SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section.240-14a-11(c) or Section.240-
14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Franklin Managed Trust
(Name of Registrant as Specified In Its Charter)
Franklin Managed Trust
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary material.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[LOGO](R)
FRANKLIN(R)TEMPLETON(R)
FRANKLIN MANAGED TRUST
IMPORTANT SHAREHOLDER INFORMATION
These materials request your input on several important matters that will
affect your Fund. They are for a special shareholders' meeting scheduled for
October 26, 1999 at 10:00 a.m. Pacific time. They discuss the proposals to be
voted on at the meeting, and contain your proxy statement and proxy card. A
proxy card is, in essence, a ballot. When you vote your proxy, it tells us
how you wish to vote on important issues relating to your Fund. If you
complete and sign the proxy, we'll vote it exactly as you tell us. If you
simply sign the proxy, we'll vote it in accordance with the Trustees'
recommendations on pages 1 and 2 of the proxy statement.
WE URGE YOU TO SPEND A FEW MINUTES REVIEWING THE PROPOSALS IN THE PROXY
STATEMENT. THEN, FILL OUT THE PROXY CARD AND RETURN IT TO US SO THAT WE KNOW
HOW YOU WOULD LIKE TO VOTE. WHEN SHAREHOLDERS RETURN THEIR PROXIES PROMPTLY,
THE FUND MAY BE ABLE TO SAVE MONEY BY NOT HAVING TO CONDUCT ADDITIONAL
MAILINGS.
WE WELCOME YOUR COMMENTS. IF YOU HAVE ANY QUESTIONS, CALL FUND INFORMATION AT
1-800/DIAL BEN(R) (1-800/342-5236).
TELEPHONE AND INTERNET VOTING
FOR YOUR CONVENIENCE, IF YOUR ACCOUNT IS ELIGIBLE, A CONTROL NUMBER AND
SEPARATE INSTRUCTIONS ARE ENCLOSED WHICH WILL ENABLE YOU TO VOTE BY TELEPHONE
OR THROUGH THE INTERNET, 24 HOURS A DAY.
This page intentionally left blank.
A LETTER FROM THE PRESIDENT
Dear Fellow Shareholders:
I am writing to request that you consider seven matters relating to your
investment in Franklin Rising Dividends Fund (the "Fund"), a series of
Franklin Managed Trust (the "Trust"). The Board of Trustees asks that you
cast your vote in favor of:
1. Electing a Board of Trustees;
2. Ratifying the appointment by the Trustees of Tait, Weller & Baker
as the independent auditors for the Trust for the fiscal year
ending September 30, 1999;
3. Modifying the Fund's current criteria for the selection of
portfolio companies related to the issuer's treatment of debt on
its balance sheet, which is fundamental;
4. Amending seven of the Fund's fundamental investment restrictions;
5. Eliminating five of the Fund's fundamental investment
restrictions;
6. Reorganizing the Trust from a Massachusetts business trust to a
Delaware business trust; and
7. Granting proxyholders the authority to vote upon any other
business that may properly come before the meeting or any
adjournments thereof.
We urge you to confirm the Board's recommendations by electing the nominated
Trustees and ratifying the selection of the independent auditors.
We have proposed a modification to the Fund's current criteria for the
selection of portfolio companies related to the issuer's treatment of debt on
its balance sheet. If approved, the change would expand the universe of high
quality companies that meet the rising dividends criteria. We have also
proposed amending or eliminating certain fundamental investment restrictions.
We believe that the recommended changes will provide additional investment
opportunities to the Fund, as further described in the attached proxy
statement. We urge you to approve these proposals which are designed to
benefit all shareholders by providing the Fund with greater flexibility in
pursuing its investment objectives. In addition, we have proposed that the
Trust be reorganized as a Delaware business trust because Delaware law
permits a less complicated structure and allows greater flexibility in a
mutual fund's business operations.
The proxy statement includes a question-and-answer format designed to provide
you with a simpler and more concise explanation of certain issues. Although
much of the information in the proxy statement is technical and required by
the various regulations that govern the Trust, we hope that this format will
be helpful to you.
Your vote is important to the Trust. On behalf of the Trustees, thank you in
advance for considering these issues and for promptly returning your proxy
card.
Sincerely,
William J. Lippman
President
This page intentionally left blank.
FRANKLIN MANAGED TRUST
NOTICE OF SPECIAL SHAREHOLDERS' MEETING
TO BE HELD ON OCTOBER 26, 1999
A Special Shareholders' Meeting (the "Meeting") of Franklin Rising Dividends
Fund (the "Fund"), a series of Franklin Managed Trust (the "Trust"), will be
held at the Trust's office at 777 Mariners Island Boulevard, San Mateo,
California 94404, at 10:00 a.m. (Pacific time), on October 26, 1999.
During the Meeting, shareholders of the Trust will vote on the following
proposals and sub-proposals:
1. To elect a Board of Trustees.
2. To ratify the selection of Tait, Weller & Baker as the Trust's
independent auditors for the Trust's fiscal year ending
September 30, 1999.
3. To modify the Fund's current criteria for the selection of
portfolio companies related to the issuer's treatment of debt on
its balance sheet, which is fundamental.
4. To approve amendments to certain of the Fund's fundamental
investment restrictions (includes seven (7) Sub-Proposals).
(a) To amend the Fund's fundamental investment restriction
regarding borrowing;
(b) To amend the Fund's fundamental investment restriction
regarding underwriting;
(c) To amend the Fund's fundamental investment restriction
regarding lending;
(d) To amend the Fund's fundamental investment restrictions
regarding investments in real estate and commodities;
(e) To amend the Fund's fundamental investment restriction
regarding issuing senior securities;
(f) To amend the Fund's fundamental investment restriction
regarding industry concentration; and
(g) To amend the Fund's fundamental investment restriction
regarding diversification of investments.
5. To approve the elimination of certain of the Fund's fundamental
investment restrictions.
6. To approve the reorganization of the Trust from a Massachusetts
business trust to a Delaware business trust.
7. To grant the proxyholders the authority to vote upon any other
business that may properly come before the Meeting or any
adjournments thereof.
The Board of Trustees has fixed August 30, 1999 as the record date for
determination of shareholders entitled to vote at the Meeting.
Please note that a separate vote is required for each Proposal or
Sub-Proposal.
By Order of the Board of Trustees,
Deborah R. Gatzek
Secretary
San Mateo, California
September 13, 1999
- ------------------------------------------------------------------------------
PLEASE SIGN AND RETURN YOUR PROXY CARD IN THE SELF-ADDRESSED ENVELOPE
REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
PROXY STATEMENT
Questions and Answers ..................................................... 1
Proposal 1: To Elect a Board of Trustees ............................... 3
Proposal 2: To Ratify the Selection of Tait, Weller & Baker
as the Trust's Independent Auditors for the Trust's fiscal
year ending September 30, 1999 ............................. 6
Proposal 3: To Modify the Fund's Current Criteria for the
Selection of Portfolio Companies Related to the
Issuer's Treatment of Debt on its Balance Sheet,
which is Fundamental........................................ 7
Introduction to Proposals 4 and 5 ......................................... 9
Proposal 4: To Approve Amendments to Certain of the Fund's Fundamental
Investment Restrictions (Includes
Seven Sub-Proposals) ....................................... 10
4a: Borrowing .............................................. 10
4b: Underwriting ........................................... 11
4c: Lending ................................................ 12
4d: Real Estate and Commodities ............................ 13
4e: Issuing Senior Securities .............................. 15
4f: Industry Concentration ................................. 16
4g: Diversification of Investments ......................... 17
Proposal 5: To Approve the Elimination of Certain of the
Fund's Fundamental Investment Restrictions ................. 18
Proposal 6: To Approve the Reorganization of the Trust
From a Massachusetts Business Trust to a
Delaware Business Trust .................................... 20
Proposal 7: Other Business ............................................. 24
EXHIBITS
Exhibit A: Current Fundamental Investment Restrictions
Proposed to be Eliminated .................................. A-1
Exhibit B: Form of Agreement and Plan of Reorganization ............... B-1
Exhibit C: Comparison and Significant Differences Between
Delaware Business Trusts and Massachusetts
Business Trusts ............................................ C-1
This page intentionally left blank.
FRANKLIN MANAGED TRUST
PROXY STATEMENT
QUESTIONS AND ANSWERS
o INFORMATION ABOUT VOTING
WHO IS ASKING FOR MY VOTE?
The Trustees of Franklin Managed Trust (the "Trust") in connection with
the Special Shareholders' Meeting of Franklin Rising Dividends Fund (the
"Fund"), a series of the Trust to be held October 26, 1999 (the
"Meeting"), have requested your vote on several matters.
WHO IS ELIGIBLE TO VOTE?
Shareholders of record at the close of business on August 30, 1999 are
entitled to vote at the Meeting or any adjourned meeting. Each share of
record is entitled to one vote on each matter presented at the Meeting.
The Notice of Meeting, the proxy card, and the proxy statement were mailed
to shareholders of record on or about September 13, 1999.
ON WHAT ISSUES AM I BEING ASKED TO VOTE?
You are being asked to vote on the following proposals:
1. To elect a Board of Trustees;
2. To ratify the selection of Tait, Weller & Baker as the Trust's
independent auditors for the Trust's fiscal year ending September 30,
1999;
3. To modify the Fund's criteria for the selection of portfolio companies
related to the issuer's treatment of debt on its balance sheet, which
is fundamental;
4. To amend certain of the Fund's fundamental investment restrictions;
5. To eliminate certain of the Fund's fundamental investment restrictions;
6. To approve the reorganization of the Trust from a Massachusetts
business trust to a Delaware business trust; and
7. To grant the proxyholders authority to vote upon any other business
that may properly come before the Meeting or any adjournments thereof.
HOW DO THE TRUSTEES RECOMMEND THAT I VOTE?
The Trustees unanimously recommend that you vote:
1. FOR the election of all nominees as Trustees;
2. FOR the ratification of the selection of Tait, Weller & Baker as the
Trust's independent auditors for the Trust's fiscal year ending
September 30, 1999;
3. FOR the modification of the Fund's current criteria for the selection
of portfolio companies related to the issuer's treatment of debt on its
balance sheet, which is fundamental;
4. FOR the amendment of each of the Fund's fundamental investment
restrictions proposed to be amended;
5. FOR the elimination of each of the Fund's fundamental investment
restrictions proposed to be eliminated;
6. FOR the reorganization of the Trust from a Massachusetts business trust
to a Delaware business trust; and
7. FOR the proxyholders to have discretion to vote on any other business
that may properly come before the Meeting or any adjournments thereof.
HOW DO I ENSURE THAT MY VOTE IS ACCURATELY RECORDED?
o You can vote in any one of these ways:
o By mail, with the enclosed proxy card.
o In person at the Meeting.
o Through Shareholder Communications Corporation ("SCC"), a proxy
solicitor, by calling 1-800/813-1651.
If you are eligible to vote through the internet, a control number and
separate instructions are enclosed.
Proxy cards that are properly signed, dated and received at or prior to
the Meeting will be voted as specified. If you specify a vote for any of
the Proposals 1 through 6, your proxy will be voted as you indicated. If
you simply sign and date the proxy card, but don't specify a vote for any
of the Proposals 1 through 6, your shares will be voted IN FAVOR of the
nominees for the Board of Trustees (Proposal 1), IN FAVOR of ratifying the
selection of Tait, Weller & Baker as independent auditors (Proposal 2), IN
FAVOR of modifying the Fund's current criteria for the selection of
portfolio companies related to the issuer's treatment of debt on its
balance sheet, which is fundamental (Proposal 3), IN FAVOR of amending
certain of the Fund's fundamental investment restrictions (Sub-Proposals
4a-4g), IN FAVOR of eliminating certain of the Fund's fundamental
investment restrictions, (Proposal 5), IN FAVOR of the reorganization of
the Trust from a Massachusetts business trust to a Delaware business trust
(Proposal 6), and IN ACCORDANCE with the discretion of the persons named
in the proxy card as to any other matters that properly may come before
the Meeting (Proposal 7).
CAN I REVOKE MY PROXY?
You may revoke your proxy at any time before it is voted by forwarding a
written revocation or later-dated proxy card to the Fund that is received
at or prior to the Meeting, or attending the Meeting and voting in person.
THE PROPOSALS
PROPOSAL 1: TO ELECT A BOARD OF TRUSTEES
WHO ARE THE NOMINEES FOR THE BOARD OF TRUSTEES?
The Board of Trustees consists of four (4) persons. The role of the
Trustees is to provide general oversight of the Trust's business, and to
ensure that the Trust is operated for the benefit of shareholders. The
Trustees meet quarterly and review the Trust's performance. The Trustees
also oversee the services provided to the Trust by the investment advisor
and the Trust's other service providers.
The nominees for election to the Board of Trustees are: Frank T. Crohn,
William J. Lippman, Charles Rubens II, and Leonard Rubin (collectively,
the "Nominees") who presently comprise the entire Board. All of the
Trustees are directors and/or trustees of other investment companies in
the Franklin Group of Funds(R) or the Templeton Group of Funds
(collectively, the "Franklin Templeton Group of Funds"). In addition, Mr.
Lippman is a senior officer of Franklin Resources, Inc. ("Resources") and
its affiliates. Resources is a publicly owned holding company. The
principal shareholders are Charles B. Johnson and Rupert H. Johnson, Jr.,
who own approximately 19% and 15%, respectively, of Resources' outstanding
shares. Resources, through its various subsidiaries, is primarily engaged
in providing investment management, share distribution, transfer agent and
administrative services to a family of investment companies. Resources is
a New York Stock Exchange, Inc. ("NYSE") listed holding company (NYSE:
BEN).
Each nominee is currently eligible and has consented to serve if elected.
If elected, the Trustees will hold office without limit in time until
death, resignation, retirement or removal, or until the next meeting of
shareholders to elect Trustees, and the election and qualification of
their successors. Election of a Trustee is by a plurality vote, which
means that the four individuals receiving the greatest number of votes at
the Meeting will be deemed to be elected. If any of the nominees should
become unavailable, the persons named in the proxy will vote in their
discretion for another person or other persons who may be nominated as
Trustees.
Listed below for each Nominee, is a brief description of his recent
professional experience and ownership of shares of the Trust and shares of
all of the investment companies in the Franklin Templeton Group of Funds.
SHARES
TRUST BENEFICIALLY OWNED
SHARES OWNED IN THE FRANKLIN
BENEFICIALLY TEMPLETON GROUP OF
AND % OF TOTAL FUNDS (INCLUDING
NAME AND PRINCIPAL OCCUPATION OUTSTANDING ON THE TRUST) AS OF
DURING PAST FIVE YEARS AND AGE JULY 30, 1999 JULY 30, 1999
- --------------------------------------------------------------------------------
Frank T. Crohn (75) 4,223** 17,766
TRUSTEE SINCE 1986
Chairman, Eastport Lobster & Fish Company; Director, Unity Mutual Life
Insurance Company; trustee of two of the investment companies in the
Franklin Templeton Group of Funds; and formerly, Chairman, Financial
Benefit Life Insurance Company (until 1996) and Director, AmVestors
Financial Corporation (until 1997).
