As filed with the Securities and Exchange Commission on November 1, 2000.
File No. 2-10103
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ______
Post-Effective Amendment No. ______
FRANKLIN GROWTH AND INCOME FUND
-------------------------------
(Exact Name of Registrant as Specified in Charter)
(650) 312-2000
--------------
(Registrant's Area Code and Telephone Number)
777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
----------------------------------------------
(Address of Principal Executive Offices: Number, Street, City, State, Zip
Code)
MURRAY L. SIMPSON, 777 MARINERS ISLAND BLVD.
--------------------------------------------
SAN MATEO, CA 94404
-------------------
(Name and Address of Agent for Service)
Copies to:
Bruce G. Leto, Esquire
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective under the Securities Act of
1933, as amended.
It is proposed that this filing will become effective on December 1, 2000,
pursuant to Rule 488.
Title of the securities being registered: Shares of beneficial interest, par
value $.01 per share, of Franklin Growth and Income Fund. No filing fee is
due because Registrant is relying on Section 24(f) of the Investment Company
Act of 1940, as amended.
FRANKLIN ASSET ALLOCATION FUND
IMPORTANT SHAREHOLDER INFORMATION
These materials are for a special shareholders' meeting scheduled for January
29, 2001 at 1:00 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 Trustees'
recommendations on page 3 of the proxy statement.
WE URGE YOU TO SPEND A FEW MINUTES REVIEWING THE PROPOSALS IN THE PROXY
STATEMENT. THEN, FILL OUT THE PROXY CARD AND RETURN IT TO US SO THAT WE KNOW HOW
YOU WOULD LIKE TO VOTE. WHEN SHAREHOLDERS RETURN THEIR PROXIES PROMPTLY, THE
FUND MAY BE ABLE TO SAVE MONEY BY NOT HAVING TO CONDUCT ADDITIONAL MAILINGS.
WE WELCOME YOUR COMMENTS. IF YOU HAVE ANY QUESTIONS, CALL FUND INFORMATION AT
1-800/DIAL BEN(R) (1-800/342-5236).
TELEPHONE AND INTERNET VOTING
For your convenience, 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.
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Dear Shareholders:
Enclosed is a Notice of Meeting for a Special Shareholders' Meeting of
Franklin Asset Allocation Fund ("Asset Allocation Fund"). The Meeting is
scheduled for January 29, 2001 at 1:00 p.m. Pacific time at the offices of
the Fund at 777 Mariners Island Boulevard, San Mateo, California 94404. The
accompanying materials describe an important proposal that may affect the
future of your Fund. We ask you to give this your prompt attention and vote
via the enclosed proxy card.
PLEASE TAKE A MOMENT TO FILL OUT, SIGN AND
RETURN THE ENCLOSED PROXY CARD
This meeting is very important to the Fund's future. The Trustees of your
Fund unanimously recommend that you consider and approve an Agreement and
Plan of Reorganization that would result in your shares of Asset Allocation
Fund being exchanged for those of a fund called Franklin Growth and Income
Fund ("Growth and Income Fund"). If the shareholders of Asset Allocation Fund
approve the proposal, you will receive shares of Growth and Income Fund equal
in value to your investment in Asset Allocation Fund. You will no longer be a
shareholder of Asset Allocation Fund, and you will instead be a shareholder
of Growth and Income Fund. Asset Allocation Fund will no longer exist after
the reorganization is completed.
The proposed transaction is intended to be tax-free, which means that you
will not have a taxable gain or loss on the exchange of your shares.
The Trustees recommend this transaction because the projected growth in
assets of Asset Allocation Fund was not sufficient to provide competitive
performance and high quality service to shareholders over the long term.
Asset Allocation Fund and Growth and Income Fund are both managed by Franklin
Advisers, Inc. ("Advisers"). Growth and Income Fund has investment goals and
investment policies that are similar to those of Asset Allocation Fund, and
is a larger fund that may be better able to obtain cost savings for
shareholders.
Please take the time to review this document and vote now. THE TRUSTEES OF
THE FUND UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THIS PROPOSAL.
o To ensure that your vote is counted, indicate your position on the
enclosed proxy card.
o Sign and return your card promptly.
o You may also vote by telephone or over the Internet.
o If you determine at a later date that you wish to attend this
meeting, you may revoke your proxy and vote in person.
Thank you for your attention to this matter.
Sincerely,
Edward B. Jamieson
President
This page intentionally left blank.
FRANKLIN ASSET ALLOCATION FUND
777 MARINERS ISLAND BOULEVARD
SAN MATEO, CALIFORNIA 94404-7777
NOTICE OF SPECIAL SHAREHOLDERS' MEETING
TO BE HELD ON JANUARY 29, 2001
To the Shareholders of Franklin Asset Allocation Fund:
NOTICE IS HEREBY GIVEN that a Special Shareholders' Meeting of Franklin
Asset Allocation Fund ("Asset Allocation Fund") will be held at the offices
of Asset Allocation Fund, 777 Mariners Island Boulevard, San Mateo,
California 94404-7777 on January 29, 2001 at 1:00 p.m. Pacific time. The
Meeting is being called for the following purpose:
To approve or disapprove an Agreement and Plan of Reorganization between
Asset Allocation Fund and Franklin Growth and Income Fund ("Growth and Income
Fund") that provides for the acquisition of substantially all of the assets
of Asset Allocation Fund by Growth and Income Fund in exchange for shares of
Class A of Growth and Income Fund and shares of Class C of Growth and Income
Fund, the distribution of such shares to the shareholders of Asset Allocation
Fund, and the liquidation and dissolution of Asset Allocation Fund.
In addition, shareholders will be asked to grant the proxyholders the
authority to vote upon any other business which may legally come before the
Meeting or any adjournment thereof.
The Agreement and Plan of Reorganization in the attached Prospectus/Proxy
Statement describes this transaction more completely. A copy of the Agreement
and Plan of Reorganization is attached as Exhibit A to the Prospectus/
Proxy Statement.
Shareholders of record as of the close of business on November 28, 2000,
are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
By Order of the Board of Trustees,
Murray L. Simpson
Secretary
San Mateo
December [ ], 2000
-------------------------------------------------------------------------------
THE BOARD OF TRUSTEES URGES YOU TO COMPLETE, DATE, SIGN, AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. IT IS
IMPORTANT THAT YOU RETURN YOUR SIGNED PROXY CARD PROMPTLY SO THAT A QUORUM
MAY BE ENSURED.
-------------------------------------------------------------------------------
PROSPECTUS AND PROXY STATEMENT
When reading this Prospectus/Proxy Statement, you will see certain terms
beginning with capital letters. This means the term is explained in our
glossary section.
TABLE OF CONTENTS
PAGE
COVER PAGE Cover
SUMMARY
What proposal am I voting on?
How will the shareholder voting be handled?
COMPARISONS OF SOME IMPORTANT FEATURES
How do the investment goals and policies of the Funds compare?
What are the risks of an investment in the Funds?
Who manages the Funds?
What are the fees and expenses of each Fund and what might they be after
the Transaction?
Where can I find more financial information about the Funds?
What are other key features of the Funds?
REASONS FOR THE TRANSACTION
INFORMATION ABOUT THE TRANSACTION
How will the Transaction be carried out?
Who will pay the expenses of the Transaction?
What are the tax consequences of the Transaction?
What should I know about the shares of Growth and Income Fund?
What are the capitalizations of the Funds and what might the
capitalization be after the Transaction?
COMPARISON OF INVESTMENT GOALS AND POLICIES
Are there any significant differences between the investment goals and
strategies of the Funds?
How do the fundamental investment restrictions of the Funds differ?
What are the risk factors associated with investments in the Funds?
TABLE OF CONTENTS (CONTINUED)
PAGE
VOTING INFORMATION
How many votes are necessary to approve the Plan?
How do I ensure my vote is accurately recorded?
Can I revoke my proxy?
What other matters will be voted upon at the Meeting?
Who is entitled to vote?
What other solicitations will be made?
Are there dissenters' rights?
INFORMATION ABOUT GROWTH AND INCOME FUND
INFORMATION ABOUT ASSET ALLOCATION FUND
PRINCIPAL HOLDERS OF SHARES
GLOSSARY - USEFUL TERMS AND DEFINITIONS
EXHIBITS TO PROSPECTUS AND PROXY STATEMENT
EXHIBIT A - AGREEMENT AND PLAN OF REORGANIZATION A-1
EXHIBIT B - PROSPECTUS OF FRANKLIN GROWTH AND INCOME FUND - CLASS A, B & C
DATED NOVEMBER 1, 2000 (ENCLOSED)
EXHIBIT C - ANNUAL REPORT TO SHAREHOLDERS OF FRANKLIN GROWTH AND INCOME
FUND
DATED JUNE 30, 2000 (ENCLOSED)
This page intentionally left blank.
PROSPECTUS AND PROXY STATEMENT
DATED NOVEMBER 28, 2000
ACQUISITION OF THE ASSETS OF
FRANKLIN ASSET ALLOCATION FUND
777 MARINERS ISLAND BOULEVARD
SAN MATEO, CALIFORNIA 94404-7777
(650) 312-2000
BY AND IN EXCHANGE FOR CLASS A SHARES AND CLASS C SHARES OF
FRANKLIN GROWTH AND INCOME FUND
777 MARINERS ISLAND BOULEVARD
SAN MATEO, CALIFORNIA 94404-7777
(650) 312-2000
This Prospectus/Proxy Statement solicits proxies to be voted at a Special
Shareholders' Meeting (the "Meeting") of Franklin Asset Allocation Fund
("Asset Allocation Fund") to approve or disapprove an Agreement and Plan of
Reorganization (the "Plan"). If shareholders of Asset Allocation Fund vote to
approve the Plan, the net assets of Asset Allocation Fund will be acquired
by, and in exchange for, shares of Franklin Growth and Income Fund ("Growth
and Income Fund").
The Meeting will be held at the principal offices of Asset Allocation
Fund, which are located at 777 Mariners Island Boulevard, San Mateo,
California 94404-7777 on January 29, 2001 at 1:00 p.m. Pacific time. The
Board of Trustees of Asset Allocation Fund is soliciting these proxies. This
Prospectus/Proxy Statement will first be sent to shareholders on or about
December [ ], 2000.
If Asset Allocation Fund shareholders vote to approve the Plan, you will
receive Class A shares of Growth and Income Fund ("Growth and Income Fund
Class A shares") equal in value to your investment in Class A shares of Asset
Allocation Fund ("Asset Allocation Fund Class A shares"), or Class C shares
of Growth and Income Fund ("Growth and Income Fund Class C shares") equal in
value to your investment in Class C shares of Asset Allocation Fund ("Asset
Allocation Fund Class C shares"). Asset Allocation Fund will then be
liquidated and dissolved.
The investment goals of Growth and Income Fund and Asset Allocation Fund
(individually, a "Fund" and collectively, the "Funds") are similar, but not
identical. Asset Allocation Fund's principal investment goal is total return.
Growth and Income Fund's principal investment goal is capital appreciation,
with current income as a secondary goal. Other differences between the Funds
are that: (i) Growth and Income Fund normally invests at least 65% of its
assets in equity securities, while Asset Allocation Fund does not have a
stated percentage requirement, but generally invests a majority of its assets
in equity securities; (ii) Asset Allocation Fund normally invests more of its
assets in debt securities than does Growth and Income Fund; (iii) Asset
Allocation Fund can invest up to 25% of its assets in foreign securities,
while Growth and Income does not have a limitation on foreign securities
investments; and (iv) Asset Allocation specifies that a majority of its
assets are invested in stocks listed in the S&P500(R) Index or the S&P400(R)
Index, while Growth and Income does not have this specification (although it
also invests a portion of its portfolio in stocks listed in these indexes).
This Prospectus/Proxy Statement gives the information about the proposed
reorganization, and Class A shares and Class C shares of Growth and Income
Fund, that you should know before investing. You should retain it for future
reference. Additional information about Growth and Income Fund and the
proposed reorganization has been filed with the SEC and can be found in the
following documents:
|_| The Prospectus of Growth and Income Fund - Class A, B & C dated
November 1, 2000 (the "Growth and Income Fund Prospectus"), is
attached to and considered a part of this Prospectus/Proxy Statement.
|_| The Annual Report to Shareholders of Growth and Income Fund dated June
30, 2000, which contains financial and performance information for Growth
and Income Fund, is attached to and considered a part of this
Prospectus/Proxy Statement.
|_| A Statement of Additional Information dated November [ ], 2000
relating to this Prospectus/Proxy Statement has been filed with the SEC
and is incorporated by reference into this Prospectus/Proxy Statement.
|_| The Prospectus of Asset Allocation Fund - Class A&C dated May 1, 2000,
as supplemented September 1, 2000 and September 26, 2000, (the " Asset
Allocation Fund Prospectus"), Asset Allocation Fund's Annual Report to
Shareholders dated December 31, 1999, and Asset Allocation Fund's
Semiannual Report to Shareholders dated June 30, 2000, which contains
financial and performance information for Asset Allocation Fund, are on
file with the SEC (File nos. 2-12647 and 811-730) and are incorporated by
reference into this Prospectus/Proxy Statement.
You may request a free copy of the SAI relating to this Prospectus/Proxy
Statement or any of the documents referred to above without charge by calling
1-800/DIAL-BEN(R) or by writing to either Fund at P.O. Box 997151, Sacramento,
CA 95899-9983.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON
THE ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER U.S. GOVERNMENT AGENCY.
MUTUAL FUND SHARES INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
SUMMARY
This is only a summary of certain information contained in this
Prospectus/Proxy Statement. You should read the more complete information in
the rest of this Prospectus/Proxy Statement, including the Plan (attached as
Exhibit A), the Growth and Income Fund Prospectus (enclosed as Exhibit B) and
the Annual Report to Shareholders of Growth and Income Fund (enclosed as
Exhibit C).
WHAT PROPOSAL AM I VOTING ON?
At a meeting held on September 26, 2000, the Board of Trustees of Asset
Allocation Fund approved the Plan and determined to recommend that
shareholders of Asset Allocation Fund vote to approve the Plan. If
shareholders of Asset Allocation Fund vote to approve the Plan, it will
result in the transfer of the net assets of Asset Allocation Fund to Growth
and Income Fund, in exchange for an equal value of shares of Growth and
Income Fund. The shares of Growth and Income Fund will then be distributed to
Asset Allocation Fund shareholders and Asset Allocation Fund will be
liquidated and dissolved. (The proposed transaction is referred to in this
Prospectus/Proxy Statement as the "Transaction.") As a result of the
Transaction, you will cease to be a shareholder of Asset Allocation Fund and
will become a shareholder of Growth and Income Fund. This exchange will occur
on the closing date of the Transaction, which is the specific date on which
the Transaction takes place.
This means that your shares of Asset Allocation Fund will be exchanged for
an equal value of shares of Growth and Income Fund. You will receive Class A
shares of Growth and Income Fund equal in value to your investment in Class A
shares of Asset Allocation Fund. You will receive Class C shares of Growth
and Income Fund equal in value to your investment in Class C shares of Asset
Allocation Fund.
Growth and Income Fund is a Franklin Templeton Investments mutual fund. It
is managed by Advisers. It has an investment goal and policies that are
similar, but not identical, to those of Asset Allocation Fund. For the
reasons set forth in the "Reasons for the Transaction" section, the Board of
Trustees of Asset Allocation Fund has determined that the Transaction is in
the best interests of the shareholders of Asset Allocation Fund. Each Fund's
Board of Trustees also concluded that no dilution in value would result to
the shareholders of Asset Allocation Fund or Growth and Income Fund, as a
result of the Transaction.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU
VOTE TO APPROVE THE AGREEMENT AND PLAN.
HOW WILL THE SHAREHOLDER VOTING BE HANDLED?
Shareholders who own shares of Asset Allocation Fund at the close of
business on November 28, 2000 will be entitled to vote at the Meeting, and
will be entitled to one vote for each full share and a fractional vote for
each fractional share that they hold. To approve the Transaction, a majority
of the shares of Asset Allocation Fund outstanding and entitled to vote must
be voted in favor of the Plan.
Please vote by proxy as soon as you receive this Prospectus/Proxy
Statement. You may place your vote by completing and signing the enclosed
proxy card or voting by telephone or over the Internet. If you vote by any of
these three methods, your votes will be officially cast at the Meeting by the
persons appointed as proxies.
You can revoke your proxy or change your voting instructions at any time
until the vote is taken at the Meeting. For more details about shareholder
voting, see the "Voting Information" section of this Prospectus/Proxy
Statement.
COMPARISONS OF SOME IMPORTANT FEATURES
HOW DO THE INVESTMENT GOALS AND POLICIES OF THE FUNDS COMPARE?
The principal differences in investment strategies and the policies of the
Funds are the extent to which their investments focus on equity securities,
the size of the companies in which the Funds invest and the extent to which
their investments are focused on particular sectors.
Asset Allocation and Growth and Income have similar investment
objectives. Asset Allocation's investment objective is to provide investors
with total return. Growth and Income's investment objective is capital
appreciation, with a secondary goal of providing current income return
through the receipt of dividends or interest from its investments.
Growth and Income Fund seeks to achieve its investment goal by investing,
under normal market conditions, at least 65% of its assets in equity
securities of companies that trade on a securities exchange or in the
over-the-counter market. These companies may be of any market capitalization
value. The Fund's primary investments are in common stock. The Fund may
invest a portion of its assets in foreign securities. It ordinarily buys
foreign securities that are traded in the U.S., as well as American,
European, and Global Depositary Receipts. Depending on current market
conditions, the Fund may invest a portion of its total assets in other
securities, including debt securities and real estate investment trusts
(REITs).
Asset Allocation Fund seeks to achieve its investment goal by investing,
under normal market conditions, mainly in equity and debt securities. A
majority of Asset Allocation's investments are in stocks listed in the
S&P500(R) Index or the S&P400(R) Index. The Fund may also invest in securities
of smaller companies, which may not be included in these indices. The Fund
generally invests in debt securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities, as well as in investment
grade corporate debt securities or unrated securities the Fund's manager
determines are comparable. Asset Allocation Fund may invest up to 25% of
its net assets in foreign securities. It ordinarily buys foreign securities
that are traded in the U.S., as well as American, European, and Global
Depositary Receipts. The Fund may also invest in convertible preferred stock
or convertible debt securities.
For more information about the investment goals and policies of the Funds,
please see the section "Comparison of Investment Goals and Policies."
WHAT ARE THE RISKS OF AN INVESTMENT IN THE FUNDS?
Investments in Growth and Income Fund and Asset Allocation Fund involve
risks common to most mutual funds. There is no guarantee against losses
resulting from an investment in either Fund, nor that either Fund will
achieve its investment goals. Both Funds are subject to the risks posed by
investing in stocks.
Growth and Income Fund may invest a more significant portion of its assets
in companies falling within the small-cap (less than $1.5 billion) and
mid-cap (less than $8 billion) ranges than Asset Allocation Fund. Thus,
Growth and Income Fund may place greater emphasis upon investments in small
cap companies that may be relatively new or unseasoned companies. Growth and
Income Fund's investments in the securities of new or unseasoned companies
may present greater risks than the securities found in the S&P 500(R) Index or
the S&P 400(R) Index in which Asset Allocation Fund generally invests.
Growth and Income Fund may concentrate its investments in one or a few
sectors, such as technology companies, to a greater extent than Asset
Allocation Fund. To the extent that Growth and Income Fund has significant
investments in one or a few sectors, it is subject to more risk than a fund
that maintains broad sector diversification.
For more information about the risks of the Funds, see the section "What
are the risk factors associated with investments in the Funds?" under the
heading "Comparison of Investment Goals and Policies."
WHO MANAGES THE FUNDS?
The management of the business and affairs of each Fund is the
responsibility of each Fund's respective Board of Trustees. Both Funds are
open-end, registered management investment companies, commonly referred to as
"mutual funds." Growth and Income Fund was organized as a Delaware business
trust on March 21, 2000 and is registered with the SEC. Asset Allocation Fund
was organized as a Delaware business trust on July 24, 1996 and is also
registered with the SEC.
Advisers manages the assets and makes the investment decisions for both
Funds. Advisers is a wholly-owned subsidiary of Resources. Resources is a
publicly owned company engaged in various aspects of the financial services
industry through its subsidiaries. Together, Advisers and its affiliates
serve as investment manager or administrator to 52 registered investment
companies, with approximately 156 U.S.-based funds or series. They have over
$236 billion in combined assets under management for more than 5 million
U.S.-based mutual fund shareholder and other accounts. The principal
shareholders of Resources are Charles B. Johnson and Rupert H. Johnson, Jr.
The team responsible for the day-to-day management of Growth and Income
Fund's portfolio is:
SERENA PERIN VINTON CFA, VICE PRESIDENT OF ADVISERS. Ms. Perin has been a
manager of the Fund since 1996. She joined Franklin Templeton Investments in
1991.
EDWARD D. PERKS CFA, VICE PRESIDENT OF ADVISERS. Mr. Perks has been a
manager of the Fund since July 2000. He joined Franklin Templeton Investments
in 1992.
CONRAD B. HERRMANN CFA, SENIOR VICE PRESIDENT OF ADVISERS. Mr. Herrmann
has been a manager of the Growth and Income Fund since 1993. He joined the
Franklin Templeton Group in 1989.
Growth and Income Fund and Asset Allocation Fund each has a management
agreement with Advisers under which Advisers is to receive a management fee
equal to an annual rate of 0.625 of 1% of the value of its average daily net
assets up to and including $100 million; 0.50 of 1% of the value of its
average daily net assets over $100 million up to and including $250 million;
and 0.45 of 1% of the value of its average daily net assets over $250
million. Each class of Growth and Income Fund and Asset Allocation Fund pays
its proportionate share of the management fee.
WHAT ARE THE FEES AND EXPENSES OF EACH FUND AND WHAT MIGHT THEY BE AFTER THE
TRANSACTION?
<TABLE>
<CAPTION>
FEE TABLE FOR
ASSET ALLOCATION FUND AND GROWTH AND INCOME FUND
ACTUAL+ PROJECTED++
GROWTH AND INCOME
ASSET ALLOCATION GROWTH AND INCOME FUND -
FUND - FUND - CLASS A
CLASS A CLASS A AFTER TRANSACTION
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES*
Maximum Sales Charge
(as a percentage of Offering Price) 5.75% 5.75% 5.75%
Paid at time of purchase1 5.75% 5.75% 5.75%
Paid at time of redemption2 None None None
Exchange Fee (per transaction) None None None
ANNUAL FUND OPERATING EXPENSES
(as percentage of average net assets)
Management Fees 0.60% 0.48% 0.48%
Distribution and service (12b-1) Fees 0.25% 0.24% 0.24%
Other Expenses 0.25% 0.19% 0.19%
Total Annual Fund Operating Expenses 1.10% 0.91% 0.91%
---------------------------------------------------------------------------------------------------------------
ACTUAL+ PROJECTED++
GROWTH AND INCOME
ASSET ALLOCATION GROWTH AND INCOME FUND -
FUND - FUND - CLASS C
CLASS C CLASS C AFTER TRANSACTION
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES*
Maximum Sales Charge
(as a percentage of Offering Price) 1.99% 1.99% 1.99%
Paid at time of purchase1 1.00% 1.00% 1.00%
Paid at time of redemption2 0.99% 0.99% 0.99%
Exchange Fee (per transaction) None None None
ANNUAL FUND OPERATING EXPENSES
(as percentage of average net assets)
Management Fees 0.60% 0.48% 0.48%
Distribution and service (12b-1) Fees 1.00% 1.00% 1.00%
Other Expenses 0.25% 0.19% 0.19%
Total Annual Fund Operating Expenses 1.85% 1.67% 1.67%
---------------------------------------------------------------------------------------------------------------
</TABLE>
+Information for Asset Allocation Fund is provided for the 12 month period
ended June 30, 2000. Information for Growth and Income Fund shares is
provided for the fiscal year ended June 30, 2000.
++Projected expenses based on current and anticipated Growth and Income Fund
expenses.
*If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
1. There is no front-end sales charge if you invest $1 million or more in
Class A shares of the Growth and Income Fund or shares of Asset Allocation
Fund. Although Class C has a lower front-end sales charge than Class A, its
Rule 12b-1 fees are higher. Over time you may pay more for Class C shares.
Please see "Your Account - Choosing a Share Class" in the Prospectus of
Growth and Income Fund ("Growth and Income Fund Prospectus").
2. A Contingent Deferred Sales Charge ("CDSC") of 1% may apply to Class A
purchases of $1 million or more with respect to each of the Funds if you sell
the shares within one year and any Class C purchase if you sell the shares
within 18 months. See "Your Account - Contingent Deferred Sales Charge" in
the Growth and Income Fund Prospectus for details.
EXAMPLE
Assumes the annual return for each class is 5%, operating expenses are as
described above, and you sell your shares after the number of years shown.
These are the projected expenses for each $10,000 that you invest in a Fund.
<TABLE>
<CAPTION>
CLASS A 1 YEAR* 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Allocation Fund $681 $905 $1,146 $1,848
Growth and Income Fund $663 $848 $1,050 $1,630
Projected Growth and Income Fund (after Transaction) $663 $848 $1,050 $1,630
CLASS C
1 YEAR ** 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Allocation Fund $384 $676 $1,091 $2,247
Growth and Income Fund $367 $621 $998 $2,056
Projected Growth and Income Fund (after Transaction) $367 $621 $998 $2,056
</TABLE>
*Assumes a CDSC will not apply.
**For the same Class C investment, you would pay projected expenses of $286
for Asset Allocation Fund, $268 for Growth and Income Fund, and $269 for
Growth and Income Fund after the Transaction if you did not sell your shares
at the end of the first year. The expenses for the remaining periods would be
the same.
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
Each Fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends of each class and are not
directly charged to your account.
WHERE CAN I FIND MORE FINANCIAL INFORMATION ABOUT THE FUNDS?
The Growth and Income Fund Prospectus (enclosed as Exhibit B) as well as
the current Annual Report to Shareholders (enclosed as Exhibit C) contain
additional financial information about Growth and Income Fund. The Annual
Report to Shareholders also has discussions of Growth and Income Fund's
performance during the fiscal year ended June 30, 2000.
The Asset Allocation Fund Prospectus, as well as the Annual and Semi
Annual Reports for Asset Allocation Fund, contain more financial information
about Asset Allocation Fund. These documents are available free of charge
upon request (see the section "Information About Asset Allocation Fund").
WHAT ARE OTHER KEY FEATURES OF THE FUNDS?
The Funds use the same service providers for the following services:
TRANSFER AGENCY AND CUSTODY SERVICES. Investor Services, a wholly owned
subsidiary of Resources, is the shareholder servicing agent and acts as the
transfer agent and dividend-paying agent for the Funds.
Bank of New York, Mutual Funds Division, 90 Washington Street, New York,
NY 10286, acts as the custodian of the securities and other assets of both
Funds.
ADMINISTRATIVE SERVICES. FT Services, a wholly-owned subsidiary of
Resources, provides certain administrative facilities and services to Growth
and Income Fund and Asset Allocation Fund under the same terms and conditions.
DISTRIBUTION SERVICES. Distributors acts as the principal underwriter in
the continuous public offering of the Funds' shares under the same terms and
conditions for both Funds.
DISTRIBUTION AND SERVICE (12B-1) FEES. Both Funds have distribution or
"Rule 12b-1" plans. Under each plan, the Fund may pay Distributors or others
for the expenses of activities that are primarily intended to sell shares of
the class. These expenses may include, among others, distribution or service
fees paid to Securities Dealers or others who have executed a servicing
agreement with the Fund, Distributors or its affiliates; a prorated portion
of Distributors' overhead expenses; and the expenses of printing prospectuses
and reports used for sales purposes, and preparing and distributing sales
literature and advertisements. The distribution and service (12b-1) fees
charged to each class are based only on the fees attributable to that
particular class.
Each of Growth and Income Fund and Asset Allocation Fund's Class A plans
may pay up to 0.25% per year of Class A's average daily net assets. Each of
Growth and Income Fund and Asset Allocation Fund's Class C plans may pay up
to 1.00% per year of Class C's average daily net assets.
For more information regarding Growth and Income Fund's Rule 12b-1 plans,
please see "The Underwriter - Distribution and Service (12b-1) fees" in its
current SAI dated November 1, 2000.
PURCHASES AND REDEMPTIONS. The maximum front-end sales charge imposed on
purchases of Class A shares of Growth and Income Fund and Asset Allocation
Fund is 5.75% with reduced charges for purchases of $50,000 or more and no
front-end sales charges for purchases of $1 million or more. The maximum
sales charge imposed on purchases of Class C shares of Growth and Income Fund
and Asset Allocation Fund is 1.00%. Each Fund generally requires a minimum
initial investment of $1,000 and subsequent investments of at least $50.
You may sell (redeem) your shares at any time. Shares of each Fund also
may be exchanged for shares of other Franklin Templeton Funds, subject to
certain limitations, as provided in the prospectus of the respective Franklin
Templeton Fund. Because an exchange is technically a sale and a purchase of
shares, an exchange is a taxable transaction.
Shares of each Fund may be redeemed at their respective Net Asset Value
per share. However, redemptions of Class A shares which were purchased in
amounts of $1,000,000 or more generally are subject to a 1% CDSC on shares
you sell within 12 months of purchase. There is also a 1% Contingent Deferred
Sales Charge on any Class C shares you sell within 18 months of purchase. The
Contingent Deferred Sales Charge for each Fund's Class C shares is waived in
certain circumstances. Growth and Income Fund shares acquired by Asset
Allocation Fund shareholders as a result of this Transaction are subject to a
CDSC to the same extent that Asset Allocation Fund shares were subject to
a CDSC.
Additional information and specific instructions explaining how to buy,
sell, and exchange shares of Growth and Income Fund are outlined in the
Growth and Income Fund Prospectus under the heading "Your Account." The
accompanying Growth and Income Fund Prospectus also lists phone numbers for
you to call if you have any questions about your account under the heading
"Questions." These instructions and phone numbers are the same for both Funds.
DIVIDENDS AND DISTRIBUTIONS. The Growth and Income Fund intends to pay a
dividend at least quarterly representing substantially all of its net
investment income. Capital gains, if any, may be distributed annually. Asset
Allocation Fund also intends to pay a dividend at least quarterly
representing substantially all of its net investment income, but will
distribute capital gains, if any, twice a year. The amount of these
distributions will vary and there is no guarantee the Funds will pay
dividends.
For more information about the tax implications of investments in the
Growth and Income Fund, see the attached Growth and Income Fund Prospectus
under the heading "Distributions and Taxes."
REASONS FOR THE TRANSACTION
The Board of Trustees of Asset Allocation Fund has recommended the
Transaction in order to combine Asset Allocation Fund with a larger fund that
has similar goals and investment policies. A larger fund may be expected to
have a lower expense ratio because certain costs may be spread over a larger
asset base. However, variable expenses that are based on the value of assets
or the number of shareholder accounts, such as custody and transfer agency
fees, would be largely unaffected by the Transaction.
The Plan was presented to the Board of Trustees of Asset Allocation Fund
at a meeting held on September 26, 2000. At the meeting, the Board of
Trustees reviewed the potential benefits and costs to shareholders of Asset
Allocation Fund; the expense ratios of Growth and Income Fund and Asset
Allocation Fund; the comparative investment performance of Growth and Income
Fund and Asset Allocation Fund; the compatibility of the investment goals,
policies, restrictions and investments of Asset Allocation Fund with those of
Growth and Income Fund; and the tax consequences of the Transaction. During
the course of its deliberations, the Board of Trustees of Asset Allocation
Fund noted that the expenses of the Transaction will be shared one-quarter by
Asset Allocation Fund, one-quarter by Growth and Income Fund, and one-half by
Advisers.
The Board of Trustees of Asset Allocation Fund, including a majority of
the trustees who are not interested persons of either Fund ("Independent
Trustees"), concluded that the Transaction is in the best interests of the
shareholders of Asset Allocation Fund and that no dilution of value would
result to the shareholders of Asset Allocation Fund from the Transaction,
approved the Plan and recommended that shareholders of Asset Allocation Fund
vote to approve the Transaction.
The Board of Trustees of Growth and Income Fund, including a majority of
Independent Trustees, approved the Plan on September 26, 2000. The Board of
Trustees of Growth and Income Fund concluded that the Transaction is in the
best interests of the shareholders of Growth and Income Fund and that no
dilution of value would result to the shareholders of Growth and Income Fund
from the Transaction.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF TRUSTEES UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THE PLAN.
If shareholders of Asset Allocation Fund do not approve the Plan, the
Board of Trustees will consider other possible courses of action for Asset
Allocation Fund, including liquidation and dissolution.
INFORMATION ABOUT THE TRANSACTION
This is only a summary of the Plan. You should read the actual Plan. It is
attached as Exhibit A.
HOW WILL THE TRANSACTION BE CARRIED OUT?
If the shareholders of Asset Allocation Fund approve the Plan, the
Transaction will take place after various conditions are satisfied by Asset
Allocation Fund and Growth and Income Fund, including the preparation of
certain documents. The Trust will determine a specific date for the actual
Transaction to take place. This is called the closing date. If the
shareholders of Asset Allocation Fund do not approve the Plan, the
Transaction will not take place.
If shareholders of Asset Allocation Fund approve the Plan at the Meeting,
shares of Asset Allocation Fund will no longer be offered for sale to
existing shareholders, except for the reinvestment of dividend and capital
gain distributions or through established automatic investment plans. Until
the close of business on the day of the Meeting, you may continue to add to
your existing account subject to your applicable minimum additional
investment amount or buy additional shares through the reinvestment of
dividend and capital gain distributions.
If the shareholders of Asset Allocation Fund approve the Plan, Asset
Allocation Fund will deliver to Growth and Income Fund substantially all of
its assets on the closing date, which is scheduled for February 8, 2001 or
such later date as the Funds may agree. In exchange, shareholders of Asset
Allocation Fund will receive Class A shares and Class C shares of Growth and
Income Fund that have a value equal to the dollar value of the assets
delivered to Asset Allocation Fund. The stock transfer books of Asset
Allocation Fund will be permanently closed as of 1:00 p.m. Pacific time on
the closing date. Asset Allocation Fund will only accept requests for
redemptions received in proper form before 1:00 p.m. Pacific time on the
closing date. Requests received after that time will be considered requests
to redeem shares of Growth and Income Fund.
To the extent permitted by law, the Funds may agree to amend the Plan
without shareholder approval. They may also agree to terminate and abandon
the Transaction at any time before or, to the extent permitted by law, after
the approval of shareholders of Asset Allocation Fund.
WHO WILL PAY THE EXPENSES OF THE TRANSACTION?
The expenses resulting from the Transaction will be paid one-quarter by
Asset Allocation Fund, one-quarter by Growth and Income Fund, and one-half by
Advisers, the investment manager for both Funds.
WHAT ARE THE TAX CONSEQUENCES OF THE TRANSACTION?
The Transaction is intended to qualify as a tax-free reorganization for
federal income tax purposes under Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended. Based on certain assumptions and representations
received from Asset Allocation Fund and Growth and Income Fund, it is the
opinion of Stradley, Ronon, Stevens & Young, LLP, counsel to the Funds, that
shareholders of Asset Allocation Fund will not recognize any gain or loss for
federal income tax purposes as a result of the exchange of their shares of
Asset Allocation Fund for shares of Growth and Income Fund and that neither
Growth and Income Fund nor its shareholders will recognize any gain or loss
upon receipt of the assets of Asset Allocation Fund.
You will continue to be responsible for tracking the purchase cost and
holding period of your shares and should consult your tax advisor regarding
the effect, if any, of the Transaction in light of your individual
circumstances. You should also consult your tax advisor as to state and local
tax consequences, if any, of the Transaction, because this discussion only
relates to the federal income tax consequences.
WHAT SHOULD I KNOW ABOUT THE SHARES OF GROWTH AND INCOME FUND?
Class A shares and Class C shares of Growth and Income Fund will be
distributed to shareholders of the Asset Allocation Fund's Class A shares and
Class C shares, respectively, and will have the same legal characteristics as
the shares of Asset Allocation Fund with respect to such matters as voting
rights, assessibility, conversion rights, and transferability. Former
shareholders of Asset Allocation Fund whose shares are represented by
outstanding share certificates will not be allowed to redeem shares of Growth
and Income Fund until Asset Allocation Fund certificates have been returned.
WHAT ARE THE CAPITALIZATIONS OF THE FUNDS AND WHAT MIGHT THE CAPITALIZATION BE
AFTER THE TRANSACTION?
The following table sets forth, as of October 10, 2000, the capitalization
of Class A and C shares of Asset Allocation Fund and the Class A and C shares of
Growth and Income Fund. The table also shows the projected capitalization of
Growth and Income Fund Class A and C shares as adjusted to give effect to the
proposed Transaction. The capitalization of Growth and Income Fund and its
classes is likely to be different when the Transaction is consummated.
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND -
ASSET ALLOCATION GROWTH AND INCOME PROJECTED AFTER
FUND FUND TRANSACTION
(UNAUDITED) (UNAUDITED) (UNAUDITED)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets (all classes) (millions) $169 $1,423 $1,592
Total shares outstanding (all classes) 15,566,625 84,642,0881 100,208,7131
Class A net assets (millions) $159 $1,194 $1,353
Class A shares outstanding 14,622,090 70,757,003 80,152,584
Class A net asset value per share $10.84 $16.87 $16.87
Class C net assets (millions) $10 $196 $206
Class C shares outstanding 944,535 11,906,035 12,525,599
Class C net asset value per share $10.81 $16.48 $16.48
</TABLE>
1. Growth and Income Fund offers two additional classes of shares, Class B
and Advisor Class.
COMPARISON OF INVESTMENT GOALS AND POLICIES
This section describes the key differences between the investment policies
of Asset Allocation Fund and Growth and Income Fund, and certain noteworthy
differences between the investment goals and policies of the two Funds. For a
complete description of Growth and Income Fund's investment policies and
risks, you should read the Growth and Income Fund Prospectus, which is
attached to this Prospectus/Proxy Statement as Exhibit B.
ARE THERE ANY SIGNIFICANT DIFFERENCES BETWEEN THE INVESTMENT GOALS AND
STRATEGIES OF THE FUNDS?
There are several important differences between the Funds.
Asset Allocation's principal investment goal is to provide investors with
total return. Growth and Income's principal investment goal is capital
appreciation, with a secondary goal of providing current income return
through the receipt of dividends or interest from its investments.
Under normal market conditions, the Growth and Income Fund the Fund
invests at least 65% of its assets in equity securities of companies that
trade on a securities exchange or in the over-the-counter market. While Asset
Allocation Fund does not have a stated percentage amount, it generally
invests a majority of its assets in equity securities.
A majority of Asset Allocation Fund's investments are in stocks listed in
the S&P500(R) Index or the S&P400(R) Index. Growth and Income may invest in
securities of companies of any size market capitalization (share price
multiplied by the number of common stocks outstanding), including a
significant portion of its assets in companies falling within the small-cap
(less than $1.5 billion) and mid-cap (less than $8 billion) ranges. Growth
and Income Fund, however, does not intend to invest more than 25% of its
total assets in small-cap companies.
Growth and Income Fund may concentrate its investments in certain sectors
to a greater extent than Asset Allocation Fund. In addition, while both Funds
may invest in foreign securities, Asset Allocation may only invest up to 25%
of its assets in foreign securities. Growth and Income Fund does not have a
stated percentage limitation on foreign investments. Growth and Income Fund
also tends to have a lower percentage of its assets invested in debt
securities than Asset Allocation Fund.
There are other differences between the Funds that are of lesser
significance.
For example, Asset Allocation Fund may not invest more than 15% of the
Fund's total assets in the securities of all issuers in the aggregate, the
respective businesses of which have been in continuous operation for less
than three years. As a non-fundamental policy, Asset Allocation Fund has
determined to limit such investments to 5% of its total assets. Growth and
Income Fund does not have a percentage limitation on such investments.
Growth and Income Fund may borrow up to 33 1/3% of the value of its total
assets, whereas Asset Allocation Fund may not borrow more than 10% of the
value of its total assets.
Growth and Income Fund may invest in securities of companies operating in
the real estate industry, including real estate investment trusts (REITs).
Growth and Income Fund currently intends to limit these investments to no
more than 10% of total assets. Asset Allocation Fund may also invest in
REITs, but has no specific limit to any investment it may make in REITs.
Growth and Income Fund may invest in convertible securities, which are
generally debt obligations or preferred stocks that may be converted within a
specified period of time into a certain amount of common stock of the same or
a different issuer. The Growth and Income Fund currently intends to limit
these investments to no more than 10% of total assets. Asset Allocation Fund
may also invest in convertible securities, but has no specific limit to any
investment it may make in convertible securities.
Growth and Income Fund may buy debt securities that are rated Baa by
Moody's Investors Service, Inc. (Moody's) or BBB by Standard & Poor's Ratings
Group (S&P(R)) or better; or unrated debt that is determined to be of
comparable quality. At present, the Growth and Income Fund does not intend to
invest more than 5% of its total assets in non-investment grade securities
(rated lower than Baa by Moody's or BBB by S&P(R)). Asset Allocation Fund
limits its investments in corporate debt to investment grade securities
(rated Baa by Moody's Investors Service, Inc. (Moody's) or BBB by Standard &
Poor's Ratings Group (S&P(R)) or better) and unrated debt which it determines
to be of comparable quality.
Growth and Income Fund may lend its portfolio securities to qualified
banks or broker dealers. Such loans may not exceed 10% of Growth and Income
Fund's total assets measured at the time of the most recent loan. Asset
Allocation Fund is restricted from lending its assets.
HOW DO THE FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUNDS DIFFER?
Policies or restrictions that are deemed fundamental may not be changed
without the approval of the lesser of (i) a majority of the outstanding
shares of the Fund, or (ii) 67% or more of the shares represented at a
meeting of shareholders at which the holders of more than 50% of the
outstanding shares are represented ("Majority Vote").
As described below, the Funds have adopted different restrictions as
fundamental policies, which may not be changed without the approval of a
Majority Vote.
Asset Allocation Fund may not purchase the securities of any one issuer
(except securities issued by the U.S. or any instrumentality thereof) if,
immediately after and as a result of such purchase, the market value of the
holdings of the Fund in the securities of such issuer would exceed 5% of the
market value of the Fund's total net assets. Growth and Income Fund is
similarly restricted as to the purchase of a single issuer, except that up to
25% of the value of the Fund's total assets may be invested without regard to
such 5% limitation. In addition, the 5% limitation does not apply to Growth
and Income Fund's investments in other investment companies.
Asset Allocation Fund may not purchase the securities of any issuer if
such purchase would cause more than 10% of the outstanding voting securities
of such issuer, or more than 10% of the outstanding voting securities of any
one class of such issuer, to be held in the Fund's portfolio. Growth and
Income Fund is similarly restricted as to the purchase of the outstanding
voting securities of a single issuer, but it is not restricted as to any one
class of shares and up to 25% of the value of the Fund's total assets may be
invested without regard to such 10% limitation. In addition, the 10%
limitation does not apply to Growth and Income Fund's investments in other
investment companies.
Asset Allocation Fund may not purchase any securities on margin or sell
securities short. Growth and Income Fund is permitted to sell securities
short.
Growth and Income Fund may purchase shares of money market funds managed
by Advisers or its affiliates to the extent permitted by exemption granted
under the 1940 Act. Asset Allocation Fund may also purchase securities of
money market funds managed by Advisers or its affiliates, but such purchases
are subject to several conditions. Asset Allocation's purchases and
redemptions of money market fund shares may not be subject to any purchase or
redemption fees, its investments may not be subject to duplication of
management fees, nor to any charge related to the expense of distributing the
fund's shares and the aggregate investments by the Fund in any money market
fund may 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.
Growth and Income Fund may invest, without limit, in the securities of
issuers which have been in continuous operation for less than three years.
Asset Allocation Fund may not invest more than 15% of its total assets in the
securities of issuers which have been in continuous operation for less than
three years.
Asset Allocation Fund is limited in its 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, Advisers.
Growth and Income Fund is not similarly restricted.
Asset Allocation Fund may not borrow money, except as a temporary measure
for extraordinary purposes, and then not in excess of 10% of the total assets
of the Fund taken at cost or value, whichever is less. Growth and Income Fund
is permitted to borrow money from banks or other investment companies to the
extent permitted by the 1940 Act, or any exemptions therefrom which may be
granted by the SEC, or from any person in a private transaction not intended
for public distribution 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).
Growth and Income Fund may participate in an interfund lending program
with other Franklin Templeton Funds to the extent permitted under the 1940
Act. Asset Allocation Fund does not yet have this authority.
Asset Allocation Fund is not permitted to mortgage or pledge any of its
assets. Growth and Income Fund is not similarly restricted.
Both Funds are restricted from acting as an underwriter of securities,
except Growth and Income Fund may act as an underwriter to the extent that it
may be deemed to be an underwriter when disposing of securities it owns or
when selling its own shares.
Both Funds also are prohibited from issuing securities senior to their
presently authorized shares. However, this restriction does not prohibit
Growth and Income Fund from (a) making any permitted borrowings, loans,
mortgages or pledges, (b) entering into options, futures contracts, forward
contracts, repurchase transactions, or reverse repurchase transactions, or
(c) making short sales of securities to the extent permitted by the 1940 Act
and any rule or order thereunder, or SEC staff interpretations thereof.
Asset Allocation Fund may not purchase or sell any securities other than
shares of the Fund from or to Advisers or any officer or director of
Advisers. It also may not invest in the securities of companies for the
purpose of exercising control. Growth and Income Fund does not have either
of these investment restrictions.
WHAT ARE THE RISK FACTORS ASSOCIATED WITH INVESTMENTS IN THE FUNDS?
Like all investments, an investment in both Funds involves risk. There is
no assurance that the Funds will meet their investment goals. The achievement
of the Funds' goals depends upon market conditions, generally, and on the
investment managers' analytical and portfolio management skills.
STOCK RISK.
While stocks historically have outperformed other asset classes over the
long term, they tend to go up and down more dramatically over the short term.
These price movements may result from factors affecting individual companies,
industries or the securities market as a whole.
SECTOR RISK.
To the extent that Growth and Income Fund has significant investments in
one or a few sectors, such as technology company stocks, it is subject to
more risk than a fund that maintains broad sector diversification.
Technology company stocks can be subject to abrupt or erratic price
movements and have been volatile, especially over the short term, due to the
rapid pace of product change and development affecting such companies.
Technology companies are subject to significant competitive pressures, such
as new market entrants, aggressive pricing and tight profit margins. In
addition, the prices of technology issuers may be influenced not only by
developments relating to the company, but also to factors that affect the
sector, even if those factors are not really relevant to the company.
Technology companies have not traditionally paid significant dividends.
Therefore, to the extent that the Growth and Income Fund's portfolio is
heavily weighted in this sector, it will not produce much income, although it
is likely to produce income on a level similar to that of comparable funds.
ELECTRONIC TECHNOLOGY AND TECHNOLOGY SERVICE COMPANIES RISK. These
companies also face the risks that new services, equipment or technologies
will not be accepted by consumers and businesses or will become rapidly
obsolete. These factors can affect the profitability of technology companies
and, as a result, the value of their securities. In addition, many
Internet-related companies are in the emerging stage of development and are
particularly vulnerable to the risks that their business plans will not
develop as anticipated and of rapidly changing technologies.
HEALTH TECHNOLOGY COMPANIES RISK. The health technology industry is
subject to extensive government regulation and characterized by competition
and rapid technological developments. As these factors impact this industry,
the value of your shares may fluctuate significantly over relatively short
periods of time.
SMALLER COMPANIES RISK.
Growth and Income Fund expects to invests a substantial portion of its
assets in equity securities of medium and smaller companies and, therefore,
it is subject to additional risks associated with those securities. Smaller
and new, unseasoned companies may offer substantial opportunities for capital
growth, but they also involve substantial risks and should be considered
speculative. Historically, smaller company securities have been more volatile
in price than larger company securities, especially over the short-term.
Among the reasons for the greater price volatility are the less certain
growth prospects of smaller companies, the lower degree of liquidity in the
markets for such securities, and the greater sensitivity of smaller companies
to changing economic conditions.
Small or new companies also may lack depth of management, be unable to
generate funds necessary for growth or development, or be developing or
marketing new products or services for which markets are not yet established
and may never become established. Increases in interest rates also may have
a negative effect on smaller companies because these companies may find it
more difficult to obtain credit to expand, or may have more difficulty
meeting interest payments.
FOREIGN SECURITIES RISK.
Both Funds may invest in foreign securities. Investing in foreign
securities typically involves more risks than investing in U.S. securities.
These risks can increase the potential for losses in either Fund and may
include, among others, currency risks (fluctuations in currency exchange
rates and the new euro currency), country risks (political, social and
economic instability, currency devaluations and policies that have the effect
of limiting or restricting foreign investment or the movement of assets),
different trading practices, less government supervision, less publicly
available information, limited trading markets and greater volatility.
INTEREST RATE RISK.
Since the Funds can only distribute what they earn, the Funds'
distributions to shareholders may decline when interest rates fall. In
addition, the Funds' distributions will be affected by the dividend paying
characteristics of the equity securities in its portfolio.
CREDIT RISK.
This is the possibility than an issuer will be unable to make interest
payments or repay principal. Changes in an issuer's financial strength or in
a security's credit rating may affect its value and, thus, impact the value
of a Fund's shares. As with the interest rate risk, to the extent that Growth
and Income Fund invests more of its assets in lower-rated debt securities
than Asset Allocation Fund, Growth and Income Fund is exposed to greater
credit risk.
CONVERTIBLE SECURITIES RISK.
To the extent either Fund invests in convertible securities, it is subject
to the risks associated with them. A convertible security has risk
characteristics of both equity and debt securities. Its value may rise and
fall with the market value of the underlying stock or, like a debt security,
vary with changes in interest rates and the credit quality of the issuer. A
convertible security tends to perform more like a stock when the underlying
stock price is high (because it is assumed it will be converted) and more
like a debt security when the underlying stock price is low (because it is
assumed it will not be converted). Because its value can be influenced by
many different factors, a convertible security is not as sensitive to
interest rate changes as a similar non-convertible debt security, and
generally has less potential for gain or loss than the underlying stock.
DERIVATIVE SECURITIES RISK.
Options, futures, options on futures, and forward currency contracts are
considered derivative investments since their value depends on the value of
the underlying asset to be purchased or sold. A Fund's investment in
derivatives may involve a small investment relative to the amount of risk
assumed. To the extent either Fund enters into any of these transactions,
their success will depend on the manager's ability to predict market
movements.
ILLIQUID SECURITIES RISK.
Both Growth and Income Fund and Asset Allocation Fund may invest up to 10%
of their net assets in securities that are not readily marketable.
Investments by a Fund in illiquid securities involve the possibility that the
securities cannot be readily sold or can only be resold at a price
significantly lower than their value, which may have a negative effect on the
value of the Fund's shares.
VOTING INFORMATION
HOW MANY VOTES ARE NECESSARY TO APPROVE THE PLAN?
The affirmative vote of a majority of the total number of shares of Asset
Allocation Fund outstanding and entitled to vote is necessary to approve the
Plan. Each shareholder will be entitled to one vote for each full share, and
a fractional vote for each fractional share of Asset Allocation Fund held at
the close of business on November 28, 2000 (the "Record Date"). If sufficient
votes to approve the Plan are not received by the date of the Meeting, the
Meeting may be adjourned to permit further solicitations of proxies.
Under relevant state law and the Asset Allocation Fund's governing
documents, abstentions and broker non-votes will be included for purposes of
determining whether a quorum is present at the Meeting, but will be treated
as votes not cast and, therefore, will not be counted for purposes of
determining whether the matters to be voted upon at the Meeting have been
approved, and will have the same effect as a vote against the Plan.
HOW DO I ENSURE MY VOTE IS ACCURATELY RECORDED?
You can vote in any one of four ways:
o By mail, with the enclosed proxy card.
o In person at the Meeting.
o By telephone or through the Internet; a control number is provided on
your proxy card and separate instructions are enclosed.
A proxy card is, in essence, a ballot. If you simply sign and date the
proxy but give no voting instructions, your shares will be voted in favor of
the Plan and in accordance with the views of management upon any unexpected
matters that come before the Meeting or adjournment of the Meeting.
CAN I REVOKE MY PROXY?
You may revoke your proxy at any time before it is voted by sending a
written notice to Asset Allocation Fund expressly revoking your proxy, by
signing and forwarding to Asset Allocation Fund a later-dated proxy, or by
attending the Meeting and voting in person.
WHAT OTHER MATTERS WILL BE VOTED UPON AT THE MEETING?
The Board of Trustees of Asset Allocation Fund does not intend to bring
any matters before the Meeting other than those described in this proxy. It
is not aware of any other matters to be brought before the Meeting by others.
If any other matter legally comes before the Meeting, proxies for which
discretion has been granted will be voted in accordance with the views of
management.
WHO IS ENTITLED TO VOTE?
Shareholders of record of Asset Allocation Fund on the Record Date will be
entitled to vote at the Meeting. On the Record Date, there were [ ]
outstanding shares of Asset Allocation Fund - Class A and [ ]
outstanding shares of Asset Allocation Fund - Class C.
WHAT OTHER SOLICITATIONS WILL BE MADE?
Asset Allocation Fund will request broker-dealer firms, custodians,
nominees, and fiduciaries to forward proxy material to the beneficial owners
of the shares of record. Asset Allocation Fund may reimburse broker-dealer
firms, custodians, nominees, and fiduciaries for their reasonable expenses
incurred in connection with such proxy solicitation. In addition to
solicitations by mail, officers and employees of Asset Allocation Fund
without extra pay, may conduct additional solicitations by telephone,
personal interviews, and other means. Asset Allocation Fund, has engaged
Shareholder Communications Corporation to solicit proxies from brokers,
banks, other institutional holders, and individual shareholders for a fee,
including out-of-pocket expenses ranging between $16,469 and $22,384. The
costs of any such additional solicitation and of any adjourned session will
be shared one-quarter by Asset Allocation Fund, one-quarter by Growth and
Income Fund, and one-half by Advisers.
ARE THERE DISSENTERS' RIGHTS?
Shareholders of Asset Allocation Fund will not be entitled to any
"dissenters' rights" since the proposed Transaction involves two open-end
investment companies registered under the 1940 Act (commonly called mutual
funds). Although no dissenters' rights may be available, you have the right
to redeem your shares at Net Asset Value until the closing date. After the
closing date, you may redeem your Growth and Income Fund shares or exchange
them for shares of certain other funds in the Franklin Templeton Funds,
subject to the terms in the prospectus of the respective fund.
INFORMATION ABOUT GROWTH AND INCOME FUND
Information about Growth and Income Fund is included in the Growth and
Income Fund Prospectus, which is attached to and considered a part of this
Prospectus/Proxy Statement. Additional information about Growth and Income
Fund is included its SAI dated November 1, 2000 which is incorporated into
the Prospectus and considered a part of this Prospectus/Proxy Statement. You
may request a free copy of the SAI and other information by calling
1-800/DIAL-BEN(R) or by writing to the Growth and Income Fund at P.O. Box
997151, Sacramento, CA 95899-9983. The Growth and Income Fund's Annual Report
to Shareholders for the fiscal year ended June 30, 2000, is attached to and
considered a part of this Prospectus/Proxy Statement.
Growth and Income Fund files proxy materials, reports and other
information with the SEC in accordance with the informational requirements of
the Securities Exchange Act of 1934 and the 1940 Act. These materials can be
inspected and copied at: the SEC's Public Reference Room at 450 Fifth Street
NW, Washington, DC 20549. Also, copies of such material can be obtained from
the SEC's Public Reference Section, Washington, DC 20549-6009, at prescribed
rates, or from the SEC's Internet address at http://www.sec.gov.
INFORMATION ABOUT ASSET ALLOCATION FUND
Information about Asset Allocation Fund is included in the current Asset
Allocation Fund Prospectus, as well as Asset Allocation Fund's SAI dated May
1, 2000, and in Asset Allocation Fund's Annual Report to Shareholders dated
December 31, 1999 and Semiannual Report dated June 30, 2000. These documents
have been filed with the SEC and the Asset Allocation Fund Prospectus, Annual
Report, and Semiannual Report are incorporated by reference herein. You may
request free copies of these documents and other information relating to
Asset Allocation Fund by calling 1-800/DIAL BEN(R) or by writing to Asset
Allocation Fund at P.O. Box 997151, Sacramento, CA 95899-9983. Reports and
other information filed by the Asset Allocation Fund can be inspected and
copied at: the SEC's Public Reference Room at 450 Fifth Street NW,
Washington, DC 20549. Also, copies of such material can be obtained from the
SEC's Public Reference Section, Washington, DC 20549-6009, at prescribed
rates, or from the SEC's Internet address at http://www.sec.gov.
PRINCIPAL HOLDERS OF SHARES
As of the Record Date, the officers and trustees of Asset Allocation Fund,
as a group, owned less than 1% of the outstanding voting shares of Class A or
Class C of Asset Allocation Fund. In addition, as of the Record Date, the
officers and trustees of Growth and Income Fund, as a group, owned less than
1% of the outstanding voting shares of Class A or Class C of Growth and
Income Fund. From time to time, the number of Fund shares held in the
"street name" accounts of various securities dealers for the benefit of their
clients or in centralized securities depositories may exceed 5% of the total
shares outstanding. Except as listed below, as of the Record Date, no other
person owned (beneficially or of record) 5% or more of the outstanding
shares of Growth and Income Fund or Asset Allocation Fund.
Name and Address Percentage (%)
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GLOSSARY
USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
ADVISERS - Franklin Advisers, Inc., 777 Mariners Island Blvd., San Mateo, CA
94404, the investment manager for both Funds
CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% that may apply
if you sell your Class A shares within 12 months of purchase
DISTRIBUTORS - Franklin Templeton Distributors, Inc., 777 Mariners Island
Blvd., San Mateo, CA 94404, the principal underwriter for the Funds
FRANKLIN TEMPLETON FUNDS - The U.S. registered mutual funds in Franklin
Templeton Investments except Franklin Templeton Variable Insurance Products
Trust and Templeton Capital Accumulator Fund, Inc.
FRANKLIN TEMPLETON INVESTMENTS - All registered investment companies and
other accounts managed by various subsidiaries of Franklin Resources, Inc., a
publicly owned holding company
FT SERVICES - Franklin Templeton Services, Inc., the Funds' administrator
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., 777 Mariners
Island Blvd., San Mateo, CA 94404, the shareholder servicing and transfer
agent to the Funds
MARKET TIMERS - Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange
shares based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.
MOODY'S - Moody's Investors Services, Inc.
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the Fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the Fund by
the number of shares outstanding.
OFFERING PRICE - The public offering price is based on the Net Asset Value
per share of the class and includes the front-end sales charge, if
applicable. For each Fund, the maximum front-end sales charge is 5.75% for
Class A shares of Growth and Income Fund and for shares of Asset Allocation
Fund, and 1.00% for Class C shares of Growth and Income Fund and for shares
of Asset Allocation Fund. We calculate the offering price to two decimal
places using standard rounding criteria.
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Funds. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
S&P - Standard & Poor's(R) Ratings Group
U.S. - United States
WE/OUR/US - Unless the context indicates a different meaning, these terms
refer to the Funds and/or Investor Services, Distributors, or other wholly
owned subsidiaries of Resources.
EXHIBITS TO PROSPECTUS
AND PROXY STATEMENT
Exhibit
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A Agreement and Plan of Reorganization between Franklin Growth and Income
Fund and Franklin Asset Allocation Fund
B Prospectus of Franklin Growth and Income Fund - Class A, B & C dated
November 1, 2000 (enclosed)
C Annual Report to Shareholders of Franklin Growth and Income Fund dated
June 30, 2000 (enclosed)
EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan"), is made as of
this[ ] day of November, 2000, by and between Franklin Asset Allocation Fund
("Asset Allocation Fund"), a business trust created under the laws of the
State of Delaware in 1996, and Franklin Growth and Income Fund ("Growth and
Income Fund") a business trust created under the laws of the State of
Delaware in 2000, each with its principal place of business at 777 Mariners
Island Boulevard, San Mateo, California 94404.
