section 6, each of the Harvard
Parties hereby covenants that, for a period of four years after the date hereof,
it will not initiate or cause to be initiated (or encourage or aid in the
initiation of) against TAML or its past, present or future directors or
officers, directly or indirectly, any suit, action, or proceeding of any kind,
or participate in any such action, individually, derivatively, or as a
representative or member of a class, under any contract (express or implied),
law, statute, or regulation, federal, state or local, pertaining in any manner
whatsoever to the Dismissed Claims, or to any other claims that could have been
asserted in the Current Litigation. This Covenant Not to ▇▇▇ shall be a complete
defense to any suit, action or proceeding brought in violation of this Covenant
Not to ▇▇▇. Nothing herein limits the right of the Harvard Parties to bring an
action to enforce this Agreement or based on an alleged material breach of this
Agreement.
(c) Subject to paragraph (d) of this Section 6, TAML hereby covenants
that it will not initiate or cause to be initiated (or encourage or aid in the
initiation of)
against any of the Harvard Parties or their respective past, present or future
directors or officers, directly or indirectly, any suit, action, or proceeding
of any kind, under any contract (express or implied), law, statute, or
regulation, federal, state or local, pertaining in any manner whatsoever to (i)
the Dismissed Claims, or any other claims that could have been asserted in the
Current Litigation, for a period of four (4) years after the date hereof, and
(ii) the claims asserted pursuant to Section 16(b) of the 1934 Act included in
the Dismissed Claims, beginning on the date which is four (4) years after the
date hereof and in perpetuity thereafter. This Covenant Not to ▇▇▇ shall be a
complete defense to any suit, action or proceeding brought in violation of this
Covenant Not to ▇▇▇. Nothing herein limits the right of TAML to bring an action
to enforce this Agreement or based on an alleged material breach of this
Agreement.
(d) In the event of a material breach of this Agreement, the Covenants
Not to ▇▇▇ set forth in paragraphs (b) and (c) of this Section 6, as applicable,
shall not be binding on the aggrieved party.
(e) The parties hereto agree that the period of time between the
voluntary dismissal of the Current Litigation (as contemplated by Section 6(a)
hereof) and the commencement of a new action by an aggrieved party asserting
similar claims (as contemplated by Section 6(d) hereof) will not be counted
towards any defense based on statute of limitations, laches, or similar
time-based defenses.
Section 7. Remedies; Consent to Jurisdiction.
(a) Each party hereto hereby acknowledges and agrees that irreparable
harm would occur in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that aggrieved parties shall be entitled to
equitable relief including, without limitation, an injunction or injunctions to
prevent and enjoin breaches of the provisions of this Agreement and specific
enforcement of the terms and provisions hereof, in addition to any other remedy
to which they may be entitled at law or in equity, including monetary damages.
Any requirements for the securing or posting of any bond with respect to any
such remedy are hereby waived.
(b) The parties hereto agree that any actions, suits or proceedings
arising out of or relating to this Agreement, the transactions contemplated
hereby (including the dismissal of the Current Litigation), or a new action by
an aggrieved party (as contemplated by Section 6(d) hereof), shall be brought
solely and exclusively in the United States District Court for the District of
Maryland, Northern Division (or if such federal court lacks subject matter
jurisdiction, in the courts of the State of Maryland located in Baltimore,
Maryland). The parties agree not to commence any such action, suit or proceeding
except in such courts and further agree that service of any process, summons,
notice or document by U.S. registered mail to the respective addresses set forth
in Section 10 hereof shall be effective service of process for any such action,
suit or proceeding brought against any party in any such court. The parties also
irrevocably and unconditionally waive any objection to the laying of venue of
any such action, suit or
proceeding in the courts of the State of Maryland or the United States of
America located in the State of Maryland, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in such court pursuant hereto has been
brought in an inconvenient forum.