SHARES
TRUST BENEFICIALLY OWNED
SHARES OWNED IN THE FRANKLIN
BENEFICIALLY TEMPLETON GROUP OF
AND % OF TOTAL FUNDS (INCLUDING
NAME AND PRINCIPAL OCCUPATION OUTSTANDING ON THE TRUST) AS OF
DURING PAST FIVE YEARS AND AGE JULY 30, 1999 JULY 30, 1999
- --------------------------------------------------------------------------------
William J. Lippman* (74) 23,219** 78,674
PRESIDENT SINCE 1986, CHIEF
EXECUTIVE OFFICER SINCE 1991
AND TRUSTEE SINCE 1986
Senior Vice President, Franklin Resources, Inc.
and Franklin Management, Inc.; President,
Franklin Advisory Services, LLC; and officer
and/or director or trustee, as the case may be,
of six
of the investment companies in the Franklin
Templeton Group
of Funds.
Charles Rubens II (69) 27,263** 121,003
TRUSTEE SINCE 1986
Private investor; and trustee or director, as
the case may be, of three of the investment
companies of the Franklin Templeton Group of
Funds.
Leonard Rubin (73) 7,762** 59,421
TRUSTEE SINCE 1986
Partner in LDR Equities, LLC (manages various
personal investments); Vice President, Trimtex
Co., Inc. (manufactures and markets specialty
fabrics); director or trustee, as the case may
be, of three of the investment companies in the
Franklin Templeton Group of Funds; and
formerly, Chairman of the Board, Carolace
Embroidery Co., Inc. (until 1996) and
President, F.N.C. Textiles, Inc.
- ------------------------------------------------------------------------------
*William J. Lippman is an "interested person" of the Trust as defined in
the Investment Company Act of 1940, as amended (the "1940 Act"). The 1940
Act limits the percentage of interested persons that can comprise a fund's
board of trustees. Mr. Lippman is an interested person due to his
employment affiliation with Resources and with Franklin Advisory Services,
LLC, the Trust's investment adviser. The remaining Trustees
("noninterested Trustees") are not interested persons of the Trust.
**Less than 1% of the outstanding shares of the Fund.
HOW OFTEN DO THE TRUSTEES MEET AND WHAT ARE THEY PAID?
The Trustees anticipate meeting at least five times during the fiscal year
ended September 30, 1999 to review the operations of the Trust and Trust's
investment performance. The Trustees also oversee the investment
management services furnished to the Trust by Franklin Advisory Services,
LLC ("Advisory Services") and various other service providers. Advisory
Services is wholly owned by Resources. The Trust pays the noninterested
Trustees $1,800 per quarter plus $900 per meeting attended.
During the fiscal year ended September 30, 1998 there were five meetings
of the Board. Each of the Trustees attended at least 75% of the total
number of meetings of the Board.
Certain Trustees and executive officers ("Executive Officers") of the
Trust are shareholders of Resources and may be deemed to receive indirect
remuneration due to their participation in the management fees and other
fees received from the Franklin Templeton Group of Funds by Advisory
Services and its affiliates. Advisory Services or its affiliates pay the
salaries and expenses of the Executive Officers. No pension or retirement
benefits are accrued as part of Trust expenses.
The following table shows the fees paid to noninterested Trustees by the
Trust and by the Franklin Templeton Group of Funds.
NUMBER OF BOARDS
WITHIN THE FRANKLIN TOTAL FEES
TEMPLETON GROUP RECEIVED FROM
AGGREGATE OF FUNDS ON THE FRANKLIN
COMPENSATION WHICH TRUSTEE TEMPLETON GROUP
NAME OF TRUSTEE FROM THE TRUST* SERVES** OF FUNDS***
- --------------------------------------------------------------------------------
Frank T. Crohn $10,800 2 $20,400
Charles Rubens II $11,700 3 $50,400
Leonard Rubin $11,700 3 $84,900
- --------------------------------------------------------------------------------
*For the fiscal year ended September 30, 1998.
**We base the number of boards on the number of registered investment
companies in the Franklin Templeton Group of Funds. This number does not
include the total number of series or funds within each investment company
for which the Board members are responsible. The Franklin Templeton Group
of Funds currently includes 54 registered investment companies, with
approximately 161 U.S. based funds or series.
***For the calendar year ended December 31, 1998.
WHO ARE THE EXECUTIVE OFFICERS OF THE TRUST?
Officers of the Trust are appointed by the Trustees and serve at the
pleasure of the Board. Listed below, for each Executive Officer is a brief
description of his or her recent professional experience:
PRINCIPAL OCCUPATION DURING
- ------------------------------------------------------------------------------
NAME AND OFFICES WITH THE TRUST PAST FIVE YEARS AND AGE
Harmon E. Burns Executive Vice President and Director,
Vice President since 1991 Franklin Resources, Inc., Franklin
Templeton Distributors, Inc. and Franklin
Templeton Services, Inc.; Executive
Vice President, Franklin Advisers,
Inc.; Director, Franklin Investment
Advisory Services, Inc. and
Franklin/Templeton Investor Services,
Inc.; and officer and/or director or
trustee, as the case may be, of most of
the other subsidiaries of Franklin
Resources, Inc. and of 52 of the
investment companies in the Franklin
Templeton Group of Funds. Age 54.
Martin L. Flanagan Senior Vice President and Chief
Vice President and Chief Financial Officer, Franklin
Financial Officer since 1995 Resources, Inc., Franklin/Templeton
Investor Services, Inc. and Franklin
Mutual Advisers, LLC; Executive Vice
President, Chief Financial Officer
and Director, Templeton Worldwide,
Inc.; Executive Vice President, Chief
Operating Officer and Director,
Templeton Investment Counsel, Inc.;
Executive Vice President and Chief
Financial Officer, Franklin Advisers,
Inc.; Chief Financial Officer, Franklin
Advisory Services, LLC and Franklin
Investment Advisory Services, Inc.;
President and Director, Franklin
Templeton Services, Inc.; officer
and/or director of some of the other
subsidiaries of Franklin Resources,
Inc.; and officer and/or director or
trustee, as the case may be, of 52 of
the investment companies
in the Franklin Templeton Group of
Funds. Age 39.
Deborah R. Gatzek Senior Vice President and General
Vice President since 1992 Counsel, Franklin Resources,
and Secretary since 1991 Inc.; Senior Vice President, Franklin
Templeton Services, Inc. and Franklin
Templeton Distributors, Inc.; Executive
Vice President, Franklin Advisers,
Inc.; Vice President, Franklin Advisory
Services, LLC and Franklin Mutual
Advisers, LLC; Vice President, Chief
Legal Officer and Chief Operating
Officer, Franklin Investment Advisory
Services, Inc.; and officer of 53 of
the investment companies in the
Franklin Templeton Group of Funds. Age
50.
PRINCIPAL OCCUPATION DURING
NAME AND OFFICES WITH THE TRUST PAST FIVE YEARS AND AGE
- ------------------------------------------------------------------------------
Rupert H. Johnson Executive Vice President and Director,
Vice President since 1991 Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; President
and Director, Franklin Advisers, Inc.
and Franklin Investment Advisory
Services, Inc.; Senior Vice President,
Franklin Advisory Services, LLC;
Director, Franklin/Templeton Investor
Services, Inc.; and officer and/or
director or trustee, as the case may
be, of most of the other subsidiaries
of Franklin Resources, Inc. and of 52
of the investment companies in the
Franklin Templeton Group of Funds. Age
59.
William J. Lippman See Proposal 1, "Election of Trustees."
President since 1986 and Chief
Executive Officer since 1991
Diomedes Loo-Tam Senior Vice President, Franklin
Treasurer and Principal Templeton Services, Inc.; and
Accounting Officer since 1995 officer of 32 of the investment
companies in the Franklin
Templeton Group of Funds. Age 60.
Edward V. McVey Senior Vice President and National
Vice President since 1991 Sales Manager, Franklin Templeton
Distributors, Inc.; and officer of 28
of the investment companies in the
Franklin Templeton Group of Funds. Age 62.
R. Martin Wiskemann Senior Vice President, Portfolio
Vice President since 1991 Manager and Director, Franklin
Advisers, Inc.; Senior Vice President,
Franklin Management, Inc.; Vice President
and Director, ILA Financial Services,
Inc.; and officer and/or director or
trustee, as the case may be, of 15 of
the investment companies in the
Franklin Templeton Group of Funds. Age
72.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE PROPOSAL 1
PROPOSAL 2: TO RATIFY THE SELECTION OF TAIT, WELLER & BAKER
AS THE TRUST'S INDEPENDENT AUDITORS FOR THE
TRUST'S FISCAL YEAR ENDING SEPTEMBER 30, 1999
HOW ARE INDEPENDENT AUDITORS SELECTED?
The Board of Trustees reviews audit procedures and results, and considers
any matters arising from an audit with respect to the accounting of the
Fund, its internal accounting controls, and its operational procedures.
The Board also recommends the selection of independent auditors.
WHICH INDEPENDENT AUDITORS DID THE BOARD SELECT?
For the fiscal year ended September 30, 1999, the Board, including all of
the noninterested Trustees, selected as auditors the firm of Tait, Weller
& Baker, Eight Penn Center Plaza, Suite 800, Philadelphia, PA 19103. Tait,
Weller & Baker has served as the independent auditors for the Trust since
its inception in 1986. Tait, Weller & Baker has examined and reported on
the fiscal year-end financial statements, dated September 30, 1998, and
certain related U.S. Securities and Exchange Commission ("SEC") filings.
The auditors give an opinion on the financial statements in the Trust's
Annual Report to Shareholders. Tait, Weller & Baker has advised the Trust
that neither the firm nor any of its members have any material direct or
indirect financial interest in the Trust.
Representatives of Tait, Weller & Baker are not expected to be present at
the Meeting.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE PROPOSAL 2
PROPOSAL 3: TO MODIFY THE FUND'S CURRENT CRITERIA FOR THE SELECTION OF
PORTFOLIO COMPANIES RELATED TO THE ISSUER'S TREATMENT OF
DEBT ON ITS BALANCE SHEET,
WHICH IS FUNDAMENTAL
WHAT IS THE FUND'S CURRENT CRITERIA FOR THE SELECTION OF PORTFOLIO
COMPANIES RELATED TO THE ISSUER'S TREATMENT OF DEBT ON ITS BALANCE SHEET,
AND WHAT IS THE PROPOSED MODIFICATION?
The Fund invests primarily in equity securities of financially sound
companies that have paid consistently rising dividends. At least 65% of
the Fund's assets are invested in securities of companies that have:
i. consistently increased dividends, in at least eight out of the
last ten years, and have not decreased dividends in that time;
ii. substantially increased dividends (at least 100%) over the
past ten years;
iii. reinvested earnings, and paid out less than 65% of the current
earnings in dividends;
iv. strong balance sheets, with long-term debt representing no
more than 30% of total capitalization; and
v. attractive prices (i.e. prices in the lower half of the
stock's price/earnings ratio range for the last ten years, or
less than the current market price/earnings ratio of the
stocks in the S&P 500 Stock Index).
The above criteria comprise a "fundamental" policy of the Fund which means
that they cannot be changed without shareholder approval.
The proposed modification relates to the fourth criteria listed above.
This criteria selection will be referred to in this Proposal 3 as the
Fund's "Debt Test." The Fund's investment adviser, Advisory Services, has
recommended modifying this Debt Test to require that rising dividends
companies either have: (1) long-term debt that is no more than 50% of
total capitalization; or (2) senior debt that has been rated investment
grade by at least one of the major bond rating agencies.
WHY IS THE BOARD RECOMMENDING THIS MODIFICATION TO THE DEBT TEST?
By modifying the current Debt Test to require either that long-term debt
not exceed 50% of total capitalization, or that senior debt obtain an
investment grade rating, the Board, based on Advisory Services'
recommendation, believes that additional investment opportunities will be
available to the Fund through a greater range of high quality companies
that meet this proposed rising dividends criteria.
In recommending to the Board the change to the Debt Test, Advisory
Services explained that it has identified many attractive rising dividends
companies that have debt in excess of the current 30% limitation. Despite
their possibly higher levels of debt, many of these companies also have the
qualitative characteristics that the rising dividends criteria was designed
to identify. As market interest rates have fallen over the past decade, the
cost of servicing debt has declined. This means that companies can service
a higher level of debt with the same cash flow than they could
historically, when the interest rates were higher. In fact, Advisory
Services has found that companies that meet the Fund's other rising
dividends criteria have increasingly taken advantage of lower rates by
using more long-term debt in their capital structure. Therefore, many of
the companies with the qualitative characteristics that the Fund's five
criteria were originally designed to target carry a higher level of debt
than they may have in the past. Modifying the Debt Test would allow the
Fund to invest in such companies.
As an alternative to an analysis of the percentage of debt on the issuer's
balance sheet, Advisory Services has proposed an alternative prong to the
Debt Test, over and above a straight percentage analysis, which considers
the rating of the issuer's senior debt. Under this alternative test, an
issuer would qualify under the new Debt Test if its senior debt has been
rated investment grade by at least one of the major bond rating agencies.
Historically, the Fund did not consider whether a company's debt was
investment grade, but looked only to the total percentage of debt.
Typically, a wide range of factors is considered in the determination of a
company's debt rating. If the Fund modifies its Debt Test to include a
ratings-based test as an alternative criteria, it would be able to take
advantage of a greater pool of companies eligible to meet the full range
of rising dividends criteria. Advisory Services believes that, generally,
those companies that meet the full range of rising dividends criteria are
likely to have debt rated at least investment grade, if they have
long-term debt outstanding.
As modified, the Fund's Debt Test would include either one of those tests
described above. Under the first prong of the modified Debt Test, the Fund
would be permitted to invest in companies where debt is not rated
investment grade as long as the debt does not exceed 50% of total
capitalization. Under the second prong, the Fund may invest in companies
whose senior debt is rated investment grade, even if such debt exceeds 50%
of total capitalization.
WHAT ARE THE RISKS OF SUCH A MODIFICATION TO THE DEBT TEST?
The proposed modifications are not expected to change the day to day
management of the Fund as it pursues its investment goals. Based on
Advisory Services' recommendation, the Board does not anticipate that the
increase from 30% to 50% in long-term debt exposure will present any
significant degree of increased risk. In addition, none of the other four
rising dividends criteria will be changed, which should further limit the
degree of additional risk to which the Fund will be exposed. However,
since the proposed modification will permit the Fund to invest in
companies with a higher percentage of long-term debt, the Fund
theoretically could be exposed to a slightly higher risk that such
companies may not be able to meet their individual goals, and may default
on their debt. If companies in which the Fund invests default, the value
of the Fund's portfolio may decline.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE PROPOSAL 3
INTRODUCTION TO PROPOSALS 4 AND 5
WHY IS THE FUND AMENDING OR ELIMINATING CERTAIN OF ITS FUNDAMENTAL
INVESTMENT RESTRICTIONS IN FAVOR OF A STANDARDIZED LIST OF INVESTMENT
RESTRICTIONS?
