SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section.240-14a-11(c) or
Section.240- 14a-12
[ ] Confidential, for Use of the Commission Only(as permitted by
Rule 14a-6(e)(2))
FTI Funds
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(Name of Registrant as Specified In Its Charter
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(Name of Person(s) Filing Proxy Statement, if other than
Registrant)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11(1)
Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary material.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.
3) Filing Party:
4) Date Filed:
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
PROXY SPECIAL SHAREHOLDERS' MEETING OF PROXY
FTI LARGE CAPITALIZATION GROWTH AND INCOME FUND
JULY 15, 2003
The undersigned hereby revokes all previous proxies for his or her shares
and appoints Gregory E. Johnson, Murray L. Simpson, Barbara J. Green,
David P. Goss and Steven J. Gray, and each of them, proxies of the undersigned
with full power of substitution to vote all shares of FTI Large Capitalization
Growth and Income Fund (FTI Fund) that the undersigned is entitled to
vote at the FTI Fund's special shareholders' meeting (Meeting) to be held at
One Franklin Parkway, San Mateo, California 94403-1906 at 10:00 a.m.
Pacific time on July 15, 2003, including any adjournments thereof, upon
such business as may properly be brought before the Meeting
IMPORTANT: PLEASE SEND IN YOUR PROXY TODAY.
YOU ARE URGED TO DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY. THIS WILL
SAVE THE EXPENSE OF FOLLOW-UP LETTERS TO SHAREHOLDERS WHO HAVE NOT RESPONDED.
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, each holder must sign.
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SIGNATURE
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SIGNATURE
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DATE
(Please see reverse side)
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF FTI FUNDS, ON
BEHALF OF FTI FUND. IT WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS
MADE, THIS PROXY SHALL BE VOTED IN FAVOR OF PROPOSAL 1, REGARDING THE
REORGANIZATION OF FTI FUND PURSUANT TO THE AGREEMENT AND PLAN OF REORGANIZATION
WITH FRANKLIN GLOBAL TRUST ON BEHALF OF FIDUCIARY LARGE CAPITALIZATION GROWTH
AND INCOME FUND(FGT FUND). IF ANY OTHER MATTERS PROPERLY COME BEFORE THE
MEETING ABOUT WHICH THE PROXYHOLDERS WERE NOT AWARE PRIOR TO THE TIME OF THE
SOLICITATION, AUTHORIZATION IS GIVEN TO THE PROXYHOLDERS TO VOTE IN ACCORDANCE
WITH THE VIEWS OF MANAGEMENTON SUCH MATTERS. MANAGEMENT IS NOT AWARE OF ANY
SUCH MATTERS.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF PROPOSAL
1.
FOR AGAINST ABSTAIN
1. To approve an Agreement and Plan of Reorganization between FTI Funds, on [] [] []
behalf of FTI Fund, and Franklin Global Trust, on behalf of FGT Fund, that
provides for (i) the acquisition of all of the assets and liabilities of FTI GRANT WITHHOLD ABSTAIN
Fund by FGT Fund in exchange for shares of FGT Fund, (ii) the distribution [] [] []
of such shares to the shareholders of FTI Fund, and (iii) the complete
liquidation and dissolution of FTI Fund. Shareholders of FTI Fund will
receive shares of FGT Fund equal in number and value to the shares held in
FTI Fund.
2. To grant the proxyholders the authority to transact any other business, not
currently contemplated, that may properly come before the Meeting.
IMPORTANT: PLEASE SIGN, DATE AND MAIL IN YOUR PROXY TODAY
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
REQUIRED IF MAILED IN THE U.S.
13349_LCAP
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
PROXY SPECIAL SHAREHOLDERS' MEETING OF PROXY
FTI SMALL CAPITALIZATION EQUITY FUND
JULY 15, 2003
The undersigned hereby revokes all previous proxies for his or her shares
and appoints Gregory E. Johnson, Murray L. Simpson, Barbara J. Green,
David P. Goss and Steven J. Gray, and each of them, proxies of the undersigned
with full power of substitution to vote all shares of FTI Small Capitalization
Equity Fund (FTI Fund) that the undersigned is entitled to vote at the FTI
Fund's special shareholders' meeting (Meeting) to be held at One Franklin
Parkway, San Mateo, California 94403-1906 at 10:00 a.m. Pacific time on
July 15, 2003, including any adjournments thereof, upon such business as may
properly be brought before the Meeting
IMPORTANT: PLEASE SEND IN YOUR PROXY TODAY.
YOU ARE URGED TO DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY. THIS WILL
SAVE THE EXPENSE OF FOLLOW-UP LETTERS TO SHAREHOLDERS WHO HAVE NOT RESPONDED.
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, each holder must sign.
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SIGNATURE
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SIGNATURE
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DATE
(Please see reverse side)
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF FTI FUNDS, ON
BEHALF OF FTI FUND. IT WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS
MADE, THIS PROXY SHALL BE VOTED IN FAVOR OF PROPOSAL 1, REGARDING THE
REORGANIZATION OF FTI FUND PURSUANT TO THE AGREEMENT AND PLAN OF REORGANIZATION
WITH FRANKLIN GLOBAL TRUST ON BEHALF OF FIDUCIARY SMALL CAPITALIZATION EQUITY
FUND (FGT FUND). IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING ABOUT
WHICH THE PROXYHOLDERS WERE NOT AWARE PRIOR TO THE TIME OF THE SOLICITATION,
AUTHORIZATION IS GIVEN TO THE PROXYHOLDERS TO VOTE IN ACCORDANCE WITH THE VIEWS
OF MANAGEMENT ON SUCH MATTERS. MANAGEMENT IS NOT AWARE OF ANY SUCH MATTERS.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE I FAVOR OF PROPOSAL
1.
FOR AGAINST ABSTAIN
1. To approve an Agreement and Plan of Reorganization between FTI Funds, [] [] []
on behalf of FTI Fund, and Franklin Global Trust, on behalf of FGT
Fund, that provides for (i) the acquisition of all of the assets and
liabilities of FTI Fund by FGT Fund in exchange for shares of FGT Fund,
(ii) the distribution of such shares to the shareholders of FTI Fund, and
(iii) the complete liquidation and dissolution of FTI Fund. Shareholders
of FTI Fund will receive shares of FGT Fund equal in number and value to the
shares held in FTI Fund.
2. To grant the proxyholders the authority to transact any other business, not GRANT WITHHOLD ABSTAIN
currently contemplated, that may properly come before the Meeting. [] [] []
IMPORTANT: PLEASE SIGN, DATE AND MAIL IN YOUR PROXY TODAY
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
REQUIRED IF MAILED IN THE U.S.
13349_SCAP
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
PROXY SPECIAL SHAREHOLDERS' MEETINGF PROXY
FTI EUROPEAN SMALLER COMPANIES FUND
JULY 15, 2003
The undersigned hereby revokes all previous proxies for his or
her shares and appoints Gregory E. Johnson, Murray L. Simpson,
Barbara J. Green, David P. Goss and Steven J. Gray, and each of
them, proxies of the undersigned with full power of substitution
to vote all shares of FTI European Smaller Companies Fund (FTI
Fund) that the undersigned is entitled to vote at the FTI Fund's
special shareholders' meeting (Meeting) to be held at One
Franklin Parkway, San Mateo, California 94403-1906 at 10:00 a.m.
Pacific time on July 15, 2003, including any adjournments thereof,
upon such business as may properly be brought before the Meeting
IMPORTANT: PLEASE SEND IN YOUR PROXY TODAY.
YOU ARE URGED TO DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY. THIS WILL
SAVE THE EXPENSE OF FOLLOW-UP LETTERS TO SHAREHOLDERS WHO HAVE NOT RESPONDED.
CONTROL NUMBER: 999 9999 9999 999
NOTE: Please sing exactly as your name
appears on the proxy. If signing for
estates, trusts or corporations, your title
or capacity should be stated. If shares are
held jointly, each holder must sign.
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SIGNATURE
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SIGNATURE
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DATE
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF FTI
FUNDS, ON BEHALF OF FTI FUND. IT WILL BE VOTED AS SPECIFIED. IF
NO SPECIFICATION IS MADE, THIS PROXY SHALL BE VOTED IN FAVOR OF
PROPOSAL 1, REGARDING THE REORGANIZATION OF FTI FUND PURSUANT TO
THE AGREEMENT AND PLAN OF REORGANIZATION WITH FRANKLIN GLOBAL
TRUST ON BEHALF OF FIDUCIARY EUROPEAN SMALLER COMPANIES FUND (FGT
FUND). IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING
ABOUT WHICH THE PROXYHOLDERS WERE NOT AWARE PRIOR TO THE TIME OF
THE SOLICITATION, AUTHORIZATION IS GIVEN TO THE PROXYHOLDERS TO
VOTE IN ACCORDANCE WITH THE VIEWS OF MANAGEMENT ON SUCH MATTERS.
MANAGEMENT IS NOT AWARE OF ANY SUCH MATTERS.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
PROPOSAL 1.
1. To approve an Agreement and Plan of Reorganization between FTI FOR AGAINST ABSTAIN
Funds, on behalf of FTI Fund, and Franklin Global Trust, on [] [] []
behalf of FGT Fund, that provides for (i) the acquisition of
all of the assets and liabilities of FTI Fund by FGT Fund in
exchange for shares of FGT Fund, (ii) the distribution of such
shares to the shareholders of FTI Fund, and (iii) the complete GRANT WITHHOLD ABSTAIN
liquidation and dissolution of FTI Fund. Shareholders of FTI [] [] []
Fund will receive shares of FGT Fund equal in number and value
to the shares held in FTI Fund.
2. To grant the proxyholders the authority to transact any other
business, not currently contemplated, that may properly come
before the Meeting.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN
FAVOR OF PROPOSAL 1.
IMPORTANT: PLEASE SIGN, DATE AND MAIL IN YOUR PROXY TODAY
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO
POSTAGE REQUIRED IF MAILED IN THE U.S.
13349_EUR
FTI FUNDS
FTI Large Capitalization Growth and Income Fund
FTI Small Capitalization Equity Fund
FTI European Smaller Companies Fund
Dear Shareholders:
Enclosed is a Notice of Meeting for a Special Joint Shareholders' Meeting
("Meeting") of FTI Large Capitalization Growth and Income Fund, FTI Small
Capitalization Equity Fund, and FTI European Smaller Companies Fund, each of
which is a series of the FTI Funds (the "FTI Trust"). The Meeting is scheduled
for July 15, 2003 at 10:00 a.m., Pacific time, at One Franklin Parkway, San
Mateo, CA 94403. The accompanying materials describe an important proposal to be
voted on at the Meeting, and contain the Notice of Meeting, proxy statement and
proxy card. A proxy card is, in essence, a ballot. When you vote your proxy, it
tells us how you wish to vote on important issues relating to your FTI Fund. If
you specify a vote for the Proposal, your proxy will be voted as you indicate.
If you simply sign and date the proxy card, but do not specify a vote for the
Proposal, your proxy will be voted FOR the Proposal.
PLEASE TAKE A MOMENT TO FILL OUT, SIGN AND
RETURN THE ENCLOSED PROXY CARD
The Board of Trustees of the FTI Trust ("FTI Board") unanimously recommends
that you consider and approve an Agreement and Plan of Reorganization that would
result in your shares of your FTI Fund(s) being exchanged for those of
corresponding and similar funds in Franklin Global Trust (collectively, the "FGT
Funds"). Each FGT Fund has identical investment goals, policies, risks,
portfolio management and overall expense ratios, and substantively the same
fundamental investment restrictions as its corresponding FTI Fund. The proposed
transactions are intended to be tax-free, which means that you will not have a
taxable gain or loss on the exchange of your shares.
If the shareholders of each of the FTI Funds approve the Proposal, you will
receive shares of the FGT Fund(s) equal in number and in value to your
investment in the FTI Fund(s). FTI Funds will no longer exist after the
reorganizations are completed. You will be able to buy shares of the FGT Funds
without a sales charge.
The FTI Board recommends these transactions because it anticipates that the
reorganizations will result in operating efficiencies that may benefit
shareholders. As a general matter, following the reorganizations, the FTI Funds
would be fully integrated with the operations of Franklin Templeton Investments.
Moreover, in the future, the FGT Funds could potentially decrease their
operating expenses by spreading certain fixed costs over a larger pool of
assets. You also may benefit from the ability to exchange your shares of your
FGT Fund(s) for other Franklin Templeton funds.
Please take the time to review this document and vote now.
THE TRUSTEES OF YOUR FTI FUND(S) UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR
THE PROPOSAL.
To ensure that your vote is counted, indicate your position on the enclosed
proxy card. Sign and return your card promptly.
If you determine at a later date that you wish to attend this Meeting, you
may revoke your proxy and vote in person.
Thank you for your attention to this matter.
Sincerely,
Gregory E. Johnson
President
June 19, 2003
NOTICE OF SPECIAL JOINT MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that a special joint meeting of shareholders (the
"Meeting") of FTI Large Capitalization Growth and Income Fund, FTI Small
Capitalization Equity Fund, and FTI European Smaller Companies Fund
(collectively, the "FTI Funds"), all series of FTI Funds (the "FTI Trust"), will
be held at the Trust's offices, One Franklin Parkway, San Mateo, California,
94403-1906, on July 15, 2003 at 10:00 a.m., Pacific time.
At the Meeting, you will be asked to vote on the following Proposal:
1. To approve an Agreement and Plan of Reorganization between FTI
Trust, on behalf of each FTI Fund, and Franklin Global Trust ("FG
Trust"), on behalf of the corresponding series of the FG Trust (the
"FGT Funds"), which provides for: (i) the acquisition of all of the
assets and liabilities of each FTI Fund by the corresponding FGT
Fund in exchange for shares of the corresponding FGT Fund, (ii) the
distribution of such FGT Fund shares to the shareholders of the
corresponding FTI Fund, and (iii) the complete liquidation and
dissolution of the FTI Funds.
Shareholders of each FTI Fund will vote separately on Proposal 1 for each FTI
Fund. The FTI Funds correspond to the FGT Funds as follows:
FTI FUNDS FGT FUNDS
FTI Large Capitalization Growth and Income Fund Fiduciary Large Capitalization Growth and Income Fund
FTI Small Capitalization Equity Fund Fiduciary Small Capitalization Equity Fund
FTI European Smaller Companies Fund Fiduciary European Smaller Companies Fund
2. To transact any other business, not currently contemplated, that
may properly come before the Meeting.
The Board of Trustees of the FTI Trust has fixed the close of business on June
6, 2003 as the record date for determination of shareholders entitled to notice
of, and to vote at, the Meeting or any adjournment thereof. Each shareholder who
does not expect to attend the Meeting in person is requested to date, fill in,
sign and return promptly the enclosed proxy card in the envelope included, which
needs no postage if mailed in the United States.
By Order of the Board of Trustees,
Murray L. Simpson
Secretary
June 19, 2003
MANY SHAREHOLDERS HOLD SHARES IN MORE THAN ONE FTI FUND AND WILL RECEIVE PROXY
MATERIALS FOR EACH FUND OWNED. PLEASE SIGN AND PROMPTLY RETURN EACH PROXY CARD
IN THE SELF-ADDRESSED ENVELOPES PROVIDED REGARDLESS OF THE NUMBER OF SHARES
YOU OWN.
TABLE OF CONTENTS
PAGE
PROXY STATEMENT -----
1
INFORMATION ABOUT VOTING 1
PROPOSAL 1:
-Approval of an Agreement and Plan of Reorganization 2
-Information about the Reorganizations 2
-Comparisons of Some Important Features 6
-Reasons for the Reorganizations 8
FURTHER INFORMATION ABOUT VOTING AND THE MEETING 10
INFORMATION ABOUT THE FGT FUNDS 11
INFORMATION ABOUT THE FTI FUNDS 11
PRINCIPAL HOLDERS OF SHARES 11
EXHIBITS
EXHIBIT A: Agreement and Plan of Reorganization between A-1
FTI Trust and FG Trust
EXHIBIT B: Comparison of Governing Documents and State Law B-1
EXHIBIT C: Prospectus of Fiduciary Large Capitalization Growth
and Income Fund, Fiduciary Small Capitalization Equity Fund,
and Fiduciary European Smaller Companies Fund - dated
June 19, 2003 (enclosed)
PROXY STATEMENT
FTI FUNDS
FTI Large Capitalization Growth and Income Fund
FTI Small Capitalization Equity Fund
FTI European Smaller Companies Fund
INFORMATION ABOUT VOTING
WHO IS ASKING FOR MY VOTE?
The Board of Trustees of FTI Funds (the "FTI Trust"), in connection with
the special joint meeting of shareholders of the FTI Large Capitalization Growth
and Income Fund, FTI Small Capitalization Equity Fund, and FTI European Smaller
Companies Fund, each a series of FTI Funds, to be held on July 15, 2003 (the
"Meeting"), have requested your vote on an important matter.
WHO IS ELIGIBLE TO VOTE?
Shareholders of record at the close of business on June 6, 2003 ("Record
Date") are entitled to be present and to vote at the Meeting or any adjourned
Meeting. Each shareholder of record is entitled to one vote for each dollar (and
a fractional vote for each fractional dollar thereof) of net asset value
(computed as the number of shares owned times the net asset value per share) of
shares. The Notice of Meeting, the proxy card, and the proxy statement will
first be mailed to shareholders of record on or about June 19, 2003.
ON WHAT PROPOSAL AM I VOTING?
At a meeting held on May 19, 2003, the Board of Trustees of the FTI Trust
(the "FTI Board"), on behalf of the FTI Funds, considered a proposal to
reorganize the FTI Funds into corresponding funds of the Franklin Global Trust
(the "FG Trust"), approved an Agreement and Plan of Reorganization (the "Plan")
substantially in the form attached to this Proxy Statement as EXHIBIT A, and
voted to recommend that shareholders of the FTI Funds approve the Plan. If
shareholders of the FTI Funds approve the Plan, all of the assets of each FTI
Fund will be acquired by a corresponding fund of the FG Trust (an "FGT Fund"),
in exchange for shares of the FGT Fund, equal in number and value to the shares
of each FTI Fund. These shares will, in turn, be distributed to the shareholders
of the FTI Funds, and the FTI Funds will then be completely liquidated and
dissolved. These proposed transactions are referred to in this proxy statement
as the ("Reorganization(s).") As a result of the Reorganizations, you will cease
to be a shareholder of your FTI Fund(s) and will become a shareholder of the
corresponding FGT Fund(s). The exchanges will occur on the closing date of the
Reorganizations, which is the specific date on which the Reorganizations take
place.
No other business other than the matters described above is expected to
come before the Meeting, but should any other matter requiring a vote of
shareholders arise, including any question as to an adjournment, the persons
designated as proxies named on the enclosed proxy card will vote on such matters
in accordance with views of management.
WHAT VOTE IS REQUIRED?
Approval of the Reorganization of each FTI Fund requires the affirmative
vote of the lesser of (i) more than 50% of the outstanding shares of the Fund,
or (ii) 67% or more of the shares of the Fund present at the Meeting, if the
holders of more than 50% of the outstanding shares are present or represented by
proxy ("Affirmative Majority Vote").
HOW DO THE TRUSTEES OF THE FTI BOARD RECOMMEND THAT I VOTE?
The Trustees unanimously recommend that you vote to approve the Plan.
HOW DO I ENSURE THAT MY VOTE IS ACCURATELY RECORDED?
You may attend the Meeting and vote in person or you may complete and
return the enclosed proxy card(s).
Proxy cards that are properly signed, dated and received at or prior to
the Meeting will be voted as specified. If you specify a vote for the Proposal,
your proxy will be voted as you indicate. If you simply sign, date and return
the proxy card, but do not specify a vote for the Proposal, your shares will be
voted FOR the approval of the Plan.
MAY I REVOKE MY PROXY?
You may revoke your proxy at any time before it is voted by forwarding to
the FTI Fund a written revocation or a later-dated proxy that is received by the
FTI Fund at or prior to the Meeting, or by attending the Meeting and voting in
person.
PROPOSAL 1
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION
Management has proposed, and the FTI Board has approved, an Agreement and
Plan of Reorganization for the FTI Funds. Currently, the FTI Funds are each a
separate series of the FTI Trust. The proposed Reorganizations would result in
the assets of the FTI Funds being managed as separate series of the FG Trust,
without any changes to the investment goals or policies of the FTI Funds or to
the portfolio management. The overall expense ratios are also expected to remain
the same.
INFORMATION ABOUT THE REORGANIZATIONS
WHY ARE WE PROPOSING THE REORGANIZATIONS?
Fiduciary International, Inc. ("Fiduciary"), located at 600 Fifth Avenue,
New York, New York 10020-2302, serves as the investment manager for each FTI
Fund. On April 10, 2001, Franklin Resources, Inc. acquired Fiduciary Trust
Company International, the ultimate parent company of Fiduciary. At that time,
Fiduciary managed seven funds as part of the FTI Trust, including the three FTI
Funds. All of those funds, except the FTI Funds, were reorganized into similar
funds within Franklin Templeton Investments. Although the operations of the FTI
Funds have since been integrated with the operations of Franklin Templeton
Investments, including generally the same service providers under generally the
same standard agreements used by other Franklin Templeton funds, the three
remaining FTI Funds continue to have a standalone trust structure and a separate
Board structure, operations and meetings. To eliminate these operational
inefficiencies, Management is proposing the Reorganizations.
WHAT IS HAPPENING IN THE REORGANIZATIONS?
The Reorganizations will be completed through two principal steps - the
creation of three new series within the FG Trust and the reorganization of each
FTI Fund into its corresponding FGT Fund. The three new FGT Funds have been
created with the same features as the corresponding FTI Funds. The FG Trust has
taken all actions required by state and federal securities law and its
controlling trust documents to establish the new FGT Funds. The new FGT Funds
thus will be eligible to receive the assets of the corresponding FTI Funds.
To accomplish the Reorganizations of the FTI Funds:
o The FTI Trust will transfer all of the assets and liabilities of each FTI
Fund to the corresponding FGT Fund within the FG Trust;
o The FG Trust will issue an equal number of shares of the FGT Funds that
correspond to the FTI Funds in exchange for each FTI Fund's assets and
liabilities;
o The FTI Trust will distribute shares of the FGT Funds to shareholders of
the FTI Funds; and
o The FTI Trust and each FTI Fund will be dissolved.
Corresponding funds of the FTI Trust and the FG Trust are set forth below.
FTI FUNDS FGT FUNDS
--------- ---------
FTI Large Capitalization Growth and Income Fund Fiduciary Large Capitalization Growth and Income Fund
FTI Small Capitalization Equity Fund Fiduciary Small Capitalization Equity Fund
FTI European Smaller Companies Fund Fiduciary European Smaller Companies Fund
The advisory agreements for the FGT Funds are identical to the
corresponding FTI Funds' agreements, other than the signatory, and they have
been approved by the Board of Trustees of the FG Trust.
We expect the Reorganizations to be completed on or about July 24, 2003.
HOW WILL THE REORGANIZATIONS BE CARRIED OUT?
If the shareholders of each of the FTI Funds approve the Plan, the
Reorganizations will take place after various conditions are satisfied by the
FTI Trust, on behalf of the FTI Funds, and by the FG Trust, on behalf of the FGT
Funds, including the preparation of certain documents. The FTI and FG Trusts
will determine a specific date, called the "closing date," for the actual
Reorganizations to take place. It is currently anticipated that the
Reorganizations will be completed on or about July 24, 2003, or such other later
date as FTI Trust and FG Trust may agree. If the shareholders of one of the FTI
Funds do not approve the Plan, the Reorganization for that FTI Fund will not
take place. In such case, we will consider what further action is appropriate
for that series, including liquidation.
