AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan"), is made
as of this 18th day of September, 2007, by and between Franklin
Strategic Series ("Strategic Series"), a statutory trust created
under the laws of the State of Delaware, with its principal place
of business at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx
00000-0000, on behalf of its series, Franklin U.S. Long-Short
Fund ("U.S. Long-Short Fund"), and Franklin Xxxxxxxxx
International Trust ("International Trust"), a statutory trust
created under the laws of the State of Delaware, with its
principal place of business at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx,
Xxxxxxxxxx 00000-0000, on behalf of its series, Xxxxxxxxx Global
Long-Short Fund ("Global Long-Short Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by
International Trust, on behalf of Global Long-Short Fund, of
substantially all of the property, assets and goodwill of U.S.
Long-Short Fund in exchange solely for full and fractional Class
A shares of beneficial interest, without par value, of Global
Long-Short Fund ("Global Long-Short Fund Shares"); (ii) the
distribution of Global Long-Short Fund Shares to the shareholders
of Class A shares of U.S. Long-Short Fund (the "U.S. Long-Short
Fund Shares"), respectively, according to their respective
interests in U.S. Long-Short Fund in complete liquidation of U.S.
Long-Short Fund; and (iii) the dissolution of U.S. Long-Short
Fund as soon as is practicable after the closing (as defined in
Section 3, hereinafter called the "Closing"), all upon and
subject to the terms and conditions of the Plan hereinafter set
forth.
AGREEMENT
In order to consummate the Plan of Reorganization and in
consideration of the premises and of the covenants and agreements
hereinafter set forth, and intending to be legally bound, the
PARTIES HERETO COVENANT AND AGREE AS FOLLOWS:
1. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF
U.S. LONG-SHORT FUND.
(a) Subject to the terms and conditions of the Plan, and in
reliance on the representations and warranties of International
Trust, on behalf of Global Long-Short Fund, herein contained, and
in consideration of the delivery by International Trust of the
number of Global Long-Short Fund Shares hereinafter provided,
Strategic Series, on behalf of U.S. Long-Short Fund, agrees that
it will convey, transfer and deliver to International Trust, for
the benefit of Global Long-Short Fund, at the Closing all of U.S.
Long-Short Fund's then existing assets, free and clear of all
liens, encumbrances, and claims whatsoever (other than
shareholders' rights of redemption), except for (i) cash, bank
deposits, or cash equivalent securities in an estimated amount
necessary to: (a) 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 (b) pay
such contingent liabilities as the Board of Trustees of Strategic
Series shall reasonably deem to exist against U.S. Long-Short
Fund, if any, at the Closing Date, for which contingent and other
appropriate liability reserves shall be established on U.S.
Long-Short Fund's books, and (ii) any obligations and liabilities
of U.S. Long-Short Fund relating to any open short sale positions
that U.S. Long-Short Fund may have as of the Closing Date (the
"Short Sale Obligations"), it being the intention of Global
Long-Short Fund to assume any open short-sale positions of U.S.
Long-Short Fund as of the Closing Date (hereinafter "Net
Assets"). Neither International Trust nor Global Long-Short Fund
shall assume any liability of U.S. Long-Short Fund or Strategic
Series, other than any Short-Sale Obligations, and U.S.
Long-Short Fund shall use its reasonable best efforts to
discharge all of its known liabilities, so far as may be
possible, from the cash, bank deposits and cash equivalent
securities described above.
(b) Subject to the terms and conditions of the Plan, and in
reliance on the representations and warranties of Strategic
Series, on behalf of U.S. Long-Short Fund, herein contained, and
in consideration of such sale, conveyance, transfer, and
delivery, International Trust agrees at the Closing to deliver to
Strategic Series the number of Global Long-Short Fund Shares,
determined by dividing the net asset value per share of Class A
shares of U.S. Long-Short Fund by the net asset value per share
of Class A shares of Global Long-Short Fund, and separately
multiplying the result thereof by the number of outstanding Class
A shares of U.S. Long-Short Fund, as of 1:00 p.m., Pacific Time,
on the Closing Date. The Global Long-Short Fund Shares delivered
to Strategic Series at the Closing shall have an aggregate net
asset value equal to the value of U.S. Long-Short Fund's Net
Assets, all determined as provided in Section 2 of this Plan and
as of the date and time specified herein.
(c) Immediately following the Closing, Strategic Series
shall dissolve U.S. Long-Short Fund and distribute pro rata to
U.S. Long-Short Fund's shareholders of record as of the close of
business on the Closing Date, Global Long-Short Fund Shares
received by U.S. Long-Short Fund pursuant to this Section 1. Such
dissolution and distribution shall be accomplished by the
establishment of accounts on the share records of Global
Long-Short Fund of the type and in the amounts due such
shareholders based on their respective holdings as of the close
of business on the Closing Date. Fractional Global Long-Short
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 U.S. Long-Short Fund shall be entitled to
surrender the same to the transfer agent for Global Long-Short
Fund in exchange for the number of Global Long-Short Fund Shares
of the same class into which the U.S. Long-Short Fund Shares
theretofore represented by the certificate or certificates so
surrendered shall have been converted. Certificates for Global
Long-Short Fund Shares shall not be issued, unless specifically
requested by the shareholders. Until so surrendered, each
outstanding certificate which, prior to the Closing, represented
shares of beneficial interest of U.S. Long-Short Fund shall be
deemed for all Global Long-Short Fund purposes to evidence
ownership of the number of Global Long-Short Fund Shares into
which the U.S. Long-Short Fund Shares (which prior to the Closing
were represented thereby) have been converted.