Section 8. Fees, Costs and Expenses. Except as expressly provided herein,
each party hereto shall pay its own fees, costs and expenses incident to this
Agreement and the transactions contemplated herein. The Harvard Parties shall be
responsible for their own legal fees and expenses with respect to the Current
Litigation and their proxy contest relating to the 2003 Annual Meetings of
Shareholders of China World and Dragon. TAML shall be responsible for its own
legal fees and expenses and the legal fees and expenses incurred by China World,
Dragon and their respective directors with respect to the respective Other
Settlement Agreements and the Current Litigation. TAML shall also be responsible
for the legal fees and expenses incurred by each of China World and Dragon
through the date hereof with respect to their proxy contests relating to the
2003 Annual Meetings of Shareholders of China World and Dragon, respectively.
Section 9. Entire Agreement; Amendments; Successors; Third Party
Beneficiaries.
(a) This Agreement and the Other Settlement Agreements contain the
entire understanding of the parties with respect to the subject matter hereof
and thereof. This Agreement and the Other Settlement Agreements supersede all
previous negotiations, representations and discussions by the parties hereto and
thereto concerning the subject matter hereof and thereof, and integrate the
whole of all of their agreements and understanding concerning same. No prior
oral representations or undertakings concerning the subject matter hereof or
thereof shall operate to amend, supersede, or replace any of the terms or
conditions set forth in this Agreement or the Other Settlement Agreements, nor
shall they be relied upon.
(b) This Agreement may be amended only by an agreement in writing
executed by the party or parties against which it is sought to be enforced.
(c) No party hereto may assign any of its respective rights or delegate
any of its respective obligations under this Agreement without the prior written
consent of the other parties hereto; provided, however, that TAML may freely
assign its rights and delegate its obligations to the transferee of all or
substantially all of its assets, so long as such transferee agrees to be bound
by all of the obligations of TAML hereunder (at which point such transferee
shall be deemed to have all of the rights and obligations hereunder of TAML).
This Agreement shall be binding upon, and shall inure to the benefit of, the
parties' successors and permitted assigns.
(d) Each FT Closed-End Fund and each entity controlling, controlled by
or under common control with TAML, including, but not limited to, FRK, is
intended to be a third party beneficiary of Sections 3, 4 and 7 of this
Agreement and shall be entitled to enforce such provisions of this Agreement as
though it were a party hereto. It is the
intention of the parties hereto that Sections 3 and 4 of this Agreement will be
enforced in respect of any FT Closed-End Fund as follows: (i) in the first
instance, by that FT Closed-End Fund and/or TAML if TAML is a proper plaintiff
in that action, (ii) in the second instance, by that FT Closed-End Fund or an
Affiliate of TAML that is the investment advisor to that FT Closed-End Fund (if
there is such an entity) if it is a proper plaintiff in that action, (iii) in
the third instance, by that FT Closed-End Fund or the lowest level subsidiary of
FRK that would be a proper plaintiff in that action (if there is such a
subsidiary), and (iv) in the fourth instance, by that FT Closed-End Fund or FRK.
China World is intended to be a third party beneficiary with respect to TAML's
obligations under Sections 5 and 8 of this Agreement and shall be entitled to
enforce such provisions of this Agreement as though it were a party hereto.
Dragon is intended to be a third party beneficiary with respect to TAML's
obligations under Section 8 of this Agreement and shall be entitled to enforce
such provisions of this Agreement as though it were a party hereto.
(e) Any material breach by any party other than the Harvard Parties
under any of the Other Settlement Agreements shall be deemed a material breach
by TAML under this Agreement.
(f) TAML acknowledges and agrees that it is familiar with the
provisions of the Other Settlement Agreements and that it will take no action
contrary to, or inconsistent with the full implementation of such agreements.
Section 10. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or mailed by certified or registered mail, postage prepaid,
return receipt requested, or delivered to a nationally recognized next business
day courier for delivery on the next business day, or by facsimile, with the
required copy also sent as aforesaid and in any instance addressed as follows:
if to any of the Harvard Parties:
c/o Harvard Management Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
Ropes & ▇▇▇▇
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
if to TAML:
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▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
or such other address as shall be furnished in writing by any of the parties,
and any such notice or communication shall be deemed to have been given as of
the date so delivered personally, so mailed, so delivered to the courier
service, or so transmitted by telecopy (except that a notice of change of
address shall not be deemed to have been given until received by the addressee).
