File No. 2-60067
AS FILED August 4, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
X Post-Effective Amendment No. 1
(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
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.
PART A
Part A of Templeton Funds, Inc. is incorporated here in by reference to the
electronic filing made on May 4, 1999, under File No. 2-60067.
PART B
Part B of Templeton Funds, Inc. is incorporated here in by reference to the
electronic filing made on May 4, 1999, under File No. 2-60067.
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:
(i) Agreement and Plan of Reorganization for Templeton Global
Infrastructure Fund dated June 1, 1999
(i) Agreement and Plan of Reorganization for Templeton Growth
and Income Fund dated June 1, 1999
(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)
(vi) Multiple Class Plan, Templeton Foreign Fund - Advisor Class
(Previously filed with Post Effective Amendment No. 30 to the
Registration Statement on December 24, 1997)
(vii) 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)
(viii) 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
dated July 22, 1999
(ii) Tax Opinion relating to the Templeton Global Infrastructure Fund
dated July 29, 1999
(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.
(Previously filed with Registration Statement on Form N-14 on
May 4, 1999)
(ii) Consent of Independent Auditor for Templeton Global Investment
Trust
(Previously filed with Registration Statement on Form N-14 on
May 4, 1999)
(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
Pursuant to the requirement of the Securities Act of 1933, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of Fort Lauderdale, and
the State of Florida, on the 3rd day of August 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 August 3, 1999
- --------------------- and Vice President
Charles B. Johnson
JAMES R. BAIO* Principal Financial and August 3, 1999
- --------------------- Accounting Officer
James R. Baio
NICHOLAS F. BRADY* Director August 3, 1999
- ---------------------
Nicholas F. Brady
HARRIS J. ASHTON* Director August 3, 1999
- ---------------------
Harris J. Ashton
S. JOSEPH FORTUNATO* Director August 3, 1999
- ---------------------
S. Joseph Fortunato
JOHN WM. GALBRAITH* Director August 3, 1999
- ---------------------
John Wm. Galbraith
ANDREW H. HINES, JR.* Director August 3, 1999
- --------------------
Andrew H. Hines, Jr.
BETTY P. KRAHMER* Director August 3, 1999
- ---------------------
Betty P. Krahmer
GORDON S. MACKLIN * Director August 3, 1999
- ---------------------
Gordon S. Macklin
FRED R. MILLSAPS* Director August 3, 1999
- ---------------------
Fred R. Millsaps
RUPERT H. JOHNSON, JR. Director August 3, 1999
- ----------------------
Rupert H. Johnson, Jr.
</TABLE>
*By /s/BARBARA J. GREEN
--------------------
Barbara J. Green
(Attorney-in-Fact
Pursuant to Powers of
Attorney previously filed)
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT
(4)(i) Agreement and Plan of Reorganization for Templeton Global
Infrastructure Fund dated June 1, 1999
(4)(ii) Agreement and Plan of Reorganization for Templeton Growth
and Income Fund dated June 1, 1999
(12)(i) Opinion and Consent of Counsel Supporting Tax Matters and
Consequences to Shareholders for Templeton Global
Infrastructure Fund dated July 22, 1999
(12)(ii) Opinion and Consent of Counsel Supporting Tax Matters and
Consequences to Shareholders for Templeton Growth and Income
Fund dated July 29, 1999
Exhibit 4 (i)
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement and Plan"), made as
of the 1st day of June, 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:
1. 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.
2. 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.
3. CLOSING AND CLOSING DATE.
The Closing Date shall be July 15, 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.
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 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, 1999, 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.
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 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.
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 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.
7. 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 Fund, 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.
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 Plan of Reorganization 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 and Plan 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, this 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.
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 Global Fund, one-quarter by
World Fund, one-quarter by Templeton Global Advisors Limited, and one-quarter
by Templeton Investment Counsel, Inc.
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 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, trustee 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 and Plan 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.
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 instrument.
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., at
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 Delaware.
IN WITNESS WHEREOF, Templeton Global Investment Trust, on behalf of
Templeton 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:
/s/ BARBARA J. GREEN BY: /S/ DEBORAH R. GATZEK
- ------------------------ ------------------------
Barbara J. Green Deborah R. Gatzek
Secretary Vice President
TEMPLETON FUNDS, INC., on behalf of
TEMPLETON WORLD FUND
Attest:
/s/ BARBARA J. GREEN BY: /S/ DEBORAH R. GATZEK
- ------------------------ ------------------------
Barbara J. Green Deborah R. Gatzek
Secretary Vice President
Exhibit 4 (ii)
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement and Plan"), made as
of the 1st day of June, 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 July 29, 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, 1999, 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 Fund, 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 Plan of Reorganization 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 and Plan 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, this 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 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 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, trustee 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 and Plan 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 instrument.
