File No. 2-60067
AS FILED MAY 4, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No.
(Check appropriate box or boxes)
TEMPLETON FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
(954) 527-7500
(Area Code and Telephone Number)
500 EAST BROWARD BOULEVARD
FORT LAUDERDALE, FL 33394-3091
(Address of Principal Executive Offices
Number, Street, City, State, Zip Code)
BARBARA J. GREEN, ESQUIRE
500 EAST BROWARD BOULEVARD
FORT LAUDERDALE, FL 33394-3091
(Name and Address of Agent for Service,
Number, Street, City, State, Zip Code)
Copies to:
BRUCE G. LETO, ESQUIRE
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 ONE COMMERCE SQUARE
PHILADELPHIA, PA 19103
Approximate Date of Proposed Public Offering: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
TITLE OF THE SECURITIES BEING REGISTERED: SHARES OF COMMON STOCK - $1.00 PAR
VALUE. NO FILING FEE IS DUE BECAUSE REGISTRANT IS RELYING ON SECTION 24(F) OF
THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON JUNE 3, 1999, PURSUANT
TO RULE 488 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
PAGE
TEMPLETON FUNDS, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481(a) under the
Securities Act of 1933)
<TABLE>
<CAPTION>
N-14 ITEM NO. AND CAPTION LOCATION IN PROSPECTUS
PART A
<S> <C>
1. Beginning of Registration Statement and Facing Page of Registration Statement;
Outside Front Cover Page of Prospectus Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Page of Table of Contents
Prospectus
3. Synopsis Information and Risk Factors Summary; Comparisons of Some Important Features
4. Information About the Transaction Summary; Reasons for the Transaction;
Information About the Transaction
5. Information About the Acquiring Fund Prospectus Cover Page; Summary; Comparisons
of Some Important Features; Comparison of
Investment Goals and Policies; Information
About World Fund
6. Information About the Fund Being Acquired Prospectus Cover Page; Comparisons of
Some Important Features; Comparison of
Investment Goals and Policies; Information
About Growth and Income Fund
7. Voting Information Prospectus Cover Page; Notice of Special
Meeting of Shareholders; Voting Information;
Principal Holders of Shares
8. Interest of Certain Persons and Experts None
9. Additional Information Required for Not Applicable
Reoffering by Persons Deemed to be
Underwriters
PART B
10. Cover Page Cover Page of Statement of Additional
Information
11. Table of Contents Not Applicable
12. Additional Information about the Acquiring Incorporation of Documents by Reference
Fund in the Statement of Additional Information
13. Additional Information about the Fund being Incorporation of Documents by Reference in
Acquired the Statement of Additional Information
14. Financial Statements Incorporation of Documents by Reference in
the Statement of Additional Information
</TABLE>
PART C - OTHER INFORMATION
Part C contains the information required by Items 15-17 under the items set
forth in the form.
PAGE
Dear Shareholder:
Enclosed is a Notice of Meeting for a Special Shareholders' Meeting of the
Templeton Growth and Income Fund (the "Growth and Income Fund"). The Meeting has
been called for July 13, 1999 at [_____________] Eastern time at the offices of
Templeton Global Investment Trust (the "Trust") at 500 East Broward Boulevard,
Fort Lauderdale, FL 33394-3091. The accompanying Prospectus/Proxy Statement
describes a proposal being presented for your consideration and requests your
prompt attention and vote via the enclosed proxy card.
PLEASE TAKE A MOMENT TO FILL OUT, SIGN AND
RETURN THE ENCLOSED PROXY CARD!
This meeting is critically important. You are being asked to consider and
approve an Agreement and Plan of Reorganization that would result in your shares
of the Growth and Income Fund being exchanged for those of a fund called
Templeton World Fund (the "World Fund"). If shareholders of the Growth and
Income Fund approve the proposal, if you own Class A shares of the Growth and
Income Fund, you will receive Class A shares of the World Fund equal in value to
your investment in the Growth and Income Fund and, if you own Class C shares of
the Growth and Income Fund, you will receive Class C shares of the World Fund
equal to your investment in Class C shares of the Growth and Income Fund. You
will no longer be a shareholder of the Growth and Income Fund, and you will
instead be a shareholder of the World Fund.
The proposed transaction is intended to be a tax-free reorganization under
the Internal Revenue Code of 1986, as amended, as further described in the
accompanying Prospectus/Proxy Statement.
The transaction is being proposed because the projected growth in assets of
the Growth and Income Fund was not sufficient to continue to offer a fund with
competitive performance and high quality service to shareholders over the long
term. The World Fund has an investment goal and investment policies that are
similar to those of the Growth and Income Fund as outlined in the
Prospectus/Proxy Statement. The World Fund is managed by Templeton Global
Advisors Limited ("Global Advisors"), the current investment adviser of the
Growth and Income Fund. Global Advisors is a wholly-owned subsidiary of Franklin
Resources, Inc. The World Fund is a larger fund than the Growth and Income Fund
and thus should be better able to diversify its investments and to obtain
certain savings in costs for shareholders.
Please take the time to review this document and vote NOW! The Trustees of
your fund unanimously recommend that you vote in favor of this proposal.
o To ensure that your vote is counted, indicate your position on the
enclosed proxy card.
o Sign and return your card promptly.
o If you determine at a later date that you wish to attend this
meeting, you may revoke your proxy and vote in person.
Thank you for your attention to this matter.
Sincerely,
Barbara J. Green
Secretary
PAGE
PRELIMINARY COPY
TEMPLETON GLOBAL INVESTMENT TRUST
ON BEHALF OF
TEMPLETON GROWTH AND INCOME FUND
500 East Broward Boulevard
Fort Lauderdale, FL 33394-3091
NOTICE OF SPECIAL SHAREHOLDERS' MEETING
To be held on July 13, 1999
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Shareholders' Meeting of the Templeton
Growth and Income Fund (the "Growth and Income Fund") will be held at the
offices of Templeton Global Investment Trust (the "Trust"), 500 East Broward
Boulevard, Fort Lauderdale, FL 33394-3091, on July 13, 1999 at [_____________],
Eastern time. The meeting is being called for the following reasons:
1. To approve or disapprove an Agreement and Plan of Reorganization between
the Trust, on behalf of the Growth and Income Fund and Templeton Funds, Inc.
(the "Company"), on behalf of the Templeton World Fund (the "World Fund") that
provides for: (i) the acquisition of substantially all of the assets of the
Growth and Income Fund in exchange for Class A and Class C shares of the World
Fund, a series of the Company; (ii) the distribution of Class A shares and Class
C shares of the World Fund to the shareholders of the Growth and Income Fund;
and (iii) the liquidation and dissolution of the Growth and Income Fund.
2. To grant the proxyholders the authority to vote upon any
other business as may properly come before the Meeting or any adjournment
thereof.
The transaction contemplated by each Agreement and Plan of Reorganization
is described in the attached Prospectus/Proxy Statement. A copy of the Agreement
and Plan of Reorganization is attached as Exhibit A to the Prospectus/Proxy
Statement.
Shareholders of record as of the close of business on May 21, 1999 are
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
By Order of the Board of Trustees,
Barbara J. Green
Secretary
May [__], 1999
THE BOARD OF TRUSTEES URGES YOU TO COMPLETE, DATE, SIGN, AND RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. IT IS IMPORTANT THAT
YOU RETURN YOUR SIGNED PROXY CARD PROMPTLY SO THAT A QUORUM MAY BE ENSURED.
PAGE
TABLE OF CONTENTS
PAGE
COVER PAGE Cover
SUMMARY
On what proposal am I being asked to vote?
How will the shareholder voting be handled?
What are the general tax consequences of the Transaction?
OMPARISONS OF SOME IMPORTANT FEATURES
How do the investment goals and policies of the funds compare?
What are the risks of an investment in the funds?
Who manages the funds?
What are the fees and expenses of each fund and what might they be after
the Transaction?
Where can I find more financial information about the funds?
What are other key features of the funds?
REASONS FOR THE TRANSACTION
INFORMATION ABOUT THE TRANSACTION
How will the Transaction be carried out?
Who will pay the expenses of the Transaction?
What are the tax consequences of the Transaction?
How do the legal structures of the funds compare?
What should I know about the World Fund Class A and Class C Shares?
What are the capitalizations of the funds and what might the capitalization
be after the Transaction?
COMPARISON OF INVESTMENT GOALS AND POLICIES
Are there any significant differences between the investment goals of the
funds?
How do the types of securities the funds buy and the investment policies of
the funds compare?
How do the fundamental investment restrictions of the funds differ?
What are the risk factors associated with investments in the funds?
VOTING INFORMATION
How many votes are necessary to approve the Agreement and Plan?
How do I ensure my vote is accurately recorded?
Can I revoke my proxy?
What other matters will be voted upon at the Meeting?
Who is entitled to vote?
What other solicitations will be made?
Are there dissenters' rights?
INFORMATION ABOUT THE WORLD FUND
INFORMATION ABOUT THE GROWTH AND INCOME FUND
PRINCIPAL HOLDERS OF SHARES
GLOSSARY OF USEFUL TERMS AND DEFINITIONS
EXHIBITS TO PROSPECTUS/PROXY STATEMENT
Exhibit A - Form of Agreement and Plan of Reorganization
Exhibit B - Prospectus of the Templeton World Fund dated January 1, 1999
Exhibit C - Annual Report to Shareholders of the Templeton World Fund dated
August 31, 1998
PAGE
PRELIMINARY COPY
PROSPECTUS AND PROXY STATEMENT
Dated May [__], 1999
Acquisition of the assets of
TEMPLETON GROWTH AND INCOME FUND
By and in exchange for shares of
TEMPLETON WORLD FUND
This Prospectus/Proxy Statement solicits proxies to be voted at a Special
Shareholders' Meeting (the "Meeting") of the Templeton Growth and Income Fund
(the "Growth and Income Fund"), which is a series of Templeton Global Investment
Trust (the "Trust") to approve or disapprove an Agreement and Plan of
Reorganization (the "Agreement and Plan"). If shareholders of the Growth and
Income Fund vote to approve the Agreement and Plan, the net assets of the Growth
and Income Fund will be acquired by the Templeton World Fund (the "World Fund")
in exchange for shares of Templeton World Fund - Class A ("World Fund Class A
Shares") and Templeton World Fund - Class C ("World Fund Class C Shares").
The Meeting will be held at the principal offices of the Trust, which are
located at 500 East Broward Boulevard, Fort Lauderdale, FL 33394-3091, on July
13, 1999 at [___________] Eastern time. The Board of Trustees of the Trust, on
behalf of the Growth and Income Fund, is soliciting these proxies. This
Prospectus/Proxy Statement will first be sent to shareholders on or about May
[__], 1999.
If the shareholders of the Growth and Income Fund vote to approve the
Agreement and Plan, you will receive World Fund Class A Shares equal in value to
your investment in Templeton Growth and Income Fund - Class A shares and World
Fund Class C shares equal in value to your investment in Templeton Growth and
Income Fund - Class C shares. The Growth and Income Fund will then be
liquidated.
The World Fund is a series of Templeton Funds, Inc. (the "Company") and the
Growth and Income Fund is a series of the Trust. Both the Company and the Trust
are open-end management investment companies. The Growth and Income Fund's
investment goal is high total return (a combination of capital growth and
income), whereas the World Fund's investment goal is long-term capital growth.
The Growth and Income Fund seeks to achieve its goal by investing primarily in
equity and debt securities of U.S. and foreign companies, while the World Fund
seeks to achieve its goal by investing primarily in equity securities of
companies located anywhere in the world, including emerging markets.
This Prospectus/Proxy Statement gives the information about the
proposed reorganization and World Fund Class A and Class C Shares that you
should know before investing. You should retain it for future reference.
Additional information about the World Fund and the proposed reorganization can
be found in the following documents:
o The Prospectus of the World Fund dated January 1, 1999 (the "World Fund
Prospectus") is attached to and considered a part of this Prospectus/Proxy
Statement.
o The Annual Report to Shareholders of the World Fund dated August 31, 1998
contains financial and performance information for the World Fund and is
attached to and considered a part of this Prospectus/Proxy Statement.
o A Statement of Additional Information dated May [___], 1999 relating to
this Prospectus/Proxy Statement has been filed with the SEC and is
incorporated by reference into this Prospectus/Proxy Statement.
o The Prospectus of the Growth and Income Fund dated August 1, 1998, as
amended January 1, 1999 (the "Growth and Income Fund Prospectus") and the
Growth and Income Fund's Annual Report to Shareholders dated March 31, 1998
and Semi-Annual Report to Shareholders dated September 30, 1998 are on file
with the SEC File Nos. 33-73244 and 811-8226) and are incorporated by
reference herein.
You may request a free copy of the Statement of Additional Information or
any of the documents described above by calling 1-800/DIAL BEN(R), or by writing
to either fund at 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL
33733-8030.
LIKE ALL MUTUAL FUND SHARES, THE SEC HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER U.S. GOVERNMENT
AGENCY. MUTUAL FUND SHARES INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
PAGE
SUMMARY
This is only a summary of certain information contained in this
Prospectus/Proxy Statement. You should read the more complete information in the
rest of this Prospectus/Proxy Statement, including the form of Agreement and
Plan (attached as Exhibit A), the World Fund Prospectus (attached as Exhibit B),
and the World Fund's Annual Report (attached as Exhibit C).
ON WHAT PROPOSAL AM I BEING ASKED TO VOTE?
The Board of Trustees of the Trust has approved the Agreement and Plan for
the Growth and Income Fund and recommends that shareholders of the Growth and
Income Fund vote to approve the Agreement and Plan. If shareholders vote to
approve the Agreement and Plan, the Growth and Income Fund's net assets will be
transferred to the World Fund in exchange for an equal value of World Fund Class
A and Class C Shares. These shares of the World Fund will then be distributed to
the Growth and Income Fund's shareholders and the Growth and Income Fund will be
liquidated. (This proposed transaction is referred to in this Prospectus/Proxy
Statement as the "Transaction.")
This means that if you own Templeton Growth and Income Fund - Class A
shares, they will be exchanged for an equal value of World Fund Class A Shares
and if you own Templeton Growth and Income Fund - Class C Shares, they will be
exchanged for an equal value of World Fund Class C Shares. As a result, you will
cease to be a shareholder of the Growth and Income Fund and will become a
shareholder of the World Fund. This exchange will occur on the closing date of
the Transaction, which is the specific date on which the Transaction takes
place.
Like the Growth and Income Fund, the World Fund is a mutual fund in the
Franklin Templeton Group of Funds that is managed by Templeton Global Advisors
Limited ("Global Advisors"). The World Fund has investment objectives and
policies that are similar, but not identical, to those of the Growth and Income
Fund.
For the reasons set forth below under "Reasons for the Transaction," the
Board of Trustees of the Trust has concluded that the Transaction is in the best
interests of the shareholders of the Growth and Income Fund. The Board of
Trustees of the Trust and the Board of Directors of the Company also concluded
that no dilution in value would result to the shareholders of the Growth and
Income Fund or to the shareholders of the World Fund, respectively, as a result
of the Transaction.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE
TO APPROVE THE AGREEMENT AND PLAN.
HOW WILL THE SHAREHOLDER VOTING BE HANDLED?
All shareholders of the Growth and Income Fund will vote to determine
whether the Growth and Income Fund will be reorganized into the World Fund.
Shareholders who own shares at the close of business on May 21, 1999 will be
entitled to vote at the Meeting, and will be entitled to one vote for each full
share and a fractional vote for each fractional share that they hold.
REQUIRED VOTE. Approval of the Transaction requires the vote of a "majority
of the outstanding voting securities" of the Growth and Income Fund (regardless
of class) in favor of the Agreement and Plan, which means the vote of: (i) more
than 50% of the outstanding voting securities of the Fund; or (ii) 67% or more
of the voting securities of the Fund present at the meeting, if the holders of
more than 50% of the outstanding voting securities are present or represented by
proxy, whichever is less.
Please vote by proxy as soon as you receive this Prospectus/Proxy
Statement. You may place your vote by completing and signing the enclosed proxy
card. If you return a signed proxy card, your votes will be officially cast at
the Meeting by the persons appointed as proxies.
You can revoke your proxy or change your voting instructions at any time
until the vote is taken at the Meeting. For more details about shareholder
voting, see the "Voting Information" section of this Prospectus/Proxy Statement.
WHAT ARE THE GENERAL TAX CONSEQUENCES OF THE TRANSACTION?
It is expected that shareholders of the Growth and Income Fund will not
recognize any gain or loss for federal income tax purposes as a result of the
exchange of their shares for World Fund Class A or Class C Shares. You should,
however, consult your tax advisor regarding the effect of the Transaction, if
any, in light of your individual circumstances. You should also consult your tax
advisor about state and local tax consequences of the Transaction, if any,
because this discussion only relates to the federal income tax consequences. For
further information about the tax consequences of the Transaction, see
"Information About the Transaction What are the Tax Consequences of the
Transaction?"
COMPARISONS OF SOME IMPORTANT FEATURES
HOW DO THE INVESTMENT GOALS AND POLICIES OF THE FUNDS COMPARE?
While not identical, the investment goals of the Growth and Income Fund
and the World Fund are similar. The Growth and Income Fund's investment goal is
high total return (a combination of capital growth and income). The World Fund's
investment goal is long-term capital growth. The primary difference between the
two goals is the Growth and Income Fund's inclusion of the income component.
The way in which each fund seeks to achieve its goal also differs. The
Growth and Income Fund seeks to achieve its goal of high total return by
investing primarily in equity and debt securities of U.S. and foreign companies.
The World Fund seeks to achieve its goal by investing primarily in the equity
securities of companies located anywhere in the world.
Both funds invest at least 65% of their total assets in issuers located in
at least three countries (including the U.S.); invest without percentage
limitation in domestic and foreign securities; and may invest up to 100% of
their total assets in emerging markets. The fund's investment policies differ,
however, in (i) the amount and types of securities in which each fund primarily
invests; (ii) the amount of total assets that each fund may invest in illiquid
securities; and (iii) limitations on each fund's investments in listed and
unlisted securities.
For more information about the investment goals and policies of the two
funds, see "Comparison of Investment Goals and Policies."
WHAT ARE THE RISKS OF AN INVESTMENT IN THE FUNDS?
As with most investments, investment in the Growth and Income Fund and the
World Fund involve risks. There can be no guarantee against losses resulting
from an investment in either fund, nor can there be any assurance that either
fund will achieve its investment goal. The risks associated with an investment
in each fund are substantially similar and include stock, foreign securities,
currency, illiquid securities, interest rate, and credit risks.
For more information about the risks of the funds, see "What are the risk
factors associated with investments in the funds?" under the heading "Comparison
of Investment Goals and Policies." Also, the World Fund Prospectus contains a
bar chart and table that shows the volatility of the World Fund's returns, which
is one indicator of the risks of investing in the World Fund.
WHO MANAGES THE FUNDS?
The management of the business and affairs of the funds is the
responsibility of the Board of Directors (in the case of the World Fund) or
Board of Trustees (in the case of the Growth and Income Fund). Each Board elects
officers who are responsible for the day-to-day operations of the funds.
Global Advisors manages the assets of both funds and makes each fund's
investment decisions. The address of Global Advisors is Templeton Global
Advisors Limited, Lyford Cay, Nassau, Bahamas. Global Advisors is a wholly-owned
subsidiary of Franklin Resources, Inc. ("Resources"). Resources is a publicly
owned company engaged in various aspects of the financial services industry
through its subsidiaries. Together, Global Advisors and its affiliates serve as
investment manager or administrator to 54 registered investment companies, with
approximately 163 U.S.-based funds. They have over $216 billion in combined
assets under management for more than 7 million U.S.-based mutual fund
shareholders and other accounts. The principal shareholders of Resources are
Charles B. Johnson and Rupert H. Johnson, Jr.
The team responsible for the day-to-day management of the World Fund is
described below. The team is the same team that manages the Growth and Income
Fund, except that Mr. Everett is the lead portfolio manager for the World Fund,
and Mr. Farrington is the lead portfolio manager for the Growth and Income Fund.
JEFFREY A. EVERETT CFA, EXECUTIVE VICE PRESIDENT OF GLOBAL ADVISORS. Mr.
Everett has been a manager of the World Fund since 1996. He holds a BS in
finance from Pennsylvania State University. He is a Chartered Financial Analyst
and a member of the International Society of Financial Analysts and the
Association of Investment Management and Research. Prior to joining the Franklin
Templeton organization in 1989, Mr. Everett was an investment officer at First
Pennsylvania Investment Research, a division of First Pennsylvania Corporation,
where he analyzed equity and convertible securities. He also coordinated
research for Centre Square Investment Group, the pension management subsidiary
of First Pennsylvania Corporation. Mr. Everett is responsible for managing
several offshore accounts as well as several Franklin Templeton mutual funds.
MARK HOLOWESKO CFA, PRESIDENT OF GLOBAL ADVISORS. Mr. Holowesko has been a
manager of the World Fund since 1987. He joined the Franklin Templeton Group in
1985. He holds a BA in economics from Holy Cross College and an MBA from Babson
College. He is a Chartered Financial Analyst, Chartered Investment Counselor,
and a founding member of the International Society of Financial Analysts. Prior
to joining Franklin Templeton in 1985, Mr. Holowesko worked with RoyWest Trust
Corporation (Bahamas) Limited as an investment analyst. His duties at RoyWest
included managing trust and individual accounts, as well as equity market
research worldwide. Mr. Holowesko is responsible for coordinating equity
research and portfolio management activities worldwide for the Templeton Global
Equity Group. He also manages several mutual funds.
RICHARD SEAN FARRINGTON CFA, VICE PRESIDENT OFGLOBAL ADVISORS. Mr.
Farrington has been a manager of World Fund since 1994. He joined the Franklin
Templeton Group in 1991. He holds a BA in economics from Harvard University. Mr.
Farrington is a Chartered Financial Analyst. He has served as the president of
the Bahamas Society of Financial Analysts and is currently on the board of the
International Society of Financial Analysts. He joined Franklin Templeton in
1991 and is a research analyst and portfolio manager.
WHAT ARE THE FEES AND EXPENSES OF EACH FUND AND WHAT MIGHT THEY BE AFTER THE
TRANSACTION?
The following tables describe the fees and expenses that you may pay if you
buy and hold Class A or Class C shares of the Growth and Income Fund or the
World Fund. The table also shows the estimated expense levels of the World Fund
after the proposed Transaction.
<TABLE>
<CAPTION>
ACTUAL+ ESTIMATED
-------------------- -----------------
Growth
and
Income World World Fund
Fund Fund Class A After
Class A/5/ Class A/5/ Transaction
---------- ------- -------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES*
Maximum sales charge (Load) as a percentage
at offering price........................... 5.75% 5.75% 5.75%
Load imposed on purchases/1/................ 5.75% 5.75% 5.75%
Maximum Deferred Sales Charge (Load)/2/..... None None None
Exchange fee**.............................. None None None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<S> <C> <C> <C>
Management fees............................... 0.75% 0.61% 0.61%
Distribution and service (12b-1) fees4......... 0.35% 0.25% 0.25%
Other expenses................................. 0.66% 0.19% [0.19%]
----- ----- -------
Total annual fund operating expenses.......... 1.76%3 1.05% [1.05%]
<CAPTION>
ACTUAL+ ESTIMATED
----------------- --------------
Growth
and
Income World World Fund
Fund Fund Class C After
Class C/5/ Class C/5/ Transaction
------- ------- -------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES*
Maximum sales charge (Load) as a percentage
of offering price.......................... 1.99% 1.99% 1.99%
Load imposed on purchases/1/................ 1.00% 1.00% 1.00%
Maximum Deferred Sales Charge (Load)/2/..... 0.99% 0.99% 0.99%
Exchange fee**.............................. None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees.............................. 0.75% 0.61% 0.61%
Distribution and service (12b-1) Fees4......... 1.00% 1.00% 1.00%
Other expenses................................. 0.66% 0.19% [0.19%]
----- ----- -------
Total annual fund operating expenses........... 2.41%3 1.80% [1.80%]
</TABLE>
+ Information provided is for Growth and Income Fund Class A and Class C
Shares for the fiscal year ended March 31, 1998. Information for World Fund
Class A and Class C Shares is provided for the fiscal year ended August 31,
1998.
* If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
** There is a $5.00 fee for each exchange by a Market Timer, as that term is
defined in the Glossary to this Prospectus/Proxy Statement. We process all other
exchanges without a fee.
/1/ There is no front-end sales charge if you invest $1 million or more.
/2/ A Contingent Deferred Sales Charge may apply to purchases of Class A Shares
of $1 million or more if you sell the shares within one year and to any
purchases of Growth and Income Fund Class C Shares if you sell the shares within
18 months. A Contingent Deferred Sales Charge may also apply to purchases by
certain retirement plans that qualify to buy Class A shares of Growth and Income
Fund without a front-end sales charge. The charge is based on the value of the
shares sold or the Net Asset Value at the time of purchase, whichever is less.
The number in the table shows the charge as a percentage of Offering Price.
While the percentage for Class C is different depending on whether the charge is
shown based on the Net Asset Value or the Offering Price, the dollar amount you
would pay is the same. See "How Do I Sell Shares?--Contingent Deferred Sales
Charge" in the prospectus of the Growth and Income Fund and see "Your Account
- -CDSC" in the prospectus of the World Fund for details.
/3/ For the period shown, Global Advisors and FT Services had agreed in advance
to waive or limit their respective management and administration fees to reduce
the fund's expenses. With this reduction, management fees were 0.24% for the
Growth and Income Fund and total operating expenses were 1.25% for Class A
Shares and 1.90% for Class C Shares of Growth and Income Fund. This arrangement
may end at any time upon notice to the Board. 4The combination of front-end
sales charges and Rule 12b-1 fees could cause long-term shareholders to pay more
than the economic equivalent of the maximum front-end sales charges permitted
under the rules of the National Association of Securities Dealers, Inc. 5 Prior
to January 1, 1999, Class A Shares were designated Class I Shares and Class C
Shares were designated Class II Shares.
The following expense example can help you compare the cost of investing in
the World Fund Class A and C Shares versus the cost of investing in the Growth
and Income Fund Class A and Class C Shares. The example assumes that you invest
$10,000 in each fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year, that each fund's operating expenses remain
the same and that no fee waivers or expense limitations are in place. Although
your actual costs may be higher or lower, based on these assumptions, your costs
would be:
<TABLE>
<CAPTION>
CLASS A 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth and Income Fund Class A $700/1/ $950 $1,220 $2,000
World Fund Class A $676/1/ $890 $1,121 $1,784
Estimated World Fund Class A
(after proposed Transaction) $__ $__ $__ $__
CLASS C
Growth and Income Fund Class C $390/2/ $690 $1,120 $2,300
World Fund Class C $379/3/ $661 $1,065 $2,195
Estimated World Fund Class C
(after proposed Transaction) $__ $__ $__ $__
</TABLE>
/1/ Assumes a Contingent Deferred Sales Charge will not apply.
/2/ For the same Class C investment, you would pay projected expenses of $290 if
you did not sell your shares at the end of the first year. Your projected
expenses for the remaining periods would be the same.
/3/ For the same Class C investment, you would pay projected expenses of $281 if
you did not sell your shares at the end of the first year. Your projected
expenses for the remaining periods would be the same.
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. Each
fund pays its operating expenses. The effects of these expenses are reflected in
the net asset value or dividends of each class and are not directly charged to
your account.
WHERE CAN I FIND MORE FINANCIAL INFORMATION ABOUT THE FUNDS?
For the World Fund, per share income information for the past five fiscal
years (and the most recent six month semi-annual period) is shown immediately
below under the heading "Financial Highlights." Also, the current Annual Report
to Shareholders of the World Fund for the fiscal year ended August 31, 1998
contains more financial information about the World Fund, including audited
financial statements and a discussion of that fund's performance during the past
fiscal year. The Annual Report is attached to and considered a part of this
Prospectus/Proxy Statement.
The Growth and Income Fund Prospectus as well as the Growth and Income
Fund's Annual Report to Shareholders for the fiscal year ended March 31, 1998
and Semi-Annual Report to Shareholders for the six month period ended September
30, 1998 contain further financial information about that fund. These documents
are available upon request (See "Information about the Growth and Income Fund").