If the shareholders of each FTI Fund approve the Plan, each FTI Fund will
transfer all of its assets on the closing date to the corresponding FGT Fund. In
exchange, FG Trust will issue shares of each FGT Fund equal to the dollar value
of the assets, subject to the liabilities, delivered to the FGT Fund. FTI Trust
will distribute the FGT Fund shares it receives to the shareholders of the
corresponding FTI Fund. As a result, shareholders of the FTI Funds will receive
FGT Fund shares equal in number and value to his or her shares of the
corresponding FTI Funds. The stock transfer books of the FTI Funds will be
permanently closed as of 4:00 p.m. Eastern time on the closing date. The FTI
Funds will only accept requests for redemptions received in proper form before
4:00 p.m. Eastern time on the closing date. Requests received after that time
will be considered requests to redeem shares of the FGT Funds.
To the extent permitted by law, the FTI Trust and the FG Trust may agree
to amend the Plan without shareholder approval. If any amendment is made to the
Plan that would have a material adverse effect on shareholders, such change will
be submitted to affected shareholders for their approval.
Each of the FTI Trust and the FG Trust has made representations and
warranties in the Plan that are customary in transactions such as the
Reorganizations. The obligations of the FTI Trust and the FG Trust under the
Plan with respect to the FTI Funds or FGT Funds are subject to various
conditions, including:
o The FG Trust's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended, to add the FGT Funds, shall have been filed with
the Securities and Exchange Commission ("SEC") and such Registration
Statement shall have become effective;
o Shareholders of the FTI Funds shall have approved the Plan and the
Reorganizations as contemplated therein; and
o The FTI Trust and FG Trust shall have received the tax opinion described
below that the consummation of the Reorganizations will not result in the
recognition of gain or loss for federal income tax purposes for the FTI
Funds, FGT Funds or FTI Funds' shareholders.
If the FTI Trust and the FG Trust agree, the Plan may be terminated or
abandoned at any time before or, to
the extent permitted by law, after the approval of the shareholders of the FTI
Funds. The Plan also may be terminated by one Trust if any condition to its
obligations has not been fulfilled by the other Trust and it reasonably appears
that such condition or obligation will not be met.
WHAT IS HAPPENING TO THE FUNDS AFTER THE REORGANIZATIONS?
Following the Reorganizations, your investment in your FTI Fund will
continue as an investment in the corresponding FGT Fund, a part of the FG Trust.
After the Reorganizations, FTI Trust will be dissolved. Each FGT Fund has the
same investment goals, strategies, policies (except as described below with
respect to the fundamental investment restrictions) and fee structures as the
current corresponding FTI Fund. Each FGT Fund also has the most updated version
of the standard fundamental restrictions used by Franklin Templeton funds. While
these restrictions are phrased slightly differently than the FTI Funds'
restrictions, they are substantively the same as those restrictions.
WHAT SHOULD I KNOW ABOUT THE SHARES OF THE FGT FUNDS?
Shares of the FGT Funds will be distributed to shareholders of the FTI
Funds and generally will have the same legal characteristics as the shares of
the FTI Funds with respect to voting rights, accessibility, conversion rights
and transferability. Former shareholders of FTI Funds whose shares are
represented by outstanding share certificates will not be allowed to redeem
shares of the FGT Funds until the FTI Funds' certificates have been returned.
HOW WILL THE REORGANIZATIONS AFFECT ME?
We anticipate that the Reorganizations will result in operating
efficiencies that may benefit shareholders. As a general matter, following the
Reorganizations, the FTI Funds would be fully integrated with the operations of
Franklin Templeton Investments. We also believe that the Reorganizations have
the following additional benefits:
o COST SAVINGS. Since, following the Reorganizations, the FG Trust will be
made up of six (6) separate series, we expect each series to continue
to gather assets over time. Therefore, the FGT Funds have the
potential to decrease their operating expenses by spreading certain
Trust-level fixed costs over a larger pool of assets.
o EXCHANGE PRIVILEGE. As shareholders of the new FGT Funds, you may benefit
from the ability to invest current account assets in additional
investment options, without a sales charge, through the exchange
privilege into other Franklin Templeton funds. You would also have the
ability in the future to purchase additional shares of such Franklin
Templeton funds without a sales charge.
WHO WILL PAY THE EXPENSES OF THE REORGANIZATIONS?
The expenses resulting from the Reorganizations, including the proxy
solicitation costs will be borne by Fiduciary or its affiliates.
WHAT ARE THE TAX CONSEQUENCES?
The Reorganizations are intended to qualify as tax-free reorganizations for
federal income tax purposes under Section 368(a)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"). Based on certain assumptions and
representations received from the FTI Trust, on behalf of the FTI Funds, and
the FG Trust, on behalf of the FGT Funds, it is the opinion of Stradley Ronon
Stevens & Young, LLP, counsel to the FGT Funds, that shareholders of the FTI
Funds will not recognize any gain or loss upon the FGT Funds' receipt of the
assets of the FTI Funds.
The FTI Funds have significant capital loss carryovers. Capital losses can
generally be carried forward to each of the eight (8) taxable years succeeding
the loss year. Since the Reorganizations are intended to qualify as a "mere
change in identity, form or place of organization of one corporation" under
Section 368(a)(1)(F) of the Code, there are no material limitations on the
availability of the capital loss carryovers during the applicable carryover
period.
After the Reorganizations, you will continue to be responsible for tracking
the purchase cost and holding period of your shares and you should consult your
tax advisor regarding the effect, if any, of the Reorganizations in light of
your particular circumstances. You should also consult your tax advisor
regarding state and local tax consequences, if any, of the Reorganizations,
because this discussion only relates to federal income tax consequences.
COMPARISONS OF SOME IMPORTANT FEATURES
HOW DO THE INVESTMENT GOALS, POLICIES AND RISKS OF THE FUNDS COMPARE?
The FTI Funds and their corresponding FGT Funds have identical investment
goals, investment policies and strategies, and investment risks, and
substantially similar fundamental investment restrictions. While the fundamental
investment restrictions of the FGT Funds are phrased slightly differently than
those of the FTI Funds, they are substantively the same and will not impact the
manner in which the FGT Funds are managed. The goals, and principal policies and
risks of each FGT Fund are described in more detail in the Prospectus of
Fiduciary Large Capitalization Growth and Income Fund, Fiduciary Small
Capitalization Equity Fund and Fiduciary European Smaller Companies Fund, dated
June 19, 2003 ("FGT Funds Prospectus"), which is included herewith as EXHIBIT C
and incorporated by reference into this Proxy Statement. Additional information
about the FGT Funds' current fundamental investment restrictions is contained in
the Statement of Additional Information ("SAI") for the FGT Funds, dated June
19, 2003, which is incorporated by reference into this Proxy Statement.
HOW DOES THE MANAGEMENT OF THE FUNDS COMPARE?
The management of the business and affairs of the FTI Funds is the
responsibility of the FTI Board and, in the case of the FGT Funds, the Board of
Trustees of the FG Trust. Additional information on the Trustees of FG Trust,
none of whom serve on the FTI Board, is contained in the SAI for the FGT Funds,
which is incorporated by reference into this Proxy Statement.
Fiduciary is the investment manager of the FTI Funds as well as the
corresponding FGT Funds. All of the portfolio managers for the FTI Funds are
also the portfolio managers for the FGT Funds.
The Trusts are both open-end, registered management investment companies,
commonly referred to as "mutual funds." FG Trust was organized as a Delaware
statutory trust (a form of entity then known as a business trust) on September
26, 2000, and is registered with the SEC. The FTI Trust was organized as a
Massachusetts business trust on October 18, 1995, and is also registered with
the SEC.
Reorganizing the FTI Funds from series of a Massachusetts business trust
to series of a Delaware statutory trust is expected to provide benefits to the
FTI Funds and their shareholders. Under Delaware law, investment companies are
able to simplify their operations by reducing administrative burdens, and there
is greater certainty regarding limiting the liability of shareholders for
obligations of business trusts or its trustees. In addition, most of the
Franklin Templeton funds are now, or are likely to become Delaware statutory
trusts. To the extent that the boards and management of Franklin Templeton funds
have to deal with the law of a single state, rather than the laws of many
states, efficiencies may be achieved, both in terms of reduced costs in
determining the requirements of law in unique circumstances and the certainty of
operating routinely in a familiar regulatory environment.
Furthermore, in Delaware there is a well-established body of legal
precedent in the area of corporate law that may be relevant in deciding issues
pertaining to statutory trusts such as the FG Trust. This could benefit the FGT
Funds and their shareholders by, for example, making litigation involving the
interpretation of provisions in the FG Trust's governing documents less likely
or, if litigation should be initiated, less burdensome or expensive.
A comparison of the Delaware statutory trust law and the Massachusetts
business trust law, and a comparison of the relevant provisions of the governing
documents of the Funds, are included as EXHIBIT B to this Proxy Statement.
HOW DO THE EXPENSE RATIOS FOR THE FUNDS COMPARE?
The expenses of the FGT Funds are expected to be the same as those of the
FTI Funds. The Board of Trustees of the FG Trust has agreed to continue the
waivers that have been in place for the FTI Funds and to extend the waivers
through November 30, 2003. Under the waivers, the manager and administrator have
agreed to waive or limit their respective fees and to assume as their own
expense certain expenses otherwise payable by the FGT Funds so that total Fund
annual operating expenses do not exceed 1.03%, 1.30% and 1.20% for the Fiduciary
Large Capitalization Growth and Income Fund, the Fiduciary Small Capitalization
Equity Fund and the Fiduciary European Smaller Companies Fund, respectively.
WHAT ARE OTHER KEY FEATURES OF THE FUNDS?
CUSTODY SERVICES. Bank of New York, Mutual Funds Division, 90 Washington
Street, New York, NY 10286, acts as the custodian of the securities and other
assets of the FGT Funds. JP Morgan Chase Bank, MetroTech Center, Brooklyn, NY
11245, acts as the custodian of the securities and other assets of the FTI
Funds.
The Funds use the same service providers for the following services:
TRANSFER AGENCY SERVICES. Franklin Templeton Investor Services, LLC, a
wholly owned subsidiary of Franklin Resources, Inc. (Resources), is the
shareholder servicing agent and acts as the transfer agent and dividend-paying
agent for the FTI Funds and the FGT Funds.
ADMINISTRATIVE SERVICES. Franklin Templeton Services, LLC, One Franklin
Parkway, San Mateo, CA, 94403-1906, an indirect wholly owned subsidiary of
Resources, provides certain administrative facilities and services to the FTI
Funds and the FGT Funds under the same terms and conditions.
DISTRIBUTION SERVICES. Templeton/Franklin Investment Services, Inc. (TFIS),
One Franklin Parkway, San Mateo, CA, 94403-1906, acts as the principal
underwriter in the continuous offering of the FTI Funds' and FGT Funds' shares
generally under the same terms and conditions for the Funds.
DISTRIBUTION AND SERVICE (12B-1) FEES. The FTI Trust and the FG Trust have
each adopted a Rule 12b-1 plan, which allows them to pay marketing fees to the
Distributor and investment professionals for the sale, distribution and customer
servicing of Fund shares. Neither the FTI Trust nor the FG Trust presently
intend to activate the Rule 12b-1 plan and TFIS has no present intention to
collect any fees pursuant to the plan. If either Trust were to activate the Rule
12b-1 plan, it would be permitted to pay up to 0.25% of the average net assets
of each Fund as a distribution fee to TFIS. Because 12b-1 fees would be paid out
of each Fund's assets on an ongoing basis, over time these fees would increase
the cost of your investment and may cost you more than paying other types of
sales charges.
For more information regarding the FGT Funds' distribution expenses, please
see "The Underwriter" in the current SAI.
PURCHASES AND REDEMPTIONS. The FTI Funds and the FGT Funds do not impose
sales charges, but restrict purchases to certain qualified investors.
Shares of the FTI Funds and the FGT Funds may be sold (redeemed) at net
asset value ("NAV"), at any time. Shares of FGT Funds also may be exchanged at
NAV for shares of many of the other Franklin Templeton funds, subject to certain
limitations, as provided in the prospectus of the respective Franklin Templeton
fund. Because an exchange is technically a sale and a purchase of shares, an
exchange is a taxable transaction.
Additional information and specific instructions explaining how to buy,
sell, and exchange shares of the Funds are outlined in the FTI Funds' and the
FGT Funds' Prospectuses under the heading "Your Account." The accompanying FGT
Funds' Prospectus also indicates how to contact us if you have any questions
about your account under the heading "Questions." These instructions and phone
number are the same for each FGT Fund.
DIVIDENDS AND DISTRIBUTIONS. The FTI Large Capitalization Growth and Income
Fund and the corresponding Fiduciary Large Capitalization Growth and Income Fund
each typically intends to pay an income dividend quarterly from its net
investment income. The FTI Small Capitalization Equity and FTI European Smaller
Companies Funds and the corresponding Fiduciary Small Capitalization Equity and
the Fiduciary European Smaller Companies Funds each typically intends to pay an
income dividend annually from their net investment income. For each of the FTI
Funds and the FGT Funds, capital gains, if any, may be distributed at least
annually. The amount of any distributions will vary, and there is no guarantee a
Fund will pay either income dividends or capital gain distributions. Neither the
FTI Funds nor the FGT Funds pay "interest" or guarantee any amount of dividends
or return on an investment in their shares.
The tax implications of an investment in each Fund are the same. For more
information about the tax implications, see the enclosed FGT Funds' prospectus
under the heading "Distributions and Taxes."
REASONS FOR THE REORGANIZATIONS
The FTI Board, on behalf of the FTI Funds, has recommended the acquisition
of all of the assets of the FTI Funds by the FGT Funds in exchange for shares of
the FGT Funds and the distribution of such shares to the shareholders of FTI
Funds in complete liquidation and dissolution of the FTI Funds in order to
combine the FTI Funds with the corresponding FGT Funds, which have the same
goals and investment policies.
Meetings of the FTI Board were held on February 13, 2003 and May 19, 2003
to consider the proposed Reorganizations. In addition, the independent Trustees
held a separate meeting on this matter. The independent Trustees and the FTI
Board have been advised on this matter by independent counsel to the FTI Funds.
In approving the Reorganizations, the FTI Board determined that the
proposed Reorganizations would be in the best interests of each of the FTI
Funds, and that the interests of shareholders would not be diluted as a result
of the Reorganizations. In recommending that shareholders approve the Plan, the
FTI Board considered the various factors described below including the tax-free
nature of the Reorganizations and the payment of all the Reorganization expenses
by Fiduciary and its affiliates.
The FTI Board considered the potential benefits and costs of the
Reorganizations to shareholders of the FTI Funds. The FTI Board reviewed
detailed information about (1) the investment goals and policies of the FGT
Funds and the comparability of those goals and policies with those of the FTI
Funds, (2) the portfolio management of the FGT Funds, (3) the current and
anticipated expense ratios of the FTI Funds and the FGT Funds, respectively, (4)
the expenses related to the Reorganizations, (5) the tax consequences of the
Reorganizations, and (6) the general characteristics of investors in the FTI
Funds.
The FTI Board also considered whether there might be significant
differences between the Massachusetts business trust form of organization and
the Delaware statutory trust. They noted that investment companies formed as
Delaware statutory trusts have certain advantages over investment companies
organized as Massachusetts business trusts. Under Delaware law, investment
companies are able to simplify their operations by reducing administrative
burdens (as more fully described above) and that there is greater certainty
regarding limiting the liability of shareholders for obligations of the
statutory trust or its trustees. The FTI Board also considered that most of the
Franklin Templeton funds are currently or are likely to become Delaware
statutory trusts.
The FTI Board also considered that: (a) the FTI Funds' shareholders would
have the ability in the future to invest current account assets in additional
investment options, without a sales charge, through the exchange privilege into
other Franklin Templeton funds, (b) the FTI Funds' shareholders would have the
ability in the future to purchase additional shares of many of the Franklin
Templeton funds without a sales charge, and (c) although the FTI Board has had
the right to terminate the fee waivers at any time since November 30, 2002, the
manager and administrator of FTI Funds have continued voluntarily to waive the
fees and the manager and administrator for the FGT Funds have agreed to extend
the current fee waiver through November 30, 2003.
Based on their evaluation of the relevant information presented to them,
and in light of their fiduciary duties under federal and state law, the FTI
Board, including all Trustees who are not interested persons of the FTI Funds
(as defined in the 1940 Act), concluded that the Reorganizations are in the best
interests of the FTI Funds and their shareholders and that no dilution of value
would result to the shareholders of the FTI Funds from the Reorganizations. The
FTI Board approved the Plan on May 19, 2003 and recommended that shareholders of
the FTI Funds vote to approve the Reorganizations.
The Board of Trustees of the FG Trust, on behalf of the FGT Funds, has also
approved the Plan.
FURTHER INFORMATION ABOUT VOTING AND THE MEETING
HOW ARE VOTES BEING SOLICITED?
The FTI Funds will request broker-dealer firms, custodians, nominees and
fiduciaries to forward proxy materials to the beneficial owners of the shares of
record. The FTI Trust may reimburse broker-dealer firms, custodians, nominees
and fiduciaries for their reasonable expenses incurred in connection with such
proxy solicitation. In addition to solicitations by mail, officers and employees
of FTI Trust without extra pay, may conduct additional solicitations by
telephone, personal interviews and other means. The costs of any such additional
solicitation and of any adjourned session will be borne by Fiduciary and its
affiliates.
HOW MANY VOTES ARE NECESSARY TO APPROVE THE REORGANIZATIONS?
One-half of the outstanding shares entitled to vote of each FTI Fund -
present in person or represented by proxy - constitutes a quorum of that Fund at
the Meeting. The shares whose proxies reflect an abstention on any item will be
counted as shares present for purposes of determining whether the required
quorum of shares exists.
An Affirmative Majority Vote of each FTI Fund's shareholders entitled to
vote is necessary to approve the Reorganizations for the FTI Funds.
Abstentions will be treated as present at the Meeting, and, therefore, will
have the same effect as a vote against the Reorganizations. Because there is
only one proposal on the ballot, the FTI Funds do not expect to receive any
broker non-votes (i.e., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power on a particular matter). As a result, broker non-votes will have
no effect on the outcome of the vote.
If sufficient votes to approve the Reorganizations are not received by the
date of the Meeting, the Meeting may be adjourned to permit further
solicitations of proxies.
ARE THERE DISSENTER'S RIGHTS?
Shareholders of the FTI Funds will not be entitled to any "dissenter's
rights" since the proposed Reorganizations involve open-end investment companies
registered under the 1940 Act (mutual funds). Although no dissenter's rights may
be available, you have the right to redeem your shares at NAV until the closing
date. After the closing date, you may redeem your FGT Fund shares or exchange
them for shares of certain other Franklin Templeton funds, subject to the terms
in the prospectus of the respective fund.
HOW DO I MAKE A PROPOSAL AT THE NEXT SHAREHOLDERS' MEETING?
Neither the FTI Funds nor the FGT Funds are required, and neither
intends, to hold regular annual shareholder meetings. Shareholders wishing to
submit proposals for consideration for inclusion in a proxy statement for the
next shareholder's meeting should send their written proposals to the
appropriate Fund's offices, One Franklin Parkway, San Mateo, CA 94403-1906, so
that they are received in a reasonable time before any such 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 and state law.
Submission of a proposal by a shareholder does not guarantee that the
proposal will be included in the Fund's proxy statement or presented at the
meeting.
INFORMATION ABOUT THE FGT FUNDS
Information about the FGT Funds is included in the FGT Funds' Prospectus,
which is included herewith as EXHIBIT C and incorporated by reference into this
Proxy Statement. Additional information about the FGT Funds is included in the
SAI, dated June 19, 2003, which is incorporated into the FGT Funds' Prospectus
and this Proxy Statement. You may request a free copy of the SAI by calling
1-800/DIAL BEN(R) or by writing the FG Trust at One Franklin Parkway, San Mateo,
California 94403-1906.
The FG Trust files proxy materials, reports and other information with the
SEC in accordance with the informational requirements of the Securities Exchange
Act of 1934, as amended and the Investment Company Act of 1940, as amended.
These materials can be inspected and copied at: the SEC's Public Reference Room
at 450 Fifth Street NW, Washington, DC 20549-6009, at prescribed rates, or from
the SEC's Internet address at HTTP://WWW.SEC.GOV.
INFORMATION ABOUT THE FTI FUNDS
Information about the FTI Funds is included in the current FTI Funds'
prospectus, as well as the FTI Funds' SAI, dated April 1, 2003, and in the FTI
Funds' Annual Report to Shareholders dated November 30, 2002. These documents
have been filed with the SEC. You may request free copies of these documents by
calling 1-800/DIAL BEN(R) or by writing the FTI Trust at One Franklin Parkway,
San Mateo, California 94403. Reports and other information filed by the FTI
Trust can be inspected and copied at: the SEC's Public Reference Room at 450
Fifth Street NW, Washington, DC 20549-6009, at prescribed rates, or from the
SEC's Internet address at HTTP://WWW.SEC.GOV.
PRINCIPAL HOLDERS OF SHARES
As of the Record Date, there were 11,626,027.807 outstanding shares of FTI
Large Capitalization Growth and Income Fund, 4,297, 134.857outstanding shares of
FTI Small Capitalization Equity Fund, and 1,999,556.493 outstanding shares of
FTI European Smaller Companies Fund.
As of the Record Date, the officers and trustees of the FTI Trust, as a
group, owned of record and beneficially less than 1% of the outstanding voting
shares of the FTI Funds. Except as listed below, as of the Record Date, no other
person owned more than 5% or more of the outstanding shares of the FTI Funds.
PERCENT
OWNERSHIP
FUND NAME (%)*
- ------------------------------------------------------
FTI LARGE CAPITALIZATION GROWTH AND INCOME FUND
ELLARD & CO. 98.2
c/o Fiduciary Trust Company International
600 Fifth Avenue, 7th Floor
New York, New York 10020
FTI SMALL CAPITALIZATION EQUITY FUND
ELLARD & CO. 78.8
c/o Fiduciary Trust Company International
600 Fifth Avenue, 7th Floor
New York, New York 10020
WOLVERHAMPTON BOROUGH COUNCIL 13.9
Finance Dept., Civic Center
St. Peter's Square
Wolverhampton, England
FTI EUROPEAN SMALLER COMPANIES FUND
ELLARD & CO. 90.4
c/o Fiduciary Trust Company International
600 Fifth Avenue, 7th Floor
New York, New York 10020
*Fiduciary Trust Company International, the parent company of the FTI Funds'
investment manager, has discretionary voting authority for the majority of the
shares in each FTI Fund and intends to vote in favor of proposal 1.
Dated June 19, 2003 By Order of the Board of Trustees,
Murray L. Simpson
Secretary
EXHIBITS TO THE PROXY STATEMENT
EXHIBIT
A Agreement and Plan of Reorganization between FTI Trust, on behalf of the
FTI Large Capitalization Growth and Income Fund, FTI Small Capitalization
Equity Fund and the FTI European Smaller Companies Fund, and FG Trust, on
behalf of Fiduciary Large Capitalization Growth and Income Fund, Fiduciary
Small Capitalization Equity Fund and the Fiduciary European Smaller
Companies Fund (attached)
B Comparison of Governing Documents and State Law (attached)
C Prospectus of Fiduciary Large Capitalization Growth and Income Fund,
Fiduciary Small Capitalization Equity Fund, and Fiduciary European Smaller
Companies Fund - dated June 19, 2003 (enclosed)
CONFIDENTIAL Page 20
FORM OF
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan"), is made as of
this 19th day of July, 2003, by and between FTI Funds ("FTI Trust"), a
business trust created under the laws of The Commonwealth of Massachusetts in
1995 with its principal place of business at One Franklin Parkway, San Mateo,
California 94403, on beha1f of its series, FTI Large Capitalization Growth
and Income Fund, FTI Small Capitalization Equity Fund and FTI European
Smaller Companies Fund ("FTI Funds"), and Franklin Global Trust ("FG Trust"),
a statutory trust created under the laws of the State of Delaware in 2000
with its principal place of business at One Franklin Parkway, San Mateo,
California 94403, on beha1f of its series, Fiduciary Large Capitalization
Growth and Income Fund, Fiduciary Small Capitalization Equity Fund and
Fiduciary European Smaller Companies Fund ("FGT Funds").
