AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan"), is made as of this
15th day of June, 2001, by and between Franklin Investors Securities Trust
("Investors Trust"), a business trust created under the laws of The Commonwealth
of Massachusetts in 1986 with its principal place of business at Xxx Xxxxxxxx
Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, on beha1f of its series, Franklin Global
Government Income Fund ("Global Government Fund"), and Xxxxxxxxx Income Trust
("Income Trust"), a business trust created under the laws of The Commonwealth of
Massachusetts in 1986 with its principal place of business at 000 Xxxx Xxxxxxx
Xxxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx 00000, on beha1f of its series, Xxxxxxxxx
Global Bond Fund ("Global Bond Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by Income Trust on behalf
of Global Bond Fund, of substantially all of the property, assets and goodwill
of Global Government Fund in exchange solely for full and fractional shares of
beneficial interest, par value $0.01 per share, of Global Bond Fund - Class A
("Global Bond Fund Class A Shares"), full and fractional shares of beneficial
interest, par value $0.01 per share, of Global Bond Fund - Class C ("Global Bond
Fund Class C Shares") and full and fractional shares of beneficial interest, par
value $0.01 per share, of Global Bond Fund - Advisor Class ("Global Bond Fund
Advisor Class Shares") (collectively, " Global Bond Fund Shares"); (ii) the
distribution of (a) Global Bond Fund Class A Shares to the shareholders of
Global Government Fund - Class A shares ("Global Government Fund Class A
Shares"); (b) Global Bond Fund Class C Shares to the shareholders of Global
Government Fund - Class C shares ("Global Government Fund Class C Shares"); and
(c) Global Bond Fund Advisor Class Shares to the shareholders of Global
Government Fund - Advisor Class shares ("Global Government Fund Advisor Class
Shares") (collectively, " Global Government Fund Shares"), according to their
respective interests in complete liquidation of Global Government Fund; and
(iii) the dissolution of Global Government Fund 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 this Plan hereinafter set forth.
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 GLOBAL
-------------------------------------------------------------------------
GOVERNMENT FUND.
---------------
(a) Subject to the terms and conditions of this Plan, and in reliance on
the representations and warranties of Income Trust on behalf of Global Bond Fund
herein contained, and in consideration of the delivery by Income Trust of the
number of Global Bond Fund Class A Shares, Global Bond Fund Class C Shares and
Global Bond Fund Advisor Class Shares hereinafter provided, Investors Trust on
behalf of Global Government Fund agrees that it will convey, transfer and
deliver to Income Trust at the Closing all of Global Government Fund's then
existing assets, free and clear of all liens, encumbrances, and claims
whatsoever (other than shareholders' rights of redemption), except for cash,
bank deposits, or cash equivalent securities in an estimated amount necessary
to: (i) pay the costs and expenses of carrying out this Plan (including, but not
limited to, fees of counsel and accountants, and expenses of its liquidation and
dissolution contemplated hereunder), which costs and expenses shall be
established on Global Government Fund's books as liability reserves; (ii)
discharge its unpaid liabilities on its books at the closing date (as defined in
Section 3, hereinafter called the "Closing Date"), including, but not limited
to, its income dividends and capital gains distributions, if any, payable for
the period prior to, and through, the Closing Date and excluding those
liabilities that would otherwise be discharged at a later date in the ordinary
course of business; and (iii) pay such contingent liabilities as the Board of
Trustees of Income Trust shall reasonably deem to exist against Global
Government Fund, if any, at the Closing Date, for which contingent and other
appropriate liability reserves shall be established on Global Government Fund's
books (hereinafter "Net Assets"). Global Government Fund shall also retain any
and all rights that it may have over and against any person that may have
accrued up to and including the close of business on the Closing Date.
(b) Subject to the terms and conditions of this Plan, and in reliance on the
representations and warranties of Investors Trust on behalf of Global Government
Fund herein contained, and in consideration of such sale, conveyance, transfer,
and delivery, Income Trust agrees at the Closing to deliver to Investors Trust:
(i) the number of Global Bond Fund Class A Shares, determined by dividing the
net asset value per share of the Global Government Fund Shares by the net asset
value per share of Global Bond Fund Class A Shares, and multiplying the result
thereof by the number of outstanding Global Government Fund Class A Shares, as
of 1:00 p.m. Pacific time on the Closing Date; (ii) the number of Global Bond
Fund Class C Shares, determined by dividing the net asset value per share of the
Global Government Fund Class C Shares by the net asset value per share of Global
Bond Fund Class C Shares, and multiplying the result thereof by the number of
outstanding Global Government Fund Class C Shares, as of 1:00 p.m. Pacific time
on the Closing Date; and, (iii) the number of Global Bond Fund Advisor Class
Shares, determined by dividing the net asset value per share of the Global
Government Fund Advisor Class Shares by the net asset value per share of Global
Bond Fund Advisor Class Shares, and multiplying the result thereof by the number
of outstanding Global Government Fund Advisor Class Shares, as of 1:00 p.m.
