File No. 033-06510
AS FILED NOVEMBER 3, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
X Post-Effective Amendment No. 1
(Check appropriate box or boxes)
TEMPLETON INCOME TRUST
(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 and 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 BENEFICIAL INTEREST, PAR
VALUE $.01 PER SHARE, OF TEMPLETON GLOBAL BOND FUND CLASS A. 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 Income Trust is incorporated herein by reference to
the electronic filing made on July 9, 1999, under File No. 33-6510.
PART B
Part B of Templeton Income Trust is incorporated herein by reference to
the electronic filing made on July 9, 1999, under File No. 33-6510.
PART C.
OTHER INFORMATION
Item 15. INDEMNIFICATION
All trustees and officers of the Registrant are to be indemnified to
the fullest extent permitted by law for any liabilities incurred in
connection with the affairs of the Registrant, except in cases where
bad faith, willful misfeasance, gross negligence or reckless disregard
of duties is established. Reference is made to Article IV of the
Registrant's Declaration of Trust (filed with Post-Effective Amendment
No. 17 to the Registration Statement filed on December 29, 1995 and
incorporated herein by reference.) Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted
to trustees, officers and controlling persons of the Registrant
pursuant to the Declaration of Trust or otherwise, the Registrant is
aware that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act
and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, officers or
controlling persons of the Registrant in connection with the successful
defense of any act, suit or proceeding) is asserted by such trustees,
officers or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 16. EXHIBITS
The following exhibits are incorporated herein by reference to the previously
filed document indicated below, except as noted:
(1) Copies of the charter of the Registrant as now in effect:
(i) Declaration of Trust dated June 16, 1986 (Previously filed
with Post Effective Amendment No. 17 to the Registration
Statement on December 29, 1995)
(ii) First Amendment to the Declaration of Trust dated September
30, 1987 (Previously filed with Post Effective Amendment No.
17 to the Registration Statement on December 29, 1995)
(iii) Second Amendment to the Declaration of Trust dated February
24, 1995 (Previously filed with Post Effective Amendment No.
16 to the Registration Statement on April 28, 1995)
(iv) Establishment and Designation of Classes dated February 24,
1995 (Previously filed with Post Effective Amendment No. 16 to
the Registration Statement on April 28, 1995)
(v) Amendment to the Declaration of Trust dated February 22, 1996
(Previously filed with Post Effective Amendment No. 18
to the Registration Statement on December 27, 1996)
(vi) Establishment and Designation of Classes dated December 26,
1996 (Previously filed with Post Effective Amendment No. 20 to
the Registration Statement on December 22, 1997)
(2) Copies of the existing by-laws or corresponding instruments of the
Registrant:
(i) Amended and Restated By-Laws of Templeton Income Trust dated
July 29, 1992 (Previously filed with Post Effective Amendment
No. 17 to the Registration Statement on December 29, 1995)
(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 dated August 2, 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 the
Registrant on behalf of Templeton Global Bond Fund and
Templeton Investment Counsel, Inc. dated December 6, 1994
(Previously filed with Post Effective Amendment No. 16 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 the
Registrant and Franklin Templeton Distributors, Inc., dated
May 1, 1995 (Previously filed with Post Effective Amendment
No. 17 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. 21 to the
Registration Statement on October 30, 1998)
(iii) Amendment of Dealer Agreement dated May 15, 1998 (Previously
filed with Post Effective Amendment No. 21 to the Registration
Statement on October 30, 1998)
(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) Custody Agreement between Registrant and The Chase Manhattan