Section 11. Law Governing. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Maryland,
without regard to any conflict of laws provisions thereof.
Section 12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. For purposes of this
Agreement, a signature page signed and transmitted by electronic mail in pdf
form, facsimile machine or telecopier is to be treated as an original signature
and document. The signature of any party thereon, for purposes hereof, is to be
considered as an original signature, and the document transmitted is to be
considered to have the same binding effect as an original signature on an
original document.
Section 13. No Presumption Against Draftsperson. Each of the undersigned
hereby acknowledges that the undersigned fully negotiated the terms of this
Agreement, that each such party had an equal opportunity to influence the
drafting of the language contained in this Agreement and that there shall be no
presumption against any such party on the ground that such party was responsible
for preparing this Agreement or any part hereof. All prior working drafts of
this Agreement, and any notes and communications prepared in connection
therewith, shall be disregarded for purposes of interpreting the meaning of any
provision contained herein.
Section 14. Enforceability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this
Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. It is hereby stipulated and
declared to be the intention of the parties that the parties would have executed
the remaining terms, provisions, covenants and restrictions without including
any of such which may be hereafter declared invalid, void or unenforceable. In
addition, the parties agree to use their best efforts to agree upon and
substitute a valid and enforceable term, provision, covenant or restriction for
any such term, provision, covenant or restriction that is held invalid, void or
unenforceable by a court of competent jurisdiction.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused the same to be executed by its duly authorized
representative, as of the date first above written.
PRESIDENT AND FELLOWS OF HARVARD COLLEGE
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Deputy Treasurer
HARVARD MANAGEMENT COMPANY, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Authorized Signatory
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Authorized Signatory
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ASSET MANAGEMENT LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Director
SCHEDULE I
FT CLOSED-END FUNDS
FT Closed-End Funds
-------------------
Franklin Floating Rate Trust (US)
Franklin Multi-IncomeTrust (US)
Franklin Mutual Recovery Fund (US)
Franklin Universal Trust (US)
▇▇▇▇▇▇▇▇▇ Emerging Markets Fund (US)
Templeton Russia and East European Fund, Inc. (US)
▇▇▇▇▇▇▇▇▇ Global Income Fund, Inc. (US)
▇▇▇▇▇▇▇▇▇ Emerging Markets Income Fund, Inc. (US)
Templeton Asia Fund (Japan)
Templeton Tax-Exempt Government Bond Fund B-1 (Korea)
Templeton Tax-Exempt Government Bond Fund B-2 (Korea)
Templeton Separate Tax Government Bond B-1 (Korea)
Templeton Workers Equity A-1 (Korea)
Templeton Tax-Exempt Government Bond A-1 (Korea)
Templeton Separate Tax Government Bond A-2 (Korea)
Templeton Separate Tax Government Bond A-1 (Korea)
Templeton Separate Tax Government Bond B-2 (Korea)
Templeton Separate Tax Hybrid A-1 (Korea)
Templeton Separate Tax Government Bond A-3 (Korea)
Templeton Separate Tax Government Bond B-3 (Korea)
BOC Hong Kong Templeton Guaranteed Fund (Hong Kong)