(d) At the Closing, each shareholder of record of U.S.
Long-Short Fund as of the record date (the "Distribution Record
Date") with respect to any unpaid dividends and other
distributions that were declared prior to the Closing, including
any dividend or distribution declared pursuant to Section 8(e)
hereof, shall have the right to receive such unpaid dividends and
distributions with respect to the shares of U.S. Long-Short Fund
that such person had on such Distribution Record Date.
2. VALUATION.
(a) The net asset value of Global Long-Short Fund Shares and
U.S. Long-Short Fund Shares and the value of U.S. Long-Short
Fund's Net Assets to be acquired by Global Long-Short Fund
hereunder shall in each case be computed as of 1:00 p.m., Pacific
Time, on the Closing Date unless on such date (a) the New York
Stock Exchange ("NYSE") is not open for unrestricted trading or
(b) the reporting of trading on the NYSE or elsewhere is
disrupted or (c) any other extraordinary financial event or
market condition occurs (all such events described in (a), (b) or
(c) are each referred to as a "Market Disruption"). The net asset
value per share of Global Long-Short Fund Shares and U.S.
Long-Short Fund Shares and the value of U.S. Long-Short Fund's
Net Assets shall be computed in accordance with the valuation
procedures set forth in the respective prospectuses of Global
Long-Short Fund and U.S. Long-Short Fund.
(b) In the event of a Market Disruption on the proposed
Closing Date so that an accurate appraisal of the net
asset value of Global Long-Short Fund Shares or U.S.
Long-Short Fund Shares or the value of U.S.
Long-Short Fund's Net Assets is impracticable, the
Closing Date shall be postponed until the first
business day when regular trading on the NYSE shall
have been fully resumed and reporting shall have been
restored and other trading markets are otherwise
stabilized.
3. CLOSING AND CLOSING DATE.
The Closing Date shall be September 18, 2007 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. Strategic Series, on behalf of U.S.
Long-Short Fund, shall have provided for delivery as of the
Closing of those Net Assets of U.S. Long-Short Fund to be
transferred to the account of Global Long-Short Fund's Custodian,
JPMorgan Chase Bank, Network Management, 0 Xxxxx XxxxxXxxx
Xxxxxx--00xx Xxxxx, Xxxxxxxx, XX 00000. Also, Strategic Series, on
behalf of U.S. Long-Short Fund, shall deliver at the Closing a
list of names and addresses of the shareholders of record of each
class of U.S. Long-Short Fund Shares and the number of full and
fractional 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. International Trust, on behalf of Global
Long-Short Fund, shall provide evidence satisfactory to Strategic
Series that the Global Long-Short Fund Shares to be delivered to
the account of U.S. Long-Short Fund have been registered in an
account on the books of Global Long-Short Fund in such manner as
the officers of Strategic Series on behalf of U.S. Long-Short
Fund may reasonably request.
4. REPRESENTATIONS AND WARRANTIES BY INTERNATIONAL TRUST ON
BEHALF OF GLOBAL LONG-SHORT FUND.
International Trust, on behalf of Global Long-Short Fund,
represents and warrants to Strategic Series that:
(a) Global Long-Short Fund is a series of International Trust,
a statutory trust created under the laws of the State of Delaware
on March 19, 1991, and is validly existing under the laws of that
State. International Trust is duly registered under the 1940 Act
as an open-end, management investment company and all of the
Global Long-Short Fund Shares sold were sold pursuant to an
effective registration statement filed under the Securities Act
of 1933, as amended (the "1933 Act"), except for those shares
sold pursuant to the private offering exemption for the purpose
of raising initial capital.
(b) International Trust is authorized to issue an unlimited
number of shares of beneficial interest, without par value, of
Global Long-Short Fund, and each outstanding share of which is,
and each share of which when issued pursuant to and in accordance
with the Plan will be, fully paid, non-assessable, and has or
will have full voting rights. International Trust currently
issues shares of two (2) series, including Global Long-Short
Fund. Global Long-Short Fund is further divided into three
classes of shares of which the Global Long-Short Fund Shares
represent one class: Class A. No shareholder of International
Trust shall have any option, warrant or preemptive right of
subscription or purchase with respect to Global Long-Short Fund
Shares.
(c) The financial statements appearing in Global Long-Short
Fund's Annual Report to Shareholders for the fiscal year ended
October 31, 2006, audited by PricewaterhouseCoopers LLP and any
interim unaudited financial statements fairly present the
financial position of Global Long-Short Fund as of their
respective dates and the results of Global Long-Short Fund's
operations for the period indicated in conformity with generally
accepted accounting principles applied on a consistent basis.
(d) The books and records of Global Long-Short Fund accurately
summarize the accounting data represented and contain no material
omissions with respect to the business and operations of Global
Long-Short Fund.
(e) International Trust has the power to own all of its
properties and assets, to perform its obligations under the Plan
and to consummate the transactions contemplated herein.
International Trust has all necessary federal, state and local
authorizations, consents and approvals required to own all of its
properties and assets and to conduct Global Long-Short Fund's
business as such business is now being conducted and to
consummate the transactions contemplated herein.