Pacific time on the Closing Date. All such values shall be determined in the
manner and as of the time set forth in Section 2 hereof.
(c) Immediately following the Closing, Investors Trust shall dissolve Global
Government Fund and distribute pro rata to its shareholders of record as of the
close of business on the Closing Date, Global Bond Fund Shares received by
Global Government Fund pursuant to this Section 1. Such liquidation and
distribution shall be accomplished by the establishment of accounts on the share
records of Global Government Fund of the type and in the amounts due such
shareholders based on their respective holdings as of the close of business on
the Closing Date. Fractional Global Bond Fund Shares shall be carried to the
third decimal place. As promptly as practicable after the Closing, each holder
of any outstanding certificate or certificates representing shares of beneficial
interest of Global Government Fund shall be entitled to surrender the same to
the transfer agent for Global Bond Fund in exchange for the number of Global
Bond Fund Shares into which the Global Government Fund Shares theretofore
represented by the certificate or certificates so surrendered shall have been
converted. Certificates for Global Bond Fund Shares shall not be issued, unless
specifically requested by the shareholders. Until so surrendered, each
outstanding certificate which, prior to the Closing, represented shares of
beneficial interest of Global Government Fund shall be deemed for all Global
Bond Fund's purposes to evidence ownership of the number of Global Bond Fund
Shares into which the Global Government Fund Shares (which prior to the Closing
were represented thereby) have been converted.
2. VALUATION.
----------
(a) The value of Global Government Fund's Net Assets to be acquired by
Global Bond Fund, hereunder shall be computed as of 1:00 p.m. Pacific time on
the Closing Date using the valuation procedures set forth in Global Government
Fund's currently effective prospectus.
(b) The net asset value of a share of beneficial interest of Global
Government Fund Shares shall be determined to the fourth decimal place as of
1:00 p.m. Pacific time on the Closing Date using the valuation procedures set
forth in Global Government Fund's currently effective prospectus.
(c) The net asset value of a share of beneficial interest of Global Bond
Fund Shares shall be determined to the nearest full cent as of 1:00 p.m. Pacific
time on the Closing Date using the valuation procedures set forth in Global Bond
Fund's currently effective prospectus.
3. CLOSING AND CLOSING DATE.
------------------------- The Closing Date shall be August 2, 2001, or such
later date as the parties may mutually agree. The Closing shall take place at
the principal office of Investors Trust at 2:00 p.m., Pacific time, on the
Closing Date. Investors Trust on behalf of Global Government Fund shall have
provided for delivery as of the Closing those Net Assets of Global Government
Fund to be transferred to the account of Global Bond Fund's Custodian, The Chase
Manhattan Bank, MetroTech Center, Xxxxxxxx, Xxx Xxxx 00000. Also, Investors
Trust on behalf of Global Government Fund shall deliver at the Closing a list of
names and addresses of the shareholders of record of its Global Government Fund
Class A Shares, Global Government Fund Class C Shares and Global Government Fund
Advisor Class Shares and the number of full and fractional shares of beneficial
interest of such classes owned by each such shareholder, indicating thereon
which such shares are represented by outstanding certificates and which by
book-entry accounts, all as of 1:00 p.m. Pacific time on the Closing Date,
certified by its transfer agent or by its President to the best of its or his
knowledge and belief. Income Trust on behalf of Global Bond Fund shall issue and
deliver a certificate or certificates evidencing the shares of beneficial
interest of Global Bond Fund to be delivered to the account of Global Government
Fund at said transfer agent registered in such manner as the officers of
Investors Trust on behalf of Global Government Fund may request, or provide
evidence satisfactory to Investors Trust that such Global Bond Fund Shares have
been registered in an account on the books of Global Bond Fund in such manner as
the officers of Investors Trust on behalf of Global Government Fund may request.
4. REPRESENTATIONS AND WARRANTIES BY INCOME TRUST ON BEHALF OF GLOBAL BOND
------------------------------------------------------------------------
FUND.
