File Nos. 333-77265
AS FILED AUGUST 17, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 1
(Check appropriate box or boxes)
FRANKLIN STRATEGIC SERIES
(Exact Name of Registrant as Specified in Charter)
(650) 312-2000
(Area Code and Telephone Number)
777 MARINERS ISLAND BLVD.
SAN MATEO, CA 94403-7777
(Address of Principal Executive Offices
Number, Street, City, State, Zip Code)
DEBORAH R. GATZEK
777 MARINERS ISLAND BLVD.
SAN MATEO, CA 94403-7777
(Name and Address of Agent for Service,
Number, Street, City, State, Zip Code)
Copies to:
BRUCE G. LETO, ESQUIRE
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 ONE COMMERCE SQUARE
PHILADELPHIA, PA 19103
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
TITLE OF THE SECURITIES BEING REGISTERED: SHARES OF BENEFICIAL INTEREST WITH
PAR VALUE OF $0.01. NO FILING FEE IS REQUIRED BECAUSE AN INDEFINITE NUMBER
OF SHARES HAVE PREVIOUSLY BEEN REGISTERED PURSUANT TO RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. A RULE 24F-2 NOTICE FOR THE REGISTRANT'S
FISCAL YEAR ENDED APRIL 30, 1998 WAS FILED ON JULY 27, 1998.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE IMMEDIATELY PURSUANT TO
RULE 485(B).
FORM N-14
PART C. OTHER INFORMATION
Item 15. INDEMNIFICATION
Please see the Agreement and Declaration of Trust, By-Laws, Management,
and Distribution Agreements, previously filed as exhibits and incorporated
herein by reference. Notwithstanding the provisions contained in the
Registrant's By-Laws, in the absence of authorization by the appropriate
court on the merits pursuant to said By-Laws, any indemnification under said
By-Laws shall be made by Registrant only if authorized in the manner provided
by such By-Laws.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
Item 16. EXHIBITS (Incorporated by reference to the filings as noted).
The following exhibits are incorporated herein by reference, except
Exhibits 4(i), and 12(i) which are attached.
(1) Copies of the charter as now in effect;
(i) Agreement and Declaration of Trust Franklin California 250
Growth Index Fund dated January 22, 1991
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(ii) Certificate of Trust of Franklin California 250 Growth
Index Fund dated January 22, 1991
Filing: Post Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(iii) Certificate of Amendment to Certificate of Trust of
Franklin California 250 Growth Index Fund dated November
19, 1991
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(iv) Certificate of Amendment to the Certificate of Trust of
Franklin Strategic Series dated May 14, 1992
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(v) Certificate of Amendment of Agreement and Declaration of
Trust of Franklin Strategic Series dated April 18, 1995
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: August 6, 1996
(2) Copies of the existing By-Laws or instruments corresponding
thereto;
(iv) Amended and Restated By-Laws of Franklin California 250
Growth Index Fund as of April 25, 1991
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(ii) Amendment to By-Laws dated October 27, 1994
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(3) Copies of any voting trust agreement with respect to more than
five percent of any class of equity securities of the Registrant;
Not Applicable
(4) The Agreement and Plan of Reorganization is included in this
Registration Statement as Exhibit A to the Prospectus/Proxy
Statement.
(i) Agreement and Plan of Reorganization
(5) Specimens or copies of each security issued by the Registrant,
including copies of all constituent instruments, defining the
rights of the holders of such securities, and copies of each
security being registered;
Not Applicable
(6) Copies of all investment advisory contracts relating to the
management of the assets of the Registrant;
(i) Management Agreement between Registrant on behalf of
Franklin Global Health Care Fund, Franklin Small Cap Growth
Fund, Franklin Global Utilities Fund and Franklin Natural
Resources Fund, and Franklin Advisers, Inc., dated February
24, 1992
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(ii) Management Agreement between the Registrant, on behalf of
Franklin Strategic Income Fund, and Franklin Advisers,
Inc., dated May 24, 1994
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(iii) Subadvisory Agreement between Franklin Advisers, Inc., on
behalf of the Franklin Strategic Income Fund, and Templeton
Investment Counsel, Inc., dated May 24, 1994
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: August 6, 1996
(iv) Amended and Restated Management Agreement between the
Registrant, on behalf of Franklin California Growth Fund,
and Franklin Advisers, Inc., dated July 12, 1993
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(v) Management Agreement between the Registrant, on behalf of
Franklin Blue Chip Fund, and Franklin Advisers, Inc. dated
February 13, 1996
Filing: Post-Effective Amendment No. 18 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: March 14, 1996
(vi) Management Agreement between the Registrant, on behalf of
Franklin Institutional MidCap Growth Fund (now know as
Franklin MidCap Growth Fund), and Franklin Advisers, Inc.
dated January 1, 1996
Filing: Post-Effective Amendment No. 19 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: March 27, 1996
(vii) Amendment dated August 1, 1995 to the Management Agreement
between the Registrant, on behalf of Franklin California
Growth Fund, and Franklin Advisers, Inc., dated July 12,
1993
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No: 33-39088
Filing Date: August 6, 1996
(viii)Amendment dated August 1, 1995 to the Management
Agreement between the Registrant, on behalf of Franklin
Global Health Care Fund, Franklin Small Cap Growth Fund,
Franklin Global Utilities Fund, and Franklin Natural
Resources Fund, and Franklin Advisers, Inc., dated February
24, 1992
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: August 6, 1996
(ix) Amendment dated August 1, 1995 to the Management Agreement
between the Registrant, on behalf of Franklin Strategic
Income Fund, and Franklin Advisers, Inc., dated May 24, 1994
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: August 6, 1996
(x) Management Agreement between the Registrant, on behalf of
Franklin Biotechnology Discovery Fund, and Franklin
Advisers, Inc., dated July 15, 1997
Filing: Post-Effective Amendment No. 25 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: August 22, 1997
(xi) Administration Agreement between the Registrant, on behalf
of Franklin Biotechnology Discovery Fund, and Franklin
Templeton Services, Inc., dated July 15, 1997
Filing: Post-Effective Amendment No 25 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: August 22, 1997
(xii) Investment Advisory Agreement between the Registrant, on
behalf of Franklin U.S. Long Short Fund, and Franklin
Advisers, Inc., dated February 18, 1999
Filing: Post-Effective Amendment No. 31 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: March 11, 1999
(xiii)Form of Investment Advisory Agreement between the
Registrant, on behalf of Franklin Large Cap Growth Fund,
and Franklin Advisers, Inc.
Filing: Post-Effective Amendment No. 32 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: March 24, 1999
(xiv) Form of Investment Advisory Agreement between the
Registrant, on behalf of Franklin Aggressive Growth Fund,
and Franklin Advisers, Inc.