The Fund is subject to certain investment restrictions which govern the
Fund's investment activities. Under the Investment Company Act of 1940, as
amended (the "1940 Act"), certain investment restrictions are required to
be "fundamental" which means that they can only be changed by a
shareholder vote. An investment company may designate additional
restrictions that are fundamental, and it may also adopt "non-fundamental"
restrictions, which may be changed by the Trustees without shareholder
approval.
After the Trust was formed in 1986, certain legal and regulatory
requirements applicable to mutual funds changed. For example, certain
restrictions imposed by state laws and regulations were preempted by the
National Securities Markets Improvement Act of 1996 ("NSMIA") and
therefore are no longer applicable to funds. As a result of NSMIA, the
Fund currently is subject to fundamental investment restrictions that are
either more restrictive than required under current law, or which are no
longer required at all. Accordingly, the Trustees recommend that the
Fund's shareholders approve the amendment or elimination of certain of the
Fund's current fundamental investment restrictions. This will result in
the Fund having a list of fundamental investment restrictions that are
standardized with those of the other funds in the Franklin Templeton Group
of Funds. The proposed standardized restrictions satisfy current federal
regulatory requirements and are written to provide flexibility to respond
to future legal, regulatory, market or technical changes.
By both standardizing and reducing the total number of investment
restrictions that can be changed only by a shareholder vote, the Trustees
believe that the Fund will be able to minimize the costs and delays
associated with holding future shareholder meetings to revise fundamental
policies that become outdated or inappropriate. The Trustees also believe
that the investment adviser's ability to manage the Fund's assets in a
changing investment environment will be enhanced, and that investment
management opportunities will be increased by these changes.
The proposed standardized changes will not affect the Fund's investment
objective. Although the proposed changes in fundamental investment
restrictions will provide the Fund greater flexibility to respond to
future investment opportunities, the Board does not anticipate that the
changes, individually or in the aggregate, will result in a material
change in the level of investment risk associated with investment in the
Fund. The Board does not anticipate that the proposed changes will
materially affect the manner in which the Fund is managed.
The recommended changes are specified below. Shareholders are requested to
vote on each Sub-Proposal in Proposal 4 separately.
PROPOSAL 4: TO APPROVE AMENDMENTS TO CERTAIN OF THE
FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
(this Proposal involves separate votes on Sub-Proposals
4a - 4g)
SUB-PROPOSAL 4A: TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING BORROWING.
The 1940 Act requires investment companies to impose certain limitations
on borrowing activities. The limitations on borrowing are generally
designed to protect shareholders and their investment by restricting a
fund's ability to subject its assets to the claims of creditors who might
have a claim to the fund's assets that would take precedence over the
claims of shareholders. A fund's borrowing restriction must be fundamental.
Under the 1940 Act, a fund may borrow from banks up to one-third of its
total assets (including the amount borrowed). In addition, a fund may
borrow up to 5% of its total assets for temporary purposes from any
person. Funds typically borrow money to meet redemptions in order to avoid
forced, unplanned sales of portfolio securities. This technique allows a
fund greater flexibility
to buy and sell portfolio securities for investment or tax considerations,
rather than for cash
flow considerations.
WHAT IS THE FUND'S CURRENT BORROWING RESTRICTION?
The Fund's current borrowing restriction states that the Fund may not:
(a) Borrow money, except temporarily for extraordinary or emergency
purposes from a bank and then not in excess of 15% of its total
assets (at the lower of cost or fair market value) or (b) mortgage,
pledge or hypothecate any of its assets except in connection with
any such borrowings. Any such borrowing will be made only if
immediately thereafter there is an asset coverage of at least 300%
of all borrowings, and no additional investments may be made while
any such borrowings are in excess of 5% of total assets.
WHAT EFFECT WILL STANDARDIZATION OF THE CURRENT BORROWING RESTRICTION HAVE
ON THE FUND?
The Fund is presently limited to borrowing up to 15% of assets, rather
than the 331/3% allowed under current law. The proposed restriction would
increase this borrowing limit to the legally permissible limit of 331/3%.
In addition, the 1940 Act limits on borrowing historically were
interpreted to prohibit mutual funds from making additional investments
while borrowings exceeded 5% of total assets. However, such a 5% limit is
not required under the 1940 Act and originated from informal regulatory
positions. Accordingly, under the proposed restriction, the Fund would be
permitted to make additional investments, even if borrowings exceed 5% of
total assets. Such additional investments made while borrowings exceed 5%
of total assets could be considered leveraging. The Fund has no present
intention of engaging in leveraging transactions in this regard.
The proposed restriction also permits the Fund to borrow cash from
affiliated investment companies. The Fund, together with other funds in
the Franklin Templeton Group of Funds, has requested an exemptive order
from the SEC that would permit the Fund to borrow money from affiliated
Franklin and Templeton funds. If this order is approved, the new
restriction would permit the Fund, under certain circumstances, to borrow
money from other Franklin and Templeton funds at rates which are more
favorable than those which the Fund would receive if it borrowed from
banks or other lenders.
The Fund is not required to have a fundamental restriction relating to
mortgaging, pledging or hypothecating Fund assets. Accordingly, the direct
references to these concepts have been removed from the Fund's proposed
borrowing restriction. However, these, and other similar types of
investment activities do raise concerns regarding whether a fund is
issuing senior securities as defined in the 1940 Act. For this reason,
these types of investment activities are encompassed in the proposed
restriction relating to senior securities (see Sub-Proposal 4e).
Finally, the new restriction would help the Fund achieve the goal of
standardizing the language of the investment restrictions among the
Franklin Templeton Group of Funds. Standardization is expected to enable
all Franklin and Templeton funds to operate more efficiently and to more
easily monitor compliance with investment restrictions.
Since the proposed borrowing restriction would provide the Fund with
greater borrowing flexibility, the Fund may be subject to additional
costs, as well as the risks inherent to borrowing, such as reduced total
return.
WHAT IS THE FUND'S PROPOSED BORROWING RESTRICTION?
If approved by shareholders, the borrowing restriction will be revised to
state that the Fund
may not:
BORROW MONEY, EXCEPT THAT THE FUND MAY BORROW MONEY FROM BANKS OR
AFFILIATED INVESTMENT COMPANIES TO THE EXTENT PERMITTED BY THE 1940
ACT, OR ANY EXEMPTIONS THEREFROM WHICH MAY BE GRANTED BY THE SEC, OR
FOR TEMPORARY OR EMERGENCY PURPOSES AND THEN IN AN AMOUNT NOT
EXCEEDING 331/3% OF THE VALUE OF THE FUND'S TOTAL ASSETS (INCLUDING
THE AMOUNT BORROWED).
SUB-PROPOSAL 4B: TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING UNDERWRITING.
Under the 1940 Act, the Fund's policy concerning underwriting is required
to be fundamental. Under the federal securities laws, a person or company
generally is considered an underwriter if it participates in the public
distribution of securities of other issuers, usually by purchasing the
securities from the issuer with the intention of re-selling the securities
to the public. From time to time, a mutual fund may purchase a security for
investment purposes which it later sells or redistributes to institutional
investors or others under circumstances where the Fund could possibly be
considered to be an underwriter under the technical definition of
underwriter contained in the securities laws. For example, funds often
purchase securities in private securities transactions where a resale could
raise a question relating to whether or not the fund is technically acting
as an underwriter. However, recent SEC interpretations clarify that re-sales
of privately placed securities by institutional investors do not make the
institutional investor an underwriter in these circumstances. The proposed
restriction encompasses these SEC positions.
WHAT IS THE FUND'S CURRENT UNDERWRITING RESTRICTION?
The Fund's current restriction states that the Fund may not "underwrite
securities."
WHAT EFFECT WILL STANDARDIZATION OF THE CURRENT UNDERWRITING RESTRICTION
HAVE ON THE FUND?
The proposed restriction is substantially similar to the current
restriction. However, the proposed underwriting restriction clarifies that
the Fund may sell its own shares without being deemed an underwriter.
Under the 1940 Act, a mutual fund will not be considered an underwriter if
it sells its own shares pursuant to a written distribution plan that
complies with Rule 12b-1 of the 1940 Act.
The proposed restriction also specifically permits the Fund to resell
restricted securities in those instances where there may be a question as
to whether the Fund is technically acting as an underwriter. Furthermore,
the new restriction would help the Fund achieve the goal of standardizing
the language of the investment restrictions among the Franklin Templeton
Group of Funds. It is not anticipated that adoption of the proposed
restriction would involve any additional risk as the proposed restriction
would not affect the way the Fund is currently managed.
WHAT IS THE FUND'S PROPOSED UNDERWRITING RESTRICTION?
If approved by shareholders, the Fund's underwriting restriction will be
revised to state that the Fund may not:
ACT AS AN UNDERWRITER EXCEPT TO THE EXTENT THE FUND MAY BE DEEMED TO
BE AN UNDERWRITER WHEN DISPOSING OF SECURITIES IT OWNS OR WHEN
SELLING ITS OWN SHARES.
SUB-PROPOSAL 4C: TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING LENDING.
Under the 1940 Act, a fund's policy regarding lending must be fundamental.
Certain investment techniques could, under certain circumstances, be
considered to be loans. For example, if the Fund invests in debt
securities, such investments might be considered to be a loan from the
Fund to the issuer of the debt securities. In order to ensure that the
Fund may invest in certain debt securities or repurchase agreements, which
could technically be characterized as the making of loans, the Fund's
current fundamental restriction specifically carves out such policies from
its prohibitions. In addition, the Fund's fundamental policy explicitly
permits the Fund to lend its portfolio securities. Securities lending is a
practice that has become common in the mutual fund industry and involves
the temporary loan of portfolio securities to parties who use the
securities for the settlement of securities transactions. The collateral
delivered to the Fund in connection with such a transaction is then
invested to provide the Fund with additional income it might not otherwise
have. Securities lending involves certain risks if the borrower fails to
return the securities.
WHAT IS THE FUND'S CURRENT LENDING RESTRICTION?
The Fund's lending restriction currently states that the Fund may not:
Make loans to others, except (a) through the purchase of debt
securities in accordance with its investment objectives and
policies, (b) through the lending of its portfolio securities as
described above and in its prospectus, or (c) to the extent the
entry into a repurchase agreement is deemed to be a loan.
WHAT EFFECT WILL STANDARDIZATION OF THE CURRENT LENDING RESTRICTION HAVE
ON THE FUND?
The proposed restriction would provide the Fund with greater lending
flexibility. While the proposed restriction retains the carve-outs in the
existing restriction, it also would permit the Fund to invest in loan
participations and direct corporate loans which recently have become more
common as investments for investment companies. The proposed restriction
also would provide the Fund additional flexibility to make loans to
affiliated investment companies to the extent permitted by exemptions
granted by the SEC. For example, the Franklin Templeton Group of Funds,
including the Fund, has requested an exemptive order from the SEC (the
"Lending Order") that will permit the Fund to lend cash to other Franklin
and Templeton funds. If the Lending Order is approved, the new restriction
would permit the Fund, under certain conditions, to lend cash to other
Franklin or Templeton funds at rates higher than those which the Fund
would receive if the Fund loaned cash to banks through short-term lendings
such as repurchase agreements. The Board anticipates that this additional
flexibility to lend cash to affiliated investment companies would provide
additional investment opportunities, and would enhance the Fund's ability
to respond to changes in market, industry or regulatory conditions.
In addition, the proposed restriction would help the Fund achieve the goal
of standardizing the language of the investment restrictions among the
Franklin Templeton Group of Funds. It is not anticipated that adoption of
the proposed restriction would involve any additional risk as the proposed
restriction would not affect the way the Fund is currently managed.
WHAT IS THE FUND'S PROPOSED LENDING RESTRICTION?
If approved by shareholders, the Fund's underwriting restriction will be
revised to state that the Fund may not:
MAKE LOANS TO OTHER PERSONS EXCEPT (A) THROUGH THE LENDING OF ITS
PORTFOLIO SECURITIES, (B) THROUGH THE PURCHASE OF DEBT SECURITIES,
LOAN PARTICIPATIONS AND/OR ENGAGING IN DIRECT CORPORATE LOANS IN
ACCORDANCE WITH ITS INVESTMENT OBJECTIVES AND POLICIES, AND (C) TO
THE EXTENT THE ENTRY INTO A REPURCHASE AGREEMENT IS DEEMED TO BE A
LOAN. THE FUND MAY ALSO MAKE LOANS TO AFFILIATED INVESTMENT
COMPANIES TO THE EXTENT PERMITTED BY THE 1940 ACT OR ANY EXEMPTIONS
THEREFROM WHICH MAY BE GRANTED BY THE SEC.
SUB-PROPOSAL 4D: TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
REGARDING INVESTMENTS IN REAL ESTATE AND COMMODITIES.
Under the 1940 Act, a fund's restrictions regarding investments in real
estate and commodities must be fundamental. The Fund presently has two
separate investment restrictions that govern the Fund's ability to invest
in real estate and commodities. The proposed standardized restriction
would combine these two restrictions into one, as well as clarify the
types of financial commodities and other instruments in which the Fund may
invest.
WHAT IS THE FUND'S CURRENT RESTRICTION REGARDING INVESTMENTS IN REAL
ESTATE?
The Fund's current restriction states that the Fund may not: "Buy or sell
interests in...real estate."
WHAT IS THE FUND'S CURRENT RESTRICTION REGARDING INVESTMENTS IN
COMMODITIES?
The Fund's current restriction states that the Fund may not: "Purchase or
sell commodities or commodity contracts or invest in put, call, straddle
or spread options."
WHAT EFFECT WILL STANDARDIZATION OF THE REAL ESTATE AND COMMODITIES
RESTRICTIONS HAVE ON THE FUND?
The proposed restriction will combine the limitations on investing in both
real estate and commodities into one restriction.
REAL ESTATE: The proposed investment restriction is designed to
standardize the language of the real estate restriction among the Franklin
Templeton Group of Funds. The proposed restriction also would permit the
Fund to purchase securities of real estate investment trusts ("REITS") to
the extent that an investment in REITS would otherwise meet the Fund's
investment criteria. Investing in REITS has gained in popularity since the
early 1990s, and the number of REITS available for investment also has
increased dramatically. The current restriction could be interpreted as
prohibiting the Fund from purchasing REITs since REITs might be considered
"interests" in real estate. Under the proposed restriction, the Fund will
continue to be prohibited from directly purchasing or selling real estate.
However, it is not anticipated that the proposed restriction will involve
any additional risk to the Fund as the Fund does not currently, and has
not in the past, invested in real estate or REITS.