------
Income Trust, on behalf of Global Bond Fund, represents and warrants to
Investors Trust that:
(a) Global Bond Fund is a series of Income Trust, a business trust created
under the laws of The Commonwealth of Massachusetts on June 16, 1986, and is
validly existing under the laws of that Commonwealth. Income Trust is duly
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, management investment company and all of the Global Bond
Fund Shares sold were sold pursuant to an effective registration statement filed
under the Securities Act of 1933, as amended (the "1933 Act"), except for those
shares sold pursuant to the private offering exemption for the purpose of
raising the required initial capital.
(b) Income Trust is authorized to issue an unlimited number of shares of
beneficial interest of Global Bond Fund Shares, par value $0.01 per share, each
outstanding share of which is fully paid, non-assessable, freely transferable
and has full voting rights. Global Bond Fund is further divided into three
classes of shares consisting of Global Bond Fund Class A Shares, Global Bond
Fund Class C Shares and Global Bond Fund Advisor Class Shares, and an unlimited
number of shares of beneficial interest, par value $0.01 per share, have been
allocated and designated to each Class of Global Bond Fund.
(c) The financial statements appearing in the Global Bond Fund's Annual
Report to Shareholders for the fiscal year ended August 31, 2000, audited by
PricewaterhouseCoopers, LLP, copies of which have been delivered to Investors
Trust, fairly present the financial position of Global Bond Fund as of such date
and the results of its operations for the period indicated in conformity with
generally accepted accounting principles applied on a consistent basis.
(d) The books and records of Global Bond Fund accurately summarize the
accounting data represented and contain no material omissions with respect to
the business and operations of Global Bond Fund.
(e) Income Trust has the necessary power and authority to conduct Global
Bond Fund's business as such business is now being conducted.
(f) Income Trust, on behalf of Global Bond Fund, 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, and is not subject to any order
or decree that would be violated by its execution of or performance under this
Plan.
(g) Income Trust has elected to treat Global Bond Fund as a regulated
investment company ("RIC") for federal income tax purposes under Part I of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
Global Bond Fund 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) Global Bond Fund is not under jurisdiction of a Court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(i) Global Bond Fund does not have any unamortized or unpaid
organizational fees or expenses.
5. REPRESENTATIONS AND WARRANTIES BY INVESTORS TRUST ON BEHALF OF GLOBAL
----------------------------------------------------------------------
GOVERNMENT FUND.
----------------
Investors Trust, on behalf of Global Government Fund, represents and
warrants to Income Trust that:
(a) Global Government Fund is a series of Investors Trust, a business
trust created under the laws of The Commonwealth of Massachusetts on December
22, 1986, and is validly existing under the laws of that Commonwealth. Investors
Trust is duly registered under the 1940 Act as an open-end, management
investment company and all of Investors Trust's Global Government Fund Shares
sold were sold pursuant to an effective registration statement filed under the
1933 Act, except for those shares sold pursuant to the private offering
exemption for the purpose of raising the required initial capital.
(b) Investors Trust is authorized to issue an unlimited number of shares
of beneficial interest of Global Government Fund, par value $0.01 per share,
each outstanding share of which is fully paid, non-assessable, freely
transferable, and has full voting rights and currently issues shares of seven
(7) series, including Global Government Fund. Global Government Fund is further
divided into three classes of shares consisting of Global Government Fund Class
A Shares, Global Government Fund Class C Shares and Global Government Fund
Advisor Class Shares, and an unlimited number of shares of beneficial interest
of Investors Trust, par value $0.01 per share, have been allocated and
designated to each Class of Global Government Fund.
(c) The financial statements appearing in the Investors Trust's Annual
Report to Shareholders for the fiscal year ended October 31, 2000, audited by
PricewaterhouseCoopers, LLP, copies of which have been delivered to Income
Trust, fairly present the financial position of Global Government Fund as of
such date and the results of its operations for the period indicated in
conformity with generally accepted accounting principles applied on a consistent
basis.
(d) The books and records of Global Government Fund accurately summarize
the accounting data represented and contain no material omissions with respect
to the business and operations of Global Government Fund.
(e) Investors Trust has the necessary power and authority to conduct
Global Government Fund's business as such business is now being conducted.
(f) Investors Trust on behalf of Global Government Fund 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 this Plan.
(g) Investors Trust has elected to treat Global Government Fund as a RIC
for federal income tax purposes under Part I of Subchapter M of the Code, Global
Government Fund 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) Global Government Fund is not under jurisdiction of a Court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(i) Global Government Fund does not have any unamortized or unpaid
organization fees or expenses.
