<PAGE>
[LOGO OF FRANKLIN TEMPLETON]
TEMPLETON GLOBAL UTILITIES, INC.
700 Central Avenue
St. Petersburg, Florida 33701-3628
January 19, 1996
Dear Shareholder:
The Board of Directors of Templeton Global Utilities, Inc. (the "Fund") has
recently reviewed and unanimously endorsed a proposal for reorganization of
the Fund which they judge to be in the best interests of its shareholders.
This proposal calls for combining the assets of the Fund with another fund
which has similar investment objectives and investment policies.
We have therefore included the consideration of the proposal on the agenda
for the Annual Meeting of Shareholders to be held on February 20, 1996. WE
STRONGLY INVITE YOUR PARTICIPATION BY ASKING YOU TO REVIEW, COMPLETE AND
RETURN YOUR PROXY AS SOON AS POSSIBLE.
As a result of this transaction, your Fund would be combined with Franklin
Global Utilities Fund ("Franklin Global Utilities"), a mutual fund managed by
Franklin Advisers, Inc., and you would become a shareholder of Franklin Global
Utilities, receiving shares of Franklin Global Utilities having an aggregate
net asset value equal to the aggregate net asset value of your investment in
the Fund. No sales charge will be imposed in the transaction and the Closing
of the transaction will be conditioned upon receiving an opinion of counsel to
the effect that the proposed transaction will qualify as a tax-free
reorganization for Federal income tax purposes.
Detailed information about the proposed transaction and the reasons for it
are contained in the enclosed materials. Please exercise your right to vote by
completing, dating and signing the enclosed proxy card. A self-addressed,
postage-paid envelope has been enclosed for your convenience. IT IS VERY
IMPORTANT THAT YOU VOTE AND THAT YOUR VOTING INSTRUCTIONS BE RECEIVED NO LATER
THAN FEBRUARY 16, 1996.
NOTE: You may receive more than one proxy package if you hold Fund shares in
more than one account. You must return separate proxy cards for separate
holdings. We have provided postage-paid return envelopes for each, which
requires no postage if mailed in the United States.
Sincerely,
Thomas M. Mistele
Secretary
<PAGE>
TEMPLETON GLOBAL UTILITIES, INC.
700 Central Avenue, St. Petersburg, Florida 33701-3628
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 20, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Templeton
Global Utilities, Inc. ("TGU" or the "Fund") will be held at the Fund's
offices, 700 Central Avenue, St. Petersburg, Florida 33701-3628 on Tuesday,
February 20, 1996 at 10:00 A.M. (Local Time) for the following purposes:
I. To approve an Agreement and Plan of Reorganization providing for the
transfer of the assets and certain liabilities of the Fund in exchange
for Class I shares of Franklin Global Utilities Fund, the distribution
of such shares to shareholders of the Fund in liquidation of the Fund
and the subsequent dissolution of the Fund;
II. To elect six Directors of the Fund to hold office for the terms
specified and until their successors are elected and qualified, or
until such earlier date as the Fund is dissolved as set forth in
Proposal I;
III. To ratify or reject the selection of McGladrey & Pullen, LLP as
independent public accountants of the Fund for the fiscal year ending
August 31, 1996; and
IV. To transact such other business as may properly come before the Annual
Meeting or any adjournment or adjournments thereof.
Every shareholder of record as of the close of business on January 4, 1996
will be entitled to vote.
By Order of the Board of Directors,
Thomas M. Mistele
Secretary
January 19, 1996
MANY SHAREHOLDERS HOLD SHARES IN MORE THAN ONE TEMPLETON FUND AND WILL HAVE
RECEIVED PROXY MATERIAL FOR EACH FUND OWNED. PLEASE SIGN AND PROMPTLY RETURN
EACH PROXY CARD IN THE SELF-ADDRESSED ENVELOPE THAT YOU RECEIVE REGARDLESS OF
THE NUMBER OF SHARES YOU OWN.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION............................................................... 1
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION........................ 2
SYNOPSIS................................................................... 2
FEE TABLE.................................................................. 7
REASONS FOR THE TRANSACTION................................................ 9
COMPARISON OF OPEN-END AND CLOSED-END INVESTMENT COMPANIES................. 11
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES........................... 13
INFORMATION ABOUT THE TRANSACTION.......................................... 16
INFORMATION ABOUT THE FUNDS................................................ 18
ADDITIONAL INFORMATION ABOUT FRANKLIN GLOBAL UTILITIES FUND................ 19
ADDITIONAL INFORMATION ABOUT THE FUND...................................... 20
ELECTION OF DIRECTORS...................................................... 27
RATIFICATION OR REJECTION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS........ 34
OTHER BUSINESS............................................................. 35
ADJOURNMENT................................................................ 35
VOTING INFORMATION......................................................... 35
AGREEMENT AND PLAN OF REORGANIZATION....................................... A-1
</TABLE>
<PAGE>
PROSPECTUS/PROXY STATEMENT
ACQUISITION OF THE ASSETS
OF TEMPLETON GLOBAL UTILITIES, INC.
700 CENTRAL AVENUE
ST. PETERSBURG, FLORIDA 33701-3628
BY AND IN EXCHANGE FOR CLASS I SHARES
OF FRANKLIN GLOBAL UTILITIES FUND
777 MARINERS ISLAND BOULEVARD
SAN MATEO, CALIFORNIA 94403-7777
----------------
INTRODUCTION
This Prospectus/Proxy Statement relates to the solicitation of shareholder
approval for the proposed transfer of the assets and certain liabilities of
Templeton Global Utilities, Inc. (the "Fund"), a diversified, closed-end
management investment company, to Franklin Global Utilities Fund ("Franklin
Global Utilities"), a non-diversified series of Franklin Strategic Series, an
open-end management investment company, in exchange for Class I shares of
beneficial interest of Franklin Global Utilities. Following the exchange,
Class I shares of Franklin Global Utilities will be distributed to the
shareholders of the Fund in liquidation of the Fund. As a result of the
proposed transaction, each holder of shares of the Fund will receive that
number of full and fractional Class I shares of Franklin Global Utilities
equal in net asset value at the close of business on the date of the exchange
to the net asset value of the shareholder's shares of the Fund.
Shareholders of the Fund will not be assessed any sales load or other fee in
connection with the proposed transaction. Class I shares of Franklin Global
Utilities distributed to the shareholders of the Fund as a result of the
proposed transaction that are redeemed or exchanged for shares of another
mutual fund managed by Franklin Advisers, Inc. ("Advisers") or its affiliates
within six months will be subject to a redemption fee of 1% (I.E., redeemed at
99% of net asset value). Class I shares of Franklin Global Utilities acquired
in the transaction that are held for six months or more will be redeemed at
100% of net asset value. The amount deducted from net asset value for
shareholders redeeming or exchanging within six months of the transaction will
be retained by Franklin Global Utilities to the benefit of the remaining
shareholders of Franklin Global Utilities. See "Information About the
Transaction--Redemption Fee" below.
<PAGE>
THE BOARD OF DIRECTORS OF THE FUND
RECOMMENDS APPROVAL OF THE PLAN
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about Franklin Global
Utilities that a prospective investor should know before returning the
enclosed proxy card. This Prospectus/Proxy Statement is accompanied by the
Prospectus of Franklin Global Utilities dated September 1, 1995, as amended
January 10, 1996 (the "Franklin Global Utilities Prospectus"), which includes
information concerning Franklin Global Utilities. The information in the
Franklin Global Utilities Prospectus is incorporated herein by reference. A
Statement of Additional Information dated January 19, 1996 (the "Supplementary
Information"), which provides a further discussion of certain matters
discussed herein, as well as additional matters, including information about
Franklin Global Utilities and the Fund, has been filed with the Securities and
Exchange Commission (the "Commission") and is also incorporated herein by
reference. A Statement of Additional Information of Franklin Global Utilities
dated September 1, 1995 has been filed with the Commission as part of the
Supplementary Information and is further incorporated by reference herein.
Copies of the Supplementary Information may be obtained without charge by
writing to Franklin Templeton Investor Services, Inc., the transfer agent of
Franklin Global Utilities, at 777 Mariners Island Boulevard, P.O. Box 777, San
Mateo, California 94403-7777, or by calling the Transfer Agent toll free at 1-
800/DIAL-BEN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
1. APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION
SYNOPSIS
This synopsis is qualified by reference to the more complete information
contained elsewhere in this Prospectus/Proxy Statement, the Franklin Global
Utilities Prospectus, the Strategic Series Annual Report and the Agreement and
Plan of Reorganization attached hereto as Exhibit A. Franklin Global Utilities
and the Fund are sometimes individually referred to herein as a "Fund" and
collectively as the "Funds."
PROPOSED TRANSACTION. At a meeting held on December 5, 1995, the Directors
of the Fund, including the Directors who are not "interested persons" of the
Fund (the "Independent Directors") within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act"), unanimously approved an
Agreement and Plan of Reorganization (the "Plan") between the Fund, a closed-
end investment company whose shares are traded on the American Stock Exchange,
and Franklin Strategic Series, an open-end investment company, on behalf of
Franklin
2
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Global Utilities, providing for the transfer of the assets of the Fund to
Franklin Global Utilities in exchange for Class I shares of Franklin Global
Utilities, the assumption by Franklin Global Utilities of certain liabilities
of the Fund and the distribution of the Class I shares of Franklin Global
Utilities to shareholders of the Fund in liquidation of the Fund (the
"Transaction"). The aggregate net asset value of the Class I shares of
Franklin Global Utilities issued in the Transaction will equal the aggregate
net asset value of the shares of the Fund then outstanding.
As a result of the Transaction, each holder of shares of the Fund will
receive that number of full and fractional Class I shares of Franklin Global
Utilities equal in net asset value, determined as of the close of trading on
the New York Stock Exchange next preceding the closing of the Transaction, to
the net asset value, determined as of the same time, of such shareholder's
shares of the Fund. Shareholders of the Fund will not be assessed any sales
load or other fee in connection with the Transaction. Franklin Global
Utilities Class I shares distributed to the shareholders of the Fund as a
result of the Transaction that are redeemed or exchanged within six months
will be subject to a redemption fee of 1% (i.e., redeemed at 99% of net asset
value). The temporary redemption fee will be deducted from the amount
otherwise payable to holders of such Class I shares upon such redemption or
exchange and, unlike a contingent deferred sales charge, which is typically
paid to a distributor, will be retained by Franklin Global Utilities and,
thereby, provide a benefit to the remaining shareholders of Franklin Global
Utilities. The level and duration of the redemption fee may be reduced, or the
fee may be terminated, at any time at the discretion of Franklin Global
Utilities. See "Information About the Transaction--Redemption Fee" below. The
Board of Directors of the Fund has determined that the interests of existing
shareholders of the Fund would not be diluted as a result of the Transaction,
concluded that the Transaction would be in the best interests of the Fund and
the shareholders of the Fund, and recommends approval of the Transaction.
Approval of the Plan and Transaction will require the affirmative vote of the
holders of a majority of the outstanding shares of the Fund.
Pursuant to the terms of the Plan, the Fund, Franklin Global Utilities,
Templeton Global Advisors Limited ("TGA") and Franklin Advisers, Inc.
("Advisers") will each pay one-fourth of the costs of the Transaction.
The Transaction is expected to occur as soon as practicable following
shareholder approval thereof. However, the Plan may be terminated at any time
prior to the closing of the Transaction by either Fund, whether or not
shareholder approval has been obtained, if the conditions precedent to that
Fund's obligations under the Plan have not been satisfied or if the Board of
Directors of that Fund determines that proceeding with the Plan would not be
in the best interests of that Fund's shareholders.
If the Transaction does not close, the Board of Directors will consider what
action, if any, would be appropriate. See "Reasons for the Transaction" below.
3
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FORM OF ORGANIZATION. Franklin Global Utilities is a non-diversified series
of Franklin Strategic Series, an open-end management investment company, while
the Fund is a diversified, closed-end management investment company. See
"Comparison of Open-End and Closed-End Investment Companies" below.
TAX CONSEQUENCES. As a condition to closing, the Fund and Franklin Global
Utilities will obtain an opinion of counsel, based on certain facts,
assumptions and representations made by the Fund and Franklin Global
Utilities, to the effect that the Transaction will qualify as a tax-free
reorganization for Federal income tax purposes. See "Information About the
Transaction."
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of Franklin
Global Utilities and that of the Fund are identical and their investment
policies are similar. Each Fund seeks to provide total return without
incurring undue risk by investing at least 65% of its total assets in
securities of companies in the utility industries. The investment policies of
Franklin Global Utilities and the Fund are discussed in detail below under
"Comparison of Investment Objectives and Policies."
ADVISORY, DISTRIBUTION AND OTHER FEES; EXPENSE RATIOS. Under an investment
advisory agreement with Advisers (the "Franklin Global Utilities Advisory
Agreement"), Franklin Global Utilities pays Advisers at the annual rate of
0.625% of the value of average daily net assets, with breakpoints at various
asset levels. The fee is accrued daily and paid monthly. During the most
recent fiscal year, Franklin Global Utilities paid fees to Advisers amounting
to 0.60% of its average daily net assets. Under an investment management
agreement with TGA (the "TGA Advisory Agreement"), the Fund pays monthly to
TGA a fee at an annual rate of 0.60% of the Fund's average daily net assets.
See "Additional Information About the Fund--Investment Manager" below.
Franklin Global Utilities has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the 1940 Act, under which Franklin Global Utilities may
reimburse Franklin Templeton Distributors, Inc. ("FTD") for expenses incurred
in distributing its Class I shares. FTD is the principal underwriter of
Franklin Global Utilities' shares and an indirect subsidiary of Franklin
Resources, Inc. ("Franklin"), a publicly owned holding company, the principal
shareholders of which are Charles B. Johnson and Rupert H. Johnson, Jr., who
own approximately 20.1% and 16%, respectively, of Franklin's outstanding
shares. Franklin is primarily engaged, through various subsidiaries, in
providing investment management, share distribution, transfer agent and
administrative services to a family of investment companies. Under the plan,
the maximum amount which Franklin Global Utilities may pay to FTD or others is
0.25% per annum of Class I's average daily net assets, payable on a quarterly
basis. As a closed-end investment company, the Fund does not distribute its
shares and, therefore, does not have a Rule 12b-1 plan.
Pursuant to a Business Management Agreement between the Fund and Templeton
Global Investors, Inc. ("TGII"), TGII performs certain administrative services
for the Fund for which the Fund pays TGII a monthly fee at an annual rate of
0.15% of the Fund's average daily net assets. TGII is an indirect wholly-owned
subsidiary of Franklin. Franklin Global Utilities does not have an
4
<PAGE>
administration or business management agreement and, therefore, pays no
separate administrative fees. Certain administrative services are provided to
Franklin Global Utilities by Advisers pursuant to the Franklin Global
Utilities Advisory Agreement.