Bank dated September 15, 1986 (Previously filed with Post
Effective Amendment No. 17 to the Registration Statement on
December 29, 1995)
(ii) Amendment dated March 3, 1998 to the Custody Agreement
(Previously filed with Post Effective Amendment No. 21 to the
Registration Statement on October 30, 1998)
(iii) Amendment No. 2 dated July 23, 1998 to the Custody Agreement
(Previously filed with Post Effective Amendment No. 21 to the
Registration Statement on October 30, 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) Plan of Distribution pursuant to Rule 12b-1 dated May 1, 1995
(Previously filed with Post Effective Amendment No. 16
to the Registration Statement on April 28, 1995)
(ii) Class II Distribution Plan pursuant to Rule 12b-1 dated May 1,
1995 (Previously filed with Post Effective Amendment No. 16 to
the Registration Statement on April 28, 1995)
(iii) Multiple Class Plan, Templeton Income Trust on behalf of
Templeton Global Bond Fund - Advisor Class (Previously filed
with Post Effective Amendment No. 20 to the Registration
Statement on December 22, 1997)
(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 (Previously filed with Post
Effective Amendment No. 20 to the Registration Statement
on December 22, 1997)
(12) An opinion, and consent to its use, of counsel, or in lieu of an
opinion, a copy of the revenue ruling from the Internal Revenue
Services supporting the tax matters and consequences to shareholders
discussed in the prospectus:
(i) Opinion and consent of counsel supporting tax matters and
consequences to shareholders dated October 21, 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 dated October 1, 1996 and
amended December 31, 1996 between the Registrant and Franklin
Templeton Services, Inc. (Previously filed with Post Effective
Amendment No. 20 to the Registration Statement on December 22,
1997)
(ii) Amended and Restated Transfer Agent Agreement dated December
31, 1996 between the Registrant and Franklin/Templeton
Investor Services, Inc. (Previously filed with Post Effective
Amendment No. 20 to the Registration Statement on December
22, 1997)
(iii) Sub-Transfer Agent Agreement dated March 1, 1992 between the
Registrant, Templeton Funds Trust Company and The Shareholder
Services Group, Inc. (Previously filed with Post Effective
Amendment No. 17 to the Registration Statement on December 29,
1995)
(iv) Sub-Accounting Services Agreement dated May 1, 1991 between
the Registrant, Templeton Funds Trust Company, Financial Data
Services, Inc., and Merrill Lynch, Pierce, Fenner & Smith,
Inc. (Previously filed with Post Effective Amendment No. 17 to
the Registration Statement on December 29, 1995)
(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 1933 Act:
(i) Consent of Independent Auditors, McGladrey & Pullen, LLP for
Templeton Income Trust (Previously filed with the Registration
Statement on Form N-14 on July 9, 1999)
(ii) Consent of Independent Auditors, McGladrey & Pullen, LLP for
Templeton Global Investment Trust (Previously filed with the
Registration Statement on Form N-14 on July 9, 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:
(i) Power of Attorney dated December 11, 1998 (Previously filed
with the Registration Statement on Form N-14 on July 9, 1999)
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, as amended,
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 Amendment to its 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 November 1999.
TEMPLETON INCOME TRUST
(Registrant)
By: /s/GREGORY E. MCGOWAN
-------------------------
Gregory E. McGowan
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>
<S> <C>
/s//GREGORY E. MCGOWAN Principal Executive Officer
Gregory E. McGowan Dated: November 3, 1999
JAMES R. BAIO* Principal Financial and Accounting
Officer
James R. Baio Dated: November 3, 1999
CHARLES B. JOHNSON* Trustee, Chairman of the Board and
Vice President
Charles B. Johnson Dated: November 3, 1999
BETTY P. KRAHMER* Trustee
Betty P. Krahmer Dated: November 3, 1999
HARRIS J. ASHTON* Trustee
Harris J. Ashton Dated: November 3, 1999
S. JOSEPH FORTUNATO* Trustee
S. Joseph Fortunato Dated: November 3, 1999
FRED R. MILLSAPS* Trustee
Fred R. Millsaps Dated: November 3, 1999