6. REPRESENTATIONS AND WARRANTIES BY INVESTORS TRUST AND INCOME TRUST.
-------------------------------------------------------------------
Investors Trust, on behalf of Global Government Fund, and Income Trust,
on behalf of Global Bond Fund, each represents and warrants to the other that:
(a) The statement of assets and liabilities to be furnished by it as
of 1:00 p.m. Pacific time on the Closing Date for the purpose of determining the
number of Global Bond Fund Shares to be issued pursuant to Section 1 of this
Plan, will accurately reflect each Fund's Net Assets and outstanding shares of
beneficial interest, as of such date, in conformity with generally accepted
accounting principles applied on a consistent basis.
(b) At the Closing, it will have good and marketable title to all of the
securities and other assets shown on the statement of assets and liabilities
referred to in (a) above, free and clear of all liens or encumbrances of any
nature whatsoever, except such imperfections of title or encumbrances as do not
materially detract from the value or use of the assets subject thereto, or
materially affect title thereto.
(c) Except as disclosed in its currently effective prospectuses relating
to Global Government Fund, in the case of Investors Trust, and Global Bond Fund,
in the case of Income Trust, there is no material suit, judicial action, or
legal or administrative proceeding pending or threatened against it.
(d) There are no known actual or proposed deficiency assessments with
respect to any taxes payable by it.
(e) The execution, delivery, and performance of this Plan have been duly
authorized by all necessary action of its Board of Trustees, and this Plan
constitutes a valid and binding obligation enforceable in accordance with its
terms.
(f) It anticipates that consummation of this Plan will not cause Global
Government Fund, in the case of Investors Trust, and Global Bond Fund, in the
case of Income 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.
(g) It has the necessary power and authority to conduct the business of its
Fund, as such business is now being conducted.
7. COVENANTS OF INVESTORS TRUST AND INCOME TRUST.
----------------------------------------------
(a) Investors Trust, on behalf of Global Government Fund, and Income
Trust, on behalf of Global Bond Fund, each covenant to operate their respective
businesses, as presently conducted between the date hereof and the Closing.
(b) Investors Trust, on behalf of Global Government Fund, undertakes that
it will not acquire Global Bond Fund Shares for the purpose of making
distributions thereof to anyone other than Global Government Fund's
shareholders.
(c) Investors Trust, on behalf of Global Government Fund, undertakes that,
if this Plan is consummated, it will liquidate and dissolve Global Government
Fund.
(d) Investors Trust, on behalf of Global Government Fund, and Income
Trust, on behalf of Global Bond Fund, each agree that, by the Closing, all of
the their Federal and other tax returns and reports required by law to be filed
on or before such date shall have been filed, and all Federal and other taxes
shown as due on said returns shall have either been paid or adequate liability
reserves shall have been provided for the payment of such taxes.
(e) At the Closing, Investors Trust, on behalf of Global Government Fund,
will provide Global Bond Fund a copy of the shareholder ledger accounts,
certified by Global Government Fund's transfer agent or its President to the
best of its or his knowledge and belief, for all the shareholders of record of
Global Government Fund Shares as of 1:00 p.m. Pacific time on the Closing Date
who are to become shareholders of Global Bond Fund as a result of the transfer
of assets that is the subject of this Plan.
(f) Investors Trust agrees to mail to each shareholder of record of Global
Government Fund entitled to vote at the meeting of its shareholders at which
action on this Plan is to be considered, in sufficient time to comply with
requirements as to notice thereof, a combined Prospectus and Proxy Statement
that complies in all material respects with the applicable provisions of Section
14(a) of the Securities Exchange Act of 1934, as amended, and Section 20(a) of
the 1940 Act, and the rules and regulations, respectively, thereunder.
(g) Income Trust will file with the U.S. Securities and Exchange
Commission a registration statement on Form N-14 under the 1933 Act relating to
Global Bond Fund Shares issuable hereunder ("Registration Statement"), and will
use its best efforts to provide that the Registration Statement becomes
effective as promptly as is practicable. At the time it becomes effective, the
Registration Statement will (i) comply in all material respects with the
applicable provisions of the 1933 Act, and the rules and regulations promulgated
thereunder; and (ii) not contain any untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading. At the time the Registration Statement
becomes effective, at the time of Global Government Fund's shareholders'
meeting, and at the Closing Date, the prospectus and statement of additional
information included in the Registration Statement will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY INVESTORS TRUST AND INCOME
-------------------------------------------------------------------
TRUST.