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by Growth and Income
Fund, of substantially all of the property, assets and goodwill of Asset
Allocation Fund in exchange solely for full and fractional shares of
beneficial interest, par value $0.01 per share, of Growth and Income Fund -
Class A ("Growth and Income Fund Class A Shares") and full and fractional
shares of beneficial interest, par value $0.01 per share, of Growth and
Income Fund - Class C ("Growth and Income Fund Class C Shares")
(collectively, " Growth and Income Fund Shares"); (ii) the distribution of
(a) Growth and Income Fund Class A Shares to the shareholders of Asset
Allocation Fund - Class A shares ("Asset Allocation Fund Class A Shares") and
(b) Growth and Income Fund Class C Shares to the shareholders of Asset
Allocation Fund - Class C shares ("Asset Allocation Fund Class C Shares"),
according to their respective interests; and (iii) the dissolution of Asset
Allocation Fund as soon as practicable after the closing (as defined in
Section 3, hereinafter called the "Closing"), all upon and subject to the
terms and conditions of this Plan hereinafter set forth.
AGREEMENT
In order to consummate the Agreement and Plan of Reorganization and in
consideration of the premises and of the covenants and agreements hereinafter
set forth, and intending to be legally bound, the parties hereto covenant and
agree as follows:
1. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF ASSET
ALLOCATION FUND.
(a) Subject to the terms and conditions of this Plan, and in reliance on
the representations and warranties of Growth and Income Fund herein
contained, and in consideration of the delivery by Growth and Income Fund of
the number of Growth and Income Fund Class A Shares and Growth and Income
Fund Class C Shares hereinafter provided, Asset Allocation Fund agrees that
it will convey, transfer and deliver to Growth and Income Fund at the Closing
all of Asset Allocation Fund's then existing assets, free and clear of all
liens, encumbrances, and claims whatsoever (other than shareholders' rights
of redemption), except for cash, bank deposits, or cash equivalent securities
in an estimated amount necessary to: (i) pay the costs and expenses of
carrying out this Plan (including, but not limited to, fees of counsel and
accountants, and expenses of its liquidation and dissolution contemplated
hereunder), which costs and expenses shall be established on Asset Allocation
Fund's books as liability reserves; (ii) discharge its unpaid liabilities on
its books at the closing date (as defined in Section 3, hereinafter called
the "Closing Date"), including, but not limited to, its income dividends and
capital gains distributions, if any, payable for the period prior to, and
through, the Closing Date and excluding those liabilities that would
otherwise be discharged at a later date in the ordinary course of business;
and (iii) pay such contingent liabilities as its Board of Trustees shall
reasonably deem to exist against Asset Allocation Fund, if any, at the
Closing Date, for which contingent and other appropriate liability reserves
shall be established on Asset Allocation Fund's books (hereinafter "Net
Assets"). Asset Allocation Fund shall also retain any and all rights that it
may have over and against any person that may have accrued up to and
including the close of business on the Closing Date.
(b) Subject to the terms and conditions of this Plan, and in reliance on
the representations and warranties of Asset Allocation Fund herein contained,
and in consideration of such sale, conveyance, transfer, and delivery, Growth
and Income Fund agrees at the Closing to deliver to Asset Allocation Fund:
(i) the number of Growth and Income Fund Class A Shares, determined by
dividing the net asset value per share of the Asset Allocation Fund Class A
Shares by the net asset value per share of Growth and Income Fund Class A
Shares, and multiplying the result thereof by the number of outstanding Asset
Allocation Fund Class A Shares, as of 1:00 p.m. Pacific time on the Closing
Date; and (ii) the number of Growth and Income Fund Class C Shares,
determined by dividing the net asset value per share of the Asset Allocation
Fund Class C Shares by the net asset value per share of Growth and Income
Fund Class C Shares, and multiplying the result thereof by the number of
outstanding Asset Allocation Fund Class C Shares, as of 1:00 p.m. Pacific
time on the Closing Date . All such values shall be determined in the manner
and as of the time set forth in Section 2 hereof.
(c) Immediately following the Closing, the Asset Allocation Fund shall
dissolve and distribute pro rata to its shareholders of record as of the
close of business on the Closing Date, Growth and Income Fund Shares received
by Asset Allocation Fund pursuant to this Section 1. Such liquidation and
distribution shall be accomplished by the establishment of accounts on the
share records of Asset Allocation Fund of the type and in the amounts due
such shareholders based on their respective holdings as of the close of
business on the Closing Date. Fractional Growth and Income Fund Shares shall
be carried to the third decimal place. As promptly as practicable after the
Closing, each holder of any outstanding certificate or certificates
representing shares of beneficial interest of Asset Allocation Fund shall be
entitled to surrender the same to the transfer agent for Growth and Income
Fund in exchange for the number of Growth and Income Fund Shares into which
the Asset Allocation Fund Shares theretofore represented by the certificate
or certificates so surrendered shall have been converted. Certificates for
Growth and Income Fund Shares shall not be issued, unless specifically
requested by the shareholders. Until so surrendered, each outstanding
certificate which, prior to the Closing, represented shares of beneficial
interest of Asset Allocation Fund shall be deemed for all Growth and Income
Fund's purposes to evidence ownership of the number of Growth and Income Fund
Shares into which the Asset Allocation Fund Shares (which prior to the
Closing were represented thereby) have been converted.
2. VALUATION.
(a) The value of Asset Allocation Fund's Net Assets to be acquired by
Growth and Income Fund, hereunder shall be computed as of 1:00 p.m. Pacific
time on the Closing Date using the valuation procedures set forth in Asset
Allocation Fund's currently effective prospectus.
(b) The net asset value of a share of beneficial interest of Asset
Allocation Fund Shares shall be determined to the fourth decimal place as of
1:00 p.m. Pacific time on the Closing Date using the valuation procedures set
forth in Asset Allocation Fund's currently effective prospectus.
(c) The net asset value of a share of beneficial interest of Growth and
Income Fund Shares shall be determined to the nearest full cent as of
1:00 p.m. Pacific time on the Closing Date using the valuation procedures set
forth in Growth and Income Fund's currently effective prospectus.
3. CLOSING AND CLOSING DATE. The Closing Date shall be February 8, 2001, or
such later date as the parties may mutually agree. The Closing shall take
place at the principal office of the Funds at 2:00 p.m., Pacific time, on the
Closing Date. Asset Allocation Fund shall have provided for delivery as of
the Closing of those Net Assets of Asset Allocation Fund to be transferred to
the account of Growth and Income Fund's Custodian, Bank of New York, Mutual
Funds Division, 90 Washington Street, New York, New York 10286. Also, Asset
Allocation Fund shall deliver at the Closing a list of names and addresses of
the shareholders of record of its Asset Allocation Fund Class A Shares and
Asset Allocation Fund Class C Shares and the number of full and fractional
shares of beneficial interest of such classes owned by each such shareholder,
indicating thereon which such shares are represented by outstanding
certificates and which by book-entry accounts, all as of 1:00 p.m. Pacific
time on the Closing Date, certified by its transfer agent or by its President
to the best of its or his knowledge and belief. Growth and Income Fund shall
issue and deliver a certificate or certificates evidencing the shares of
beneficial interest of Growth and Income Fund to be delivered to the account
of Asset Allocation Fund at said transfer agent registered in such manner as
the officers of Asset Allocation Fund may request, or provide evidence
satisfactory to Asset Allocation Fund that such Growth and Income Fund Shares
have been registered in an account on the books of Growth and Income Fund in
such manner as Asset Allocation Fund may request.
4. REPRESENTATIONS AND WARRANTIES BY GROWTH AND INCOME FUND.
Growth and Income Fund represents and warrants to Asset Allocation Fund
that:
(a) Growth and Income Fund is a business trust created under the laws of
the State of Delaware on March 21, 2000, and is validly existing under the
laws of that State. Growth and Income Fund is duly registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified
open-end, management investment company and all Growth and Income Fund Shares
sold were sold pursuant to an effective registration statement filed under
the Securities Act of 1933, as amended (the "1933 Act"), except for those
shares sold pursuant to the private offering exemption for the purpose of
raising the required initial capital.
(b) Growth and Income Fund is authorized to issue an unlimited number of
shares of beneficial interest of Growth and Income Fund Shares, par value
$0.01 per share, each outstanding share of which is fully paid,
non-assessable, freely transferable and has full voting rights. Growth and
Income Fund is further divided into four classes of shares of which Growth
and Income Fund Class A Shares and Growth and Income Fund Class C Shares are
two, and an unlimited number of shares of beneficial interest, par value
$0.01 per share, have been allocated and designated to each Class of Growth
and Income Fund.
(c) The financial statements appearing in the Growth and Income Fund's
Annual Report to Shareholders for the fiscal year ended June 30, 2000,
audited by PricewaterhouseCoopers, LLP, copies of which have been delivered
to Asset Allocation Fund, fairly present the financial position of Growth and
Income Fund as of such date and the results of its operations for the period
indicated in conformity with generally accepted accounting principles applied
on a consistent basis.
(d) The books and records of Growth and Income Fund accurately summarize
the accounting data represented and contain no material omissions with
respect to the business and operations of Growth and Income Fund.
(e) Growth and Income Fund has the necessary power and authority to conduct
its business as such business is now being conducted.
(f) Growth and Income Fund is not a party to or obligated under any
provision of its Agreement and Declaration of Trust or By-laws ("By-laws"),
or any contract or any other commitment or obligation, and is not subject to
any order or decree that would be violated by its execution of or performance
under this Plan.
(g) Growth and Income Fund has elected to be treated as a regulated
investment company ("RIC") for federal income tax purposes under Part I of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
and Growth and Income Fund has qualified as a RIC for each taxable year since
its inception, and will qualify as a RIC as of the Closing Date.
(h) Growth and Income Fund is not under jurisdiction of a Court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(i) Growth and Income Fund does not have any unamortized or unpaid
organizational fees or expenses.
5. REPRESENTATIONS AND WARRANTIES BY ASSET ALLOCATION FUND.
Asset Allocation Fund represents and warrants to Growth and Income Fund
that:
(a) Asset Allocation Fund is a business trust created under the laws of the
State of Delaware on July 24, 1996, and is validly existing under the laws of
that state. Asset Allocation Fund is duly registered under the 1940 Act as a
diversified open-end, management investment company and all Asset Allocation
Fund Shares sold were sold pursuant to an effective registration statement
filed under the 1933 Act, except for those shares sold pursuant to the
private offering exemption for the purpose of raising the required initial
capital.
(b) Asset Allocation Fund is authorized to issue an unlimited number of
shares of beneficial interest of Asset Allocation Fund, par value $0.01 per
share, each outstanding share of which is fully paid, non-assessable, freely
transferable, and has full voting rights. Asset Allocation Fund is further
divided into two classes of shares, Asset Allocation Fund Class A Shares and
Asset Allocation Fund Class C Shares, and an unlimited number of shares of
beneficial interest, par value $0.01 per share, have been allocated and
designated to each Class of Asset Allocation Fund.
(c) The financial statements appearing in the Asset Allocation Fund's
Annual Report to Shareholders for the fiscal year ended December 31, 1999,
audited by PricewaterhouseCoopers, LLP, and the Semiannual Report to
Shareholders for the six month period ended June 30, 2000, copies of which
have been delivered to Growth and Income Fund, fairly present the financial
position of Asset Allocation Fund as of such dates and the results of its
operations for the period indicated in conformity with generally accepted
accounting principles applied on a consistent basis.
(d) The books and records of Asset Allocation Fund accurately summarize
the accounting data represented and contain no material omissions with
respect to the business and operations of Asset Allocation Fund.
(e) Asset Allocation Fund has the necessary power and authority to conduct
its business as such business is now being conducted.
(f) Asset Allocation Fund is not a party to or obligated under any
provision of the its Agreement and Declaration of Trust or By-laws, or any
contract or any other commitment or obligation, and is not subject to any
order or decree, that would be violated by its execution of or performance
under this Plan.
(g) Asset Allocation Fund has elected to be treat as a RIC for federal
income tax purposes under Part I of Subchapter M of the Code, and Asset
Allocation Fund has qualified as a RIC for each taxable year since its
inception and will qualify as a RIC as of the Closing Date.
(h) Asset Allocation Fund is not under jurisdiction of a Court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(i) Asset Allocation Fund does not have any unamortized or unpaid
organization fees or expenses.
6. REPRESENTATIONS AND WARRANTIES BY THE FUNDS.
Asset Allocation Fund and Growth and Income Fund each represents and
warrants to the other that:
(a) The statement of assets and liabilities to be furnished by it as of
1:00 p.m. Pacific time on the Closing Date for the purpose of determining the
number of Growth and Income Fund Shares to be issued pursuant to Section 1 of
this Plan, will accurately reflect its Net Assets in the case of Asset
Allocation Fund and its net assets in the case of Growth and Income Fund, and
outstanding shares of beneficial interest, as of such date, in conformity
with generally accepted accounting principles applied on a consistent basis.
(b) At the Closing, it will have good and marketable title to all of the
securities and other assets shown on the statement of assets and liabilities
referred to in "(a)" above, free and clear of all liens or encumbrances of
any nature whatsoever, except such imperfections of title or encumbrances as
do not materially detract from the value or use of the assets subject
thereto, or materially affect title thereto.
(c) Except as disclosed in its currently effective prospectuses, there is
no material suit, judicial action, or legal or administrative proceeding
pending or threatened against it.
(d) There are no known actual or proposed deficiency assessments with
respect to any taxes payable by it.
(e) The execution, delivery, and performance of this Plan have been duly
authorized by all necessary action of its Boards of Trustees, and this Plan
constitutes a valid and binding obligation enforceable in accordance with its
terms.
(f) Each Fund anticipates that consummation of this Plan will not cause it
to fail to conform to the requirements of Subchapter M of the Code for
federal income taxation as a RIC at the end of its fiscal year.
(g) It has the necessary power and authority to conduct its business, as
such business is now being conducted.
7. COVENANTS OF ASSET ALLOCATION FUND AND GROWTH AND INCOME FUND.
(a) Asset Allocation Fund and Growth and Income Fund each covenant to
operate their respective businesses, as presently conducted between the date
hereof and the Closing.
(b) Asset Allocation Fund undertakes that it will not acquire Growth and
Income Fund Shares for the purpose of making distributions thereof to anyone
other than Asset Allocation Fund's shareholders.
(c) Asset Allocation Fund undertakes that, if this Plan is consummated, it
will liquidate and dissolve Asset Allocation Fund.
(d) Asset Allocation Fund and Growth and Income Fund each agree that, by
the Closing, all of the their Federal and other tax returns and reports
required by law to be filed on or before such date shall have been filed, and
all Federal and other taxes shown as due on said returns shall have either
been paid or adequate liability reserves shall have been provided for the
payment of such taxes.
(e) At the Closing, Asset Allocation Fund will provide Growth and Income
Fund a copy of the shareholder ledger accounts, certified by the Asset
Allocation Fund's transfer agent or its President to the best of its or his
knowledge and belief, for all the shareholders of record of Asset Allocation
Fund Shares as of 1:00 p.m. Pacific time on the Closing Date who are to
become shareholders of Growth and Income Fund as a result of the transfer of
assets that is the subject of this Plan.
(f) Asset Allocation Fund agrees to mail to each shareholder of record of
entitled to vote at the meeting of its shareholders at which action on this
Plan is to be considered, in sufficient time to comply with requirements as
to notice thereof, a combined Prospectus and Proxy Statement that complies in
all material respects with the applicable provisions of Section 14(a) of the
Securities Exchange Act of 1934, as amended, and Section 20(a) of the 1940
Act, and the rules and regulations, respectively, thereunder.
(g) Growth and Income Fund will file with the U.S. Securities and Exchange
Commission a registration statement on Form N-14 under the 1933 Act relating
to Growth and Income Fund Shares issuable hereunder ("Registration
Statement"), and will use its best efforts to provide that the Registration
Statement becomes effective as promptly as practicable. At the time it
becomes effective, the Registration Statement will (i) comply in all material
respects with the applicable provisions of the 1933 Act, and the rules and
regulations promulgated thereunder; and (ii) not contain any untrue statement
of material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. At the
time the Registration Statement becomes effective, at the time of Asset
Allocation Fund's shareholders' meeting, and at the Closing Date, the
prospectus and statement of additional information included in the
Registration Statement will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY ASSET ALLOCATION FUND AND GROWTH
AND INCOME FUND.
The consummation of this Plan hereunder shall be subject to the following
respective conditions:
(a) That: (i) all the representations and warranties of the other party
contained herein shall be true and correct as of the Closing with the same
effect as though made as of and at such date; (ii) the other party shall have
performed all obligations required by this Plan to be performed by it prior
to the Closing; and (iii) the other party shall have delivered to such party
a certificate signed by the President and by the Secretary or equivalent
officer to the foregoing effect.
(b) That each party shall have delivered to the other party a copy of the
resolutions approving the Plan adopted and approved by the appropriate action
of the Board of Trustees certified by its Secretary of equivalent officers of
each of the Funds.
(c) That the U.S. Securities and Exchange Commission shall not have issued
an unfavorable management report under Section 25(b) of the 1940 Act or
instituted or threatened to institute any proceeding seeking to enjoin
consummation of the Plan under Section 25(c) of the 1940 Act. And, further,
no other legal, administrative or other proceeding shall have been instituted
or threatened that would materially affect the financial condition of either
party or would prohibit the transactions contemplated hereby.
(d) That this Plan and the Agreement and Plan of Reorganization
contemplated hereby shall have been adopted and approved by the appropriate
action of the shareholders of Asset Allocation Fund at an annual or special
meeting or any adjournment thereof.
(e) That a distribution or distributions shall have been declared for
Asset Allocation Fund prior to the Closing Date that, together with all
previous distributions, shall have the effect of distributing to its
shareholders (i) all of its ordinary income and all of its capital gain net
income, if any, for the period from the close of its last fiscal year to
1:00 p.m. Pacific time on the Closing Date; and (ii) any undistributed
ordinary income and capital gain net income from any period to the extent not
otherwise declared for distribution. Capital gain net income has the meaning
given such term by Section 1222(a) of the Code.
(f) That there shall be delivered to Asset Allocation Fund and Growth and
Income Fund an opinion from Messrs. Stradley, Ronon, Stevens & Young, LLP,
counsel to Asset Allocation Fund and Growth and Income Fund, to the effect
that, provided the acquisition contemplated hereby is carried out in
accordance with this Plan and based upon certificates of the officers of
Asset Allocation Fund and Growth and Income Fund with regard to matters
of fact:
(1) The acquisition by Growth and Income Fund of substantially all the
assets of Asset Allocation Fund as provided for herein in exchange for Growth
and Income Fund Shares followed by the distribution by Asset Allocation Fund
to its shareholders of Growth and Income Fund Shares in complete liquidation
will qualify as a reorganization within the meaning of Section 368(a)(1) of
the Code, and Asset Allocation Fund and Growth and Income Fund will each be a
"party to the reorganization" within the meaning of Section 368(b) of
the Code;
(2) No gain or loss will be recognized by Asset Allocation Fund upon
the transfer of substantially all of its assets to Growth and Income Fund in
exchange solely for voting shares of Growth and Income Fund (Code Sections
361(a) and 357(a)). No opinion, however, will be expressed as to whether any
accrued market discount will be required to be recognized as ordinary income
pursuant to Section 1276 of the Code;
(3) No gain or loss will be recognized by Asset Allocation Fund upon
the distribution of Growth and Income Fund Shares to is shareholders pursuant
to the liquidation of Asset Allocation Fund (in pursuance of the Plan)
(Section 361(c)(1) of the Code);
(4) No gain or loss will be recognized by Growth and Income Fund upon
the receipt of substantially all of the assets of Asset Allocation Fund in
exchange solely for voting shares of Growth and Income Fund (Section 1032(a)
of the Code);
(5) The basis of the assets of Asset Allocation Fund received by Growth
and Income Fund will be the same as the basis of such assets to Asset
Allocation Fund immediately prior to the exchange (Section 362(b) of the
Code);
(6) The holding period of the assets of Asset Allocation Fund received
by Growth and Income Fund will include the period during which such assets
were held by Asset Allocation Fund (Section 1223(2) of the Code);
(7) No gain or loss will be recognized to the shareholders of Asset
Allocation Fund Shares upon the exchange of their shares in Asset Allocation
Fund for voting shares of Growth and Income Fund including fractional shares
to which they may be entitled (Section 354(a) of the Code);
(8) The basis of Growth and Income Fund Shares received by Asset
Allocation Fund Shares' shareholders shall be the same as the basis of the
Asset Allocation Fund Shares exchanged therefor (Section 358(a)(1) of the
Code);
(9) The holding period of Growth and Income Fund Shares received by
shareholders of Asset Allocation Fund Shares (including fractional shares to
which they may be entitled) will include the holding period of the Asset
Allocation Fund Shares surrendered in exchange therefor, provided that the
Asset Allocation Fund Shares were held as a capital asset on the effective
date of the exchange (Section 1223(1) of the Code); and
(10) Growth and Income Fund will succeed to and take into account as of
the date of the transfer (as defined in Section 1.381(b)-1(b) of the Income
Tax Regulations) the items of Asset Allocation Fund described in Section
381(c) of the Code, subject to the conditions and limitations specified in
Sections 381, 382, 383 and 384 of the Code and the Income Tax Regulations
thereunder.