Franklin Templeton Investor Services, Inc., an indirect wholly-owned
subsidiary of Franklin, serves as transfer agent and dividend paying agent for
Franklin Global Utilities. Chemical Mellon Shareholder Services serves as
transfer agent and dividend paying agent for the Fund.
For the year ended April 30, 1995, the ratio of expenses to average daily
net assets for the Class I shares of Franklin Global Utilities was 1.12%. For
the year ended August 31, 1995, the ratio of expenses to average daily net
assets for the Fund was 1.25%. Based on net asset, fee and expense levels as
of October 31, 1995, the pro forma ratio of operating expenses to average
daily net assets for the Class I shares of Franklin Global Utilities upon
completion of the Transaction would be 1.05%. The expense ratio of the Class I
shares of Franklin Global Utilities would be higher at lower levels of net
assets.
DIVIDENDS AND DISTRIBUTIONS. The Fund's current policy is to make monthly
distributions to shareholders consisting of net investment income (which may
include short-term capital gains and net realized gains from foreign currency
transactions, if any) and to pay net realized long-term capital gains
annually. Franklin Global Utilities' current policy is to make semi-annual
distributions of net investment income and to pay net short-term and net long-
term capital gains annually. The Funds have no fixed dividend rates. It is the
intention of each Fund to distribute each fiscal year all of its net
investment income and net realized capital gains, if any, for such year.
There is no sales or other charge in connection with the reinvestment of
dividends and capital gain distributions of Franklin Global Utilities.
Franklin Global Utilities permits its shareholders to make an election to
receive dividends and distributions in cash or in full or fractional shares of
Franklin Global Utilities.
The Fund offers its shareholders a Dividend Reinvestment Plan as described
below under "Additional Information About the Fund--Dividend Reinvestment
Plan."
PURCHASE PROCEDURES AND EXCHANGE PRIVILEGES. Class I shares of Franklin
Global Utilities are offered on a continuous basis at a price equal to their
net asset value, plus a maximum sales charge of 4.50% of the public offering
price. The sales charge does not apply to shares acquired through the
reinvestment of dividends. No sales load will be assessed to shareholders of
the Fund in connection with the Transaction. The sales charge on Class I
shares of Franklin Global Utilities may be reduced or eliminated in accordance
with Franklin Global Utilities' Rights of Accumulation, Letter of Intent,
Group Purchases and Purchases at Net Asset Value programs. Purchases of Class
I shares of Franklin Global Utilities of $1,000,000 or more are not subject to
an initial sales charge but may be subject to a contingent deferred sales
charge under certain circumstances. The
5
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minimum initial investment in shares of Franklin Global Utilities is $100 and
the minimum for subsequent investments is $25, except in certain instances as
described in the Franklin Global Utilities Prospectus. See "How to Buy Shares
of the Fund" in the Franklin Global Utilities Prospectus.
Under a multi-class structure, Franklin Global Utilities offers investors
the choice of purchasing Class I shares, which bear a higher front-end sales
charge and lower ongoing Rule 12b-1 fees, and Class II shares, which have a
lower front-end sales charge and higher ongoing Rule 12b-1 fees. For more
information about the classes of shares of Franklin Global Utilities, see the
Franklin Global Utilities Prospectus which accompanies this Prospectus/Proxy
Statement. Each share of Franklin Global Utilities represents an interest in
the same investment portfolio of Franklin Global Utilities. While only Class I
shares of Franklin Global Utilities are to be issued in the Transaction, Class
II shares are available for purchase in accordance with the Franklin Global
Utilities Prospectus.
Class I shares of Franklin Global Utilities may be exchanged for shares of
the same class of certain other open-end investment companies managed by
Advisers and its affiliates ("Franklin Templeton Funds"). See "Exchange
Privilege" in the Franklin Global Utilities Prospectus. Exchanges of shares
are made at the relative net asset values next determined, without sales or
service charges, except that exchanges of Class I shares of Franklin Global
Utilities received in the Transaction will be subject to a redemption fee for
a period of six months from the closing of the Transaction. The entire amount
deducted from net asset value for shareholders exchanging shares within six
months of the Transaction will be retained by Franklin Global Utilities. See
"Redemption Procedures" and "Information About the Transaction--Redemption
Fee" below.
The Fund is a closed-end investment company and, therefore, does not
continually issue new shares as does Franklin Global Utilities and does not
have distribution and purchase procedures or exchange privileges. The Fund's
shares currently are traded on the American Stock Exchange, at prices that may
be less or more than their net asset value. Shareholders currently pay
brokerage commissions in connection with purchases and sales of the Fund's
shares. The Fund has a Dividend Reinvestment Plan as described below under
"Additional Information about the Fund--Dividend Reinvestment Plan."
REDEMPTION PROCEDURES. Class I shares of Franklin Global Utilities may be
redeemed on any day the New York Stock Exchange is open for trading, either
directly or through a securities dealer. Class I shares are redeemed at net
asset value next calculated after Franklin Global Utilities receives a
redemption request in proper form and, except with respect to certain
redemptions of Class I shares purchased in amounts of $1,000,000 or more,
without any contingent deferred sales charges. In the case of repurchases
through securities dealers, the redemption price is the net asset value next
calculated after the shareholder's dealer receives the order, which is
promptly transmitted to Franklin Global Utilities, rather than on the day
Franklin Global Utilities receives the shareholder's written request in proper
form. Proceeds of a redemption generally are sent within seven days. See "How
to Sell Shares of the Fund" in the Franklin Global Utilities Prospectus. There
is no sales charge or other fee for redemptions of
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shares of Franklin Global Utilities, except that Class I shares of Franklin
Global Utilities received in the Transaction that are redeemed or exchanged
within six months of the Transaction will be subject to a 1% redemption fee
(I.E. redeemed at 99% of net asset value). The level and duration of the
redemption fee may be reduced, or the fee may be terminated, at any time at
the discretion of Franklin Global Utilities. See "Information About the
Transaction--Redemption Fee" below. As a closed-end investment company, the
Fund does not redeem its shares. See "Comparison of Open-End and Closed-End
Investment Companies" below.
FEE TABLE
The table below sets forth information with respect to Class I shares of
Franklin Global Utilities and shares of the Fund as well as pro forma
information for Class I shares of Franklin Global Utilities after giving
effect to the Transaction. The table was prepared by Advisers based on the net
asset, fee and expense levels of the Funds as of October 31, 1995.
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
CLASS I
SHARES OF
FRANKLIN GLOBAL
SHARES OF UTILITIES
FRANKLIN GLOBAL SHARES OF FOLLOWING
UTILITIES THE FUND THE TRANSACTION
--------------- --------- ---------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load
(as a percentage of offering
price)............................ 4.50%(a) N/A(b) 4.50%(a)
Deferred Sales Load (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower)............... None(a) N/A(b) None(a)
Redemption Fees
(as a percentage of amount 1% for six
redeemed)......................... None N/A months(c)
ANNUAL EXPENSES
Advisory and Administrative Fees... .60% .75% .57%
12b-1 Fees......................... .23% N/A .23%
Other Expenses..................... .29% .46% .25%
---- ---- ----------
Total Fund Operating Expenses..... 1.12%(d) 1.21% 1.05%(e)
==== ==== ==========
</TABLE>
- --------
(a) No sales load or other fee will be charged in connection with the
Transaction. Purchases of Class I shares of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1% deferred
sales charge on redemptions made within one year of purchase. See "How to
Sell Shares of the Fund--Contingent Deferred Sales Charge" in the Franklin
Global Utilities Prospectus.
(b) Shares of the Fund are generally available for purchase and sale only in
the secondary market. Brokerage commissions and other fees may be incurred
in connection with such transactions.
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(c) Redemptions and exchanges, made within six months of the Transaction, of
Class I shares of Franklin Global Utilities received in the Transaction
will be at 99% of net asset value.
(d) This amount reflects current fees and expenses of Franklin Global
Utilities and, therefore, differs from the corresponding percentage amount
set forth in the current prospectus of Franklin Global Utilities.
(e) The foregoing pro forma combined financial information assumes that all of
the Fund assets acquired by Franklin Global Utilities are retained. If
this is not the case (e.g., if there are substantial redemptions by former
shareholders of the Fund following the effective date of the Transaction),
the expense ratio of the Class I shares of Franklin Global Utilities would
be adversely affected.
EXAMPLE
The Example below shows the cumulative expenses attributable to a $1,000
investment in Class I shares of Franklin Global Utilities, shares of the Fund
and Class I shares of the pro forma combined fund for the periods specified.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Franklin Global Utilities (Class I shares)... $56 $79 $104 $175
The Fund..................................... $12 $38 $ 67 $147
Pro Forma Combined Fund (I.E., Class I shares
of Franklin Global Utilities received in the
Transaction)................................ $55 $77 $100 $167
$59.80*
</TABLE>
- --------
* Assumes redemption within six months of the Transaction.
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that an investor in a Fund will
bear directly or indirectly. Long-term holders of Class I shares of Franklin
Global Utilities may pay aggregate sales charges totaling more than the
economic equivalent of the maximum initial sales charges permitted by the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
The Example above assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Commission regulations. The
Example is not to be considered representative of past or future expenses;
actual expenses may be greater or less than those shown. Except as noted in
the Example, the cumulative expenses attributable to the hypothetical
investment are the same whether or not redemption at the end of the respective
periods is assumed.
8
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REASONS FOR THE TRANSACTION
At a December 5, 1995 meeting of the Board of Directors of the Fund, TGA
recommended to the Directors that they approve and recommend the Transaction
and the Plan to the shareholders of the Fund for their approval. The Directors
unanimously accepted TGA's recommendation, concluded that the Transaction and
the Plan would be in the best interests of the Fund and its shareholders, and
recommended that the shareholders approve the proposed Transaction.
TGA made its recommendation to the Board of Directors with reference to a
provision in the Articles of Incorporation of the Fund which requires the
Fund's Board of Directors to submit to shareholders a proposal to convert the
Fund to an open-end investment company (the "Conversion Proposal") if its
shares trade on the American Stock Exchange at an average discount from net
asset value of 2% or more during the quarter immediately preceding August 31,
1995 (the "Test Period"). During the Test Period, the Fund's shares traded at
an average discount of 9.28%.
The Conversion Proposal policy was designed to deter sustained market
discounts in the price of the Fund's shares. As stated in the prospectus of
the Fund dated May 23, 1990 for the initial public offering of the Fund's
shares:
The fact that the Fund's Articles of Incorporation provide for the
automatic submission to the Fund's shareholders of a proposal to convert
the Fund to an open-end investment company may enhance the attractiveness
of the Fund's shares to investors, thereby reducing the excess of the net
asset value over market price that might otherwise exist. Sellers may be
less inclined to accept a significant discount if they have some prospect
of being able to receive net asset value if the Fund converted to an open-
end investment company.
Since commencement of the Fund's operations, its shares have traded at both
a premium and a discount. For the period from commencement of operations
through August 31, 1995, the price relative to net asset value has ranged from
a premium of 25.36% to a discount of 11.55%, and has averaged a premium of
.69%. See "Additional Information About the Fund--Sales Price and Net Asset
Value Information."
At the December 5 meeting, TGA informed the Directors that it had given
intensive consideration to the appropriate course of action the Board of
Directors might recommend to shareholders when submitting the Conversion
Proposal. TGA concluded that the Fund need no longer operate as a closed-end
investment company. After evaluating the alternatives for change, TGA advised
the Board of Directors of its view that the Fund's shareholders could benefit
most by reorganizing the Fund into Franklin Global Utilities, an existing
open-end investment company, rather than by converting the Fund to a stand-
alone open-end investment company. It is TGA's view that this course of action
is the best available accommodation of both the objectives of (i) providing
liquidity at net asset value to shareholders consistent with the purposes of
the Fund's Conversion Proposal policy and (ii) seeking a high level of total
return without incurring
9
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undue risk through investment in utilities industries securities. In
formulating its recommendation to the Board of Directors, TGA noted that the
Funds have the same investment objective and similar investment policies.
In reaching its decision to recommend shareholder approval of the
Transaction, the Board of Directors considered the foregoing and a number of
other factors. The Board of Directors reviewed summaries of operating expenses
of the Fund and of Franklin Global Utilities. It was noted that the Fund had
an expense ratio of 1.25% for its fiscal year ended August 31, 1995, compared
to Franklin Global Utilities' expense ratio of 1.12% for its fiscal year ended
April 30, 1995. The Board also considered the fact that the Transaction would
permit the shareholders of the Fund to pursue substantially the same
investment goals in a larger fund. A larger fund should enhance the ability of
the investment adviser to effect portfolio transactions on more favorable
terms and give the investment adviser greater investment flexibility and the
ability to select a larger number of portfolio securities for the combined
Fund, with the attendant ability to spread investment risks among a larger
number of portfolio securities. Higher aggregate net assets may enable the
combined entity to obtain the benefits of economies of scale, permitting the
reduction or elimination of certain duplicate costs and expenses which may
result in lower overall expense ratios through the spreading of both fixed and
variable costs of fund operations over a larger asset base.
The Board of Directors also considered the imposition of a temporary
redemption fee, as proposed by TGA, on redemptions and exchanges of Franklin
Global Utilities shares to be distributed to Fund shareholders upon
consummation of the Transaction. In that regard, the Board of Directors noted
that a high level of redemptions and exchanges following the closing of the
Transaction would impose significant direct and indirect costs on Franklin
Global Utilities, to the detriment of its shareholders, in light of the nature
and size of, and liquidity of the market for, many of the positions that would
be held by Franklin Global Utilities after consummation of the Transaction.
The Directors considered the fact that the disposition of such securities
would involve various direct costs (such as commissions and custody fees). The
Board of Directors also considered the indirect costs of liquidating large
portfolio positions to meet significant redemptions and exchanges, such as the
adverse impact on prices received upon such liquidations. The Board of
Directors reviewed the recommendation of TGA that, in view of the size of, and
liquidity of the markets for, many of the positions to be held by Franklin
Global Utilities upon consummation of the Transaction, a temporary redemption
fee of 1% (I.E., redemption at 99%) of the net asset value of the Franklin
Global Utilities Class I shares received in the Transaction that are redeemed
or exchanged should be imposed for a period of six months from the date of the
Transaction. The Board of Directors noted that a number of other closed-end
funds that have converted to open-end status have imposed temporary redemption
fees to discourage high levels of redemptions and exchanges upon conversion to
such status, and that the proceeds of the proposed redemption fee would be
retained by Franklin Global Utilities and would tend to offset costs that
would be incurred as a result of redemptions and exchanges, to the benefit of
the remaining shareholders of Franklin Global Utilities. The Board of
Directors determined in view of the considerations described above that both
the amount and duration of the temporary
10
<PAGE>
redemption fee were reasonable. The Board of Trustees of Franklin Strategic
Series, on behalf of Franklin Global Utilities, also considered the proposed
redemption fee at a meeting on January 18, 1996. The Board of Trustees also
determined in view of the considerations discussed above that the amount and
duration of the temporary redemption fee were reasonable, and approved the fee
as described above.
