As filed with the Securities and Exchange Commission February 6, 2009
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] Pre-Effective Amendment No. 1
[ ] Post-Effective Amendment No. __
(Check appropriate box or boxes)
FRANKLIN CUSTODIAN FUNDS
(Exact Name of Registrant as Specified in Charter)
(650) 312-2000
(Registrant's Area Code and Telephone Number)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Address of Principal Executive Offices) (Number, Street, City, State, Zip
Code)
CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and Address of Agent for Service of Process) (Number, Street, City,
State, Zip Code)
Approximate Date of Public Offering: As soon as practicable after this
Registration Statement becomes effective under the Securities Act of 1933, as
amended.
Title of securities being registered: Shares of beneficial interest, without
par value, of Franklin Growth Fund. No filing fee is due because Registrant is
relying on section 24(f) of the Investment Company Act of 1940, as amended
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to
such Section 8(a), shall determine.
FRANKLIN TEMPLETON LOGO
FRANKLIN CAPITAL GROWTH FUND
IMPORTANT SHAREHOLDER INFORMATION
These materials are for a Special Meeting of Shareholders of Franklin Capital
Growth Fund scheduled for April 9, 2009, at 2:00 p.m., Pacific Time. They
discuss a proposal to be voted on at the meeting and contain a Notice of
Special Meeting of Shareholders, a Prospectus/Proxy Statement, and a proxy
card. A proxy card is, in essence, a ballot. When you complete a proxy
card, it tells us how you wish the individual(s) named on your proxy to vote
on important issues relating to the Fund. If you complete, sign and return a
proxy card, we'll vote it exactly as you tell us. If you simply sign and
return a proxy card, we'll vote it in accordance with the Board of Trustees'
recommendations on page 5 of the Prospectus/Proxy Statement.
WE URGE YOU TO SPEND A FEW MINUTES REVIEWING THE PROPOSAL IN THE
PROSPECTUS/PROXY STATEMENT. THEN, FILL OUT THE PROXY CARD AND RETURN IT TO
US SO THAT WE KNOW HOW YOU WOULD LIKE TO VOTE.
WE WELCOME YOUR COMMENTS. IF YOU HAVE ANY QUESTIONS, CALL FUND INFORMATION AT
(800) DIAL BEN(R) OR (800) 342-5236.
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TELEPHONE AND INTERNET VOTING
For your convenience, you may be able to vote by telephone or through the
Internet, 24 hours a day. If your account is eligible, separate instructions
are enclosed.
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FRANKLIN TEMPLETON LOGO
FRANKLIN CAPITAL GROWTH FUND
ONE FRANKLIN PARKWAY
SAN MATEO, CA 94403-1906
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 9, 2009
To the Shareholders of Franklin Capital Growth Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of Franklin Capital Growth Fund ("Target Fund") will be held at
Target Fund's offices, One Franklin Parkway, San Mateo, California,
94403-1906, on April 9, 2009, at 2:00 p.m., Pacific Time. The Meeting is
being called for the following purposes:
1. To approve an Agreement and Plan of Reorganization (the "Plan") between
Target Fund and Franklin Custodian Funds ("Acquiring Trust"), on behalf of
Franklin Growth Fund ("Growth Fund"), that provides for: (i) the acquisition
of substantially all of the assets of Target Fund by Growth Fund in exchange
solely for shares of Growth Fund, (ii) the distribution of such shares to the
shareholders of Target Fund, and (iii) the complete liquidation and
dissolution of Target Fund. If Target Fund effects the Plan, a Target Fund
shareholder will receive Class A, Class B, Class C, Class R, or Advisor Class
shares of Growth Fund, as the case may be, with an aggregate net asset value
equal to the aggregate net asset value of such shareholder's Class A, Class
B, Class C, Class R or Advisor Class shares of Target Fund.
2. To transact such other business as may properly come before the Meeting.
A copy of the form of the Plan, which more completely describes the
transaction proposed for Target Fund, is attached as Exhibit A to the
Prospectus/Proxy Statement.
Shareholders of record as of the close of business on January 9, 2009, are
entitled to notice of, and to vote at, the Meeting or any adjournment of the
Meeting.
By Order of the Board of Trustees,
Karen L. Skidmore
SECRETARY
February 9, 2009
YOU ARE INVITED TO ATTEND THE MEETING, BUT IF YOU CANNOT DO SO, THE BOARD OF
TRUSTEES OF TARGET FUND URGES YOU TO COMPLETE, DATE, SIGN, AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. IT IS
IMPORTANT THAT YOU RETURN YOUR SIGNED PROXY CARD PROMPTLY SO THAT A QUORUM
MAY BE ENSURED AT THE MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE
IT IS EXERCISED BY THE SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED
PROXY, BY GIVING WRITTEN NOTICE OF REVOCATION TO TARGET FUND AT ANY TIME
BEFORE THE PROXY IS EXERCISED, OR BY VOTING IN PERSON AT THE MEETING.
PROSPECTUS/PROXY STATEMENT
When reading this Prospectus/Proxy Statement, you will notice that certain
terms are capitalized. This means the term is explained in our glossary
section.
TABLE OF CONTENTS
PAGE
COVER PAGE Cover
SUMMARY..........................................................
WHAT PROPOSAL WILL BE VOTED ON?............................
HOW WILL THE TRANSACTION AFFECT ME?........................
HOW WILL SHAREHOLDER VOTING BE HANDLED?....................
COMPARISONS OF SOME IMPORTANT FEATURES OF THE FUNDS..............
HOW DO THE INVESTMENT GOALS, STRATEGIES AND POLICIES OF
THE FUNDS COMPARE?....................................
WHAT ARE THE PRINCIPAL RISKS OF AN INVESTMENT IN A FUND?...
WHAT ARE THE DISTRIBUTION AND PURCHASE PROCEDURES OF.......
THE FUNDS?
WHAT ARE THE REDEMPTION PROCEDURES AND EXCHANGE
PRIVILEGES OF THE FUNDS?.............................
WHO MANAGES THE FUNDS?.....................................
WHAT ARE THE FUNDS' INVESTMENT MANAGEMENT AND FUND
FEES?................................................
WHAT ARE THE FEES AND EXPENSES OF EACH FUND AND WHAT
MIGHT THEY BE AFTER THE TRANSACTION?.................
.....................
HOW DO THE PERFORMANCE RECORDS OF THE FUNDS COMPARE?.......
WHERE CAN I FIND MORE FINANCIAL AND PERFORMANCE
INFORMATION ABOUT THE FUNDS?..........................
WHAT ARE OTHER KEY FEATURES OF THE FUNDS?..................
REASONS FOR THE TRANSACTION......................................
INFORMATION ABOUT THE TRANSACTION................................
HOW WILL THE TRANSACTION BE CARRIED OUT?...................
WHO WILL PAY THE EXPENSES OF THE TRANSACTION?..............
WHAT ARE THE TAX CONSEQUENCES OF THE TRANSACTION?..........
WHAT SHOULD I KNOW ABOUT GROWTH FUND SHARES?...............
WHAT ARE THE CAPITALIZATIONS OF THE FUNDS AND WHAT MIGHT
GROWTH FUND'S CAPITALIZATION BE AFTER THE
TRANSACTION?.........................................
COMPARISON OF INVESTMENT GOALS, STRATEGIES, POLICIES AND RISKS...
ARE THERE ANY SIGNIFICANT DIFFERENCES BETWEEN THE
INVESTMENT GOALS, STRATEGIES, POLICIES AND RISKS
OF THE FUNDS?.........................................
HOW DO THE INVESTMENT RESTRICTIONS OF THE FUNDS DIFFER?....
WHAT ARE THE PRINCIPAL RISK FACTORS ASSOCIATED WITH
INVESTMENTS IN THE FUNDS?.............................
INFORMATION ABOUT GROWTH FUND....................................
INFORMATION ABOUT TARGET FUND....................................
FURTHER INFORMATION ABOUT THE FUNDS..............................
VOTING INFORMATION...............................................
HOW MANY VOTES ARE NECESSARY TO APPROVE TARGET
FUND'S PLAN?.........................................
HOW DO I ENSURE MY VOTE IS ACCURATELY RECORDED?............
MAY I REVOKE MY PROXY?.....................................
WHAT OTHER MATTERS WILL BE VOTED UPON AT THE MEETING?......
WHO IS ENTITLED TO VOTE?...................................
HOW WILL PROXIES BE SOLICITED?.............................
ARE THERE DISSENTERS' RIGHTS?..............................
PRINCIPAL HOLDERS OF SHARES......................................
SHAREHOLDER PROPOSALS............................................
ADJOURNMENT......................................................
GLOSSARY.........................................................
EXHIBITS TO PROSPECTUS/PROXY STATEMENT..........................1
A. Form of Agreement and Plan of Reorganization
B. Prospectus of Franklin Growth Fund - Class A, Class B, Class C, Class R
and Advisor Class shares, dated February 1, 2009 (enclosed)
C. Principal Holders of Securities of Each Fund
PROSPECTUS/PROXY STATEMENT
DATED FEBRUARY 9, 2009
ACQUISITION OF SUBSTANTIALLY ALL OF THE ASSETS OF
FRANKLIN CAPITAL GROWTH FUND
(A DELAWARE STATUTORY TRUST)
BY AND IN EXCHANGE FOR SHARES OF
FRANKLIN GROWTH FUND
(A SERIES OF FRANKLIN CUSTODIAN FUNDS)
This Prospectus/Proxy Statement solicits proxies to be voted at a Special
Meeting of Shareholders (the "Meeting") of Franklin Capital Growth Fund
("Target Fund"). At the Meeting, shareholders of Target Fund will be asked to
approve or disapprove an Agreement and Plan of Reorganization (the "Plan").
If Target Fund shareholders vote to approve the Plan, substantially all of
the assets of Target Fund will be acquired by Franklin Growth Fund ("Growth
Fund"), a series of Franklin Custodian Funds ("Acquiring Trust"), in exchange
for shares of Franklin Growth Fund - Class A ("Growth Fund Class A shares"),
Franklin Growth Fund - Class B ("Growth Fund Class B shares"), Franklin
Growth Fund - Class C ("Growth Fund Class C shares"), Franklin Growth Fund -
Class R ("Growth Fund Class R shares"), and Franklin Growth Fund - Advisor
Class ("Growth Fund Advisor Class shares" and, all together, "Growth Fund
Shares").
The principal offices of Target Fund and Acquiring Trust are located at One
Franklin Parkway, San Mateo, CA 94403-1906. You can reach the offices of
Target Fund and Acquiring Trust by calling (800) 342-5236.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The Meeting will be held at Target Fund's offices, One Franklin Parkway, San
Mateo, California, on April 9, 2009, at 2:00 p.m., Pacific Time. The Board
of Trustees of Target Fund (the "Target Fund Board") is soliciting these
proxies. This Prospectus/Proxy Statement will first be sent to shareholders
on or about February 9, 2009.
If Target Fund shareholders vote to approve the Plan, you will receive Growth
Fund Class A shares of equivalent aggregate net asset value ("NAV") to your
investment in Class A shares of Target Fund, Growth Fund Class B shares of
equivalent aggregate NAV to your investment in Class B shares of Target Fund,
Growth Fund Class C shares of equivalent aggregate NAV to your investment in
Class C shares of Target Fund, Growth Fund Class R shares of equivalent
aggregate NAV to your investment in Class R shares of Target Fund, and Growth
Fund Advisor Class shares of equivalent aggregate NAV to your investment in
Advisor Class shares of Target Fund. Target Fund will then be liquidated and
dissolved.
The primary investment goals of the Funds are identical. Each Fund has
capital appreciation as its primary investment goal. Target Fund's secondary
investment goal is to provide current income return through the receipt of
dividends or interest from its investments.
This Prospectus/Proxy Statement includes information about the Plan and
Growth Fund that you should know before voting on the Plan. You should
retain this Prospectus/Proxy Statement for future reference. Additional
information about Growth Fund and the proposed transaction has been filed
with the U.S. Securities and Exchange Commission ("SEC") and can be found in
the following documents:
o The Prospectus of Growth Fund - Class A, Class B, Class C, Class R and
Advisor Class dated February 1, 2009 (the "Growth Fund Prospectus"), which
is enclosed with and considered a part of this Prospectus/Proxy Statement.
o A Statement of Additional Information ("SAI") dated February 9, 2009,
relating to this Prospectus/Proxy Statement, which has been filed with the
SEC and is considered a part of this Prospectus/Proxy Statement.
You may request a free copy of the SAI relating to this Prospectus/Proxy
Statement or the Growth Fund Prospectus without charge by calling (800) DIAL
BEN or by writing to Franklin Templeton Investments at One Franklin Parkway,
San Mateo, CA 94403-1906.
SUMMARY
This is only a summary of certain information contained in this
Prospectus/Proxy Statement. You should read the more complete information in
the rest of this Prospectus/Proxy Statement, including the form of the Plan
(attached as Exhibit A) and the Growth Fund Prospectus (enclosed as Exhibit
B).
WHAT PROPOSAL WILL BE VOTED ON?
At a meeting held on December 1, 2008, the Target Fund Board considered a
proposal to reorganize Target Fund with and into Growth Fund, approved the
Plan, and voted to recommend that shareholders of Target Fund vote to approve
the Plan. In addition, at a meeting also held on December 1, 2008, the Board
of Trustees of Acquiring Trust, on behalf of Growth Fund, concluded that the
Plan is in the best interests of Growth Fund and its shareholders and
approved the Plan.
If shareholders of Target Fund vote to approve the Plan, substantially all of
Target Fund's assets will be transferred to Growth Fund in exchange for
Growth Fund Shares of equivalent aggregate NAV. If shareholders of Target
Fund approve the Plan, your Class A, Class B, Class C, Class R, or Advisor
Class shares of Target Fund will be exchanged for shares of equivalent
aggregate NAV of the corresponding class of Growth Fund. Because Target Fund
and Growth Fund (each, a "Fund" and, collectively, the "Funds") have
different NAVs per share, the number of Growth Fund Shares that you receive
will likely be different than the number of Target Fund shares that you own,
but the total value of your investment will be the same immediately before
and after the exchange. After Growth Fund Shares are distributed to Target
Fund shareholders, Target Fund will be completely liquidated and dissolved.
(The proposed transaction is referred to in this Prospectus/Proxy Statement
as the "Transaction.") As a result of the Transaction, you will cease to be
a shareholder of Target Fund and will become a shareholder of Growth Fund.
This exchange is expected to occur on or about May 6, 2009.
Franklin Advisers, Inc. ("FAI") serves as investment manager to both Funds.
The investment goals of Target Fund and Growth Fund are similar, but they are
not identical. Both Funds have capital appreciation as their primary
investment goal, but Target Fund has as a secondary investment goal to
provide current income return through the receipt of dividends or interest
from its investments. For the reasons set forth in the "Reasons for the
Transaction" section of this Prospectus/Proxy Statement, the Target Fund
Board, including the Trustees who are not "interested persons" of Target Fund
as such term is defined in the 1940 Act (the "Independent Trustees"), has
determined that the Transaction is in the best interests of Target Fund and
Target Fund's shareholders. The Target Fund Board and the Board of Trustees
of Acquiring Trust also concluded that no dilution in value would result to
the shareholders of Target Fund or Growth Fund, respectively, as a result of
the Transaction.
It is expected that Target Fund shareholders will not recognize any gain or
loss for federal income tax purposes as a result of the exchange of their
Target Fund shares for Growth Fund Shares. You should, however, consult your
tax adviser regarding the effect, if any, of the Transaction, in light of
your individual circumstances. You should also consult your tax adviser
about state and local tax consequences. For more information about the tax
consequences of the Transaction, please see the section "Information about
the Transaction - What are the tax consequences of the Transaction?"
THE TARGET FUND BOARD RECOMMENDS THAT YOU
VOTE TO APPROVE THE PLAN.
HOW WILL THE TRANSACTION AFFECT ME?
If the Transaction is completed, you will cease to be a shareholder of Target
Fund and become a shareholder of Growth Fund. It is anticipated that the
Transaction will benefit you as follows:
POTENTIAL COST SAVINGS. The total annual operating expenses of Growth Fund
are less than those of Target Fund. In addition, FAI believes that it is
unlikely that Target Fund will experience significant future net sales that
would allow Target Fund's expenses to decrease as a percentage of net assets
by being spread across a larger asset base. The following table compares the
annualized net expense ratio, after any applicable management fee reductions,
for each class of Growth Fund, based on its fiscal year ended September 30,
2008, with those of each class of Target Fund, based on its fiscal year ended
June 30, 2008:
--------------------------------------
GROWTH FUND TARGET FUND
--------------------------------------
Class A 0.89% 0.94%
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Class B 1.64% 1.70%
--------------------------------------
Class C 1.64% 1.70%
--------------------------------------
Class R 1.14% 1.20%
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Advisor Class 0.64% 0.70%
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Upon the reorganization of Target Fund into Growth Fund, Target Fund
shareholders will become shareholders of a larger fund that may be able to
achieve greater operating efficiencies. As of October 31, 2008, Growth
Fund's total net assets were approximately $1.93 billion and Target Fund's
total net assets were approximately $0.94 billion. The Transaction is not
projected to have a material impact on the expense ratio of Growth Fund.
For a more detailed comparison of the Funds' fees and expenses, see the
sections below captioned "What are the Funds' Investment Management and Fund
Administration Fees?" and "What are the fees and expenses of each of the
Funds and what might they be after the Transaction?"
RELATIVE PERFORMANCE. Growth Fund has outperformed Target Fund over the most
recent one-, five- and ten-year periods ended October 31, 2008. The
performance of each Fund's Class A shares as of that date, without giving
effect to applicable sales charges or redemption fees, is shown in the
following table:
-------------------------------------------------------------
AVERAGE ANNUAL TOTAL
RETURN TARGET FUND GROWTH FUND
-------------------------------------------------------------
1 Year (36.33%) (34.98%)
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5 Year (2.06%) (1.98%)
-------------------------------------------------------------
10 Year 1.08% 1.43%
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More detailed performance information is included below under the section
"How do the performance records of the Funds compare?" in this
Prospectus/Proxy Statement.
It is anticipated that the Transaction may disadvantage you as follows:
UNREALIZED APPRECIATION. Target Fund's shareholders that receive Growth Fund
Shares will be "buying into" greater unrealized appreciation in value of
investments relative to what they are presently exposed to. Such net
unrealized gain, when realized on sale of portfolio securities (minus any
available capital loss carryovers) is paid to Fund shareholders each calendar
year, and any income taxes payable by Fund shareholders on receipt of such
payments would reduce their return on investment on an after-tax basis. For
more information, please see the section "What are the tax consequences of
the Transaction?" in this Prospectus/Proxy Statement.
COSTS OF THE TRANSACTION. Target Fund will pay 25% of the expenses of the
Transaction, including proxy solicitation costs. Acquiring Trust, on behalf
of Growth Fund, will pay 25% of such expenses. FAI will pay the remaining
50% of such expenses. The total amount of such expenses for the Transaction
is estimated to be $286,288.
HOW WILL SHAREHOLDER VOTING BE HANDLED?
Shareholders who own shares of Target Fund at the close of business on
January 9, 2009, will be entitled to vote at the Meeting, and will be
entitled to one vote for each full share and a proportionate fractional vote
for each fractional share that they hold. Approval of the Transaction by
Target Fund requires the affirmative vote of the lesser of: (i) a majority of
the outstanding shares of Target Fund or (ii) 67% or more of the outstanding
shares of Target Fund present at or represented by proxy at the Meeting if
the holders of more than 50% of the outstanding shares of Target Fund are
present or represented by proxy ("Affirmative Majority Vote"). Computershare
Fund Services has been retained by Target Fund to collect and tabulate
shareholder votes.
Please vote by proxy as soon as you receive this Prospectus/Proxy Statement.
You may place your vote by completing, signing, and mailing the enclosed
proxy card, by calling the number on the enclosed proxy card, or via the
Internet by following the instructions on the enclosed proxy card. If you
vote by any of these methods, the persons appointed as proxies will
officially cast your votes at the Meeting.
You can revoke your proxy or change your voting instructions at any time
until the vote is taken at the Meeting. You may also attend the Meeting and
cast your vote in person at the Meeting. For more details about shareholder
voting, see the "Voting Information" section of this Prospectus/Proxy
Statement.
COMPARISONS OF SOME IMPORTANT FEATURES OF THE FUNDS
HOW DO THE INVESTMENT GOALS, STRATEGIES AND POLICIES OF THE FUNDS COMPARE?
INVESTMENT GOALS. The primary investment goals of the Funds are identical.
Each Fund has capital appreciation as its primary investment goal. Target
Fund has, as a secondary investment goal, the provision of current income
return through the receipt of dividends or interest from its investments.
Historically, however, Growth Fund and Target Fund have had a similar
proportion of their portfolios invested in dividend paying investments. As
of September 30, 2008, Target Fund and Growth Fund held 96.8% and 100% of
their respective net assets in common stocks.
PRINCIPAL INVESTMENT STRATEGIES. The investment strategies of Target Fund
are substantially similar to the investment strategies of Growth Fund. For
both Funds, FAI applies a "bottom-up," growth-oriented approach, focusing
primarily on individual securities and choosing companies that it believes
are positioned for growth in revenues, earnings or assets.
In choosing individual equity investments, each Fund's manager considers
sectors that have growth potential and fast-growing, innovative companies
within these sectors. Consequently, each Fund may from time to time have
significant positions in particular sectors, which may include, for example,
technology (including computers and telecommunications), health care
(including biotechnology) and producer manufacturing. Due to market
appreciation, a Fund's investment in an industry sector or the securities of
a single company may come to represent a significant portion of the Fund's
portfolio. Nevertheless, a Fund will maintain such a position so long as it
believes that the company or industry continues to meet its investment
guidelines.
TURNOVER. Growth Fund generally pursues a "buy-and-hold" growth strategy.
Growth Fund has historically had relatively low portfolio turnover, and its
portfolio turnover has historically been lower than that of Target Fund.
Because Growth Fund uses a "buy-and-hold" investment strategy, the Fund's
portfolio securities may have a higher level of unrealized capital
appreciation than if the Fund did not use this strategy. During periods of
net redemptions of Growth Fund Shares or when market conditions warrant, the
manager may sell these securities, generating a higher level of taxable gain
for shareholders than would occur if the Fund had not used these strategies.
In contrast, Target Fund has historically experienced relatively higher
turnover, which may increase fund expenses and have negative tax implications
for shareholders.
MARKET CAPITALIZATION. Target Fund and Growth Fund may invest in companies
of any size. Both Funds focus primarily on investments in large- and
mid-capitalization companies, and have done so historically. Both Funds may
also invest in securities of small-capitalization companies. Growth Fund may
invest up to 40% of its assets in smaller companies, which it considers
generally to be those with market capitalizations of less than $1.5 billion;
Target Fund has no specific limit on such investments. As of September 30,
2008, Target Fund did not have any of its net assets invested in small-cap
companies but had 16.8% of its net assets invested in mid-cap companies,
while as of that date Growth Fund had 4.4% of its net assets invested in
small-cap companies and 22.9% invested in mid-cap companies. Therefore,
Growth Fund has had greater exposure to small- and mid-cap companies, and
their related risks, than Target Fund.
FOREIGN SECURITIES. Growth Fund may invest up to 40% of its assets in
foreign securities, and had invested 5.1% of its portfolio in foreign
securities as of September 30, 2008. Target Fund has no set limit on foreign
securities, and invested 13.8% of its portfolio in foreign securities as of
September 30, 2008. Growth Fund therefore has had less exposure to foreign
securities, and their related risks, than Target Fund.
WHAT ARE THE PRINCIPAL RISKS OF AN INVESTMENT IN A FUND?
An investment in either of the Funds involves risks common to most mutual
funds. Mutual fund shares are not deposits or obligations of, or guaranteed
or endorsed by, any bank, and are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other U.S.
government agency. Mutual fund shares involve investment risks, including
the possible loss of principal. There is no guarantee against losses
resulting from an investment in either Fund, or that either Fund will achieve
its investment goal. Each of the Funds is also generally subject to the
risks associated with investing in equity securities, and each Fund, to
varying degrees as described above, is subject to the risks associated with
investing in foreign securities and small- and mid-cap companies.
For more information about the investment goals, strategies, policies, and
risks of Target Fund and Growth Fund, please see the section "Comparison of
Investment Goals, Strategies, Policies and Risks" in this Prospectus/Proxy
Statement.
WHAT ARE THE DISTRIBUTION AND PURCHASE PROCEDURES OF THE FUNDS?
Shares of each Fund are sold on a continuous basis by Franklin Templeton
Distributors, Inc. ("Distributors"). Class A shares of each Fund are
generally sold at NAV per share plus a sales charge. Class B shares, which
are no longer offered to new investors, are subject to a CDSC according to
the same schedule for both Funds. Class C shares of each Fund are sold at
NAV subject to a contingent deferred sales charge ("CDSC") according to an
identical CDSC schedule. Class R and Advisor Class shares of each Fund are
not subject to a sales charge. Holders of Class A shares of Target Fund will
not be assessed a sales charge on their receipt of Growth Fund Class A shares
in connection with the Transaction. Holders of Class B and Class C shares of
Target Fund will be given credit for their holding period in Target Fund in
determining any applicable CDSC, and shareholders will be given credit for
their holding period of Target Fund Class B shares in determining the date of
conversion of their Growth Fund Class B shares to Class A shares. No CDSC
will be charged to Target Fund shareholders in connection with the exchange
of their shares pursuant to the terms of the Transaction.
WHAT ARE THE REDEMPTION PROCEDURES AND EXCHANGE PRIVILEGES OF THE FUNDS?
Each Fund offers the same redemption features pursuant to which redemption
proceeds are remitted by check after prompt receipt of proper documents,
including signature guarantees under certain circumstances. Each Fund has
the same exchange privileges. Shares of each Fund may be redeemed at its
respective NAV per share. However, redemptions of Class A shares that were
purchased without an initial sales charge generally are subject to a 1% CDSC
if redeemed within 18 months of their purchase. A CDSC may also apply when
redeeming Class B or C shares of a Fund.
WHO MANAGES THE FUNDS?
The management of the business and affairs of each Fund is the responsibility
of its respective Board of Trustees. Growth Fund is a series of Acquiring
Trust. Acquiring Trust and Target Fund are each an open-end, registered
management investment company, commonly referred to as a "mutual fund."
Acquiring Trust was organized as a Delaware corporation in 1947,
reincorporated as a Maryland corporation in 1979, and was reorganized as a
Delaware statutory trust on February 1, 2008. Target Fund was organized as a
California corporation in 1984 and was reorganized on August 10, 2000, into a
Delaware statutory trust (a form of entity formerly known as a business
trust) created on March 21, 2000.