Franklin ▇▇▇▇▇▇▇▇▇ China Safe Shinjong Separate Taxation Switching Hybrid Fund
A-1 (Korea)
Franklin ▇▇▇▇▇▇▇▇▇ China Safe Shinjong Separate Taxation Switching Hybrid Fund
A-A (Korea)
Templeton Growth Long-Term 1 (Korea)
Templeton Separate Tax Government Bond B-4 (Korea)
Templeton Best Sinjong Separate Taxation Govt Bond A-1 (Korea)
Franklin ▇▇▇▇▇▇▇▇▇ Separate Taxation Hybrid Bond 1 (Korea)
Franklin ▇▇▇▇▇▇▇▇▇ Private Placement Hybrid Fund 1 (Korea)
Franklin Private Offered Bond Fund 1 (Korea)
Franklin ▇▇▇▇▇▇▇▇▇ Tax Exempt High Yield High Risk Hybrid Fund 1 (Korea)
Franklin Value Bond Fund 1 (Korea)
Santa Claua New High Yield Closed End 1 (Korea)
Franklin ▇▇▇▇▇▇▇▇▇ Private Placement Equity Fund (Korea)
Franklin Private Placed Bond Fund 2 (Korea)
Templeton Shinjong Separate Taxation Hybrid Fund 2 (Korea)
Templeton Private Placement Hybrid Fund 3 (Korea)
Franklin ▇▇▇▇▇▇▇▇▇ Private Placement Hybrid Fund 2 (Korea)
Templeton Private Placement Hybrid Fund 2 (Korea)
Templeton Balanced 50 Equity Hybrid Fund 2 (Korea)
Franklin ▇▇▇▇▇▇▇▇▇ Shinjong Separate Taxation Hybrid Series 2 (Korea)
Franklin Floating Rate PLC - Class A (Dublin)
Franklin Floating Rate PLC - Class B (Dublin)
Franklin Floating Rate PLC - Class C (Dublin)
Franklin Floating Rate PLC - Class X (Dublin)
Franklin Floating Rate PLC - Class Z (Dublin)
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ (▇▇▇▇▇)
Franklin India Taxshield 96 (India)
Franklin India Taxshield 97 (India)
Franklin India Taxshield 98 (India)
Franklin India Taxshield 99 (India)
Templeton India Guaranteed Income Plan (India)
▇▇▇▇▇▇▇▇▇ Emerging Markets Appreciation Fund (Canada)
▇▇▇▇▇▇▇▇▇ Emerging Markets Investment Trust (UK)
Templeton Latin America Investment Trust (UK)
SCHEDULE II
FORM OF PRESS RELEASE
FORM OF PRESS RELEASE
FOR IMMEDIATE RELEASE
Media Contacts: ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Investments, Tel: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Harvard Management, Tel: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------------------------------------------------------
HARVARD UNIVERSITY, ▇▇▇▇▇▇▇▇▇ CHINA WORLD FUND, INC.,
▇▇▇▇▇▇▇▇▇ DRAGON FUND, INC. AND
▇▇▇▇▇▇▇▇▇ ASSET MANAGEMENT LTD.
SETTLE LAWSUIT
HARVARD UNIVERSITY WITHDRAWS
ITS ▇▇▇▇▇▇▇▇▇ CHINA WORLD SHAREHOLDER PROPOSALS
AND SUPPORTS TEMPLETON CHINA WORLD'S
OPEN-ENDING PROPOSAL WITH AN IN-KIND DISTRIBUTION FEATURE
HARVARD UNIVERSITY WITHDRAWS
ITS ▇▇▇▇▇▇▇▇▇ DRAGON SHAREHOLDER PROPOSALS;
▇▇▇▇▇▇▇▇▇ DRAGON TO MAKE CASH TENDER OFFER FOR
15% OF ITS OUTSTANDING SHARES AT 92.5% OF NET ASSET VALUE PER SHARE
▇▇▇▇▇▇▇▇▇ DRAGON
TO SEEK AUTHORITY TO MAKE IN-KIND TENDER OFFERS
Fort Lauderdale, Florida and Boston, Massachusetts, March [__], 2003 - ▇▇▇▇▇▇▇▇▇
China World Fund, Inc. (NYSE: TCH), a closed-end management investment company
("China World"), ▇▇▇▇▇▇▇▇▇ Dragon Fund, Inc. (NYSE: TDF), a closed-end
management investment company ("Dragon"), Templeton Asset Management Ltd., the
investment advisor to each of the funds ("Templeton"), and President and Fellows
of Harvard College ("Harvard University") announced today that they had reached
agreements that will result in, among other things, the dismissal of their
litigation claims against each other and the withdrawal of Harvard University's
shareholder proposals for the funds' upcoming annual meetings. Also, Harvard
will now support the Board's proposal to open-end China World with an in-kind
distribution feature, and Dragon will make a tender offer to be commenced on or
prior to April 30, 2003, and may, pursuant to its settlement with Harvard, make
additional tender offers in the future.