Filing: Post-Effective Amendment No. 33 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: April 9, 1999
(7) Copies of each underwriting or distribution contract between the
Registrant and a principal underwriter, and specimens or copies
of all agreements between principal underwriters and dealers;
(i) Amended and Restated Distribution Agreement between
Registrant, on behalf of all Series except Franklin
Strategic Income Fund, and Franklin/Templeton Distributors,
Inc., dated April 23, 1995
Filing: Post-Effective Amendment No. 14 to
Registration Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(ii) Amended and Restated Distribution Agreement between the
Registrant, on behalf of Franklin Strategic Income Fund,
and Franklin Templeton Distributors, Inc., dated March 29,
1995
Filing: Post-Effective Amendment No. 14 to
Registration Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(iii) Form of Dealer Agreement between Franklin/Templeton
Distributors, Inc., and Securities Dealers dated March 1,
1998
Filing: Post-Effective Amendment No. 30 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: December 23, 1998
(8) Copies of all bonus, profit sharing, pension or other similar
contracts or arrangements wholly or partly for the benefit of
directors or officers of the Registrant in their capacity as
such; any such plan that is not set forth in a formal document,
furnish a reasonably detailed description thereof;
Not Applicable
(9) Copies of all custodian agreements and depository contracts under
Section 17(f) of the 1940 Act, with respect to securities and
similar investments of the Registrant, including the schedule of
remuneration;
(i) Master Custody Agreement between the Registrant and Bank of
New York dated February 16, 1996
Filing: Post-Effective Amendment No. 19 to
Registration Statement on Form N-1A
File No. 33-39088
Filing Date: March 14, 1996
(ii) Terminal Link Agreement between the Registrant and Bank of
New York dated February 16, 1996
Filing: Post-Effective Amendment No. 19 to
Registration Statement on Form N-1A
File No. 33-39088
Filing Date: March 14, 1996
(iii) Amendment dated May 7, 1997 to Master Custody Agreement
between Registrant and Bank of New York dated February 16,
1996
Filing: Post-Effective Amendment No. 27 to
Registration Statement on Form N-1A
File No. 33-39088
Filing Date: March 13, 1998
(iv) Amendment dated February 27, 1998 to Master Custody
Agreement between Registrant and Bank of New York dated
February 16,1996
Filing: Post-Effective Amendment No.30 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: December 23, 1998
(v) Foreign Custody Agreement between the Registrant and The
Bank of New York dated February 27, 1998
Filing: Post-Effective Amendment No. 30 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: December 23, 1998
(10) Copies of any plan entered into by Registrant pursuant to Rule
12b-1 under the 1940 Act, which describes all material aspects of
the financing of distribution of Registrant's shares, and any
agreements with any person relating to implementation of such
plan.
(i) Amended and Restated Distribution Plan between the
Registrant, on behalf of Franklin California Growth Fund,
Franklin Small Cap Growth Fund, Franklin Global Health Care
Fund and Franklin Global Utilities Fund, and
Franklin/Templeton Distributors, Inc., dated July 1, 1993
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(ii) Distribution Plan between the Registrant, on behalf of
Franklin Global Utilities Fund - Class II, and
Franklin/Templeton Distributors, Inc., dated March 30, 1995
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(iii) Distribution Plan pursuant to Rule 12b-1 between the
Registrant, on behalf of the Franklin Strategic Income
Fund, and Franklin/Templeton Distributors, Inc., dated May
24, 1994
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(iv) Distribution Plan pursuant to Rule 12b-1 between the
Registrant, on behalf of the Franklin Natural Resources
Fund, and Franklin/Templeton Distributors, Inc., dated June
1, 1995
Filing: Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: June 1, 1995
(v) Distribution Plan pursuant to Rule 12b-1 between the
Registrant, on behalf of the Franklin MidCap Growth Fund,
and Franklin/Templeton Distributors, Inc., dated June 1,
1996
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: August 7, 1996
(vi) Distribution Plan pursuant to Rule 12b-1 between the
Registrant, on behalf of the Franklin Blue Chip Fund, and
Franklin/Templeton Distributors, Inc., dated May 28, 1996
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: August 7, 1996
(vii) Distribution Plan pursuant to Rule 12b-1 between the
Registrant, on behalf of Franklin Small Cap Growth Fund -
Class II, and Franklin/Templeton Distributors, Inc., dated
September 29, 1995
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: August 7, 1996
(viii)Distribution Plan pursuant to Rule 12b-1 between the
Registrant, on behalf of Franklin Biotechnology Discovery
Fund and Franklin/Templeton Distributors, Inc., dated
September 15, 1997
Filing: Post-Effective Amendment No. 27 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: March 13, 1998
(ix) Distribution Plan pursuant to Rule 12b-1 between the
Registrant, on behalf of Franklin California Growth Fund -
Class II and Franklin Global Health Care Fund - Class II,
and Franklin/Templeton Distributors, Inc., dated September
3, 1996
Filing: Post-Effective Amendment No. 26 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: August 29, 1997
(x) Distribution Plan pursuant to Rule 12b-1 between Registrant
on behalf of Franklin Strategic Income Fund - Class II, and
Franklin/Templeton Distributors, Inc. dated February 26,
1998
Filing: Post-Effective Amendment No. 28 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: April 21, 1998
(xi) Distribution Plan pursuant to Rule 12b-1 between the
Registrant on behalf of California Growth Fund - Class B
and Franklin/Templeton Distributors, Inc. dated October 16,
1998
Filing: Post-Effective Amendment No. 33 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: March 24, 1999
(xii) Distribution Plan pursuant to Rule 12b-1 between the
Registrant on behalf of Franklin Global Health Care Fund -
Class B and Franklin/Templeton Distributors, Inc. dated
October 16, 1998
Filing: Post-Effective Amendment No. 33 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: March 24, 1999
(xiii)Distribution Plan pursuant to Rule 12b-1 between the
Registrant on behalf of Franklin Global Utilities Fund -
Class B and Franklin/Templeton Distributors, Inc. dated
October 16, 1998
Filing: Post-Effective Amendment No. 33 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: March 24, 1999
(xiv) Distribution Plan pursuant to Rule 12b-1 between the
Registrant on behalf of Franklin Strategic Income Fund -
Class B and Franklin/Templeton Distributors, Inc. dated
October 16, 1998
Filing: Post-Effective Amendment No. 33 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: March 24, 1999
(11) Legal opinion of Stradley, Ronon, Stevens & Young LLP, counsel to
the Registrant, as to the legality of the securities being
registered, is incorporated herein by reference to Post-Effective
Amendment No. 31 to Registrant's Registration Statement on Form
N-1A (File Nos. 33-39088, 811-6243) as filed electronically with
the Commission on March 11, 1999.