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 Delaware.
IN WITNESS WHEREOF, Templeton Global Investment Trust, on behalf of
Templeton 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:
/s/ BARBARA J. GREEN By: /s/ DEBORAH R. GATZEK
- -------------------- ---------------------
Barbara J. Green Deborah R. Gatzek
Secretary Vice President
TEMPLETON FUNDS, INC., on behalf of
TEMPLETON WORLD FUND
Attest:
/s/ BARBARA J. GREEN By: /s/ DEBORAH R. GATZEK
- -------------------- ---------------------
Barbara J. Green Deborah R. Gatzek
Secretary Vice President
Exhibit 12 (i)
STRADLEY RONON STEVENS & YOUNG
2600 ONE COMMERCE SQUARE
PHILADELPHIA, PA 19103-7098
(215) 564-8000
July 22, 1999
Board of Trustees
Templeton Global Investment Trust
500 East Broward Boulevard
Fort Lauderdale, FL 33394
Board of Directors
Templeton Funds, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404
Re: AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF
THE 1ST DAY OF JUNE, 1999 (THE "AGREEMENT"), BY AND BETWEEN
TEMPLETON FUNDS, INC., A MARYLAND CORPORATION, ON BEHALF OF
ITS SERIES, TEMPLETON WORLD FUND ("ACQUIRING FUND") AND
TEMPLETON GLOBAL INVESTMENT TRUST, A DELAWARE BUSINESS TRUST,
ON BEHALF OF ITS SERIES, TEMPLETON GLOBAL INFRASTRUCTURE FUND
("ACQUIRED FUND")
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the reorganization of Acquired Fund which will consist of (i)
the acquisition by the Acquiring Fund of substantially all of the property,
assets and goodwill of the Acquired Fund in exchange solely for shares of common
stock, par value $1.00 per share, of the Acquiring Fund - Class A ("Acquiring
Fund Class A Shares") and shares of common stock, par value $1.00 per share, of
the Acquiring Fund - Class C ("Acquiring Class C Shares") (collectively
"Acquiring Fund Shares"), (ii) the distribution of (a) Acquiring Fund Class A
Shares to the shareholders of Class A shares of common stock of the Acquired
Fund; and (b) Acquiring Fund Class C Shares to the shareholders of Class C
shares of common stock of the Acquired Fund, according to their respective
interests, and (iii) the subsequent dissolution of the Acquired Fund as soon as
practicable after the closing (the "Reorganization"), all upon and subject to
the terms and conditions of the Agreement.
In rendering our opinion, we have reviewed and relied upon (a) the
Agreement and Plan of Reorganization, dated as of the 1st day of June, 1999, by
and between the Acquiring Fund and the Acquired Fund ("Agreement"), (b) the
proxy materials provided to stockholders of the Acquired Fund in connection with
the Special Meeting of Stockholders of the Acquired Fund held on July 13, 1999,
(c) certain representations concerning the Reorganization made to us by the
Acquiring Fund and the Acquired Fund in a letter dated July 15, 1999 (the
"Representation Letter"), (d) all other documents, financial and other reports
and corporate minutes which we deemed relevant or appropriate, and (e) such
statutes, regulations, rulings and decisions as we deemed material to the
rendition of this opinion. All terms used herein, unless otherwise defined, are
used as defined in the Agreement.
For purposes of this opinion, we have assumed that the Acquired Fund on the
effective date of the Reorganization satisfies, and following the
Reorganization, the Acquiring Fund will continue to satisfy, the requirements of
subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), for
qualification as a regulated investment company.
Under regulations to be prescribed by the Secretary of Treasury under
Section 1276(d) of the Code, certain transfers of market discount bonds will be
excepted from the requirement that accrued market discount be recognized on
disposition of a market discount bond under Section 1276(a) of the Code. Such
regulations are to provide, in part, that accrued market discount will not be
included in income if no gain is recognized under Section 361(a) of the Code
where a bond is transferred in an exchange qualifying as a tax-free
reorganization. As of the date hereof, the Secretary has not issued any
regulations under Section 1276 of the Code.
Based on the foregoing and provided the Reorganization is carried out in
accordance with the applicable laws of the States of Maryland and Delaware, the
Agreement and the Representation Letter, it is our opinion that:
1. The Reorganization will constitute a tax-free reorganization within the
meaning of Section 368(a)(1)(C) of the Code, and Acquired Fund and Acquiring
Fund will each be a party to the reorganization within the meaning of Section
368(b) of the Code.