Templeton World Fund
Financial Highlights -- Class A
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1999 Year Ended August 31,
(unaudited) 1998 1997 1996 1995 1994
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout the
period)
Net asset value, beginning of period $____ $19.66 $16.21 $16.76 $17.06 $15.94
----------------------------------------------------------------------------
Income from investment operations:
Net investment income $____ .42 .45 .41 .33 .26
Net realized and unrealized gains (losses) $____ (1.59) 4.47 1.29 1.11 2.50
----------------------------------------------------------------------------
Total from investment operations $____ (1.17) 4.92 1.70 1.44 2.76
----------------------------------------------------------------------------
Less: Dividends from net investment income ($___) (.44) (.43) (.37) (.28) (.26)
Less: Distributions from net realized gains ($___) (2.60) (1.04) (1.88) (1.46) (1.38)
----------------------------------------------------------------------------
Total Distributions $____ (3.04) (1.47) (2.25) (1.74) (1.64)
----------------------------------------------------------------------------
Net asset value, end of period $____ $15.45 $19.66 $16.21 $16.76 $17.06
----------------------------------------------------------------------------
Total Return (%)/1/ ____ (7.80) 32.70 11.73 9.87 18.87
Ratios/Supplemental Data
Net assets, end of period (000's) $_______ $7,852,041 $8,649,994 $6,483,146 $5,868,967 $5,421,691
Ratios to average net assets (%):
Expenses ____ 1.04 1.03 1.03 1.05 1.04/2/
Net investment income ____ 2.34 2.58 2.66 2.18 1.67/2/
Portfolio turnover rate (%) ____ 43.36 39.16 22.05 34.05 30.77
</TABLE>
/1/ Total return does not reflect sales charges and is not annualized.
/2/ Annualized.
Templeton World Fund
Financial Highlights -- Class C
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1999 Year Ended August 31,
(unaudited) 1998 1997 1996 1995/1/
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout the
period)
Net asset value, beginning of period $____ $19.39 $16.04 $16.71 $15.36
----------------------------------------------------------------------------
Income from investment operations:
Net investment income $____ .33 .34 .45 .03
Net realized and unrealized gains (losses) $____ (1.61) 4.39 1.11 1.32
----------------------------------------------------------------------------
Total from investment operations $____ (1.28) 4.73 1.56 1.35
Less: Dividends from net investment income ($___) (.35) (.34) (.35) --
Less: Distributions from net realized gains ($___) (2.60) (1.04) (1.88) --
Total Distributions $____ (2.95) (1.38) (2.23) --
----------------------------------------------------------------------------
Net asset value, end of period $____ $15.16 $19.39 $16.04 $16.71
----------------------------------------------------------------------------
Total Return (%)/2/ ____ (8.51) 31.61 10.88 8.79
Ratios/Supplemental Data
Net assets, end of period (000's) $_______ $325,319 $207,679 $58,619 $7,623
Ratios to average net assets (%):
Expenses ____ 1.80 1.83 1.84 1.82/3/
Net investment income ____ 1.66 1.92 2.14 1.37/3/
Portfolio turnover rate (%) ____ 43.36 39.16 22.05 34.05
</TABLE>
/1/ Figures for Class C are for the period May 1, 1995 (effective date) through
August 31, 1995.
/2/ Total return does not reflect sales charges and is not annualized.
/3/ Annualized.
WHAT ARE OTHER KEY FEATURES OF THE FUNDS?
TRANSFER AGENCY AND CUSTODY SERVICES. Franklin/Templeton Investor Services,
Inc. ("Investor Services"), a wholly owned subsidiary of Resources, is the
shareholder servicing agent and acts as the transfer agent and dividend-paying
agent for the funds. Under an administration agreement, Franklin Templeton
Services, Inc. ("FT Services"), also a wholly owned subsidiary of Resources,
provides certain administrative facilities and services to each fund.
The Chase Manhattan Bank acts as the custodian of the securities and other
assets of the World Fund and of the Growth and Income Fund. The main office of
the Chase Manhattan Bank is MetroTech Center, Brooklyn, NY 11245. As a foreign
custody manager, the bank selects and monitors foreign sub-custodian banks,
selects and evaluates non-compulsory foreign depositaries and monitors and
furnishes information relevant to the selection of compulsory depositories.
MANAGEMENT AND ADMINISTRATION FEES. Global Advisors is the investment
manager of both the Growth and Income Fund and the World Fund Under the Growth
and Income Fund's management agreement, the Growth and Income Fund pays Global
Advisors a management fee (before any waiver) equal to an annual rate of 0.75%
of its average daily net assets. The World Fund pays Global Advisors a
management fee equal to an annual rate of 0.75% of the value of average daily
net assets up to and including $200 million; 0.675% of the value of average
daily net assets over $200 million and up to and including $1.3 billion; and
0.60% of the value of average daily net assets over $1.3 billion. The management
fee rates for the past fiscal year for each of these funds are shown in the Fee
Table for each fund included in the Summary section of this Prospectus/Proxy
Statement. Because the World Fund and Growth and Income Fund have multiple
classes, holders of World Fund Class A shares and World Fund Class C Shares and
holders of Growth and Income Fund Class A Shares and Class C shares pay a
proportionate share of these fees.
DISTRIBUTION SERVICES. Pursuant to underwriting agreements relating to each
of the funds, Franklin/Templeton Distributors, Inc. ("Distributors") acts as a
principal underwriter in a continuous public offering of the funds' shares.
Distributors pays the expenses of the distribution of the shares of the funds,
including advertising expenses and the costs of printing sales materials and
prospectuses used to offer shares to the public.
RULE 12B-1 PLANS. Each class of the Growth and Income Fund and the World
Fund has a separate distribution plan or "Rule 12b-1 Plan" under which the fund
shall pay or may reimburse Distributors or others for the expenses of activities
that are primarily intended to sell shares of that class. These expenses may
include, among others, distribution or service fees paid to securities dealers
who have executed a servicing agreement with the fund, Distributors or its
affiliates; a prorated portion of Distributors' overhead expenses; and the
expenses of printing prospectuses and reports used for sales purposes and
preparing and distributing sales literature and advertisements.
Payments of Rule 12b-1 fees by the Growth and Income Fund under its Class A
plan may not exceed 0.35% per year of the fund's average daily net assets and
under its Class C plan may not exceed 1.00% per year of the fund's average daily
net assets. During the first year after certain Class A purchases are made
without a sales charge, securities dealers may not be eligible to receive the
Rule 12b-1 fees associated with the purchase.
In the case of the World Fund's Class A plan, the Rule 12b-1 fees
charged may not exceed 0.25% per year of the fund's average daily net assets and
in the case of the World Fund's Class C plan, the Rule 12b-1 fees charged may
not exceed 1.00% per year of the fund's average daily net assets.
PURCHASES AND REDEMPTIONS. Each fund has a maximum sales charge imposed
on purchases of its Class A shares of 5.75% with reduced charges for purchases
over $50,000 and no sales charges for purchases in excess of $1,000,000. Each
fund has a maximum sales charge of 1.00% imposed on purchases of its Class C
shares and a maximum deferred sales charge of 0.99% imposed on the redemption of
its Class C shares. The deferred sales charge for each fund's Class C shares is
waived in certain circumstances. For more information, please see "Choosing a
Share Class" in the World Fund's Prospectus and "How Do I Sell Shares" in the
Growth and Income Fund's Prospectus. Both funds generally require a minimum
initial investment of $1,000 and subsequent investments of at least $50. The
minimum may be waived or reduced when shares of these funds are purchased
through retirement accounts or plans providing for regular periodic investments.
You may sell (redeem) your shares at any time. You can also exchange shares
between most Franklin Templeton Funds (an "exchange") within the same class,
generally without paying an additional sales charge. Because it is technically a
sale and a purchase of shares, an exchange is a taxable transaction.
Shares of both funds may be redeemed at their respective Net Asset Value
per share. However, redemptions of Class A shares of both funds that were
purchased in amounts of $1,000,000 or more generally are subject to a Contingent
Deferred Sales Charge ("CDSC") of 1% for a period of 12 months following the
date of purchase. In addition, there may be a CDSC on any Class C share of
either fund if it is sold within 18 months after purchase or on sales of Class A
shares the of the World Fund by certain retirement plans that acquired the
shares without an initial sales charge. World Fund Shares acquired by Growth and
Income Fund shareholders as a result of this Transaction are subject to a CDSC
to the same extent that the Growth and Income Fund shares were subject to a
CDSC.
Additional information and specific instructions explaining how to buy,
sell, and exchange shares of the funds are outlined in the current prospectus of
the Growth and Income Fund under the heading "About Your Account" and in the
World Fund Prospectus under the heading "Your Account." The World Fund
Prospectus accompanying this Prospectus/Proxy Statement also lists phone numbers
for you to call if you have any questions about your account under the heading
"Questions." These phone numbers are the same for the World Fund and the Growth
and Income Fund.
DIVIDENDS AND DISTRIBUTIONS. Both funds declare dividends. The amount of
these dividends will vary depending on changes in the funds' net investment
income. Neither fund pays "interest" nor guarantees any amount of dividends or
return on an investment in its shares.
Each fund automatically reinvests distributions in additional shares of
that fund unless you select a different option. Specific instructions explaining
how to select a different option are outlined in the current prospectus of each
fund under the heading "Distribution Options."
Distributions generally are taxable to you either as ordinary income or
capital gains. This is true whether you reinvest your distributions in
additional shares or receive them in cash. Distributions designated by both
funds as long-term capital gains are taxable to you as such.
Ordinary dividends and capital gain distributions that you receive from the
funds, and gains arising from redemptions or exchanges of your fund shares, will
generally be subject to state and local income tax.
For more information about the tax implications of investments in either
fund, see the heading "Tax Considerations" in the prospectus for the World Fund
and "How Taxation Affects the Fund and its Shareholders" in the prospectus for
the Growth and Income Fund.
REASONS FOR THE TRANSACTION
Because of the relatively low demand for the Growth and Income Fund, Global
Advisors recommended to the Board of Trustees of the Trust that the Growth and
Income Fund be combined with a larger fund that has similar investment goals and
policies. A larger fund should be better able to diversify its investments and
to obtain certain savings in costs for the Growth and Income Fund's
shareholders. The Transaction was also recommended in order to combine similar
funds within the Franklin Templeton Group to eliminate duplication of expenses
and internal competition.
The Agreement and Plan was presented to the Trust's Board of Trustees at a
meeting of the Board. At the meeting, the Board questioned management about the
potential benefits and costs to shareholders of the Growth and Income Fund. In
deciding whether to recommend approval of the Transaction to shareholders, the
Board of Trustees considered, among other things: the expense ratio of the
Growth and Income Fund and the World Fund; the comparative investment
performance of the Growth and Income Fund and the World Fund; the compatibility
of the investment objectives, policies, restrictions and investments of the
World Fund with those of the Growth and Income Fund; the tax consequences of the
Transaction; and the significant experience of Global Advisors. During the
course of its deliberations, the Board of Trustees also considered that the
expenses of each Transaction will be shared one-quarter by the World Fund,
one-quarter by the Growth and Income Fund and one-half by Global Advisors.
The Board concluded that the Transaction is in the best interests of the
shareholders of the Growth and Income Fund and that no dilution of value would
result to the shareholders of the Growth and Income Fund from the Transaction.
It then decided to approve the Agreement and Plan and to recommend that
shareholders of the Growth and Income Fund vote to approve the Transaction. As
required by law, the Trustees approving the Agreement and Plan included a
majority of the Trustees who are not interested persons of the Growth and Income
Fund.
The Board of Trustees' conclusion was based on a number of factors,
including that the Transaction would permit shareholders to pursue their
investment goals in a larger fund. A larger fund should have an enhanced ability
to effect portfolio transactions on more favorable terms and should have greater
investment flexibility. A fund with higher aggregate net assets may also be able
to reduce or eliminate certain duplicative costs and expenses. This may result
in lower overall expense ratios through the spreading of fixed costs of fund
operations over a larger asset base. However, variable expenses that are based
on the value of assets or the number of shareholder accounts, such as custody
and transfer agent fees, would be largely unaffected by the Transaction.
The Board of Directors of the Company, on behalf of the World Fund, also
determined that the Transaction was in the best interests of the World Fund and
its shareholders and that no dilution would result to those shareholders.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF TRUSTEES OF THE TRUST, ON
BEHALF OF THE GROWTH AND INCOME FUND, RECOMMENDS THAT YOU VOTE FOR THE AGREEMENT
AND PLAN.
If the Agreement and Plan is not approved for Growth and Income Fund, the
Board of Trustees will consider other possible courses of action for Growth and
Income Fund, including dissolution and liquidation.
INFORMATION ABOUT THE TRANSACTION
This is only a summary of the Agreement and Plan. You should read the
actual Agreement and Plan. It is attached as Exhibit A.
HOW WILL THE TRANSACTION BE CARRIED OUT?
If the shareholders of the Growth and Income Fund approve the Agreement and
Plan, the Transaction will take place after various conditions are satisfied by
the Trust, on behalf of Growth and Income Fund, and by the Company on behalf of
the World Fund, including the delivery of certain documents. The Trust and the
Company will agree on the closing date. If the shareholders of the Growth and
Income Fund do not approve the Agreement and Plan, the Transaction will not take
place.
If the shareholders of the Growth and Income Fund approve the Agreement and
Plan, that fund will deliver substantially all of its assets to the World Fund
on the closing date. In exchange, the Trust, on behalf of Growth and Income
Fund, will receive World Fund Class A Shares and World Fund Class C Shares that
have a value equal to the dollar value of the assets delivered to the World
Fund. The stock transfer books of the Growth and Income Fund will be permanently
closed as of [ ____ ] Eastern time on the closing date. The Growth and Income
Fund will only accept requests for redemption received in proper form before[
____ ] Eastern time on the Closing Date. Requests received after that time will
be considered requests to redeem shares of the World Fund.
To the extent permitted by law, the Trust and the Company may agree to
amend the Agreement and Plan without shareholder approval. They may also agree
to terminate and abandon the Transaction at any time before or, to the extent
permitted by law, after the approval of shareholders of the Growth and Income
Fund.
WHO WILL PAY THE EXPENSES OF THE TRANSACTION?
The expenses resulting from the Transaction will be shared by the following
parties in the percentages indicated: 25% by the World Fund, 25% by the Growth
and Income Fund, and 50% by Global Advisors. As described above, Global Advisors
is the manager and administrator for the funds involved in the Transaction.
HOW DO THE LEGAL STRUCTURES OF THE FUNDS COMPARE?
The Growth and Income Fund is a series of the Trust, which is a business
trust organized under the laws of the State of Delaware on December 21, 1993.
The World Fund is a series of Templeton Funds, Inc., a Maryland corporation
(previously defined as the "Company"), which was formed on August 15, 1977. Both
the Delaware Business Trust Act and the Maryland General Corporation Law contain
provisions that are specially designed to facilitate the operations of mutual
funds.
WHAT ARE THE TAX CONSEQUENCES OF THE TRANSACTION?
The Transaction is intended to qualify as a tax-free reorganization for
federal income tax purposes under Section 368(a)(1) of the Internal Revenue Code
of 1986, as amended. Based on certain assumptions and representations received
from the Trust, on behalf of the Growth and Income Fund, and the Company, on
behalf of the World Fund, it is the opinion of Stradley, Ronon, Stevens & Young,
LLP, counsel to the funds, that shareholders of the Growth and Income Fund will
not recognize any gain or loss for federal income tax purposes as a result of
the exchange of their shares of the Growth and Income Fund for shares of the
World Fund and that the Growth and Income Fund will not recognize any gain or
loss upon receipt of the World Fund's assets.
You will continue to be responsible for tracking the purchase cost and
holding period of your shares and should consult your tax advisor regarding the
effect, if any, of the Transaction in light of your individual circumstances.
You should also consult your tax advisor as to state and local tax consequences,
if any, of the Transaction because this discussion only relates to the federal
income tax consequences.
WHAT SHOULD I KNOW ABOUT THE WORLD FUND CLASS A AND CLASS C SHARES?
World Fund Class A Shares and World Fund Class C shares will be distributed
to the shareholders of Growth and Income Fund. Each share will be fully paid and
nonassessable when issued with no personal liability attaching to the ownership
thereof. Each World Fund Class A Share and World Fund Class C Share will have no
preemptive or conversion rights, and will be transferable upon the books of the
World Fund. The shares of the World Fund will be recorded electronically in each
shareholder's account. The World Fund will then send a confirmation to each
shareholder. As described in its prospectus, the World Fund does not issue share
certificates unless requested. Former shareholders of the Growth and Income Fund
whose shares are represented by outstanding share certificates will not be
allowed to redeem shares of the World Fund until the certificates have been
returned.
The shares of both funds have non-cumulative voting rights. This gives
holders of more than 50% of the shares voting the ability to elect all of the
members of the Board. If this happens, holders of the remaining shares voting
will not be able to elect anyone to the Board.
Like the Growth and Income Fund, the World Fund does not routinely hold
annual meetings of shareholders. The funds may each hold special meetings for
matters requiring shareholder approval. A meeting of shareholders may also be
called by the Board of Directors or Trustees in its discretion or by
shareholders who hold at least 10% of that company's or trust's outstanding
shares in order to consider the removal of a Board member.
WHAT ARE THE CAPITALIZATIONS OF THE FUNDS AND WHAT MIGHT THE CAPITALIZATION BE
AFTER THE TRANSACTION?
The following table sets forth, as of March 31, 1999, the capitalization of
the Class A and C shares of the Growth and Income Fund and the World Fund. The
table also shows the projected capitalization of the World Fund Class A and C
Shares as adjusted to give effect to the proposed Transaction. The
capitalization of the World Fund and its classes is likely to be different when
the Transaction is consummated.
World Fund
Growth and World after Transaction
Income Fund Fund (projected)
-----------------------------------------
Net Assets (all classes)* $ $ $
Class A net assets (millions)
Class A shares outstanding
Class A net asset value per share
Class C net assets
Class C net asset value per share
Class C shares outstanding
* The World Fund offers an additional class of shares, Class B.
COMPARISON OF INVESTMENT GOALS AND POLICIES
This section describes key investment goals of the Growth and Income Fund
and the World Fund, and certain noteworthy differences between the investment
objectives and policies of the funds. For a complete description of the World
Fund's investment policies and risks, you should read the World Fund Prospectus,
which is attached to this Prospectus/Proxy Statement as Exhibit B.
ARE THERE ANY SIGNIFICANT DIFFERENCES BETWEEN THE INVESTMENT GOALS OF THE FUNDS?
The Growth and Income Fund's investment goal is high total return, which is
a combination of capital growth and income. The World Fund's investment goal is
capital growth. Therefore, the difference between the two goals is the Growth
and Income Fund's inclusion of the income component. Each investment goal is
fundamental.
The way in which each fund seeks to achieve its goal differs. The Growth
and Income Fund seeks to achieve its goal by investing at least 65% of its total
assets in equity and debt securities of U.S. and foreign companies, while the
World Fund seeks to achieve its goal by investing primarily in equity securities
of U.S. and foreign companies.
Policies or restrictions stated in this Prospectus/Proxy Statement as
fundamental may not be changed without the approval of the lesser of: (i) a
majority of the outstanding shares of the fund; or (ii) 67% or more of the
shares represented at a shareholders' meeting at which the holders of more than
50% of the outstanding shares are represented.
HOW DO THE TYPES OF SECURITIES THE FUNDS BUY AND INVESTMENT POLICIES OF THE
FUNDS COMPARE?
GENERAL.
Both funds invest in equity and debt securities of U.S. and foreign
companies. Both funds invest at least 65% of their total assets in issuers
located in at least three countries (including the U.S.); invest without
percentage limitation in domestic and foreign securities; and may invest up to
100% of their total assets in emerging markets. The funds make foreign
investments by directly holding foreign securities or investing in depositary
receipts. Under certain circumstances, each fund invests a portion of its assets
temporarily in short-term instruments.
EQUITY SECURITIES.
Both funds invest in equity securities of U.S. and foreign companies,
including companies located in emerging markets. The World Fund seeks to obtain
its investment goal by primarily investing in equity securities, while the
Growth and Income Fund seeks to obtain its investment goal by primarily
investing equity and debt securities. Equity securities generally entitle the
holder to participate in a company's general operating results and typically
include common stock, preferred stock, convertible securities, warrants or
rights. Currently, the Growth and Income Fund invests primarily in common stock,
while the World Fund invests primarily in common as well as preferred stock.
DEBT SECURITIES.
The Growth and Income Fund attempts to achieve its investment goal by
having a flexible policy of investing in debt securities and equity securities.
Depending upon current market conditions, the World Fund generally invests a
portion of its total assets in debt securities of companies and governments
located anywhere in the world. Debt securities represent an obligation of the
issuer to repay a loan of money to it, and generally provide for the payment of
interest. These include bonds, notes and debentures. Both funds may buy rated
and unrated debt securities of any maturity. Neither fund may invest more than
5% of its total assets in non-investment grade securities (i.e., those rated
lower than BBB by S&P or Baa by Moody's or, in the case of Growth and Income
Fund, if unrated, determined by the fund to be of comparable quality).
DEPOSITARY RECEIPTS.
Both funds invest in American, European and Global Depositary Receipts.
Depositary Receipts are certificates typically issued by a bank or trust company
that give their holders the right to receive securities issued by a foreign or
domestic company.
TEMPORARY INVESTMENTS.
When Global Advisors believes unusual or adverse economic, market or
other conditions exist, each fund's portfolio may be invested in a temporary
defensive manner. Under these circumstances, the World Fund may invest all of
its assets in: (i) high quality commercial paper; (ii) securities issued by or
guaranteed by the U.S. government; (iii) repurchase agreements with banks and
broker-dealers; or (iv) short-term time deposits with banks. Similarly, under
these circumstances, the Growth and Income Fund may invest up to 100% of its
assets in money market securities denominated in the currency of any nation
including: (i) short-term and medium-term securities issued or guaranteed by the
U.S. or a foreign government, their agencies or instrumentalities; (ii) finance
company and corporate commercial paper, and other short-term corporate
obligations, rated A by S&P or Prime-1 by Moody's or, if unrated, determined by
the fund to be of comparable quality; (iii) bank obligations (including CDs,
time deposits and bankers' acceptances); and (iv) repurchase agreements with
banks and broker dealers.
ILLIQUID SECURITIES.
The Growth and Income Fund may invest up to 15% of its total assets in
illiquid securities, including up to 10% of its total assets in restricted
securities. The World Fund may invest no more than 10% of its total assets in
securities with a limited trading market. The Growth and Income Fund may invest
without percentage limitation in listed or unlisted securities of foreign and
domestic companies of any size (market capitalization). By comparison, the World
Fund may only invest up to 15% of its total asset in foreign securities that are
not listed on a recognized U.S. or foreign securities exchange.
DIVERSIFICATION.
Both funds are diversified under the 1940 Act. However, the World Fund's
portfolio is potentially more diversified than the Growth and Income Fund's
portfolio. The World Fund may invest no more than 5% of its total assets in
securities issued by any one company or foreign government. The Growth and
Income Fund will not buy a security if, with respect to 75% of its net assets,
more than 5% would be invested in the securities of any single issuer or if it
would result in the fund owning more than 10% of the voting securities of a
single issuer. The remaining 25% of the Growth and Income Fund's assets may be
invested in the securities of a single issuer. Each fund, irrespective of these
limits, may invest up to 100% of its total assets in U.S. government securities.
CONCENTRATION.
Both funds may invest in any industry although neither will concentrate
(invest more than 25% of its total assets) in any one industry.
HOW DO THE FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUNDS DIFFER?
Except as described below, the funds have adopted similar restrictions as
fundamental policies, which may not be changed without the approval of a
majority of the outstanding voting securities of the fund.
Both funds are generally prohibited from investing in real estate or
mortgages on real estate, although each fund may invest in marketable securities
secured by real estate or interests therein or, in the case of the World Fund,
issued by companies or investments trusts that invest in real estate or
interests therein.
Both funds are generally prohibited from investing in other open-end
investment companies, except that the Growth and Income Fund may invest in such
securities in connection with a merger, consolidation, acquisition or
reorganization.
Both funds are generally prohibited from investing in interests in oil, gas
or other mineral exploration or development programs, except that the Growth and
Income Fund may invest in debentures or equity stock interests of such issuers.
Both funds are generally prohibited from purchasing or selling commodity
contracts, except that both funds may purchase or sell futures contracts, in the
case of Growth and Income Fund, and stock index futures contracts, in the case
of the World Fund.
Both funds are prohibited from acting as an underwriter.
Both funds are generally prohibited from issuing senior securities,
purchasing on margin or selling short, provided, however, that the World Fund
may make margin payments in connection with, and purchase and sell, stock index
futures contracts and options on securities indexes and the Growth and Income
Fund may make margin payments in connection with futures, options and currency
transactions.
Neither fund may loan money, except that each fund may purchase a portion
of an issue of publicly distributed bonds, debentures, notes and other evidences
of indebtedness and enter into repurchase agreements.
Both funds are generally prohibited from borrowing money, except that the
Growth and Income Fund may borrow from banks in an amount not exceeding 33 1/3%
of the value of its total assets and the World Fund may borrow from banks in an
amount not exceed 5% of the value of its total assets (provided such borrowing
is temporary and in connection with the purchase or cancellation of its shares).
Both funds are generally prohibited from pledging, mortgaging, and
hypothecating their assets for any purposes except to secure bank borrowings
and, in the case of the World Fund, only if such borrowings do not exceed 10% of
the value of its total assets and are approved by a board resolution. This
restriction does not prohibit, in the case of the Growth and Income Fund,
escrow, collateral or margin arrangements in connection with its use of options,
futures contracts, and options on futures contracts.
Both funds are prohibited from investing more than 25% of their total
assets in a single industry and, with certain exceptions, participating on a
joint or a joint and several basis in any trading account in securities.
The World Fund, with respect to 100% of its assets, may not purchase more
than 10% of any class of securities of any one company. The Growth and Income
Fund, with respect to 75% of its assets, may not purchase more than 10% of any
class of securities of any one company or invest more than 5% of its total
assets in any one company. The World Fund also is prohibited from investing in
any company for the purpose of exercising control or management.
The following policies are fundamental for the World Fund (but are only
non-fundamental for the Growth and Income Fund). The World Fund may not:
purchase or retain securities of any company in which directors or officers of
the Company (or trustees and officers of the Trust, in the case of the Growth
and Income Fund) or Global Advisors individually owning more than 1/2 of 1% of
the securities of such company in the aggregate own more than 5% of the
securities of such company; invest more than 5% of its total assets in
securities of issuers that have been in continuous operation less than three
years; invest more than 5% of its assets in warrants and more than 2% of its
assets in warrants not listed on the New York Stock Exchange or American Stock
Exchange; nor invest more than 15% of its total assets in securities of foreign
issuers that are not listed on a U.S. or foreign securities exchange, including
no more than 10% of its total assets that may be invested in securities with a
limited trading market.
The World Fund may not invest in "letter stocks" or securities on which
there are any sales restrictions under a purchase agreement. This is neither a
fundamental nor a non-fundamental policy of the Growth and Income Fund.
WHAT ARE THE RISK FACTORS ASSOCIATED WITH INVESTMENTS IN THE FUNDS?
Like all investments, an investment in the funds involves risk. There
is no assurance that the funds will meet their investment goals. The
achievement
of the funds' goals depends upon market conditions, generally, and on the
investment managers' analytical and portfolio management skills. The risks of
the funds are basically the same as those of other investments in foreign
securities.
STOCKS.
While stocks have historically outperformed other asset classes over the
long term, they tend to go up and down more dramatically over the shorter term.
These price movements may result from factors affecting individual companies,
industries or securities markets as a whole. Value stock prices are considered
"cheap" relative to the company's perceived value. They may not increase in
value, as anticipated by the fund manager, if other investors fail to recognize
the company's value and bid up the price or in markets favoring faster-growing
companies.
FOREIGN SECURITIES.