FAI serves as investment manager for both Funds. FAI is a wholly owned
subsidiary of Franklin Resources, Inc. ("Resources"). Resources is a
publicly owned global investment organization operating as Franklin Templeton
Investments. Franklin Templeton Investments provides global and domestic
investment management services through its Franklin, Templeton, Mutual Series
and Fiduciary Trust subsidiaries. FAI and its affiliates serve as investment
manager or administrator to 46 registered investment companies, with
approximately 109 U.S.-based funds or series. Resources has over $416
billion in assets under management as of December 31, 2008. The principal
shareholders of Resources are Charles B. Johnson and Rupert H. Johnson, Jr.,
who are trustees and/or officers of Target Fund and Acquiring Trust.
Growth Fund is subadvised by Franklin Investment Advisory Services, LLC
("Investment Advisory"), One Franklin Parkway, San Mateo, CA 94403-1906, an
affiliate of FAI.
GROWTH FUND MANAGEMENT TEAM. Growth Fund is managed by a team of dedicated
professionals focused on investments in securities of companies that are
leaders in their industry. The portfolio managers of the team are Vivian J.
Palmieri, Serena Perin Vinton, and Conrad B. Herrmann.
Mr. Palmieri is a Vice President of Investment Advisory and has been a
manager of Growth Fund since 1965. He has primary responsibility for the
investments of Growth Fund. He has final authority over all aspects of
Growth Fund's investment portfolio, such as purchases and sales of individual
securities, portfolio risk assessment, and the management of daily cash
balances in accordance with anticipated management requirements. The degree
to which he may perform these functions, and the nature of these functions,
may change from time to time. He joined Franklin Templeton Investments in
1965.
Serena Perin Vinton, a Chartered Financial Analyst and a Vice President of
FAI, has been a manager of Growth Fund since 1996. She joined Franklin
Templeton Investments in 1991.
Mr. Herrmann, a Chartered Financial Analyst, is a Senior Vice President of
FAI. Mr. Herrmann has been a manager of Growth Fund since 1993, providing
research and advice on purchases and sales of individual securities and
portfolio risk assessment. He joined Franklin Templeton Investments in 1989.
The Statement of Additional Information for Growth Fund dated February 1,
2009, as amended and supplemented to date (the "Growth Fund SAI"), provides
additional information about the portfolio managers' compensation, other
accounts managed by the portfolio managers, and the portfolio managers'
ownership of securities in Growth Fund. For information on how to obtain a
copy of the Growth Fund SAI, please see the section entitled "Information
About Growth Fund."
TARGET FUND MANAGEMENT TEAM. Target Fund is managed by a team of dedicated
professionals focused on investments in equity securities. The portfolio
managers of the team are Ms. Perin Vinton, Steve Kornfeld, and Mr. Herrmann.
Ms. Perin Vinton has been lead portfolio manager of Target Fund since 1996.
She has primary responsibility for the investments of Target Fund. She has
final authority over all aspects of Target Fund's investment portfolio, such
as purchases and sales of individual securities, portfolio risk assessment,
and the management of daily cash balances in accordance with anticipated
management requirements. The degree to which she may perform these functions,
and the nature of these functions, may change from time to time. Further
biographical information for Ms. Perin Vinton is included above in the
discussion of her role in managing Growth Fund.
Steve Kornfeld, a Chartered Financial Analyst and a Portfolio Manager of FAI,
has been a manager of Target Fund since 2002, providing research and advice
on the purchases and sales of individual securities, and portfolio risk
assessment. He joined Franklin Templeton Investments in 2001.
Mr. Herrmann has been a manager of Target Fund since 1993, providing research
and advice on the purchases and sales of individual securities, and portfolio
risk assessment. Further biographical information for Mr. Herrmann is
included above in the discussion of his role in managing Growth Fund.
The Statement of Additional Information for Target Fund dated November 1,
2008, (the "Target Fund SAI") provides additional information about the
portfolio managers' compensation, other accounts managed by the portfolio
managers, and the portfolio managers' ownership of securities in Target
Fund. For information on how to obtain a copy of Target Fund SAI, please see
the section entitled "Information About Target Fund."
WHAT ARE THE FUNDS' INVESTMENT MANAGEMENT AND FUND ADMINISTRATION FEES?
The terms of each Fund's investment management agreement with FAI are
substantially similar, except that Growth Fund offers additional breakpoints
at asset levels above $17.5 billion. The following table shows the
investment management fees for the Funds.
-----------------------------------------------------------------------
TARGET FUND GROWTH FUND
-----------------------------------------------------------------------
o 0.625% of the value of net o 0.625% of the value of net
assets up to and including $100 assets up to and including
million; $100 million;
o 0.500% of the value of net o 0.500% of the value of net
assets over $100 million and assets over $100 million and
not over $250 million; not over $250 million;
o 0.450% of the value of net o 0.450% of the value of net
assets over $250 million and assets over $250 million and
not over $7.5 billion; not over $7.5 billion;
o 0.440% of the value of net o 0.440% of the value of net
assets over $7.5 billion and assets over $7.5 billion not
not over $10 billion; over $10 billion; and
o 0.430 of the value of net o 0.430% of the value of net
assets over $10 billion and not assets over $10 billion and
over $12.5 billion; not over $12.5 billion;
o 0.420% of the value of net o 0.420% of the value of net
assets over $12.5 billion and assets over $12.5 billion and
not over $15 billion; and not over $15 billion;
o 0.400% of the value of net o 0.400% of the value of net
assets in excess of $15 billion. assets over $15 billion and
not over $17.5 billion;
o 0.380% of the value of net
assets over $17.5 billion and
not over $20 billion;
o 0.360% of the value of net
assets over $20 billion and
not over $35 billion;
o 0.355% of the value of net
assets over $35 billion and
not over $50 billion; and
o 0.350% of the value of net
assets in excess of $50
billion.
-----------------------------------------------------------------------
For the fiscal year ended September 30, 2008, Growth Fund paid management
fees of $12,544,223, or 0.45% of Growth Fund's average daily net assets, to
Investment Advisory. Prior to November 1, 2008, Investment Advisory served
as Growth Fund's primary investment adviser. Effective November 1, 2008, FAI
was appointed as the investment adviser for Growth Fund and Investment
Advisory was appointed subadviser for Growth Fund. This change did not
affect the calculation or payment of management fees for Growth Fund. A
discussion regarding the basis for the Board of Trustees of Acquiring Trust
approving the investment management agreement of Growth Fund will be
available in Growth Fund's Semiannual Report to Shareholders for the
six-month period ending March 31, 2009.
For the fiscal year ended June 30, 2008, Target Fund paid management fees,
net of fee waivers, in the amount of $6,635,529, or 0.45% of Target Fund's
average daily net assets. A discussion regarding the basis for the Target
Fund Board approving the investment management agreement for Target Fund is
available in Target Fund's most recent Annual Report to Shareholders for the
fiscal year ended June 30, 2008.
Each Fund has a "bundled" investment management arrangement, whereby FAI pays
Franklin Templeton Services, LLC ("FT Services") for providing administrative
services to the Fund out of the investment management fee it receives from
the Fund, at the following rate schedule:
------------------------------------
FUND ADMINISTRATION FEE (PAID BY
FAI)
------------------------------------
o 0.15% of the net assets up
to and including $200 million;
o 0.135% of net assets over
$200 million but not more than
$700 million;
o 0.100% net assets over $700
million but not more than $1.2
billion; and
o 0.075% of net assets over
$1.2 billion
------------------------------------
WHAT ARE THE FEES AND EXPENSES OF EACH FUND AND WHAT MIGHT THEY BE AFTER THE
TRANSACTION?
The tables below describe the fees and expenses that you may pay if you buy
and hold shares of the Funds. The tables also show the estimated fees and
expenses for Growth Fund, assuming that Target Fund approves the Plan and
that the Transaction had been completed as of the beginning of Growth Fund's
last completed fiscal year. The purpose of the tables is to assist you in
understanding the various costs and expenses that you will bear directly or
indirectly as a shareholder of Growth Fund.
You will not pay any initial or deferred sales charge in connection with the
Transaction.
TABLE OF SHAREHOLDER FEES (BOTH FUNDS)
The following table shows shareholder fees paid directly from a new
investment, which will remain the same after the Transaction. You will not
pay these charges in connection with the Transaction.
------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A CLASS B CLASS C CLASS R ADVISOR
CLASS
------------------------------------------------------------------------
Maximum sales charge 5.75%(1) 4.00% 1.00% None None
(load)
as a percentage of
offering price
------------------------------------------------------------------------
Load imposed on 5.75%(1) None None None None
purchases
------------------------------------------------------------------------
Maximum deferred None(2) 4.00%(3) 1.00% None None
sales charge (load)
------------------------------------------------------------------------
1. The dollar amount of the sales charge is the difference between the
offering price of the shares purchased (which factors in the applicable
sales charge in this table) and the net asset value of those shares.
Because the offering price is calculated to two decimal places using
standard rounding criteria, the number of shares purchased and the
dollar amount of the sales charge as a percentage of the offering price
and of your net investment may be higher or lower depending on whether
there was a downward or upward rounding.
2. There is a 1% contingent deferred sales charge ("CDSC") that applies to
investments of $1 million or more and purchases by certain retirement
plans without an initial sales charge if redeemed within 18 months of
purchase.
3. Declines to 1% over the course of six years, and is eliminated
thereafter.
ANNUAL OPERATING EXPENSE TABLE FOR CLASS A SHARES OF
THE FUNDS, AND PRO FORMA FEES AFTER THE TRANSACTION
-------------------------------------------------------------------
GROWTH FUND
PRO FORMA
(ASSUMES
ANNUAL FUND OPERATING EXPENSES TRANSACTION
(EXPENSES DEDUCTED FROM FUND TARGET GROWTH WAS
ASSETS) FUND(1) FUND(1) COMPLETED)(2)
-------------------------------------------------------------
Management fees (3) 0.46% 0.45% 0.45%
-------------------------------------------------------------
Distribution and service 0.24% 0.25% 0.25%
(12b-1) fees
-------------------------------------------------------------
Other expenses 0.24% 0.19% 0.19%
-------------------------------------------------------------
Acquired fund fees and 0.01% - -
expenses (3)
-------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING 0.95% 0.89% 0.89%
EXPENSES
-------------------------------------------------------------
Management fee reduction (3) -0.01% - -
-------------------------------------------------------------
Net annual Fund operating 0.94%(4) 0.89% 0.89%
expenses (3)
--------------------------------------------------------------
1. Expense ratios reflect annual fund operating expenses for the most
recent fiscal year of the Fund (June 30, 2008, for Target Fund and
September 30, 2008, for Growth Fund).
2. The pro forma expense ratios are calculated as if the Transaction had
been completed as of October 1, 2007. Excluded from Other Expenses is
the portion of the one-time costs of the Transaction that will be
allocated to Growth Fund. The total costs of the Transaction are
anticipated to total approximately $286,288, of which approximately
$71,572 will be allocated to each of Growth Fund and Target Fund.
3. FAI has agreed in advance to reduce its fee to reflect reduced services
resulting from each Fund's investment in a Franklin Templeton money
fund. This reduction is required by each Fund's Board of Trustees and
an exemptive order from the SEC. For Growth Fund, this fee reduction
amounted to less than 0.01% of the Fund's average net assets.
4. Net annual Fund operating expenses differ from the ratio of expenses to
average net assets shown in the Financial Highlights in Target Fund's
Annual Report to Shareholders for the fiscal year ended June 30, 2008,
which reflect the operating expenses of Target Fund but do not include
acquired fund fees and expenses.
EXAMPLE
This example can help you compare the cost of investing in Target Fund's
Class A shares with the cost of investing in Growth Fund Class A shares, both
before and after the Transaction. It assumes:
o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year;
o The Fund's operating expenses remain the same, taking into account any
contractual waivers for the applicable period; and
o You sell your shares at the end of the period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------------
Target Fund - Class A $665(1) $857 $1,065 $1,663
Growth Fund - Class A $661(1) $843 $1,040 $1,608
Pro Forma Growth Fund - Class A $661(1) $843 $1,040 $1,608
(assuming the Transaction is
completed)
1. Assumes a CDSC will not apply.
ANNUAL OPERATING EXPENSE TABLE FOR CLASS B SHARES OF
THE FUNDS, AND PRO FORMA FEES AFTER THE TRANSACTION
----------------------------------------------------------------
GROWTH FUND
PRO FORMA
(ASSUMES
TRANSACTION
ANNUAL FUND OPERATING EXPENSES WAS
(EXPENSES DEDUCTED FROM FUND TARGET GROWTH COMPLETED)
ASSETS) FUND(1) FUND(1) (2)
---------------------------------------------------------------
Management fees (3) 0.46% 0.45% 0.45%
---------------------------------------------------------------
Distribution and service 1.00% 1.00% 1.00%
(12b-1) fees
---------------------------------------------------------------
Other expenses 0.24% 0.19% 0.19%
---------------------------------------------------------------
Acquired fund fees and expenses 0.01% - -
(3)
---------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING 1.71% 1.64% 1.64%
EXPENSES
---------------------------------------------------------------
Management fee reduction (3) -0.01% - -
---------------------------------------------------------------
Net annual Fund operating 1.70%(4) 1.64% 1.64%
expenses (3)
---------------------------------------------------------------
1. Expense ratios reflect annual fund operating expenses for the most
recent fiscal year of the Fund (June 30, 2008, for Target Fund and
September 30, 2008, for Growth Fund).
2. The pro forma expense ratios are calculated as if the Transaction had
been completed as of October 1, 2007. Excluded from Other Expenses is
the portion of the one-time costs of the Transaction that will be
allocated to Growth Fund. The total costs of the Transaction are
anticipated to total approximately $286,288, of which approximately
$71,572 will be allocated to each of Growth Fund and Target Fund.
3. FAI has agreed in advance to reduce its fee to reflect reduced services
resulting from each Fund's investment in a Franklin Templeton money
fund. This reduction is required by each Fund's Board of Trustees and
an exemptive order from the SEC. For Growth Fund, this fee reduction
amounted to less than 0.01% of the Fund's average net assets.
4. Net annual Fund operating expenses differ from the ratio of expenses to
average net assets shown in the Financial Highlights in Target Fund's
Annual Report to Shareholders for the fiscal year ended June 30, 2008,
which reflect the operating expenses of Target Fund but do not include
acquired fund fees and expenses.
EXAMPLE
This example can help you compare the cost of investing in Target Fund's
Class B shares with the cost of investing in Growth Fund Class B shares, both
before and after the Transaction. It assumes:
o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year; and
o The Fund's operating expenses remain the same, taking into account any
contractual waivers for the applicable period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------
IF YOU SELL YOUR SHARES AT THE
END OF THE PERIOD:
Target Fund - Class B $573 $836 $1,123 $1,807(1)
Growth Fund - Class B $567 $817 $1,092 $1,743(1)
Pro Forma Growth Fund - Class B $567 $817 $1,092 $1,743(1)
(assuming the Transaction is
completed)
If you do not sell your shares:
Target Fund - Class B $173 $536 $923 $1,807(1)
Growth Fund - Class B $167 $517 $892 $1,743(1)
Pro Forma Growth Fund - Class B $167 $517 $892 $1,743(1)
(assuming the Transaction is
completed)
1. Assumes conversion of Class B shares to Class A shares after eight
years, lowering your annual expensefrom that time on.
ANNUAL OPERATING EXPENSE TABLE FOR CLASS C SHARES OF
THE FUNDS, AND PRO FORMA FEES AFTER THE TRANSACTION
--------------------------------------------------------
GROWTH
FUND PRO
FORMA
ANNUAL FUND OPERATING (ASSUMES
EXPENSES TRANSACTION
(EXPENSES DEDUCTED FROM TARGET GROWTH WAS
FUND ASSETS) FUND(1) FUND(1) COMPLETED)(2)
--------------------------------------------------------
Management fees (3) 0.46% 0.45% 0.45%
------------------------------------------------------
Distribution and Service 1.00% 1.00% 1.00%
(12b-1) fees
------------------------------------------------------
Other expenses 0.24% 0.19% 0.19%
------------------------------------------------------
Acquired fund fees and 0.01% - -
expenses (3)
------------------------------------------------------
TOTAL ANNUAL FUND 1.71% 1.64% 1.64%
OPERATING EXPENSES
------------------------------------------------------
Management fee reduction -0.01% - -
(3)
------------------------------------------------------
Net annual Fund operating 1.70%(4) 1.64% 1.64%
expenses (3)
------------------------------------------------------
1. Expense ratios reflect annual fund operating expenses for the most
recent fiscal year of the Fund (June 30, 2008, for Target Fund and
September 30, 2008, for Growth Fund).
2. The pro forma expense ratios are calculated as if the Transaction had
been completed as of October 1, 2007. Excluded from Other Expenses is
the portion of the one-time costs of the Transaction that will be
allocated to Growth Fund. The total costs of the Transaction are
anticipated to total approximately $286,288, of which approximately
$71,572 will be allocated to each of Growth Fund and Target Fund.
3. FAI has agreed in advance to reduce its fee to reflect reduced services
resulting from each Fund's investment in a Franklin Templeton money
fund. This reduction is required by each Fund's Board of Trustees and
an exemptive order from the SEC. For Growth Fund, this fee reduction
amounted to less than 0.01% of the Fund's average net assets.
4. Net annual Fund operating expenses differ from the ratio of expenses to
average net assets shown in the Financial Highlights in Target Fund's
Annual Report to Shareholders for the fiscal year ended June 30, 2008,
which reflect the operating expenses of Target Fund but do not include
acquired fund fees and expenses.
EXAMPLE
This example can help you compare the cost of investing in Target Fund's
Class C shares with the cost of investing in Growth Fund Class C shares, both
before and after the Transaction. It assumes:
o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year; and
o The Fund's operating expenses remain the same, taking into account any
contractual waivers for the applicable period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------------
IF YOU SELL YOUR SHARES AT THE
END OF THE PERIOD:
Target Fund - Class C $273 $536 $923 $2,009
Growth Fund - Class C $267 $517 $892 $1,944
Pro Forma Growth Fund - Class C $267 $517 $892 $1,944
(assuming the Transaction is
completed)
IF YOU DO NOT SELL YOUR SHARES:
Target Fund - Class C $173 $536 $923 $2,009
Growth Fund - Class C $167 $517 $892 $1,944
Pro Forma Growth Fund - Class C $167 $517 $892 $1,944
(assuming the Transaction is
completed)
ANNUAL OPERATING EXPENSE TABLE FOR CLASS R SHARES OF
TARGET FUND AND GROWTH FUND, AND PRO FORMA FEES AFTER THE TRANSACTION
------------------------------------------------------------------------
GROWTH
FUND PRO
FORMA
(ASSUMES
TRANSACTION
ANNUAL FUND OPERATING EXPENSES WAS
(EXPENSES DEDUCTED FROM FUND TARGET GROWTH COMPLETED)
ASSETS) FUND(1) FUND (1) (2)
----------------------------------------------------------------
Management fees (3) 0.46% 0.45% 0.45%
----------------------------------------------------------------
Distribution and service 0.50% 0.50% 0.50%
(12b-1) fees
----------------------------------------------------------------
Other Expenses 0.24% 0.19% 0.19%
----------------------------------------------------------------
Acquired fund fees and 0.01% - -
expenses (3)
----------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING 1.21% 1.14% 1.14%
EXPENSES
----------------------------------------------------------------
Management fee reduction (3) -0.01% - -
----------------------------------------------------------------
Net annual Fund operating 1.20%(4) 1.14% 1.14%
expenses (3)
----------------------------------------------------------------
1. Expense ratios reflect annual fund operating expenses for the most
recent fiscal year of each Fund (June 30, 2008 for Target Fund and
September 30, 2008 for Growth Fund).
2. The pro forma expense ratios are calculated as if the Transaction had
been completed as of October 1, 2007. Excluded from Other Expenses is
the portion of the one-time costs of the Transaction that will be
allocated to Growth Fund. The total costs of the Transaction are
anticipated to total approximately $286,288, of which approximately
$71,572 will be allocated to each of Growth Fund and Target Fund.
3. FAI has agreed in advance to reduce its fee to reflect reduced services
resulting from each Fund's investment in a Franklin Templeton money
fund. This reduction is required by each Fund's Board of Trustees and
an exemptive order from the SEC. For Growth Fund, this fee reduction
amounted to less than 0.01% of the Fund's average net assets.
4. Net annual Fund operating expenses differ from the ratio of expenses to
average net assets shown in the Financial Highlights in Target Fund's
Annual Report to Shareholders for the fiscal year ended June 30, 2008,
which reflect the operating expenses of Target Fund but do not include
acquired fund fees and expenses.
EXAMPLE
This example can help you compare the cost of investing in Target Fund's
Class R shares with the cost of investing in Growth Fund Class R shares, both
before and after the Transaction. It assumes:
o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year;
o The Fund's operating expenses remain the same, taking into account any
contractual waivers for the applicable period; and
o You sell your shares at the end of the period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------
Target Fund - Class R $122 $381 $660 $1,455
Growth Fund - Class R $116 $362 $628 $1,386
Pro Forma Growth Fund - Class R $116 $362 $628 $1,386
(assuming the Transaction is
completed)
ANNUAL OPERATING EXPENSE TABLE FOR ADVISOR CLASS SHARES OF
TARGET FUND AND GROWTH FUND, AND PRO FORMA FEES AFTER THE TRANSACTION
---------------------------------------------------------------------
GROWTH
FUND PRO
FORMA
(ASSUMES
TRANSACTION
ANNUAL FUND OPERATING EXPENSES WAS
(EXPENSES DEDUCTED FROM FUND TARGET GROWTH COMPLETED)
ASSETS) FUND(1) FUND(1) (2)
---------------------------------------------------------------
Management fees (3) 0.46% 0.45% 0.45%
---------------------------------------------------------------
Distribution and service - - -
(12b-1) fees
---------------------------------------------------------------
Other expenses 0.24% 0.19% 0.19%
---------------------------------------------------------------
Acquired fund fees and 0.01% - -
expenses (3)
---------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING 0.71% 0.64% 0.64%
EXPENSES
---------------------------------------------------------------
Management fee reduction (3) -0.01% - -
---------------------------------------------------------------
Net annual Fund operating 0.70%(4) 0.64% 0.64%
expenses (3)
---------------------------------------------------------------
1. Expense ratios reflect annual fund operating expenses for the most
recent fiscal year of the Fund (June 30, 2008, for Target Fund and
September 30, 2008, for Growth Fund).
2. The pro forma expense ratios are calculated as if the Transaction had
been completed as of October 1, 2007. Excluded from Other Expenses is
the portion of the one-time costs of the Transaction that will be
allocated to Growth Fund. The total costs of the Transaction are
anticipated to total approximately $286,288, of which approximately
$71,572 will be allocated to each of Growth Fund and Target Fund.
3. FAI has agreed in advance to reduce its fee to reflect reduced services
resulting from such Fund's investment in a Franklin Templeton money
fund. This reduction is required by each Fund's Board of Trustees and
an exemptive order from the SEC. For Growth Fund, this fee reduction
amounted to less than 0.01% of the Fund's average net assets.
4. Net annual Fund operating expenses differ from the ratio of expenses to
average net assets shown in the Financial Highlights in Target Fund's
Annual Report to Shareholders for the fiscal year ended June 30, 2008,
which reflect the operating expenses of Target Fund but do not include
acquired fund fees and expenses.
EXAMPLE
This example can help you compare the cost of investing in Target Fund's
Advisor Class shares with the cost of investing in Growth Fund Advisor Class
shares, both before and after the Transaction. It assumes:
o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year;
o The Fund's operating expenses remain the same, taking into account any
contractual waivers for the applicable period; and
o You sell your shares at the end of the period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------
Target Fund - Advisor Class $72 $224 $390 $871
Growth Fund - Advisor Class $65 $205 $357 $798
Pro Forma Growth Fund - Advisor $65 $205 $357 $798
Class
(assuming the Transaction is
completed)
HOW DO THE PERFORMANCE RECORDS OF THE FUNDS COMPARE?
The performance of the Funds, including sales charges and before taxes,
as of October 31, 2008, is shown below.
------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (1)
---------------------------------------------------
1 YEAR 5 YEARS 10 YEARS/SINCE
INCEPTION
------------------------------------------------------------------
CLASS A
------------------------------------------------------------------
Target Fund - Class A (39.97)% (3.21)% 0.48%
------------------------------------------------------------------
Growth Fund - Class A (38.72)% 0.78% 0.84%
------------------------------------------------------------------
CLASS B
------------------------------------------------------------------
Target Fund - Class B (39.27)% (3.16)% (0.89)%(2)
------------------------------------------------------------------
Growth Fund - Class B (38.05)% 0.84% 0.27%(2)
------------------------------------------------------------------
CLASS C
------------------------------------------------------------------
Target Fund - Class C (37.40)% (2.79)% 0.32%
------------------------------------------------------------------
Growth Fund - Class C (36.11)% 1.22% 0.67%
------------------------------------------------------------------
CLASS R
------------------------------------------------------------------
Target Fund - Class R(3) (36.55)% (2.32)% 0.81%
----------------------------------------------------------------
Growth Fund - Class R(3) (35.14)% 1.72% 1.18%
------------------------------------------------------------------
ADVISOR CLASS
------------------------------------------------------------------
Target Fund - Advisor (36.24)% (1.84)% 1.33%
Class
------------------------------------------------------------------
Growth Fund - Advisor (34.82)% 2.23% 1.68%
Class
------------------------------------------------------------------
1. Figures reflect the current maximum applicable sales charges.
2. Share class first offered on January 1, 1999.
3. Effective January 1, 2002, the Fund began offering Class R shares, which
do not have initial sales charges. Performance quotations for this
class reflect the following methods of calculation: (a) for periods
prior to January 1, 2002, a restated figure is used based on the Fund's
Class A performance, excluding the effect of Class A's maximum initial
sales charge, reflecting the Rule 12b-1 rate differential between Class
A and R; and (b) for periods after January 1, 2002, actual Class R
performance is used reflecting all charges and fees applicable to that
class.
WHERE CAN I FIND MORE FINANCIAL AND PERFORMANCE INFORMATION ABOUT THE FUNDS?
The Growth Fund Prospectus (enclosed as Exhibit B) contains additional
financial and performance information about Growth Fund, including Growth
Fund's financial performance for the past five years, under the heading
"Financial Highlights." Additional performance information as of the calendar
year ended December 31, 2008, including after-tax return information, is
contained in the Growth Fund Prospectus under the heading "Performance."