The Board of Directors also considered, among other things: (i) the terms
and conditions of the Transaction; (ii) whether the Transaction would result
in the dilution of shareholders' interests; (iii) the fact that the investment
objectives of the Funds are identical and that their investment policies are
similar; (iv) the relative performance of the Fund and Franklin Global
Utilities; (v) the benefits of the Transaction to persons other than the Fund
and the fact that the Fund, Franklin Global Utilities, TGA and Advisers will
each bear one-fourth of the costs of the Transaction; (vi) the fact that
Franklin Global Utilities will assume certain liabilities of the Fund; (vii)
the expected Federal income tax consequences of the Transaction; and (viii)
the historical information referred to above.
During their consideration of the Transaction, the Independent Directors met
separately regarding the legal issues involved. Based on the factors described
above, the Board of Directors unanimously determined that the Transaction
would be in the best interests of the Fund and its shareholders and would not
result in dilution of shareholders' interests, and unanimously recommended
that the shareholders of the Fund approve the proposed Transaction.
In the event the shareholders of the Fund do not approve the Transaction or
the Transaction is not consummated for any other reason, the Board of
Directors will consider possible alternative courses of action, including the
possibility of submitting a proposal to convert the Fund to a stand-alone
open-end investment company.
COMPARISON OF OPEN-END AND CLOSED-END INVESTMENT COMPANIES
GENERAL. Open-end investment companies such as Franklin Global Utilities,
commonly referred to as mutual funds, issue redeemable securities. The holders
of redeemable securities have the right to surrender those securities to the
mutual fund and obtain in return an amount based on their proportionate share
of the value of the mutual fund's net assets. Most mutual funds also
continuously issue new shares to investors at a price based on the fund's net
asset value at the time of issuance. Like that of other mutual funds, Franklin
Global Utilities net asset value per share is determined by deducting the
amount of its liabilities from the value of its assets and dividing the
difference by the number of shares outstanding. Franklin Global Utilities
shares do not trade on any exchange.
In contrast, closed-end investment companies such as the Fund generally do
not redeem their outstanding shares or engage in the continuous sale of new
securities, and thus operate with a relatively fixed capitalization. The
shares of closed-end investment companies are normally bought and sold in
securities markets. The Fund's shares are traded on the American Stock
Exchange.
11
<PAGE>
ELIMINATION OF DISCOUNT AND PREMIUM. Upon consummation of the Transaction,
shareholders who wish to realize the value of their shares will be able to do
so by redeeming their shares at prices based on their then current net asset
value (less the temporary redemption fee discussed below under "Information
About the Transaction--Redemption Fee.") As a result, the discount from net
asset value at which the Fund's shares currently trade on the American Stock
Exchange will be eliminated. Shareholders should note, however, that
shareholder approval of Proposal 1 also will eliminate any possibility that
the Fund's shares will trade at a premium over net asset value. If Proposal 1
is approved by shareholders, the discount may be reduced further before the
effective date of the Transaction.
VOTING RIGHTS. Shareholders of each Fund are entitled to one vote per share.
Neither Fund's shareholders have cumulative voting rights. Shareholders of
Franklin Global Utilities and of all other series of Franklin Strategic Series
vote as a group on matters that affect each series in substantially the same
manner. However, each series votes separately with respect to matters for
which separate series voting is appropriate under applicable law. In addition,
as discussed above, Franklin Global Utilities offers Class I and Class II
shares, which vote together on matters that affect each class in substantially
the same manner. However, each class of shares votes separately with respect
to its Rule 12b-1 plan and other matters for which separate class voting is
appropriate under applicable law.
PORTFOLIO MANAGEMENT. Most open-end investment companies maintain reserves
of cash or cash equivalents in order to meet redemption requests as they
arise. Because closed-end investment companies generally are not required to
meet redemptions, their cash reserves can be substantial or minimal, depending
primarily on the investment adviser's perception of market conditions. The
maintenance of larger reserves of cash or cash equivalents may, at times of
rising markets, adversely affect a fund's performance. Furthermore, unlike
mutual funds, closed-end investment companies are not subject to pressures to
sell portfolio securities at disadvantageous times in order to meet net
redemptions.
SENIOR SECURITIES. The 1940 Act prohibits open-end investment companies from
issuing "senior securities" representing indebtedness (i.e., bonds,
debentures, notes, preferred stock and other similar securities), other than
indebtedness to banks when there is asset coverage of at least 300% for all
borrowings. Closed-end investment companies, on the other hand, are permitted
by the 1940 Act to issue senior securities representing both indebtedness to
any lenders (subject to various limitations), as well as senior securities
representing equity. Pursuant to the 1940 Act, senior securities representing
equity issued by a closed-end investment company must be supported by asset
coverage of at least 300%. The ability to issue senior securities may give
closed-end investment companies more flexibility in "leveraging" their
shareholders' investments. Neither the Fund nor Franklin Global Utilities has
any outstanding indebtedness to banks or other lenders, nor has the Fund any
outstanding authorized class of senior securities representing equity.
PRINCIPAL UNDERWRITER. Mutual fund shares are normally purchased and
redeemed through a principal underwriter. As the principal underwriter of the
shares of Franklin Global Utilities, Franklin
12
<PAGE>
Templeton Distributors, Inc. receives, and retains a portion of, the proceeds
of any applicable sales charge and the distribution fee payable under the Rule
12b-1 plan of Franklin Global Utilities described above under "Synopsis--
Advisory, Distribution and Other Fees; Expense Ratios" and "Management of the
Fund" in the Franklin Global Utilities Prospectus.
SALES CHARGES ON PURCHASES OF SHARES. Shareholders currently pay brokerage
commissions in connection with purchases and sales of the Fund's shares on the
American Stock Exchange. Shares of Franklin Global Utilities are offered at
their net asset value plus any applicable sales charge which varies with the
amount purchased as follows:
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
-----------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF NET
SIZE OF TRANSACTION AT OFFERING PRICE OFFERING PRICE AMOUNT INVESTED
- ------------------------------------- ------------------ ----------------------
<S> <C> <C>
Less than $100,000................... 4.50% 4.71%
$100,000 but less than $250,000...... 3.75% 3.90%
$250,000 but less than $500,000...... 2.75% 2.83%
$500,000 but less than $1,000,000.... 2.25% 2.30%
$1,000,000 or more................... none none
</TABLE>
See "How to Buy Shares of the Fund" in the Franklin Global Utilities
Prospectus.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
GENERAL. The investment objectives of the Funds are identical and the
investment policies of the Funds are similar. Franklin Global Utilities
invests at least 65% of its total assets in securities issued by companies
which are, in the opinion of Advisers, primarily engaged in the ownership or
operation of facilities used to generate, transmit or distribute electricity,
telephone communications, cable and other pay television services, wireless
telecommunications, gas or water. The Fund invests at least 65% of its total
assets in securities issued by companies primarily engaged in the ownership or
operation of facilities used to generate, transmit or distribute electricity,
telecommunications, gas or water, or which provide products, services or
equipment to such companies. Under normal circumstances, each Fund invests at
least 65% of its total assets in issuers domiciled in at least three
countries, one of which may be the United States. Of course, there can be no
assurance that either Fund will achieve its investment objective.
Neither Fund invests 25% or more of its total assets in any single industry
other than the utility industries. For this purpose, "industry" does not
include the U.S. government and agencies and instrumentalities of the U.S.
government, although a foreign government is deemed to be an "industry."
The Fund may write (i.e., sell) covered call options on securities and may
write covered put and call options on futures contracts. As an operating
policy, the Fund neither purchases nor writes put options on securities nor
purchases call options on securities (except in connection with closing
purchase transactions). Franklin Global Utilities may write covered put and
call options and
13
<PAGE>
may purchase put and call options on securities, indices and stock index
futures. Franklin Global Utilities will not engage in any securities options
or securities index options if the option premiums paid regarding its open
option positions exceed 5% of the value of its total assets.
Both Funds may purchase and sell stock index futures contracts and futures
contracts on individual securities. Both Funds limit their use of futures
contracts and related options to hedging purposes, and do not use them for
speculation. As an operating policy, neither Fund will enter into any futures
contracts and/or options on futures contracts if, immediately thereafter, the
amount of initial margin deposits on all futures contracts and options on
futures contracts of that Fund and premiums paid on options on futures
contracts would exceed 5% of the market value of the total assets of the Fund.
In addition, Franklin Global Utilities will not enter into any futures
contract or related option if, immediately thereafter, more than one-third of
its net assets would be represented by futures contracts or related options.
Neither Fund invests in commodities or commodity contracts, except that the
Funds may engage in the futures and related options transactions discussed
above.
The Fund may enter into forward foreign currency exchange contracts and
foreign currency futures contracts, as well as purchase put or call options on
foreign currency. The Fund will not enter into such forward or futures
contracts if, as a result, the Fund would have more than 20% of the value of
its total assets committed to the consummation of such contracts. Franklin
Global Utilities may also enter into forward foreign currency exchange
contracts and foreign currency futures contracts, and may both purchase and
sell put or call options on foreign currencies, subject to the limits on
futures and options transactions discussed above.
Each of the Funds may lend to banks and broker-dealers portfolio securities
with an aggregate market value of up to one-third of its total assets. Such
loans must be secured by collateral, consisting of any combination of cash,
U.S. government securities or irrevocable letters of credit. In the case of
the Fund, the collateral must be maintained in an amount at least equal (on a
daily marked-to-market basis) to the current value of the securities loaned.
For Franklin Global Utilities, the collateral must have an initial market
value of at least 102% of the initial market value of the securities loaned,
including any accrued interest, with the value of the collateral and loaned
securities marked-to-market daily to maintain collateral coverage of at least
100%.
The Fund may not issue senior securities, borrow money in excess of 30% of
its total assets (not including the amount borrowed) or pledge its assets,
except that the Fund may pledge its assets to secure permitted borrowings. The
Fund may borrow from unaffiliated banks or other financial institutions up to
30% of the value of its total assets to increase its holdings of portfolio
securities (I.E., leverage its portfolio). Franklin Global Utilities does not
borrow money, except that it may enter into reverse repurchase agreements or
borrow money from banks in an amount up to 33% of its total assets for
temporary or emergency purposes. While borrowings exceed 5% of Franklin Global
Utilities' total assets, it does not make additional investments.
The Fund, as a diversified fund, may not purchase any security (other than
obligations of the U.S. government, its agencies or instrumentalities) if, as
a result, as to 75% of the Fund's total
14
<PAGE>
assets, (i) more than 5% of the Fund's total assets would then be invested in
securities of any single issuer, or (ii) the Fund would then own more than 10%
of the voting securities of any single issuer. Franklin Global Utilities, as
non-diversified fund, is permitted to invest in a smaller number of individual
issuers than is the Fund. Accordingly, an investment in Franklin Global
Utilities may, under certain circumstances, present greater risk to an
investor than would an investment in a diversified investment company such as
the Fund.
The Fund may not purchase securities on margin, except such short-term
credits as may be necessary for clearance of transactions and the maintenance
of margin accounts with respect to futures contracts and options. Franklin
Global Utilities may not maintain a margin account with a securities dealer.
The Fund may not make short sales of securities or maintain a short
position, except in connection with the use of options, futures contracts,
options thereon and forward currency contracts. Franklin Global Utilities may
not make short sales, unless at the time it owns securities equivalent in kind
and amount to those sold (which will normally be for deferring recognition of
gains or losses for tax purposes). Franklin Global Utilities does not
currently intend to employ this investment technique.
The Fund may not invest in securities which are not publicly traded or which
cannot be readily resold because of legal or contractual restrictions
("restricted securities"), or which are not otherwise readily marketable
(including repurchase agreements having more than seven days remaining to
maturity) if, regarding all such securities, more than 25% of its total assets
would be invested in such securities. Franklin Global Utilities may not invest
more than 5% of its assets in restricted securities (although Franklin Global
Utilities may invest in such securities to the extent permitted under the
federal securities laws), and may not invest more than 15% of its total assets
in securities that are not readily marketable.
The Fund may not purchase real estate or interests in real estate, except
that it may purchase securities that are secured by real estate and securities
of companies (including partnerships) which invest or deal in real estate.
Franklin Global Utilities may not invest directly in real estate, real estate
limited partnerships or illiquid securities issued by real estate investment
trusts.
Neither Fund may underwrite the securities of other issuers except to the
extent that, in connection with the disposition of portfolio securities, it
may be deemed to be an underwriter under applicable securities laws. In
addition, neither Fund may make investments for the purpose of exercising
control or management over the issuer.
Detailed descriptions of Franklin Global Utilities' investment policies and
restrictions, and risks associated with an investment in Franklin Global
Utilities, are contained in the Franklin Global Utilities Prospectus.
15
<PAGE>
INFORMATION ABOUT THE TRANSACTION
AGREEMENT AND PLAN OF REORGANIZATION. The following summary of the proposed
Plan is qualified in its entirety by reference to the Plan attached to this
Proxy Statement/Prospectus as Exhibit A. The Plan provides that Franklin
Global Utilities will acquire all or substantially all of the assets of the
Fund in exchange for Class I shares of Franklin Global Utilities and the
assumption by Franklin Global Utilities of certain identified liabilities of
the Fund on a date to be determined by management, which is expected to be as
soon as practicable after approval of the Plan by shareholders (the "Closing
Date"). Franklin Global Utilities will not assume any liabilities or
obligations of the Fund, other than those reflected in an unaudited statement
of assets and liabilities of the Fund as of the normal close of business of
the New York Stock Exchange (currently 4:30 p.m., New York City time) on the
Closing Date (the "Valuation Date"). The number of full and fractional Class I
shares of Franklin Global Utilities to be issued to shareholders of the Fund
will be determined on the basis of the relative net asset values per share and
aggregate net assets of Franklin Global Utilities and the Fund computed as of
the close of business of the New York Stock Exchange on the Valuation Date.
The net asset value per share for both Franklin Global Utilities and the Fund
will be determined by dividing their respective assets, less liabilities, by
the total number of their respective outstanding shares. Portfolio securities
of both Franklin Global Utilities and the Fund will be valued in accordance
with the valuation practices of Franklin Global Utilities as described under
"Valuation of Fund Shares" in its current prospectus.