(f) International Trust, on behalf of Global Long-Short Fund,
is not a party to or obligated under any provision of its
Declaration of Trust, as amended ("International Trust
Declaration") or By-laws, as amended ("By-laws"), or any contract
or any other commitment or obligation and is not subject to any
order or decree that would be violated by its execution of or
performance under the Plan, and no consent, approval,
authorization or order of any court or governmental authority is
required for the consummation by Global Long-Short Fund or
International Trust of the transactions contemplated by the Plan,
except for the registration of Global Long-Short Fund Shares
under the 1933 Act, the 1940 Act, or as may otherwise be required
under the federal and state securities laws or the rules and
regulations thereunder.
(g) International Trust has elected to treat Global Long-Short
Fund as a regulated investment company ("RIC") for federal income
tax purposes under Part I of Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). Global Long-Short Fund is
a "fund" as defined in Section 851(g)(2) of the Code, has
qualified as a RIC for each taxable year since its inception, and
will qualify as a RIC as of the Closing Date, and consummation of
the transactions contemplated by the Plan will not cause it to
fail to be qualified as a RIC as of the Closing Date.
(h) Global Long-Short Fund is not under jurisdiction of a Court
in a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(i) Global Long-Short Fund does not have any unamortized or
unpaid organizational fees or expenses.
(j) Global Long-Short Fund does not have any known liabilities,
costs or expenses of a material amount, contingent or otherwise,
other than those incurred in the ordinary course of business as
an investment company.
(k) There is no intercorporate indebtedness existing between
U.S. Long-Short Fund and Global Long-Short Fund that was issued,
acquired or will be settled at a discount.
(l) Global Long-Short Fund does not own, directly or
indirectly, nor has it owned during the past five (5) years,
directly or indirectly, any shares of U.S. Long-Short Fund.
(m) International Trust has no plan or intention to issue
additional shares of Global Long-Short Fund following the
reorganization except for shares issued in the ordinary course of
Global Long-Short Fund's business as a series of an open-end
investment company; nor does International Trust have any plan or
intention to redeem or otherwise reacquire any shares of Global
Long-Short Fund issued pursuant to the Plan of Reorganization,
either directly or through any transaction, agreement, or
arrangement with any other person, other than in the ordinary
course of its business or to the extent necessary to comply with
its legal obligation under Section 22(e) of the 1940 Act.
(n) Global Long-Short Fund is in the same line of business as
U.S. Long-Short Fund before the Plan of Reorganization and did
not enter into such line of business as part of the
reorganization. Global Long-Short Fund will actively continue
U.S. Long-Short Fund's business in substantially the same manner
that U.S. Long-Short Fund conducted that business immediately
before the Plan of Reorganization and has no plan or intention to
change such business. On the Closing Date, Global Long-Short Fund
expects that at least 33 1/3% of U.S. Long-Short Fund's portfolio
assets will meet the investment objectives, strategies, policies,
risks and restrictions of Global Long-Short Fund. Global
Long-Short Fund has no plan or intention to change any of its
investment objectives, strategies, policies, risks and
restrictions after the reorganization. Global Long-Short Fund has
no plan or intention to sell or otherwise dispose of any of the
former assets of U.S. Long-Short Fund, except for dispositions
made in the ordinary course of its business or dispositions
necessary to maintain its qualification as a RIC, although in the
ordinary course of its business, Global Long-Short Fund will
continuously review its investment portfolio (as U.S. Long-Short
Fund did before the Closing) to determine whether to retain or
dispose of particular stocks or securities, including those
included among the former assets of U.S. Long-Short Fund.
(o) The registration statement on Form N-14 referred to in
Section 7(g) hereof (the "Registration Statement"), and any
prospectus or statement of additional information of Global
Long-Short Fund contained or incorporated therein by reference,
and any supplement or amendment to the Registration Statement or
any such prospectus or statement of additional information, on
the effective and clearance dates of the Registration Statement,
on the date of the Special Meeting of U.S. Long-Short Fund
shareholders, and on the Closing Date: (a) shall comply in all
material respects with the provisions of the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the
1940 Act, the rules and regulations thereunder, and all
applicable state securities laws and the rules and regulations
thereunder; and (b) shall not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which the statements were made,
not misleading.
5. REPRESENTATIONS AND WARRANTIES BY STRATEGIC SERIES ON BEHALF
OF U.S. LONG-SHORT FUND.
Strategic Series, on behalf of U.S. Long-Short Fund, represents
and warrants to International Trust that:
(a) U.S. Long-Short Fund is a series of Strategic Series, a
statutory trust created under the laws of the State of Delaware
on January 25, 1991, and is validly existing under the laws of
the State of Delaware. Strategic Series is duly registered under
the 1940 Act as an open-end, management investment company and
all of Strategic Series' U.S. Long-Short Fund Shares sold were
sold pursuant to an effective registration statement filed under
the 1933 Act, except for those shares sold pursuant to the
private offering exemption for the purpose of raising the
required initial capital.
(b) Strategic Series is authorized to issue an unlimited number
of shares of beneficial interest, without par value, of U.S.
Long-Short Fund, and each outstanding share of which is fully
paid, non-assessable, and has full voting rights. Strategic
Series issues shares of twelve (12) series, including U.S.
Long-Short Fund. U.S. Long-Short Fund has one class of shares:
Class A, and an unlimited number of shares of beneficial interest
of Strategic Series have been allocated and designated to such
class of U.S. Long-Short Fund. No shareholder of Strategic Series
has or will have any option, warrant or preemptive rights of
subscription or purchase with respect to U.S. Long-Short Fund
Shares.