DISMISSAL OF LAWSUIT
The three settlement agreements announced today (between China World and
Harvard, Dragon and Harvard, and Templeton and Harvard, respectively) will
result in the dismissal without prejudice of the lawsuit originally brought in
January 2003 by China World, Dragon and Templeton in the United States District
Court for the District of Maryland, Northern Division,
against Harvard University, Harvard Management Company, Inc., which is an
investment advisor to Harvard University, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, an officer of
Harvard Management (collectively, "Harvard"), as well as the dismissal without
prejudice of the counterclaims brought by Harvard against the funds, their
respective directors and Templeton. The parties have also entered into covenants
not to ▇▇▇ each other with respect to the claims that were made or could have
been made in the litigation absent a breach of the settlement agreements.
END OF PROXY CONTEST
As part of the settlements, Harvard has agreed to withdraw all of its
shareholder proposals for the respective upcoming 2003 Annual Meetings of
Shareholders of China World and Dragon. Harvard also will not solicit proxies
from shareholders for the China World 2003 Annual Meeting and will not vote any
proxies previously received.
CONVERSION OF CHINA WORLD TO AN OPEN-END FUND
Harvard announced that it intends to support the Board of Directors' proposal at
the 2003 Annual Meeting calling for the open-ending of China World, with an
in-kind distribution feature described below.
If shareholders approve the open-ending proposal, the in-kind distribution
feature will provide the fund the option of meeting large redemption requests
through a pro rata, in-kind distribution of its portfolio investments by making
an election pursuant to Rule 18f-1 under the Investment Company Act of 1940 and
adopting related procedures. This will allow the fund to minimize the potential
adverse impact of large redemption requests on the fund's net asset value per
share. Small redemption requests (generally in amounts less than $250,000 in any
ninety-day period) will be paid in cash by the fund.
Harvard also announced that, if and when China World open-ends, Harvard will
redeem all of its shares of the fund within 30 days after conversion, and that
under the settlement it will take its redemption proceeds through a pro rata,
in-kind distribution of portfolio investments. As a result, the fund will avoid
having to sell significant portfolio assets to raise cash to meet Harvard's
redemption request - thus limiting the potential adverse effect on the fund's
net asset value per share.
China World announced that if conversion to an open-end fund is approved by
shareholders, the open-end fund would assess a redemption fee, not in excess of
two percent, on all redemptions or exchanges of shares made within six months
following the effective date of the conversion except on any redemptions of
shares purchased after the conversion.
Representatives of Harvard and China World also have agreed to discuss, prior to
conversion, steps China World might take to minimize any adverse effect on the
net asset value per share of the fund resulting from a need to sell portfolio
securities of the fund to raise cash to satisfy redemption requests.
2
DRAGON TENDER OFFERS
Dragon announced that as part of its settlement with Harvard, it has agreed to
take the following actions:
o April 2003 cash tender offer - The Board of Directors of Dragon approved
the making of a cash tender offer to be commenced on or prior to April 30,
2003, for 15% of the fund's outstanding shares at 92.5% of net asset value
per share as of the date the offer expires. Previously, the Board of
Directors had approved an April 2003 cash tender offer for not less than
10% of the fund's outstanding shares at not less than 90% of net asset
value per share.
o In-kind tender offers - Dragon also will apply to the Securities and
Exchange Commission ("SEC") for an exemption allowing the fund to make
occasional, non-periodic tender offers, each for up to 20% of Dragon's
outstanding shares at a price equal to 95% of net asset value per share as
of the date the offer expires, to be paid entirely in kind through a pro
rata distribution of marketable portfolio securities. The fund will not
apply, however, for interval fund status. Subject to certain conditions,
the settlement requires the fund to commence such an in-kind tender offer
for 20% of the fund's shares within three months after obtaining the SEC
exemption. Dragon may also be required under the settlement to conduct, on
substantially identical terms, up to two additional in-kind tender offers
under certain circumstances. There is no assurance that the SEC will grant
the exemption, nor is it possible to predict the date when an exemption
might be granted.