(12) An opinion, and consent to its use, of counsel, supporting the
tax matters and consequences to shareholders discussed in the
prospectus.
(i) Opinion and Consent of Counsel Supporting Tax Matters
and Consequences to Shareholders dated August 12, 1999
(13) Copies of all other material contracts not made in the ordinary
course of business which are to be performed in whole or in part
at or after the date of filing the Registration Statement:
(i) Subcontract for Fund Administrative Services dated October
1, 1996 and Amendment thereto dated April 30, 1998 between
Franklin Advisers, Inc. and Franklin Templeton Services,
Inc.
Filing: Post-Effective Amendment No. 30 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: December 23, 1998
(ii) Administration Agreement between the Registrant, on behalf
of Franklin Biotechnology Discovery Fund, and Franklin
Templeton Services, Inc., dated July 15, 1997
Filing: Post-Effective Amendment No. 25 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: August 22, 1997
(iii) Fund Administration Agreement between the Registrant, on
behalf of Franklin U.S. Long-Short Fund, and Franklin
Templeton Services, Inc. dated February 18, 1999
Filing: Post-Effective Amendment No. 31 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: March 11, 1999
(iv) Form of Fund Administration Agreement between the
Registrant, on behalf of Franklin Large Cap Growth Fund,
and Franklin Templeton Services, Inc.
Filing: Post-Effective Amendment No. 32 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: March 24, 1999
(v) Form of Fund Administration Agreement between the
Registrant, on behalf of Franklin Aggressive Growth Fund,
and Franklin Templeton Services, Inc.
Filing: Post-Effective Amendment No. 33 to Registration
Statement on Form N-1A
File No. 33-39088
Filing Date: April 9, 1999
(14) Copies of any other opinions, appraisals or rulings, and consents
to their use relied on in preparing the registration statement
and required by Section 7 of the 1933 Act.
(i) Consent of PricewaterhouseCoopers, LLP, independent
auditors of Franklin Strategic Series
Filing: Registration Statement on Form N-14
File No. 333-77265
Filing Date: April 28, 1999
(ii) Consent of Tait, Weller & Baker, independent auditors of
Franklin Managed Trust
Filing: Registration Statement on Form N-14
File No. 333-77265
Filing Date: April 28, 1999
(15) All financial statements omitted from Item 14(a)(1):
Not Applicable
(16) (i) Power of Attorney for Franklin Strategic Series dated April
16, 1998
Filing: Post-Effective Amendment No. 28 to
Registration Statement on Form N-1A
File No. 33-39088
Filing Date: April 21, 1998
(ii) Certificate of Secretary for Franklin Strategic Series
dated April 16, 1998
Filing: Post-Effective Amendment No. 28 to
Registration Statement on Form N-1A
File No. 33-39088
Filing Date: April 21, 1998
(iii) Power of Attorney for Franklin Strategic Series dated
February 18, 1999
Filing: Registration Statement on Form N-14
File No. 333-77265
Filing Date: April 28, 1999
(iv) Certificate of Secretary for Franklin Strategic Series
dated February 18, 1999
Filing: Registration Statement on Form N-14
File No. 333-77265
Filing Date: April 28, 1999
(17) Any additional exhibits which the Registrant may wish to file:
None
Item 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this Registration Statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may
be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed as a part
of an amendment to the registration statement and will not be
used until the amendment is effective, and that, in determining
any liability under the 1933 Act, each Post-Effective Amendment
shall be deemed to be a new Registration Statement for the
securities offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide offering
for them.
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of San Mateo, and
the State of California, on the 13th day of August, 1999.
Franklin Strategic Series
(Registrant)
By: /s/KAREN L. SKIDMORE
Karen L. Skidmore
Assistant Vice President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
RUPERT H. JOHNSON, JR.* Principal Executive Officer
Rupert H. Johnson, Jr. and Trustee
Dated: August 13, 1999
MARTIN L. FLANAGAN* Principal Financial Officer
Martin L. Flanagan Dated: August 13, 1999
DIOMEDES LOO-TAM* Principal Accounting Officer
Diomedes Loo-Tam Dated: August 13, 1999
FRANK H. ABBOTT, III* Trustee
Frank H. Abbott, III Dated: August 13, 1999
HARRIS J. ASHTON* Trustee
Harris J. Ashton Dated: August 13, 1999
HARMON E. BURNS* Trustee
Harmon E. Burns Dated: August 13, 1999
S. JOSEPH FORTUNATO* Trustee
S. Joseph Fortunato Dated: August 13, 1999
EDITH E. HOLIDAY* Trustee
Edith E. Holiday Dated: August 13, 1999
CHARLES B. JOHNSON* Trustee
Charles B. Johnson Dated: August 13, 1999
FRANK W.T. LAHAYE* Trustee
Frank W.T. LaHaye Dated: August 13, 1999
GORDON S. MACKLIN* Trustee
Gordon S. Macklin Dated: August 13, 1999
*By /s/ Karen L. Skidmore
Attorney-in-Fact
(Pursuant to Power of Attorney previously filed)
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT
EX-4(i) Agreement and Plan of Reorganization
EX-12(i) Opinion and Consent of Counsel Supporting
Tax Matters and Consequences to Shareholders
dated August 12, 1999
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement and Plan"), made as
of this 1st day of June, 1999, by and between Franklin Managed Trust
("Managed Trust"), a business trust created under the laws of the
Commonwealth of Massachusetts in 1986, with its principal place of business
at 777 Mariners Island Boulevard, San Mateo, California 94404, on behalf of
its series Franklin Investment Grade Income Fund (the "Investment Grade
Fund"), and Franklin Strategic Series ("Strategic Series"), a business trust
created under the laws of the State of Delaware in 1991, with its principal
place of business at 777 Mariners Island Boulevard, San Mateo, California
94404, on behalf of its series Franklin Strategic Income Fund ("Strategic
Income Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by Strategic Series on
behalf of Strategic Income Fund of substantially all of the property, assets
and goodwill of Investment Grade Fund in exchange solely for shares of
beneficial interest, par value of $0.01 per share, of Strategic Income Fund -
Class A ("Strategic Income Fund Class A Shares") and shares of beneficial
interest, par value of $.01 per share, of Strategic Income Fund - Advisor
Class ("Strategic Income Fund Advisor Class Shares"); (ii) the distribution
of (a) Strategic Income Fund Class A Shares to the shareholders of Class A
shares of Investment Grade Fund; and (b) Strategic Income Fund Advisor Class
Shares to the shareholders of Advisor Class shares of Investment Grade Fund
according to their respective interests; and (iii) the subsequent dissolution
of Investment Grade Fund as soon as practicable after the closing (as defined
in Section 3, hereinafter called the "Closing"), all upon and subject to the
terms and conditions of this Agreement and Plan hereinafter set forth.