JOHN WM. GALBRAITH* Trustee
John Wm. Galbraith Dated: November 3, 1999
GORDON S. MACKLIN* Trustee
Gordon S. Macklin Dated: November 3, 1999
ANDREW H. HINES, JR.* Trustee
- --------------------
Andrew H. Hines, Jr. Dated: November 3, 1999
NICHOLAS F. BRADY* Trustee
Nicholas F. Brady Dated: November 3, 1999
</TABLE>
*By:/s/BARBARA J. GREEN
------------------------
Barbara J. Green, Attorney-in-Fact
(pursuant to Power of Attorney previously filed)
<TABLE>
<CAPTION>
TEMPLETON INCOME TRUST
REGISTRATION STATEMENT ON FORM N-14
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION LOCATION
<S> <C> <C>
EX-99.(1)(i) Declaration of Trust dated June 16, 1986 *
EX-99.(1)(ii) First Amendment to the Declaration of Trust
dated September 30, 1987 *
EX-99.(1)(iii) Second Amendment to the Declaration of Trust
dated February 24, 1995 *
EX-99.(1)(iv) Establishment and Designation of Classes dated
February 24, 1995 *
EX-99.(1)(v) Amendment to the Declaration of Trust dated
February 22, 1996 *
EX-99.(1)(vi) Establishment and Designation of Classes dated
December 26, 1996 *
EX-99.(2)(i) Amended and Restated By-Laws dated July 29, 1992 *
EX-99.(4)(i) Agreement and Plan of Reorganization dated
August 2, 1999 Attached
EX-99.(6)(i) Amended and Restated Management Agreement between *
the Registrant on behalf of Templeton Global
Bond Fund and Templeton Investment Counsel, Inc.
dated December 6, 1994
EX-99.(7)(i) Amended and Restated Distribution Agreement between *
Registrant and Franklin/Templeton Distributors, Inc.,
dated May 1, 1995
EX-99.(7)(ii) Form of Dealer Agreement between Franklin Templeton *
Distributors, Inc. and Securities Dealers
EX-99.(7)(iii) Amendment of Dealer Agreement dated May 15, 1998 *
EX-99.(9)(i) Custody Agreement between Registrant and The Chase
Manhattan Bank dated September 15, 1986 *
EX-99.(9)(ii) Amendment dated March 3, 1998 to the Custody Agreement *
EX-99.(9)(iii) Amendment No. 2 dated July 23, 1998 to the Custody
Agreement *
EX-99.(10)(i) Plan of Distribution pursuant to Rule 12b-1 dated
May 1, 1995 *
EX-99.(10)(ii) Class II Distribution Plan pursuant to Rule 12b-1
dated May 1, 1995 *
EX-99.(10)(iii) Multiple Class Plan, Templeton Income Trust on *
behalf of Templeton Global Bond Fund - Advisor Class
EX-99.(11)(i) Opinion and consent of counsel *
EX-99.(12) Opinion and consent of counsel supporting tax Attached
matters and consequences to shareholders dated
October 21, 1999
EX-99.(13)(i) Fund Administration Agreement dated October 1, 1996 *
and amended December 31, 1996 between Registrant and
Franklin/Templeton Investor Services, Inc.
EX-99.(13)(ii) Amended and Restated Transfer Agent Agreement dated *
December 31, 1996 between Registrant and Franklin/
Templeton Investor Services, Inc.
EX-99.(13)(iii) Sub-Transfer Agent Agreement dated March 1, 1992 *
between Registrant, Templeton Funds Trust Company
and The Shareholder Services Group, Inc.
EX-99.(13)(iv) Sub-Accounting Services Agreement dated May 1, 1991 *
between the Registrant, Templeton Funds Trust
Company, Financial Data Services, Inc., and
Merrill Lynch, Pierce, Fenner & Smith, Inc.
EX-99.(14)(i) Consent of McGladrey & Pullen, LLP, Independent *
Auditors for Templeton Income Trust
EX-99.(l4)(ii) Consent of McGladrey & Pullen, LLP, Independent *
Auditors for Templeton Global Investment Trust
EX-99.(16)(i) Power of Attorney dated December 11, 1998 *
</TABLE>
*Incorporated by Reference
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement and Plan"), made
as of this 2nd day of August, 1999, by and between TEMPLETON INCOME TRUST
("Income Trust"), a business trust created under the laws of the Commonwealth of
Massachusetts in 1986, with its principal place of business at 500 East Broward
Boulevard, Fort Lauderdale, Florida 33394, on behalf of Templeton Global Bond
Fund ("Bond Fund"), a series of shares of Income Trust, and TEMPLETON GLOBAL
INVESTMENT TRUST ("Investment Trust"), a business trust created under the laws
of the State of Delaware in 1993, with its principal place of business at 500
East Broward Boulevard, Fort Lauderdale, Florida 33394, on behalf of Templeton
Americas Government Securities Fund ("Government Fund"), a series of shares of
Investment Trust.
