SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Franklin Gold Fund
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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[LOGO]
FRANKLIN(R)TEMPLETON(R)
FRANKLIN GOLD FUND
IMPORTANT SHAREHOLDER INFORMATION
These materials are for a special shareholders' meeting scheduled for March
14, 2000 at 2:00 p.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 Board of Directors'
recommendations on page 1 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 SHAREHOLER
COMMUNICATIONS/ALAMO AT DIAL BEN AT 1-800/DIAL BEN(R) (1-800/342-5236).
[NOTE TO DISTRIBUTION GROUP: INTERNET VOTING IS LEGALLY PERMISSIBLE WITH
THIS FUND. IT IS STILL BEING DETERMINED IF WE WILL UTILIZE INTERNET VOTING
THROUGH A VENDOR'S WEB SITE OR NOT OFFER IT AT THIS TIME. ]
TELEPHONE AND INTERNET VOTING
FOR YOUR CONVENIENCE, YOU MAY BE ABLE TO VOTE BY TELEPHONE OR THROUGH THE
INTERNET, 24 HOURS A DAY. IF YOUR ACCOUNT IS ELIGIBLE, A CONTROL NUMBER AND
SEPARATE INSTRUCTIONS ARE ENCLOSED.
This page intentionally left blank.
A LETTER FROM THE CHAIRMAN
Dear Fellow Shareholders:
I am writing to request that you consider nine matters relating to your
investment in Franklin Gold Fund (the "Fund"). The Board of Directors asks
that you cast your vote in favor of:
1. Electing a Board of Directors;
2. Ratifying the appointment by the Directors of
PricewaterhouseCoopers LLP as the independent auditors for the Fund
for the fiscal year ending July 31, 2000;
3. Modifying the Fund's current investment criteria to include other
precious metals (platinum, palladium and silver), in addition to
gold as the principal investment focus, and amending the Fund's
charter to change the Fund's name to reflect its revised investment
focus;
4. Changing the classification of the Fund from a diversified to a
non-diversified fund;
5. Amending five of the Fund's fundamental investment restrictions;
6. Eliminating six of the Fund's fundamental investment restrictions;
7. Reorganizing the Fund from a California corporation to a Delaware
business trust;
8. Amending the Fund's charter to increase the Fund's authorized
capital in the event that Proposal 7 is not approved; and
9. Granting proxyholders the authority to vote upon any other business
that may properly come before the meeting or any adjournment.
We urge you to confirm the Board's recommendations by electing the nominated
Directors and ratifying the selection of the independent auditors.
We have proposed modifying the Fund's investment criteria to include other
precious metals such as platinum, palladium and silver, in addition to gold,
as the Fund's principal investment focus in order to expand the Fund's
ability to invest in a broader range of companies thereby increasing Fund's
liquidity. The proposed change is intended to allow the Fund to better
manage the volatility of changing market conditions. A change in the Fund's
investment focus also will require amending the Fund's charter to change to
the Fund's name, since gold would no longer be the only metal in which the
Fund would be permitted to invest.
We also have proposed a change to the classification of the Fund from a
diversified to a non-diversified investment company. If approved, the Fund
would be permitted to invest all of its assets in the securities of
relatively few issuers. In addition, we have 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. We also have proposed that the Fund 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. Finally,
in the event that the proposal to reorganize the Fund from a California
corporation to a Delaware business trust is not approved, you are being asked
to approve an amendment to the Fund's charter to increase the number of
shares that the Fund is authorized to sell. An increase in capital would
enable the Fund to increase its asset size, which would provide the Fund with
additional investment opportunities.
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 Fund, we hope that this format will
be helpful to you.
Your vote is important to the Fund. On behalf of the Directors, thank you in
advance for considering these issues and for promptly returning your proxy
card.
Sincerely,
---------------------------------
Charles B. Johnson
CHAIRMAN OF THE BOARD
[LOGO]
FRANKLIN(R)TEMPLETON(R)
FRANKLIN GOLD FUND
NOTICE OF SPECIAL SHAREHOLDERS' MEETING
TO BE HELD ON MARCH 14, 2000
A Special Shareholders' Meeting ("Meeting") of Franklin Gold Fund
(the "Fund"), will be held at the Fund's office at 777 Mariners Island
Boulevard, San Mateo, California 94404, at 2:00 p.m. (Pacific time), on March
14, 2000.
During the Meeting, shareholders of the Fund will vote on the following
Proposals and Sub-Proposals:
1. To elect a Board of Directors.
2. To ratify the selection of PricewaterhouseCoopers LLP as the
independent auditors for the Fund for the fiscal year ending
July 31, 2000.
3. To modify the Fund's investment focus and to change the Fund's
name (includes two (2) Sub-Proposals):
(a) To modify the Fund's current investment criteria to
include other precious metals (platinum, palladium and
silver), in addition to gold as the principal investment focus;
(b) To amend the Fund's charter to change the Fund's name to
reflect its new investment focus, in the event that
Sub-Proposal 3(a) is approved.
4. To change the classification of the Fund from a diversified to
a non-diversified fund.
5. To approve amendments to certain of the Fund's fundamental
investment restrictions (includes five (5) 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 restriction
regarding investments in real estate and commodities; and
(e) To amend the Fund's fundamental investment restriction
regarding issuing senior securities.
6. To approve the elimination of certain of the Fund's
fundamental investment restrictions.
7. To approve the reorganization of the Fund from a California
corporation to a Delaware business trust.
8. To amend the Fund's charter to increase the Fund's authorized
capital in the event that Proposal 7 is not approved.
9. To grant the proxyholders authority to vote upon any other
business that may properly come before the Meeting or any
adjournment thereof.
The Board of Directors has fixed January 24, 2000 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 Directors,
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Deborah R. Gatzek
Secretary
San Mateo, California
February 1, 2000
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PLEASE SIGN AND RETURN YOUR PROXY CARD IN THE SELF-ADDRESSED
ENVELOPE REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
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TABLE OF CONTENTS
PAGE
PROXY STATEMENT
Question and Answer............................................................
Proposal 1: To Elect a Board of Directors......................................
Proposal 2: To Ratify the Selection of PricewaterhouseCoopers LLP as
Independent Auditors for the Fund..................................
Proposal 3: To Modify the Fund's Investment Focus and To Change the Fund's
Name (Includes Two (2) Sub-Proposals) .............................
3a: To Modify the Fund's Current Investment Criteria to Include Other
Precious Metals as the Principal Investment Focus.................
3b: To Amend the Fund's Charter to Change the Fund's Name to Reflect
Its Revised Investment Focus, in the Event that Sub-Proposal 3a is
Approved..........................................................
Proposal 4: To Change the Classification of the Fund From a Diversified to a
Non-Diversified Fund...............................................
Proposal 5: To Approve Amendments to Certain of the Fund's Fundamental
Investment Restrictions (Includes Five (5) Sub-Proposals)..........
5a: Borrowing.........................................................
5b: Underwriting......................................................
5c: Lending...........................................................
5d: Real Estate and Commodities.......................................
5e: Issuing Senior Securities.........................................
Proposal 6: To Approve the Elimination of Certain of the Fund's Fundamental
Investment Restrictions............................................
Proposal 7: To Approve the Reorganization of the Fund From a California
Corporation to a Delaware Business Trust...........................
Proposal 8: To Amend the Fund's Charter to Increase the Fund's Authorized
Capital in the Event that Proposal 7 is Not Approved...............
Proposal 9: Other Business.....................................................
TABLE OF CONTENTS (CONTINUED)
EXHIBITS
Exhibit A: Fundamental Investment Restrictions
Proposed to be Amended or Eliminated................................
Exhibit B: Form of Agreement and Plan of Reorganization........................
Exhibit C: Comparison and Significant Differences Between Delaware Business
Trusts and California Corporations..................................
FRANKLIN GOLD FUND
PROXY STATEMENT
o INFORMATION ABOUT VOTING
WHO IS ASKING FOR MY VOTE?
The Board of Directors of Franklin Gold Fund (the "Fund") in connection
with the Special Shareholders' Meeting of the Fund to be held March 14,
2000 (the "Meeting"), have requested your vote on several matters.
WHO IS ELIGIBLE TO VOTE?
Shareholders of record at the close of business on January 24, 2000 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 February 1 , 2000.
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 Directors;
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors for the Fund for the fiscal year ending July 31, 2000;
3. To modify the Fund's current investment criteria to include other
precious metals (platinum, palladium and silver) in addition to gold as
the principal investment focus; and to amend the Fund's charter to
change the Fund's name to reflect its revised investment focus;
4. To change the classification of the Fund from a diversified to a
non-diversified fund;
5. To amend certain of the Fund's fundamental investment restrictions;
6. To eliminate certain of the Fund's fundamental investment restrictions;
7. To approve the reorganization of the Fund from a California corporation
to a Delaware business trust;
8. To amend the Fund's charter to increase the Fund's authorized capital in
the event that Proposal 7 is not approved; and
9. To grant the proxyholders authority to vote upon any other business that
may properly come before the Meeting or any adjournment thereof.
HOW DO THE DIRECTORS RECOMMEND THAT I VOTE?
The Directors unanimously recommend that you vote:
1. FOR the election of all nominees as Directors;
2. FOR the ratification of the selection of PricewaterhouseCoopers LLP as
independent auditors for the Fund for the fiscal year ending July 31,
2000;
3. FOR the modification of the Fund's current investment criteria to
include other precious metals (platinum, palladium and silver) in
addition to gold as the principal investment focus, and FOR the
amendment to the Fund's charter to change in the Fund's name to reflect
its revised investment focus;
4. FOR the change of the classification of the Fund from a diversified to a
non-diversified fund;
5. FOR the amendment of each of the of the Fund's fundamental investment
restrictions proposed to be amended;
6. FOR the elimination of each of the Fund's fundamental investment
restrictions proposed to be eliminated;
7. FOR the reorganization of the Fund from a California corporation to a
Delaware business trust;
8. FOR the amendment to the Fund's charter to increase in the Fund's
authorized capital in the event that Proposal 7 is not approved; and
9. FOR the proxyholders to vote, in their discretion, on any other
business as may properly come before the Meeting or any adjournment
thereof.
HOW DO I ENSURE THAT MY VOTE IS ACCURATELY RECORDED?
You may attend the Meeting and vote in person or you may complete and
return the proxy card. [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 9, your proxy will be voted as you indicate. If you
simply sign and date the proxy card, but don't specify a vote for any of
the Proposals 1 through 9, your shares will be voted IN FAVOR of the
nominees for the Board of Directors (Proposal 1), IN FAVOR of ratifying the
selection of PricewaterhouseCoopers LLP as independent auditors (Proposal
2), IN FAVOR of modifying the Fund's current investment policy to include
other precious metals, and amending the Fund's charter to change the Fund's
name to reflect its revised investment focus, (Sub-Proposals 3a-3b), IN
FAVOR of changing the classification of the Fund from a diversified to a
non-diversified fund (Proposal 4), IN FAVOR of amending certain of the
Fund's fundamental investment restrictions (Sub-Proposals 5a-5e), IN FAVOR
of eliminating certain of the Fund's fundamental investment restrictions,
(Proposal 6), IN FAVOR of the reorganization of the Fund from a California
corporation to a Delaware business trust (Proposal 7), IN FAVOR of amending
the Fund's charter to increase the Fund's authorized capital (Proposal 8),
and/or 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 9).
MAY I REVOKE MY PROXY?
You may revoke your proxy at any time before it is voted by: (1) delivering
a written revocation to the Secretary of the Fund, (2) forwarding to the
Fund a later-dated proxy card that is received by the Fund at or prior to
the Meeting, or (3) attending the Meeting and voting in person.