The Prospectus of Target Fund, the Annual Report to Shareholders of Target
Fund for the year ended June 30, 2008, and the semi-annual report to
shareholders of Target Fund for the period ended December 31, 2008 (when
available) contain more financial information about Target Fund, including
Target Fund's financial performance for the past five years under the heading
"Financial Highlights." Additional performance information as of the
calendar year ended December 31, 2007, including after-tax return
information, is contained in the Prospectus of Target Fund under the heading
"Performance." These documents are available free of charge upon request (see
the section "Information about Target Fund").
WHAT ARE OTHER KEY FEATURES OF THE FUNDS?
SERVICE PROVIDERS. The Funds use the same service providers for the
following services:
o CUSTODY SERVICES. The Bank of New York Mellon, Mutual Funds Division,
100 Church Street, New York, NY 10286, acts as custodian of the
securities and other assets of the Funds.
o TRANSFER AGENCY SERVICES. Franklin Templeton Investor Services, LLC
("Investor Services"), an indirect wholly owned subsidiary of Resources,
is the shareholder servicing and transfer agent and dividend-paying
agent for the Funds.
o ADMINISTRATIVE SERVICES. FT Services, an indirect wholly owned
subsidiary of Resources, provides certain administrative facilities and
services to each Fund, generally under the same terms and conditions.
o DISTRIBUTION SERVICES. Distributors acts as the principal underwriter
in the continuous public offering of Funds' shares under the same terms
and conditions.
DISTRIBUTION AND SERVICE (12B-1) FEES. Each share class of each Fund, other
than Advisor Class Shares, has a separate distribution or "Rule 12b-1" plan.
Under each Rule 12b-1 plan, the Fund may pay Distributors or others for the
expenses of activities that are primarily intended to sell shares of that
class. These expenses may include, among others, distribution or service
fees paid to securities dealers or others who have executed a servicing
agreement with the Fund, Distributors, or their affiliates, the expenses of
printing prospectuses and reports used for sales purposes, and preparing and
distributing sales literature and advertisements. The distribution and
service (12b-1) fees charged to each class are based only on expenses
attributable to that particular class.
The following table shows the maximum amount that each class of each Fund may
pay on an annual basis, as a percentage of its average daily net assets.
Advisor Class shares have no Rule 12b-1 plan. For more information regarding
Growth Fund's Rule 12b-1 plans, please see "The Underwriter--Distribution and
service (12b-1) fees" in the Growth Fund SAI.
----------------------------------------
TARGET FUND GROWTH FUND
----------------------------------------
Class A 0.25% 0.25%
----------------------------------------
Class B 1.00% 1.00%
----------------------------------------
Class C 1.00% 1.00%
----------------------------------------
Class R 0.50% 0.50%
----------------------------------------
PURCHASES AND REDEMPTIONS. The maximum front-end sales charge imposed on
purchases of Class A shares of each Fund is 5.75%, with reduced charges for
purchases of $50,000 or more and no front-end sales charges for purchases of
$1 million or more. Class B shares, which are no longer offered for sale
except in certain instances to existing holders of Class B shares of a Fund,
are subject to a CDSC if they are redeemed within six years of purchase. The
maximum CDSC imposed on redemptions of Class B shares of each Fund is 4%,
decreasing incrementally to zero over six years. After eight years, Class B
shares of each Fund automatically convert to Class A shares. The maximum
sales charge imposed on redemptions of Class C shares of each Fund is 1%.
Class C shares are subject to a 1% CDSC if redeemed within 12 months of their
purchase. Class R and Advisor Class shares are not subject to a front-end
sales charge or CDSC.
Shares of each Fund may be redeemed at the Fund's respective NAV per share,
subject to any applicable CDSC. Redemptions of Class A shares that were
purchased without an initial sales charge generally are subject to a 1% CDSC
if sold within 18 months following their purchase. Additional information
and specific instructions explaining how to buy, redeem, and exchange shares
of each Fund are outlined in each Fund's prospectus under the heading "Your
Account." The Growth Fund Prospectus enclosed herewith also lists, under the
heading "Questions," phone numbers for you to call if you have any questions
about your account.
DIVIDENDS AND DISTRIBUTIONS. Each Fund intends to pay a dividend at least
annually representing substantially all of its net investment income and to
distribute capital gains, if any, annually. The amount of these
distributions will vary and there is no guarantee that a Fund will pay
dividends.
Each Fund has qualified, and intends to continue to qualify, to be treated as
a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify for taxation as a regulated investment
company, a mutual fund must, among other things, distribute at least 90% of
its investment company taxable income (if any), derive at least 90% of its
gross income from permitted sources, and diversify its holdings as required
by the Code. While so qualified, so long as each Fund distributes all of its
investment company taxable income (if any) and any net realized gains to its
shareholders, it is expected that neither Fund will be required to pay any
federal income taxes on amounts distributed to its shareholders.
The tax implications of an investment in each Fund are generally the same.
For more information about the tax implications of investments in the Funds,
see each Fund's prospectus under the heading "Distributions and Taxes."
REASONS FOR THE TRANSACTION
The Target Fund Board has recommended that Target Fund's shareholders approve
the Transaction in order to combine Target Fund with a larger fund that has
similar goals and investment policies. Shareholders of Target Fund may
potentially benefit from the lower expenses and being part of a larger mutual
fund. Growth Fund has had stronger average total returns than Target Fund
for the one-year, five-year and ten-year periods ended October 31, 2008.
Fund management had begun considering the proposed Transaction before the
current market turmoil that began in September 2008.
A meeting of the Target Fund Board was held on December 1, 2008, to consider
the proposed Transaction. The Independent Trustees and the Target Fund Board
have been advised on this matter by independent counsel to the Independent
Trustees. In addition, a meeting of Acquiring Trust's Board was also held
on December 1, 2008, to consider the proposed Transaction.
The Target Fund Board requested and received from FAI written materials
containing relevant information about Growth Fund and the proposed
Transaction, including fee and expense information on an actual and future
estimated basis, and comparative performance data.
The Target Fund Board considered the potential benefits and costs of the
Transaction to shareholders of Target Fund. The Target Fund Board reviewed
detailed information about: (1) the investment goal, strategies and policies
of Growth Fund; (2) the portfolio management of Growth Fund; (3) the
financial and organizational strength of FAI; (4) the comparability of the
investment goals, policies, restrictions and investments of Target Fund with
those of Growth Fund; (5) the comparative short-term and long-term investment
performance of Target Fund and Growth Fund; (6) the current expense ratios of
each Fund; (7) the relative asset size of each Fund, including the benefits
to Target Fund of joining with a larger fund; (8) FAI's agreement to pay a
portion of the expenses related to each Transaction; (9) the tax consequences
of the Transaction to Target Fund and Target Fund's shareholders; and (10)
the general characteristics of Target Fund.
The Target Fund Board also considered that: (a) the combined investment
advisory and administrative fees for Growth Fund are less than those being
paid by Target Fund; (b) the historical investment performance of Growth Fund
had been better than the historical investment performance of Target Fund as
of October 31, 2008; (c) based on Target Fund's historical asset growth and
projected sales activity, Target Fund's assets were not likely to grow
sufficiently in the foreseeable future to result in significant economies of
scale; (d) benefits to shareholders, including operating efficiencies, may be
achieved from combining the Funds; and (e) alternatives are available to
shareholders of Target Fund, including the ability to redeem their shares.
Based upon their evaluation of the relevant information presented to them,
and in light of their fiduciary duties under federal and state law, the
Target Fund Board, including all of the Independent Trustees, concluded that
completing the Transaction is in the best interests of the shareholders of
Target Fund and that no dilution of value would result to the shareholders of
Target Fund from the Transaction. The Target Fund Board approved the Plan on
December 1, 2008, and recommended that shareholders of Target Fund vote to
approve the Plan.
The Board of Trustees of Acquiring Trust, on behalf of Growth Fund, also
concluded that the Transaction is in the best interests of Growth Fund and
its shareholders and that no dilution of value would result to the
shareholders of Growth Fund from the Transaction. Consequently, the Board of
Trustees of Acquiring Trust approved the Plan on behalf of Growth Fund.
FOR THE REASONS DISCUSSED ABOVE, THE TARGET FUND BOARD UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE PLAN
INFORMATION ABOUT THE TRANSACTION
This is only a summary of the Plan. You should read the form of the Plan,
which is attached as Exhibit A, for complete information about the
Transaction.
HOW WILL THE TRANSACTION BE CARRIED OUT?
If the shareholders of Target Fund approve the Plan, the Transaction will
take place after various conditions are satisfied, including the preparation
of certain documents. If the shareholders of Target Fund do not approve the
Plan, the Transaction will not take place, and Target Fund will continue to
operate as it currently does.
Target Fund no longer offers its shares for sale to the public. Existing
shareholders, however, are permitted to purchase additional shares until the
date of the Meeting. If shareholders approve the Plan at the Meeting, they
may continue to add to their existing accounts until the close of business on
May 6, 2009, through the reinvestment of dividend and capital gain
distributions or through established automatic investment plans.
If the shareholders of Target Fund approve the Plan, Target Fund and
Acquiring Trust will determine a specific date, called the "closing date,"
for the actual Transaction to take place. Target Fund will transfer
substantially all of its assets, free and clear of all liens, encumbrances,
and claims whatsoever (other than shareholders' rights of redemption), to
Growth Fund on the closing date, which is scheduled to occur on or about May
6, 2009, but which may occur on an earlier or later date as Target Fund and
Acquiring Trust may agree. Neither Growth Fund nor Acquiring Trust shall
assume any liability of Target Fund. In exchange, Acquiring Trust will issue
Growth Fund Shares that have an aggregate NAV equal to the dollar value of
the assets delivered to Growth Fund by Target Fund. Target Fund will
distribute to its shareholders the Growth Fund Shares it receives. Each
shareholder of Target Fund will receive Growth Fund Shares with an aggregate
NAV equal to the aggregate NAV of his or her shares of Target Fund. The
share transfer books of Target Fund will be permanently closed as of 1:00
p.m., Pacific Time, on the closing date. Target Fund will accept requests
for redemptions only if received in proper form before 1:00 p.m., Pacific
Time, on the closing date. Requests received after that time will be
considered requests to redeem Growth Fund Shares. Prior to the closing date,
Target Fund will pay or make provision for payment of all its remaining
liabilities, if any. At the closing, each shareholder of record of Target
Fund shall have the right to receive any unpaid dividends or distributions
declared prior to the closing, including any declared dividend or
distribution, with respect to shares of Target Fund that such shareholder had
on the distribution record date. Target Fund will then terminate its
existence, liquidate, and dissolve.
Target Fund and Acquiring Trust may agree to amend the Plan without
shareholder approval, except that any amendment made to the Plan that would
have a material adverse effect on shareholders would be submitted to the
affected shareholders for their approval.
Each of Target Fund and Acquiring Trust has made representations and
warranties in the Plan that are customary in transactions such as the
Transaction. The obligations under the Plan of Target Fund and Acquiring
Trust (with respect to Growth Fund) are subject to various conditions,
including:
o Acquiring Trust's Registration Statement on Form N-14 under the
Securities Act of 1933, of which this Prospectus/Proxy Statement is a
part, shall have been filed with the SEC, such Registration Statement
shall have become effective, no stop-order suspending the
effectiveness of the Registration Statement shall have been issued,
and no proceeding for that purpose shall have been initiated or
threatened by the SEC (and not withdrawn or terminated);
o the shareholders of Target Fund shall have approved the Transaction;
and
o Target Fund and Acquiring Trust shall have received the tax opinion
described below that the consummation of the Transaction will not
result in the recognition of gain or loss for federal income tax
purposes for Target Fund, Growth Fund, or their shareholders.
If Target Fund and Acquiring Trust agree, the Plan may be terminated or
abandoned at any time before or after the approval of the Plan by the
shareholders of Target Fund.
Following the closing date, Target Fund share certificates shall be deemed
cancelled.
WHO WILL PAY THE EXPENSES OF THE TRANSACTION?
Target Fund will pay 25% of the expenses of the Transaction, including the
costs of the proxy solicitation. Acquiring Trust, on behalf of Growth Fund,
will pay 25% of such expenses. FAI will pay the remaining 50% of such
expenses. The total amount of such costs and expenses for the Transaction is
estimated to be $286,288.
WHAT ARE THE TAX CONSEQUENCES OF THE TRANSACTION?
The Transaction is intended to qualify as a tax-free reorganization for
federal income tax purposes under Section 368(a)(1) of the Code. The Funds
will procure an opinion from Stradley Ronon Stevens & Young, LLP, counsel to
Acquiring Trust and Target Fund, based on certain assumptions and
representations received from Target Fund and Acquiring Trust, on behalf of
Growth Fund, that (i) shareholders of Target Fund will not recognize any gain
or loss for federal income tax purposes as a result of the exchange of their
shares of Target Fund for Growth Fund Shares; (ii) neither Growth Fund nor
its shareholders will recognize any gain or loss upon Growth Fund's receipt
of the assets of Target Fund; and (iii) the holding period and aggregate tax
basis for Growth Fund Shares that are received by a Target Fund shareholder
will be the same as the holding period and aggregate tax basis of the shares
of Target Fund previously held by such shareholder.
Opinions of counsel are not binding upon the Internal Revenue Service or the
courts. If the Transaction is consummated but does not qualify as a tax free
reorganization under the Code, and thus is taxable, Target Fund would
recognize gain or loss on the transfer of its assets to Growth Fund and each
shareholder of Target Fund would recognize a taxable gain or loss equal to
the difference between its tax basis in its Target Fund shares and the fair
market value of the Growth Fund Shares it received.
Capital losses can generally be carried forward to each of the eight (8)
taxable years succeeding the loss year to offset future capital gains. The
Transaction will result in a more than 50% "change in ownership" of Target
Fund, the smaller of the two Funds. As a result, the capital loss carryovers
(together with any current year loss and net unrealized depreciation in the
value of investments, collectively referred to as "total capital loss
carryovers") of Target Fund will be subject to an annual limitation for
federal income tax purposes. At November 18, 2008, the tax basis capital
loss carryovers, unrealized appreciation in value of investments and
aggregate net asset value of Target Fund as compared to Growth Fund and the
approximate annual limitation on the use of Target Fund's total capital loss
carryovers following the Transaction are as follows:
------------------------------------------------------------
TARGET FUND GROWTH FUND
11/18/2008 11/18/2008
------------------------------------------------------------
Capital Loss Carryovers (1)
------------------------------------------------------------
Expiring 2009-2010 ($6,664,049)
------------------------------------------------------------
Expiring 2012 ($16,688,284)
------------------------------------------------------------
Net Unrealized (Depreciation)($224,057,564) N/A
of Investments for tax
purposes
------------------------------------------------------------
Total Capital Loss ($230,721,613) ($16,688,284)
Carryovers
------------------------------------------------------------
Net Unrealized Appreciation N/A $651,886,606
for tax purposes
------------------------------------------------------------
Net Unrealized Appreciation -27.86% 38%
(Depreciation) for tax
purposes as Percentage of NAV
------------------------------------------------------------
Net Asset Value (NAV) $828,057,230 $1,723,774,371
------------------------------------------------------------
Tax-Exempt Rate (Dec. 2008) 5.40%
------------------------------------------------------------
Annual Limitation $44,715,090 N/A
(approximate) (2)
------------------------------------------------------------
1. As of the last fiscal year-end of Target Fund and Growth
Fund, 6/30/08 and 9/30/08, respectively.
2. The actual limitation will equal the aggregate net asset value of
Target Fund on the closing date multiplied by the long-term
tax-exempt rate for ownership changes during the month in which the
Transaction closes; such limitation is increased by the amount of
any built-in gain, i.e., unrealized appreciation in value of
investments, of Target Fund on the closing date that is recognized
in a taxable year.
Given the amount of this annual limitation relative to the amount of Target
Fund's total capital loss carryovers and unrealized depreciation in value of
investments as of November 18, 2008, this limitation may be material.
However, whether this annual limitation is material will depend upon the
facts at time of closing of the Transaction. The Transaction will not result
in any material limitation on the use by Growth Fund of its capital loss
carryovers.
Target Fund shareholders also should be aware that, as a result of the
Transaction, they will be "buying into" Growth Fund's greater unrealized
appreciation in value of its investments (exacerbated by any limitation on
use of Target Fund's capital loss carryovers). As of November 18, 2008, the
net unrealized depreciation in the value of the investments of Target Fund on
a tax basis as a percentage of its net asset value on such date was (-27%).
As of November 18, 2008, the net unrealized appreciation in the value of the
assets of Growth Fund on a tax basis as a percentage of its net asset value
was 38% and, approximately, 17% of unrealized appreciation on a combined
basis following the Transaction. Net unrealized appreciation (depreciation)
in value of investments represents the net of unrealized gains (losses) on
portfolio securities currently held. Net unrealized losses, when realized on
sale of portfolio securities, generally either offset any other realized
gains or increases any capital loss carryovers. Conversely, net unrealized
gain, when realized on sale of portfolio securities, as reduced by any
available capital loss carryovers, is paid to Fund shareholders each calendar
year as income dividends and/or capital gains distributions that are subject
to tax in the hands of taxable shareholders. Any income taxes payable by
Fund shareholders on receipt of dividends and distributions reduce their
return on investment in a fund on an after-tax basis. This, of course, is
the same exposure that applies to anyone when buying (or reinvesting
dividends in) Growth Fund Shares. One counterbalancing factor to consider is
that Growth Fund pursues a "buy-and-hold" growth strategy. This strategy is
evidenced by Growth Fund's average turnover rate of approximately 2.2% for
the past five years (5.64% for the fiscal year ended September 30, 2008). A
fund with a low turnover rate tends to be more tax efficient than a fund with
a high turnover rate. A fund's turnover rate basically represents the
percentage of a fund's holdings that change every year.
After the Transaction, you will continue to be responsible for tracking the
adjusted tax basis and holding period of your shares for federal income tax
purposes. You should consult your tax adviser regarding the effect, if any,
of the Transaction in light of your particular circumstances, as well as the
state and local tax consequences, if any, of the Transaction because this
discussion only relates to the federal income tax consequences.
WHAT SHOULD I KNOW ABOUT GROWTH FUND SHARES?
The Growth Fund Shares that will be distributed to Target Fund shareholders
generally will have the same legal characteristics as the shares of Target
Fund with respect to such matters as voting rights, assessability, conversion
rights, and transferability. Growth Fund is a series of Acquiring Trust, a
Delaware statutory trust, and Target Fund is a Delaware statutory trust.
After the Transaction, shareholders of Target Fund whose shares are
represented by outstanding share certificates will not receive certificates
for Growth Fund Shares and all outstanding Target Fund share certificates
will be cancelled.
WHAT ARE THE CAPITALIZATIONS OF THE FUNDS AND WHAT MIGHT GROWTH FUND'S
CAPITALIZATION BE AFTER THE TRANSACTION?
The following table sets forth as of September 30, 2008 the capitalizations
of Target Fund and Growth Fund. The table also shows the pro forma
capitalization of Growth Fund as adjusted to give effect to the proposed
Transaction. The capitalization of Growth Fund and its classes is likely to
be different when the Transaction is consummated.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
GROWTH FUND
PRO FORMA -PRO FORMA
ADJUSTMENTS (assuming
TARGET GROWTH TO the Transaction
FUND FUND CAPITALIZATION(1) is completed)(2)
(UNAUDITED) (AUDITED) (Unaudited) (UNAUDITED)
------------------------------------------------------------------------------
Net assets (all classes) $1,150,424 $2,340,979 ($143) $3,491,260
(thousands)
------------------------------------------------------------------------------
Total shares outstanding 114,781,320 63,485,382 (83,655,335) 94,611,367
(all classes)
------------------------------------------------------------------------------
Class A net assets $614,326 $1,708,612 ($90) $2,322,849
(thousands)
------------------------------------------------------------------------------
Class A shares 60,996,186 45,967,776 (44,469,752) 62,494,210
outstanding
------------------------------------------------------------------------------
Class A net asset value $10.07 $37.17 $37.17
per share
------------------------------------------------------------------------------
Class B net assets $39,610 $89,779 ($5) $129,383
(thousands)
------------------------------------------------------------------------------
Class B shares 4,175,045 2,532,916 (3,057,449) 3,650,512
outstanding
------------------------------------------------------------------------------
Class B net asset value $9.49 $35.44 $35.44
per share
------------------------------------------------------------------------------
Class C net assets $93,127 $255,425 ($14) $348,538
(thousands)
------------------------------------------------------------------------------
Class C shares 9,924,197 7,268,101 (7,274,189) 9,918,109
outstanding
------------------------------------------------------------------------------
Class C net asset value $9.38 $35.14 $35.14
per share
------------------------------------------------------------------------------
Class R net assets $14,904 $30,175 ($3) $45,076
(thousands)
------------------------------------------------------------------------------
Class R shares 1,496,989 818,448 (1,092,800) 1,222,637
outstanding
------------------------------------------------------------------------------
Class R net asset value $9.96 $36.87 $36.87
per share
------------------------------------------------------------------------------
Advisor Class net assets $388,457 $256,988 ($31) $645,414
(thousands)
------------------------------------------------------------------------------
Advisor Class shares 38,188,903 6,898,141 (27,761,145) 17,325,899
outstanding
------------------------------------------------------------------------------
Advisor Class net asset $10.17 $37.25 $37.25
value per share
------------------------------------------------------------------------------
1. Adjustments reflect the costs of the Transaction incurred by the Funds.
2. Numbers are pro forma after the Transaction.
At the closing of the Transaction, shareholders of Target Fund will receive
Growth Fund Shares based on the relative net asset values of the Funds as of
1:00 p.m., Pacific Time, on the closing date.
COMPARISON OF INVESTMENT GOALS, STRATEGIES, POLICIES AND RISKS
This section describes and compares the key differences between the
investment goals, strategies and principal policies of the Funds, as well as
the risks associated with such goals, strategies and policies. The
investment goals and most of the investment restrictions of each Fund are
fundamental, which means that they cannot be changed without the Affirmative
Majority Vote of that Fund's outstanding voting securities. Unless otherwise
noted, the investment policies of each Fund are non-fundamental and may be
changed without shareholder approval. For a complete description of Growth
Fund's investment policies and risks, you should read the Growth Fund
Prospectus, which accompanies this Prospectus/Proxy Statement, and the Growth
Fund SAI, which is available upon request.
ARE THERE ANY SIGNIFICANT DIFFERENCES BETWEEN THE INVESTMENT GOALS,
STRATEGIES, POLICIES AND RISKS OF THE FUNDS?
The primary investment goal of the Funds is identical, but Target Fund has a
secondary investment goal that Growth Fund does not share. Both Funds invest
primarily in equity securities of companies that the manager believes will
grow, and each Fund's manager uses a similar strategy to choose investments.
Both Funds have the same investment policies. Accordingly, although the
portfolio makeup of the Funds differs in some respects, the Funds are subject
to substantially similar risks.
INVESTMENT GOALS. The primary investment goal of both Target Fund and Growth
Fund is capital appreciation. Target Fund also has, as a secondary goal, to
provide current income return through the receipt of dividends or interest
from investments.
INVESTMENT STRATEGY. Both Funds invest primarily in equity securities. For
both Funds, FAI applies a "bottom-up," growth-oriented approach, focusing
primarily on individual securities and choosing companies that it believes
are positioned for growth in revenues, earnings or assets.
Each Fund's portfolio managers rely on a team of analysts to provide in-depth
industry expertise and use both qualitative and quantitative analysis to
evaluate companies for distinct and sustainable competitive advantages that
are likely to lead to growth in earnings and/or share price. Advantages such
as a particular market niche, proven technology, sound financial records,
strong management, and industry leadership are factors that FAI, as each
Fund's manager, believes point to strong growth potential.
FOREIGN EXPOSURE. Target Fund and Growth Fund are permitted to invest in
foreign securities. Target Fund has no specific limit to such investments,
and as of September 30, 2008, it had invested 13.8% of its net assets in
foreign securities. Growth Fund may invest up to 40% of its nets assets in
foreign securities, and as of September 30, 2008, it had invested 5.1% of its
net assets in foreign securities. If the Transaction is approved and
completed, Target Fund shareholders will become shareholders of a fund that
has decreased exposure to foreign securities and their related risks.
INDUSTRY CONCENTRATION. Target Fund has the same fundamental investment
restrictions on industry concentration as Growth Fund. Neither Fund may, at
the time an investment is made, invest more than 25% of its net assets in
securities of issuers in any one industry (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities
or securities of other investment companies). Subject to that requirement,
each Fund may invest in various market sectors as consistent with its
investment goal, and both Funds invest to a similar extent in the Healthcare,
Materials, Consumer Discretionary, and Information Technology sectors.
Growth Fund has a relatively greater investment in Industrials, while Target
Fund has a relatively greater investment in Telecom Services, Energy,
Consumer Staples, Financials, and Utilities.
DIVERSIFICATION. Growth Fund and Target Fund are diversified funds that have
a limited ability to invest their assets in any one issuer. Neither Fund may
purchase the securities of any one issuer (other than the U.S. government or
any of its agencies or instrumentalities or securities of other investment
companies that are either registered under the 1940 Act or excluded from
registration under Section 3(c) of the 1940 Act) if immediately after such
investment (i) more than 5% of the value of the Fund's total assets would be
invested in such issuer or (ii) more than 10% of the outstanding voting
securities of such issuer would be owned by the Fund, except that up to 25%
of the value of each Fund's total assets may be invested without regard to
such 5% and 10% limitations.
HOW DO THE INVESTMENT RESTRICTIONS OF THE FUNDS DIFFER?
The Funds' fundamental investment restrictions with respect to borrowing,
underwriting, lending, real estate investments, commodities investments,
industry concentration, issuer diversification, and issuing senior securities
are identical.
WHAT ARE THE PRINCIPAL RISK FACTORS ASSOCIATED WITH INVESTMENTS IN THE FUNDS?
Like all investments, an investment in a Fund involves risk. There is no
assurance that any mutual fund will meet its investment goals. The
achievement of the Funds' goals depends upon market conditions, generally,
and on the investment managers' analytical and portfolio management skills.
For more information about the principal risk factors associated with
investments in the Funds, see each Fund's prospectus under the heading "Main
Risks" and the Growth Fund SAI and Target Fund SAI under the heading "Goals,
Strategies and Risks."
Both Funds invest primarily in equity securities of U.S.-based large- and
mid-capitalization companies, but may also invest a portion of their assets
in foreign securities and small-capitalization companies or concentrate
investments in a particular sector. As a result, they are subject to similar
risks that are common to equity securities, as well as foreign securities
risk, sector risk, and the risks associated with investments in smaller and
midsize companies.