Securities of companies and governments located outside the U.S. may
involve risks that can increase the potential for losses in a fund. Investments
in Depositary Receipts also involve some or all the following risks.
COUNTRY. General securities market movements in any country where a fund
has investments are likely to affect the value of the securities the fund owns
that trade in that country. These movements will affect a fund's share price and
fund performance.
The political, economic and social structure of some countries a fund
invests in may be less stable and more volatile than those in the U.S. The risks
of investing in these countries include the possibility of the imposition of
exchange controls, currency devaluations, foreign ownership limitations,
expropriation, restrictions on removal of currency or other assets,
nationalization of assets, punitive taxes and certain custody and settlement
risks.
Each fund's investments in developing or emerging markets are subject to
all of the risks of foreign investing generally, and have additional heightened
risks due to a lack of established legal, business and social frameworks to
support securities markets. Foreign securities markets, including emerging
markets, may have substantially lower trading volumes than U.S. markets,
resulting in less liquidity and more volatility than experienced in the U.S.
While short-term volatility in these markets can be disconcerting, declines in
excess of 50% are not unusual.
COMPANY. Foreign companies are not subject to the same disclosure,
accounting, auditing and financial reporting standards and practices as U.S.
companies and their securities may not be as liquid as securities of similar
U.S. companies. Foreign stock exchanges, trading systems, brokers and companies
generally have less government supervision and regulation than in the U.S. A
fund may have greater difficulty voting proxies, exercising shareholder rights,
pursuing legal remedies and obtaining judgments with respect to foreign
investments in foreign courts than with respect to U.S. companies in U.S.
courts.
CURRENCY.
Many of the funds' investments are denominated in foreign currencies.
Changes in foreign currency exchange rates will affect the value of a fund's
foreign investments and that fund's share price. Generally, when the U.S. dollar
rises in value against a foreign currency, an investment in that country loses
value because that currency is worth fewer U.S. dollars. Devaluation of currency
by a country's government or banking authority also has a significant impact on
the value of any securities denominated in that currency.
EURO. On January 1, 1999, the European Monetary Union (EMU) introduced a
new single currency, the euro, to replace the national currency for the eleven
participating member countries. If a fund holds investments in countries with
currencies replaced by the euro, the investment process, including trading,
foreign exchange, payments, settlements, cash accounts, custody and accounting
will be impacted.
Because the change to a single currency is new and untested, the
establishment of the euro may result in market volatility. For the same reason,
it is not possible to predict the impact of the euro on the business or
financial condition of European issuers which the fund may hold in its
portfolio, and their impact on the value of fund shares and fund performance. To
the extent either fund holds non-U.S. dollar (euro or other) denominated
securities, it will still be exposed to currency risk due to fluctuations in
those currencies versus the U.S. dollar.
ILLIQUID SECURITIES.
The World Fund may invest up to 10% of its total assets in securities with
a limited trading market, while the Growth and Income Fund may invest up to 15%
of its total assets in securities with a limited trading market. Such a market
can result from political or economic conditions affecting previously
established securities markets, particularly in emerging market countries.
INTEREST RATE.
When interest rates rise, debt security prices fall. The opposite is also
true: debt security prices go up when interest rates fall. Generally, interest
rates rise during times of inflation or a growing economy, and fall during an
economic slowdown or recession. Securities with longer maturities usually are
more sensitive to interest rate changes than securities with shorter maturities.
CREDIT.
This is the possibility that an issuer will be unable to make interest
payments or repay principal. Changes in an issuer's financial strength or in a
security's credit rating may affect its value and, thus, impact the value of a
fund's shares.
VOTING INFORMATION
HOW MANY VOTES ARE NECESSARY TO APPROVE THE AGREEMENT AND PLAN?
A "majority of the outstanding voting securities" of the Growth and Income
Fund (regardless of class) is necessary to approve the Agreement and Plan, which
means the vote of: (i) more than 50% of the outstanding voting securities of the
Fund; or (ii) 67% or more of the voting securities of the Fund present at the
meeting, if the holders of more than 50% of the outstanding voting securities
are present or represented by proxy, whichever is less. Each shareholder will be
entitled to one vote for each full share, and a fractional vote for each
fractional share, of Growth and Income Fund held at the close of business on May
21, 1999 (the "Record Date"). If sufficient votes to approve the Agreement and
Plan are not received by the date of the Meeting, the Meeting may be adjourned
to permit further solicitations of proxies. The holders of any number of shares
who are entitled to vote at the Meeting and present in person or by proxy
(whether or not sufficient to constitute quorum) may adjourn the Meeting.
Abstentions and broker non-votes will be included for purposes of
determining whether a quorum is present at the Meeting, but will be treated as
votes not cast and, therefore, will not be counted for purposes of determining
whether the matters to be voted upon at the Meeting have been approved, and will
have the same effect as a vote against the Agreement and Plan.
HOW DO I ENSURE MY VOTE IS ACCURATELY RECORDED?
You can vote in any one of three ways:
By mail, with the enclosed proxy card.
In person at the Meeting.
Through Shareholder Communications Corporation ("SCC"),
a proxy solicitor, by calling 1-800/645-3559.
A proxy card is, in essence, a ballot. IF YOU SIMPLY SIGN AND DATE THE
PROXY BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED IN FAVOR OF THE
AGREEMENT AND PLAN AND IN ACCORDANCE WITH THE VIEWS OF MANAGEMENT UPON ANY
UNEXPECTED MATTERS THAT COME BEFORE THE MEETING OR ADJOURNMENT OF THE MEETING.
CAN I REVOKE MY PROXY?
You may revoke your proxy at any time before it is voted by sending a
written notice to the Growth and Income Fund expressly revoking your proxy, by
signing and forwarding to the Growth and Income Fund a later-dated proxy, or by
attending the Meeting and voting in person.
WHAT OTHER MATTERS WILL BE VOTED UPON AT THE MEETING?
The Board of Trustees of the Trust does not intend to bring any matters
before the Meeting other than described in this Prospectus/Proxy Statement. It
is not aware of any other matters to be brought before the Meeting by others. If
any other matter legally comes before the Meeting, proxies for which discretion
has been granted will be voted in accordance with the views of management.
WHO IS ENTITLED TO VOTE?
Shareholders of record of the Growth and Income Fund at the close of
business on May 21, 1999 (the "Record Date") will be entitled to vote at the
meeting. Each share is entitled to one vote. On the Record Date, there were
[_______________] outstanding shares of the Templeton Growth and Income Fund -
Class A, and [_______________] outstanding shares of the Templeton Growth and
Income Fund - Class C.
WHAT OTHER SOLICITATIONS WILL BE MADE?
The Growth and Income Fund will request broker-dealer firms,
custodians, nominees and fiduciaries to forward proxy material to the beneficial
owners of the shares of record. The Growth and Income Fund may reimburse
broker-dealer firms, custodians, nominees and fiduciaries for their reasonable
expenses incurred in connection with such proxy solicitation. In addition to
solicitations by mail, officers and employees of the Trust, without extra pay,
may conduct additional solicitations by telephone, telegraph and personal
interviews. The Company, on behalf of the Growth and Income Fund, has engaged
SCC to solicit proxies from brokers, banks, other institutional holders and
individual shareholders for an approximate fee, including out-of-pocket
expenses, ranging from $_______ to $__________. The costs of any such additional
solicitation and of any adjourned session will be shared one-quarter by the
Growth and Income Fund, one-quarter by the World Fund, and one-half by Global
Advisors.
ARE THERE DISSENTERS' RIGHTS?
Shareholders of the Growth and Income Fund will not be entitled to any
"dissenters' rights" since the proposed Transaction involves two open-end
investment companies registered under the 1940 Act (commonly called mutual
funds). Although no dissenters' rights may be available, you have the right to
redeem your shares at Net Asset Value until the closing date. After the closing
date, you may redeem your World Fund shares or exchange them into shares of
certain other funds in the Franklin Templeton Funds, subject to the terms of the
prospectus of the respective fund.
INFORMATION ABOUT THE WORLD FUND
Information about the World Fund is included in the World Fund Prospectus,
which is attached to and considered a part of this Prospectus/Proxy Statement.
Additional information about the World Fund is included in its SAI, dated
January 1, 1999, which has been filed with the SEC and is incorporated into the
SAI relating to this Prospectus/Proxy Statement. You may request a free copy of
the World Fund's SAI and other information by calling 1-800/DIAL BEN(R) or by
writing to the World Fund at P.O. Box 33030, 100 Fountain Parkway, St.
Petersburg, FL 33733-8030. The World Fund's Annual Report to Shareholders for
the fiscal year ended August 31, 1998 is attached to and considered a part of
this Prospectus/Proxy Statement.
The World Fund files proxy materials, reports and other information with
the SEC in accordance with the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act. These materials can be inspected and
copied at: the SEC's Public Reference Room at 450 Fifth Street NW, Washington,
DC 20549, and at the Regional Offices of the SEC located in New York City at 7
World Trade Center, Suite 1300, New York, NY 10048 and in Chicago at 500 West
Madison Street, Suite 1400, Chicago, IL 60661. Also, copies of such material can
be obtained from the SEC's Public Reference Section, Washington, DC 20549-6009,
at prescribed rates or from the SEC's internet address at http: //www.sec.gov.
INFORMATION ABOUT THE GROWTH AND INCOME FUND
Information about the Growth and Income Fund is included in the current
Growth and Income Fund Prospectus and Statement of Additional Information, as
well as in the Growth and Income Fund's Annual Report to Shareholders dated
March 31, 1998 and Semi-Annual Report to Shareholders dated September 30, 1998.
These documents have been filed with the SEC and the prospectus and shareholder
reports are incorporated by reference herein. You may request free copies of
these documents and other information relating to the Growth and Income Fund by
calling 1-800/DIAL BEN(R) or by writing to P.O. Box 33030, 100 Fountain Parkway,
St. Petersburg, FL 33733-8030. Reports and other information filed by the Growth
and Income Fund can be inspected and copied at: the Public Reference Facilities
maintained by the SEC at 450 Fifth Street NW, Washington, DC 20549, or at the at
the Regional Offices of the SEC located in New York City at 7 World Trade
Center, Suite 1300, New York, NY 10048 and in Chicago at 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Also, copies of such material can be
obtained from the SEC's Public Reference Section, Washington, DC 20549-6009, at
prescribed rates or from the SEC's internet address at http: //www.sec.gov.
PRINCIPAL HOLDERS OF SHARES
As of the Record Date, the officers and Trustees of the Trust, as a group,
owned less than 1% of the outstanding voting shares of the Growth and Income
Fund. As of the Record Date, no person owned (beneficially or of record) 5% or
more of the outstanding shares of the World Fund. As of the Record Date, the
following shareholders of Growth and Income Fund (beneficial or of record) held
5% or more of the outstanding shares of those funds:
PAGE
GLOSSARY OF USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
GLOBAL ADVISORS - Templeton Global Advisors Limited, the investment manager for
the World Fund and the Growth and Income Fund
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., principal underwriter for
Growth and Income Fund and the World Fund, is located at 777 Mariners Island
Boulevard, San Mateo, CA 94403-7777
FRANKLIN TEMPLETON FUNDS - The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds, except Franklin Valuemark
Funds, Templeton Capital Accumulator Fund, Inc., and Templeton Variable Products
Series Fund
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds
FT SERVICES -Franklin Templeton Services, Inc., the Funds' administrator
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the shareholder
servicing and transfer agent to the World Fund and the Growth and Income Fund,
located at 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL 33733-8030.
MARKET TIMERS - Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange shares
based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Growth and Income Fund and the World Fund. This reference is
for convenience only and does not indicate a legal conclusion of capacity.
U.S. - United States
WE/OUR/US - Unless the context indicates a different meaning, these terms refer
to the Growth and Income Fund and the World Fund and/or Investor Services,
Distributors, or other wholly owned subsidiaries of Resources.
PAGE
EXHIBITS TO PROSPECTUS/PROXY STATEMENT
EXHIBIT
A Form of Agreement and Plan of Reorganization between Templeton
Funds, Inc. (on behalf of Templeton World Fund) and Templeton
Global Investment Trust (on behalf of Templeton Growth and
Income Fund)
B Prospectus of Templeton World Fund, dated January 1, 1999
C Annual Report to Shareholders of Templeton World Fund for the
fiscal year ended August 31, 1998
PAGE
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
Agreement and Plan of Reorganization (the "Agreement and Plan"), made as of
the ___ day of ______________, 1999, by and between Templeton Funds, Inc. (the
"Company"), a corporation incorporated under the laws of the State of Maryland,
with its principal place of business at 500 East Broward Boulevard, Fort
Lauderdale, Florida 33394-3091, on behalf of its series, Templeton World Fund
("World Fund") and Templeton Global Investment Trust (the "Trust"), a business
trust created under the laws of the State of Delaware, with its principal place
of business at 500 East Broward Boulevard, Fort Lauderdale, Florida 33394-3091,
on behalf of its series, Templeton Growth and Income Fund ("Growth and Income
Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as "Plan of Reorganization")
will consist of (i) the acquisition by the Company, on behalf of the World Fund,
of substantially all of the property, assets and goodwill of Growth and Income
Fund solely in exchange for shares of common stock, par value $1.00 per share,
of Templeton World Fund - Class A ("World Fund Class A Shares") and shares of
common stock, par value $1.00 per share, of Templeton World Fund - Class C
("World Fund Class C Shares") (collectively, "World Fund Shares"); (ii) the
distribution of (a) World Fund Class A Shares to the shareholders of Templeton
Growth and Income Fund - Class A ("Growth and Income Fund Class A Shares") and
(b) World Fund Class C Shares to the shareholders of Templeton Growth and Income
Fund Class C ("Growth and Income Fund Class C Shares"), according to their
respective interests; and (iii) the subsequent dissolution of Growth and Income
Fund as soon as practicable after the closing (as defined in Section 3,
hereinafter called the "Closing"), all upon and subject to the terms and
conditions of this Agreement and Plan hereinafter set forth.
AGREEMENT
In order to consummate the Plan of Reorganization and in consideration
of the promises and of the covenants and agreements hereinafter set forth, and
intending to be legally bound, the parties hereto covenant and agree as follows:
1. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF GROWTH AND INCOME
FUND.
(a) Subject to the terms and conditions of this Agreement and
Plan, and in reliance on the representations and warranties of the Company
herein contained, and in consideration of the delivery by the Company of the
number of its World Fund Class A Shares and World Fund Class C Shares
hereinafter provided, the Trust, on behalf of Growth and Income Fund, agrees
that it will convey, transfer and deliver to the Company at the Closing all of
Growth and Income Fund's then-existing assets, free and clear of all liens,
encumbrances, and claims whatsoever (other than shareholders' rights of
redemption), except for cash, bank deposits or cash equivalent securities in an
estimated amount necessary to: (i) pay the costs and expenses of carrying out
this Agreement and Plan (including, but not limited to, fees of counsel and
accountants, and expenses of its liquidation and dissolution contemplated
hereunder), which costs and expenses shall be established on Growth and Income
Fund's books as liability reserves; (ii) discharge its unpaid liabilities on its
books at the closing date (as defined in Section 3, hereinafter called the
"Closing Date"), including, but not limited to, its income dividends and capital
gains distributions, if any, payable for the period prior to, and through, the
Closing Date; and (iii) pay such contingent liabilities as the Board of Trustees
of the Trust shall reasonably deem to exist against Growth and Income Fund, if
any, at the Closing Date, for which contingent and other appropriate liabilities
reserves shall be established on Growth and Income Fund's books (hereinafter
"Net Assets"). Growth and Income Fund shall also retain any and all rights that
it may have over and against any person that may have accrued up to and
including the close of business on the Closing Date.
(b) Subject to the terms and conditions of this Agreement and Plan,
and in reliance on the representations and warranties of the Trust herein
contained, and in consideration of such sale, conveyance, transfer, and
delivery, the Company agrees at the Closing to deliver to the Trust: (i) the
number of World Fund Class A Shares, determined by dividing the net asset value
per share of Growth and Income Fund Class A Shares by the net asset value per
share of World Fund Class A Shares, and multiplying the result thereof by the
number of outstanding Growth and Income Fund Class A Shares, as of 4:00 p.m.
Eastern time on the Closing Date; and (ii) the number of World Fund Class C
Shares, determined by dividing the net asset value per share of Growth and
Income Fund Class C Shares by the net asset value per share of World Fund Class
C Shares, and multiplying the result thereof by the number of outstanding Growth
and Income Fund Class C Shares, as of 4:00 p.m. Eastern time on the Closing
Date. All such values shall be determined in the manner and as of the time set
forth in Section 2 hereof.
(c) Immediately following the Closing, Growth and Income Fund shall
dissolve and distribute pro rata to its shareholders as of the close of business
on the Closing Date, World Fund Shares received by Growth and Income Fund
pursuant to this Section 1. Such liquidation and distribution shall be
accomplished by the establishment of accounts on the share records of World Fund
of the type and amounts due such shareholders based on their respective holdings
as of the close of business on the Closing Date. Fractional World Fund Shares
shall be carried to the third decimal place. As promptly as practicable after
the Closing, each holder of any outstanding certificate or certificates
representing shares of beneficial interest of Growth and Income Fund shall be
entitled to surrender the same to the transfer agent for World Fund in exchange
for the number of World Fund Shares into which the shares of the Growth and
Income Fund theretofore represented by the certificate or certificates so
surrendered shall have been converted. Certificates for World Fund Shares shall
not be issued, unless specifically requested by the shareholders. Until so
surrendered, each outstanding certificate which, prior to the Closing,
represented shares of beneficial interest of Growth and Income Fund shall be
deemed for all World Fund's purposes to evidence ownership of the number of
World Fund Shares into which the shares of beneficial interest of Growth and
Income Fund (which prior to the Closing were represented thereby) have been
converted.
2. VALUATION.
(a) The value of Growth and Income Fund's Net Assets to be
acquired by World Fund hereunder shall be computed as of 4:00 p.m. Eastern time
on the Closing Date using the valuation procedures set forth in Growth and
Income Fund's currently effective prospectus.
(b) The net asset value of a share of common stock of World Fund
Class A Shares and World Fund Class C Shares shall be determined to the nearest
full cent as of 4:00 p.m. Eastern time on the Closing Date using the valuation
procedures set forth in World Fund's currently effective prospectus.
(c) The net asset value of a share of beneficial interest of Growth
and Income Fund Class A Shares and Growth and Income Fund Class C Shares shall
be determined to the fourth decimal place as of 4:00 p.m. Eastern time on the
Closing Date using the valuation procedures set forth in Growth and Income
Fund's currently effective prospectus.
3. CLOSING AND CLOSING DATE.
The Closing Date shall be ______________, 1999, or such later date as the
parties may mutually agree. The Closing shall take place at the principal office
of the Company at [5:00] p.m. Eastern time on the Closing Date. The Trust shall
have provided for delivery as of the Closing of those net assets of Growth and
Income Fund to be transferred to World Fund's custodian, The Chase Manhattan
Bank, Metro Tech Center, Brooklyn, New York 11245. Also, the Trust shall deliver
at the Closing a list of names and addresses of the shareholders of record of
Growth and Income Fund Class A Shares and Growth and Income Fund Class C Shares
and the number of shares of beneficial interest of such classes owned by each
such shareholder, indicating thereon which such shares are represented by
outstanding certificates and which by book-entry accounts, all as of 4:00 p.m.
Eastern time on the Closing Date, certified by its transfer agent or by its
President to the best of its or his or her knowledge and belief. The Company
shall issue and deliver a certificate or certificates evidencing the shares of
common stock of World Fund to be delivered to said transfer agent registered in
such manner as the Trust may request, or provide evidence satisfactory to the
Trust that such World Fund Shares have been registered in an account on the
books of World Fund in such manner as the Trust may request.
4. REPRESENTATIONS AND WARRANTIES BY THE TRUST.
The Trust represents and warrants to the Company that:
(a) The Trust is a business trust created under the laws of the State of
Delaware on December 21, 1993, and is validly existing and in good standing
under the laws of that state. The Trust is duly registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end, management
investment company and all of Growth and Income Fund's shares sold were sold
pursuant to an effective registration statement filed under the Securities Act
of 1933, as amended (the "1933 Act"), except for those shares sold pursuant to
the private offering exemption for the purpose of raising the required initial
capital.
(b) The Trust is authorized to issue an unlimited number of shares
of beneficial interest, par value $0.01 per share, each outstanding share of
which is fully paid, non-assessable, fully transferable, and has full voting
rights and currently issues shares of five (5) series, including Growth and
Income Fund. The Trust is authorized to issue an unlimited number of shares of
beneficial interest of each series.
(c) The financial statements appearing in Growth and Income
Fund's Annual Report to Shareholders for the fiscal year ended March 31, 1998,
audited by McGladrey & Pullen, L.L.P., copies of which have been delivered to
the Company, fairly present the financial position of Growth and Income Fund as
of such date and the results of its operations for the periods indicated in
conformity with generally accepted accounting principles applied on a consistent
basis.
(d) The books and records of Growth and Income Fund made available
to World Fund and/or its counsel accurately summarize the accounting data
represented and contain no material omissions with respect to the business and
operations of Growth and Income Fund.
(e) The Trust has the necessary power and authority to conduct
Growth and Income Fund's business as such business is now being conducted.
(f) The Trust is not a party to or obligated under any provision of
its Trust Instrument, its By-laws, or any contract or any other commitment or
obligation, and is not subject to any order or decree that would be violated by
the Trust's execution of or performance under this Agreement and Plan.
(g) The Trust has elected to treat Growth and Income Fund as a
regulated investment company ("RIC") for federal income tax purposes under Part
I of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
and Growth and Income Fund has qualified as a RIC for each taxable year since
its inception and will qualify as a RIC as of the Closing Date.
5. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company, represents and warrants to the Trust that:
(a) The Company is a corporation incorporated under the laws of the
State of Maryland on August 15, 1977, and is validly existing and in good
standing under the laws of that state. The Company is duly registered under the
1940 Act as an open-end, management investment company and all of its shares
sold were sold pursuant to an effective registration statement filed under the
1933 Act, except for those shares sold pursuant to the private offering
exemption for the purpose of raising the required initial capital.
(b) The Company is authorized to issue 3,700,000 shares of common
stock, par value, $1.00 per share, each outstanding share of which is fully
paid, non-assessable, fully transferable, and has full voting rights and
currently issues shares of two (2) series including World Fund. The World Fund
Shares to be issued pursuant to this Agreement and Plan will all be fully paid
non-assessable, freely transferable and have full voting rights.
(c) At the Closing, World Fund Shares will be eligible for offering
to the public in those states of the United States and jurisdictions in which
the shares of Growth and Income Fund are presently eligible for offering to the
public, and there are a sufficient number of World Fund Shares registered under
the 1933 Act to permit the transfers contemplated by this Agreement and Plan to
be consummated.
(d) The financial statements appearing in World Fund's Annual Report
to Shareholders for the fiscal year ended August 31, 1998, audited by McGladrey
& Pullen, L.L.P., copies of which have been delivered to Growth and Income Fund,
fairly present the financial position of World Fund as of such date and the
results of its operations for the periods indicated in conformity with generally
accepted accounting principles applied on a consistent basis.
(e) The Company has the necessary power and authority to conduct
World Fund's business as such business is now being conducted.
(f) The Company is not a party to or obligated under any provision
of its Articles of Incorporation, as amended, its By-laws, or any contract or
any other commitment or obligation, and is not subject to any order or decree
that would be violated by the Company's execution of or performance under this
Agreement and Plan.
(g) The Company has elected to treat World Fund as a RIC for federal
income tax purposes under Part I of Subchapter M of the Code, and World Fund has
qualified as a RIC for each taxable year since its inception and will qualify as
a RIC as of the Closing Date.
6. REPRESENTATIONS AND WARRANTIES BY THE TRUST AND THE COMPANY.
The Trust and the Company each represents and warrants to the other that:
(a) The statement of assets and liabilities to be furnished by it as
of 4:00 p.m. Eastern time on the Closing Date for the purpose of determining the
number of World Fund Shares to be issued pursuant to Section 1 of this Agreement
and Plan will accurately reflect each funds' Net Assets, and outstanding shares
of common stock, as of such date, in conformity with generally accepted
accounting principles applied on a consistent basis.
(b) At the Closing, it will have good and marketable title to all of the
securities and other assets shown on the statement of assets and liabilities
referred to in "6(a)" above, free and clear of all liens or encumbrances of any
nature whatsoever, except such imperfections of title or encumbrances as do not
materially detract from the value or use of the assets subject thereto, or
materially affect title thereto.
(c) Except as disclosed in its currently effective prospectus, there
is no material suit, judicial action, or legal or administrative proceeding
pending or threatened against it.
(d) There are no known actual or proposed deficiency assessments
with respect to any taxes payable by it.
(e) The execution, delivery, and performance of this Agreement and
Plan have been duly authorized by all necessary action of its Board of Trustees
or Board of Directors, as applicable, and this Agreement and Plan constitutes a
valid and binding obligation enforceable in accordance with its terms.
(f) It anticipates that consummation of this Agreement and Plan will
not cause Growth and Income Fund, in the case of the Trust, and World Fund, in
the case of the Company, to fail to conform to the requirements of Subchapter M
of the Code for federal income taxation purposes as a RIC at the end of its
fiscal year.
(g) It has the necessary power and authority to conduct the business
of its fund as such business is now being conducted.
7. COVENANTS OF THE TRUST AND THE COMPANY.
(a) The Trust, on behalf of Growth and Income Fund, and the Company,
on behalf of World Fund, each covenant to operate their respective businesses as
presently conducted between the date hereof and the Closing.
(b) The Company undertakes that it will not acquire Growth and
Income Fund shares for the purpose of making distributions thereof to anyone
other than Growth and Income Fund's shareholders.
(c) The Trust undertakes that, if this Agreement and Plan is
consummated, it will dissolve Growth and Income Fund and rescind the
establishment of Growth and Income Fund as a series of the Trust.
(d) The Trust and the Company each agree that, by the Closing, all
of their federal and other tax returns and reports required by law to be filed
by the Trust on behalf of Growth and Income and, or by the Company, on behalf of
World Fund, on or before such date shall have been filed, and all federal and
other taxes shown as due on said returns shall have either been paid or adequate
liability reserves shall have been provided for the payment of such taxes.
(e) At the Closing, the Trust will provide World Fund with a copy of
the shareholder ledger accounts of Growth and Income Fund, certified by its
transfer agent or its President to the best of its or his or her knowledge and
belief, for all the shareholders of record of Growth and Income Fund's shares as
of 4:00 p.m. Eastern time on the Closing Date who are to become shareholders of
World Fund as a result of the transfer of assets that is the subject of this
Agreement and Plan.
(f) The Trust agrees to mail to each shareholder of record entitled
to vote at the meeting of Growth and Income Fund's shareholders at which action
on this Agreement and Plan is to be considered, in sufficient time to comply
with requirements as to notice thereof, a Joint Prospectus and Proxy Statement
that complies in all material respects with the applicable provisions of Section
14(a) of the Securities Exchange Act of 1934, as amended, and Section 20(a) of
the 1940 Act, and the rules and regulations, respectively, thereunder.
(g) The Company will file with the U.S. Securities and Exchange
Commission a registration statement on Form N-14 under the 1933 Act relating to
the World Fund Shares issuable hereunder ("Registration Statement"), and will
use its best efforts to provide that the Registration Statement becomes
effective as promptly as practicable. At the time it becomes effective, the
Registration Statement will: (i) comply in all material respects with the
applicable provisions of the 1933 Act, and the rules and regulations promulgated
thereunder; and (ii) not contain any untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading. At the time the Registration Statement
becomes effective, at the time of Growth and Income Fund's shareholders'
meeting, and at the Closing Date, the prospectus and statement of additional
information included in the Registration Statement will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY THE TRUST AND THE COMPANY.
The obligations of the Trust and the Company to effectuate this Agreement
and Plan hereunder shall be subject to the following respective conditions:
(a) That: (i) all the representations and warranties of the other
party contained herein shall be true and correct as of the Closing with the same
effect as though made as of and at such date; (ii) the other party shall have
performed all obligations required by this Agreement and Plan to be performed by
it prior to the Closing; and (iii) the other party shall have delivered to such
party a certificate signed by the President and by the Secretary or equivalent
officer to the foregoing effect.