(c) The financial statements appearing in U.S. Long-Short
Fund's Annual Report to Shareholders for the fiscal year ended
April 30, 2006, audited by PricewaterhouseCoopers LLP and any
interim financial statements for Strategic Series fairly present
the financial position of U.S. Long-Short Fund as of their
respective dates and the results of U.S. Long-Short Fund's
operations for the period indicated in conformity with generally
accepted accounting principles applied on a consistent basis.
(d) Strategic Series has the power to own all of its properties
and assets, to perform its obligations under the Plan and to
consummate the transactions contemplated herein. Strategic Series
has all necessary federal, state and local authorizations,
consents and approvals required to own all of its properties and
assets and to conduct U.S. Long-Short Fund's business as such
business is now being conducted and to consummate the
transactions contemplated herein.
(e) Strategic Series, on behalf of U.S. Long-Short Fund, is not
a party to or obligated under any provision of its Declaration of
Trust, as amended ("Strategic Series Trust Instrument"), or
Bylaws, or any contract or any other commitment or obligation,
and is not subject to any order or decree, that would be violated
by its execution of or performance under the Plan. U.S.
Long-Short Fund has no material contracts or other commitments
(other than the Plan or agreements for the purchase of securities
entered into in the ordinary course of business and consistent
with its obligations under this Plan) which will not be
terminated by U.S. Long-Short Fund in accordance with their terms
at or prior to the Closing Date, or which will result in a
penalty or additional fee to be due or payable by U.S. Long-Short
Fund.
(f) Strategic Series has elected to treat U.S. Long-Short Fund
as a RIC for federal income tax purposes under Part I of
Subchapter M of the Code. U.S. Long-Short Fund is a "fund" as
defined in Section 851(g)(2) of the Code, has qualified as a RIC
for each taxable year since its inception, and will qualify as a
RIC as of the Closing Date, and consummation of the transactions
contemplated by the Plan will not cause it to fail to be
qualified as a RIC as of the Closing Date.
(g) U.S. Long-Short Fund is not under jurisdiction of a Court
in a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(h) U.S. Long-Short Fund does not have any unamortized or
unpaid organization fees or expenses.
(i) U.S. Long-Short Fund does not have any known liabilities,
costs or expenses of a material amount, contingent or otherwise,
other than those reflected in the financial statements referred
to in Section 5(c) hereof and those incurred in the ordinary
course of business as an investment company.
(j) Since October 31, 2006 there has not been any material
adverse change in U.S. Long-Short Fund's financial condition,
assets, liabilities, or business other than changes occurring in
the ordinary course of its business.
(k) No consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by
U.S. Long-Short Fund or Strategic Series of the transactions
contemplated by the Plan, except the necessary U.S. Long-Short
Fund shareholder approval, or as may otherwise be required under
the federal or state securities laws or the rules and regulations
thereunder.
(l) There is no intercorporate indebtedness existing between
U.S. Long-Short Fund and Global Long-Short Fund that was issued,
acquired or will be settled at a discount.
(m) During the five-year period ending on the Closing Date, (i)
U.S. Long-Short Fund has not acquired, and will not acquire, U.S.
Long-Short Fund Shares with consideration other than Global
Long-Short Fund Shares or U.S. Long-Short Fund Shares, except for
redemptions in the ordinary course of U.S. Long-Short Fund's
business or to the extent necessary to comply with its legal
obligation under Section 22(e) of the 1940 Act, and (ii) no
distributions have been made with respect to U.S. Long-Short Fund
Shares (other than regular, normal dividend distributions made
pursuant to the U.S. Long-Short Fund's historic dividend paying
practice), either directly or through any transaction, agreement,
or arrangement with any other person, except for distributions
described in Sections 852 and 4982 of the Code.
(n) As of the Closing Date, U.S. Long-Short Fund will not have
outstanding any warrants, options, convertible securities, or any
other type of rights pursuant to which any person could acquire
shares of U.S. Long-Short Fund, except for the right of investors
to acquire its shares at the applicable stated offering price in
the normal course of its business as an open-end management
investment company operating under the 0000 Xxx.
(o) Throughout the five year period ending on the Closing Date,
U.S. Long-Short Fund will have conducted its historic business
within the meaning of Section 1.368-1(d) of the Income Tax
Regulations under the Code. U.S. Long-Short Fund did not enter
into (or expand) a line of business as part of the Plan of
Reorganization. U.S. Long-Short Fund will not alter its
investment portfolio in connection with the Plan of
Reorganization.
6. REPRESENTATIONS AND WARRANTIES BY STRATEGIC SERIES AND
INTERNATIONAL TRUST.
Strategic Series, on behalf of U.S. Long-Short Fund, and
International Trust, on behalf of Global Long-Short Fund, each
represents and warrants to the other that:
(a) The statement of assets and liabilities to be furnished by
it as of 1:00 p.m., Pacific Time, on the Closing Date for the
purpose of determining the number of Global Long-Short Fund
Shares to be issued pursuant to Section 1 of the Plan, will
accurately reflect each Fund's Net Assets and outstanding shares,
as of such date, in conformity with generally accepted accounting
principles applied on a consistent basis.
