Franklin Templeton Variable Insurance Products Trust
Form N-SAR
File No. 811-5583
Sub-Item 77C - Submission of matters to a vote of security holders
At special meetings on February 8, 2000 the shareholders of Franklin Small Cap,
Templeton Developing Markets Equity, Templeton Global Asset Allocation, and
Templeton International Equity Funds, each a Series of Franklin Templeton
Variable Insurance Products Trust (the "Trust"), approved new investment
advisory agreements, and changes to, and elimination of, certain of the
fundamental investment restrictions, to be effective as of May 1, 2000. In
addition, shareholders of Franklin Rising Dividends Securities Fund, also a
Series of the Trust, approved a modification of the fund's current criteria for
the selection of portfolio companies related to debt as part of the issuer's
capital structure, and changes to, and elimination of, certain of the fund's
other fundamental investment restrictions, to be effective as of May 1, 2000.
The vote follows:
Franklin Rising Dividends Securities Fund the "Fund")
1. Regarding the approval of a modification of the Fund's current criteria for
the selection of portfolio companies related to debt as part of the issuer's
capital structure:
Shares Voted For Shares Voted Against
31,187,926.239 1,310,140.114
2. Regarding the approval of changes in the following fundamental investments
restrictions:
Shares Voted For Shares Voted Against
(i) Borrowing 30,364,960.448 2,004,812.041
(ii) Underwriting 30,937,738.640 1,351,902.686
(iii) Lending 30,627,603.069 1,665,004.505
(iv) Real Estate and Commodities 30,491,288.755 1,824,505.657
(v) Senior Securities 30,790,380.970 1,583,482.434
(vi) Concentration 30,873,386.121 1,467,482.510
(vii) Diversification 31,270,378.920 1,130,744.766
3. Regarding the approval to eliminate certain fundamental investment
restrictions:
Shares Voted For Shares Voted Against
31,018,266.640 1,407,621.475
Franklin Small Cap Fund (the "Fund")
1. Regarding the approval of a new investment advisory agreement:
Shares Voted For Shares Voted Against
15,924,198.742 1,460,550.545
2. Regarding the approval of changes in the following fundamental investments
restrictions:
Shares Voted For Shares Voted Against
(a) Diversification 16,477,970.342 913,778.609
(b) Borrowing 15,584,213.385 1,689,334.485
(c) Lending 15,851,672.166 1,428,899.473
(d) Underwriting 16,015,154.413 1,206,200.983
(e) Concentration 15,978,912.676 1,254,405.961
(f) Senior Securities 16,012,931.423 1,247,669.028
(g) Real Estate and Commodities 15,872,028.601 1,405,639.367
3. Regarding the approval to eliminate certain fundamental investment
restrictions:
Shares Voted For Shares Voted Against
16,089,736.890 1,231,178.818
Templeton Developing Markets Equity (Developing Markets), Templeton Global
Asset Allocation (Global Asset Allocation), and Templeton International Equity
Funds (International):
1. Regarding the approval of a new investment advisory agreement:
Shares Voted For Share Voted Against
Developing Markets 16,643,113.339 316,569.083
Global Asset Allocation 4,876,674.848 96,681.269
International 40,368,795.570 824.499.311
2. Regarding the approval of changes in the following fundamental investments
restrictions:
(a) Diversification
Shares Voted For Shares Voted Against
Developing Markets 16,710,277.009 251,266.325
Global Asset Allocation 4,655,162.142 95,308.429
International 40,132,799.935 748,361.204
(b) Borrowing
Shares Voted For Shares Voted Against
Developing Markets 16,028,768.210 773,840.545
Global Asset Allocation 4,485,809.527 256,928.404
International 37,918,778.113 2,465,639.919
(c) Lending
Shares Voted For Shares Voted Against
Developing Markets 16,248,486.259 558,650.236
Global Asset Allocation 4,515,526.810 209,939.770
International 38,527,292.561 1,884,118.568
(d) Underwriting
Shares Voted For Shares Voted Against
Developing Markets 16,284,157.533 523,157.546
Global Asset Allocation 4,602,118.027 114,619.431
International 39,034,888.689 1,426,651.417
(e) Concentration
Shares Voted For Shares Voted Against
Developing Markets 16,426,194.875 393,199.573
Global Asset Allocation 4,558,580.736 131,923.214
International 39,112,258.974 1,309,365.688
(f) Senior Securities
Shares Voted For Shares Voted Against
Developing Markets 16,409,980.428 410,401.607
Global Asset Allocation 4,581,468.769 137,363.380
International 39,288,852.525 1,276,504.755
(g) Real Estate and Commodities
Shares Voted For Shares Voted Against
Developing Markets 16,207,115.077 622,804.971
Global Asset Allocation 4,520,220.922 185,790.635
International 38,784,297.831 1,607,358.554
1. Regarding the approval to eliminate certain fundamental investment
restrictions:
Shares Voted For Shares Voted Against
Developing Markets 16,271,220.422 527,502.539
Global Asset Allocation 4,582,110.985 178,528.088
International 38,965,505.675 1,740,541.099
Sub-Item 77D - Policies with respect to security investments
(i)
At a meeting of the Board of Trustees of the Trust (the "Board") on July 15,
1999, the following resolutions were unanimously approved:
RESOLVED, that pursuant to Article III, Section 6, of the Trust's Amended
Agreement and Declaration of Trust, the name of the series of the Trust now
designated as the Global Utilities Securities Fund be, and it hereby is,
Changed to Franklin Global Communications Securities Fund, effective as of
November 15, 1999; and
FURTHER RESOLVED, that the Prospectuses dated May 1, 1999 of the Franklin
Templeton Variable Insurance Products Trust be amended to reflect that the
Franklin Global Communications Securities Fund's strategy in seeking to achieve
its objective will be to invest at least 65% of total assets in equity
securities of companies that are primarily engaged in providing communications
services and communications equipment, such change to be effective November 15,
1999.