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by Income Trust, on behalf
of Bond Fund, of substantially all of the property, assets and goodwill of
Government Fund in exchange solely for shares of beneficial interest, par value
$0.01 per share, of Bond Fund Class A ("Bond Fund Shares"); (ii) the
distribution of Bond Fund Shares to the shareholders of Government Fund
according to their respective interests; and (iii) the subsequent dissolution of
Government 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 GOVERNMENT FUND.
(a) Subject to the terms and conditions of this Agreement and
Plan, and in reliance on the representations and warranties of Income Trust
herein contained, and in consideration of the delivery by Income Trust of the
number of its Bond Fund Shares hereinafter provided, Investment Trust, on behalf
of Government Fund, agrees that it will convey, transfer and deliver to Income
Trust, on behalf of Bond Fund, at the Closing all of Government 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 Government 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 shall reasonably deem to
exist against Government Fund, if any, at the Closing Date, for which contingent
and other appropriate liabilities reserves shall be established on Government
Fund's books (hereinafter "Net Assets"). Government 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 Investment Trust herein
contained, and in consideration of such sale, conveyance, transfer, and
delivery, Income Trust agrees at the Closing to deliver to Investment Trust the
number of Bond Fund Shares, determined by dividing the aggregate Net Assets of
Government Fund on the Closing Date by the net asset value per share of Bond
Fund Shares, as of 1:00 p.m. Pacific 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, Government Fund shall dissolve
and distribute pro rata to its shareholders of record as of the close of
business on the Closing Date, Bond Fund Shares received by Government Fund
pursuant to this Section 1. Such liquidation and distribution shall be
accomplished by the establishment of accounts on the share records of Bond Fund
of the type and in the amounts due such shareholders based on their respective
holdings as of the close of business on the Closing Date. Fractional Bond 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 Government Fund shall be entitled
to surrender the same to the transfer agent for Bond Fund in exchange for the
number of Bond Fund Shares into which the shares of Government Fund theretofore
represented by the certificate or certificates so surrendered shall have been
converted. Certificates for Bond 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 Government Fund shall be deemed for all Bond Fund's
purposes to evidence ownership of the number of Bond Fund Shares into which the
shares of beneficial interest of Government Fund (which prior to the Closing
were represented thereby) have been converted.
2. VALUATION.
(a) The value of Government Fund's Net Assets to be acquired by
Income Trust, on behalf of Bond Fund, hereunder shall be computed as of 1:00
p.m. Pacific time on the Closing Date using the valuation procedures set forth
in Government Fund's currently effective prospectus.
(b) The net asset value of a share of beneficial interest of
Bond Fund shall be determined to the nearest full cent as of 1:00 p.m. Pacific
time on the Closing Date using the valuation procedures set forth in Bond Fund's
currently effective prospectus.
(c) The net asset value of a share of beneficial interest of
Government Fund shall be determined to the fourth decimal place as of 1:00 p.m.
Pacific time on the Closing Date using the valuation procedures set forth in
Government Fund's currently effective prospectus.