COMMON STOCKS. At least in the U.S., stocks historically have outperformed
other types of investments over the long term. Individual stock prices,
however, tend to fluctuate more dramatically. These price movements may
result from factors affecting individual companies or industries, or the
relevant securities market as a whole. A slower-growth or recessionary
economic environment could have an adverse effect on the price of the various
stocks held by a Fund.
SMALLER AND MIDSIZE COMPANIES. While smaller and midsize companies may offer
substantial opportunities for capital growth, they also involve substantial
risks and may be considered more speculative. Historically, smaller and
midsize company securities have been more volatile in price than larger
company securities, especially over the short term. Among the reasons for
the greater price volatility are the less certain growth prospects of smaller
and midsize companies, the lower degree of liquidity in the markets for such
securities, and the greater sensitivity of smaller and midsize companies to
changing economic conditions. In addition, smaller and midsize companies may
lack depth of management, be unable to generate funds necessary for growth or
development, or be developing or marketing new products or services for which
markets are not yet established and may never become established.
FOREIGN SECURITIES. Investing in foreign securities typically involves more
risks than investing in U.S. securities. Certain of these risks also may
apply to securities of U.S. companies with significant foreign operations.
These risks can increase the potential for losses in a Fund and may include,
among others, currency risks (fluctuations in currency exchange rates),
country risks (political, economic and social instability, diplomatic
developments, regional conflicts, terrorism, war, currency devaluations and
policies that have the effect of limiting or restricting foreign investment
or the movement of assets), different trading practices, including less
government supervision, less publicly available information, less liquid
trading markets, and greater volatility.
SECTOR FOCUS. To the extent a Fund invests a significant portion of its
assets in a particular sector or sectors, the Fund will face a greater risk
of loss due to factors affecting that sector than if the Fund always
maintained wide diversity among the sectors. Each Fund has historically had
a similar breakdown in industry sector concentration, although Growth Fund
has historically concentrated more on Industrials, while Target Fund has
historically had relatively larger investments in Consumer Staples,
Financials, Utilities, Telecom Services, and Energy.
TECHNOLOGY AND TELECOMMUNICATIONS COMPANIES. The technology and
telecommunications sector has historically been volatile due to the rapid
pace of product change and development within the sector. For example, their
products may not prove commercially successful or may become obsolete
quickly. The activities of these companies may also be adversely affected by
changes in government regulations. The stock prices of companies operating
within this sector may be subject to abrupt or erratic movements. Although
Growth Fund intends to focus its investments in rapidly developing
industries, including technology and telecommunications companies, it has
historically had less exposure to such companies than Target Fund.
HEALTH CARE COMPANIES. The activities of health care companies may be funded
or subsidized by federal and state governments. If government funding and
subsidies are reduced or discontinued, the profitability of these companies
could be adversely affected. Health care companies may also be affected by
government policies on health care reimbursements, regulatory approval for
new drugs and medical instruments, and similar matters. They are also
subject to legislative risk, I.E., the risk of a reform of the health care
system through legislation.
FINANCIAL SERVICES COMPANIES. To the extent that a Fund has significant
investments in financial services companies, general market and economic
conditions as well as other risks specific to the financial services industry
will impact the Fund's investments and its performance. For example,
increases in interest rates can have a negative effect on the profitability
of financial services companies. Financial services companies are subject to
extensive government regulation, which tends to limit not only the amount and
types of loans and other financial commitments a financial services company
can make, but also the interest rates and fees it can charge. These
limitations can have a significant impact on the profitability of a financial
services company.
GROWTH STYLE INVESTING. Target Fund and Growth Fund are subject to the risks
of growth style investing. Growth stock prices reflect projections of future
earnings or revenues, and can, therefore, fall dramatically if the company
fails to meet those projections. Growth stocks may also be more expensive
relative to their earnings or assets compared to value or other stocks, and
if their valuations return to more typical norms, their prices may moderate
or fall. Prices of these companies' securities historically have been more
volatile than other securities, especially over the short term.
PORTFOLIO TURNOVER. Target Fund's portfolio turnover rate has generally been
higher than that for Growth Fund. Higher portfolio turnover may involve
additional expenses, including transaction costs for purchases and sales of
securities. These transactions may result in realization of taxable capital
gains, including short-term capital gains, which are generally taxed at
ordinary income tax rates.
INFORMATION ABOUT GROWTH FUND
Information about Growth Fund is included in the Growth Fund Prospectus,
which is enclosed with and incorporated by reference into (is considered a
part of) this Prospectus/Proxy Statement. Additional information about
Growth Fund is included in the Growth Fund SAI, which is incorporated into
the Growth Fund Prospectus and into the SAI dated February 1, 2009 relating
to this Prospectus/Proxy Statement, which has been filed with the SEC and is
considered part of this Prospectus/Proxy Statement. You may request a free
copy of the Growth Fund SAI, Growth Fund's Annual Report to Shareholders for
the fiscal year ended September 30, 2008, the SAI relating to this
Prospectus/Proxy Statement, and other information by calling (800) DIAL BEN
or by writing to Growth Fund at P.O. Box 997151, Sacramento, CA 95899-7151.
Acquiring Trust files proxy materials, reports and other information with the
SEC in accordance with the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act. These materials can be inspected and
copied at the public reference facilities maintained by the SEC, 100 F
Street, N.E., Room 1580, Washington, D.C. You can also obtain copies of this
information, after paying a duplicating fee at prescribed rates, by writing
to the SEC's Public Reference Branch, Office of Consumer Affairs and
Information Services, Washington, DC 20549 or from the SEC's Internet site at
http://www.sec.gov or by electronic request at the following email address:
publicinfo@sec.gov.
INFORMATION ABOUT TARGET FUND
Information about Target Fund is included in its current Prospectus, which is
incorporated into this Prospectus/Proxy Statement by reference, as well as
the Target Fund SAI dated November 1, 2008, and Target Fund's Annual Report
to Shareholders for the fiscal year ended June 30, 2008. These documents
have been filed with the SEC. You may request free copies of these documents
and other information relating to Target Fund by calling (800) DIAL BEN or by
writing to Target Fund at P.O. Box 997151, Sacramento, CA 95899-7151.
Reports and other information filed by Target Fund can be inspected and
copied at the public reference facilities maintained by the SEC, 100 F
Street, N.E., Room 1580, Washington, D.C. You can also obtain copies of this
information, after paying a duplicating fee at prescribed rates, by writing
to the SEC's Public Reference Branch, Office of Consumer Affairs and
Information Services, Washington, DC 20549 or from the SEC's Internet site at
http://www.sec.gov or by electronic request at the following email address:
publicinfo@sec.gov.
FURTHER INFORMATION ABOUT THE FUNDS
The following is a discussion of the organization of the Funds and, where
applicable, of Target Fund and Acquiring Trust. More detailed information
about each Fund's current corporate structure is contained in each Fund's
SAI.
COMPARISON OF CAPITAL STRUCTURE. Target Fund was organized as a California
corporation in 1984 and was reorganized on August 10, 2000, into a Delaware
statutory trust (a form of entity formerly known as a business trust) created
pursuant to an Agreement and Declaration of Trust dated March 21, 2000, as
amended and restated as of May 21, 2007. The authorized number of shares of
Target Fund is unlimited, each without par value, and Target Fund may issue
fractional shares.
Growth Fund is one series of Acquiring Trust, which was incorporated in
Delaware in 1947, reincorporated as a Maryland corporation in 1979 under the
Maryland General Corporation Law, and reorganized as a Delaware statutory
trust on February 1, 2008. The authorized number of Growth Fund Shares is
unlimited, each without par value, and Growth Fund may issue fractional
shares.
Shares of each Fund are fully paid and nonassessable and have no preference,
preemptive or subscription rights. Target Fund and Growth Fund shareholders
have no appraisal rights.
COMPARISON OF VOTING RIGHTS. For each Fund, each whole share is entitled to
one vote as to any matter on which it is entitled to vote and each fractional
share carries a proportionate fractional vote. Shareholders of the Funds are
not entitled to cumulative voting in the election of Trustees. Quorum for a
shareholders' meeting of Target Fund, Acquiring Trust, or any of Acquiring
Trust's series (including Growth Fund) is generally forty per cent (40%) of
the shares entitled to vote which are present in person or by proxy.
The 1940 Act provides that shareholders of the Funds have the power to vote
with respect to certain matters; specifically, for the election of trustees,
the selection of auditors (under certain circumstances), approval of
investment management agreements and plans of distribution, and amendments to
policies, goals or restrictions deemed to be fundamental.
In addition, shareholders of each Fund are granted the power to vote on
certain matters by the laws governing Delaware statutory trusts and by their
Agreements and Declarations of Trust ("Trust Instruments"). The rights to
vote on these matters are the same for Target Fund and Acquiring Trust. For
example, the Trust Instruments and bylaws for both Target Fund and Acquiring
Trust give shareholders the power to vote: (1) for the election of Trustees
at a meeting called for the purpose of electing Trustees, (2) with respect to
certain amendments to the Trust Instrument as required by the Trust
Instrument, the 1940 Act or the requirements of any securities exchanges on
which shares are listed for trading, and (3) on such matters as required by
the Trust Instrument, the bylaws and any registration statement filed with
the SEC or any State, or as the Trustees may consider necessary or desirable.
Under the Trust Instruments of Target Fund and Acquiring Trust, to the extent
a larger vote is not required by applicable law, a majority of the votes cast
at a meeting at which a quorum is present generally shall decide any
questions, with the exception that Trustees are elected by not less than a
plurality of the votes cast at such a meeting.
The Trust Instruments for each Fund establish the maximum number of days
prior to a shareholders' meeting during which a record date may be set by
that Fund's Board. The maximum number of days is 120 for both Target Fund
and Acquiring Trust.
LEGAL STRUCTURES. Mutual funds formed under the Delaware Statutory Trust
Act, such as Target Fund and Acquiring Trust, are granted a significant
amount of operational flexibility with respect to features, rights and
obligations of the statutory trust and its trustees and shareholders in their
organizational instruments. Mutual funds organized as Delaware statutory
trusts have benefited from this flexibility to streamline their operations
and minimize expenses. For example, mutual funds organized as Delaware
statutory trusts are not required to hold annual shareholders' meetings if
meetings are not otherwise required by the federal securities laws or their
declarations of trust or bylaws, and such funds may create new classes or
series of shares without having to obtain the approval of shareholders. In
addition, a fund may provide in its governing documents that certain fund
transactions, such as certain mergers, reorganizations and liquidations, may
go forward with only trustee approval and not a shareholder vote; such funds
are still subject, however, to the voting requirements of the 1940 Act.
LIMITED LIABILITY FOR SHAREHOLDERS. Under the Delaware Statutory Trust Act,
shareholders of the Funds are entitled to the same limitation of personal
liability as is extended to shareholders of a corporation organized for
profit under the Delaware General Corporation Law.
BOARDS OF TRUSTEES. Pursuant to the Delaware Statutory Trust Act and Target
Fund's and Acquiring Trust's Trust Instruments, the responsibility for the
management of each of Target Fund and Acquiring Trust is vested in its Board
of Trustees, which, among other things, is empowered by the Trust Instrument
to elect officers and provide for the compensation of agents, consultants and
other professionals to assist and advise in such management. Pursuant to the
Trust Instruments, no Trustee shall be liable for any act or omission or any
conduct whatsoever in his capacity as Trustee, except for an act or omission
that constitutes a bad faith violation of the implied contractual covenant of
good faith and fair dealing, willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
INSPECTION RIGHTS. Each Fund provides shareholders certain inspection rights
of its books and records, to at least the extent required by applicable law.
LEGAL PROCEEDINGS. For information about material pending legal proceedings
and regulatory matters, please see the sections entitled "Management" and
"Additional Management Information" in the Growth Fund Prospectus and in the
"Management" section of the prospectus of Target Fund.
VOTING INFORMATION
HOW MANY VOTES ARE NECESSARY TO APPROVE TARGET FUND'S PLAN?
An Affirmative Majority Vote, as defined herein, of the outstanding voting
securities of Target Fund is required to approve the Plan. Each Target Fund
shareholder will be entitled to one vote for each full share, and a
proportionate fractional vote for each fractional share, of Target Fund held
at the close of business on January 9, 2009 (the "Record Date"). If
sufficient votes to approve the Plan are not received by the date of the
Meeting, the Meeting may be adjourned to permit further solicitations of
proxies.
Forty percent (40%) of Target Fund's outstanding shares entitled to vote in
person or by proxy as of the Record Date shall be a quorum for the
transaction of business at the Meeting. Under relevant state law and Target
Fund's Trust Instrument, abstentions and broker non-votes (that is, proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote
shares on a particular matter with respect to which the brokers or nominees
do not have discretionary power) will be treated as votes present at the
Meeting; abstentions and broker non-votes, however, will not be treated as
votes cast at such Meeting. Abstentions and broker non-votes, therefore,
will be included for purposes of determining whether a quorum is present but
will have the same effect as a vote against the Plan.
HOW DO I ENSURE MY VOTE IS ACCURATELY RECORDED?
You can vote in any one of four ways:
o By mail, with the enclosed proxy card;
o In person at the Meeting;
o By telephone; or
o Through the Internet.
If your account is eligible for voting by telephone or through the Internet,
separate instructions are enclosed.
A proxy card is, in essence, a ballot. When you vote your proxy, it tells us
how you want to vote on important issues relating to Target Fund. If you
simply sign, date and return the proxy card but give no voting instructions,
your shares will be voted in favor of the Plan and in accordance with the
views of management upon any unexpected matters that come before the Meeting
or adjournment of the Meeting. If your shares are held of record by a
broker-dealer and you wish to vote in person at the Meeting, you should
obtain a legal proxy from your broker of record and present it at the Meeting.
MAY I REVOKE MY PROXY?
You may revoke your proxy at any time before it is voted by sending a written
notice to Target Fund expressly revoking your proxy, by signing and
forwarding to Target Fund a later-dated proxy card that is received at or
prior to the Meeting, or by attending the Meeting and voting in person. If
your shares are held in the name of your broker, you will have to make
arrangements with your broker to revoke a previously executed proxy.
WHAT OTHER MATTERS WILL BE VOTED UPON AT THE MEETING?
The Target Fund Board does not intend to bring any matters before the Meeting
other than those described in this Prospectus/Proxy Statement. It is not
aware of any other matters to be brought before the Meeting by others. If
any other matter legally comes before the Meeting, proxies for which
discretion has been granted will be voted in accordance with the views of
management.
WHO IS ENTITLED TO VOTE?
Shareholders of record of Target Fund on the Record Date will be entitled to
vote at the Meeting. The following table shows the number of shares of each
class and the total number of outstanding shares of each Class of Target Fund
as of the Record Date:
Class Shares Outstanding
---------------------------------
Class A 58,115,627
Class B 3,795,009
Class C 9,330,586
Class R 1,410,180
Advisor Class 39,209,774
----------
Total 111,861,176
===========
HOW WILL PROXIES BE SOLICITED?
Computershare, a professional proxy solicitation firm (the "Solicitor"), has
been engaged to assist in the solicitation of proxies, at an estimated cost
of approximately $75,552 to $93,835. Target Fund expects that the
solicitation will be primarily by mail. As the date of the Meeting
approaches, however, certain Target Fund shareholders may receive a telephone
call from a representative of the Solicitor if their votes have not yet been
received. Authorization to permit the Solicitor to execute proxies may be
obtained by telephonic instructions from shareholders of Target Fund.
Proxies that are obtained telephonically will be recorded in accordance with
the procedures set forth below. The Target Fund Board believes that these
procedures are reasonably designed to ensure that both the identity of the
shareholder casting the vote and the voting instructions of the shareholder
are accurately determined.
In all cases where a telephonic proxy is solicited, the Solicitor
representative is required to ask for each shareholder's full name and
address and to confirm that the shareholder has received the proxy materials
in the mail. If the shareholder is a corporation or other entity, the
Solicitor representative is required to ask for the person's title and for
confirmation that the person is authorized to direct the voting of the
shares. If the information elicited agrees with the information provided to
the Solicitor, then the Solicitor representative may ask for the
shareholder's instructions on the proposal described in this Prospectus/Proxy
Statement. Although the Solicitor representative is permitted to answer
questions about the process, he or she is not permitted to recommend to the
shareholder how to vote, other than by reading any recommendation set forth
in this Prospectus/Proxy Statement. The Solicitor representative will record
the shareholder's instructions on the card. Within 72 hours, the shareholder
will be sent a letter or mailgram to confirm his or her vote and asking the
shareholder to call the Solicitor immediately if his or her instructions are
not correctly reflected in the confirmation.
If a shareholder wishes to participate in the Meeting, but does not wish to
give a proxy by telephone or over the Internet, the shareholder may submit
the proxy card originally sent with this Prospectus/Proxy Statement or attend
in person.
Target Fund will request broker-dealer firms, custodians, nominees, and
fiduciaries to forward proxy material to the beneficial owners of the shares
of record. Target Fund may reimburse broker-dealer firms, custodians,
nominees, and fiduciaries for their reasonable expenses incurred in
connection with such proxy solicitation. In addition, certain officers and
representatives of Target Fund or its affiliates, who will receive no extra
compensation for their services, may solicit proxies by telephone, telegram,
or personally.
ARE THERE DISSENTERS' RIGHTS?
Shareholders of Target Fund will not be entitled to any "dissenters' rights"
because the Transaction involves two open-end investment companies registered
under the 1940 Act (commonly called mutual funds), and thus shareholders have
the right to redeem or exchange shares of Target Fund at NAV until the
closing date. After the closing date, shareholders may redeem Growth Fund
shares or exchange them for shares of certain other funds in Franklin
Templeton Investments. Redemptions are subject to the terms and conditions
in the prospectus of the respective Fund.
PRINCIPAL HOLDERS OF SHARES
As of the Record Date, the officers and trustees of Target Fund, as a group,
owned of record and beneficially less than 1% of the outstanding voting
shares of Target Fund. As of the Record Date, the officers and trustees of
Acquiring Trust, as a group, owned of record and beneficially less than 1% of
the outstanding voting shares of Growth Fund.
From time to time, the number of Fund shares held in "street name" accounts
of various securities dealers for the benefit of their clients or in
centralized securities depositories may exceed 5% of the total shares
outstanding. To the knowledge of the Funds, no other person owned
(beneficially or of record) 5% or more of the outstanding shares of any class
of Target Fund or of Growth Fund as of the Record Date, except as listed in
Exhibit C to this Prospectus/Proxy Statement. Based upon information as of
the Record Date, upon completion of the Transaction, except as listed in
Exhibit C, it is not expected that those persons disclosed in Exhibit C as
owning 5% or more of a Fund's outstanding Class A, Class B, Class C, Class R,
or Advisor Class shares as of the Record Date will own in excess of 5% of the
then outstanding shares of such classes of Growth Fund upon completion of the
Transaction.
As of the Record Date, the Franklin Templeton Corefolio Allocation Fund, a
fund of funds (the "FT Fund"), and certain other accounts managed by Franklin
Templeton Investments owned of record, in the aggregate, approximately 33.8%
of Target Fund's outstanding shares and approximately 8.2% of Growth Fund's
outstanding shares. After the Transaction of the FT Fund and other accounts
managed by Franklin Templeton Investments are projected, based upon
information as of the Record Date, to own of record approximately 16.3% of
Growth Fund's outstanding shares. Actual holdings after the Transaction may
differ from those projected based upon information as of the Record Date.
Because Franklin Templeton Investments will vote shares of Target Fund held
by the FT Fund and the 529 College Savings Plan noted in Exhibit C for or
against adoption of the Plan in proportion to the votes of all other Target
Fund shareholders, a voting technique known as "echo voting," the vote on the
Transaction will be controlled by Target Fund's other shareholders. Any
shares of Growth Fund held by the FT Fund and such 529 College Savings Plans
are expected also to be voted at future shareholder meetings using echo
voting, in accordance with Franklin Templeton Investments' current proxy
voting policies. Such proxy voting policies may change in the future.
SHAREHOLDER PROPOSALS
Neither Target Fund nor Acquiring Trust is required to hold, and neither
intends to hold, regular annual meetings of shareholders. A shareholder who
wishes to submit a proposal for consideration for inclusion in Target Fund's
proxy statement for the next meeting of shareholders (if any) should send a
written proposal to Target Fund's offices at One Franklin Parkway, San Mateo,
California 94403-1906, Attention: Secretary, so that it is received within a
reasonable time in advance of such meeting in order to be included in Target
Fund's proxy statement and proxy card relating to that meeting and presented
at the meeting. A shareholder proposal may be presented at a meeting of
shareholders only if such proposal concerns a matter that may be properly
brought before the meeting under applicable federal proxy rules, state law,
and other governing instruments.
Submission of a proposal by a shareholder does not guarantee that the
proposal will be included in Target Fund's proxy statement or presented at
the meeting.
ADJOURNMENT
The holders of a majority of the shares present (in person or by proxy) and
entitled to vote with respect to Target Fund at the Meeting, whether or not a
quorum is present, or the chairperson of the Target Fund Board, the president
of Target Fund (in the absence of the chairperson of the Board), or any vice
president or other authorized officer of Target Fund (in the absence of the
president) may adjourn the Meeting. Such authority to adjourn the Meeting
may be used for any reason whatsoever, including to allow time for further
solicitation of proxies. Any adjournment will not delay or otherwise affect
the effectiveness and validity of any business transacted at the Meeting
prior to adjournment. The persons designated as proxies may use their
discretionary authority to vote as instructed by management of Target Fund on
questions of adjournment.
By Order of the Board of Trustees,
Karen L. Skidmore
SECRETARY
February 9, 2009
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1940 ACT--The Investment Company Act of 1940, as amended.
ACQUIRING TRUST -- Franklin Custodian Funds, a Delaware statutory trust.
AFFIRMATIVE MAJORITY VOTE -- The affirmative vote of the lesser of: (i) a
majority of the outstanding shares of Target Fund, or (ii) 67% or more of the
outstanding shares of Target Fund present at or represented by proxy at the
Meeting if the holders of more than 50% of the outstanding shares of Target
Fund are present or represented by proxy.
CDSC -- Contingent deferred sales charge.
DISTRIBUTORS -- Franklin Templeton Distributors, Inc., One Franklin Parkway,
San Mateo, CA 94403-1906, the principal underwriter for the Funds.
FAI--Franklin Advisers, Inc., the investment manager for the Funds.
FRANKLIN TEMPLETON FUNDS -- The U.S. registered mutual funds in Franklin
Templeton Investments, excluding Franklin Templeton Variable Insurance
Products Trust and Franklin Mutual Recovery Fund.
FRANKLIN TEMPLETON INVESTMENTS -- Resources is a publicly owned global
investment management organization operating as Franklin Templeton
Investments. Franklin Templeton Investments provides global and domestic
investment management services through its Franklin, Templeton, Mutual Series
and Fiduciary Trust subsidiaries.
FT SERVICES -- Franklin Templeton Services, LLC, the administrator for the
Funds. FT Services is an indirect, wholly owned subsidiary of Resources and
is an affiliate to each Fund's investment manager and principal underwriter.
INDEPENDENT TRUSTEES--The Trustees who are not "interested persons" of a Fund,
as such term is defined in the 1940 Act.
INVESTMENT ADVISORY--Franklin Investment Advisory Services, LLC, One Franklin
Parkway, San Mateo, CA 94403-1906, an affiliate of FAI and the subadviser for
Growth Fund.
INVESTOR SERVICES -- Franklin Templeton Investor Services, LLC, One Franklin
Parkway, San Mateo, CA, the shareholder servicing, transfer agent and
dividend-paying agent for the Funds.
MEETING -- The Special Meeting of Shareholders of Target Fund concerning
approval of the Plan.
NET ASSET VALUE (NAV )-- The net asset value of a mutual fund is determined by
deducting a fund's liabilities from the total assets of the portfolio. The
net asset value per share is determined by dividing the net asset value of
the fund by the number of shares outstanding.
PLAN--The Agreement and Plan of Reorganization between Target Fund and
Franklin Custodian Funds on behalf of Franklin Growth Fund.
RESOURCES -- Franklin Resources, Inc., One Franklin Parkway, San Mateo, CA
94403-1906.
SAI -- Statement of Additional Information, a document that supplements
information found in a mutual fund's prospectus.
SEC -- U.S. Securities and Exchange Commission.
SECURITIES DEALER -- A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Funds. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
TARGET FUND -- Franklin Capital Growth Fund, a Delaware statutory trust.
TRANSACTION -- The proposed transaction contemplated by the Plan.
U.S.-- The United States of America.
EXHIBITS TO PROSPECTUS/PROXY STATEMENT
EXHIBIT
A. Form of Agreement and Plan of Reorganization
B. Prospectus of Franklin Growth Fund - Class A, Class B, Class C, Class R
and Advisor Class shares, dated February 1, 2009 (enclosed)
C. Principal Holders of Securities
EXHIBIT A
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan"), is made as of this
__ day of _______, 2009, by and between Franklin Custodian Funds, a statutory
trust created under the laws of the State of Delaware ("Acquiring Trust"),
with its principal place of business at One Franklin Parkway, San Mateo, CA
94403-1906, on behalf of its series, Franklin Growth Fund ("Acquiring Fund"),
and Franklin Capital Growth Fund, a statutory trust created under the laws of
the State of Delaware with its principal place of business at One Franklin
Parkway, San Mateo, CA 94403-1906 ("Target Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Reorganization") will
consist of (i) the acquisition by Acquiring Trust, on behalf of Acquiring
Fund, of substantially all of the property, assets and goodwill of Target
Fund in exchange solely for full and fractional Class A, Class B, Class C,
Class R, and Advisor Class shares of beneficial interest, with no par value,
of Acquiring Fund ("Acquiring Fund Shares"); (ii) the distribution of
Acquiring Fund Shares to the holders of Class A, Class B, Class C, Class R,
and Advisor Class shares of beneficial interest of Target Fund ("Target Fund
Shares") according to their respective interests in Target Fund in complete
liquidation of Target Fund; and (iii) the dissolution of Target Fund as soon
as is practicable after the closing (as described in Section 3, hereinafter
called the "Closing"), all upon and subject to the terms and conditions of
the Plan hereinafter set forth.
AGREEMENT
In order to consummate the Reorganization and in consideration of the
premises and of the covenants and agreements hereinafter set forth, and
intending to be legally bound, the parties hereto covenant and agree as
follows:
1. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF TARGET FUND.