------
The consummation of this Plan hereunder shall be subject to the following
respective conditions:
(a) That: (i) all the representations and warranties of the other party
contained herein shall be true and correct as of the Closing with the same
effect as though made as of and at such date; (ii) the other party shall have
performed all obligations required by this Plan to be performed by it prior to
the Closing; and (iii) the other party shall have delivered to such party a
certificate signed by the President and by the Secretary or equivalent officer
to the foregoing effect.
(b) That each party shall have delivered to the other party a copy of the
resolutions approving the Plan adopted and approved by the appropriate action of
the Board of Trustees certified by its Secretary or equivalent officer of each
of the Funds.
(c) That the U.S. Securities and Exchange Commission shall not have issued
an unfavorable management report under Section 25(b) of the 1940 Act or
instituted or threatened to institute any proceeding seeking to enjoin
consummation of the Plan under Section 25(c) of the 1940 Act. And, further, no
other legal, administrative or other proceeding shall have been instituted or
threatened that would materially affect the financial condition of either party
or would prohibit the transactions contemplated hereby.
(d) That this Plan and the Plan of Reorganization contemplated hereby
shall have been adopted and approved by the appropriate action of the
shareholders of Global Government Fund at an annual or special meeting or any
adjournment thereof.
(e) That a distribution or distributions shall have been declared for
Global Government Fund prior to the Closing Date that, together with all
previous distributions, shall have the effect of distributing to its
shareholders (i) all of its ordinary income and all of its capital gain net
income, if any, for the period from the close of its last fiscal year to 1:00
p.m. Pacific time on the Closing Date; and (ii) any undistributed ordinary
income and capital gain net income from any period to the extent not otherwise
declared for distribution. Capital gain net income has the meaning given such
term by Section 1222(a) of the Code.
(f) That there shall be delivered to Investors Trust, on behalf of Global
Government Fund, and Income Trust, on behalf of Global Bond Fund an opinion,
from Messrs. Stradley, Ronon, Xxxxxxx & Xxxxx, LLP, counsel to Investors Trust
and Income Trust, to the effect that, provided the acquisition contemplated
hereby is carried out in accordance with this Plan and based upon certificates
of the officers of Investors Trust and Income Trust with regard to matters of
fact:
(1) The acquisition by Global Bond Fund of substantially all the assets
of Global Government Fund as provided for herein in exchange for Global Bond
Fund Shares followed by the distribution by Global Government Fund to its
shareholders of Global Bond Fund Shares in complete liquidation of Global
Government Fund will qualify as a reorganization within the meaning of Section
368(a)(1) of the Code, and Global Government Fund and Global Bond 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 Global Government Fund upon
the transfer of substantially all of its assets to Global Bond Fund in exchange
solely for voting shares of Global Bond Fund (Sections 361(a) and 357(a) of the
Code). No opinion, however, will be expressed as to whether any accrued market
discount will be required to be recognized as ordinary income pursuant to
Section 1276 of the Code;
(3) No gain or loss will be recognized by Global Bond Fund upon the
receipt of substantially all of the assets of Global Government Fund in exchange
solely for voting shares of Global Bond Fund (Section 1032(a) of the Code);
(4) No gain or loss will be recognized by Global Government Fund upon
the distribution of Global Bond Fund Shares to its shareholders in liquidation
of Global Government Fund (in pursuance of the Plan) (Section 361(c)(1) of the
Code);
(5) The basis of the assets of Global Government Fund received by
Global Bond Fund will be the same as the basis of such assets to Global
Government Fund immediately prior to the reorganization (Section 362(b) of the
Code);
(6) The holding period of the assets of Global Government Fund received
by Global Bond Fund will include the period during which such assets were held
by Global Government Fund (Section 1223(2) of the Code);
(7) No gain or loss will be recognized to the shareholders of Global
Government Fund upon the exchange of their shares in Global Government Fund for
voting shares of Global Bond Fund including fractional shares to which they may
be entitled (Section 354(a) of the Code);
(8) The basis of Global Bond Fund Shares received by the shareholders
of Global Government Fund shall be the same as the basis of the Global
Government Fund Shares exchanged therefor (Section 358(a)(1) of the Code);
(9) The holding period of Global Bond Fund Shares received by
shareholders of Global Government Fund (including fractional shares to which
they may be entitled) will include the holding period of the Global Government
Fund Shares surrendered in exchange therefor, provided that the Global
Government Fund Shares were held as a capital asset on the effective date of the
exchange (Section 1223(1) of the Code); and
(10) Global Bond 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
Global Government 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 Income Trust on behalf of Global Bond