2. No gain or loss will be recognized by Acquired Fund upon the transfer of
all of its assets to Acquiring Fund in exchange solely for Acquiring Fund Shares
pursuant to Section 361(a) and Section 357(a) of the Code. We express no opinion
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 Acquiring Fund upon the receipt by
it of all of the assets of Acquired Fund in exchange solely for Acquiring Fund
Shares pursuant to Section 1032(a) of the Code.
4. The basis of the assets of Acquired Fund received by Acquiring Fund will
be the same as the basis of such assets to Acquired Fund immediately prior to
the exchange pursuant to Section 362(b) of the Code.
5. The holding period of the assets of Acquired Fund received by Acquiring
Fund will include the period during which such assets were held by Acquired Fund
pursuant to Section 1223(2) of the Code.
6. No gain or loss will be recognized by the stockholders of Acquired Fund
upon the exchange of their Acquired Fund Shares for Acquiring Fund Shares
(including fractional shares to which they may be entitled), pursuant to Section
354(a) of the Code.
7. The basis of the Acquiring Fund Shares received by the stockholders of
Acquired Fund (including fractional shares to which they may be entitled) will
be the same as the basis of the Acquired Fund Shares exchanged therefor pursuant
to Section 358(a)(1) of the Code.
8. The holding period of the Acquiring Fund Shares received by the
stockholders of Acquired Fund (including fractional shares to which they may be
entitled) will include the holding period of the Acquired Fund Shares
surrendered in exchange therefor, provided that the Acquired Fund Shares were
held as a capital asset on the effective date of the Reorganization, pursuant to
Section 1223(1) of the Code.
9. Acquiring 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 Acquired Fund described in Section 381(c) of the Code,
subject to the conditions and limitations specified in Sections 381(b) and (c),
382, 383 and 384 of the Code.
Our opinion is based upon the Code, the applicable Treasury Regulations
promulgated thereunder, the present position of the Internal Revenue Service as
set forth in published revenue rulings and revenue procedures, present
administrative positions of the Internal Revenue Service, and existing judicial
decisions, all of which are subject to change either prospectively or
retroactively. We do not undertake to make any continuing analysis of the facts
or relevant law following the date of this letter.
Our opinion is conditioned upon the performance by Acquiring
Fund and Acquired Fund of their undertakings in the Agreement and the
Representation Letter.
This opinion is being rendered to Acquiring Fund and Acquired Fund and may
be relied upon only by such funds and the stockholders of each.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By:/s/WILLIAM P. ZIMMERMAN
-----------------------------
William P. Zimmerman, a Partner
Exhibit 12 (ii)
STRADLEY RONON STEVENS & YOUNG
2600 ONE COMMERCE SQUARE
PHILADELPHIA, PA 19103-7098
(215) 564-8000
July 29, 1999
Board of Trustees
Templeton Global Investment Trust
500 East Broward Boulevard
Fort Lauderdale, FL 33394
Board of Directors
Templeton Funds, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404
Re: AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF
THE 1ST DAY OF JUNE, 1999 (THE "AGREEMENT"), BY AND BETWEEN
TEMPLETON FUNDS, INC., A MARYLAND CORPORATION, ON BEHALF OF
ITS SERIES, TEMPLETON WORLD FUND ("ACQUIRING FUND") AND
TEMPLETON GLOBAL INVESTMENT TRUST, A DELAWARE BUSINESS TRUST,
ON BEHALF OF ITS SERIES, TEMPLETON GROWTH AND INCOME FUND
("ACQUIRED FUND")
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the reorganization of Acquired Fund which will consist of (i)
the acquisition by the Acquiring Fund of substantially all of the property,
assets and goodwill of the Acquired Fund in exchange solely for shares of common
stock, par value $1.00 per share, of the Acquiring Fund - Class A ("Acquiring
Fund Class A Shares") and shares of common stock, par value $1.00 per share, of
the Acquiring Fund - Class C ("Acquiring Class C Shares") (collectively
"Acquiring Fund Shares"), (ii) the distribution of (a) Acquiring Fund Class A
Shares to the shareholders of Class A shares of common stock of the Acquired
Fund; and (b) Acquiring Fund Class C Shares to the shareholders of Class C
shares of common stock of the Acquired Fund, according to their respective
interests, and (iii) the subsequent dissolution of the Acquired Fund as soon as
practicable after the closing (the "Reorganization"), all upon and subject to
the terms and conditions of the Agreement.