(ii)
At a Board meeting on September 14, 1999, the following resolutions were
unanimously approved:
RESOLVED, that pursuant to Article III, Section 6, of the Trust's Amended
Agreement and Declaration of Trust, the name of the series of the Trust now
designated as the Capital Growth Fund be, and it hereby is, changed to Franklin
Large Cap Growth Securities Fund, effective as of December 15, 1999; and
FURTHER RESOLVED, that the Prospectuses dated May 1, 1999 of the Franklin
Templeton Variable Insurance Products Trust be amended to reflect that the
Franklin Large Cap Growth Securities Fund's strategy in seeking to achieve its
objective will be to invest at least 65% of its total assets in equity
securities of U.S. large cap growth companies, such change to be effective
December 15, 1999.
(iii)
At a Board meeting on January 20, 2000, the following resolutions were adopted:
RESOLVED, that the prospectus and statement of additional information for
the Franklin Growth and Income Fund (the "Fund") series of the Trust be amended
as follows:
1. To provide that the Fund may invest up to 35% of its net assets, in the
aggregate, in any combination of one or more of the types of securities
currently permitted to be purchased by the Fund in addition to its primary
investments;
2. To eliminate the sentence in the section of the statement of additional
information describing the debt securities in which the Fund may invest which
currently states that the Fund does not intend to invest more than 5% of its
assets in fixed-income securities rated below Baa by Moody's or BBB by S&P; and
3. To clarify that the Fund's main investments may include both domestic and
foreign securities.
FURTHER RESOLVED, that the officers of the Trust, in consultation with
counsel, be and each of them hereby is, authorized and directed to take any and
all actions appropriate to carry out the intent and accomplish the purposes of
the foregoing resolution, including the filing of a supplement or amendment to
the Trust's registration statement with the U.S. Securities and Exchange
Commission, and the distribution of such amended or supplemented disclosure
concerning such changes to the Fund's shareholders.
(iv)
At a Board meeting on February 15, 2000, the following resolutions were
unanimously approved:
RESOLVED, that the names of certain series of the Franklin Templeton Variable
Insurance Products Trust (the "VIP Trust") shall hereby be changed, effective
as of May 1, 2000, provided that the merger of the funds of the Templeton
Variable Products Series Fund ("TVP Trust") into the funds of the VIP Trust is
approved by TVP Trust shareholders on February 8, 2000; and
FURTHER RESOLVED, that pursuant to Article III, Section 6, of the VIP
Trust's Amended Agreement and Declaration of Trust, the name of the series of
the VIP Trust designated as the Templeton Global Asset Allocation Fund be, and
it hereby is, changed to Templeton Asset Strategy Fund; the name of the series
of the VIP Trust designated as the Templeton Developing Markets Equity Fund be,
and it hereby is, changed to Templeton Developing Markets Securities Fund; the
name of the series of the VIP Trust designated as Templeton Global Growth Fund
be, and it hereby is, changed to Templeton Growth Securities Fund; the name of
the series of the VIP Trust designated as the Templeton International Equity
Fund be, and it hereby is, changed to Templeton International Securities Fund
and the name of the series of the Trust designated as the Templeton Pacific
Growth Fund be, and it hereby is, changed to Templeton Pacific Growth
Securities Fund.
(v)
At a Board meeting on March 21, 2000, the following resolutions were
unanimously approved:
RESOLVED, that the definition of "small cap" for the Franklin Small Cap
Fund (the "Fund") be amended to read as follows:
"Under normal market conditions, the Fund will invest at least 65% of its
total assets in the equity securities of U.S. small capitalization (small cap)
companies. For this fund, small cap companies are those companies with market
cap values not exceeding: (i) $1.5 billion; or (ii) the highest market cap
value in the Russell 2000 Index, whichever is greater at the time of purchase."
and
FURTHER RESOLVED, that such changes, to become effective as of May 1,
2000, be reflected in the Fund's updated annual prospectuses, and that the
appropriate officers of the Trust take all steps necessary to accomplish this.
(vi)
At a Board meeting on March 21, 2000, the following resolutions were
unanimously approved:
RESOLVED, that the May 1, 2000 annual update of the prospectuses of the
Templeton International Smaller Companies Fund, Templeton Global Growth Fund
(to be named Templeton Growth Securities Fund as of May 1, 2000) and Templeton
International Equity Fund (to be named Templeton International Securities Fund
as of May 1, 2000) be amended to include a change in the definition of "small
cap" from meaning companies with market capitalizations of less than $1.5
billion to a definition meaning companies with market capitalizations of less
than $2 billion; and
FURTHER RESOLVED, that such change will become effective as of May 1, 2000
and that the appropriate officers of the Trust take all steps necessary to
accomplish this.
Sub-Item 77I Terms of new or amended securities:
A new Series of the Fund, Franklin S&P 500 Index Fund, which became effective
May 1, 2000, began offering a third class of shares, Class 3, in addition to
class 1 and class 2 which are currently offered by all other Series of the
Fund. The classes differ only with respect to certain class-specific expenses.
Class 2 and class 3 each have a rule 12b-1 distribution plan. In addition,
class 3 bears its own registration expenses under state and federal securities
laws and transfer agency (shareholder account maintenance) expenses. The full
title of each series and class of Franklin S&P 500 Index Fund is:
Franklin S&P 500 Index Fund - Class 1
Franklin S&P 500 Index Fund - Class 2
Franklin S&P 500 Index Fund - Class 3
Shares of each class represent proportionate interests in the assets of the
Fund's Series. On matters that affect a Series as a whole, each class has the
same voting and other rights and preferences as any other class. On matters
that only affect one class, only shareholders of that class may vote. Each
class votes separately on matters affecting only that class, or expressly
required to be voted on separately by state or federal law. Shares of each
class of a Series have the same voting and other rights and preferences as
other classes and Series of the Fund for matters that affect the Fund as a
whole.