PLAN OF REORGANIZATION
The reorganization will consist of (i) the acquisition by FG Trust, on
behalf of the FGT Funds, of all of the property, assets and goodwill of the
FTI Funds in exchange solely for the assumption of all obligations and
liabilities of the FTI Funds by the corresponding FGT Funds and full and
fractional shares of beneficial interest, par value $0.01 per share, of the
corresponding FGT Funds; (ii) the distribution of shares of the FGT Funds to
the shareholders of the corresponding FTI Funds, according to their
respective interests in the FTI Funds, in complete liquidation of the FTI
Funds; and (iii) the dissolution of the FTI Funds as soon as is practicable
after the closing (as defined in Section 3, hereinafter called the
"Closing"), all upon and subject to the terms and conditions of the Plan
hereinafter set forth.
The FTI Funds and the FGT Funds correspond to each other as follows:
- -----------------------------------------------------------------------
FTI Large Capitalization corresponds Fiduciary Large
Growth and Income to Capitalization Growth and
Fund Income Fund
- -----------------------------------------------------------------------
FTI Small Capitalization corresponds Fiduciary Small
Equity Fund to Capitalization Equity
Fund
- -----------------------------------------------------------------------
FTI European Smaller corresponds Fiduciary European Smaller
Companies Fund to Companies Fund
- -----------------------------------------------------------------------
AGREEMENT
In order to consummate the Plan 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 FTI FUNDS.
(a) Subject to the terms and conditions of the Plan, and in reliance on the
representations and warranties of FG Trust on behalf of FGT Funds herein
contained, and in consideration of the delivery by FG Trust of the number of
FGT Funds' shares hereinafter provided and the assumption of FG Trust, on
behalf of the FGT Funds, of all of the obligations and liabilities of the
corresponding FTI Funds (as hereinafter provided), FTI Trust on behalf of
each FTI Fund agrees that it will convey, transfer and deliver to FG Trust,
on behalf of each corresponding FGT Fund, at the closing date (as defined in
Section 3, hereinafter called the "Closing Date") all of FTI Fund's then
existing assets ("Assets"). The transactions contemplated hereby are intended
to qualify as reorganizations within the meaning of Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code").
(b) Subject to the terms and conditions of the Plan, and in reliance on the
representations and warranties of FTI Trust on behalf of FTI Funds herein
contained, and in consideration of such sale, conveyance, transfer, and
delivery, FG Trust, on behalf of each FGT Fund, agrees at the Closing Date to
(i) assume and pay, to the extent that they exist on or after the Closing
Date, all of the corresponding FTI Fund's obligations and liabilities,
whether absolute, accrued, known or unknown, contingent or otherwise,
including all fees and expenses in connection with the Plan ("Liabilities");
and (ii) deliver to FTI Trust the number of each FGT Fund's shares equal to
the number of outstanding shares of the corresponding FTI Fund, as of 4:00
p.m., Eastern time, on the Closing Date. The value of each FGT Fund's shares
delivered to FTI Trust shall have an aggregate net asset value equal to the
value of the corresponding FTI Fund's Assets, less Liabilities assumed, all
determined as provided in Section 2 of this Plan and as of the date and time
specified therein.
(c) Immediately following the Closing Date, FTI Trust shall dissolve itself
and the FTI Funds and distribute pro rata to their shareholders of record as
of the close of business on the Closing Date, shares of the corresponding FGT
Funds received by FTI Funds pursuant to this Section 1. Such liquidation and
distribution shall be accomplished by the establishment of accounts on the
share records of FGT Funds for the benefit of shareholders of the
corresponding FTI Funds of the type and in the amounts due such shareholders
based on their respective holdings as of the close of business on the Closing
Date. Fractional FGT Funds' shares shall be carried to the third decimal
place. As promptly as practicable after the Closing, each holder of any
outstanding certificate or certificates representing shares of beneficial
interest of the FTI Funds shall be entitled to surrender the same to the
transfer agent for FGT Funds in exchange for the number of shares of the
corresponding FGT Funds into which the FTI Funds' shares theretofore
represented by the certificate or certificates so surrendered shall have been
converted. Certificates for FGT Funds' shares shall not be issued, unless
specifically requested by the shareholders. Until so surrendered, each
outstanding certificate which, prior to the Closing, represented shares of
beneficial interest of the FTI Funds shall be deemed for all the FGT Funds'
purposes to evidence ownership of the number of FGT Funds' shares into which
the FTI Funds' shares (which prior to the Closing were represented thereby)
have been converted.
2. VALUATION.
(a) The value of the FGT Funds' shares, the FTI Funds' shares and the FTI
Funds' Assets to be acquired by FGT Funds hereunder shall in each case be
computed as of 4:00 p.m. Eastern 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 or elsewhere is disrupted or
(c) any other extraordinary financial event or market condition occurs (all
such events described in (a), (b) or (c) are each referred to as a "Market
Disruption"). The net asset value per share of the FGT Funds' shares, the
FTI Funds' shares and the value of the FTI Funds' Assets shall be computed in
accordance with the valuation procedures set forth in the respective
prospectus of the FGT Funds and the FTI Funds.
(b) In the event of a Market Disruption on the proposed Closing Date so that
accurate appraisal of the net asset value of the FGT Funds' shares, the FTI
Funds' shares or the value of the FTI Funds' 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.
(c) All computations of value regarding the net asset value of the FGT
Funds' shares, the FTI Funds' shares and the value of the FTI Funds' Assets
shall be made by the investment advisor to the FGT Funds; provided, however,
that all computations of value shall be subject to review by the FTI Funds.
3. CLOSING AND CLOSING DATE. The Closing Date shall be July 24, 2003, or
such later date as the parties may mutually agree. The Closing Date shall
take place at the principal office of FTI Trust at 5:00 p.m., Eastern time,
on the Closing Date. FTI Trust, on behalf of FTI Funds, shall have provided
for delivery as of the Closing Date of the Assets of FTI Funds to be
transferred to the account of the corresponding FGT Funds at FGT Funds'
Custodian, Bank of New York, Mutual Funds Division, 90 Washington Street, New
York, NY 10286. The FGT Funds shall assume all liabilities of the FTI Funds
in connection with the acquisition of Assets, except that recourse for
assumed liabilities relating to an FTI Fund shall be limited to the
corresponding FGT Fund. Also, FTI Trust, on behalf of FTI Funds, shall
deliver at the Closing a list of names and addresses of the shareholders of
record of the FTI Funds' shares and the number of full and fractional shares
of beneficial interest owned by each such shareholder, indicating thereon
which such shares are represented by outstanding certificates and which by
book-entry accounts, all as of 4:00 p.m., Eastern time, on the Closing Date,
certified by its transfer agent or by its President to the best of its or his
knowledge and belief. FG Trust on behalf of FGT Funds shall issue and deliver
a certificate or certificates evidencing the shares of beneficial interest of
FGT Funds to be delivered to the accounts of the FTI Funds at said transfer
agent registered in such manner as the officers of FTI Trust on behalf of FTI
Funds may request, or provide evidence satisfactory to FTI Trust that such
FGT Funds' shares have been registered in an account on the books of the FGT
Funds in such manner as the officers of FTI Trust on behalf of FTI Funds may
request.
4. REPRESENTATIONS AND WARRANTIES BY FG TRUST ON BEHALF OF FGT FUNDS.
FG Trust, on behalf of FGT Funds, represents and warrants to FTI Trust
that:
(a) FGT Funds are series of FG Trust, a business trust created under the
laws of the State of Delaware on September 26, 2000, and are validly existing
under the laws of that State. FG Trust is duly registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company, and that while no FGT Funds' shares have been
issued, they will be issued and sold pursuant to an effective registration
statement filed under the Securities Act of 1933, as amended (the "1933 Act").
(b) FG Trust is authorized to issue an unlimited number of shares of
beneficial interest of the FGT Funds, par value $0.01 per share, each
outstanding share of which is fully paid, non-assessable, freely transferable
and has full voting rights. The FGT Funds have one class of shares, and an
unlimited number of shares of beneficial interest, par value $0.01 per share,
has been allocated and designated to the FGT Funds' shares. No shareholder
of FG Trust shall have any option, warrant or preemptive right of
subscription or purchase with respect to the each FGT Fund.
(c) The books and records of FGT Funds accurately summarize the accounting
data represented and contain no material omissions with respect to the
business and operations of FGT Funds.
(d) FG Trust has the power to own all of its properties and assets, to
perform its obligations under the Plan and to consummate the transactions
contemplated herein. FG Trust is not required to qualify to do business in
any jurisdiction in which it is not so qualified or where failure to qualify
would not subject it to any material liability or disability. FG Trust has
all necessary federal, state and local authorizations, consents and approvals
required to own all of its properties and assets and to conduct FGT Funds'
business as such business is now being conducted and to consummate the
transactions contemplated herein.
(e) FG Trust, on behalf of FGT Funds, is not a party to or obligated under
any provision of its Declaration of Trust, as amended ("Declaration of
Trust") or Amended and Restated By-laws ("By-laws"), or any contract or any
other commitment or obligation, is not subject to any order or decree that
would be violated by its execution of or performance of its obligations under
the Plan, and no consent, approval, authorization or order of any court or
governmental authority is required for the consummation by FG Trust of the
transactions contemplated by the Plan, except for the registration of the FGT
Funds 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) FG Trust has elected or intends to elect to treat each of the FGT Funds
as a regulated investment company ("RIC") for federal income tax purposes
under Part I of Subchapter M of the Code, each of the FGT Funds will be a
"fund" as defined in Section 851(g)(2) of the Code, will qualify as a RIC as
of the Closing Date, and consummation of the transactions contemplated by the
Plan will not cause it to fail to be qualified as a RIC as of the Closing
Date.
(g) FGT Funds are 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) FGT Funds do not have any unamortized or unpaid organizational fees or
expenses.
(i) All information to be furnished by FG Trust to FTI Trust for use in
preparing any prospectus, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto.
(j) FGT Funds do not have and will not have any liabilities or assets prior
to the Closing.
(k) FG Trust has no plan or intention to issue additional shares of the FGT
Funds following the reorganization except for shares issued in the ordinary
course of business as series of an open-end investment company; nor does FG
Trust have any plan or intention to redeem or otherwise reacquire any shares
of the FGT Funds issued pursuant to the reorganization, other than in the
ordinary course of business or to the extent necessary to comply with any
legal obligation under Section 22(e) of the 1940 Act.
(l) FGT Funds will actively continue the FTI Funds' business in
substantially the same manner that the FTI Funds conducted that business
immediately before the reorganization. The FGT Funds have no plan or
intention to sell or otherwise dispose of any of the former assets of the FTI
Funds, except for dispositions made in the ordinary course of business or
dispositions necessary to maintain qualification as a RIC, although in the
ordinary course of business, the FGT Funds will continuously review their
investment portfolios (as the FTI Funds did before the reorganization) to
determine whether to retain or dispose of particular stocks or securities,
including those included among the former assets of the FTI Funds.
(m) The Proxy Statement referred to in Section 7(f) hereof (other than the
portions of such documents based on information furnished by or on behalf of
FTI Trust for inclusion or incorporation by reference therein), and any
Prospectus or Statement of Additional Information of FGT Funds accompanying
or incorporated therein by reference, and any supplement or amendment to the
Proxy Statement or any such Prospectus or Statement of Additional
Information, on the effective and clearance dates of the Proxy Statement, on
the date of the Special Meeting of the FTI Funds' shareholders, and on the
Closing Date: (a) shall comply in all material respects with the provisions
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1933
Act, the 1940 Act, the rules and regulations thereunder, and all applicable
state securities laws and the rules and regulations thereunder; and (b) 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 FTI TRUST ON BEHALF OF THE FTI FUNDS.
FTI Trust, on behalf of the FTI Funds, represents and warrants to FG
Trust that:
(a) FTI Funds are series of FTI Trust, a business trust created under the
laws of The Commonwealth of Massachusetts on October 18, 1995, and is validly
existing under the laws of that Commonwealth. FTI Trust is duly registered
under the 1940 Act as an open-end, management investment company, and all of
FTI Trust's FTI Funds' shares sold were sold pursuant to an effective
registration statement filed under the 1933 Act, except for those shares sold
pursuant to the private offering exemption for the purpose of raising the
required initial capital.
(b) FTI Trust is authorized to issue an unlimited number of shares of
beneficial interest of the FTI Funds, without par value, each outstanding
share of which is fully paid, non-assessable, freely transferable and has
full voting rights, and currently issues shares of three (3) series. The FTI
Funds have one class of shares, and an unlimited number of shares of
beneficial interest of FTI Trust, without par value, has been allocated and
designated to this class of the FTI Funds.
(c) The financial statements appearing in the FTI Trust's Annual Report to
Shareholders for the fiscal year ended November 30, 2002, audited by Ernst &
Young, LLP, copies of which have been delivered to FG Trust, and any interim
financial statements for FTI Trust which may be furnished to FG Trust, fairly
present the financial position of the FTI Funds as of such date and the
results of its operations for the period indicated in conformity with
generally accepted accounting principles applied on a consistent basis.
(d) The books and records of the FTI Funds accurately summarize the
accounting data represented and contain no material omissions with respect to
the business and operations of the FTI Funds.
(e) FTI Trust has the power to own all of its properties and assets, to
perform its obligations under the Plan and to consummate the transactions
contemplated herein. FTI Trust is not required to qualify to do business in
any jurisdiction in which it is not so qualified or where failure to qualify
would not subject it to any material liability or disability. FTI Trust has
all necessary federal, state and local authorizations, consents and approvals
required to own all of its properties and assets and to conduct the FTI
Funds' business as such business is now being conducted and to consummate the
transactions contemplated herein.
(f) FTI Trust on behalf of the FTI Funds is not a party to or obligated
under any provision of its Agreement and Declaration of Trust or By-laws, or
any contract or any other commitment or obligation, and is not subject to any
order or decree, that would be violated by its execution of or performance
under the Plan. FTI Trust has furnished FG Trust with copies or descriptions
of all material agreements or other arrangements to which the FTI Funds are a
party. The FTI Funds have 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 the FTI Funds in accordance with their
terms at or prior to the Closing Date.
(g) FTI Trust has elected to treat each of the FTI Funds as a RIC for
federal income tax purposes under Part I of Subchapter M of the Code, each of
the FTI Funds has qualified as a RIC for each taxable year since its
inception and will qualify as a RIC as of the Closing Date, and consummation
of the transactions contemplated by the Plan will not cause it to fail to be
qualified as a RIC as of the Closing Date.
(h) The FTI Funds are not under jurisdiction of a Court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(i) The FTI Funds do not have any unamortized or unpaid organization fees or
expenses.
(j) The Prospectus of the FTI Funds, dated April 1, 2003, and the
corresponding Statement of Additional Information, dated April 1, 2003, do
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and any amended, revised, or new prospectus or statement of
additional information of the FTI Funds or any supplement thereto, that is
hereafter filed with the Securities and Exchange Commission ("SEC") (copies
of which documents shall be provided to FG Trust promptly after such filing),
shall not contain any untrue statement of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(k) The FTI Funds do 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 since the dates of
those financial statements. On the Closing Date, FTI Trust shall advise FG
Trust in writing of all the FTI Funds' known liabilities, contingent or
otherwise, whether or not incurred in the ordinary course of business,
existing or accrued at such time.
(l) Since November 30, 2002, there has not been any material adverse change
in the FTI Funds' financial condition, assets, liabilities, or business other
than changes occurring in the ordinary course of business.
(m) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the FTI Funds or
FTI Trust of the transactions contemplated by the Plan, except as may be
required under the federal or state securities laws or the rules and
regulations thereunder.
(n) The information to be furnished by FTI Trust or the FTI Funds for use in
preparing the Proxy Statement referred to in Section 7(f) hereof, and any
other documents which may be necessary in connection with the transactions
contemplated hereby, shall be accurate and complete and shall comply in all
material respects with federal securities and other laws and regulations
thereunder applicable thereto.
(o) There is no plan or intention of the FTI Funds' shareholders who
individually own 5% or more of shares of the FTI Funds and, to the best of
FTI Trust's knowledge, there is no plan or intention of the remaining FTI
Funds' shareholders to redeem or otherwise to dispose of any shares of FGT
Funds to be received by them in the reorganization (other than redemptions
and dispositions of shares of FGT Funds that may occur in the future as a
consequence of investment decisions unrelated to the reorganization). FTI
Trust does not anticipate dispositions of shares of the FTI Funds at the time
or soon after the reorganization to exceed the usual rate and frequency of
redemptions of shares of the FTI Funds as series of an open-end investment
company. Consequently, FTI Trust is not aware of any plan that would cause
the percentage of shareholder interests, if any, that will be disposed of as
a result of or at the time of the reorganization to be 1% or more of the
shares of the FTI Funds outstanding as of the Closing Date.
(p) The statement of assets and liabilities to be furnished by it as of 4:00
p.m. Eastern time on the Closing Date for the purpose of determining the
number of FGT Funds' shares to be issued pursuant to Section 1 of the Plan,
will accurately reflect each FTI Fund's Assets and outstanding shares of
beneficial interest, as of such date, in conformity with generally accepted
accounting principles applied on a consistent basis.
(q) At the Closing, it will have good and marketable title to all of the
Assets shown on the statement of assets and liabilities referred to in (a)
above, except such imperfections of title as do not materially detract from
the value or use of the Assets subject thereto, or materially affect title
thereto.
(r) As of the Closing Date, the FTI Funds will not have outstanding any
warrants, options, convertible securities, or any other type of rights
pursuant to which any person could acquire shares of the FTI Funds, except
for the right of investors to acquire shares at net asset value in the normal
course of business as open-end diversified management investment companies
operating under the 1940 Act.
(s) Throughout the five-year period ending on the Closing Date, the FTI
Funds will have conducted their historic business within the meaning of
Section 1.368-1(d) of the Income Tax Regulations under the Code in a
substantially unchanged manner.
6. REPRESENTATIONS AND WARRANTIES BY FTI TRUST AND FG TRUST.
FTI Trust, on behalf of the FTI Funds, and FG Trust, on behalf of the
FGT Funds, each represents and warrants to the other that:
(a) Except as disclosed in its currently effective prospectus relating to
the FTI Funds, in the case of FTI Trust, and the FGT Funds, in the case of FG
Trust, there is no material suit, judicial action, or legal or administrative
proceeding pending or threatened against it. Neither FG Trust nor FTI Trust
is 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 the
FGT Funds' or the FTI Funds' business or their ability to consummate the
transactions herein contemplated.
(b) There are no known actual or proposed deficiency assessments with
respect to any taxes payable by it.
(c) 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 to the approval of the FTI Funds' shareholders in the case of FTI
Trust, constitutes a valid and binding obligation enforceable in accordance
with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization arrangement, moratorium, and other similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(d) It anticipates that consummation of the Plan will not cause the FTI
Funds, in the case of FTI Trust, and the FGT Funds, in the case of FG Trust,
to fail to conform to the requirements of Subchapter M of the Code for
federal income taxation as a RIC at the end of its fiscal year.
7. COVENANTS OF FTI TRUST AND FG TRUST.
(a) FTI Trust, on behalf of the FTI Funds, and FG Trust, on behalf of the
FGT Funds, each covenant to operate their respective businesses as presently
conducted between the date hereof and the Closing, it being understood that
such ordinary course of business will include customary dividends and
distributions and any other distribution necessary or desirable to avoid
federal income or excise taxes.
(b) FTI Trust, on behalf of the FTI Funds, undertakes that it will not
acquire the FGT Funds' shares for the purpose of making distributions thereof
to anyone other than the FTI Funds' shareholders.
(c) FTI Trust, on behalf of the FTI Funds, undertakes that, if the Plan is
consummated as to one or more FTI Funds, such FTI Funds will liquidate and
dissolve, and if the Plan is consummated for all FTI Funds, FTI Trust will
liquidate and dissolve itself and all FTI Funds.
(d) FTI Trust, on behalf of the FTI Funds, and FG Trust, on behalf of the
FGT Funds, 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 all Federal and other taxes shown as due on said
returns shall have either been paid or adequate liability reserves shall have
been provided for the payment of such taxes, 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, FTI Trust, on behalf of the FTI Funds, will provide the
FGT Funds a copy of the shareholder ledger accounts, certified by the FTI
Funds' transfer agent or their President to the best of its or his knowledge
and belief, for all the shareholders of record of the FTI Funds' shares as of
4:00 p.m., Eastern time, on the Closing Date who are to become shareholders
of the FGT Funds as a result of the transfer of assets that is the subject of
the Plan.
(f) The Board of Trustees of FTI Trust shall call and FTI Trust shall hold,
a Special Joint Meeting of the FTI Funds' shareholders to consider and vote
upon the Plan (the "Special Meeting") and FTI Trust shall take all other
actions reasonably necessary to obtain approval of the transactions
contemplated herein. FTI Trust agrees (i) to file with the SEC, and (ii) to
mail to each shareholder of record of FTI Funds 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 Proxy
Statement that complies in all material respects with the applicable
provisions of Section 14(a) of the 1934 Act, as amended, and Section 20(a) of
the 1940 Act, and the rules and regulations, respectively, thereunder. At the
time it becomes effective, at the time of the Special Meeting, and at the
Closing Date, the Proxy Statement will (i) comply in all material respects
with the applicable provisions of the 1934 Act, and the rules and regulations
promulgated thereunder; and (ii) not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(g) Subject to the provisions of the Plan, FG Trust and FTI Trust 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.
(h) FTI Trust shall furnish to FG Trust on the Closing Date a Statement of
Assets and Liabilities of the FTI Funds as of the Closing Date, which
statement shall be prepared in accordance with GAAP consistently applied and
shall be certified by the FTI Funds' Treasurer or Assistant Treasurer. As
promptly as practicable, but in any case, within forty-five (45) days after
the Closing Date, FTI Trust shall furnish to FG Trust, in such form as is
reasonably satisfactory to FG Trust, a statement of the earnings and profits
of the FTI Funds for federal income tax purposes, and of any capital loss
carryovers and other items that will be carried over to the FGT Funds as a
result of Section 381 of the Code, which statement shall be certified by the
FTI Funds' Treasurer or Assistant Treasurer. FTI Trust covenants that each
of the FTI Funds have no earnings and profits that were accumulated by it or
any acquired entity during a taxable year when it or such entity did not
qualify as a RIC under the Code, or, if it has such earnings and profits, it
shall distribute them to its shareholders prior to the Closing Date.
(i) FTI Trust shall deliver to FG Trust at the Closing Date confirmation or
other adequate evidence as to the tax costs and holding periods of the assets
and property of the FTI Funds transferred to FG Trust in accordance with the
terms of the Plan.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY FTI TRUST AND FG 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
each of the Funds.
(c) That the SEC shall not have issued an unfavorable management report
under Section 25(b) of the 1940 Act or instituted or threatened to institute
any proceeding seeking to enjoin consummation of the Plan under Section
25(c) of the 1940 Act. And, further, no other legal, administrative or other
proceeding shall have been instituted or threatened that would materially
affect the financial condition of either party or would prohibit the
transactions contemplated hereby.
(d) That the Plan and reorganizations contemplated hereby shall have been
adopted and approved by the appropriate action of the shareholders of the FTI
Funds at an annual or special meeting or any adjournment thereof.