(b) That each party shall have delivered to the other party a
copy of the resolutions approving this Agreement and Plan adopted by its Board
of Trustees or Board of Directors, as applicable, certified by its Secretary or
equivalent officer.
(c) That the U.S. Securities and Exchange Commission shall not have
issued an unfavorable management report under Section 25(b) of the 1940 Act or
instituted or threatened to institute any proceeding seeking to enjoin the
consummation of the Agreement under Section 25(c) of the 1940 Act. And, further,
no other legal, administrative or other proceeding shall have been instituted or
threatened that would materially affect the financial condition of either party
or would prohibit the transactions contemplated hereby.
(d) That this Agreement and Plan and the Plan of Reorganization
contemplated hereby shall have been adopted and approved by the appropriate
action of the shareholders of Growth and Income Fund at an annual or special
meeting or any adjournment thereof.
(e) That each party shall have declared a distribution or
distributions prior to the Closing Date that, together with all previous
distributions, shall have the effect of distributing to its shareholders (i) all
of its net investment income and all of its net realized capital gains, if any,
for the period from the close of its last fiscal year to 4:00 p.m. Eastern time
on the Closing Date; and (ii) any undistributed net investment income and net
realized capital gains from any period to the extent not otherwise declared for
distribution.
(f) That there shall be delivered to the Trust and the Company an
opinion from Messrs. Stradley, Ronon, Stevens & Young, LLP, counsel to the Trust
and the Company, to the effect that, provided the acquisition contemplated
hereby is carried out in accordance with this Agreement and Plan and based upon
certificates of the officers of the Trust and the Company with regard to matters
of fact:
(1) The acquisition by World Fund of substantially all the assets of
Growth and Income Fund as provided for herein in exchange for World Fund Shares
will qualify as a reorganization within the meaning of Section 368(a)(1)(C) of
the Code, and Growth and Income Fund and World Fund will each be a party to the
respective reorganization within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Growth and Income Fund
upon the transfer of substantially all of its assets to World Fund in exchange
solely for voting shares of World Fund (Code Sections 361(a) and 357(a)). No
opinion, however, will be expressed as to whether any accrued market discount
will be required to be recognized as ordinary income pursuant to Section 1276 of
the Code;
(3) No gain or loss will be recognized by World Fund upon the
receipt of substantially all of the assets of Growth and Income Fund in exchange
solely for voting shares of World Fund (Code Section 1032(a));
(4) The basis of the assets of Growth and Income Fund received by
World Fund will be the same as the basis of such assets to Growth and Income
Fund immediately prior to the exchange (Code Section 362(b));
(5) The holding period of the assets of World Fund received by
Growth and Income Fund will include the period during which such assets were
held by Growth and Income Fund (Code Section 1223(2));
(6) No gain or loss will be recognized to the shareholders of Growth
and Income Fund upon the exchange of their shares in Growth and Income Fund for
voting shares of World Fund (Code Section 354(a));
(7) The basis of the World Fund Shares received by Growth and Income
Fund's shareholders shall be the same as the basis of the shares of Growth and
Income Fund exchanged therefor (Code Section 358(a)(1));
(8) The holding period of World Fund shares received by Growth and
Income Fund's shareholders (including fractional shares to which they may be
entitled) will include the holding period of Growth and Income Fund's shares
surrendered in exchange therefor, provided that Growth and Income Fund's shares
were held as a capital asset on the date of the exchange (Code Section 1223(1));
and
(9) World Fund will succeed to and take into account as of the date
of the proposed transfer (as defined in Section 1.381(b)-1(b) of the Income Tax
Regulations) the items of Growth and Income Fund described in Section 381(c) of
the Code (as defined in Section 1.381(b)-1(b) of the Income Tax Regulations),
subject to the conditions and limitations specified in Sections 381(b) and (c),
382, 383 and 384 of the Code and the Income Tax Regulations thereunder.
(g) The Company shall have received an opinion in form and substance
satisfactory to it from Messrs. Stradley Ronon Stevens & Young, LLP, counsel to
the Trust, to the effect that, subject in all respects to the effects of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
other laws now or hereafter affecting generally the enforcement of creditors'
rights:
(1) The Trust was organized as a business trust under the laws of
the State of Delaware on December 21, 1993, and is validly existing and in good
standing under the laws of that state;
(2) The Trust is authorized to issue an unlimited number of shares
of beneficial interest of Growth and Income Fund, $0.01 par value per share.
Assuming that the initial shares of beneficial interest were issued in
accordance with the 1940 Act, and the Trust Instrument and By-laws of the Trust,
and that all other outstanding shares of Growth and Income Fund were sold,
issued and paid for in accordance with the terms of Growth and Income Fund's
prospectus in effect at the time of such sales, each such outstanding share is
fully paid, non-assessable, fully transferable and has full voting rights;
(3) The Trust is an open-end management investment company of the type
registered as such under the 1940 Act;
(4) Except as disclosed in Growth and Income Fund's currently
effective prospectus, such counsel does not know of any material suit, action,
or legal or administrative proceeding pending or threatened against Growth and
Income Fund, the unfavorable outcome of which would materially and adversely
affect the Trust or Growth and Income Fund;
(5) All actions required to be taken by the Trust to authorize this
Agreement and Plan and to effect the Plan of Reorganization contemplated hereby
have been duly authorized by all necessary action on the part of the Trust; and
(6) Neither the execution, delivery, nor performance of this
Agreement and Plan by the Trust violates any provision of its Trust Instrument
or By-laws, or the provisions of any agreement or other instrument known to such
counsel to which the Trust is a party or by which Growth and Income Fund is
otherwise bound; this Agreement is the legal, valid and binding obligation of
the Trust and is enforceable against the Trust and/or Growth and Income Fund in
accordance with its terms.
In giving the opinions set forth above, counsel may state that it is
relying on certificates of the officers of the Trust with regard to matters of
fact, and certain certifications and written statements of governmental
officials with respect to the good standing of the Trust and Growth and Income
Fund.
(h) That the Trust shall have received an opinion in form and
substance satisfactory to it from Messrs. Stradley, Ronon, Stevens & Young, LLP,
counsel to the Company, to the effect that, subject in all respects to the
effects of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other laws now or hereafter affecting generally the enforcement
of creditors' rights:
(1) The Company was incorporated as a corporation under the laws of
the State of Maryland on August 15, 1977, and is validly existing and in good
standing under the laws of that state;
(2) The Company is authorized to issue 3,700,000 shares of common
stock of its series, World Fund, $1.00 par value per share. Assuming that the
initial shares of World Fund were issued in accordance with the 1940 Act, and
the Articles of Incorporation and By-laws of the Company, and that all other
outstanding shares of World Fund were sold, issued and paid for in accordance
with the terms of World Fund's prospectus in effect at the time of such sales,
each such outstanding share of World Fund is fully paid, non-assessable, freely
transferable and has full voting rights;
(3) The Company is an open-end management, diversified investmentcompany
of the type registered as such under the 1940 Act;
(4) Except as disclosed in World Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against the Company, the
unfavorable outcome of which would materially and adversely affect the Company
or World Fund;
(5) World Fund Shares to be issued pursuant to the terms of this
Agreement and Plan have been duly authorized and, when issued and delivered as
provided in this Agreement and Plan, will have been validly issued and fully
paid and will be non-assessable by World Fund;
(6) All corporate actions required to be taken by the Company to
authorize this Agreement and Plan and to effect the Plan of Reorganization
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company;
(7) Neither the execution, delivery, nor performance of this
Agreement and Plan by the Company violates any provision of its Articles of
Incorporation, its By-laws, or the provisions of any agreement or other
instrument known to such counsel to which the Company is a party or by which the
Company on behalf of World Fund is otherwise bound; this Agreement and Plan is
the legal, valid and binding obligation of the Company and World Fund and is
enforceable against the Company and/or World Fund in accordance with its terms;
and
(8) The registration statement of which the prospectus, dated
January 1, 1999, of World Fund is a part (the "Prospectus") is, at the time of
the signing of this Agreement and Plan, effective under the 1933 Act, and, to
the best knowledge of such counsel, no stop order suspending the effectiveness
of such registration statement has been issued, and no proceedings for such
purpose have been instituted or are pending before or threatened by the U.S.
Securities and Exchange Commission under the 1933 Act, and nothing has come to
such counsel's attention that causes it to believe that, at the time the
Prospectus became effective, or at the time of the signing of this Agreement and
Plan, or at the Closing, such Prospectus (except for the financial statements
and other financial and statistical data included therein, as to which counsel
need not express an opinion), contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and such counsel knows of no
legal or government proceedings required to be described in the Prospectus, or
of any contract or document of a character required to be described in the
Prospectus that is not described as required.
In giving the opinions set forth above, this counsel may state that it is
relying on certificates of the officers of the Company with regard to matters of
fact, and certain certifications and written statements of governmental
officials with respect to the good standing of the Company and World Fund.
(i) That the Trust shall have received a certificate from the
President and Secretary of the Company to the effect that the statements
contained in World Fund's Prospectus, at the time the Prospectus became
effective, at the date of the signing of this Agreement and Plan, and at the
Closing, did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(j) That the Company's Registration Statement with respect to the
World Fund Shares to be delivered to the Growth and Income Fund's shareholders
in accordance with this Agreement and Plan shall have become effective, and no
stop order suspending the effectiveness of the Registration Statement or any
amendment or supplement thereto, shall have been issued prior to the Closing
Date or shall be in effect at Closing, and no proceedings for the issuance of
such an order shall be pending or threatened on that date.
(k) That the World Fund Shares to be delivered hereunder shall be
eligible for sale by World Fund with each state commission or agency with which
such eligibility is required in order to permit the shares lawfully to be
delivered to each Growth and Income Fund shareholder.
(l) That, at the Closing, the Trust, on behalf of Growth and
Income Fund, transfers to the Company, on behalf of World Fund, aggregate Net
Assets of Growth and Income Fund comprising at least 90% in fair market value of
the total net assets and 70% of the fair market value of the total gross assets
recorded on the books of Growth and Income Fund on the Closing Date.
9. BROKERAGE FEES AND EXPENSES.
(a) The Trust and the Company each represents and warrants to the
other that there are no broker or finders' fees payable by it in connection with
the transactions provided for herein.
(b) The expenses of entering into and carrying out the provisions of
this Agreement and Plan shall be borne one-quarter by Growth and Income Fund,
one-quarter by World Fund, and one half by Templeton Global Advisors Limited.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
(a) Anything contained in this Agreement and Plan to the contrary
notwithstanding, this Agreement and Plan may be terminated and the Plan of
Reorganization abandoned at any time (whether before or after approval thereof
by the shareholders of Growth and Income Fund) prior to the Closing or the
Closing may be postponed as follows:
(1) by mutual consent of the Trust and the Company;
(2) by the Trust if any condition of its obligations set forth in Section 8
of this Agreement has not been fulfilled or waived; or
(3) by the Company if any condition of its obligations set forth in Section
8 of this Agreement has not been fulfilled or waived.
An election by the Trust, on behalf of Growth and Income Fund, or the
Company, on behalf of World Fund, to terminate this Agreement and Plan and to
abandon the Plan of Reorganization shall be exercised, respectively, by the
Board of Trustees of the Trust or the Board of Directors of the Company.
(b) If the transactions contemplated by this Agreement and Plan have
not been consummated by [DECEMBER 31], 1999, the Agreement and Plan shall
automatically terminate on that date, unless a later date is agreed to by both
the Trust and the Company.
(c) In the event of termination of this Agreement and Plan pursuant
to the provisions hereof, the same shall become void and have no further effect,
and neither the Trust nor the Company, nor their trustees or directors,
officers, agents or shareholders shall have any liability in respect of this
Agreement and Plan.
(d) At any time prior to the Closing, any of the terms or conditions
of this Agreement and Plan may be waived by the party who is entitled to the
benefit thereof by action taken by that party's Board of Trustees or Board of
Directors, as applicable, if, in the judgment of such Board, such action or
waiver will not have a material adverse effect on the benefits intended under
this Agreement and Plan to its shareholders, on behalf of whom such action is
taken.
(e) The respective representations and warranties contained in
Sections 4 to 6 hereof shall expire with and be terminated by the Plan of
Reorganization, and neither the Trust nor the Company, nor any of their
officers, trustees or directors, agents or shareholders shall have any liability
with respect to such representations or warranties after the Closing. This
provision shall not protect any officer, trustees or director, agent or
shareholder of the Trust or the Company against any liability to the entity for
which that officer, trustee or director, agent or shareholder so acts or to its
shareholders to which that officer, trustee or director, agent or shareholder
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties in the conduct of such office.
(f) If any order or orders of the U.S. Securities and Exchange
Commission with respect to this Agreement shall be issued prior to the Closing
and shall impose any terms or conditions that are determined by action of the
Board of Trustees of the Trust or Board of Directors of the Company to be
acceptable, such terms and conditions shall be binding as if a part of this
Agreement and Plan without further vote or approval of the shareholders of
Growth and Income Fund, unless such terms and conditions shall result in a
change in the method of computing the number of World Fund Shares to be issued
to Growth and Income Fund shareholders in which event, unless such terms and
conditions shall have been included in the proxy solicitation material furnished
to the shareholders of Growth and Income Fund prior to the meeting at which the
transactions contemplated by this Agreement and Plan shall have been approved,
this Agreement and Plan shall not be consummated and shall terminate unless
Growth and Income Fund shall promptly call a special meeting of shareholders at
which such conditions so imposed shall be submitted for approval.
11. ENTIRE AGREEMENT AND AMENDMENTS.
This Agreement and Plan embodies the entire agreement between the parties
and there are no agreements, understandings, restrictions, or warranties between
the parties other than those set forth herein or herein provided for. This
Agreement and Plan may be amended only by mutual consent of the parties in
writing. Neither this Agreement and Plan nor any interest herein may be assigned
without the prior written consent of the other party.
12. COUNTERPARTS.
This Agreement and Plan may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all such counterparts together
shall constitute but one
13. NOTICES.
Any notice, report, or demand required or permitted by any provision of
this Agreement and Plan shall be in writing and shall be deemed to have been
given if delivered or mailed, first class postage prepaid, addressed to
Templeton Global Investment Trust at 500 East Broward Boulevard, Fort
Lauderdale, FL 33394-3091, Attention: Secretary, or Templeton Funds Inc., 500
East Broward Boulevard, Fort Lauderdale, FL 33394-3091, Attention: Secretary, as
the case may be.
14. GOVERNING LAW.
This Agreement and Plan shall be governed by and carried out in accordance
with the laws of the State of Maryland.
IN WITNESS WHEREOF, Templeton Global Investment Trust, on behalf of Growth
and Income Fund, and Templeton Funds, Inc., on behalf of Templeton World Fund,
have each caused this Agreement and Plan to be executed on its behalf by its
duly authorized officers, all as of the date and year first-above written.
TEMPLETON GLOBAL INVESTMENT TRUST,
ON BEHALF OF TEMPLETON GROWTH AND
INCOME FUND
Attest:
By: By:
-------------------------- --------------------------------
Barbara J. Green Deborah R. Gatzek
Secretary Vice President
TEMPLETON FUNDS, INC., ON BEHALF
OF TEMPLETON WORLD FUND
Attest:
By: By:
-------------------------- --------------------------------
Barbara J. Green Deborah R. Gatzek
Secretary Vice President
PAGE
EXHIBIT B
PROSPECTUS OF
TEMPLETON WORLD FUND
DATED JANUARY 1, 1999
Prospectus of Templeton World Fund dated January 1, 1999 is part of this
Prospectus/Proxy Statement and will be included in the proxy mailing to
shareholders. For purposes of the instant EDGAR Filing, the prospectus of
Templeton World Fund dated January 1, 1999 is incorporated herein by reference
to the electronic filing made on December 31, 1998, under File No. 002-60067.
PAGE
EXHIBIT C
ANNUAL REPORT TO SHAREHOLDERS OF
TEMPLETON WORLD FUND
FOR THE FISCAL YEAR ENDED AUGUST 31, 1998
Annual Report of Templeton World Fund dated August 31, 1998 is part of this
Prospectus/Proxy Statement and will be included in the proxy mailing to
shareholders. For purposes of the instant EDGAR Filing, the Annual Report of
Templeton World Fund dated August 31, 1998 is incorporated herein by reference
to the electronic filing made on October 22, 1998, under File No. 002-60067.
PAGE
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN
YOUR PROXY TODAY
Please detach at perforation before mailing.
PROXY PROXY
SPECIAL MEETING OF SHAREHOLDERS OF
TEMPLETON GROWTH AND INCOME FUND
JULY 13, 1999
The undersigned hereby revokes all previous proxies for his shares and appoints
[ _____________________________________________________________________ ] and
each of them, proxies of the undersigned with full power of substitution to vote
all shares of Templeton Growth and Income Fund (the "Growth and Income Fund")
that the undersigned is entitled to vote at the Growth and Income Fund's Special
Meeting of Shareholders to be held at 500 East Broward Boulevard, Fort
Lauderdale, FL 33394-3091 at [_______], Eastern Time on July 13, 1999, including
any adjournment thereof, upon such business as may properly be brought before
the Meeting.
IMPORTANT: PLEASE SEND IN YOUR PROXY TODAY.
YOU ARE URGED TO DATE AND SIGN THE ATTACHED PROXY AND RETURN IT PROMPTLY. THIS
WILL SAVE THE EXPENSE OF FOLLOW-UP LETTERS TO SHAREHOLDERS WHO HAVE NOT
RESPONDED.
Note: Please sign exactly as your name
appears on the proxy. If signing for
estates, trusts or corporations, title
or capacity should be stated. If shares
are held jointly, each holder must sign.
------------------------------------
Signature
------------------------------------
Print Name
------------------------------------
Signature
------------------------------------
Print Name
(Please see reverse side)
PAGE
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TEMPLETON
GLOBAL INVESTMENT TRUST, ON BEHALF OF ONE OF ITS SERIES, TEMPLETON GROWTH AND
INCOME FUND. IT WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS
PROXY SHALL BE VOTED IN FAVOR OF PROPOSAL 1, REGARDING THE REORGANIZATION OF
TEMPLETON GROWTH AND INCOME FUND PURSUANT TO THE AGREEMENT AND PLAN OF
REORGANIZATION WITH TEMPLETON WORLD FUND. IF ANY OTHER MATTERS PROPERLY COME
BEFORE THE MEETING ABOUT WHICH THE PROXYHOLDERS WERE NOT AWARE PRIOR TO THE TIME
OF THE SOLICITATION, AUTHORIZATION IS GIVEN THE PROXYHOLDERS TO VOTE IN
ACCORDANCE WITH THE VIEWS OF MANAGEMENT ON SUCH MATTERS. MANAGEMENT IS NOT AWARE
OF ANY SUCH MATTERS.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR PROPOSAL 1.
1. To approve an Agreement and Plan of FOR AGAINST ABSTAIN
Reorganization by Templeton Global
Investment Trust, on behalf of one of its |_| |_| |_|
series, Templeton Growth and Income Fund
("Growth and Income Fund") and Templeton
World Fund, that provides for the
acquisition of substantially all of the
assets of the Growth and Income Fund in
exchange for shares of Templeton World Fund
- Class A and shares of Templeton World Fund
-- Class C, the distribution of such shares
to the shareholders of the Growth and Income
Fund, and the dissolution of the Growth and
Income Fund (the "Reorganization").
2. To vote upon any other business that may GRANT WITHHOLD
legally come before the Special Meeting of |_| |_|
Shareholders or any adjournment thereof.
IMPORTANT: PLEASE SIGN IN YOUR PROXY. . . TODAY!
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
REQUIRED IF MAILED IN THE U.S.
PAGE
Dear Shareholder:
Enclosed is a Notice of Meeting for a Special Shareholders' Meeting of the
Templeton Global Infrastructure Fund (the "Global Fund"). The Meeting has been
called for July 13, 1999 at [________] Eastern time, at the offices of Templeton
Global Investment Trust (the "Trust") at 500 East Broward Boulevard, Fort
Lauderdale, FL 33394-3091. The accompanying Prospectus/Proxy Statement describes
a proposal being presented for your consideration and requests your prompt
attention and vote via the enclosed proxy card.
PLEASE TAKE A MOMENT TO FILL OUT, SIGN AND
RETURN THE ENCLOSED PROXY CARD!
This meeting is critically important. You are being asked to consider and
approve an Agreement and Plan of Reorganization that would result in your shares
of the Global Fund being exchanged for those of a fund called Templeton World
Fund (the "World Fund"). If shareholders of the Global Fund approve the
proposal, if you own Class A shares of the Global Fund, you will receive Class A
shares of the World Fund equal in value to your investment in shares of the
Global Fund and, if you own Class C shares of the Global Fund, you will receive
Class C shares of the World Fund equal in value to your investment in shares of
the Global Fund. You will no longer be a shareholder of the Global Fund, and you
will instead be a shareholder of the World Fund.
The proposed transaction is intended to be a tax-free reorganization under
the Internal Revenue Code of 1986, as amended, as further described in the
accompanying Prospectus/Proxy Statement.
The transaction is being proposed because the projected growth in assets of
the Global Fund was not sufficient to continue to offer a fund with competitive
performance and high quality service to shareholders over the long term. The
World Fund has an investment goal and investment policies substantially similar
to those of the Global Fund, as outlined in the Prospectus/Proxy Statement. The
World Fund is managed by Templeton Global Advisors Limited. The Global Fund is
managed by Templeton Investment Counsel, Inc. Both managers are wholly-owned
subsidiaries of Franklin Resources, Inc. The World Fund is a larger fund than
the Global Fund and thus should be better able to diversify its investments and
to obtain certain savings in costs for shareholders.
Please take the time to review this document and vote NOW! The Trustees of
your fund unanimously recommend that you vote in favor of this proposal.
o To ensure that your vote is counted, indicate your position on
the enclosed proxy card.
o Sign and return your card promptly.
o If you determine at a later date that you wish to attend this
meeting, you may revoke your proxy and vote in person.
Thank you for your attention to this matter.
Sincerely,
Barbara J. Green
Secretary
PRELIMINARY COPY
TEMPLETON GLOBAL INVESTMENT TRUST
ON BEHALF OF
TEMPLETON GLOBAL INFRASTRUCTURE FUND
500 East Broward Boulevard
Fort Lauderdale, FL 33394-3091
NOTICE OF SPECIAL SHAREHOLDERS' MEETING
To be held on July 13, 1999
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Shareholders' Meeting of the Templeton
Global Infrastructure Fund (the "Global Fund") will be held at the offices of
Templeton Global Investment Trust (the "Trust"), 500 East Broward Boulevard,
Fort Lauderdale, FL 33394-3091, on July 13, 1999 at [______] Eastern time. The
Meeting is being called for the following reasons:
1. To approve or disapprove an Agreement and Plan of Reorganization
between the Trust, on behalf of the Global Fund, and Templeton Funds, Inc. (the
"Company") on behalf of the Templeton World Fund (the "World Fund") that
provides for: (i) the acquisition of substantially all of the assets of Global
Fund in exchange for Class A and Class C shares of the Templeton World Fund, a
series of the Company; (ii) the distribution of Class A shares and Class C
shares of the World Fund to the shareholders of the Global Fund; and (iii) the
liquidation and dissolution of the Global Fund.
2. To grant the proxyholders the authority to vote upon any other
business as may properly come before the Meeting or any adjournment thereof.
The transaction contemplated by the Agreement and Plan of Reorganization is
described in the attached Prospectus/Proxy Statement. A copy of the Agreement
and Plan of Reorganization is attached as Exhibit A to the Prospectus/Proxy
Statement.
Shareholders of record as of the close of business on May 21, 1999 are
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
By Order of the Board of Trustees,
Barbara J. Green
Secretary
May [___], 1999
THE BOARD OF TRUSTEES URGES YOU TO COMPLETE, DATE, SIGN, AND RETURN THE ENCLOSED
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. IT IS IMPORTANT THAT
YOU RETURN YOUR SIGNED PROXY CARD PROMPTLY SO THAT A QUORUM MAY BE ENSURED.
PROSPECTUS AND PROXY STATEMENT
When reading this Prospectus/Proxy Statement, you will see certain terms
beginning with capital letters. This means the term is explained in our glossary
section.
TABLE OF CONTENTS
PAGE
COVER PAGE Cover
SUMMARY
On what proposal am I being asked to vote?
How will the shareholder voting be handled?
What are the general tax consequences of the Transaction?
COMPARISONS OF SOME IMPORTANT FEATURES
How do the investment goals and policies of the funds compare?
What are the risks of an investment in the funds?
Who manages the funds?
What are the fees and expenses of each fund and what might they be after
the Transaction?
Where can I find more financial information about the funds?
What are other key features of the funds?
REASONS FOR THE TRANSACTION INFORMATION ABOUT THE TRANSACTION
How will the Transaction be carried out?
Who will pay the expenses of the Transaction?
What are the tax consequences of the Transaction?
How do the legal structures of the funds compare?
What should I know about the World Fund Class A and Class C Shares?
What are the capitalizations of the funds and what might the capitalization
be after the Transaction?
COMPARISON OF INVESTMENT GOALS AND POLICIES
Are there any significant differences between the investment goals of the
funds?
How do the types of securities the funds buy and the investment policies of
the funds compare?
How do the fundamental investment restrictions of the funds differ?
What are the risk factors associated with investments in the funds?
VOTING INFORMATION
How many votes are necessary to approve the Agreement and Plan?
How do I ensure my vote is accurately recorded?
Can I revoke my proxy?
What other matters will be voted upon at the Meeting?
Who is entitled to vote?
What other solicitations will be made?
Are there dissenters' rights?
INFORMATION ABOUT THE WORLD FUND
INFORMATION ABOUT THE GLOBAL FUND
PRINCIPAL HOLDERS OF SHARES
GLOSSARY OF USEFUL TERMS AND DEFINITIONS
EXHIBITS TO PROSPECTUS/PROXY STATEMENT
Exhibit A - Form of Agreement and Plan of Reorganization
Exhibit B - Prospectus of the Templeton World Fund dated January 1, 1999
Exhibit C - Annual Report to Shareholders of the Templeton World Fund dated
August 31, 1998
PAGE
PRELIMINARY COPY
PROSPECTUS AND PROXY STATEMENT
Dated May [_____], 1999
Acquisition of the assets of
TEMPLETON GLOBAL INFRASTRUCTURE FUND
By and in exchange for shares of
TEMPLETON WORLD FUND
This Prospectus/Proxy Statement solicits proxies to be voted at a Special
Shareholders' Meeting (the "Meeting") of the Templeton Global Infrastructure
Fund (the "Global Fund"), which is a series of Templeton Global Investment Trust
(the "Trust"), to approve or disapprove an Agreement and Plan of Reorganization
(the "Agreement and Plan"). If shareholders of the Global Fund vote to approve
the Agreement and Plan, the net assets of the Global Fund will be acquired by
the Templeton World Fund (the "World Fund") in exchange for shares of Templeton
World Fund -- Class A ("World Fund Class A Shares") and shares of Templeton
World Fund -- Class C ("World Fund Class C Shares").
The Meeting will be held at the principal offices of the Trust, which are
located at 500 East Broward Boulevard, Fort Lauderdale, FL 33394-3091, on July
13, 1999 at [_______] Eastern time. The Board of Trustees of the Trust, on
behalf of the Global Fund, is soliciting these proxies. This Prospectus/Proxy
Statement will first be sent to shareholders on or about May [_____], 1999.
If the shareholders of the Global Fund vote to approve the Agreement and
Plan, you will receive World Fund Class A Shares equal in value to your
investment in shares of Templeton Global Fund - Class A ("Global Fund Class A
Shares") and World Fund Class C shares equal in value to your investment in
shares of Templeton Global Fund -- Class C ("Global Fund Class C Shares"). The
Global Fund will then be liquidated.
