[LOGO APPEARS HERE]
XXXXXXXX RONON XXXXXXX & XXXXX, LLP
0000 XXX XXXXXXXX XXXXXX
XXXXXXXXXXXX, XX 00000-0000
TELEPHONE (000) 000-0000
FAX (000) 000-0000
XXX.XXXXXXXX.XXX
August 4, 2005
Board of Trustees
Franklin Multi-Income Trust
Xxx Xxxxxxxx Xxxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Board of Directors
Franklin Custodian Funds, Inc
Xxx Xxxxxxxx Xxxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Re: Agreement and Plan of Reorganization, dated as of
February 28, 2005 (the "Agreement"), by and between
Franklin Multi-Income Trust, a business trust
organized under the laws of The Commonwealth of
Massachusetts ("Acquired Fund"), and Franklin
Custodian Funds, Inc., a corporation organized under
the laws of the State of Maryland ("Custodian
Funds"), on behalf of its series, Franklin Income
Fund ("Acquiring Fund").
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Ladies and Gentlemen:
You have requested our opinion concerning certain federal income tax
consequences of the reorganization of Acquired Fund (the "Reorganization"),
which will consist of: (i) the acquisition by Custodian Funds on behalf of
Acquiring Fund of substantially all of the property, assets and goodwill of
Acquired Fund in exchange solely for full and fractional shares of common stock,
par value $0.01 per share, of Acquiring Fund - Class A ("Acquiring Fund
Shares"), which are voting securities; (ii) the distribution of Acquiring Fund
Shares to the holders of shares of beneficial interest, par value $0.01 per
share, of Acquired Fund ("Acquired Fund Shares"), according to their respective
interests in Acquired Fund in complete liquidation of Acquired Fund; and (iii)
the dissolution of Acquired Fund as soon as is practicable after the closing
(the "Closing"), all upon and subject to the terms and conditions of the
Agreement.
In rendering our opinion, we have reviewed and relied upon:
(a) the Agreement; (b) the proxy materials provided to shareholders of Acquired
Fund in connection with the Special Meeting of Shareholders of Acquired Fund
held on July 13, 2005; (c) certain representations concerning the Reorganization
made to us by Acquired Fund and Acquiring Fund in a letter dated August 4, 2005
(the "Representation Letter"); (d) all other documents, financial and other
reports and corporate minutes we deemed relevant or appropriate; and (e) such
statutes, regulations, rulings and decisions as we deemed material in rendering
this opinion. All terms used herein, unless otherwise defined, are used as
defined in the Agreement.
For purposes of this opinion, we have assumed that Acquired
Fund, on the Closing of the Reorganization, satisfies, and immediately following
the Closing, Acquiring Fund will continue to satisfy, the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), for
qualification as a regulated investment company.
Based on the foregoing, and provided the Reorganization is
carried out in accordance with the applicable laws of the Commonwealth of
Massachusetts and State of Maryland, the terms of the Agreement and the
statements in the Representation Letter, it is our opinion that:
1. The acquisition by Acquiring Fund of substantially all the
assets of Acquired Fund as provided for in the Agreement in exchange for
Acquiring Fund Shares followed by the distribution by Acquired Fund to its
shareholders of Acquiring Fund Shares in complete liquidation of Acquired Fund
will qualify as a reorganization within the meaning of Section 368(a)(1) of the
Code, and Acquired Fund and Acquiring Fund each will 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 Acquired Fund upon the
transfer of substantially all of its assets to Acquiring Fund in exchange solely
for Acquiring Fund Shares pursuant to Section 361(a) and Section 357(a) of the
Code.
3. No gain or loss will be recognized by Acquiring Fund upon the
receipt by it of substantially all the assets of Acquired Fund in exchange
solely for Acquiring Fund Shares pursuant to Section 1032(a) of the Code.
4. No gain or loss will be recognized by Acquired Fund upon the
distribution of Acquiring Fund Shares to its shareholders in complete
liquidation of Acquired Fund (in pursuance of the Agreement) pursuant to Section
361(c)(1) of the Code.
5. The basis of the assets of Acquired Fund received by Acquiring
Fund will be the same as the basis of these assets to Acquired Fund immediately
prior to the exchange pursuant to Section 362(b) of the Code.
6. The holding period of the assets of Acquired Fund received by
Acquiring Fund will include the period during which such assets were held by
Acquired Fund pursuant to Section 1223(2) of the Code.
7. No gain or loss will be recognized by the shareholders of
Acquired Fund upon the exchange of their Acquired Fund Shares for Acquiring Fund
Shares (including fractional shares to which they may be entitled) pursuant to
Section 354(a) of the Code.
8. The basis of the Acquiring Fund Shares received by the
shareholders of Acquired Fund (including fractional shares to which they may be
entitled) will be the same as the basis of Acquired Fund Shares exchanged
therefore pursuant to Section 358(a)(1) of the Code.
9. The holding period of Acquiring Fund Shares received by the
shareholders of Acquired Fund (including fractional shares to which they may be
entitled) will include the holding period of Acquired Fund Shares surrendered in
exchange therefore, provided that Acquired Fund Shares were held as a capital
asset pursuant to Section 1223(1) of the Code on the Closing Date.
10. Acquiring Fund will succeed to and take into account, as of
the date of the transfer as defined in Section 1.381(b)-1(b) of the income tax
regulations issued by the United States Department of the Treasury (the
"Treasury Regulations"), the items of Acquired 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.
Our opinion is based upon the Code, the applicable Treasury
Regulations, the present positions of the Internal Revenue Service (the
"Service") as are set forth in published revenue rulings and revenue procedures,
present administrative positions of the Service, and existing judicial
decisions, all of which are subject to change either prospectively or
retroactively. We do not undertake to make any continuing analysis of the facts
or relevant law following the date of the Reorganization.
Our opinion is conditioned upon the performance by Custodian
Funds, on behalf of Acquiring Fund, and Acquired Fund of their undertakings in
the Agreement and the Representation Letter. Our opinion is limited to the
transactions incident to the Reorganization described herein, and no opinion is
rendered with respect to (i) any other transaction or (ii) the effect, if any,
of the Reorganization (and/or the transactions incident thereto) on any other
transaction and/or the effect, if any, of any such other transaction on the
Reorganization.
This opinion is being rendered to Custodian Funds, on behalf
of Acquiring Fund, and Acquired Fund and may be relied upon only by such funds
and the shareholders of each. We hereby consent to the use of this opinion as an
exhibit to the Registration Statement of Custodian Funds on Form N-14, and any
amendments thereto, covering the registration of Acquiring Fund Shares under the
Securities Act of 1933, as amended, to be issued in the Reorganization.
Very truly yours,
STRADLEY, RONON, XXXXXXX & XXXXX, LLP
By:/S/XXXXXXX X. XXXXXXX, III
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Xxxxxxx X. Xxxxxxx, III, a Partner