(g) That there shall be delivered to Growth and Income Fund an opinion in
form and substance satisfactory to it from Messrs. Stradley, Ronon, Stevens &
Young, LLP, counsel to Asset Allocation Fund, to the effect that, subject in
all respects to the effects of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and other laws now or hereafter affecting
generally the enforcement of creditors' rights:
(1) Asset Allocation Fund is a business trust organized under the laws
of the State of Delaware on July 24, 1996, and is a validly existing business
trust and in good standing under the laws of that state;
(2) Asset Allocation Fund is authorized to issue an unlimited number of
shares of beneficial interest, par value $0.01 per share. Two classes of
shares of Asset Allocation Fund have been designated as the Asset Allocation
Fund Class A Shares and Asset Allocation Fund Class C Shares, and an
unlimited number of shares of beneficial interest of the Trust has been
allocated to each Class of Asset Allocation Fund. Assuming that the initial
shares of beneficial interest of Asset Allocation Fund were issued in
accordance with the 1940 Act and the Agreement and Declaration of Trust and
By-laws of Asset Allocation Fund, and that all other outstanding shares of
Asset Allocation Fund were sold, issued and paid for in accordance with the
terms of Asset Allocation Fund's prospectus in effect at the time of such
sales, each such outstanding share is fully paid, non-assessable, freely
transferable and has full voting rights;
(3) Asset Allocation Fund is a diversified open-end investment company
of the management type registered as such under the 1940 Act;
(4) Except as disclosed in Asset Allocation Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal
or administrative proceeding pending or threatened against Asset Allocation
Fund, the unfavorable outcome of which would materially and adversely affect
Asset Allocation Fund;
(5) All actions required to be taken by Asset Allocation Fund to
authorize this Plan and to effect the Agreement and Plan of Reorganization
contemplated hereby have been duly authorized by all necessary action on the
part of Asset Allocation Fund; and
(6) Neither the execution, delivery, nor performance of this Plan by
Asset Allocation Fund violates any provision of its Agreement and Declaration
of Trust or By-laws, or the provisions of any agreement or other instrument
known to such counsel to which Asset Allocation Fund is a party or by which
Asset Allocation Fund is otherwise bound; this Plan is the legal, valid and
binding obligation of Asset Allocation Fund and is enforceable against Asset
Allocation Fund in accordance with its terms.
In giving the opinions set forth above, this counsel may state that it is
relying on certificates of the officers of Asset Allocation Fund with regard
to matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of Asset Allocation
Fund.
(h) That there shall be delivered to Asset Allocation Fund an opinion in
form and substance satisfactory to it from Messrs. Stradley, Ronon, Stevens &
Young, LLP, counsel to Growth and Income Fund, to the effect that, subject in
all respects to the effects of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other laws now or hereafter affecting
generally the enforcement of creditors' rights:
(1) Growth and Income Fund is a business trust organized under the laws
of the State of Delaware on March 21, 2000 and is a validly existing business
trust and in good standing under the laws of that state;
(2) Growth and Income Fund is authorized to issue an unlimited number
of shares of beneficial interest, par value $0.01 per share. Growth and
Income Fund is further divided into four classes of shares of which Growth
and Income Fund-Class A Shares and Growth and Income Fund Class C Shares are
two, and an unlimited number of shares of beneficial interest, par value
$0.01 per share, have been allocated and designated to each of those Classes
of Growth and Income Fund. Assuming that the initial shares of beneficial
interest of Growth and Income Fund were issued in accordance with the 1940
Act, and the Agreement and Declaration of Trust and By-laws of the Trust, and
that all other outstanding shares of Growth and Income Fund were sold, issued
and paid for in accordance with the terms of Growth and Income Fund's
prospectus in effect at the time of such sales, each such outstanding share
of Growth and Income Fund is fully paid, non-assessable, freely transferable
and has full voting rights;
(3) Growth and Income Fund is a diversified open-end investment company
of the management type registered as such under the 1940 Act;
(4) Except as disclosed in Growth and Income Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal
or administrative proceeding pending or threatened against Growth and Income
Fund, the unfavorable outcome of which would materially and adversely affect
Growth and Income Fund;
(5) Growth and Income Fund Shares to be issued pursuant to the terms of
this Plan have been duly authorized and, when issued and delivered as
provided in this Plan, will have been validly issued and fully paid and will
be non-assessable by Growth and Income Fund;
(6) All actions required to be taken by Growth and Income Fund to
authorize this Plan and to effect the Agreement and Plan of Reorganization
contemplated hereby have been duly authorized by all necessary action on the
part of Growth and Income Fund;
(7) Neither the execution, delivery, nor performance of this Plan by
Growth and Income Fund violates any provision of its Agreement and
Declaration of Trust or By-laws, or the provisions of any agreement or other
instrument known to such counsel to which Growth and Income Fund is a party
or by which Growth and Income Fund is otherwise bound; this Plan is the
legal, valid and binding obligation of Growth and Income Fund and is
enforceable against Growth and Income Fund in accordance with its terms; and
(8) The registration statement of Growth and Income Fund, of which the
prospectus dated November 1, 2000 is a part (the "Prospectus") is, at the
time of the signing of this Plan, effective under the 1933 Act, and, to the
best knowledge of such counsel, no stop order suspending the effectiveness of
such registration statement has been issued, and no proceedings for such
purpose have been instituted or are pending before or threatened by the U.S.
Securities and Exchange Commission under the 1933 Act, and nothing has come
to counsel's attention that causes it to believe that, at the time the
Prospectus became effective, or at the time of the signing of this Plan, or
at the Closing, such Prospectus (except for the financial statements and
other financial and statistical data included therein, as to which counsel
need not express an opinion), contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and such counsel
knows of no legal or government proceedings required to be described in the
Prospectus, or of any contract or document of a character required to be
described in the Prospectus that is not described as required.
In giving the opinions set forth above, this counsel may state that it is
relying on certificates of the officers of Growth and Income Fund with regard
to matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of Growth and Income
Fund.
(i) That Asset Allocation Fund shall have received a certificate from the
President and Secretary of Growth and Income Fund to the effect that the
statements contained in the Prospectus, at the time the Prospectus became
effective, at the date of the signing of this Plan, and at the Closing, did
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading
(j) That Growth and Income Fund's Registration Statement to be delivered
to Asset Allocation Fund's shareholders in accordance with this Plan shall
have become effective, and no stop order suspending the effectiveness of the
Registration Statement or any amendment or supplement thereto, shall have
been issued prior to the Closing Date or shall be in effect at Closing, and
no proceedings for the issuance of such an order shall be pending or
threatened on that date.
(k) That Growth and Income Fund Shares to be delivered hereunder shall be
eligible for sale with each state commission or agency with which such
eligibility is required in order to permit Growth and Income Fund Shares
lawfully to be delivered to each holder of Asset Allocation Fund Shares.
(l) That, at the Closing, there shall be transferred to Growth and Income
Fund, aggregate Net Assets of Asset Allocation Fund comprising at least 90%
in fair market value of the total net assets and 70% of the fair market value
of the total gross assets recorded on the books of Asset Allocation Fund on
the Closing Date.
9. BROKERAGE FEES AND EXPENSES.
(a) Asset Allocation Fund and Growth and Income Fund each represents and
warrants to the other that there are no broker or finders' fees payable by it
in connection with the transactions provided for herein.
(b) The expenses of entering into and carrying out the provisions of this
Plan shall be borne one-quarter by Growth and Income Fund, one-quarter by
Asset Allocation Fund, and one-half by Franklin Advisers, Inc.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
(a) Anything contained in this Plan to the contrary notwithstanding, this
Plan may be terminated and the Agreement and Plan of Reorganization abandoned
at any time (whether before or after approval thereof by the shareholders of
Asset Allocation Fund) prior to the Closing, or the Closing may be postponed
as follows:
(1) by mutual consent of Asset Allocation Fund and Growth and Income Fund;
(2) by Growth and Income Fund if any condition of its obligations set forth
in Section 8 has not been fulfilled or waived; or
(3) by Asset Allocation Fund if any conditions of its obligations set forth
in Section 8 has not been fulfilled or waived.
An election by Growth and Income Fund or Asset Allocation Fund
to terminate this Plan and to abandon the Agreement and Plan of
Reorganization shall be exercised respectively, by the Board of Trustees of
either Growth and Income Fund or Asset Allocation Fund.
(b) If the transactions contemplated by this Plan have not been
consummated by June 30, 2001, the Plan shall automatically terminate on that
date, unless a later date is agreed to by both Growth and Income Fund and
Asset Allocation Fund.
(c) In the event of termination of this Plan pursuant to the provisions
hereof, the same shall become void and have no further effect, and neither
Asset Allocation Fund nor Growth and Income Fund, nor their trustees,
officers, or agents or the shareholders of Asset Allocation Fund or Growth
and Income Fund shall have any liability in respect of this Plan.
(d) At any time prior to the Closing, any of the terms or conditions of
this Plan may be waived by the party who is entitled to the benefit thereof
by action taken by that party's Board of Trustees if, in the judgment of such
Board of Trustees, such action or waiver will not have a material adverse
effect on the benefits intended under this Plan to its shareholders, on
behalf of whom such action is taken.
(e) The respective representations and warranties contained in Sections 4
to 6 hereof shall expire with and be terminated by the Agreement and Plan of
Reorganization, and neither Asset Allocation Fund nor Growth and Income Fund,
nor any of their officers, trustees, agents or shareholders shall have any
liability with respect to such representations or warranties after the
Closing. This provision shall not protect any officer, trustee, agent or
shareholder of Growth and Income Fund or Asset Allocation Fund against any
liability to the entity for which that officer, trustee, agent or shareholder
so acts or to its shareholders to which that officer, trustee, agent or
shareholder would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties in the conduct
of such office.
(f) If any order or orders of the U.S. Securities and Exchange Commission
with respect to this Plan shall be issued prior to the Closing and shall
impose any terms or conditions that are determined by action of the Board of
Trustees of Asset Allocation Fund or Growth and Income Fund to be acceptable,
such terms and conditions shall be binding as if a part of this Plan without
further vote or approval of the shareholders of Asset Allocation Fund, unless
such terms and conditions shall result in a change in the method of computing
the number of Growth and Income Fund Shares to be issued to Asset Allocation
Fund in which event, unless such terms and conditions shall have been
included in the proxy solicitation material furnished to the shareholders of
Asset Allocation Fund prior to the meeting at which the transactions
contemplated by this Plan shall have been approved, this Plan shall not be
consummated and shall terminate unless Asset Allocation Fund shall promptly
call a special meeting of the shareholders at which such conditions so
imposed shall be submitted for approval.
11. ENTIRE AGREEMENT AND AMENDMENTS.
This Plan embodies the entire agreement between the parties and there are
no agreements, understandings, restrictions, or warranties relating to the
transactions contemplated by this Plan other than those set forth herein or
herein provided for. This Plan may be amended only by mutual consent of the
parties in writing. Neither this Plan nor any interest herein may be assigned
without the prior written consent of the other party.
12. COUNTERPARTS.
This Plan may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts together shall
constitute but one instrument.
13. NOTICES.
Any notice, report, or demand required or permitted by any provision of
this Plan shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage prepaid, addressed to Asset
Allocation Fund, at 777 Mariners Island Boulevard, San Mateo, California
94404, Attention: Secretary, or Growth and Income Fund, at 777 Mariners
Island Boulevard, San Mateo, California 94404, Attention: Secretary, as the
case may be.
14. GOVERNING LAW.
This Plan shall be governed by and carried out in accordance with the laws
of the State of Delaware.
IN WITNESS WHEREOF, Asset Allocation Fund and Growth and Income Fund have
each caused this Plan to be executed on its behalf by its duly authorized
officers, all as of the date and year first-above written.
FRANKLIN GROWTH AND INCOME FUND
Attest:
_________________________ By:________________________________
Murray L. Simpson David P. Goss
Secretary Vice President
Attest:
_________________________ By:________________________________
Murray L. Simpson David P. Goss
Secretary Vice President
EXHIBIT B
FRANKLIN GROWTH AND INCOME FUND - CLASS A, B & C
PROSPECTUS DATED NOVEMBER 1, 2000
The prospectus of Franklin Growth and Income Fund - Class A, B & C dated
November 1, 2000, is part of this Prospectus/Proxy Statement and will be
included in the proxy mailing to all shareholders of record. For purposes of
this EDGAR filing, the prospectus of Franklin Growth and Income Fund - Class
A, B & C dated November 1, 2000, is incorporated by reference to the
electronic filing made on October 26, 2000, under File No. 2-10103.
EXHIBIT C
ANNUAL REPORT TO SHAREHOLDERS OF
FRANKLIN GROWTH AND INCOME FUND
DATED JUNE 30, 2000
The Annual Report to shareholders of Franklin Growth and Income Fund dated
June 30, 2000, is part of this Prospectus/Proxy Statement and will be
included in the proxy mailing to all shareholders of record. For purposes of
this EDGAR filing, the Annual Report to shareholders of Franklin Growth and
Income Fund dated June 30, 2000, is incorporated by reference to the
electronic filing made on September 8, 2000, under File No. 2-10103.
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 ASSET ALLOCATION FUND
JANUARY 29, 2001
The undersigned hereby revokes all previous proxies for his or her shares and
appoints Rupert H. Johnson, Jr., Harmon E. Burns, Murray L. Simpson, Barbara
J. Green, and David P. Goss, and each of them, proxies of the undersigned
with full power of substitution to vote all shares of Franklin Asset
Allocation Fund (the "Asset Allocation Fund") that the undersigned is
entitled to vote at the Asset Allocation Fund's Meeting to be held at 777
Mariners Island Boulevard, San Mateo, CA 94404 at 1:00 p.m. Pacific time on
January 29, 2001, 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.
VOTE VIA THE INTERNET: WWW.FRANKLIN.COM
VOTE VIA THE TELEPHONE: 1-800-597-7836
CONTROL NUMBER:
Note: Please sign exactly as your name
appears on the proxy. If signing for
estates, trusts or corporations, your
title or capacity should be stated. If
shares are held jointly, each holder must
sign.
-----------------------------------
Signature
-----------------------------------
Signature
-----------------------------------
Date
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
REQUIRED IF MAILED IN THE U.S.
(Please see reverse side)
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE DETACH AT PERFORATION BEFORE MAILING.
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE ASSET
ALLOCATION FUND. IT WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE,
THIS PROXY SHALL BE VOTED IN FAVOR OF PROPOSAL 1, REGARDING THE
REORGANIZATION OF THE FUND PURSUANT TO THE AGREEMENT AND PLAN OF
REORGANIZATION WITH FRANKLIN GROWTH AND INCOME FUND. IF ANY OTHER MATTERS
PROPERLY COME BEFORE THE MEETING ABOUT WHICH THE PROXYHOLDERS WERE NOT AWARE
PRIOR TO THE TIME OF THE SOLICITATION, AUTHORIZATION IS GIVEN TO THE
PROXYHOLDERS TO VOTE IN ACCORDANCE WITH THE VIEWS OF MANAGEMENT ON SUCH
MATTERS. MANAGEMENT IS NOT AWARE OF ANY SUCH MATTERS.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
PROPOSAL 1.
For Against Abstain
1. To approve and Agreement and Plan of [] [] []
Reorganization between Franklin Asset
Allocation Fund ("Asset Allocation Fund")
and Franklin Growth and Income Fund ("Growth
and Income Fund"), that provides for the
acquisition of substantially all of the assets
of the Asset Allocation Fund by Growth and
Income Fund in exchange for Class A and C shares
of Growth and Income Fund, the distribution of
such shares to the shareholders of the Asset
Allocation Fund, and the dissolution of the Asset
Allocation Fund (the "Reorganization").
GRANT WITHHOLD ABSTAIN
2. To grant the proxyholders the authority to [] [] []
vote upon any other business which may
legally come before the Meeting or any
adjournments thereof.
IMPORTANT: PLEASE SIGN AND MAIL IN YOUR PROXY...TODAY
STATEMENT OF ADDITIONAL INFORMATION
FOR
FRANKLIN GROWTH AND INCOME FUND
DATED NOVEMBER XX, 2000
Acquisition of
the Assets of
FRANKLIN ASSET ALLOCATION FUND
By and in exchange for shares of the
FRANKLIN GROWTH AND INCOME FUND
This Statement of Additional Information (SAI) relates specifically to
the proposed delivery of substantially all of the assets of Franklin Asset
Allocation Fund for Class A and C shares of Franklin Growth and Income Fund.
This SAI consists of this Cover Page and the following documents. Each
of these documents is attached to and is legally considered to be a part of
this SAI:
1. Statement of Additional Information of Franklin Growth and
Income Fund - Class A, B & C dated November 1, 2000.
2. Annual Report of Franklin Growth and Income Fund for the fiscal
year ended June 30, 2000.
3. Annual Report of Franklin Asset Allocation Fund for the fiscal
year ended December 31, 1999.
4. Semi-Annual Report of Franklin Asset Allocation Fund for the six
months ended June 30, 2000.
5. Projected (Pro Forma) after Transaction Financial Statements.
This SAI is not a Prospectus; you should read this SAI in conjunction with
the Prospectus/Proxy Statement dated November XX, 2000, relating to the
above-referenced transaction. You can request a copy of the Prospectus/Proxy
Statement by calling 1-800/DIAL BEN or by writing to Franklin Growth and
Income Fund, 777 Mariners Island Boulevard, P.O. Box 7777, San Mateo, CA
94403-7777.
--------------------------------------------------------------------------------
The Statement of Additional Information of Franklin Growth and Income Fund -
Class A, B & C dated November 1, 2000, is part of this SAI and will be
provided to all shareholders requesting this SAI. For purposes of this EDGAR
filing, the Statement of Additional Information of Franklin Growth and Income
Fund - Class A, B & C dated November 1, 2000, is incorporated by reference to
the electronic filing made on October 26, 2000, under File No. 2-10103.
The Annual Report to shareholders of Franklin Growth and Income Fund dated
June 30, 2000, is part of this SAI and will be provided to all shareholders
requesting this SAI. For purposes of this EDGAR filing, the Annual Report to
shareholders of Franklin Growth and Income Fund dated June 30, 2000, is
incorporated by reference to the electronic filing made on September 8, 2000,
under File No. 2-10103.
The Annual Report to shareholders of Franklin Asset Allocation Fund dated
December 31, 1999, is part of this SAI and will be provided to all
shareholders requesting this SAI. For purposes of this EDGAR filing, the
Annual Report to shareholders of Franklin Asset Allocation Fund dated
December 31, 1999, is incorporated by reference to the electronic filing made
on March 8, 2000, under File No. 2-12647.
The Semi-Annual Report to shareholders of Franklin Asset Allocation Fund
dated June 30, 2000, is part of this SAI and will be provided to all
shareholders requesting this SAI. For purposes of this EDGAR filing, the
Semi-Annual Report to shareholders of Franklin Asset Allocation Fund dated
June 30, 2000, is incorporated by reference to the electronic filing made on
September 8, 2000, under File No. 2-12647.