THE PROPOSALS
PROPOSAL 1: TO ELECT A BOARD OF DIRECTORS
WHO ARE THE NOMINEES FOR THE BOARD OF DIRECTORS?
The Board of Directors consists of nine (9) persons. The role of the
Directors is to provide general oversight of the Fund's business, and to
ensure that the Fund is operated for the benefit of shareholders. The
Directors meet monthly and review the Fund's performance. The Directors
also oversee the services provided to the Fund by the investment advisor
and the Fund's other service providers.
The nominees for election to the Board of Directors are: Frank H. Abbott,
III, Harris J. Ashton, Harmon E. Burns, S. Joseph Fortunato, Charles B.
Johnson, Rupert H. Johnson, Jr., Frank W. T. LaHaye, Gordon S. Macklin and
R. Martin Wiskemann (collectively, the "Nominees") who presently comprise
the entire Board. All nine Directors are directors and/or trustees of other
investment companies in the Franklin Group of Funds(R) and/or the Templeton
Group of Funds (collectively, the "Franklin Templeton Group of Funds"). In
addition, Harmon E. Burns, Charles B. Johnson and Rupert H. Johnson, Jr.
are senior officers 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 is primarily engaged, through its various subsidiaries,
in providing investment management, share distribution, transfer agency 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 Directors will hold office without limit in time until
death, resignation, retirement or removal, or until the next meeting of
shareholders to elect Directors, and the election and qualification of
their successors. Election of a Director is by a plurality vote, which
means that the nine 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
Directors.
Listed below for each Nominee, is a brief description of his recent
professional experience and ownership of shares of the Fund and shares of
all of the investment companies in the Franklin Templeton Group of Funds.
Shares
Beneficially
Owned in the
Fund Shares Franklin
Owned Templeton
Beneficially Group of
and % of Funds
Total (including
Outstanding the Fund) as
Name, Address, Principal Occupation on December of December
During Past Five Years and Age 31, 1999 31, 1999
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Frank H. Abbott, III (78)
1045 Sansome Street
San Francisco, CA 94111
DIRECTOR SINCE 1968
President and Director, Abbott
Corporation (an investment company);
director or trustee, as the case may be,
of 27 of the investment companies in the
Franklin Templeton Group of Funds; and
FORMERLY, Director, MotherLode Gold Mines
Consolidated (gold mining) (until 1996)
and Vacu-Dry Co. (food processing) (until
1996).
Harris J. Aston (67)
191 Clapboard Ridge Road
Greenwich, CT 06830
DIRECTOR SINCE 1982
Director, RBC Holdings, Inc. (bank
holding company) and Bar-S Foods (meat
packing company); director or trustee, as
the case may be, of 47 of the investment
companies in the Franklin Templeton Group
of Funds; and FORMERLY, President, Chief
Executive Officer and Chairman of the
Board, General Host Corporation (nursery
and craft centers) (until 1998).
Harmon E. Burns* (54)
777 Mariners Island Blvd.
San Mateo, CA 94404
VICE PRESIDENT SINCE 1986 AND DIRECTOR
SINCE 1993
Vice Chairman, Member - Office of the
Chairman and Director, 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 51 of the
investment companies in the Franklin
Templeton Group of Funds.
S. Joseph Fortunato (67)
Park Avenue at Morris County
P.O. Box 1945
Morristown, NJ 07962-1945
DIRECTOR SINCE 1989
Member of the law firm of Pitney, Hardin,
Kipp & Szuch; and director or trustee, as
the case may be, of 49 of the investment
companies in the Franklin Templeton Group
of Funds.
Charles B. Johnson*+ (67)
777 Mariners Island Blvd.
San Mateo, CA 94404
CHAIRMAN OF THE BOARD SINCE 1993 AND
DIRECTOR SINCE 1976
Chairman of the Board, Chief Executive
Officer, Member - Office of the Chairman
and Director, Franklin Resources, Inc.;
Chairman of the Board and Director,
Franklin Advisers, Inc. and Franklin
Investment Advisory Services, Inc.; Vice
President, Franklin Templeton
Distributors, Inc.; Director,
Franklin/Templeton Investor Services,
Inc. and Franklin Templeton Services,
Inc.; officer and/or director or trustee,
as the case may be, of most of the other
subsidiaries of Franklin Resources, Inc.
and of 48 of the investment companies in
the Franklin Templeton Group of Funds.
Rupert H. Johnson, Jr.* + (59)
777 Mariners Island Blvd.
San Mateo, CA 94404
VICE PRESIDENT SINCE 1973 AND DIRECTOR
SINCE 1982
Vice Chairman, Member - Office of the
Chairman and Director, Franklin
Resources, Inc.; Executive Vice President
and Director, Franklin Templeton
Distributors, Inc.; 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 51 of
the investment companies in the Franklin
Templeton Group of Funds.
Frank W. T. LaHaye (70)
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014
DIRECTOR SINCE 1968
General Partner, Miller & LaHaye, which
is the General Partner of Peregrine
Ventures II (venture capital firm);
Chairman of the Board and Director,
Quarterdeck Corporation (software firm);
Director, Digital Transmission Systems,
Inc. (wireless communications); director
or trustee, as the case may be, of 27 of
the investment companies in the Franklin
Templeton Group of Funds; and formerly,
Director, Fischer Imaging Corporation
(medical imaging systems) and General
Partner, Peregrine Associates, which was
the General Partner of Peregrine Ventures
(venture capital firm).
Gordon S. Macklin (71)
8212 Burning Tree Road
Bethesda, MD 20817
DIRECTOR SINCE 1997
Director, Fund American Enterprises
Holdings, Inc. (holding company), Martek
Biosciences Corporation, MCI WorldCom
(information services), MedImmune, Inc.
(biotechnology) and Spacehab, Inc.
(aerospace services); director or
trustee, as the case may be, of 47 of the
investment companies in the Franklin
Templeton Group of Funds; and FORMERLY,
Chairman, White River Corporation
(financial services) and Hambrecht and
Quist Group (investment banking),
President, National Association of
Securities Dealers, Inc. and Director,
Real 3D (software).
R. Martin Wiskemann* (72)
777 Mariners Island Blvd.
San Mateo, CA 94404
PRESIDENT SINCE 1993 AND DIRECTOR SINCE
1968
Senior Vice President, Portfolio Manager
and Director, Franklin Advisers, Inc.;
Senior Vice President, Franklin
Management, 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; and
FORMERLY, Vice President and Director,
ILA Financial Services, Inc. (until
1998).
*This director is an "interested person" of the Fund 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 Directors. Messrs. Burns, Johnson, Johnson, Jr. and Wiskemann are
interested persons due to their employment affiliation with Resources and
with Franklin Advisers, Inc., the Fund's investment manager. The remaining
Directors ("noninterested Directors") are not interested persons of the Fund.
+ Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
[** Less than 1% of the outstanding shares of the Fund.]
HOW OFTEN DO THE DIRECTORS MEET AND WHAT ARE THEY PAID?
The Directors anticipate meeting at least 11 times during the current fiscal
year to review the operations of the Fund and the Fund's investment
performance. The Directors also oversee the investment management services
furnished to the Fund by Franklin Advisers, Inc. ("Franklin Advisers") and
various other service providers. Franklin Advisers is wholly owned by
Resources. The Fund pays the noninterested Directors $150 per month plus
$150 per meeting attended. Board members who serve on the Audit Committee of
the Fund and other funds in the Franklin Templeton Group of Funds receive a
flat fee of $2,000 per committee meeting attended, a portion of which is
allocated to the Fund. Members of a committee are not compensated for any
committee meeting held on the day of a board meeting.
During the fiscal year ended July 31, 1999 there were 11 meetings of the
Board and [___] meetings of the Audit Committee. [Each of the Directors
attended at least 75% of the total number of meetings of the Board. There
was 100% attendance at the meetings of the Audit Committee.]
Certain Directors and executive officers ("Executive Officers") of the Fund
are shareholders of Resources and may be deemed to receive indirect
remuneration due to their participation in the management fees and other fees
received from the Franklin Templeton Group of Funds by Franklin Advisers and
its affiliates. Franklin Advisers or its affiliates pay the salaries and
expenses of the Executive Officers. No pension or retirement benefits are
accrued as part of Fund expenses.
The following table shows the fees paid to noninterested Directors by the
Fund and by the Franklin Templeton Group of Funds.
NUMBER OF BOARDS
TOTAL FEES IN THE FRANKLIN
TOTAL FEES RECEIVED FROM TEMPLETON GROUP
NAME RECEIVED THE FRANKLIN OF FUNDS ON
FROM THE TEMPLETON GROUP WHICH EACH
FUND 1 ($) OF FUNDS 2 ($) Serves 3
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Frank H. Abbott, III 2,345 27
Harris J. Ashton 2,745 47
S. Joseph Fortunato 2,560 49
Frank W.T. LaHaye 2,495 27
Gordon S. Macklin 2,745 47
1. For the fiscal year ended July 31, 1999.
2. 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 53 registered investment
companies, with approximately 155 U.S. based funds or series.
3. For the calendar year ended December 31, 1999.
The preceding table indicates the total fees paid to Directors by the Fund
individually, and by all of the funds in the Franklin Templeton Group of
Funds. These Directors also serve as directors or trustees of other
investment companies in the Franklin Templeton Group of Funds, many of
which hold meetings at different dates and times. The Directors believe
that having the same individuals serving on the boards of many of the funds
in the Franklin Templeton Group of Funds enhances the ability of each fund
to obtain, at a relatively modest cost to each separate fund, the services
of high caliber, experienced and knowledgeable noninterested Directors who
can more effectively oversee the management of the funds.
Board members historically have followed a policy of having substantial
investments in one or more of the funds in the Franklin Templeton Group of
Funds, as is consistent with their individual financial goals. In February
1998, this policy was formalized through adoption of a requirement that
each board member invest one-third of fees received for serving as a
director or trustee of a Templeton fund in shares of one or more Templeton
funds, and one-third of fees received for serving as a director or trustee
of a Franklin fund in shares of one or more Franklin funds until the value
of such investments equals or exceeds five times the annual fees paid such
Board member. Investments in the name of family members or entities
controlled by a Board member constitute fund holdings of such Board member
for purposes of this policy, and a three year phase-in period applies to
such investment requirements for Board members elected for the first time
to a Board. In implementing such policy, a Board member's fund holdings
existing on February 27, 1998, are valued as of such date with subsequent
investments valued at cost.
WHO ARE THE EXECUTIVE OFFICERS OF THE FUND?
Executive Officers of the Fund are appointed by the Directors and serve at
the pleasure of the Board. Listed below, for each Executive Officer (with
the exception of Messrs. Burns, Johnson, Johnson, Jr. and Wiskemann, whose
biographical information is included in Proposal 1), is a brief description
of his or her recent professional experience:
-----------------------------------------------------------------
NAME, ADDRESS, AND PRINCIPAL OCCUPATION
OFFICES WITH THE FUND DURING PAST FIVE YEARS AND AGE
-----------------------------------------------------------------
Martin L. Flanagan President, Member - Office of
777 Mariners Island Blvd. the President, Franklin
San Mateo, CA 94404 Resources, Inc.; Senior Vice
VICE PRESIDENT AND CHIEF President, Chief Financial
FINANCIAL OFFICER SINCE 1995 Officer and Director,
Franklin/Templeton Investor
Services, Inc.; Senior Vice
President and Chief Financial
Officer, 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 51 of
the investment companies in
the Franklin Templeton Group
of Funds.
Age 39.