3. CLOSING AND CLOSING DATE.
The Closing Date shall be October 21, 1999, or such later date as the
parties may mutually agree. The Closing shall take place at the principal office
of Income Trust at 2:00 p.m. Pacific time on the Closing Date. Investment Trust
shall have provided for delivery as of the Closing of those Net Assets of
Government Fund to be transferred to Bond Fund's Custodian, The Chase Manhattan
Bank, N.A., MetroTech Center, Brooklyn, New York 11245. Also, Investment Trust
shall deliver at the Closing a list of names and addresses of the shareholders
of record of Government Fund's shares and the number of shares of beneficial
interest owned by each such shareholder, indicating thereon which such shares
are represented by outstanding certificates and which by book-entry accounts,
all as of 1:00 p.m. Pacific time on the Closing Date, certified by its transfer
agent or by its President to the best of its or his knowledge and belief. Income
Trust shall issue and deliver a certificate or certificates evidencing the
shares of beneficial interest of Bond Fund to be delivered to said transfer
agent registered in such manner as Investment Trust may request, or provide
evidence satisfactory to Investment Trust that such Bond Fund Shares have been
registered in an account on the books of Bond Fund in such manner as Investment
Trust may request.
4. REPRESENTATIONS AND WARRANTIES BY INVESTMENT TRUST.
Investment Trust represents and warrants to Income Trust that:
(a) Investment 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. Investment 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 Government 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) Investment 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, freely transferable and has full
voting rights, and currently issues shares of five (5) series, including
Government Fund. Investment Trust is authorized to issue an unlimited number of
shares of beneficial interest of each series.
(c) The financial statements appearing in Government Fund's
Annual Report to Shareholders for the fiscal year ended March 31, 1999, audited
by McGladrey & Pullen LLP, copies of which have been delivered to Income Trust,
fairly present the financial position of Government 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 Government Fund made available to
Income Trust and/or its counsel accurately summarize the accounting data
represented and contain no material omissions with respect to the business and
operations of Government Fund.
(e) Investment Trust has the necessary power and authority to
conduct Government Fund's business as such business is now being conducted.
(f) Investment Trust is not a party to or obligated under any
provision of its Trust Instrument or 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 Investment Trust's execution of or performance under this
Agreement and Plan.
(g) Investment Trust has elected to treat Government 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 Government 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 INCOME TRUST.
Income Trust represents and warrants to Investment Trust that:
(a) Income Trust is a business trust created under the laws of
the Commonwealth of Massachusetts on June 16, 1986, and is validly existing and
in good standing under the laws of that commonwealth. Income Trust is duly
registered under the 1940 Act as an open-end, management investment company and
all of Income Fund's 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) Income 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, freely transferable and has full voting
rights. Bond Fund Shares to be issued pursuant to this Agreement and Plan will
be fully paid, non-assessable, freely transferable and have full voting rights.
(c) At the Closing, Bond Fund Shares will be eligible for
offering to the public in those states of the United States and jurisdictions in
which the shares of Government Fund are presently eligible for offering to the
public, and there are a sufficient number of Bond 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 Bond Fund's Annual
Report to Shareholders for the fiscal year ended August 31, 1998, audited by
McGladrey & Pullen LLP, and Semi-Annual Report to Shareholders for the six month
period ended February 28, 1999, copies of which have been delivered to
Investment Trust, fairly present the financial position of Bond Fund as of such
dates and the results of its operations for the periods indicated in conformity
with generally accepted accounting principles applied on a consistent basis.
(e) Income Trust has the necessary power and authority to
conduct Bond Fund's business as such business is now being conducted.
(f) Income Trust is not a party to or obligated under any
provision of its Declaration of Trust, as amended, or 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 Income Trust's execution of or performance
under this Agreement and Plan.
(g) Income Trust has elected to treat Bond Fund as a RIC for
federal income tax purposes under Part I of Subchapter M of the Code, and Bond
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 INVESTMENT TRUST AND INCOME TRUST.
Investment Trust and Income Trust each represents and warrants to the
other that:
(a) The statement of assets and liabilities to be furnished by
it as of 1:00 p.m. Pacific time on the Closing Date for the purpose of
determining the number of Bond Fund Shares to be issued pursuant to Section 1 of
this Agreement and Plan will accurately reflect its Net Assets in the case of
Government Fund and its net assets in the case of Bond Fund, and outstanding
shares of beneficial interest, 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 "(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 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 Bond Fund, in the case of Income Trust, and Government Fund, in the
case of Investment Trust, to fail to conform to the requirements of Subchapter
M of the Code for federal income taxation as a RIC at the end of its fiscal
year.