COMMODITIES: The proposed investment restriction is designed to
standardize the language of the commodities restriction among the Franklin
Templeton Group of Funds. Generally, commodities are considered to be
physical commodities such as wheat, cotton, rice and corn. However,
futures contracts, including financial futures contracts such as those
related to currencies, stock indices or interest rates, are also
considered to be commodities. Funds typically invest in such contracts and
options on contracts for hedging or other investment purposes. The
proposed restriction clarifies that the Fund has the flexibility to invest
in financial futures contracts and related options. The proposed
restriction would permit investment in financial futures instruments for
either investment or hedging purposes. Although the Fund has always had
the ability to invest in options on securities and options on futures, it
has not done so. The Fund does not intend to begin investing in financial
futures contracts and related options. Therefore, it is not anticipated
that the proposed restriction would involve any additional risk. Using
financial futures instruments can involve substantial risks, and will be
utilized only if the investment manager believes such risks are advisable.
WHAT IS THE FUND'S PROPOSED REAL ESTATE AND COMMODITIES RESTRICTION?
If approved by shareholders, the Fund's restriction will be revised to
state that the Fund may not:
PURCHASE OR SELL REAL ESTATE AND COMMODITIES, EXCEPT THAT THE FUND
MAY PURCHASE OR SELL SECURITIES OF REAL ESTATE INVESTMENT TRUSTS,
MAY PURCHASE OR SELL CURRENCIES, MAY ENTER INTO FUTURES CONTRACTS ON
SECURITIES, CURRENCIES, AND OTHER INDICES OR ANY OTHER FINANCIAL
INSTRUMENTS, AND MAY PURCHASE AND SELL OPTIONS ON SUCH FUTURES
CONTRACTS.
SUB-PROPOSAL 4E: TO AMEND THE FUND'S INVESTMENT RESTRICTION REGARDING
ISSUING SENIOR SECURITIES.
Under the 1940 Act, the Fund must have an investment policy describing its
ability to issue senior securities. A "senior security" is an obligation
of a fund with respect to its earnings or assets that takes precedence
over the claims of the fund's shareholders with respect to the same
earnings or assets. The 1940 Act generally prohibits an open-end fund from
issuing senior securities in order to limit the use of leverage. In
general, a fund uses leverage when it borrows money to enter into
securities transactions, or acquires an asset without being required to
make payment until a later time.
SEC staff interpretations allow a fund to engage in a number of types of
transactions which might otherwise be considered to create "senior
securities" or "leverage," so long as the fund meets certain collateral
requirements designed to protect shareholders. For example, some
transactions that may create senior security concerns include short sales,
certain options and futures transactions, reverse repurchase agreements
and securities transactions that obligate the fund to pay money at a
future date (such as when-issued, forward commitment or delayed delivery
transactions). When engaging in such transactions, a fund must mark on its
or its custodian bank's books, or set aside money or securities with its
custodian bank to meet the SEC staff's collateralization requirements.
This procedure effectively eliminates a fund's ability to engage in
leverage for these types of transactions.
WHAT IS THE FUND'S CURRENT RESTRICTION CONCERNING ISSUING SENIOR
SECURITIES?
The Fund's current restriction concerning issuing senior securities is
non-fundamental and states that the Fund may not:
Issue senior securities, as defined in the 1940 Act, except that
this restriction shall not be deemed to prohibit any fund from
(a) making any permitted borrowings, mortgages or pledges, or
(b) entering into repurchase transactions.
WHAT EFFECT WILL STANDARDIZATION OF THE RESTRICTION REGARDING ISSUING
SENIOR SECURITIES HAVE ON THE FUND?
The new restriction would permit the Fund to engage in forward contracts
and to make short sales as permitted under the 1940 Act, and any
exemptions available under the 1940 Act. The proposed restriction also
would permit the Fund to engage in permissible types of leveraging
transactions. Essentially, the proposed restriction clarifies the Fund's
ability to engage in those investment transactions (such as repurchase
transactions) which, while appearing to raise senior security concerns,
have been interpreted as not constituting the issuance of senior
securities under the federal securities laws.
Finally, the proposed investment restriction is designed to standardize
the language regarding issuing senior securities among the Franklin
Templeton Group of Funds. The Board does not anticipate that any
additional risk to the Fund will occur as a result of amending the current
restriction and making it fundamental because the Fund has no present
intention of changing its current investment policies or engaging in
transactions that may be interpreted as issuing senior securities.
WHAT IS THE FUND'S PROPOSED RESTRICTION REGARDING ISSUING SENIOR
SECURITIES?
If approved by shareholders, the Fund's senior securities restriction will
be a fundamental restriction, and will state that the Fund may not:
ISSUE SECURITIES SENIOR TO THE FUND'S PRESENTLY AUTHORIZED SHARES OF
BENEFICIAL INTEREST. EXCEPT THAT THIS RESTRICTION SHALL NOT BE
DEEMED TO PROHIBIT THE FUND FROM (A) MAKING ANY PERMITTED
BORROWINGS, LOANS, MORTGAGES OR PLEDGES, (B) ENTERING INTO OPTIONS,
FUTURES CONTRACTS, FORWARD CONTRACTS, REPURCHASE TRANSACTIONS, OR
REVERSE REPURCHASE TRANSACTIONS, OR (C) MAKING SHORT SALES OF
SECURITIES TO THE EXTENT PERMITTED BY THE 1940 ACT AND ANY RULE OR
ORDER THEREUNDER, OR SEC STAFF INTERPRETATIONS THEREOF.
SUB-PROPOSAL 4F: TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING CONCENTRATION OF THE FUND'S INVESTMENTS IN
THE SAME INDUSTRY.
Under the 1940 Act, a fund's policy of concentrating its investments in
securities of companies in the same industry must be fundamental. Under
the federal securities laws, a mutual fund "concentrates" its investments
if it invests more than 25% of its "net" assets (exclusive of certain
items such as cash, U.S. government securities, securities of other
investment companies, and tax-exempt securities) in a particular industry
or group of industries. A fund is not permitted to concentrate its
investments in a particular industry unless it so states.
WHAT IS THE FUND'S CURRENT RESTRICTION REGARDING INDUSTRY CONCENTRATION?
The Fund's current restriction regarding concentration states that the
Fund may not:
Invest more than 25% of the market value of its assets in the
securities of companies engaged in any one industry. (Does not apply
to investment in the securities of the U.S. government, its agencies
or instrumentalities.)
WHAT EFFECT WILL STANDARDIZATION OF THE CURRENT RESTRICTION REGARDING
INDUSTRY CONCENTRATION HAVE ON THE FUND?
The new restriction would help the Fund achieve the goal of standardizing
the language of the investment restrictions among the Franklin Templeton
Group of Funds. The new restriction provides the Fund with marginally
added flexibility because it exempts from the 25% limitation the
securities of other investment companies. This investment flexibility will
help the Fund respond to future legal, regulatory, market or technical
changes. However, adoption of the proposed restriction is not expected to
change materially the way in which the Fund is currently managed as the
Fund does not intend to begin concentrating in shares of other investment
companies.
WHAT IS THE FUND'S PROPOSED RESTRICTION REGARDING INDUSTRY CONCENTRATION?
If approved by shareholders, the Fund's restriction relating to
concentration will be revised to state that the Fund may not:
CONCENTRATE (INVEST MORE THAN 25% OF ITS NET ASSETS) IN SECURITIES
OF ISSUERS IN A PARTICULAR INDUSTRY (OTHER THAN SECURITIES ISSUED OR
GUARANTEED BY THE U.S. GOVERNMENT OR ANY OF ITS AGENCIES OR
INSTRUMENTALITIES OR SECURITIES OF OTHER INVESTMENT COMPANIES).
SUB-PROPOSAL 4G: TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING DIVERSIFICATION OF INVESTMENTS.
The 1940 Act prohibits a "diversified" investment company, like the Fund,
from purchasing securities of any one issuer if, at the time of purchase,
as to 75% of the fund's total assets more than 5% of the fund's total
assets would be invested in securities of that issuer, or the fund would
own or hold more than 10% of the outstanding voting securities of that
issuer, except that up to 25% of the fund's total assets may be invested
without regard to these limitations. Under the 1940 Act, these 5% and 10%
limitations do not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or to the securities of
other investment companies.
WHAT IS THE FUND'S CURRENT INVESTMENT DIVERSIFICATION RESTRICTION?
The Fund's current diversification restriction states that the Fund may
not:
Invest in the securities of any one issuer (other than the U.S.
government and its agencies and instrumentalities), if immediately
after and as a result of such investment (a) more than 5% of the
total assets of the fund would be invested in such issuer or
(b) more than 10% of the outstanding voting securities of such issuer
would be owned by the fund.
Thus, the current restriction applies to 100% of the Fund's total assets
rather than the lower statutorily imposed 75% limit. Further, although the
1940 Act excludes the securities of other investment companies as well as
those of the U.S. government and its agencies and instrumentalities, the
current restriction does not include such a carve-out for the securities
of other investment companies.
WHAT EFFECT WILL STANDARDIZATION OF THE CURRENT INVESTMENT DIVERSIFICATION
RESTRICTION HAVE ON THE FUND?
Amending the Fund's diversification policy would make it consistent with
the definition of a diversified investment company under the 1940 Act, and
would provide the Fund with greater investment flexibility. The proposed
restriction is substantially similar to the current restriction, but would
help the Fund achieve the goal of standardizing the language of the
investment restrictions among the Franklin Templeton Group of Funds.
The proposed investment restriction clarifies that the 5% and 10%
limitations do not apply to 25% of the Fund's total assets. However, it is
not currently anticipated that adoption of the proposed restriction would
materially change the way the Fund is managed.
Another change in the proposed restriction is that it excludes from the 5%
and 10% limitations the purchase by the Fund of the securities of other
investment companies. With this exclusion, the Fund would be able to
invest cash held at the end of the day in money market funds or other
short-term investments without regard to the 5% and 10% investment
limitations. The Fund, together with the other funds in the Franklin
Templeton Group of Funds, has obtained an exemptive order from the SEC
(the "Cash Sweep Order") to permit the Franklin and Templeton funds to
invest their uninvested cash in one or more Franklin or Templeton money
market funds. Amending the Fund's current restriction would permit the
Fund to take advantage of the investment opportunities presented by the
Cash Sweep Order, since the Cash Sweep Order contemplates relief from the
1940 Act restrictions relating to the permissible percentage investments
in other investment companies.
WHAT IS THE FUND'S PROPOSED INVESTMENT DIVERSIFICATION RESTRICTION?
If approved by shareholders, the Fund's diversification restriction will
be revised to state that the Fund may not:
PURCHASE THE SECURITIES OF ANY ONE ISSUER (OTHER THAN THE U.S.
GOVERNMENT OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES OR SECURITIES
OF OTHER INVESTMENT COMPANIES) IF IMMEDIATELY AFTER SUCH INVESTMENT
(A) MORE THAN 5% OF THE VALUE OF THE FUND'S TOTAL ASSETS WOULD BE
INVESTED IN SUCH ISSUER OR (B) MORE THAN 10% OF THE OUTSTANDING
VOTING SECURITIES OF SUCH ISSUER WOULD BE OWNED BY THE FUND, EXCEPT
THAT UP TO 25% OF THE VALUE OF THE FUND'S TOTAL ASSETS MAY BE
INVESTED WITHOUT REGARD TO SUCH 5% AND 10% LIMITATIONS.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE SUB-PROPOSALS 4A-4G
PROPOSAL 5: TO APPROVE THE ELIMINATION OF CERTAIN OF THE FUND'S
FUNDAMENTAL INVESTMENT RESTRICTIONS
WHICH FIVE (5) FUNDAMENTAL INVESTMENT RESTRICTIONS IS THE BOARD
RECOMMENDING THAT THE FUND ELIMINATE?
Some of the Fund's fundamental investment restrictions were originally
drafted pursuant to state laws and regulations, which, due to NSMIA, are
no longer in accordance with SEC staff positions since the positions have
either changed or are no longer relevant to the Fund. Since NSMIA
eliminated the states' ability to substantively regulate investment
companies, the Fund is no longer legally required to include current
restrictions 4, 5, 6, 8 and 9 among its fundamental investment
restrictions. Advisory Services has recommended, and the Board has
determined, that all of these current fundamental investment restrictions
should be eliminated.
The exact wording of these five restrictions, (referred to in this
Proposal 5 as the "Restrictions") has been included in Exhibit A, which is
entitled, "Current Fundamental Investment Restrictions Proposed to be
Eliminated."
SECURITIES ON MARGIN, SHORT SALES, AND JOINT TRADING:
The Fund's current fundamental investment restriction number 4 limits the
Fund's ability to purchase securities on margin, sell securities short, or
participate on a joint or joint and several basis in any securities
trading accounts. This restriction was originally included in response to
the various state law requirements to which mutual funds used to be
subject. As discussed earlier in the introduction, under NSMIA the Fund is
no longer required to retain a fundamental policy regarding all of these
types of investment activities.
As a general matter, elimination of this fundamental restriction relating
to purchasing securities on margin, selling securities short, and
participating in a securities trading account should not have an impact on
the day to day management of the Fund, since the 1940 Act prohibitions on
these types of transactions would continue to apply to the Fund. The
Fund's ability to sell securities short, while no longer required to be
fundamental, raises senior security issues. Accordingly, the Fund's
ability to sell securities short is addressed in the proposed restriction
relating to issuing senior securities (described in Sub-Proposal 4e).
Under the proposed restriction, the Fund would be permitted to sell
securities short to the extent permitted by the 1940 Act, and any rule or
exemptive order granted by the SEC. The Fund's ability to purchase
securities on margin also raises senior security issues and is similarly
prohibited under the 1940 Act. Elimination of the restriction, therefore,
would not affect the Fund's ability to purchase on margin. Further, joint
transactions are generally prohibited under the 1940 Act, and the Fund
would continue to remain subject to the conditions imposed on joint
transactions by the 1940 Act and any exemptions granted by the SEC.
Finally, the Fund has not previously, nor does it currently intend to
engage in these investment activities.
OIL, GAS AND MINERAL INTERESTS:
The Fund's current fundamental investment restriction number 5, which
limits the Fund's ability to buy or sell interests in oil, gas or mineral
exploration or development programs, is no longer required to be
fundamental. These restrictions were originally enacted in response to
various state law requirements, but under NSMIA, the Fund is no longer
legally required to retain such policies as fundamental restrictions.
As a general matter, elimination of these fundamental restrictions should
not have an impact on the day to day management of the Fund as the Fund
has not previously, nor does it currently intend to engage in these types
of investment activities.
MANAGEMENT OWNERSHIP OF SECURITIES:
The Fund's current restriction number 6 limits the Fund's ability to
invest in securities issued by companies whose securities are owned in
certain amounts by Trustees and officers of the Fund, or its investment
manager, Advisory Services. This policy originated many years ago with a
now obsolete state securities law. As a general matter, elimination of
this fundamental restriction should not have an impact on the day to day
management of the Fund, as the 1940 Act restrictions still apply to the
Fund.
ILLIQUID SECURITIES:
The Fund's current fundamental investment restriction number 8 limits the
Fund's ability to invest more than 10% of its assets in illiquid
securities. This restriction arose out of an SEC staff position which is
not required to be fundamental. The SEC recently amended its position to
permit funds to invest up to 15% of their assets in illiquid securities.
However, the Fund may not take advantage of this new SEC position because
its policy relating to investments in illiquid securities is fundamental.