The Board of Directors of the Fund and the Board of Trustees of Franklin
Global Utilities have each determined that the interests of existing
shareholders will not be diluted as a result of the transactions contemplated
by the Transaction, and that participation in the Transaction is in the best
interests of shareholders of the Fund and Franklin Global Utilities,
respectively.
Prior to the Closing Date, the Fund will endeavor to discharge all of its
known liabilities and obligations. The liabilities assumed are expected to
relate generally to expenses incurred in the ordinary course of the Fund's
operations, such as accounts payable relating to custodian and transfer agency
fees and legal and accounting fees. Franklin Global Utilities will assume all
liabilities, expenses, costs, charges and reserves reflected on an unaudited
statement of assets and liabilities of the Fund as of the close of the New
York Stock Exchange on the Valuation Date prepared by TGII in accordance with
generally accepted accounting principles consistently applied from the prior
audited period. Franklin Global Utilities will assume only those liabilities
of the Fund reflected in that unaudited statement of assets and liabilities
and will not assume any other liabilities.
As of or prior to the Closing Date, the Fund may declare and pay a dividend
or dividends which are intended to have the effect of distributing to the
Fund's shareholders all of the Fund's net income which has not been
distributed previously.
Immediately after the Closing Date, the Fund will distribute pro rata to its
shareholders of record as of the close of business on the Valuation Date the
full and fractional Class I shares of Franklin Global Utilities received by
the Fund, and the Fund will then terminate. Such distribution
16
<PAGE>
will be accomplished by the establishment of accounts on the share records of
Franklin Global Utilities in the name of Fund shareholders, each representing
the respective pro rata number of full and fractional Class I shares of
Franklin Global Utilities due such shareholders. After the Closing Date, any
outstanding certificates representing shares of the Fund will represent Class
I shares of Franklin Global Utilities distributed to the record holders of the
Fund. Share certificates of the Fund will, upon presentation to Franklin
Templeton Investor Services, Inc., the transfer agent for Franklin Global
Utilities, be exchanged for Class I shares of Franklin Global Utilities.
Certificates for Franklin Global Utilities shares will be issued only upon
written request.
The consummation of the Plan is subject to the conditions set forth therein.
The Plan may be terminated at any time prior to the Closing Date, before or
after approval by shareholders of the Fund, by resolution of the Board of
Directors of the Fund or the Board of Trustees of Franklin Strategic Series on
behalf of Franklin Global Utilities, if circumstances should develop that, in
the opinion of either Board, make proceeding with the Transaction inadvisable.
Approval of the Plan will require the affirmative vote of the holders of a
majority of the outstanding voting securities of the Fund. If the Transaction
is not approved by the shareholders of the Fund, the Board of Directors of the
Fund will consider other possible courses of action, including submitting to
shareholders a proposal to convert the Fund to a stand-alone open-end
investment company.
DESCRIPTION OF CLASS I SHARES OF FRANKLIN GLOBAL UTILITIES. Full and
fractional Class I shares of Franklin Global Utilities will be issued without
the imposition of a sales load or other fee to the shareholders of the Fund in
accordance with the procedures described above. As described immediately
below, Class I shares of Franklin Global Utilities received in the Transaction
that are redeemed or exchanged within six months of the Closing Date will be
subject to a redemption fee. Each Class I share of Franklin Global Utilities
to be issued in the Transaction will be fully paid and nonassessable when
issued and will have no preemptive or conversion rights.
REDEMPTION FEE. Class I shares of Franklin Global Utilities distributed to
shareholders of the Fund pursuant to the Plan that are redeemed or exchanged
for shares of other Franklin or Templeton Funds within six months of the
Closing Date will be subject to a redemption fee of 1% (i.e., redeemed at 99%
of net asset value). The redemption fee will be deducted from the amount
otherwise payable to holders of such Class I shares of Franklin Global
Utilities upon redemption or exchange and will be retained by Franklin Global
Utilities. The redemption fee will not be imposed with respect to other
outstanding Class I shares of Franklin Global Utilities or shares issued upon
reinvestment of dividends paid on shares of Franklin Global Utilities
distributed pursuant to the Plan. In determining the amount of the redemption
fee with respect to a particular redemption or exchange, it will be assumed
that the redemption or exchange is first of any shares to which the redemption
fee does not apply and second of any shares to which the redemption fee does
apply. The redemption fee will be retained by Franklin Global Utilities and,
thereby, provide a benefit to the shareholders of Franklin Global Utilities.
The level and duration of the redemption fee may be reduced, or the fee may be
terminated, at any time at the discretion of Franklin Global Utilities. The
rationale for imposition of the redemption fee is discussed above under
"Reasons for the Transaction."
17
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES. The Transaction is intended to qualify for
Federal income tax purposes as a tax-free reorganization under Section
368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), with
no gain or loss recognized as a consequence of the Transaction by Franklin
Global Utilities, the Fund, or the shareholders of the Fund. As a condition to
the closing of the Transaction, the Fund and Franklin Global Utilities will
have received an opinion from the law firm of Dechert Price & Rhoads to that
effect. That opinion will be based in part upon representations made by the
Fund and Franklin Global Utilities and certain facts and assumptions.
Shareholders of the Fund should consult their tax advisers regarding the
effect, if any, of the proposed Transaction in light of their individual
circumstances. SINCE THE FOREGOING DISCUSSION ONLY RELATES TO THE FEDERAL
INCOME TAX CONSEQUENCES OF THE TRANSACTION, SHAREHOLDERS OF THE FUND SHOULD
ALSO CONSULT THEIR TAX ADVISERS AS TO STATE, LOCAL, AND OTHER TAX
CONSEQUENCES, IF ANY, OF THE TRANSACTION.
CAPITALIZATION. The following table shows the capitalization and net asset
values per share of the common stock of the Fund and the shares of beneficial
interest of Franklin Global Utilities as of October 31, 1995 and on a pro
forma basis as of that date after giving effect to the proposed Transaction.
<TABLE>
<CAPTION>
PRO FORMA
FRANKLIN GLOBAL UTILITIES THE FUND COMBINED
------------------------- ----------- ------------
<S> <C> <C> <C>
Net assets................... $122,747,485 $42,636,817 $165,384,302
Net asset value per share
Class I shares............. $ 13.24 $ 13.52 $ 13.24
Class II shares............ $ 13.20 -- $ 13.20
Shares outstanding
Class I shares............. 9,194,912 3,153,664 12,415,215
Class II shares............ 73,657 73,657
</TABLE>
INFORMATION ABOUT THE FUNDS
GENERAL. The Fund is organized as a Maryland corporation and is governed by
its Charter and By-Laws as well as by Maryland corporate law. Franklin Global
Utilities is a series of Franklin Strategic Series, a Delaware business trust,
which is governed by its Trust Instrument and By-Laws as well as Delaware
business trust law.
As an open-end investment company organized as a Delaware business trust,
Franklin Strategic Series is not required to hold annual shareholders'
meetings and does so only under certain specified circumstances or when
required under federal law. In contrast, as a closed-end investment company
whose shares currently are traded on an exchange, the Fund is required to hold
annual meetings of shareholders. The Fund's By-Laws currently provide that an
annual shareholders' meeting for the election of Directors and the transaction
of other proper business is
18
<PAGE>
to be held on a date between January 25th and February 25th of every year, as
fixed from time to time by the Board of Directors. Franklin Global Utilities
has procedures available to its shareholders for calling shareholders'
meetings for the removal of Trustees. Each Fund indemnifies its
Directors/Trustees and officers to the full extent permitted by applicable
law.
Franklin Global Utilities has authorized an unlimited number of shares of
beneficial interest, with a par value of $.01 per share. The Fund has
authorized capital of one hundred million shares of common stock, each having
a par value of $.01 per share. The shares of each of the Funds have no
preemptive or conversion rights.
PUBLIC INFORMATION. Information about Franklin Global Utilities is included
in the Franklin Global Utilities Prospectus dated September 1, 1995, as
amended January 10, 1996, a copy of which is included herewith, and in the
Franklin Strategic Series Annual Report as of April 30, 1995 and Semi-Annual
Report as of October 31, 1995, copies of which have been filed as part of the
Supplementary Information and are incorporated herein by reference. Additional
information concerning Franklin Global Utilities is included in its Statement
of Additional Information dated September 1, 1995, which has been filed as
part of the Supplementary Information and is also incorporated herein by
reference. A copy of the Supplementary Information can be obtained without
charge by writing to Franklin Templeton Investor Services, Inc., the transfer
agent of Franklin Global Utilities, at 777 Mariners Island Boulevard, P.O. Box
777, San Mateo, California 94403-7777, or by calling the Transfer Agent toll
free at 1-800/DIAL-BEN. Information about the Fund is included in its Annual
Report as of August 31, 1995, which is included in the Supplementary
Information and copies of which also may be obtained without charge by writing
or calling Franklin Templeton Investor Services, Inc. Shares of the Fund are
listed on the American Stock Exchange and reports, proxy statements and other
information concerning the Fund can be inspected at the offices of that
Exchange. Franklin Global Utilities and the Fund both file reports, proxy
statements and other information with the Commission. These documents and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such material can also be obtained from the Public
Reference Branch, Office of Filings and Information Services, Securities and
Exchange Commission, Washington, D.C. 20549 at prescribed rates.
ADDITIONAL INFORMATION ABOUT FRANKLIN GLOBAL UTILITIES
Information about Franklin Global Utilities comparable to that provided
immediately below with respect to the Fund is set forth in the Franklin Global
Utilities Prospectus which accompanies this Prospectus/Proxy Statement.
19
<PAGE>
ADDITIONAL INFORMATION ABOUT THE FUND
FINANCIAL HIGHLIGHTS. The information set forth below presents per share
income and capital changes for a share outstanding throughout each period
indicated. The information in the following table has been audited by
McGladrey & Pullen, LLP, for the periods indicated in their report included in
the Supplementary Information. This information should be read in conjunction
with the financial statements and notes thereto included in the Supplementary
Information, copies of which can be obtained at no charge. This information
reflects the Fund's operation as a closed-end investment company; the Fund's
performance may have been different had it operated as an open-end company
during the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
--------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year........................... $ 15.03 $ 15.01 $ 13.38 $ 11.85 $ 10.60
------- ------- ------- ------- -------
Income from investment
operations:
Net investment income......... .54 .60 .60 .67 .61
Net realized and unrealized
gain (loss).................. (.10) .73 1.90 1.47 1.32
------- ------- ------- ------- -------
Total from investment
operations..................... .44 1.33 2.50 2.14 1.93
------- ------- ------- ------- -------
Distributions:
Dividends from net investment
income....................... (.48) (.64) (.64) (.61) (.68)
Distributions from net
realized gains............... (1.22) (.67) (.23) -- --
------- ------- ------- ------- -------
Total distributions............. (1.70) (1.31) (.87) (.61) (.68)
------- ------- ------- ------- -------
Change in net asset value....... (1.26) .02 1.63 1.53 1.25
------- ------- ------- ------- -------
Net asset value, end of year.... $ 13.77 $ 15.03 $ 15.01 $ 13.38 $ 11.85
======= ======= ======= ======= =======
TOTAL RETURN
Based on market value per
share.......................... (9.88)% 3.78% 27.31% 25.97% 13.96%
Based on net asset value per
share.......................... 3.66% 8.98% 19.57% 18.53% 18.91%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000)... $43,438 $47,317 $46,429 $40,702 $35,855
Ratio of expenses to average net
assets......................... 1.25% 1.21% 1.31% 1.44% 1.55%
Ratio of net investment income
to average net assets.......... 4.08% 4.00% 4.41% 5.28% 5.46%
Portfolio turnover rate......... 24.76% 40.34% 42.90% 15.21% 19.85%
</TABLE>
SALES PRICE AND NET ASSET VALUE INFORMATION. The outstanding shares of
common stock of the Fund are listed on the American Stock Exchange. The
following table shows, for each fiscal quarter of the Fund, (i) the high and
low sales prices per share of common stock of the Fund, as reported in the
consolidated transaction reporting system, (ii) the net asset value per share
of the Fund as determined on the date of each such quotation and (iii) the
percentage premium over, or discount from, net asset value represented by each
such quotation.
20
<PAGE>
<TABLE>
<CAPTION>
HIGH LOW
SALES PREMIUM SALES PREMIUM
FISCAL QUARTER ENDED: PRICE NAV /DISCOUNT PRICE NAV /DISCOUNT
- --------------------- ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
November 30, 1993............... $16.75 $15.58 8% $14.88 $14.77 1%
February 28, 1994............... 17.88 16.16 11% 15.25 14.89 2%
May 31, 1994.................... 17.25 15.26 13% 12.75 14.69 -13%
August 31, 1994................. 15.63 14.03 11% 13.13 14.10 -7%
November 30, 1994............... 15.25 14.93 2% 12.25 13.17 -7%
February 28, 1995............... 13.63 12.73 7% 11.50 12.65 -9%
May 31, 1995.................... 12.75 13.30 -4% 11.00 12.32 -11%
August 31, 1995................. 13.00 13.46 -3% 12.13 13.84 -12%
November 30, 1995............... 13.38 14.10 -5% 12.25 13.89 -12%
</TABLE>
The shares of the Fund have generally traded at a premium over their net
asset values since the Fund's inception. At the close of business on January
12, 1996, the Fund's net asset value was $13.93 per share while the closing
market price of the Fund's common stock was $13.50 per share, which
represented a discount from net asset value of 3.1%.
BOARD OF DIRECTORS. The business of the Fund is managed under the direction
of its Board of Directors, which formulates the general policies of the Fund
and meets periodically to review the investment performance of the Fund,
monitor investment activities and practices and discuss other matters
affecting the Fund. In addition, the Board, in its discretion, declares what,
if any, dividends are to be paid by the Fund and when they are to be paid.
INVESTMENT MANAGER. TGA, a Bahamas corporation with offices at Nassau,
Bahamas, serves as Investment Manager of the Fund. On November 11, 1994, TGA
assumed the investment management duties with respect to the Fund previously
performed by Templeton Investment Counsel, Inc. ("TICI"). TGA and TICI are
both indirect wholly-owned subsidiaries of Franklin. The TGA Advisory
Agreement dated October 30, 1992 was last approved by the Board of Directors,
including the Directors who are not parties to the Agreement or interested
persons of any such party, on December 5, 1995 to continue through December
31, 1996, unless sooner terminated in connection with the dissolution of the
Fund pursuant to the Transaction. Otherwise, the TGA Advisory Agreement will
continue from year to year thereafter, subject to approval annually by the
Board of Directors or by vote of the holders of a majority of the outstanding
shares of the Fund (as defined in the 1940 Act) and also, in either event,
approval by a majority of those Directors who are not parties to the Agreement
or interested persons of any such party in person at a meeting called for the
purpose of voting on such approval. The TGA Advisory Agreement requires TGA to
manage the investment and reinvestment of the Fund's assets. TGA is not
required to furnish any personnel, overhead items or facilities for the Fund,
including pricing or trading desk facilities, although such expenses are paid
by investment advisers of some other investment companies.