(g) It has the necessary power and authority to conduct Bond
Fund's business, in the case of Income Trust, and Government Fund's business, in
the case of the Investment Trust, as such business is now being conducted.
7. COVENANTS OF INVESTMENT TRUST AND INCOME TRUST.
(a) Investment Trust, on behalf of Government Fund, and Income
Trust, on behalf of Bond Fund, each covenant to operate their respective
businesses as presently conducted between the date hereof and the Closing.
(b) Investment Trust undertakes that it will not acquire Bond
Fund Shares for the purpose of making distributions thereof to anyone other than
Government Fund's shareholders.
(c) Investment Trust undertakes that, if this Agreement and Plan
is consummated, it will dissolve Government Fund and rescind the establishment
of Government Fund as a series of Investment Trust.
(d) Investment Trust and Income Trust each agree that, by the
Closing, all of their federal and other tax returns and reports required by law
to be filed by Investment Trust, on behalf of Government Fund, or by Income
Trust, on behalf of Bond 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, Investment Trust will provide Income Trust
with a copy of the shareholder ledger accounts of Government Fund, certified by
its transfer agent or its President to the best of its or his knowledge and
belief, for all the shareholders of record of Government Fund's shares as of
1:00 p.m. Pacific time on the Closing Date who are to become shareholders of
Bond Fund as a result of the transfer of assets that is the subject of this
Agreement and Plan.
(f) Investment Trust agrees to mail to each shareholder of
record entitled to vote at the meeting of Government 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 Combined 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) Income Trust will file with the U.S. Securities and Exchange
Commission a registration statement on Form N-14 under the 1933 Act relating to
Bond 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 Government 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 INVESTMENT TRUST AND INCOME TRUST.
The obligations of Investment Trust and Income Trust 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, 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
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 Government 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 1:00 p.m. Pacific 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 Investment Trust and Income
Trust an opinion from Messrs. Stradley Ronon Stevens & Young, LLP, counsel to
Investment Trust and Income Trust, 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 Investment Trust and Income Trust
with regard to matters of fact:
(1) The acquisition by Bond Fund of substantially all
the assets of Government Fund as provided for herein in exchange for Bond Fund
Shares will qualify as a reorganization within the meaning of Section
368(a)(1)(C) of the Code, and Government Fund and Bond 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 Government
Fund upon the transfer of substantially all of its assets to Bond Fund in
exchange solely for voting shares of Bond 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 Bond Fund
upon the receipt of substantially all of the assets of Government Fund in
exchange solely for voting shares of Bond Fund (Code Section 1032(a));
(4) The basis of the assets of Government Fund received
by Bond Fund will be the same as the basis of such assets to Government Fund
immediately prior to the exchange (Code Section 362(b));
(5) The holding period of the assets of Government Fund
received by Bond Fund will include the period during which such assets were held
by Government Fund (Code Section 1223(2));
(6) No gain or loss will be recognized to the
shareholders of Government Fund upon the exchange of their shares in Government
Fund for voting shares of Bond Fund (Code Section 354(a));
(7) The basis of Bond Fund Shares received by
Government Fund's shareholders shall be the same as the basis of the shares of
Government Fund exchanged therefor (Code Section 358(a)(1));
(8) The holding period of Bond Fund Shares received by
Government Fund's shareholders (including fractional shares to which they may be
entitled) will include the holding period of Government Fund's shares
surrendered in exchange therefor, provided that Government Fund's shares were
held as a capital asset on the date of the exchange (Code Section 1223(1)); and
(9) Bond Fund will succeed to and take into account as
of the date of the proposed transfer the items of Government 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) That Income Trust shall have received an opinion in form and
substance satisfactory to it from Messrs. Stradley Ronon Stevens & Young, LLP,
counsel to Investment 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) Investment Trust was created as a business trust
under the laws of the State of Delaware on December 21, 1993, and is a validly
existing business trust and in good standing under the laws of that state;
(2) Investment Trust is authorized to issue an
unlimited number of shares of beneficial interest of Government Fund, par value
$0.01 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
Investment Trust, and that all other outstanding shares of Government Fund were
sold, issued and paid for in accordance with the terms of Government Fund's
prospectus in effect at the time of such sales, each such outstanding share is
fully paid, non-assessable, freely transferable and has full voting rights;
(3) Investment Trust is an open-end investment company
of the management type registered as such under the 1940 Act;
(4) Except as disclosed in Government Fund's currently
effective prospectus, such counsel does not know of any material suit, action,
or legal or administrative proceeding pending or threatened against Investment
Trust, the unfavorable outcome of which would materially and adversely affect
Investment Trust or Government Fund;
(5) All actions required to be taken by Investment
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 Investment Trust; and
(6) Neither the execution, delivery, nor performance of
this Agreement and Plan by Investment 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 Investment Trust is a party or by which
Investment Trust, on behalf of Government Fund, is otherwise bound; this
Agreement and Plan is the legal, valid and binding obligation of Investment
Trust and Government Fund and is enforceable against Investment Trust and/or
Government 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 Investment Trust with regard to
matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of Investment Trust.