Elimination of this fundamental restriction would permit the Fund to take
advantage of the current SEC position. Although the Fund's policy relating
to illiquid securities would not be fundamental, the Fund would still be
subject to the SEC rules and regulations in this area.
CONTROL OR MANAGEMENT:
The Fund's current fundamental investment restriction number 9 limits the
Fund's ability to invest for purposes of exercising control or management.
This restriction was enacted in response to various state securities laws
and is no longer required under NSMIA. Typically, if a fund acquires a
large percentage of the securities of a single issuer, it will be deemed
to have invested in such issuer for the purposes of exercising control or
management. This restriction was intended to ensure that a mutual fund
would not be engaged in the business of managing another company.
Eliminating this restriction will not have any impact on the day to day
management of the Fund because the Fund has no present intention to invest
in an issuer for the purposes of exercising control or management.
Further, the goal of this restriction, namely to limit a fund's ability to
control another issuer, is embodied in the 1940 Act diversification rule
which is proposed to be incorporated in the proposed investment
restriction relating to diversification (described in Sub-Proposal 4g).
The diversification restriction limits the Fund's ability to own more than
a certain percentage of any one issuer, which acts to limit its ability to
exercise control or management over another company.
WHY IS THE BOARD RECOMMENDING THAT THE RESTRICTIONS BE ELIMINATED, AND
WHAT EFFECT WILL SUCH ELIMINATION HAVE ON THE FUND?
The Board has determined that eliminating the Restrictions is consistent
with the federal securities laws and will conform the Fund's list of
fundamental restrictions with standardized investment restrictions adopted
by other Franklin and Templeton funds. By both standardizing and reducing
the total number of investment restrictions that can be changed only by a
shareholder vote, the Board believes that the Fund will be able to
minimize the costs and delays associated with holding future shareholder
meetings to revise fundamental policies that become outdated or
inappropriate. The Board believes that eliminating the Restrictions is in
the best interest of the Fund's shareholders as it will provide the Fund
with increased flexibility to pursue its investment goals.
WHAT ARE THE RISKS, IF ANY, IN ELIMINATING THE RESTRICTIONS?
The Board does not anticipate that eliminating the Restrictions will
result in any additional risk to the Fund. Although the Fund's current
Restrictions, as drafted, are no longer legally required, the Fund's
ability to invest in these five areas will continue to be subject to the
limitations of the 1940 Act, and any exemptive orders granted under the
1940 Act. Further, the Fund has no current intention to change its present
investment practices as a result of eliminating these Restrictions.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE PROPOSAL 5
PROPOSAL 6: TO APPROVE THE REORGANIZATION OF THE TRUST FROM A
MASSACHUSETTS BUSINESS TRUST TO A DELAWARE BUSINESS TRUST
WHAT WILL THE REORGANIZATION MEAN FOR THE TRUST AND ITS SHAREHOLDERS?
The Trustees recommend that you approve a change in the place of
organization of the Trust from a Massachusetts business trust to a
Delaware business trust. This proposed change will be referred to in this
proxy statement as the "Reorganization." The Board of Trustees has
approved an Agreement and Plan of Reorganization (the "Plan"),
substantially in the form attached to this proxy statement as Exhibit B.
The Plan provides for the Reorganization, which involves the continuation
of the Trust, (referred to in this Proposal 6 as the "Massachusetts
Trust") in the form of a newly created Delaware business trust, also named
"Franklin Managed Trust" (and referred to in this Proposal 6 as the
"Delaware Trust"). As of the effective date of the Reorganization,
the Delaware Trust will have one series, the "Franklin Rising Dividends
Fund" (referred to in this Proposal 6 as the "Rising Dividends-DE") that
will correspond to the current Franklin Rising Dividends Fund of the
Massachusetts Trust. For ease of reference and comparison, the current
Rising Dividends Series will be referred to in this Proposal 6 as the
"Rising Dividends-MA."
Rising Dividends-DE will have the same investment objective, policies and
restrictions as Rising Dividends-MA. This means that Rising Dividends-DE's
fundamental investment policies and restrictions will reflect the results
of the shareholders' vote on Proposals 3, 4 and 5 of this proxy statement.
The Trustees and officers will be the same, and will operate the Delaware
Trust in the same manner as they previously operated the Massachusetts
Trust. On the closing date of the Reorganization, you will hold an
interest in the Delaware Trust that is equivalent to your interest in the
Massachusetts Trust. Essentially, your investment will not change, and the
Reorganization will have no material impact on your economic interests as
a shareholder.
WHY ARE THE TRUSTEES RECOMMENDING THAT I APPROVE THE REORGANIZATION?
The Trustees have determined that mutual funds formed as Delaware business
trusts have certain advantages over those funds organized as Massachusetts
business trusts. Delaware law contains provisions specifically designed
for mutual funds, which take into account their unique structure and
operations. Under Delaware law, funds are able to simplify their
operations by reducing administrative burdens. The Delaware law allows
greater flexibility in drafting a fund's governing documents, which can
result in greater efficiencies of operation and savings for a fund and its
shareholders. Delaware law also provides favorable state tax treatment.
Furthermore, there is a well-established body of corporate legal precedent
that may be relevant in deciding issues pertaining to the Delaware Trust.
A comparison of the Delaware business trust law and the Massachusetts
business trust law, as well as a comparison of the relevant provisions of
the governing documents of the Delaware Trust and the Massachusetts Trust,
is included in Exhibit C, which is entitled, "Comparison and Significant
Differences Between Delaware Business Trusts and Massachusetts Business
Trusts."
The Reorganization also would increase uniformity among the Franklin
Templeton Group of Funds, since many of the funds are already organized as
Delaware business trusts, and the Delaware trust form has been chosen for
new Franklin and Templeton funds that have been created over the past few
years. Increased uniformity among the funds, many of which share common
trustees, officers and service providers, is expected to reduce the costs
and resources needed to comply with state corporate laws, and also reduce
administrative burdens.
For these reasons, the Trustees believe that it is in the best interests
of the shareholders to approve the Reorganization.
WHAT ARE THE CONSEQUENCES AND PROCEDURES OF THE REORGANIZATION?
Upon completion of the Reorganization, the Delaware Trust will continue
the business of the Massachusetts Trust with the same investment objective
and policies of Rising Dividends-MA as exist on the date of the
Reorganization, and will hold the same portfolio of securities previously
held by the Massachusetts Trust on behalf of Rising Dividends-MA. The
Delaware Trust will be operated under substantially identical overall
management, investment management, distribution and administrative
arrangements as those of the Massachusetts Trust. As the successor to the
Massachusetts Trust's operations, the Delaware Trust will adopt the
Massachusetts Trust's registration statement with amendments to show the
new Delaware business trust structure.
The Delaware Trust was created solely for the purpose of becoming the
successor organization to, and carrying on the business of, the
Massachusetts Trust. To accomplish the Reorganization, the
Plan provides that the Massachusetts Trust will transfer all of the
portfolio securities of Rising Dividends-Mass and any other assets,
subject to its related liabilities, to the Delaware Trust. In exchange for
these assets and liabilities, the Delaware Trust will issue its own shares
to the Massachusetts Trust, which will then distribute those shares pro
rata to you as a shareholder of the Massachusetts Trust. Through this
procedure you will receive exactly the same number and dollar amount of
shares of Rising Dividends-DE as you previously held in Rising
Dividends-MA. The net asset value of each share of Rising Dividends-DE
will be the same as that of Rising Dividends-MA on the date of the
Reorganization. You will retain the right to any declared but
undistributed dividends or other distributions payable on the shares of
the Rising Dividends-MA that you may have had as of the effective date of
the Reorganization. As soon as practicable after the date of the
Reorganization, the Massachusetts Trust will be dissolved and will go out
of existence.
The Trustees may terminate the Plan and abandon the Reorganization at any
time prior to the effective date of the Reorganization if they determine
that such actions are in the best interests of the Massachusetts Trust's
shareholders. If the Reorganization is not approved, or if the Trustees
abandon the Reorganization, the Massachusetts Trust will continue to
operate as a Massachusetts business trust.
WHAT EFFECT WILL THE REORGANIZATION HAVE ON THE CURRENT INVESTMENT
ADVISORY AGREEMENT?
As a result of the Reorganization, Rising Dividends-DE will be subject to
a new investment advisory agreement between the Delaware Trust, on behalf
of Rising Dividends-DE, and Advisory Services. The new advisory agreement
will be substantially identical to the current advisory agreement between
Advisory Services, and the Massachusetts Trust on behalf of Rising
Dividends-MA It is anticipated that there will be no material change to
the investment advisory agreement as a result of the Reorganization.
WHAT EFFECT WILL THE REORGANIZATION HAVE ON THE SHAREHOLDER SERVICING
AGREEMENTS AND DISTRIBUTION PLANS?
The Delaware Trust will enter into agreements with Franklin/Templeton
Investor Services, Inc. for transfer agency, dividend disbursing,
shareholder servicing and fund accounting services that are substantially
identical to the agreements currently in place for the Massachusetts
Trust. Franklin Templeton Distributors, Inc. will serve as the distributor
for the shares of the Delaware Trust under a separate distribution
agreement that is substantially identical to the distribution agreement
currently in effect for the Massachusetts Trust.
As of the effective date of the Reorganization, Rising Dividends-DE will
have distribution plans under Rule 12b-1 of the 1940 Act relating to the
distribution of the classes of shares that are substantially identical to
the distribution plans currently in place for the corresponding classes of
shares of Rising Dividends-MA. It is anticipated that there will be no
material change to the distribution plans as a result of the
Reorganization.
WHAT IS THE EFFECT OF SHAREHOLDER APPROVAL OF THE REORGANIZATION?
Under the 1940 Act, the shareholders of a mutual fund must vote on the
following: (1) election of trustees; (2) selection of the independent
auditors; and (3) approval of initial investment management agreement for
the fund.
Theoretically, if the Reorganization is approved, the shareholders would
need to vote on these three items for the Delaware Trust. In fact, the
Delaware Trust must have shareholder approval of these issues or else it
will not comply with the 1940 Act. However, the Trustees have determined
that it is in the best interests of the shareholders to avoid the
considerable expense of another shareholder meeting to obtain these
approvals after the Reorganization. Therefore, the Trustees have
determined that approval of the Reorganization also will constitute the
requisite shareholder approval for the Plan contained in Exhibit B, and
also, for purposes of the 1940 Act, constitute shareholder approval of:
(1) the election of the Trustees of the Massachusetts Trust who are in
office at the time of the Reorganization as Trustees for the Delaware
Trust; (2) the selection of Tait, Weller & Baker as independent auditors
for the Delaware Trust; and (3) a new investment advisory agreement
between the Delaware Trust on behalf of Rising Dividends-DE and Advisory
Services, which is substantially identical to the agreement currently in
place for the Massachusetts Trust on behalf of Rising Dividends-MA.
Prior to the Reorganization, the officers will cause the Massachusetts
Trust, as the sole shareholder of the Delaware Trust, to vote its shares
FOR the matters specified above. This action will enable the Delaware
Trust to satisfy the requirements of the 1940 Act without involving the
time and expense of another shareholder meeting.
WHAT IS THE CAPITALIZATION AND STRUCTURE OF THE DELAWARE TRUST?
The Delaware Trust was created on July 7, 1999 pursuant to Delaware law.
The Delaware Trust has an unlimited number of shares of beneficial
interest with a par value of $0.01 per share. On the date of the
Reorganization, an unlimited number of shares will be allocated to the
Rising Dividends-DE. The shares of the Delaware Trust will be further
allocated into three classes to correspond to the current three classes of
shares of Rising Dividends-MA of the Massachusetts Trust.
As of the effective date of the Reorganization, shares of the respective
classes of Rising Dividends-MA of the Massachusetts Trust and Rising
Dividends-DE of the Delaware Trust will have equal dividend and redemption
rights, will be fully paid, non-assessable, freely transferable, have the
same conversion rights, and have no preemptive or subscription rights.
Shares of the respective classes of both the Delaware Trust and the
Massachusetts Trust will have equal voting and liquidation rights and have
one vote per share. The Delaware Trust also will have the same fiscal year
as the Massachusetts Trust.
WHO WILL BEAR THE EXPENSES OF THE REORGANIZATION?
Since the Reorganization will benefit the Massachusetts Trust and its
shareholders, the Board has authorized that the expenses incurred in the
Reorganization shall be paid by the Massachusetts Trust, whether or not
the Reorganization is approved by shareholders.
ARE THERE ANY TAX CONSEQUENCES FOR SHAREHOLDERS?
The Reorganization is designed to be tax free for federal income tax
purposes so that you will not experience a taxable gain or loss when the
Reorganization is completed. Generally, the basis and holding period of
your shares in Rising Dividends-DE will be the same as the basis and
holding period of your shares in Rising Dividends-MA.
WHAT IF I CHOOSE TO SELL MY SHARES AT ANY TIME?
A request to sell Massachusetts Trust shares that is received and
processed prior to the Reorganization will be treated as a redemption of
shares of the Massachusetts Trust. A request to sell shares that is
received and processed after the Reorganization will be treated as a
request for the redemption of the same number of shares of the Delaware
Trust.
WHAT IS THE EFFECT OF MY "YES" VOTE?
By voting "YES" to the Reorganization, you will be agreeing to become a
shareholder of a mutual fund organized as a Delaware trust, with its
Trustees, independent auditors, investment management agreement and
distribution plans already in place, and all such arrangements that are
substantially identical to those of the Massachusetts Trust.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE PROPOSAL 6
PROPOSAL 7: OTHER BUSINESS
The Trustees do not intend to bring any matters before the Meeting other
than Proposals 1, 2, 3, 4, 5, and 6 and are not aware of any other matters
to be brought before the Meeting by others. If any other matters do
properly come before the Meeting, the persons named in the enclosed proxy
will use their best judgment in voting on such matters.
o INFORMATION ABOUT THE TRUST
THE INVESTMENT MANAGER. Franklin Advisory Services, LLC ("Advisory
Services"), One Parker Plaza, Ninth Floor, Fort Lee, New Jersey 07024
serves as the Trust's investment manager. Advisory Services is wholly
owned by Resources.
THE TRUST ADMINISTRATOR. Under an agreement with Advisory Services,
Franklin Templeton Services, Inc. ("FT Services"), whose principal address
is also 777 Mariners Island Blvd., San Mateo, CA 94404, provides certain
administrative services and facilities for the Trust. FT Services is a
wholly owned subsidiary of Resources and is an affiliate of Advisory
Services and the Trust's principal underwriter.
THE UNDERWRITER. The underwriter for the Trust is Franklin Templeton
Distributors, Inc., 777 Mariners Island Blvd., San Mateo, California 94404.
THE TRANSFER AGENT. The transfer agent, registrar and dividend
disbursement agent for the Trust is Franklin/Templeton Investor Services,
Inc., 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California
94403-7777.
THE CUSTODIAN. The Bank of New York, Mutual Funds Division, 90 Washington
Street, New York, NY 10286, acts as custodian of the Trust's securities
and other assets.