The TGA Advisory Agreement provides that TGA will select brokers and dealers
for execution of the Fund's portfolio transactions consistent with the Fund's
brokerage policies. Although the services provided by broker-dealers in
accordance with the brokerage policies incidentally may
21
<PAGE>
help reduce the expenses of or otherwise benefit TGA and other investment
advisory clients of TGA and of its affiliates, as well as the Fund, the value
of such services is indeterminable and TGA's fee is not reduced by any offset
arrangement by reason thereof.
TGA renders its services to the Fund from outside the United States. When
TGA determines to buy or sell the same securities for the Fund that TGA or
certain of its affiliates have recommended for one or more of TGA's other
clients or for clients of its affiliates, the orders for all such securities
trades may be placed for execution by methods determined by TGA, with approval
by the Fund's Board of Directors, to be impartial and fair, in order to seek
good results for all parties. TGA performs similar services for other funds
and accounts and there may be times when the actions taken with respect to the
Fund's portfolio will differ from those taken by TGA on behalf of other funds
and accounts. Neither TGA and its affiliates, its officers, directors or
employees, nor the officers and Directors of the Fund are prohibited from
investing in securities held by the Fund or other funds and accounts which are
managed or administered by TGA to the extent such transactions comply with the
Fund's Code of Ethics.
The TGA Advisory Agreement provides that TGA shall have no liability to the
Fund or any shareholder of the Fund for any error of judgment, mistake of law,
or any loss arising out of any investment or other act or omission in the
performance by TGA of its duties under the TGA Advisory Agreement, or for any
loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians or security depositories, or from any
wars or political acts of any foreign governments to which such assets might
be exposed, except for any liability, loss or damage resulting from willful
misfeasance, bad faith or gross negligence on TGA's part or reckless disregard
of its duties under the TGA Advisory Agreement. The TGA Advisory Agreement
will terminate automatically in the event of its assignment, and may be
terminated by the Fund at any time without payment of any penalty on 60 days'
written notice, with the approval of a majority of the Directors of the Fund
in office at the time or by vote of a majority of the outstanding shares of
the Fund (as defined in the 1940 Act).
For its services, the Fund pays TGA a fee, calculated and paid monthly,
equal on an annual basis to 0.60% of the Fund's average daily net assets
payable in U.S. dollars at the end of each calendar month.
Currently, the lead portfolio manager for the Fund is Sean Farrington, Vice
President of the Fund. Mr. Farrington holds an AB in Economics from Harvard
University. He is a member of TGA's research technology group and is
responsible for the maintenance of TGA's internal research database. He joined
TGA in 1991 and became a Vice President of TGA in 1994.
During the fiscal year ended August 31, 1995, TGA received fees from the
Fund of $251,410. For additional information regarding the ownership and
control of TGA, see the Supplementary Information.
BUSINESS MANAGER. Templeton Global Investors, Inc., Broward Financial
Centre, Suite 2100, Ft. Lauderdale, Florida 33394-3091, an indirect wholly-
owned subsidiary of Franklin (the "Business
22
<PAGE>
Manager"), performs certain administrative functions for the Fund pursuant to
a Business Management Agreement.
The Business Management Agreement requires the Business Manager to be
responsible for various activities on behalf of the Fund, including:
. providing office space, telephone, office equipment and supplies for the
Fund;
. paying compensation to the Fund's officers;
. authorizing expenditures and approving bills for payment on behalf of the
Fund;
. supervising preparation of quarterly reports to shareholders, notices of
dividends, capital gain distributions and tax credits, and attending to
correspondence and other communications with individual shareholders;
. daily pricing of the Fund's investment portfolio and preparing and
supervising publication of the net asset value of the Fund's shares,
earnings reports and other financial data;
. providing trading desk facilities for the Fund;
. monitoring relationships with organizations serving the Fund, including
the custodian, transfer agent and printers;
. supervising compliance by the Fund with record-keeping requirements under
the 1940 Act and regulations promulgated thereunder; and with state
regulatory requirements; maintaining books and records for the Fund
(other than those maintained by the custodian and transfer agent); and
preparing and filing tax reports other than the Fund's income tax
returns; and
. providing executive, clerical and secretarial help needed to carry out
its responsibilities.
For its services, the Business Manager receives a fee equal on an annual
basis to 0.15% of the Fund's average daily net assets, reduced to 0.135% of
such daily net assets in excess of $200 million, 0.10% of such daily net
assets in excess of $700 million, and .075% of such daily net assets in excess
of $1.2 billion, based upon the net asset value at the end of each day and
payable at the end of each calendar month. During the fiscal year ended August
31, 1995, the Business Manager received fees of $62,850.
The Business Manager is relieved of liability to the Fund for any act or
omission in the course of its performance under the Business Management
Agreement in the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations. The Business Management Agreement
may be terminated by either party at any time on 60 days' written notice
without payment of penalty, provided that such termination by the Fund shall
be directed or approved by vote of a majority of the Directors of the Fund in
office at the time or by vote of a majority of the Fund's shareholders (as
defined in the 1940 Act), and shall terminate automatically and immediately in
the event of its assignment. The Business Management Agreement will continue
through December 31, 1996, unless sooner terminated in connection with the
dissolution of the Fund pursuant to the Transaction. Otherwise, the Business
Management Agreement will continue thereafter from year to year, subject to
approval by the Board of Directors, and was last
23
<PAGE>
approved by the Board (including a majority of the Directors who are not
parties to the Agreement or interested persons of any such party) on December
5, 1995.
CUSTODIAN, TRANSFER AGENT, DIVIDEND-PAYING AGENT AND REGISTRAR. The Chase
Manhattan Bank, N.A. is the custodian of the Fund's assets. Its address is
MetroTech Center, Brooklyn, New York 11245. The custodian employs
subcustodians outside the U.S. approved by the Board of Directors in
accordance with regulations under the 1940 Act. Chemical Mellon Shareholder
Services is the transfer agent and dividend paying agent and registrar for the
Fund. Its address is 85 Challenger Road, Ridgefield Park, NJ 07660.
CAPITAL STOCK. The Fund's only class of capital stock is its common stock,
$.01 par value per share. Each share of such common stock is entitled to one
vote with respect to all matters as to which shareholders are entitled to
vote. Upon liquidation of the Fund, its net assets would be distributed to its
shareholders. All shares of common stock issued by the Fund are deemed fully
paid and nonassessable and are not subject to further calls. No share is
entitled to any pre-emptive rights or conversion rights.
OUTSTANDING SECURITIES. The following information with respect to the Fund's
common stock is furnished as of December 15, 1995.
<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------------
TITLE OF CLASS AUTHORIZED OUTSTANDING
-------------- ----------- -----------
<S> <C> <C>
Common Stock par value $.01 per share.................. 100,000,000 3,153,664
</TABLE>
TAXATION. Until consummation of the Transaction, and if the Transaction is
not consummated, the Fund intends to continue to qualify to be taxed as a
"regulated investment company" under the Code. Thus, to the extent that the
Fund distributes its taxable income and net capital gain to its shareholders
as required by the Code, its qualification as a regulated investment company
relieves the Fund of Federal income and excise taxes on that part of its
taxable income including net capital gain which it pays out to its
shareholders. Dividends out of net ordinary income and distributions of net
short-term capital gains are taxable to the recipient shareholders as ordinary
income. The Fund's shareholders are advised annually as to the Federal tax
status of dividends and capital gain distributions made by the Fund for the
preceding years.
DIVIDEND REINVESTMENT PLAN. Pursuant to the Fund's Dividend Reinvestment
Plan (the "Plan"), a shareholder whose Fund shares are registered in his own
name will have all distributions reinvested automatically in additional shares
of the Fund by Mellon Securities Trust Company (the "Plan Agent") as agent
under the Plan unless the shareholder elects to have distributions in cash.
Shareholders whose shares are held by a broker or nominee that does not
provide a dividend reinvestment program may be required to have their shares
registered in their own name to participate in the Plan. Investors who own
shares of the Fund registered in street name should contact their broker or
nominee for details. All distributions to investors who do not participate in
the Plan will be paid by check mailed directly to the record holder (or, if
the shares are held in street or other nominee name, then to such nominee) by
Mellon Securities Trust Company as dividend paying agent.
24
<PAGE>
The Plan Agent serves as agent for the shareholders in administering the
Plan. When the Fund declares a dividend or capital gain distribution,
participants in the Plan will receive shares of the Fund, as outlined below,
with the number of shares determined as of the time of purchase (generally the
payable date of the dividend) or at such other date as the Board of Directors
may determine. Whenever market price is equal to or exceeds net asset value at
the time shares are valued for the purpose of determining the number of shares
to be received, participants will be issued shares of the Fund at a price
equal to net asset value but not less than 95% of the then current market
price of the Fund's shares. The Fund will not issue shares under the Plan at a
price below net asset value. If net asset value determined as at the time of
purchase exceeds the market price of Fund shares at such time, or if the Fund
should declare a dividend or other distribution payable only in cash (i.e., if
the Board of Directors should preclude reinvestment at net asset value), the
Plan Agent will, as agent for the participants, buy Fund shares in the open
market, on the American Stock Exchange or elsewhere, for the participants'
accounts. If, before the Plan Agent has completed its purchases, the market
price exceeds the net asset value of a Fund share, the average per share
purchase price paid by the Plan Agent may exceed the net asset value of the
Fund's shares, resulting in the acquisition of fewer shares than if the
dividend or distribution had been paid in shares issued by the Fund valued at
net asset value.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmation of all transactions in the accounts, including
information needed by shareholders for personal and tax records. Shares in the
account of each Plan participant will be held by the Plan Agent in
noncertificated form in the name of the participant, and each shareholder's
proxy will include those shares purchased pursuant to the Plan.
In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of shares certified from time
to time by the record shareholders as representing the total amount registered
in the record shareholder's name and held for the account of beneficial owners
who are to participate in the Plan.
There is no charge to participants for reinvesting dividends or capital gain
distributions. The Plan Agent's fees for the handling of reinvestment of
dividends and distributions will be paid by the Fund. A $5.00 fee will be
imposed for withdrawal from participation in the Plan. There will be no
brokerage charges with respect to shares issued directly by the Fund as a
result of dividends or capital gain distributions payable either in shares or
in cash. However, each participant will pay a pro rata share of brokerage
commissions incurred with respect to the Plan Agent's open market purchases in
connection with the reinvestment of dividends or capital gain distributions.
The automatic reinvestment of dividends and distributions will not relieve
participants of any U.S. income tax that may be payable on such dividends or
distributions.
Experience under the Plan may indicate that changes thereto may be
desirable. Accordingly, the Fund reserves the right to amend or terminate the
Plan as applied to any dividend or distribution paid (i) subsequent to notice
of the change sent to all shareholders of the Fund at least
25
<PAGE>
90 days before the record date for such dividend or distribution or (ii)
otherwise in accordance with the terms of the Plan. The Plan also may be
amended or terminated by the Plan Agent by at least 90 days' prior written
notice to all shareholders of the Fund. All correspondence concerning the Plan
should be directed to the Plan Agent at Chemical Mellon Shareholder Services,
Shareholder Investment Services, P.O. Box 750, Pittsburgh, PA 15230.
ANTI-TAKEOVER PROVISIONS IN THE ARTICLES OF INCORPORATION. The Fund's
Articles of Incorporation include provisions that could have the effect of
limiting the ability of other entities or persons to acquire control of the
Fund. The Board of Directors is divided into three classes, each having a term
of three years. At the annual meeting of shareholders in each year, the term
of one class will expire. This provision could delay for up to two years the
replacement of a majority of the Board of Directors. A Director may be removed
from office only by vote of the holders of at least two-thirds of the shares
of the Fund entitled to be voted on the matter.
In addition, the Articles of Incorporation require the favorable vote of the
holders of at least 75% of the shares of the Fund then entitled to be voted to
approve, adopt or authorize the following:
(i) a merger or consolidation of the Fund with another corporation,
(ii) a sale of all or substantially all of the Fund's assets (other than
in the regular course of the Fund's investment activities), or
(iii) a liquidation or dissolution of the Fund,
unless such action has been approved, adopted or authorized by the affirmative
vote of two-thirds of the total number of Directors fixed in accordance with
the By-Laws, in which case the affirmative vote of a majority of the
outstanding Shares is required.
The Board of Directors has determined that the 75% voting requirements
described above, which are greater than the minimum requirements under
Maryland law or the 1940 Act, are in the best interests of shareholders
generally. Reference should be made to the Articles of Incorporation on file
with the Commission for the full text of these provisions, which could have
the effect of depriving shareholders of an opportunity to sell their shares at
a premium over prevailing market prices by discouraging a third party from
seeking to obtain control of the Fund.
SHARE OWNERSHIP. As of December 15, 1995, the officers and Trustees of
Franklin Strategic Series as a group beneficially owned less than 1% of the
outstanding shares of Franklin Global Utilities and, to the best of the
knowledge of Franklin Global Utilities, no person owned of record or
beneficially 5% or more of Franklin Global Utilities' outstanding shares. As
of December 15, 1995, the officers and Directors of the Fund as a group
beneficially owned less than 1% of the outstanding shares of the Fund and, to
the best of the knowledge of the Fund, no person of record or beneficially
owned 5% or more of the outstanding shares of the Fund.
26
<PAGE>
THE BOARD OF DIRECTORS OF THE FUND
UNANIMOUSLY RECOMMENDS APPROVAL OF THE PLAN.
II. ELECTION OF DIRECTORS
The Board of Directors of the Fund is divided into three classes, each class
having a term of three years. Each year the term of office of one class will
expire. Betty P. Krahmer, Harris J. Ashton, S. Joseph Fortunato, and Gordon S.
Macklin have been nominated for three-year terms to expire at the 1999 Annual
Meeting of Shareholders and Charles B. Johnson and John Wm. Galbraith have
been nominated for one-year terms to expire at the 1997 Annual Meeting of
Shareholders, and such terms to continue until their respective successors are
duly elected and qualified, or until such earlier date as the Fund is
dissolved pursuant to the Transaction discussed above.