(a) Subject to the terms and conditions of the Plan, and in reliance on
the representations and warranties of Acquiring Trust, on behalf of Acquiring
Fund, herein contained, and in consideration of the delivery by Acquiring
Trust of the number of Acquiring Fund Shares hereinafter provided, Target
Fund agrees that, at the time of Closing, it will convey, transfer and deliver
to Acquiring Trust, for the benefit of Acquiring Fund, all of Target Fund's
then existing assets, including any interest in pending or future legal
claims in connection with past or present portfolio holdings, whether in the
form of class action claims, opt-out or other direct litigation claims, or
regulator or government-established investor recovery fund claims, and any
and all resulting recoveries, free and clear of all liens, encumbrances, and
claims whatsoever (other than shareholders' rights of redemption), except for
cash, bank deposits, or cash equivalent securities in an estimated amount
necessary to: (i) pay 25% of the costs and expenses of carrying out the
Reorganization (including, but not limited to, fees of counsel and
accountants, and expenses of its liquidation and dissolution contemplated
hereunder), in accordance with Section 9 of the Plan, which costs and
expenses shall be established on Target Fund's books as liability reserves;
(ii) discharge its unpaid liabilities on its books at the Closing Date (as
such term is defined in Section 3), including, but not limited to, its income
dividends and capital gains distributions, if any, payable for the period
prior to, and through, the Closing Date; and (iii) pay such contingent
liabilities, if any, as the Board of Trustees of Target Fund shall reasonably
deem to exist against Target Fund at the Closing Date, for which contingent
and other appropriate liability reserves shall be established on Target
Fund's books (such assets hereinafter "Net Assets"). Neither Acquiring Trust
nor Acquiring Fund shall assume any liability of Target Fund, and Target Fund
shall use its reasonable best efforts to discharge all of its known
liabilities, so far as may be possible, from the cash, bank deposits and cash
equivalent securities described above.
(b) Subject to the terms and conditions of the Plan, and in reliance on
the representations and warranties of Target Fund herein contained, and in
consideration of such sale, conveyance, transfer, and delivery, Acquiring
Trust agrees to deliver to Target Fund at the Closing the number of Acquiring
Fund Shares, determined by dividing the net asset value per share of Class A,
Class B, Class C, Class R, and Advisor Class shares of Target Fund by the net
asset value per share of Class A, Class B, Class C, Class R, and Advisor
Class shares, respectively, of Acquiring Fund, and multiplying the result
thereof by the number of outstanding Class A, Class B, Class C, Class R, and
Advisor Class shares of Target Fund, respectively, all as of 1:00 p.m.,
Pacific Time, on the Closing Date. Acquiring Fund Shares delivered to Target
Fund at the Closing shall have an aggregate net asset value equal to the
value of Target Fund's Net Assets, all determined as provided in Section 2 of
the Plan and as of the date and time specified herein.
(c) Immediately following the Closing, Target Fund shall be dissolved and
shall distribute the Acquiring Fund Shares received by Target Fund pursuant
to this Section 1 pro rata to Target Fund's shareholders of record as of the
close of business on the Closing Date. Such distribution shall be
accomplished by the establishment of accounts on the share records of
Acquiring Fund in the amounts due such shareholders based on their respective
holdings in Target Fund as of the close of business on the Closing Date.
Fractional Acquiring Fund Shares shall be carried to the third decimal
place. Certificates for Acquiring Fund Shares shall not be issued, unless
specifically requested by a shareholder. After the distribution, Target Fund
shall be dissolved.
(d) At the Closing, each shareholder of record of Target Fund as of the
record date (the "Distribution Record Date") with respect to any unpaid
dividends and other distributions that were declared prior to the Closing,
including any dividend or distribution declared pursuant to Section 8(e)
hereof, shall have the right to receive such unpaid dividends and
distributions with respect to the shares of Target Fund that such person had
on the Distribution Record Date.
(e) All books and records relating to Target Fund, including all books and
records required to be maintained under the Investment Company Act of 1940,
as amended (the "1940 Act"), and the rules and regulations thereunder, shall
be available to Acquiring Trust from and after the date of the Plan, and
shall be turned over to Acquiring Trust on or prior to the Closing.
2. VALUATION.
(a) The net asset value of Acquiring Fund Shares and Target Fund Shares
and the value of Target Fund's Net Assets to be acquired by Acquiring Fund
hereunder shall in each case be computed as of 1:00 p.m., Pacific Time, on
the Closing Date, unless on such date: (a) the New York Stock Exchange
("NYSE") is not open for unrestricted trading; or (b) the reporting of trading
on the NYSE is disrupted; or (c) any other extraordinary financial event or
market condition occurs (each of the events described in (a), (b) or (c), a
"Market Disruption"). The net asset value per share of Acquiring Fund Shares
and Target Fund Shares and the value of Target Fund's Net Assets shall be
computed in accordance with the valuation procedures set forth in the most
recent respective prospectuses of Acquiring Fund and Target Fund, as amended
or supplemented.
(b) In the event of a Market Disruption on the proposed Closing Date, so
that an accurate appraisal of the net asset value of Acquiring Fund Shares or
Target Fund Shares or the value of Target Fund's Net Assets is impracticable,
the Closing Date shall be postponed until the first business day when regular
trading on the NYSE shall have been fully resumed and reporting shall have
been restored and other trading markets are otherwise stabilized.
3. CLOSING AND CLOSING DATE.
The Closing shall take place at the principal office of Acquiring Trust at
2:00 p.m., Pacific Time, on May 6, 2009 or such later date as the parties may
mutually agree (the "Closing Date"). Target Fund shall have provided for
delivery as of the Closing of those Net Assets of Target Fund to be
transferred to the account of Acquiring Fund's Custodian, The Bank of New
York Mellon, Mutual Funds Division, 100 Church Street, New York, NY 10286.
Target Fund shall deliver at the Closing a list of names and addresses of the
shareholders of record of Target Fund Shares and the number of full and
fractional shares of beneficial interest owned by each such shareholder as of
1:00 p.m., Pacific Time, on the Closing Date, certified by its transfer agent
or by its President to the best of its or his knowledge and belief.
Acquiring Trust on behalf of Acquiring Fund shall provide evidence
satisfactory to Target Fund that such Acquiring Fund Shares have been
registered in an account on the books of Acquiring Fund in such manner as the
officers of Target Fund may reasonably request.
4. REPRESENTATIONS AND WARRANTIES BY ACQUIRING TRUST, ON BEHALF OF ACQUIRING
FUND.
Acquiring Trust, on behalf of Acquiring Fund, represents and warrants to
Target Fund that:
(a) Acquiring Fund is a series of Acquiring Trust, a statutory trust
organized originally as a Delaware corporation in 1947, reincorporated as a
Maryland corporation in 1979, and converted into a Delaware statutory trust
effective February 1, 2008. Acquiring Trust is duly registered under the
1940 Act as an open-end, management investment company and all of Acquiring
Fund Shares sold were sold pursuant to an effective registration statement
filed under the Securities Act of 1933, as amended (the "1933 Act"), except
for those shares sold pursuant to the private offering exemption for the
purpose of raising initial capital or obtaining any required initial
shareholder approvals.
(b) Acquiring Trust is authorized to issue an unlimited number of shares
of beneficial interest, without par value, of Acquiring Fund, each
outstanding share of which is, and each share of which when issued pursuant
to and in accordance with the Plan will be, fully paid, non-assessable, and
has or will have full voting rights. Acquiring Trust currently issues shares
of five (5) series, including Acquiring Fund. Acquiring Fund issues five
classes of shares: Class A, Class B, Class C, Class R, and Advisor Class. No
shareholder of Acquiring Trust shall have any preemptive or other right to
subscribe for Acquiring Fund Shares.
(c) The financial statements appearing in Acquiring Fund's Annual Report
to Shareholders for the fiscal year ended September 30, 2008, audited by
PricewaterhouseCoopers LLP, a copy of which has been delivered to Target
Fund, and any interim unaudited financial statements, copies of which may be
furnished to Target Fund, fairly present the financial position of Acquiring
Fund as of their respective dates and the results of Acquiring Fund's
operations for the periods indicated in conformity with Generally Accepted
Accounting Principles applied on a consistent basis.
(d) The books and records of Acquiring Fund accurately summarize the
accounting data represented and contain no material omissions with respect to
the business and operations of Acquiring Fund.
(e) Acquiring Trust, on behalf of Acquiring Fund, is not a party to or
obligated under any provision of its Agreement and Declaration of Trust,
By-laws, any contract or any other commitment or obligation, and is not
subject to any order or decree, that would be violated by its execution of or
performance under the Plan, and no consent, approval, authorization or order
of any court or governmental authority is required for the consummation by
Acquiring Fund or Acquiring Trust of the transactions contemplated by the
Plan, except for the registration of Acquiring Fund Shares under the 1933
Act, the 1940 Act, or as may otherwise be required under the federal and
state securities laws or the rules and regulations thereunder.
(f) Acquiring Trust has elected to treat Acquiring Fund as a regulated
investment company ("RIC") for federal income tax purposes under Part I of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Acquiring Fund is a "fund" as defined in Section 851(g)(2) of the Code, has
qualified as a RIC for each taxable year since its inception, and intends to
continue to qualify as a RIC as of the Closing Date. Consummation of the
transactions contemplated by the Plan will not cause Acquiring Fund to fail
to be qualified as a RIC as of the Closing Date.
(g) Acquiring Fund is not under jurisdiction of a Court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(h) Acquiring Fund does not have any unamortized or unpaid organizational
fees or expenses.
(i) Acquiring Fund does not have any known liabilities, costs or
expenses of a material amount, contingent or otherwise, other than those
incurred in the ordinary course of business as an investment company.
(j) There is no intercorporate indebtedness existing between Target Fund
and Acquiring Fund that was issued, acquired, or will be settled at a
discount.
(k) Acquiring Fund does not own, directly or indirectly, nor has it owned
during the past five (5) years, directly or indirectly, any shares of Target
Fund.
(l) Acquiring Trust has no plan or intention to issue additional shares of
Acquiring Fund following the Reorganization except for shares issued in the
ordinary course of Acquiring Fund's business as a series of an open-end
investment company; nor does Acquiring Trust have any plan or intention to
redeem or otherwise reacquire any shares of Acquiring Fund issued pursuant to
the Plan, either directly or through any transaction, agreement, or
arrangement with any other person, other than in the ordinary course of its
business or to the extent necessary to comply with its legal obligation under
Section 22(e) of the 1940 Act.
(m) Acquiring Fund is in the same line of business as Target Fund before
the Reorganization and did not enter into such line of business as part of
the Reorganization. Acquiring Fund will actively continue Target Fund's
business in substantially the same manner that Target Fund conducted that
business immediately before the Reorganization and has no plan or intention
to change such business. On the Closing Date, Acquiring Fund expects that at
least 33 (1)/3% of Target Fund's portfolio assets will meet the investment
objectives, strategies, policies, risks and restrictions of Acquiring Fund.
Acquiring Fund has no plan or intention to change any of its investment
objectives, strategies, policies, risks and restrictions after the
Reorganization. Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the former assets of Target Fund, except for dispositions
made in the ordinary course of its business or dispositions necessary to
maintain its qualification as a RIC, although in the ordinary course of its
business, Acquiring Fund will continuously review its investment portfolio
(as Target Fund did before the Closing) to determine whether to retain or
dispose of particular securities, including those included among the former
assets of Target Fund.
(n) The registration statement on Form N-14 referred to in Section 7(g)
hereof (the "Registration Statement"), and any prospectus or statement of
additional information of Acquiring Fund contained or incorporated therein by
reference, and any supplement or amendment to the Registration Statement or
any such prospectus or statement of additional information, on the effective
date of the Registration Statement, on the date of the Special Meeting of
Target Fund shareholders, and on the Closing Date: (i) shall comply in all
material respects with the applicable provisions of the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act,
the rules and regulations thereunder, and all applicable state securities
laws and the rules and regulations thereunder; and (ii) shall not contain 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 the statements were made, not
misleading.
5. REPRESENTATIONS AND WARRANTIES BY TARGET FUND.
Target Fund represents and warrants to Acquiring Trust that:
(a) Target Fund was originally organized as a California corporation on
August 30, 1984, and was reorganized as a Delaware statutory trust effective
March 21, 2000. Target Fund is duly registered under the 1940 Act as an
open-end, management investment company and all Target Fund Shares sold were
sold pursuant to an effective registration statement filed under the 1933
Act, except for those shares sold pursuant to the private offering exemption
for the purposes of raising the required initial capital or obtaining any
required initial shareholder approvals.
(b) Target Fund is authorized to issue an unlimited number of shares of
beneficial interest, without par value, each outstanding share of which is
fully paid, non-assessable, and has full voting rights. Target Fund has five
classes of shares and an unlimited number of shares of beneficial interest of
Target Fund have been allocated and designated to each such class. No
shareholder of Target Fund has or will have any option, warrant, or
preemptive rights of subscription or purchase with respect to Target Fund
Shares.
(c) The financial statements appearing in Target Fund's Annual Report to
Shareholders for the fiscal year ended June 30, 2008, audited by
PricewaterhouseCoopers LLP, and unaudited Semi-Annual Report to Shareholders
for the period ended December 31, 2008, copies of which have been delivered
to Acquiring Trust, and any interim financial statements for Target Fund that
may be furnished to Acquiring Trust, fairly present the financial position of
Target Fund as of their respective dates and the results of Target Fund's
operations for the periods indicated in conformity with generally accepted
accounting principles applied on a consistent basis.
(d) Target Fund is not a party to or obligated under any provision of its
Agreement and Declaration of Trust or Bylaws, as amended, and restated, or
any contract or any other commitment or obligation, and is not subject to any
order or decree that would be violated by its execution of or performance
under the Plan. Target Fund has no material contracts or other commitments
(other than the Plan or agreements for the purchase of securities entered
into in the ordinary course of business and consistent with its obligations
under the Plan) which will not be terminated by Target Fund in accordance
with their terms at or prior to the Closing Date, or which will result in a
penalty or additional fee to be due or payable by Target Fund.
(e) Target Fund has elected to be treated as a RIC for federal income tax
purposes under Part I of Subchapter M of the Code. Target Fund is a "fund"
as defined in Section 851(g)(2) of the Code, has qualified as a RIC for each
taxable year since its inception, and will qualify as a RIC as of the Closing
Date. Consummation of the transactions contemplated by the Plan will not
cause Target Fund to fail to be qualified as a RIC as of the Closing Date.
(f) Target Fund is not under jurisdiction of a Court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(g) Target Fund does not have any unamortized or unpaid organization fees
or expenses.
(h) Target Fund does not have any known liabilities, costs or expenses of
a material amount, contingent or otherwise, other than those reflected in the
financial statements referred to in Section 5(c) hereof and those incurred in
the ordinary course of business as an investment company and of a nature and
amount similar to, and consistent with, those shown in such financial
statements since the dates of those financial statements.
(i) Since December 31, 2008, there has not been any material adverse
change in Target Fund's financial condition, assets, liabilities, or business
other than changes occurring in the ordinary course of its business.
(j) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Target Fund of the
transactions contemplated by the Plan, except the necessary Target Fund
shareholder approval, or as may otherwise be required under the federal or
state securities laws or the rules and regulations thereunder.
(k) There is no intercorporate indebtedness existing between Target Fund
and Acquiring Fund that was issued, acquired, or will be settled at a
discount.
(l) During the five-year period ending on the Closing Date, (i) Target
Fund has not acquired, and will not acquire, Target Fund Shares with
consideration other than Acquiring Fund Shares or Target Fund Shares, except
for redemptions in the ordinary course of Target Fund's business or to the
extent necessary to comply with its legal obligation under Section 22(e) of
the 1940 Act, and (ii) no distributions will have been made with respect to
Target Fund Shares (other than regular, normal dividend distributions made
pursuant to Target Fund's historic dividend paying practice), either directly
or through any transaction, agreement, or arrangement with any other person,
except for distributions described in Sections 852 and 4982 of the Code.
(m) As of the Closing Date, Target Fund will not have outstanding any
warrants, options, convertible securities, or any other type of rights
pursuant to which any person could acquire shares of Target Fund, except for
the right of investors to acquire its shares at the applicable stated
offering price in the normal course of its business as an open-end management
investment company operating under the 1940 Act.
(n) Throughout the five year period ending on the Closing Date, Target
Fund will have conducted its historic business within the meaning of
Section 1.368-1(d) of the Income Tax Regulations under the Code. Target Fund
did not enter into (or expand) a line of business as part of the
Reorganization. Target Fund will not alter its investment portfolio in
connection with the Reorganization.
6. REPRESENTATIONS AND WARRANTIES BY TARGET FUND AND ACQUIRING TRUST.
Target Fund and Acquiring Trust, on behalf of Acquiring Fund, each
represents and warrants to the other that:
(a) The statement of assets and liabilities to be furnished by it as of
1:00 p.m., Pacific Time, on the Closing Date for the purpose of determining
the number of Acquiring Fund Shares to be issued pursuant to Section 1 of the
Plan, will accurately reflect Target Fund's Net Assets and outstanding
shares, as of such date, in conformity with generally accepted accounting
principles applied on a consistent basis.
(b) At the Closing, it will have good and marketable title to all of the
securities and other assets shown on the statement of assets and liabilities
referred to in (a) above, free and clear of all liens or encumbrances of any
nature whatsoever, except such imperfections of title or encumbrances as do
not materially detract from the value or use of the assets subject thereto,
or materially affect title thereto.
(c) Except as disclosed in its currently effective prospectus relating to
Target Fund or Acquiring Fund, as applicable, there is no material suit,
judicial action, or legal or administrative proceeding pending or threatened
against it. It 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.
(d) There are no known actual or proposed deficiency assessments with
respect to any taxes payable by it.
(e) The execution, delivery, and performance of the Plan have been duly
authorized by all necessary action of its Board of Trustees, and the Plan,
subject with respect to Target Fund to the approval of Target Fund's
shareholders, constitutes a valid and binding obligation enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization
arrangement, moratorium, and other similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(f) It anticipates that consummation of the Plan will not cause Target
Fund or Acquiring Fund, as applicable, to fail to conform to the requirements
of Subchapter M of the Code for federal income taxation qualification as a
RIC at the end its fiscal year.
7. COVENANTS OF TARGET FUND AND ACQUIRING TRUST.
(a) Target Fund and Acquiring Trust, on behalf of Acquiring Fund, each
covenants to operate its respective business as presently conducted between
the date hereof and the Closing, it being understood that such ordinary
course of business will include the distribution of customary dividends and
distributions and any other distribution necessary or desirable to minimize
federal income or excise taxes.
(b) Target Fund undertakes that it will not acquire Acquiring Fund Shares
for the purpose of making distributions thereof to anyone other than Target
Fund's shareholders.
(c) Target Fund undertakes that, if the Plan is consummated, it will
liquidate and dissolve.
(d) Target Fund and Acquiring Trust, on behalf of Acquiring Fund, each
agree that, by the Closing, all of their federal and other tax returns and
reports required by law to be filed on or before such date shall have been
filed, and either all federal and other taxes shown as due on said returns
shall have been paid, or adequate liability reserves shall have been provided
for the payment of such taxes, and to the best of their knowledge no such tax
return is currently under audit and no tax deficiency or liability has been
asserted with respect to such tax returns or reports by the Internal Revenue
Service or any state or local tax authority.
(e) At the Closing, Target Fund will provide Acquiring Fund with a copy of
the shareholder ledger accounts, certified by Target Fund's transfer agent or
its President to the best of its or his knowledge and belief, for all the
holders of record of Target Fund Shares as of 1:00 p.m., Pacific Time, on the
Closing Date who are to become shareholders of Acquiring Fund as a result of
the transfer of assets that is the subject of the Plan.
(f) As of the Closing, the Board of Trustees of Target Fund shall have
called, and Target Fund shall have held, a Special Meeting of Target Fund's
shareholders to consider and vote upon the Plan (the "Special Meeting") and
Target Fund shall have taken all other actions reasonably necessary to obtain
approval of the transactions contemplated herein. Target Fund shall have
mailed to each shareholder of record of Target Fund entitled to vote at the
Special Meeting at which action on the Plan is to be considered, in
sufficient time to comply with requirements as to notice thereof, a combined
Prospectus/Proxy Statement that complies in all material respects with the
applicable provisions of the 1933 Act, Section 14(a) of the 1934 Act and
Section 20(a) of the 1940 Act, and the rules and regulations thereunder (the
"Prospectus/Proxy Statement").
(g) Acquiring Trust has filed the Registration Statement with the SEC and
used its best efforts to provide that the Registration Statement became
effective as promptly as practicable. At the time it became effective, the
Registration Statement: (i) complied in all material respects with the
applicable provisions of the 1933 Act and the rules and regulations
promulgated thereunder; and (ii) did not contain any untrue statement of
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading. At the time the
Registration Statement became effective, at the time of the Special Meeting,
and at the Closing Date, the prospectus and statement of additional
information included in the Registration Statement did not and will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(h) Subject to the provisions of the Plan, Acquiring Trust and Target Fund
each shall take, or cause to be taken, all action, and do or cause to be
done, all things reasonably necessary, proper or advisable to consummate the
transactions contemplated by the Plan.
(i) Target Fund shall deliver to Acquiring Trust at the Closing Date
confirmation or other adequate evidence as to the tax costs and holding
periods of the assets and property of Target Fund transferred to Acquiring
Trust, on behalf of the Acquiring Fund. in accordance with the terms of the
Plan.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY TARGET FUND AND ACQUIRING TRUST.
The consummation of the Plan hereunder shall be subject to the following
respective conditions:
(a) That: (i) all the representations and warranties of the other party
contained herein shall be true and correct as of the Closing with the same
effect as though made as of and at such date; (ii) the other party shall have
performed all obligations required by the Plan to be performed by it prior to
the Closing; and (iii) the other party shall have delivered to such party a
certificate signed by the President and by the Secretary or equivalent
officer to the foregoing effect.
(b) That each party shall have delivered to the other party a copy of the
resolutions approving the Plan adopted and approved by the appropriate action
of the Board of Trustees certified by its Secretary or equivalent officer of
such party.
(c) That the SEC shall have declared effective the Registration Statement
and not have issued an unfavorable management report under Section 25(b) of
the 1940 Act or instituted or threatened to institute any proceeding seeking
to enjoin consummation of the Plan under Section 25(c) of the 1940 Act. And,
further, no other legal, administrative or other proceeding shall have been
instituted or threatened that would materially affect the financial condition
of either party or would prohibit the transactions contemplated hereby.
(d) That the Plan and the Reorganization contemplated hereby shall have
been adopted and approved by the appropriate action of the shareholders of
Target Fund at a meeting or any adjournment thereof.
(e) That a distribution or distributions shall have been declared for
Target Fund prior to the Closing Date that, together with all previous
distributions, shall have the effect of distributing to its shareholders:
(i) all of its ordinary income and all of its capital gain net income, if any,
for the period from the close of its last fiscal year to 1:00 p.m., Pacific
Time, on the Closing Date; and (ii) any undistributed ordinary income and
capital gain net income from any prior period to the extent not otherwise
declared for distribution. Capital gain net income has the meaning given such
term by Section 1222(9) of the Code.
(f) That all required consents of other parties and all other consents,
orders, and permits of federal, state and local authorities (including those
of the SEC and of state Blue Sky securities authorities, including any
necessary "no-action" positions or exemptive orders from such federal and
state authorities) to permit consummation of the transaction contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order, or permit would not involve a risk of material adverse effect
on the assets and properties of Target Fund or Acquiring Fund.
(g) That there shall be delivered to Target Fund and Acquiring Trust, on
behalf of Acquiring Fund, an opinion in form and substance satisfactory to
them from the law firm of Stradley Ronon Stevens & Young, LLP, counsel to
Acquiring Trust and Target Fund, to the effect that, provided the transaction
contemplated hereby is carried out in accordance with the Plan and the laws
of the State of Delaware, and based upon certificates of the officers of
Target Fund and Acquiring Trust with regard to matters of fact:
(1) The acquisition by Acquiring Fund of substantially all the assets
of Target Fund, as provided for herein, in exchange for Acquiring Fund
Shares, followed by the distribution by Target Fund to its shareholders of
Acquiring Fund Shares in complete liquidation of Target Fund, will qualify
as a reorganization within the meaning of Section 368(a)(1) of the Code,
and Target Fund and Acquiring Fund will each be a "party to the
reorganization" within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Target Fund upon the
transfer of substantially all of its assets to Acquiring Fund in exchange
solely for voting shares of Acquiring Fund (Sections 361(a) and 357(a) of
the Code);
(3) Acquiring Fund will recognize no gain or loss upon the receipt of
substantially all of the assets of Target Fund in exchange solely for
voting shares of Acquiring Fund (Section 1032(a) of the Code);
(4) No gain or loss will be recognized by Target Fund upon the
distribution of Acquiring Fund Shares to its shareholders in liquidation
of Target Fund, in pursuance of the Plan (Section 361(c)(1) of the Code);
(5) The basis of the assets of Target Fund received by Acquiring Fund
will be the same as the basis of such assets to Target Fund immediately
prior to the Reorganization (Section 362(b) of the Code);
(6) The holding period of the assets of Target Fund received by
Acquiring Fund will include the period during which such assets were held
by Target Fund (Section 1223(2) of the Code);
(7) No gain or loss will be recognized by the shareholders of Target
Fund upon the exchange of their shares in Target Fund for voting shares of
Acquiring Fund including fractional shares to which they may be entitled
(Section 354(a) of the Code);
(8) The basis of Acquiring Fund Shares received by the shareholders of
Target Fund shall be the same as the basis of Target Fund Shares exchanged
therefor (Section 358(a)(1) of the Code);
(9) The holding period of Acquiring Fund Shares received by
shareholders of Target Fund (including fractional shares to which they may
be entitled) will include the holding period of Target Fund Shares
surrendered in exchange therefor, provided that Target Fund Shares were
held as a capital asset on the effective date of the exchange (Section
1223(1) of the Code); and
(10) Acquiring Fund will succeed to and take into account as of the
date of the transfer (as defined in Section 1.381(b)-1(b) of the
regulations issued by the United States Treasury ("Treasury Regulations"))
the items of Target Fund described in Section 381(c) of the Code, subject
to the conditions and limitations specified in Sections 381, 382, 383 and
384 of the Code and the Treasury Regulations.
(h) That there shall be delivered to Acquiring Trust, on behalf of
Acquiring Fund, an opinion in form and substance satisfactory to it from
Stradley Ronon Stevens & Young, LLP, counsel to Target Fund to the effect
that, subject in all respects to the effects of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and other laws now or
hereafter affecting generally the enforcement of creditors' rights:
(1) Target Fund is a validly existing statutory trust in good standing
under the laws of the State of Delaware;
(2) Target Fund is an open-end investment company of the management
type registered as such under the 1940 Act;
(3) The execution and delivery of the Plan and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary statutory trust action on the part of Target Fund; and
(4) The Plan is the legal, valid and binding obligation of Target Fund
and is enforceable against Target Fund in accordance with its terms.