REPORTS TO SHAREHOLDERS AND FINANCIAL STATEMENTS. The Trust's last audited
financial statements and annual report, for the fiscal year ended
September 30, 1998, and its semi-annual report dated March 31, 1999, are
available free of charge. To obtain a copy, please call 1-800/DIAL BEN(R) or
forward a written request to Franklin/Templeton Investor Services, Inc.,
777 Mariners Island Blvd., P.O. Box 7777, San Mateo, CA 94403-7777.
PRINCIPAL SHAREHOLDERS. As of August 30, 1999, there were 17,472,001.311
outstanding shares of Franklin Rising Dividends Fund - Class A, 62,466.712
outstanding shares of Franklin Rising Dividends Fund - Class B, and
1,979,369.145 outstanding shares of Franklin Rising Dividends Fund -
Class C. American Enterprise Investment SVCS., P.O. Box 9446, Minneapolis,
MN 55440 owned 5.51% of the outstanding shares of Franklin Rising
Dividends Fund - Class B. From time to time, the number of shares held in
"street name" accounts of various securities dealers for
the benefit of their clients may exceed 5% of the total shares outstanding.
In addition, to the knowledge of the Trust's management, as of July 30,
1999, no Trustee of the Trust owned 1% or more of the outstanding shares
of the Trust, and the Officers and Trustees of the Trust owned, as a
group, less than 1% of the outstanding shares of the Trust.
o FURTHER INFORMATION ABOUT VOTING AND THE MEETING
SOLICITATION OF PROXIES. The cost of soliciting these proxies will be
borne by the Trust. The Trust reimburses brokerage firms and others for
their expenses in forwarding proxy material to the beneficial owners and
soliciting them to execute proxies. The Trust has engaged SCC to solicit
proxies from brokers, banks, other institutional holders and individual
shareholders for an approximate fee, including out-of-pocket expenses,
ranging between $53,853 and $78,802. The Trust expects that the
solicitation will be primarily by mail, but also may include telephone,
personal interviews and other means. The Trust does not reimburse Trustees
and officers of the Trust, or regular employees and agents of Advisory
Services involved in the solicitation of proxies. The Trust intends to pay
all costs associated with the solicitation and the Meeting.
In addition to solicitations by mail, some of the Executive Officers and
employees of the Trust, Advisory Services and its affiliates, without
extra compensation, may conduct additional solicitations by telephone,
personal interviews and other means.
VOTING BY BROKER-DEALERS. The Trust expects that, before the Meeting,
broker-dealer firms holding shares of the Trust in "street name" for their
customers will request voting instructions from their customers and
beneficial owners. If these instructions are not received by the date
specified in the broker-dealer firms' proxy solicitation materials, the
Trust understands that NYSE Rules permit the broker-dealers to vote on the
items to be considered at the Meeting on behalf of their customers and
beneficial owners. Certain broker-dealers may exercise discretion over
shares held in their name for which no instructions are received by voting
those shares in the same proportion as they vote shares for which they
received instructions.
QUORUM. Forty percent of the shares entitled to vote, present in person or
represented by proxy, constitutes a quorum at the Meeting. The shares over
which broker-dealers have discretionary voting power, the shares that
represent "broker non-votes" (i.e., shares held by brokers or nominees as
to which: (i) instructions have not been received from the beneficial
owners or persons entitled to vote; and (ii) the broker or nominee does
not have discretionary voting power on a particular matter), and the
shares whose proxies reflect an abstention on any item are all counted as
shares present and entitled to vote for purposes of determining whether
the required quorum of shares exists.
REQUIRED VOTE. Provided that a quorum is present, Proposal 1, the election
of Trustees, requires that the four nominees receiving the greatest number
of votes cast at the Meeting will be elected. All voting rights are
non-cumulative, which means that the holders of more than 50% of the
shares voting for the election of Trustees can elect 100% of such Trustees
if they choose to do so, and in such event, the holders of the remaining
shares voting will not be able to elect any Trustees. Proposal 2,
ratification of the selection of independent auditors, requires the
affirmative vote of a majority of the Trust's shares present and voting on
the Proposal at the Meeting. Proposal 3, modification of the Fund's current
criteria for the selection of portfolio companies related to the issuer's
treatment of debt on its balance sheet, requires the affirmative vote of a
majority of the Trust's shares present and voting on the Proposal at the
Meeting. Proposals 4 and 5, amendments to, or elimination of, fundamental
investment restrictions, require the affirmative vote of the lesser of:
(i) more than 50% of the outstanding voting securities of the Trust; or
(ii) 67% or more of the voting securities of the Trust present at the
Meeting, if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy. Proposal 6, the
reorganization of the Trust from a Massachusetts business trust to a
Delaware business trust, requires the affirmative vote of a majority of
the Trust's shares present and voting on the Proposal at the Meeting.
Proposal 7, the transaction of any other business, is expected to require
the affirmative vote of a majority of the Trust's shares present and
voting on the Proposal at the Meeting. Abstentions and broker non-votes
will be treated as votes not cast and, therefore, will not be counted for
purposes of obtaining approval of each Proposal.
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY. The Trust is
not required, and does not intend, to hold regular annual meetings of
shareholders. Shareholders wishing to submit proposals for consideration
for inclusion in a proxy statement for the next meeting of shareholders
should send their written proposals to the Trust's offices, 777 Mariners
Island Blvd., San Mateo, CA 94404, so they are received within a
reasonable time before any such meeting. No business other than the
matters described above is expected to come before the Meeting, but should
any other matter requiring a vote of shareholders arise, including any
question as to an adjournment or postponement of the Meeting, the persons
named on the enclosed proxy card will vote on such matters according to
their best judgment in the interests of the Trust.
By order of the Board of Trustees,
Deborah R. Gatzek
Secretary
September 13, 1999
San Mateo, California
EXHIBIT A
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS PROPOSED TO BE ELIMINATED
Five of the Fund's current fundamental investment restrictions have been
proposed to be eliminated, and are listed in the table below.
Subject Current Investment Restriction States
that the Fund May Not:
- ------------------------------------------------------------------------------
Purchase Securities on Margin; 4. Purchase securities on margin,
Sell Securities Short; sell securities short,
Joint Trading participateon a joint or joint
and several basis in any
securities trading account... .
(Does not preclude a fund from
obtaining such short-term
credit as may be necessary for
the clearance of purchases and
sales of its portfolio
securities.)
Oil/Gas/Mineral Interests 5. Buy or sell interests in oil,
gas or mineral exploration or
development programs.... (Does
not preclude investments in
marketable securities of
companies engaged in such
activities.)
Ownership by Management 6. Purchase or hold securities of
any issuer if, at the time of
purchase or thereafter, any of
the trustees or officers of the
trust or the manager own
beneficially more than one-half
of 1%, and all such trustees or
officers holding more than
one-half of 1% together own
beneficially more than 5% of
the issuer's securities.
Illiquid Securities 8. Invest more than 10% of its
assets in securities with legal
or contractual restrictions on
resale, securities which are
not readily marketable, and
repurchase agreements with more
than seven days to maturity.
Control or Management 9. Invest in any issuer for
purposes of exercising control
or management.
EXHIBIT B
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made
this __ day of ______________, 1999 by and between Franklin Managed Trust, a
business trust created under the laws of the Commonwealth of Massachusetts
(the "Massachusetts Trust"), and Franklin Managed Trust, a business trust
created under the laws of the State of Delaware (the "Delaware Trust").
In consideration of the mutual promises contained herein, and
intending to be legally bound, the parties hereto agree as follows:
1. PLAN OF REORGANIZATION.
(a) Upon satisfaction of the conditions precedent described in
Section 3 hereof, the Massachusetts Trust will convey, transfer
and deliver to the Delaware Trust, on behalf of its Franklin
Rising Dividends Fund series (the "New Fund"), at the closing
provided for in Section 2 (hereinafter referred to as the
"Closing") all of its then-existing assets, including the assets
underlying its single series of shares designated as the Franklin
Rising Dividends Fund series (the "Fund"). In consideration
thereof, the Delaware Trust agrees at the Closing (i) to assume
and pay, to the extent that they exist on or after the Effective
Date of the Reorganization (as defined in Section 2 hereof), all
of the Massachusetts Trust's obligations and liabilities, whether
absolute, accrued, contingent or otherwise, including all fees
and expenses in connection with the Agreement, including without
limitation costs of legal advice, accounting, printing, mailing,
proxy solicitation and transfer taxes, if any, the obligations
and liabilities allocated to the Massachusetts Trust to become
the obligations and liabilities of the Delaware Trust, and
(ii) to deliver to the Massachusetts Trust full and fractional
shares of the New Fund equal in number to the number of full and
fractional shares outstanding of the Fund. The transactions
contemplated hereby are intended to qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended ("Code").
(b) The Delaware Trust will effect such delivery by
establishing an open account for each shareholder of the Fund and
by crediting to such account, the exact number of full and
fractional shares of the appropriate class of the New Fund such
shareholder held in the corresponding class of the Fund on the
Effective Date of the Reorganization. Fractional shares of the
New Fund will be carried to the third decimal place. On the
Effective Date of the Reorganization, the net asset value per
share of beneficial interest of each class of the New Fund shall
be deemed to be the same as the net asset value per share of each
corresponding class of the Fund. On such date, each certificate
representing shares of a class of the Fund will represent the
same number of shares of the corresponding class of the New Fund.
Each shareholder of the Fund will have the right to exchange his
(her) share certificates for share certificates of the
corresponding class of the New Fund. However, a shareholder need
not make this exchange of certificates unless he (she) so
desires. Simultaneously with the crediting of the shares of the
New Fund to the shareholders of record of the Fund, the shares of
the Fund held by such shareholder shall be canceled.
(c) As soon as practicable after the Effective Date of the
Reorganization, the Massachusetts Trust shall take all necessary
steps under Massachusetts law to terminate the Massachusetts
Trust.
2. CLOSING AND EFFECTIVE DATE OF THE REORGANIZATION. The Closing
shall commence at 2:00 p.m. Pacific time on January 31, 2000 or on
such later date as the parties may agree, and shall be effective on
the business day following the commencement of the Closing (the
"Effective Date"). The Closing will take place at the principal
offices of the Massachusetts and Delaware Trusts at 777 Mariners
Island Boulevard, San Mateo, CA 94404.
3. CONDITIONS PRECEDENT. The obligations of the Massachusetts Trust
and the Delaware Trust to effectuate the Reorganization hereunder
shall be subject to the satisfaction of each of the following
conditions:
(a) Such authority and orders from the Securities and Exchange
Commission (the "SEC") and state securities commissions as may be
necessary to permit the parties to carry out the transactions
contemplated by this Agreement shall have been received;
(b) One or more post-effective amendments to the Massachusetts
Trust's Registration Statement on Form N-1A under the Securities
Act of 1933 and the Investment Company Act of 1940, containing
(i) such amendments to such Registration Statement as are
determined by the Trustees of the Massachusetts Trust to be
necessary and appropriate as a result of the Agreement, and
(ii) the adoption by the Delaware Trust as its own of such
Registration Statement, as so amended, shall have been filed with
the SEC, and such post-effective amendment or amendments to the
Massachusetts Trust's Registration Statement shall have become
effective, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceeding
for that purpose shall have been initiated or threatened by the
SEC(other than any such stop order, proceeding or threatened
proceeding which shall have been withdrawn or terminated);
(c) Confirmation shall have been received from the SECor the
Staff thereof that the Delaware Trust shall, effective upon or
before the Effective Date of the Reorganization, be duly
registered as an open-end management investment company under the
Investment Company Act of 1940, as amended;
(d) Each party shall have received a ruling from the Internal
Revenue Service or an opinion from Messrs. Stradley, Ronon,
Stevens & Young, LLP, Philadelphia, Pennsylvania, to the effect
that the reorganization contemplated by this Agreement qualifies
as a "reorganization" under Section 368(a) of the Code, and,
thus, will not give rise to the recognition of income, gain or
loss for federal income tax purposes to the Massachusetts Trust,
the Delaware Trust or shareholders of the Massachusetts Trust or
the Delaware Trust;
(e) The Massachusetts Trust shall have received an opinion from
Messrs. Stradley, Ronon, Stevens & Young, LLP, addressed to and
in form and substance satisfactory to it, to the effect that
(i) this Agreement and the reorganization provided for herein,
and the execution of this Agreement, has been duly authorized and
approved by the Delaware Trust and constitutes a legal, valid and
binding agreement of the Delaware Trust in accordance with its
terms; (ii) the shares of the Delaware Trust to be issued
pursuant to the terms of this Agreement have been duly authorized
and, when issued and delivered as provided in this Agreement,
will have been validly issued and fully paid and will be
non-assessable by the Delaware Trust; and (iii) the Delaware
Trust is duly organized and validly existing under the laws of
the State of Delaware;
(f) The Delaware Trust shall have received an opinion from
Messrs. Stradley, Ronon, Stevens & Young, LLP, Philadelphia, PA,
addressed to and in form and substance satisfactory to it, to the
effect that (i) this Agreement and the reorganization provided
herein, and the execution of this Agreement, has been duly
authorized and approved by the Massachusetts Trust and
constitutes a legal, valid and binding agreement of the
Massachusetts Trust in accordance with its terms; and (ii) the
Massachusetts Trust is duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts.
(g) The shares of the New Fund shall have been duly qualified
for offering to the public in all states of the United States,
the Commonwealth of Puerto Rico, Guam, U.S. Virgin Islands, and
the District of Columbia so as to permit the transfers
contemplated by this Agreement to be consummated;
(h) This Agreement and the reorganization contemplated hereby
shall have been adopted by an affirmative vote of at least a
majority the outstanding voting securities of the Massachusetts
Trust at a meeting of shareholders of such trust;
(i) The shareholders of the Massachusetts Trust shall have
voted to direct the Massachusetts Trust to vote, and the
Massachusetts Trust shall have voted, as sole shareholder of each
class of the Delaware Trust, to:
(1) Elect as Trustees of the Delaware Trust (the
"Trustees") the following individuals: Messrs. Lippman,
Crohn, Rubens II and Rubin;
(2) Select Tait, Weller & Baker as the independent public
accountants for the Delaware Trust for the fiscal year
ending September 30, 2000; and
(3) Approve a new investment management agreement between
the Delaware Trust on behalf of the New Fund, and Franklin
Advisory Services, LLC, which is substantially identical to
the current investment management agreement between the
Massachusetts Trust on behalf of the Fund, and Franklin
Advisory Services, LLC
(j) The Trustees shall have taken the following action at a
meeting duly called for such purposes:
(1) Approval of the Delaware Trust's Custodian Agreement;
(2) Selection of Tait, Weller & Baker as the Delaware
Trust's independent public accountants for the fiscal year
ending September 30, 2000;
(3) Approval of the investment management agreement between
the Delaware Trust on behalf of the New Fund, and Franklin
Advisory Services, LLC, which is substantially identical to
the current investment management agreement between the
Massachusetts Trust on behalf of the Fund, and Franklin
Advisory Services, LLC;
(4) Authorization of the issuance by the Delaware Trust,
prior to the Effective Date of the Reorganization, of one
share of each class of the New Fund, to the Massachusetts
Trust in consideration for the payment of the current
public offering price of each corresponding class of the
Fund, for the purpose of enabling the Massachusetts Trust
to vote on matters referred to in paragraph (i) of this
Section 3;
(5) Submission of the matters referred to in paragraph
(i) of this Section 3 to the Massachusetts Trust as sole
shareholder of the Delaware Trust; and
(6) Authorization of the issuance by the Delaware Trust of
shares of the New Fund on the Effective Date of the
Reorganization in exchange for the assets of the Fund
pursuant to the terms and provisions of this Agreement.