The persons named in the accompanying form of proxy intend to vote at the
Annual Meeting (unless directed not to vote) in favor of the nominees named
below. All of the nominees are currently members of the Board of Directors of
the Fund. In addition, all Directors and nominees are also directors or
trustees of other investment companies in the Franklin Templeton Group.
All of the nominees listed below are available and have consented to serve
if elected. If any of the nominees should not be available, the persons named
in the proxy will vote in their discretion for another person or other persons
who may be nominated as Directors.
27
<PAGE>
The following table provides information concerning each nominee for
election as Director and each Director of the Fund:
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
AND % OF TOTAL
NAME, ADDRESS AND PRINCIPAL OCCUPATION DIRECTOR OUTSTANDING AS OF
OFFICES WITH THE FUND DURING PAST FIVE YEARS AND AGE SINCE DECEMBER 15, 1995
--------------------- ------------------------------ -------- -----------------
<C> <S> <C> <C>
NOMINEES TO SERVE UNTIL 1999 ANNUAL MEETING OF SHAREHOLDERS:
BETTY P. KRAHMER.............. Director or trustee of 1990 1,000(0.03%)
2201 Kentmere Parkway various civic
Wilmington, Delaware associations; formerly
DIRECTOR economic analyst, U.S.
Government. Age 66.
HARRIS J. ASHTON.............. Chairman of the board, 1992 500(0.01%)
Metro Center, 1 Station Place president, and chief
Stamford, Connecticut executive officer of
DIRECTOR General Host
Corporation (nursery
and craft centers); and
director of RBC
Holdings (U.S.A.) Inc.
(bank holding company)
and Bar-S Foods. Age
63.
S. JOSEPH FORTUNATO........... Member of the law firm 1992 100(**)
200 Campus Drive of Pitney, Hardin, Kipp
Florham Park, New Jersey & Szuch; and director
DIRECTOR of General Host
Corporation. Age 63.
GORDON S. MACKLIN............. Chairman of White River 1993 -0-
8212 Burning Tree Road Corporation
Bethesda, Maryland (information services);
DIRECTOR director of Infovest
Corporation, Fund
America Enterprises
Holdings, Inc., Fusion
Systems Corporation,
Lockheed Martin
Corporation, MCI
Communications
Corporation, Medimmune,
Inc.; formerly chairman
of Hambrecht and Quist
Group, director of H&Q
Healthcare Investors
and president of the
National Association of
Securities Dealers,
Inc. Age 67.
DIRECTORS SERVING UNTIL 1998 ANNUAL MEETING OF SHAREHOLDERS:
F. BRUCE CLARKE............... Retired; formerly, 1990 147(**)
19 Vista View Blvd. credit adviser,
Thornhill, Ontario National Bank of
DIRECTOR Canada, Toronto. Age
85.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
AND % OF TOTAL
NAME, ADDRESS AND PRINCIPAL OCCUPATION DIRECTOR OUTSTANDING AS OF
OFFICES WITH THE FUND DURING PAST FIVE YEARS AND AGE SINCE DECEMBER 15, 1995
--------------------- ------------------------------ -------- -----------------
<C> <S> <C> <C>
ANDREW H. HINES, JR..... Consultant, Triangle 1990 1,466(0.04%)
150 2nd Avenue N. Consulting Group;
St. Petersburg, Florida chairman of the board
DIRECTOR and chief executive
officer of Florida
Progress Corporation
(1982-February 1990) and
director of various of
its subsidiaries;
chairman and director of
Precise Power
Corporation; Executive-
In-Residence of Eckerd
College (1991-present);
director of Checkers
Drive-In Restaurants,
Inc. Age 72.
CHARLES E. JOHNSON*..... Senior vice president and 1992 -0-
500 East Broward Blvd. director of Franklin
Fort Lauderdale, Resources, Inc.; senior
Florida vice president of
DIRECTOR Franklin Templeton
Distributors, Inc.;
chairman of the board of
Templeton Investment
Counsel, Inc.; president
and director of Franklin
Institutional Services
Corporation and
Templeton Worldwide,
Inc.; vice president
and/or director, as the
case may be, for some of
the subsidiaries of
Franklin Resources, Inc.
Age 39.
NICHOLAS F. BRADY*...... Chairman, Templeton 1993 -0-
102 East Dover Street Emerging Markets
Easton, Maryland Investment Trust PLC;
DIRECTOR chairman, Templeton
Latin America Investment
Trust PLC; chairman of
Darby Overseas
Investments, Ltd. (an
investment firm), (1994-
present); director of
the Amerada Hess
Corporation, H.J. Heinz
Company, Capital
Cities/ABC, Inc. and the
Christiana Companies;
Secretary of the United
States Department of the
Treasury (1988-January
1993); chairman of the
board of Dillon, Read &
Co. Inc. (investment
banking) prior thereto.
Age 65.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
AND % OF TOTAL
NAME, ADDRESS AND PRINCIPAL OCCUPATION DIRECTOR OUTSTANDING AS OF
OFFICES WITH THE FUND DURING PAST FIVE YEARS AND AGE SINCE DECEMBER 15, 1995
--------------------- ------------------------------ -------- -----------------
<C> <S> <C> <C>
DIRECTORS SERVING UNTIL 1997 ANNUAL MEETING OF SHAREHOLDERS:
HASSO-G VON............... Farmer; president of 1990 142(**)
DIERGARDT-NAGLO Clairhaven Investments,
R.R. 3 Ltd. and other private
Stouffville, Ontario investment companies.
DIRECTOR Age 79.
FRED R. MILLSAPS.......... Manager of personal 1990 720(0.02%)
2665 NE 37th Drive investments (1978-
Fort Lauderdale, Florida present); chairman and
DIRECTOR chief executive officer
of Landmark Banking
Corporation (1969-
1978); financial vice
president of Florida
Power and Light (1965-
1969); vice president
of The Federal Reserve
Bank of Atlanta
(1958-1965); and
director of various
other business and
nonprofit
organizations. Age 66.
NOMINEES TO SERVE UNTIL 1997 ANNUAL MEETING OF SHAREHOLDERS:
CHARLES B. JOHNSON*....... President and director 1995 -0-
777 Mariners Island Blvd. of Franklin Resources,
San Mateo, California Inc.; chairman of the
CHAIRMAN OF THE BOARD board and director of
AND VICE PRESIDENT Franklin Advisers, Inc.
and Franklin Templeton
Distributors, Inc.;
director of General
Host Corporation and
Templeton Global
Investors, Inc.;
officer and/or
director, trustee or
managing general
partner, as the case
may be, of most other
subsidiaries of
Franklin Resources,
Inc. Age 63.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
AND % OF TOTAL
NAME, ADDRESS AND PRINCIPAL OCCUPATION DIRECTOR OUTSTANDING AS OF
OFFICES WITH THE FUND DURING PAST FIVE YEARS AND AGE SINCE DECEMBER 15, 1995
--------------------- ------------------------------ -------- -----------------
<C> <S> <C> <C>
JOHN WM. GALBRAITH.............. President of Galbraith 1995 -0-
360 Central Avenue, Suite 1300, Properties, Inc.
St. Petersburg, Florida (personal investment
DIRECTOR company); director of
Gulfwest Banks, Inc.
(bank holding company)
(1995-present) and
Mercantile Bank (1991-
present); vice
chairman of Templeton,
Galbraith & Hansberger
Ltd. (1986-1992); and
chairman of Templeton
Funds Management, Inc.
(1974-1991).
Age 74.
</TABLE>
- --------
* Messrs. Charles E. Johnson, Charles B. Johnson and Nicholas F. Brady are
"interested persons" of the Fund as that term is defined in the Investment
Company Act of 1940. Mr. Brady and Franklin Resources are both limited
partners of Darby Overseas Partners L.P. ("Darby Overseas"). Mr. Brady
established Darby Overseas in February, 1994, and is Chairman and a
shareholder of the corporate general partner of Darby Overseas. In
addition, Darby Overseas and TGA are limited partners of Darby Emerging
Markets Fund, L.P. Mrs. Krahmer and Messrs. Clarke, von Diergardt-Naglo,
Hines, Ashton, Fortunato, Macklin, Millsaps and Galbraith are not
"interested persons" of the Fund.
** Less than 0.01%.
REMUNERATION OF DIRECTORS AND OFFICERS
Each fund in the Templeton Family of Funds pays its independent
directors/trustees and Mr. Brady an annual retainer and/or fees for attendance
at board and committee meetings, the amount of which is based on the level of
assets in the fund. Accordingly, the Fund pays the independent Directors and
Mr. Brady an annual retainer of $100 and no additional fees for attending
meetings of the Board. Committee members receive an additional annual fee of
$2,000, pro rated among the funds on whose committees they serve. Directors
are reimbursed for any expenses incurred in attending meetings, paid pro rata
by each Franklin Templeton Fund on which they serve. The direct aggregate and
total remuneration (including reimbursements of such expenses) paid to all
Directors as a group for the fiscal year ended August 31, 1995 under the
director compensation arrangement then in effect was $6,500. The Business
Manager pays the salaries and expenses of the officers of the Fund. No pension
or retirement benefits are accrued as part of Fund expenses.
31
<PAGE>
The following table shows the total compensation paid to the independent
Directors and Mr. Brady by the Fund and by all investment companies in the
Franklin Templeton Group for the periods indicated:
<TABLE>
<CAPTION>
NUMBER OF FRANKLIN TOTAL COMPENSATION
AGGREGATE TEMPLETON FUND FROM ALL FUNDS
COMPENSATION BOARDS ON WHICH IN FRANKLIN
NAME OF DIRECTOR FROM THE FUND* DIRECTOR SERVES TEMPLETON GROUP**
---------------- -------------- ------------------ ------------------
<S> <C> <C> <C>
Harris J. Ashton......... $ 575 56 $327,925
Nicholas F. Brady........ 575 24 98,225
F. Bruce Clarke.......... 1,075 20 83,350
Hasso-G Von Diergardt-
Naglo................... 575 20 77,350
S. Joseph Fortunato...... 575 58 344,745
John Wm. Galbraith....... 25 23 70,100
Andrew H. Hines, Jr...... 1,075 24 106,325
Betty P. Krahmer......... 575 24 93,475
Gordon S. Macklin........ 575 53 321,525
Fred R. Millsaps......... 1,075 24 104,325
</TABLE>
- --------
* For the fiscal year ended August 31, 1995.
** For the calendar year ended December 31, 1995.
Certain Directors and officers of the Fund are shareholders of Franklin
Resources, Inc. and may be deemed to receive indirect remuneration by virtue
of their participation in the management fees and other fees received from the
Franklin Templeton Group.
There are no family relationships among any of the Directors or nominees for
Directors, except that Mr. Charles B. Johnson and Mr. Charles E. Johnson are
father and son.
Under the securities laws of the United States, the Fund's Directors, its
officers, and any persons holding more than ten percent of the Fund's common
stock, as well as affiliated persons of TGA, are required to report their
ownership of the Fund's common stock and any changes in that ownership to the
Securities and Exchange Commission and the American Stock Exchange. Specific
due dates for these reports have been established and the Fund is required to
report in this Proxy Statement any failure to file by these dates during the
fiscal year ended August 31, 1995. All of these filing requirements were
satisfied except the Initial Statements of Beneficial Ownership of Securities
filed on behalf of the Investment Manager and certain of its affiliates, which
were inadvertently filed late. In making these statements, the Fund has relied
on the written representations of the persons affected and copies of the
reports that they have filed with the Commission.
The Fund has a standing Audit Committee consisting of Messrs. Clarke,
Millsaps, Hines and Galbraith, all of whom are Directors and are not
interested persons of the Fund. The Audit Committee reviews both the audit and
nonaudit work of the Fund's independent public accountants, submits a
recommendation to the Board of Directors as to the selection of independent
public accountants, and reviews generally the maintenance of the Fund's
records and the safekeeping arrangements of the Fund's custodians. The Board
also has established a
32
<PAGE>
Nominating and Compensation Committee consisting of Messrs. Macklin and Hines.
The Nominating and Compensation Committee is responsible for the selection,
nomination for appointment and election of candidates to serve as Independent
Directors of the Fund. The Nominating and Compensation Committee will review
shareholders' nominations to fill vacancies on the Board, if addressed in
writing to the Committee at the Fund's headquarters. However, the Committee
expects to be able to identify from its own resources an ample number of
qualified candidates.
During the fiscal year ended August 31, 1995, there were four meetings of
the Board of Directors, one meeting of the Audit Committee and three meetings
of the Nominating and Compensation Committee. Each of the Directors then in
office attended at least 75% of the meetings of the Board of Directors held
throughout the year. There was 100% attendance at the meetings of the Audit
Committee and the Nominating and Compensation Committee.
As of December 15, 1995, the Directors and officers of the Fund as a group
owned 4,075 shares, or less than 1% of the Fund's outstanding shares.
EXECUTIVE OFFICERS OF THE FUND
Officers of the Fund are appointed by the Directors and serve at the
pleasure of the Board. The executive officers are:
<TABLE>
<C> <S> <C>
GARY P. MOTYL............. Senior vice president and director of
500 East Broward Blvd. Templeton Investment Counsel, Inc.,
Fort Lauderdale, Florida ("TICI"); director of TGII; and
President since 1993 president or vice president of other
Templeton Funds. Age 43.
MARK G. HOLOWESKO......... President and director of TGA; chief
Lyford Cay investment officer of the global equity
Nassau, Bahamas group for Templeton Worldwide, Inc.;
Vice president since 1989 president or vice president of other
Templeton Funds; investment
administrator, Roy West Trust
Corporation (Bahamas) Limited (1984-
1985). Age 35.
MARTIN L. FLANAGAN........ Senior vice president, treasurer, and
777 Mariners Island Blvd. chief financial officer of Franklin
San Mateo, California Resources, Inc.; director and executive
Vice president since 1989 vice president of TICI and TGA;
director, chairman, president and chief
executive officer of TGII; director or
trustee and president or vice president
of various Templeton Funds; accountant
with Arthur Andersen & Company (1982-
1983); member of the International
Society of Financial Analysts and the
American Institute of Certified Public
Accountants. Age 35.
SAMUEL J. FORESTER, JR. .. President of Templeton Global Bond
500 East Broward Blvd. Managers Division of TICI; president or
Fort Lauderdale, Florida vice president of other Templeton
Vice president since 1990 Funds; founder and partner of Forester,
Hairston Investment Management (1989-
1990); managing director (Mid-East
Region) of Merrill Lynch, Pierce,
Fenner & Smith Inc. (1987-1988);
advisor for Saudi Arabian Monetary
Agency (1982-1987). Age 47.
</TABLE>
33
<PAGE>
<TABLE>
<C> <S> <C>
SEAN FARRINGTON.......... Vice president of TGA. Age 24.