(e) That a distribution or distributions shall have been declared for each
of the FTI Funds 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 4:00 p.m. Eastern
time on the Closing Date; and (ii) any undistributed ordinary income and
capital gain net income from any period to the extent not otherwise declared
for distribution. Capital gain net income has the meaning given such term by
Section 1222(a) of the Code.
(f) That there shall be delivered to FTI Trust, on behalf of the FTI Funds,
and FG Trust, on behalf of the FGT Funds, an opinion from Messrs. Stradley,
Ronon, Stevens & Young, LLP, counsel to FG Trust, to the effect that,
provided the acquisition contemplated hereby is carried out in accordance
with this Plan and with the laws of the Commonwealth of Massachusetts and
State of Delaware, and based upon certificates of the officers of FTI Trust
and FG Trust with regard to matters of fact for each FTI Fund and
corresponding FGT Fund:
(1) The acquisition by the FGT Fund of all the assets of the FTI Fund as
provided for herein in exchange for the FGT Fund's shares and the
assumption by the FGT Fund of all of the liabilities of the FTI Fund,
followed by the distribution by the FTI Fund to its shareholders of the
FGT Fund's shares in complete liquidation of the FTI Fund will qualify
as a reorganization within the meaning of Section 368(a)(1) of the Code,
and the FTI Fund and the FGT 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 the FTI Fund upon the transfer of
all of its assets to, and assumption of its liabilities by, the FGT Fund
in exchange solely for voting shares of the FGT Fund (Sections 361(a)
and 357(a) of the Code);
(3) The FGT Fund will recognize no gain or loss upon the receipt of all of
the assets of the corresponding FTI Fund, in exchange solely for voting
shares of the FGT Fund (Section 1032(a) of the Code);
(4) No gain or loss will be recognized by the FTI Fund upon the distribution
of the corresponding FGT Fund's shares to its shareholders in complete
liquidation of the FTI Fund (in pursuance of the Plan) (Section
361(c)(1) of the Code);
(5) The basis of the assets of the FTI Fund received by the FGT Fund will be
the same as the basis of such assets to the FTI Fund immediately prior
to the reorganization (Section 362(b) of the Code);
(6) The holding period of the assets of the FTI Fund received by the FGT
Fund will include the period during which such assets were held by the
FTI Fund (Section 1223(2) of the Code);
(7) No gain or loss will be recognized to the shareholders of the FTI Fund
upon the exchange of their shares in the FTI Fund for voting shares of
the FGT Fund (including fractional shares to which they may be entitled)
(Section 354(a) of the Code);
(8) The basis of a FGT Fund's shares received by the shareholders of the FTI
Fund shall be the same as the basis of the FTI Fund's shares exchanged
therefor (Section 358(a)(1) of the Code);
(9) The holding period of the FGT Fund's shares received by shareholders of
the FTI Fund (including fractional shares to which they may be entitled)
will include the holding period of the FTI Fund's shares surrendered in
exchange therefor, provided that the FTI Fund's shares were held as a
capital asset on the effective date of the exchange (Section 1223(1) of
the Code); and
(10) A FGT 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 the
FTI 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.
(g) That there shall be delivered to FG Trust on behalf of the FGT Funds an
opinion in form and substance satisfactory to it from Messrs. Stradley,
Ronon, Stevens & Young, LLP, counsel to FTI Trust on behalf of the FTI Funds,
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) Each of the FTI Funds is a series of FTI Trust and the FTI Trust is a
validly existing business trust in good standing under the laws of The
Commonwealth of Massachusetts;
(2) FTI Trust is authorized to issue an unlimited number of shares of
beneficial interest, without a par value, of the FTI Funds. One class of
shares of the FTI Funds has been designated as the FTI Funds' shares,
and an unlimited number of shares of beneficial interest of FTI Trust
have been allocated to the FTI Funds' shares. Assuming that the initial
shares of beneficial interest of the FTI Funds were issued in accordance
with the 1940 Act and the Declaration of Trust, as amended, and By-laws,
as amended and restated, of FTI Trust, and that all other outstanding
shares of the FTI Funds were sold, issued and paid for in accordance
with the terms of the FTI Funds' prospectus in effect at the time of
such sales, each such outstanding share is duly authorized, fully paid,
and non-assessable;
(3) The FTI Trust is an open-end investment company of the management type
registered as such under the 1940 Act;
(4) Except as disclosed in the FTI Funds' currently effective prospectus,
such counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against the FTI Funds,
the unfavorable outcome of which would materially and adversely affect
FTI Trust or the FTI Funds;
(5) The execution and delivery of the Plan and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary trust action on the part of FTI Trust on behalf of the FTI
Funds; and
(6) Neither the execution, delivery, nor performance of the Plan by FTI
Trust on behalf of the FTI Funds violates any provision of its
Declaration of Trust or By-laws, or the provisions of any agreement or
other instrument filed by FTI Trust as an exhibit to its Registration
Statement on Form N-1A; the Plan is the legal, valid and binding
obligation of FTI Trust on behalf of the FTI Funds and is enforceable
against FTI Trust on behalf of the FTI Funds in accordance with its
terms.
In giving the opinions set forth above, this counsel may state that it is
relying on certificates of the officers of FTI Trust with regard to matters
of fact, and certain certifications and written statements of governmental
officials with respect to the good standing of FTI Trust.
(h) That there shall be delivered to FTI Trust on behalf of the FTI Funds an
opinion in form and substance satisfactory to it from Messrs. Stradley,
Ronon, Stevens & Young, LLP, counsel to FG Trust on behalf of the FGT Funds,
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) Each of the FGT Funds is a series of FG Trust and FG Trust is a validly
existing statutory trust in good standing under the laws of the State of
Delaware;
(2) FG Trust is authorized to issue an unlimited number of shares of
beneficial interest, par value $0.01 per share of the FGT Funds. One
class of shares FGT Funds has been designated as the FGT Funds' shares,
and an unlimited number of shares of beneficial interest, par value
$0.01 per share, have been allocated to the FGT Funds' shares. Assuming
that the shares of beneficial interest of the FGT Funds to be delivered
pursuant to the Plan are sold, issued and paid for in accordance with
the terms of the FGT Funds' prospectus in effect at the time of the
Closing, each such share of the FGT Funds is validly issued, fully paid,
and non-assessable;
(3) Each of the FGT Funds is a series of the FG Trust, an open-end
investment company of the management type registered as such under the
1940 Act;
(4) Such counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against the FGT Funds,
the unfavorable outcome of which would materially and adversely affect
FG Trust or the FGT Funds;
(5) The execution and delivery of the Plan and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary trust action on the part of FG Trust on behalf of the FGT
Funds;
(6) Neither the execution, delivery, nor performance of the Plan by FG Trust
on behalf of the FGT Funds violates any provision of its Declaration of
Trust or By-laws, or the provisions of any agreement or other instrument
filed by FG Trust as an exhibit to its Registration Statement on
Form N-1A; the Plan is the legal, valid and binding obligation of FG
Trust on behalf of the FGT Funds and is enforceable against FG Trust on
behalf of the FGT Funds in accordance with its terms; and
(7) The Registration Statement of FG Trust, of which the prospectus dated
June 19, 2003 of the FGT Funds 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, and nothing has come to
counsel's attention that causes it to believe that, at the time the
Prospectus became effective, or at the time of the signing of the Plan,
or at the Closing, such Prospectus (except for the financial statements
and other financial and statistical data included therein, as to which
counsel need not express an opinion), contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; and such counsel knows of no legal or government proceedings
required to be described in the Prospectus, or of any contract or
document of a character required to be described in the Prospectus that
is not described as required.
In giving the opinions set forth above, this counsel may state that it
is relying on certificates of the officers of FG Trust with regard to matters
of fact, and certain certifications and written statements of governmental
officials with respect to the good standing of FG Trust.
(i) That the FTI Funds shall have received a certificate from the President
and Secretary of FG Trust on behalf of FGT Funds to the effect that the
statements contained in the Prospectus, at the time the Prospectus became
effective, at the date of the signing of the Plan, and at the Closing, did
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(j) That FG Trust's Registration Statement with respect to FGT Funds' shares
to be delivered to FTI Funds' shareholders in accordance with the Plan shall
have become effective, and no stop order suspending the effectiveness of the
Registration Statement or any amendment or supplement thereto, shall have
been issued prior to the Closing Date or shall be in effect at Closing, and
no proceedings for the issuance of such an order shall be pending or
threatened on that date.
(k) That the FGT Funds' 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 the FGT Funds' shares lawfully to be delivered to
each holder of FTI Funds' shares.
(l) That, at the Closing, there shall be transferred to FG Trust on behalf
of FGT Funds, aggregate Assets of the corresponding FTI Funds 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 each FTI Fund
on the Closing Date.
(m) That there be delivered to FG Trust on behalf of FGT Funds information
concerning the tax basis of FTI Funds in all securities transferred to the
corresponding FGT Funds, together with shareholder information including the
names, addresses, and taxpayer identification numbers of the shareholders of
FTI Funds 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 FTI Funds respect to each
shareholder.
9. BROKERAGE FEES AND EXPENSES.
(a) FTI Trust on behalf of FTI Funds and FG Trust on behalf of FGT Funds
each represents and warrants to the other that there are no broker or
finders' fees payable by it in connection with the transactions provided for
herein.
(b) The expenses of entering into and carrying out the provisions of the
Plan shall be borne by Fiduciary International, Inc. and its affiliates.
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 (whether
before or after approval thereof by the shareholders of the FTI Funds) prior
to the Closing, or the Closing may be postponed as follows:
(1) by mutual consent of FTI Trust on behalf of FTI Funds and FG Trust on
behalf of FGT Funds;
(2) by FG Trust on behalf of FGT Funds 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 FTI Trust on behalf of FTI Funds 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.
An election by FG Trust or FTI Trust to terminate the Plan and to
abandon the reorganization shall be exercised, respectively, by the Board of
Trustees of either FG Trust or FTI Trust.
(b) If the transactions contemplated by the Plan have not been consummated
by July 31, 2003, the Plan shall automatically terminate on that date, unless
a later date is agreed to by both FG Trust and FTI Trust.
(c) In the event of termination of the Plan pursuant to the provisions
hereof, the same shall become void and have no further effect, and neither
FTI Trust, FG Trust, FTI Funds nor FGT Funds, nor their trustees, officers,
or agents or the shareholders of FTI Funds or FGT Funds 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(b) 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 by
action taken by that party's Board of Trustees if, in the judgment of such
Board of Trustees, such action or waiver will not have a material adverse
effect on the benefits intended under 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 terminate on the Closing Date, and neither FTI
Trust nor FG 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. This provision shall not protect any
officer, trustee, agent or shareholder of FTI Trust or FG Trust against any
liability to the entity for which that officer, trustee, agent or shareholder
so acts or to its shareholders to which that officer, trustee, agent or
shareholder would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties in the conduct
of such office.
(f) If any order or orders of the SEC with respect to the Plan shall be
issued prior to the Closing and shall impose any terms or conditions that are
determined by action of the Board of Trustees of FTI Trust, on behalf of FTI
Funds, or FG Trust, on behalf of FGT Funds, to be acceptable, such terms and
conditions shall be binding as if a part of the Plan without further vote or
approval of the shareholders of FTI Funds, unless such terms and conditions
shall result in a change in the method of computing the number of FGT Funds'
shares to be issued to FTI Funds in which event, unless such terms and
conditions shall have been included in the proxy solicitation material
furnished to the shareholders of FTI Funds prior to the meeting at which the
transactions contemplated by the Plan shall have been approved, the Plan
shall not be consummated and shall terminate unless FTI Trust shall promptly
call a special meeting of the shareholders of FTI Funds at which such
conditions so imposed shall be submitted for approval.
11. INDEMNIFICATION.
(a) FG Trust and the FGT Funds shall indemnify, defend and hold harmless the
FTI Funds, FTI Trust, its Board of Trustees, officers, employees and agents
(collectively "Acquired Fund Indemnified Parties") against all losses,
claims, demands, liabilities and expenses, including reasonable legal and
other expenses incurred in defending third party claims, actions, suits or
proceedings, whether or not resulting in any liability to such Acquired Fund
Indemnified Parties, including amounts paid by any one or more of the
Acquired Fund Indemnified Parties in a compromise or settlement of any such
claim, action, suit or proceeding, or threatened third party claim, suit,
action or proceeding made with the consent of FG Trust, arising from any
untrue statement or alleged untrue statement of a material fact contained in
the Proxy Statement, as filed and in effect with the SEC or any application
prepared by FG Trust and FGT Funds with any state regulatory agency in
connection with the transactions contemplated by the Plan under the
securities laws thereof ("Application"); or which arises out of or is based
upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that FG Trust and FGT Funds shall only be
liable in such case to the extent that any such loss, claim, demand,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission about FG Trust
and/or FGT Funds or the transactions contemplated by the Plan made in the
Proxy Statement or any Application.
(b) After the Closing Date, FG Trust, on behalf of the FGT Funds, shall
also indemnify and hold harmless FTI Funds' Board of Trustees and officers
(collectively, "Acquired Fund Covered Persons") against all losses, claims,
demands, liabilities and expenses, including reasonable legal and other
expenses incurred in defending third party claims, actions, suits or
proceedings, whether or not resulting in any liability to such Acquired Fund
Covered Person, including amounts paid by any one or more of the Acquired
Fund Covered Persons in a compromise or settlement of any such claim, suit,
action or proceeding, or threatened third party claim, suit, action or
proceeding made with the consent of FG Trust, on behalf of the FGT Funds, to
the extent such Acquired Fund Covered Person is, or would have been, entitled
to indemnification by FTI Trust prior to the Closing Date pursuant to FTI
Trust's Declaration of Trust and By-Laws.
(c) FTI Trust on behalf of FTI Funds, until the time of FTI Funds'
liquidation, shall indemnify, defend, and hold harmless FGT Funds, FG Trust,
its Board of Trustees, officers, employees and agents ("Acquiring Fund
Indemnified Parties") against all losses, claims, demands, liabilities, and
expenses, including reasonable legal and other expenses incurred in defending
third party claims, actions, suits or proceedings, whether or not resulting
in any liability to such Acquiring Fund Indemnified Parties, including
amounts paid by any one or more of the Acquiring Fund Indemnified Parties in
a compromise or settlement of any such claim, suit, action, or proceeding,
made with the consent of FTI Trust, arising from any untrue statement or
alleged untrue statement of a material fact contained in the Proxy Statement,
as filed with the SEC or any Application; or which arises out of or is based
upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that FTI Trust and FTI Funds shall only be
liable in such case to the extent that any such loss, claim, demand,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission about FTI Trust
and/or FTI Funds or the transactions contemplated by the Plan made in the
Proxy Statement or any Application.
(d) A party seeking indemnification hereunder is hereinafter called the
"Indemnified Party" and the party from whom the Indemnified Party is seeking
indemnification hereunder is hereinafter called the "Indemnifying Party."
Each Indemnified Party shall notify the Indemnifying Party in writing within
ten (10) days of the receipt by one or more of the Indemnified Parties of any
notice of legal process of any suit brought against or claim made against
such Indemnified Party as to any matters covered by this Section 11, but the
failure to notify the Indemnifying Party shall not relieve the Indemnifying
Party from any liability which it may have to any Indemnified Party otherwise
than under this Section 11. The Indemnifying Party shall be entitled to
participate at its own expense in the defense of any claim, action, suit, or
proceeding covered by this Section 11, or, if it so elects, to assume at its
own expense, the defense thereof with counsel satisfactory to the Indemnified
Parties; provided, however, if the defendants in any such action include both
the Indemnifying Party and any Indemnified Party and the Indemnified Party
shall have reasonably concluded that there may be legal defenses available to
it which are different from or additional to those available to the
Indemnifying Party, the Indemnified Party shall have the right to select
separate counsel to assume such legal defense and to otherwise participate in
the defense of such action on behalf of such Indemnified Party.
Upon receipt of notice from the Indemnifying Party to the
Indemnified Parties of the election by the Indemnifying Party to assume the
defense of such action, the Indemnifying Party shall not be liable to such
Indemnified Parties under this Section 11 for any legal or other expenses
subsequently incurred by such Indemnified Parties in connection with the
defense thereof unless (i) the Indemnified Parties shall have employed such
counsel in connection with the assumption of legal defenses in accordance
with the provision of the immediately preceding sentence (it being
understood, however, that the Indemnifying Parties shall not be liable for
the expenses of more than one separate counsel); (ii) the Indemnifying
Parties do not employ counsel reasonably satisfactory to the Indemnified
Parties to represent the Indemnified Parties within a reasonable amount of
time after notice of commencement of the action; or (iii) the Indemnifying
Parties have authorized the employment of counsel for the Indemnified Parties
at its expense.
(e) This Section 11 shall survive the termination of the Plan and for a
period of three (3) years following the Closing Date.
12. LIABILITY OF FG TRUST AND FTI TRUST.
(a) Each party acknowledges and agrees that all obligations of FG Trust
under the Plan are binding only with respect to FGT Funds; that any liability
of FG Trust under the Plan with respect to an FGT Fund, or in connection with
the transactions contemplated herein with respect to such FGT Fund, shall be
discharged only out of the assets of that FGT Fund; that no other series of
FG Trust shall be liable with respect to the Plan or in connection with the
transactions contemplated herein; and that neither FTI Trust nor FTI Funds
shall seek satisfaction of any such obligation or liability from the
shareholders of FG Trust, the trustees, officers, employees or agents of FG
Trust, or any of them.
(b) Each party acknowledges and agrees that all obligations of FTI Trust
under the Plan are binding only with respect to the respective FTI Funds;
that any liability of FTI Trust under the Plan with respect to an FTI Fund,
or in connection with the transactions contemplated herein with respect to
such FTI Fund, shall be discharged only out of the assets of that FTI Fund;
that no other series of FTI Trust shall be liable with respect to the Plan or
in connection with the transactions contemplated herein; and that neither FG
Trust nor FGT Funds shall seek satisfaction of any such obligation or
liability from the shareholders of FTI Trust, the trustees, officers,
employees or agents of FTI Trust, or any of them.
13. SEVERABILITY.
Subject to the conditions set forth in the Plan and notwithstanding
anything herein that may be construed to the contrary, the failure of one of
the FTI Funds to consummate the transactions contemplated hereby shall not,
or to comply with the conditions set forth in Section 8 of the Plan may not,
affect the consummation or validity of the reorganization with respect to any
other FTI Fund, and the provisions of this Agreement shall be construed to
effect this intent, including, without limitation, as the context requires,
construing the terms "FTI Fund" and "FGT Fund" as meaning only those series
of FTI Trust and FG Trust, respectively, that are involved in the
reorganization as of the Closing Date.
14. 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.
15. 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.
16. 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
Global Trust, at One Franklin Parkway, San Mateo, California 94403,
Attention: Secretary, or the FTI Funds, at One Franklin Parkway, San Mateo,
California 94403 Attention: Secretary, as the case may be.
17. GOVERNING LAW.
The Plan shall be governed by and carried out in accordance with the
laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, FTI Trust, on behalf of FTI Funds, and FG Trust, on
behalf of FGT Funds, 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 GLOBAL TRUST, ON
BEHALF OF FIDUCIARY LARGE
CAPITALIZATION GROWTH AND
INCOME FUND, FIDUCIARY SMALL
CAPITALIZATION EQUITY FUND
AND FIDUCIARY EUROPEAN
SMALLER COMPANIES FUND
Attest:
By:
- -------------------------------
- --------------------- ------------------
Murray L. Simpson David P. Goss
Secretary Vice President
FTI FUNDS, ON BEHALF OF FTI
LARGE CAPITALIZATION GROWTH
AND INCOME FUND, FTI SMALL
CAPITALIZATION EQUITY FUND
AND FTI EUROPEAN SMALLER
COMPANIES FUND
Attest:
By:
- -------------------------------
Murray L. Simpson David P. Goss
Secretary Vice President
EXHIBIT B
A COMPARISON OF GOVERNING DOCUMENTS AND STATE LAW
A Comparison of:
THE LAW GOVERNING DELAWARE STATUTORY TRUSTS AND
THE CHARTER DOCUMENTS OF FRANKLIN GLOBAL TRUST, A DELAWARE STATUTORY
TRUST, UNDER SUCH LAW,
THE LAW GOVERNING MASSACHUSETTS BUSINESS TRUSTS AND
THE CHARTER DOCUMENTS OF FTI FUNDS, A MASSACHUSETTS BUSINESS TRUST,
UNDER SUCH LAW
DELAWARE STATUTORY TRUST MASSACHUSETTS BUSINESS TRUST
GOVERNING A Delaware statutory trust A Massachusetts business
DOCUMENTS/ (formerly known as a Delaware trust (an "MBT") is created
GOVERNING business trust) (a "DST") is by filing a declaration of
BODY formed by a governing trust with the Secretary of
instrument and the filing of State of Massachusetts and
a certificate of trust with with the clerk of every city
the Delaware Secretary of or town in Massachusetts
State ("Secretary of State"). where the trust has a usual
The Delaware law governing a place of business.
DST is referred to in this
analysis as the "Delaware
Act."
An MBT is an unincorporated
A DST is an unincorporated association organized under
association organized under the Massachusetts statute
the Delaware Act whose governing business trusts
operations are governed by (the "Massachusetts Statute")
its governing instrument and is considered to be a
(which may consist of one or hybrid, having
more instruments). Its characteristics of both
business and affairs are corporations and common law
managed by or under the trusts. An MBT's operations
direction of one or more are governed by a trust
trustees. instrument and by-laws. The
business and affairs of an
MBT are managed by or under
the direction of a board of
trustees.
As described in this chart,
DSTs are granted a MBTs also are granted a
significant amount of significant amount of
organizational and organizational and
operational flexibility. operational flexibility. The
Delaware law makes it easy Massachusetts Statute is
toobtain needed shareholder silent on most of the salient
approvals, and also permits features of MBTs, thereby
management of a DST to take allowing the trustees of the
various actions without MBT to freely structure the
being required to make MBT. The Massachusetts
statefilings or obtain Statute does not specify what
shareholder approval. information must be contained
in the declaration of trust,
nor does it require a
registered officer or agent
for service of process.
The governing instrument for The governing instrument for
the DST, Franklin Global the MBT, FTI Funds, is comprised
Trust ("Global Trust"), is of a declaration of trust, as
comprised of an agreement and amended ("MA Declaration"), and
declaration of trust, as by-laws ("MA By-Laws"). The FTI
amended ("Declaration"), and Funds' governing body is a board
board of trustees (the of trustees (the "board" or "board
by-laws ("By-Laws"). Global of trustees" or collectively, the
board of trustees (the "trustees").
"board" or "board of
trustees" or collectively,
the "trustees").
Each trustee of Global Trust Each trustee of FTI Funds shall
shall hold office for the hold office for the lifetime of
lifetime of Global Trust FTI Funds until he or she dies,
until he or she dies, resigns or is removed or retired.
resigns, is declared bankrupt
or incompetent by a court, or
is removed, or, if earlier,
until the next meeting of
shareholders called for the
purpose of electing trustees
and until the election and
qualification of his or her
successor.
OWNERSHIP Under the Delaware Act, the Under the Massachusetts
SHARES OR ownership interests in a DST Statute, the ownership
INTERESTS are denominated as interests in an MBT are
"beneficial interests" that denominated as "beneficial
are held by "beneficial interests" that are held by
owners." However, there is "beneficial owners." However,
flexibility as to how a there is flexibility as to
governing instrument refers how a governing instrument
to "beneficial interests" and refers to "beneficial
"beneficial owners" and the interests" and "beneficial
governing instrument may owners" and the governing
identify "beneficial instrument may identify
interests" and "beneficial "beneficial interests" and
owners" as "shares" and "beneficial owners" as
"shareholders," respectively. "shares" and "shareholders,"
respectively.