At any time prior to the Closing, any of the foregoing conditions
may be waived by the Board of Trustees of the Massachusetts Trust if, in the
judgment of the Trustees, such waiver will not have a material adverse effect
on the benefits intended under this Agreement to the shareholders of the
Massachusetts Trust.
4. TERMINATION. The Board of Trustees of the Massachusetts Trust may
terminate this Agreement and abandon the reorganization contemplated
hereby, notwithstanding approval thereof by the shareholders of the
Fund, at any time prior to the Effective Date of the Reorganization if,
in the judgment of the Trustees, the facts and circumstances make
proceeding with the Agreement inadvisable.
5. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the parties and there are no agreements, understandings,
restrictions or warranties among the parties other than those set forth
herein or herein provided for.
6. FURTHER ASSURANCES. The Massachusetts Trust and the Delaware Trust
shall take such further action as may be necessary or desirable and
proper to consummate the transactions contemplated hereby.
7. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same instrument.
8. GOVERNING LAW. This Agreement and the transactions contemplated
hereby shall be governed by and construed and enforced in accordance
with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Massachusetts Trust and the Delaware Trust
have each caused this Agreement and Plan of Reorganization to be executed on
its behalf by its ____________ and attested by its ____________, all as of
the day and year first-above written.
Attest: Franklin Managed Trust
(a Delaware business trust)
By: _______________________________ By: ________________________________
Attest: Franklin Managed Trust
(a Massachusetts business trust)
By: _______________________________ By: ________________________________
EXHIBIT C
COMPARISON AND SIGNIFICANT DIFFERENCES
BETWEEN DELAWARE BUSINESS TRUSTS AND
MASSACHUSETTS BUSINESS TRUSTS
<TABLE>
<CAPTION>
DELAWARE BUSINESS TRUST MASSACHUSETTS BUSINESS TRUST
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Governing A Delaware Business Trust (a A Massachusetts Business Trust (a
Documents "DBT") is created by a governing "MBT") is created by filing a
instrument (which may consist of declaration of trust with the
one or more instruments, Secretary of State of
including an agreement and Massachusetts and by filing with
declaration of trust and the clerk of every city or town
By-Laws) and a Certificate of where the trust has a usual place
Trust, which must be filed with of business.
the Delaware Secretary of State.
The law governing DBTs is
referred to in this chart as the
"Delaware Act."
A DBT is an unincorporated A MBT is an unincorporated
association organized under the association organized under the
Delaware Act which operates Massachusetts statute (the
similar to a typical corporation. "Massachusetts Statute") which
A DBT's operations are governed by operates similar to a typical
a trust instrument and By-Laws. corporation. A MBT's operations
The business and affairs of a DBT are governed by a trust
are managed by or under the instrument and By-Laws. The
direction of a Board of Trustees. business and affairs of a MBT are
managed by or under the direction
of a Board
of Trustees.
A DBT organized as an open-end A MBT organized as an open-end
investment company is subject to investment company is subject to
the Investment Company Act of the 1940 Act. Shareholders own
1940, as amended (the "1940 Act"). shares of "beneficial interest"
Shareholders own shares of as compared to the shares of
"beneficial interest" as compared "common stock" issued by
to the shares of "common stock" corporations.
issued by corporations.
As described in this chart, DBTs MBTs are also granted a
are granted a significant amount significant amount of
of organizational and operational organizational and operational
flexibility. Delaware law makes it flexibility. The Massachusetts
easier to obtain needed Statute is silent on most of the
shareholder approvals, and also salient features of MBTs, thereby
permits management of a DBT to allowing the MBT to freely
take various actions without being structure the trust.
required to make state filings or
obtain shareholder approval. The
Delaware Act also contains
favorable limitations on
shareholder and Trustee liability,
and provides for indemnification
out of trust property for any
shareholder or Trustee that may be
held personally liable for the
obligations of a DBT.
Multiple Series Under the Delaware Act, a The Massachusetts Statute permits
and Classes declaration of trust may provide a business trust to issue one or
for classes, groups or series of more series or classes of
shares, or classes, groups or beneficial interest. The
series of shareholders, having Massachusetts Statute is largely
such relative rights, powers and silent as to any requirements for
duties as the declaration of trust the creation of such series or
may provide. The series and classes, although the trust
classes of a DBT may be described documents creating a MBT may
in the declaration of trust or in provide methods or authority to
resolutions adopted by the Board create such series or classes
of Trustees. Neither state filings without seeking shareholder
nor shareholder approval is approval. The Massachusetts
required to create series or Statute does not specify what
classes. The Trustees of Franklin information must be contained in
Managed Trust have proposed to the declaration
reorganize the Trust from a of trust, nor does it require a
Massachusetts business trust (the registered officer or agent for
"Massachusetts Trust") into a service of process. The
Delaware business trust (the Massachusetts Trust's Declaration
"Delaware Trust"). The Delaware of Trust authorizes the division
Trust's Declaration of Trust of the shares into an unlimited
permits the creation of multiple number of shares which may be
series and classes and establishes further divided into separate
the provisions relating to shares. series or classes.
The Delaware Act explicitly The Massachusetts Statute does
provides for a reciprocal not contain statutory provisions
limitation of inter-series addressing series liability with
liability. The debts, liabilities, respect to a multiple series
obligations and expenses incurred, investment company. Therefore,
contracted for or otherwise unless otherwise provided in the
existing with respect to a declaration of trust for a MBT,
particular series of a multiple the debts, liabilities,
series investment company obligations and expenses
registered under the 1940 Act are incurred, contracted for or
enforceable only against the otherwise existing with respect
assets of such series, and not to a particular series may be
against the assets of the trust, enforceable against the assets of
or any other series, generally, the business trust generally.
provided that:
(i) the governing instrument
creates one or more series;
(ii) separate and distinct
records are maintained for any
such series;
(iii) the series' assets are
held and accounted for
separately from the trust's
other assets or any series
thereof;
(iv) notice of the limitation
on liabilities of the series is
set forth in the certificate of
trust; and
(v) the governing instrument so
provides.
Multiple Series The Declaration of Trust for the The Massachusetts Trust's
and Classes Delaware Trust provides that each Declaration of Trust explicitly
(cont.) of its series shall not be charged limits the liability
with the liabilities of any other of each series and states that
series. Further, it states under no circumstances shall the
that any general assets or assets allocated or belonging to
liabilities not readily a particular series be charged
identifiable as to a particular with liabilities attributable to
series will be allocated or any other series. Further, it
charged by the Trustees of the states that third parties shall
Delaware Trust to and among any look only to the assets of a
one or more series in such manner, particular series for payment of
and on such basis, as the Trustees any credit, claim or contract.
deem fair and equitable in their Although these provisions serve
sole discretion. to put third parties on notice,
since there is no support in the
Massachusetts Statute to limit
liability, there remains the
possibility that a court may not
uphold the limitations of a MBT's
governing document.
A court applying federal A court applying federal
securities law may not respect securities law may not respect
provisions that serve provisions that serve to limit
to limit the liability of one the liability of one series of an
series of an investment company's investment company's shares for
shares for the liabilities of the liabilities of another
another series. Accordingly, series. Accordingly, provisions
provisions relating to series relating to series liability
liability contained in the contained in the declaration of
declaration of trust may be trust may be preempted by the way
preempted by the way in which the in which the courts interpret the
courts interpret the 1940 Act. 1940 Act.
Shareholder The governing instrument There is no provision in the
Voting Rights determines shareholders' rights. Massachusetts Statute addressing
and Proxy The Declaration of Trust for the voting by the shareholders of a
Requirements Delaware Trust provides that MBT. The declaration of trust of
shareholders of record of each a MBT, however, may specify
share are entitled to one vote for matters on which shareholders are
each full share, and a fractional entitled to vote. The
vote for each fractional share. In Massachusetts Trust's Declaration
addition, shareholders are not of Trust provides that
entitled to cumulative voting shareholders are entitled to one
for electing a Trustee(s). The vote for each full share, and
Delaware Trust's Declaration of each fractional share shall be
Trust further provides that voting entitled to a proportionate
will occur separately by series, fractional vote. Further, it
and if applicable, by class, provides that all shares of the
subject to: (1) requirements of Trust entitled to vote on a
the 1940 Act where shares of the matter shall vote separately by
Trust must be voted in the series, subject to:
aggregate without reference to (1) requirements of the 1940 Act
series or class, and (2) where the where shares of the Trust to be
matter affects only a particular voted in the aggregate without
series or class. differentiation between the
separate series, and (2) where
the matter affects only a
particular series or class.
Shareholder The Delaware Act and By-Laws for The Massachusetts Trust's By-Laws
Voting Rights the Delaware Trust also permit the permits the Trust to accept
and Proxy Trust to accept proxies by any written proxies signed by the
Requirements electronic, telephonic, shareholder. A proxy shall be
(cont.) computerized telecommunications or deemed signed if the
other reasonable alternative to shareholder's name is placed
the execution of a written (whether by manual signature,
instrument authorizing the proxy typewriting, telegraphic
to act, provided such transmission or otherwise) by the
authorization is received within shareholder. No proxy shall be
eleven (11) months before the valid after the expiration of
meeting. eleven (11) months from the date
of the proxy unless otherwise
provided in the proxy.
Shareholders' The Delaware Act permits special The Declaration of Trust for the
Meetings shareholder meetings to be called Massachusetts Trust specifies the
for any purpose. However, the matters on which beneficial
governing instrument determines owners are entitled, but not
beneficial owners' rights to call necessarily required, to vote.
meetings. The Declaration of Trust The Declaration of Trust provides
for the Delaware Trust provides Trustees with a great deal of
that the Board of Trustees shall latitude as to which matters are
call shareholder meetings for the to be submitted to a vote of the
purpose of (1) electing Trustees, beneficial owners. Specifically,
(2) for such other purposes as may a shareholder has the power to
be prescribed by law, the vote only: (1) for the election
Declaration of Trust or the of Trustees, (2) to the same
By-Laws, and (3) taking action extent as shareholders of a
upon any other matter deemed by Massachusetts business
the Trustees to be necessary or corporation as to whether or not
desirable. The By-Laws further a court action, proceeding or
provide that a special meeting may claim should be brought or
be called at any time by the Board maintained derivatively or as a
of Trustees, by the Chairperson of class action, (3) for the
the Board, or by the President or termination of the trust or any
any Vice President or the series, or (4) with respect to
Secretary and any two such additional matters required
(2) Trustees. An annual by the Declaration of Trust, the
shareholders' meeting is not By-Laws, the Massachusetts
required by either the Delaware Statute, or as the Trustees
Act, the Declaration of Trust, or consider necessary or desirable.
the By-Laws. An annual shareholders' meeting
is not required by Massachusetts
law, the Declaration of Trust or
the By-Laws.
Quorum Except when a larger quorum is Unless a larger quorum is
Requirement required by applicable law, the required by applicable law, the
By-Laws, or the Declaration of By-Laws, or the Declaration of
Trust, the Delaware Trust's Trust, the Massachusetts Trust's
Declaration of Trust provides that Declaration of Trust provides
forty percent (40%) of the shares that forty percent (40%) of the
entitled to vote shall constitute shares entitled to vote on a
a quorum at a shareholder's matter shall constitute a quorum
meeting. Further, the Declaration at a shareholders' meeting.
of Trust provides that when a Further, the Declaration of Trust
quorum is present, a majority of provides that when a quorum is
the votes cast shall decide any present at any meeting, a
issues and a plurality shall elect majority of the shares voted
a Trustee, unless a larger vote is shall decide any questions and a
required by the Declaration of plurality shall elect a Trustee,
Trust, the By-Laws or by unless a larger vote is required
applicable law. by the Declaration of Trust, the
By-Laws or by applicable law.
Action Without Delaware law permits the governing The Massachusetts Trust's
Shareholders' instrument to set forth the Declaration of Trust provides
Meeting procedure whereby action required that any action taken by
to be approved by shareholders at shareholders may be taken without
a meeting may be done by consent. a meeting if shareholders holding
The Delaware Trust's Declaration a majority of the shares entitled
of Trust provides that any action to vote on the matter (or such
taken by shareholders may be taken larger proportion thereof as
without a meeting if shareholders shall be required by any express
holding a majority of the shares provision of the Declaration of
entitled to vote on the matter (or Trust or By-Laws) and holding a
such larger proportion thereof as majority (or such larger
shall be required by any express proportion as aforesaid) of the
provision of the Declaration of shares of any series entitled to
Trust or By-Laws) and holding a vote separately on the matter
majority (or such larger consent to the action in writing.
proportion as aforesaid) of the
shares of any series (or class)
entitled to vote separately on the
matter consent to the action in
writing.
Amendments The Delaware Act provides broad The Massachusetts Statute
to Governing flexibility with respect to provides that the Trustees shall,
Documents amendments to the governing within thirty 30) days after the
documents of a DBT. adoption of any amendment to the
declaration of trust, file a copy
with the Secretary of State of
Massachusetts and with the clerk
of every city or town where the
trust has a usual place of
business.
The Delaware Trust's Declaration The Massachusetts Trust's
of Trust provides that the Declaration of Trust may be
Declaration of Trust may be amended at any time by an
restated and/or amended at any instrument in writing signed by a
time by an instrument in writing majority of the Trustees.
signed by a majority of the then
Trustees, and if required, by
approval of such amendment by
shareholders in accordance with
the quorum and required voting
requirements as set forth in the
Declaration of Trust.
The By-Laws may be amended or The By-Laws may be amended or
repealed by the affirmative vote repealed by a majority of the
or written consent of a majority outstanding shares entitled to
of the outstanding shares entitled vote, or by the Board of Trustees
to vote, or by the Board of subject to the rights of the
Trustees subject to the rights of shareholders.
the shareholders.
Matters The Delaware Act affords Trustees The Massachusetts Trust's
Requiring the ability to easily adapt a DBT Declaration of Trust provides
Shareholder to future contingencies. For Trustees with a great deal of
Approval example, Trustees have the latitude as to which matters are
authority to incorporate a DBT, to to be submitted to a vote of the
merge or consolidate with another beneficial owners. Specifically,
entity, to cause multiple series a shareholder has the power to
of a DBT to become separate vote only:
trusts, to change the domicile or
to liquidate a DBT, all without (1) for the election of
having to obtain a shareholder Trustees;
vote. More importantly, in cases
where funds are required or do (2) to the same extent as
elect to seek shareholder approval shareholders of a Massachusetts
for transactions, the Delaware Act business corporation as to
provides great flexibility with whether or not a court action,
respect to the quorum and voting proceeding or claim should be
requirements for approval of such brought or maintained
transactions. derivatively or as a class
action;
(3) for the termination of the
Trust or any series; or
(4) with respect to such
additional matters required by
the Declaration of Trust, the
By-Laws, the Massachusetts
Statute, or as the Trustees
consider necessary or desirable.