(b) Except as disclosed in its currently effective prospectus
relating to U.S. Long-Short Fund, in the case of Strategic
Series, and Global Long-Short Fund, in the case of International
Trust, there is no material suit, judicial action, or legal or
administrative proceeding pending or threatened against it.
Neither International Trust nor Strategic Series is a party to or
subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects
Global Long-Short Fund's or U.S. Long-Short Fund's business or
their ability to consummate the transactions herein contemplated.
(c) There are no known actual or proposed deficiency
assessments with respect to any taxes payable by it.
(d) The execution, delivery, and performance of the Plan have
been duly authorized by all necessary action of its Board of
Trustees, and the Plan, subject to the approval of U.S.
Long-Short Fund's shareholders in the case of Strategic Series,
constitutes a valid and binding obligation enforceable in
accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization arrangement, moratorium,
and other similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(e) It anticipates that consummation of the Plan will not cause
either U.S. Long-Short Fund, in the case of Strategic Series, nor
Global Long-Short Fund, in the case of International Trust, to
fail to conform to the requirements of Subchapter M of the Code
for federal income taxation qualification as a RIC at the end
their respective fiscal years.
7. COVENANTS OF STRATEGIC SERIES AND INTERNATIONAL TRUST.
(a) Strategic Series, on behalf of U.S. Long-Short Fund, and
International Trust, on behalf of Global Long-Short Fund, each
covenants to operate their respective businesses as presently
conducted between the date hereof and the Closing, it being
understood that such ordinary course of business will include the
distribution of customary dividends and distributions and any
other distribution necessary or desirable to minimize federal
income or excise taxes.
(b) Strategic Series, on behalf of U.S. Long-Short Fund,
undertakes that it will not acquire Global Long-Short Fund Shares
for the purpose of making distributions thereof to anyone other
than U.S. Long-Short Fund's shareholders.
(c) Strategic Series, on behalf of U.S. Long-Short Fund,
undertakes that, if the Plan is consummated, it will liquidate
and dissolve U.S. Long-Short Fund.
(d) Strategic Series, on behalf of U.S. Long-Short Fund, and
International Trust, on behalf of Global Long-Short 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, and to the best of their knowledge no such tax return
is currently under audit and no tax deficiency or liability has
been asserted with respect to such tax returns or reports by the
Internal Revenue Service or any state or local tax authority.
(e) At the Closing, Strategic Series, on behalf of U.S.
Long-Short Fund, will provide Global Long-Short Fund a copy of
the shareholder ledger accounts, certified by U.S. Long-Short
Fund's transfer agent or its President to the best of its or his
knowledge and belief, for all the shareholders of record of U.S.
Long-Short Fund Shares as of 1:00 p.m., Pacific Time, on the
Closing Date who are to become shareholders of Global Long-Short
Fund as a result of the transfer of assets that is the subject of
the Plan.
(f) The Board of Trustees of Strategic Series shall call and
Strategic Series shall hold, a Special Meeting of U.S. Long-Short
Fund's shareholders to consider and vote upon the Plan (the
"Special Meeting") and Strategic Series shall take all other
actions reasonably necessary to obtain approval of the
transactions contemplated herein. Strategic Series agrees to mail
to each shareholder of record of U.S. Long-Short Fund entitled to
vote at the Special Meeting at which action on the Plan is to be
considered, in sufficient time to comply with requirements as to
notice thereof, a combined Prospectus/Proxy Statement that
complies in all material respects with the applicable provisions
of the 1933 Act, Section 14(a) of the 1934 Act and Section 20(a)
of the 1940 Act, and the rules and regulations, respectively,
thereunder.
(g) International Trust has filed with the SEC the
Registration Statement and will use its best efforts to provide
that the Registration Statement becomes effective as promptly as
is practicable. At the time it becomes effective, the
Registration Statement will (i) comply in all material respects
with the applicable provisions of the 1933 Act, and the rules and
regulations promulgated thereunder; and (ii) not contain any
untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading. At the time the Registration
Statement becomes effective, at the time of the Special 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.
(h) Subject to the provisions of this Plan, International
Trust and Strategic Series each shall take, or cause to be taken,
all action, and do or cause to be done, all things reasonably
necessary, proper or advisable to consummate the transactions
contemplated by this Plan.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY STRATEGIC SERIES AND
INTERNATIONAL TRUST.
The consummation of the Plan hereunder shall be subject to the
following respective conditions:
(a) That: (i) all the representations and warranties of the
other party contained herein shall be true and correct as of the
Closing with the same effect as though made as of and at such
date; (ii) the other party shall have performed all obligations
required by this Plan to be performed by it prior to the Closing;
and (iii) the other party shall have delivered to such party a
certificate signed by the President and by the Secretary or
equivalent officer to the foregoing effect.
(b) That each party shall have delivered to the other party a
copy of the resolutions approving the Plan adopted and approved
by the appropriate action of the Board of Trustees certified by
its Secretary or equivalent officer of each of the Funds.
(c) That the SEC shall have declared effective the Registration
Statement and not have issued an unfavorable management report
under Section 25(b) of the 1940 Act or instituted or threatened
to institute any proceeding seeking to enjoin consummation of the
Plan under Section 25(c) of the 1940 Act. And, further, no other
legal, administrative or other proceeding shall have been
instituted or threatened that would materially affect the
financial condition of either party or would prohibit the
transactions contemplated hereby.