Global Trust's units of
beneficial interest, par FTI Funds' units of
value $0.01 per unit, are beneficial interest, without
designated as "shares" and par value, are designated as
its beneficial owners are "shares" and its beneficial
designated as "shareholders." owners are designated as
This analysis will use the "shareholders." This analysis
"share" and "shareholder" will use the "share" and
terminology. "shareholder" terminology.
SERIES AND Under the Delaware Act, the The Massachusetts Statute
CLASSES governing instrument may permits an MBT to issue one
provide for classes, groups or more series or classes of
or series of shares, beneficial interest. The
shareholders or trustees, Massachusetts Statute is
having such relative rights, largely silent as to any
powers and duties as set requirements for the creation
forth in the governing of such series or classes,
instrument. Such series, although the trust documents
classes or groups may be creating an MBT may provide
described in the DST's methods or authority to
governing instrument or in create such series or classes
resolutions adopted by its without seeking shareholder
trustees. No state filing is approval.
necessary and, unless
required by the governing
instrument, shareholder
approval is not needed.
In addition, under the
Delaware Act, except to the
extent otherwise provided in
the governing instrument of a
DST, where a DST is a
registered investment company
under the Investment Company
Act of 1940, as amended (the
"1940 Act"), any class, group
or series of shares of the
DST is preferred as to
distribution of assets or The MA Declaration authorizes
payment of dividends over all an unlimited number of
other classes, groups or shares, which may be further
series of the DST with divided into separate series
respect to assets and classes. Such series and
specifically allocated to classes will have the rights
such class, group or series and preferences as determined
as contemplated by Section 18 by the trustees.
(or any amendment or
successor provision) of the
1940 Act.
The Declaration authorizes an
unlimited number of shares,
which the trustees may divide
into separate series and may
further divide the series
into separate classes of
shares. Such series and
classes will have the rights
and preferences as determined
by the trustees.
AMENDMENTS The Delaware Act provides The Massachusetts Statute
TO broad flexibility as to the provides broad flexibility as
GOVERNING manner of amending and/or to the manner of amending
DOCUMENTS restating the governing and/or restating the
instrument of a DST. governing instrument of an
Amendments to the governing MBT. The Massachusetts
instrument that do not change Statute provides that the
the information in the DST's trustees shall, within thirty
certificate of trust are not (30) days after the adoption
required to be filed with the of any amendment to the
Secretary of State. declaration of trust, file a
copy with the Secretary of
State of Massachusetts and
with the clerk of every city
or town in Massachusetts
where the MBT has a usual
place of business.
DECLARATION OF TRUST DECLARATION OF TRUST
Subject to the paragraph No amendment of the MA
below, the Declaration may be Declaration may repeal the
restated and/or amended at limitations on personal
any time by a written liability of any shareholder
instrument signed by a or trustee or repeal the
majority of the trustees and, prohibition of assessment
if required, by approval of upon the shareholders without
such amendment by the the express consent of each
shareholders, by a majority shareholder or trustee
of the shares voted at a involved. Subject to the
shareholders' meeting at foregoing, the MA Declaration
which a quorum is present. may be amended by a written
instrument signed by a
The board of trustees shall majority of the trustees (or
have the power to amend the by an officer of FTI Funds
Declaration, without the need pursuant to the vote of a
for shareholder action, so as majority of the trustees) so
to add to, delete, replace or long as such amendment does
otherwise modify any not (i) adversely affect the
provisions relating to the rights of any shareholder
shares contained in the with respect to which such
Declaration, provided that amendment applies, and (ii)
before adopting any such contravene applicable law.
amendment without shareholder Any amendment that adversely
approval the board of affects the rights of
trustees shall determine that shareholders may be adopted
it is consistent with the by a written instrument
fair and equitable treatment signed by a majority of the
of all shareholders or that trustees (or by an officer of
shareholder approval is not FTI Funds pursuant to the
otherwise required by the vote of a majority of the
1940 Act or other applicable trustees) when authorized to
law. If shares have been do so by the vote of the
issued, shareholder approval shareholders holding a
shall be required to adopt majority of the shares
any amendment to the entitled to vote.
Declaration which would
adversely affect to a The MA Declaration may be
material degree the rights amended by a majority of the
and preferences of the shares trustees, without shareholder
of any series (or class) or approval, to: (a) establish
to increase or decrease the and designate one or more
par value of the shares of series or classes with such
any series (or class). rights and preferences and
eligibility requirements for
investment therein as the
trustees determine, and
reclassify outstanding shares
as shares of a particular
series or class; (b) combine
two or more series or classes
into a single series or class
on such terms and conditions
as the trustees determine;
(c) change or eliminate any
eligibility requirements for
investment in any series or
class, including without
limitation, to provide for
the issue of shares of any
series or class in connection
with any merger or
consolidation of FTI Funds
with another trust or company
or any acquisition by FTI
Funds of part or all of the
assets of any other trust or
company; (d) change the
designation of any series or
class; (e) change the method
of allocating dividends among
the various series and
classes; (f) allocate
specific assets, liabilities,
items of income or expense of
FTI Funds to one or more
series and classes; and (g)
specifically allocate assets
to any or all series or
classes, or create one or
more additional series or
classes that are preferred
over all other series or
classes in respect of assets
specifically allocated
thereto or any dividends paid
by FTI Funds and provide for
any special voting or other
rights with respect to such
series or classes. in
addition, unless otherwise
provided by applicable law,
the trustees may amend the MA
Declaration to abolish a
series or class and rescind
its establishment and
designation without the
approval of the shareholders
of that series or class.
BY-LAWS BY-LAWS
The By-Laws may be amended or The MA By-Laws may be amended
repealed by the affirmative by a majority vote of all of
vote or written consent of a the trustees.
majority of the outstanding
shares entitled to vote,
except as otherwise provided
by applicable law, the
Declaration or the By-Laws.
Subject to the right of
shareholders to adopt, amend
or repeal By-Laws, and except
as otherwise provided by law CERTIFICATE OF TRUST
or the Declaration, the The Massachusetts Statute
By-Laws may be adopted, does not require an MBT to
amended, or repealed by the file a certificate of trust.
board of trustees.
CERTIFICATE OF TRUST
Pursuant to the Declaration,
the certificate of trust may
be amended and/or restated by
a procedure similar to that
used to amend and/or restate
the Declaration, as described
above. Any such amendment or
restatement of the
certificate of trust shall be
effective immediately upon
filing with the Secretary of
State or such future date as
may be stated therein.
PREEMPTIVE Under the Delaware Act, a Under the Massachusetts
RIGHTS AND governing instrument may Statute, a governing
REDEMPTION contain any provision instrument may contain any
OF SHARES relating to the rights, provision relating to the
duties and obligations of the rights, duties and
shareholders. Unless obligations of the
otherwise provided in the shareholders.
governing instrument or
another agreement, a
shareholder has no preemptive
right to subscribe to any
additional issue of shares or
other interest in a DST.
The Declaration provides that The MA Declaration provides
no shareholder shall have the that no shareholder shall
preemptive or other right to have the preemptive or other
subscribe to additional right to subscribe to any
shares or other securities additional shares or other
issued by Global Trust or any securities issued by FTI
series thereof. Funds.
Global Trust shall purchase FTI Funds shall purchase the
the outstanding shares shares of any series or class
offered by any shareholder offered for redemption by any
for redemption upon such shareholder of record upon
shareholder's compliance with such shareholder's compliance
the procedures set forth in with the terms and conditions
the Declaration and/or such determined by the trustees.
other procedures as the board
may authorize. Global Trust Such shares shall be
shall pay the net asset value purchased at the net asset
for such outstanding shares value thereof in accordance
in accordance with the with the MA Declaration,
Declaration, By-Laws and reduced by any redemption
applicable law. Payment may charge or deferred sales
be made wholly or partly in charge as the trustees from
kind at the determination of time to time may determine.
the trustees and the fair Payment may be made in whole
value, selection and quantity or in part by a distribution
of securities or other in kind of securities from
property so paid may be the portfolio of the relevant
determined by or under series or class, taking such
authority of the trustees. securities at the same value
Global Trust is not liable employed in determining net
for any delay in transferring asset value, and selecting
securities selected for the securities in such manner
delivery as all or part of as the trustees deem fair and
any payment in kind. equitable.
Global Trust's obligation to FTI Funds may also purchase
repurchase such outstanding shares of a series or class
shares may be suspended or by agreement with the owner
postponed by the trustees: thereof at a purchase price
(i) at any time that the New not exceeding the net asset
York Stock Exchange ("NYSE") value per share (reduced by
is closed for other than any redemption charge or
weekends or holidays, (ii) if deferred sales charge).
permitted by the rules of the
Securities and Exchange The trustees may suspend the
Commission (the "SEC") during determination of net asset
periods when trading on the value or right of redemption
NYSE is restricted, (iii) or postpone the payment date
during any emergency that for any period in accordance
makes it impracticable for with the 1940 act.
Global Trust to dispose of
the investments of the In addition, FTI Funds has
applicable series or to the right at any time to
determine fairly the value of redeem the shares of any
the net assets held with series or class held of
respect to such series or record by any shareholder at
(iv) during any other period the net asset value thereof
permitted by order of the SEC (which may be reduced by any
for the protection of applicable redemption charge
investors. or deferred sales charge), if
at any time: (i) the total
In addition, Global Trust investment in the
may, at its option and at any shareholder's account does
time, redeem outstanding not have a minimum dollar
shares of any shareholder at value determined from time to
the net asset value thereof time by the trustees; (ii) a
to the extent such shareholder fails to furnish
shareholder owns outstanding certified social security or
shares: (i) of any series tax identification numbers;
having an aggregate net asset or (iii) the trustees
value of less than an amount determine that failure to so
determined from time to time redeem may have materially
by the trustees prior to the adverse consequences to the
acquisition of said shares; other shareholders, FTI Funds
(ii) of a particular series or any series or class
equal to or in excess of a thereof.
percentage of the outstanding
shares of that series
determined from time to time
by the trustees; or (iii)
equal to or in excess of a
percentage, determined from
time to time by the trustees,
of the outstanding shares of
Global Trust or of any series
thereof.
DISSOLUTION Global Trust may be dissolved The trustees may, by majority
AND by the vote of a majority of action, and with the
TERMINATION the outstanding shares of affirmative "vote of a
EVENTS each series entitled to vote, majority of the outstanding
voting separately by series, voting securities" (as
or by the trustees by written defined in the 1940 Act) of
notice to the shareholders. each series or class entitled
Any particular series may be to vote as determined by the
dissolved (i) by vote of a trustees pursuant to the MA
majority of the shares of Declaration, sell and convey
that series; (ii) by the the assets of FTI Funds or
trustees by written notice to any series or class thereof
the shareholders of that to another trust or
series; or (iii) by vote of a corporation. The trustees
majority of the trustees at may also sell and convert
any time that there are no into money all the assets of
shares outstanding of such FTI Funds or any series or
series. At any time that class thereof without
there are no shares shareholder approval, unless
outstanding of a particular otherwise required by
class, such class may be applicable law. In addition,
abolished by the vote of a unless otherwise provided by
majority of the trustees. applicable law, the trustees
may amend the MA Declaration
to abolish a series or class
and rescind its establishment
and designation without the
approval of the shareholders
of that series or class.
LIQUIDATION Under the Delaware Act, a DST Under the Massachusetts
that has dissolved shall Statute, there are no
first pay or make reasonable provisions as to the
provision to pay all known liquidation of an MBT.
claims and obligations,
including those that are
contingent, conditional and
unmatured, and all known
claims and obligations for
which the claimant is
unknown. Any remaining assets
shall be distributed to the
shareholders or as otherwise
provided in the governing
instrument.
Under the Delaware Act, a
series that has dissolved
shall first pay or make
reasonable provision to pay
all known claims and
obligations of the series,
including those that are Following a sale of assets as
contingent, conditional and described under DISSOLUTION
unmatured, and all known AND TERMINATION EVENTS, the
claims and obligations of the MA Declaration provides that
series for which the claimant upon making provision to pay
is unknown. Any remaining all outstanding obligations,
assets of the series shall be taxes and other liabilities,
distributed to the accrued or contingent,
shareholders of such series belonging to each series or
or as otherwise provided in class of FTI Funds, the
the governing instrument. trustees shall distribute the
remaining assets belonging to
With respect to any remaining each series or class ratably
assets, the Declaration among the holders of the
provides that Global Trust outstanding shares of that
shall, in accordance with series or class.
such procedures as the
trustees consider
appropriate, reduce such
assets held with respect to
each series (or the
applicable series, as the
case may be) to any
combination of cash, shares
or other securities, and
distribute the proceeds held
with respect to each series
(or the applicable series, as
the case may be) to the
shareholders of that series,
ratably according to the
number of shares of that
series held of record by the
several shareholders on the
dissolution date. All
distributions shall be made
ratably among all
shareholders of a particular
(class of a) series from the
assets held with respect to
such series according to the
number of shares of such
(class of such) series held
of record by such shareholder
on the dissolution date.
VOTING Under the Delaware Act, the There is no provision in the
RIGHTS, governing instrument may set Massachusetts Statute
MEETINGS, forth any provision relating addressing voting by the
NOTICE, to trustee and shareholder shareholders of an MBT. The
QUORUM, voting rights, including the declaration of trust of an
RECORD withholding of such rights MBT, however, may specify
DATES AND from certain trustees or matters as to which
PROXIES shareholders. If voting shareholders are entitled to
rights are granted, the vote.
governing instrument may
contain any provision
relating to meetings, notice
requirements, written
consents, record dates,
quorum requirements, voting
by proxy and any other matter
pertaining to the exercise of
voting rights. The governing
instrument may also provide
for the establishment of
record dates for allocations
and distributions by the DST.
ONE VOTE PER SHARE ONE VOTE PER DOLLAR
The Declaration provides that The MA Declaration provides
each whole share of global that each whole dollar of net
trust is entitled to one vote asset value of shares owned
as to any matter on which it of FTI Funds is entitled to
is entitled to vote and each one vote as to any matter on
fractional share is entitled which it is entitled to vote
to a proportionate fractional and each fractional dollar of
vote. net asset value of shares
owned is entitled to a
proportionate fractional
vote.
VOTING BY SERIES VOTING BY SERIES
The Declaration provides that The MA Declaration provides
all shares of Global Trust that only shareholders of a
entitled to vote on a matter particular series or class
shall vote separately by were entitled to vote on
series and, if applicable, by matters affecting such series
class, except if (i) the 1940 or class. Except with respect
Act requires all Global Trust to matters as to which a
shares to be voted in the particular series or class is
aggregate without affected materially differently,
differentiation between the or as otherwise required by
separate series or classes, applicable law, all of the
in which case all of Global shares of each series or class
Trust's shares may vote on a shall, on matters as to which
one-vote-per-share basis; and such series or class is entitled
(ii) any matter affects only to vote, vote with other series
the interests of some but not or classes so entitled as a
all series or classes, in single class. Notwithstanding
which case only the the foregoing, with respect
shareholders of such affected to matters which would
series or classes may vote on otherwise be voted on by two
the matter. or more series or classes as
a single class, the trustees
may ubmit such matters to the
shareholders of any or all
such series or classes,
separately.
SHAREHOLDERS' MEETINGS SHAREHOLDERS' MEETINGS
The Delaware Act does not An annual shareholders'
mandate annual shareholders' meeting is not required by
meetings. the Massachusetts Statute.
The Declaration provides that The MA Declaration provides
shareholders' meetings may be that the trustees or the
called by the trustees: (i) chief executive officer of
to elect or remove trustees; FTI Funds may call a special
(ii) for such other purposes shareholders' meeting. The
as may be prescribed by law, trustees will also call a
the Declaration or the special meeting upon the
By-Laws; and (iii) for the written request of
purpose of taking action upon shareholders holding at least
any other matter deemed by 10% of the outstanding shares
the trustees to be necessary of all series and classes
or desirable. In addition, a entitled to vote. In
shareholders' meeting for the addition, the MA By-Laws
purpose of electing or provide that a special
removing trustees may be shareholders' meeting of FTI
called upon the demand of Funds or of a series or class
shareholders owning 10% or thereof will be called by the
more of the shares of Global secretary whenever ordered by
Trust. The By-Laws authorize the trustees, the chairman or
the board of trustees, the requested in writing by the
chairman of the board or the holders of 10% of the
president to call a outstanding shares of FTI
shareholders' meeting. Funds or of the relevant
series or class entitled to
vote.
RECORD DATES RECORD DATES
As stated above, under the There is no record date
Delaware Act, the governing provision in the
instrument may provide for Massachusetts Statute.
record dates.
In order to determine the The MA Declaration authorizes
shareholders of any series the trustees to close the
(or class) entitled to notice share transfer books
of, and to vote at, a maintained for any series or
shareholders' meeting or any class for a period not
adjournment of such a exceeding ninety (90) days,
meeting, the Declaration or in lieu thereof to fix in
authorizes the trustees to advance a record date not
fix a record date. The record exceeding ninety (90) days,
date may not be more than before: (i) the date of a
ninety (90) days before the shareholders' meeting of FTI
date of such shareholders' Funds or any series or class
meeting. The By-Laws provide thereof; (ii) the date of any
that for purposes of dividend payment or other
determining the shareholders distribution to shareholders;
entitled to notice of any (iii) the date for the
meeting or to vote or allotment of rights; (iv) the
entitled to give consent to date when any change,
action without a meeting, the conversion or exchange of
trustees may fix in advance a shares of any series or class
record date which may not be goes into effect; or (v) the
more than ninety (90) days last day on which the consent
nor less than seven (7) days or dissent of shareholders of
before the date of any such any series or class may be
meeting or action by written effectively expressed for any
consent. purpose, for the
determination of shareholders
Pursuant to the By-Laws, if entitled to notice of, and,
the board of trustees does to vote at, any such meeting
not fix a record date: (a) and any adjournment thereof,
the record date for or entitled to receive
determining shareholders payment of any such dividend
entitled to notice of, and to or distribution, or to any
vote at, a meeting will be at such allotment of rights, or
the close of business on the to exercise the rights in
business day next preceding respect of any such change,
the date on which notice is conversion or exchange of
given or, if notice is shares, or to exercise the
waived, at the close of right to give such consent or
business on the business day dissent. The trustees may
next preceding the day of the set different record dates
meeting; (b) the record date for different series or
for determining shareholders classes.
entitled to give consent to
action in writing without a
meeting, (i) when no prior
action by the board of
trustees has been taken,
shall be the day on which the
first written consent is
given, or (ii) when prior
action of the board of
trustees has been taken,
shall be at the close of
business on the day on which
the board of trustees adopts
the resolution relating to
such action or the
seventy-fifth day before the
date of such other action,
whichever is later.
To determine the shareholders
of any series or class
entitled to a dividend or any
other distribution, the
Declaration authorizes the The MA Declaration provides
trustees to fix a record date that shareholders are
which shall be before the entitled to at least fifteen
date such dividend or days' notice of any meeting.
distribution is to be paid.
Without fixing a record date
the trustees may, for voting
and/or distribution purposes,
close the register or
transfer books for one or
more series for all or any
part of the period between a
record date and a
shareholders' meeting or a
distribution payment. The
trustees may set different
record dates for different
series or classes.
The Declaration provides that
written notice of any
shareholders' meeting shall
be provided by the trustees
by mailing such notice at
least seven (7) days before
such meeting to each
shareholder. The By-Laws
further provide that notice
shall be given not more than
seventy-five (75) days before
the date of the meeting.
QUORUM FOR SHAREHOLDERS' QUORUM FOR SHAREHOLDERS'
MEETING MEETING
Under the Declaration, except The MA Declaration provides
when a larger quorum is that, except as otherwise
required by the Declaration, provided by law, the presence
the By-Laws or applicable in person or by proxy of the
law, forty percent (40%) of holders of (i) one-half of
the shares entitled to vote the shares of FTI Funds on
at a shareholders' meeting all matters requiring the
shall constitute a quorum at affirmative "vote of a
such meeting, When any one or majority of the outstanding
more series or classes is to voting securities" (as
vote as a single class defined in the 1940 Act), or
separate from any other (ii) one-third of the shares
shares, forty percent (40%) of FTI Funds on all other
of the shares of each such matters permitted by law, in
series or class entitled to each case, entitled to vote
vote at a shareholders' without regard to class shall
meeting of such series or constitute a quorum at any
class shall constitute a shareholders' meeting. With
quorum at such series or respect to any matter which
class meeting. by law requires the separate
approval of one or more
series or classes, the
presence in person or by
proxy of the holders of
one-half or one-third, as set
forth above, of the shares of
each series or class entitled
to vote separately on the
matter shall constitute a
quorum.
SHAREHOLDER VOTE SHAREHOLDER VOTE
Subject to Article III, The MA Declaration provides
Section 3.06(D) of the that subject to applicable
Declaration relating to law, the MA Declaration or
separate voting by series and the MA By-Laws, a plurality
classes, when a quorum is of the votes cast shall elect
present at any meeting, a a trustee, and all other
majority of the shares voted matters shall be decided by a
shall decide any questions majority of the votes cast
and a plurality shall elect a and entitled to vote
trustee, except when a larger thereon. However, the MA
vote is required by any Declaration further provides
provision of the Declaration, that unless otherwise
the By-Laws or by applicable required by the 1940 Act, or
law. a court or regulatory body,
or unless the trustees
determine otherwise, trustees
shall be elected by the
trustees, and shareholders
have no right to elect
trustees.
SHAREHOLDER VOTE ON CERTAIN SHAREHOLDER VOTE ON CERTAIN
TRANSACTIONS TRANSACTIONS
To the extent consistent with The trustees may, by majority
applicable law, the trustees action, and with the
may cause (i) Global Trust to affirmative "vote of a
be merged into or majority of the outstanding
consolidated with another voting securities" (as
trust or company, (ii) the defined in the 1940 Act) of
outstanding shares of Global each series or class entitled
Trust or any series thereof to vote as determined by the
to be converted into trustees pursuant to the MA
beneficial interests in Declaration, sell and convey
another statutory trust (or the assets of FTI Funds or
series thereof) created any series or class thereof
pursuant to the Declaration, to another trust or
or (iii) the outstanding corporation. The trustees
shares to be exchanged under may also sell and convert
or pursuant to any state or into money all the assets of
federal statute; provided FTI Funds or any series or
that such transaction must be class thereof without
authorized by vote of a shareholder approval, unless
majority of the outstanding otherwise required by
shares of Global Trust, as a applicable law.
whole, or any affected
series, as may be applicable.
In all respects not governed
by statute or applicable law,
the trustees may prescribe
the procedure necessary or
appropriate to accomplish a
sale of assets, merger or
consolidation, and may create
one or more separate
statutory trusts to which all
or any part of the assets,
liabilities, profits or The trustees may, without the
losses of Global Trust may be approval of the shareholders
transferred and may provide of any series or class,
for the conversion of shares unless otherwise required by
of Global Trust or any series applicable law, combine the
thereof into beneficial assets and liabilities
interests in such separate belonging to a single series
statutory trust or trusts (or or class with the assets and
series thereof). liabilities of one or more
other series or classes.
The trustees may, without the
approval of the shareholders
of any series unless
otherwise required by
applicable law, combine the
assets and liabilities held
with respect to any two or
more series into assets and
liabilities held with respect
to a single series.
CUMULATIVE VOTING CUMULATIVE VOTING
The Declaration provides that The MA Declaration provides
shareholders are not entitled that shareholders are not
to cumulate their votes in entitled to accumulate their
the election of trustees. votes in the election of
trustees.