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Deborah R. Gatzek Senior Vice President and
777 Mariners Island Blvd. General Counsel, Franklin
San Mateo, CA 94404 Resources, Inc.; Senior Vice
VICE PRESIDENT SINCE 1992 AND President, Franklin Templeton
SECRETARY SINCE 1986 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 52 of the
investment companies in the
Franklin Templeton Group of
Funds.
Age 51.
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Edward V. McVey Senior Vice President and
777 Mariners Island Blvd. National Sales Manager,
San Mateo, CA 94404 Franklin Templeton
VICE PRESIDENT SINCE 1985 Distributors, Inc.; and
officer of 28 of the
investment companies in the
Franklin Templeton Group of
Funds.Age 62.
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Kimberley Monasterio Vice President, Franklin
777 Mariners Island Blvd. Templeton Services, Inc.; and
San Mateo, CA 94404 officer of 25 of the
TREASURER AND PRINCIPAL investment companies in the
ACCOUNTING OFFICER SINCE 1999 Franklin Templeton Group of
Funds. Age 36.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE PROPOSAL 1
PROPOSAL 2: TO RATIFY THE SELECTION OF INDEPENDENT AUDITORS
HOW ARE INDEPENDENT AUDITORS SELECTED?
The Board has a standing Audit Committee consisting of Messrs. Abbott and
LaHaye, both of whom are noninterested Directors. The Audit Committee
reviews the maintenance of the Fund's records and the safekeeping
arrangements of the Fund's custodian, reviews both the audit and non-audit
work of the Fund's independent auditors, and submits a recommendation to
the full Board as to the selection of independent auditors.
WHICH INDEPENDENT AUDITORS DID THE BOARD SELECT?
For the current fiscal year, the Board, including all of the noninterested
Directors, selected as auditors the firm of PricewaterhouseCoopers LLP, 333
Market Street, San Francisco, CA 94105. Coopers & Lybrand L.L.P. served
as the independent auditors for the fund from ______ until 1998.
PricewaterhouseCoopers LLP is the successor entity to a 1998 combination of
Coopers & Lybrand L.L.P. with Price Waterhouse LLP. PricewaterhouseCoopers
LLP has examined and reported on the fiscal year-end financial statements,
dated July 31, 1999, and certain related U.S. Securities and Exchange
Commission ("SEC") filings. The auditors give an opinion on the financial
statements in the Fund's Annual Report to Shareholders.
PricewaterhouseCoopers LLP has advised the Fund that neither the firm nor
any of its members have any material direct or indirect financial interest
in the Fund.
Representatives of PricewaterhouseCoopers LLP are not expected to be
present at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE PROPOSAL 2
PROPOSAL 3: TO MODIFY THE FUND'S INVESTMENT FOCUS AND TO CHANGE THE FUND'S
NAME (THIS PROPOSAL INVOLVES SEPARATE VOTES ON TWO (2)
SUB-PROPOSALS):
SUB-PROPOSAL 3A: TO MODIFY THE FUND'S CURRENT INVESTMENT CRITERIA TO
INCLUDE OTHER PRECIOUS METALS (PLATINUM, PALLADIUM AND SILVER), IN ADDITION
TO GOLD AS THE PRINCIPAL INVESTMENT FOCUS.
WHY IS THE BOARD PROPOSING TO MODIFY THE FUND'S CURRENT INVESTMENT CRITERIA
AND PERMIT THE FUND TO EXPAND ITS INVESTMENTS IN OTHER PRECIOUS?
The Fund currently invests at least 65% of its total assets in equity
securities of companies that mine, process, or deal in gold. The declining
gold price over the past few years has resulted in a decline in the number of
companies that meet the Fund's investment criteria. Even if there is a
significant rebound in the price of gold, management believes that it will
take several years for the universe of companies in which the Fund may invest
to expand. Management has determined, and has reported to the Board, that
the current environment for gold equity securities is likely to result in
further consolidation within the gold industry. Such consolidation in
conjunction with volatile market conditions makes managing the Fund more
difficult. In order to enhance investment opportunities, management is
recommending that the Fund modify its principal investment criteria to expand
its ability to invest in companies that mine, process or otherwise deal in
other precious metals, in addition to gold.
Presently, the Fund concentrates (invests more than 25% of total assets) in
companies that mine, process and deal in both gold and other precious metals,
such as silver, platinum, and palladium. If shareholders approve this
Sub-Proposal 3a, the Fund would be permitted to increase its investment in
the equity securities related to these other precious metals. Accordingly,
the Fund would no longer be required to invest up to 65% of its total assets
in the equity securities of gold companies only. Instead, the Fund would be
permitted to invest up to 65% of total assets in the equity securities of
companies that mine, process or deal in both gold and other precious metals.
It is anticipated that this change would provide the Fund with additional
flexibility to pursue its investment objectives through investment in a
larger universe of companies. This proposal is not intended to change the
Fund's traditional focus on gold. However, expanding the ability of the Fund
to invest in companies associated with other precious metals is intended to
allow the Fund to better manage the market volatility that the current
historically low gold price has created.
SUB-PROPOSAL 3B: TO AMEND THE FUND'S CHARTER TO CHANGE THE FUND'S NAME TO
REFLECT ITS REVISED INVESTMENT FOCUS, IN THE EVENT THAT SUB-PROPOSAL 3A IS
APPROVED.
WHY IS THE BOARD RECOMMENDING THAT THE FUND CHANGE ITS NAME?
The Board is recommending that shareholders approve changing the Fund's name
to the "Franklin Gold and Precious Metals Fund." If shareholders approve the
change to the Fund's investment criteria as described in Sub-Proposal 3a,
under the federal securities laws, the Fund would be required to change its
name. A fund's name must be consistent with its investment focus, and may
not be either deceptive or misleading. If a fund's name implies that it will
invest primarily in a certain type of security, the fund is required to have
a policy that, under normal circumstances, at least 65% of the value of its
total assets will be invested in that type of security. The Fund's current
name implies that the Fund invests primarily in gold-related securities, and
in fact, it has been the Fund's policy to invest at least 65% of its assets
in gold-related securities. If the Fund changes its investment criteria to
expand its ability to invest in securities related to precious metals other
than gold equity securities, such as platinum, palladium and silver, the Fund
may no longer be investing at least 65% of its assets in gold equity
securities, as the name "Franklin Gold Fund" implies. Therefore, the Fund
would not be able to continue to use the name "Franklin Gold Fund" since that
name would be considered misleading.
Modifying the Fund's investment criteria as described in Sub-Proposal 3a will
result in the Fund investing approximately 65% of its assets in the equity
securities of companies associated with gold and other precious metals. For
this reason the Board has recommended that, if Sub-Proposal 3a is approved,
the name of the Fund be changed to the "Franklin Gold and Precious Metals
Fund." If Sub-Proposal 3a is not approved by the shareholders, the Fund will
not change its name, regardless of whether Sub-Proposal 3b is approved.
WHY IS THE FUND'S CHARTER BEING AMENDED TO CHANGE THE FUND'S NAME?
In order to legally change the Fund's name, shareholders must approve a
amendment to the Fund's Articles of Incorporation, as amended and restated
(the "Articles"). Presently, Article First of the Fund's Articles states the
following: "THE NAME OF THIS CORPORATION IS FRANKLIN GOLD FUND." If
approved, Article First of the Fund's Articles would be amended to read as
follows: "THE NAME OF THIS CORPORATION IS FRANKLIN GOLD AND PRECIOUS METALS
FUND." Approval of the amendment would also have the effect of changing the
Fund's name in any other location in the Articles where the name appears.
Approval of this amendment, and filing the amendment with the State of
California, would legally change the name of the Fund.
If the proposal to reorganize the Fund as a Delaware business trust is
approved (see Proposal 7), the name of the new Delaware business trust would
be the "Franklin Gold and Precious Metals Fund." Accordingly, no amendment
to the Fund's corporate charter would be filed, since the Fund would no
longer be a California corporation. However, if the Fund is not reorganized
into a Delaware business trust, it would still be required to file the
amendment to the Articles to change the Fund's name under California law.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE SUB-PROPOSALS 3A-3B
PROPOSAL 4: TO CHANGE THE CLASSIFICATION OF THE FUND FROM A DIVERSIFIED TO
A NON-DIVERSIFIED FUND
WHAT DOES THE FUND'S CURRENT CLASSIFICATION AS "DIVERSIFIED" MEAN?
The Fund is currently classified as "diversified" according to the Investment
Company Act of 1940, as amended ("1940 Act"). This classification requires
the Fund to have an investment policy prohibiting it, as to 75% of its total
assets, from investing more than 5% of the value of its total assets in the
securities of any one issuer (other than securities issued by the U.S.
government, its agencies or instrumentalities or securities of other
investment companies), and to not more than 10% of the outstanding voting
securities of such issuer. The Fund's current investment limitations are
even more restrictive since the Fund is prohibited, as to 100% of its total
assets, from investing more than 5% of the value of its total assets in the
securities of any one issuer (other than securities issued by the U.S.
government, its agencies or instrumentalities). Under the 1940 Act, the
remaining 25% of the Fund's total assets may be invested without regard to
the 5% and 10% limitations. Consistent with many mutual funds, the Fund,
while having claimed diversified status since its inception, also has two
fundamental investment restrictions summarizing the diversification
requirements of the 1940 Act. These restrictions, which currently appear in
the Fund's Statement of Additional Information as restrictions 1 and 2, state
that the Fund may not:
1. PURCHASE THE STOCK OR SECURITIES OF ANY ISSUER OTHER THAN THOSE OF THE
U.S. OR ITS INSTRUMENTALITIES, IF AT THE TIME OF THE
INVESTMENT THE EFFECT THEREOF SHALL BE TO CAUSE MORE THAN 5%
OF THE VALUE OF ITS ASSETS TO BE INVESTED AT SUCH TIME IN THE
SECURITIES OF THE ISSUER.
2. AS TO 75% OF ITS TOTAL ASSETS, PURCHASE STOCK OR SECURITIES OF AN
ISSUER, OTHER THAN THE U.S. OR ITS INSTRUMENTALITIES, IF THE
EFFECT THEREOF SHALL BE TO CAUSE MORE THAN 10% OF THE VOTING
SECURITIES OF SUCH ISSUER TO BE HELD BY THE FUND.
The Fund's investment adviser, Franklin Advisers, has recommended changing
the Fund's classification from "diversified to "non-diversified." Under the
1940 Act, a change from diversified to non-diversified status requires a
shareholder vote. In addition, elimination of a fundamental investment
restriction requires such a vote. If Proposal 4 is approved by shareholders,
the Fund's diversification status would change, and its current fundamental
investment restrictions 1 and 2 regarding diversification would be eliminated.
WHY IS THE BOARD RECOMMENDING A CHANGE TO THE FUND'S CURRENT CLASSIFICATION?
Franklin Advisers has described to the Board that in the gold and precious
metals industries, investment opportunities are concentrated in a relatively
small number of companies. The diversified nature of the Fund, which
requires it to invest in a greater number of companies, is impeding the
Fund's ability to fully benefit from the performance of certain securities
which comprise a significant percentage of the Fund's investments. Thus, the
non-diversified status of the Fund puts it at a competitive disadvantage
compared with other funds which have the ability to invest in the securities
of fewer companies.
Changing the Fund to non-diversified would help provide the Fund with
additional investment flexibility that, in light of the Fund's focus, would
be in the best interests of shareholders. Although greater investment
flexibility would result from a change to non-diversified status, it should
be noted that the Fund intends to continue to operate in compliance with
diversification requirements of the Internal Revenue Code of 1986, as
amended, ("Code") in order to qualify as a regulated investment company under
the Code. These Code provisions require that the Fund limit its investments
so that, at the close of each quarter of its taxable year: (i) not more than
25% of its total assets are invested in the securities (other than U.S.
government securities or the securities of other regulated investment
companies) of any one issuer; and (ii) at least 50% of the value of its total
assets is represented by cash and cash items (including receivables),
government securities and securities of other regulated investment companies,
and other securities for purposes of this calculation limited in respect of
any one issuer to an amount not greater in value than 5% of the value of the
Fund's total assets, and to not more than 10% of the outstanding voting
securities of the issuer.
WHAT ARE THE RISKS OF SUCH A CHANGE TO THE FUND'S DIVERSIFICATION STATUS?
Changing the Fund to non-diversified involves potential risks, including the
potential that changes in the value of a single company's securities may have
a greater effect on the Fund's performance and share price than if the Fund
remained diversified. The gold and precious metals markets are relatively
limited and there are fewer companies in which to invest. Therefore, a
decrease in the price of a small number of companies could negatively impact
the net asset value of the Fund.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE PROPOSAL 4
INTRODUCTION TO PROPOSALS 5 AND 6.
WHY IS THE FUND AMENDING OR ELIMINATING CERTAIN OF ITS FUNDAMENTAL INVESTMENT
RESTRICTIONS?
The Fund is subject to certain investment restrictions which govern the
Fund's investment activities. Under 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 Directors without
shareholder approval.
After the Fund was formed in 1973, 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 Directors recommend that the Fund's shareholders
approve the amendment or elimination of certain of the Fund's current
fundamental investment restrictions. The fundamental investment restrictions
to which the Fund is presently subject are listed in the Fund's Statement of
Additional Information as well as the Fund's By-Laws. Amending or
eliminating these restrictions by approving Proposals 5 and 6 will have the
effect of amending both the Statement of Additional Information and the
Fund's By-Laws.
By reducing the total number of investment restrictions that can be changed
only by a shareholder vote, the Directors 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 Directors 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 restrictions satisfy current federal regulatory requirements,
and are written to provide flexibility to respond to future legal,
regulatory, market or technical changes. The proposed 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 Fund's existing investment restrictions, together with the recommended
changes to the restrictions, are detailed in Exhibit A, which is entitled,
"Fundamental Investment Restrictions Proposed to be Amended or Eliminated."
Shareholders are requested to vote on each Sub-Proposal in Proposal 5
separately.
PROPOSAL 5 TO APPROVE AMENDMENTS TO CERTAIN OF THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS (THIS PROPOSAL INVOLVES SEPARATE VOTES
ON SUB-PROPOSALS 5A - 5E)
SUB-PROPOSAL 5A: 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). 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 EFFECT WILL AMENDING THE CURRENT BORROWING RESTRICTION HAVE ON THE FUND?
As described in the Fund's current investment restriction 3, the Fund is
presently limited to borrowing up to 5% of assets, rather than the 33 1/3%
allowed under current law. The proposed restriction would increase this
borrowing limit to the legally permissible limit of 33 1/3%. The proposed
restriction would also clarify that the Fund may borrow: (1) from banks to
the extent permitted by the 1940 Act or any exemptions therefrom, and (2)
from any person for temporary purposes; but (3) in any event all borrowings
must not exceed 33 1/3% of total assets. The Fund's current restriction also
states that the Fund may not borrow in excess of 5% "for direct investment in
securities." The 1940 Act limits on borrowing historically were interpreted
to prohibit mutual funds from making additional investments in securities
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.
The proposed restriction also permits the Fund to borrow cash from affiliated
investment companies. The SEC recently granted an exemptive order to the
Fund, together with other funds in the Franklin Templeton Group of Funds,
permitting the Fund to borrow money from affiliated Franklin and Templeton
funds. The proposed borrowing 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.
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.
SUB-PROPOSAL 5B: 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.
The Fund's current restriction 5 relating to underwriting is combined with a
restriction relating to investing in illiquid securities. The adoption of
this Sub-Proposal would result in the separation of the Fund's underwriting
restriction from the Fund's fundamental investment restriction relating to
investing more than 10% in illiquid securities. The restriction on investing
in illiquid securities is proposed to be eliminated (see Proposal 6).
WHAT EFFECT WILL AMENDING THE CURRENT UNDERWRITING RESTRICTION HAVE ON THE
FUND?
The proposed restriction is similar to the current investment restriction 5.
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. 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.
SUB-PROPOSAL 5C: 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 current 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 EFFECT WILL AMENDING THE CURRENT LENDING RESTRICTION HAVE ON THE FUND?
The proposed restriction is similar to the Fund's current restriction 4, but
would provide the Fund with greater lending flexibility. Although 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. The
Franklin Templeton Group of Funds, including the Fund, recently received an
exemptive order from the SEC that permits the Fund to lend cash to other
Franklin and Templeton funds. The proposed restriction permits 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.
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.
SUB-PROPOSAL 5D: 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 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 EFFECT WILL AMENDING 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 restriction is exactly the same as the real estate
limitation contained in the Fund's current restriction 9. Accordingly, the
Fund will continue to be prohibited from directly purchasing or selling real
estate, but will be permitted to purchase or sell securities of real estate
investment trusts.
The Fund's current restriction 9 relating to real estate is combined with a
restriction relating to investments in other investment companies. The
adoption of this Sub-Proposal would result in the separation of the Fund's
real estate restriction from the Fund's fundamental investment restriction
relating to investments in other investment companies. This restriction on
investing in other investment companies is proposed to be eliminated (see
Proposal 6).
COMMODITIES: 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 retains the carve-outs for gold bullion and gold
coins that are contained in the Fund's current restriction. In addition, 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. [PLEASE CONFIRM: 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.
SUB-PROPOSAL 5E: 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 EFFECT WILL AMENDING THE RESTRICTION REGARDING ISSUING SENIOR SECURITIES
HAVE ON THE FUND?
The proposed senior securities restriction is similar to the Fund's current
non-fundamental restriction 5. The proposed 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.
If approved, the proposed restriction would be fundamental. 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE SUB-PROPOSALS 5A-5E
PROPOSAL 6: TO APPROVE THE ELIMINATION OF CERTAIN OF THE FUND'S
FUNDAMENTAL INVESTMENT RESTRICTIONS
WHICH SIX (6) FUNDAMENTAL INVESTMENT RESTRICTIONS ARE THE BOARD RECOMMENDING
THAT THE FUND ELIMINATE?
Some of the Fund's fundamental investment restrictions were originally
drafted to comply with 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 6, 7, 10, 11
and certain parts of restrictions 5 and 9, among its fundamental investment
restrictions. Franklin Advisers has recommended, and the Board has
determined, that all of these current fundamental investment restrictions
should be eliminated.
The exact wording of these six restrictions, (referred to in this Proposal 6
as the "Restrictions") has been included in Exhibit A, which is entitled,
"Current Fundamental Investment Restrictions Proposed to be Amended or
Eliminated."
ILLIQUID AND RESTRICTED SECURITIES:
The Fund's current fundamental investment restriction number 5 limits the
Fund's ability to invest more than 10% of its assets in illiquid securities,
including certain securities with legal or contractual restrictions on
resale. 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 6 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.
SECURITIES ON MARGIN AND SHORT SALES:
The Fund's current fundamental investment restriction number 7 limits the
Fund's ability to purchase securities on margin or sell securities short.
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 these types of investment activities.
As a general matter, elimination of this fundamental restriction relating to
purchasing securities on margin and selling securities short, 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 5e). 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 inability to purchase on margin. Finally, the Fund has not
previously, nor does it currently intend to engage in these investment
activities.
INVESTMENT IN OTHER INVESTMENT COMPANIES:
The Fund's current restriction 9 limits the Fund's ability to invest in the
securities of other open-end investment companies, except in connection with
a merger, consolidation, acquisition or reorganization. This restriction 9,
which is inconsistent with the 1940 Act provisions in this regard, was
originally included in the Fund's fundamental investment restrictions in
response to various state law requirements. Under NSMIA, however, the Fund
is no longer legally required to retain such a policy as a fundamental
restriction.
Upon elimination of this restriction, the Fund would remain subject to the
1940 Act restrictions (or any exemption from such restrictions) on a fund's
ability to invest in other open-end funds. The 1940 Act restrictions state
that a fund may not purchase more than 3% of another fund's total outstanding
voting stock, commit more than 5% of its assets to the purchase of another
fund's securities, or have more than 10% of its total assets invested in
securities of all other funds.
The current restriction permits investments by the Fund in shares of a money
market fund, subject to certain conditions. Although eliminating the present
restriction would continue to permit the Fund to invest cash held at the end
of the day in money market funds, it would not subject the Fund to the
limiting conditions on investing in money market funds contained in the
current restriction. 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") which permits 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 in certain limited circumstances.
Elimination of this restriction should not have an impact on the day to day
management of the Fund as the Fund does not intend to begin pursuing its
investment objective through the purchase of other open-end investment
company securities.
SECURITIES WITH UNLIMITED LIABILITY:
The Fund's current fundamental investment restriction 10 limits the Fund's
ability to invest in assessable securities or securities involving unlimited
liability on the part of the Fund. This restriction was originally included
in response to the various state law requirements to which mutual funds used
to be subject. Securities that are assessable have potentially unlimited
liability and generally are considered to be senior securities. The Fund's
policy regarding senior securities is discussed in Sub-Proposal 5e. As
discussed earlier in the introduction, under NSMIA the Fund is no longer
required to retain a fundamental policy regarding investments in securities
with unlimited liability.
Elimination of this restriction should not have an impact on the day to day
management of the Fund as [PLEASE CONFIRM: the Fund has not previously, nor
does it currently intend, to invest in securities with unlimited liability.]
MANAGEMENT OWNERSHIP OF SECURITIES:
The Fund's current restriction number 11 limits the Fund's ability to invest
in securities issued by companies whose securities are owned in certain
amounts by Directors and officers of the Fund, or its investment manager,
Franklin Advisers. 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 in this area would still apply to the Fund.
WHY IS THE BOARD RECOMMENDING THAT THE RESTRICTIONS BE ELIMINATED, AND WHAT
EFFECT WILL THEIR ELIMINATION HAVE ON THE FUND?
The Board has determined that eliminating the Restrictions is consistent with
the federal securities laws. By 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 six 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 DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE PROPOSAL 6
PROPOSAL 7: TO APPROVE THE REORGANIZATION OF THE FUND FROM A CALIFORNIA
CORPORATION TO A DELAWARE BUSINESS TRUST
WHAT WILL THE REORGANIZATION MEAN FOR THE FUND AND ITS SHAREHOLDERS?
The Directors recommend that you approve a change in the place of
organization of the Fund from a California corporation to a Delaware business
trust. This proposed change will be referred to in this proxy statement as
the "Reorganization." The Board of Directors 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 Fund, (referred to in this Proposal 7
as the ("CA Corporation") in the form of a newly created Delaware business
trust, named "Franklin Gold and Precious Metals Fund" (and referred to in
this Proposal 7 as the "DE Trust").
The DE Trust will have the same investment objective, policies and
restrictions as the CA Corporation. This means that the DE Trust's
fundamental investment policies and restrictions will reflect the results of
the shareholders' vote on Proposals 3, 4, 5 and 6 of this proxy statement.
The Directors, officers and employees will be the same, and will operate the
DE Trust in the same manner as they previously operated the CA Corporation.
On the closing date of the Reorganization, you will hold an interest in the
DE Trust that is equivalent to your interest in the CA Corporation.
Essentially, your investment will not change, and the Reorganization will
have no material impact on your economic interests as a shareholder.