Sub-Item 77M - Mergers
Pursuant to an Agreement and Plan of Reorganization between Franklin Templeton
Variable Insurance Products Trust (the "Fund"), on behalf of its Series
Franklin Large Cap Growth Securities Fund, Franklin Small Cap Fund, Mutual
Shares Securities Fund, Templeton Global Asset Allocation Fund, Templeton
Global Income Securities Fund, Templeton Developing Markets Equity Fund,
Templeton International Equity Fund, Templeton Global Growth Fund, Franklin S&P
500 Index Fund and Franklin Strategic Income Securities Fund, and Templeton
Variable Products Series Fund, on behalf of its Series Franklin Large Cap
Growth Investments Fund, Franklin Small Cap Investments Fund, Mutual Shares
Investments Fund, Templeton Asset Allocation Fund, Templeton Bond Fund,
Templeton Developing Markets Fund, Templeton International Fund, Templeton
Stock Fund, Franklin S&P 500 Index Fund and Franklin Strategic Income
Investments Fund (the "Acquired Series"), on May 1, 2000 all of the assets the
Acquired Series were transferred to a corresponding Fund Series, in exchange
solely for shares of the specified classes of the corresponding Fund Series and
the assumption by each Fund Series of the liabilities of each corresponding
Acquired Series. Each Series is named below next to its corresponding Acquired
Series:
Series
Acquired Series
Franklin Large Cap Growth Securities Fund
Franklin Large Cap Growth Investments Fund
Franklin Small Cap Fund
Franklin Small Cap Investments Fund
Mutual Shares Securities Fund
Mutual Shares Investments Fund
Templeton Global Asset Allocation Fund
Templeton Asset Allocation Fund
Templeton Global Income Securities Fund
Templeton Bond Fund
Templeton Developing Markets Equity Fund
Templeton Developing Markets Fund
Templeton International Equity Fund
Templeton International Fund
Templeton Global Growth Fund
Templeton Stock Fund
Franklin S&P 500 Index Fund
Franklin S&P 500 Index Fund
Franklin Strategic Income Securities Fund
Franklin Strategic Income Investments Fund
Exhibit 77QI(a)
CERTIFICATE OF AMENDMENT
OF
AGREEMENT AND DECLARATION OF TRUST
OF
FRANKLIN VALUEMARK FUNDS
The undersigned certify that:
1. They constitute a majority of the Board of Trustees of Franklin Valuemark
Funds, a Massachusetts business trust (the "Trust").
2. They hereby adopt the following amendment to the Agreement and Declaration
of Trust, which deletes in its entirety the Section of the Agreement and
Declaration of Trust entitled "Section 1. Name." of Article I and replaces
such Section of Article I with the following:
"Section 1. Name. The Trust shall be known as the Franklin
Templeton Variable Insurance Products Trust and the Trustees shall conduct the
business of the Trust under that name or any other name as they may from time
to time determine."
3. This Amendment is made pursuant to Article VIII, Section 9, which empowers
the Trustees to amend the Agreement and Declaration of Trust at any time by an
instrument in writing signed by a majority of the Trustees; and Article I,
Section 1, which empowers the Trustees to conduct the business of the Trust
under any other name as they may from time to time determine.
IN WITNESS WHEREOF, the Trustees named below have signed their names hereto
this 18th day of May, 1999.
/s/ Frank H. Abbott, III /s/ Harris J. Ashton
/s/ Edward J. Bonach /s/ Robert F. Carlson
/s/ S. Joseph Fortunato /s/ Charles B. Johnson
/s/ Charles E. Johnson /s/ Rupert H. Johnson, Jr.
/s/ Frank W. T. LaHaye /s/ Gordon S. Macklin
EXHIBIT 77Q1(g)
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 19th day of April, 2000 by and between Templeton Variable Products Series
Fund (the "TVP Trust"), a Massachusetts Business Trust with its principal place
of business at Broward Financial Centre, Suite 2100, Ft. Lauderdale, Florida
33394, for itself and on behalf of Franklin Large Cap Growth Investments Fund,
Franklin Small Cap Investments Fund, Mutual Shares Investments Fund, Templeton
Asset Allocation Fund, Templeton Bond Fund, Templeton Developing Markets Fund,
Templeton International Fund, Templeton Stock Fund, Franklin S&P 500 Index
Fund, and Franklin Strategic Income Investments Fund (each an "Acquired Fund"
and collectively the "Acquired Funds") and Franklin Templeton Variable
Insurance Products Trust (the "VIP Trust"), a Massachusetts Business Trust with
its principal place of business at 777 Mariners Island Boulevard, San Mateo,
California 94404, for itself and on behalf of the Franklin Large Cap Growth
Securities Fund, Franklin Small Cap Fund, Mutual Shares Securities Fund,
Templeton Global Asset Allocation Fund, Templeton Global Income Securities
Fund, Templeton Developing Markets Equity Fund, Templeton International Equity
Fund, Templeton Global Growth Fund, Franklin S&P 500 Index Fund, and Franklin
Strategic Income Securities Fund (each an "Acquiring Fund" and collectively the
"Acquiring Funds").
In accordance with the terms and conditions set forth in this Agreement, the
parties desire that all of the assets of each Acquired Fund be transferred to
its corresponding Acquiring Fund corresponding thereto (as set forth in Exhibit
A hereto) in exchange for shares of the specified classes of the corresponding
Acquiring Fund (the "Acquiring Fund Shares") and the assumption by each
Acquiring Fund of the liabilities (as defined in paragraph 1.6) of each
corresponding Acquired Fund, and that Acquiring Fund Shares be distributed
immediately after the Closing (as defined in paragraph 3.1) by each Acquired
Fund to its shareholders of the respective share classes of the Acquired Fund
in liquidation of the Acquired Fund. The parties intend that each
Reorganization as defined herein qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that each of the Acquiring Funds qualify as a "party to a
reorganization" within the meaning of Section 368 (b) of the Code, with respect
to such Reorganization.