The World Fund is a series of Templeton Funds, Inc. (the "Company") and the
Global Fund is a series of the Trust. Both the Company and the Trust are
open-end management investment companies. Like the Global Fund, the World Fund's
primary investment goal is to provide shareholders with long-term capital
growth. The Global Fund seeks to achieve its goal by investing at least 65% of
its total assets in equity and debt securities of U.S. and foreign companies,
while the World Fund seeks to achieve its goal by investing primarily in equity
securities of companies located anywhere in the world, including emerging
markets. A significant difference between the funds is the fact that the Global
Fund further seeks to achieve its goal by investing in companies that are
primarily engaged in or related to the development, operation or rehabilitation
of the physical and social infrastructures of any nation. The World Fund does
not have this focus.
This Prospectus/Proxy Statement gives the information about the proposed
reorganization and World Fund Class A and C Shares that you should know before
investing. You should retain it for future reference. Additional information
about the World Fund and the proposed reorganization can be found in the
following documents:
o The Prospectus of the World Fund dated January 1, 1999 (the "World Fund
Prospectus") is attached to and considered a part of this Prospectus/Proxy
Statement.
o The Annual Report to Shareholders of the World Fund dated August 31, 1998
contains financial and performance information for the World Fund and is
attached to and considered a part of this Prospectus/Proxy Statement.
o A Statement of Additional Information dated May [_____], 1999 relating to
this Prospectus/Proxy Statement, which has been filed with the SEC and is
incorporated by reference into this Prospectus/Proxy Statement.
o The prospectus of the Global Fund dated August 1, 1998 as amended January
1, 1999 (the "Global Fund Prospectus") and the Global Fund's Annual Report
to Shareholders dated March 31, 1998 and Semi-Annual Report to Shareholders
dated September 30, 1998 are on file with the SEC (File Nos. 33-73244 and
811-8226) and are incorporated by reference herein.
You may request a free copy of the SAI relating to this Prospectus/Proxy
Statement, or any of the documents described above without charge by calling
1-800/DIAL BEN(R), or by writing to either fund at 100 Fountain Parkway, P.O.
Box 33030, St. Petersburg, FL 33733-8030.
LIKE ALL MUTUAL FUND SHARES, THE SEC HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER U.S. GOVERNMENT
AGENCY. MUTUAL FUND SHARES INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
SUMMARY
This is only a summary of certain information contained in this
Prospectus/Proxy Statement. You should read the more complete information in the
rest of this Prospectus/Proxy Statement, including the form of Agreement and
Plan (attached as Exhibit A), the World Fund Prospectus (attached as Exhibit B),
and the World Fund's Annual Report (attached as Exhibit C).
ON WHAT PROPOSAL AM I BEING ASKED TO VOTE?
The Board of Trustees of the Trust has approved the Agreement and Plan for
the Global Fund and recommends that shareholders of the Global Fund vote to
approve the Agreement and Plan. If shareholders vote to approve the Agreement
and Plan, the Global Fund's net assets will be transferred to the World Fund in
exchange for an equal value of World Fund Class A and Class C Shares. These
shares of the World Fund will then be distributed to the Global Fund's
shareholders and the Global Fund will be liquidated. (This proposed transaction
is referred to in this Prospectus/Proxy Statement as the "Transaction.")
This means that if you own Global Fund Class A Shares, they will be
exchanged for an equal value of World Fund Class A Shares, and if you own Global
Fund Class C Shares, they will be exchanged for an equal value of World Fund
Class C Shares. As a result, you will cease to be a shareholder of the Global
Fund and will become a shareholder of the World Fund. This exchange will occur
on the closing date of the Transaction, which is the specific date on which the
Transaction takes place.
Like the Global Fund, the World Fund is a mutual fund in the Franklin
Templeton Group of Funds. The World Fund is managed by Templeton Global Advisors
Limited ("Global Advisors"), which, like the manager of the Global Fund,
Templeton Investment Counsel, Inc. ("Investment Counsel"), is a wholly-owned
subsidiary of Resources. The World Fund has investment goals and policies that
are similar, but not identical, to those of the Global Fund.
For the reasons set forth below under "Reasons for the Transaction," the
Board of Trustees of the Trust has concluded that the Transaction is in the best
interests of the shareholders of the Global Fund. The Board of Trustees of the
Trust and Board of Directors of the Company also concluded that no dilution in
value would result to the shareholders of the Global Fund or the World Fund,
respectively, as a result of the Transaction.
THE BOARD OF TRUSTEES RECOMMENDS THAT
YOU VOTE TO APPROVE THE AGREEMENT AND PLAN
HOW WILL THE SHAREHOLDER VOTING BE HANDLED?
All shareholders of the Global Fund will vote to determine whether the
Global Fund will be reorganized into the World Fund. Shareholders who own shares
of the Global Fund at the close of business on May 21, 1999 will be entitled to
vote at the Meeting, and will be entitled to one vote for each full share and a
fractional vote for each fractional share that they hold.
REQUIRED VOTE. Approval of the Transaction requires the vote of a "majority
of the outstanding voting securities" of the Global Fund (regardless of class)
in favor of the Agreement and Plan, which means the vote of: (i) more than 50%
of the outstanding voting securities of the Fund; or (ii) 67% or more of the
voting securities of the Fund present at the meeting, if the holders of more
than 50% of the outstanding voting securities are present or represented by
proxy, whichever is less.
Please vote by proxy as soon as you receive this Prospectus/Proxy
Statement. You may place your vote by completing and signing the enclosed proxy
card. If you return a signed proxy card, your votes will be officially cast at
the Meeting by the persons appointed as proxies.
You can revoke your proxy or change your voting instructions at any time
until the vote is taken at the Meeting. For more details about shareholder
voting, see the "Voting Information" section of this Prospectus/Proxy Statement.
WHAT ARE THE GENERAL TAX CONSEQUENCES OF THE TRANSACTION?
It is expected that shareholders of the Global Fund will not recognize any
gain or loss for federal income tax purposes as a result of the exchange of
their shares for World Fund Class A or Class C Shares. You should, however,
consult your tax advisor regarding the effect, if any, of the Transaction in
light of your individual circumstances. You also should consult your tax advisor
about state and local tax consequences of the Transaction, if any, because this
discussion only relates to the federal income tax consequences. For further
information about the tax consequences of the Transaction, see "Information
About the Transaction - What are the tax consequences of the Transaction?"
COMPARISONS OF SOME IMPORTANT FEATURES
HOW DO THE INVESTMENT GOALS AND POLICIES OF THE FUNDS COMPARE?
The World Fund and the Global Fund share the identical investment goal of
obtaining long-term capital growth for shareholders. The way in which each fund
seeks to achieve its goal differs. The Global Fund seeks to achieve its goal by
investing at least 65% of its total assets in equity and debt securities of U.S.
and foreign companies, while the World Fund seeks to achieve its goal by
investing primarily in equity securities of companies located anywhere in the
world, including emerging markets. Furthermore, the Global Fund seeks to achieve
its goal by investing in companies that are principally engaged in or related to
the development, operation or rehabilitation of the physical and social
infrastructures of any nation. The World Fund does not have this focus.
Both funds invest at least 65% of their total assets in issuers located in
at least three countries (including the U.S.); invest without percentage
limitation in domestic and foreign securities; and may invest up to 100% of
their total assets in emerging markets. The funds' investment policies differ,
however, in (i) the amount and types of securities in which each fund primarily
invests; (ii) the amount of total assets that each fund may invest in illiquid
securities; and (iii) limitations on each fund's investments in listed and
unlisted securities.
For more information about the investment goals and policies of the funds,
see "Comparison of Investment Goals and Policies."
WHAT ARE THE RISKS OF AN INVESTMENT IN THE FUNDS?
As with most investments, investments in the Global Fund and the World Fund
involve risks. There can be no guarantee against losses resulting from an
investment in either fund, nor can there be any assurance that either fund will
achieve its investment goal. The risks associated with an investment in each
fund are substantially similar and include stock, foreign securities, currency,
illiquid securities, interest rate, and credit risks.
For more information about the risks of the funds, see "What are the risk
factors associated with investments in the two funds?" under the heading
"Comparison of Investment Goals and Policies." Also, the World Fund prospectus
contains a bar chart and table that show the volatility of the World Fund's
returns, which is one indicator of the risks of investing in the World Fund.
WHO MANAGES THE FUNDS?
The management of the business and affairs of the funds is the
responsibility of the Board of Directors (in the case of the World Fund) or the
Board of Trustees (in the case of the Global Fund). Each Board elects officers
who are responsible for the day-to-day operations of the funds.
Investment Counsel manages the assets of the Global Fund and Global
Advisors manages the assets of the World Fund. The management teams for the two
funds therefore differ. Global Advisors and Investment Counsel are each
wholly-owned subsidiaries of Franklin Resources, Inc. ("Resources"). Resources
is a publicly owned company engaged in various aspects of the financial services
industry through its subsidiaries. Together, Global Advisors, Investment Counsel
and their affiliates serve as investment manager to 54 registered investment
companies, with approximately 163 U.S.-based funds. They have over $216 billion
in combined assets, under management for more than 7 million U.S.-based mutual
fund shareholder and other accounts. The principal shareholders of Resources are
Charles B. Johnson and Rupert H. Johnson, Jr.
The team responsible for the day-to-day management of the World Fund is
described below. Mr. Everett is the World Fund's lead portfolio manager, while
Mr. Holowesko and Mr. Farrington have secondary portfolio management
responsibilities.
JEFFREY A. EVERETT CFA, EXECUTIVE VICE PRESIDENT OF GLOBAL ADVISORS. Mr.
Everett has been a manager of the World Fund since 1996. He holds a BS in
finance from Pennsylvania State University. He is a Chartered Financial Analyst
and a member of the International Society of Financial Analysts and the
Association of Investment Management and Research. Prior to joining the Franklin
Templeton organization in 1989, Mr. Everett was an investment officer at First
Pennsylvania Investment Research, a division of First Pennsylvania Corporation,
where he analyzed equity and convertible securities. He also coordinated
research for Centre Square Investment Group, the pension management subsidiary
of First Pennsylvania Corporation. Mr. Everett is responsible for managing
several offshore accounts, as well as several Franklin Templeton mutual funds.
MARK G. HOLOWESKO CFA, PRESIDENT OF GLOBAL ADVISORS. Mr. Holowesko has been
a manager of the World Fund since 1987. He joined the Franklin Templeton Group
in 1985. He holds a BA in economics from Holy Cross College and an MBA from
Babson College. He is a Chartered Financial Analyst, Chartered Investment
Counselor, and a founding member of the International Society of Financial
Analysts. Prior to joining the Franklin Templeton organization in 1985, Mr.
Holowesko worked with RoyWest Trust Corporation (Bahamas) Limited as an
investment analyst. His duties at RoyWest included managing trust and individual
accounts, as well as equity market research worldwide. Mr. Holowesko is
responsible for coordinating equity research and portfolio management activities
worldwide for the Templeton Global Equity Group. He also manages several mutual
funds.
RICHARD SEAN FARRINGTON CFA, VICE PRESIDENT OF GLOBAL ADVISORS. Mr.
Farrington has been a manager of the World Fund since 1994. He joined the
Franklin Templeton Group in 1991. He holds a BA in economics from Harvard
University. Mr. Farrington is a Chartered Financial Analyst. He has served as
the president of the Bahamas Society of Financial Analysts and is currently on
the board of the International Society of Financial Analysts. He joined the
Franklin Templeton organization in 1991 and is a research analyst and portfolio
manager.
The Investment Counsel portfolio management team for the Global Fund is
comprised of Tucker Scott, lead portfolio manager, and Gary R. Clemons and Peter
A. Nori. These gentlemen do not provide investment management services to the
World Fund.
WHAT ARE THE FEES AND EXPENSES OF EACH FUND AND WHAT MIGHT THEY BE AFTER THE
TRANSACTION?
The following tables describe the fees and expenses that you may pay if you
buy and hold Class A or Class C shares of the Global Fund or the World Fund. The
table also shows the estimated expense levels of the World Fund after the
proposed Transaction.
<TABLE>
<CAPTION>
ACTUAL+ ESTIMATED
--------------------- ------------------
Global World World Fund Class A
Fund Fund After
SHAREHOLDER TRANSACTION EXPENSES* Class A/5/ Class A/5/ TRANSACTION
- -------------------------------- ------- ------- ------------------
<S> <C> <C> <C>
Maximum sales charge (Load) as a percentage
at offering price........................... 5.75% 5.75% 5.75%
Load imposed on purchases/1/................ 5.75% 5.75% 5.75%
Maximum Deferred Sales Charge (Load)/2/..... None None None
Exchange fee**.............................. None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees............................... 0.75% 0.61% 0.61%
Distribution and service (12b-1) fees/4/....... 0.35% 0.25% 0.25%
Other expenses................................. 0.72% 0.19% [0.19%]
----- ----- -------
Total annual fund operating expenses........... 1.82%3 1.05% [1.05%]
<CAPTION>
ACTUAL+ ESTIMATED
-------------------- -----------------
Global World World Fund Class C
Fund Fund After
SHAREHOLDER TRANSACTION EXPENSES* Class C/5/ Class C/5/ TRANSACTION
- -------------------------------- ------- ------- -----------
<S> <C> <C> <C>
Maximum sales charge (Load) as a percentage
of offering price.......................... 1.99% 1.99% 1.99%
Load imposed on purchases/1/................ 1.00% 1.00% 1.00%
Maximum Deferred Sales Charge (Load)/2/..... 0.99% 0.99% 0.99%
Exchange fee**.............................. None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees.............................. 0.75% 0.61% 0.61%
Distribution and service (12b-1) Fees/4/....... 1.00% 1.00% 1.00%
Other expenses................................. 0.72% 0.19% [0.19%]
----- ----- -------
Total annual fund operating expenses........... 2.47%3 1.80% [1.80%]
</TABLE>
+ Information provided is for Global Fund Class A and Class C Shares for
the fiscal year ended March 31, 1998. Information for World Fund Class A and
Class C Shares is provided for the fiscal year ended August 31, 1998.
*If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
**There is a $5.00 fee for each exchange by a Market Timer, as that term is
defined in the Glossary to this Prospectus/Proxy Statement. We process all other
exchanges without a fee.
/1/ There is no front-end sales charge if you invest $1 million or more.
/2/ A Contingent Deferred Sales Charge ("CDSC") may apply to purchases of Class
A Shares of $1 million or more if you sell the shares within one year and to any
purchases of Class C Shares if you sell the shares within 18 months. A CDSC may
also apply to purchases by certain retirement plans that qualify to buy Class A
shares without a front-end sales charge. The charge is based on the value of the
shares sold or the Net Asset Value at the time of purchase, whichever is less.
The number in the table shows the charge as a percentage of Offering Price.
While the percentage for Class C is different depending on whether the charge is
shown based on the Net Asset Value or the Offering Price, the dollar amount you
would pay is the same. See "How Do I Sell Shares?--Contingent Deferred Sales
Charge" in the prospectus of the Global Fund and see "Your Account -CDSC" in the
prospectus of the World Fund for details.
/3/ For the period shown, Global Advisors and FT Services had agreed in advance
to waive or limit their respective management and administration fees to reduce
the fund's expenses. With this reduction, management fees were 0.24% for the
Global Fund and total operating expenses were 1.25% for Class A Shares and 1.90%
for Class C Shares of Global Fund. This arrangement may end at any time upon
notice to the Board.
/4/ The combination of front-end sales charges and Rule 12b-1 fees could cause
long-term shareholders to pay more than the economic equivalent of the maximum
front-end sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
/5/ Prior to January 1, 1999, Class A Shares were designated Class I Shares and
Class C Shares were designated Class II Shares.
The following expense example can help you compare the cost of investing in
the World Fund Class A and C Shares versus the cost of investing in the Global
Fund Class A and Class C Shares. The example assumes that you invest $10,000 in
each fund for the time periods indicated and then redeem all of your shares at
the end of those periods. The example also assumes that your investment has a 5%
return each year, that each fund's operating expenses remain the same and that
no fee waivers or expense limitations are in place. Although your actual costs
may be higher or lower, based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
CLASS A 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Global Fund Class A $750/1/ $1,110 $1,500 $2,590
World Fund Class A $676/1/ $890 $1,121 $1,784
Estimated World Fund Class A (after $__ $__ $__ $__
proposed Transaction)
CLASS C
Global Fund Class C $450/2/ $860 $1,400 $2,880
World Fund Class C $379/3/ $661 $1,065 $2,195
Estimated World Fund Class C (after $__ $__ $__ $__
proposed Transaction)
</TABLE>
/1/ Assumes a Contingent Deferred Sales Charge will not apply.
/2/ For the same Class C investment, you would pay projected expenses of $350 if
you did not sell your shares at the end of the first year. Your projected
expenses for the remaining periods would be the same.
/3/ For the same Class C investment, you would pay projected expenses of $281 if
you did not sell your shares at the end of the first year. Your projected
expenses for the remaining periods would be the same.
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. Each
fund pays its operating expenses. The effects of these expenses are reflected in
the net asset value or dividends of each class and are not directly charged to
your account.
WHERE CAN I FIND MORE FINANCIAL INFORMATION ABOUT THE FUNDS?
For the World Fund, per share income information for the past five fiscal
years (and the most recent six month semi-annual period) is shown immediately
below under the heading "Financial Highlights." Also, the current Annual Report
to Shareholders of the World Fund for the fiscal year ended August 31, 1998
contains more financial information about the World Fund, including audited
financial statements and a discussion of that fund's performance during the past
fiscal year. The Annual Report is attached to and considered to be a part of
this Prospectus/Proxy Statement.
The Global Fund Prospectus, as well as the Global Fund's Annual Report to
Shareholders the fiscal year ended March 31, 1998 and Semi-Annual Report to
Shareholders for the six-month period ended September 30, 1998 contain similar
information about that fund. These documents are available free of charge upon
request (See "Information about the Global Fund").
Templeton World Fund
Financial Highlights -- Class A
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1999 Year Ended August 31,
(unaudited) 1998 1997 1996 1995 1994
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout the
period)
Net asset value, beginning of period $____ $19.66 $16.21 $16.76 $17.06 $15.94
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income $____ .42 .45 .41 .33 .26
Net realized and unrealized gains (losses) $____ (1.59) 4.47 1.29 1.11 2.50
-----------------------------------------------------------------------------
Total from investment operations $____ (1.17) 4.92 1.70 1.44 2.76
Less: Dividends from net investment income ($___) (.44) (.43) (.37) (.28) (.26)
Less: Distributions from net realized gains ($___) (2.60) (1.04) (1.88) (1.46) (1.38)
-----------------------------------------------------------------------------
Total Distributions $____ (3.04) (1.47) (2.25) (1.74) (1.64)
-----------------------------------------------------------------------------
Net asset value, end of period $____ $15.45 $19.66 $16.21 $16.76 $17.06
-----------------------------------------------------------------------------
Total Return (%)/1/ ____ (7.80) 32.70 11.73 9.87 18.87
Ratios/Supplemental Data
Net assets, end of period (000's) $_______ $7,852,041 $8,649,994 $6,483,146 $5,868,967 $5,421,691
Ratios to average net assets (%):
Expenses ____ 1.04 1.03 1.03 1.05 1.04/2/
Net investment income ____ 2.34 2.58 2.66 2.18 1.67/2/
Portfolio turnover rate (%) ____ 43.36 39.16 22.05 34.05 30.77
</TABLE>
/1/ Total return does not reflect sales charges and is not annualized.
/2/ Annualized.
Templeton World Fund
Financial Highlights -- Class C
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1999 Year Ended August 31,
(unaudited) 1998 1997 1996 1995/1/
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout the
period)
Net asset value, beginning of period $____ $19.39 $16.04 $16.71 $15.36
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income $____ .33 .34 .45 .03
Net realized and unrealized gains (losses) $____ (1.61) 4.39 1.11 1.32
-----------------------------------------------------------------------------
Total from investment operations $____ (1.28) 4.73 1.56 1.35
Less: Dividends from net investment income ($___) (.35) (.34) (.35) --
Less: Distributions from net realized gains ($___) (2.60) (1.04) (1.88) --
-----------------------------------------------------------------------------
Total Distributions $____ (2.95) (1.38) (2.23) --
-----------------------------------------------------------------------------
Net asset value, end of period $____ $15.16 $19.39 $16.04 $16.71
-----------------------------------------------------------------------------
Total Return (%)/2/ ____ (8.51) 31.61 10.88 8.79
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $_________ $325,319 $207,679 $58,619 $7,623
Ratios to average net assets (%):
Expenses ____ 1.80 1.83 1.84 1.823
Net investment income ____ 1.66 1.92 2.14 1.373
Portfolio turnover rate (%) ____ 43.36 39.16 22.05 34.05
</TABLE>
/1/ Figures for Class C are for the period May 1, 1995 (effective date) through
August 31, 1995.
/2/ Total return does not reflect sales charges and is not annualized.
/3/ Annualized.
WHAT ARE OTHER KEY FEATURES OF THE FUNDS?
TRANSFER AGENCY AND CUSTODY SERVICES. Franklin/Templeton Investor Services,
Inc. ("Investor Services"), a wholly owned subsidiary of Resources, is the
shareholder servicing agent and acts as the transfer agent and dividend-paying
agent for the funds. Under an administration agreement, Franklin Templeton
Services, Inc. ("FT Services"), also a wholly-owned subsidiary of Resources,
provides certain administrative facilities to each fund.
The Chase Manhattan Bank acts as the custodian of the securities and other
assets of both of the funds. The main office of The Chase Manhattan Bank is
MetroTech Center, Brooklyn, New York 11245. As a foreign custody manager, the
bank selects and monitors foreign sub-custodian banks, selects and evaluates
non-compulsory foreign depositories, and monitors and furnishes information
relevant to the selection of compulsory depositories.
MANAGEMENT AND ADMINISTRATION FEES. Global Advisors is the investment
manager of the World Fund and Investment Counsel is the investment manager of
the Global Fund. Under the World Fund's investment management agreement, the
World Fund pays Global Advisors a management fee equal to an annual rate of
0.75% of the average daily net assets up to and including $200 million; 0.675%
of the average daily net assets over $200 million up to and including $1.3
billion; and 0.60% of the average daily net assets over $1.3 billion. The Global
Fund pays Investment Counsel a monthly management fee equal to an annual rate of
0.75% of its average daily net assets. The management fee rates for the past
fiscal year for each of these funds are shown in the Fee Table for each fund
included in the Summary section of this Prospectus/Proxy Statement. Because the
World Fund and the Global Fund have multiple classes, holders of World Fund
Class A Shares and World Fund Class C Shares and holders of Global Fund Class A
Shares and Global Fund Class C Shares, each pays a proportionate share of these
fees.
DISTRIBUTION SERVICES. Pursuant to underwriting agreements relating to each
of the funds, Franklin/Templeton Distributors, Inc. ("Distributors") acts as a
principal underwriter in a continuous public offering of the funds' shares.
Distributors pays the expenses of the distribution of the shares of the funds,
including advertising expenses and the costs of printing sales materials and
prospectuses used to offer shares to the public.
RULE 12B-1 PLANS. Each class of the Global Fund and the World Fund has a
separate distribution plan or "Rule 12b-1 Plan" under which the fund shall pay
or may reimburse Distributors or others for the expenses of activities that are
primarily intended to sell shares of that class. These expenses may include,
among others, distribution or service fees paid to securities dealers who have
executed a servicing agreement with the fund, Distributors or its affiliates; a
prorated portion of Distributors' overhead expenses and the expenses of printing
prospectuses and reports used for sales purposes, and preparing and distributing
sales literature and advertisements.
Payments of Rule 12b-1 fees by the Global Fund under its Class A plan may
not exceed 0.35% per year of the fund's average daily net assets and under its
Class C plan may not exceed 1.00% per year of the fund's average daily net
assets. During the first year after certain Class A purchases are made without a
sales charge, Securities Dealers may not be eligible to receive the Rule 12b-1
fees associated with the purchase.
In the case of the World Fund's Class A plan, the Rule 12b-1 fees charged
may not exceed 0.25% per year of the fund's average daily net assets and in the
case of the World Fund's Class C plan, the Rule 12b-1 fees charged may not
exceed 1.00% per year of the fund's average daily net assets.
PURCHASES AND REDEMPTIONS. Each fund has a maximum front-end sales charge
imposed on the purchase of its Class A shares of 5.75% with reduced charges for
purchases over $50,000 and no sales charges for purchases of $1,000,000 or more.
Each fund has a maximum sales charge of 1.00% imposed on purchases of its Class
C shares and a maximum deferred sales charge of 0.99% imposed on the redemption
of its Class C shares. The deferred sales charge for each fund's Class C Shares
is waived in certain circumstances. For more information, please see "Choosing a
Share Class" in the World Fund Prospectus and "How Do I Sell Shares" in the
Global Fund Prospectus. Both funds generally require a minimum initial
investment of $1,000 and subsequent investments of at least $50. The minimum may
be waived or reduced when shares of these funds are purchased through retirement
accounts or plans providing for regular periodic investments.
You may sell (redeem) your shares at any time. Shares of each fund also may
be exchanged for shares of other Franklin Templeton Funds, subject to certain
limitations, as provided in the prospectuses of the respective Franklin
Templeton Fund. Because it is technically a sale and a purchase of shares, an
exchange is a taxable transaction.
Shares of both funds may be redeemed at their respective Net Asset Value
per share. However, redemptions of Class A shares of both funds that were
purchased in amounts of $1,000,000 or more generally are subject to a Contingent
Deferred Sales Charge ("CDSC") of 1% for a period of twelve months following the
date of purchase. In addition, there may be a CDSC on any Class C share of
either fund if it is sold within 18 months after purchase or on sales of Class A
shares of the World Fund by certain retirement plans that acquired the shares
without an initial sales charge. World Fund shares acquired by Global Fund
shareholders as a result of this Transaction are subject to a Contingent
Deferred Sales Charge to the same extent that the Global Fund shares were
subject to a Contingent Deferred Sales Charge.
Additional information and specific instructions explaining how to buy,
sell, and exchange shares of the funds are outlined in the current prospectus of
each fund under the heading "About Your Account" in the Global Fund's Prospectus
and "Your Account" in the World Fund's Prospectus. The accompanying World Fund
Prospectus also lists phone numbers for you to call if you have any questions
about your account under the heading "Questions." These phone numbers are the
same for both funds.
DIVIDENDS AND DISTRIBUTIONS. Both funds declare dividends. The amount of
these dividends will vary depending on changes in the funds' net investment
income. Neither fund pays "interest" nor guarantees any amount of dividends or
return on an investment in its shares.
Each fund automatically reinvests distributions in additional shares of
that fund unless you select a different option. Specific instructions explaining
how to select a different option are outlined in the current prospectus of each
fund.
Distributions generally are taxable to you either as ordinary income or
capital gains. This is true whether you reinvest your distributions in
additional shares or receive them in cash. Distributions designated by both
funds as long-term capital gains are taxable to you as such.
Ordinary dividends and capital gain distributions that you receive from the
funds, and gains arising from redemptions or exchanges of your fund shares, will
generally be subject to state and local income tax.
For more information about the tax implications of investments in either
fund, see the heading "Tax Considerations" in the World Fund Prospectus and "How
Taxation Affects the Fund and its Shareholders" in the Global Fund Prospectus.
REASONS FOR THE TRANSACTION
Because of the relatively low demand for the Global Fund, Investment
Counsel recommended to the Board of Trustees of the Trust that Global Fund be
combined with a larger fund that has similar investment goals and policies. A
larger fund should be better able to diversify its investments and to obtain
certain savings in costs for the Global Fund and its shareholders. The
Transaction was also recommended to combine two similar funds within the
Franklin Templeton Group to eliminate duplication of expenses and internal
competition.
The Agreement and Plan was presented to the Trust's Board of Trustees at a
meeting of the Board. At the meeting, the Board questioned management about the
potential benefits and costs to shareholders of the Global Fund. In deciding
whether to recommend approval of the Transaction to shareholders, the Board of
Trustees considered, among other things: the expense ratios of the Global Fund
and World Fund; the comparative investment performance of the Global Fund and
the World Fund; the compatibility of the investment goals, policies,
restrictions and investments of the Global Fund with those of the World Fund;
the tax consequences of the Transaction; and the significant experience of
Global Advisors. During the course of its deliberations, the Board of Trustees
also considered that the expenses of the Transaction will be shared one-quarter
by the Global Fund, one-quarter by the World Fund, one-quarter by Investment
Counsel, and one-quarter by Global Advisors.