WHY ARE THE DIRECTORS RECOMMENDING THAT I APPROVE THE REORGANIZATION?
The Directors have determined that mutual funds formed as Delaware business
trusts have certain advantages over those funds organized as California
corporations. 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 DE Trust.
A comparison of the Delaware business trust law and the California General
Corporation law, and a comparison of the relevant provisions of the governing
documents of the DE Trust and the CA Corporation, are included in Exhibit C,
which is entitled, "Comparison and Significant Differences Between California
Corporations and Delaware 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 Directors,
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 Directors believe that it is in the best interests of
the shareholders to approve the Reorganization.
WHAT ARE THE PROCEDURES AND CONSEQUENCES OF THE REORGANIZATION?
Upon completion of the Reorganization, the DE Trust will continue the
business of the CA Corporation with the same investment objective and
policies as exist on the date of the Reorganization, and will hold the same
portfolio of securities previously held by the CA Corporation. The DE Trust
will be operated under substantially identical overall management, investment
management, distribution and administrative arrangements as those of the CA
Corporation. As the successor to the CA Corporation's operations, the DE
Trust will adopt the CA Corporation's registration statement under the
federal securities laws with amendments to show the new Delaware business
trust structure.
The DE Trust was created solely for the purpose of becoming the successor
organization to, and carrying on the business of, the CA Corporation. To
accomplish the Reorganization, the Plan provides that the CA Corporation will
transfer all of its portfolio securities and any other assets, subject to its
related liabilities, to the DE Trust. In exchange for these assets and
liabilities, the DE Trust will issue its own shares to the CA Corporation,
which will then distribute those shares pro rata to you as a shareholder of
the CA Corporation. Through this procedure you will receive exactly the same
number and dollar amount of shares of the DE Trust as you previously held in
the CA Corporation. The net asset value of each share of the DE Trust will
be the same as that of the CA Corporation 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 CA Corporation that you may
have had as of the effective date of the Reorganization. As soon as
practicable after the date of the Reorganization, the CA Corporation will be
dissolved and will go out of existence.
The Directors 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 CA Corporation's shareholders.
If the Reorganization is not approved, or if the Directors abandon the
Reorganization, the CA Corporation will continue to operate as a corporation
under the laws of the State of California.
WHAT EFFECT WILL THE REORGANIZATION HAVE ON THE CURRENT INVESTMENT MANAGEMENT
AGREEMENT?
As a result of the Reorganization, the DE Trust will be subject to a new
investment management agreement between the DE Trust and Franklin Advisers.
The new management agreement will be identical to the current management
agreement between Franklin Advisers and the CA Corporation. It is
anticipated that there will be no material change to the investment
management agreement as a result of the Reorganization.
WHAT EFFECT WILL THE REORGANIZATION HAVE ON THE SHAREHOLDER SERVICING
AGREEMENTS AND DISTRIBUTION PLANS?
The DE 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 CA Corporation. Franklin Templeton
Distributors, Inc. will serve as the distributor for the shares of the DE
Trust under a separate distribution agreement that is substantially identical
to the distribution agreement currently in effect for the CA Corporation.
As of the effective date of the Reorganization, the DE Trust 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 the CA Corporation. 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 Directors; (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 DE Trust. In fact, the DE Trust must
have shareholder approval of these issues or else it will not comply with the
1940 Act. However, the Directors 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 Directors 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 Directors of the CA
Corporation who are in office at the time of the Reorganization as Trustees
of the DE Trust1; (2) the selection of PricewaterhouseCoopers LLP as
independent auditors for the DE Trust; and (3) a new investment management
agreement between the DE Trust and Franklin Advisers, which is substantially
identical to the investment management agreement currently in place for the
CA Corporation.
Prior to the Reorganization, the officers will cause the CA Corporation, as
the sole shareholder of the DE Trust, to vote its shares FOR the matters
specified above. This action will enable the DE 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 DE TRUST?
- ----------------
1 The Directors of a Delaware business trust are referred to as Trustees.
The DE Trust was created on November 16, 1999 pursuant to Delaware law. The
DE Trust has an unlimited number of shares of beneficial interest with a par
value of $0.01 per share. The shares of the DE Trust will be allocated into
three classes to correspond to the current three classes of shares of the CA
Corporation.
As of the effective date of the Reorganization, shares of the respective
classes of the CA Corporation and the DE 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 DE Trust and the CA
Corporation will have equal voting and liquidation rights and have one vote
per share. The DE Trust also will have the same fiscal year as the CA
Corporation.
WHO WILL BEAR THE EXPENSES OF THE REORGANIZATION?
Since the Reorganization will benefit the CA Corporation and its
shareholders, the Board has authorized that the expenses incurred in the
Reorganization shall be paid by the CA Corporation, 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 the DE Trust will be the same as the basis and holding period of
your shares in the CA Corporation. Consummation of the Reorganization is
subject to receipt of a legal opinion from the law firm of Stradley, Ronon,
Stevens & Young, LLP, counsel to the DE Trust and the CA Corporation, that,
under the Internal Revenue Code of 1986, as amended, the exchange of assets
of the CA Corporation for the shares of the DE Trust, the transfer of such
shares to the holders of shares of the CA Corporation and the liquidation and
dissolution of the CA Corporation pursuant to the Plan will not give rise to
the recognition of a gain or loss for federal income tax purposes to the CA
Corporation, the DE Trust, or shareholders of either the CA Corporation or
the DE Trust.
WHAT IF I CHOOSE TO SELL MY SHARES AT ANY TIME?
A request to sell CA Corporation shares that is received and processed prior
to the Reorganization will be treated as a redemption of shares of the CA
Corporation. 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 DE 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 CA Corporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU APPROVE PROPOSAL 7
PROPOSAL 8: TO AMEND THE FUND'S CHARTER TO INCREASE THE FUND'S AUTHORIZED
CAPITAL, IN THE EVENT THAT PROPOSAL 7 IS NOT APPROVED
WHY DOES THE FUND NEED TO INCREASE ITS AUTHORIZED CAPITAL?
Under its Articles, the Fund has an authorized capital of one hundred million
shares, which means that the Fund may currently issue (sell) one hundred
million shares of its stock. As the Fund has grown over the years, it has
sold much of its authorized capital. In order for the Fund to continue
selling its shares, shareholders must approve an increase in the number of
shares that the Fund has authority to sell.
Management has recommended, and the Board has agreed, that the Fund's
authorized capital should be increased by fifty (50) million shares, from the
current one hundred (100) million authorized shares, to a total of one
hundred fifty (150) million authorized shares.
Increasing the authorized capital of the Fund will enable the Fund to sell
more shares, which in turn is expected to help the Fund increase its asset
size. An increase in asset size will provide additional benefits to both the
Fund and to your investment in the Fund. As the Fund's assets grow, it may
be in a position to use these additional funds to place larger buy and sell
orders. In so doing, the Fund may be able to take advantage of certain
investment opportunities, and achieve economies of scale, that may be
unavailable to smaller orders.
WHY IS THE FUND'S CHARTER BEING AMENDED TO INCREASE THE FUND'S AUTHORIZED
CAPITAL?
Since the number of shares that the Fund has authority to sell is contained
in the Fund's Articles, under state law an amendment to the Articles is
necessary to increase that number. Currently, the first sentence of Article
Fifth of the Fund's Articles states:
"THE TOTAL NUMBER OF SHARES OF CAPITAL STOCK WHICH THE
CORPORATION SHALL HAVE AUTHORITY TO ISSUE IS ONE HUNDRED
MILLION (100,000,000) SHARES OF CAPITAL STOCK, $0.10 PAR VALUE
PER SHARE."
If approved, the first sentence of Article Fifth of the Fund's Articles would
be amended to read as follows:
"THE TOTAL NUMBER OF SHARES OF CAPITAL STOCK WHICH THE
CORPORATION SHALL HAVE AUTHORITY TO ISSUE IS ONE HUNDRED
FIFTY MILLION (150,000,000) SHARES OF CAPITAL STOCK, $0.10 PAR
VALUE PER SHARE."
Approving this amendment, and filing this amendment with the State of
California, would legally increase the number of shares the Fund is
authorized to sell.
WHAT EFFECT WOULD APPROVAL OF PROPOSAL 7 HAVE ON THIS PROPOSAL TO AMEND THE
CHARTER TO INCREASE THE FUND'S AUTHORIZED CAPITAL?
If the proposal to reorganize the Fund into a Delaware business trust (as
described above in Proposal 7) is approved, an amendment to the corporate
charter under California law would no longer be necessary. The new Delaware
business trust would be authorized to issue an unlimited number of shares,
and would not need to undergo the time and expense of a shareholder vote each
time the number of authorized shares approached the number of Fund shares
actually outstanding. However, in the event that Proposal 7 is not approved,
the Fund would be required to continue to seek shareholder approval, and
amend its charter, each time the Fund needs to increase its total number of
authorized shares.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE PROPOSAL 8
PROPOSAL 9: OTHER BUSINESS
The Directors do not intend to bring any matters before the Meeting other
than Proposals 1 through 9 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 FUND
THE INVESTMENT MANAGER. Franklin Advisers, Inc. ("Franklin Advisers"), 777
Mariners Island Blvd., San Mateo, California 94404 serves as the Fund's
investment manager. Franklin Advisers is wholly owned by Resources.
THE FUND ADMINISTRATOR. Under an agreement with Franklin Advisers,
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 Fund. FT Services is a
wholly owned subsidiary of Resources and is an affiliate of Franklin
Advisers and the Fund's principal underwriter.
THE UNDERWRITER. The underwriter for the Fund 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 Fund 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 Fund's securities and
other assets.
REPORTS TO SHAREHOLDERS AND FINANCIAL STATEMENTS. The Fund's last audited
financial statements and annual report, for the fiscal year ended July 31,
1999 is 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 January 24, 2000, the Fund had
______________ shares outstanding and total net assets of $____________.
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.
As of January 24, 2000, the principal shareholders of the fund, beneficial
or of record, were:
NAME AND ADDRESS SHARE
CLASS PERCENTAGE
(%)
- ---------------------------------------------------------------
Franklin Templeton Trust Class B
Company CUST for the Rollover
IRA of
Steven W. Allen
2624 Quail Valley
Irving, TX 75060
Salomon Smith Barney Inc. Advisor
FBO Philip A. Scatena Class
Rollover IRA
Mutual Funds
388 Greenwich St., 16th Floor
New York, NY 10013-2396
Franklin Templeton Trust Advisor
Company TTEE for ValuSelect Class
Franklin Resources, Inc. Profit
Sharing Plan1
P.O. Box 2438
Rancho Cordova, CA 95741-2438
Charles B. Johnson and Rupert H. Johnson, Jr., who are officers and
directors of the fund, serve on the Administrative Committee of the
Franklin Templeton Profit Sharing 401(k) Plan which owns shares of the
fund. In that capacity, they participate in the voting of such shares.
Charles B. Johnson and Rupert H. Johnson, Jr., disclaim beneficial
ownership of any share of the fund owned by the Franklin Templeton Profit
Sharing 401(k) Plan.