WHEREAS, the TVP Trust and the VIP Trust have agreed to a reorganization (the
"Reorganization") pursuant to which the duplication of funds will be eliminated
as the funds of the TVP Trust (the "TVP Funds") will become a part of the
corresponding funds of the VIP Trust (the "VIP Funds");
WHEREAS, the Board of Trustees of the TVP Trust and the VIP Trust (including a
majority of the non-interested Trustees for each Trust) have determined that
the Reorganization is in the best interest of their respective funds and their
respective shareholders and that the interest of the existing shareholders of
the VIP Funds would not be diluted as a result of the Reorganization;
WHEREAS, the purpose of the Reorganization is to combine the assets of the TVP
Funds with those of the VIP Funds in an attempt to achieve greater operating
economies;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF EACH ACQUIRED FUND TO ITS CORRESPONDING ACQUIRING
FUND IN EXCHANGE FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF CERTAIN
IDENTIFIED ACQUIRED FUND LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1. Subject to the terms and conditions herein set forth and on the basis of
the representations and warranties contained herein, each Acquired Fund agrees
to transfer all of the Acquired Fund's assets (as set forth in paragraph 1.2)
to its corresponding Acquiring Fund and each Acquiring Fund agrees in exchange
therefor:
(i) to deliver to the Acquired Fund the full and fractional number of each
class of Acquiring Fund Shares, determined to three decimal places by dividing
the value of each of the Acquired Fund's net assets that are so conveyed and
are attributable to each class of the Acquired Fund, computed in the manner and
as of the time and date set forth in paragraph 2.1 by the net asset value of
one Acquiring Fund Share of the particular class that is to be delivered with
respect thereto computed in the manner and as of the time and date set forth in
paragraph 2.2; and
(ii) to assume the liabilities of the Acquired Fund, as set forth in paragraph
1.6. Such transactions shall take place at the Closing provided for in
paragraph 3.1 (the "Closing").
1.2. The assets of each Acquired Fund to be acquired by the corresponding
Acquiring Fund shall consist of all property, including without limitation, all
cash, securities, commodities and futures interests and dividends or interest
receivable which are owned by the Acquired Fund and any deferred or prepaid
expenses shown as an asset on the books of the Acquired Fund on the date
provided in paragraph 3.1 (the "Closing Date").
1.3. Delivery of the assets of each Acquired Fund to be transferred shall be
made on the Closing Date and to the Custodians (as defined in paragraph 3.2)
for the account of the corresponding Acquiring Fund, together with proper
instructions and all documents necessary to transfer such assets to the account
of the corresponding Acquiring Fund, free and clear of all liens, encumbrances,
rights, restrictions and claims, except as may be indicated in a schedule
delivered by an Acquired Fund to the Acquiring Fund immediately prior to the
Closing. All cash delivered shall be in the form of currency or immediately
available funds payable to the order of the appropriate Custodian.
1.4. Following the transfer of assets by each Acquired Fund to its
corresponding Acquiring Fund, the assumption of the Acquired Fund's liabilities
set forth in paragraph 1.6 by the Acquiring Fund, and the distribution by the
Acquired Fund of the Acquiring Fund Shares to the shareholders of the
respective classes of the Acquired Fund, the TVP Trust shall terminate the
registration of such Acquired Fund and its shares at all appropriate federal
and state agencies. Any reporting responsibility of an Acquired Fund is and
shall remain the exclusive responsibility of the Acquired Fund up to and
including the date on which the particular Acquired Fund is terminated,
dissolved and deregistered with federal and state securities or "blue sky"
authorities.
1.5. Immediately after the transfer of its assets, each Acquired Fund will
distribute pro rata to the Acquired Fund's shareholders of record, determined
as of immediately after the close of business on the Closing Date (the
"Acquired Fund Shareholders"), the Acquiring Fund Shares of the respective
classes received by the Acquired Fund pursuant to paragraph 1.1 and will
completely liquidate. Such distribution and liquidation will be accomplished by
the transfer of the Acquiring Fund Shares then credited to the account of the
Acquired Fund on the books of the Acquiring Fund to open accounts on the share
records of the Acquiring Fund in the names of the Acquired Fund Shareholders.
acquired Fund Shareholders will be credited with full and fractional shares of
the class that is issued by its corresponding Acquiring Fund under this
Agreement with respect to the shares of the Acquired Fund that are held by the
Acquired Fund Investor. The aggregate net asset value of Acquiring Fund Shares
to be so credited to the Acquired Fund Shareholders shall be equal to the
aggregate net asset value of the Acquired Fund shares owned by such
shareholders as of immediately after the close of business of the New York
Stock Exchange on the Valuation Date and the outstanding shares of the Acquired
Fund will simultaneously be canceled on the books of the Acquired Fund. From
and after the Closing, all of the share certificates representing interests in
the Acquired Fund will represent a number of Acquiring Fund Shares after the
Closing Date as determined in accordance with paragraph 2.3. An Acquiring Fund
will not issue certificates representing the Acquiring Fund Shares in
connection with such exchange except upon request by an Acquired Fund
Shareholder.
1.6. Each Acquired Fund will endeavor to discharge all of its known liabilities
and obligations prior to the Closing Date. Each Acquiring Fund shall assume all
liabilities, expenses, costs, charges and reserves of its corresponding
Acquired Fund (which shall include expenses incurred in the ordinary course of
the Acquired Fund's operations, such as accounts payable relating to custodian
and transfer agency fees, legal and audit fees, and expenses of state
securities registration of the Acquired Fund's Shares) reflected on an
unaudited statement of assets and liabilities of the Acquired Fund prepared by
Franklin Templeton Services, Inc., the business manager of the Acquired Fund,
as of the Valuation Date (as defined in paragraph 2.1) in accordance with
generally accepted accounting principles consistently applied from the prior
audited period. Each Acquiring Fund shall assume only those liabilities of its
corresponding Acquired Fund reflected on that unaudited statement of assets and
liabilities and shall not assume any other liabilities.