(h) That Investment Trust shall have received an opinion in form
and substance satisfactory to it from Messrs. Stradley Ronon Stevens & Young,
LLP, counsel to Income 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) Income Trust was created as a business trust under
the laws of the Commonwealth of Massachusetts on June 16, 1986, and is a validly
existing business trust and in good standing under the laws of that
commonwealth;
(2) Income Trust is authorized to issue an unlimited
number of shares of beneficial interest of Bond Fund, par value $0.01 per share.
Assuming that the initial shares of beneficial interest of Bond Fund were issued
in accordance with the 1940 Act, and the Declaration of Trust, as amended, and
By-laws of Income Trust, and that all other outstanding shares of Bond Fund were
sold, issued and paid for in accordance with the terms of Bond Fund's prospectus
in effect at the time of such sales, each such outstanding share of Bond Fund is
fully paid, non-assessable, freely transferable and has full voting rights;
(3) Income Trust is an open-end investment company of
the management type registered as such under the 1940 Act;
(4) Except as disclosed in Bond Fund's currently
effective prospectus, such counsel does not know of any material suit, action,
or legal or administrative proceeding pending or threatened against Income
Trust, the unfavorable outcome of which would materially and adversely affect
Income Trust or Bond Fund;
(5) Bond 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 Income Trust;
(6) All actions required to be taken by Income 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 Income Trust;
(7) Neither the execution, delivery, nor performance of
this Agreement and Plan by Income Trust violates any provision of its
Declaration of Trust, as amended, or By-laws, or the provisions of any agreement
or other instrument known to such counsel to which Income Trust is a party or by
which Income Trust, on behalf of Bond Fund, is otherwise bound; this Agreement
and Plan is the legal, valid and binding obligation of Income Trust and is
enforceable against Income Trust and/or Bond Fund in accordance with its terms;
and
(8) The registration statement of Income Trust, of
which the prospectus, dated January 1, 1999, as amended March 23, 1999, of Bond
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 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 Income Trust with regard to
matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of Income Trust.
(i) That Investment Trust shall have received a certificate from
the President and Secretary of Income Trust to the effect that the statements
contained in Bond 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 Income Trust's Registration Statement with respect to
Bond Fund Shares to be delivered to Government 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 Bond Fund Shares to be delivered hereunder shall be
eligible for sale by Income Trust with each state commission or agency with
which such eligibility is required in order to permit Bond Fund Shares lawfully
to be delivered to each Government Fund shareholder.
(l) That, at the Closing, Investment Trust, on behalf of
Government Fund, transfers to Income Trust aggregate Net Assets of Government
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
Government Fund on the Closing Date.