As of December 31, 1999, the officers and board members, as a group, owned
of record and beneficially 1.06% of the fund's Advisor Class shares and
less than 1% of the outstanding shares of the other classes.
o FURTHER INFORMATION ABOUT VOTING AND THE MEETING
SOLICITATION OF PROXIES. The cost of soliciting these proxies will be
borne by the Fund. The Fund reimburses brokerage firms and others for
their expenses in forwarding proxy material to the beneficial owners and
soliciting them to execute proxies. The Fund has engaged Shareholder
Communications Corporation to solicit proxies from brokers, banks, other
institutional holders and individual shareholders for an approximate fee,
including out-of-pocket expenses, ranging between $59,196 and $75,784. The
Fund expects that the solicitation will be primarily by mail, but also may
include telephone, telecopy or oral solicitations. The Fund does not
reimburse Directors and officers of the Fund, or regular employees and
agents of Franklin Advisers involved in the solicitation of proxies. The
Fund 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 Fund, Franklin Advisers and its affiliates, without extra
compensation, may conduct additional solicitations by telephone, personal
interviews and other means.
VOTING BY BROKER-DEALERS. The Fund expects that, before the Meeting,
broker-dealer firms holding shares of the Fund 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
Fund 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. A majority of the Fund's 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 Directors, requires that the nine Nominees receiving the greatest number
of votes cast at the Meeting will be elected. In the election of Directors
each shareholder entitled to vote may, under California law, cumulate his
or her votes and give one candidate a number of votes equal to the number
of Directors to be elected, multiplied by the number of votes to which his
or her shares are entitled or distribute his or her votes in the same way
among as many candidates as he or she thinks fit. Proposal 2, ratification
of the selection of independent auditors, requires the affirmative vote of
a majority of the Fund's shares present and voting on the Proposal at the
Meeting. Sub-Proposal 3a, modification of the Fund's current investment
policy to include other precious metals requires the affirmative vote of
the lesser of: (i) more than 50% of the outstanding voting securities of
the Fund; or (ii) 67% or more of the voting securities of the Fund present
at the Meeting, if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy (referred to as a "1940 Act
vote"). Sub-Proposal 3b, amending the Fund's charter to change the Fund's
name requires the affirmative vote of a majority of the Fund's outstanding
shares. Proposal 4, changing the Fund's classification from diversified to
non-diversified; Sub-Proposals 5a-5e, amendments to fundamental investment
restrictions; and Proposal 6, elimination of fundamental investment
restrictions; all require a 1940 Act vote (see Sub-Proposal 3a). Proposal
7, the reorganization of the Fund from a California corporation to a
Delaware business trust; Proposal 8, amending the Fund's charter to
increase the Fund's authorized capital; and Proposal 9, the transaction of
any other business, all require the affirmative vote of a majority of the
Fund's outstanding shares. 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 Fund 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 Fund'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 Fund.
By order of the Board of Directors,
-----------------------------
Deborah R. Gatzek
SECRETARY
Dated: February 1, 2000
San Mateo, California
EXHIBIT A
FUNDAMENTAL INVESTMENT RESTRICTIONS PROPOSED
TO BE AMENDED OR ELIMINATED
- -------------------------------------------------------------------------------
PROPOSED
CURRENT FUNDAMENTAL FUNDAMENTAL
RESTRICTION RESTRICTION
PROPOSAL OR
SUB-PROPOSAL RESTRICTION THE FUND MAY NOT: THE FUND MAY NOT:
- -------------------------------------------------------------------------------
4 Diversification The Fund may not: Proposed to be
Eliminated.
1. Purchase the stock or
securities of any issuer
other than those of the
U.S. or its
instrumentalities, if at
the time of the
investment the effect
thereof shall be to
cause more than 5% of
the value of its assets
to be invested at such
time in the securities
of such issuer.
- ------------------------------------------------------------------------------
4 Diversification 2. As to 75% of its total Proposed to be
assets, purchase stock Eliminated.
or securities of an
issuer, other than the
U.S. or its
instrumentalities, if
the effect thereof shall
be to cause more than
10% of the voting
securities of such
issuer to be held by the
fund.
- ------------------------------------------------------------------------------
5a Borrowing 3. Borrow money in an Borrow money,
amount in excess of 5% except that the
of the value of its fund may borrow
total assets, and then money from banks
only from banks for or affiliated
temporary or emergency investment
purposes, and not for companies to the
direct investment in extent permitted
securities. 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 33
1/3% of the
value of the
fund's total
assets
(including the
amount borrowed).
- ------------------------------------------------------------------------------
5b Underwriting 5. Underwrite the Act as an
securities of other underwriter
issuers or invest more except to the
than 10% of its assets extent the fund
in illiquid securities, may be deemed to
including certain be an
securities with legal or underwriter when
contractual restrictions disposing of
on resale. securities it
owns or when
selling its own
shares.
- ------------------------------------------------------------------------------
5c Lending 4. Lend its assets, except Make loans to
through the purchase or other persons
acquisition of bonds, except (a)
debentures, or other through the
debt securities of a lending of its
type customarily portfolio
purchased by securities, (b)
institutional investors, through the
or through loans of its purchase of debt
portfolio securities, or securities, loan
to the extent the entry participations
into a repurchase and/or engaging
agreement may be deemed in direct
a loan. 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.
- ------------------------------------------------------------------------------
5d Commodities 8. Invest in commodities or Purchase or sell
commodity contracts, real estate and
except that it may commodities,
invest in gold bullion except that the
and foreign currency in fund may
the form of gold coins. 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, and
may also invest
in gold bullion
and foreign
currency in the
form of gold
coins.
- ------------------------------------------------------------------------------
5d Real Estate 9. Invest directly in real Purchase or
estate (although it may sell real estate
invest in real estate and commodities,
investment trusts). . . 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, and
may also invest
in gold bullion
and foreign
currency in the
form of gold
coins.
- ------------------------------------------------------------------------------
5e Senior Issue senior securities, Issue
Securities as defined in the securities
Investment Company Act senior to the
of 1940, except that fund's presently
this restriction shall authorized
not be deemed to shares of
prohibit the fund from beneficial
(a) making any permitted interest.
borrowings, mortgages or Except that this
pledges, or (b) entering restriction
into repurchase shall not be
transactions. deemed to
prohibit the
fund from (a)
Note: This policy is making any
presently a permitted
non-fundamental policy. borrowings,
If shareholders approve loans, mortgages
Sub-Proposal 6e, this or pledges, (b)
policy will be a entering into
fundamental policy. 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.
- -------------------------------------------------------------------------------
6 Illiquid 5. Underwrite the Proposed to be
Securities securities of other Eliminated.
issuers or invest more
than 10% of its assets
in illiquid securities,
including certain
securities with legal or
contractual restrictions
on resale.
- ------------------------------------------------------------------------------
6 Control or 6. Invest in securities for Proposed to be
Management the purpose of Eliminated.
exercising management
or control of the
issuer.
- ------------------------------------------------------------------------------
6 Margin 7. Maintain a margin Proposed to be
Account; account with a Eliminated.
Short Sales securities dealer or
effect short sales.
- ------------------------------------------------------------------------------
6 Investment 9. Invest. . .in the Proposed to be
in Other securities of other Eliminated.
Investment open-end investment
Companies companies, except that
securities of another
open-end investment
company may be acquired
pursuant to a plan of
reorganization, merger,
consolidation, or
acquisition, and except
to the extent the fund
invests its uninvested
daily cash balances in
shares of Franklin Money
Fund and other money
market funds in the
Franklin Group of Funds,
provided (i) its
purchases and
redemptions of such
money market fund shares
may not be subject to
any purchase or
redemption fees, (iii)
its investments may not
be subject to
duplication of
management fees, nor to
any charge related to
the expenses of
distributing the fund's
shares (as determined
under Rule 12b-1, as
amended under the
federal securities
laws), and (iii)
provided aggregate
investments by the fund
in any such money market
fund do not exceed (A)
the greater of (i) 5% of
the fund's total net
assets or (ii) $2.5
million, or (B) more
than 3% of the
outstanding shares of
any such money market
fund.
- ------------------------------------------------------------------------------
6 Securities 10. Invest in assessable Proposed to be
with securities or securities Eliminated.
Unlimited involving unlimited
Liability liability on the part of
the fund.
- ------------------------------------------------------------------------------
6 Management 11. Purchase or retain in Proposed to be
Ownership of its portfolio any Eliminated.
Securities security if any officer,
director, or security
holder of the issuer is
at the same time an
officer, director, or
employee of the fund or
of the fund's manager
and this person owns
beneficially more than 1/2
of 1% of the securities
and if all persons
owning more than 1/2 of 1%
own more than 5% of the
outstanding securities
of the issuer.
- -------------------------------------------------------------------------------
EXHIBIT B
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made
this __ day of ______________, 2000 by and between Franklin Gold Fund, a
corporation created under the laws of the State of California (the "Fund"),
and Franklin Gold and Precious Metals Fund, a business trust created under
the laws of the State of Delaware (the "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 Fund will convey, transfer and deliver to the
Trust, at the closing provided for in Section 2 (hereinafter
referred to as the "Closing") all of its then-existing assets. In
consideration thereof, the 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 Fund'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, and taxes assessed
by the State of California, if any, the obligations and liabilities
allocated to the Fund to become the obligations and liabilities of
the Trust, and (ii) to deliver to the Fund full and fractional
shares of each class of the Trust equal in number to the number of
full and fractional shares outstanding of each class 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 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 Trust such shareholder held in the
corresponding class of the Fund on the Effective Date of the
Reorganization. Fractional shares of the Trust 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 Trust 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 Trust. Each shareholder of the Fund
will have the right to exchange his (her) share certificates for
share certificates of the corresponding class of the Trust.
However, a shareholder need not make this exchange of certificates
unless he (she) so desires. Simultaneously with the crediting of
the shares of the Trust 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 Fund shall take all necessary steps under
California law to terminate the Fund.
2. CLOSING AND EFFECTIVE DATE OF THE REORGANIZATION. The Closing
shall commence at ________ Pacific time on April 9, 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
Fund and the Trust at 777 Mariners Island Boulevard, San Mateo, CA
94404.
3. CONDITIONS PRECEDENT. The obligations of the Fund and the 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 U.S. Securities and
Exchange Commission (the "Commission") 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 Fund'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 under
the supervision of the Directors of the Fund to be necessary and
appropriate as a result of the Agreement, and (ii) the adoption by
the Trust as its own of such Registration Statement, as so amended,
shall have been filed with the Commission, and such post-effective
amendment or amendments to the Fund'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 Commission (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 Commission or
the Staff thereof that the 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, 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 Fund,
the Trust or shareholders of the Fund or the Trust;
(e) The Fund 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 Trust and
constitutes a legal, valid and binding agreement of the Trust in
accordance with its terms; (ii) the shares of the 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 Trust; and (iii) the Trust is duly organized
and validly existing under the laws of the State of Delaware;
(f) The 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 herein, and the execution of this
Agreement, has been duly authorized and approved by the Fund and
constitutes a legal, valid and binding agreement of the Fund in
accordance with its terms; and (ii) the Fund is duly organized,
validly existing and in good standing under the laws of the State
of California.
(g) The shares of the Trust shall have been duly registered,
qualified or otherwise authorized for offering to the public in all
states of the United States, the Commonwealth of Puerto Rico 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 Fund (as defined
in the Investment Company Act of 1940) at a meeting of shareholders
of such fund;
(i) The Trustees shall have taken the following action at a
meeting duly called for such purposes:
(1) Approval of the Trust's Custodian Agreement;
(2) Selection of PricewaterhouseCoopers LLP as the Trust's
independent public accountants for the fiscal year ending July
31, 2000;
(3) Approval of the investment management agreement between
the Trust and Franklin Advisers, Inc., which is substantially
identical to the current investment management agreement
between the Fund and Franklin Advisers, Inc.;
(4) Authorization of the issuance by the Trust, prior to the
Effective Date of the Reorganization, of one share of each
class of the Trust, to the Fund in consideration for the
payment of the current public offering price of each
corresponding class of the Trust, for the purpose of enabling
the Fund to vote on matters referred to in paragraph (j) of
this Section 3;
(5) Approval of the submission of the matters referred to in
paragraph (j) of this Section 3 to the Fund as sole
shareholder of the Trust; and
(6) Authorization of the issuance by the Trust of shares of
the Trust on the Effective Date of the Reorganization in
exchange for the assets of the Fund pursuant to the terms and
provisions of this Agreement.