1.7. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund and they will be issued in the manner described in the Acquiring
Fund's then-current prospectus and statement of additional information.
1.8. Any reporting responsibility of each Acquired Fund including, but not
limited to, the responsibility for any periods ending on or before the Closing
Date for filing of regulatory reports, tax returns, or other documents with the
Securities and Exchange Commission (the "SEC"), any state securities or any
other relevant regulatory authority, is and shall remain the responsibility of
that Acquired Fund.
1.9. Each Acquired Fund will provide its corresponding Acquiring Fund with a
schedule of its assets and liabilities, and each Acquiring Fund will provide
its corresponding Acquired Fund with a copy of its current investment objective
and policies. Each Acquired Fund reserves the right to sell any of the
securities or other assets shown on the schedule prior to the Closing Date but
will not, without the prior approval of the corresponding Acquiring Fund,
acquire any additional securities other than securities which the Acquiring
Fund is permitted to purchase in accordance with its stated investment
objective and policies. As used herein, with respect to the VIP Trust Templeton
Global Asset Allocation Fund, Templeton Developing Markets Equity Fund, and
Templeton International Equity Fund references to an Acquiring Fund's stated
investment objectives and policies shall be the stated investment objectives
and policies of their respective corresponding Acquired Fund that will be
adhered to following the Closing Date. After the receipt of the schedule of
assets and liabilities from its corresponding Acquired Fund, each Acquiring
Fund will advise its corresponding Acquired Fund of any investments shown on
the schedule provided by its corresponding Acquired Fund which the Acquiring
Fund would not be permitted to hold, pursuant to its stated investment
objective and policies or otherwise. In the event that any Acquired Fund holds
any investments that its corresponding Acquiring Fund would not be permitted to
hold under its stated investment objective or policies, the Acquired Fund, if
requested by the Acquiring Fund and, to the extent permissible and consistent
with the Acquired Fund's own investment objective and policies, will dispose of
such securities prior to the Closing Date. In addition, if it is determined
that the holdings of any Acquired Fund and its corresponding Acquiring Fund,
when aggregated, would contain investments exceeding certain percentage
limitations to which the corresponding Acquiring Fund is or will be subject
with respect to such investments, the Acquired Fund, if requested by the
corresponding Acquiring Fund and, to the extent permissible and consistent with
the Acquired Fund's own investment objective and policies, will dispose of
and/or reinvest a sufficient amount of such investments as may be necessary.
2. VALUATION
2.1 The value of each Acquired Fund's assets to be acquired by its
corresponding Acquiring Fund hereunder shall be the value of such assets
computed as of the normal close of business of the New York Stock Exchange on
the Closing Date (the "Valuation Date"), using the valuation procedures set
forth in the TVP Trust's Declaration of Trust and then-current prospectus or
statement of additional information.
2.2 The net asset value of each of Acquiring Fund Share of the particular
class to be delivered with respect to the class of shares held by an Acquired
Fund Shareholder shall be the net asset value per share computed as of
immediately after the close of business of the New York Stock Exchange on the
Valuation Date, using the valuation procedures set forth in the VIP Trust's
Declaration of Trust and then-current prospectus or statement of additional
information.
2.3. The number of each Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for its corresponding Acquired Fund's
assets shall be determined by dividing the value of the net assets of its
corresponding Acquired Fund that are so conveyed and are attributable to each
class of the Acquired Fund determined using the same valuation procedures
referred to in paragraph 2.1 by the net asset value of an Acquiring Fund Share
of the particular class that is to be delivered with respect thereto determined
in accordance with paragraph 2.2.
2.4. All computations of value with respect to the Acquiring Fund shall be made
by Franklin Templeton Services, Inc..
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be April 30, 2000 or such later date as the parties
may agree in writing. All acts taking place at the Closing shall be deemed to
take place simultaneously as of immediately after the close of business on the
Closing Date, unless otherwise agreed to by the parties. The close of business
on the Closing Date shall be as of May 1, 2000. The Closing shall be held at
the offices of the VIP Trust, San Mateo, California or at such other place and
time as the parties shall mutually agree.
3.2. The Bank of New York, Mutual Funds Division as custodian for the VIP Funds
and The Chase Manhattan Bank, N.A., as custodian for Templeton Global Asset
Allocation Fund, Templeton Developing Markets Equity Fund, Templeton
International Equity Fund, and Templeton Global Growth Fund, and as custodian
(collectively the "Custodians"), shall be instructed to deliver at the Closing
a certificate of an authorized officer stating that: (a) each Acquired Fund's
portfolio securities, cash, and any other assets shall have been delivered in
proper form to the corresponding Acquiring Fund; and (b) all necessary taxes
including without limitation all applicable federal and state stock transfer
stamps, if any, shall have been paid, or provision for payment shall have been
made, in conjunction with the delivery of portfolio securities.
3.3. Franklin/Templeton Investor Services, Inc. (the "Transfer Agent"), on
behalf of the Acquired Funds, shall deliver at the Closing a certificate of an
authorized officer stating that its records contain the names and addresses of
the Acquired Fund Shareholders and the number and percentage ownership of
outstanding shares by class owned by each such shareholder immediately prior to
the Closing. Each Acquiring Fund shall deliver a certificate evidencing that
the Acquiring Fund Shares to be credited on the Closing Date to its
corresponding Acquired Fund or provide evidence satisfactory to the each
Acquired Fund that such Acquiring Fund Shares have been credited to each
Acquired Fund's account on the books of each Acquiring Fund. At the Closing,
each party shall deliver to the other such bills of sale, checks, assignments,
share certificates, if any, receipts or other documents as such other party or
its counsel may reasonably request.