Lyford Cay
Nassau, Bahamas
Vice president since
1994
JOHN R. KAY.............. Vice president of the Templeton Funds;
500 East Broward Blvd. vice president and treasurer of TGII and
Fort Lauderdale, Florida Templeton Worldwide, Inc.; assistant
Vice president since vice president of Franklin Templeton
1994 Distributors, Inc.; former vice
president and controller of the Keystone
Group, Inc. Age 55.
JAMES R. BAIO............ Treasurer of the Templeton Funds; senior
500 East Broward Blvd. vice president of Templeton Worldwide,
Fort Lauderdale, Florida Inc., TGII, and Templeton Funds Trust
Treasurer since 1994 Company; senior tax manager of Ernst &
Young (certified public accountants)
(1977-1989). Age 41.
THOMAS M. MISTELE........ Senior vice president of TGII; vice
700 Central Avenue president of Franklin Templeton
St. Petersburg, Florida Distributors, Inc.; secretary of the
Secretary since 1989 Templeton Funds; attorney, Dechert Price
& Rhoads (1985-1988) and Freehill,
Hollingdale & Page (1988); judicial
clerk, U.S. District Court (Eastern
District of Virginia) (1984-1985).
Age 42.
</TABLE>
III. RATIFICATION OR REJECTION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017, have
been the independent public accountants for the Fund since its inception in
May, 1990 and have examined the Fund's financial statements for the fiscal
year ended August 31, 1995, and in connection therewith have reported on the
financial statements of the Fund and reviewed certain filings of the Fund with
the Securities and Exchange Commission. At a meeting held on October 21, 1995,
upon recommendation of the Audit Committee, the Board of Directors, including
a majority of those Directors who are not interested persons of the Fund,
selected McGladrey & Pullen, LLP as independent public accountants for the
Fund for the fiscal year ending August 31, 1996, subject to ratification by
shareholders at the Annual Meeting.
The Fund is advised that neither the firm of McGladrey & Pullen, LLP nor any
of its members has any material direct or indirect financial interest in the
Fund. Representatives of McGladrey & Pullen, LLP are not expected to be
present at the Annual Meeting, but have been given the opportunity to make a
statement if they so desire, and will be available should any matter arise
requiring their presence.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF RATIFYING THE
SELECTION OF MCGLADREY & PULLEN, LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
FUND FOR THE FISCAL YEAR ENDING AUGUST 31, 1996.
34
<PAGE>
IV. OTHER BUSINESS
The Board of Directors knows of no other business to be presented at the
Annual Meeting. If any additional matters should be properly presented, the
enclosed proxy will be voted in accordance with the judgment of the persons
named in the proxy.
V. ADJOURNMENT
In the event that sufficient votes in favor of the proposals set forth in
the Notice of Annual Meeting and Proxy Statement are not received by the time
scheduled for the Annual Meeting, the persons named as proxies may move one or
more adjournments of the Annual Meeting to permit further solicitation of
proxies with respect to any such proposals. Any such adjournment will require
the affirmative vote of a majority of the Shares present at the Annual
Meeting. The persons named as proxies will vote in favor of such adjournment
those Shares which they are entitled to vote which have voted in favor of such
proposals. They will vote against any such adjournment those proxies required
to be voted against such proposals.
VI. VOTING INFORMATION
Proxies from the shareholders of the Fund are being solicited by the Board
of Directors of the Fund for the Annual Meeting to be held on February 20,
1996, at the Fund's offices at 700 Central Avenue, St. Petersburg, Florida
33701 at 10:00 A.M. (local time), or at such later time made necessary by
adjournment. A proxy may be revoked at any time at or before the meeting by
oral or written notice to the Secretary of the Fund. Unless revoked, all valid
proxies will be voted in accordance with the specifications thereon or, in the
absence of such specifications, in favor of approval of the Plan and the
Transaction as set forth in Proposal I, in favor of the election of Directors
named in Proposal II, and in favor of Proposal III. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" will be treated as shares that are present
but which have not been voted. For this reason, abstentions and broker "non-
votes" will have the effect of "no" votes for purposes of Proposals I, II and
III. Approval of the Plan and the Transaction, as set forth in Proposal I,
will require the affirmative vote of the holders of a majority of the Fund's
outstanding voting securities. The election of Directors, as set forth in
Proposal II, will require the affirmative vote of the holders of a plurality
of the Fund's shares present at the Annual Meeting. Ratification of the
selection of the independent public accountants, as set forth in Proposal III,
will require the affirmative vote of the holders of a majority of the Fund's
shares present at the Annual Meeting.
The cost of soliciting proxies in the accompanying form, including the fees
of a proxy soliciting agent, will be deemed a cost of the Transaction and paid
one-fourth each by the Fund, Franklin Global Utilities, Advisers and TGA. In
addition to solicitation by mail, proxies may be solicited by Directors,
officers and regular employees and agents of the Fund without compensation
therefor. The Fund will reimburse brokerage firms and others for their
expenses in forwarding proxy material to the beneficial owners and soliciting
them to execute the proxies.
35
<PAGE>
Shareholders of the Fund of record at the close of business on January 4,
1996 ("Record Date") will be entitled to vote at the Annual Meeting or any
adjournment thereof. The holders of more than 50% of the shares of the Fund
outstanding at the close of business on the Record Date present in person or
represented by proxy will constitute a quorum for the meeting. Shareholders
are entitled to one vote for each share held and fractional votes for
fractional shares held. As of December 15, 1995, as shown on the books of the
Fund, there were issued and outstanding 3,153,664 shares of common stock of
the Fund. As of December 15, 1995, as shown on the books of Franklin Global
Utilities, there were issued and outstanding 9,160,132 shares of beneficial
interest.
The votes of the shareholders of Franklin Global Utilities are not being
solicited, since their approval or consent is not necessary for the
Transaction to take place.
YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Directors,
Thomas M. Mistele, Secretary
January 19, 1996
36
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this day of , 1996, by and between Franklin Strategic Series, a Delaware
business trust with its principal place of business at 777 Mariners Island
Blvd., San Mateo, CA 94403-7777, on behalf of its Franklin Global Utilities
Fund series of shares (the "Acquiring Fund"), and Templeton Global Utilities,
Inc., a Maryland corporation with its principal place of business at 700
Central Avenue, St. Petersburg, Florida 33701 (the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization
(the "Reorganization") will consist of the transfer of all or substantially
all of the assets of the Acquired Fund to the Acquiring Fund in exchange
solely for Class I shares of beneficial interest ($0.01 par value per share),
of the Acquiring Fund (the "Acquiring Fund Shares"), the assumption by the
Acquiring Fund of certain identified liabilities of the Acquired Fund, and the
distribution of the Acquiring Fund Shares to the shareholders of the Acquired
Fund in complete liquidation of the Acquired Fund as provided herein, all upon
the terms and conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquired Fund is a closed-end, registered investment company of
the management type, the Acquiring Fund is an open-end, registered investment
company of the management type, and the Acquired Fund owns securities which
generally are assets of the character in which the Acquiring Fund is permitted
to invest;
WHEREAS, the Board of Trustees of the Acquiring Fund has determined that the
exchange of all or substantially all of the assets of the Acquired Fund for
Acquiring Fund Shares and the assumption of certain identified liabilities of
the Acquired Fund by the Acquiring Fund is in the best interests of the
Acquiring Fund and its shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction;
WHEREAS, the Board of Directors of the Acquired Fund has determined that the
exchange of all or substantially all of the assets of the Acquired Fund for
Acquiring Fund Shares and the assumption of certain identified liabilities of
the Acquired Fund by the Acquiring Fund is in the best interests of the
Acquired Fund and its shareholders and that the interests of the existing
shareholders of the Acquired Fund would not be diluted as a result of this
transaction;
WHEREAS, the purpose of the Reorganization is to combine the assets of the
Acquiring Fund with those of the Acquired Fund in an attempt to achieve
greater operating economies and increased portfolio diversification;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
A-1
<PAGE>
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF CERTAIN IDENTIFIED
ACQUIRED FUND LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the terms and conditions herein set forth and on the basis of
the representations and warranties contained herein, the Acquired Fund agrees
to transfer all of the Acquired Fund's assets as set forth in paragraph 1.2 to
the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor (i) to
deliver to the Acquired Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined by dividing the value of the
Acquired Fund's net assets computed in the manner and as of the time and date
set forth in paragraph 2.1 by the net asset value of one Acquiring Fund Share
computed in the manner and as of the time and date set forth in paragraph 2.2;
and (ii) to assume certain identified liabilities of the Acquired Fund, as set
forth in paragraph 1.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 (the "Closing").
1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all property, including, without limitation, all cash,
securities, commodities and futures interests and dividends or interest
receivable which are owned by the Acquired Fund and any deferred or prepaid
expenses shown as an asset on the books of the Acquired Fund on the closing
date provided in paragraph 3.1 (the "Closing Date").
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund
shall assume all liabilities, expenses, costs, charges and reserves (expected
to include expenses incurred in the ordinary course of the Acquired Fund's
operations, such as accounts payable relating to custodian and transfer agency
fees, legal and audit fees, and expenses of state securities registration of
the Acquired Fund's Shares) reflected on an unaudited statement of assets and
liabilities of the Acquired Fund prepared by Templeton Global Investors, Inc.,
the business manager of the Acquired Fund, as of the Valuation Date (as
defined in paragraph 2.1) in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall assume only those liabilities of the Acquired Fund reflected on
that unaudited statement of assets and liabilities and shall not assume any
other liabilities.
1.4 Immediately after the transfer of assets provided for in paragraph 1.1,
the Acquired Fund will distribute pro rata to the Acquired Fund's Shareholders
of record, determined as of immediately after the close of business on the
Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares
received by the Acquired Fund pursuant to paragraph 1.1 and will completely
liquidate. Such distribution and liquidation will be accomplished by the
transfer of the Acquiring Fund Shares then credited to the account of the
Acquired Fund on the books of the Acquiring Fund to open accounts on the share
records of the Acquiring Fund in the names of the Acquired Fund Shareholders.
The aggregate net asset value of Acquiring Fund Shares to be so credited to
Acquired Fund Shareholders shall be equal to the aggregate net asset value of
the Acquired Fund shares owned by such shareholders as of immediately after
the close of business
A-2
<PAGE>
on the Closing Date. All issued and outstanding shares of the Acquired Fund
will simultaneously be canceled on the books of the Acquired Fund, although
share certificates representing interests in the Acquired Fund will represent
a number of Acquiring Fund Shares after the Closing Date as determined in
accordance with paragraph 2.3. The Acquiring Fund will not issue certificates
representing the Acquiring Fund Shares in connection with such exchange except
upon request by a shareholder of the Acquired Fund.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund. Shares of the Acquiring Fund will be issued in the manner
described in the Acquiring Fund's then-current prospectus and statement of
additional information.
2. VALUATION
2.1 The value of the Acquired Fund's assets to be acquired by the Acquiring
Fund hereunder shall be the value of such assets computed as of the normal
close of business of the New York Stock Exchange on the Closing Date (such
time and date being hereinafter called the "Valuation Date"), using the
valuation procedures set forth in the Acquiring Fund's Trust Instrument and
then-current prospectus or statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the net asset
value per share computed as of immediately after the close of business of the
New York Stock Exchange on the Valuation Date, using the valuation procedures
set forth in the Acquiring Fund's Trust Instrument and then-current prospectus
or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's assets shall be
determined by dividing the value of the net assets of the Acquired Fund
determined using the same valuation procedures referred to in paragraph 2.1 by
the net asset value of an Acquiring Fund Share determined in accordance with
paragraph 2.2.
2.4 All computations of value with respect to the Acquiring Fund shall be
made by Franklin Advisers, Inc.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be , 1996 or such later date as the parties
may agree in writing. All acts taking place at the Closing shall be deemed to
take place simultaneously as of immediately after the close of business on the
Closing Date unless otherwise agreed to by the parties. The close of business
on the Closing Date shall be as of 4:00 p.m., New York time. The Closing shall
be held at the offices of Dechert Price & Rhoads, Washington, D.C. or at such
other place and time as the parties shall mutually agree.
3.2 Bank of New York, as custodian for the Acquiring Fund (the "Custodian"),
shall deliver at the Closing a certificate of an authorized officer stating
that: (a) the Acquired Fund's portfolio securities, cash, and any other assets
shall have been delivered in proper form to the Acquiring
A-3
<PAGE>
Fund; and (b) all necessary taxes including without limitation all applicable
federal and state stock transfer stamps, if any, shall have been paid, or
provision for payment shall have been made, in conjunction with the delivery
of portfolio securities.