PROXIES PROXIES
Under the Delaware Act, There is no provision in the
unless otherwise provided in Masschusetts Statute addressing
the governing instrument of a proxy voting by the shareholders
DST, on any matter that is to or trustees of an MBT.
be voted on by the trustees
or the shareholders, the
trustees or shareholders (as
applicable) may vote in
person or by proxy and such
proxy may be granted in The MA Declaration permits shares
writing, by means of to be voted in person or by proxy.
"electronic transmission" (as A proxy with respect to shares
defined in the Delaware Act) held in thename of two or more
or as otherwise permitted by persons may be executed by any one
applicable law. of them unless at or prior to
the exercise of the proxy FTI Funds
receives a specific written notice
to the contrary from any one of
The Declaration permits them. A proxy purporting to
shares to be voted in person be executed by or on behalf
or by proxy. A proxy with of a shareholder will be deemed
respect to shares held in the valid unless challenged at or prior
name of two or more persons to its exercise and the burden of
may be executed by any one of proving invalidity rests on
them unless at or prior to the challenger. Unless
the exercise of the proxy otherwise specified in the
Global Trust receives a proxy, the proxy will apply
specific written notice to to all shares of FTI Funds
the contrary from any one of (or each series or class)
them. A proxy purporting to owned by the shareholder. A
be executed by or on behalf proxy may be in written,
of a shareholder will be telephonic or electronic
deemed valid unless form, including facsimile,
challenged at or prior to its and all such forms will be
exercise, and the burden of valid when in conformance
proving invalidity will rest with procedures established
on the challenger. and implemented by the
officers of FTI Funds.
The By-Laws provide that a
proxy is deemed signed if the
shareholder's name is placed The MA By-Laws state that
on the proxy (by manual every written proxy must be
signature, typewriting, subscribed by the shareholder
telegraphic transmission or or his duly authorized
otherwise) by the shareholder attorney and dated, but need
or the shareholder's not be sealed, witnessed or
attorney-in-fact. A validly acknowledged. All proxies
executed proxy that does not must be filed with and
state that it is irrevocable verified by the secretary or
will continue in full force an assistant secretary of FTI
and effect unless: (i) the Funds or, the person acting
person who executed the proxy as secretary of the
delivers a written revocation shareholder meeting.
to Global Trust before the
vote pursuant to that proxy;
(ii) revoked by a subsequent
proxy executed by or the
attendance at the meeting and
voting in person by the
person who executed that
proxy; or (iii) written
notice of the death or
incapacity of the maker of
that proxy is received by
Global Trust before the vote
pursuant to that proxy is
counted. Unless a proxy
provides otherwise, it is not
valid for more than eleven
(11) months from its date. In
addition, the revocability of
a proxy that states on its
face that it is irrevocable
is governed by the provisions
of the General Corporation
Law of the State of
California.
ACTION BY WRITTEN CONSENT ACTION BY WRITTEN CONSENT
Under the Delaware Act, There is no provision in the
unless otherwise provided in Massachusetts Statute
the governing instrument of a addressing actions by written
DST, on any matter that is to consent.
be voted on by the trustees
or the shareholders, such
action may be taken without a
meeting, without prior notice
and without a vote if a
written consent(s), setting
forth the action taken, is
signed by the trustees or
shareholders (as applicable)
having the minimum number of
votes that would be necessary
to take such action at a
meeting at which all trustees
or interests in the DST (as
applicable) entitled to vote
on such action were present
and voted. Unless otherwise
provided in the governing
instrument, a consent The MA Declaration and MA
transmitted by "electronic By-Laws provide that, subject
transmission" (as defined in to applicable law, any action
the Delaware Act) by a taken by the shareholders may
trustee or shareholder (as be taken without a meeting if
applicable) or by a person a majority of the
authorized to act for a shareholders entitled to vote
trustee or shareholder (as on the matter (or such larger
applicable) will be deemed to proportion thereof as may be
be written and signed for required by law, the MA
this purpose. Declaration or the MA
By-Laws) consent to the
The Declaration provides that action in writing and such
any shareholder action may be consent is filed with the
taken without a meeting if records of FTI Funds.
shareholders holding a
majority of the shares
entitled to vote on the
matter (or such larger
proportion thereof as may be
required by any express
provision of the Declaration
or by the By-Laws) and
holding a majority (or such
larger proportion as
aforesaid) of the shares of
any series (or class)
entitled to vote separately Under the MA By-Laws, any
on the matter consent to the action required or permitted
action in writing. The to be taken at any meeting of
By-Laws authorize actions by the trustees may be taken
written consent without prior without a meeting if consents
notice. in writing setting forth such
action are signed by all
Under the By-Laws, if the members of the board and such
consents of all shareholders consents are filed with the
entitled to vote have not records of FTI Funds. In the
been solicited in writing and event of the death, removal,
if the unanimous written resignation or incapacity of
consent of all such any board member prior to
shareholders has not been that trustee signing such
received, prompt notice of consent, the remaining board
the action approved by the members may re-constitute
shareholders without a themselves as the entire
meeting must be given in the board until such time as the
manner set forth in the vacancy is filled in order to
By-Laws. fulfill the requirement that
such consents be signed by
The Declaration provides that all members of the board.
any action required or
permitted to be taken at any
meeting of the board of
trustees may be taken without
a meeting if all members of
the board of trustees consent
in writing to that action,
and the writings are filed
with the minutes of the
proceedings of the board of
trustees.
REMOVAL OF The governing instrument of a The governing instrument of
TRUSTEES DST may contain any provision an MBT may contain any
relating to the removal of provision relating to the
trustees; provided however, removal of trustees;
that there shall at all times provided, however, that there
be at least one trustee of shall at all times be at
the DST. least one trustee of the MBT.
Under the Declaration, any The MA Declaration provides
trustee may be removed (i) that any trustee may be
with or without cause, by removed at any time by
action of a majority of the two-thirds of the number of
then trustees or (ii) by a trustees prior to such
vote of two-thirds of the removal or by a vote of
outstanding shares of Global two-thirds of the outstanding
Trust. a shareholders' shares at any special meeting
meeting for the purpose of of shareholders.
removing trustees may be
called (i) by the trustees or
(ii) upon the demand of
shareholders owning 10% or
more of the shares of Global
Trust.
VACANCIES The Declaration and By-Laws Under the MA Declaration,
ON BOARD OF provide that a majority of vacancies in the board of
TRUSTEES the then trustees may fill trustees shall be filled by
vacancies on the board of the remaining trustees. An
trustees unless the board of appointment of a trustee may
trustees calls a be made by the trustees then
shareholders' meeting for the in office in anticipation of
purpose of electing a vacancy to occur, provided
trustees. A shareholders' that said appointment shall
meeting will be called to become effective only at or
elect trustees (i) if less after the effective date of
than a majority of the said vacancy. No vacancy
trustees holding office at which reduces the number of
such time were elected by the trustees below three (3)
holders of the outstanding shall remain unfilled for a
voting securities of Global period longer than six (6)
Trust or (ii) if required by calendar months.
the 1940 Act. In addition,
for so long as Global Trust
participates in, or has in
effect, a plan under which it
may be deemed to bear
expenses of distributing its
shares as that practice is
described in Rule 12b-1 under
the 1940 Act, then the
selection and nomination of
the trustees who are not
interested persons of Global
Trust (as that term is
defined in the 1940 Act) will
be committed to the
discretion of such
disinterested trustees.
Pursuant to the Declaration,
in the event of the death,
declination, resignation,
retirement, removal or
incapacity of all of the
trustees, the investment
manager(s) of Global Trust
are empowered to appoint new
trustees subject to the
provisions of the 1940 Act.
LIMITATION The Delaware Act explicitly The Massachusetts Statute
ON authorizes limitation on does not contain statutory
INTERSERIES interseries liability so that provisions addressing series
LIABILITY the debts, liabilities, or class liability with
obligations and expenses respect to a multiple series
incurred, contracted for or or class investment company.
otherwise existing with Therefore, unless otherwise
respect to a particular provided in the declaration
series of a multiple series of trust for an MBT, the
DST will be enforceable only debts, liabilities,
against the assets of such obligations and expenses
series, and not against the incurred, contracted for or
general assets of the DST or otherwise existing with
any other series, and unless respect to a particular
otherwise provided in the series or class may be
governing instrument of the enforceable against the
DST, none of the debts, assets of the business trust
liabilities, obligations and generally.
expenses incurred, contracted
for or otherwise existing
with respect to the DST
generally or any other series
thereof will be enforceable
against the assets of such
series. This protection will
be afforded if: (i) the DST
separately maintains the
records and the assets of
such series; (ii) notice of The MA Declaration provides
the limitation on liabilities that the assets of each
of the series is set forth in series or class shall be
the certificate of trust; and charged with the liabilities
(iii) the governing of each such series or
instrument so provides. class. It also states that
third parties extending
The Declaration and credit to, contracting with
certificate of trust of or having any claim against
Global Trust provide for FTI Funds or a particular
limitation on interseries series or class thereof shall
liability. look only to the assets of
FTI Funds, or to the assets
of such series or class, as
appropriate, for payment.
Although these provisions
serve to put third parties on
notice, since there is no
support in the Massachusetts
Statute to limit liability,
there remains the possibility
that a court may not uphold
the limitations set forth in
the MA Declaration.
SHAREHOLDER Under the Delaware Act, The Massachusetts Statute
LIABILITY except to the extent does not expressly limit the
otherwise provided in the liability of the beneficial
governing instrument of a owners of a business trust.
DST, shareholders of a DST Therefore, the owners of an
are entitled to the same MBT could potentially be
limitation of personal liable for obligations of the
liability extended to MBT, notwithstanding an
shareholders of a private express provision in the
corporation organized for governing instrument stating
profit under the General that the beneficial owners
Corporation Law of the State are not personally liable in
of Delaware. connection with MBT property
or the acts, obligations or
affairs of the MBT.
Under the Declaration, Pursuant to the MA
neither Global Trust, nor Declaration, the trustees,
any of its trustees, officers, officers, employees or agents
employees or agents, shall of FTI Funds shall have no
have the power to personally power to bind any shareholder
bind any shareholder or call of any series or class
upon any shareholder for any personally or to call upon
payment or assessment other such shareholder for any
than as such shareholder may payment or assessment other
personally agree to pay. than as such shareholder may
However, the trustees may at any time agree to pay. No
cause each shareholder of shareholder of any series or
Global Trust or of any class shall be liable solely
particular series, to pay, in by reason of being a
advance or arrears, for shareholder, for any
charges of Global Trust's liability or obligation of
custodian or transfer, FTI Funds or any series or
shareholder servicing or class thereof.
similar agent. Additionally,
the trustees may impose a
sales charge upon investments
in Global Trust.
TRUSTEE Subject to the provisions in The Massachusetts Statute
LIABILITY the governing instrument, the does not contain an express
Delaware Act provides that a provision limiting the
trustee or any other person liability of the trustees of
managing the DST, when acting an MBT. The trustees of an
in such capacity, will not be MBT could potentially be held
personally liable to any personally liable for the
person other than the DST or obligations of the MBT.
a shareholder of the DST for
any act, omission or
obligation of the DST or any
trustee. To the extent that
at law or in equity, a
trustee has duties (including
fiduciary duties) and
liabilities to the DST and
its shareholders, such duties The MA Declaration provides
and liabilities may be that no trustee, officer,
expanded or restricted by the employee or agent of FTI
governing instrument. Funds has the power to bind
personally any other trustee,
The Declaration provides that officer, employee or agent of
every note, bond, contract, FTI Funds. Each trustee,
certificate or undertaking officer, employee or agent of
and every other act or thing FTI Funds, in taking or
whatsoever issued, executed omitting any actions on
or done by or on behalf of behalf of FTI Funds, is
Global Trust or the trustees deemed to be acting in his
in connection with Global respective capacity as
Trust shall be conclusively trustee, officer, employee or
deemed to have been done only agent of FTI Funds and not in
in such person's capacity as his own individual capacity.
trustee, and such trustee However, a trustee or officer
shall not be personally will be liable for his own
liable thereon. The trustees Disqualifying Conduct, but
shall not be liable for any for nothing else. Subject to
neglect or wrongdoing of any the preceding sentence,
officer, agent, employee, trustees will not be liable
manager or principal for errors of judgment or
underwriter of Global Trust mistakes of fact or law.
and to any shareholder
solely for such trustee's
own willful misfeasance,
bad faith, gross negligence
or reckless disregard of
the duties involved in the
conduct of such trustee's
office (such conduct referred
to as "Disqualifying Conduct"),
and shall not be liable for
errors of jusgment or mistakes
of fact or law.
INDEMNIFICA- Subject to such standards and Although the Massachusetts
TION restrictions contained in the Statute is silent as to the
governing instrument of a indemnification of trustees,
DST, the Delaware Act officers and shareholders,
authorizes a DST to indemnify indemnification is expressly
and hold harmless any provided for in the MA
trustee, shareholder or other Declaration.
person from and against any
and all claims and demands.
SHAREHOLDER INDEMNIFICATION
If any shareholder or former SHAREHOLDER INDEMNIFICATION
shareholder is exposed to A shareholder or former
liability by reason of a shareholder of any series or
claim or demand relating to class will be indemnified for
his or her status or former any liability and the costs
status as a shareholder, and of any litigation or other
not because of his or her proceedings resulting in such
acts or omissions, the liability if such shareholder
shareholder or former or former shareholder is,
shareholder (or his or her contrary to the MA
heirs, executors, Declaration, held personally
administrators, or other liable.
legal representatives or in
the case of a corporation or
other entity, its corporate
or other general successor)
will be entitled to
indemnification by Global
Trust against all loss and
expense arising from such
claim or demand.
TRUSTEE INDEMNIFICATION INDEMNIFICATION OF TRUSTEES,
Pursuant to the Declaration, OFFICERS AND OTHER PERSONS
Global Trust will indemnify FTI Funds will indemnify each
any trustee from and against of its trustees and officers
any and all claims and (including persons who serve
demands related to such at FTI Funds' request as
trustee's performance of his directors, officers or
or her duties as trustee. trustees of another
However, no trustee shall be organization in which FTI
indemnified for any liability Funds has an interest as a
to Global Trust or any shareholder, creditor or
shareholder to which such otherwise), their heirs,
trustee would otherwise be executors and administrators
subject by reason of willful (referred to as a "Covered
misfeasance, bad faith, gross Person") against all
negligence or reckless liabilities and expenses of
disregard of the duties any Covered Person in
involved in the conduct of connection with the defense
such trustee's office. or disposition of any action,
suit or other proceeding, and
any appeal therefrom, before
INDEMNIFICATION OF AGENTS AND any court or other body in
OTHER PERSONS which such Covered Person may
Pursuant to the By-Laws, be or may have been a party
Global Trust will indemnify or otherwise or with which
any person who is or was a such person may be or may
trustee, officer, employee or have been threatened, while
other agent of Global Trust in office or thereafter, by
or is or was serving at the reason of being or having
request of Global Trust in been a Covered Person.
certain capacities for other However, no Covered Person
entities (an "Agent") who was will be indemnified against
or is a party or is any liability to FTI Funds or
threatened to be made a party its shareholders to which
to any proceeding (other than such Covered Person would
an action by or in the right otherwise be subject by
of Global Trust) by reason of reason of such Covered
such Agent's capacity, Person's Disqualifying
against attorneys' fees and Conduct.
other expenses, judgments,
fines, settlements and other
amounts incurred in
connection with such
proceeding including expenses
of establishing a right to
indemnification
("Expenses"), if such Agent
acted in good faith and in a
manner that such Agent
reasonably believed to be in
the best interests of Global
Trust or in the case of a
criminal proceeding, had no
reasonable cause to believe
such Agent's conduct was
unlawful.
The By-Laws also provide that
Global Trust will indemnify
any Agent who was or is a
party or is threatened to be
made a party to any action by
or in the right of Global
Trust by reason of such
Agent's capacity, against
Expenses actually and
reasonably incurred by the
Agent in connection with the INDEMNIFICATION WITHOUT
defense or settlement of that ADJUDICATION
action if such Agent acted in As to any matter disposed of
good faith, in a manner such (whether by a compromise
Agent believed to be in the payment, pursuant to a
best interests of Global consent decree or otherwise)
Trust and with such care, without an adjudication on
including reasonable inquiry, the merits by a court or any
as an ordinarily prudent other body that such Covered
person in a like position Person is liable to FTI Funds
would use under similar or its shareholders for such
circumstances. Covered Person's
Disqualifying Conduct,
indemnification will be
INDEMNIFICATION WITHOUT provided if (a) it is
ADJUDICATION approved as in the best
However, under the By-Laws interest of FTI Funds by a
there is no right to majority of non-party
indemnification in respect of trustees who are not
any claim, issue, or matter interested persons of FTI
as to which an Agent is Funds (provided that a
adjudged to be liable on the majority of such trustees
basis that personal benefit then in office act on the
was received by such Agent, matter), upon a determination
or for any liability arising that such Covered Person is
from the Agent's not liable to FTI Funds or
Disqualifying Conduct. Nor is its shareholders by reason of
there any right to Disqualifying Conduct, or (b)
indemnification for there has been obtained a
settlement payments, with or written opinion of
without court approval, or of independent legal counsel
expenses incurred in that such indemnification
defending a settled action, would not protect such
unless a determination is Covered Person against any
made that indemnification is liability to FTI Funds to
proper by (a) a majority vote which such Covered Person
of a quorum of trustees not would otherwise be subject by
party to the proceeding and reason of Disqualifying
not interested persons of Conduct.
Global Trust (as defined in
the 1940 Act); or (b) a
written opinion of INDEMNIFICATION WITH
independent legal counsel. ADJUDICATION
Any such approval will not
prevent the recovery from any
Covered Person of any
indemnification so paid if
such Covered Person is
subsequently adjudicated by a
court of competent
jurisdiction to be liable to
FTI Funds or its shareholders
by reason of Disqualifying
Conduct.
INDEMNIFICATION WITH
ADJUDICATION These provisions do not
The By-Laws further provide affect any right to
that to the extent that an indemnification to which such
Agent has been successful on Covered Persons and FTI
the merits in defense of a Funds' personnel or other
proceeding or any claim, persons may otherwise be
issue or matter therein, entitled.
before a court or other body,
the Agent will be indemnified
against expenses incurred in
connection therewith,
provided that the board of
trustees, including a
majority who are
disinterested, non-party
trustees, also determines
that the Agent was not liable
by reason of Disqualifying
Conduct.
However, the By-Laws state
that except as provided in
the preceding paragraph,
Global Trust will only
indemnify an Agent if a
determination is made that
indemnification is proper by
(a) a majority vote of a
quorum of trustees not party
to the proceeding and not
interested persons of Global
Trust (as defined in the 1940
Act); or (b) a written
opinion of independent legal
counsel. ADVANCEMENT OF EXPENSES
Expenses, including counsel
fees incurred by any such
The By-Laws do not authorize Covered Person (but excluding
any indemnification or amounts paid in satisfaction
advance, except as provided of judgments, in compromise
in the preceding two or as fines or penalties),
paragraphs where it appears may be paid from time to time
(a) that it would be by FTI Funds in advance of
inconsistent with the the final disposition of any
Declaration, a shareholders' such action, suit or
resolution, or an agreement proceeding upon receipt of an
in effect at the time of undertaking by or on behalf
accrual of the alleged cause of such Covered Person to
of action asserted in the repay the amount of the
proceeding in which the advance if it is ultimately
expenses were incurred or determined that
payment made; or (b) that it indemnification is not
would be inconsistent with authorized, provided: (i) the
any condition expressly Covered Person provides
imposed by a court in security for his undertaking;
approving a settlement. (ii) the Trust is insured
against losses arising from
ADVANCEMENT OF EXPENSES such Covered Person's failure
Under the By-Laws, expenses to fulfill his undertaking;
incurred by an Agent in or (iii) a majority of the
defending any proceeding may non-party trustees who are
be advanced by Global Trust not interested persons of FTI
before the final disposition Funds (provided that a
of the proceeding on receipt majority of such trustees
of an undertaking by or on then in office act on the
behalf of the Agent to repay matter), or independent legal
the amount of the advance counsel in a written opinion,
unless it is ultimately determine that there is
determined that the Agent is reason to believe such
entitled to indemnification Covered Person ultimately
by Global Trust, provided the will be entitled to
Agent provides security for indemnification.
his or her undertaking, or a
majority of a quorum of the
disinterested, non-party NOTE that the 1933 Act, in
trustees, or an independent the opinion of the SEC, and
legal counsel in a written the 1940 Act also limit the
opinion, determine that there ability of FTI Funds to
is reason to believe that the indemnify such persons.
Agent ultimately will be
found entitled to
indemnification.
The indemnification
provisions contained in the
By-Laws are subject to the
indemnification provisions
set forth in the Declaration.
NOTE that the Securities Act
of 1933, as amended (the
"1933 Act"), in the opinion
of the SEC, and the 1940 Act
also limit the ability of
Global Trust to indemnify an
Agent.
INSURANCE The Delaware Act is silent as There is no provision in the
to the right of a DST to Massachusetts Statute
purchase insurance on behalf relating to insurance.
of its trustees or other
persons.
The MA Declaration, to the
However, as the policy of the extent not restricted by the
Delaware Act is to give 1933 Act and 1940 Act,
maximum effect to the authorizes the trustees to
principle of freedom of purchase insurance of any
contract and to the kind, including, without
enforceability of governing limitation, insurance on
instruments, the Declaration, behalf of any person who is
to the extent not restricted or was a trustee, officer,
by the 1933 Act and 1940 Act, employee or agent of FTI
provides the trustees with Funds, or is or was serving
authority to purchase with at the request of FTI Funds
Global Trust assets such as a trustee, director,
insurance as they deem officer, agent or employee of
appropriate for the conduct another corporation,
of the business, including, partnership, joint venture,
without limitation, insurance trust or other enterprise,
policies insuring the assets against any liability
of Global Trust or payment of asserted against such person
distributions and principal or incurred by such person in
on its portfolio investments, any such capacity or arising
and insurance policies out of such person's status
insuring shareholders, as such; provided however,
employees, agents, investment that with respect to
advisers or independent trustees, officers,
contractors of Global Trust "controlling persons" (as
who are not "controlling defined in the 1933 Act) and
persons" (as defined in the certain underwriters, FTI
1933 Act), individually Funds may purchase insurance
against all claims and insuring such persons against
liabilities of every nature such liability only to the
arising by reason of holding extent that FTI Funds would
shares, holding or having have the power to indemnify
held any such office or such person against that
position, or by reason of any liability.
action alleged to have been
taken or omitted by any such
person as employee, agent,
investment adviser or
independent contractor,
including any action taken or
omitted that may be
determined to constitute
negligence, whether or not
Global Trust would have the
power to indemnify such
person against liability.
In addition, under the
Declaration, to the extent
not restricted by the 1933
Act and 1940 Act, the
trustees are authorized to
purchase with Global Trust
assets insurance policies
insuring the trustees,
officers, "controlling
persons" (as defined in the
1933 Act, including, if any,
certain shareholders,
employees, agents, investment
advisers and independent
contractors) and principal
underwriters of Global Trust,
individually against all
claims and liabilities of
every nature arising by
reason of holding shares,
holding or having held any
such office or position, or
by reason of any action
alleged to have been taken or
omitted by any such person as
principal underwriter.
Global Trust is restricted
from providing insurance to
the foregoing persons to the
same extent as it is
restricted from indemnifying
them.
With respect to any Agent not
covered by the preceding
paragraphs ("Other Agent"),
the By-Laws permit the board
of trustees to cause Global
Trust to purchase insurance
on behalf of any such Other
Agent against any liability
asserted against or incurred
by the Other Agent in such
capacity or arising out of
the Other Agent's status as
such, but only to the extent
that Global Trust would have
the power to indemnify such
Other Agent against that
liability.