3.4. If on the Valuation Date (a) the primary trading market for portfolio
securities of an Acquiring Fund or the applicable Acquired Fund shall be closed
to trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading shall be disrupted so that accurate appraisal of the value
of the net assets of the Acquiring Funds or the Acquired Funds is
impracticable, the Closing Date shall be postponed with respect to the affected
Acquired Funds until the first business day after the day when trading shall
have been fully resumed and reporting shall have been restored, or such other
time as the parties may mutually agree.
3.5. With respect to each Acquired Fund, the TVP Trust shall provide the VIP
Trust and its Transfer Agent with immediate access from and after the Closing
Date to (a) the computer, electronic or such other forms of records containing
the names, addresses and taxpayer identification numbers of each Acquired
Fund's shareholders and the number and percentage ownership of each outstanding
Acquired Fund shares owned by such person, all as of the Valuation Date, and
(b) all original documentation (including all applicable Internal Revenue
Service forms, certificates, certifications and correspondence) relating to
each investor's taxpayer identification number and their liability for or
exemption from back-up withholding. Each corresponding Acquiring Fund shall
issue and deliver to the Secretary or Assistant Secretary of the TVP Funds,
acting on behalf of the Acquired Funds, a confirmation evidencing the Acquiring
Fund Shares credited on the Closing Date or shall provide evidence satisfactory
to each Acquired Fund that such Acquiring Fund Shares have been credited to
each Acquired Fund's account on the books of each Acquiring Fund. At the
Closing, each party shall deliver to the other such bills of sale, checks,
assignments, assumptions of liability share certificates, if any, receipts or
other documents of transfer, assignment or conveyance as such other party or
its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1. The TVP Trust, on behalf of each Acquired Fund, represents and warrants to
the VIP Trust that for each taxable year of operation since inception
(including the taxable year ending on the Closing Date) each Acquired Fund has
met the requirements of Subchapter M of the Code for qualification as a
regulated investment company and has elected to be treated as such and has met
the diversification requirements under Section 817(h) of the Code and the rules
thereunder.
4.2. The VIP Trust, on behalf of each Acquiring Fund, represents and warrants
to the TVP Trust that for each taxable year of its operation, each Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification as
a regulated investment company and has elected to be treated as such and has
met the diversification requirements under Section 817(h) of the Code and the
rules thereunder.
5. CONVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1. The Acquiring Funds and the Acquired Funds will operate their business in
the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions, and any other
distributions that may be advisable.
5.2. The Acquired Funds covenant that the Acquiring Fund Shares to be issued
hereunder are not being acquired for the purpose of making any distribution
thereof other than in accordance with the terms of this Agreement.
5.3. Subject to the provisions of this Agreement, the TVP Trust and the VIP
Trust will each take, or cause to be taken, all action, and do or cause to be
done, all things reasonably necessary, proper, or advisable to consummate and
make effective the transactions contemplated by this Agreement.
5.4. As promptly as practicable after the Closing Date, the TVP Trust, on
behalf of each Acquired Fund, shall furnish its corresponding Acquiring Fund,
in such form as is reasonably satisfactory to VIP Trust, a statement of the
earnings and profits of each Acquired Fund for federal income tax purposes
which will be carried over to the applicable Acquiring Fund as a result of
Section 381 of the Code and which will be certified by an authorizer officer of
the TVP Trust.
5.5. On the Closing Date, the TVP Trust, on behalf of each Acquired Fund, shall
furnish to its corresponding Acquiring Fund, a final statement of the total
amount of fund assets and stated liabilities of each Acquired Fund as of the
Closing Date, which statement shall be certified by an officer of the TVP Trust
as being determined in accordance with generally accepted accounting principles
consistently applied.
5.6. As promptly as practicable after the date hereof, the TVP Trust will call
a meeting of each Acquired Fund's shareholders to consider and act upon this
Agreement and to take all other action necessary and appropriate to obtain
approval of the transactions contemplated herein. The VIP Trust shall prepare
and file with the SEC a Registration Statement on Form N-14 complying in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "1933 Act"), the Securities Exchange Act of 1934, as amended, the
Investment Company Act of 1940, as amended, and applicable rules and
regulations thereunder (the "Registration Statement"), relating to such meeting
of the shareholders of each Acquired Fund. The VIP Trust shall take all
necessary and reasonable actions to have such Registration Statement declared
effective by the SEC. The TVP Trust agrees to provide all information relating
to each Acquired Fund which the VIP Trust deems necessary, proper or advisable
in the preparation of the Registration Statement or consummation of the
transactions contemplated herein.
5.7. Prior to the Closing, each Acquired Fund shall have declared a dividend or
dividends which, together with all previous such dividends, shall have the
effect of distributing to its shareholders all of its investment company
taxable income for its short taxable year beginning January 1, 2000 and ending
on the Closing Date (computed without regard to any deduction for dividends
paid), and all of its net capital gain realized in its taxable year beginning
on January 1, 2000 and ending on the Closing Date (after reduction for any
capital loss carryover.)
5.8. As soon after the Closing Date as is reasonably practicable, the TVP
Trust, on behalf of each Acquired Fund shall (i) prepare and file all federal
and other tax returns and reports of each Acquired Fund required by law to be
filed with respect to all period ending on or before the Closing Date but not
previously filed, and (ii) pay all federal and other taxes shown as due and/or
all federal and other taxes that were unpaid as of the Closing Date.