The following are projected (Pro Forma) financial statements that were
prepared to indicate the anticipated financial information for Franklin
Growth and Income Fund following the completion of the reorganization. They
consist of a Combined Pro Forma Statement of Investments, Pro Forma Combining
Statement of Assets and Liabilities; a Pro Forma Combining Statement of
Operations; and notes relating to the combining Statements.
<TABLE>
<CAPTION>
FRANKLIN GROWTH AND INCOME FUND
FRANKLIN ASSET ALLOCATION FUND
PRO FORMA COMBINING STATEMENT OF INVESTMENTS, JUNE 30, 2000 (UNAUDITED)
FRANKLIN GROWTH AND INCOME FUND
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks 88.3%
COMMERCIAL SERVICES 1.2%
Concord EFS Inc. United States 500,000 $ 13,000,000
Robert Half International Inc. United States 200,000 5,700,000
---------------
18,700,000
---------------
CONSUMER DURABLES .7%
Electronic Arts Inc. United States 150,000 10,940,625
---------------
CONSUMER NON-DURABLES 3.1%
Coca-Cola Co. United States
Estee Lauder Cos. Inc., A United States
Gillette Co. United States 130,000 4,541,875
Givaudan AG Switzerland
Nestle SA Switzerland
PepsiCo Inc. United States 150,000 6,665,625
Philip Morris Cos. Inc. United States 600,000 15,937,500
Procter & Gamble Co. United States 80,000 4,580,000
Wm. Wrigley Jr. Co. United States 110,000 8,820,625
---------------
40,545,625
---------------
CONSUMER SERVICES 2.5%
Charter Communications Inc., A United States
Clear Channel Communications Inc. United States 115,000 8,625,000
Entercom Communications Corp. United States 95,200 4,641,000
Fox Entertainment Group Inc., A United States 300,000 9,112,500
SFX Entertainment Inc. United States 125,000 5,664,063
Time Warner Inc. United States 60,000 4,560,000
United Pan-Europe Communications NV, A Netherlands
---------------
32,602,563
---------------
ELECTRONIC TECHNOLOGY 30.7%
Agilent Technologies Inc. United States 100,900 7,441,375
Altera Corp. United States 150,000 15,290,625
Applied Materials Inc. United States 250,000 22,656,250
Applied Micro Circuits Corp. United States 120,000 11,850,000
Broadcom Corp., A United States 40,000 8,757,500
Celestica Inc. Canada 240,500 11,934,813
CIENA Corp. United States 90,000 15,001,875
Cisco Systems Inc. United States 750,000 47,671,875
Cobalt Networks Inc. United States 98,600 5,706,475
Comverse Technology Inc. United States 150,000 13,950,000
Corning Inc. United States 61,100 16,489,363
EMC Corp. United States 280,000 21,542,500
Infineon Technologies AG, ADR Germany 102,700 8,138,975
Intel Corp. United States 225,000 30,079,688
International Business Machines Corp. United States 60,000 6,573,750
Intersil Holding Corp. United States 106,200 5,741,438
JDS Uniphase Corp. United States 400,000 47,950,000
Juniper Networks Inc. United States 140,000 20,378,750
Linear Technology Corp. United States 350,000 22,378,125
Motorola Inc. United States 375,000 10,898,438
Nokia Corp., ADR Finland 560,000 27,965,000
Nortel Networks Corp. Canada 280,000 19,110,000
Redback Networks Inc. United States 30,000 5,340,000
SDL Inc. United States 30,000 8,555,625
Stratos Lightwave Inc. United States 30,600 852,975
Symbol Technologies Inc. United States
Taiwan Semiconductor Manufacturing Co, Ltd., ADR Taiwan 197,600 7,669,350
Tektronix Inc. United States 294,400 21,785,600
Tellabs Inc. United States 150,000 10,265,625
Waters Corp. United States
---------------
451,975,990
---------------
ENERGY MINERALS 3.2%
Chevron Corp. United States
Conoco Inc., B United States
Devon Energy Corp. United States 250,000 14,046,875
Exxon Mobil Corp. United States 132,015 10,363,178
Texaco Inc. United States 100,000 5,325,000
Union Pacific Resources Group Inc. United States 533,400 11,734,800
---------------
41,469,853
---------------
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------
Common Stocks (cont.)
FINANCE 6.7%
American Express Co. United States 210,000 $ 10,946,250
American International Group Inc. United States 150,000 17,625,000
Bank of America Corp. United States
Capital One Financial Corp. United States 350,000 15,618,750
Citigroup Inc. United States 280,000 16,870,000
Federated Investors Inc., B United States 375,000 13,148,438
Fifth Third Bancorp United States 100,000 6,325,000
Fleet Boston Financial Corp. United States 177,660 6,040,440
Morgan Stanley Dean Witter & Co. United States 43,288 3,603,726
Providian Financial Corp. United States 80,000 7,200,000
Wells Fargo & Co. United States
---------------
97,377,604
---------------
HEALTH SEVICES .3%
Cardinal Health Inc. United States 50,000 3,700,000
IMS Health Inc. United States
---------------
3,700,000
---------------
HEALTH TECHNOLOGY 8.6%
Abbott Laboratories United States 250,000 11,140,625
Amgen Inc. United States 250,000 17,562,500
Baxter International Inc. United States 230,000 16,171,875
Bristol-Myers Squibb Co. United States 140,000 8,155,000
Genentech Inc. United States 140,000 24,080,000
Genzyme Corp. United States
Packard BioScience Co. United States 199,100 3,384,700
Pfizer Inc. United States 412,500 19,800,000
Roche Holding AG Switzerland 700 6,835,988
Schering-Plough Corp. United States 200,000 10,100,000
---------------
117,230,688
---------------
INDUSTRIAL SERVICES 1.2%
AES Corp. United States 350,000 15,968,750
Schlumberger Ltd. United States
Transocean Sedco Forex Inc. United States
---------------
15,968,750
---------------
NON-ENERGY MINERALS .6%
Barrick Gold Corp. Canada
De Beers Consolidated Mines AG, ADR South Africa 325,000 7,901,563
Rio Tinto PLC, ADR United Kingdom
---------------
7,901,563
---------------
PROCESS INDUSTRIES 2.7%
Bowater Inc. United States
Cambrex Corp. United States 180,000 8,100,000
E. I. du Pont de Nemours and Co. United States
Ecolab Inc. United States 200,000 7,812,500
General Electric Co. United States 225,000 11,925,000
Packaging Corp. of America United States 403,600 4,086,450
---------------
31,923,950
---------------
PRODUCER MANUFACTURING 2.2%
Avery Dennison Corp. United States 85,000 5,705,625
Ballard Power Systems Inc. Canada
Deere & Co. United States
Honeywell International Inc. United States 220,000 7,411,250
Illinois Tool Works Inc. United States
Minnesota Mining & Manufacturing Co. United States
Pentair Inc. United States
Tyco International Ltd. Bermuda 250,000 11,843,750
---------------
24,960,625
---------------
REAL ESTATE 1.0%
Equity Office Properties Trust United States 300,000 8,268,750
MeriStar Hospital Corp. United States 250,000 5,250,000
Simon Property Group Inc. United States
---------------
13,518,750
---------------
RETAIL TRADE 1.9%
Costco Wholesale Corp. United States
GAP Inc. United States 275,000 8,593,750
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------
Common Stocks (cont.)
RETAIL TRADE (CONT.)
Target Corp. United States 100,000 $ 5,800,000
Wal-Mart Stores Inc. United States 150,000 8,643,750
---------------
23,037,500
---------------
TECHNOLOGY SERVICES 10.1%
America Online Inc. United States
Art Technology Group Inc. United States 75,000 7,570,313
Brio Technology Inc. United States 300,000 6,356,250
Computer Sciences Corp. United States
Electronic Data Systems Corp. United States 100,000 4,125,000
Equant NV, N.Y. shs. Netherlands 125,000 5,375,000
First Data Corp. United States
i2 Technologies Inc. United States 175,000 18,246,484
InfoSpace Inc. United States 80,000 4,420,000
Microsoft Corp. United States 50,000 4,000,000
Oracle Corp. United States 300,000 25,218,750
Sapient Corp. United States 130,000 13,901,875
Siebel Systems Inc. United States 100,000 16,356,250
Storagenetworks Inc. United States 84,100 7,590,025
VERITAS Software Corp. United States 255,000 28,818,984
Vignette Corp. United States 100,000 5,201,563
---------------
147,180,494
---------------
TELECOMMUNICATIONS 5.6%
Allegiance Telecom Inc. United States 75,000 4,800,000
AT & T Corp. United States 44,774 1,415,973
GTE Corp. United States 125,000 7,781,250
KPNQwest NV Netherlands 75,000 2,971,875
NEXTLINK Communications Inc., A United States 200,000 7,587,500
Qwest Communications International Inc. United States 250,000 12,421,875
Sprint Corp. (FON Group) United States 250,000 12,750,000
Time Warner Telecom Inc., A United States 100,000 6,437,500
Verizon Communications United States 60,000 3,048,750
Vodafone AirTouch PLC, ADR United Kingdom 285,000 11,809,688
VoiceStream Wireless Corp. United States 130,000 15,118,594
---------------
86,143,005
---------------
TRANSPORTATION 2.7%
C.H. Robinson Worldwide Inc. United States 250,000 12,375,000
Expeditors International of Washington Inc. United States 350,000 16,625,000
Southwest Airlines Co. United States 455,625 8,628,398
United Parcel Service Inc., B United States 50,000 2,950,000
---------------
40,578,398
---------------
UTILITIES 3.3%
AT&T Corp. United States
Duke Energy Corp. United States
Enron Corp. United States 450,000 29,025,000
GTE Corp. United States
KPNQwest NV Netherlands
Montana Power Co. United States 275,000 9,710,932
Swisscom AG Switzerland
---------------
38,735,932
---------------
---------------
TOTAL COMMON STOCKS (COST $730,717,065) 1,244,491,915
---------------
CONVERTIBLE PREFERRED STOCKS .3%
Apache Corp., 6.50%, cvt. pfd. United States
Georgia-Pacific Corp., 7.50%, cvt. pfd. United States
MediaOne Group Inc., 7.00%, cvt. pfd. United States
Tower Automotive Capital, 6.75%, cvt. pfd. United States
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $5,210,244)
PRINCIPAL AMOUNT
--------------------------------
BONDS
Georgia-Pacific Corp., 9.125%, 7/01/22 United States
PanAmerican Beverage Inc., senior note, 8.125%, 4/01/03 Mexico
Target Corp., 8.60%, 1/15/12 United States
TOTAL BONDS (COST $596,005)
COUNTRY PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------
Convertible Bonds 2.4%
BEA Systems Inc., cvt., 144A, 4.00%, 12/15/06 United States $ 8,000,000 $ 12,470,000
Level 3 Communications Inc., cvt., 6.00%, 3/15/10 United States 5,000,000 4,600,500
Liberty Media Corp., cvt., 4.00%, 11/15/29
(convertible into Sprint PCS) UnitedrStates
Omnicom Group Inc., cvt. sub. deb., 4.25%, 1/03/07 United States 2,000,000 5,652,500
Omnicom Group Inc., cvt. sub. deb, 144A, 4.25%, 1/03/07 United States 2,000,000 5,652,500
Redback Networks Inc., cvt., 144A, 5.00%, 4/01/07 United States 5,500,000 6,321,590
Thermo Electron Corp., cvt., 144A, 4.25%, 1/01/03 United States ---------------
TOTAL CONVERTIBLE BONDS (COST $23,894,429) 34,697,090
---------------
U.S. GOVERNMENT AGENCY SECURITIES .2%
Federal Home Loan Mortgage Corp., 5.75%, 4/15/08 United States
Federal National Mortgage Association, 6.375%, 6/15/09 United States
TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $3,447,854)
U.S.GOVERNMENT SECURITIES 1.1%
U.S. Treasury Bond, 8.00%, 11/15/21 United States
U.S. Treasury Bond, 6.25%, 8/15/23 United States
U.S. Treasury Bond, 6.875%, 8/15/25 United States
U.S. Treasury Bond, 6.00%, 2/15/26 United States
U.S. Treasury Note, 5.50%, 1/31/03 United States
U.S. Treasury Note, 7.25%, 5/15/04 United States
U.S. Treasury Note, 5.875%, 11/15/05 United States
U.S. Treasury Note, 3.375%, 1/15/07 United States
U.S. Treasury Note, 6.125%, 8/15/07 United States
U.S. Treasury Strip, 11/15/21 United States
TOTAL U.S. GOVERNMENT SECURITIES (COST $16,428,328)
REPURCHASE AGREEMENT 7.9%
Joint Repurchase Agreement, 6.563%, 7/3/00
(Maturity Value $121,286,060) United,States 98,736,405 98,736,405
(COST $121,219,758)
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Goldman, Sachs & Co.
Greenwich Capital Markets Inc.
Lehman Brothers Inc.
Nesbitt Burns Securities Inc.
Paine Webber Inc.
Paribas Corp.
UBS Warburg
Collateralized by U.S. Treasury Bills & Notes
---------------
TOTAL INVESTMENTS (COST $901,513,683) 100.2% 1,377,925,410
OTHER ASSETS, LESS LIABILITIES (.2%) (3,831,040)
---------------
NET ASSETS 100.0% $ 1,374,094,370
---------------
a Non-income producing.
b Investment is through participation in a joint account with other funds
managed by the investment advisor. At June 30, 2000, all repurchase agreements
had been entered into on that date.
c Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN GROWTH AND INCOME FUND
FRANKLIN ASSET ALLOCATION FUND
PRO FORMA COMBINING STATEMENT OF INVESTMENTS, JUNE 30, 2000 (UNAUDITED)
FRANKLIN ASSET ALLOCATION FUND
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stocks 88.3%
COMMERCIAL SERVICES 1.2%
Concord EFS Inc. United States
Robert Half International Inc. United States
CONSUMER DURABLES .7%
Electronic Arts Inc. United States
CONSUMER NON-DURABLES 3.1%
Coca-Cola Co. United States 40,000 $ 2,297,500
Estee Lauder Cos. Inc., A United States 35,000 1,730,313
Gillette Co. United States
Givaudan AG Switzerland 90 27,480
Nestle SA Switzerland 480 963,778
PepsiCo Inc. United States
Philip Morris Cos. Inc. United States 60,000 1,593,750
Procter & Gamble Co. United States 13,000 744,250
Wm. Wrigley Jr. Co. United States
-------------
7,357,071
-------------
CONSUMER SERVICES 2.5%
Charter Communications Inc., A United States 80,000 1,315,000
Clear Channel Communications Inc. United States 15,000 1,125,000
Entercom Communications Corp. United States
Fox Entertainment Group Inc., A United States
SFX Entertainment Inc. United States
Time Warner Inc. United States 30,000 2,280,000
United Pan-Europe Communications NV, A Netherlands 55,200 1,449,262
-------------
6,169,262
-------------
ELECTRONIC TECHNOLOGY 30.7%
Agilent Technologies Inc. United States
Altera Corp. United States
Applied Materials Inc. United States
Applied Micro Circuits Corp. United States
Broadcom Corp., A United States
Celestica Inc. Canada
CIENA Corp. United States
Cisco Systems Inc. United States 94,000 5,974,875
Cobalt Networks Inc. United States
Comverse Technology Inc. United States
Corning Inc. United States
EMC Corp. United States 24,000 1,846,500
Infineon Technologies AG, ADR Germany
Intel Corp. United States 20,000 2,673,750
International Business Machines Corp. United States
Intersil Holding Corp. United States
JDS Uniphase Corp. United States
Juniper Networks Inc. United States
Linear Technology Corp. United States 40,000 2,557,500
Motorola Inc. United States 60,000 1,743,750
Nokia Corp., ADR Finland
Nortel Networks Corp. Canada
Redback Networks Inc. United States
SDL Inc. United States
Stratos Lightwave Inc. United States
Symbol Technologies Inc. United States 52,500 2,835,000
Taiwan Semiconductor Manufacturing Co, Ltd., ADR Taiwan
Tektronix Inc. United States
Tellabs Inc. United States
Waters Corp. United States 20,000 2,496,250
-------------
20,127,625
-------------
ENERGY MINERALS 3.2%
Chevron Corp. United States 22,500 1,908,281
Conoco Inc., B United States 29,999 736,850
Devon Energy Corp. United States 40,000 2,247,500
Exxon Mobil Corp. United States 27,500 2,158,750
Texaco Inc. United States
Union Pacific Resources Group Inc. United States
-------------
7,051,381
-------------
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------
Common Stocks (cont.)
FINANCE 6.7%
American Express Co. United States
American International Group Inc. United States 21,875 $ 2,570,313
Bank of America Corp. United States 30,000 1,290,000
Capital One Financial Corp. United States
Citigroup Inc. United States
Federated Investors Inc., B United States
Fifth Third Bancorp United States
Fleet Boston Financial Corp. United States
Morgan Stanley Dean Witter & Co. United States
Providian Financial Corp. United States
Wells Fargo & Co. United States 45,000 1,743,750
-------------
5,604,063
-------------
HEALTH SEVICES .3%
Cardinal Health Inc. United States
IMS Health Inc. United States 50,000 900,000
-------------
900,000
-------------
HEALTH TECHNOLOGY 8.6%
Abbott Laboratories United States 35,000 1,559,688
Amgen Inc. United States
Baxter International Inc. United States
Bristol-Myers Squibb Co. United States 20,000 1,165,000
Genentech Inc. United States 30,000 5,160,000
Genzyme Corp. United States 20,000 1,188,750
Packard BioScience Co. United States
Pfizer Inc. United States 51,250 2,460,000
Roche Holding AG Switzerland 90 878,913
Schering-Plough Corp. United States 35,000 1,767,500
-------------
-------------
14,179,851
-------------
INDUSTRIAL SERVICES 1.2%
AES Corp. United States
Schlumberger Ltd. United States 20,000 1,492,500
Transocean Sedco Forex Inc. United States 3,872 206,910
-------------
1,699,410
-------------
NON-ENERGY MINERALS .6%
Barrick Gold Corp. Canada 30,000 545,625
De Beers Consolidated Mines AG, ADR South Africa
Rio Tinto PLC, ADR United Kingdom 20,000 1,305,000
-------------
1,850,625
-------------
PROCESS INDUSTRIES 2.7%
Bowater Inc. United States 30,000 1,323,750
Cambrex Corp. United States 40,000 1,800,000
E. I. du Pont de Nemours and Co. United States 15,836 692,825
Ecolab Inc. United States 30,000 1,171,875
General Electric Co. United States 90,000 4,770,000
Packaging Corp. of America United States
-------------
9,758,450
-------------
PRODUCER MANUFACTURING 2.2%
Avery Dennison Corp. United States
Ballard Power Systems Inc. Canada 14,000 1,257,375
Deere & Co. United States 35,000 1,295,000
Honeywell International Inc. United States 47,625 1,604,367
Illinois Tool Works Inc. United States 35,000 1,995,000
Minnesota Mining & Manufacturing Co. United States 15,000 1,237,500
Pentair Inc. United States 31,000 1,100,500
Tyco International Ltd. Bermuda
-------------
8,489,742
-------------
REAL ESTATE 1.0%
Equity Office Properties Trust United States 40,000 1,102,500
MeriStar Hospital Corp. United States
Simon Property Group Inc. United States 30,000 665,625
-------------
1,768,125
-------------
RETAIL TRADE 1.9%
Costco Wholesale Corp. United States 50,000 1,650,000
GAP Inc. United States
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------
Common Stocks (cont.)
RETAIL TRADE (CONT.)