In giving the opinions set forth above, counsel may state that it is
relying on certificates of the officers of Target Fund with regard to matters
of fact, and certain certifications and written statements of governmental
officials with respect to the good standing of Target Fund.
(i) That there shall be delivered to Target Fund an opinion in form and
substance satisfactory to it from the law firm of Stradley Ronon Stevens &
Young, LLP, counsel to Acquiring Trust, on behalf of Acquiring Fund, to the
effect that, subject in all respects to the effects of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other laws
now or hereafter affecting generally the enforcement of creditors' rights:
(1) Acquiring Fund is a series of Acquiring Trust and Acquiring Trust
is a validly existing statutory trust in good standing under the laws of
the State of Delaware;
(2) Acquiring Trust is authorized to issue an unlimited number of
shares of beneficial interest, without par value, of Acquiring Fund;
(3) Acquiring Trust is an open-end investment company of the
management type registered as such under the 1940 Act;
(4) Acquiring Fund Shares to be issued pursuant to the terms of the
Plan have been duly authorized and, when issued and delivered as provided
in the Plan and the Registration Statement, will have been validly issued
and fully paid and will be non-assessable by Acquiring Trust, on behalf of
Acquiring Fund;
(5) The execution and delivery of the Plan and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary statutory trust action on the part of Acquiring Trust, on behalf
of Acquiring Fund;
(6) The Plan is the legal, valid and binding obligation of Acquiring
Trust, on behalf of Acquiring Fund, and is enforceable against Acquiring
Trust, on behalf of Acquiring Fund, in accordance with its terms; and
(7) The registration statement on Form N-1A of Acquiring Trust, of
which the prospectus dated February 1, 2009, of Acquiring Fund is a part
(the "Prospectus"), is, at the time of the signing of the Plan, effective
under the 1933 Act, and, to the best knowledge of such counsel, no stop
order suspending the effectiveness of such registration statement has been
issued, and no proceedings for such purpose have been instituted or are
pending before or threatened by the SEC under the 1933 Act.
In giving the opinions set forth above, counsel may state that it is
relying on certificates of the officers of Acquiring Trust with regard to
matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of Acquiring Trust.
(j) That Acquiring Trust's prospectus contained in the Registration
Statement with respect to Acquiring Fund Shares delivered to Target Fund's
shareholders in accordance with the Plan shall be effective, and no stop
order suspending the effectiveness of the Registration Statement or any
amendment or supplement thereto shall have been issued prior to the Closing
Date or shall be in effect at Closing, and no proceedings for the issuance of
such an order shall be pending or threatened on that date.
(k) That Acquiring Fund Shares to be delivered hereunder shall be eligible
for sale with each state commission or agency with which such eligibility is
required in order to permit Acquiring Fund Shares lawfully to be delivered to
each holder of Target Fund Shares.
(l) That, at the Closing, there shall be transferred to Acquiring Trust,
on behalf of Acquiring Fund, aggregate Net Assets of Target Fund comprising
at least 90% in fair market value of the total net assets and 70% of the fair
market value of the total gross assets recorded on the books of Target Fund
on the Closing Date.
(m) That there be delivered to Acquiring Trust, on behalf of Acquiring
Fund, information concerning the tax basis of Target Fund in all securities
transferred to Acquiring Fund, together with shareholder information
including: the names, addresses, and taxpayer identification numbers of the
shareholders of Target Fund as of the Closing Date; the number of shares held
by each shareholder; the dividend reinvestment elections applicable to each
shareholder; and the backup withholding and nonresident alien withholding
certifications, notices or records on file with Target Fund with respect to
each shareholder.
9. EXPENSES.
The expenses of entering into and carrying out the provisions of the Plan
shall be borne as follows: each of Target Fund and Acquiring Trust, on behalf
of Acquiring Fund, will pay 25% of the costs of the Reorganization, and
Franklin Advisers, Inc., the investment manager for both Acquiring Fund and
Target Fund, will pay 50% of the costs of the Reorganization.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
(a) Anything contained in the Plan to the contrary notwithstanding, the
Plan may be terminated and the Reorganization abandoned at any time prior
(whether before or after approval thereof by the shareholders of Target Fund)
to the Closing, or the Closing may be postponed, as follows:
(1) by mutual consent of Target Fund and Acquiring Trust, on behalf of
Acquiring Fund;
(2) by Acquiring Trust, on behalf of Acquiring Fund, if any condition
of its obligations set forth in Section 8 has not been fulfilled or waived
and it reasonably appears that such condition or obligation will not or
cannot be met; or
(3) by Target Fund if any condition of its obligations set forth in
Section 8 has not been fulfilled or waived and it reasonably appears that
such condition or obligation will not or cannot be met.
(b) If the transactions contemplated by the Plan have not been consummated
by December 31, 2009, the Plan shall automatically terminate on that date,
unless a later date is agreed to by both Acquiring Trust and Target Fund.
(c) In the event of termination of the Plan prior to its consummation,
pursuant to the provisions hereof, the Plan shall become void and have no
further effect, and neither Target Fund, Acquiring Trust, nor Acquiring Fund,
nor their trustees, officers, or agents or the shareholders of Target Fund or
Acquiring Fund shall have any liability in respect of the Plan, but all
expenses incidental to the preparation and carrying out of the Plan shall be
paid as provided in Section 9 hereof.
(d) At any time prior to the Closing, any of the terms or conditions of
the Plan may be waived by the party who is entitled to the benefit thereof
if, in the judgment of such party, such action or waiver will not have a
material adverse effect on the benefits intended under the Plan to its
shareholders, on behalf of whom such action is taken.
(e) The respective representations and warranties contained in Sections 4
to 6 hereof shall expire with and be terminated by the Plan on the Closing
Date, and neither Target Fund nor Acquiring Trust, nor any of their officers,
trustees, agents or shareholders shall have any liability with respect to
such representations or warranties after the Closing Date.
(f) If any order of the SEC with respect to the Plan shall be issued prior
to the Closing that imposes any term or condition that is determined by the
Board of Trustees of Target Fund or the Board of Trustees of Acquiring Trust,
on behalf of Acquiring Fund, to be acceptable, such term or condition shall
be binding as if it were a part of the Plan without a vote or approval of the
shareholders of Target Fund; provided that, if such term or condition would
result in a change in the method of computing the number of Acquiring Fund
Shares to be issued to Target Fund, and such term or condition had not been
included in the Prospectus/Proxy Statement or other proxy solicitation
material furnished to the shareholders of Target Fund prior to the Special
Meeting, the Plan shall not be consummated and shall terminate unless Target
Fund promptly calls a special meeting of the shareholders of Target Fund at
which such condition shall be submitted for approval.
11. LIABILITY OF ACQUIRING TRUST AND TARGET FUND.
(a) Each party acknowledges and agrees that all obligations of Acquiring
Trust under the Plan are binding only with respect to Acquiring Fund; that
any liability of Acquiring Trust under the Plan with respect to Acquiring
Trust, or in connection with the transactions contemplated herein with
respect to Acquiring Fund, shall be discharged only out of the assets of
Acquiring Fund; that no other series of Acquiring Trust shall be liable with
respect to the Plan or in connection with the transactions contemplated
herein; and that Target Fund shall not seek satisfaction of any such
obligation or liability from the shareholders of Acquiring Trust, the
trustees, officers, or the employees or agents of Acquiring Trust.
(b) Each party acknowledges and agrees that all obligations of Target Fund
under the Plan are binding only with respect to Target Fund; that any
liability of Target Fund under the Plan in connection with the transactions
contemplated herein, shall be discharged only out of the assets of Target
Fund; and that neither Acquiring Trust nor Acquiring Fund shall seek
satisfaction of any such obligation or liability from the shareholders of
Target Fund, or the trustees, officers, or the employees or agents of Target
Fund.
12. ENTIRE AGREEMENT AND AMENDMENTS.
The Plan embodies the entire agreement between the parties and there are
no agreements, understandings, restrictions, or warranties relating to the
transactions contemplated by the Plan other than those set forth herein or
herein provided for. The Plan may be amended only by mutual consent of the
parties in writing. Neither the Plan nor any interest herein may be assigned
without the prior written consent of the other party.
13. COUNTERPARTS.
The Plan may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts together shall
constitute but one instrument.
14. NOTICES.
Any notice, report, or demand required or permitted by any provision of
the Plan shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage prepaid, addressed to Franklin
Growth Fund, at Franklin Custodian Funds, One Franklin Parkway, San Mateo, CA
94403-1906, Attention: Secretary, or Franklin Capital Growth Fund, at One
Franklin Parkway, San Mateo, CA 94403-1906, Attention: Secretary, as the case
may be.
15. GOVERNING LAW.
The Plan shall be governed by and carried out in accordance with the laws
of the State of Delaware.
IN WITNESS WHEREOF, Target Fund and Acquiring Trust, on behalf of
Acquiring Fund, have each caused the Plan to be executed on its behalf by its
duly authorized officers, all as of the date and year first-above written.
FRANKLIN CUSTODIAN FUNDS, on
behalf of FRANKLIN GROWTH FUND
By:
-------------------------------
(Name) (Title)
FRANKLIN CAPITAL GROWTH FUND
By:
-------------------------------
(Name) (Title)
EXHIBIT B - PROSPECTUS (enclosed)
EXHIBIT C - PRINCIPAL HOLDERS OF SECURITIES
NAME AND ADDRESS SHARE CLASS PERCENTAGE
(%)
-------------------------------------------------------
CAPITAL GROWTH FUND
Edward Jones A 7.65
Attn: Mutual Fund
Shareholder
Accounting
201 Progress Parkway
Maryland Heights, MO
63043-3009
Orchard Trust Company R 5.54
FBO Hudiburg Auto Group
c/o Fascore LLC
8515 E. Orchard Rd., 2T2
Greenwood Village, CO
80111-5002
Corefolio Advisor 5.90
FT 529 College Savings Plan
c/o Fund Accounting
Attn.: Gregory Seward
500 E. Broward Blvd., Ste.
2100
Fort Lauderdale, FL
33394-3007
Growth Advisor 5.14
FT 529 College Savings Plan
c/o Fund Accounting
Attn.: Gregory Seward
500 E. Broward Blvd., Ste.
2100
Fort Lauderdale, FL
33394-3007
Age Newborn-8 Years Advisor 23.95
FT 529 College Savings Plan
c/o Fund Accounting
Attn.: Gregory Seward
500 E. Broward Blvd., Ste.
2100
Fort Lauderdale, FL
33394-3007
Age 9-12 Years Advisor 10.48
FT 529 College Savings Plan
c/o Fund Accounting
Attn.: Gregory Seward
500 E. Broward Blvd., Ste.
2100
Fort Lauderdale, FL
33394-3007
Age 13-16 Years Advisor 7.37
FT 529 College Savings Plan
c/o Fund Accounting
Attn.: Gregory Seward
500 E. Broward Blvd., Ste.
2100
Fort Lauderdale, FL
33394-3007
Franklin Templeton Corefolio Advisor 33.41
FT Fund Allocator Series
Attn.: Gregory Seward
500 E. Broward Blvd., Ste.
2100
Fort Lauderdale, FL
33394-3007
GROWTH FUND
Edward Jones A 11.90
Attn: Mutual Fund
Shareholder
Accounting
201 Progress Parkway
Maryland Heights, MO
63043-3009
Citigroup Global Markets, C 6.45
Inc.
333 West 34th St., 3rd Floor
Attn: 00109801250
New York, NY 10001-2402
Guardian Group Pension GIAC R 61.64
1560 Valley Center Parkway
Ste. 100
Bethlehem, PA 18017-2275
Hartford Life Insurance R 7.73
Company
Attn.: UIT Operations
P.O. Box 2999
Hartford, CT 06104-2999
Corefolio Advisor 8.59
FT 529 College Savings Plan
c/o Fund Accounting
Attn.: Gregory Seward
500 E. Broward Blvd., Ste.
2100
Fort Lauderdale, FL
33394-3007
Franklin Templeton Corefolio Advisor 49.67
Allocation Fund
FT Fund Allocator Series
c/o Fund Accounting
Attn.: Gregory Seward
500 E. Broward Blvd., Ste.
2100
Fort Lauderdale, FL
33394-3007
Nationwide Trust Company Advisor 13.68
FBO Franklin Templeton PS
401K Plan
98 San Jacinto Blvd., Ste.
1100
Austin, TX 78701-4255
GROWTH FUND - PROJECTED AFTER TRANSACTION(1)
Edward Jones A 10.84
Attn: Mutual Fund
Shareholder
Accounting
201 Progress Parkway
Maryland Heights, MO
63043-3009
Guardian Group Pension GIAC R 51.30
1560 Valley Center Parkway
Ste. 100
Bethlehem, PA 18017-2275
Hartford Life Insurance R 6.43
Company
Attn.: UIT Operations
P.O. Box 2999
Hartford, CT 06104-2999
Corefolio Advisor 7.01
FT 529 College Savings Plan
c/o Fund Accounting
Attn.: Gregory Seward
500 E. Broward Blvd., Ste.
2100
Fort Lauderdale, FL
33394-3007
Franklin Templeton Corefolio Advisor 40.13
FT Fund Allocator Series
c/o Fund Accounting
Attn.: Gregory Seward
500 E. Broward Blvd., Ste.
2100
Fort Lauderdale, FL
33394-3007
Age Newborn-8 Years Advisor 14.05
FT 529 College Savings Plan
c/o Fund Accounting
Attn.: Gregory Seward
500 E. Broward Blvd., Ste.
2100
Fort Lauderdale, FL
33394-3007
Age 9-12 Years Advisor 6.14
FT 529 College Savings Plan
c/o Fund Accounting
Attn.: Gregory Seward
500 E. Broward Blvd., Ste.
2100
Fort Lauderdale, FL
33394-3007
Nationwide Trust Company Advisor 5.66
FBO Franklin Templeton PS
401K Plan
98 San Jacinto Blvd., Ste.
1100
Austin, TX 78701-4255
1. Based upon information as of Record Date. Actual holdings after the
Transaction may differ from projections based on information as of the Record
Date.
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE DETACH AT PERFORATION BEFORE MAILING.
PROXY PROXY
FRANKLIN CAPITAL GROWTH FUND
SPECIAL MEETING OF SHAREHOLDERS
APRIL 9, 2009
The undersigned hereby revokes all previous proxies for his/her shares of
Franklin Capital Growth Fund ("Capital Growth Fund") and appoints Craig S.
Tyle, Steven J. Gray, David P. Goss and Karen L. Skidmore, and each of them,
proxies of the undersigned with full power of substitution to vote all shares
of Capital Growth Fund that the undersigned is entitled to vote at Capital
Growth Fund's Special Meeting of Shareholders ("Meeting") to be held at One
Franklin Parkway, San Mateo, California 94403-1906 at 2:00 p.m., Pacific Time
on April 9, 2009 including any postponements or adjournments thereof, upon
the matter set forth below and instructs them to vote upon any other matters
that may properly be acted upon at the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF FRANKLIN
CAPITAL GROWTH FUND (THE "TRUST") ON BEHALF OF CAPITAL GROWTH FUND. IT WILL
BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY SHALL BE VOTED
FOR THE PROPOSAL REGARDING THE REORGANIZATION OF CAPITAL GROWTH FUND PURSUANT
TO THE AGREEMENT AND PLAN OF REORGANIZATION WITH FRANKLIN CUSTODIAN FUNDS, ON
BEHALF OF FRANKLIN GROWTH FUND. IF ANY OTHER MATTERS PROPERLY COME BEFORE THE
MEETING TO BE VOTED ON, THE PROXY HOLDERS WILL VOTE, ACT AND CONSENT ON THOSE
MATTERS IN ACCORDANCE WITH THE VIEWS OF MANAGEMENT.
IMPORTANT: PLEASE SEND IN YOUR PROXY TODAY.
YOU ARE URGED TO DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY. THIS WILL
SAVE THE EXPENSE OF FOLLOW-UP LETTERS TO SHAREHOLDERS WHO HAVE NOT RESPONDED.
VOTE VIA THE INTERNET: WWW.FRANKLINTEMPLETON.COM
VOTE VIA THE TELEPHONE: 1-866-241-6192
CONTROL NUMBER: 999 9999 9999 999
Note: Please sign exactly as your name appears
on the proxy. If signing for estates, trusts or
corporations, your title or capacity should be
stated. If shares are held jointly, one or more
joint owners should sign personally.
-------------------------
Signature
-------------------------
Signature
------------------------, 2009
Date
(Please see reverse side)
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
PROPOSAL 1.
FOR AGAINST ABSTAIN
1. To approve an Agreement and Plan of [] [] []
Reorganization between the Trust, on
behalf of Capital Growth Fund, and
Franklin Custodian Funds, on behalf of
Franklin Growth Fund ("Growth Fund"),
that provides for (i) the acquisition of
substantially all of the assets of
Capital Growth Fund by Growth Fund in
exchange solely for Class A, B, C, R and
Advisor shares of Growth Fund and the
assumption of certain liabilities of
Capital Growth Fund be Growth Fund, (ii)
the distribution of such shares to the
shareholders of Capital Growth Fund, and
(iii) the complete liquidation and
dissolution of Capital Growth Fund.
Shareholders of Capital Growth Fund will
receive Class A, B, C, R and Advisor
shares of Growth Fund with an aggregate
net asset value equal to the aggregate
net asset value of the shareholders'
Class A, B, C, R and Advisor shares in
Capital Growth Fund.
IMPORTANT: PLEASE SIGN AND MAIL IN YOUR PROXY...TODAY
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE IS
REQUIRED IF MAILED IN THE U.S.
EXHIBIT B
FRANKLIN GROWTH FUND
PROSPECTUS DATED FEBRUARY 1, 2009
The prospectus of Franklin Growth Fund dated February 1, 2009, is part of
this Prospectus/Proxy Statement and will be included in the Proxy mailing to
all shareholders of record of Franklin Capital Growth Fund. For purposes of
this EDGAR filing, the prospectus of Growth Fund dated February 1, 2009, is
incorporated by reference to the electronic filing on Form N-1A made by
Franklin Custodian Funds on January 27, 2009, under Accession No.
0000038721-09-000004.
PART B
STATEMENT OF ADDITIONAL INFORMATION
FOR
FRANKLIN GROWTH FUND
DATED FEBRUARY 9, 2009
Acquisition of Substantially All of the Assets of
FRANKLIN CAPITAL GROWTH FUND,
a series of Franklin Capital Growth Fund
By and in exchange for shares of
FRANKLIN GROWTH FUND,
a series of Franklin Custodian Funds
This Statement of Additional Information (SAI) relates specifically to
the proposed acquisition of substantially all of the assets of Franklin
Capital Growth Fund in exchange for Class A, B, C, R and Advisor shares of
Franklin Growth Fund.
This SAI consists of this Cover Page and the following documents. Each
of these documents is attached to and is legally considered to be a part of
this SAI:
1. The Statement of Additional Information of Franklin Growth Fund
dated February 1, 2009.
2. Annual Report of Franklin Growth Fund for the fiscal year ended
September 30, 2008.
3. Annual Report of Franklin Capital Growth Fund for the fiscal year
ended June 30, 2008.
4. Semi-Annual Report of Franklin Capital Growth Fund for the period
ended December 31, 2007.
5. Pro Forma Financial Statements for the reorganization of Franklin
Capital Growth Fund with and into Franklin Growth Fund.
This SAI is not a Prospectus; you should read this SAI in conjunction with
the Prospectus/Proxy Statement dated February 9, 2009, relating to the
above-referenced transaction. You can request a copy of the Prospectus/Proxy
Statement by calling 1-800/DIAL BEN or by writing to Franklin Growth Fund,
P.O. Box 997151, Sacramento, CA 95899-7151.
---------------------------------------------------------------------------
The Statement of Additional Information of Franklin Growth Fund dated
February 1, 2009, is part of this SAI and will be provided to all
shareholders of Franklin Capital Growth Fund requesting this SAI. For
purposes of this EDGAR filing, the Statement of Additional Information for
Franklin Growth Fund dated February 1, 2009, is incorporated by reference to
the electronic filing made on January 27, 2009, under Accession No.
0000038721-09-000004.
The Annual Report to shareholders of Franklin Growth Fund for the fiscal year
ended September 30, 2008, is part of this SAI and will be provided to all
shareholders of Franklin Capital Growth Fund requesting this SAI. For
purposes of this EDGAR filing, the Annual Report to shareholders of Franklin
Growth Fund for the fiscal year ended September 30, 2008, is incorporated by
reference to the electronic filing on form N-CSR made on [], 2008, under
Accession No. 0000038721-09-000004.
The Annual Report to shareholders of Franklin Capital Growth Fund for the
fiscal year ended June 30, 2008, is part of this SAI and will be provided to
all shareholders requesting this SAI. For purposes of this EDGAR filing, the
Annual Report to shareholders of Franklin Capital Growth Fund for the fiscal
year ended June 30, 2008, is incorporated by reference to the electronic
filing on form N-CSR made on August 29, 2008, under Accession No.
0000083297-08-000012.
The Semi-Annual Report to shareholders of Franklin Capital Growth Fund for
the period ended on December 31, 2008, is part of this SAI and will be
provided to all shareholders of Franklin Capital Growth Fund requesting this
SAI. For purposes of this EDGAR filing, the Semi-Annual Report to
shareholders of Franklin Capital Growth Fund ended on December 31, 2007, is
incorporated by reference to the electronic filing on form N-CSRS made on May
28, 2008, under Accession No. 0000038721-08-000018.
FRANKLIN CAPITAL GROWTH FUND
FRANKLIN GROWTH FUND
PRO FORMA COMBINING STATEMENTS OF INVESTMENTS, SEPTEMBER 30, 2008
(UNAUDITED)
The following unaudited Pro Forma Combining Statements give effect to the
proposed reorganization, accounted as if the reorganization had occurred as of
October 1, 2007. Each Pro Forma Combining Statement has been prepared based upon
the proposed fee and expense structure after the combination, as discussed in
the combined proxy statement/prospectus.
The unaudited Pro Forma Combining Statements should be read in conjunction with
the historical financial statements and notes thereto of the Franklin Capital
Growth Fund and the Franklin Growth Fund which are incorporated by reference in
this Statement of Additional Information. The reorganization will be accounted
for as a tax-free reorganization.