Fund an opinion in form and substance satisfactory to it from Messrs. Stradley,
Ronon, Xxxxxxx & Young, LLP, counsel to Investors Trust on behalf of Global
Government Fund, to the effect that, subject in all respects to the effects of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
other laws now or hereafter affecting generally the enforcement of creditors'
rights:
(1) Global Government Fund is a series of Investors Trust, a business
trust organized under the laws of The Commonwealth of Massachusetts on December
22, 1986, and is a validly existing business trust and in good standing under
the laws of that Commonwealth;
(2) Investors Trust is authorized to issue an unlimited number of
shares of beneficial interest, par value $0.01 per share of Global Government
Fund. Three classes of shares of Global Government Fund have been designated as
Global Government Fund Class A Shares, Global Government Fund Class C Shares and
Global Government Fund Advisor Class Shares, and an unlimited number of shares
of beneficial interest of Investors Trust has been allocated to each Class of
Global Government Fund. Assuming that the initial shares of beneficial interest
of Global Government Fund were issued in accordance with the 1940 Act and the
Agreement and Declaration of Trust and By-laws of Investors Trust, and that all
other outstanding shares of Global Government Fund were sold, issued and paid
for in accordance with the terms of Global Government Fund's prospectus in
effect at the time of such sales, each such outstanding share is fully paid,
non-assessable, freely transferable and has full voting rights;
(3) Global Government Fund is an open-end investment company of the
management type registered as such under the 1940 Act;
(4) Except as disclosed in Global Government Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against Global Government Fund,
the unfavorable outcome of which would materially and adversely affect Investors
Trust or Global Government Fund;
(5) All actions required to be taken by Investors Trust on behalf of
Global Government Fund to authorize this Plan and to effect the Plan
contemplated hereby have been duly authorized by all necessary action on the
part of Investors Trust on behalf of Global Government Fund; and
(6) Neither the execution, delivery, nor performance of this Plan by
Investors Trust on behalf of Global Government Fund violates any provision of
its Agreement and Declaration of Trust or By-laws, or the provisions of any
agreement or other instrument known to such counsel to which Investors Trust is
a party or by which Investors Trust is otherwise bound; this Plan is the legal,
valid and binding obligation of Investors Trust on behalf of Global Government
Fund and is enforceable against Investors Trust on behalf of Global Government
Fund in accordance with its terms.
In giving the opinions set forth above, this counsel may state that it is
relying on certificates of the officers of Investors Trust with regard to
matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of Investors Trust.
(h) That there shall be delivered to Investors Trust on behalf of Global
Government Fund an opinion in form and substance satisfactory to it from Messrs.
Stradley, Ronon, Xxxxxxx & Xxxxx, LLP, counsel to Income Trust on behalf of
Global Bond Fund, to the effect that, subject in all respects to the effects of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other laws now or hereafter affecting generally the enforcement of creditors'
rights:
(1) Global Bond Fund is a series of Income Trust, a business trust
organized under the laws of The Commonwealth of Massachusetts on June 16, 1986
and is a validly existing business trust and in good standing under the laws of
that Commonwealth;
(2) Income Trust is authorized to issue an unlimited number of shares
of beneficial interest, par value $0.01 per share of Global Bond Fund. Global
Bond Fund is further divided into three classes of shares consisting of Global
Bond Fund Class A Shares, Global Bond Fund Class C Shares and Global Bond Fund
Advisor Class Shares, and an unlimited number of shares of beneficial interest,
par value $0.01 per share, has been allocated and designated to each of those
Classes of Global Bond Fund. Assuming that the initial shares of beneficial
interest of Global Bond Fund were issued in accordance with the 1940 Act, and
the Declaration of Trust and By-laws of Income Trust, and that all other
outstanding shares of Global Bond Fund were sold, issued and paid for in
accordance with the terms of Global Bond Fund's prospectus in effect at the time
of such sales, each such outstanding share of Global Bond Fund is fully paid,
non-assessable, freely transferable and has full voting rights;
(3) Global Bond Fund is an open-end investment company of the
management type registered as such under the 1940 Act;
(4) Except as disclosed in Global Bond Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against Global Bond Fund, the
unfavorable outcome of which would materially and adversely affect Income Trust
or Global Bond Fund;
(5) Global Bond Fund Shares to be issued pursuant to the terms of this
Plan have been duly authorized and, when issued and delivered as provided in
this Plan, will have been validly issued and fully paid and will be
non-assessable by Income Trust on behalf of Global Bond Fund;
(6) All actions required to be taken by Income Trust on behalf of
Global Bond Fund to authorize this Plan and to effect the Plan of Reorganization
contemplated hereby have been duly authorized by all necessary action on the