Target Corp. United States 35,000 $ 2,030,000
Wal-Mart Stores Inc. United States 40,000 2,305,000
-------------
5,985,000
-------------
TECHNOLOGY SERVICES 10.1%
America Online Inc. United States 10,000 527,500
Art Technology Group Inc. United States
Brio Technology Inc. United States
Computer Sciences Corp. United States 25,000 1,867,188
Electronic Data Systems Corp. United States
Equant NV, N.Y. shs. Netherlands 20,000 860,000
First Data Corp. United States 30,000 1,488,750
i2 Technologies Inc. United States
InfoSpace Inc. United States
Microsoft Corp. United States 20,000 1,600,000
Oracle Corp. United States 19,000 1,597,188
Sapient Corp. United States
Siebel Systems Inc. United States
Storagenetworks Inc. United States
VERITAS Software Corp. United States
Vignette Corp. United States
-------------
7,940,626
-------------
TELECOMMUNICATIONS 5.6%
Allegiance Telecom Inc. United States
AT & T Corp. United States
GTE Corp. United States
KPNQwest NV Netherlands
NEXTLINK Communications Inc., A United States
Qwest Communications International Inc. United States
Sprint Corp. (FON Group) United States
Time Warner Telecom Inc., A United States
Verizon Communications United States
Vodafone AirTouch PLC, ADR United Kingdom
VoiceStream Wireless Corp. United States
TRANSPORTATION 2.7%
C.H. Robinson Worldwide Inc. United States
Expeditors International of Washington Inc. United States
Southwest Airlines Co. United States
United Parcel Service Inc., B United States 17,100 1,008,900
-------------
1,008,900
-------------
UTILITIES 3.3%
AT&T Corp. United States 50,000 1,581,250
Duke Energy Corp. United States 30,000 1,691,250
Enron Corp. United States 60,000 3,870,000
GTE Corp. United States 30,000 1,867,500
KPNQwest NV Netherlands 21,500 851,938
Montana Power Co. United States 35,200 1,243,000
Swisscom AG Switzerland 2,870 997,202
-------------
12,102,140
-------------
TOTAL COMMON STOCKS (COST $730,717,065) 111,992,271
-------------
CONVERTIBLE PREFERRED STOCKS .3%
Apache Corp., 6.50%, cvt. pfd. United States 40,300 2,085,525
Georgia-Pacific Corp., 7.50%, cvt. pfd. United States 35,500 1,136,000
MediaOne Group Inc., 7.00%, cvt. pfd. United States 33,300 1,348,650
Tower Automotive Capital, 6.75%, cvt. pfd. United States 20,000 632,500
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $5,210,244) 5,202,675
-------------
PRINCIPAL AMOUNT
------------------------------
BONDS
Georgia-Pacific Corp., 9.125%, 7/01/22 United States $ 100,000 96,084
PanAmerican Beverage Inc., senior note, 8.125%, 4/01/03 Mexico 250,000 237,170
Target Corp., 8.60%, 1/15/12 United States 250,000 265,967
-------------
TOTAL BONDS (COST $596,005) 599,221
-------------
COUNTRY PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------
Convertible Bonds 2.4%
BEA Systems Inc., cvt., 144A, 4.00%, 12/15/06 United States
Level 3 Communications Inc., cvt., 6.00%, 3/15/10 United States
Liberty Media Corp., cvt., 4.00%, 11/15/29
(convertible into Sprint PCS) United States $ 1,250,000 $ 1,775,000
Omnicom Group Inc., cvt. sub. deb., 4.25%, 1/03/07 United States
Omnicom Group Inc., cvt. sub. deb, 144A, 4.25%, 1/03/07 United States
Redback Networks Inc., cvt., 144A, 5.00%, 4/01/07 United States
Thermo Electron Corp., cvt., 144A, 4.25%, 1/01/03 United States 600,001 555,750
-------------
TOTAL CONVERTIBLE BONDS (COST $23,894,429) 2,330,750
-------------
U.S. GOVERNMENT AGENCY SECURITIES .2%
Federal Home Loan Mortgage Corp., 5.75%, 4/15/08 United States 2,000,000 1,836,608
Federal National Mortgage Association, 6.375%, 6/15/09 United States 1,500,000 1,423,871
-------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $3,447,854) 3,260,479
-------------
U.S.GOVERNMENT SECURITIES 1.1%
U.S. Treasury Bond, 8.00%, 11/15/21 United States 250,000 301,797
U.S. Treasury Bond, 6.25%, 8/15/23 United States 2,900,000 2,919,031
U.S. Treasury Bond, 6.875%, 8/15/25 United States 1,000,000 1,087,500
U.S. Treasury Bond, 6.00%, 2/15/26 United States 3,000,000 2,933,436
U.S. Treasury Note, 5.50%, 1/31/03 United States 2,000,000 1,958,750
U.S. Treasury Note, 7.25%, 5/15/04 United States 1,300,000 1,340,625
U.S. Treasury Note, 5.875%, 11/15/05 United States 2,000,000 1,966,250
U.S. Treasury Note, 3.375%, 1/15/07 United States 1,000,000 1,037,328
U.S. Treasury Note, 6.125%, 8/15/07 United States 1,700,000 1,690,438
U.S. Treasury Strip, 11/15/21 United States 4,000,000 1,080,596
-------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $16,428,328) 16,315,751
-------------
REPURCHASE AGREEMENT 7.9%
Joint Repurchase Agreement, 6.563%, 7/3/00
(Maturity Value $121,286,060) United States 22,483,353 22,483,353
(COST $121,219,758)
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Goldman, Sachs & Co.
Greenwich Capital Markets Inc.
Lehman Brothers Inc.
Nesbitt Burns Securities Inc.
Paine Webber Inc.
Paribas Corp.
UBS Warburg
Collateralized by U.S. Treasury Bills & Notes
-------------
TOTAL INVESTMENTS (COST $901,513,683) 100.2% 162,184,500
OTHER ASSETS, LESS LIABILITIES (.2%) 680,384
-------------
NET ASSETS 100.0% $ 162,864,884
-------------
a Non-income producing.
b Investment is through participation in a joint account with other funds
managed by the investment advisor. At June 30, 2000, all repurchase agreements
had been entered into on that date.
c Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN GROWTH AND INCOME FUND
FRANKLIN ASSET ALLOCATION FUND
PRO FORMA COMBINING STATEMENT OF INVESTMENTS, JUNE 30, 2000 (UNAUDITED)
PRO FORMA COMBINED
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------
COMMON STOCKS 88.3%
<S> <C> <C> <C>
a COMMERCIAL SERVICES 1.2%
Concord EFS Inc. United States 500,000 $ 13,000,000
Robert Half International Inc. United States 200,000 5,700,000
-----------
18,700,000
-----------
a CONSUMER DURABLES .7%
Electronic Arts Inc. United States 150,000 10,940,625
-----------
CONSUMER NON-DURABLES 3.1%
Coca-Cola Co. United States 40,000 2,297,500
Estee Lauder Cos. Inc., A United States 35,000 1,730,313
Gillette Co. United States 130,000 4,541,875
a Givaudan AG Switzerland 90 27,480
Nestle SA Switzerland 480 963,778
PepsiCo Inc. United States 150,000 6,665,625
Philip Morris Cos. Inc. United States 660,000 17,531,250
Procter & Gamble Co. United States 93,000 5,324,250
Wm. Wrigley Jr. Co. United States 110,000 8,820,625
-----------
47,902,696
-----------
CONSUMER SERVICES 2.5%
a Charter Communications Inc., A United States 80,000 1,315,000
a Clear Channel Communications Inc. United States 130,000 9,750,000
a Entercom Communications Corp. United States 95,200 4,641,000
a Fox Entertainment Group Inc., A United States 300,000 9,112,500
a SFX Entertainment Inc. United States 125,000 5,664,063
Time Warner Inc. United States 90,000 6,840,000
a United Pan-Europe Communications NV, A Netherlands 55,200 1,449,262
-----------
38,771,825
-----------
ELECTRONIC TECHNOLOGY 30.7%
a Agilent Technologies Inc. United States 100,900 7,441,375
a Altera Corp. United States 150,000 15,290,625
a Applied Materials Inc. United States 250,000 22,656,250
a Applied Micro Circuits Corp. United States 120,000 11,850,000
a Broadcom Corp., A United States 40,000 8,757,500
a Celestica Inc. Canada 240,500 11,934,813
a CIENA Corp. United States 90,000 15,001,875
a Cisco Systems Inc. United States 844,000 53,646,750
a Cobalt Networks Inc. United States 98,600 5,706,475
a Comverse Technology Inc. United States 150,000 13,950,000
Corning Inc. United States 61,100 16,489,363
a EMC Corp. United States 304,000 23,389,000
a Infineon Technologies AG, ADR Germany 102,700 8,138,975
Intel Corp. United States 245,000 32,753,438
International Business Machines Corp. United States 60,000 6,573,750
a Intersil Holding Corp. United States 106,200 5,741,438
a JDS Uniphase Corp. United States 400,000 47,950,000
a Juniper Networks Inc. United States 140,000 20,378,750
Linear Technology Corp. United States 390,000 24,935,625
Motorola Inc. United States 435,000 12,642,188
Nokia Corp., ADR Finland 560,000 27,965,000
Nortel Networks Corp. Canada 280,000 19,110,000
a Redback Networks Inc. United States 30,000 5,340,000
a SDL Inc. United States 30,000 8,555,625
a Stratos Lightwave Inc. United States 30,600 852,975
Symbol Technologies Inc. United States 52,500 2,835,000
a Taiwan Semiconductor Manufacturing Co, Ltd., ADRTaiwan 197,600 7,669,350
Tektronix Inc. United States 294,400 21,785,600
a Tellabs Inc. United States 150,000 10,265,625
a Waters Corp. United States 20,000 2,496,250
-----------
472,103,615
-----------
ENERGY MINERALS 3.2%
Chevron Corp. United States 22,500 1,908,281
Conoco Inc., B United States 29,999 736,850
Devon Energy Corp. United States 290,000 16,294,375
Exxon Mobil Corp. United States 159,515 12,521,928
Texaco Inc. United States 100,000 5,325,000
Union Pacific Resources Group Inc. United States 533,400 11,734,800
-----------
48,521,234
-----------
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
FINANCE 6.7%
<S> <C> <C> <C>
American Express Co. United States 210,000 $ 10,946,250
American International Group Inc. United States 171,875 20,195,313
Bank of America Corp. United States 30,000 1,290,000
Capital One Financial Corp. United States 350,000 15,618,750
Citigroup Inc. United States 280,000 16,870,000
Federated Investors Inc., B United States 375,000 13,148,438
Fifth Third Bancorp United States 100,000 6,325,000
Fleet Boston Financial Corp. United States 177,660 6,040,440
Morgan Stanley Dean Witter & Co. United States 43,288 3,603,726
Providian Financial Corp. United States 80,000 7,200,000
Wells Fargo & Co. United States 45,000 1,743,750
-----------
102,981,667
-----------
HEALTH SEVICES .3%
Cardinal Health Inc. United States 50,000 3,700,000
IMS Health Inc. United States 50,000 900,000
-----------
4,600,000
-----------
HEALTH TECHNOLOGY 8.6%
Abbott Laboratories United States 285,000 12,700,313
a Amgen Inc. United States 250,000 17,562,500
Baxter International Inc. United States 230,000 16,171,875
Bristol-Myers Squibb Co. United States 160,000 9,320,000
a Genentech Inc. United States 170,000 29,240,000
a Genzyme Corp. United States 20,000 1,188,750
a Packard BioScience Co. United States 199,100 3,384,700
Pfizer Inc. United States 463,750 22,260,000
Roche Holding AG Switzerland 790 7,714,901
Schering-Plough Corp. United States 235,000 11,867,500
-----------
131,410,539
-----------
INDUSTRIAL SERVICES 1.2%
a AES Corp. United States 350,000 15,968,750
Schlumberger Ltd. United States 20,000 1,492,500
Transocean Sedco Forex Inc. United States 3,872 206,910
-----------
17,668,160
-----------
NON-ENERGY MINERALS .6%
Barrick Gold Corp. Canada 30,000 545,625
De Beers Consolidated Mines AG, ADR South Africa 325,000 7,901,563
Rio Tinto PLC, ADR United Kingdom 20,000 1,305,000
-----------
9,752,188
-----------
PROCESS INDUSTRIES 2.7%
Bowater Inc. United States 30,000 1,323,750
Cambrex Corp. United States 220,000 9,900,000
E. I. du Pont de Nemours and Co. United States 15,836 692,825
Ecolab Inc. United States 230,000 8,984,375
General Electric Co. United States 315,000 16,695,000
a Packaging Corp. of America United States 403,600 4,086,450
-----------
41,682,400
-----------
PRODUCER MANUFACTURING 2.2%
Avery Dennison Corp. United States 85,000 5,705,625
Ballard Power Systems Inc. Canada 14,000 1,257,375
Deere & Co. United States 35,000 1,295,000
Honeywell International Inc. United States 267,625 9,015,617
Illinois Tool Works Inc. United States 35,000 1,995,000
Minnesota Mining & Manufacturing Co. United States 15,000 1,237,500
Pentair Inc. United States 31,000 1,100,500
Tyco International Ltd. Bermuda 250,000 11,843,750
-----------
33,450,367
-----------
REAL ESTATE 1.0%
Equity Office Properties Trust United States 340,000 9,371,250
MeriStar Hospital Corp. United States 250,000 5,250,000
Simon Property Group Inc. United States 30,000 665,625
-----------
15,286,875
-----------
RETAIL TRADE 1.9%
a Costco Wholesale Corp. United States 50,000 1,650,000
GAP Inc. United States 275,000 8,593,750
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
RETAIL TRADE (CONT.)
<S> <C> <C> <C>
Target Corp. United States 135,000 $ 7,830,000
Wal-Mart Stores Inc. United States 190,000 10,948,750
-----------
29,022,500
-----------
TECHNOLOGY SERVICES 10.1%
a America Online Inc. United States 10,000 527,500
a Art Technology Group Inc. United States 75,000 7,570,313
a Brio Technology Inc. United States 300,000 6,356,250
a Computer Sciences Corp. United States 25,000 1,867,188
Electronic Data Systems Corp. United States 100,000 4,125,000
a Equant NV, N.Y. shs. Netherlands 145,000 6,235,000
First Data Corp. United States 30,000 1,488,750
a i2 Technologies Inc. United States 175,000 18,246,484
a InfoSpace Inc. United States 80,000 4,420,000
a Microsoft Corp. United States 70,000 5,600,000
a Oracle Corp. United States 319,000 26,815,938
a Sapient Corp. United States 130,000 13,901,875
a Siebel Systems Inc. United States 100,000 16,356,250
a,cStoragenetworks Inc. United States 84,100 7,590,025
a VERITAS Software Corp. United States 255,000 28,818,984
a Vignette Corp. United States 100,000 5,201,563
-----------
155,121,120
-----------
TELECOMMUNICATIONS 5.6%
a Allegiance Telecom Inc. United States 75,000 4,800,000
AT & T Corp. United States 44,774 1,415,973
GTE Corp. United States 125,000 7,781,250
a KPNQwest NV Netherlands 75,000 2,971,875
a NEXTLINK Communications Inc., A United States 200,000 7,587,500
a Qwest Communications International Inc. United States 250,000 12,421,875
Sprint Corp. (FON Group) United States 250,000 12,750,000
a Time Warner Telecom Inc., A United States 100,000 6,437,500
Verizon Communications United States 60,000 3,048,750
Vodafone AirTouch PLC, ADR United Kingdom 285,000 11,809,688
a VoiceStream Wireless Corp. United States 130,000 15,118,594
-----------
86,143,005
-----------
TRANSPORTATION 2.7%
C.H. Robinson Worldwide Inc. United States 250,000 12,375,000
Expeditors International of Washington Inc. United States 350,000 16,625,000
Southwest Airlines Co. United States 455,625 8,628,398
United Parcel Service Inc., B United States 67,100 3,958,900
-----------
41,587,298
-----------
UTILITIES 3.3%
AT&T Corp. United States 50,000 1,581,250
Duke Energy Corp. United States 30,000 1,691,250
Enron Corp. United States 510,000 32,895,000
GTE Corp. United States 30,000 1,867,500
a KPNQwest NV Netherlands 21,500 851,938
Montana Power Co. United States 310,200 10,953,932
Swisscom AG Switzerland 2,870 997,202
-----------
50,838,072
-----------
TOTAL COMMON STOCKS (COST $730,717,065) 1,356,484,186
-----------
CONVERTIBLE PREFERRED STOCKS .3%
Apache Corp., 6.50%, cvt. pfd. United States 40,300 2,085,525
Georgia-Pacific Corp., 7.50%, cvt. pfd. United States 35,500 1,136,000
MediaOne Group Inc., 7.00%, cvt. pfd. United States 33,300 1,348,650
Tower Automotive Capital, 6.75%, cvt. pfd. United States 20,000 632,500
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $5,210,244) 5,202,675
-----------
PRINCIPAL AMOUNT
------------------------
BONDS
<S> <C> <C> <C>
Georgia-Pacific Corp., 9.125%, 7/01/22 United States $ 100,000 96,084
PanAmerican Beverage Inc., senior note, 8.125%, Mexico3 250,000 237,170
Target Corp., 8.60%, 1/15/12 United States 250,000 265,967
-----------
TOTAL BONDS (COST $596,005) 599,221
-----------
PRINCIPLE
COUNTRY AMOUNT VALUE
------------------------------------------------------------------------------------
CONVERTIBLE BONDS 2.4%
<S> <C> <C> <C>
BEA Systems Inc., cvt., 144A, 4.00%, 12/15/06 United States $8,000,000 $ 12,470,000
Level 3 Communications Inc., cvt., 6.00%,
3/15/10 United States 5,000,000 4,600,500
Liberty Media Corp., cvt., 4.00%, 11/15/29
(convertible into Sprint PCS) UnitediStates 1,250,000 1,775,000
Omnicom Group Inc., cvt. sub. deb., 4.25%,
1/03/07 United States 2,000,000 5,652,500
Omnicom Group Inc., cvt. sub. deb, 144A,
4.25%, 1/03/07 United States 2,000,000 5,652,500
Redback Networks Inc., cvt., 144A, 5.00%,
4/01/07 United States 5,500,000 6,321,590
Thermo Electron Corp., cvt., 144A, 4.25%,
1/01/03 United States 600,001 555,750
-----------
TOTAL CONVERTIBLE BONDS (COST $23,894,429) 37,027,840
-----------
U.S. GOVERNMENT AGENCY SECURITIES .2%
Federal Home Loan Mortgage Corp., 5.75%,
4/15/08 United States 2,000,000 1,836,608
Federal National Mortgage Association, 6.375%,
6/15/09 United/States 1,500,000 1,423,871
-----------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $3,447,854) 3,260,479
-----------
U.S.GOVERNMENT SECURITIES 1.1%
U.S. Treasury Bond, 8.00%, 11/15/21 United States 250,000 301,797
U.S. Treasury Bond, 6.25%, 8/15/23 United States 2,900,000 2,919,031
U.S. Treasury Bond, 6.875%, 8/15/25 United States 1,000,000 1,087,500
U.S. Treasury Bond, 6.00%, 2/15/26 United States 3,000,000 2,933,436
U.S. Treasury Note, 5.50%, 1/31/03 United States 2,000,000 1,958,750
U.S. Treasury Note, 7.25%, 5/15/04 United States 1,300,000 1,340,625
U.S. Treasury Note, 5.875%, 11/15/05 United States 2,000,000 1,966,250
U.S. Treasury Note, 3.375%, 1/15/07 United States 1,000,000 1,037,328
U.S. Treasury Note, 6.125%, 8/15/07 United States 1,700,000 1,690,438
U.S. Treasury Strip, 11/15/21 United States 4,000,000 1,080,596
-----------
TOTAL U.S. GOVERNMENT SECURITIES (COST $16,428,328) 16,315,751
-----------
b REPURCHASE AGREEMENT 7.9%
Joint Repurchase Agreement, 6.563%, 7/3/00
(Maturity Value $121,286,060) United States 121,219,7580 121,219,758
(COST $121,219,758)
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Goldman, Sachs & Co.
Greenwich Capital Markets Inc.
Lehman Brothers Inc.
Nesbitt Burns Securities Inc.
Paine Webber Inc.
Paribas Corp.
UBS Warburg
Collateralized by U.S. Treasury Bills & Notes
-----------
TOTAL INVESTMENTS (COST $901,513,683) 100.2% 1,540,109,910
OTHER ASSETS, LESS LIABILITIES (.2%) (3,187,506)d
-----------
NET ASSETS 100.0% $1,536,922,404d
-----------
</TABLE>
a Non-income producing.
b Investment is through participation in a joint account with other funds
managed by the investment advisor. At June 30, 2000, all repurchase agreements
had been entered into on that date.
c Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
d Other assets and liabilities were adjusted to reflect $18,425 and $18,425 in
merger related liabilities for the Franklin Growth and Income Fund and the
Franklin Asset Allocation Fund, respectively.