AGREEMENT
In order to consummate the Plan of Reorganization and in consideration of
the promises 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 INVESTMENT
GRADE FUND.
(a) Subject to the terms and conditions of this Agreement and Plan, and
in reliance on the representations and warranties of the Strategic Series
herein contained, and in consideration of the delivery by Strategic Series of
the number of its Strategic Income Fund Class A Shares and Strategic Income
Fund Advisor Class Shares hereinafter provided, Managed Trust, agrees that it
will convey, transfer and deliver to Strategic Series at the Closing all of
Investment Grade 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 Agreement and 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 Investment Grade
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 (iii) pay such contingent liabilities as the
Board of Trustees shall reasonably deem to exist against Investment Grade
Fund, if any, at the Closing Date, for which contingent and other appropriate
liabilities reserves shall be established on Investment Grade Fund's books
(hereinafter "Net Assets"). Investment Grade 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 Agreement and Plan, and
in reliance on the representations and warranties of Managed Trust herein
contained, and in consideration of such sale, conveyance, transfer, and
delivery, Strategic Series agrees at the Closing to deliver to Managed Trust:
(i) the number of Strategic Income Fund Class A Shares determined by dividing
the net asset value per share of Investment Grade Fund Class A Shares by the
net asset value per share of Strategic Income Fund Class A Shares, and
multiplying the result thereof by the number of outstanding Investment Grade
Fund Class A Shares, as of 1:00 p.m. Pacific time on the Closing Date; and
(ii) the number of Strategic Income Fund Advisor Class Shares determined by
dividing the net asset value per share of Investment Grade Fund Advisor Class
Shares by the net asset value per share of Strategic Income Fund Advisor
Class Shares, and multiplying the result thereof by the number of outstanding
Investment Grade 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, Managed Trust shall dissolve
Investment Grade Fund and distribute pro rata to the shareholders of
Investment Grade Fund of record as of the close of business on the Closing
Date, the Strategic Income Fund Class A Shares and Strategic Income Fund
Advisor Class Shares to be delivered to Managed Trust pursuant to this
Section 1. Such liquidation and distribution shall be accomplished by the
establishment of accounts on the share records of Strategic Series relating
to Strategic Income Fund and noting in such accounts of the type and amounts
of such Strategic Income Fund shares which such former Investment Grade Fund
shareholders are due based on their respective holdings of Investment Grade
Fund as of the close of business on the Closing Date. Fractional Strategic
Income 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 Investment
Grade Fund shall be entitled to surrender the same to the transfer agent for
Strategic Income Fund in exchange for the number of Strategic Income Fund
Class A Shares or Strategic Income Fund Advisor Class Shares into which the
shares of the Investment Grade Fund theretofore represented by the
certificate or certificates so surrendered shall have been converted.
Certificates for Strategic Income Fund Class A Shares or Strategic Income
Fund Advisor Class 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
Investment Grade Fund shall be deemed for all Strategic Income Fund's
purposes to evidence ownership of the number of Strategic Income Fund Class A
Shares or Strategic Income Fund Advisor Class Shares into which the shares of
beneficial interest of Investment Grade Fund (which prior to the Closing were
represented thereby) have been converted.
2. VALUATION.
(a) The value of Investment Grade Fund's Net Assets to be acquired by
Strategic Income Fund hereunder shall be computed as of 1:00 p.m. Pacific
time on the Closing Date using the valuation procedures set forth in
Investment Grade Fund's currently effective prospectus.
(b) The net asset value of a share of beneficial interest of Strategic
Income Fund Class A or Strategic Income Fund Advisor Class 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 Strategic Income
Fund's currently effective prospectus.
(c) The net asset value of a share of beneficial interest of Investment
Grade Fund Class A Shares and Investment Grade Fund Advisor Class 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 Investment
Grade Fund's currently effective prospectus.
3. CLOSING AND CLOSING DATE.
The Closing Date shall be August 12, 1999, or such later date as the
parties may mutually agree. The Closing shall take place at the principal
office of Strategic Series at 2:00 p.m. Pacific time on the Closing Date.
Managed Trust shall have provided for delivery, as of the Closing, those net
assets of Investment Grade Fund to be transferred to Strategic Income Fund's
Custodian, Bank of New York, Mutual Funds Division, 90 Washington Street, New
York, NY 10286. Also, Managed Trust shall deliver at the Closing a list of
names and addresses of the shareholders of record of Investment Grade Fund
Class A Shares and Investment Grade Fund Advisor Class Shares and the number
of shares of beneficial interest owned by each such shareholder, indicating
thereon which such shares are represented by outstanding certificates and
which by book-entry accounts, all as of 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. Strategic Income Fund shall issue and deliver a
certificate or certificates evidencing the shares of beneficial interest of
Strategic Income Fund to be delivered to said transfer agent registered in
such manner as Managed Trust may request, or provide evidence satisfactory to
Managed Trust that such Strategic Income Fund Shares have been registered in
an account on the books of Strategic Income Fund in such manner as Managed
Trust may request.
4. REPRESENTATIONS AND WARRANTIES BY MANAGED TRUST ON BEHALF OF INVESTMENT
GRADE FUND.
Managed Trust on behalf of Investment Grade Fund represents and warrants
to Strategic Series that:
(a) Managed Trust is a business trust created under the laws of the
Commonwealth of Massachusetts on July 15, 1986, and is validly existing and
in good standing under the laws of that commonwealth. Managed 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 Investment
Grade Fund's 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, if any, pursuant to the private offering
exemption for the purpose of raising the required initial capital.
(b) Managed Trust is authorized to issue an unlimited number of shares
of beneficial interest, par value of $0.01 per share, each outstanding share
of which is fully paid, non-assessable, fully transferable and has full
voting rights. The Trust currently issues shares of two (2) series, which are
offered in Classes A, B, C and/or Advisor Class, depending on the particular
series. Investment Grade Fund offers two classes of shares, Class A and
Advisor Class. Managed Trust is authorized to issue an unlimited number of
shares of beneficial interest of each series.
(c) The financial statements appearing in Managed Trust's Annual Report
to Shareholders for the fiscal year ended September 30, 1998, audited by
Tait, Weller & Baker, copies of which have been delivered to Strategic
Series, fairly present the financial position of Investment Grade Fund as of
such date and the results of its operations for the periods indicated in
conformity with generally accepted accounting principles applied on a
consistent basis.
(d) The books and records of Investment Grade Fund made available to
Strategic Income Fund and/or its counsel accurately summarize the accounting
data represented and contain no material omissions with respect to the
business and operations of Investment Grade Fund.
(e) Managed Trust has the necessary power and authority to conduct
Investment Grade Fund's business as such business is now being conducted.