o Additional cash tender offers - If the SEC does not grant the exemption for
in-kind tender offers by May 26, 2004, the settlement provides that Dragon
may, but is not obligated to, conduct an additional cash tender offer, and
possibly later follow-on cash tender offers, each for 15% of the fund's
outstanding shares at a price of 92.5% of net asset value per share as of
the date the offer expires. Under certain circumstances, if Dragon does not
conduct these tender offers, Harvard will be relieved of its obligation to
refrain from making shareholder proposals and taking other actions with
respect to the fund, as described below.
Harvard announced that it intends to tender all of the shares it then owns into
each tender offer described above that is commenced.
The Dragon settlement agreement provides that Dragon will not be obligated to
commence in-kind tender offers or additional cash tender offers under certain
circumstances or conditions. These relate to, among other things, the number of
shares tendered by shareholders into preceding tender offers as well as the
beneficial ownership percentages of the fund's shareholders.
STANDSTILL
As part of the three settlements, Harvard agreed not to submit any proposals for
consideration by shareholders of China World or Dragon , or any other closed-end
fund or similar investment vehicle managed by Templeton or its affiliates, or
for consideration by shareholders of Franklin Resources, Inc. (NYSE: BEN), the
parent company of Templeton, nor to encourage others to do
3
so, for a period of four years. Harvard also has agreed not at any time to
acquire additional shares of China World, Dragon or any other closed-end fund or
similar investment vehicle managed by Templeton or its affiliates.
* * * * *
The summaries of the settlements reached by Harvard and China World, Harvard and
Dragon, and Harvard and Templeton included in this press release are qualified
in their entirety by reference to the full text of the three separate settlement
agreements. Copies of the settlement agreements will be filed by China World and
Dragon with the U.S. Securities and Exchange Commission and will be available
for free at the SEC's website, ▇▇▇.▇▇▇.▇▇▇. The parties have agreed not to make
public statements (including to the media) regarding the settlements.
* * * * *
In connection with their 2003 annual meetings of shareholders, China World and
Dragon intend to file relevant materials with the U.S. Securities and Exchange
Commission ("SEC"), including their respective proxy statements. Because those
documents contain important information, shareholders of China World and Dragon
are urged to read them when they become available. When filed with the SEC, they
will be available for free at the SEC's website, ▇▇▇.▇▇▇.▇▇▇. Shareholders also
can obtain copies of these documents, when available, for free by calling China
World or Dragon at ▇-▇▇▇-▇▇▇-▇▇▇▇.
China World, its directors and executive officers and certain other persons may
be deemed to be participants in China World's solicitation of proxies from its
shareholders in connection with its 2003 annual meeting of shareholders. Dragon,
its directors and executive officers and certain other persons may be deemed to
be participants in Dragon's solicitation of proxies from its shareholders in
connection with its 2003 annual meeting of shareholders. Information about their
respective directors is set forth in the proxy statement for China World's 2002
annual meeting of shareholders and for Dragon's 2002 annual meeting of
shareholders, respectively. Participants in China World's and Dragon's
respective solicitations may also be deemed to include the following executive
officers or other persons whose interests in China World or Dragon may not be
described in their respective proxy statements for China World's and Dragon's
2002 annual meetings: ▇▇▇▇ ▇▇▇▇▇▇ (President and C.E.O. - Investment
Management); ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Senior Vice President and C.E.O. - Finance and
Administration); ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Vice President); ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
(Vice President); ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (Vice President); ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (Vice
President); ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Vice President); ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (President,
Franklin Resources, Inc.); ▇▇▇▇ ▇. ▇▇▇ (Vice President); ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Vice
President and Asst. Secretary); ▇▇▇▇▇ ▇. ▇▇▇▇ (Vice President and Asst.