(d) That the Plan and the Plan of Reorganization contemplated
hereby shall have been adopted and approved by the appropriate
action of the shareholders of U.S. Long-Short Fund at a meeting
or any adjournment thereof.
(e) That a distribution or distributions shall have been
declared for U.S. Long-Short Fund prior to the Closing Date that,
together with all previous distributions, shall have the effect
of distributing to its shareholders (i) all of its ordinary
income and all of its capital gain net income, if any, for the
period from the close of its last fiscal year to 1:00 p.m.
Pacific Time, on the Closing Date; and (ii) any undistributed
ordinary income and capital gain net income from any prior period
to the extent not otherwise declared for distribution. Capital
gain net income has the meaning given such term by Section
1222(9) of the Code.
(f) That all required consents of other parties and all other
consents, orders, and permits of federal, state and local
authorities (including those of the SEC and of state Blue Sky
securities authorities, including any necessary "no-action"
positions or exemptive orders from such federal and state
authorities) to permit consummation of the transaction
contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order, or permit would not
involve a risk of material adverse effect on the assets and
properties of U.S. Long-Short Fund or Global Long-Short Fund.
(g) That there shall be delivered to Strategic Series, on
behalf of U.S. Long-Short Fund, and International Trust, on
behalf of Global Long-Short Fund, an opinion in form and
substance satisfactory to them, from the law firm of Xxxxxxxx
Ronon Xxxxxxx & Xxxxx, LLP, counsel to International Trust and
Strategic Series, to the effect that, provided the transaction
contemplated hereby is carried out in accordance with the Plan,
the laws of the State of Delaware, and based upon certificates of
the officers of Strategic Series and International Trust with
regard to matters of fact:
(1) The acquisition by Global Long-Short Fund of
substantially all the assets of U.S. Long-Short Fund as provided
for herein in exchange solely for Global Long-Short Fund Shares
and the assumption of Global Long-Short Fund of the Short-Sale
Obligations of U.S. Long-Short Fund, followed by the distribution
by U.S. Long-Short Fund to its shareholders of Global Long-Short
Fund Shares in complete liquidation of U.S. Long-Short Fund will
qualify as a reorganization within the meaning of Section
368(a)(1) of the Code, and U.S. Long-Short Fund and Global
Long-Short 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 U.S. Long-Short
Fund upon the transfer of substantially all of its assets to, and
the assumption of its Short-Sale Obligations by, Global
Long-Short Fund in exchange solely for voting shares of Global
Long-Short Fund (Sections 361(a) and 357(a) of the Code);
(3) Global Long-Short Fund will recognize no gain or loss
upon the receipt of substantially all of the assets of U.S.
Long-Short Fund in exchange solely for voting shares of Global
Long-Short Fund and the assumption by Global Long-Short Fund of
the Short-Sale Obligations of U.S. Long-Short Fund (Section
1032(a) of the Code);
(4) No gain or loss will be recognized by U.S. Long-Short
Fund upon the distribution of Global Long-Short Fund Shares to
its shareholders in liquidation of U.S. Long-Short Fund (in
pursuance of the Plan) (Section 361(c)(1) of the Code);
(5) The basis of the assets of U.S. Long-Short Fund received
by Global Long-Short Fund will be the same as the basis of such
assets to U.S. Long-Short Fund immediately prior to the Plan of
Reorganization (Section 362(b) of the Code);
(6) The holding period of the assets of U.S. Long-Short Fund
received by Global Long-Short Fund will include the period during
which such assets were held by U.S. Long-Short Fund (Section
1223(2) of the Code);
(7) No gain or loss will be recognized by the shareholders
of U.S. Long-Short Fund upon the exchange of their shares in U.S.
Long-Short Fund for voting shares of Global Long-Short Fund
including fractional shares to which they may be entitled
(Section 354(a) of the Code);
(8) The basis of Global Long-Short Fund Shares received by
the shareholders of U.S. Long-Short Fund shall be the same as the
basis of the U.S. Long-Short Fund Shares exchanged therefor
(Section 358(a)(1) of the Code);
(9) The holding period of Global Long-Short Fund Shares
received by shareholders of U.S. Long-Short Fund (including
fractional shares to which they may be entitled) will include the
holding period of U.S. Long-Short Fund Shares surrendered in
exchange therefor, provided that U.S. Long-Short Fund Shares were
held as a capital asset on the effective date of the exchange
(Section 1223(1) of the Code); and
(10) Global Long-Short Fund will succeed to and take into
account as of the date of the transfer (as defined in Section
1.381(b)-1(b) of the regulations issued by the United States
Treasury ("Treasury Regulations")) the items of U.S. Long-Short
Fund described in Section 381(c) of the Code, subject to the
conditions and limitations specified in Sections 381, 382, 383
and 384 of the Code and the Treasury Regulations.
(h) That there shall be delivered to International Trust, on
behalf of Global Long-Short Fund, an opinion in form and
substance satisfactory to it from Xxxxxxxx Ronon Xxxxxxx &
Xxxxx, LLP, counsel to Strategic Series, on behalf of U.S.