(f) Managed Trust is not a party to or obligated under any provision of
the Trust's Amended and Restated 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 the Trust's
execution of or performance under this Agreement and Plan.
(g) Managed Trust has elected to treat Investment Grade 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"), and Investment Grade Fund has qualified as a RIC for each taxable
year since its inception and will qualify as a RIC as of the Closing Date.
5. REPRESENTATIONS AND WARRANTIES BY STRATEGIC SERIES ON BEHALF OF STRATEGIC
INCOME FUND.
Strategic Series on behalf of Strategic Income Fund represents and
warrants to the Managed Trust that:
(a) Strategic Series is a business trust created under the laws of the
State of Delaware on January 25, 1991, and is validly existing and in good
standing under the laws of that state. Strategic Series is duly registered
under the 1940 Act as an open-end, management investment company and all of
Strategic Income Fund's shares sold have been sold pursuant to an effective
registration statement filed under the 1933 Act, except for those shares
sold, if any, pursuant to the private offering exemption for the purpose of
raising the required initial capital.
(b) Strategic Series is authorized to issue an unlimited number of
shares of beneficial interest, par value of $0.01 per share, and each
outstanding share of which is fully paid, non-assessable, fully transferable,
and has full voting rights. Strategic Series currently issues shares of nine
(9) series, which are offered in Classes A, B, C and/or Advisor Class,
depending on the particular series. Strategic Income Fund offers four classes
of shares, Class A, B, C and Advisor Class. Strategic Income Fund shares to
be issued pursuant to this Agreement and Plan will be fully paid,
non-assessable, freely transferable and have full voting rights.
(c) At the Closing, Strategic Income Fund shares will be eligible for
offering to the public in those states of the United States and jurisdictions
in which the shares of Investment Grade Fund are presently eligible for
offering to the public, and there are a sufficient number of Strategic Income
Fund shares registered under the 1933 Act to permit the transfers
contemplated by this Agreement and Plan to be consummated.
(d) The financial statements appearing in Strategic Series' Annual
Report to Shareholders for the fiscal year ended April 30, 1998, audited by
Coopers & Lybrand L.L.P., and the Semi-Annual Report to Shareholders for the
periods ended October 31, 1998, copies of which have been delivered to
Managed Trust, fairly present the financial position of Strategic Income Fund
as of such date and the results of its operations for the periods indicated
in conformity with generally accepted accounting principles applied on a
consistent basis.
(e) Strategic Series has the necessary power and authority to conduct
Strategic Income Fund's business as such business is now being conducted.
(f) Strategic Series is not a party to or obligated under any provision
of the Trust's 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 the Trust's execution of or performance
under this Agreement and Plan.
(g) Strategic Series has elected to treat Strategic Income Fund as a
RIC for federal income tax purposes under Part I of Subchapter M of the Code,
and Strategic Income Fund has qualified as a RIC for each taxable year since
its inception, and will qualify as a RIC as of the Closing Date.
6. REPRESENTATIONS AND WARRANTIES BY MANAGED TRUST AND STRATEGIC SERIES ON
BEHALF OF THEIR RESPECTIVE FUNDS.
Managed Trust and Strategic Series each represents and warrants to the
other that:
(a) The statement of assets and liabilities to be furnished by each of
Managed Trust and Strategic Series as of 1:00 p.m. Pacific time on the
Closing Date for the purpose of determining the number of Strategic Income
Fund Class A Shares and Strategic Income Fund Advisor Class Shares to be
issued pursuant to Section 1 of this Agreement and Plan will accurately
reflect the net assets in the case of Investment Grade Fund and the net
assets in the case of Strategic Income Fund, and outstanding shares, as of
such date, in conformity with generally accepted accounting principles
applied on a consistent basis.
(b) At the Closing, Investment Grade Fund and Strategic Income Fund
each 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 prospectus, there is
no material suit, judicial action, or legal or administrative proceeding
pending or threatened against the funds.
(d) There are no known actual or proposed deficiency assessments with
respect to any taxes payable by the funds.
(e) The execution, delivery, and performance of this Agreement and Plan
have been duly authorized by all necessary action of each Trust's Board of
Trustees, and this Agreement and Plan constitutes a valid and binding
obligation enforceable in accordance with its terms.
(f) Each fund, respectively, anticipates that consummation of this
Agreement and Plan will not cause Investment Grade Fund, in the case of
Managed Trust, and Strategic Income Fund, in the case of Strategic Series, 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) Each fund has the necessary power and authority to conduct its
business as such business is now being conducted.
7. COVENANTS OF MANAGED TRUST AND STRATEGIC SERIES.
(a) Managed Trust, on behalf of Investment Grade Fund, and Strategic
Series on behalf of Strategic Income Fund, each covenant to operate their
respective businesses as presently conducted between the date hereof and the
Closing.
(b) Managed Trust undertakes that it will not acquire Investment Grade
Fund shares for the purpose of making distributions thereof to anyone other
than Investment Grade Fund shareholders.
(c) Managed Trust undertakes that, if this Agreement and Plan is
consummated, it will dissolve Investment Grade Fund and rescind the
establishment of Investment Grade Fund as a series of Managed Trust.
(d) Managed Trust and Investment Grade Fund each agree that, by the
Closing, all of their federal and other tax returns and reports required by
law to be filed on or before such date shall have been filed, and all federal
and other taxes shown as due on said returns shall have either been paid or
adequate liability reserves shall have been provided for the payment of such
taxes.
(e) At the Closing, Managed Trust will provide Strategic Series with a
copy of the shareholder ledger accounts of Investment Grade Fund, certified
by its transfer agent or its President to the best of its or his knowledge
and belief, for all the shareholders of record of Investment Grade Fund's
shares as of 1:00 p.m. Pacific time on the Closing Date who are to become
shareholders of Strategic Income Fund as a result of the transfer of assets
that is the subject of this Agreement and Plan.
(f) Managed Trust agrees to mail to each shareholder of record entitled
to vote at the meeting of Investment Grade Fund's shareholders at which
action on this Agreement and 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) Strategic Series will file with the U.S. Securities and Exchange
Commission a registration statement on Form N-14 under the 1933 Act relating
to the Strategic Income Fund Shares issuable hereunder ("Registration
Statement"), and will use its best efforts to provide that the Registration
Statement becomes effective as promptly as 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 Investment
Grade 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 MANAGED TRUST AND STRATEGIC SERIES.
The obligations of Managed Trust and Strategic Series to effectuate this
Agreement and Plan and the Plan of Reorganization 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 Agreement and 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 this Agreement and Plan adopted by its Board of
Trustees, certified by its Secretary or equivalent officer.