(j) The shareholders of the Fund shall have voted to approve the
Reorganization and, in connection with that vote, been informed
that such a vote would have the effect of directing the Fund to
vote, as sole shareholder of each class of the Trust, to:
(1) Elect as Trustees of the Trust (the "Trustees") the
following individuals: Messrs. Abbott, Ashton, Burns,
Fortunato, Johnson, Johnson, Jr., LaHaye, Macklin and
Wiskemann;
(2) Select PricewaterhouseCoopers LLP as the independent
public accountants for the Trust for the fiscal year ending
July 31, 2000, and
(3) Approve a new investment management agreement between the
Trust and Franklin Advisers, Inc., which is substantially
identical to the current investment management agreement
between the Fund and Franklin Advisers, Inc.; and
the Fund shall have voted to approve each such item.
At any time prior to the Closing, any of the foregoing conditions
may be waived by the Board of Directors of the Fund if, in the judgment
of the Directors, such waiver will not have a material adverse effect on
the benefits intended under this Agreement to the shareholders of the
Fund.
4. TERMINATION. The Board of Directors of the Fund 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 Directors, 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 Fund and the 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 Fund and the 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 Gold and Precious Metals Fund
(a Delaware business trust)
By: __________________________ By: __________________________
Attest: Franklin Gold Fund
(a California Corporation)
By: _______________________ By: __________________________
EXHIBIT C
COMPARISON AND SIGNIFICANT DIFFERENCES BETWEEN
DELAWARE BUSINESS TRUSTS AND CALIFORNIA CORPORATIONS
DELAWARE BUSINESS TRUST CALIFORNIA CORPORATION
----------------------- ----------------------
GOVERNING A Delaware Business Trust (a A California corporation
DOCUMENTS "DBT") is created by a (a "corporation") is
governing instrument (which created by filing articles
may consist of one or more of incorporation with the
instruments, including an Secretary of State of
agreement and declaration of California. The law
trust and By-Laws) and a governing corporations is
Certificate of Trust, which referred to in this chart
must be filed with the as the "California Act."
Delaware Secretary of State.
The law governing DBTs is
referred to in this chart as
the "Delaware Act."
A DBT is an unincorporated A corporation is
association organized under incorporated under the
the Delaware Act which California Act. A
operates similar to a typical corporation's operations
corporation. A DBT's are governed by its
operations are governed by a articles of incorporation
trust instrument and By-Laws and By-Laws and its
and its business and affairs business and affairs are
are managed by or under the managed by or under the
direction of a Board of direction of a Board of
Trustees. Directors.
A DBT organized as an A corporation organized as
open-end investment company an open-end investment
is subject to the Investment company is subject to the
Company Act of 1940, as 1940 Act. Shareholders
amended (the "1940 Act"). own shares of "common
Shareholders own shares of stock."
"beneficial interest" as
compared to the shares of
"common stock" issued by
corporations.
MULTIPLE SERIES Under the Delaware Act, a The California Act
AND CLASSES declaration of trust may authorizes a corporation
provide for classes, groups to issue one or more
or series of shares, or classes or series of
classes, groups or series of common stock. A
shareholders, having such corporation issuing
relative rights, powers and multiple series or classes
duties as the declaration of must describe in its
trust may provide. The articles of incorporation
series and classes of a DBT the number of shares
may be described in the allocated to each series
declaration of trust or in and/or class, and set
resolutions adopted by the forth the designation of
Board of Trustees. Neither each series and/or class
state filings nor shareholder (or provide that the Board
approval is required to may determine or alter the
create series or classes. designation of each class
The Directors of Franklin and the rights,
Gold Fund ("the CA preferences, privileges
Corporation") have proposed and restrictions granted
to reorganize the CA to or imposed upon each
Corporation from a series or class). As a
corporation into a Delaware result, a corporation is
business trust (the "DE required to obtain
Trust"). The DE Trust's shareholder approval to
Declaration of Trust permits increase the number of
the creation of multiple shares the corporation is
series and classes and authorized to issue, and
establishes the provisions to file with the state an
relating to shares. amendment to the articles
of incorporation
reflecting that increase.
The Delaware Act explicitly The California Act does
provides for a reciprocal not contain statutory
limitation of interseries provisions addressing
liability. Generally, the interseries liability in
debts, liabilities, the context of a multiple
obligations and expenses series investment
incurred, contracted for or company. The California
otherwise existing with Act does, however, provide
respect to a particular that a corporation which
series of a multiple series is authorized to issue
investment company registered more than one series or
under the 1940 Act are class of shares shall set
enforceable only against the forth any preferences and
assets of such series, and restrictions relating to
not against the assets of the each such series or class
DBT, or any other series, in its articles of
provided that the DBT incorporation. Therefore,
separately maintains the a corporation could
records and assets of the incorporate a provision
series and makes certain limiting interseries
disclosures in its governing liability in its articles
instruments. of incorporation.
Notwithstanding, it
remains uncertain whether
such a provision can
validly limit interseries
liability.
The Declaration of Trust for The CA Corporation does
the DE Trust specifically not address interseries
limits interseries liability in its Articles
liability. However, a court of Incorporation or
applying federal securities By-Laws.
law may not respect
provisions that serve to
limit the liability of one
series of an investment
company's shares for the
liabilities of another
series. Accordingly,
provisions relating to series
liability contained in the
Declaration of Trust may be
preempted by the way in which
the courts interpret the 1940
Act.
SHAREHOLDER The Declaration of Trust for Each outstanding share of
VOTING the DE Trust provides that a corporation is generally
RIGHTS shareholders of record of entitled to one vote on
AND PROXY each share are entitled to each matter submitted to a
REQUIREMENTS one vote for each full share, vote of shareholders (the
and a fractional vote for California Act makes no
each fractional share. In mention of fractional
addition, shareholders are shares). Shareholders are
not entitled to cumulative entitled to cumulative
voting for electing a voting when electing
Trustee(s). The DE Trust's Directors. The California
Declaration of Trust further Act permits separate
provides that voting will voting by series or
occur separately by series, class. The CA
and if applicable, by class, Corporation's By-Laws
subject to: (i) the provide that voting shall
requirements of the 1940 Act occur separately by class
where shares of the DE Trust when (i) required by the
must be voted in the California Act or the 1940
aggregate without reference Act or (ii) the matter
to series or class, and (ii) only affects a particular
where the matter affects only class.
a particular series or class.
The By-Laws for the DE Trust Similar to the By-Laws for
permit the DE Trust to accept the DE Trust, the
proxies by any electronic, California Act permits a
telephonic, computerized corporation to accept
telecommunications or other written proxies as well as
reasonable alternative to the proxies submitted by
execution of a written electronic or telephonic
instrument authorizing the means. The CA
proxy to act, provided such Corporation's By-Laws
authorization is received provide that all proxies
within eleven (11) months shall be in writing and
before the meeting. signed by the shareholder
or his duly authorized
attorney. The By-Laws
further provide that
proxies shall be effective
for eleven (11) months,
unless the proxy provides
for a longer effective
period.
SHAREHOLDERS' The Delaware Act permits The California Act
MEETINGS special shareholder meetings requires corporations
to be called for any operating as registered
purpose. However, the investment companies to
governing instrument hold shareholder meetings
determines shareholders' when required to do so
rights to call meetings. The under the 1940 Act. The
Declaration of Trust for the California Act also
DE Trust provides that the provides that special
Board of Trustees shall call shareholder meetings may
shareholder meetings for the be called by the Board,
purpose of: (i) electing the Chairman of the Board,
Trustees, (ii) for such other the President of the
purposes as may be prescribed corporation, the holders
by law, the Declaration of of at least 10% of the
Trust or the By-Laws, and outstanding voting shares,
(iii) taking action upon any or other persons given the
other matter deemed by the privilege to call such
Trustees to be necessary or meetings, pursuant to the
desirable. The By-Laws articles of incorporation
further provide that a or By-Laws. The CA
special meeting may be called Corporation's By-Laws
at any time by the Board of provide that shareholder
Trustees, by the Chairperson meetings shall be called
of the Board, or by the by the Board of Directors
President or any Vice to elect Directors and for
President or the Secretary such other business that
and any two (2) Trustees. An may properly arise. In
annual shareholders' meeting addition, the By-Laws
is not required by either the provide that special
Delaware Act, or the DE meetings may be called by
Trust's Declaration of Trust, the President or any three
or the By-Laws. of the Directors, or by
the holders of twenty
percent (20%) of the
shares entitled to vote at
the meeting. The CA
Corporation is not
required to hold annual
meetings under either the
California Act, or its
Articles of Incorporation
or By-Laws.
QUORUM Except when a larger quorum The CA Corporation's
REQUIREMENT is required by law, the By-Laws generally mirror
By-Laws, or the Declaration the California Act,
of Trust, the DE Trust's providing that a majority
Declaration of Trust provides of the shares entitled to
that forty percent (40%) of vote shall constitute a
the shares entitled to vote quorum at a shareholders
shall constitute a quorum at meeting.
a shareholder's meeting.
ACTION WITHOUT Delaware law permits the The California Act
SHAREHOLDERS' governing instrument to set provides that unless the
MEETING forth the procedure whereby articles of incorporation
action required to be provide otherwise, any
approved by shareholders at a action which may be taken
meeting may be done by at any annual or special
consent. The DE Trust's meeting of shareholders
Declaration of Trust provides may be taken without a
that any action taken by meeting and without prior
shareholders may be taken notice, if shareholders
without a meeting if having not less than the
shareholders holding a minimum number of votes
majority of the shares that would be necessary to
entitled to vote on the take such action at a
matter (or such larger meeting at which all
proportion as shall be shares entitled to vote
required by any express thereon were present and
provision of the Declaration voted, consent to the
of Trust or By-Laws) and action in writing. Both
holding a majority (or such the CA Corporation's
larger proportion as Articles of Incorporation
aforesaid) of the shares of and By-Laws are silent
any series (or class) with regard to shareholder
entitled to vote separately action by written consent.
on the matter consent to the
action in writing.
AMENDMENTS TO The Delaware Act provides When amending its articles
GOVERNING broad flexibility with of incorporation, a
DOCUMENTS respect to amending to the corporation is generally
governing documents of a DBT. required to obtain the
approval of the Board of
Directors and the
shareholders, and to file
a certificate of amendment
with the state.
The DE Trust's Declaration of The CA Corporation's
Trust provides that the Articles of Incorporation
Declaration of Trust may be do not contain any
restated and/or amended at provisions regarding the
any time by an instrument in amendment of the Articles
writing signed by a majority of Incorporation.
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 of the DE Trust Most provisions of the
may be amended or repealed by By-Laws may be amended or
the affirmative vote or repealed by a majority of
written consent of a majority the outstanding shares
of the outstanding shares entitled to vote, or by
entitled to vote, or by the the Board of Directors,
Board of Trustees subject to subject to the rights of
the rights of the the shareholders. Certain
shareholders. provisions may be amended
only by shareholders.