The Declaration of Trust for the
Delaware Trust, consistent with
the Delaware Act, affords
shareholders the power to vote on
the following matters:
(1) the election or removal of
Trustees;
(2) as required by the
Declaration
of Trust, the By-Laws, the 1940
Act or the Delaware Trust's
registration statement; and
(3) other matters deemed by the
Board of Trustees to be
necessary or desirable.
The Delaware Trust's Declaration The Massachusetts Trust's
of Trust provides that when a Declaration of Trust provides
quorum is present, a majority of that when a quorum
votes cast shall decide any is present at any meeting, a
issues, and a plurality shall majority of the shares voted
elect a Trustee(s), unless a shall decide any questions and a
different vote is required by the plurality shall elect a
Declaration of Trust, By-Laws, or Trustee(s), unless a larger vote
applicable law. is required by the Declaration of
Trust, the By-Laws, or applicable
law.
Record The Delaware Act permits a There is no comparable record
Date/Notice governing instrument to provide date provision in the
for the establishment of record Massachusetts Statute.
dates for determining voting
rights.
Record The Declaration of Trust for the The Declaration of Trust and the
Date/Notice Delaware Trust provides that the By-Laws of the Massachusetts
(cont.) Board of Trustees may fix in Trust permit the Trustees from
advance a record date which shall time to time to set the record
not be more than ninety (90) days, date for shareholder meeting to
nor less than seven (7) days, be not more than ninety (90)
before the date of any such days, nor less than seven (7)
meeting. days, before the date of any
shareholder meeting.
The Declaration of Trust provides The By-Laws provide that the
that the record date for record date for determining
determining shareholders entitled shareholders entitled to give
to give consent to action in consent to action in writing
writing without a meeting is without a meeting is determined
determined in the following in the following manner: (i) when
manner: (i) when the Board of the Board of Trustees has not
Trustees has not taken prior taken prior action, the record
action, the record date will be date will be set on the day on
set on the day on which the first which the first written consent
written consent is given; or is given; or (ii) when the Board
(ii) when the Board of Trustees of Trustees has taken prior
has taken prior action, the record action, the record date will be
date will be set at the close of set at the close of business on
business on the day on which the the day on which the Board of
Board of Trustees adopts the Trustees adopts the resolution
resolution relating to that action relating to that action or the
or the seventy-fifth (75th) day seventy-fifth (75th) day before
before the date of such other the date of such other action,
action, whichever whichever is later.
is later.
The By-Laws for the Delaware Trust The By-Laws for the Massachusetts
provide that all notices of Trust also provide that all
shareholder meetings shall be sent notices of shareholder meetings
or otherwise given to shareholders shall be sent to shareholders not
not less than seven (7) days nor less than seven (7) days nor more
more than seventy-five (75) days than seventy-five (75) days
before the date of the meeting. before the date of the meeting.
Removal of The Delaware Act is silent with The Massachusetts Statute is also
Trustees respect to the removal of silent with respect to the
Trustees. However, the Delaware removal of Trustees. The
Trust's Declaration of Trust Massachusetts Trust's Declaration
states that the Board of Trustees, of Trust provides that the Board
by action of a majority of the of Trustees, by action of a
then Trustees at a duly majority of the then Trustees at
constituted meeting, may fill a duly constituted meeting, may
vacancies in the Board of Trustees fill vacancies or remove Trustees
or remove Trustees with or without with or without cause.
cause.
Shareholder The Delaware Act sets forth the The Massachusetts Trust's By-Laws
Rights of rights of shareholders to gain provides that the minutes and
Inspection access to and receive copies of accounting books and records
certain Trust documents and shall be open for inspection upon
records. This right is qualified the written demand of any
by the extent otherwise provided shareholder or holder of a voting
in the governing instrument of the trust certificate at any
Trust as well as a reasonable reasonable time during usual
demand standard related to the business hours for a purpose
shareholder's interest as an owner reasonably related to the
of the DBT. holder's interests as a
shareholder or as the holder of a
voting trust certificate. The
inspection may be made in person
or by an agent or attorney and
shall include the right to copy
and make extracts.
Shareholder Consistent with Delaware law, the
Rights of By-Laws of the Delaware Trust
Inspection provides that the minutes and
(cont.) accounting books and records shall
be open to inspection upon the
written demand of any shareholder
or holder of a voting trust
certificate at any reasonable time
during usual business hours for a
purpose reasonably related to the
holder's interest as a shareholder
or as the holder a voting trust
certificate. The inspection may be
made in person or by an agent or
attorney and shall include the
right to copy and make extracts.
Shareholder Personal liability is limited by The Massachusetts Statute does
Liability the Delaware Act to the amount of not include an express provision
investment in the trust, and may relating to the limitation of
be further limited or restricted liability of the beneficial
by the governing instrument. owners of a business trust.
Therefore, the owners of a MBT
could potentially be liable for
obligations of the trust,
notwithstanding an express
provision in the governing
instrument stating that the
beneficial owners are not
personally liable in connection
with trust property or the acts,
obligations or affairs of the
trust.
Consistent with the Delaware Act, The Massachusetts Trust's
the Declaration of Trust for the Declaration of Trust provides
Delaware Trust provides that its that neither the Trust nor the
Trustees, officers, employees, and Trustees, nor any officer,
agents do not have the power to employee or agent of the Trust
personally bind a shareholder. shall have any power to bind
Shareholders of the DBT are personally any shareholder.
entitled to the same limitation of
personal liability extended to
stockholders of a private
corporation organized for profit
under the general corporation law
of the State of Delaware.
Trustee Subject to the declaration of The Massachusetts Statute does
Liability trust, the Delaware Act provides not include an express provision
that a Trustee, when acting in limiting the liability of the
such capacity, may not be held Trustees of a MBT. The Trustees
personally liable to any person of a MBT could potentially be
other than the DBT or a beneficial held personally liable for the
owner for any act, omission or obligations of the trust.
obligation of the DBT or any
Trustee. A Trustee's duties and
liabilities to the DBT and its
beneficial owners may be expanded
or restricted by the provisions of
the Declaration of Trust.
Trustee The Declaration of Trust for the The Massachusetts Trust's
Liability Delaware Trust provides that the Declaration of Trust does provide
(cont.) Trustees shall not be liable or that the Trustees shall not be
responsible for any neglect or responsible for any neglect or
wrongdoing of any officer, agent, wrong-doing of any officer, agent
employee, manager or principal or employee, manager, or
underwriter of the Delaware Trust, principal underwriter of the
nor shall any Trustee be Trust, nor for the act or
responsible for the act or omission of another Trustee.
omission of any other Trustee. However, nothing in the
Trustees and officers of the Declaration of Trust protects a
Delaware Trust may be held liable Trustee against any liability for
to the Trust and/or shareholders which the Trustee would otherwise
solely for such Trustee's or be subject by reason of willful
officer's own willful misfeasance, misfeasance, bad faith, gross
bad faith, gross negligence or negligence or reckless disregard
reckless disregard of the duties of the duties involved in the
involved in the conduct of the conduct of the office of Trustee.
office of such Trustee or officer,
and may not be held liable for
errors of judgment or mistakes of
fact or law. In addition, the
Declaration of Trust also provides
that the Trustees acting in their
capacity as Trustees, shall not be
personally liable for acts done by
or on behalf of the Delaware Trust.
Indemnification The Delaware Act permits a DBT to Although the Massachusetts
indemnify and hold harmless any Statute is silent as to the
Trustee, beneficial owner or agent indemnification of Trustees,
from and against any and all officers and shareholders,
claims and demands. Consistent indemnification is expressly
with the Delaware Act, the provided for in the Massachusetts
Declaration of Trust for the Trust's Declaration of Trust and
Delaware Trust provides for the By-Laws. The Declaration of Trust
indemnification of officers and provides that Trustees shall be
Trustees from and against any and entitled and empowered to the
all claims and demands arising out fullest extent permitted by law
of or related to the performance to provide by resolution or in
of their duties as an officer or the By-Laws for indemnification
Trustee. The Delaware Trust will out of the Trust's assets for
not indemnify, hold harmless or liability and for all expenses
relieve from liability any reasonably incurred or paid or
Trustees or officers for those expected to be paid by a Trustee
acts or omissions for which they or officer in connection with any
are liable if such conduct claim, action, suit or
constitutes willful misfeasance, proceeding. However, the
bad faith, gross negligence or Declaration of Trust of the
reckless disregard of their duties. Massachusetts Trust excludes
indemnification for willful
misfeasance, bad faith, and gross
negligence or reckless disregard
of one's duties.
The Declaration of Trust of the The Massachusetts Statute does
Delaware Trust also provides that not have a specific provision
any shareholder or former permitting indemnification of
shareholder that is exposed to shareholders. The Massachusetts
liability by reason of a claim or Trust's Declaration of Trust,
demand related to having been a however, does provide for
shareholder, and not because of indemnification of a shareholder
his or her acts or omissions, or former shareholder.
shall be entitled or be held
harmless and indemnified out of
the assets of the Delaware Trust.
Insurance The Delaware Act does not contain There is no provision in the
a provision specifically related Massachusetts statute relating to
to insurance. The Delaware Trust's insurance. The Massachusetts
Declaration of Trust provides that Trust's Declaration of Trust
the Trustees shall be entitled and permits the purchase of liability
empowered to the fullest extent insurance out of the
permitted by law to purchase with Massachusetts Trust's assets on
the Delaware Trust's assets behalf of the Trustees, officers
insurance for liability and for and agents of the Massachusetts
all expenses reasonably incurred Trust. Insurance may be
or paid or expected to be paid by maintained for any agent of the
a Trustee or officer in connection Massachusetts Trust only to the
with any claim or proceeding in extent that the Massachusetts
which he or she becomes involved Trust would have the power to
by virtue of his or her capacity indemnify the agent against such
(or former capacity) with the liability.
Delaware Trust, whether or not the
Delaware Trust would have the
power to indemnify against such
liability.
The By-Laws of the Delaware Trust The By-Laws of the Massachusetts
permit insurance coverage only to Trust permit insurance coverage
the extent that the Delaware Trust only to the extent that the
would have the power to indemnify Massachusetts Trust would have
against such liability. the power to indemnify the agent
against such liability.
</TABLE>
158 Proxy 09/99
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
PROXY PROXY
SPECIAL SHAREHOLDERS' MEETING OF
FRANKLIN RISING DIVIDENDS FUND
OCTOBER 26, 1999
The undersigned hereby revokes all previous proxies for his or her shares and
appoints Rupert H. Johnson, Jr., Harmon E. Burns, Deborah R. Gatzek, and
Leiann Nuzum, and each of them, proxies of the undersigned with full power of
substitution to vote all shares of Franklin Rising Dividends Fund (the
"Fund") that the undersigned is entitled to vote at the Fund's Special
Meeting to be held at 777 Mariners Island Boulevard, San Mateo, CA 94404 at
10:00 a.m., Pacific time on October 26, 1999, including any adjournments
thereof, upon such business as may properly be brought before the Meeting.
IMPORTANT: PLEASE SEND IN YOUR PROXY TODAY.
YOU ARE URGED TO DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY. THIS WILL
SAVE THE EXPENSE OF FOLLOW-UP LETTERS TO SHAREHOLDERS WHO HAVE NOT RESPONDED.
Note: Please sign exactly as your name appears on
the proxy. If signing for estates, trusts or
corporations, title or capacity should be stated.
If shares are held jointly, each holder must sign.
_________________________________________________
Signature
_________________________________________________
Signature
_________________________________________________
Date
IMPORTANT: PLEASE SIGN AND MAIL IN YOUR PROXY...TODAY
(Please see reverse side)
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
REQUIRED IF MAILED IN THE U.S.
Please detach at perforation before mailing.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE FRANKLIN
MANAGED TRUST (THE "TRUST"), ON BEHALF OF ITS SERIES, FRANKLIN RISING
DIVIDENDS FUND (THE "FUND"). IT WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THIS PROXY SHALL BE VOTED IN FAVOR OF PROPOSALS 1
(INCLUDING ALL NOMINEES FOR TRUSTEE), 2, 3, 4 (INCLUDING ALL SUB PROPOSALS),
5, AND 6. IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING ABOUT WHICH
THE PROXYHOLDERS WERE NOT AWARE PRIOR TO THE TIME OF THE SOLICITATION,
AUTHORIZATION IS GIVEN THE PROXYHOLDERS TO VOTE IN ACCORDANCE WITH THE VIEWS
OF MANAGEMENT ON SUCH MATTERS. MANAGEMENT IS NOT AWARE OF ANY SUCH MATTERS.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF FOR all Vote Withheld FOR all nomine
PROPOSALS 1 - 6. nominees for all (except as mark
to the contrary)
1. Election of Trustees. To withhold authority to vote for any individual
nominee, strike a line through the nominees name in the list below. [ ] [ ] [ ]
Frank T. Crohn William J. Lippman Charles Rubens II Leonard Rubin
FOR AGAINST ABSTAIN
2. To ratify the selection of Tait, Weller & Baker as the Trust's independent
auditors for the Trusts fiscal year ending September 30, 1999. [ ] [ ] [ ]
3. To modify the Funds current criteria for the selection of portfolio
companies related to the issuers treatment of debt on its balance sheet, [ ] [ ] [ ]
which fundamental.
4. To approve amendments to certain of the Funds fundamental investment [ ] [ ] [ ]
restrictions (includes seven (7) Sub Proposals).
4.a. To amend the Funds fundamental investment restriction regarding [ ] [ ] [ ]
borrowing.
4.b. To amend the Funds fundamental investment restriction regarding [ ] [ ] [ ]
underwriting.
4.c. To amend the Funds fundamental investment restriction regarding [ ] [ ] [ ]
lending.
4.d. To amend the Funds fundamental investment restrictions regarding [ ] [ ] [ ]
investment in real estate and commodities.
4.e. To amend the Funds fundamental investment restriction regarding [ ] [ ] [ ]
issuing senior securities.
4.f. To amend the Funds fundamental investment restriction regarding [ ] [ ] [ ]
industry concentration.
4.g. To amend the Funds fundamental investment restriction regarding [ ] [ ] [ ]
diversification of investments.
5. To approve the elimination of certain of the Funds fundamental [ ] [ ] [ ]
investment restrictions.
6. To approve the reorganization of the Trust from a Massachusetts [ ] [ ] [ ]
business trust to a Delaware business trust.
GRANT WITHHOLD ABSTAIN
7. To grant the proxyholders the authority to vote upon any other business
that may properly come before the Meeting or any adjournments thereof. [ ] [ ] [ ]
</TABLE>
IMPORTANT: PLEASE SIGN AND MAIL IN YOUR PROXY...TODAY