9. BROKERAGE FEES AND EXPENSES.
(a) Investment Trust and Income Trust 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 Government
Fund, one-quarter by Bond Fund, and one-half 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 Government Fund) prior to the Closing or the
Closing may be postponed as follows:
(1) by mutual consent of Investment Trust and Income Trust;
(2) by Income Trust if any condition of its obligations set
forth in Section 8 has not been fulfilled or waived; or
(3) by Investment Trust if any condition of its obligations
set forth in Section 8 has not been fulfilled or waived.
An election by Investment Trust, on behalf of Government Fund, or
Income Trust, on behalf of Bond Fund, to terminate this Agreement and Plan and
to abandon the Plan of Reorganization shall be exercised, respectively, by the
Board of Trustees of Investment Trust or Income Trust.
(b) If the transactions contemplated by this Agreement and Plan
have not been consummated by January 31, 2000, the Agreement and Plan shall
automatically terminate on that date, unless a later date is agreed to by both
Income Trust and Investment Trust.
(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 Investment Trust nor Income Trust, nor their
trustees, 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, if, in
the judgment of such Board of Trustees, 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 Investment Trust nor Income Trust, nor any of their
officers, trustees, 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, agent or shareholder of Investment Trust or
Income Trust against any liability to the entity for which that officer,
trustee, agent or shareholder so acts or to its shareholders to which that
officer, trustee, 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 Investment Trust or Income Trust 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 Government Fund,
unless such terms and conditions shall result in a change in the method of
computing the number of Bond Fund Shares to be issued to Government Fund in
which event, unless such terms and conditions shall have been included in the
proxy solicitation material furnished to the shareholders of Government 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 Government 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 Income Trust at 500 East Broward Boulevard, Fort Lauderdale, FL
33394-3091, Attention: Secretary, or Templeton Global Investment Trust, 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 Income Trust, on behalf of Templeton
Global Bond Fund, and Templeton Global Investment Trust, on behalf of Templeton
Americas Government Securities 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 INCOME TRUST, ON
BEHALF OF TEMPLETON GLOBAL
BOND FUND
Attest:/s/BARBARA J. GREEN By:/s/DEBORAH R. GATZEK
-------------------- -------------------------
Barbara J. Green Deborah R. Gatzek
Secretary Vice President
TEMPLETON GLOBAL INVESTMENT TRUST,
ON BEHALF OF TEMPLETON
AMERICAS GOVERNMENT SECURITIES FUND
Attest:/s/BARBARA J. GREEN By: /s/DEBORAH R. GATZEK
------------------- -------------------------
Barbara J. Green Deborah R. Gatzek
Secretary Vice President
STRADLEY RONON STEVENS & YOUNG, LLP
2600 ONE COMMERCE SQUARE
PHILADELPHIA, PA 19103-7098
TELEPHONE (215) 564-8000
FAX (215) 564-8120
October 21, 1999
Board of Trustees
Templeton Income Trust
500 East Broward Boulevard
Fort Lauderdale, Florida 33394
Board of Trustees
Templeton Global Investment Trust
500 East Broward Boulevard
Fort Lauderdale, Florida 33394
Re: AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF
THE 2ND DAY OF AUGUST, 1999 (THE "AGREEMENT"), BY AND BETWEEN
TEMPLETON GLOBAL INVESTMENT TRUST, A DELAWARE BUSINESS TRUST
("INVESTMENT TRUST"), ON BEHALF OF ITS SERIES, TEMPLETON
AMERICAS GOVERNMENT SECURITIES FUND ("ACQUIRED FUND") AND
TEMPLETON INCOME TRUST, A MASSACHUSETTS BUSINESS TRUST
("INCOME TRUST"), ON BEHALF OF ITS SERIES, TEMPLETON GLOBAL
BOND FUND ("ACQUIRING 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 $0.01, of the Acquiring Fund - Class A ("Acquiring Fund
Shares"), (ii) the distribution of Acquiring Fund Shares to the shareholders 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 2nd day of August,
1999, by and between the Investment Trust and the Income Trust (the
"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 the 1st day of October, 1999, (c) certain representations concerning the
Reorganization made to us by the Investment Trust and the Income Trust in a
letter dated October 21, 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 State of Delaware and
the Commonwealth of Massachusetts, 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 the 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