(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 of Reorganization 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 Agreement and Plan and the Plan of Reorganization
contemplated hereby shall have been adopted and approved by the appropriate
action of the shareholders of Investment Grade Fund at an annual or special
meeting or any adjournment thereof.
(e) That each party shall have declared a distribution or distributions
prior to the Closing Date that, together with all previous distributions,
shall have the effect of distributing to its shareholders (i) all of its net
investment income and all of its net realized capital gains, 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 net investment income and net
realized capital gains from any period to the extent not otherwise declared
for distribution.
(f) That there shall be delivered to Managed Trust and Strategic Series
an opinion from Messrs. Stradley, Ronon, Stevens & Young, LLP, counsel to
Managed Trust and Strategic Series, to the effect that, provided the
acquisition contemplated hereby is carried out in accordance with this
Agreement and Plan and based upon certificates of the officers of Managed
Trust and Strategic Series with regard to matters of fact:
(1) The acquisition by Strategic Income Fund of substantially all the
assets of Investment Grade Fund as provided for herein in exchange for
Strategic Income Fund shares will qualify as a reorganization within the
meaning of Section 368(a)(1)(C) of the Code, and Investment Grade Fund and
Strategic Income Fund will each be a party to the respective reorganization
within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Investment Grade Fund upon
the transfer of substantially all of its assets to Strategic Income Fund in
exchange solely for voting shares of Strategic Income Fund (Sections 361(a)
and 357(a)). 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 Strategic Income Fund upon
the receipt of substantially all of the assets of Investment Grade Fund in
exchange solely for voting shares of Strategic Income Fund (Section 1032(a));
(4) The basis of the assets of Investment Grade Fund received by
Strategic Income Fund will be the same as the basis of such assets to
Investment Grade Fund immediately prior to the exchange (Section 362(b));
(5) The holding period of the assets of Strategic Income Fund received
by Investment Grade Fund will include the period during which such assets
were held by Investment Grade Fund (Section 1223(2));
(6) No gain or loss will be recognized to the shareholders of
Investment Grade Fund upon the exchange of their shares in Investment Grade
Fund for voting shares of Strategic Income Fund (Section 354(a));
(7) The basis of the Strategic Income Fund shares received by
Investment Grade Fund's shareholders shall be the same as the basis of the
shares of Investment Grade Fund exchanged therefor (Section 358(a)(1));
(8) The holding period of Strategic Income Fund shares received by
Investment Grade Fund's shareholders (including fractional shares to which
they may be entitled) will include the holding period of Investment Grade
Fund's shares surrendered in exchange therefor, provided that Investment
Grade Fund's shares were held as a capital asset on the date of the exchange
(Section 1223(1)); and
(9) Strategic Income Fund will succeed to and take into account as of
the date of the proposed transfer (as defined in Section 1.381(b)-1(b) of the
Income Tax Regulations) the items of Investment Grade Fund described in
Section 381(c) of the Code (as defined in Section 1.381(b)-1(b) of the Income
Tax Regulations), subject to the conditions and limitations specified in
Sections 381(b) and (c), 382, 383 and 384 of the Code and the Income Tax
Regulations thereunder.
(g) That Strategic Series, on behalf of Strategic Income Fund, shall
have received an opinion in form and substance satisfactory to it from
Messrs. Stradley, Ronon, Stevens & Young, LLP, counsel to Managed Trust, 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) Investment Grade Fund is a diversified series of Managed Trust
which was organized as a business trust under the laws of the Commonwealth of
Massachusetts on July 15, 1986, and is validly existing and in good standing
under the laws of that commonwealth;
(2) Managed Trust is authorized to issue an unlimited number of shares
of beneficial interest of its series, Investment Grade Fund, par value of
$0.01 per share, which series is subdivided into two (2) classes of shares,
Class A and Advisor Class. Assuming that the initial shares of beneficial
interest were issued in accordance with the 1940 Act and the Amended and
Restated Agreement and Declaration of Trust and By-Laws of Managed Trust, and
that all other outstanding shares of Investment Grade Fund were sold, issued
and paid for in accordance with the terms of Investment Grade Fund's
prospectus in effect at the time of such sales, each such outstanding share
is fully paid, non-assessable, fully transferable and has full voting rights;
(3) Managed Trust is an open-end investment company of the management
type registered as such under the 1940 Act;
(4) Except as disclosed in Investment Grade Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal
or administrative proceeding pending or threatened against Investment Grade
Fund, the unfavorable outcome of which would materially and adversely affect
Managed Trust or Investment Grade Fund;
(5) All actions required to be taken by Managed Trust to authorize this
Agreement and Plan and to effect the Plan of Reorganization contemplated
hereby have been duly authorized by all necessary action on the part of
Managed Trust; and
(6) Neither the execution, delivery, nor performance of this Agreement
and Plan by Managed Trust violates any provision of its Amended and Restated
Agreement and Declaration of Trust or By-Laws, or the provisions of any
agreement or other instrument known to such counsel to which the Managed
Trust is a party or by which Managed Trust on behalf of Investment Grade Fund
is otherwise bound; this Agreement and Plan is the legal, valid and binding
obligation of Managed Trust and is enforceable against Managed Trust in
accordance with its terms.
In giving the opinions set forth above, counsel may state that it is
relying on certificates of the officers of Managed Trust and/or Investment
Grade Fund with regard to matters of fact, and certain certifications and
written statements of governmental officials with respect to the good
standing of Managed Trust and Investment Grade Fund.
(h) That Managed Trust on behalf of Investment Grade Fund shall have
received an opinion in form and substance satisfactory to it from Messrs.