FRANKLIN GROWTH FUND
FRANKLIN CAPITAL GROWTH FUND
PRO FORMA COMBINING STATEMENTS OF INVESTMENTS, SEPTEMBER 30, 2008 (UNAUDITED)
FRANKLIN CAPITAL FRANKLIN GROWTH FUND
GROWTH FUND PRO FORMA COMBINED
FRANKLIN GROWTH FUND (UNAUDITED) (UNAUDITED)
------------------------- -------------------------- --------------------------
COMMON STOCKS 99.0% SHARES VALUE SHARES VALUE SHARES VALUE
- ---------------------------------------- --------- -------------- ---------- -------------- ---------- --------------
AUTOMOBILES & COMPONENTS 2.4%
(a) Ford Motor Co 1,100,000 $ 5,720,000 $ 1,100,000 $ 5,720,000
General Motors Corp 400,000 3,780,000 400,000 3,780,000
Harley-Davidson Inc. 500,000 18,650,000 555,200 20,708,960 1,055,200 39,358,960
Johnson Controls Inc. 1,200,000 36,396,000 1,200,000 36,396,000
-------------- -------------- --------------
64,546,000 20,708,960 85,254,960
-------------- -------------- --------------
BANKS 0.2%
(a) Tree. Com Inc. 10,003 48,214 10,003 48,214
Wells Fargo & Co. 225,000 8,444,250 225,000 8,444,250
-------------- -------------- --------------
48,214 8,444,250 8,492,464
-------------- -------------- --------------
CAPITAL GOODS 22.5%
3M Co 855,000 58,405,050 221,500 15,130,665 1,076,500 73,535,715
ABB Ltd., ADR (Switzerland) 689,600 13,378,240 689,600 13,378,240
The Boeing Co 1,045,000 59,930,750 198,200 11,366,770 1,243,200 71,297,520
Danaher Corp. 364,700 25,310,180 364,700 25,310,180
Emerson Electric Co 1,000,000 40,790,000 1,000,000 40,790,000
General Dynamics Corp 1,000,000 73,620,000 1,000,000 73,620,000
General Electric Co 70,000 1,785,000 70,000 1,785,000
Illinois Tool Works Inc 1,000,000 44,450,000 1,000,000 44,450,000
Ingersoll-Rand Co. Ltd., A 1,002,000 31,232,340 1,002,000 31,232,340
Lockheed Martin Corp 500,000 54,835,000 500,000 54,835,000
Northrop Grumman Corp 1,000,000 60,540,000 1,000,000 60,540,000
Pall Corp 500,000 17,195,000 500,000 17,195,000
Precision Castparts Corp. 257,300 20,270,094 257,300 20,270,094
Raytheon Co 600,000 32,106,000 600,000 32,106,000
Rockwell Collins Inc. 100,000 4,809,000 100,000 4,809,000
(a) SunPower Corp., A 2,000 141,860 37,300 2,645,689 39,300 2,787,549
Teleflex Inc. 500,000 31,745,000 500,000 31,745,000
Textron Inc. 1,050,000 30,744,000 1,050,000 30,744,000
(a) Thomas & Betts Corp. 500,000 19,535,000 500,000 19,535,000
Tyco International Ltd. 387,513 13,570,705 387,513 13,570,705
United Technologies Corp. 850,000 51,051,000 391,300 23,501,478 1,241,300 74,552,478
W.W. Grainger Inc. 550,000 47,833,500 550,000 47,833,500
-------------- -------------- --------------
674,319,205 111,603,116 785,922,321
-------------- -------------- --------------
COMMERCIAL & PROFESSIONAL
SERVICES 1.5%
Avery Dennison Corp. 462,000 20,549,760 462,000 20,549,760
Dun & Bradstreet Corp. 122,000 11,511,920 122,000 11,511,920
Equifax Inc. 400,000 13,780,000 400,000 13,780,000
Robert Half International Inc. 300,000 7,425,000 300,000 7,425,000
-------------- --------------
53,266,680 53,266,680
-------------- --------------
CONSUMER DURABLES & APPAREL 1.1%
VF Corp. 500,000 38,655,000 500,000 38,655,000
-------------- --------------
CONSUMER SERVICES 1.4%
Carnival Corp. 565,000 19,972,750 564,600 19,958,610 1,129,600 39,931,360
(a) Interval Leisure Group Inc. 60,020 624,208 60,020 624,208
International Game Technology 221,029 3,797,278 221,029 3,797,278
Starwood Hotels & Resorts Worldwide
Inc. 204,600 5,757,444 204,600 5,757,444
-------------- -------------- --------------
20,596,958 29,513,332 50,110,290
-------------- -------------- --------------
DIVERSIFIED FINANCIALS 1.3%
American Express Co. 242,300 8,584,689 242,300 8,584,689
BlackRock Inc. 92,500 17,991,250 92,500 17,991,250
Moody's Corp. 538,000 18,292,000 538,000 18,292,000
-------------- -------------- --------------
18,292,000 26,575,939 44,867,939
-------------- -------------- --------------
ENERGY 3.7%
BP PLC, ADR (United Kingdom) 350,200 17,569,534 350,200 17,569,534
ConocoPhillips 35,000 2,563,750 35,000 2,563,750
Devon Energy Corp. 50,000 4,560,000 150,000 13,680,000 200,000 18,240,000
Exxon Mobil Corp. 70,000 5,436,200 70,000 5,436,200
(a) FMC Technologies 121,000 5,632,550 121,000 5,632,550
Halliburton Co. 381,600 12,360,024 381,600 12,360,024
National Oilwell Varco Inc. 195,100 9,799,873 195,100 9,799,873
Occidental Petroleum Corp. 136,500 9,616,425 136,500 9,616,425
Peabody Energy Corp. 189,300 8,518,500 189,300 8,518,500
(b) Petroplus Holdings AG, 144A
(Switzerland) 188,400 7,087,620 188,400 7,087,620
Royal Dutch Shell PLC, A, ADR
(Netherlands) 280,000 16,522,800 280,000 16,522,800
Schlumberger Ltd. 40,000 3,123,600 153,000 11,947,770 193,000 15,071,370
(a) Transocean Inc. 15,222 1,671,985 15,222 1,671,985
-------------- -------------- --------------
51,447,869 78,642,762 130,090,631
-------------- -------------- --------------
FOOD, BEVERAGE & TOBACCO 1.5%
Bungel Ltd. 142,300 8,990,514 142,300 8,990,514
(a) Hansen Natural Corp. 641,400 19,402,350 641,400 19,402,350
PepsiCo Inc. 309,200 22,036,684 309,200 22,036,684
-------------- --------------
50,429,548 50,429,548
-------------- --------------
FOOD & STAPLES RETAILING 0.5%
CVS Caremark Corp. 514,700 17,324,802 514,700 17,324,802
-------------- --------------
HEALTH CARE EQUIPMENT & SERVICES
3.6%
(a) Advanced Medical Optics Inc. 88,888 1,580,429 88,888 1,580,429
Baxter International Inc. 400,000 26,252,000 400,000 26,252,000
Cardinal Health Inc. 300,000 14,784,000 300,000 14,784,000
Covidien Ldt. 345,900 18,595,584 345,900 18,595,584
(a) Edwards Lifesciences Corp. 50,000 2,888,000 50,000 2,888,000
(a) Hospira Inc. 40,000 1,528,000 40,000 1,528,000
IMS Health Inc. 500,000 9,455,000 500,000 9,455,000
(a) Intuitive Surgical Inc. 1,000 240,980 1,000 240,980
(a) Medco Health Solutions Inc. 96,480 4,341,600 96,480 4,341,600
Medtronic Inc. 60,000 3,006,000 60,000 3,006,000
Quest Diagnostics Inc. 500,000 25,835,000 500,000 25,835,000
(a) Varian Medical Systems Inc. 223,300 12,757,129 223,300 12,757,129
(a) Zimmer Holdings Inc. 64,000 4,131,840 64,000 4,131,840
-------------- -------------- --------------
94,042,849 31,352,713 125,395,562
-------------- -------------- --------------
HOUSEHOLD & PERSONAL PRODUCTS 0.8%
The Procter & Gamble Co. 35,000 2,439,150 353,200 24,614,508 388,200 27,053,658
-------------- -------------- --------------
INSURANCE 1.2%
AFLAC Inc. 305,700 17,959,875 305,700 17,959,875
(a) Berkshire Hathaway Inc., A 184 24,030,400 184 24,030,400
-------------- --------------
41,990,275 41,990,275
-------------- --------------
MATERIALS 2.3%
Air Products and Chemicals Inc. 500,000 34,245,000 500,000 34,245,000
Cemex SAB de CV, CPO, ADR (Mexico) 880,121 15,155,683 880,121 15,155,683
Goldcorp Inc. (Canada) 280,800 8,881,704 280,800 8,881,704
Sigma-Aldrich Corp. 400,000 20,968,000 400,000 20,968,000
-------------- -------------- --------------
55,213,000 24,037,387 79,250,387
-------------- -------------- --------------
MEDIA 2.0%
Time Warner Inc. 1,350,000 17,698,500 1,350,000 17,698,500
The Walt Disney Co. 1,130,000 34,679,700 557,290 17,103,230 1,687,290 51,782,930
-------------- -------------- --------------
52,378,200 17,103,230 69,481,430
-------------- -------------- --------------
PHARMACEUTICALS, BIOTECHNOLOGY &
LIFE SCIENCES 18.0%
Abbott Laboratories 400,000 23,032,000 400,000 23,032,000
Allergan Inc. 800,000 41,200,000 800,000 41,200,000
(a) Amgen Inc. 932,000 55,239,640 932,000 55,239,640
(a) Biogen Idec Inc. 400,000 20,116,000 400,000 20,116,000
(a) Celgene Corp. 25,000 1,582,000 294,100 18,610,648 319,100 20,192,648
(a) Dionex Corp. 250,000 15,887,500 250,000 15,887,500
Eli Lilly and Co. 400,000 17,612,000 400,000 17,612,000
(a) Genentech Inc. 1,000,000 88,680,000 205,600 18,232,608 1,205,600 106,912,608
(a) Gilead Sciences Inc. 342,700 15,620,266 342,700 15,620,266
Johnson & Johnson 1,081,000 74,891,680 442,010 30,622,453 1,523,010 105,514,133
Merck & Co. Inc. 500,000 15,780,000 500,000 15,780,000
(a) Millipore Corp. 400,000 27,520,000 400,000 27,520,000
Pfizer Inc. 2,170,000 40,014,800 2,170,000 40,014,800
Roche Holding AG, ADR (Switzerland) 40,000 3,102,000 342,300 26,545,365 382,300 29,647,365
Schering-Plough Corp. 500,000 9,235,000 1,021,600 18,868,952 1,521,600 28,103,952
Teva Pharmaceutical Industries Ltd.,
ADR (Israel) 332,500 15,225,175 332,500 15,225,175
(a) Waters Corp. 500,000 29,090,000 500,000 29,090,000
Wyeth 600,000 22,164,000 600,000 22,164,000
-------------- -------------- --------------
485,146,620 143,725,467 628,872,087
-------------- -------------- --------------
REAL ESTATE 0.1%
iStar Financial Inc. 763,600 1,985,360 763,600 1,985,360
-------------- --------------
RETAILING 1.6%
Best Buy Co. Inc. 220,900 8,283,750 220,900 8,283,750
(a) Expedia Inc. 300,100 4,534,511 300,100 4,534,511
Genuine Parts Co. 300,400 12,079,084 300,400 12,079,084
(a) HSN Inc. 60,020 660,820 60,020 660,820
Lowe's Cos. Inc. 577,900 13,690,451 577,900 13,690,451
Target Corp. 328,700 16,122,735 328,700 16,122,735
(a) Ticketmaster 60,020 644,015 60,020 644,015
-------------- -------------- --------------
17,918,430 38,096,936 56,015,366
-------------- -------------- --------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT 1.5%
Intel Corp. 900,000 16,857,000 848,800 15,898,024 1,748,800 32,755,024
KLA-Tencor Corp. 188,700 5,972,355 188,700 5,972,355
Texas Instruments Inc. 515,000 11,072,500 515,000 11,072,500
(a) Verigy Ltd. (Singapore) 48,974 797,297 48,974 797,297
-------------- -------------- --------------
28,726,797 21,870,379 50,597,176
-------------- -------------- --------------
SOFTWARE & SERVICES 8.1%
(a) Activision Blizzard Inc. 1,129,300 17,425,099 1,129,300 17,425,099
(a) Adobe Systems Inc. 491,700 19,407,399 491,700 19,407,399
(a) Autodesk Inc. 485,900 16,301,945 485,900 16,301,945
Automatic Data Processing Inc. 700,000 29,925,000 700,000 29,925,000
(a) Computer Sciences Corp. 1,000,000 40,190,000 1,000,000 40,190,000
(a) Google Inc., A 27,000 10,814,040 36,300 14,538,876 63,300 25,352,916
(a) IAC/InterActiveCorp . 150,050 2,595,865 150,050 2,595,865
MasterCard Inc., A 59,600 10,568,868 59,600 10,568,868
Microsoft Corp. 975,000 26,022,750 764,400 20,401,836 1,739,400 46,424,586
(a) Oracle Corp. 500,000 10,155,000 500,000 10,155,000
Paychex Inc. 539,900 17,832,897 539,900 17,832,897
Visa Inc., A 291,900 17,919,741 291,900 17,919,741
(a) Yahoo! Inc. 1,600,000 27,680,000 1,600,000 27,680,000
-------------- -------------- --------------
147,382,655 134,396,661 281,779,316
-------------- -------------- --------------
TECHNOLOGY HARDWARE & EQUIPMENT
13.0%
(a) Agilent Technologies Inc. 400,000 11,864,000 861,500 25,552,090 1,261,500 37,416,090
(a) Apple Inc. 700,000 79,562,000 79,400 9,024,604 779,400 88,586,604
(a) Cisco Systems Inc. 1,545,000 34,855,200 1,423,600 32,116,416 2,968,600 66,971,616
(a) Dell Inc. 500,000 8,240,000 820,200 13,516,896 1,320,200 21,756,896
(a) EMC Corp. 1,000,000 11,960,000 1,000,000 11,960,000
(a) FLIR Systems Inc. 327,800 12,594,076 327,800 12,594,076
Harris Corp. 287,400 13,277,880 287,400 13,277,880
Hewlett-Packard Co. 1,156,250 53,465,000 1,156,250 53,465,000
International Business Machines
Corp. 580,000 67,836,800 580,000 67,836,800
(a) Logitech International SA
(Switzerland) 150,000 3,498,000 150,000 3,498,000
(a) Mettler-Toledo International Inc. 50,000 4,900,000 50,000 4,900,000
Molex Inc. 146,483 3,288,543 146,483 3,288,543
Molex Inc., A 146,483 3,048,311 146,483 3,048,311
Nokia Corp., ADR (Finland) 521,900 9,733,435 521,900 9,733,435
QUALCOMM Inc. 110,000 4,726,700 647,500 27,823,075 757,500 32,549,775
(a) Research In Motion Ltd. (Canada) 127,400 8,701,420 127,400 8,701,420
(a) Sun Microsystems Inc. 400,000 3,040,000 400,000 3,040,000
Tyco Electronics Ltd. 387,513 10,718,610 387,513 10,718,610
-------------- -------------- --------------
301,003,164 152,339,892 453,343,056
-------------- -------------- --------------
TELECOMMUNICATIONS SERVICES 1.7%
America Movil SAB de CV, L, ADR
(Mexico) 259,300 12,021,148 259,300 12,021,148
(a) American Tower Corp., A 115,000 4,136,550 737,900 26,542,263 852,900 30,678,813
(a) MetroPCS Communications Inc. 331,400 4,636,286 331,400 4,636,286
Rogers Communications Inc., B
(Canada) 415,100 13,460,384 415,100 13,460,384
-------------- -------------- --------------
4,136,550 56,660,081 60,796,631
-------------- -------------- --------------
TRANSPORTATION 7.8%
Air France-KLM, ADR (France) 550,000 12,600,500 550,000 12,600,500
(a) Alaska Air Group Inc. 500,000 10,195,000 500,000 10,195,000
(a) AMR Corp. 2,000,000 19,640,000 2,000,000 19,640,000
Arkansas Best Corp. 500,000 16,845,000 500,000 16,845,000
British Airways PLC, ADR
(United Kingdom) 500,000 15,062,500 500,000 15,062,500
Canadian National Railway Co.
(Canada) 500,000 23,915,000 500,000 23,915,000
Canadian Pacific Railway Ltd.
(Canada) 500,000 26,930,000 500,000 26,930,000
C.H Robinson Worldwide Inc. 267,300 13,621,608 267,300 13,621,608
(a) Continental Airlines Inc., B 1,000,000 16,680,000 1,000,000 16,680,000
Expeditors International of
Washington Inc. 80,000 2,787,200 324,200 11,295,128 404,200 14,082,328
FedEx Corp. 168,000 13,278,720 168,000 13,278,720
Forward Air Corp. 500,000 13,615,000 500,000 13,615,000
Heartland Express Inc. 500,000 7,760,000 500,000 7,760,000
(a) Ryanair Holdings PLC, ADR (Ireland) 217,700 4,883,011 217,700 4,883,011
Southwest Airlines Co. 65,200 946,052 65,200 946,052
Union Pacific Corp. 600,000 42,696,000 600,000 42,696,000
Werner Enterprises Inc. 500,000 10,855,000 500,000 10,855,000
(a) YRC Worldwide Inc. 700,000 8,372,000 700,000 8,372,000
-------------- -------------- --------------
228,899,252 43,078,467 271,977,719
-------------- -------------- --------------
UTILITIES 1.2%
International Power PLC
(United Kingdom) 3,588,400 23,216,781 3,588,400 23,216,781
Public Service Enterprise Group Inc. 100,000 3,279,000 496,400 16,276,956 596,400 19,555,956
-------------- -------------- --------------
3,279,000 39,493,737 42,772,737
-------------- -------------- --------------
TOTAL COMMON STOCKS
(COST $2,135,566,328) 2,341,737,593 1,113,987,802 3,455,725,395
-------------- -------------- --------------
SHORT TERM INVESTMENTS
(COST $40,134,777) 1.1%
MONEY MARKET FUNDS 1.1%
(c) Franklin Institutional Fiduciary
Trust Money Market Portfolio,
1.98% 1,560,596 1,560,596 38,574,181 38,574,181 40,134,777 40,134,777
-------------- -------------- --------------
TOTAL INVESTMENTS
(COST $2,175,701,105) 100.1% 2,343,298,189 1,152,561,983 3,495,860,172
OTHER ASSETS, LESS LIABILITES (0.1)% (2,318,965) (2,137,566) (4,599,675)(d)
-------------- -------------- --------------
NET ASSETS 100% $2,340,979,224 $1,150,424,417 $3,491,260,497(d)
-------------- -------------- --------------
FOOTNOTE LEGEND
(a) Non-income producing for the twelve months ended September 30, 2008.
(b) Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be sold in transactions exempt from registration only to
qualified institutional buyers or in a public offering registered under the
Securities Act of 1933.This security has been deemed liquid under
guidelines approved by the Fund's Board of Trustees. At September 30, 2008,
the value of this security was $7,087,620, representing 0.20% of net assets
(c) The Franklin Institutional Fiduciary Trust Money Market Portfolio is
managed by the Franklin Growth Fund's investment manager. The rate shown is
the annualized seven-day yield at period end.
(d) Includes the estimated expenses of the Transactions borne by the Franklin
Capital Growth Fund and the Franklin Growth Fund.
ABBREVIATION LEGEND
ADR - American Depository Receipt
CPO - Certificates of Ordinary Participation
See Notes to Pro Forma Combining Statements
FRANKLIN GROWTH FUND
FRANKLIN CAPITAL GROWTH FUND
FINANCIAL STATEMENTS
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2008
(UNAUDITED)
FRANKLIN GROWTH
FRANKLIN CAPITAL PRO FORMA FUND PRO FORMA
FRANKLIN GROWTH GROWTH FUND ADJUSTMENTS COMBINED
FUND (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------------- ---------------- ------------ ---------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers $1,077,802,405 $1,057,763,923 $ -- $2,135,566,328
Cost - Sweep Money Fund 1,560,596 38,574,181 -- 40,134,777
-------------- -------------- ------------ --------------
Total cost of investments 1,079,363,001 1,096,338,104 -- 2,175,701,105
============== ============== ============ ==============
Value - Unaffiliated issuers 2,341,737,593 1,113,987,802 -- 3,455,725,395
Value - Sweep Money Fund 1,560,596 38,574,181 -- 40,134,777
-------------- -------------- ------------ --------------
Total value of Investments 2,343,298,189 1,152,561,983 -- 3,495,860,172
Cash 92,078 -- 92,078
Receivables: -- --
Investment securities sold 1,358,440 1,905,841 -- 3,264,281
Capital shares sold 2,109,578 117,556 -- 2,227,134
Dividends 2,279,253 770,536 -- 3,049,789
Other Assets 7,305 -- -- 7,305
-------------- -------------- ------------ --------------
Total assets 2,349,144,843 1,155,355,916 -- 3,504,500,759
-------------- -------------- ------------ --------------
Liabilities:
Payables:
Investment securities purchased -- 3,008,367 -- 3,008,367
Capital shares redeemed 4,952,662 383,097 -- 5,335,759
Affiliates 2,547,815 1,167,766 -- 3,715,581
Unaffiliated transfer agent fees 432,365 200,086 -- 632,451
Funds advanced by custodian -- 117,162 117,162
Other liabilities 232,777 55,021 143,144(a) 430,942
-------------- -------------- ------------ --------------
Total liabilities 8,165,619 4,931,499 143,144 13,240,262
-------------- -------------- ------------ --------------
Net assets, at value $2,340,979,224 $1,150,424,417 $ (143,144) $3,491,260,497
============== ============== ============ ==============
Net assets consist of:
Undistributed net investment income $1,083,490,921 $ 5,852,163 $ (143,144) $1,089,199,940
Net unrealized appreciation (depreciation) 10,241,399 56,224,627 -- 66,466,026
Accumulated net realized gain (loss) 1,263,935,188 (14,269,628) -- 1,249,665,560
Capital shares (16,688,284) 1,102,617,255 -- 1,085,928,971
-------------- -------------- ------------ --------------
Net assets, at value $2,340,979,224 $1,150,424,417 $ (143,144) $3,491,260,497
============== ============== ============ ==============
CLASS A:
Net assets, at value $1,708,612,045 $ 614,326,241 $ (89,691) $2,322,848,595
============== ============== ============ ==============
Shares outstanding(b) 45,967,776 60,996,186 (44,469,752) 62,494,210
============== ============== ============ ==============
Net asset value per share(c) $ 37.17 $ 10.07 $ 37.17
============== ============== ==============
Maximum offering price per share
(net asset value / 94.25%) $ 39.44 $ 10.69 $ 39.44
============== ============== ==============
CLASS B:
Net assets, at value $ 89,778,767 $ 39,610,266 $ (5,676) $ 129,383,367
============== ============== ============ ==============
Shares outstanding(b) 2,532,916 4,175,045 (3,057,449) 3,650,512
============== ============== ============ ==============
Net asset value and maximum
offering price per share(c) $ 35.44 $ 9.49 $ 35.44
============== ============== ==============
CLASS C:
Net assets, at value $ 255,425,099 $ 93,127,209 $ (13,818) $ 348,538,490
============== ============== ============ ==============
Shares outstanding(b) 7,268,101 9,924,197 (7,274,189) 9,918,109
============== ============== ============ ==============
Net asset value and maximum
offering price per share(c) $ 35.14 $ 9.38 $ 35.14
============== ============== ==============
CLASS R:
Net assets, at value $ 30,175,455 $ 14,903,600 $ (2,678) $ 45,076,377
============== ============== ============ ==============
Shares outstanding(b) 818,448 1,496,989 (1,092,800) 1,222,637
============== ============== ============ ==============
Net asset value and maximum
offering price per share $ 36.87 $ 9.96 $ 36.87
============== ============== ==============
ADVISOR CLASS:
Net assets, at value $ 256,987,858 $ 388,457,101 $ (31,281) $ 645,413,678
============== ============== ============ ==============
Shares outstanding(b) 6,898,141 38,188,903 (27,761,145) 17,325,899
============== ============== ============ ==============
Net asset value and maximum
offering price per share $ 37.25 $ 10.17 $ 37.25
============== ============== ==============
(a) Estimated reorganization costs.
(b) See note 2 in the accompanying notes to Pro Forma Combining Statements.
(c) Redemption price is equal to the net asset value less contingent sales
charges, if applicable.
See notes to Pro Forma Combining Statements
FRANKLIN GROWTH FUND
FRANKLIN CAPITAL GROWTH FUND
FINANCIAL STATEMENTS
PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2008 (UNAUDITED)
FRANKLIN FRANKLIN GROWTH
FRANKLIN CAPITAL PRO FORMA FUND PRO FORMA
GROWTH GROWTH FUND ADJUSTMENTS COMBINED
FUND (UNAUDITED) (UNAUDITED)* (UNAUDITED)
------------- ------------- ------------ ---------------
Investment Income:
Dividends:
Unaffiliated issuers $ 39,462,563 $ 19,807,444 $ -- $ 59,447,386
Sweep Money Fund 828,060 177,379 -- 828,060
------------- ------------- --------- ---------------
Total investment income 40,290,623 19,984,823 -- 60,275,446
------------- ------------- --------- ---------------
Expenses:
Management fees 12,544,223 6,384,810 (154,750) 18,774,283(a)
Distribution fees:
Class A 4,865,049 1,812,664 -- 6,677,713
Class B 1,160,677 523,657 -- 1,684,334
Class C 3,053,322 1,158,044 -- 4,211,366
Class R 294,059 113,888 -- 407,947
Transfer agent fees 4,528,767 2,866,701 (258,841) 7,136,627(b)
Custodian fees 53,202 35,292 -- 88,494
Reports to shareholders 396,386 145,397 (27,089) 514,694(c)
Registration and filing fees 161,600 116,654 (55,651) 222,603(d)
Professional fees 56,575 40,242 (4,841) 91,976(e)
Trustee's fees and expenses 16,704 95,808 (95,808) 16,704(f)
Other 41,683 31,161 (31,161) 41,683(g)
------------- ------------- --------- ---------------
Total expense 27,172,247 13,324,318 (628,141) 39,868,424
Expense reductions (195) (1,152) -- (1,347)
------------- ------------- --------- ---------------
Net expenses 27,172,052 13,323,166 (628,141) 39,867,077
------------- ------------- --------- ---------------
Net investment income 13,118,571 6,661,657 628,141 20,408,369
------------- ------------- --------- ---------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments 93,114,666 (726,203) -- 92,388,463
Foreign currency transactions 3,793 262,285 -- 266,078
------------- ------------- --------- ---------------
Net realized gain (loss) 93,118,459 (463,918) -- 92,654,541
------------- ------------- --------- ---------------
Net change in unrealized appreciation
(depreciation) from:
Investments (703,968,727) (322,746,316) -- (1,026,715,043)
Translation of assets and liabilities
denominated in foreign currencies -- (2,474) -- (2,474)
------------- ------------- --------- ---------------
Net change in unrealized
appreciation (depreciation) (703,968,727) (322,748,790) -- (1,026,717,517)
------------- ------------- --------- ---------------
Net realized and unrealized gain (loss) (610,850,268) (323,212,708) -- (934,062,976)
------------- ------------- --------- ---------------
Net increase (decrease) in net assets
resulting from operations $(597,731,697) $(316,551,051) $ 628,141 $ (913,654,607)
------------- ------------- --------- ---------------
* Projected Expenses are based on current and anticipated expenses and do not
include the estimated costs of the transaction of approximately $143,144 to
be borne by the Funds.
(a) Pro Forma adjustment for increase in average net assets.
(b) Pro Forma adjustment for removal of duplicative transfer agent fees.
(c) Pro Forma adjustment for removal of duplicative reports to shareholders
fees.
(d) Pro Forma adjustment for removal of duplicative registration and filing
fees.
(e) Pro Forma adjustment for removal of duplicative professional fees.
(f) Pro Forma adjustment for removal of duplicative trustee's fees and
expenses.
(g) Pro Forma adjustment for removal of duplicative other fees.
See notes to Pro Forma Combining Statements
FRANKLIN CAPITAL GROWTH FUND
FRANKLIN GROWTH FUND
NOTES TO PRO FORMA COMBINING STATEMENTS (UNAUDITED)
1. BASIS OF COMBINATION
Subject to approval of the proposed Agreement and
Plan of Reorganization (the "Agreement and Plan") by
the shareholders of the Franklin Capital Growth Fund,
the Franklin Growth Fund will acquire substantially
all of the assets of the Franklin Capital Growth Fund
in exchange for the Class A, B, C, R and Advisor
Class shares of the Franklin Growth Fund. The
reorganization will be accounted for by the method of
accounting for tax-free business combinations of
investment companies. The accompanying Pro Forma
Combining Statements are presented to show the effect
of the proposed reorganization as if such
reorganization had occurred on October 1, 2007. The
Pro Forma Combining Statement of Assets and
Liabilities and The Pro Forma Combining Statement of
Investments for the Franklin Growth Fund and Franklin
Capital Growth Fund have been combined to reflect
balances as of September 30, 2008. The Pro Forma
Combining Statement of Operations for the Franklin
Growth Fund and the Franklin Capital Growth Fund has
been combined to reflect the twelve months ended
September 30, 2008. The Pro Forma Combining
Statements are presented for the information of the
reader, and should be read in conjunction with the
historical financial statements of the Franklin
Growth Fund and the Franklin Capital Growth Fund.
2. SHARES OF BENEFICIAL INTEREST
The number of Class A shares issued was calculated by
dividing the Class A net assets of the Franklin
Capital Growth Fund at September 30, 2008 by the
Class A net asset value per share of the Franklin
Growth Fund at September 30, 2008.
The number of Class B shares issued was calculated by
dividing the Class B net assets of the Franklin
Capital Growth Fund at September 30, 2008 by the
Class B net asset value per share of the Franklin
Growth Fund at September 30, 2008.
The number of Class C shares issued was calculated by
dividing the Class C net assets of the Franklin
Capital Growth Fund at September 30, 2008 by the
Class C net asset value per share of the Franklin
Growth Fund at September 30, 2008.
The number of Class R shares issued was calculated by
dividing the Class R net assets of the Franklin
Capital Growth Fund at September 30, 2008 by the
Class R net asset value per share of the Franklin
Growth Fund at September 30, 2008.
The number of Advisor Class shares issued was
calculated by dividing the Advisor Class net assets
of the Franklin Capital Growth Fund at September 30,
2008 by the Advisor Class net asset value per share
of the Franklin Growth Fund at September 30, 2008.
3. INVESTMENT RESTRICTIONS
None of the securities held by the Franklin Capital
Growth Fund as of the closing date will violate the
investment restrictions of the Franklin Growth Fund.
4. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with
accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the
amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
5. SECURITY VALUATION
Securities listed on a securities exchange or on the NASDAQ
National Market are valued at the last quoted sale price or
the official closing price of the day, respectively.