The Board concluded that the Transaction is in the best interests of the
shareholders of the Global Fund and that no dilution of value would result to
the shareholders of the Global Fund from the Transaction. It then decided to
approve the Agreement and Plan and to recommend that shareholders of the Global
Fund vote to approve the Transaction. As required by law, the Trustees approving
the Agreement and Plan included a majority of the Trustees who are not
interested persons of the Global Fund.
The Board's conclusion was based on a number of factors, including that the
Transaction would permit shareholders to pursue their investment goals in a
larger fund. A larger fund should have an enhanced ability to effect portfolio
transactions on more favorable terms and should have greater investment
flexibility. A fund with higher aggregate net assets may also be able to reduce
or eliminate certain duplicative costs and expenses. This may result in lower
overall expense ratios through the spreading of fixed costs of fund operations
over a larger asset base. However, variable expenses that are based on the value
of assets or the number of shareholder accounts, such as custody and transfer
agent fees, would be largely unaffected by the Transaction.
The Board of Directors of the Company, on behalf of the World Fund, also
determined that the Transaction was in the best interests of the World Fund and
its shareholders and that no dilution would result to such shareholders.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF TRUSTEES OF THE TRUST, ON
BEHALF OF THE GLOBAL FUND, RECOMMENDS THAT YOU VOTE FOR THE AGREEMENT AND PLAN.
If the Agreement and Plan is not approved, the Board of Trustees will consider
other possible courses of action for the Global Fund, including dissolution and
liquidation.
INFORMATION ABOUT THE TRANSACTION
This is only a summary of the Agreement and Plan. You should read the
actual Agreement and Plan. It is attached as Exhibit A.
HOW WILL THE TRANSACTION BE CARRIED OUT?
If the shareholders of the Global Fund approve the Agreement and Plan, the
Transaction will take place after various conditions are satisfied by the Trust,
on behalf of the Global Fund, and by the Company, on behalf of the World Fund,
including the delivery of certain documents. The Trust and the Company will
agree on the closing date. If the shareholders of the Global Fund do not approve
the Agreement and Plan, the Transaction will not take place.
If shareholders of the Global Fund approve the Agreement and Plan, the
Global Fund will deliver substantially all of its assets to the World Fund on
the closing date. In exchange, the Global Fund will receive World Fund Class A
Shares and World Fund Class C Shares that have a value equal to the dollar value
of the assets initially delivered to the World Fund. Those shares will be
distributed pro rata to the Global Fund's shareholders of record as of the close
of business on the closing date. World Fund Class A Shares will be distributed
to holders of Global Fund Class A Shares and World Fund Class C Shares will be
distributed to holders of Global Fund Class C Shares. The stock transfer books
of the Global Fund will be permanently closed as of [____] p.m. Eastern time on
the closing date. The Global Fund will only accept requests for redemption
received in proper form before [____] p.m. on the closing date. Requests
received after that time will be considered requests to redeem shares of the
World Fund.
To the extent permitted by law, the Trust and the Company may amend the
Agreement and Plan without shareholder approval. They may also decide to
terminate and abandon the Transaction at any time before or, to the extent
permitted by law, after the approval of shareholders of the Global Fund.
WHO WILL PAY THE EXPENSES OF THE TRANSACTION?
The expenses resulting from the Transaction will be shared by the following
parties in the percentages indicated: 25% by the Global Fund, 25% by the World
Fund, 25% by Investment Counsel, and 25% by Global Advisors. As described above,
Investment Counsel and Global Advisors are the investment managers for the
Global Fund and the World Fund, respectively.
HOW DO THE LEGAL STRUCTURES OF THE FUNDS COMPARE?
The Global Fund is a series of the Trust, which is a business trust
organized under the laws of the State of Delaware on December 21, 1993. The
World Fund is a series of Templeton Funds, Inc., a Maryland corporation
(previously defined as the "Company"), which was formed on August 15, 1977. Both
the Delaware Business Trust Act and the Maryland General Corporation Law contain
provisions that are specially designed to facilitate the operations of mutual
funds.
WHAT ARE THE TAX CONSEQUENCES OF THE TRANSACTION?
The Transaction is intended to qualify as a tax-free reorganization for
federal income tax purposes under Section 368(a)(1) of the Internal Revenue Code
of 1986, as amended. Based on certain assumptions and representations received
from the Trust, on behalf of the Global Fund, and the Company, on behalf of the
World Fund, it is the opinion of Stradley, Ronon, Stevens & Young LLP, counsel
to the Trust and the Company, that shareholders of the Global Fund will not
recognize any gain or loss for federal income tax purposes as a result of the
exchange of their shares of the Global Fund for shares of the World Fund and
that the World Fund will not recognize any gain or loss upon receipt of the
Global Fund's assets.
You will continue to be responsible for tracking the purchase cost and
holding period of your shares and should consult your tax advisor regarding the
effect, if any, of the Transaction in light of your individual circumstances.
You should also consult your tax adviser as to state and local tax consequences,
if any, of the Transaction because this discussion only relates to the federal
income tax consequences.
WHAT SHOULD I KNOW ABOUT WORLD FUND CLASS A AND CLASS C SHARES?
World Fund Class A Shares and World Fund Class C Shares will be distributed
to the shareholders of the Global Fund. Each share will be fully paid and
nonassessable when issued with no personal liability attaching to the ownership
thereof. Each World Fund Class A Share and World Fund Class C Share will have no
preemptive or conversion rights, and will be transferable upon the books of the
World Fund. The shares of the World Fund will be recorded electronically in each
shareholder's account. The World Fund will then send a confirmation to each
shareholder. As described in its prospectus, the World Fund does not issue share
certificates unless requested. Former shareholders of the Global Fund whose
shares are represented by outstanding share certificates will not be allowed to
redeem shares of the Global Fund until the certificates have been returned.
The shares of both funds have noncumulative voting rights. This gives
holders of more than 50% of the shares voting the ability to elect all of the
members of the Board. If this happens, holders of the remaining shares voting
will not be able to elect anyone to the Board.
Like the Global Fund, the World Fund does not routinely hold annual
meetings of shareholders. The funds may each hold special meetings for matters
requiring shareholder approval. A meeting of shareholders may also be called by
the Board of Directors or Trustees in its discretion or by shareholders who hold
at least 10% of that company's or trust's outstanding shares in order to
consider the removal of a Board member.
WHAT ARE THE CAPITALIZATIONS OF THE FUNDS AND WHAT MIGHT THE CAPITALIZATION BE
AFTER THE TRANSACTION?
The following table sets forth, as of March 31, 1999, the capitalization of
the Class A and C Shares of the Global Fund and the World Fund. The table also
shows the projected capitalization of the World Fund Class A and Class C Shares
as adjusted to give effect to the proposed Transaction. The capitalization of
the World Fund and its classes is likely to be different when the Transaction is
consummated.
World Fund
Global World after Transaction
Fund Fund (projected)
-----------------------------------------
Net Assets (all classes)* $ $ $
Class A net assets (millions)
Class A shares outstanding
Class A net asset value per share
Class C net assets
Class C net asset value per share
Class C shares outstanding
* The World Fund offers an additional class of shares, Class B.
COMPARISON OF INVESTMENT GOALS AND POLICIES
This section describes key investment goals of the Global Fund and the
World Fund, and certain noteworthy differences between the investment objectives
and policies of the funds. For a complete description of the World Fund's
investment policies and risks, you should read the World Fund prospectus, which
is attached to this Prospectus/Proxy Statement as Exhibit B.
ARE THERE ANY SIGNIFICANT DIFFERENCES BETWEEN THE INVESTMENT GOALS OF THE FUNDS?
The Global Fund and the World Fund have the same investment goal of
providing investors with long-term capital growth. Each investment goal is
fundamental. The way in which each fund seeks to achieve its goal differs. The
Global Fund seeks to achieve its goal by investing at least 65% of its total
assets in equity and debt securities of U.S. and foreign companies, while the
World Fund seeks to achieve its goal by investing primarily in equity securities
of companies located anywhere in the world, including emerging markets. A
significant difference between the funds is that the Global Fund further seeks
to achieve its goal by investing in companies that are principally engaged in or
related to the development, operation or rehabilitation of the physical and
social infrastructures of any nation. The World Fund does not have this focus.
Policies or restrictions stated in this Prospectus/Proxy Statement as
fundamental may not be changed without the approval of the lesser of: (i) a
majority of the outstanding shares of the fund; or (ii) 67% or more of the
shares represented at a shareholders' meeting at which the holders of more than
50% of the outstanding shares are represented.
HOW DO THE TYPES OF SECURITIES THE FUNDS BUY AND INVESTMENT POLICIES OF THE
FUNDS COMPARE?
GENERAL.
Both funds invest in equity and debt securities of U.S. and foreign
companies. The primary difference between the types of securities that make up
the funds' portfolios is that the Global Fund focuses primarily on companies
that are principally engaged in or related to the development, operation or
rehabilitation of the physical and social infrastructures of any nation. The
World Fund does not have this focus. Both funds invest at least 65% of their
total assets in issuers located in at least three countries (including the
U.S.); invest without percentage limitation in domestic and foreign securities;
and may invest up to 100% of their total assets in emerging markets. The funds
make foreign investments by directly holding foreign securities or investing in
depositary receipts. Under certain circumstances, each fund invests a portion of
its assets temporarily in short-term instruments.
EQUITY SECURITIES.
Both funds invest in equity securities of U.S. and foreign companies,
including companies located in emerging markets. The World Fund seeks to obtain
its investment goal by primarily investing in equity securities, while the
Global Fund seeks to obtain its investment goal by primarily investing equity
and debt securities. Equity securities generally entitle the holder to
participate in a company's general operating results and typically include
common stock, preferred stock, convertible securities, warrants or rights.
Currently, the Global Fund invests primarily in common stock, while the World
Fund invests primarily in common as well as preferred stock.
DEBT SECURITIES.
The Global Fund attempts to achieve its investment goal by having a
flexible policy of investing in debt securities and equity securities. Depending
upon current market conditions, the World Fund generally invests a portion of
its total assets in debt securities of companies and governments located
anywhere in the world. Debt securities represent an obligation of the issuer to
repay a loan of money to it, and generally provide for the payment of interest.
These include bonds, notes and debentures. Both funds may buy rated and unrated
debt securities of any maturity. Neither fund may invest more than 5% of its
total assets in non-investment grade securities (i.e., those rated lower than
BBB by S&P or Baa by Moody's or, in the case of the Growth and Income Fund, if
unrated, determined by the fund to be of comparable quality).
DEPOSITARY RECEIPTS.
Both funds invest in American, European and Global Depositary Receipts.
Depositary Receipts are certificates typically issued by a bank or trust company
that give their holders the right to receive securities issued by a foreign or
domestic company.
TEMPORARY INVESTMENTS.
When either Investment Counsel or Global Advisors believes unusual or
adverse economic, market or other conditions exist, each fund's portfolio may be
invested in a temporary defensive manner. Under these circumstances, each fund
may invest all of its assets in: (i) high quality commercial paper; (ii)
securities issued by or guaranteed by the U.S. government; (iii) repurchase
agreements with banks and broker-dealers; or (iv) short-term time deposits with
banks. The Global Fund may additionally invest in securities issued by or
guaranteed by a foreign government as a temporary investment.
ILLIQUID SECURITIES.
The Global Fund may invest up to 15% of its total assets in illiquid
securities, including up to 10% of its total assets in restricted securities.
The World Fund may invest no more than 10% of its total assets in securities
with a limited trading market. The Global Fund may invest without percentage
limitation in listed or unlisted securities of foreign and domestic companies of
any size (market capitalization). By comparison, the World Fund may only invest
up to 15% of its total asset in foreign securities that are not listed on a
recognized U.S. or foreign securities exchange.
DIVERSIFICATION.
Both funds are diversified under the 1940 Act. However, the World
Fund's portfolio is potentially more diversified than the Global Fund's
portfolio. The World Fund may invest no more than 5% of its total assets in
securities issued by any one company or foreign government. The Global Fund will
not buy a security if, with respect to 75% of its net assets, more than 5% would
be invested in the securities of any single issuer or if it would result in the
fund owning more than 10% of the voting securities of a single issuer. The
remaining 25% of the Global Fund's assets may be invested in the securities of a
single issuer. Each fund, irrespective of these limits, may invest up to 100% of
its total assets in U.S. government securities.
CONCENTRATION.
Both funds may invest in any industry although neither will concentrate
(invest more than 25% of its total assets) in any one industry.
HOW DO THE FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUNDS DIFFER?
Except as described below, the funds have adopted similar restrictions as
fundamental policies, which may not be changed without the approval of a
majority of the outstanding voting securities of the fund.
Both funds are generally prohibited from investing in real estate or
mortgages on real estate, although each fund may invest in marketable securities
secured by real estate or interests therein or, in the case of the World Fund,
issued by companies or investments trusts that invest in real estate or
interests therein.
Both funds are generally prohibited from investing in other open-end
investment companies, except that the Global Fund may invest in such securities
in connection with a merger, consolidation, acquisition or reorganization.
Both funds are generally prohibited from investing in interests in oil, gas
or other mineral exploration or development programs, except that the Global
Fund may invest in debentures or equity stock interests of such issuers.
Both funds are generally prohibited from purchasing or selling commodity
contracts, except that both funds may purchase or sell futures contracts, in the
case of the Global Fund, and stock index futures contracts, in the case of the
World Fund.
Both funds are prohibited from acting as an underwriter.
Both funds are generally prohibited from issuing senior securities,
purchasing on margin or selling short, provided, however, that the World Fund
may make margin payments in connection with, and purchase and sell, stock index
futures contracts and options on securities indexes and the Global Fund may make
margin payments in connection with futures, options and currency transactions.
Neither fund may loan money, except that each fund may purchase a portion
of an issue of publicly distributed bonds, debentures, notes and other evidences
of indebtedness and enter into repurchase agreements.
Both funds are generally prohibited from borrowing money, except that the
Global Fund may borrow from banks in an amount not exceeding 33 1/3% of the
value of its total assets and the World Fund may borrow from banks in an amount
not exceed 5% of the value of its total assets (provided such borrowing is
temporary and in connection with the purchase or cancellation of its shares).
Both funds are generally prohibited from pledging, mortgaging, and
hypothecating their assets for any purposes except to secure bank borrowings
and, in the case of the World Fund, only if such borrowings do not exceed 10% of
the value of its total assets and are approved by a board resolution. This
restriction does not prohibit, in the case of the Global Fund, escrow,
collateral or margin arrangements in connection with its use of options, futures
contracts, and options on futures contracts.
Both funds are prohibited from investing more than 25% of their total
assets in a single industry and, with certain exceptions, participating on a
joint or a joint and several basis in any trading account in securities.
The World Fund, with respect to 100% of its assets, may not purchase more
than 10% of any class of securities of any one company. The Global Fund, with
respect to 75% of its assets, may not purchase more than 10% of any class of
securities of any one company or invest more than 5% of its total assets in any
one company. The World Fund also is prohibited from investing in any company for
the purpose of exercising control or management.
The following policies are fundamental for the World Fund (but are only
non-fundamental for the Global Fund). The World Fund may not: purchase or retain
securities of any company in which directors or officers of the Templeton Funds,
Inc. (or trustees and officers of Templeton Global Investment Trust, in the case
of the Global Fund) or Global Advisors (or Investment Counsel, in the case of
the Global Fund) individually owning more than 1/2 of 1% of the securities of
such company in the aggregate own more than 5% of the securities of such
company; invest more than 5% of its total assets in securities of issuers that
have been in continuous operation less than three years; invest more than 5% of
its assets in warrants and more than 2% of its assets in warrants not listed on
the New York Stock Exchange or American Stock Exchange; nor invest more than 15%
of its total assets in securities of foreign issuers that are not listed on a
U.S. or foreign securities exchange, including no more than 10% of its total
assets that may be invested in securities with a limited trading market.
The World Fund may not invest in "letter stocks" or securities on which
there are any sales restrictions under a purchase agreement. This is neither a
fundamental nor a non-fundamental policy of the Global Fund.
WHAT ARE THE RISK FACTORS ASSOCIATED WITH INVESTMENTS IN THE FUNDS?
Like all investments, an investment in the funds involves risk. There is no
assurance that the funds will meet their investment goals. The achievement of
the funds' goals depends upon market conditions, generally, and on the
investment managers' analytical and portfolio management skills. The risks of
the funds are basically the same as those of other investments in foreign
securities.
STOCKS.
While stocks have historically outperformed other asset classes over the
long term, they tend to go up and down more dramatically over the shorter term.
These price movements may result from factors affecting individual companies,
industries or securities markets as a whole. Value stock prices are considered
"cheap" relative to the company's perceived value. They may not increase in
value, as anticipated by the fund manager, if other investors fail to recognize
the company's value and bid up the price or in markets favoring faster-growing
companies.
FOREIGN SECURITIES.
Securities of companies and governments located outside the U.S. may
involve risks that can increase the potential for losses in a fund. Investments
in Depositary Receipts also involve some or all the following risks.
COUNTRY. General securities market movements in any country where a fund
has investments are likely to affect the value of the securities the fund owns
that trade in that country. These movements will affect a fund's share price and
fund performance.
The political, economic and social structure of some countries a fund
invests in may be less stable and more volatile than those in the U.S. The risks
of investing in these countries include the possibility of the imposition of
exchange controls, currency devaluations, foreign ownership limitations,
expropriation, restrictions on removal of currency or other assets,
nationalization of assets, punitive taxes and certain custody and settlement
risks.
Each fund's investments in developing or emerging markets are subject to
all of the risks of foreign investing generally, and have additional heightened
risks due to a lack of established legal, business and social frameworks to
support securities markets. Foreign securities markets, including emerging
markets, may have substantially lower trading volumes than U.S. markets,
resulting in less liquidity and more volatility than experienced in the U.S.
While short-term volatility in these markets can be disconcerting, declines in
excess of 50% are not unusual.
COMPANY. Foreign companies are not subject to the same disclosure,
accounting, auditing and financial reporting standards and practices as U.S.
companies and their securities may not be as liquid as securities of similar
U.S. companies. Foreign stock exchanges, trading systems, brokers and companies
generally have less government supervision and regulation than in the U.S. A
fund may have greater difficulty voting proxies, exercising shareholder rights,
pursuing legal remedies and obtaining judgments with respect to foreign
investments in foreign courts than with respect to U.S. companies in U.S.
courts.
CURRENCY.
Many of the funds' investments are denominated in foreign currencies.
Changes in foreign currency exchange rates will affect the value of what each
fund owns and that fund's share price. Generally, when the U.S. dollar rises in
value against a foreign currency, an investment in that country loses value
because that currency is worth fewer U.S. dollars. Devaluation of currency by a
country's government or banking authority also has a significant impact on the
value of any securities denominated in that currency.
EURO. On January 1, 1999, the European Monetary Union (EMU)
introduced a new single currency, the euro, which will replace the national
currency for the eleven participating member countries. If a fund holds
investments in countries with currencies replaced by the euro, the investment
process, including trading, foreign exchange, payments, settlements, cash
accounts, custody and accounting will be impacted.
Because the change to a single currency is new and untested, the
establishment of the euro may result in market volatility. For the same reason,
it is not possible to predict the impact of the euro on the business or
financial condition of European issuers which the fund may hold in its
portfolio, and their impact on the value of fund shares and fund performance. To
the extent either fund holds non-U.S. dollar (euro or other) denominated
securities, it will still be exposed to currency risk due to fluctuations in
those currencies versus the U.S. dollar.
ILLIQUID SECURITIES.
The World Fund may invest up to 10% of its total assets in securities with
a limited trading market, while the Global Fund may invest up to 15% of its
total assets in securities with a limited trading market. Such a market can
result from political or economic conditions affecting previously established
securities markets, particularly in emerging market countries.
INTEREST RATE.
When interest rates rise, debt security prices fall. The opposite is
also true: debt security prices go up when interest rates fall. Generally,
interest rates rise during times of inflation or a growing economy, and fall
during an economic slowdown or recession. Securities with longer maturities
usually are more sensitive to interest rate changes than securities with shorter
maturities.
CREDIT.
This is the possibility that an issuer will be unable to make interest
payments or repay principal. Changes in an issuer's financial strength or in a
security's credit rating may affect its value and, thus, impact the value of a
fund's shares.
VOTING INFORMATION
HOW MANY VOTES ARE NECESSARY TO APPROVE THE AGREEMENT AND PLAN?
A "majority of the outstanding voting securities" of the Global Fund
(regardless of class) is necessary to approve the Agreement and Plan, which
means the vote of: (i) more than 50% of the outstanding voting securities of the
Fund; or (ii) 67% or more of the voting securities of the Fund present at the
meeting, if the holders of more than 50% of the outstanding voting securities
are present or represented by proxy, whichever is less. Each shareholder will be
entitled to one vote for each full share, and a fractional vote for each
fractional share, of the Global Fund held at the close of business on May 21,
1999 (the "Record Date"). If sufficient votes to approve the Agreement and Plan
are not received by the date of the Meeting, the Meeting may be adjourned to
permit further solicitations of proxies. The holders of any number of shares
entitled to vote at the Meeting and present in person or by proxy (whether or
not sufficient to constitute quorum) may adjourn the Meeting.
Abstentions and broker non-votes will be included for purposes of
determining whether a quorum is present at the Meeting, but will be treated as
votes not cast and, therefore, will not be counted for purposes of determining
whether the matters to be voted upon at the Meeting have been approved and will
have the same effect as a vote against the Agreement and Plan.
HOW DO I ENSURE MY VOTE IS ACCURATELY RECORDED?
You can vote in any one of three ways:
By mail, with the enclosed proxy card.
In person at the Meeting.
Through Shareholder Communications Corporation ("SCC"), a proxy
solicitor, by calling 1-800/645-3559.
A proxy card is, in essence, a ballot. IF YOU SIMPLY SIGN AND DATE THE
PROXY BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED IN FAVOR OF THE
AGREEMENT AND PLAN AND IN ACCORDANCE WITH THE VIEWS OF MANAGEMENT UPON ANY
UNEXPECTED MATTERS THAT COME BEFORE THE MEETING OR ADJOURNMENT OF THE MEETING.
CAN I REVOKE MY PROXY?
You may revoke your proxy at any time before it is voted by sending a
written notice to the Global Fund expressly revoking your proxy, by signing and
forwarding to the Global Fund a later-dated proxy, or by attending the Meeting
and voting in person.
WHAT OTHER MATTERS WILL BE VOTED UPON AT THE MEETING?
The Board of Trustees of the Trust does not intend to bring any matters
before the Meeting other than described in this Prospectus/Proxy Statement. It
is not aware of any other matters to be brought before the Meeting by others. If
any other matter legally comes before the Meeting, proxies for which discretion
has been granted will be voted in accordance with the views of management.
WHO IS ENTITLED TO VOTE?
Shareholders of record of the Global Fund at the close of business on May
21, 1999 (the "Record Date") will be entitled to vote at the meeting. Each share
is entitled to one vote. On the Record Date, there were [_______________]
outstanding shares of the Templeton Global Fund -- Class A and [_______________]
outstanding shares of Templeton Global Fund -- Class C.
WHAT OTHER SOLICITATIONS WILL BE MADE?
The Global Fund will request broker-dealer firms, custodians, nominees and
fiduciaries to forward proxy material to the beneficial owners of the shares of
record. The Global Fund may reimburse broker-dealer firms, custodians, nominees
and fiduciaries for their reasonable expenses incurred in connection with such
proxy solicitation. In addition to solicitations by mail, officers and employees
of the Trust, without extra pay, may conduct additional solicitations by
telephone, telegraph and personal interviews. The Trust, on behalf of the Global
Fund, has engaged SCC to solicit proxies from brokers, banks, other
institutional holders and individual shareholders for an approximate fee,
including out-of-pocket expenses, ranging from $[____] to [_____]. The costs of
any such additional solicitation and of any adjourned session will be shared
one-quarter by the Global Fund, one-quarter by the World Fund, one-quarter by
Investment Counsel, and one-quarter by Global Advisors.
ARE THERE DISSENTERS' RIGHTS?
Shareholders of the Global Fund will not be entitled to any "dissenters'
rights" since the proposed Transaction involves two open-end investment
companies registered under the 1940 Act (commonly called mutual funds). Although
no dissenters' rights may be available, you have the right to redeem your shares
at Net Asset Value until the closing date. After the closing date, you may
redeem your Global Fund shares or exchange them into shares of certain other
funds in the Franklin Templeton Funds, subject to the terms in the prospectus of
the respective fund.
INFORMATION ABOUT THE WORLD FUND
Information about the World Fund is included in the World Fund prospectus,
which is attached to and considered a part of this Prospectus/Proxy Statement.
Additional information about the World Fund is included in its SAI, dated
January 1, 1999, which has been filed with the SEC and is incorporated into the
SAI relating to this Prospectus/Proxy Statement. You may request a free copy of
the World Fund's SAI and other information by calling 1-800/DIAL BEN(R) or by
writing to the World Fund at P.O. Box 33030, 100 Fountain Parkway, St.
Petersburg, FL 33733-8030. The World Fund's Annual Report to Shareholders for
the fiscal year ended August 31, 1998 is attached to and considered a part of
this Prospectus/Proxy Statement.
The World Fund files proxy materials, reports and other information with
the SEC in accordance with the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act. These materials can be inspected and
copied at: the SEC's Public Reference Room at 450 Fifth Street N.W., Washington,
D.C. 20549, and at the Regional Offices of the SEC located in New York City at 7
World Trade Center, Suite 1300, New York, NY 10048 and in Chicago at 500 West
Madison Street, Suite 1400, Chicago IL 60661. Also, copies of such material can
be obtained from the SEC's Public Reference Section, Washington, D.C.
20549-6009, at prescribed rates or from the SEC's internet address at
http://www.sec.gov.
INFORMATION ABOUT THE GLOBAL FUND
Information about the Global Fund is included in the current Global Fund
Prospectus and SAI dated August 1, 1998, as well as in the Global Fund's Annual
Report to Shareholders dated March 31, 1998 and Semi-Annual Report to
Shareholders dated September 30, 1998. These documents have been filed with the
SEC and the prospectus and shareholder reports are incorporated by reference
herein. You may request free copies of these documents and other information by
calling 1-800/DIAL BEN(R) or by writing to P.O. Box 33030, 100 Fountain Parkway,
St. Petersburg, FL 33733-8030. Reports and other information filed by the Global
Fund can be inspected and copied at: the SEC's Public Reference Room at 450
Fifth Street N.W., Washington, D.C. 20549, and at the Regional Offices of the
SEC located in New York City at 7 World Trade Center, Suite 1300, New York, NY
10048 and in Chicago at 500 West Madison Street, Suite 1400, Chicago IL 60661.
Also, copies of such material can be obtained from the SEC's Public Reference
Section, SEC, Washington, D.C. 20549-6009, at prescribed rates or from the SEC's
internet address at http://www.sec.gov.
PRINCIPAL HOLDERS OF SHARES
As of the Record Date, the officers of and Trustees of the Trust, as a
group, owned less than 1% of the outstanding voting shares of the Global Fund
and the World Fund. As of the Record Date, no person owned (beneficially or of
record) 5% or more of the outstanding shares of the Global Fund. As of the
Record Date, the following shareholders of the World Fund (beneficial or of
record) held 5% or more of the outstanding shares of the Global Fund:
GLOSSARY OF USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% or more that may
apply if you sell your shares within 12 months of purchase
DIRECTORS - The Board of Directors of the Company
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., 777 Mariners Island
Boulevard, San Mateo, CA 94404, the principal underwriter for both funds
FRANKLIN TEMPLETON FUNDS - The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds, except Franklin Valuemark
Funds, Templeton Capital Accumulator Fund, Inc., and Templeton Variable Products
Series Fund
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group
of Funds
GLOBAL ADVISORS - Templeton Global Advisors Limited, Lyford Cay, Nassau,
Bahamas, the investment manager for the World Fund
INVESTMENT COUNSEL - Templeton Investment Counsel, Inc., 500 East Broward
Boulevard, Fort Lauderdale, Florida 33394-3091, the investment manager for the
Global Fund
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., 777 Mariners
Island Boulevard, San Mateo, CA 94404, the shareholder servicing and transfer
agent
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
OFFERING PRICE - The public offering price is based on the Net Asset Value per
share and includes the front-end sales charge. The maximum front-end sales
charge for each fund is 5.75%.