6. CONDITIONS PRECEDENT
Each party's obligations hereunder shall be subject to (1) performance by the
other party of all the obligations to be performed hereunder at or before the
Closing Date, (2) all representations and warranties of the other party
contained herein being true and correct in all material respects as of the date
hereof, and, except as they may be affected by the transactions contemplated
hereby, as of the Closing Date, with the same force and effect as if made at
and as of the Closing Date, and (3) the following further conditions that, at
or before the Closing Date:
6.1. The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of each
Acquired Fund in accordance with the provisions of the TVP Trust's Declaration
of Trust and Bylaws and certified copies of the resolutions evidencing such
approval shall have been delivered to the corresponding Acquiring Fund;
6.2. On the Closing Date, no action, suit or other proceeding shall be
threatened or pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein;
6.3. All consents of other parties and all other consents, orders and permits
of Federal, state, and local regulatory authorities deemed necessary by the
Acquiring Funds or the Acquired Funds to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Funds or the Acquired Funds, provided that either party hereto may
for itself waive any of such conditions;
6.4. The VIP Trust's registration statement shall have become effective under
the 1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act; and
6.5 The TVP Trust shall have received on the Closing Date the opinion of
Jorden, Burt, Boros, Cicchetti, Berenson & Johnson LLP in a form reasonably
satisfactory to the TVP Trust, and dated as of the Closing Date, to the effect
that: (a) the VIP Trust has been duly formed and is validly existing and in
good standing under the laws of the Commonwealth of Massachusetts; and (b) the
Agreement has been duly authorized, executed and delivered by the VIP Trust on
behalf of each Acquiring Fund and constitutes a valid and legally binding
obligation of each Acquiring Fund; and (c) the Agreement is enforceable against
the VIP Trust in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
6.5. The VIP Trust shall have received on the Closing Date the opinion of
Jorden, Burt, Boros, Cicchetti, Berenson & Johnson LLP in a form reasonably
satisfactory to the VIP Trust, dated as of the Closing Date, to the effect
that: (a) the TVP Trust has been duly formed and is in good standing under the
laws of the Commonwealth of Massachusetts; (b) the Agreement has been duly
authorized, executed and delivered by the TVP Trust, on behalf of each Acquired
Fund, and constitutes a valid and legally binding obligation of each Acquired
Fund; and (c) the Agreement is enforceable against each Acquired Fund in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
6.6. The parties shall have received the opinion of Jorden, Burt, Boros,
Cicchetti, Berenson & Johnson LLP addressed to the TVP Trust and the VIP as to
the federal income tax consequences of the Reorganization (the "Tax Opinion").
In rendering the Tax Opinion, such counsel may rely as to factual matters,
exclusively and without independent verification, on the representations made
in this Agreement and each Fund's separate covenants. The Tax Opinion shall be
substantially to the effect that, based on the facts and assumptions stated
therein and conditioned on consummation of the Reorganization in accordance
with this Agreement, for federal income tax purposes:
6.7.1 The transfer of all or substantially all of the Acquired Funds' assets in
exchange for shares of the applicable Acquiring Funds and the distribution of
such shares to the shareholders of the Acquired Funds in liquidation of the
Acquired Funds will constitute a "reorganization" within the meaning of Section
368(a)(1) of the Code;
6.7.2. No gain or loss will be recognized by an Acquiring Fund upon the
receipt of the assets of the applicable Acquired Fund solely in exchange or the
Acquiring Fund Shares
6.7.3. No gain or loss will be recognized by an Acquired Fund upon the
transfer of the applicable Acquired Fund assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares or upon the distribution (whether actual
or constructive) of the Acquiring Fund Shares to Acquired Fund shareholders in
exchange for their shares of the Acquired Fund
6.7.4. No gain or loss will be recognized by the Acquired Fund shareholders
upon the exchange of their Acquired Fund shares for the applicable Acquiring
Fund Shares;
6.7.5. The tax basis of each Acquired Fund's assets acquired by the
applicable Acquiring Fund will be the same as the tax basis of such assets to
the Acquired Fund immediately prior to the Reorganization
6.7.6. The tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund shareholders pursuant to the Reorganization will be the same as
the tax basis of the Acquired Fund shares held by such shareholder immediately
prior to the Reorganization
6.7.7. The holding period of the assets of each Acquired Fund in the hands
of the applicable Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and
6.7.8. The holding period of the Acquiring Fund Shares to be received by
each Acquired Fund's shareholders will include the period during which the
Acquired Fund shares exchanged therefor were held by such shareholder (provided
the Acquired Fund shares were held as capital assets on the date of the
Reorganization).
7. BROKERAGE FEES AND EXPENSES
7.1. Each Acquiring Fund and each Acquired Fund represents and warrants to the
other that it has no obligations to pay any brokers or finders fees in
connection with the transactions provided for herein.
7.2. Each party to this Agreement shall bear or cause to be borne by an
appropriate affiliate its own expenses in connection with carrying out the
terms of this Agreement.
8. TERMINATION
8.1. This Agreement may be terminated by the mutual agreement of the VIP Trust
and the TVP Trust. In addition, this Agreement may be terminated as follows at
or prior to the Closing Date:
(a) This Agreement may be terminated as to any Acquired Fund by resolution of
the Board of Trustees of that Acquired Fund if, in good faith opinion of such
Board, proceeding with the Agreement is not in the best interests of the
Acquired Fund or its shareholders; or
(b) This Agreement may be terminated as to any Acquiring Fund by resolution of
the Board of Trustees of that Acquiring Fund if, in the good faith opinion of
such Board, proceeding with the Agreement is not in the best interests of that
Acquiring Fund or its shareholders.
The termination of a Reorganization between an Acquired Fund and its
corresponding Acquiring Fund, shall not affect the consummation or validity of
a Reorganization with respect to any other corresponding funds, and the
provisions of this Agreement shall be construed to effect this intent,
including, without limitation, as the context requires, construing the terms
"Acquiring Fund" and "Acquired Fund" as meaning only those TVP Funds and VIP
Funds, respectively, which are involved in a Reorganization as of a Closing
Date.