SHAREHOLDER Under the Delaware Act, There is no provision in the
RIGHT OF except to the extent Massachusetts Statute
INSPECTION otherwise provided in the relating to shareholder
governing instrument and inspection rights.
subject to reasonable
standards established by the
trustees, each shareholder
has the right, upon
reasonable demand for any
purpose reasonably related to
the shareholder's interest as
a shareholder, to obtain from
the DST certain information The MA Declaration provides
regarding the governance and that FTI Funds shall keep at
affairs of the DST. its office the MA Declaration
where it may be inspected by
The Declaration provides that any shareholder. The MA
Global Trust will keep at its By-Laws provide that the
office the declaration where trustees shall determine
it may be inspected by any whether and to what extent,
shareholder. The By-Laws and at what times and places,
provide that Global Trust and under what conditions and
will keep at its principal regulations the accounts and
executive office the By-Laws books of FTI Funds maintained
which may be inspected by the On behalf of each series and
shareholders at all class shall be open for
reasonable times during inspection by any shareholder
office hours. of any series or class. No
shareholder has the right to
In addition, the accounting inspect any account or book
books, records and minutes of or document of FTI Funds
proceedings of the except: (i) to the extent
shareholders and board of such account or book or
trustees (and any committees document relates to the
thereof) will be kept at the series or class in which such
place(s) designated by the person is a shareholder or
board of trustees or the fti funds generally, (ii) as
principal executive office of conferred by law or (iii)
Global Trust. Such authorized by the trustees or
accounting books, records and by resolution of the
minutes will be open to shareholders of the relevant
inspection upon the written series or class.
demand of any shareholder or
holder of a voting trust
certificate at any reasonable
time during usual business
hours for a purpose
reasonably related to the
holder's interest as a
shareholder or holder of a
voting trust certificate. The
inspection may be made in
person or by an agent or
attorney and includes the
right to copy and make
extracts. Further, certain
financial statements, income
statements and balance sheets
prepared by Global Trust will
be kept on file at its
principal executive office
for a twelve (12) month
period and each such
statement will be exhibited
at all reasonable times to
any shareholder demanding an
examination or a copy will be
mailed to any such
shareholder. Finally, the
share register will be kept
at the principal executive
office or at the office of
Global Trust's transfer agent
or registrar.
DERIVATIVE Under the Delaware Act, a There is no provision under
ACTIONS shareholder may bring a the Massachusetts Statute
derivative action if trustees regarding derivative
with authority to do so have actions.
refused to bring the action
or if a demand upon the
trustees to bring the action
is not likely to succeed. A
shareholder may bring a
derivative action only if the
shareholder is a shareholder
at the time the action is
brought and: (i) was a
shareholder at the time of
the transaction complained
about or (ii) acquired the
status of shareholder by
operation of law or pursuant
to the governing instrument
from a person who was a The MA Declaration states
shareholder at the time of that a shareholder may not
the transaction. A bring an action on behalf of
shareholder's right to bring FTI Funds unless a prior
a derivative action may be demand regarding such matter
subject to such additional has been made on the trustees
standards and restrictions, of FTI Funds.
if any, as are set forth in
the governing instrument.
The Declaration and By-Laws
do not have any provisions
specifically regarding
derivative actions.
MANAGEMENT Global Trust is an open-end FTI Funds is an open-end
INVESTMENT management investment company management investment company
COMPANY under the 1940 Act (I.E., a under the 1940 Act (i.e., a
CLASSIFICA- management investment company management investment company
TION whose securities are whose securities are
redeemable). redeemable).
JUNE 19, 2003
The SEC has not approved or disapproved these securities or
passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
PROSPECTUS
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND
Franklin Global Trust
[FRANKLIN TEMPLETON LOGO]
- -------------------------------------------------------------------
Fund shares are NOT deposits or other obligations of, or endorsed
or guaranteed by any bank. Fund shares are NOT insured or
guaranteed by the U.S. government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other governmental
agency. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
- -------------------------------------------------------------------
CONTENTS
THE FUNDS
[Begin callout]
INFORMATION ABOUT EACH FUND YOU SHOULD KNOW BEFORE INVESTING
[End callout]
[insert page #] Fiduciary Large Capitalization Growth and
Income Fund
[insert page #] Fiduciary Small Capitalization Equity Fund
[insert page #] Fiduciary European Smaller Companies Fund
[insert page #] More Information on Investment Policies,
Practices and Risks
[insert page #] Management
[insert page #] Distributions and Taxes
YOUR ACCOUNT
[Begin callout]
INFORMATION ABOUT ACCOUNT TRANSACTIONS AND SERVICES
[End callout]
[insert page #] Qualified Investors
[insert page #] Buying Shares
[insert page #] Investor Services
[insert page #] Selling Shares
[insert page #] Account Policies
[insert page #] Questions
FOR MORE INFORMATION
[Begin callout]
Where to learn more about each Fund
[End callout]
Back Cover
- -------------------------------------------------------------------
Fund shares are NOT deposits or other obligations of, or endorsed
or guaranteed by any bank. Fund shares are NOT insured or
guaranteed by the U.S. government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other governmental
agency. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
- -------------------------------------------------------------------
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND
(LARGE CAPITALIZATION FUND)
[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES
-------------------
GOAL The Fund's goal is long-term growth of principal and income.
MAIN INVESTMENT STRATEGY Under normal market conditions, the Fund
will invest at least 80% of its net assets in investments of
large capitalization companies. Shareholders will be given 60
days' advance notice of any change to this 80% policy.
The Fund invests mainly in dividend-paying equity securities that
the manager believes will approximate the dividend yield of the
companies that comprise the Standard & Poor's 500 Composite Stock
Price Index (S&P(R) 500), while attempting to keep taxable capital
gains distributions relatively low. The manager focuses on a
company's securities' dividend paying prospects in an effort to
generate income. For this Fund, large capitalization companies
are companies with market capitalizations (the total value of a
company's outstanding stock) of more than $5 billion at the time
of purchase. The Fund may invest up to 10% of its net assets in
equity securities of foreign companies that meet the criteria
applicable to U.S. securities.
A TAX-SENSITIVE APPROACH TO INVESTING In pursuing its goal, the
Fund will be managed in an attempt to keep its distributions of
capital gains relatively low. For example, it will generally buy
securities that it intends to hold for a number of years and
avoid short-term trading. In deciding which securities to sell,
the manager will consider their capital gain or loss situation,
and may attempt to offset capital gains by timing its sales of
securities that have gone down in value. Also, the manager will
consider selling any security that has not met growth
expectations, in which case the capital gain, if any, would be
relatively small. Successful application of this strategy may
result in shareholders incurring relatively larger amounts of
capital gains when they ultimately sell their shares.
PORTFOLIO SELECTION The manager is a research driven, fundamental
investor, pursuing a blend of growth and value strategies. The
manager uses a "top-down" analysis of macroeconomic trends,
market sectors (with some attention to the sector weightings in
its comparative index) and industries combined with a "bottom-up"
analysis of individual securities. In selecting investments for
the Fund, the manager looks for companies it believes are
positioned for growth in revenues, earnings or assets, and are
selling at reasonable prices. The basic financial and operating
strength and quality of a company and company management are also
considered.
[Insert graphic of chart with line going up and down] MAIN RISKS
STOCKS The value of equity securities in the Fund's portfolio
will rise and fall dramatically. There is no assurance that these
fluctuations would not be a sustained trend. These price
movements may result from factors affecting individual companies,
industries or securities markets, and the Fund's share price may
decline.
SECTOR RISKS Companies with similar characteristics may be
grouped together in broad categories called sectors. Sector risk
is the possibility that a certain sector may underperform other
sectors or the market as a whole. Although the manager does not
expect to concentrate the Fund's investments in any one sector or
industry, it may allocate more of the Fund's portfolio holdings
to a particular sector. In such case, the Fund's performance will
be more susceptible to any economic, business or other
developments that generally affect that sector.
BLEND-STYLE INVESTING A "blend" strategy results in investments
in both growth and value stocks, or in stocks with
characteristics of both. Growth stock prices reflect projections
of future earnings or revenues, and can, therefore, fall
dramatically if the company fails to meet those projections.
Value stock prices are considered "cheap" relative to the
company's perceived value and are often out of favor with other
investors. However, if other investors fail to recognize the
company's value (and do not become buyers, or become sellers), or
favor investing in faster-growing companies, value stocks may not
increase in value as anticipated by the manager or may decline
even further. By combining both styles, the manager seeks to
diversify the risks and lower the volatility, but there is no
assurance this strategy will have that result.
FOREIGN SECURITIES Securities of companies located outside the
U.S. may involve risks, particularly changes in currency exchange
rates, that can increase the potential for losses in the Fund.
Please also see "More Information on Investment Policies,
Practices and Risks" on page 14.
[Insert graphic of a bull and a bear] PERFORMANCE
------------
Because this Fund is new, it has no performance history.
[Insert graphic of percentage sign] FEES AND EXPENSES
-----------------
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- -------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND
ASSETS)/(1),(2)
- -------------------------------------------------------------------
Management fees 0.75%
Distribution and service (12b-1) fees/(3) None
Other expenses (including administration fees) 0.35%
-------
Total annual Fund operating expenses 1.10%
=======
1. The management fees shown are based on the Fund's maximum
contractual amount. Other expenses are estimated.
2. For the period ending November 30, 2003, the manager and
administrator have agreed in advance to waive or limit their
respective fees and to assume as their own expense certain
expenses otherwise payable by the Fund so that total Fund
annual operating expenses do not exceed 1.03%. After November
30, 2003, the manager and administrator may end this
arrangement at any time upon notice to the Fund's Board of
Trustees (Board).
3. The Board has approved a rule 12b-1 plan providing for
payment of distribution fees of up to 0.25% per year of the
Fund's average net assets. The Fund, however, has no current
intention to use the plan.
EXAMPLE
This example can help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. 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 are BEFORE WAIVER and remain
the same; and
o You sell your shares at the end of the periods shown.
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 YEAR 3 YEARS
----------------------------
$112 $350
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND
(SMALL CAPITALIZATION EQUITY FUND)
[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES
-------------------
GOAL The Fund's goal is to provide growth of principal.
MAIN INVESTMENT STRATEGY Under normal market conditions, the Fund
will invest at least 80% of its net assets in marketable equity
and equity-related securities of small capitalization companies.
Shareholders will be given 60 days' advance notice of any change
to this 80% policy.
To seek its goal, the Fund invests in the common stocks of small
cap companies that the manager believes are undervalued in the
marketplace or have earnings that might be expected to grow
faster than the U.S. economy in general. For this Fund, small
capitalization companies are companies with market
capitalizations (the total market value of a company's
outstanding stock) under $1.5 billion at the time of purchase.
The Fund also may invest up to 10% of its net assets in foreign
securities traded publicly in the U. S.
PORTFOLIO SELECTION The manager invests with a growth bias. As a
"bottom-up" investor focusing primarily on individual securities,
the manager typically seeks stocks of companies with strong
franchises and companies that have high barriers of entry to
competitors, strong balance sheets and cash flows. Such companies
typically possess a relatively high rate of return on invested
capital so that future growth can be internally financed. They
may offer the potential for accelerating earnings growth because
they offer an opportunity to participate in new products,
services and technologies.
[Insert graphic of chart with line going up and down] MAIN RISKS
STOCKS The value of equity securities in the Fund's portfolio
will rise and fall dramatically. There is no assurance that these
fluctuations would not be a sustained trend. These price
movements may result from factors affecting individual companies,
industries or securities markets, and the Fund's share price may
decline.
GROWTH INVESTING Due to their relatively high valuations, growth
stocks are typically more volatile than value stocks. For
instance, the price of a growth stock may experience a larger
decline on a forecast of lower earnings, a negative fundamental
development or an adverse market development. Further, growth
stocks may not pay dividends or may pay lower dividends than
value stocks. This means they depend more on price changes for
returns and may be more adversely affected in a down market
compared to value stocks that pay higher dividends.
SMALLER COMPANIES Generally, the smaller the market
capitalization of a company, the fewer the number of shares
traded daily, the less liquid its stock and the more volatile its
price. Companies with smaller market capitalizations also tend to
have unproven track records, a limited product or service base
and limited access to capital. These factors also increase risks
and make these companies more likely to fail than companies with
larger market capitalizations.
SECTOR RISKS Companies with similar characteristics may be
grouped together in broad categories called sectors. Sector risk
is the possibility that a certain sector may underperform other
sectors or the market as a whole. Although the manager does not
expect to concentrate the Fund's investments in any one industry,
it may allocate more of the Fund's portfolio holdings to a
particular sector. In such case, the Fund's performance will be
more susceptible to any economic, business or other developments
that generally affect that sector.
FOREIGN SECURITIES Securities of companies located outside the
U.S. may involve risks, particularly changes in currency exchange
rates, that can increase the potential for losses in the Fund.
Please also see "More Information on Investment Policies,
Practices and Risks" on page 14.
[Insert graphic of a bull and a bear] PERFORMANCE
-----------
Because this Fund is new, it has no performance history.
[Insert graphic of percentage sign] FEES AND EXPENSES
-----------------
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- -------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND
ASSETS)/(1),(2)
- -------------------------------------------------------------------
Management fees 1.00%
Distribution and service (12b-1) fees(3) None
Other expenses (including administration fees) 0.34%
---------
Total annual Fund operating expenses 1.34%
=========
1. The management fees shown are based on the Fund's maximum
contractual amount. Other expenses are estimated.
2. For the period ending November 30, 2003, the manager and
administrator have agreed in advance to waive or limit their
respective fees and to assume as their own expense certain
expenses otherwise payable by the Fund so that total Fund
annual operating expenses do not exceed 1.30%. After November
30, 2003, the manager and administrator may end this
arrangement at any time upon notice to the Board.
3. The Board has approved a rule 12b-1 plan providing for
payment of distribution fees of up to 0.25% per year of the
Fund's average net assets. The Fund, however, has no current
intention to use the plan.
EXAMPLE
This example can help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. 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 are BEFORE WAIVER and remain
the same; and
o You sell your shares at the end of the periods shown.
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 YEAR 3 YEARS
---------------------------------
$136 $425
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND
(EUROPEAN SMALLER COMPANIES FUND)
[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES
-------------------
GOAL The Fund's goal is long-term growth of principal. The Fund's
investment goal (or objective) may be changed by the Fund's Board
of Trustees (Board) without shareholder approval.
MAIN INVESTMENT STRATEGY Under normal market conditions, the Fund
will invest at least 80% of its net assets in a diversified
portfolio of marketable equity and equity-related securities of
smaller European companies. Shareholders will be given 60 days'
advance notice of any change to this 80% policy.
For this Fund, smaller European companies are companies with
market capitalizations (the total market value of a company's
outstanding stock) between $100 million and $5 billion or the
equivalent in local currencies, at the time of purchase. The Fund
considers European companies to be those organized under the laws
of a country in Europe or having a principal office in a country
in Europe, or whose securities are listed or traded principally
on a recognized stock exchange or over-the-counter in Europe. The
Fund will generally invest in securities listed or traded on
recognized international markets in any of the following European
countries: Austria, Belgium, the Czech Republic, Denmark,
Finland, France, Germany, Greece, Hungary, Italy, Ireland,
Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain,
Sweden, Switzerland, Turkey and the United Kingdom.
The benchmark of the Fund is the HSBC Smaller European Companies
Index. This index is composed of about 1,500 companies in Europe
that have market capitalizations in a similar range to that used
by the Fund. The composition of the index is updated quarterly.
All of the above countries in which the Fund may invest are
presently included in the index except the Czech Republic,
Hungary, Luxembourg, Poland and Turkey. At the time of purchase,
no single issuer will account for more than 5% of the total
portfolio.
PORTFOLIO SELECTION The manager will use a disciplined
investment focus, based on fundamental analysis and valuation, in
selecting securities based on their perceived potential for
growth and companies with sustainable operating margins and
strong balance sheets.
The manager has identified an "emerging company" phenomenon in
Europe, as new securities listings have increased the depth and
breadth of the European equity markets. Many interesting and
well-established smaller companies, previously in the private
sector, are now accessible to investors and are still relatively
undiscovered. The euro currency zone created by the European
Economic and Monetary Unit (EEMU) has also facilitated a move
away from top down country allocation to sector and stock
selection as the major factor in identifying securities that may
have above average returns.
As a bottom up investor focusing primarily on individual
securities, the Fund may from time to time have significant
investments in one or more countries, particularly the United
Kingdom, which represents a heavier weighting in the HSBC Smaller
European Index. The manager does not select investments for the
Fund that are merely representative of the European small cap
asset class, but instead aims to produce a portfolio of
securities of dynamic companies operating in sectors that offer
attractive growth potential as a result of secular changes. The
manager has a team of research analysts dedicated to the
identification of smaller companies that have, in their opinion,
the potential to provide above average performance. While the
manager seeks to outperform the HSBC Smaller European Index,
positions may be taken by the Fund that are not represented in
that index.
[Insert graphic of chart with line going up and down] MAIN RISKS
STOCKS The value of equity securities in the Fund's portfolio
will rise and fall dramatically. There is no assurance that these
fluctuations would not be a sustained trend. These price
movements may result from factors affecting individual companies,
industries or securities markets, and the Fund's share price may
decline.
GROWTH INVESTING Due to their relatively high valuations, growth
stocks are typically more volatile than value stocks. For
instance, the price of a growth stock may experience a larger
decline on a forecast of lower earnings, a negative fundamental
development or an adverse market development. Further, growth
stocks may not pay dividends or may pay lower dividends than
value stocks. This means they depend more on price changes for
returns and may be more adversely affected in a down market
compared to value stocks that pay higher dividends.
FOREIGN SECURITIES Due to the following considerations, foreign
securities may be more volatile and less liquid than similar
securities traded in the U.S.:
o Foreign economic or political conditions may be less
favorable than those of the U.S. Securities and foreign markets
may also be subject to taxation policies that reduce returns
for U.S. investors.
o Foreign countries may have restrictions on foreign ownership
or may impose exchange controls, capital flow restrictions or
repatriation restrictions that could adversely affect the
liquidity of the Fund's investments.
o Foreign financial markets may have fewer investor
protections than U.S. markets. For instance, there may be less
publicly available information about foreign companies, and the
information that is available may be difficult to obtain or may
not be current. In addition, foreign countries may lack
financial controls and reporting standards or regulatory
requirements comparable to those applicable to U.S. companies.
CURRENCY RISKS Exchange rates for currencies, including the
currency of the EEMU, fluctuate daily. The combination of
currency risk and market risk tends to make securities traded in
foreign markets more volatile than securities traded exclusively
in the U.S.
SMALLER COMPANIES Generally, the smaller the market
capitalization of a company, the fewer the number of shares
traded daily, the less liquid its stock and the more volatile its
price. Companies with smaller market capitalizations also tend to
have unproven track records, a limited product or service base
and limited access to capital. These factors also increase risks
and make these companies more likely to fail than companies with
larger market capitalizations.
SECTOR RISKS Companies with similar characteristics may be
grouped together in broad categories called sectors. Sector risk
is the possibility that a certain sector may underperform other
sectors or the market as a whole. Although the manager does not
expect to concentrate the Fund's investments in any one industry,
it may allocate more of the Fund's portfolio holdings to a
particular sector. In such case, the Fund's performance will be
more susceptible to any economic, business or other developments
that generally affect that sector.
Please also see "More Information on Investment Policies,
Practices and Risks" on page 14.
[Insert graphic of a bull and a bear] PERFORMANCE
------------
Because this Fund is new, it has no performance history.
[Insert graphic of percentage sign] FEES AND EXPENSES
-----------------
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND
ASSETS)/(1),(2)
- -------------------------------------------------------------------
Management fees 1.00%
Distribution and service (12b-1) fees/(3) None
Other expenses (including administration fees) 0.61%
------
Total annual Fund operating expenses 1.61%
======
1. The management fees shown are based on the Fund's maximum
contractual amount. Other expenses are estimated.
2. For the period ending November 30, 2003, the manager and
administrator have agreed in advance to waive or limit their
respective fees and to assume as their own expense certain
expenses otherwise payable by the Fund so that total Fund
annual operating expenses do not exceed 1.20%. After November
30, 2003, the manager and administrator may end this
arrangement at any time upon notice to the Board.
3. The Board has approved a rule 12b-1 plan providing for
payment of distribution fees of up to 0.25% per year of the
Fund's average net assets. The Fund, however, has no current
intention to use the plan.
EXAMPLE
This example can help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. 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 are BEFORE WAIVER and remain
the same; and
o You sell your shares at the end of the periods shown.
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 YEAR 3 YEARS
-------------------------------------------
$164 $508
[Insert graphic of Stocks and Bonds] MORE INFORMATION ON
--------------------
INVESTMENT POLICIES, PRACTICES AND RISKS
RISKS In addition to the risks set forth above that are specific
to an investment in a particular Fund, there are risks common to
all mutual funds. For example, a Fund's share price may decline
and an investor could lose money. Because each Fund is actively
managed, it is subject to the risk of the manager's judgment in
the analysis and evaluation of securities selected for
investment. Also, there is no assurance that a Fund will achieve
its investment goal. The shares offered by this prospectus are
not deposits or obligations of any bank, are not endorsed or
guaranteed by any bank and are not insured or guaranteed by the
U.S. government, the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other government agency. An
investment in any one or all of the Funds does not necessarily
constitute a balanced investment program for any one investor.
EQUITY SECURITIES Each Fund invests primarily in common stocks,
the most prevalent type of equity security. An equity security or
stock, represents a proportionate share of the ownership of a
company; its value is based on the success of the company's
business, any income paid to stockholders, the value of its
assets, and general market conditions. While stocks have
historically outperformed other asset classes over the long term,
their value tends to go up and down more dramatically over the
short term. These price movements may result from factors
affecting individual companies, industries or securities markets.
For example, a negative development regarding an individual
company's earnings, management, or accounting practices can cause
its stock price to decline or a broad based market drop can cause
the stock prices of many companies to decline. A Fund cannot
predict the income it will receive from equity securities because
issuers generally have discretion as to the payment of any
dividends or distributions.
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.
CURRENCY EXCHANGE RATES. Certain of the Funds' investments may
be issued and traded in foreign currencies. Adverse changes in
foreign currencies and in currency exchange rates can
dramatically decrease the value of a Fund's foreign portfolio
holdings.
POLITICAL AND ECONOMIC DEVELOPMENTS. The political, economic
and social structures of some countries the Funds invest in may
be less stable and more volatile than those in the U.S. The risks
of investing in these countries include the imposition of
exchange controls, currency devaluations, foreign ownership
limitations, confiscatory taxes, restrictions on the removal of
currency or other assets, nationalization of assets, diplomatic
and political developments (including rapid and adverse political
changes, social instability, internal and regional conflicts,
terrorism and war) and expropriation. A Fund may have greater
difficulty voting proxies, exercising shareholder rights and
pursuing legal remedies with respect to its foreign investments.
TRADING PRACTICES. Brokerage commissions and other fees
generally are higher for foreign securities. There may be less
effective government supervision and regulation of foreign stock
exchanges, currency markets, trading systems and brokers than in
the U.S. The procedures and rules governing foreign transactions
and custody also may involve delays in payment, delivery or
recovery of money or investments.
AVAILABILITY OF INFORMATION. Foreign companies may be subject
to less revealing disclosure, accounting, auditing and financial
reporting standards and practices than U.S. companies, and there
may be less publicly available information about them.
LIMITED MARKETS. Markets may be less liquid, and even those
that are generally considered to be liquid may become illiquid
for short or extended periods. Certain foreign securities may be
less liquid and more volatile than many U.S. securities, which
could limit a Fund's ability to sell them at favorable prices.
EMERGING MARKETS. A Fund's investments in emerging market
countries are subject to all the risks of foreign investing
generally, and have additional, heightened risks due to a lack of
established legal, political, business and social frameworks to
support securities markets.
ILLIQUID SECURITIES Each Fund may invest up to 15% of its net
assets in illiquid securities, which are securities with a
limited trading market. Illiquid securities may not be readily
sold or may only be resold at a price significantly lower than if
they were liquid.
PORTFOLIO TURNOVER THE LARGE CAPITALIZATION FUND APPROACH TO
PORTFOLIO TURNOVER HAS BEEN DISCUSSED ABOVE. THE FOLLOWING
DISCUSSION RELATES TO SMALL CAPITALIZATION EQUITY FUND AND
EUROPEAN SMALLER COMPANIES FUND. Although the Funds do not intend
to invest for the purpose of seeking short-term profits,
securities in their portfolios will be sold whenever the manager
believes it is appropriate to do so in light of that Fund's
investment goal without regard to the length of time a particular
security has been held. The rate of portfolio turnover for the
Funds may exceed that of certain other mutual funds with the same
investment objective. A higher rate of portfolio turnover
involves correspondingly greater transaction expenses that must
be borne directly by a Fund and, thus, indirectly by its
shareholders. In addition, a high rate of portfolio turnover may
result in the realization of larger amounts of capital gains
which, when distributed to a Fund's shareholders, are taxable to
them. Nevertheless, transactions for each Fund's portfolio will
be based only upon investment considerations and will not be
limited by any other considerations when the manager deems it
appropriate to make changes in a Fund's portfolio. A portfolio
turnover rate exceeding 100% is considered to be high.
SMALLER COMPANIES While smaller companies may offer substantial
opportunities for capital growth, they also involve substantial
risks and should be considered speculative. Historically, smaller
company securities have been more volatile in price than larger
company securities, especially over the short term. Among the
reasons for the greater price volatility are the less certain
growth prospects of smaller companies, the lower degree of
liquidity in the markets for such securities, and the greater
sensitivity of smaller companies to changing economic conditions.
In addition, smaller 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.
Initial public offerings (IPOs) of securities issued by
unseasoned companies with little or no operating history are
risky and their prices are highly volatile. Attractive IPOs are
often oversubscribed and may not be available to the Funds or
only in very limited quantities. Thus, when a Fund's size is
smaller, any gains from IPOs will have an exaggerated impact on
the Fund's reported performance than when the Fund is larger.
TEMPORARY DEFENSIVE INVESTMENTS Each of the Funds may temporarily
depart from their principal investment strategies by investing
their assets in cash and shorter-term debt securities and similar
obligations. The Funds may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during
adverse market conditions. This may cause a Fund to give up
greater investment returns to attempt to maintain the safety of
principal, that is, the original amount invested by shareholders.
[Insert graphic of briefcase] MANAGEMENT
----------
Fiduciary International, Inc. (Fiduciary), located at 600 Fifth
Avenue, New York, New York 10020-2302, is the Funds' investment
manager. Fiduciary is an indirect wholly owned subsidiary of
Fiduciary Trust Company International (Fiduciary Trust), which is
a direct wholly owned subsidiary of Franklin Resources, Inc.
Together, Fiduciary and its affiliates manage over $267 billion
in assets as of April 30, 2003.
The following persons are responsible for the Funds' portfolio
management:
LARGE CAPITALIZATION FUND
S. MACKINTOSH PULSIFER
VICE PRESIDENT OF FIDUCIARY & SENIOR VICE PRESIDENT OF FIDUCIARY
TRUST
Mr. Pulsifer has been a manager of the Fund since inception. He
joined Fiduciary Trust in 1988.
CARL SCATURO
VICE PRESIDENT OF FIDUCIARY & SENIOR VICE PRESIDENT OF FIDUCIARY
TRUST
Mr. Scaturo has been a manager of the Fund since inception. He
joined Fiduciary Trust in 1990.
SMALL CAPITALIZATION EQUITY FUND
JOHN P. CALLAGHAN
VICE PRESIDENT OF FIDUCIARY & SENIOR VICE PRESIDENT OF FIDUCIARY
TRUST
Mr. Callaghan has been a manager of the Fund since inception.
Prior to joining Fiduciary Trust in 2001, he was Managing
Director at Deutsche Asset Management.
ALISON J. SCHATZ, CFA
VICE PRESIDENT OF FIDUCIARY & SENIOR VICE PRESIDENT of FIDUCIARY
TRUST
Ms. Schatz has been a manager of the Fund since inception. She
joined Fiduciary Trust in 1985.
EUROPEAN SMALLER COMPANIES FUND
MARGARET S. LINDSAY
VICE PRESIDENT OF FIDUCIARY & EXECUTIVE VICE PRESIDENT
OF FIDUCIARY TRUST
Ms. Lindsay has been a manager of the Fund since inception. She
joined Fiduciary Trust in 1991.
PRATIK M. PATEL
VICE PRESIDENT OF FIDUCIARY & VICE PRESIDENT OF FIDUCIARY TRUST
Mr. Patel has been a manager of the Fund since inception. He
joined Fiduciary Trust in 1998.
ALEXANDRE OLTRAMARE
VICE PRESIDENT OF FIDUCIARY & VICE PRESIDENT OF FIDUCIARY TRUST
Mr. Oltramare has been a manager of the Fund since inception. He
joined Fiduciary Trust in 1996.
Each Fund pays Fiduciary a fee for managing the Funds' assets.
The management fees, based on each Fund's average net assets, are
0.75% of the Large Capitalization Fund and 1.00% each of the
Small Capitalization Equity Fund and European Smaller Companies
Fund.
[Insert graphic of dollar signs and stacks of coins]
DISTRIBUTIONS AND TAXES
2003 TAX ACT On May 28, 2003, President Bush signed into law the
Jobs and Growth Tax Relief Reconciliation Act of 2003 (JAGTRRA).
This Act will have a significant impact on how each Fund accounts
for and distributes income and capital gains, and will provide
you with significant tax relief on the income and gains
distributed to you by the Fund. The provisions of this Act that
affect each Fund and the taxation of its distributions to you are
discussed below and in the Distributions and Taxes section of the
Statement of Additional Information.
INCOME AND CAPITAL GAIN DISTRIBUTIONS The Large Capitalization
Fund typically intends to pay an income dividend quarterly from
its net investment income. The Small Capitalization Equity Fund
and the European Smaller Companies Fund each typically intends to
pay an income dividend annually from its net investment income.
For each Fund, capital gains, if any, may be distributed at least
annually. The amount of any distributions will vary, and there is
no guarantee a Fund will pay either income dividends or capital
gain distributions. Your dividends and capital gain distributions
will be automatically reinvested in additional shares without a
sales charge, unless you elect cash payments.
AVOID "BUYING A DIVIDEND" If you invest in a Fund shortly before
it makes a distribution, you may receive some of your investment
back in the form of a taxable distribution.
TAX CONSIDERATIONS In general, if you are a taxable investor,
Fund distributions are taxable to you as either ordinary income
or capital gains. This is true whether you reinvest your
distributions in additional Fund shares or receive them in cash.
Any capital gains a Fund distributes are taxable as long-term
capital gains no matter how long you have owned your shares.
Under JAGTRRA, certain ordinary income and capital gain
distributions paid to you by a Fund will be subject to a maximum
rate of tax of 5% (for individuals in the 10% and 15% federal
rate brackets; 0% in 2008) and 15% (for individuals in higher
rate brackets). In general, only ordinary income dividends paid
to you from dividends received by the Fund after December 31,
2002 and before 2009 from domestic securities and qualified
foreign corporations will be permitted this favored federal tax
treatment. Ordinary income dividends from interest earned by a
Fund on debt securities and dividends received from unqualified
foreign corporations will not qualify for these reduced rates of
taxation. Distributions of net capital gain on portfolio
securities sold after May 5, 2003 and before 2009 also qualify
for the 5% and 15% rates of taxation. Each Fund will track its
portfolio investments to determine which distributions qualify
for these reduced rates and will provide you with this
information, together with other information on the tax status of
your distributions, shortly after the end of the calendar year.
BACKUP WITHHOLDING By law, each Fund must withhold a portion of
your taxable distributions and sales proceeds unless you:
o provide your correct social security or taxpayer identification number,
o certify that this number is correct,
o certify that you are not subject to backup withholding, and
o certify that you are a U.S. person (including a U.S. resident alien).
Each Fund also must withhold if the IRS instructs it to do so.
When withholding is required, the amount will be 28% of any
distributions or proceeds paid.
When you sell your shares in a Fund, you may realize a capital
gain or loss. For tax purposes, an exchange of your Fund shares
for shares of a different Franklin Templeton fund is the same as
a sale.
Fund distributions and gains from the sale of your Fund shares
generally are subject to state and local taxes. For the EUROPEAN
SMALLER COMPANIES FUND, any foreign taxes that this Fund pays on
its investments may be passed through to you as a foreign tax
credit. Non-U.S. investors may be subject to U.S. withholding or
estate tax, and are subject to special U.S. tax certification
requirements. You should consult your tax advisor about the
federal, state, local or foreign tax consequences of your
investment in a Fund.
YOUR ACCOUNT
[Insert graphic of pencil marking an "X"]
[QUALIFIED INVESTORS]
The Funds are generally only available to the following:
o.....Individuals and institutions who have a client relationship
with Fiduciary Trust or subsidiaries of Fiduciary Trust.
o Full time employees, officers, trustees and directors of
Franklin Templeton entities, and their immediate family members.
[Insert graphic of a paper with lines and someone writing] BUYING
SHARES
- -------------------------------------------------------------------
MINIMUM INVESTMENTS INITIAL ADDITIONAL
- -------------------------------------------------------------------
Regular accounts $1,000 no minimum
UGMA/UTMA accounts $100 $50
Full-time employees, officers, trustees $100 $50
and directors of Franklin Templeton
entities, and their immediate family
members
- -------------------------------------------------------------------
This prospectus should be read together with any account
agreement maintained for required minimum investment amounts
imposed by Fiduciary Trust or subsidiaries of Fiduciary Trust.
Certain Franklin Templeton funds offer multiple share classes not
offered by the Funds. Please note that for selling or exchanging
your shares, or for other purposes, each Fund's shares are
considered Advisor Class shares.
DISTRIBUTION AND SERVICE (12B-1) FEES Each Fund has a
distribution plan, sometimes known as a Rule 12b-1 plan, that
allows a Fund to pay distribution and other fees of up to 0.25%
per year for the sale of shares and for services provided to
shareholders. The Funds have no current intention to use the Rule
12b-1 plan.
If you are opening a new account, please complete and sign an
Account Application.
BUYING SHARES
- ---------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------
[Insert graphic of
hands shaking]
Contact your Contact your investment
THROUGH YOUR investment representative
INVESTMENT representative
REPRESENTATIVE
- ---------------------------------------------------------------------
[Insert graphic of If you have another Before requesting a
phone] Franklin Templeton telephone purchase into
fund account with an existing account,
BY PHONE your bank account please make sure we have
information on file, your bank account
(Up to $100,000 you may open a new information on file. If
per shareholder account by phone. we do not have this
per day) information, you will
To make a same day need to send written
1-800/632-2301 investment, your instructions with your
phone order must be bank's name and address,
received and accepted a voided check or
by us by 1:00 p.m. savings account deposit
Pacific time or the slip, and a signature
close of the New York guarantee if the bank
Stock Exchange, and Fund accounts do not
whichever is earlier. have at least one common
owner.
To make a same day
investment, your phone
order must be received
and accepted by us by
1:00 p.m. Pacific time
or the close of the New
York Stock Exchange,
whichever is earlier.
- ---------------------------------------------------------------------
Make your check Make your check payable
[Insert graphic of payable to the Fund. to the Fund. Include
envelope] your account number on
Mail the check and the check.
BY MAIL your signed
application to Fill out the deposit
Investor Services. slip from your account
statement. If you do not
have a slip, include a
note with your name, the
Fund name, and your
account number.
Mail the check and
deposit slip or note to
Investor Services.
- ---------------------------------------------------------------------
[Insert graphic of Call to receive a Call to receive a wire
three lightning wire control number control number and wire
bolts] and wire instructions.
instructions.
To make a same day wire
Wire the funds and investment, please call
BY WIRE mail your signed us by 1:00 p.m. Pacific
application to time and make sure your
1-800/632-2301 Investor Services. wire arrives by 3:00
(or 1-650/312-2000 Please include the p.m.
collect) wire control number
or your new account
number on the
application.
To make a same day
wire investment,
please call us by
1:00 p.m. Pacific
time and make sure
your wire arrives by
3:00 p.m.
- ---------------------------------------------------------------------
[Insert graphic of Call Investor Call Investor Services
two Services at the at the number below, or
arrows pointing in number below, or send send signed written
opposite signed written instructions.
directions] instructions.
(Please see page 25 for
BY EXCHANGE (Please see page 25 information on
for information on exchanges.)
Our website exchanges.)
ftci.com
- -------------------------------------------------------------------
FRANKLIN TEMPLETON INVESTOR SERVICES, LLC
P.O. BOX 33030, ST. PETERSBURG, FL 33733-8030
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
[Insert graphic of person with a headset] INVESTOR SERVICES
-----------------
DISTRIBUTION OPTIONS Your dividends and capital gain
distributions will be automatically reinvested in additional
shares, unless you elect cash payments.
TELEPHONE PRIVILEGES You will automatically receive telephone
privileges when you open your account, allowing you and your
investment representative to sell or exchange your shares and
make certain other changes to your account by phone.
For accounts with more than one registered owner, telephone
privileges also allow the Funds to accept written instructions
signed by only one owner for transactions and account changes
that could otherwise be made by phone. For all other transactions
and changes, all registered owners must sign the instructions. In
addition, our telephone exchange privilege allows you to exchange
shares by phone from a fund account requiring two or more
signatures into an identically registered money fund account
requiring only one signature for all transactions. This type of
telephone exchange is available as long as you have telephone
exchange privileges on your account.
As long as we follow reasonable security procedures and act on
instructions we reasonably believe are genuine, we will not be
responsible for any losses that may occur from unauthorized
requests. Of course, you can decline telephone exchange or
redemption privileges on your account application.
The telephone transaction options available to retirement plans
are limited to those that are provided under the plan.
EXCHANGE PRIVILEGE You can exchange shares of a Fund with those
of other Franklin Templeton funds that offer Advisor Class
shares. You also may exchange your shares for Class A shares of a
fund that does not currently offer an Advisor Class (without any
sales charge)* or for Class Z shares of Franklin Mutual Series
Fund Inc.
[Begin callout]
An EXCHANGE is really two transactions: a sale of one fund and
the purchase of another. In general, the same policies that apply
to purchases and sales apply to exchanges, including minimum
investment amounts. Exchanges also have the same tax consequences
as ordinary sales and purchases.
[End callout]
Generally exchanges may only be made between identically
registered accounts, unless you send written instructions with a
signature guarantee.
Because excessive trading can hurt fund performance, operations
and shareholders, the Funds reserve the right to revise or
terminate the exchange privilege, limit the amount or number of
exchanges, reject any exchange, or restrict or refuse purchases
if (i) the Funds or their manager believe the Funds would be
harmed or unable to invest effectively, or (ii) the Funds receive
or anticipate simultaneous orders that may significantly affect
the Funds (please see "Market Timers" on page 30).
*If you exchange into Class A shares and you later decide you
would like to exchange into a fund that offers an Advisor Class,
you may exchange your Class A shares for Advisor Class shares if
you otherwise qualify to buy the fund's Advisor Class shares.
[Insert graphic of a certificate] SELLING SHARES
--------------
You can sell your shares at any time.
SELLING SHARES IN WRITING Generally, requests to sell $100,000 or
less can be made over the phone, or with a simple letter.
Sometimes, however, to protect you and the Funds we will need
written instructions signed by all registered owners, with a
signature guarantee for each owner, if:
o you are selling more than $100,000 worth of shares
o you want your proceeds paid to someone who is not a
registered owner
o you want to send your proceeds somewhere other than the
address of record, or preauthorized bank or brokerage firm
account
[Begin callout]
A SIGNATURE GUARANTEE helps protect your account against fraud.
You can obtain a signature guarantee at most banks and securities
dealers.
A notary public CANNOT provide a signature guarantee.
[End callout]
We also may require a signature guarantee on instructions we
receive from an agent, not the registered owners, or when we
believe it would protect the Funds against potential claims based
on the instructions received.
SELLING RECENTLY PURCHASED SHARES If you sell shares recently
purchased, we may delay sending you the proceeds until your
check, draft or wire/electronic funds transfer has cleared, which
may take seven business days or more. A certified or cashier's
check may clear in less time.
Your redemption check will be sent within seven days after we
receive your request in proper form. We are not able to receive
or pay out cash in the form of currency. Redemption proceeds may
be delayed if we have not yet received your signed account
application.
SELLING SHARES
- ----------------------------------------------------------
TO SELL SOME OR ALL OF YOUR SHARES
- ----------------------------------------------------------
[Insert graphic of
hands shaking]
Contact your investment
THROUGH YOUR representative
INVESTMENT
REPRESENTATIVE
- ----------------------------------------------------------
[Insert graphic of Send written instructions to
envelope] Investor Services. Corporate,
partnership or trust accounts may
BY MAIL need to send additional documents.
Specify the Fund, the account number
and the dollar value or number of
shares you wish to sell. Be sure to
include all necessary signatures and
any additional documents, as well as
signature guarantees if required.
A check will be mailed to the
name(s) and address on the account,
or otherwise according to your
written instructions.
- ----------------------------------------------------------
[Insert graphic of As long as your transaction is for
phone] $100,000 or less and you have not
changed your address by phone within
BY PHONE the last 15 days, you can sell your
shares by phone.
1-800/632-2301
A check will be mailed to the
name(s) and address on the account.
Written instructions, with a
signature guarantee, are required to
send the check to another address or
to make it payable to another
person.
- ----------------------------------------------------------
[Insert graphic of Obtain a current prospectus for the
two fund you are considering.
arrows pointing in
opposite Call Investor Services at the number
directions] below or send signed written
instructions. See the policies above
BY EXCHANGE for selling shares by mail or phone.
- ----------------------------------------------------------
FRANKLIN TEMPLETON INVESTOR SERVICES, LLC
P.O. BOX 33030, ST. PETERSBURG, FL 33733-8030
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
[Insert graphic of paper and pen] ACCOUNT POLICIES
----------------
CALCULATING SHARE PRICE Each Fund calculates the net asset value
per share (NAV) each business day at the close of trading on the
New York Stock Exchange (normally 1:00 p.m. Pacific time). The
NAV for each Fund is calculated by dividing its net assets by
the number of its shares outstanding.
Each Fund's assets are generally valued at their market value. If
market prices are unavailable, or if an event occurs after the
close of the trading market that materially affects the values,
assets may be valued at their fair value. If a Fund holds
securities listed primarily on a foreign exchange that trades on
days when the Funds are not open for business, the value of your
shares may change on days that you cannot buy or sell shares.
Requests to buy and sell shares are processed at the NAV next
calculated after we receive your request in proper form.
ACCOUNTS WITH LOW BALANCES If the value of your account falls
below $1,000 ($50 for employee accounts) because you sell some of
your shares, we may mail you a notice asking you to bring the
account back up to its applicable minimum investment amount. If
you choose not to do so within 30 days, we may close your account
and mail the proceeds to the address of record.
STATEMENTS, REPORTS AND PROSPECTUSES You will receive quarterly
account statements that show all your account transactions during
the quarter. You also will receive written notification after
each transaction affecting your account (except for
distributions, which will be reported on your quarterly
statement).
You also will receive the Funds' financial reports every six
months as well as an annual updated prospectus. To reduce Fund
expenses, we try to identify related shareholders in a household
and send only one copy of the financial reports and prospectus.
This process, called "householding," will continue indefinitely
unless you instruct us otherwise. If you prefer not to have these
documents householded, please call us at 1-800/632-2301.
FINANCIAL ADVISOR ACCOUNT ACCESS If there is a financial advisor
or other investment representative of record on your account, he
or she will be able to obtain your account information, conduct
transactions for your account, and also will receive copies of
all notifications and statements and other information about your
account directly from the Funds.
STREET OR NOMINEE ACCOUNTS You may transfer your shares from the
street or nominee name account of one dealer to another, as long
as both dealers have an agreement with Templeton/Franklin
Investment Services, Inc. (TFIS) We will process the transfer
after we receive authorization in proper form from your
delivering securities dealer.
JOINT ACCOUNTS Unless you specify a different registration,
accounts with two or more owners are registered as "joint tenants
with rights of survivorship" (shown as "Jt Ten" on your account
statement). To make any ownership changes to a joint account, all
owners must agree in writing, regardless of the law in your state.
MARKET TIMERS Each Fund may restrict or refuse purchases or
exchanges by Market Timers. You may be considered a Market Timer
if you have (i) requested an exchange or redemption out of any of
the Franklin Templeton funds within two weeks of an earlier
purchase or exchange request out of any fund, or (ii) exchanged
or redeemed shares out of any of the Franklin Templeton funds
more than twice within a rolling 90 day period. Accounts under
common ownership or control with an account that is covered by
(i) or (ii) also are subject to these limits.
Anyone, including the shareholder or the shareholder's agent, who
is considered to be a Market Timer by the Funds, their manager or
shareholder services agent, will be issued a written notice of
their status and each Fund's policies. Identified Market Timers
will be required to register with the market timing desk of
Franklin Templeton Investor Services, LLC, and to place all
purchase, exchange and redemption trade requests through the
desk. Some funds do not allow investments by Market Timers.
ADDITIONAL POLICIES Please note that each Fund maintains
additional policies and reserves certain rights, including:
The Fund may restrict or refuse any order to buy shares,
including any purchase under the exchange privilege.
o The Fund may modify, suspend, or terminate telephone
privileges at any time.
o At any time, the Fund may change its investment minimums or
waive or lower their minimums for certain purchases.
o Investors who purchase, redeem or exchange shares through a
financial intermediary may be charged a service fee by that
financial intermediary.
o The Fund may modify or discontinue the exchange privilege on
60 days' notice.
o You may only buy shares of a fund eligible for sale in your
state or jurisdiction.
o In unusual circumstances, we may temporarily suspend
redemptions, or postpone the payment of proceeds, as allowed by
federal securities laws.
o For redemptions over a certain amount, the Fund reserves the
right, in the case of an emergency, to make payments in
securities or other assets of the Fund, if the payment of cash
proceeds by check or wire would be harmful to existing
shareholders.
o To permit investors to obtain the current price, dealers are
responsible for transmitting all orders to the Fund promptly.
DEALER COMPENSATION Qualifying dealers who sell shares may
receive up to 0.25% of the amount invested. This amount is paid
by TFIS from its own resources.
[Insert graphic of question mark] QUESTIONS
----------
If you have any questions about the Funds or your account, you
can write to us at Shareholder Services, P.O. Box 33030, St.
Petersburg, FL 33733-8030. You also can call us at 1-800/632-2301
(TDD (Hearing Impaired) 1-800/851-0637). For your protection and
to help ensure we provide you with quality service, all calls may
be monitored or recorded.
FOR MORE INFORMATION
You can learn more about each Fund in the following document:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more information about each Fund, its investments and
policies. It is incorporated by reference (is legally a part of
this prospectus).
For a free copy of the SAI, please contact your investment
representative or call us at the number below.
Franklin(R) Templeton(R) Investments
1-800/632-2301
TDD (Hearing Impaired) 1-800/851-0637
You also can obtain information about each Fund by visiting the
SEC's Public Reference Room in Washington, DC (phone
1-202/942-8090) or the EDGAR Database on the SEC's Internet site
at http://www.sec.gov. You can obtain copies of this information,
after paying a duplicating fee, by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102 or by electronic
request at the following e-mail address: publicinfo@sec.gov.
Investment Company Act file # 811-10157 Lit Code FGT1 P
06/03