Secretary); ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (Vice President and Secretary); ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(Vice President - AML Compliance); ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (Treasurer and Chief
Financial Officer); and ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (Director of Corporate Communications
- Franklin Resources, Inc.).
As of the date of this communication, none of the foregoing participants
individually, or as a group, beneficially owns in excess of 1% of China World's
common stock or 1% of Dragon's
4
common stock. Except as disclosed above, to the knowledge of China World and
Dragon, none of their respective directors or executive officers has any
interest, direct or indirect, by security holdings or otherwise, in China World
or Dragon.
Shareholders of China World or Dragon may obtain additional information
regarding the interests of the participants by reading the proxy statements of
China World and Dragon when they become available.
------------
Dragon has not commenced any tender offer referred to in this communication.
Upon commencement of any such offer, Dragon will file with the SEC a Schedule TO
and related exhibits, including the offer to purchase, letter of transmittal and
other related documents. Dragon shareholders are strongly encouraged to read
these documents when they become available because they will contain important
information about any offer. When filed with the SEC, the Schedule TO and
related exhibits will be available without charge at the SEC's website at
▇▇▇.▇▇▇.▇▇▇. Any offer to purchase and related letter of transmittal, when
available, will be delivered without charge to all of Dragon's shareholders.
Dragon shareholders may also obtain copies of these documents without charge by
calling Dragon at ▇-▇▇▇-▇▇▇-▇▇▇▇.
This communication is not an offer to purchase or the solicitation of an offer
to sell shares of Dragon. Any tender offer will be made only by an offer to
purchase and the related letter of transmittal. Neither the offer to purchase
shares will be made to, nor will tenders pursuant to the offer to purchase be
accepted from or on behalf of, holders of shares in any jurisdiction in which
making or accepting the offer to purchase would violate that jurisdiction's
laws.
5
SCHEDULE III
FORM OF STIPULATION OF DISMISSAL WITHOUT PREJUDICE
16
Form of Stipulation of Dismissal Without Prejudice
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
(Northern Division)
-------------------------------------
)
▇▇▇▇▇▇▇▇▇ CHINA WORLD FUND, INC., )
▇▇▇▇▇▇▇▇▇ DRAGON FUND, INC. and )
▇▇▇▇▇▇▇▇▇ ASSET MANAGEMENT LTD., )
)
Plaintiffs, )
)
) Civil Action No.JFM 03-CV-275
)
v. )
)
PRESIDENT AND FELLOWS OF HARVARD )
COLLEGE, HARVARD MANAGEMENT )
COMPANY, INC. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, )
)
)
Defendants.)
----------------------------------- )
STIPULATION OF DISMISSAL
It is hereby stipulated and agreed, pursuant to Fed. R. Civ. P. 41(a)(1),
by and between Plaintiffs ▇▇▇▇▇▇▇▇▇ China World Fund, Inc., ▇▇▇▇▇▇▇▇▇ Dragon
Fund, Inc. and ▇▇▇▇▇▇▇▇▇ Asset Management Ltd., and Defendants President and
Fellows of Harvard College, Harvard Management Company, Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
through their undersigned counsel, that this action, including all claims,
counterclaims and third-party claims, is dismissed, without prejudice and with
each party to bear its own costs.
Dated: ________________
---------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
Federal Bar No. 00263
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Federal Bar No. 04588
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Bar No. 015005
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
& ▇▇▇▇▇▇▇▇▇, LLP ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
-and-
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
WEIL, GOTSHAL & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
Attorneys for Plaintiffs ▇▇▇▇▇▇▇▇▇
China World Fund, Inc. and ▇▇▇▇▇▇▇▇▇
Dragon Fund, Inc.
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇ ▇▇▇ ▇▇. ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Attorneys for Plaintiff ▇▇▇▇▇▇▇▇▇
Asset Management Ltd.
2
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, Jr.
▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
-and-
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
ROPES & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
Attorneys for Defendants President And
Fellows Of Harvard College, Harvard
Management Company, Inc. and ▇▇▇▇▇▇
▇▇▇▇▇▇▇
3