MATTERS REQUIRING The Delaware Act affords Under the California Act,
SHAREHOLDER Trustees the ability to shareholders have the
APPROVAL easily adapt a DBT to future ability to vote on the
contingencies. For example, following matters: (i) the
Trustees have the authority election and removal of
to incorporate a DBT, to Directors; (ii) certain
merge or consolidate with amendments to the articles
another entity, to cause of incorporation and
multiple series of a DBT to By-Laws; and (iii) with
become separate trusts, to regard to a merger,
change the domicile, or to reorganization, or
liquidate a DBT, all without transfer or sale of all or
having to obtain a substantially all of the
shareholder vote. corporation's assets other
than in the ordinary
course of business.
The Declaration of Trust for The By-Laws broadly
the DE Trust, consistent with provide that shareholders
the Delaware Act, affords shall have the right to
shareholders the power to vote at any meeting of
vote on the following shareholders or at any
matters: (i) the election or election of the CA
removal of Trustees; (ii) as Corporation.
required by the Declaration
of Trust, the By-Laws, the The CA Corporation's
1940 Act or the DE Trust's By-Laws provide that when
registration statement; and a quorum is present, a
(iii) other matters deemed by majority of the shares
the Board of Trustees to be voted shall be sufficient
necessary or desirable. to elect Directors and
take any action, unless a
The Declaration of Trust also larger vote is required by
provides that when a quorum the Articles of
is present, a majority of the Incorporation, the By-Laws
votes cast shall decide any or by applicable law. In
issues and a plurality shall the event that
elect a Trustee, unless a shareholders vote
larger vote is required by cumulatively for
the Declaration of Trust, the Directors, the available
By-Laws or by applicable law. Director slots shall be
filled by those candidates
receiving the highest
number of affirmative
votes of the shares
entitled to be voted.
RECORD The Delaware Act permits a The California Act
DATE/NOTICE governing instrument to provides that a
provide for the establishment corporation may set a
of record dates for record date which is not
determining voting rights. more than sixty (60) nor
less than ten (10) days
before a meeting.
The Declaration of Trust for The CA Corporation's
the DE Trust provides that By-Laws permit the
the Board of Trustees may fix Directors to set a record
in advance a record date date which shall not be
which shall not be more than more than fifty (50) days
ninety (90) days, nor less before the date of any
than seven (7) days, before shareholder meeting.
the date of any such meeting.
The By-Laws for the DE Trust The By-Laws for the CA
provide that all notices of Corporation provide that
shareholder meetings shall be all notices of shareholder
sent or otherwise given to meetings shall be sent to
shareholders not less than shareholders not less than
seven (7) days nor more than ten (10) days before the
seventy-five (75) days before date of the meeting.
the date of the meeting.
REMOVAL OF The Delaware Act is silent Under the California Act,
TRUSTEES/ with respect to the removal a Director may be removed
DIRECTORS of Trustees. However, the DE with or without cause by
Trust's Declaration of Trust the affirmative vote of a
states that the Board of majority of the
Trustees, by action of a outstanding shares
majority of the then Trustees entitled to vote.
at a duly constituted However, no Director may
meeting, may fill vacancies be removed (unless the
in the Board of Trustees or entire Board of Directors
remove Trustees with or is removed) when the votes
without cause. cast against removal would
be sufficient to elect the
Director if voted
cumulatively at an
election.
SHAREHOLDER The Delaware Act sets forth Like the Delaware Act, the
RIGHTS the rights of shareholders to California Act permits
OF INSPECTION gain access to and receive shareholders to make
copies of certain DBT Trust reasonable demands to gain
documents and records. This access to and receive
right is qualified by the copies of certain
extent otherwise provided in corporate documents and
the governing instrument of records. Specifically, a
the DBT as well as a shareholder may, upon
reasonable demand standard written demand and for a
related to the shareholder's purpose reasonably related
interest as an owner of the to such shareholder's
DBT. interest as a shareholder,
inspect and copy the
accounting books and
records, minutes of
shareholder and board
meetings, and the record
of shareholders' names and
addresses at any time
during normal business
hours.
Consistent with Delaware law, Neither the Articles of
the By-Laws of the DE Trust Incorporation nor the
provide that a shareholder By-Laws of the CA
shall have the right to Corporation address
inspect and copy the minutes shareholder inspection
and accounting books and rights.
records of the company upon
written demand at any
reasonable time during usual
business hours for a purpose
reasonably related to the
shareholder's interest as a
shareholder.
SHAREHOLDER Personal liability is limited The California Act
LIABILITY by the Delaware Act to the generally limits a
amount of investment in the shareholder's personal
DBT, and may be further liability to the amount of
limited or restricted by the his or her investment in
governing instrument. the corporation. However,
Shareholders of a DBT are a shareholder of a
entitled to the same corporation may be held
limitation of personal liable for the amount of
liability extended to any distribution he or she
stockholders of a private accepts with the knowledge
corporation organized for that the distribution was
profit under the general made in violation of the
corporation law of the State California Act. There is
of Delaware. The DE Trust's no specific mention of
Declaration of Trust shareholder liability in
specifically limits the the CA Corporation's
personal liability of Articles of Incorporation
shareholders. or By-Laws.
TRUSTEE/DIRECTOR Subject to the declaration of The California Act
LIABILITY trust, the Delaware Act provides that a Director,
provides that a Trustee, when when acting in such
acting in such capacity, may capacity, shall not be
not be held personally liable subject to liability if
to any person other than the the Director performs his
DBT or a shareholder for any or her duties in
act, omission or obligation accordance with the
of the DBT or any Trustee. A standard provided under
Trustee's duties and California law. The
liabilities to the DBT and California Act requires
its shareholders may be Directors to act in good
expanded or restricted by the faith and in a manner
provisions of the Declaration which they believe to be
of Trust. in the best interests of
the corporation and its
shareholders, and to
exercise such care as an
ordinarily prudent person
in a like position would
use under similar
circumstances. A
corporation may not limit
a Director's liability for
acts involving intentional
misconduct, bad faith, or
a reckless disregard for
the Director's duty to the
corporation, or for acts
or omissions that
constitute an unexcused
pattern of inattention.
The California Act further
provides that a
corporation may not limit
a Director's liability in
connection with the
approval of improper
distributions to
shareholders, or with
regard to interested
transactions or
transactions for which the
Director derived an
improper personal
benefit.
The DE Trust's Declaration of The CA Corporation's
Trust shields Trustees from Articles of Incorporation
liability for the acts or and By-Laws do not contain
omissions of any officer, provisions protecting
agent, employee, manager or Directors from liability
principal underwriter or for any neglect or
other Trustee. Trustees and wrongdoing.
officers of the DE Trust may
be held liable to the DE
Trust for willful
misfeasance, bad faith, gross
negligence or reckless
disregard of the duties
involved in the conduct of
their office as a Trustee or
officer, but may not be held
liable for errors of judgment
or mistakes of fact or law.
In addition, the Declaration
of Trust also provides that
Trustees, acting in their
capacity as Trustees, shall
not be personally liable for
acts done by or on behalf of
the DE Trust.
INDEMNIFICATION The Delaware Act permits a The California Act allows
DBT to indemnify and hold a corporation to indemnify
harmless any Trustee, and hold harmless
shareholder or agent from and Directors and officers.
against any and all claims Accordingly, the CA
and demands. Consistent with Corporation's By-Laws
the Delaware Act, the provide for the
Declaration of Trust for the indemnification of any
DE Trust provides for the Director or officer for
indemnification of officers claims arising out of or
and Trustees from and against related to the performance
any and all claims and of their duties as an
demands arising out of or officer or Director. Like
related to the performance of the DE Trust, the CA
their duties as an officer or Corporation does not
Trustee. The DE Trust will indemnify Directors and
not indemnify, hold harmless officers from and against
or relieve Trustees from liability incurred by
liability which results from reason of willful
willful misfeasance, bad misfeasance, bad faith,
faith, gross negligence or gross negligence or
reckless disregard of their reckless disregard of
duties. their duties.
The Declaration of Trust of Neither the California Act
the DE Trust also provides nor the Articles of
that any shareholder or Incorporation or By-Laws
former shareholder that is of the CA Corporation
exposed to liability by contain specific
reason of a claim or demand provisions permitting the
related to such person having indemnification of
been a shareholder, and not shareholders.
because of his or her acts or
omissions, shall be entitled
to be held harmless and
indemnified out of the assets
of the DE Trust.
INSURANCE The Delaware Act does not Under the California Act,
contain a provision a corporation may purchase
specifically related to and maintain insurance on
insurance. The DE Trust's behalf of any Director,
Declaration of Trust provides officer, employee, or
that the Trustees shall be other agent of the
entitled and empowered to the corporation against any
fullest extent permitted by liability asserted against
law to purchase insurance or incurred by such person
with the DE Trust's assets in such capacity or
for liability and for all arising out of the
expenses reasonably incurred person's status as a
or paid or expected to be Director, officer,
paid by a Trustee or officer employee or agent of the
in connection with any claim corporation. A
or proceeding in which he or corporation may carry such
she becomes involved by insurance regardless of
virtue of his or her capacity whether it would have the
(or former capacity) with the power to indemnify the
DE Trust, whether or not the person against the
DE Trust would have the power liability.
to indemnify against such
liability.
The By-Laws of the DE Trust The Articles of
permit insurance coverage Incorporation and By-Laws
only to the extent that the of the CA Corporation do
DE Trust would have the power not contain provisions
to indemnify against such regarding the purchase of
liability. insurance coverage for the
benefit of Directors,
officers, employees and
agents of the CA
Corporation.
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 GOLD FUND
MARCH 14, 2000
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 Gold 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 2:00 p.m., Pacific time on
March 14, 2000, 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 DIRECTORS OF FRANKLIN GOLD
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
DIRECTOR), 2, 3 (INCLUDING ALL SUB-PROPOSALS), 4, 5 (INCLUDING ALL
SUB-PROPOSALS), 6, 7, AND 8. 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>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
PROPOSALS 1 - 8.
<S> <C> <C> <C>
1. Election of Directors. To withhold authority to vote for any individual FOR all Vote Withheld FOR all nominees
nominee, strike a line through the nominee's name in the list below. nominees for all (except as marked)
to the contrary
Frank H. Abbott, III Harris J. Ashton Harmon E. Burns
S. Joseph Fortunato Charles B. Johnson Rupert H. Johnson, Jr.
Frank W.T. LaHaye Gordon S. Macklin R. Martin Wiskemann FOR AGAINST ABSTAIN
</TABLE>
2. To ratify the selection of PricewaterhouseCoopers LLP as the Fund's
independent auditors for the Fund's fiscal year ending July 31, 2000.
3. To modify the Fund's investment focus and to change the Fund's name
(includes two (2) Sub-Proposals).
3.a. To modify the Fund's current investment criteria to include other
precious metals as the principal investment focus.
3.b. To amend the Fund's charter to change the Fund's name to reflect its
revised investment focus, in the event that Sub-Proposal 3a is approved.
4. To change the classification of the Fund from a diversified fund to a
non-diversified fund.
5. To approve amendments to certain of the Fund's fundamental investment
restrictions (includes five (5) Sub Proposals).
5.a. Borrowing.
5.b. Underwriting.
5.c. Lending.
5.d. Real estate and commodities.
5.e. Issuing senior securities.
6. To approve the elimination of certain of the Fund's fundamental
investment restrictions.
7. To approve the reorganization of the Fund from a California corporation
to a Delaware business trust.
8. To amend the Fund's charter to increase the Fund's authorized capital in
the event that Proposal 7 is not approved.
9. To grant the proxyholders the authority to vote upon any other business
that may properly come before the Meeting or any adjournments thereof.
10. To grant the proxyholders the authority to vote upon any other business
that may properly come before the Meeting or any adjournments thereof.
IMPORTANT: PLEASE SIGN AND MAIL IN YOUR PROXY...TODAY