Long-Short Fund, to the effect that, subject in all respects to
the effects of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and other laws now or
hereafter affecting generally the enforcement of creditors'
rights:
(1) U.S. Long-Short Fund is a series of Strategic Series and
that Strategic Series is a validly existing statutory trust in
good standing under the laws of the State of Delaware;
(2) Strategic Series is authorized to issue an unlimited
number of shares of beneficial interest, without par value, of
U.S. Long-Short Fund. One class of shares of U.S. Long-Short Fund
(Class A) has been designated as U.S. Long-Short Fund Shares, and
an unlimited number of shares of beneficial interest of Strategic
Series have been allocated to U.S. Long-Short Fund Shares;
(3) Strategic Series is an open-end investment company of
the management type registered as such under the 1940 Act;
(4) The execution and delivery of the Plan and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary trust action on the part of
Strategic Series on behalf of U.S. Long-Short Fund; and
(5) The Plan is the legal, valid and binding obligation of
Strategic Series, on behalf of U.S. Long-Short Fund, and is
enforceable against Strategic Series, on behalf of U.S.
Long-Short Fund, in accordance with its terms.
In giving the opinions set forth above, this counsel may
state that it is relying on certificates of the officers of
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 there shall be delivered to Strategic Series, on
behalf of U.S. Long-Short Fund, an opinion in form and substance
satisfactory to it from the law firm of Xxxxxxxx Ronon Xxxxxxx &
Xxxxx, LLP, counsel to International Trust, on behalf of Global
Long-Short Fund, to the effect that, subject in all respects to
the effects of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other laws now or hereafter
affecting generally the enforcement of creditors' rights:
(1) Global Long-Short Fund is a series of International
Trust and International Trust is a validly existing statutory
trust in good standing under the laws of the State of Delaware;
(2) International Trust is authorized to issue an unlimited
number of shares of beneficial interest, without par value, of
Global Long-Short Fund;
(3) International Trust is an open-end investment company of
the management type registered as such under the 1940 Act;
(4) Global Long-Short Fund Shares to be issued pursuant to
the terms of the Plan have been duly authorized and, when issued
and delivered as provided in the Plan and the Registration
Statement, will have been validly issued and fully paid and will
be non-assessable by International Trust, on behalf of Global
Long-Short Fund;
(5) The execution and delivery of this Plan and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary trust action on the part of
International Trust, on behalf of Global Long-Short Fund;
(6) The Plan is the legal, valid and binding obligation of
International Trust, on behalf of Global Long-Short Fund, and is
enforceable against International Trust, on behalf of Global
Long-Short Fund, in accordance with its terms; and
(7) To the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has
been issued, and no proceedings for such purpose have been
instituted or are pending before or threatened by the SEC under
the 1933 Act.
In giving the opinions set forth above, this counsel may state
that it is relying on certificates of the officers of
International Trust with regard to matters of fact, and certain
certifications and written statements of governmental officials
with respect to the good standing of International Trust.
(j) That U.S. Long-Short Fund shall have received a certificate
from the President or any Vice President and the Secretary or any
Assistant Secretary of International Trust, on behalf of Global
Long-Short Fund, to the effect that the statements contained in
the Prospectus, at the time the Prospectus became effective and
at the date of the signing of this Plan, 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.
(k) That International Trust's Registration Statement with
respect to Global Long-Short Fund Shares to be delivered to U.S.
Long-Short Fund's shareholders in accordance with the 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.
(l) That Global Long-Short Fund Shares to be delivered
hereunder shall be eligible for sale with each state commission
or agency with which such eligibility is required in order to
permit Global Long-Short Fund Shares lawfully to be delivered to
each holder of U.S. Long-Short Fund Shares.
(m) That, at the Closing, there shall be transferred to
International Trust, on behalf of Global Long-Short Fund,
aggregate Net Assets of U.S. Long-Short 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 U.S. Long-Short Fund on the Closing Date.
(n) That there be delivered to International Trust, on behalf
of Global Long-Short Fund, information concerning the tax basis
of U.S. Long-Short Fund in all securities transferred to Global
Long-Short Fund, together with shareholder information including
the names, addresses, and taxpayer identification numbers of the
shareholders of U.S. Long-Short Fund as of the Closing Date, the
number of shares held by each shareholder, the dividend
reinvestment elections applicable to each shareholder, and the
backup withholding and nonresident alien withholding
certifications, notices or records on file with U.S. Long-Short
Fund with respect to each shareholder.
9. EXPENSES.
The expenses of entering into and carrying out the provisions
of this Plan shall be borne as follows: Franklin Advisers, Inc.
will pay 50% of the expenses, including the costs of the proxy
solicitation, and U.S. Long-Short Fund and Global Long-Short Fund
will each pay 25% of the such expenses.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
(a) Anything contained in the Plan to the contrary
notwithstanding, the Plan may be terminated and the Plan of
Reorganization abandoned at any time (whether before or after
approval thereof by the shareholders of U.S. Long-Short Fund)
prior to the Closing, or the Closing may be postponed as follows:
(1) by mutual consent of Strategic Series, on behalf of U.S.
Long-Short Fund, and International Trust, on behalf of Global
Long-Short Fund;
(2) by International Trust, on behalf of Global Long-Short
Fund, if any condition of its obligations set forth in Section 8
has not been fulfilled or waived and it reasonably appears that
such condition or obligation will not or cannot be met; or
(3) by Strategic Series, on behalf of U.S. Long-Short Fund,
if any conditions of its obligations set forth in Section 8 has
not been fulfilled or waived and it reasonably appears that such
condition or obligation will not or cannot be met.
(b) If the transactions contemplated by the Plan have not been
consummated by December 31, 2007, the Plan shall automatically
terminate on that date, unless a later date is agreed to by both
International Trust and Strategic Series.