Stradley, Ronon, Stevens & Young, LLP, counsel to Strategic Series, 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) Strategic Income Fund is a non-diversified series of Strategic
Series, which was organized as a business trust under the laws of the State
of Delaware on January 25, 1991, and is validly existing and in good standing
under the laws of that state;
(2) Strategic Series is authorized to issue an unlimited number of
shares of beneficial interest of its series, Strategic Income Fund, par value
of $0.01 per share, which is further subdivided into four (4) classes of
shares, Classes A, B, C and Advisor Class. Assuming that the initial shares
of beneficial interest were issued in accordance with the 1940 Act, and the
Agreement and Declaration of Trust and By-Laws of Strategic Series, and that
all other outstanding shares of Strategic Income Fund were sold, issued and
paid for in accordance with the terms of Strategic Income Fund's prospectus
in effect at the time of such sales, each such outstanding share of Strategic
Income Fund is fully paid, non-assessable, freely transferable and has full
voting rights;
(3) Strategic Series is an open-end investment company of the
management type registered as such under the 1940 Act;
(4) Except as disclosed in Strategic Income Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal
or administrative proceeding pending or threatened against Strategic Income
Fund, the unfavorable outcome of which would materially and adversely affect
Strategic Series and/or Strategic Income Fund;
(5) Strategic Income Fund shares to be issued pursuant to the terms of
this Agreement and Plan have been duly authorized and, when issued and
delivered as provided in this Agreement and Plan, will have been validly
issued and fully paid and will be non-assessable by Strategic Income Fund;
(6) All actions required to be taken by Strategic Series and/or
Strategic Income Fund to authorize this Agreement and Plan and to effect the
Plan of Reorganization contemplated hereby have been duly authorized by all
necessary corporate action on the part of Strategic Series and Strategic
Income Fund;
(7) Neither the execution, delivery, nor performance of this Agreement
and Plan by Strategic Series and/or Strategic Income Fund violates any
provision of its Agreement and Plan and Declaration of Trust, its By-Laws, or
the provisions of any agreement or other instrument known to such counsel to
which Strategic Series is a party or by which Strategic Series on behalf of
Strategic Income Fund is otherwise bound; this Agreement and Plan is the
legal, valid and binding obligation of Strategic Series and is enforceable
against Strategic Series in accordance with its terms; and
(8) The registration statement of which the prospectus, dated September
1, 1998 as amended January 1, 1999, of Strategic Income Fund's Class A, B and
C is a part (the "Prospectus") is, at the time of the signing of this
Agreement and 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 such 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 Agreement
and 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 Strategic Series with regard to
matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of Strategic Series.
(i) That Managed Trust on behalf of Investment Grade Fund shall have
received a certificate from the President and Secretary of Strategic Series
to the effect that the statements contained in Strategic Income Fund's
Prospectus, at the time the Prospectus became effective, at the date of the
signing of this Agreement and 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 Strategic Series' Registration Statement relating to the
Strategic Income Fund Class A Shares and Strategic Income Fund Advisor Class
Shares to be delivered to the Investment Grade Fund's shareholders in
accordance with this Agreement and Plan shall have become effective, and no
stop order suspending the effectiveness of the Registration Statement or any
amendment or supplement thereto, shall have been issued prior to the Closing
Date or shall be in effect at Closing, and no proceedings for the issuance of
such an order shall be pending or threatened on that date.
(k) That the Strategic Income Fund Class A Shares and Strategic Income
Fund Advisor Class Shares to be delivered hereunder shall be eligible for
sale by Strategic Income Fund with each state commission or agency with which
such eligibility is required in order to permit the shares lawfully to be
delivered to each Investment Grade Fund shareholder.
(l) That, at the Closing, Managed Trust, on behalf of Investment Grade
Fund, transfers to Strategic Income Fund aggregate Net Assets of Investment
Grade 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 Investment Grade Fund on the Closing Date.
9. BROKERAGE FEES AND EXPENSES.
(a) Managed Trust and Investment Grade 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 Agreement and Plan shall be borne one-quarter by Investment Grade Fund,
one-quarter by Strategic Income Fund, one-quarter by Franklin Advisers, Inc.
and one-quarter by Franklin Advisory Services, LLC.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
(a) Anything contained in this Agreement and Plan to the contrary
notwithstanding, this Agreement and Plan may be terminated and the Plan of
Reorganization abandoned at any time (whether before or after approval
thereof by the shareholders of Investment Grade Fund) prior to the Closing or
the Closing may be postponed as follows:
(1) by mutual consent of Managed Trust and Strategic Series;
(2) by Managed Trust if any condition of its or Investment Grade Fund's
obligations set forth in Section 8 has not been fulfilled or waived; or
(3) by Strategic Series if any condition of its or Strategic Income
Fund's obligations set forth in Section 8 has not been fulfilled or waived.
An election by Managed Trust, on behalf of Investment Grade Fund, or
Strategic Series, on behalf of Strategic Income Fund to terminate this
Agreement and Plan and to abandon the Plan of Reorganization shall be
exercised by the respective Board of Trustees.
(b) If the transactions contemplated by this Agreement and Plan have
not been consummated by December 31, 1999, the Agreement and Plan shall
automatically terminate on that date, unless a later date is agreed to by
both Managed Trust and Strategic Series.
(c) In the event of termination of this Agreement and Plan pursuant to
the provisions hereof, the same shall become void and have no further effect,
and neither Managed Trust, Strategic Series, Investment Grade Fund nor
Strategic Income Fund, nor their trustees, officers, agents or shareholders
shall have any liability in respect of this Agreement and Plan.
(d) At any time prior to the Closing, any of the terms or conditions of
this Agreement and Plan may be waived by the party who is entitled to the
benefit thereof by action taken by that party's Board of Trustees, as
applicable, if, in the judgment of such Board, such action or waiver will not
have a material adverse affect on the benefits intended under this Agreement
and 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 of
Reorganization, and neither Managed Trust, Strategic Series, Investment Grade
Fund nor Strategic Income Fund, 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 or director, agent or shareholder of Managed Trust,
Strategic Series, Investment Grade Fund or Strategic Income Fund 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 Agreement and 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 Managed Trust or Strategic Series to be
acceptable, such terms and conditions shall be binding as if a part of this
Agreement and Plan without further vote or approval of the shareholders of
Investment Grade Fund, unless such terms and conditions shall result in a
change in the method of computing the number of Strategic Income Fund shares
to be issued to Investment Grade Fund in which event, unless such terms and
conditions shall have been included in the proxy solicitation material
furnished to the shareholders of Investment Grade Fund prior to the meeting
at which the transactions contemplated by this Agreement and Plan shall have
been approved, this Agreement and Plan shall not be consummated and shall
terminate unless Investment Grade Fund shall promptly call a special meeting
of shareholders at which such conditions so imposed shall be submitted for
approval.
11. ENTIRE AGREEMENT AND AMENDMENTS.
This Agreement and Plan embodies the entire Agreement between the parties
and there are no agreements, understandings, restrictions, or warranties
between the parties other than those set forth herein or herein provided for.
This Agreement and Plan may be amended only by mutual consent of the parties
in writing. Neither this Agreement and Plan nor any interest herein may be
assigned without the prior written consent of the other party.
12. COUNTERPARTS.
This Agreement and 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 Agreement and Plan shall be in writing and shall be deemed to have been
given if delivered or mailed, first class postage prepaid, addressed to
Franklin Managed Trust at 777 Mariners Island Boulevard, P. O. Box 7777, San
Mateo, CA 94403-7777, Attention: Secretary, or Franklin Strategic Series at
777 Mariners Island Boulevard, P.O. Box 7777, San Mateo CA 94403-7777,
Attention: Secretary, as the case may be.
14. GOVERNING LAW.
This Agreement and Plan shall be governed by and carried out in accordance
with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, Franklin Managed Trust on behalf of Franklin
Investment Grade Income Fund, and Franklin Strategic Series, on behalf of
Franklin Strategic Income Fund, have each caused this Agreement and Plan to
be executed on its behalf by its duly authorized officers, all as of the date
and year first-above written.