See notes to financial statements.
<TABLE>
<CAPTION>
FRANKLIN GROWTH AND INCOME FUND
FRANKLIN ASSET ALLOCATION FUND
Financial Statements
PRO FORMA COMBINING STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
Franklin
Growth and Income
Franklin Franklin Fund
Growth and Income Asset Allocation Pro Forma
Fund Fund Combined
--------------- --------------- ---------------
Assets:
<S> <C> <C> <C>
Investments in securities:
Cost $ 772,422,890 $ 129,090,793 $ 901,513,683
--------------- --------------- ---------------
Value 1,377,925,410 162,184,500 1,540,109,910
Receivables:
Investment securities sold 7,872,355 - 7,872,355
Capital shares sold 8,092,500 760,282 8,852,782
Dividends and interest 945,822 472,677 1,418,499
--------------- --------------- ---------------
Total assets 1,394,836,087 163,417,459 1,558,253,546
--------------- --------------- ---------------
Liabilities:
Payables:
Investment securities purchased 17,381,374 17,381,374
Capital shares redeemed 1,384,515 205,271 1,589,786
Affiliates 1,458,099 153,368 1,611,467
Shareholders 479,299 191,105 670,404
Other liabilities 38,430 2,831 78,111 ***
--------------- --------------- ---------------
Total liabilities 20,741,717 552,575 21,331,142
--------------- --------------- ---------------
Net assets, at value $ 1,374,094,370 $ 162,864,884 $ 1,536,922,404
--------------- --------------- ---------------
Net assets consist of:
Undistributed net investment income $ - $ 92,683 $ 55,833
Net unrealized appreciation 605,502,520 33,093,707 638,596,227
Accumulated net realized gain 67,453,758 2,953,982 70,407,740
Capital shares 701,138,092 126,724,512 827,862,604
--------------- --------------- ---------------
Net assets, at value $ 1,374,094,370 $ 162,864,884 $ 1,536,922,404
--------------- --------------- ---------------
CLASS A :
Net assets, at value $ 1,165,175,321 $ 154,921,974 $ 1,320,064,145
--------------- --------------- ---------------
--------------- --------------- ---------------
Shares outstanding** 68,525,027 13,929,680 77,636,677
--------------- --------------- ---------------
Net asset value per share* $ 17.00 $ 11.12 $ 17.00
--------------- --------------- ---------------
--------------- --------------- ---------------
Maximum offering price per share (net asset value
per share divided by 94.25%) $ 18.04 $ 11.80 $ 18.04
--------------- --------------- ---------------
CLASS B :
Net assets, at value $ 15,229,279 $ - $ 15,229,075
--------------- --------------- ---------------
--------------- --------------- ---------------
Shares outstanding 907,444 - 907,444
--------------- --------------- ---------------
--------------- --------------- ---------------
Net asset value and maximum offering price per share* $ 16.78 $ - $ 16.78
--------------- --------------- ---------------
CLASS C :
Net assets, at value $ 181,086,706 $ 7,942,910 $ 189,026,289
--------------- --------------- ---------------
--------------- --------------- ---------------
Shares outstanding** 10,877,978 716,096 11,354,945
--------------- --------------- ---------------
Net asset value per share* $ 16.65 $ 11.09 $ 16.65
--------------- --------------- ---------------
--------------- --------------- ---------------
Maximum offering price per share (net asset value per
share divided by 99%) $ 16.82 $ 11.20 $ 16.82
--------------- --------------- ---------------
ADVISOR CLASS :
Net assets, at value $ 12,603,064 $ - $ 12,602,895
--------------- --------------- ---------------
--------------- --------------- ---------------
Shares outstanding 739,605 - 739,605
--------------- --------------- ---------------
--------------- --------------- ---------------
Net asset value and maximum offering price per share $ 17.04 $ - $ 17.04
--------------- --------------- ---------------
* Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
** See note 2 in the accompanying notes to pro forma combining financial statements.
*** Other liabilites were adjusted to reflect $18,425 and $18,425 in merger
related liabilites for the Franklin Growth and Income Fund and the Franklin
Asset Allocation Fund, respectively.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN GROWTH AND INCOME FUND
FRANKLIN ASSET ALLOCATION FUND
Financial Statements (continued)
PRO FORMA COMBINING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2000 (UNAUDITED)
Franklin
Growth and Income
Franklin Franklin Fund
Growth and Income Asset Allocation Pro Forma Pro Forma
Fund Fund Adjustments** Combined
-------------- --------------- -------------- --------------
Investment income:*
<S> <C> <C> <C> <C>
Dividends $ 6,239,332 $ 1,474,873 $ - $ 7,714,205
Interest 3,880,166 2,363,351 - 6,243,517
-------------- --------------- -------------- --------------
Total investment income 10,119,498 3,838,224 - 13,957,722
-------------- --------------- -------------- --------------
Expenses:
Management fees 5,012,245 855,630 (197,524)*** 5,670,351
Distribution fees
Class A 2,196,089 357,508 - 2,553,597
Class B 58,016 - - 58,016
Class C 1,237,416 38,184 - 1,275,600
Transfer agent fees 1,481,371 215,135 - 1,696,506
Custodian fees 15,845 5,968 - 21,813
Reports to shareholders 265,186 55,501 - 320,687
Registration and filing fees 118,101 48,033 - 166,134
Professional fees 36,103 30,030 - 66,133
Directors'/Trustees' fees and expenses 34,217 2,941 - 37,158
Other - 5,063 - 5,063
-------------- --------------- -------------- --------------
Total expenses 10,454,589 1,613,993 (197,524) 11,871,058
-------------- --------------- -------------- --------------
Net investment income (loss) (335,091) 2,224,231 197,524 2,086,664
-------------- --------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments 110,071,613 4,755,073 - 114,826,686
Transactions in written options which
expired or were closed - 121,846 - 121,846
Foreign currency transactions (13,859) 7,918 - (5,941)
-------------- --------------- -------------- --------------
Net realized gain 110,057,754 4,884,837 - 114,942,591
Net unrealized appreciation on investments 305,789,258 5,642,718 - 311,431,976
-------------- --------------- -------------- --------------
Net realized and unrealized gain 415,847,012 10,527,555 - 426,374,567
-------------- --------------- -------------- --------------
Net increase in net assets resulting from
operation $ 415,511,921 $ 12,751,786 $ 197,524 $ 428,461,231
============= =============== ============== ==============
</TABLE>
*Net of foreign taxes of $61,911 and $20,944 for the Franklin Growth and Income
Fund and Franklin Asset Allocation Fund, respectively.
** No adjustments were made to reflect the non-recurring merger related expenses
of $18,425 and $18,425 of the Franklin Growth and Income Fund and the Franklin
Asset Allocation Fund, respectively.
*** Pro Forma adjustment for change in combined net assets. The Pro Forma
Combined Franklin Growth and Income Fund's management fee will be .625% of the
first $100 million of average net assets, .500% of the next $150 million of
average net assets and .4
See notes to financial statements.
PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma financial information gives effect to the
proposed reorganization, accounted as if the reorganization had occurred as
of June 30, 2000. In addition, each pro forma combining statement has been
prepared based upon the structure of the proposed fee and expense structure
after the combination, as discussed in the combined proxy
statement/prospectus.
The pro forma financial information should be read in conjunction with
the historical financial statements and notes thereto of the Franklin Growth
and Income Fund and the Franklin Asset Allocation Fund which are incorporated
by reference in this Statement of Additional Information. Each combination
will be accounted for as a tax-free reorganization.
FRANKLIN GROWTH AND INCOME FUND
FRANKLIN ASSET ALLOCATION FUND
NOTES TO PRO FORMA COMBINING STATEMENTS (UNAUDITED)
1. BASIS OF COMBINATION:
Subject to approval of the proposed Agreement and Plan of Reorganization
(the "Agreement and Plan") by the shareholders of the Franklin Asset
Allocation Fund, the Franklin Growth and Income Fund will acquire all the
net assets of the Franklin Asset Allocation Fund in exchange for the Class
A and C shares of the Franklin Growth and Income Fund. The merger will be
accounted for by the method of accounting for tax-free business
combinations of investment companies. The pro forma combining Statement
of Assets and Liabilities reflects the financial position of the Franklin
Growth and Income Fund and the Franklin Asset Allocation Fund at June 30,
2000 as though the merger occurred as of that date. The pro forma
combining Statement of Operations reflects the results of operations of
the Franklin Growth and Income Fund and the Franklin Asset Allocation Fund
for the period July 1, 1999 to June 30, 2000 as though the merger occurred
on July 1, 1999. The pro forma financial statements do not reflect the
expenses of either fund in carrying out its obligations under the
Agreement and Plan of Reorganization or any adjustment with respect to
additional distributions that may be made prior to reorganization. The
pro forma financial statements are presented for the information of the
reader, and should be read in conjunction with the historical financial
statements of the funds.
2. SHARES OF BENEFICIAL INTEREST:
The number of Class A and C shares issued was calculated by dividing the
Class A and C net asset values per share of the Franklin Asset Allocation
Fund at June 30, 2000 by the Class A and C net asset values per share of
the Franklin Growth and Income Fund at June 30, 2000 and multiplying the
result thereof by the number of outstanding Franklin Asset Allocation Fund
Class A and C shares at June 30, 2000.
FRANKLIN GROWTH AND INCOME FUND
File No. 2-10103
FORM N-14
PART C
OTHER INFORMATION
Item 15. INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Please see the Declaration of Trust, By-Laws, Management Agreement and
Distribution Agreements previously filed as exhibits and incorporated herein by
reference.
Item 16. EXHIBITS The following exhibits are incorporated by reference to
the previously filed document indicated below, except Exhibits 12(a) and
14(a):
(1) Copies of the charter of the Registrant as now in effect;
(a) Certificate of Trust of Franklin Growth and Income Fund dated
March 21, 2000
Filing: Post-Effective Amendment No. 90 to
Registration Statement on Form N-1A
File No. 2-10103
Filing Date: June 9, 2000
(b) Agreement and Declaration of Trust of Franklin Growth and Income
Fund dated March 21, 2000
Filing: Post-Effective Amendment No. 90 to
Registration Statement on Form N-1A
File No. 2-10103
Filing Date: June 9, 2000
(2) Copies of the existing by-laws or corresponding instruments of the
Registrant;
(a) By-Laws of Franklin Growth and Income Fund
Filing: Post-Effective Amendment No. 90 to
Registration Statement on Form N-1A
File No. 2-10103
Filing Date: June 9, 2000
(3) Copies of any voting trust agreement affecting more than five
percent of any class of equity securities of the Registrant;
Not Applicable.
(4) Copies of the agreement of acquisition, reorganization, merger,
liquidation and any amendments to it;
(a) The Agreement and Plan of Reorganization is included in this
registration statement as Exhibit A to the Prospectus/Proxy
Statement
(5) Copies of all instruments defining the rights of holders of the
securities being registered including, where applicable, the
relevant portion of the articles of incorporation or by-laws of the
Registrant;
Not Applicable.
(6) Copies of all investment advisory contracts relating to the
management of the assets of the Registrant;
(a) Management Agreement between Registrant and Franklin Advisers,
Inc. dated August 10, 2000
Filing: Post-Effective Amendment No. 91 to Registration
Statement on Form N-1A
File No. 2-10103
Filing Date: October 26, 2000
(7) Copies of each underwriting or distribution contract between the
Registrant and a principal underwriter, and specimens or copies of
all agreements between principal underwriters and dealers;
(a) Distribution Agreement between Registrant and
Franklin/Templeton Distributors, Inc. dated August 10, 2000
Filing: Post-Effective Amendment No. 91 to Registration
Statement on Form N-1A
File No. 2-10103
Filing Date: October 26, 2000
(b) Forms of Dealer Agreement between
Franklin/Templeton Distributors, Inc. and
Securities Dealers
Filing: Post-Effective Amendment No. 89 to
Registration Statement on Form N-1A
File No. 2-10103
Filing Date: August 26, 1999
(8) Copies of all bonus, profit sharing, pension, or other similar
contracts or arrangements wholly or partly for the benefit of
trustees or officers of the Registrant in their capacity as such.
Furnish a reasonably detailed description of any plan that is not
set forth in a formal document;
Not Applicable.
(9) Copies of all custodian agreements and depository contracts under
Section 17(f) of the 1940 Act for securities and similar
investments of the Registrant, including the schedule of
remuneration;
(a) Master Custody Agreement between Registrant and
Bank of New York dated February 16, 1996
Filing: Post-Effective Amendment No. 84 to
Registration Statement on Form N-1A
File No. 2-10103
Filing Date: October 30, 1996
(b) Amendment to Master Custody Agreement dated February 27, 1998
on behalf of all funds listed on Exhibit A
Filing: Post-Effective Amendment No. 87 to
Registration Statement on Form N-1A
File No. 2-10103
Filing Date: August 24, 1998
(c) Amendment dated May 7, 1997 to the Master Custody Agreement
dated February 16, 1996 between Registrant and Bank of New York
Filing Post-Effective Amendment No. 86 to
Registration Statement on Form N-1A
File No. 2-10103
Filing Date: October 30, 1997
(d) Terminal Link Agreement between Registrant and
Bank of New York dated February 16, 1996
Filing: Post-Effective Amendment No. 84 to
Registration Statement on Form N-1A
File No. 2-10103
Filing Date: October 30, 1996
(e) Foreign Custody Manager Agreement between the Registrant and
Bank of New York dated July 30, 1998.
Filing: Post-Effective Amendment No. 88 to
Registration Statement on Form N-1A
File No. 2-10103
Filing Date: December 22, 1998
(f) Amendment dated August 30, 2000, to Exhibit A of the Master
Custody Agreement between Registrant and Bank of New York
dated February 16, 1996
Filing: Post-Effective Amendment No. 91 to Registration
Statement on Form N-1A
File No. 2-10103
Filing Date: October 26, 2000
(g) Amendment dated August 30, 2000 to Schedule 1 of the Foreign
Custody Manager Agreement dated July 30, 1998
Filing: Post-Effective Amendment No. 91 to Registration
Statement on Form N-1A
File No. 2-10103
Filing Date: October 26, 2000
(h) Amendment dated September 1, 2000 to Schedule 2 of the Foreign
Custody Manager Agreement dated July 30, 1998
Filing: Post-Effective Amendment No. 91 to Registration
Statement on Form N-1A
File No. 2-10103
Filing Date: October 26, 2000
(10) Copies of any plan entered into by Registrant pursuant to Rule
12b-1 under the 1940 Act and any agreements with any person
relating to implementation of the plan, and copies of any plan
entered into by Registrant pursuant to Rule 18f-3 under the 1940
Act, any agreement with any person relating to implementation of
the plan, any amendment to the plan, and a copy of the portion of
the minutes of the meeting of the Registrant's trustees describing
any action taken to revoke the plan;
(a) Distribution Plan pursuant to Rule 12b-1 effective August 10,
2000
Filing: Post-Effective Amendment No. 91 to Registration
Statement on Form N-1A
File No. 2-10103
Filing Date: October 26, 2000
(b) Class C Distribution Plan pursuant to
Rule 12b-1, dated August 10, 2000
Filing: Post-Effective Amendment No. 91 to Registration
Statement on Form N-1A
File No. 2-10103
Filing Date: October 26, 2000
(c) Class B Distribution Plan pursuant to Rule 12b-1 dated August
10, 2000
Filing: Post-Effective Amendment No. 91 to Registration
Statement on Form N-1A
File No. 2-10103
Filing Date: October 26, 2000
(d) Multiple Class Plan dated August 10, 2000
Filing: Post-Effective Amendment No. 91 to Registration
Statement on Form N-1A
File No. 2-10103
Filing Date: October 26, 2000
(11) An opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will, when
sold, be legally issued, fully paid and nonassessable;
(a) Opinion and Consent of Counsel
Filing: Post-Effective Amendment No. 87 to
Registration Statement on Form N-1A
File No. 2-10103
Filing Date: August 24, 1998
(12) An opinion, and consent to their use, of counsel or, in lieu of an
opinion, a copy of the revenue ruling from the Internal Revenue
Service, supporting the tax matters and consequences to
shareholders discussed in the prospectus;
(a) Form of Opinion and Consent of Counsel Supporting Tax Matters
and Consequences to Shareholders
(13) Copies of all material contracts of the Registrant not made in the
ordinary course of business which are to be performed in whole or
in part on or after the date of filing the registration statement;
(a) Subcontract for Fund Administrative Services dated October 1,
1996 and Amendment thereto dated April 30, 1998 between
Franklin Advisers, Inc. and Franklin Templeton Services Inc.
Filing: Post-Effective Amendment No. 87 to
Registration Statement on Form N-1A
File No. 2-10103
Filing Date: August 24, 1998
(b) Amendment dated August 10, 2000 to Subcontract for Fund
Administrative Services between Franklin Advisers, Inc. and
Franklin Templeton Service Inc.
Filing: Post-Effective Amendment No. 91 to Registration
Statement on Form N-1A
File No. 2-10103
Filing Date: October 26, 2000
(14) Copies of any other opinions, appraisals, or rulings, and consents
to their use, relied on in preparing the registration statement and
required by Section 7 of the 1933 Act;
(a) Consent of PricewaterhouseCoopers LLP, independent auditors to
the Registrant
(15) All financial statements omitted pursuant to Items 14(a)(1);
Not Applicable.
(16) Manually signed copies of any power of attorney pursuant to which
the name of any person has been signed to the registration
statement; and
(a) Power of Attorney dated April 18, 2000
Filing: Post-Effective Amendment No. 90 to
Registration Statement on Form N-1A
File No. 2-10103
Filing Date: June 9, 2000
(17) Any additional exhibits which the Registrant may wish to file.
Not Applicable.
Item 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the
applicable registration form for reofferings by persons who
may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the 1933 Act, each post-effective amendment
shall be deemed to be a new registrations statement for the
securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial bona fide
offering of them.
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant, in the City of San Mateo and the
State of California, on the 31st day of October, 2000.
FRANKLIN GROWTH AND INCOME FUND
(Registrant)
By:/s/ David P. Goss
David P. Goss, Vice President
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated:
CHARLES E. JOHNSON* Principal Executive Officer
------------------
Charles E. Johnson and Trustee
Dated: November 1, 2000
MARTIN L. FLANAGAN* Principal Financial Officer
------------------
Martin L. Flanagan Dated: November 1, 2000
KIMBERLEY H. MONASTERIO* Principal Accounting Officer
-----------------------
Kimberley H. Monasterio Dated: November 1, 2000
FRANK H. ABBOTT, III* Trustee
--------------------
Frank H. Abbott, III Dated: November 1, 2000
HARRIS J. ASHTON* Trustee
----------------
Harris J. Ashton Dated: November 1, 2000
S. JOSEPH FORTUNATO* Trustee
-------------------
S. Joseph Fortunato Dated: November 1, 2000
CHARLES B. JOHNSON* Trustee
------------------
Charles B. Johnson Dated: November 1, 2000
RUPERT H. JOHNSON, JR.* Trustee
---------------------
Rupert H. Johnson, Jr. Dated: November 1, 2000
FRANK W.T. LAHAYE* Trustee
-----------------
Frank W.T. LaHaye Dated: November 1, 2000
GORDON S. MACKLIN* Trustee
------------------
Gordon S. Macklin Dated: November 1, 2000
R. MARTIN WISKEMANN* Trustee
-------------------
R. Martin Wiskemann Dated: November 1, 2000
*By /s/ David P. Goss
David P. Goss, Attorney-in-Fact
(Pursuant to Power of Attorney filed herewith)
FRANKLIN GROWTH AND INCOME FUND
N-14 REGISTRATION STATEMENT
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
EX-99.(12)(a) Form of Opinion and Consent of Counsel
Supporting Tax Matters and Consequences to
Shareholders
EX-99.(14)(a) Consent of Auditors, PricewaterhouseCoopers LLP