(c) In the event of termination of the Plan prior to
consummation of the Plan of Reorganization pursuant to the
provisions hereof, the same shall become void and have no further
effect, and neither Strategic Series, International Trust, U.S.
Long-Short Fund nor Global Long-Short Fund, nor their trustees,
officers, or agents or the shareholders of U.S. Long-Short Fund
or Global Long-Short Fund shall have any liability in respect of
this Plan, but all expenses incidental to the preparation and
carrying out of the Plan shall be paid as provided in Section 9
hereof.
(d) At any time prior to the Closing, any of the terms or
conditions of this Plan may be waived by the party who is
entitled to the benefit thereof if, in the judgment of such
party, such action or waiver will not have a material adverse
effect on the benefits intended under this Plan to its
shareholders, on behalf of whom such action is taken.
(e) The respective representations and warranties contained in
Sections 4 to 6 hereof shall expire with and be terminated by the
Plan on the Closing Date, and neither Strategic Series nor
International Trust, nor any of their officers, trustees, agents
or shareholders shall have any liability with respect to such
representations or warranties after the Closing Date.
(f) If any order or orders of the SEC with respect to the 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 Strategic Series, on behalf of U.S. Long-Short Fund,
or the Board of Trustees of International Trust, on behalf of
Global Long-Short Fund, to be acceptable, such terms and
conditions shall be binding as if a part of the Plan without
further vote or approval of the shareholders of U.S. Long-Short
Fund, unless such terms and conditions shall result in a change
in the method of computing the number of Global Long-Short Fund
Shares to be issued to U.S. Long-Short Fund in which event,
unless such terms and conditions shall have been included in the
proxy solicitation material furnished to the shareholders of U.S.
Long-Short Fund prior to the meeting at which the transactions
contemplated by this Plan shall have been approved, this Plan
shall not be consummated and shall terminate unless Strategic
Series shall promptly call a special meeting of the shareholders
of U.S. Long-Short Fund at which such conditions so imposed shall
be submitted for approval.
11. LIABILITY OF INTERNATIONAL TRUST AND STRATEGIC SERIES.
(a) Each party acknowledges and agrees that all obligations of
International Trust under the Plan are binding only with respect
to Global Long-Short Fund; that any liability of International
Trust under this Plan with respect to International Trust, or in
connection with the transactions contemplated herein with respect
to Global Long-Short Fund, shall be discharged only out of the
assets of Global Long-Short Fund; that no other series of
International Trust shall be liable with respect to the Plan or
in connection with the transactions contemplated herein; and that
neither Strategic Series nor U.S. Long-Short Fund shall seek
satisfaction of any such obligation or liability from the
shareholders of International Trust, the trustees, officers,
employees or agents of International Trust, or any of them.
(b) Each party acknowledges and agrees that all obligations of
Strategic Series under the Plan are binding only with respect to
U.S. Long-Short Fund; that any liability of Strategic Series
under this Plan with respect to U.S. Long-Short Fund, or in
connection with the transactions contemplated herein with respect
to U.S. Long-Short Fund, shall be discharged only out of the
assets of U.S. Long-Short Fund; that no other series of Strategic
Series shall be liable with respect to this Plan or in connection
with the transactions contemplated herein; and that neither
International Trust nor Global Long-Short Fund shall seek
satisfaction of any such obligation or liability from the
shareholders of Strategic Series, the trustees, officers,
employees or agents of Strategic Series, or any of them.
12. ENTIRE AGREEMENT AND AMENDMENTS.
The Plan embodies the entire agreement between the parties and
there are no agreements, understandings, restrictions, or
warranties relating to the transactions contemplated by the Plan
other than those set forth herein or herein provided for. The
Plan may be amended only by mutual consent of the parties in
writing. Neither the Plan nor any interest herein may be assigned
without the prior written consent of the other party.
13. COUNTERPARTS.
The 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.
14. NOTICES.
Any notice, report, or demand required or permitted by any
provision of this Plan shall be in writing and shall be deemed to
have been given if delivered or mailed, first class postage
prepaid, addressed to Global Long-Short Fund, at Franklin
Xxxxxxxxx International Trust, Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx,
Xxxxxxxxxx 00000-0000, Attention: Secretary, or U.S. Long-Short
Fund, at Franklin Strategic Series, Xxx Xxxxxxxx Xxxxxxx, Xxx
Xxxxx, Xxxxxxxxxx 00000-0000, Attention: Secretary, as the case
may be.
15. GOVERNING LAW.
This Plan shall be governed by and carried out in accordance
with the laws of the State of Delaware.
IN WITNESS WHEREOF, Strategic Series, on behalf of U.S.
Long-Short Fund, and International Trust, on behalf of Global
Long-Short Fund, have each caused this Plan to be executed on its
behalf by its duly authorized officers, all as of the date and
year first-above written.
FRANKLIN STRATEGIC SERIES,
on behalf of FRANKLIN U.S. LONG-SHORT FUND
By: /s/ XXXXX X. XXXXXXXX
Name: Xxxxx X. Xxxxxxxx
Title: Secretary
FRANKLIN XXXXXXXXX INTERNATIONAL TRUST,
on behalf of TEMPLETON GLOBAL LONG-SHORT FUND
By: /s/ XXXXX X. XXXXXXXX
Name: Xxxxx X. Xxxxxxxx
Title: Secretary