In rendering our opinion, we have reviewed and relied upon (a) the
Agreement and Plan of Reorganization, dated as of the 1st day of June, 1999, by
and between the Acquiring Fund and the Acquired Fund ("Agreement"), (b) the
proxy materials provided to stockholders of the Acquired Fund in connection with
the Special Meeting of Stockholders of the Acquired Fund held on July 13, 1999,
(c) certain representations concerning the Reorganization made to us by the
Acquiring Fund and the Acquired Fund in a letter dated July 29, 1999 (the
"Representation Letter"), (d) all other documents, financial and other reports
and corporate minutes which we deemed relevant or appropriate, and (e) such
statutes, regulations, rulings and decisions as we deemed material to the
rendition of this opinion. All terms used herein, unless otherwise defined, are
used as defined in the Agreement.
For purposes of this opinion, we have assumed that the Acquired Fund on the
effective date of the Reorganization satisfies, and following the
Reorganization, the Acquiring Fund will continue to satisfy, the requirements of
subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), for
qualification as a regulated investment company.
Under regulations to be prescribed by the Secretary of Treasury under
Section 1276(d) of the Code, certain transfers of market discount bonds will be
excepted from the requirement that accrued market discount be recognized on
disposition of a market discount bond under Section 1276(a) of the Code. Such
regulations are to provide, in part, that accrued market discount will not be
included in income if no gain is recognized under Section 361(a) of the Code
where a bond is transferred in an exchange qualifying as a tax-free
reorganization. As of the date hereof, the Secretary has not issued any
regulations under Section 1276 of the Code.
Based on the foregoing and provided the Reorganization is carried out in
accordance with the applicable laws of the States of Maryland and Delaware, the
Agreement and the Representation Letter, it is our opinion that:
1. The Reorganization will constitute a tax-free reorganization within the
meaning of Section 368(a)(1)(C) of the Code, and Acquired Fund and Acquiring
Fund will each be a party to the reorganization within the meaning of Section
368(b) of the Code.
2. No gain or loss will be recognized by Acquired Fund upon the transfer of
all of its assets to Acquiring Fund in exchange solely for Acquiring Fund Shares
pursuant to Section 361(a) and Section 357(a) of the Code. We express no opinion
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 Acquiring Fund upon the receipt by
it of all of the assets of Acquired Fund in exchange solely for Acquiring Fund
Shares pursuant to Section 1032(a) of the Code.
4. The basis of the assets of Acquired Fund received by Acquiring Fund will
be the same as the basis of such assets to Acquired Fund immediately prior to
the exchange pursuant to Section 362(b) of the Code.
5. The holding period of the assets of Acquired Fund
received by Acquiring Fund will include the period during which such assets were
held by Acquired Fund pursuant to Section 1223(2) of the Code.
6. No gain or loss will be recognized by the stockholders of Acquired Fund
upon the exchange of their Acquired Fund Shares for Acquiring Fund Shares
(including fractional shares to which they may be entitled), pursuant to Section
354(a) of the Code.
7. The basis of the Acquiring Fund Shares received by the stockholders of
Acquired Fund (including fractional shares to which they may be entitled) will
be the same as the basis of the Acquired Fund Shares exchanged therefor pursuant
to Section 358(a)(1) of the Code.
8. The holding period of the Acquiring Fund Shares received by the
stockholders of Acquired Fund (including fractional shares to which they may be
entitled) will include the holding period of the Acquired Fund Shares
surrendered in exchange therefor, provided that the Acquired Fund Shares were
held as a capital asset on the effective date of the Reorganization, pursuant to
Section 1223(1) of the Code.
9. Acquiring 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 Acquired Fund described in Section 381(c) of the Code,
subject to the conditions and limitations specified in Sections 381(b) and (c),
382, 383 and 384 of the Code.
Our opinion is based upon the Code, the applicable Treasury Regulations
promulgated thereunder, the present position of the Internal Revenue Service as
set forth in published revenue rulings and revenue procedures, present
administrative positions of the Internal Revenue Service, and existing judicial
decisions, all of which are subject to change either prospectively or
retroactively. We do not undertake to make any continuing analysis of the facts
or relevant law following the date of this letter.
Our opinion is conditioned upon the performance by Acquiring Fund and
Acquired Fund of their undertakings in the Agreement and the Representation
Letter.
This opinion is being rendered to Acquiring Fund and Acquired Fund and may
be relied upon only by such funds and the stockholders of each.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By:/s/WILLAM P. ZIMMERMAN
--------------------------
William P. Zimmerman, a Partner