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity
TRUSTEES - The Board of Trustees of the Trust
U.S. - United States
WE/OUR/US - Unless the context indicates a different meaning, these terms refer
to the funds and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources
PAGE
EXHIBITS TO COMBINED PROXY
STATEMENT AND PROSPECTUS
EXHIBIT
A Form of Agreement and Plan of Reorganization by Templeton
Global Investment Trust, on behalf of its series, Templeton
Global Infrastructure Fund, and Templeton Funds, Inc., on
behalf of its series, Templeton World Fund
B Prospectus of Templeton World Fund, dated January 1, 1999
C Annual Report to Shareholders of Templeton World Fund for the
fiscal year ended August 31, 1998
PAGE
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
Agreement and Plan of Reorganization (the "Agreement and Plan"), made as of
the ___ day of ______________, 1999, by and between Templeton Funds, Inc. (the
"Company"), a corporation incorporated under the laws of the State of Maryland,
with its principal place of business at 500 East Broward Boulevard, Fort
Lauderdale, Florida 33394-3091, on behalf of its series, Templeton World Fund
("World Fund") and Templeton Global Investment Trust (the "Trust"), a business
trust created under the laws of the State of Delaware, with its principal place
of business at 500 East Broward Boulevard, Fort Lauderdale, Florida 33394-3091,
on behalf of its series, Templeton Global Infrastructure Fund ("Global Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as "Plan of Reorganization")
will consist of (i) the acquisition by the Company, on behalf of the World Fund,
of substantially all of the property, assets and goodwill of Global Fund solely
in exchange for shares of common stock, par value $1.00 per share, of Templeton
World Fund - Class A ("World Fund Class A Shares") and shares of common stock,
par value $1.00 per share, of Templeton World Fund - Class C ("World Fund Class
C Shares") (collectively, "World Fund Shares"), (ii) the distribution of (a)
World Fund Class A Shares to the shareholders of Templeton Global Fund - Class A
("Global Fund Class A Shares") and (b) World Fund Class C Shares to the
shareholders of Templeton Global Fund - Class C ("Global Fund Class C Shares"),
according to their respective interests; and (iii) the subsequent dissolution of
Global Fund as soon as practicable after the closing (as defined in Section 3,
hereinafter called the "Closing"), all upon and subject to the terms and
conditions of this Agreement and Plan hereinafter set forth.
AGREEMENT
In order to consummate the Plan of Reorganization and in consideration of
the promises and of the covenants and agreements hereinafter set forth, and
intending to be legally bound, the parties hereto covenant and agree as follows:
15. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF GLOBAL
FUND.
(a) Subject to the terms and conditions of this Agreement and Plan,
and in reliance on the representations and warranties of the Company herein
contained, and in consideration of the delivery by the Company of the number of
its World Fund Class A Shares and World Fund Class C Shares hereinafter
provided. The Trust, on behalf of Global Fund, agrees that it will convey,
transfer and deliver to the Company at the Closing all of Global Fund's
then-existing assets, free and clear of all liens, encumbrances, and claims
whatsoever (other than shareholders' rights of redemption), except for cash,
bank deposits or cash equivalent securities in an estimated amount necessary to:
(i) pay the costs and expenses of carrying out this Agreement and Plan
(including, but not limited to, fees of counsel and accountants, and expenses of
its liquidation and dissolution contemplated hereunder), which costs and
expenses shall be established on Global Fund's books as liability reserves; (ii)
discharge its unpaid liabilities on its books at the closing date (as defined in
Section 3, hereinafter called the "Closing Date"), including, but not limited
to, its income dividends and capital gains distributions, if any, payable for
the period prior to, and through, the Closing Date; and (iii) pay such
contingent liabilities as the Board of Trustees of the Trust shall reasonably
deem to exist against Global Fund, if any, at the Closing Date, for which
contingent and other appropriate liabilities reserves shall be established on
Global Fund's books (hereinafter "Net Assets"). Global Fund shall also retain
any and all rights that it may have over and against any person that may have
accrued up to and including the close of business on the Closing Date.
(b) Subject to the terms and conditions of this Agreement and Plan,
and in reliance on the representations and warranties of the Trust herein
contained, and in consideration of such sale, conveyance, transfer, and
delivery, the Company agrees at the Closing to deliver to the Trust: (i) the
number of World Fund Class A Shares, determined by dividing the net asset value
per share of Global Fund Class A Shares by the net asset value per share of
World Fund Class A Shares, and multiplying the result thereof by the number of
outstanding Global Fund Class A Shares, as of 4:00 p.m. Eastern time on the
Closing Date; and (ii) the number of World Fund Class C Shares, determined by
dividing the net asset value per share of Global Fund Class C Shares by the net
asset value per share of World Fund Class C Shares, and multiplying the result
thereof by the number of outstanding Global Fund Class C Shares, as of 4:00 p.m.
Eastern time on the Closing Date. All such values shall be determined in the
manner and as of the time set forth in Section 2 hereof.
(c) Immediately following the Closing, Global Fund shall dissolve and
distribute pro rata to its shareholders as of the close of business on the
Closing Date, World Fund Shares received by Global Fund pursuant to this Section
1. Such liquidation and distribution shall be accomplished by the establishment
of accounts on the share records of World Fund of the type and amounts due such
shareholders based on their respective holdings as of the close of business on
the Closing Date. Fractional World Fund Shares shall be carried to the third
decimal place. As promptly as practicable after the Closing, each holder of any
outstanding certificate or certificates representing shares of beneficial
interest of Global Fund shall be entitled to surrender the same to the transfer
agent for World Fund in exchange for the number of World Fund Shares into which
the shares of the Global Fund theretofore represented by the certificate or
certificates so surrendered shall have been converted. Certificates for World
Fund Shares shall not be issued, unless specifically requested by the
shareholders. Until so surrendered, each outstanding certificate which, prior to
the Closing, represented shares of beneficial interest of Global Fund shall be
deemed for all World Fund's purposes to evidence ownership of the number of
World Fund Shares into which the shares of beneficial interest of Global Fund
(which prior to the Closing were represented thereby) have been converted.
16. VALUATION.
(a) The value of Global Fund's Net Assets to be acquired by World
Fund hereunder shall be computed as of 4:00 p.m. Eastern time on the Closing
Date using the valuation procedures set forth in Global Fund's currently
effective prospectus.
(b) The net asset value of a share of common stock of World Fund
Class A Shares and World Fund Class C Shares shall be determined to the nearest
full cent as of 4:00 p.m. Eastern time on the Closing Date using the valuation
procedures set forth in World Fund's currently effective prospectus.
(c) The net asset value of a share of beneficial interest of Global
Fund Class A Shares and Global Fund Class C Shares shall be determined to the
fourth decimal place as of 4:00 p.m. Eastern time on the Closing Date using the
valuation procedures set forth in Global Fund's currently effective prospectus.
17. CLOSING AND CLOSING DATE.
The Closing Date shall be ______________, 1999, or such later date as the
parties may mutually agree. The Closing shall take place at the principal office
of the Company at [5:00] p.m. Eastern time on the Closing Date. The Trust shall
have provided for delivery as of the Closing of those net assets of Global Fund
to be transferred to World Fund's custodian, The Chase Manhattan Bank, Metro
Tech Center, Brooklyn, New York 11245. Also, the Trust shall deliver at the
Closing a list of names and addresses of the shareholders of record of Global
Fund Class A Shares and Global Fund Class C Shares and the number of shares of
beneficial interest of such classes owned by each such shareholder, indicating
thereon which such shares are represented by outstanding certificates and which
by book-entry accounts, all as of 4:00 p.m. Eastern time on the Closing Date,
certified by its transfer agent or by its President to the best of its or his or
her knowledge and belief. The Company shall issue and deliver a certificate or
certificates evidencing the shares of common stock of World Fund to be delivered
to said transfer agent registered in such manner as the Trust may request, or
provide evidence satisfactory to the Trust that such World Fund Shares have been
registered in an account on the books of World Fund in such manner as the Trust
may request.
18. REPRESENTATIONS AND WARRANTIES BY THE TRUST.
The Trust represents and warrants to the Company that:
(a) The Trust is a business trust created under the laws of the
State of Delaware on December 21, 1993, and is validly existing and in good
standing under the laws of that state. The Trust is duly registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company and all of Global Fund's shares sold were sold
pursuant to an effective registration statement filed under the Securities Act
of 1933, as amended (the "1933 Act"), except for those shares sold pursuant to
the private offering exemption for the purpose of raising the required initial
capital.
(b) The Trust is authorized to issue an unlimited number of shares
of beneficial interest, par value $0.01 per share, each outstanding share of
which is fully paid, non-assessable, fully transferable, and has full voting
rights and currently issues shares of five (5) series, including Global Fund.
The Trust is authorized to issue an unlimited number of shares of beneficial
interest of each series.
(c) The financial statements appearing in Global Fund's
Annual Report to Shareholders for the fiscal year ended March 31, 1998, audited
by McGladrey & Pullen, L.L.P., copies of which have been delivered to the
Company, fairly present the financial position of Global Fund as of such date
and the results of its operations for the periods indicated in conformity with
generally accepted accounting principles applied on a consistent basis.
(d) The books and records of Global Fund made available to World
Fund and/or its counsel accurately summarize the accounting data represented and
contain no material omissions with respect to the business and operations of
Global Fund.
(e) The Trust has the necessary power and authority to conduct
Global Fund's business as such business is now being conducted.
(f) The Trust is not a party to or obligated under any
provision of its Trust Instrument, its By-laws, or any contract or any other
commitment or obligation, and is not subject to any order or decree that would
be violated by the Trust's execution of or performance under this Agreement and
Plan.
(g) The Trust has elected to treat Global Fund as a regulated
investment company ("RIC") for federal income tax purposes under Part I of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
Global Fund has qualified as a RIC for each taxable year since its inception and
will qualify as a RIC as of the Closing Date.
19. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company, represents and warrants to the Trust that:
(a) The Company is a corporation incorporated under the laws of the
State of Maryland on August 15, 1977, and is validly existing and in good
standing under the laws of that state. The Company is duly registered under the
1940 Act as an open-end, management investment company and all of its shares
sold were sold pursuant to an effective registration statement filed under the
1933 Act, except for those shares sold pursuant to the private offering
exemption for the purpose of raising the required initial capital.
(b) The Company is authorized to issue 3,700,000 shares of common
stock, par value, $1.00 per share, each outstanding share of which is fully
paid, non-assessable, fully transferable, and has full voting rights and
currently issues shares of two (2) series including World Fund. The World Fund
Shares to be issued pursuant to this Agreement and Plan will all be fully paid
non-assessable, freely transferable and have full voting rights.
(c) At the Closing, World Fund Shares will be eligible for offering
to the public in those states of the United States and jurisdictions in which
the shares of Global Fund are presently eligible for offering to the public, and
there are a sufficient number of World Fund Shares registered under the 1933 Act
to permit the transfers contemplated by this Agreement and Plan to be
consummated.
(d) The financial statements appearing in World Fund's Annual Report
to Shareholders for the fiscal year ended August 31, 1998, audited by McGladrey
& Pullen, L.L.P., copies of which have been delivered to Global Fund, fairly
present the financial position of World Fund as of such date and the results of
its operations for the periods indicated in conformity with generally accepted
accounting principles applied on a consistent basis.
(e) The Company has the necessary power and authority to conduct
World Fund's business as such business is now being conducted.
(f) The Company is not a party to or obligated under any provision
of its Articles of Incorporation, as amended, its By-laws, or any contract or
any other commitment or obligation, and is not subject to any order or decree
that would be violated by the Company's execution of or performance under this
Agreement and Plan.
(g) The Company has elected to treat World Fund as a RIC for federal
income tax purposes under Part I of Subchapter M of the Code, and World Fund has
qualified as a RIC for each taxable year since its inception and will qualify as
a RIC as of the Closing Date.
20. REPRESENTATIONS AND WARRANTIES BY THE TRUST AND THE COMPANY.
The Trust and the Company each represents and warrants to the other that:
(a) The statement of assets and liabilities to be furnished by it as
of 4:00 p.m. Eastern time on the Closing Date for the purpose of determining the
number of World Fund Shares to be issued pursuant to Section 1 of this Agreement
and Plan will accurately reflect each funds' Net Assets, and outstanding shares
of common stock, as of such date, in conformity with generally accepted
accounting principles applied on a consistent basis.
(b) At the Closing, it will have good and marketable title to all of
the securities and other assets shown on the statement of assets and liabilities
referred to in "6(a)" above, free and clear of all liens or encumbrances of any
nature whatsoever, except such imperfections of title or encumbrances as do not
materially detract from the value or use of the assets subject thereto, or
materially affect title thereto.
(c) Except as disclosed in its currently effective prospectus, there
is no material suit, judicial action, or legal or administrative proceeding
pending or threatened against it.
(d) There are no known actual or proposed deficiency assessments
with respect to any taxes payable by it.
(e) The execution, delivery, and performance of this Agreement and
Plan have been duly authorized by all necessary action of its Board of Trustees
and Board of Directors, as applicable, and this Agreement and Plan constitutes a
valid and binding obligation enforceable in accordance with its terms.
(f) It anticipates that consummation of this Agreement
and Plan will not cause Global Fund, in the case of the Trust, and World Fund,
in the case of the Company, to fail to conform to the requirements of Subchapter
M of the Code for federal income taxation purposes as a RIC at the end of its
fiscal year.
(g) It has the necessary power and authority to conduct the business of its
fund as such business is now being
conducted.
21. COVENANTS OF THE TRUST AND THE COMPANY.
(a) The Trust, on behalf of Global Fund, and the Company, on behalf
of World Fund, each covenant to operate their respective businesses as presently
conducted between the date hereof and the Closing.
(b) The Company undertakes that it will not acquire Global Fund
shares for the purpose of making distributions thereof to anyone other than
Global Fund's shareholders.
(c) The Trust undertakes that, if this Agreement and Plan is
consummated, it will dissolve Global Fund and rescind the establishment of
Global Fund as a series of the Trust.
(d) The Trust and the Company each agree that, by the
Closing, all of their federal and other tax returns and reports required by law
to be filed by the Trust on behalf of Global and, or by the Company, on behalf
of World Fund, on or before such date shall have been filed, and all federal and
other taxes shown as due on said returns shall have either been paid or adequate
liability reserves shall have been provided for the payment of such taxes.
(e) At the Closing, the Trust will provide World Fund with a copy of
the shareholder ledger accounts of Global Fund, certified by its transfer agent
or its President to the best of its or his or her knowledge and belief, for all
the shareholders of record of Global Fund's shares as of 4:00 p.m. Eastern time
on the Closing Date who are to become shareholders of World Fund as a result of
the transfer of assets that is the subject of this Agreement and Plan.
(f) The Trust agrees to mail to each shareholder of record entitled
to vote at the meeting of Global Fund's shareholders at which action on this
Agreement and Plan is to be considered, in sufficient time to comply with
requirements as to notice thereof, a Joint Prospectus and Proxy Statement that
complies in all material respects with the applicable provisions of Section
14(a) of the Securities Exchange Act of 1934, as amended, and Section 20(a) of
the 1940 Act, and the rules and regulations, respectively, thereunder.
(g) The Company will file with the U.S. Securities and Exchange
Commission a registration statement on Form N-14 under the 1933 Act relating to
the World Fund Shares issuable hereunder ("Registration Statement"), and will
use its best efforts to provide that the Registration Statement becomes
effective as promptly as practicable. At the time it becomes effective, the
Registration Statement will: (i) comply in all material respects with the
applicable provisions of the 1933 Act, and the rules and regulations promulgated
thereunder; and (ii) not contain any untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading. At the time the Registration Statement
becomes effective, at the time of Global Fund's shareholders' meeting, and at
the Closing Date, the prospectus and statement of additional information
included in the Registration Statement will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
22. CONDITIONS PRECEDENT TO BE FULFILLED BY THE TRUST AND THE COMPANY.
The obligations of the Trust and the Company to effectuate this Agreement
and Plan hereunder shall be subject to the following respective conditions:
(a) That: (i) all the representations and warranties of the other
party contained herein shall be true and correct as of the Closing with the same
effect as though made as of and at such date; (ii) the other party shall have
performed all obligations required by this Agreement and Plan to be performed by
it prior to the Closing; and (iii) the other party shall have delivered to such
party a certificate signed by the President and by the Secretary or equivalent
officer to the foregoing effect.
(b) That each party shall have delivered to the other party a copy
of the resolutions approving this Agreement and Plan adopted by its Board of
Trustees or Board of Directors, as applicable, certified by its Secretary or
equivalent officer.
(c) That the U.S. Securities and Exchange Commission shall not have
issued an unfavorable management report under Section 25(b) of the 1940 Act or
instituted or threatened to institute any proceeding seeking to enjoin the
consummation of the Agreement under Section 25(c) of the 1940 Act. And, further,
no other legal, administrative or other proceeding shall have been instituted or
threatened that would materially affect the financial condition of either party
or would prohibit the transactions contemplated hereby.
(d) That this Agreement and Plan and the Plan of Reorganization
contemplated hereby shall have been adopted and approved by the appropriate
action of the shareholders of Global Fund at an annual or special meeting or any
adjournment thereof.
(e) That each party shall have declared a distribution or
distributions prior to the Closing Date that, together with all previous
distributions, shall have the effect of distributing to its shareholders (i) all
of its net investment income and all of its net realized capital gains, if any,
for the period from the close of its last fiscal year to 4:00 p.m. Eastern time
on the Closing Date; and (ii) any undistributed net investment income and net
realized capital gains from any period to the extent not otherwise declared for
distribution.
(f) That there shall be delivered to the Trust and the
Company an opinion from Messrs. Stradley, Ronon, Stevens & Young, LLP, counsel
to the Trust and the Company, to the effect that, provided the acquisition
contemplated hereby is carried out in accordance with this Agreement and Plan
and based upon certificates of the officers of the Trust and the Company with
regard to matters of fact:
(1) The acquisition by World Fund of substantially all the assets of
Global Fund as provided for herein in exchange for World Fund Shares will
qualify as a reorganization within the meaning of Section 368(a)(1)(C) of the
Code, and Global Fund and World Fund will each be a party to the respective
reorganization within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Global Fund upon the
transfer of substantially all of its assets to World Fund in exchange solely for
voting shares of World Fund (Code Sections 361(a) and 357(a)). No opinion,
however, will be expressed as to whether any accrued market discount will be
required to be recognized as ordinary income pursuant to Section 1276 of the
Code;
(3) No gain or loss will be recognized by World Fund upon the
receipt of substantially all of the assets of Global Fund in exchange solely for
voting shares of World Fund (Code Section 1032(a));
(4) The basis of the assets of Global Fund received by World Fund
will be the same as the basis of such assets to Global Fund immediately prior to
the exchange (Code Section 362(b));
(5) The holding period of the assets of World Fund received by
Global Fund will include the period during which such assets were held by Global
Fund (Code Section 1223(2));
(6) No gain or loss will be recognized to the shareholders of Global
Fund upon the exchange of their shares in Global Fund for voting shares of World
Fund (Code Section 354(a));
(7) The basis of the World Fund Shares received by Global Fund's
shareholders shall be the same as the basis of the shares of Global Fund
exchanged therefor (Code Section 358(a)(1));
(8) The holding period of World Fund shares received by Global
Fund's shareholders (including fractional shares to which they may be entitled)
will include the holding period of Global Fund's shares surrendered in exchange
therefor, provided that Global Fund's shares were held as a capital asset on the
date of the exchange (Code Section 1223(1)); and
(9) World Fund will succeed to and take into account as of the date
of the proposed transfer (as defined in Section 1.381(b)-1(b) of the Income Tax
Regulations) the items of Global Fund described in Section 381(c) of the Code
(as defined in Section 1.381(b)-1(b) of the Income Tax Regulations), subject to
the conditions and limitations specified in Sections 381(b) and (c), 382, 383
and 384 of the Code and the Income Tax Regulations thereunder.
(g) The Company shall have received an opinion in form and substance
satisfactory to it from Messrs. Stradley Ronon Stevens & Young, LLP, counsel to
the Trust, to the effect that, subject in all respects to the effects of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
other laws now or hereafter affecting generally the enforcement of creditors'
rights:
(1) The Trust was organized as a business trust under the laws
of the State of Delaware on December 21, 1993, and is validly existing and in
good standing under the laws of that state;
(2) The Trust is authorized to issue an unlimited number of shares
of beneficial interest of Global Fund, $0.01 par value per share. Assuming that
the initial shares of beneficial interest were issued in accordance with the
1940 Act, and the Trust Instrument and By-laws of the Trust, and that all other
outstanding shares of Global Fund were sold, issued and paid for in accordance
with the terms of Global Fund's prospectus in effect at the time of such sales,
each such outstanding share is fully paid, non-assessable, fully transferable
and has full voting rights;
(3) The Trust is an open-end management investment company of the type
registered as such under the 1940 Act;
(4) Except as disclosed in Global Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against Global Fund, the
unfavorable outcome of which would materially and adversely affect the Trust or
Global Fund;
(5) All actions required to be taken by the Trust to authorize this
Agreement and Plan and to effect the Plan of Reorganization contemplated hereby
have been duly authorized by all necessary action on the part of the Trust; and
(6) Neither the execution, delivery, nor performance of this Agreement and
Plan by the Trust violates any provision of its Trust Instrument or By-laws, or
the provisions of any agreement or other instrument known to such counsel to
which the Trust is a party or by which Global Fund is otherwise bound; this
Agreement is the legal, valid and binding obligation of the Trust and is
enforceable against the Trust and/or Global Fund in accordance with its terms.
In giving the opinions set forth above, counsel may state that it is
relying on certificates of the officers of the Trust with regard to matters of
fact, and certain certifications and written statements of governmental
officials with respect to the good standing of the Trust and Global Fund.
(h) That the Trust shall have received an opinion in form and substance
satisfactory to it from Messrs. Stradley, Ronon, Stevens & Young, LLP, counsel
to the Company, to the effect that, subject in all respects to the effects of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other laws now or hereafter affecting generally the enforcement of creditors'
rights:
(1) The Company was incorporated as a corporation under the laws
of the State of Maryland on August 15, 1977, and is validly existing and in good
standing under the laws of that state;
(2) The Company is authorized to issue 3,700,000 shares of common stock of
its series, World Fund, $1.00 par value per share. Assuming that the initial
shares of World Fund were issued in accordance with the 1940 Act, and the
Articles of Incorporation and By-laws of the Company, and that all other
outstanding shares of World Fund were sold, issued and paid for in accordance
with the terms of World Fund's prospectus in effect at the time of such sales,
each such outstanding share of World Fund is fully paid, non-assessable, freely
transferable and has full voting rights;
(3) The Company is an open-end management, diversified investment company
of the type registered as such under the 1940
Act;
(4) Except as disclosed in World Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against the Company, the
unfavorable outcome of which would materially and adversely affect the Company
or World Fund;
(5) World Fund Shares to be issued pursuant to the terms of this
Agreement and Plan have been duly authorized and, when issued and delivered as
provided in this Agreement and Plan, will have been validly issued and fully
paid and will be non-assessable by World Fund;
(6) All corporate actions required to be taken by the Company to
authorize this Agreement and Plan and to effect the Plan of Reorganization
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company;
(7) Neither the execution, delivery, nor performance of this
Agreement and Plan by the Company violates any provision of its Articles of
Incorporation, its By-laws, or the provisions of any agreement or other
instrument known to such counsel to which the Company is a party or by which the
Company on behalf of World Fund is otherwise bound; this Agreement and Plan is
the legal, valid and binding obligation of the Company and World Fund and is
enforceable against the Company and/or World Fund in accordance with its terms;
and
(8) The registration statement of which the prospectus, dated
January 1, 1999, of World Fund is a part (the "Prospectus") is, at the time of
the signing of this Agreement and Plan, effective under the 1933 Act, and, to
the best knowledge of such counsel, no stop order suspending the effectiveness
of such registration statement has been issued, and no proceedings for such
purpose have been instituted or are pending before or threatened by the U.S.
Securities and Exchange Commission under the 1933 Act, and nothing has come to
such counsel's attention that causes it to believe that, at the time the
Prospectus became effective, or at the time of the signing of this Agreement and
Plan, or at the Closing, such Prospectus (except for the financial statements
and other financial and statistical data included therein, as to which counsel
need not express an opinion), contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and such counsel knows of no
legal or government proceedings required to be described in the Prospectus, or
of any contract or document of a character required to be described in the
Prospectus that is not described as required.
In giving the opinions set forth above, this counsel may state that it is
relying on certificates of the officers of the Company with regard to matters of
fact, and certain certifications and written statements of governmental
officials with respect to the good standing of the Company and World Fund.
(i) That the Trust shall have received a certificate from the
President and Secretary of the Company to the effect that the statements
contained in World Fund's Prospectus, at the time the Prospectus became
effective, at the date of the signing of this Agreement and Plan, and at the
Closing, did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(j) That the Company's Registration Statement with respect to the
World Fund Shares to be delivered to the Global Fund's shareholders in
accordance with this Agreement and Plan shall have become effective, and no stop
order suspending the effectiveness of the Registration Statement or any
amendment or supplement thereto, shall have been issued prior to the Closing
Date or shall be in effect at Closing, and no proceedings for the issuance of
such an order shall be pending or threatened on that date.
(k) That the World Fund Shares to be delivered hereunder shall be
eligible for sale by World Fund with each state commission or agency with which
such eligibility is required in order to permit the shares lawfully to be
delivered to each Global Fund shareholder.
(l) That, at the Closing, the Trust, on behalf of Global Fund,
transfers to the Company, on behalf of World Fund, aggregate Net Assets of
Global Fund comprising at least 90% in fair market value of the total net assets
and 70% of the fair market value of the total gross assets recorded on the books
of Global Fund on the Closing Date.
23. BROKERAGE FEES AND EXPENSES.
(a) The Trust and the Company each represents and warrants to the
other that there are no broker or finders' fees payable by it in connection with
the transactions provided for herein.
(b) The expenses of entering into and carrying out the provisions of
this Agreement and Plan shall be borne one-quarter by Global Fund, one-quarter
by World Fund, and one quarter by Templeton Global Advisors Limited, and one
quarter by Templeton Investment Counsel, Inc.
24. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
(a) Anything contained in this Agreement and Plan to the contrary
notwithstanding, this Agreement and Plan may be terminated and the Plan of
Reorganization abandoned at any time (whether before or after approval thereof
by the shareholders of Global Fund) prior to the Closing or the Closing may be
postponed as follows:
(1) by mutual consent of the Trust and the Company;
(2) by the Trust if any condition of its obligations set forth in Section 8
of this Agreement has not been fulfilled or waived; or
(3) by the Company if any condition of its obligations set forth in Section
8 of this Agreement has not been fulfilled or waived.
An election by the Trust, on behalf of Global Fund, or the Company, on
behalf of World Fund, to terminate this Agreement and Plan and to abandon the
Plan of Reorganization shall be exercised, respectively, by the Board of
Trustees of the Trust or the Board of Directors of the Company.
(b) If the transactions contemplated by this Agreement and Plan
have not been consummated by [DECEMBER 31], 1999, the Agreement and Plan shall
automatically terminate on that date, unless a later date is agreed to by both
the Trust and the Company.
(c) In the event of termination of this Agreement and Plan pursuant
to the provisions hereof, the same shall become void and have no further effect,
and neither the Trust nor the Company, nor their trustees or directors,
officers, agents or shareholders shall have any liability in respect of this
Agreement and Plan.