3.3 Chemical Mellon Shareholder Services (the "Transfer Agent") on behalf of
the Acquired Fund shall deliver at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses of the
Acquired Fund Shareholders and the number and percentage ownership of
outstanding shares owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund shall issue and deliver a confirmation evidencing
the Acquiring Fund Shares to be credited on the Closing Date to the Acquired
Fund or provide evidence satisfactory to the Acquired Fund that such Acquiring
Fund Shares have been credited to the Acquired Fund's account on the books of
the Acquiring Fund. At the Closing each party shall deliver to the other such
bills of sale, checks, assignments, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Acquired Fund is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland;
(b) The Acquired Fund is a registered closed-end investment company and its
registration with the Securities and Exchange Commission (the "Commission") as
an investment company under the Investment Company Act of 1940, as amended
(the "1940 Act") is in full force and effect;
(c) The Acquired Fund is not, and the execution, delivery and performance of
this Agreement will not result, in a material violation of its Articles of
Incorporation or By-Laws or of any agreement, indenture, instrument, contract,
lease or other undertaking to which the Acquired Fund is a party or by which
it is bound;
(d) The Acquired Fund has no material contracts or other commitments (other
than this Agreement) which will be terminated with liability to it prior to
the Closing Date;
(e) No material litigation or administrative proceeding or investigation of
or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquired Fund or any properties or assets
held by it. The Acquired Fund knows of no facts which might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(f) The Statement of Assets and Liabilities of the Acquired Fund at August
31, 1995 has been audited by McGladrey & Pullen, LLP, independent certified
public accountants, and is in
A-4
<PAGE>
accordance with generally accepted accounting principles consistently applied,
and such statement (a copy of which has been furnished to the Acquiring Fund)
presents fairly, in all material respects, the financial position of the
Acquired Fund as of such date, and there are no known contingent liabilities
of the Acquired Fund as of such date not disclosed therein;
(g) Since August 31, 1995, there has not been any material adverse change in
the Acquired Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence
by the Acquired Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and accepted
by the Acquiring Fund. For the purposes of this subparagraph (g), a decline in
net asset value per share of the Acquired Fund or the discharge of Acquired
Fund liabilities shall not constitute a material adverse change;
(h) At the Closing Date, all material Federal and other tax returns and
reports of the Acquired Fund required by law to have been filed by such date
shall have been filed and are or will be correct, and all Federal and other
taxes shown as due or required to be shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment
thereof, and, to the best of the Acquired Fund's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(i) For each taxable year of its operation, the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such;
(j) All issued and outstanding shares of the Acquired Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable. All of the issued and outstanding shares of the Acquired Fund
will, at the time of Closing, be held by the persons and in the amounts set
forth in the records of the Transfer Agent, as provided in paragraph 3.3. The
Acquired Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of the Acquired Fund shares, nor is there
outstanding any security convertible into any of the Acquired Fund shares;
(k) At the Closing Date, the Acquired Fund will have good and marketable
title to the Acquired Fund's assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.2 and full right, power, and authority to sell,
assign, transfer and deliver such assets hereunder, and upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the Securities Act of 1933
(the "1933 Act"), other than as disclosed to the Acquiring Fund;
(l) The execution, delivery and performance of this Agreement will have been
duly authorized prior to the Closing Date by all necessary action on the part
of the Acquired Fund's Directors, and, subject to the approval of the Acquired
Fund Shareholders, this Agreement will constitute a valid and binding
obligation of the Acquired Fund, enforceable in accordance with its terms,
subject,
A-5
<PAGE>
as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general equity
principles;
(m) The information to be furnished by the Acquired Fund for use in
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with Federal securities and other laws and regulations
thereunder applicable thereto; and
(n) The proxy statement of the Acquired Fund (the "Proxy Statement") to be
included in the Registration Statement referred to in paragraph 5.6 (other
than information therein that relates to the Acquiring Fund) will, on the
effective date of the Registration Statement and on the Closing Date, 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, in light of the circumstances under which such statements are made,
not materially misleading.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a business trust duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(b) The Acquiring Fund is a registered open-end investment company and its
registration with the Commission as an investment company under the 1940 Act,
and the registration of its shares under the 1933 Act, are in full force and
effect;
(c) The current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations of the
Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading;
(d) At the Closing Date, the Acquiring Fund will have good and marketable
title to the Acquiring Fund's assets;
(e) The Acquiring Fund is not, and the execution, delivery and performance
of this Agreement will not result in a material violation of its Trust
Instrument or By-Laws or of any agreement, indenture, instrument, contract,
lease or other undertaking to which the Acquiring Fund is a party or by which
it is bound;
(f) No material litigation or administrative proceeding or investigation of
or before any court or governmental body is presently pending or threatened
against the Acquiring Fund or any of its properties or assets. The Acquiring
Fund knows of no facts which might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of any order,
A-6
<PAGE>
decree or judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated;
(g) The Statement of Assets and Liabilities of the Acquiring Fund at April
30, 1995 has been audited by Coopers & Lybrand L.L.P., independent certified
public accountants, and is in accordance with generally accepted accounting
principles consistently applied, and such statement (a copy of which has been
furnished to the Acquired Fund) presents fairly, in all material respects, the
financial position of the Acquiring Fund as of such date, and there are no
known contingent liabilities of the Acquiring Fund as of such date not
disclosed therein;
(h) Since April 30, 1995, there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or business
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred. For the purposes of this
subparagraph (h), a decline in net asset value per share of the Acquiring
Fund, the discharge of Acquiring Fund liabilities, or the redemption of
Acquiring Fund shares by Acquiring Fund shareholders, shall not constitute a
material adverse change;
(i) At the Closing Date, all material Federal and other tax returns and
reports of the Acquiring Fund required by law to have been filed by such date
shall have been filed and are or will be correct, and all Federal and other
taxes shown as due or required to be shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment
thereof, and, to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(j) All issued and outstanding Acquiring Fund Shares are, and at the Closing
Date will be, duly and validly issued and outstanding, fully paid and non-
assessable by the Acquiring Fund. The Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any
Acquiring Fund Shares, nor is there outstanding any security convertible into
any Acquiring Fund Shares;
(k) The execution, delivery and performance of this Agreement will have been
duly authorized prior to the Closing Date by all necessary action, if any, on
the part of the Trustees of the Acquiring Fund, and this Agreement will
constitute a valid and binding obligation of the Acquiring Fund enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund, for the account of the Acquired Fund Shareholders, pursuant to the terms
of this Agreement will at the Closing Date have been duly authorized and, when
so issued and delivered, will be duly and validly issued Acquiring Fund
Shares, and will be fully paid and non-assessable by the Acquiring Fund;
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(m) The information to be furnished by the Acquiring Fund for use in
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with Federal securities and other laws and regulations
applicable thereto;
(n) The Proxy Statement to be included in the Registration Statement (only
insofar as it relates to the Acquiring Fund) will, on the effective date of
the Registration Statement and on the Closing Date, 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, in light of the
circumstances under which such statements were made, not materially
misleading;
(o) The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such
of the state blue sky or securities laws as may be necessary in order to
continue its operations after the Closing Date; and
(p) For each taxable year of its operation, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions, and any other
distributions that may be advisable.
5.2 The Acquired Fund will call a meeting of the Acquired Fund Shareholders
to consider and act upon this Agreement and to take all other action necessary
to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Acquiring Fund Shares to be issued
hereunder are not being acquired for the purpose of making any distribution
thereof other than in accordance with the terms of this Agreement.
5.4 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the
beneficial ownership of the Acquired Fund Shares.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund will each take, or cause to be taken, all actions, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
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5.6 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(n), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act in
connection with the meeting of the Acquired Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions provided
for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations and warranties of the Acquiring Fund contained in
this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
6.2 The Acquiring Fund shall have delivered to the Acquired Fund a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in a form reasonably satisfactory to the
Acquired Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Fund made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement and as to such
other matters as the Acquired Fund shall reasonably request; and
6.3 The Acquired Fund shall have received on the Closing Date the opinion of
Messrs. Stradley, Ronon, Stevens & Young, in a form reasonably satisfactory to
the Acquired Fund, and dated as of the Closing Date, that:
(a) The Acquiring Fund has been duly formed and is validly existing and in
good standing under the laws of the State of Delaware; (b) the Acquiring Fund
has the power to carry on its business as presently conducted; (c) the
Agreement has been duly authorized, executed and delivered by the Acquiring
Fund and constitutes a valid and legally binding obligation of the Acquiring
Fund enforceable against the Acquiring Fund in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and laws of general applicability relating to or affecting
creditors' rights and to general equity principles; (d) the Registration
Statement has been declared effective under the 1933 Act and, to the knowledge
of such counsel, no stop order has been issued or threatened suspending its
effectiveness; (e) to the knowledge of such counsel, all regulatory consents,
authorizations, approvals or filings required to be obtained or made by the
Acquiring Fund under the Federal laws of the United States or the State of
Delaware for the exchange of the Acquired Fund's assets for shares of the
Acquiring
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Fund, pursuant to the Agreement have been obtained or made; and (f) the
Acquiring Fund Shares to be issued in the Reorganization have been duly
authorized and upon issuance thereof in accordance with this Agreement will be
validly issued, fully paid and nonassessable, and no shareholder of the
Acquiring Fund has any preemptive right to subscribe or purchase in respect
thereof.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by the
Acquired Fund of all of the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquired Fund contained in
this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a statement
of the Acquired Fund's assets and liabilities, as of the Closing Date,
certified by the Treasurer of the Acquired Fund;
7.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund and dated as of the Closing Date, to the
effect that the representations and warranties of the Acquired Fund made in
this Agreement are true and correct at and as of the Closing Date, except as
they may be affected by the transactions contemplated by this Agreement, and
as to such other matters as the Acquiring Fund shall reasonably request; and
7.4 The Acquiring Fund shall have received on the Closing Date the opinion
of Messrs. Dechert Price & Rhoads dated as of the Closing Date, that:
(a) The Acquired Fund has been duly formed and is validly existing and in
good standing under the laws of the State of Maryland; (b) the Acquired Fund
has the power to carry on its business as presently conducted; (c) the
Agreement has been duly authorized, executed and delivered by the Acquired
Fund and constitutes a valid and legally binding obligation of the Acquired
Fund enforceable against the Acquired Fund in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and laws of general applicability relating to or affecting
creditors' rights and to general equity principles; (d) the Reorganization has
been approved by the requisite vote of the shareholders of the Acquired Fund;
and (e) to the knowledge of such counsel, all regulatory consents,
authorizations, approvals or filings required to be obtained or made by the
Acquired Fund under the Federal laws of the United
A-10
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States or the State of Maryland for the exchange of the Acquired Fund's assets
for shares of the Acquiring Fund, pursuant to the Agreement have been obtained
or made.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of the Acquired Fund's
Articles of Incorporation and By-Laws and certified copies of the resolutions
evidencing such approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring Fund
nor the Acquired Fund may waive the conditions set forth in this paragraph
8.1;
8.2 On the Closing Date, no action, suit or other proceeding shall be
threatened or pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and permits
of Federal, state and local regulatory authorities deemed necessary by the
Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act; and
8.5 The parties shall have received the opinion of Messrs. Dechert Price &
Rhoads addressed to the Acquiring Fund and the Acquired Fund substantially to
the effect that the transaction contemplated by this Agreement constitutes a
tax-free reorganization for Federal income tax purposes. The delivery of such
opinion is conditioned upon receipt by Dechert Price & Rhoads of
representations it shall request of the parties. Notwithstanding anything
herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may
waive the condition set forth in this paragraph 8.5.
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9. BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund and the Acquired Fund each represents and warrants to
the other that it has no obligations to pay any brokers or finders fees in
connection with the transactions provided for herein.
9.2 The expenses of entering into and carrying out the provisions of this
Agreement shall be borne as follows: Franklin Advisers, Inc. ("Franklin"),
Templeton Global Advisors Limited ("TGA"), the Acquiring Fund and the Acquired
Fund shall each pay one-fourth of the total expenses incurred in connection
with this Agreement. Following the consummation of the transaction, Franklin
and TGA will determine if such arrangement relating to the expenses is
disproportionate to either the Acquiring Fund or to the Acquired Fund in
relation to the benefits derived by each. In such event, Franklin and TGA will
assume responsibility for paying that portion of the expenses which is deemed
to be so disproportionate.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Acquired Fund agree that neither party has
made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations and warranties contained in this Agreement or in
any document delivered pursuant hereto or in connection herewith shall not
survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
This Agreement and the transaction contemplated hereby may be terminated and
abandoned by either party by resolution of the party's Board of Directors or
Board of Trustees at any time prior to the Closing Date, if circumstances
should develop that, in the opinion of such Board, make proceeding with the
Agreement inadvisable.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the
Acquired Fund and the Acquiring Fund; provided, however, that following the
meeting of the Acquired Fund Shareholders called by the Acquired Fund pursuant
to paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund
Shares to be issued to the Acquired Fund Shareholders under this Agreement to
the detriment of such shareholders without their further approval.
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13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly
given if delivered or mailed by registered mail, postage prepaid, addressed to
the Acquired Fund, 700 Central Avenue, St. Petersburg, Florida 33701,
Attention: Thomas M. Mistele, Esq. or to the Acquiring Fund, 777 Mariners
Island Blvd., P.O. Box 7777, San Mateo, California 94403-7777, Attention:
Deborah R. Gatzek, Esq.
14. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any
person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
14.4 It is expressly agreed that the obligations of the Acquiring Fund
hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents, or employees of the Acquiring Fund personally, but
bind only the property of the Acquiring Fund. The execution and delivery of
this Agreement have been authorized by the Trustees of the Acquiring Fund and
signed by authorized officers of the Acquiring Fund acting as such, and
neither such authorization by such Trustees nor such execution and delivery by
such officers shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
property of the Acquiring Fund.
14.5 This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President or Vice President and its seal to be affixed
thereto and attested by its Secretary or Assistant Secretary.
Attest: FRANKLIN STRATEGIC SERIES
_____________________________________ By: _________________________________
Attest: TEMPLETON GLOBAL UTILITIES, INC.
_____________________________________ By: _________________________________
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<PAGE>
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TEMPLETON GLOBAL UTILITIES, INC.
ANNUAL MEETING OF SHAREHOLDERS, FEBRUARY 20, 1996
PLEASE VOTE PROMPTLY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints THOMAS M. MISTELE, JAMES A. BAIO and
JOHN R. KAY, and each of them, with full power of substitution, as proxies to
vote for and in the name, place and stead of the undersigned at the Annual
Meeting of Shareholders of Templeton Global Utilities, Inc. (the "Fund") to be
held at 700 Central Avenue, St. Petersburg, Florida 33701-3628, on Tuesday,
February 20, 1996 at 10:00 A.M., EST, and at any adjournment thereof, according
to the number of votes and as fully as if personally present.
This proxy when properly executed will be voted in the manner (or not
voted) as specified. If no specification is made, the Proxy will be voted FOR
all nominees for Director in Item 2, and in favor of Items 1 and 3.
, 1996
- ------------------------------------------ --------------------------
Signature(s) Date
Please date this Proxy and sign exactly as your name or names appear hereon. If
more than one owner is registered as such, all must sign. If signing as
attorney, executor, trustee or any other representative capacity, or as a
corporate officer, please give full title.
(Continued on other side)
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--FOLD AND DETACH HERE--
<PAGE>
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PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE [X]
The Board of Directors Recommends a vote FOR Items 1 through 3:
Item 1 - Approval of an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets of the Fund by Franklin Global
Utilities Fund ("Franklin Global Utilities") in exchange for shares of
Franklin Global Utilities, the distribution of such Franklin Global
Utilities shares to shareholders of the Fund, and the subsequent
dissolution of the Fund.
FOR [_] AGAINST [_] ABSTAIN [_]
Item 2 - Election of Directors
For All Nominess listed (except as marked below) [_]
WITHHOLD AUTHORITY to Vote for all Nominees listed [_]
Nominees: Betty P. Krahmer, Harris J. Ashton, S. Joseph Fortunato, Gordon S.
Macklin, Charles B. Johnson, and John Wm. Galbraith
To withhold authority to vote for any individual nominee, write that nominee's
name on the line below.
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Item 3 - Ratification of the selection of McGladrey & Pullen, LLP as
independent public accountants for the Fund for the fiscal year ending
August 31, 1996.
FOR [_] AGAINST [_] ABSTAIN [_]
Item 4 - In their discretion, the Proxyholders are authorized to vote on all
other matters that may properly come before the meeting or any
adjournments thereof.
I PLAN TO ATTEND MEETING [_]
(CONTINUED, AND TO BE SIGNED, ON OTHER SIDE)
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--FOLD AND DETACH HERE--