part of Income Trust on behalf of Global Bond Fund;
(7) Neither the execution, delivery, nor performance of this Plan by
Income Trust on behalf of Global Bond Fund violates any provision of its
Declaration of Trust or By-laws, or the provisions of any agreement or other
instrument known to such counsel to which Income Trust is a party or by which
Income Trust is otherwise bound; this Plan is the legal, valid and binding
obligation of Income Trust on behalf of Global Bond Fund and is enforceable
against Income Trust on behalf of Global Bond Fund in accordance with its terms;
and
(8) The registration statement of Income Trust, of which the prospectus
dated January 1, 2001 of Global Bond Fund is a part (the "Prospectus") is, at
the time of the signing of this Plan, effective under the 1933 Act, and, to the
best knowledge of such counsel, no stop order suspending the effectiveness of
such registration statement has been issued, and no proceedings for such purpose
have been instituted or are pending before or threatened by the U.S. Securities
and Exchange Commission under the 1933 Act, and nothing has come to counsel's
attention that causes it to believe that, at the time the Prospectus became
effective, or at the time of the signing of this Plan, or at the Closing, such
Prospectus (except for the financial statements and other financial and
statistical data included therein, as to which counsel need not express an
opinion), contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading; and such counsel knows of no legal or
government proceedings required to be described in the Prospectus, or of any
contract or document of a character required to be described in the Prospectus
that is not described as required.
In giving the opinions set forth above, this counsel may state that it is
relying on certificates of the officers of Income Trust with regard to matters
of fact, and certain certifications and written statements of governmental
officials with respect to the good standing of Income Trust.
(i) That Global Government Fund shall have received a certificate from the
President and Secretary of Income Trust on behalf of Global Bond Fund to the
effect that the statements contained in the Prospectus, at the time the
Prospectus became effective, at the date of the signing of this Plan, and at the
Closing, did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(j) That Income Trust's Registration Statement with respect to Global Bond
Fund Shares to be delivered to Global Government Fund's shareholders in
accordance with this Plan shall have become effective, and no stop order
suspending the effectiveness of the Registration Statement or any amendment or
supplement thereto, shall have been issued prior to the Closing Date or shall be
in effect at Closing, and no proceedings for the issuance of such an order shall
be pending or threatened on that date.
(k) That Global Bond Fund Shares to be delivered hereunder shall be
eligible for sale with each state commission or agency with which such
eligibility is required in order to permit Global Bond Fund Shares lawfully to
be delivered to each holder of Global Government Fund Shares.
(l) That, at the Closing, there shall be transferred to Income Trust on
behalf of Global Bond Fund, aggregate Net Assets of Global Government Fund
comprising at least 90% in fair market value of the total net assets and 70% of
the fair market value of the total gross assets recorded on the books of Global
Government Fund on the Closing Date.
(m) That there be delivered to Income Trust on behalf of Global Bond Fund
information concerning the tax basis of Global Government Fund in all securities
transferred to Global Bond Fund, together with shareholder information including
the names, addresses, and taxpayer identification numbers of the shareholders of
Global Government Fund as of the Closing Date, the number of shares held by each
shareholder, the dividend reinvestment elections applicable to each shareholder,
and the backup withholding and nonresident alien withholding certifications,
notices or records on file with Global Government Fund respect to each
shareholder.
9. BROKERAGE FEES AND EXPENSES.
----------------------------
(a) Investors Trust on behalf of Global Government Fund and Income Trust
on behalf of Global Bond Fund each represents and warrants to the other that
there are no broker or finders' fees payable by it in connection with the
transactions provided for herein.
(b) The expenses of entering into and carrying out the provisions of this
Plan shall be borne one-quarter by Global Bond Fund, one-quarter by Global
Government Fund, and one-quarter by Franklin Advisers, Inc. and one-quarter by
Xxxxxxxxx Investment Counsel, LLC.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
-----------------------------------------
(a) Anything contained in this Plan to the contrary notwithstanding, this
Plan may be terminated and the Plan of Reorganization abandoned at any time
(whether before or after approval thereof by the shareholders of Global
Government Fund) prior to the Closing, or the Closing may be postponed as
follows:
(1) by mutual consent of Investors Trust on behalf of Global
Government Fund and Income Trust on behalf of Global Bond
Fund;
(2) by Income Trust on behalf of Global Bond Fund if any condition
of its obligations set forth in Section 8 has not been
fulfilled or waived; or
(3) by Investors Trust on behalf of Global Government Fund if any
conditions of its obligations set forth in Section 8 has
not been fulfilled or waived.