(d) At any time prior to the Closing, any of the terms or
conditions of this Agreement and Plan may be waived by the party who is entitled
to the benefit thereof by action taken by that party's Board of Trustees or
Board of Directors, as applicable, if, in the judgment of such Board, such
action or waiver will not have a material adverse effect on the benefits
intended under this Agreement and Plan to its shareholders, on behalf of whom
such action is taken.
(e) The respective representations and warranties contained in
Sections 4 to 6 hereof shall expire with and be terminated by the Plan of
Reorganization, and neither the Trust nor the Company, nor any of their
officers, trustees or directors, agents or shareholders shall have any liability
with respect to such representations or warranties after the Closing. This
provision shall not protect any officer, trustees or director, agent or
shareholder of the Trust or the Company against any liability to the entity for
which that officer, trustee or director, agent or shareholder so acts or to its
shareholders to which that officer, trustee or director, agent or shareholder
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties in the conduct of such office.
(f) If any order or orders of the U.S. Securities and Exchange
Commission with respect to this Agreement shall be issued prior to the Closing
and shall impose any terms or conditions that are determined by action of the
Board of Trustees of the Trust or Board of Directors of the Company to be
acceptable, such terms and conditions shall be binding as if a part of this
Agreement and Plan without further vote or approval of the shareholders of
Global Fund, unless such terms and conditions shall result in a change in the
method of computing the number of World Fund Shares to be issued to Global Fund
shareholders in which event, unless such terms and conditions shall have been
included in the proxy solicitation material furnished to the shareholders of
Global Fund prior to the meeting at which the transactions contemplated by this
Agreement and Plan shall have been approved, this Agreement and Plan shall not
be consummated and shall terminate unless Global Fund shall promptly call a
special meeting of shareholders at which such conditions so imposed shall be
submitted for approval.
25. ENTIRE AGREEMENT AND AMENDMENTS.
This Agreement and Plan embodies the entire agreement between the parties
and there are no agreements, understandings, restrictions, or warranties between
the parties other than those set forth herein or herein provided for. This
Agreement and Plan may be amended only by mutual consent of the parties in
writing. Neither this Agreement and Plan nor any interest herein may be assigned
without the prior written consent of the other party.
26. COUNTERPARTS.
This Agreement and Plan may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all such counterparts together
shall constitute but one instrument.
27. NOTICES.
Any notice, report, or demand required or permitted by any provision of
this Agreement and Plan shall be in writing and shall be deemed to have been
given if delivered or mailed, first class postage prepaid, addressed to
Templeton Global Investment Trust at 500 East Broward Boulevard, Fort
Lauderdale, FL 33394-3091, Attention: Secretary, or Templeton Funds Inc., at 500
East Broward Boulevard, Fort Lauderdale, FL 33394-3091, Attention: Secretary, as
the case may be.
28. GOVERNING LAW.
This Agreement and Plan shall be governed by and carried out in accordance
with the laws of the State of Maryland.
IN WITNESS WHEREOF, Templeton Global Investment Trust, on behalf of Global
Infrastructure Fund, and Templeton Funds, Inc., on behalf of Templeton World
Fund, have each caused this Agreement and Plan to be executed on its behalf by
its duly authorized officers, all as of the date and year first-above written.
TEMPLETON GLOBAL INVESTMENT TRUST,
ON BEHALF OF TEMPLETON GLOBAL
INFRASTRUCTURE FUND
Attest:
By: By:
----------------------------- -------------------------------
Barbara J. Green Deborah R. Gatzek
Secretary Vice President
TEMPLETON FUNDS, INC., ON BEHALF
OF TEMPLETON WORLD FUND
Attest:
By: By:
----------------------------- -------------------------------
Barbara J. Green Deborah R. Gatzek
Secretary Vice President
PAGE
EXHIBIT B
PROSPECTUS OF
TEMPLETON WORLD FUND
DATED JANUARY 1, 1999
Prospectus of Templeton World Fund dated January 1, 1999 is part of this
Prospectus/Proxy Statement and will be included in the proxy mailing to
shareholders. For purposes of the instant EDGAR Filing, the prospectus of
Templeton World Fund dated January 1, 1999 is incorporated herein by reference
to the electronic filing made on December 31, 1998, under File No. 002-60067.
PAGE
EXHIBIT C
ANNUAL REPORT TO SHAREHOLDERS OF
TEMPLETON WORLD FUND
DATED AUGUST 31, 1998
Annual Report of Templeton World Fund dated August 31, 1998 is part of this
Prospectus/Proxy Statement and will be included in the proxy mailing to
shareholders. For purposes of the instant EDGAR Filing, the Annual Report of
Templeton World Fund dated August 31, 1998 is incorporated herein by reference
to the electronic filing made on October 22, 1998, under File No. 002-60067.
PAGE
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN
YOUR PROXY TODAY
Please detach at perforation before mailing.
PROXY PROXY
SPECIAL MEETING OF SHAREHOLDERS OF
TEMPLETON GLOBAL INFRASTRUCTURE FUND
JULY 13, 1999
The undersigned hereby revokes all previous proxies for his shares and appoints
[ _________________________ ] and each of them, proxies of the undersigned with
full power of substitution to vote all shares of Templeton Global Infrastructure
Fund (the "Global Fund") that the undersigned is entitled to vote at the Global
Fund's Special Meeting to be held at 500 East Broward Boulevard, Fort
Lauderdale, Florida 33394-3091 at [___] a.m., Eastern time on July 13, 1999,
including any adjournment thereof, upon such business as may properly be brought
before the Meeting.
IMPORTANT: PLEASE SEND IN YOUR PROXY TODAY.
YOU ARE URGED TO DATE AND SIGN THE ATTACHED PROXY AND RETURN IT PROMPTLY. THIS
WILL SAVE THE EXPENSE OF FOLLOW-UP LETTERS TO SHAREHOLDERS WHO HAVE NOT
RESPONDED.
Note: Please sign exactly as your name
appears on the proxy. If signing for estates,
trusts or corporations, title or capacity
should be stated. If shares are held jointly,
each holder must sign.
-------------------------------------------
Signature
-------------------------------------------
Print Name
-------------------------------------------
Signature
-------------------------------------------
Print Name
(Please see reverse side)
PAGE
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TEMPLETON
GLOBAL INVESTMENT TRUST, ON BEHALF OF ITS SERIES, TEMPLETON GLOBAL
INFRASTRUCTURE FUND. IT WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE,
THIS PROXY SHALL BE VOTED IN FAVOR OF PROPOSAL 1, REGARDING THE REORGANIZATION
OF THE TEMPLETON GLOBAL INFRASTRUCTURE FUND PURSUANT TO THE AGREEMENT AND PLAN
OF REORGANIZATION WITH THE TEMPLETON WORLD FUND, A SERIES OF THE TEMPLETON
FUNDS, INC. IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING ABOUT WHICH
THE PROXYHOLDERS WERE NOT AWARE PRIOR TO THE TIME OF THE SOLICITATION,
AUTHORIZATION IS GIVEN THE PROXYHOLDERS TO VOTE IN ACCORDANCE WITH THE VIEWS OF
MANAGEMENT ON SUCH MATTERS. MANAGEMENT IS NOT AWARE OF ANY SUCH MATTERS.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR PROPOSAL 1.
1. To approve an Agreement and Plan of FOR AGAINST ABSTAIN
Reorganization by Templeton Global |_| |_| |_|
Investment Trust, on behalf of its
series, Templeton Global Infrastructure
Fund ("Global Fund") and Templeton Funds,
Inc., on behalf of its series, Templeton
World Fund ("World Fund"), that provides
for the acquisition of substantially all
of the assets of the Global Fund in exchange
for shares of the World Fund-Class A and
shares of the World Fund - Class C, the
distribution of such shares to the share-
holders of the Global Fund, and the
dissolution of the Global Fund (the
"Reorganization").
2. To vote upon any other business that may GRANT WITHHOLD
legally come before the Special Meeting or |_| |_|
any adjournment thereof.
IMPORTANT: PLEASE SIGN IN YOUR PROXY. . . TODAY!
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
REQUIRED IF MAILED IN THE U.S.
PAGE
PART B
STATEMENT OF ADDITIONAL INFORMATION
FOR
TEMPLETON FUNDS, INC.
Dated May [__], 1999
Acquisition of the Assets of the
TEMPLETON GLOBAL INFRASTRUCTURE FUND
By and in exchange for shares of the
TEMPLETON WORLD FUND
This Statement of Additional Information (SAI) relates specifically to the
proposed delivery of substantially all of the assets of the Templeton Global
Infrastructure Fund ("Global Fund") to the Templeton World Fund, a series of
Templeton Funds, Inc., in exchange for Class A and Class C shares of the
Templeton World Fund.
This SAI consists of this Cover Page and the following documents. Each of
these documents is attached and is legally considered to be a part of this SAI:
1. Statement of Additional Information of Templeton World Fund
dated January 1, 1999.
2. Annual Report to Shareholders of the Global Fund for the fiscal
year ended March 31, 1998.
3. Semi-Annual Report to Shareholders of the Global Fund for the
fiscal period ended September 30, 1998.
This SAI is not a Prospectus; you should read this SAI in conjunction with
the Prospectus/Proxy Statement dated May [__], 1999, relating to the
above-referenced transaction. Audited financial statement information for the
World Fund is contained in that fund's Annual Report to Shareholders dated
August 31, 1998, which is attached to and considered a part of the
Prospectus/Proxy Statement. You can request a copy of the Prospectus/Proxy
Statement by calling 1-800/DIAL BEN or by writing to either fund at 100 Fountain
Parkway, P.O. Box 33030, St. Petersburg, FL 33733-8030.
PAGE
STATEMENT OF ADDITIONAL INFORMATION OF
TEMPLETON WORLD FUND
DATED JANUARY 1, 1999
Statement of Additional Information of Templeton World Fund dated January
1, 1999 is part of this SAI and will be provided to all shareholders requesting
this SAI. For purposes of the instant EDGAR Filing, the Statement of Additional
Information of Templeton World Fund dated January 1, 1999 is incorporated herein
by reference to the electronic filing made on January 5, 1999, under File No.
002-60067.
PAGE
ANNUAL REPORT OF
TEMPLETON GLOBAL INFRASTRUCTURE FUND
DATED MARCH 31, 1998
Annual Report of Templeton Global Infrastructure Fund for the fiscal year
ended March 31, 1998 is part of this SAI and will be provided to all
shareholders requesting this SAI. For purposes of the instant EDGAR Filing, the
Annual Report of Templeton Global Infrastructure Fund dated March 31, 1998 is
incorporated herein by reference to the electronic filing thereof made on May
22, 1998, under File No. 811-08226.
PAGE
SEMI-ANNUAL REPORT OF
TEMPLETON GLOBAL INFRASTRUCTURE
DATED SEPTEMBER 30, 1998
Semi-Annual Report of Templeton Global Infrastructure Fund for the fiscal
period ended September 30, 1998 is part of this SAI and will be provided to all
shareholders requesting this SAI. For purposes of the instant EDGAR Filing, the
Semi-Annual Report of Templeton Global Infrastructure Fund for the fiscal period
ended September 30, 1998 is incorporated herein by reference to the electronic
filing thereof made on November 30, 1998, under File No. 811-08226.
PAGE
PART B
STATEMENT OF ADDITIONAL INFORMATION
FOR
TEMPLETON FUNDS, INC.
ON BEHALF OF
TEMPLETON WORLD FUND
DATED MAY , 1999
Acquisition of the Assets of the
TEMPLETON GROWTH AND INCOME FUND
By and in exchange for shares of
TEMPLETON WORLD FUND
This Statement of Additional Information (SAI) relates specifically to the
proposed delivery of substantially all of the assets of the Templeton Growth and
Income Fund (the "Growth and Income Fund") to the Templeton World Fund, a series
of Templeton Fund, Inc., in exchange for Class A and Class C shares of the
Templeton World Fund.
This SAI consists of this Cover Page and the following documents. Each of
these documents is attached to and is legally considered to be a part of this
SAI:
1. Statement of Additional Information of Templeton World Fund
dated January 1, 1999.
2. Annual Report to Shareholders of the Growth and Income Fund
or the fiscal year ended March 31, 1998.
3. Semi-Annual Report of the Growth and Income Fund for the
fiscal period ended September 30, 1998.
This SAI is not a Prospectus; you should read this SAI in conjunction with
the Prospectus/Proxy Statement dated May [___], 1999, relating to the
above-referenced transaction. Audited financial statement information for
Templeton World Fund is contained in that fund's Annual Report to Shareholders
dated August 31, 1998, which is attached to and considered a part of the
Prospectus/Proxy Statement. You can request a copy of the Prospectus/Proxy
Statement by calling 1-800/DIAL BEN(R) or by writing to either fund at 100
Fountain Parkway, P. O. Box 33030, St. Petersburg, FL 33733-8030.
PAGE
Statement of Additional Information of
Templeton World Fund
dated January 1, 1999
Statement of Additional Information of Templeton World Fund dated January
1, 1999 is part of this SAI and will be provided to all shareholders requesting
this SAI. For purposes of the instant EDGAR Filing, the Statement of Additional
Information of Templeton World Fund dated January 1, 1999 is incorporated herein
by reference to the electronic filing made on January 5, 1999, under File No.
002-60067.
PAGE
Annual Report of
Templeton Growth and Income Fund for
the fiscal year ended March 31, 1998
Annual Report of Templeton Growth and Income Fund for the fiscal year ended
March 31, 1998 is part of this SAI and will be provided to all shareholders
requesting this SAI. For purposes of the instant EDGAR Filing, the Annual Report
of Templeton Growth and Income Fund for the fiscal year ended March 31, 1998 is
incorporated herein by reference to the electronic filing thereof made on May
22, 1998, under File No. 811-08226.
PAGE
Semi-Annual Report of
Templeton Growth and Income Fund for the
fiscal period ended September 30, 1998.
Semi-Annual Report of Templeton Growth and Income Fund for the fiscal
period ended September 30, 1998 is part of this SAI and will be provided to all
shareholders requesting this SAI. For purposes of the instant EDGAR Filing, the
Semi-Annual Report of Templeton Growth and Income Fund for the fiscal period
ended September 30, 1998 is incorporated herein by reference to the electronic
filing thereof made on November 30, 1998, under File No. 811-08226.
PAGE
TEMPLETON FUNDS, INC.
File Nos. 2-60067 and 811-2781
PART C
OTHER INFORMATION
Item 15. Indemnification
All officers, directors, employees and agents of the Registrant are to be
indemnified to the fullest extent permitted by law for any liabilities of any
nature whatsoever incurred in connection with the affairs of the Registrant,
except in cases where willful misfeasance, bad faith, gross negligence or
reckless disregard of duties to the Registrant are established. See Article 5.1
of the By-Laws of the Registrant, filed as Exhibit 2 to the Registration
Statement, which is incorporated herein by reference, for a more complete
description of matters relating to indemnification.
Item 16. Exhibits
The following exhibits are incorporated herein by reference to the previously
filed document indicated below, except those exhibits which are filed herewith
as indicated.
(1) Copies of the charter of the Registrant as now in effect:
(i) Restated Articles of Incorporation
(Previously filed with Post Effective Amendment No. 27 to
the Registration Statement on December 29, 1995)
(ii) Articles of Amendment dated October 24, 1990
(Previously filed with Post Effective Amendment No. 27 to
the Registration Statement on December 29, 1995)
(iii) Articles Supplementary dated October 16, 1993
(Previously filed with Post Effective Amendment No. 27 to
the Registration Statement on December 29, 1995)
(iv) Articles of Amendment dated February 16, 1994
(Previously filed with Post Effective Amendment No. 27 to
the Registration Statement on December 29, 1995)
(v) Articles Supplementary dated April 13, 1995
(Previously filed with Post Effective Amendment No. 26 to
the Registration Statement on April 28, 1995)
(vi) Articles of Amendment dated April 17, 1995
(Previously filed with Post Effective Amendment No. 26 to
the Registration Statement on April 28, 1995)
(vii) Articles Supplementary dated October 25, 1995
(Previously filed with Post Effective Amendment No. 27 to
the Registration Statement on December 29, 1995)
(viii) Articles Supplementary dated December 27, 1996
(Previously filed with Post Effective Amendment No. 29 to
the Registration Statement on December 31, 1996)
(ix) Articles Supplementary dated April 10, 1997
(Previously filed with Post Effective Amendment No. 31 to
the Registration Statement on October 29, 1998)
(x) Articles of Amendment dated December 23, 1998.
(Previously filed with Post Effective Amendment No. 32 to
the Registration Statement on December 29, 1998)
(xi) Articles Supplementary dated December 23, 1998
(Previously filed with Post Effective Amendment No. 32 to
the Registration Statement on December 29, 1998)
(2) Copies of the existing by-laws or corresponding instruments of the
Registrant:
(i) Amended and Restated By-Laws of Templeton Funds, Inc. dated
October 19, 1996
(Previously filed with Post Effective Amendment No. 28 to the
Registration Statement on December 27, 1996)
(3) Copies of any voting trust agreement affecting more than 5 percent of any
class of equity securities of the registrant:
Not Applicable
(4) Copies of the agreement of acquisition, reorganization, merger, liquidation
and any amendments to it:
The Agreement and Plan of Reorganization is included in this
Registration Statement as Exhibit A to the Prospectus/Proxy
Statement.
(5) Copies of all instruments defining the rights of holders of the securities
being registered including, where applicable, the relevant portion of the
articles of incorporation or by-laws of the Registrant:
Not applicable.
(6) Copies of all investment advisory contracts relating to the management of
the assets of the Registrant:
(i) Amended and Restated Management Agreement between Templeton
World Fund and Templeton Galbraith and Hansberger Ltd. dated
December 6, 1994
(Previously filed with Post Effective Amendment No. 26 to the
Registration Statement on April 28, 1995)
(ii) Amended and Restated Management Agreement between Templeton
Foreign Fund and Templeton Galbraith and Hansberger Ltd. dated
December 6, 1994
(Previously filed with Post Effective Amendment No. 26 to the
Registration Statement on April 28, 1995)
(7) Copies of each underwriting or distribution contract between the Registrant
and a principal underwriter and specimens or copies of all agreements between
principal underwriters and dealers:
(i) Amended and Restated Distribution Agreement between Registrant
and Franklin Templeton Distributors, Inc., dated May 1, 1995
(Previously filed with Post Effective Amendment No. 27 to the
Registration Statement on December 29, 1995)
(ii) Form of Dealer Agreement between Registrant and Franklin/
Templeton Distributors, Inc. and Securities Dealers
(Previously filed with Post Effective Amendment No. 31 to the
Registration Statement on October 29, 1998)
(iii) Amendment of Dealer Agreement dated May 15, 1998
(Previously filed with Post Effective Amendment No. 31 to the
Registration Statement on October 29, 1998)
(iv) Non-Exclusive Underwriting Agreement between the Registrant
and Templeton Franklin Investment Services (Asia) Limited dated
September 18, 1995
(Previously filed with Post Effective Amendment No. 30 to the
Registration Statement on December 24, 1997)
(8) Copies of all bonus, profit sharing, pension, or other similar contracts or
arrangements wholly or partly for the benefit of directors or officers of the
registrant in their capacity as such. Furnish a reasonably detailed description
of any plan that is not set forth in a formal document:
Not applicable
(9) Copies of all custodian agreements and depository contracts under Section
17(f) of the 1940 Act, for securities and similar investments of the Registrant
including the schedule of remuneration.
(i) Restated Custody Agreement between Registrant on behalf of
Templeton World Fund and The Chase Manhattan Bank dated February
11, 1986
(Previously filed with Post Effective Amendment No. 27 to the
Registration Statement on December 29, 1995)
(ii) Restated Custody Agreement between Registrant on behalf of
Templeton Foreign Fund and The Chase Manhattan Bank dated
February 11, 1986
(Previously filed with Post Effective Amendment No. 27 to the
Registration Statement on December 29, 1995)
(iii) Amendment dated March 3, 1998 to the Custody Agreement
(Previously filed with Post Effective Amendment No. 31 to the
Registration Statement on October 29, 1998)
(iv) Amendment No. 2 dated July 23, 1998 to the Custody Agreement
(Previously filed with Post Effective Amendment No. 31 to the
Registration Statement on October 29, 1998)
(10) Copies of any plan entered into by Registrant pursuant to Rule 12b-1 under
the 1940 Act and any agreements with any person relating to implementation of
the plan, and copies of any plan entered into by Registrant pursuant to Rule
18f-3 under the 1940 Act, any agreement with any person relating to
implementation of the plan, any amendments to the plan, and a copy of the
portion of the minutes of the meeting of the Registrant's directors describing
any action taken to revoke the plan:
(i) Templeton World Fund Plan of Distribution pursuant to Rule 12b-1
dated May 1, 1995
(Previously filed with Post Effective Amendment No. 26 to the
Registration Statement on April 28, 1995)
(ii) Templeton World Fund Class C Distribution Plan pursuant to
Rule 12b-1 dated May 1, 1995
(Previously filed with Post Effective Amendment No. 26 to the
Registration Statement on April 28, 1995)
(iii) Templeton Foreign Fund Plan of Distribution pursuant to Rule
12b-1 dated May 1, 1995
(Previously filed with Post Effective Amendment No. 26 to the
Registration Statement on April 28, 1995)
(iv) Templeton Foreign Fund Class C Distribution Plan pursuant to
Rule 12b-1 dated May 1, 1995
(Previously filed with Post Effective Amendment No. 26 to the
Registration Statement on April 28, 1995)
(v) Form of Class B Distribution Plan
(Previously filed with Post Effective Amendmen No. 32 to the
Registration Statement on December 29, 1998)
(i) Multiple Class Plan, Templeton Foreign Fund - Advisor Class
(Previously filed with Post Effective Amendment No. 30 to the
Registration Statement on December 24, 1997)
(ii) Form of Class B Multiple Class Plan - Templeton Foreign Fund
(Previously filed with Post Effective Amendment No. 32 to the
Registration Statement on December 29, 1998)
(iii) Form of Class B Multiple Class Plan - Templeton World Fund
(Previously filed with Post Effective Amendment No. 32 to the
Registration Statement on December 29, 1998)
(11) An opinion and consent of counsel as to the legality of the securities
being registered, indicating whether they will, when sold, be legally issued,
fully paid and non-assessable:
(i) Opinion and consent of counsel dated October 27, 1998
(Previously filed with Post Effective Amendment No. 31 to the
Registration Statement on October 29, 1998)
(12) An opinion, and consent to their use, of counsel, or in lieu of an opinion,
a copy of the revenue ruling from the Internal Revenue Service, supporting the
tax mattes and consequences to shareholders discussed in the prospectus:
(i) Tax Opinion relating to the Templeton Growth and Income Fund
will be filed by amendment.
(ii) Tax Opinion relating to the Templeton Global Infrastructure Fund
will be filed by amendment.
(13) Copies of all material contracts of the Registrant not made in the ordinary
course of business which are to be performed in whole or in part on or after the
date of filing the registration statement:
(i) Fund Administration Agreement between the Registrant and
Franklin Templeton Services, Inc. dated June 1, 1997
(Previously filed with Post Effective Amendment No. 30 to the
Registration Statement on December 24, 1997)
(ii) Amended and Restated Transfer Agent Agreement between the
Registrant and Franklin/Templeton Investor Services Inc., dated
July 1, 1996
(Previously filed with Post Effective Amendment No. 30 to the
Registration Statement on December 24, 1997)
(iii) Sub-Transfer Agent Agreement between the Registrant, Templeton
Funds Trust Company and The Shareholder Services Group, Inc.
dated March 1, 1992
(Previously filed with Post Effective Amendment No. 27 to the
Registration Statement on December 29, 1995)
(iv) Sub-Accounting Services Agreement between the Registrant,
Templeton Funds Trust Company, Financial Data Services, Inc., and
Merrill Lynch, Pierce, Fenner and Smith Inc. dated May 1, 1991
(Previously filed with Post Effective Amendment No. 27 to the
Registration Statement on December 29, 1995)
(v) Sub-Transfer Agent Agreement between the Registrant on behalf of
Templeton Foreign Fund and Fidelity Investments Institutional
Operations Company dated July 1, 1993
(Previously filed with Post Effective Amendment No. 27 to the
Registration Statement on December 29, 1995)
(vi) Shareholder Services Agreement between Franklin/Templeton
Investor Services, Inc. and Templeton Franklin Investment
Services, Limited dated September 18, 1995
(Previously filed with Post Effective Amendment No. 30 to the
Registration Statement on December 24, 1997)
(14) Copies of any other opinions, appraisals or rulings, and consents to their
use relied on in preparing the registration statement and required by Section 7
of the 1993 Act:
(i) Consent of Independent Auditor for Templeton Funds, Inc. is
electronically filed herewith.
(ii) Consent of Independent Auditor for Templeton Global Investment
Trust Fund is electronically filed herewith.
(15) All financial statements omitted pursuant to Item 14(a)(1):
Not applicable
(16) Manually signed copies of any power of attorney pursuant to which the name
of any person has been signed to the Registration Statement:
Powers of Attorney dated December 11, 1998
(Previously filed with Post Effective Amendment No. 32 to the
Registration Statement on December 29, 1998)
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this Registration Statement by
any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information called for
by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part of
an amendment to the registration statement and will not be
used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new
Registration Statement for the securities offered therein, and
the offering of the securities at that time shall be deemed to
be the initial bona fide offering of them.
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of Ft. Lauderdale, and
the State of Florida, on the 4th day of May, 1999.
TEMPLETON FUNDS, INC.
(Registrant)
By: /s/MARK G. HOLOWESKO
-----------------------
Mark G. Holowesko,
President
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE: TITLE: DATE:
- -------------------------------------------------------------------------------
<S> <C> <C>
CHARLES B. JOHNSON* Chairman of the Board May 4, 1999
- --------------------- and Vice President
Charles B. Johnson
JAMES R. BAIO* Principal Financial and May 4, 1999
- --------------------- Accounting Officer
James R. Baio
NICHOLAS F. BRADY* Director May 4, 1999
- ---------------------
Nicholas F. Brady
HARRIS J. ASHTON* Director May 4, 1999
- ---------------------
Harris J. Ashton
S. JOSEPH FORTUNATO* Director May 4, 1999
- ---------------------
S. Joseph Fortunato
JOHN WM. GALBRAITH* Director May 4, 1999
- ---------------------
John Wm. Galbraith
ANDREW H. HINES, JR.* Director May 4, 1999
- --------------------
Andrew H. Hines, Jr.
BETTY P. KRAHMER* Director May 4, 1999
- ---------------------
Betty P. Krahmer
GORDON S. MACKLIN * Director May 4, 1999
- ---------------------
Gordon S. Macklin
FRED R. MILLSAPS* Director May 4, 1999
- ---------------------
Fred R. Millsaps
RUPERT H. JOHNSON, JR. Director May 4, 1999
- ----------------------
Rupert H. Johnson, Jr.
</TABLE>
*By /s/BARBARA J. GREEN
--------------------
Barbara J. Green
(Attorney-in-Fact
Pursuant to Powers of
Attorney previously filed)
PAGE
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT
(14)(i) Consent of Auditors, McGladrey & Pullen, LLP
(14)(ii) Consent of Auditors, McGladrey & Pullen, LLP
PAGE
Exhibit 14 (i)
MCGLADREY & PULLEN, LLP
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated September 29, 1998 on the financial
statements of Tempelton World Fund, referred to therein, which appears in the
1998 Annual Report to Shareholders which is included in the Registration
Statement on Form N-14 of Templeton Funds, Inc., File No. 2-60067 being filed
with the Securities and Exchange Commission.
/s/MCGLADREY & PULLEN, LLP
New York, New York
May 4, 1999
PAGE
Exhibit 14 (ii)
MCGLADREY & PULLEN, LLP
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated April 24, 1998 on the financial
statements of Tempelton Growth and Income Fund and to the use of our report
dated April 24, 1998 on the financial statements of Templeton Global
Infrastructure Fund which are included in the Registration Statement on Form
N-14 of Templeton Funds, Inc., File No. 2-60067 being filed with the Securities
and Exchange Commission.
/s/MCGLADREY & PULLEN, LLP
New York, New York
May 4, 1999