Over-the-counter securities and listed securities for which
there is no reported sale are valued within the range of the
most recent quoted bid and ask prices. Securities that trade
in multiple markets or on multiple exchanges are valued
according to the broadest and most representative market.
Investments in open-end mutual Funds are valued at the
closing net asset value.
Foreign securities are valued as of the close of trading on
the foreign stock exchange on which the security is
primarily traded, or the NYSE, whichever is earlier. If no
sale is reported at that time, the foreign security will be
valued within the range of the most recent quoted bid and
ask prices. The value is then converted into its U.S. dollar
equivalent at the foreign exchange rate in effect at the
close of the NYSE on the day that the value of the foreign
security is determined.
Each fund has procedures to determine the fair value of
individual securities and other assets for which market
prices are not readily available or which may not be
reliably priced. Methods for valuing these securities may
include: fundamental analysis, matrix pricing, discounts
from market prices of similar securities, or discounts
applied due to the nature and duration of restrictions on
the disposition of the securities. Due to the inherent
uncertainty of valuations of such securities, the fair
values may differ significantly from the values that would
have been used had a ready market for such investments
existed. Occasionally, events occur between the time at
which trading in a security is completed and the close of
the NYSE that might call into question the availability
(including the reliability) of the value of a portfolio
security held by the fund. The investment manager monitors
price movements following the close of trading in foreign
stock markets through a series of country specific market
proxies (such as baskets of American Depository Receipts,
futures contracts and exchange traded funds). These price
movements are measured against established trigger
thresholds for each specific market proxy to assist in
determining if an event has occurred. If such an event
occurs, the securities may be valued using fair value
procedures, which may include the use of independent pricing
services. All security valuation procedures are approved by
each Fund's Board of Trustees.
6. Reorganization Costs
The Franklin Growth Fund and the Franklin Capital Growth
Fund will each pay 25% of the expenses, including the costs
of proxy solicitation, resulting from their participation in
the reorganization. Franklin Advisers, Inc. will pay the
remaining 50% of such expenses for the reorganization. The
total amount of such expenses for the reorganization is
estimated to be $286,288.
PART C
OTHER INFORMATION
Item 15. Indemnification. The Agreement and Declaration of
Trust (the "Declaration") provides that any person who
is or was a Trustee, officer, employee or other agent,
including the underwriter, of such Trust shall be
liable to such Trust and its shareholders only for (1)
any act or omission that constitutes a bad faith
violation of the implied contractual covenant of good
faith and fair dealing, or (2) the person's own willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
person (such conduct referred to herein as
"Disqualifying Conduct") and for nothing else. Except
in these instances, these persons shall not be
responsible or liable for any act or omission of any
other agent of such Trust or its investment adviser or
principal underwriter to the fullest extent that
limitations of liability are permitted by the Delaware
Statutory Trust Act (the "Delaware Act"). Moreover,
except in these instances, none of these persons, when
acting in their respective capacity as such, shall be
personally liable to any other person, other than such
Trust or its shareholders, for any act, omission or
obligation of such Trust or any trustee thereof.
The Trust shall indemnify, out of its assets, to the
fullest extent permitted under applicable law, any of
these persons who was or is a party, or is threatened
to be made a party, to any Proceeding (as defined in
the Declaration) because the person is or was an agent
of such Trust. These persons shall be indemnified
against any expenses, judgments, fines, settlements and
other amounts actually and reasonably incurred in
connection with the Proceeding if the person acted in
good faith or, in the case of a criminal proceeding,
had no reasonable cause to believe that the conduct was
unlawful. The termination of any proceeding by
judgment, settlement or its equivalent shall not in
itself create a presumption that the person did not act
in good faith or that the person had reasonable cause
to believe that the person's conduct was unlawful.
There shall nonetheless be no indemnification for a
person's own Disqualifying Conduct.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933, as amended (the "1933
Act" or "Securities Act"), may be permitted to
Trustees, officers and controlling persons of the Trust
pursuant to the foregoing provisions, or otherwise, the
Trust has been advised that in the opinion of the
Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other
than the payment by the Trust of expenses incurred or
paid by a Trustee, officer or controlling person of the
Trust in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or
controlling person in connection with securities being
registered, the Trust may be required, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court or appropriate
jurisdiction the question whether such indemnification
is against public policy as expressed in the Act and
will be governed by the final adjudication of such
issue.
Item 16. Exhibits. The following exhibits are incorporated by
reference to the Registrant's previously filed
registration statements on Form N-1A indicated below,
except as noted:
(1) Copies of the charter of the Registrant as
now in effect;
(a) Agreement and Declaration of Trust of
Franklin Custodian Funds, a Delaware
statutory trust dated October 18, 2006
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(b) Certificate of Amendment dated December 4,
2006 of Agreement and Declaration of Trust
dated October 18, 2006
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(c) Certificate of Amendment dated October 21,
2008 of Agreement and Declaration of Trust
dated October 18, 2006
Filing: Form N-14
File No. 333-156353
Filing Date: December 19, 2008
(d) Certificate of Trust of Franklin Custodian
Funds dated October 18, 2006
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(e) Certificate of Amendment dated December 4,
2006 to the Certificate of Trust dated
October 18, 2006
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(2) Copies of the existing bylaws or corresponding
instrument of the Registrant;
(a) By-Laws of Franklin Custodian Funds, a
Delaware statutory trust, dated October 18,
2006
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(b) Certificate of Amendment dated December 4,
2006 of By-Laws dated October 18, 2006
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(3) Copies of any voting trust agreement affecting
more than 5 percent of any class of equity
securities of the Registrant;
Not applicable.
(4) Copies of the agreement of acquisition,
reorganization, merger, liquidation and any
amendments to it;
(a) Form of Agreement and Plan of Reorganization
between the Registrant, on behalf of Franklin
Growth Fund, and Franklin Capital Growth
Fund, is filed herewith as Exhibit A to the
Prospectus/Proxy Statement.
(5) Copies of all instruments defining the rights of
holders of the securities being registered
including, where applicable, the relevant portion
of the articles of incorporation or by-laws of the
Registrant;
(a) Articles III, V, VI, VII, VIII and IX of the
Agreement and Declaration of Trust of
Franklin Custodian Funds, a Delaware
statutory trust dated October 18, 2006
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(b) Article VII of the Agreement and Declaration
of Trust as amended by the Certificate of
Amendment of Agreement and Declaration of
Trust dated October 21, 2008
(c) Articles II, VI and VII of the By-Laws of
Franklin Custodian Funds, a Delaware
statutory trust, dated October 18, 2006
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(6) Copies of all investment advisory contracts
relating to the management of the assets of the
Registrant;
(a) Investment Management Agreement between the
Registrant on behalf of the Franklin DynaTech
Fund and Franklin Advisers, Inc. dated
February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(b) Investment Management Agreement between the
Registrant on behalf of the Franklin Growth
Fund and Franklin Advisers, Inc. dated
November 1, 2008
Filing: Form N-14
File No. 333-156353
Filing Date: December 19, 2008
(c) Sub-Advisory Agreement between the Franklin
Advisers, Inc., on behalf of the Franklin
Growth Fund, and Franklin Investment Advisory
Services, LLC dated November 1, 2008
Filing: Form N-14
File No. 333-156353
Filing Date: December 19, 2008
(d) Investment Management Agreement between the
Registrant on behalf of the Franklin Income
Fund and Franklin Advisers, Inc. dated
February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(e) Investment Management Agreement between the
Registrant on behalf of the Franklin U.S.
Government Securities Fund and Franklin
Advisers, Inc. dated February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(f) Investment Management Agreement between the
Registrant on behalf of the Franklin
Utilities Fund and Franklin Advisers, Inc.
dated February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(7) Copies of each underwriting or distribution
contract between the Registrant and a principal
underwriter, and specimens or copies of all
agreements between principal underwriters and
dealers;
(a) Distribution Agreement between Registrant and
Franklin/Templeton Distributors, Inc. dated
February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(b) Form of Selling Agreements between
Franklin/Templeton Distributors, Inc. and
Securities Dealers dated November 1, 2003
Filing: Post-Effective Amendment No. 88 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: November 29, 2004
(c) Amendment dated May 15, 2006 to form of
Selling Agreements between Franklin/Templeton
Distributors, Inc. and Securities Dealers
dated November 1, 2003
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(8) Copies of all bonus, profit sharing, pension, or
other similar contracts or arrangements wholly or
partly for the benefit of trustees or officers of
the Registrant in their capacity as such. Furnish
a reasonably detailed description of any plan that
is not set forth in a formal document;
Not applicable.
(9) Copies of all custodian agreements and depository
contracts under Section 17(f) of the Investment
Company Act of 1940, as amended (the "1940 Act")
for securities and similar investments of the
Registrant, including the schedule of remuneration;
(a) Master Custody Agreement between Registrant
and The Bank of New York Mellon dated
February 16, 1996
Filing: Post-Effective Amendment No. 74 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: August 19, 1996
(b) Amendment dated May 7, 1997 to the Master
Custody Agreement dated February 16, 1996
between the Registrant and The Bank of New
York Mellon
Filing: Post-Effective Amendment No. 77 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 29, 1998
(c) Amendment dated February 27, 1998 to Master
Custody Agreement between the Registrant and
The Bank of New York Mellon dated February
16, 1996
Filing: Post-Effective Amendment No. 78 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: November 27, 1998
(d) Amendment dated December 5, 2008 to Exhibit A
of the Master Custody Agreement between
Registrant and The Bank of New York Mellon
made as of February 16, 1996
Filing: Post-Effective Amendment No. 94 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 27, 2009
(e) Amended and Restated Foreign Custody Manager
Agreement between the Registrant and The Bank
of New York Mellon made as of May 16, 2001
Filing: Post-Effective Amendment No. 83 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: October 29, 2001
(f) Amendment dated December 1, 2008 to Schedule
1 of the Amended and Restated Foreign Custody
Manager Agreement between the Registrant and
The Bank of New York Mellon
Filing: Post-Effective Amendment No. 94 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 27, 2009
(g) Amendment dated November 14, 2008 to Schedule
2 of the Amended and Restated Foreign Custody
Manager Agreement between the Registrant and
The Bank of New York Mellon made as May 16,
2001
Filing: Post-Effective Amendment No. 94 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 27, 2009
(h) Terminal Link Agreement between Registrant
and The Bank of New York Mellon dated
February 16, 1996
Filing: Post-Effective Amendment No. 74 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: August 19, 1996
(10) Copies of any plan entered into by Registrant
pursuant to Rule 12b-1 under the 1940 Act and any
agreements with any person relating to
implementation of the plan, and copies of any plan
entered into by Registrant pursuant to Rule 18f-3
under the 1940 Act, any agreement with any person
relating to implementation of the plan, any
amendment to the plan, and a copy of the portion
of the minutes of the meeting of the Registrant's
trustees describing any action taken to revoke the
plan;
(a) Distribution Plan pursuant to Rule 12b-1
between the Registrant, on behalf of Franklin
DynaTech Fund - Class A and
Franklin/Templeton Distributors, Inc. dated
February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(b) Distribution Plan pursuant to Rule 12b-1
between the Registrant, on behalf of Franklin
Growth Fund - Class A, and Franklin/Templeton
Distributors, Inc. dated February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(c) Distribution Plan pursuant to Rule 12b-1
between the Registrant, on behalf of Franklin
Income Fund - Class A, and Franklin/Templeton
Distributors, Inc. dated February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(d) Distribution Plan pursuant to Rule 12b-1
between the Registrant, on behalf of Franklin
U.S. Government Securities Fund - Class A and
Franklin/Templeton Distributors, Inc. dated
February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(e) Distribution Plan pursuant to Rule 12b-1
between the Registrant, on behalf of Franklin
Utilities Fund - Class A, and
Franklin/Templeton Distributors, Inc. dated
February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(f) Distribution Plan pursuant to Rule 12b-1
between the Registrant, on behalf of Franklin
DynaTech Fund, Franklin Growth Fund, Franklin
Income Fund, Franklin U.S. Government
Securities Fund and Franklin Utilities Fund -
Class C, and Franklin/Templeton Distributors,
Inc. dated February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(g) Distribution Plan pursuant to Rule 12b-1
between the Registrant on behalf of Franklin
DynaTech Fund, Franklin Growth Fund and
Franklin Income Fund - Class B, and
Franklin/Templeton Distributors, Inc. dated
February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(h) Distribution Plan pursuant to Rule 12b-1
between the Registrant, on behalf of Franklin
Income Fund - Class B1, Franklin U.S.
Government Securities Fund and Franklin
Utilities Fund - Class B, and
Franklin/Templeton Distributors, Inc. dated
February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(i) Distribution Plan pursuant to Rule 12b-1
between the Registrant, on behalf of Franklin
Growth Fund, Franklin Income Fund, Franklin
U.S. Government Securities Fund and Franklin
Utilities Fund - Class R, and
Franklin/Templeton Distributors, Inc. dated
February 1, 2008
Filing: Post-Effective Amendment No. 92 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: May 12, 2008
(j) Distribution Plan pursuant to Rule 12b-1
between the Registrant, on behalf of Franklin
DynaTech Fund - Class R, and
Franklin/Templeton Distributors, Inc. dated
December 1, 2008
Filing: Form N-14
File No. 333-156353
Filing Date: December 19, 2008
(k) Multiple Class Plan on behalf of Franklin
DynaTech Fund dated July 10, 2008
Filing: Form N-14
File No. 333-156353
Filing Date: December 19, 2008
(l) Multiple Class Plan on behalf of Franklin
Growth Fund dated October 17, 2006
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(m) Multiple Class Plan on behalf of Franklin
Income Fund dated October 17, 2006
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(n) Multiple Class Plan on behalf of Franklin
U.S. Government Securities Fund dated October
17, 2006
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(o) Multiple Class Plan on behalf of Franklin
Utilities Fund dated October 17, 2006
Filing: Post-Effective Amendment No. 91 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 25, 2008
(11) An opinion and consent of counsel as to the
legality of the securities being registered,
indicating whether they will, when sold, be
legally issued, fully paid and nonassessable;
(a) Opinion and Consent of Counsel dated December
17, 2008
Filing: Form N-14
File No. 333-156353
Filing Date: December 19, 2008
(12) An opinion, and consent to their use, of counsel
or, in lieu of an opinion, a copy of the revenue
ruling from the Internal Revenue Service,
supporting the tax matters and consequences to
shareholders discussed in the prospectus;
(13) Copies of all material contracts of the Registrant
not made in the ordinary course of business which
are to be performed in whole or in part on or
after the date of filing the registration
statement;
(a) Subcontract for Fund Administrative Services
dated March 1, 2008 between Franklin
Advisers, Inc. and Franklin Templeton
Services, LLC as amended November 1, 2008
Filing: Post-Effective Amendment No. 94 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: January 27, 2009
(14) Copies of any other opinions, appraisals, or
rulings, and consents to their use, relied on in
preparing the registration statement and required
by Section 7 of the 1933 Act;
(a) Consent of Independent Registered Public
Accounting Firm
(15) All financial statements omitted pursuant to Item
14(a)(1);
Not applicable.
(16) Manually signed copies of any power of attorney
pursuant to which the name of any person has been
signed to the registration statement; and
(a) Power of Attorney dated December 1, 2008
Filing: Form N-14
File No. 333-156353
Filing Date: December 19, 2008
(b) Powers of Attorney dated December 1, 2008
Filing: Form N-14
File No. 333-156353
Filing Date: December 19, 2008
(17) Any additional exhibits which the Registrant may
wish to file.
(a) Code of Ethics dated May, 2008
Filing: Post-Effective Amendment No. 93 to
Registration Statement on Form N-1A
File No. 002-11346
Filing Date: July 14, 2008
Item 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to
any public reoffering of the securities registered
through the use of a prospectus which is part of
this registration statement by any person or party
who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information
called for by the applicable registration form for
reofferings by persons who may be deemed
underwriters, in addition to the information
called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every
prospectus that is filed under paragraph (1) above
will be filed as part of an amendment to the
registration statement and will not be used until
the amendment is effective, and that, in
determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a
new registration statement for the securities
offered therein, and the offering of the
securities at that time shall be deemed to be the
initial bona fide offering of them.
(3) The undersigned Registrant agrees to file by
Post-Effective Amendment the opinions and consents
of counsel regarding the tax consequences of the
proposed reorganizations required by Item 16(12)
of Form N-14 within a reasonable time after
receipt of such opinions.
SIGNATURES
As required by the Securities Act of 1933, as amended, (the
"1933 Act"), this Registration Statement has been signed on
behalf of the Registrant in the City of San Mateo and the State
of California on the 5th day of February, 2009.
FRANKLIN CUSTODIAN FUNDS
a Delaware statutory trust
(Registrant)
By: /s/ DAVID P. GOSS
David P. Goss
Vice President
As required by the 1933 Act, this Registration Statement has
been signed by the following persons in the capacities and on the
dates indicated:
CHARLES B. JOHNSON* Chief Executive Officer-
Charles B. Johnson Investment Management and
Trustee
Dated: February 5, 2009
JENNIFER J. BOLT* Chief Executive Officer-
Jennifer J. Bolt Finance and Administration
Dated: February 5, 2009
LAURA F. FERGERSON* Chief Financial Officer and
Laura F. Fergerson Chief Accounting Officer
Dated: February 5, 2009
HARRIS J. ASHTON* Trustee
Harris J. Ashton Dated: February 5, 2009
ROBERT F. CARLSON* Trustee
Robert F. Carlson Dated: February 5, 2009
SAM GINN* Trustee
Sam Ginn Dated: February 5, 2009
EDITH E. HOLIDAY* Trustee
Edith E. Holiday Dated: February 5, 2009
RUPERT H. JOHNSON, JR.* Trustee
Rupert H. Johnson, Jr. Dated: February 5, 2009
FRANK W.T. LAHAYE* Trustee
Frank W.T. LaHaye Dated: February 5, 2009
FRANK A. OLSON* Trustee
Frank A. Olson Dated: February 5, 2009
LARRY D. THOMPSON* Trustee
Larry D. Thompson Dated: February 5, 2009
JOHN B WILSON* Trustee
John B. Wilson Dated: February 5, 2009
*By /s/ DAVID P. GOSS
David P. Goss, Attorney-in-Fact
(Pursuant to Powers of Attorney filed herewith)
FRANKLIN CUSTODIAN FUNDS
REGISTRATION STATEMENT
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.(1)(a) Agreement and Declaration of *
Trust of Franklin Custodian
Funds, a Delaware statutory
trust, dated October 18, 2006
EX-99.(1)(b) Certificate of Amendment dated *
December 4, 2006 of Agreement
and Declaration of Trust dated
October 18, 2006
EX-99.(1)(c) Certificate of Amendment dated *
October 21, 2008 of Agreement
and Declaration of Trust dated
October 18, 2006
EX-99.(1)(d) Certificate of Trust of Franklin *
Custodian Funds dated October
18, 2006
EX-99.(1)(e) Certificate of Amendment dated *
December 4, 2006 to the
Certificate of Trust dated
October 18, 2006
EX-99.(2)(a) By-Laws of Franklin Custodian *
Funds, a Delaware statutory
trust, dated October 18, 2006
EX-99.(2)(b) Certificate of Amendment dated *
December 4, 2006 of By-Laws
dated October 18, 2006
EX-99.(5)(a) Articles III, V, VI, VII, VIII *
and IX of the Agreement and
Declaration of Trust of
Franklin Custodian Funds, a
Delaware statutory trust dated
October 18, 2006
EX-99.(5)(b) Article VII of the Agreement and *
Declaration of Trust as amended
by the Certificate of Amendment
of Agreement and Declaration of
Trust dated October 21, 2008
EX-99.(5)(c) Articles II, VI and VII of the *
By-Laws of Franklin Custodian
Funds, a Delaware statutory
trust, dated October 18, 2006
EX-99.(6)(a) Investment Management Agreement *
between the Registrant on behalf
of the Franklin DynaTech Fund
and Franklin Advisers, Inc.
dated February 1, 2008
EX-99.(6)(b) Investment Management Agreement *
between the Registrant on behalf
of the Franklin Growth Fund and
Franklin Advisers, Inc. dated
November 1, 2008
EX-99.(6)(c) Sub-Advisory Agreement between *
the Franklin Advisers, Inc., on
behalf of the Franklin Growth
Fund, and Franklin Investment
Advisory Services, LLC dated
November 1, 2008
EX-99.(6)(d) Investment Management Agreement *
between the Registrant on behalf
of the Franklin Income Fund and
Franklin Advisers, Inc. dated
February 1, 2008
EX-99.(6)(e) Investment Management Agreement *
between the Registrant on behalf
of the Franklin U.S. Government
Securities Fund and Franklin
Advisers, Inc. dated February 1,
2008
EX-99.(6)(f) Investment Management Agreement *
between the Registrant on behalf
of the Franklin Utilities Fund
and Franklin Advisers, Inc.
dated February 1, 2008
EX-99.(7)(a) Distribution Agreement between *
Registrant and
Franklin/Templeton Distributors,
Inc. dated February 1, 2008
EX-99.(7)(b) Form of Selling Agreements *
between Franklin/Templeton
Distributors, Inc. and
Securities Dealers dated
November 1, 2003
EX-99.(7)(c) Amendment dated May 15, 2006 to *
form of Selling Agreements
between Franklin/Templeton
Distributors, Inc. and
Securities Dealers dated
November 1, 2003
EX-99.(8)(a) Master Custody Agreement between *
Registrant and The Bank of New
York Mellon dated February 16,
1996
EX-99.(8)(b) Amendment dated May 7, 1997 to *
the Master Custody Agreement
dated February 16, 1996 between
the Registrant and The Bank of
New York Mellon
EX-99.(8)(c) Amendment dated February 27, *
1998 to the Master Custody
Agreement dated February 16,
1996 between the Registrant and
The Bank of New York Mellon
EX-99.(8)(d) Amendment dated December 5, 2008 *
to Exhibit A of the Master
Custody Agreement between
Registrant and The Bank of New
York Mellon made as of February
16, 1996
EX-99.(8)(e) Amended and Restated Foreign *
Custody Manager Agreement
between the Registrant and The
Bank of New York Mellon made as
of May 16, 2001
EX-99.(8)(f) Amendment dated December 1, *
2008, to Schedule 1 of the
Amended and Restated Foreign
Custody Manager Agreement
between the Registrant and The
Bank of New York Mellon as of
May 16, 2003
EX-99.(8)(g) Amendment dated November 14, *
2008, to Schedule 2 of the
Amended and Restated Foreign
Custody Manager Agreement
between the Registrant and The
Bank of New York Mellon as of
May 16, 2001
EX-99.(8)(h) Terminal Link Agreement between *
Registrant and The Bank of New
York Mellon dated February 16,
1996
EX-99.(10)(a) Distribution Plan pursuant to *
Rule 12b-1 between the
Registrant, on behalf of
Franklin DynaTech Fund - Class
A, and Franklin/Templeton
Distributors, Inc. dated
February 1, 2008
EX-99.(10)(b) Distribution Plan pursuant to *
Rule 12b-1 between the
Registrant, on behalf of
Franklin Growth Fund - Class A,
and Franklin/Templeton
Distributors, Inc. dated
February 1, 2008
EX-99.(10)(c) Distribution Plan pursuant to *
Rule 12b-1 between the
Registrant, on behalf of
Franklin Income Fund - Class A,
and Franklin/Templeton
Distributors, Inc. dated
February 1, 2008
EX-99.(10)(d) Distribution Plan pursuant to *
Rule 12b-1 between the
Registrant, on behalf of
Franklin U.S. Government
Securities Fund - Class A, and
Franklin/Templeton Distributors,
Inc. dated February 1, 2008
EX-99.(10)(e) Distribution Plan pursuant to *
Rule 12b-1 between the
Registrant, on behalf of the
Franklin Utilities Fund - Class
A, and Franklin/Templeton
Distributors, Inc. dated
February 1, 2008
EX-99.(10)(f) Distribution Plan pursuant to *
Rule 12b-1 between the
Registrant, on behalf of
Franklin DynaTech Fund, Franklin
Growth Fund, Franklin Income
Fund, Franklin U.S. Government
Securities Fund and Franklin
Utilities Fund - Class C, and
Franklin/Templeton Distributors,
Inc. dated February 1, 2008
EX-99.(10)(g) Distribution Plan pursuant to *
Rule 12b-1 between the
Registrant, on behalf of
Franklin DynaTech Fund, Franklin
Growth Fund and Franklin Income
Fund - Class B, and
Franklin/Templeton Distributors,
Inc. dated February 1, 2008
EX-99.(10)(h) Distribution Plan pursuant to *
Rule 12b-1 between the
Registrant, on behalf of
Franklin Income Fund - Class B1,
Franklin U.S. Government
Securities Fund and Franklin
Utilities Fund - Class B, and
Franklin/Templeton Distributors,
Inc. dated February 1, 2008
EX-99.(10)(i) Distribution Plan pursuant to *
Rule 12b-1 between the
Registrant, on behalf of
Franklin Growth Fund, Franklin
Income Fund, Franklin U.S.
Government Securities Fund and
Franklin Utilities Fund - Class
R, and Franklin/Templeton
Distributors, Inc. dated
February 1, 2008
EX-99.(10)(j) Distribution Plan pursuant to *
Rule 12b-1 between the
Registrant, on behalf of
Franklin DynaTech Fund - Class
R, and Franklin/Templeton
Distributors, Inc. dated
December 1, 2008
EX-99.(10)(k) Multiple Class Plan on behalf of *
Franklin DynaTech Fund dated
July 10, 2008
EX-99.(10)(l) Multiple Class Plan on behalf of *
Franklin Growth Fund dated
October 17, 2006
EX-99.(10)(m) Multiple Class Plan on behalf of *
Franklin Income Fund dated
October 17, 2006
EX-99.(10)(n) Multiple Class Plan on behalf of *
U.S. Government Securities Fund
dated October 17, 2006
EX-99.(10)(o) Multiple Class Plan on behalf of *
Franklin Utilities Fund dated
October 17, 2006
EX-99.(11)(a) Opinion and Consent of Counsel *
dated December 17, 2008
EX-99.(13)(a) Subcontract for Fund *
Administrative Services dated
March 1, 2008 between Franklin
Advisers, Inc. and Franklin
Templeton Services, LLC as
amended November 1, 2008
EX-99.(14)(a) Consent of Independent Attached
Registered Public Accounting Firm
EX-99.(16)(a) Powers of Attorney dated *
December 1, 2008
EX-99.(16)(b) Power of Attorney dated December *
1, 2008
EX-99.(17)(a) Code of Ethics dated May, 2008 *
*Incorporated By Reference