An election by Income Trust or Investors Trust to terminate this Plan and to
abandon the Plan of Reorganization shall be exercised respectively, by the Board
of Trustees of either Income Trust or Investors Trust.
(b) If the transactions contemplated by this Plan have not been
consummated by October 31, 2001, the Plan shall automatically terminate on that
date, unless a later date is agreed to by both Income Trust and Investors Trust.
(c) In the event of termination of this Plan pursuant to the provisions
hereof, the same shall become void and have no further effect, and neither
Investors Trust, Income Trust, Global Government Fund nor Global Bond Fund, nor
their trustees, officers, or agents or the shareholders of Global Government
Fund or Global Bond Fund shall have any liability in respect of this Plan.
(d) At any time prior to the Closing, any of the terms or conditions of
this Plan may be waived by the party who is entitled to the benefit thereof by
action taken by that party's Board of Trustees if, in the judgment of such Board
of Trustees, such action or waiver will not have a material adverse effect on
the benefits intended under this Plan to its shareholders, on behalf of whom
such action is taken.
(e) The respective representations and warranties contained in Sections 4
to 6 hereof shall expire with and be terminated by the Plan, and neither
Investors Trust nor Income Trust, nor any of their officers, trustees, agents or
shareholders shall have any liability with respect to such representations or
warranties after the Closing. This provision shall not protect any officer,
trustee, agent or shareholder of Investors Trust or Income 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 U.S. Securities and Exchange Commission
with respect to this Plan shall be issued prior to the Closing and shall impose
any terms or conditions that are determined by action of the Board of Trustees
of Investors Trust, on behalf of Global Government Fund, or Income Trust, on
behalf of Global Bond Fund, to be acceptable, such terms and conditions shall be
binding as if a part of this Plan without further vote or approval of the
shareholders of Global Government Fund, unless such terms and conditions shall
result in a change in the method of computing the number of Global Bond Fund
Shares to be issued to Global Government Fund in which event, unless such terms
and conditions shall have been included in the proxy solicitation material
furnished to the shareholders of Global Government Fund prior to the meeting at
which the transactions contemplated by this Plan shall have been approved, this
Plan shall not be consummated and shall terminate unless Investors Trust shall
promptly call a special meeting of the shareholders of Global Government Fund at
which such conditions so imposed shall be submitted for approval.
11. ENTIRE AGREEMENT AND AMENDMENTS.
--------------------------------
This Plan embodies the entire agreement between the parties and there are
no agreements, understandings, restrictions, or warranties relating to the
transactions contemplated by this Plan other than those set forth herein or
herein provided for. This Plan may be amended only by mutual consent of the
parties in writing. Neither this Plan nor any interest herein may be assigned
without the prior written consent of the other party.
12. COUNTERPARTS.
-------------
This Plan may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts together shall
constitute but one instrument.
13. NOTICES.
--------
Any notice, report, or demand required or permitted by any provision of
this Plan shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage prepaid, addressed to Franklin
Investors Securities Trust, at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx
00000, Attention: Secretary, or Templeton Income Trust, at 000 Xxxx Xxxxxxx
Xxxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx 00000, Attention: Secretary, as the case may
be.
14. GOVERNING LAW.
--------------
This Plan shall be governed by and carried out in accordance with the laws
of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, Investors Trust, on behalf of Global Government Fund, and
Income Trust, on behalf of Global Bond Fund, have each caused this Plan to be
executed on its behalf by its duly authorized officers, all as of the date and
year first-above written.
FRANKLIN INVESTORS SECURITIES TRUST, ON BEHALF
OF FRANKLIN GLOBAL GOVERNMENT INCOME FUND
Attest:
/S/ XXXXXX X. XXXXXXX By: /S/XXXXX X. XXXX
--------------------- -----------------
Xxxxxx X. Xxxxxxx Xxxxx X. Xxxx
Secretary Vice President
TEMPLETON INCOME TRUST, ON
BEHALF OF XXXXXXXXX GLOBAL BOND FUND
Attest:
/S/ XXXXXXX X. XXXXX By: /S/XXXXX X. XXXX
-------------------- -----------------
Xxxxxxx X. Xxxxx Xxxxx X. Xxxx
Secretary Vice President