8.2. If this Agreement is terminated and the transactions contemplated hereby
are abandoned, this Agreement shall become void and have no effect, without any
liability on the part of any party hereto.
9. AMENDMENTS
9.1. This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the TVP
Trust and the VIP Trust; provided, however, that following the meeting of the
Acquired Funds' Shareholders, no such amendment may have the effect of changing
the provisions for determining the number of shares of each Acquiring Fund
shares to be issued to the shareholders of the corresponding Acquired Fund
under this Agreement to the detriment of such shareholders without their
further approval.
10. ENTIRE AGREEMENT
10.1. This Agreement constitutes the entire agreement between the parties
and supersedes any prior or contemporaneous understanding or arrangement
with respect to the subject matter hereof.
11. SURVIVAL OF WARRANTIES
11.1. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
herein.
12. LIABILITY AND INDEMNIFICATION
12.1. The parties acknowledge that the TVP Trust and the VIP Trust are
business trusts, as defined by Massachusetts law. Notice is hereby given that
this Agreement is executed on behalf of each Fund's trustees solely in their
capacity as trustees, and not individually, and that each Fund's obligations
under this Agreement are not binding on or enforceable against any of its
trustees, officers, or shareholders, but are only binding on and enforceable
against the respective Funds' assets and property. Each Fund agrees that, in
asserting any rights or claims under this Agreement, it shall look only to the
other Fund's assets and property in settlement of such rights or claims and not
to such trustees, officers or trustees.
12.2. The Acquiring Funds agree to indemnify and hold harmless each
trustee of the Acquired Fund at the time of the execution of this Agreement,
whether or not such person is or becomes a trustee of the Acquiring Funds
subsequent to the Reorganization, against expenses, including reasonable
attorney's fees, judgments, fines and amount paid in settlement, actually and
reasonably incurred by such trustee in connection with any claim that is
asserted against such trustee arising out of such person's service as a trustee
of the Acquired Funds, provided that such indemnification shall be limited to
the full extent of indemnification that is available to the trustees of the
Acquiring Funds pursuant to the provisions of applicable law.
12.3. No Acquired Fund shall have any liability for the obligations of any
other Acquired Fund hereunder and no Acquiring Fund shall have any liability
for the obligation of any other Acquiring Fund hereunder.
13 WAIVER
13.1. At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Trustees of the VIP Trust or those of the TVP
Trust if, in the judgment of both Boards of Trustees, such waiver will not
alter the shares to be received by shareholders of the Acquired Funds or
otherwise have a material adverse effect on the benefits intended under this
Agreement to the shareholders of the Acquiring Funds or the Acquired Funds, as
the case may be.
14. NOTICES
14.1. Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, certified mail or overnight express courier addressed to:
For TVP Funds, on behalf of itself or each Acquired Fund:
Barbara Green, Esq.
100 Fountain Parkway,
St. Petersburgh, Florida 33716
For VIP Funds, on behalf of itself or each Acquiring Fund:
Karen Skidmore, Esq.
777 Mariners Island Boulevard
San Mateo, California 94404
15. MISCELLANEOUS
15.1. The headings contained herein are for reference purposes only and
shall note affect in any way the meaning or interpretation or this Agreement.
15.2. Whenever the terms "hereto", "hereunder", "herein" or "hereof" are
used in this Agreement, they shall be construed as referring to this entire
Agreement.
15.3. This Agreement may be executed by any number of counterparts, each
of which shall be deemed an original.
15.4. This Agreement shall be governed by and construed in accordance with
the laws of the state of Massachusetts, without giving effect to the conflict
of laws principles otherwise applicable therein.
15.5. Nothing expressed or implied herein is intended or shall be
construed to confer upon or give any person, firm, trust or corporation other
than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
15.6. Any announcement or similar publicity with respect to this Agreement
or the transactions contemplated herein shall be made only at such time and in
such manner as the parties shall agree, provided that nothing herein shall
prevent either party upon notice to the other party from making such public
announcements as such party's counsel may consider advisable in order to
satisfy the party's legal and contractual obligations in such regard.
15.7. Subject to the conditions set forth in this Agreement, the failure
of one Acquired Fund to consummate the transactions contemplated hereby shall
not affect the consummation or validity of the Reorganization with respect to
any other Acquired Fund, and the provisions of this Agreement shall be
construed to effect this intent, including, without limitation, as the context
requires, construing the terms "Acquiring Funds" and "Acquired Funds" to mean
only those series of VIP Funds and TVP Funds, respectively, which are involved
in the Reorganization as of the Closing Date.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its President or Vice President and its seal to be affixed thereto
and attested by its Secretary or Assistant Secretary.
Attest Templeton Variable Products Series Fund on behalf of:
Franklin Large Cap Growth Investments Fund
Franklin Small Cap Investments Fund
Mutual Shares Investments Fund
Templeton Asset Allocation Fund
Templeton Bond Fund
Templeton Developing Markets Fund
Templeton International Fund
Templeton Stock Fund
Franklin S&P 500 Index Fund
Franklin Strategic Income Investments Fund
/s/ Karen Skidmore_______________ By: /s/ Harmon E. Burns
Karen Skidmore Harmon E. Burns
Assistant Secretary Vice President
Attest: Franklin Templeton Variable Insurance
Products Trust on behalf of:
Franklin Large Cap Growth Securities Fund
Franklin Small Cap Fund
Mutual Shares Securities Fund
Templeton Global Asset Allocation Fund
Templeton Global Income Securities Fund
Templeton Developing Markets Equity Fund
Templeton International Equity Fund
Templeton Global Growth Fund
Franklin S&P 500 Index Fund
Franklin Strategic Income Securities Fund
/s/ Karen Skidmore_______________ By: /s/ Harmon E. Burns
Karen Skidmore Harmon E. Burns
Assistant Secretary Vice President
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N-SAR, Item 77.doc 14