FRANKLIN MANAGED TRUST, on behalf of
Franklin Investment Grade Income Fund
Attest:
/s/ LEIANN NUZUM By: /s/ DEBORAH R.GATZEK
- ---------------------------------- -----------------------------------
Assistant Secretary Deborah R. Gatzek
Vice President and Secretary
FRANKLIN STRATEGIC SERIES, on behalf of
Franklin Strategic Income Fund
Attest:
/s/ LEIANN NUZUM By: /s/ DEBORAH R.GATZEK
- ---------------------------------- -----------------------------------
Assistant Secretary Deborah R. Gatzek
Vice President and Secretary
August 12, 1999
Board of Trustees
Franklin Managed Trust
777 Mariners Island Blvd.
San Mateo, CA 94404
Board of Trustees
Franklin Strategic Series
777 Mariners Island Blvd.
San Mateo, CA 94404
Re: AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF THE 1ST
DAY OF JUNE, 1999 (THE "AGREEMENT"), BY AND BETWEEN FRANKLIN
MANAGED TRUST, A MASSACHUSETTS BUSINESS TRUST, ON BEHALF OF ITS
SERIES FRANKLIN INVESTMENT GRADE FUND ("ACQUIRED FUND") AND
FRANKLIN STRATEGIC SERIES, A DELAWARE BUSINESS TRUST ON BEHALF OF
ITS SERIES FRANKLIN STRATEGIC INCOME FUND ("ACQUIRING FUND")
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the reorganization of Acquired Fund which will consist of (i)
the acquisition by the Acquiring Fund of substantially all of the property,
assets and goodwill of the Acquired Fund in exchange solely for shares of
beneficial interest, $0.01 par value, of the Acquiring Fund - Class A
("Acquiring Fund Class A Shares") and shares of beneficial interest, $0.01
par value, of the Acquiring Fund - Advisor Class ("Acquiring Advisor Class
Shares") (collectively "Acquiring Fund Shares"), (ii) the distribution of (a)
Acquiring Fund Class A Shares to the shareholders of Class A shares of
beneficial interest of the Acquired Fund; and (b) Acquiring Fund Advisor
Class Shares to the shareholders of Advisor Class shares of beneficial
interest of the Acquired Fund, according to their respective interests, and
(iii) the subsequent dissolution of the Acquired Fund as soon as practicable
after the closing (the "Reorganization"), all upon and subject to the terms
and conditions of the Agreement.
In rendering our opinion, we have reviewed and relied upon (a)
the Agreement and Plan of Reorganization, dated as of the 1st day of June,
1999, by and between the Acquiring Fund and the Acquired Fund ("Agreement"),
(b) the proxy materials provided to stockholders of the Acquired Fund in
connection with the Special Meeting of Stockholders of the Acquired Fund held
on July 26, 1999, (c) certain representations concerning the Reorganization
made to us by the Acquiring Fund and the Acquired Fund in a letter dated
August 12, 1999 (the "Representation Letter"), (d) all other documents,
financial and other reports and corporate minutes which we deemed relevant or
appropriate, and (e) such statutes, regulations, rulings and decisions as we
deemed material to the rendition of this opinion. All terms used herein,
unless otherwise defined, are used as defined in the Agreement.
For purposes of this opinion, we have assumed that the Acquired
Fund on the effective date of the Reorganization satisfies, and following the
Reorganization, the Acquiring Fund will continue to satisfy, the requirements
of subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a regulated investment company.
Under regulations to be prescribed by the Secretary of Treasury
under Section 1276(d) of the Code, certain transfers of market discount bonds
will be excepted from the requirement that accrued market discount be
recognized on disposition of a market discount bond under Section 1276(a) of
the Code. Such regulations are to provide, in part, that accrued market
discount will not be included in income if no gain is recognized under
Section 361(a) of the Code where a bond is transferred in an exchange
qualifying as a tax-free reorganization. As of the date hereof, the
Secretary has not issued any regulations under Section 1276 of the Code.
Based on the foregoing and provided the Reorganization is carried
out in accordance with the applicable laws of the Commonwealth of
Massachusetts and the State of Delaware, the Agreement and the Representation
Letter, it is our opinion that:
1. The Reorganization will constitute a tax-free
reorganization within the meaning of Section 368(a)(1)(C) of the Code, and
Acquired Fund and Acquiring 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 Acquired Fund upon
the transfer of 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. We express no opinion 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 Acquiring Fund upon
the receipt by it of all of the assets of Acquired Fund in exchange solely
for Acquiring Fund Shares pursuant to Section 1032(a) of the Code.
4. The basis of the assets of Acquired Fund received by
Acquiring Fund will be the same as the basis of such assets to Acquired Fund
immediately prior to the exchange pursuant to Section 362(b) of the Code.
5. The holding period of the assets of Acquired Fund received
by Acquiring Fund will include the period during which such assets were held
by Acquired Fund pursuant to Section 1223(2) of the Code.
6. No gain or loss will be recognized by the stockholders of
Acquired Fund upon the exchange of their Acquired Fund Shares for Acquiring
Fund Shares (including fractional shares to which they may be entitled),
pursuant to Section 354(a) of the Code.
7. The basis of the Acquiring Fund Shares received by the
stockholders of Acquired Fund (including fractional shares to which they may
be entitled) will be the same as the basis of the Acquired Fund Shares
exchanged therefor pursuant to Section 358(a)(1) of the Code.
8. The holding period of the Acquiring Fund Shares received by
the stockholders of Acquired Fund (including fractional shares to which they
may be entitled) will include the holding period of the Acquired Fund Shares
surrendered in exchange therefor, provided that the Acquired Fund Shares were
held as a capital asset on the effective date of the Reorganization, pursuant
to Section 1223(1) of the Code.
9. Acquiring Fund will succeed to and take into account as of
the date of the proposed transfer (as defined in Section 1.381(b)-1(b) of the
Income Tax Regulations) the items of Acquired Fund described in Section
381(c) of the Code, subject to the conditions and limitations specified in
Sections 381(b) and (c), 382, 383 and 384 of the Code.
Our opinion is based upon the Code, the applicable Treasury
Regulations promulgated thereunder, the present position of the Internal
Revenue Service as set forth in published revenue rulings and revenue
procedures, present administrative positions of the Internal Revenue 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 this letter.
Our opinion is conditioned upon the performance by Acquiring Fund
and Acquired Fund of their undertakings in the Agreement and the
Representation Letter.
This opinion is being rendered to Acquiring Fund and Acquired
Fund and may be relied upon only by such funds and the stockholders of each.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By: /s/William P. Zimmerman
William P. Zimmerman, a Partner
