STRADLEY Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP
RONON 2600 One Commerce Square
ATTORNEYS AT LAW Xxxxxxxxxxxx, XX 00000-0000
Telephone 000.000.0000
Fax 000.000.0000
xxx.xxxxxxxx.xxx
May 6, 2009
Board of Trustees
Franklin Custodian Funds
Xxx Xxxxxxxx Xxxxxxx
Xxx Xxxxx, XX 00000-0000
RE: AGREEMENT AND PLAN OF REORGANIZATION (THE "PLAN")
ENTERED INTO ON MAY 4, 2009 BY FRANKLIN CUSTODIAN
FUNDS, A DELAWARE STATUTORY TRUST ("ACQUIRING TRUST"),
ON BEHALF OF ITS SERIES, FRANKLIN GROWTH FUND
("ACQUIRING FUND") AND FRANKLIN CAPITAL GROWTH
FUND ("TARGET FUND")
Ladies and Gentlemen:
You have requested our opinion concerning certain federal
income tax consequences of the reorganization of Target Fund (the
"Reorganization"), which will consist of: (i) the acquisition by
Acquiring Trust, on behalf of Acquiring Fund, of substantially
all of the property, assets and goodwill of Target Fund in
exchange solely for full and fractional Class A, Class B, Class
C, Class R, and Advisor Class shares of beneficial interest,
which are voting securities with no par value, of Acquiring Fund
("Acquiring Fund Shares"); (ii) the distribution of Acquiring
Fund Shares to the holders of Class A, Class B, Class C, Class R,
and Advisor Class shares of beneficial interest of Target Fund
("Target Fund Shares") according to their respective interests in
Target Fund in complete liquidation of Target Fund; and (iii) the
dissolution of Target Fund as soon as is practicable after the
closing (hereinafter called the "Closing"), all upon and subject
to the terms and conditions of the Plan.
In rendering our opinion, we have reviewed and relied upon:
(a) a copy of the executed Plan, dated as of May 6, 2009; (b) the
combined proxy statement/prospectus provided to shareholders of
Target Fund in connection with a Special Meeting of Shareholders
of Target Fund held on April 9, 2009; (c) certain representations
concerning the Reorganization made to us by Acquiring Trust in a
letter dated May 6, 2009 (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 capitalized terms used herein, unless
otherwise defined, are used as defined in the Plan.
For purposes of this opinion, we have assumed that Target
Fund, on the Closing of the Reorganization, satisfies, and
immediately following the Closing of the Reorganization,
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 regulated investment
companies.
Based on the foregoing, and provided the Reorganization is
carried out in accordance with the applicable laws of the State
of Delaware, the terms of the Plan and the statements in the
Representation Letter for Target Fund and Acquiring Fund, it is
our opinion that:
1. The acquisition by Acquiring Fund of substantially
all of the assets of Target Fund, as provided for in the Plan, in
exchange solely for Acquiring Fund Shares, followed by the
distribution by Target Fund to its shareholders of Acquiring Fund
Shares in complete liquidation of Target Fund, will qualify as a
reorganization within the meaning of Section 368(a)(1) of the
Code, and Target Fund and Acquiring Fund 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 Target 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 of the assets of
Target Fund in exchange solely for the issuance of Acquiring Fund
Shares pursuant to Section 1032(a) of the Code.
4. No gain or loss will be recognized by Target Fund
upon the distribution of Acquiring Fund Shares by Target Fund to
its shareholders in complete liquidation (in pursuance of the
Plan) pursuant to Section 361(c)(1) of the Code.
5. The tax basis of the assets of Target Fund received
by Acquiring Fund will be the same as the tax basis of such
assets in the hands of Target Fund immediately prior to the
transfer pursuant to Section 362(b) of the Code.
6. The holding periods of the assets of Target Fund in
the hands of Acquiring Fund will include the periods during which
such assets were held by Target Fund pursuant to Section 1223(2)
of the Code.
7. No gain or loss will be recognized by the
shareholders of Target Fund upon the exchange of all of their
Target Fund Shares for Acquiring Fund Shares pursuant to Section
354(a) of the Code.
8. The aggregate tax basis of Acquiring Fund Shares to
be received by each shareholder of Target Fund (including
fractional shares to which they may be entitled) will be the same
as the aggregate tax basis of Target Fund Shares exchanged
therefor pursuant to Section 358(a)(1) of the Code.
9. The holding period of Acquiring Fund Shares received
by a shareholder of Target Fund (including fractional shares to
which they may be entitled) will include the holding period of
Target Fund Shares exchanged therefor, provided that the
shareholder held Target Fund Shares as a capital asset on the
date of the exchange pursuant to Section 1223(1) of the Code.
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 "Income Tax
Regulations"), the items of Target Fund described in Section
381(c) of the Code, subject to the conditions and limitations
specified in Sections 381, 382, 383 and 384 of the Code and the
Income Tax Regulations,
Our opinion is based upon the Code, the applicable Income
Tax 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
Acquiring Trust on behalf of Target Fund and Acquiring Fund, of
their undertakings in the Plan 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 Acquiring Fund and
Target 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
Acquiring Fund 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,
XXXXXXXX RONON XXXXXXX & XXXXX, LLP
/s/ Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP
