<PAGE>
PROSPECTUS SUPPLEMENT
---------------------
(To Prospectus dated May 19, 1994)
$300,000,000
FRANKLIN RESOURCES, INC.
Medium-Term Notes
Due Nine Months or More from Date of Issue
__________________
Franklin Resources, Inc. (the "Company") may offer from time
to time up to $300,000,000 aggregate initial offering price, or
the equivalent thereof in one or more foreign or composite
currencies, of its Medium-Term Notes due nine months or more from
date of issue (the "Notes"). Such aggregate initial offering
price is subject to reduction as a result of the sale by the
Company of other Debt Securities described in the accompanying
Prospectus. Each Note will mature on any day nine months or more
from the date of issue, as specified in the applicable pricing
supplement hereto (each, a "Pricing Supplement"), and may be
subject to redemption at the option of the Company or repayment
at the option of the Holder thereof, in each case, in whole or in
part, prior to its Stated Maturity, as set forth therein and
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, the Notes will bear interest at fixed rates (the
"Fixed Rate Notes") or at floating rates (the "Floating Rate
Notes"). The applicable Pricing Supplement will specify whether
a Floating Rate Note is a Regular Floating Rate Note, a Floating
Rate/Fixed Rate Note or an Inverse Floating Rate Note and whether
the rate of interest thereon is determined by reference to one or
more of the CD Rate, the CMT Rate, the Commercial Paper Rate, the
Eleventh District Cost of Funds Rate, the Federal Funds Rate,
LIBOR, the Prime Rate or the Treasury Rate (each, an "Interest
Rate Basis"), or any other interest rate basis or formula, as
adjusted by any Spread and/or Spread Multiplier. Interest on
each Floating Rate Note will accrue from its date of issue and
will be payable in arrears monthly, quarterly, semiannually or
annually, as specified in the applicable Pricing Supplement, and
at Maturity. Unless otherwise specified in the applicable
Pricing Supplement, the rate of interest on each Floating Rate
Note will be reset daily, weekly, monthly, quarterly,
semiannually or annually, as set forth therein and specified in
the applicable Pricing Supplement. Interest on each Fixed Rate
Note will accrue from its date of issue and, unless otherwise
specified in the applicable Pricing Supplement, will be payable
semiannually in arrears on April 15 and October 15 of each year
and at Maturity. The Notes may also be issued with original
issue discount, and such Notes may or may not pay any interest.
See "Description of Notes."
The interest rate, or the formula for the determination of
any such interest rate, applicable to each Note and the other
variable terms thereof as described herein, will be established
by the Company on the date of issue of such Note and will be set
forth therein and specified in the applicable Pricing Supplement.
Interest rates, interest rate formulae and such other variable
terms are subject to change by the Company, but no change will
affect any Note already issued or as to which an offer to
purchase has been accepted by the Company.
Each Note, other than a Foreign Currency Note, will be
issued in fully registered book-entry form (a "Book-Entry Note")
or in certificated form (a "Certificated Note"), as set forth in
the applicable Pricing Supplement, in denominations of $1,000 and
integral multiples thereof, unless otherwise specified in the
applicable Pricing Supplement. Each Book-Entry Note will be
represented by one or more fully registered global securities
(the "Global Securities") deposited with or on behalf of The
Depository Trust Company (or such other depositary as is
identified in the applicable Pricing Supplement) (the
"Depositary") and registered in the name of the Depositary or the
<PAGE>
Depositary's nominee. Interests in the Global Securities will be
shown on, and transfers thereof will be effected only through,
records maintained by the Depositary (with respect to its
participants) and the Depositary's participants (with respect to
beneficial owners).
____________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY
SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Agents' Discounts Proceeds to
Public(1) and Commissions(1)(2) Company (1)(2)(3)
<S> <C> <C> <C>
Per Note........... 100% .125% - .875% 99.875% - 99.125%
Total (4).......... $300,000,000 $375,000 -$2,625,000 $299,625,000 -$297,375,000
<FN>
<FN1>
(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Goldman, Sachs & Co. (collectively, the
"Agents"), will purchase the Notes, as principal, from the
Company, for resale to investors and other purchasers at
varying prices relating to prevailing market prices at the
time of resale as determined by the Agents, or, if so specified
in the applicable Pricing Supplement, for resale at a fixed
public offering price. Unless otherwise specified in the
applicable Pricing Supplement, any Note sold to an Agent as
principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage of
the principal amount equal to the commission applicable to
an agency sale (as described below) of a Note of identical
maturity. If agreed to by the Company and the Agents, the
Agents may utilize their reasonable efforts on an agency
basis to solicit offers to purchase the Notes at 100% of the
principal amount thereof, unless otherwise specified in the
applicable Pricing Supplement. The Company will pay a
commission to the Agents, ranging from .125% to .875% of the
principal amount of a Note, depending upon its stated
maturity, sold through the Agents. Commissions with respect
to Notes with stated maturities in excess of 40 years that
are sold through an Agent will be negotiated between the
Company and such Agent at the time of such sale. See "Plan
of Distribution."
<FN2>
(2) The Company has agreed to indemnify the Agents against, and
to provide contribution with respect to, certain
liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Plan of Distribution."
<FN3>
(3) Before deducting expenses payable by the Company estimated
at $400,000.
<FN4>
(4) Or the equivalent thereof in one or more foreign or
composite currencies.
_______________
</TABLE>
The Notes are being offered on a continuous basis by the
Company through the Agents. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will not be listed on
any securities exchange and there can be no assurance that the
Notes offered hereby will be sold or that there will be a
secondary market for the Notes. The Company reserves the right
to cancel or modify the offer made hereby without notice. The
Company or the Agents, if they solicit the offer on an agency
basis, may reject any offer to purchase Notes in whole or in
part. See "Plan of Distribution."
Merrill Lynch & Co. Goldman, Sachs & Co.
The date of this Prospectus Supplement is May 19, 1994.<PAGE>
<PAGE>
IN CONNECTION WITH THE OFFERING OF NOTES, THE AGENTS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DESCRIPTION OF NOTES
The Notes will be issued as a series of debt securities
under an Indenture, dated as of May 19, 1994 (the "Indenture"),
between the Company and Chemical Bank, as trustee (the
"Trustee"). The following summary of certain provisions of the
Notes and of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, a copy
of which has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and the
accompanying Prospectus constitute a part. Capitalized terms
used but not defined herein shall have the meanings given to them
in the Indenture or the Notes, as the case may be. The term
"Debt Securities," as used in this Prospectus Supplement, refers
to all debt securities issued and issuable from time to time
under the Indenture and includes the Notes. The following
description of Notes will apply to each Note offered hereby
unless otherwise specified in the applicable Pricing Supplement.
GENERAL
All Debt Securities, including the Notes, issued and to be
issued under the Indenture will be unsecured general obligations
of the Company and will rank pari passu with all other unsecured
and unsubordinated indebtedness of the Company from time to time
outstanding. The Indenture does not limit the aggregate
principal amount of Debt Securities which may be issued
thereunder and Debt Securities may be issued thereunder from time
to time in one or more series up to the aggregate principal
amount from time to time authorized by the Company for each
series. The Company may, from time to time, without the consent
of the Holders of the Notes, provide for the issuance of Notes or
other Debt Securities under the Indenture in addition to the
$300,000,000 aggregate initial offering price of Notes offered
hereby.
The Notes are currently limited to $300,000,000 aggregate
initial offering price, or the equivalent thereof in one or more
foreign or composite currencies. The Notes will be offered on a
continuous basis and will mature on any day nine months or more
from their dates of issue (each, an "Original Issue Date"), as
specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, interest-bearing
Notes will either be Fixed Rate Notes or Floating Rate Notes as
specified in the applicable Pricing Supplement. The Notes may
also be issued with original issue discount ("Original Issue
Discount Notes") and such Notes may or may not bear any interest.
Unless otherwise specified in the applicable Pricing
Supplement, the Notes will be denominated in United States
dollars and payments of principal of, and premium, if any, and
interest on, the Notes will be made in United States dollars.
The Notes may also be denominated in currencies or composite
currencies other than United States dollars ("Foreign Currency
Notes") (the currency or composite currency in which a Note is
denominated, whether United States dollars or otherwise, is
herein referred to as the "Specified Currency"). See "Special
Provisions and Risks Relating to Foreign Currency Notes--Payments
of Principal and Premium, if any, and Interest."
Unless otherwise specified in the applicable Pricing
Supplement, purchasers are required to pay for Foreign Currency
Notes in the Specified Currency in which such Notes are
denominated. At the present time, there are limited facilities
in the United States for the conversion of United States dollars
into foreign currencies
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<PAGE>
or composite currencies and vice versa, and commercial banks do
not generally offer non-United States dollar checking or savings
account facilities in the United States. If requested on or
prior to the fifth Business Day (as defined below) preceding the
date of delivery of the Foreign Currency Notes, or by such other
day as determined by the applicable Agent, such Agent is prepared
to arrange for the conversion of United States dollars into the
Specified Currency to enable the purchasers to pay for such
Notes. Each such conversion will be made by such Agent on such
terms and subject to such conditions, limitations and charges as
such Agent may from time to time establish in accordance with its
regular foreign exchange practices. All costs of exchange will
be borne by the purchasers of the Foreign Currency Notes. See
"Special Provisions and Risks Relating to Foreign Currency
Notes."
Interest rates, interest rate formulae and other variable
terms of the Notes are subject to change by the Company from time
to time, but no such change will affect any Note already issued
or as to which an offer to purchase has been accepted by the
Company.
Each Note, other than a Foreign Currency Note, will be
issued in fully registered form as a Book-Entry Note or a
Certificated Note in denominations of $1,000 and integral
multiples thereof, unless otherwise specified in the applicable
Pricing Supplement. The authorized denominations of Foreign
Currency Notes will be specified in the applicable Pricing
Supplement.
Book-Entry Notes may be transferred or exchanged only
through the Depositary. See "Book-Entry Notes." Registration of
transfer or exchange of Certificated Notes will be made at the
office or agency of the Company maintained by the Company for
such purpose in the Borough of Manhattan, The City of New York.
No service charge will be made by the Company or the Trustee for
any such registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection
therewith (other than exchanges pursuant to the Indenture not
involving any transfer).
Payments of principal of, and premium, if any, and interest
on, Book-Entry Notes will be made by the Company through the
Trustee to the Depositary. See "Book-Entry Notes." In the case
of Certificated Notes, payment of principal and premium, if any,
due at Stated Maturity or any prior date on which the principal,
or an installment of principal, of a Note becomes due and
payable, whether by the declaration of acceleration, call for
redemption at the option of the Company, repayment at the option
of the Holder or otherwise (the Stated Maturity or such prior
date, as the case may be, is herein referred to as the
"Maturity") of each Certificated Note will be made in immediately
available funds upon presentation thereof at the office or agency
of the Company maintained by the Company for such purpose in the
Borough of Manhattan, The City of New York (or, in the case of
any repayment on an Optional Repayment Date, upon presentation of
such Certificated Note in accordance with the provisions
described below). Payment of interest due at Maturity for each
Certificated Note will be made to the person to whom payment of
the principal and premium, if any, shall be made. Payment of
interest due on each Certificated Note on any Interest Payment
Date (as defined below) (other than at Maturity) will be made at
the office or agency of the Company referred to above maintained
for such purpose or, at the option of the Company, may be made by
check mailed to the address of the Holder entitled thereto as
such address shall appear in the Security Register of the
Company. Notwithstanding the foregoing, a Holder of $10,000,000
(or the equivalent thereof with respect to the Specified Currency
applicable to a Foreign Currency Note) or more in aggregate
principal amount of Notes (whether having identical or different
terms and provisions) will be entitled to receive interest
payments on any Interest Payment Date (other than at Maturity) by
wire transfer of immediately available funds if appropriate wire
transfer instructions have been received in writing by the
Trustee not less than 15 days prior to such Interest Payment
Date. Such wire instructions, upon receipt by the Trustee, shall
remain in effect until revoked by such Holder. For special
payment terms
S-
<PAGE>
<PAGE>
applicable to Foreign Currency Notes, see "Special Provisions and
Risks Relating to Foreign Currency Notes--Payments of Principal
and Premium, if any, and Interest."
As used herein, "Business Day" means any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on
which banking institutions are authorized or required by law or
executive order to close in The City of New York; provided,
however, that, with respect to Foreign Currency Notes the payment
of which is to be made in a Specified Currency other than United
States dollars, such day is also not a day on which banking
institutions are authorized or required by law or executive order
to close in the principal financial center of the country of such
Specified Currency (or, in the case of the European Currency Unit
("ECU"), is not a day designated as an ECU Non-Settlement Day by
the ECU Banking Association or otherwise generally regarded in
the ECU interbank market as a day on which payments on ECUs shall
not be made); provided further that, with respect to Notes as to
which LIBOR is an applicable Interest Rate Basis, such day is
also a London Business Day (as defined below). "London Business
Day" means any day (i) if the Index Currency (as defined herein)
is other than ECU, on which dealings in such Index Currency are
transacted in the London interbank market or (ii) if the Index
Currency is ECU, that is not designated as an ECU Non-Settlement
Day by the ECU Banking Association or otherwise generally
regarded in the ECU interbank market as a day on which payments
on ECUs shall not be made.
TRANSACTION AMOUNTS
Interest rates offered by the Company with respect to the
Notes may differ depending upon the aggregate principal amount of
Notes purchased in any transaction. The Company expects
generally to distinguish, with respect to such offered rates,
between purchases which are for less than, and purchases which
are equal to or greater than, $250,000 (or the equivalent thereof
with respect to the Specified Currency applicable to a Foreign
Currency Note). Such different rates may be offered concurrently
at any time. The Company may also concurrently offer Notes
having different variable terms (as are described herein or in
the applicable Pricing Supplement) to different investors, and
such different offers may depend upon whether an offered purchase
is for an aggregate principal amount of Notes at least equal to
or for an amount less than $250,000 (or the equivalent thereof
with respect to the Specified Currency applicable to a Foreign
Currency Note).
REDEMPTION AT THE OPTION OF THE COMPANY
Unless otherwise specified in the applicable Pricing
Supplement, the Notes will not be subject to any sinking fund.
The Notes will be redeemable at the option of the Company prior
to Stated Maturity only if an Initial Redemption Date is
specified in the applicable Pricing Supplement. If so specified,
the Notes will be subject to redemption at the option of the
Company on any date on and after the applicable Initial
Redemption Date in whole or from time to time in part in
increments of $1,000 (or the minimum denomination specified in
such Pricing Supplement) at the applicable Redemption Price (as
defined below) on notice given not more than 60 nor less than 30
days prior to the date of redemption and in accordance with the
provisions of the Indenture. "Redemption Price," with respect to
a Note, means an amount equal to the sum of (i) 100% of the
unpaid principal amount thereof or the portion thereof to be
redeemed (or, if such Note is an Original Issue Discount Note,
the Amortized Face Amount (as defined below) determined as of the
date of redemption as provided below), (ii) the Initial
Redemption Percentage specified in such Pricing Supplement (as
adjusted by the Annual Redemption Percentage Reduction, if
applicable) multiplied by the unpaid principal amount or the
portion to be redeemed (or, if such Note is an Original Issue
Discount Note, the Issue Price (as determined under Treasury
Regulation Section 1.1273-2(a)(1)) specified in such Pricing
Supplement (the "Issue Price"), net of any portion of such Issue
Price which has been paid prior to the date of redemption, or the
portion of such Issue Price (or
S-<PAGE>
<PAGE>
such net amount) proportionate to the portion of the unpaid
principal amount to be redeemed) plus (iii) accrued interest to
the date of redemption (or, if such Note is an Original Issue
Discount Note, any accrued interest to the date of redemption the
payment of which would constitute qualified stated interest
payments within the meaning of Treasury Regulation Section
1.1273-1(c) under the Code (as defined below)). Information with
respect to the Redemption Price for Indexed Notes (as defined
below) shall be set forth in the applicable Pricing Supplement.
The Initial Redemption Percentage, if any, applicable to a Note
shall decline at each anniversary of the Initial Redemption Date
by an amount equal to the applicable Annual Redemption Percentage
Reduction, if any, until it equals zero. "Amortized Face Amount,"
with respect to an Original Issue Discount Note, means an amount
equal to the sum of (i) the Issue Price plus (ii) the aggregate
of the portions of the original issue discount (the excess of the
amounts considered as part of the "stated redemption price at
maturity" of such Note within the meaning of Section 1273(a)(2)
of the Code, whether denominated as principal or interest, over
the Issue Price) which shall theretofore have accrued pursuant to
Section 1272 of the Code (without regard to Section 1272(a)(7) of
the Code) from the Original Issue Date of such Note to the date
of determination, minus (iii) any amount considered as part of
the "stated redemption price at maturity" of such Note which has
been paid from the Original Issue Date to the date of
determination.
REPAYMENT AT THE OPTION OF THE HOLDER
If so specified in the applicable Pricing Supplement, the
Notes will be repayable by the Company in whole or in part at the
option of the Holders thereof on their respective Optional
Repayment Dates specified in such Pricing Supplement. If no
Optional Repayment Date is specified with respect to a Note, such
Note will not be repayable at the option of the Holder thereof
prior to Stated Maturity. Any repayment in part will be in
increments of $1,000 (or the minimum denomination specified in
the applicable Pricing Supplement) provided that any remaining
principal amount of such Note will be an authorized denomination
of such Note. Unless otherwise specified in the applicable
Pricing Supplement, the repayment price for any Note to be repaid
means an amount equal to the sum of (i) 100% of the unpaid
principal amount thereof or the portion thereof (or, if such Note
is an Original Issue Discount Note, the Amortized Face Amount
determined as of the date of repayment) plus (ii) accrued
interest to the date of repayment (or, if such Note is an
Original Issue Discount Note, any accrued interest to the date of
repayment the payment of which would constitute qualified stated
interest payments within the meaning of Treasury Regulation
Section 1.1273-1(c) under the Code). Information with respect to
the repayment price for Indexed Notes shall be set forth in the
applicable Pricing Supplement. For any Note to be repaid, such
Note must be received, together with the form thereon entitled
"Option to Elect Repayment" duly completed, by the Trustee at its
Corporate Trust Office (or such other address of which the
Company shall from time to time notify the Holders) not more than
60 nor less than 30 days prior to the date of repayment.
Exercise of such repayment option by the Holder will be
irrevocable.
While the Book-Entry Notes are represented by the Global
Securities held by or on behalf of the Depositary, and registered
in the name of the Depositary or the Depositary's nominee, the
option for repayment may be exercised by the applicable
Participant that has an account with the Depositary, on behalf of
the beneficial owners of the Global Security or Securities
representing such Book-Entry Notes, by delivering a written
notice substantially similar to the above-mentioned form to the
Trustee at its Corporate Trust Office (or such other address of
which the Company shall from time to time notify the Holders),
not more than 60 nor less than 30 days prior to the date of
repayment. Notices of elections from Participants on behalf of
beneficial owners of the Global Security or Securities
representing such Book-Entry Notes to exercise their option to
have such Book-Entry Notes repaid must be received by the Trustee
by 5:00 P.M., New York City time, on the last day for giving such
notice. In order to ensure that a notice is received by the
<PAGE>
Trustee on a particular day, the beneficial owner of the Global
Security or Securities representing such Book-Entry Notes must so
direct the applicable Participant before such Participant's
deadline for accepting instructions for that day. Different
firms
<PAGE>
<PAGE>
may have different deadlines for accepting instructions from
their customers. Accordingly, beneficial owners of the Global
Security or Securities representing Book-Entry Notes should
consult the Participants through which they own their interest
therein for the respective deadlines for such Participants. All
notices shall be executed by a duly authorized officer of such
Participant (with signature guaranteed) and shall be irrevocable.
In addition, beneficial owners of the Global Security or
Securities representing Book-Entry Notes shall effect delivery at
the time such notices of election are given to the Depositary by
causing the applicable Participant to transfer such beneficial
owner's interest in the Global Security or Securities
representing such Book-Entry Notes, on the Depositary's records,
to the Trustee. See "Book-Entry Notes."
If applicable, the Company will comply with the requirements
of Rule 14e-1 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and any other securities laws or
regulations in connection with any such repayment.
The Company may at any time purchase Notes at any price or
prices in the open market or otherwise. Notes so purchased by
the Company may be held or resold or, at the discretion of the
Company, may be surrendered to the Trustee for cancellation.
INTEREST
General
Unless otherwise specified in the applicable Pricing
Supplement, each Note will bear interest from its Original Issue
Date at the rate per annum, in the case of a Fixed Rate Note, or
pursuant to the interest rate formula, in the case of a Floating
Rate Note, in each case as specified in the applicable Pricing
Supplement, until the principal thereof is paid or duly made
available for payment. Interest will be payable in arrears on
each Interest Payment Date specified in the applicable Pricing
Supplement on which an installment of interest is due and payable
and at Maturity. Unless otherwise specified in the applicable
Pricing Supplement, the first payment of interest on any Note
originally issued between a Record Date (as defined below) and
the related Interest Payment Date or on an Interest Payment Date
will be made on the Interest Payment Date immediately following
the next succeeding Record Date to the Holder on such next
succeeding Record Date. Unless otherwise specified in the
applicable Pricing Supplement, a "Record Date" shall be the
fifteenth calendar day (whether or not a Business Day)
immediately preceding the related Interest Payment Date.
Fixed Rate Notes
Interest payments on Fixed Rate Notes will equal the amount
of interest accrued from and including the immediately preceding
Interest Payment Date in respect of which interest has been paid
(or from and including the Original Issue Date, if no interest
has been paid with respect to such Fixed Rate Note) to but
excluding the related Interest Payment Date or at Maturity, as
the case may be. Unless otherwise specified in the applicable
Pricing Supplement, the "Interest Payment Dates" for the Fixed
Rate Notes will be April 15 and October 15 of each year and at
Maturity. Unless otherwise specified in the applicable Pricing
Supplement, interest on Fixed Rate Notes will be computed on the
basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or Maturity of a Fixed Rate
Note falls on a day that is not a Business Day, the required
payment of principal, premium, if any, and/or interest will be
made on the next succeeding Business Day as if made on the date
such payment was due, and no interest will accrue on such payment
for the period from and after such Interest Payment Date or at
Maturity, as the case may be, to the date of such payment on the
next succeeding Business Day.
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Floating Rate Notes
Unless otherwise specified in the applicable Pricing
Supplement, Floating Rate Notes will be issued as described
below. The applicable Pricing Supplement will specify certain
terms with respect to which each Floating Rate Note is being
delivered, including: whether such Floating Rate Note is a
"Regular Floating Rate Note," a "Floating Rate/Fixed Rate Note"
or an "Inverse Floating Rate Note," Fixed Rate Commencement Date
and Fixed Interest Rate, as applicable, Interest Rate Basis or
Bases, Initial Interest Rate, Interest Reset Period and Dates,
Record Dates, Interest Payment Period and Dates, Index Maturity,
maximum interest rate and minimum interest rate, if any, and
Spread and/or Spread Multiplier, if any, and if one or more of
the applicable Interest Rate Bases is LIBOR, the Index Currency
and the Designated LIBOR Page, as described below.
The interest rate borne by the Floating Rate Notes will be
determined as follows:
(i) Unless such Floating Rate Note is designated as a
"Floating Rate/Fixed Rate Note," an "Inverse Floating Rate
Note" or as having an Addendum attached, such Floating Rate
Note will be designated as a "Regular Floating Rate Note"
and, except as described below or in the applicable Pricing
Supplement, bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Bases (i)
plus or minus the applicable Spread, if any, and/or (ii)
multiplied by the applicable Spread Multiplier, if any.
Commencing on the Initial Interest Reset Date, the rate at
which interest on such Regular Floating Rate Note shall be
payable shall be reset as of each Interest Reset Date;
provided, however, that (i) the interest rate in effect for
the period from the Original Issue Date to the Initial
Interest Reset Date will be the Initial Interest Rate, and
(ii) unless otherwise specified in the applicable Pricing
Supplement, the interest rate in effect for the 10 calendar
days immediately prior to Maturity shall be that in effect
on the tenth calendar day preceding such Maturity.
(ii) If such Floating Rate Note is designated as a
"Floating Rate/Fixed Rate Note," then, except as described
below or in the applicable Pricing Supplement, such Floating
Rate Note will bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Bases (i)
plus or minus the applicable Spread, if any, and/or (ii)
multiplied by the applicable Spread Multiplier, if any.
Commencing on the Initial Interest Reset Date, the rate at
which interest on such Floating Rate/Fixed Rate Note shall
be payable shall be reset as of each Interest Reset Date;
provided, however, that (i) the interest rate in effect for
the period from the Original Issue Date to the Initial
Interest Reset Date will be the Initial Interest Rate, (ii)
unless otherwise specified in the applicable Pricing
Supplement, the interest rate in effect for the 10 calendar
days immediately prior to the Fixed Rate Commencement Date
shall be that in effect on the tenth calendar day preceding
the Fixed Rate Commencement Date, and (iii) the interest
rate in effect commencing on the Fixed Rate Commencement
Date to Maturity shall be the Fixed Interest Rate, if such
rate is specified in the applicable Pricing Supplement or,
if no such Fixed Interest Rate is so specified, the interest
rate in effect thereon on the Business Day immediately
preceding the Fixed Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an
"Inverse Floating Rate Note," then, except as described
below or in the applicable Pricing Supplement, such Floating
Rate Note will bear interest equal to the Fixed Interest
Rate specified in the applicable Pricing Supplement minus
the rate determined by reference to the applicable Interest
Rate Basis or Bases (i) plus or minus the applicable Spread,
if any, and/or (ii) multiplied by the applicable Spread
Multiplier, if any; provided, however, that, unless
otherwise specified in the applicable Pricing Supplement,
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the interest rate thereon will not be less than zero.
Commencing on the Initial Interest Reset Date, the rate at
which interest on such
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Inverse Floating Rate Note is payable shall be reset as of
each Interest Reset Date; provided, however, that (i) the
interest rate in effect for the period from the Original
Issue Date to the Initial Interest Reset Date will be the
Initial Interest Rate, and (ii) unless otherwise specified
in the applicable Pricing Supplement, the interest rate in
effect for the 10 calendar days immediately prior to
Maturity shall be that in effect on the tenth calendar day
preceding Maturity.
The "Spread" is the number of basis points to be added to or
subtracted from the related Interest Rate Basis or Bases
applicable to such Floating Rate Note. The "Spread Multiplier"
is the percentage of the related Interest Rate Basis or Bases
applicable to such Floating Rate Note by which such Interest Rate
Basis or Bases will be multiplied to determine the applicable
interest rate on such Floating Rate Note. The "Index Maturity"
is the period to maturity of the instrument or obligation with
respect to which the related Interest Rate Basis or Bases will be
calculated.
Notwithstanding the foregoing, if such Floating Rate Note is
designated as having an Addendum attached as specified on the
face thereof, such Floating Rate Note shall bear interest in
accordance with the terms described in such Addendum and the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, the interest rate with respect to each Interest Rate
Basis will be determined in accordance with the applicable
provisions below. Except as set forth above or in the applicable
Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate
determined as of the Interest Determination Date (as defined
below) immediately preceding such Interest Reset Date or (ii) if
such day is not an Interest Reset Date, the interest rate
determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
Interest on Floating Rate Notes will be determined by
reference to the applicable Interest Rate Basis or Interest Rate
Bases, which may, as described below, include (i) the CD Rate,
(ii) the CMT Rate, (iii) the Commercial Paper Rate, (iv) the
Eleventh District Cost of Funds Rate, (v) the Federal Funds Rate,
(vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or
(ix) such other Interest Rate Basis or interest rate formula as
may be set forth in the applicable Pricing Supplement; provided,
however, that with respect to a Floating Rate/Fixed Rate Note,
the interest rate commencing on the Fixed Rate Commencement Date
to the Maturity Date shall be the Fixed Interest Rate, if such
rate is specified in the applicable Pricing Supplement or, if no
such Fixed Interest Rate is so specified, the interest rate in
effect thereon on the day immediately preceding the Fixed Rate
Commencement Date.
The applicable Pricing Supplement will specify whether the
rate of interest on the related Floating Rate Note will be reset
daily, weekly, monthly, quarterly, semiannually, annually or such
other specified period (each, an "Interest Reset Period") and the
dates on which such rate of interest will be reset (each, an
"Interest Reset Date" and the first of such for any Note the
"Initial Interest Reset Date"). Unless otherwise specified in
the applicable Pricing Supplement, the Interest Reset Date will
be, in the case of Floating Rate Notes which reset: (i) daily,
each Business Day; (ii) weekly, the Wednesday of each week (with
the exception of weekly reset Floating Rate Notes as to which the
Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii)
monthly, the third Wednesday of each month (with the exception of
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monthly reset Floating Rate Notes as to which the Eleventh
District Cost of Funds Rate is an applicable Interest Rate Basis,
which will reset on the first calendar day of the month); (iv)
quarterly, the third Wednesday of March, June, September and
December of each year; (v) semiannually, the third Wednesday of
the two months specified in the applicable Pricing Supplement;
and (vi) annually, the third Wednesday of the month specified in
the applicable Pricing Supplement; provided, however, that, with
respect to Floating Rate/Fixed Rate Notes, the fixed rate of
interest in effect for the period from the Fixed Rate
Commencement
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Date to Maturity shall be the Fixed Interest Rate or, if no such
Fixed Interest Rate is specified, the interest rate in effect on
the day immediately preceding the Fixed Rate Commencement Date,
as specified in the applicable Pricing Supplement. If any
Interest Reset Date for any Floating Rate Note would otherwise be
a day that is not a Business Day, such Interest Reset Date will
be postponed to the next succeeding day that is a Business Day,
except that in the case of a Floating Rate Note as to which LIBOR
is an applicable Interest Rate Basis, if such Business Day falls
in the next succeeding calendar month, such Interest Reset Date
will be the immediately preceding Business Day.
The interest rate applicable to each Interest Reset Period
commencing on the Interest Reset Date with respect to such
Interest Reset Period will be the rate determined as of the
applicable Interest Determination Date on or prior to the
Calculation Date (as defined below). The "Interest Determination
Date" with respect to the CD Rate, the CMT Rate, the Commercial
Paper Rate, the Federal Funds Rate and the Prime Rate will be the
second Business Day immediately preceding the applicable Interest
Reset Date; the "Interest Determination Date" with respect to the
Eleventh District Cost of Funds Rate will be the last working day
of the month immediately preceding the applicable Interest Reset
Date on which the Federal Home Loan Bank of San Francisco (the
"FHLB of San Francisco") publishes the Index (as defined below);
and the "Interest Determination Date" with respect to LIBOR will
be the second London Business Day immediately preceding the
applicable Interest Reset Date. With respect to the Treasury
Rate, the "Interest Determination Date" will be the day in the
week in which the applicable Interest Reset Date falls on which
day Treasury Bills (as defined below) are normally auctioned
(Treasury Bills are normally sold at an auction held on Monday of
each week, unless that day is a legal holiday, in which case the
auction is normally held on the following Tuesday, except that
such auction may be held on the preceding Friday); provided,
however, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the Interest
Determination Date will be such preceding Friday; and provided
further that if an auction falls on the applicable Interest Reset
Date, then the Interest Reset Date will instead be the first
Business Day following such auction. The "Interest Determination
Date" pertaining to a Floating Rate Note the interest rate of
which is determined by reference to two or more Interest Rate
Bases will be the most recent Business Day which is at least two
Business Days prior to the applicable Interest Reset Date for
such Floating Rate Note on which each Interest Rate Basis is
determinable. Each Interest Rate Basis will be determined on such
date, and the applicable interest rate will take effect on the
applicable Interest Reset Date.
A Floating Rate Note may also have either or both of the
following: (i) a maximum numerical limitation, or ceiling, on the
rate at which interest may accrue during any interest period and
(ii) a minimum numerical limitation, or floor, on the rate at
which interest may accrue during any interest period. In
addition to any maximum interest rate that may be applicable to
any Floating Rate Note pursuant to the above provisions, the
interest rate on Floating Rate Notes will in no event be higher
than the maximum rate permitted by New York law, as the same may
be modified by United States law of general application.
Except as provided below or in the applicable Pricing
Supplement, interest will be payable, in the case of Floating
Rate Notes which reset: (i) daily, weekly or monthly, on the
third Wednesday of each month or on the third Wednesday of March,
June, September and December of each year, as specified in the
applicable Pricing Supplement; (ii) quarterly, on the third
Wednesday of March, June, September and December of each year;
(iii) semiannually, on the third Wednesday of the two months of
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each year specified in the applicable Pricing Supplement; and
(iv) annually, on the third Wednesday of the month of each year
specified in the applicable Pricing Supplement (each, an
"Interest Payment Date") and, in each case, at Maturity. If any
Interest Payment Date for any Floating Rate Note (other than
Maturity) would otherwise be a day that is not a Business Day,
such Interest Payment Date will be postponed to the next
succeeding day that is a Business Day, except that in the case of
a Floating Rate Note as to which LIBOR is an applicable Interest
Rate Basis, if such
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Business Day falls in the next succeeding calendar month, such
Interest Payment Date will be the immediately preceding Business
Day. If the Maturity of a Floating Rate Note falls on a day that
is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next
succeeding Business Day as if made on the date such payment was
due, and no interest shall accrue on such payment for the period
from and after Maturity to the date of such payment on the next
succeeding Business Day.
All percentages resulting from any calculation on Floating
Rate Notes will be rounded to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage
point rounded upwards (e.g., 9.876545% (or .09876545) would be
rounded to 9.87655% (or .0987655)), and all amounts used in or
resulting from such calculation on Floating Rate Notes will be
rounded, in the case of United States dollars, to the nearest
cent or, in the case of a Specified Currency other than United
States dollars, to the nearest unit (with one-half cent or unit
being rounded upward).
Interest payments on Floating Rate Notes will equal the
amount of interest accrued from and including the immediately
preceding Interest Payment Date in respect of which interest has
been paid (or from and including the Original Issue Date, if no
interest has been paid with respect to such Floating Rate Note)
to but excluding the related Interest Payment Date or Maturity,
as the case may be; provided, however, that in the case of
Floating Rate Notes on which the interest rate is reset daily or
weekly, interest will, unless otherwise specified in the
applicable Pricing Supplement, accrue from but excluding the last
Record Date to which interest has been paid (or from and
including the Original Issue Date, if no interest has been paid
with respect to such Floating Rate Note) to and including the
Record Date immediately preceding the applicable Interest Payment
Date, except that at Maturity, interest will accrue to but
excluding Maturity.
With respect to each Floating Rate Note, accrued interest is
calculated by multiplying its principal amount by an accrued
interest factor. Such accrued interest factor is computed by
adding the interest factor calculated for each day in the period
for which accrued interest is being calculated. Unless otherwise
specified in the applicable Pricing Supplement, the interest
factor for each such day will be computed by dividing the
interest rate applicable to such day by 360, in the case of Notes
for which the Interest Rate Basis is the CD Rate, the Commercial
Paper Rate, the Eleventh District Cost of Funds Rate, the Federal
Funds Rate, LIBOR or the Prime Rate, or by the actual number of
days in the year in the case of Notes for which the Interest Rate
Basis is the CMT Rate or the Treasury Rate. Unless otherwise
specified in the applicable Pricing Supplement, the interest
factor for Notes for which the interest rate is calculated with
reference to two or more Interest Rate Bases will be calculated
in each period in the same manner as if only one of the
applicable Interest Rate Bases applied as specified in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, Chemical Bank (or its successor in such capacity)
will be the "Calculation Agent." Upon request of the Holder of
any Floating Rate Note, the Calculation Agent will disclose the
interest rate then in effect and, if determined, the interest
rate that will become effective as a result of a determination
made for the next succeeding Interest Reset Date with respect to
such Floating Rate Note. Unless otherwise specified in the
applicable Pricing Supplement, the "Calculation Date," if
applicable, pertaining to any Interest Determination Date will be
the earlier of (i) the tenth calendar day after such Interest
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Determination Date, or, if such day is not a Business Day, the
next succeeding Business Day or (ii) the Business Day immediately
preceding the applicable Interest Payment Date or Maturity, as
the case may be.
CD Rate. CD Rate Notes will bear interest at the rates
(calculated with reference to the CD Rate and the Spread and/or
Spread Multiplier, if any) specified in such CD Rate Notes and in
the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing
Supplement, "CD Rate" means, with respect to any Interest
Determination Date relating to a CD Rate Note or any Floating
Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination
Date"), the rate on such date for negotiable certificates of
deposit having the Index Maturity specified in the applicable
Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates" or any successor publication
("H.15(519)") under the heading "CDs (Secondary Market)," or, if
not published by 3:00 P.M., New York City time, on the related
Calculation Date, the rate on such CD Rate Interest Determination
Date for negotiable certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 P.M. Quotations for U.S. Government
Securities" or any successor publication ("Composite Quotations")
under the heading "Certificates of Deposit." If such rate is not
yet published in either H.15(519) or Composite Quotations by 3:00
P.M., New York City time, on the related Calculation Date, then
the CD Rate on such CD Rate Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic
mean of the secondary market offered rates as of 10:00 A.M., New
York City time, on such CD Rate Interest Determination Date, of
three leading nonbank dealers in negotiable United States dollar
certificates of deposit in The City of New York (which may
include the Agents or their affiliates) selected by the
Calculation Agent for negotiable certificates of deposit of major
United States money market banks for negotiable certificates of
deposit with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement in an amount that
is representative for a single transaction in that market at that
time; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence,
the CD Rate determined as of such CD Rate Interest Determination
Date will be the CD Rate in effect on such CD Rate Interest
Determination Date.
CMT Rate. CMT Rate Notes will bear interest at the rates
(calculated with reference to the CMT Rate and the Spread and/or
Spread Multiplier, if any), specified in such CMT Rate Notes and
in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "CMT Rate" means, with respect to any Interest
Determination Date relating to a CMT Rate Note or any Floating
Rate Note for which the interest rate is determined with
reference to the CMT Rate (a "CMT Rate Interest Determination
Date"), the rate displayed on the Designated CMT Telerate Page
under the caption "...Treasury Constant Maturities...Federal
Reserve Board Release H.15...Mondays Approximately 3:45 P.M.,"
under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7055, the rate on such CMT
Rate Interest Determination Date and (ii) if the Designated CMT
Telerate Page is 7052, the week, or the month, as applicable,
ended immediately preceding the week in which the related CMT
Rate Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page, or if not displayed by
3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for such CMT Rate Interest Determination Date
will be such Treasury constant maturity rate for the Designated
CMT Maturity Index as published in the relevant H.15(519). If
such rate is no longer published, or if not published by 3:00
P.M., New York City time, on the related Calculation Date, then
the CMT Rate for such CMT Rate Interest Determination Date will
be such Treasury constant maturity rate for the Designated CMT
Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest
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Determination Date with respect to such Interest Reset Date as
may then be published by either the Board of Governors of the
Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable
to the rate formerly displayed on the Designated CMT Telerate
Page and published in the relevant H.15(519). If such
information is not provided by 3:00 P.M., New York City time, on
the related Calculation Date, then the CMT Rate for the CMT Rate
Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity, based on the arithmetic
mean of the secondary market closing offer side
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prices as of approximately 3:30 P.M. (New York City time) on the
CMT Rate Interest Determination Date reported, according to their
written records, by three leading primary United States
government securities dealers (each, a "Reference Dealer") in The
City of New York selected by the Calculation Agent (from five
such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality,
one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for the most recently issued
direct noncallable fixed rate obligations of the United States
("Treasury Notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of
not less than such Designated CMT Maturity Index minus one year.
If the Calculation Agent cannot obtain three such Treasury Note
quotations, the CMT Rate for such CMT Rate Interest Determination
Date will be calculated by the Calculation Agent and will be a
yield to maturity based on the arithmetic mean of the secondary
market offer side prices as of approximately 3:30 P.M. (New York
City time) on the CMT Rate Interest Determination Date of three
Reference Dealers in The City of New York (from five such
Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality,
one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an
original maturity of the number of years that is the next highest
to the Designated CMT Maturity Index and a remaining term to
maturity closest to the Designated CMT Maturity Index and in an
amount of at least $100 million. If three or four (and not five)
of such Reference Dealers are quoting as described above, then
the CMT Rate will be based on the arithmetic mean of the offer
prices obtained and neither the highest nor the lowest of such
quotes will be eliminated; provided, however, that if fewer than
three Reference Dealers selected by the Calculation Agent are
quoting as described herein, the CMT Rate will be the CMT Rate in
effect on such CMT Rate Interest Determination Date. If two
Treasury Notes with an original maturity as described in the
third preceding sentence have remaining terms to maturity equally
close to the Designated CMT Maturity Index, the quotes for the
CMT Rate Note with the shorter remaining term to maturity will be
used.
"Designated CMT Telerate Page" means the display on the Dow
Jones Telerate Service on the page designated in the applicable
Pricing Supplement (or any other page as may replace such page on
that service for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519)), for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519).
If no such page is specified in the applicable Pricing
Supplement, the Designated CMT Telerate Page shall be 7052, for
the most recent week.
"Designated CMT Maturity Index" means the original period to
maturity of the U.S. Treasury securities (either 1, 2, 3, 5, 7,
10, 20, or 30 years) specified in the applicable Pricing
Supplement with respect to which the CMT Rate will be calculated.
If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
Commercial Paper Rate. Commercial Paper Rate Notes will
bear interest at the rates (calculated with reference to the
Commercial Paper Rate and the Spread and/or Spread Multiplier, if
any) specified in such Commercial Paper Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "Commercial Paper Rate" means, with respect to any
Interest Determination Date relating to a Commercial Paper Rate
Note or any Floating Rate Note for which the interest rate is
determined with reference to the Commercial Paper Rate (a
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"Commercial Paper Rate Interest Determination Date"), the Money
Market Yield (as defined below) on such date of the rate for
commercial paper having the Index Maturity specified in the
applicable Pricing Supplement as published in H.15(519) under the
heading "Commercial Paper." In the event that such rate is not
published by 3:00 P.M., New York City time, on the related
Calculation Date, then the Commercial Paper Rate will be the
Money Market Yield on such Commercial Paper Rate Interest
Determination Date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as
published in Composite Quotations
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under the heading "Commercial Paper" (with an Index Maturity of
one month or three months being deemed to be equivalent to an
Index Maturity of 30 days or 90 days, respectively). If by 3:00
P.M., New York City time, on the related Calculation Date such
rate is not yet published in either H.15(519) or Composite
Quotations, then the Commercial Paper Rate on such Commercial
Paper Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the Money Market Yield of the
arithmetic mean of the offered rates at approximately 11:00 A.M.,
New York City time, on such Commercial Paper Rate Interest
Determination Date of three leading dealers of commercial paper
in The City of New York (which may include the Agents or their
affiliates) selected by the Calculation Agent for commercial
paper having the Index Maturity designated in the applicable
Pricing Supplement placed for an industrial issuer whose bond
rating is "AA," or the equivalent, from a nationally recognized
statistical rating organization; provided, however, that if the
dealers so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Commercial Paper Rate determined
as of such Commercial Paper Rate Interest Determination Date will
be the Commercial Paper Rate in effect on such Commercial Paper
Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a
percentage) calculated in accordance with the following formula:
D x 360
Money Market Yield = ------------- X 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial
paper quoted on a bank discount basis and expressed as a decimal,
and "M" refers to the actual number of days in the interest
period for which interest is being calculated.
Eleventh District Cost of Funds Rate. Eleventh District
Cost of Funds Rate Notes will bear interest at the rates
(calculated with reference to the Eleventh District Cost of Funds
Rate and the Spread and/or Spread Multiplier, if any) specified
in such Eleventh District Cost of Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "Eleventh District Cost of Funds Rate" means, with
respect to any Interest Determination Date relating to an
Eleventh District Cost of Funds Rate Note or any Floating Rate
Note for which the interest rate is determined with reference to
the Eleventh District Cost of Funds Rate (an "Eleventh District
Cost of Funds Rate Interest Determination Date"), the rate equal
to the monthly weighted average cost of funds for the calendar
month immediately preceding the month in which such Eleventh
District Cost of Funds Rate Interest Determination Date falls, as
set forth under the caption "11th District" on Telerate Page 7058
as of 11:00 A.M., San Francisco time, on such Eleventh District
Cost of Funds Rate Interest Determination Date. If such rate
does not appear on Telerate Page 7058 on any related Eleventh
District Cost of Funds Rate Interest Determination Date, the
Eleventh District Cost of Funds Rate for such Eleventh District
Cost of Funds Rate Interest Determination Date shall be the
monthly weighted average cost of funds paid by member
institutions of the Eleventh Federal Home Loan Bank District that
was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month
immediately preceding the date of such announcement. If the FHLB
of San Francisco fails to announce such rate for the calendar
month immediately preceding such Eleventh District Cost of Funds
Rate Interest Determination Date, then the Eleventh District Cost
of Funds Rate determined as of such Eleventh District Cost of
Funds Rate Interest Determination Date will be the Eleventh
District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
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Federal Funds Rate. Federal Funds Rate Notes will bear
interest at the rates (calculated with reference to the Federal
Funds Rate and the Spread and/or Spread Multiplier, if any)
specified in such Federal Funds Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any
Interest Determination Date relating to a Federal Funds Rate Note
or any Floating Rate Note for which the interest rate is
determined with reference to the Federal Funds Rate (a "Federal
Funds Rate Interest Determination Date"), the rate on such date
for federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)" or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on
such Federal Funds Rate Interest Determination Date as published
in Composite Quotations under the heading "Federal
Funds/Effective Rate." If by 3:00 P.M., New York City time, on
the related Calculation Date such rate is not published in either
H.15(519) or Composite Quotations, then the Federal Funds Rate on
such Federal Funds Rate Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic
mean of the rates for the last transaction in overnight United
States dollar federal funds arranged by three leading brokers of
federal funds transactions in The City of New York (which may
include the Agents or their affiliates) selected by the
Calculation Agent prior to 9:00 A.M., New York City time, on such
Federal Funds Rate Interest Determination Date; provided,
however, that if the brokers so selected by the Calculation Agent
are not quoting as mentioned in this sentence, the Federal Funds
Rate determined as of such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on
such Federal Funds Rate Interest Determination Date.
LIBOR. LIBOR Notes will bear interest at the rates
(calculated with reference to LIBOR and the Spread and/or Spread
Multiplier, if any) specified in such LIBOR Notes and in any
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "LIBOR" means the rate determined by the Calculation
Agent in accordance with the following provisions:
(i) With respect to an Interest Determination Date
relating to a LIBOR Note or any Floating Rate Note for which
the interest rate is determined with reference to LIBOR (a
"LIBOR Interest Determination Date"), LIBOR will be either:
(a) if "LIBOR Reuters" is specified in the applicable
Pricing Supplement, the arithmetic mean of the offered rates
(unless the specified Designated LIBOR Page by its terms
provides only for a single rate, in which case such single
rate shall be used) for deposits in the Index Currency
having the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Business
Day immediately following such LIBOR Interest Determination
Date, that appear on the Designated LIBOR Page specified in
the applicable Pricing Supplement as of 11:00 A.M. London
time, on such LIBOR Interest Determination Date, if at least
two such offered rates appear (unless, as aforesaid, only a
single rate is required) on such Designated LIBOR Page, or
(b) if "LIBOR Telerate" is specified in the applicable
Pricing Supplement or if neither "LIBOR Reuters" nor "LIBOR
Telerate" is specified as the method for calculating LIBOR,
the rate for deposits in the Index Currency having the Index
Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately
following such LIBOR Interest Determination Date that
appears on the Designated LIBOR Page specified in the
applicable Pricing Supplement as of 11:00 A.M., London time,
on such LIBOR Interest Determination Date. If fewer than
two such offered rates appear, or if no such rate appears,
as applicable, LIBOR in respect of the related LIBOR
Interest Determination Date will be determined in accordance
with the provisions described in clause (ii) below.
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(ii) With respect to a LIBOR Interest Determination
Date on which fewer than two offered rates appear, or no
rate appears, as the case may be, on the applicable
Designated LIBOR Page as specified in clause (i) above, the
Calculation Agent will request the principal London offices
of each of four major reference banks in the London
interbank market, as selected by the Calculation Agent, to
provide the Calculation Agent with its offered quotation for
deposits in the Index Currency for the period of the Index
Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately
following such LIBOR Interest Determination Date, to prime
banks in the London interbank market at approximately 11:00
A.M., London time, on such LIBOR Interest Determination Date
and in a principal amount that is representative for a
single transaction in such Index Currency in such market at
such time. If at least two such quotations are provided,
LIBOR determined on such LIBOR Interest Determination Date
will be the arithmetic mean of such quotations. If fewer
than two quotations are provided, LIBOR determined on such
LIBOR Interest Determination Date will be the arithmetic
mean of the rates quoted at approximately 11:00 A.M., in the
applicable Principal Financial Center, on such LIBOR
Interest Determination Date by three major banks in such
Principal Financial Center (which may include affiliates of
the Agents) selected by the Calculation Agent for loans in
the Index Currency to leading European banks, having the
Index Maturity designated in the applicable Pricing
Supplement and in a principal amount that is representative
for a single transaction in such Index Currency in such
market at such time; provided, however, that if the banks so
selected by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR determined as of such
LIBOR Interest Determination Date will be LIBOR in effect on
such LIBOR Interest Determination Date.
"Index Currency" means the currency (including composite
currencies) specified in the applicable Pricing Supplement as the
currency for which LIBOR shall be calculated. If no such
currency is specified in the applicable Pricing Supplement, the
Index Currency shall be United States dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters"
is specified in the applicable Pricing Supplement, the display on
the Reuters Monitor Money Rates Service for the purpose of
displaying the London interbank rates of major banks for the
applicable Index Currency, or (b) if "LIBOR Telerate" is
specified in the applicable Pricing Supplement or neither "LIBOR
Reuters" nor "LIBOR Telerate" is specified as the method for
calculating LIBOR, the display on the Dow Jones Telerate Service
for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency.
"Principal Financial Center" will generally be the capital
city of the country of the specified Index Currency, except that
with respect to United States dollars, Deutsche Marks, Dutch
Guilders, Italian Lire, Swiss Francs and ECUs, the Principal
Financial Center shall be The City of New York, Frankfurt,
Amsterdam, Milan, Zurich and Luxembourg, respectively.
Prime Rate. Prime Rate Notes will bear interest at the
rates (calculated with reference to the Prime Rate and the Spread
and/or Spread Multiplier, if any) specified in such Prime Rate
Notes and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "Prime Rate" means, with respect to any Interest
Determination Date relating to a Prime Rate Note or any Floating
Rate Note for which the interest rate is determined with
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reference to the Prime Rate (a "Prime Rate Interest Determination
Date"), the rate on such date as such rate is published in
H.15(519) under the heading "Bank Prime Loan." If such rate is
not published prior to 3:00 P.M., New York City time, on the
related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by
each bank that appears on the Reuters
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Screen NYMF Page (as defined below) as such bank's prime rate or
base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such rates but more than
one such rate appear on the Reuters Screen NYMF Page for such
Prime Rate Interest Determination Date, the Prime Rate shall be
the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by a 360-day year as of
the close of business on such Prime Rate Interest Determination
Date by four major money center banks in The City of New York
(which may include affiliates of the Agents) selected by the
Calculation Agent. If fewer than two such rates appear on the
Reuters Screen NYMF Page, the Prime Rate will be determined by
the Calculation Agent on the basis of the rates furnished in The
City of New York by three substitute banks or trust companies
organized and doing business under the laws of the United States,
or any State thereof, having total equity capital of at least
$500 million and being subject to supervision or examination by
Federal or State authority, selected by the Calculation Agent to
provide such rate or rates; provided, however, that if the banks
or trust companies selected as aforesaid are not quoting as
mentioned in this sentence, the Prime Rate determined as of such
Prime Rate Interest Determination Date will be the Prime Rate in
effect on such Prime Rate Interest Determination Date.
"Reuters Screen NYMF Page" means the display designated as
page "NYMF" on the Reuters Monitor Money Rates Service (or such
other page as may replace the NYMF page on that service for the
purpose of displaying prime rates or base lending rates of major
United States banks).
Treasury Rate. Treasury Rate Notes will bear interest at
the rates (calculated with reference to the Treasury Rate and the
Spread and/or Spread Multiplier, if any) specified in such
Treasury Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest
Determination Date relating to a Treasury Rate Note or any
Floating Rate Note for which the interest rate is determined by
reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent
auction of direct obligations of the United States ("Treasury
Bills") having the Index Maturity specified in the applicable
Pricing Supplement, as such rate is published in H.15(519) under
the heading "Treasury Bills-Auction Average (Investment)" or, if
not published by 3:00 P.M., New York City time, on the related
Calculation Date, the auction average rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced
by the United States Department of the Treasury. In the event
that the results of the auction of Treasury Bills having the
Index Maturity designated in the applicable Pricing Supplement
are not reported as provided by 3:00 P.M., New York City time, on
such Calculation Date, or if no such auction is held in a
particular week, then the Treasury Rate will be calculated by the
Calculation Agent and will be a yield to maturity (expressed as a
bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M.,
New York City time, on such Treasury Rate Interest Determination
Date, of three leading primary United States government
securities dealers (which may include the Agents or their
affiliates) selected by the Calculation Agent, for the issue of
Treasury Bills with a remaining maturity closest to the Index
Maturity designated in the applicable Pricing Supplement;
provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence,
the Treasury Rate determined as of such Treasury Rate Interest
Determination Date will be the Treasury Rate in effect on such
Treasury Rate Interest Determination Date.
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OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the
determination of an Interest Rate Basis, the calculation of the
interest rate applicable to a Floating Rate Note, and the
specification of one or more Interest Rate Bases, the Interest
Payment Dates, Maturity or any other variable term relating
thereto, may be modified as specified under "Other Provisions" on
the face thereof or in an Addendum relating thereto, if so
specified on the face thereof and in the applicable Pricing
Supplement.
AMORTIZING NOTES
The Company may, from time to time, offer Amortizing Notes.
Unless otherwise specified in the applicable Pricing Supplement,
interest on each Amortizing Note will be computed on the basis of
a 360-day year of twelve 30-day months. Payments with respect to
Amortizing Notes will be applied first to interest due and
payable thereon and then to the reduction of the unpaid principal
amount thereof. Further information concerning additional terms
and provisions of Amortizing Notes will be specified in the
applicable Pricing Supplement. A table setting forth repayment
information in respect of each Amortizing Note will be included
in the applicable Pricing Supplement and set forth in each such
Note.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may offer Original Issue Discount Notes from
time to time. Such Original Issue Discount Notes may currently
pay no interest or interest at a rate which at the time of
issuance is below market rates. The amount payable in the event
of the acceleration of maturity of an Original Issue Discount
Note shall be the Amortized Face Amount thereof plus accrued but
unpaid qualified stated interest. See "United States Taxation."
Certain additional considerations relating to the offering of any
Original Issue Discount Notes may be set forth in the applicable
Pricing Supplement.
INDEXED NOTES
Notes may be issued with the amount of principal, premium
and/or interest payable in respect thereof to be determined with
reference to the price or prices of specified commodities or
stocks, the exchange rate of one or more specified currencies
(including a composite currency such as the ECU) relative to an
indexed currency or such other price or exchange rate ("Indexed
Notes"), as set forth in the applicable Pricing Supplement. In
certain cases, Holders of Indexed Notes may receive a principal
amount at Maturity that is greater than or less than the face
amount of the Notes depending upon the relative value at Maturity
of the specified indexed item. Information as to the method for
determining the amount of principal, premium and/or interest
payable in respect of Indexed Notes, certain historical
information with respect to the specified indexed item and tax
considerations associated with an investment in such Indexed
Notes will be set forth in the applicable Pricing Supplement.
An investment in Notes indexed, as to principal, premium
and/or interest, to one or more values of currencies (including
exchange rates between currencies), commodities or interest rate
indices entails significant risks that are not associated with
similar investments in a conventional fixed-rate debt security.
If the interest rate of an Indexed Note is so indexed, it may
result in an interest rate that is less than that payable on a
conventional fixed-rate debt security issued at the same time,
including the possibility that no interest will be paid, and, if
the principal of and/or premium on an Indexed Note is so indexed,
the amount of principal payable in respect thereof may be less
than the original purchase price of such Indexed Note if allowed
pursuant to the terms thereof, including the possibility that no
such amount will be paid. The secondary market for Indexed
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Notes will be affected by a number of factors, independent of the
creditworthiness of the Company and the value of the applicable
currency, commodity or interest rate index, including the
volatility of the applicable currency, commodity or interest rate
index, the time remaining to the maturity of such Notes, the
amount outstanding of such Notes and market interest rates. The
value of the applicable currency, commodity or interest rate
index depends on a number of interrelated factors, including
economic, financial and political events, over which the Company
has no control. Additionally, if the formula used to determine
the amount of principal, premium and/or interest payable with
respect to Indexed Notes contains a multiple or leverage factor,
the effect of any change in the applicable currency, commodity or
interest rate index will be increased. The historical experience
of the relevant currencies, commodities or interest rate indices
should not be taken as an indication of future performance of
such currencies, commodities or interest rate indices during the
term of any Indexed Note. The credit ratings assigned to the
Company's medium-term note program are a reflection of the
Company's credit status, and, in no way, are a reflection of the
potential impact of the factors discussed above, or any other
factors, on the market value of the Notes. Accordingly,
prospective investors should consult their own financial and
legal advisors as to the risks entailed by an investment in
Indexed Notes and the suitability of Indexed Notes in light of
their particular circumstances.
BOOK-ENTRY NOTES
The following provisions assume that the Company has
established a depository arrangement with The Depository Trust
Company with respect to the Book-Entry Notes. Any additional or
differing terms of the depository arrangements with respect to
the Book-Entry Notes will be described in the applicable Pricing
Supplement.
Upon issuance, all Book-Entry Notes up to $150,000,000
aggregate principal amount bearing interest (if any) at the same
rate or pursuant to the same formula and having the same Original
Issue Date, redemption provisions (if any), repayment provisions
(if any), Stated Maturity and other variable terms will be
represented by a single Global Security. Each Global Security
representing Book-Entry Notes will be deposited with, or on
behalf of, the Depositary and will be registered in the name of
the Depositary or a nominee of the Depositary. No Global
Security may be transferred except as a whole by a nominee of the
Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or such nominee to a successor
of the Depositary of such successor.
So long as the Depositary or its nominee is the registered
owner of a Global Security, the Depositary or its nominee, as the
case may be, will be the sole Holder of the Book-Entry Notes
represented thereby for all purposes under the Indenture. Except
as otherwise provided in this section, the beneficial owners of
the Global Security or Securities representing Book-Entry Notes
will not be entitled to receive physical delivery of Certificated
Notes and will not be considered the Holders thereof for any
purpose under the Indenture, and no Global Security representing
Book-Entry Notes shall be exchangeable or transferrable.
Accordingly, each person owning a beneficial interest in a Global
Security must rely on the procedures of the Depositary and, if
such person is not a participant, on the procedures of the
participant through which such person owns its interest in order
to exercise any rights of a Holder under the Indenture. The laws
of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in
certificated form. Such limits and such laws may impair the
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ability to transfer beneficial interests in a Global Security
representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing
Supplement, each Global Security representing Book-Entry Notes is
exchangeable for Certificated Notes of like tenor and terms and
of differing authorized denominations aggregating a like amount,
only if (i) the Depositary notifies the Company that it is
unwilling or
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unable to continue as Depositary for the Global Securities, (ii)
the Depositary ceases to be a clearing agency registered under
the Exchange Act, (iii) the Company in its sole discretion
determines that the Global Securities shall be exchangeable for
Certificated Notes, or (iv) there shall have occurred and be
continuing an Event of Default under the Indenture with respect
to the Notes. Upon any such exchange, the Certificated Notes
shall be registered in the names of the beneficial owners of the
Global Security or Securities representing Book-Entry Notes as
provided by the Depositary's relevant participants (as identified
by the Depositary).
The following is based on information furnished by the
Depositary:
The Depositary will act as securities depository for
the Book-Entry Notes. The Book-Entry Notes will be issued as
fully registered securities registered in the name of Cede &
Co. (the Depositary's partnership nominee). One fully
registered Global Security will be issued for each issue of
Book-Entry Notes, each in the aggregate principal amount of
such issue, and will be deposited with the Depositary. If,
however, the aggregate principal amount of any issue exceeds
$150,000,000, one Global Security will be issued with
respect to each $150,000,000 of principal amount and an
additional Global Security will be issued with respect to
any remaining principal amount of such issue.
The Depositary is a limited-purpose trust company
organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. The
Depositary holds securities that its participants
("Participants") deposit with the Depositary. The Depositary
also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-
entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain
other organizations. The Depositary is owned by a number of
its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the
Depositary's system is also available to others such as
securities brokers and dealers, banks and trust companies
that clear through or maintain a custodial relationship with
a Direct Participant, either directly or indirectly
("Indirect Participant"). The rules applicable to the
Depositary and its Participants are on file with the
Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's
system must be made by or through Direct Participants, which
will receive a credit for such Book-Entry Notes on the
Depositary's records. The ownership interest of each actual
purchaser of each Book-Entry Note represented by a Global
Security ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from the
Depositary of their purchase, but Beneficial Owners are
expected to receive written confirmations providing details
of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through
which such Beneficial Owner entered into the transaction.
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Transfers of ownership interests in a Global Security
representing Book-Entry Notes are to be accomplished by
entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners of a Global Security
representing Book-Entry Notes will not receive Certificated
Notes representing their ownership interests therein, except
in the event that use of the book-entry system for such
Book-Entry Notes is discontinued.
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To facilitate subsequent transfers, all Global
Securities representing Book-Entry Notes which are deposited
with the Depositary are registered in the name of the
Depositary's nominee, Cede & Co. The deposit of Global
Securities with the Depositary and their registration in the
name of Cede & Co. effect no change in beneficial ownership.
The Depositary has no knowledge of the actual Beneficial
Owners of the Global Securities representing the Book-Entry
Notes; the Depositary's records reflect only the identity of
the Direct Participants to whose accounts such Book-Entry
Notes are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the
Depositary to Direct Participants, by Direct Participants to
Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners will by governed
by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to
time.
Redemption notices shall be sent to Cede & Co. If less
than all of the Book-Entry Notes within an issue are being
redeemed, the Depositary's practice is to determine by lot
the amount of the interest of each Direct Participant in
such issue to be redeemed.
Neither the Depositary nor Cede & Co. will consent or
vote with respect to the Global Securities representing the
Book-Entry Notes. Under its usual procedures, the Depositary
mails an Omnibus Proxy to the Company as soon as possible
after the applicable record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Book-Entry Notes are
credited on the applicable record date (identified in a
listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on
the Global Securities representing the Book-Entry Notes will
be made to the Depositary. The Depositary's practice is to
credit Direct Participants' accounts on the applicable
payment date in accordance with their respective holdings
shown on the Depositary's records unless the Depositary has
reason to believe that it will not receive payment on such
date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices,
as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of
the Depositary, the Trustee or the Company, subject to any
statutory or regulatory requirements as may be in effect
from time to time. Payment of principal, premium, if any,
and interest to the Depositary is the responsibility of the
Company or the Trustee, disbursement of such payments to
Direct Participants shall be the responsibility of the
Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.
A Beneficial Owner shall give notice to elect to have
its Book-Entry Notes repaid by the Company, through its
Participant, to the Trustee, and shall effect delivery of
such Book-Entry Notes by causing the Direct Participant to
transfer the Participant's interest in the Global Security
or Securities representing such Book-Entry Notes, on the
Depositary's records, to the Trustee. The requirement for
physical delivery of Book-Entry Notes in connection with a
demand for repayment will be deemed satisfied when the
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ownership rights in the Global Security or Securities
representing such Book-Entry Notes are transferred by Direct
Participants on the Depositary's records.
The Depositary may discontinue providing its services
as securities depository with respect to the Book-Entry
Notes at any time by giving reasonable notice to the Company
or the Trustee. Under
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such circumstances, in the event that a successor securities
depository is not obtained, Certificated Notes are required
to be printed and delivered.
The Company may decide to discontinue use of system of
book-entry transfers through the Depositary (or a successor
securities depository). In that event, Certificated Notes
will be printed and delivered.
The information in this section concerning the Depositary
and the Depositary's system has been obtained from sources that
the Company believes to be reliable, but the Company takes no
responsibility for the accuracy thereof.
SPECIAL PROVISIONS AND RISKS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing
Supplement, Notes denominated in other than United States dollars
or ECUs will not be sold in, or to residents of, the country
issuing the Specified Currency in which the particular Notes are
denominated. The information set forth in this Prospectus
Supplement is directed to prospective purchasers who are United
States residents and, with respect to Foreign Currency Notes, is
by necessity incomplete. The Company disclaims any
responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of
payments of principal of and premium, if any, and interest on the
Notes. Such persons should consult their own financial and legal
advisors with regard to such matters.
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL RISKS OF AN
INVESTMENT IN FOREIGN CURRENCY NOTES THAT RESULT FROM SUCH NOTES
BEING DENOMINATED OR PAYABLE IN A SPECIFIED CURRENCY OTHER THAN
UNITED STATES DOLLARS, EITHER AS SUCH RISKS EXIST AT THE DATE OF
THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME
TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN
INVESTMENT IN FOREIGN CURRENCY NOTES. FOREIGN CURRENCY NOTES ARE
NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant
risks that are not associated with a similar investment in a debt
security denominated in United States dollars. Such risks
include, without limitation, the possibility of significant
changes in the rate of exchange between the United States dollar
and the applicable Specified Currency and the possibility of the
imposition or modification of foreign exchange controls by either
the United States or foreign governments. Such risks generally
depend on events over which the Company has no control, such as
economic and political events and the supply and demand for the
relevant currencies. In recent years, rates of exchange between
the United States dollar and certain foreign currencies have been
highly volatile and such volatility may be expected in the
future. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of
fluctuations in the rate that may occur during the term of any
Foreign Currency Note. Depreciation of the Specified Currency
applicable to a Foreign Currency Note against the United States
dollar would result in a decrease in the United States dollar-
equivalent yield of
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such Note, in the United States dollar-equivalent value of the
principal and premium, if any, payable at Maturity of such Note,
and, generally, in the United States dollar-equivalent market
value of such Note.
Governments have imposed from time to time exchange controls
and may in the future impose or revise exchange controls at or
prior to the date on which any payment of principal of or
premium, if any, or interest on a Foreign Currency Note is due,
which could affect exchange rates as well as the availability of
the Specified Currency on such date. Even if there are no
exchange controls, it is possible that the Specified Currency for
any particular Foreign Currency Note would not be available on
the applicable payment date due to other circumstances beyond the
control of the Company. In that event, the Company will make the
required payment in respect of such Foreign Currency Note in
United States dollars on the basis of the Market Exchange Rate
(as defined below). See "Payment Currency."
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance
with the laws of the State of New York. If an action based on
Foreign Currency Notes were commenced in a court of the United
States, it is likely that such court would grant judgment
relating to such Notes only in United States dollars. It is not
clear, however, whether, in granting such judgment, the rate of
conversion into United States dollars would be determined with
reference to the date of default, the date judgment is rendered
or some other date. Under current New York law, a state court in
the State of New York rendering a judgment on a Foreign Currency
Note would be required to render such judgment in the Specified
Currency in which such Foreign Currency Note is denominated, and
such judgment would be converted into United States dollars at
the exchange rate prevailing on the date of entry of the
judgment. Accordingly, Holders of Foreign Currency Notes would
bear the risk of exchange rate fluctuations between the time the
amount of the judgment is calculated and the time such amount is
converted from United States dollars into the applicable
Specified Currency.
PAYMENT OF PRINCIPAL AND PREMIUM, IF ANY, AND INTEREST
The Company is obligated to make payments of principal and
premium, if any, and interest on Foreign Currency Notes in the
applicable Specified Currency (or, if such Specified Currency is
not at the time of such payment legal tender for the payment of
public and private debts, in such other coin or currency of the
country which issued such Specified Currency as at the time of
such payment is legal tender for the payment of such debts). Any
such amounts paid by the Company will, unless otherwise specified
in the applicable Pricing Supplement, be converted by the
Exchange Rate Agent named in the applicable Pricing Supplement
into United States dollars for payment to Holders. However,
unless otherwise specified in the applicable Pricing Supplement,
the Holder of a Foreign Currency Note may elect to receive such
payments in the applicable Specified Currency as hereinafter
described.
Any United States dollar amount to be received by a Holder
of a Foreign Currency Note will be based on the highest bid
quotation in The City of New York received by the Exchange Rate
Agent at approximately 11:00 A.M., New York City time, on the
second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of whom may be the
Exchange Rate Agent) selected by the Exchange Rate Agent and
approved by the Company for the purchase by the quoting dealer of
the Specified Currency for United States dollars for settlement
on such payment date in the aggregate amount of the Specified
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Currency payable to all Holders of Foreign Currency Notes
scheduled to receive United States dollar payments and at which
the applicable dealer commits to execute a contract. All
currency exchange costs will be borne by the Holder of such
Foreign Currency Note by deductions from such payments. If three
such bid quotations are not available, payments will be made in
the Specified Currency.
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Unless otherwise specified in the applicable Pricing
Supplement, a Holder of a Foreign Currency Note may elect to
receive payment of the principal of and premium, if any, and/or
interest on such Note in the Specified Currency by submitting a
written request for such payment to the Trustee at its corporate
trust office in The City of New York on or prior to the
applicable Record Date or at least fifteen calendar days prior to
the Maturity Date, as the case may be. Such written request may
be mailed or hand-delivered or sent by cable, telex or other form
of facsimile transmission. A Holder of a Foreign Currency Note
may elect to receive payment in the applicable Specified Currency
for all such principal, premium, if any, and interest payments
and need not file a separate election for each payment. Such
election will remain in effect until revoked by written notice to
the Trustee, but written notice of any such revocation must be
received by the Trustee on or prior to the applicable Record Date
or at least fifteen calendar days prior to the Maturity Date, as
the case may be. Holders of Foreign Currency Notes whose Notes
are to be held in the name of a broker or nominee should contact
such broker or nominee to determine whether and how an election
to receive payments in the applicable Specified Currency may be
made.
Payments of the principal of and premium, if any, and
interest on Foreign Currency Notes which are to be made in U.S.
dollars will be made in the manner specified herein with respect
to Notes denominated in United States dollars. See "Description
of Notes--General." Payments of interest on Foreign Currency
Notes which are to be made in the applicable Specified Currency
on an Interest Payment Date (other than at Maturity) will be made
by check mailed at the address of the Persons entitled thereto as
they appear in the Security Register. Payments of principal of
and premium, if any, and interest on Foreign Currency Notes which
are to be made in the applicable Specified Currency at Maturity
will be made by wire transfer of immediately available funds to
an account with a bank designated at least fifteen calendar days
prior to Maturity by the applicable Holder, provided that such
bank has appropriate facilities therefor and that the applicable
Note is presented at the principal corporate trust office of the
Trustee in time for the Trustee to make such payments in such
funds in accordance with its normal procedures.
Unless otherwise specified in the applicable Pricing
Supplement, a Beneficial Owner of a Global Security or Securities
representing Book-Entry Notes denominated in a Specified Currency
other than United States dollars which elects to receive payments
of principal, premium, if any, and interest in such Specified
Currency must notify the Participant through which its interest
is held on or prior to the applicable Record Date or at least
fifteen calendar days prior to Maturity, as the case may be, of
such Beneficial Owner's election to receive all or a portion of
such payment in such Specified Currency. Such Participant must
notify the Depositary of such election on or prior to the third
Business Day after such Record Date or at least twelve Business Days
prior to Maturity, as the case may be, and the Depositary will
notify the Trustee of such election on or prior to the fifth
Business Day after such Record Date or at least ten Business Days
prior to Maturity, as the case may be. If complete instructions
are received by the Participant and forwarded by the Participant
to the Depositary, and by the Depositary to the Trustee, on or
prior to such dates, then the Beneficial Owner will receive
payments in such Specified Currency.
PAYMENT CURRENCY
If the applicable Specified Currency is not available for
the payment of principal, premium, if any, or interest with
respect to a Foreign Currency Note due to the imposition of
exchange controls or other circumstances beyond the control of
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the Company, the Company will be entitled to satisfy its
obligations to the Holder of such Foreign Currency Note by making
such payment in United States dollars on the basis of the Market
Exchange Rate on the second Business Day prior to such payment
or, if such Market Exchange Rate is not then available, on the
basis of the most recently available Market Exchange Rate or as
otherwise specified in the applicable Pricing Supplement. The
"Market Exchange Rate" for a Specified Currency other than United
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States dollars means the noon dollar buying rate in The City of
New York for cable transfer for such Specified Currency as
certified for customs purposes by (or if not so certified, as
otherwise determined by) the Federal Reserve Bank of New York.
Any payment made under such circumstances in United States
dollars where the required payment is in a Specified Currency
other than United States dollars will not constitute an Event of
Default under the Indenture with respect to the Notes.
If payment in respect of a Foreign Currency Note is required
to be made in any currency unit (e.g., ECU), and such currency
unit is unavailable due to the imposition of exchange controls or
other circumstances beyond the Company's control, then the
Company will be entitled, but not required, to make any payments
in respect of such Note in United States dollars until such
currency unit is again available. The amount of each payment in
United States dollars shall be computed on the basis of the
equivalent of the currency unit in United States dollars, which
shall be determined by the Company or its agent on the following
basis. The component currencies of the currency unit for this
purpose (collectively, the "Component Currencies" and each, a
"Component Currency") shall be the currency amounts that were
components of the currency unit as of the last day on which the
currency unit was used. The equivalent of the currency unit in
United States dollars shall be calculated by aggregating the
United States dollar equivalents of the Component Currencies.
The United States dollar equivalent of each of the Component
Currencies shall be determined by the Company or such agent on
the basis of the most recently available Market Exchange Rate for
each such Component Currency, or as otherwise specified in the
applicable Pricing Supplement.
If the official unit of any Component Currency is altered by
way of combination or subdivision, the number of units of the
currency as a Component Currency shall be divided or multiplied
in the same proportion. If two or more Component Currencies are
consolidated into a single currency, the amounts of those
currencies as Component Currencies shall be replaced by an amount
in such single currency equal to the sum of the amounts of the
consolidated Component Currencies expressed in such single
currency. If any Component Currency is divided into two or more
currencies, the amount of the original Component Currency shall
be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original
Component Currency.
All determinations referred to above made by the Company or
its agent (including the Exchange Rate Agent) shall be at its
sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the
Foreign Currency Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes certain U.S.
federal income tax aspects of the acquisition, ownership and
disposition of the Notes. This discussion is a summary for
general information only and does not consider all aspects of
U.S. federal income tax that may be relevant to the purchase,
ownership and disposition of the Notes by a prospective investor
in light of the investor's own circumstances. This discussion
also does not address the U.S. federal income tax consequences of
ownership of Notes not held as capital assets within the meaning
of Section 1221 of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), or the U.S. federal income tax consequences
to investors subject to special treatment under the U.S. federal
income tax laws, such as dealers in securities or foreign
currency, tax-exempt entities, banks, thrifts, insurance
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companies, persons that hold the Notes as part of a "straddle" or
as a "hedge" against currency risk or that have a "functional
currency" other than the U.S. dollar, and investors in pass-
through entities. In addition, the discussion is generally
limited to the tax consequences to initial holders. It does not
describe any tax consequences arising out of the tax laws of any
state, local or foreign jurisdiction. This discussion also does
not
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address the special rules that apply if the holder receives
principal in installment payments or if the Note is called before
the maturity date.
This summary is based upon the Code, existing and proposed
regulations thereunder, and current administrative rulings and
court decisions. All of the foregoing are subject to change, and
any such change could affect the continuing validity of this
discussion.
PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF U.S. FEDERAL
INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL, OR
FOREIGN TAXING JURISDICTION TO THEIR PARTICULAR SITUATIONS.
ADDITIONAL U.S. FEDERAL INCOME TAX CONSEQUENCES APPLICABLE TO
PARTICULAR NOTES MAY BE SET FORTH IN THE APPLICABLE PRICING
SUPPLEMENT.
Special considerations relevant to the U.S. federal income
taxation of payments on Notes denominated in a Specified Currency
other than the U.S. dollar or indexed to changes in exchange
rates ("Foreign Currency Notes") are discussed separately below
under the heading "U.S. Holders -- Foreign Currency Notes."
Special considerations relevant to the U.S. Federal income
taxation of payments on Notes, the interest and/or principal of
which is indexed to property other than foreign currency and
which is not a "variable rate debt instrument" (discussed below
under the heading "Stated Interest; Original Issue Discount")
will be discussed in the applicable Pricing Supplement. Special
considerations relevant to the U.S. Federal income taxation of
Notes issued in bearer form will be discussed in the applicable
Pricing Supplement. The discussion below assumes that the Notes
will be treated as debt for U.S. federal income tax purposes.
However, it is possible that some contingent payment arrangements
would not be treated as debt for U.S. federal income tax
purposes. Holders should consult their own tax advisors with
respect to whether any contingent payment obligations are debt.
U.S. HOLDERS
The following discussion is limited to the U.S. federal
income tax consequences relevant to a holder of a note that is a
(i) a citizen or resident of the United States, (ii) a
corporation organized under the laws of the United States or any
political subdivision thereof or therein, or (iii) an estate or
trust, the income of which is subject to U.S. federal income tax
regardless of the source (a "U.S. Holder"). Certain aspects of
U.S. federal income tax relevant to a holder other than a U.S.
Holder (a "Non-U.S. Holder") are discussed separately below.
Stated Interest; Original Issue Discount
Except as set forth below, interest on a Note will be
taxable to a U.S. Holder as ordinary interest income at the time
it accrues or is received in accordance with such holder's method
of accounting for tax purposes. U.S. Holders of Notes that bear
original issue discount ("OID") generally will be subject to the
special tax accounting rules for original issue discount
obligations. U.S. Holders of Notes that bear OID and that mature
more than one year from the date of issuance will generally be
required to include OID in income as it accrues in advance of the
receipt of cash attributable to such income, whether such Holder
uses the cash or accrual method of accounting.
On February 2, 1994, the Internal Revenue Service (the
"IRS") issued final regulations (the "OID Regulations")
concerning the U.S. federal income tax treatment of debt
instruments issued with OID. In general, the OID regulations
apply to debt instruments issued on or after April 4, 1994.
Special rules for computing OID on a "variable rate debt
instrument" are considered below under the heading "Variable Rate
Notes."
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In connection with the issuance of the OID Regulations, the
IRS issued as a temporary and proposed regulation an anti-abuse
rule which provides that if a principal purpose in structuring a
debt instrument or applying the OID Regulations is to achieve a
result that is unreasonable in light of the purposes of the
applicable statutes, then the Commissioner can apply or depart
from the OID Regulations as necessary or appropriate to achieve a
reasonable result. Whether a result is unreasonable is
determined based on all the facts and circumstances. Although
the Company does not believe that the Notes were structured with
such a principal purpose, there can be no assurance that the IRS
will agree with such position.
The amount of OID, if any, on a Note is the excess of its
"stated redemption price at maturity" over its "issue price,"
subject to a statutory de minimis exception. For this purpose,
de minimis OID is OID that is less than 1/4 of 1 percent of the
stated redemption price at maturity multiplied by the number of
complete years to its maturity from the issue date.
Generally, the issue price of an issue of Notes will be the
first price at which a substantial amount of such Notes has been
sold. (For this purpose, sales to bond houses, brokers or
similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers are ignored.) A
U.S. Holder may elect in certain circumstances to decrease the
issue price by an amount equal to the portion of the initial
purchase price of the Note equal to pre-issuance accrued
interest.
A Note's stated redemption price at maturity includes all
payments required to be made over the term of the Note other than
the payment of "qualified stated interest," which is defined as
interest that is unconditionally payable in cash or property
(other than debt instruments of the Issuer) at least annually at
a single fixed rate, or in the circumstances described below, a
qualified floating rate or objective rate on a variable rate debt
instrument. If a debt instrument provides for alternate payment
schedules upon the occurrence of one or more contingencies, the
determination of whether a debt instrument provides for qualified
stated interest is made by analyzing each alternative payment
schedule (including the stated payment schedule) as if it were
the debt instrument's sole payment schedule. The debt instrument
will be considered to provide for qualified stated interest to
the extent of the lowest fixed rate at which qualified interest
would be payable under any payment schedule.
Interest is considered unconditionally payable only if late
payment (other than late payment within a reasonable grace
period) or nonpayment is expected to be penalized or reasonable
remedies exist to compel payment.
Interest is payable at a single fixed rate only if the rate
appropriately takes into account the length of the interval
between stated interest payments. Thus, if the interval between
payments varies during the term of the instrument, the value of
the fixed rate on which payment is based generally must be
adjusted to reflect a corresponding assumption consistent with
the length of the interval preceding the payment.
For purposes of determining whether the OID on a Note is de
minimis, in the case of a Note that otherwise has less than the
de minimis amount of OID and on which all stated interest would
be qualified stated interest except that for one or more accrual
periods the interest rate is below the rate applicable for the
remaining term of such Note (e.g., Notes with teaser rates or
interest holidays), the Note's stated redemption price at
maturity is treated as equal to the Note's issue price plus the
greater of the amount of foregone interest or the "true" discount
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(i.e., the excess of the Note's stated principal amount over its
issue price).
A U.S. Holder (whether on the cash or accrual method of
accounting) must include in income for the taxable year the sum
of the daily portions of OID for each day of the taxable year on
which the U.S. Holder
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held the Note with an original maturity of more than one year.
The daily portions of OID are determined by determining the OID
attributable to each accrual period and allocating a ratable
portion of such amount to each day in the accrual period. The
accrual period may be of any length and may vary in length over
the term of the Note, provided that each accrual period is no
longer than one year and each scheduled payment of principal and
interest occurs on the final day of an accrual period or on the
first day of an accrual period. In general, OID allocable to an
accrual period equals the product of the (i) the adjusted issue
price at the beginning of the accrual period (i.e., the original
issue price plus previously accrued OID minus previous payments
other than payments of qualified stated interest) multiplied by
the original yield to maturity of the Note (determined on the
basis of compounding at the end of each accrual period) minus
(ii) the amount of qualified stated interest allocable to the
accrual period.
The OID Regulations provide special rules for determining
the amount of OID allocable to a period when there is unpaid
qualified stated interest, for short initial accrual periods and
final accrual periods, and for determining the yield to maturity
for debt instruments subject to certain contingencies as to the
timing of payments, debt instruments that provide for options to
accelerate or defer any payments, and debt instruments with
indefinite maturities. Under the OID Regulations, options to
convert debt into stock of the issuer or into stock or debt of
certain related parties or to cash or other property in an amount
equal to the approximate value of such stock or debt are
disregarded in determining OID. Under the Code and the OID
Regulations, U.S. Holders generally will have to include in
income increasingly greater amounts of OID in successive accrual
periods.
Variable Rate Notes
The OID Regulations contain special rules for determining
the accrual of OID and the amount of qualified stated interest on
a "variable rate debt instrument." For purposes of these
regulations, a variable rate debt instrument is a debt instrument
that: (1) has an issue price that does not exceed total
noncontingent principal payments by more than a specified amount;
(2) provides for stated interest (compounded or paid at least
annually) at (a) one or more "qualified floating rates;" (b) a
single fixed rate and one or more qualified floating rates, (c) a
single "objective rate," or (d) a single fixed rate and a single
objective rate that is a "qualified inverse floating rate;" and
(3) provides that a qualified floating rate or objective rate in
effect at any time during the term of the instrument is set at a
current value of that rate.
For purposes of determining if a Note is a variable rate
debt instrument, a floating rate is a "qualified floating rate,"
if variations in the rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in
the currency in which the debt instrument is denominated. A
multiple of a qualified floating rate is generally not a
qualified floating rate, unless it is either (a) a product of a
qualified rate times a fixed multiple greater than zero but not
more than 1.35 or (b) a multiple of the type described in (a)
increased or decreased by a fixed rate. If a debt instrument
provides for two or more qualified floating rates that can
reasonably be expected to have approximately the same value
throughout the term of the instrument, the qualified floating
rates will be considered a single qualified floating rate. Two
or more such rates will be considered to have approximately the
same value throughout the term of the instrument, if the values
of the rates on the date of issuance are within 25 basis points
of each other.
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An "objective rate" is a rate, other than a qualified
floating rate, that is determined using a single fixed formula
and that is based on (i) the yield or changes in the price of one
or more items of property that is actively traded within the
meaning of section 1092 of the Code (other than stock or debt of
the issuer or a related party), (ii) one or more qualified
floating rates (but that is not itself a qualified floating
rate), (iii) one or more rates if each rate would be a qualified
floating rate for a debt instrument denominated in a currency
other
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than the currency in which the debt instrument is denominated, or
(iv) some combination of (i), (ii) or (iii). In addition, the
IRS may designate other variable rates as objective rates.
Restrictions on a minimum interest rate ("floor") or maximum
interest rate ("cap"), or the amount of increase or decrease in
the stated interest rate ("governor"), generally will not result
in the rate failing to be treated as a qualified floating rate if
the restriction is fixed throughout the term of the instrument
and the cap, floor or governor is "at the money" as of the date
of issuance. However, a rate is not an objective rate if it is
reasonably expected that the average value of such rate over the
first half of the instrument's term will be either that is
significantly less or more than the average value of the rate
during the final half of the instrument's term, i.e., if there is
a significant front loading or back loading of interest.
A "qualified inverse floating rate" is a rate that is equal
to a fixed rate minus a qualified floating rate if variations in
the rate can reasonably be expected inversely to reflect
contemporaneous variations in the cost of newly borrowed funds.
Under the OID Regulations, a debt instrument providing for
one or more qualified floating rates is converted to an
equivalent fixed rate debt instrument by assuming that each
qualified floating rate will remain at its value as of the issue
date. A debt instrument providing for an objective rate is
converted to an equivalent fixed rate debt instrument by assuming
that the objective rate will equal a fixed rate that reflects the
yield that is reasonably expected for the instrument. The rules
applicable to fixed rate debt instruments are then applied to
determine the OID accruals and the qualified stated interest
payments on the equivalent fixed rate debt instruments.
Election to Treat all Interest as OID
Under the OID Regulations, a U.S. Holder may elect for a
Note acquired after April 4, 1994 to account for all income on a
Note (other than foreign currency gain or loss), including stated
interest, OID, de minimis OID, market discount, de minimis market
discount, amortizable bond premium, or acquisition premium in the
same manner as OID. If this election is made, the U.S. Holder
may be subject to the conformity requirements of section 171(c)
or 1278(b), respectively, which may require the amortization of
bond premium and the accrual of market discount on other debt
instruments held by the same U.S. Holder.
Short-Term Notes
In general, an individual or other cash method U.S. Holder
of a Note that has an original maturity of not more than one year
from the date of issuance (a "short-term Note") is not required
to accrue OID unless he or she elects to do so. Such an election
applies to all short-term Notes acquired by the U.S. Holder
during the first taxable year for which the election is made, and
all subsequent taxable years of the U.S. Holder unless the IRS
consents to a revocation. U.S. Holders who report income for
U.S. federal income tax purposes on the accrual method and
certain other U.S. Holders and electing cash method U.S. Holders,
are required to include OID on such short-term Notes on a
straight-line basis, unless an irrevocable election with respect
to any short-term Note is made to accrue the OID according to a
constant interest rate based on daily compounding. In the case
of a U.S. Holder who is not required, and does not elect, to
include OID in income currently, any gain realized on the sale,
exchange or retirement of the short-term Note will be ordinary
income to the extent of the OID accrued on a straight-line basis
(or, if elected, according to the constant yield method based on
daily compounding) through the date of sale, exchange or
retirement. In addition, such non-electing U.S. Holders who are
not subject to the current inclusion requirement described above
will be required to defer deductions for any interest paid on
indebtedness incurred or continued to purchase or carry such
short-term Notes.
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Market Discount
If a Note is acquired at a "market discount," some or all of
any gain realized upon a sale or other disposition, or payment at
maturity, or some or all of a partial principal payment of such
Note may be treated as ordinary income, as described below. For
this purpose, "market discount" is the excess (if any) of the
Note's issue price (or, in the case of a subsequent purchaser,
the Note's stated redemption price at maturity) over the purchase
price, subject to a statutory de minimis exception. In the case
of a Note issued with OID, in lieu of using the Note's stated
redemption price at Maturity, the Note's revised issue price as
of the purchase date is used. Unless a U.S. Holder has elected
to include the market discount in income as it accrues, any gain
realized on any subsequent disposition of such Note (other than
in connection with certain nonrecognition transactions) or
payment at maturity, or some or all of any partial principal
payment with respect to such Note will be treated as ordinary
income to the extent of the market discount that is treated as
having accrued during the period such Note was held.
The amount of market discount treated as having accrued will
be determined either (i) on a ratable basis by multiplying the
market discount times a fraction, the numerator of which is the
number of days the Note was held by the U.S. Holder and the
denominator of which is the total number of days after the date
such U.S. Holder acquired the Note up to and including the date
of its maturity, or (ii) if the U.S. Holder so elects, on a
constant interest rate method. A U.S. Holder may make that
election with respect to any Note, and such election is
irrevocable.
In lieu of recharacterizing gain upon disposition as
ordinary income to the extent of accrued market discount at the
time of disposition, a U.S. Holder of such Note acquired at a
market discount may elect to include market discount in income
currently, through the use of either the ratable inclusion method
or the elective constant interest method. Once made, the
election to include market discount in income currently applies
to all Notes and other obligations of the U.S. Holder that are
purchased at a market discount during the taxable year for which
the election is made, and all subsequent taxable years of the
U.S. Holder, unless the IRS consents to a revocation of the
election. If an election is made to include market discount in
income currently, the basis of the Note in the hands of the U.S.
Holder will be increased by the market discount thereon as it is
includible in income.
If the U.S. Holder makes the election to treat as OID all
interest on a debt instrument that has market discount, the U.S.
Holder is deemed to have made the election to accrue currently
market discount on all other debt instruments with market
discount. In addition, if the U.S. Holder has previously made
the election to accrue market discount currently, the conformity
requirements of that election are met for debt instruments with
respect to which the U.S. Holder elects to treat all interest as
OID.
Unless a U.S. Holder who acquires a Note at a market
discount elects to include market discount in income currently,
such U.S. Holder may be required to defer a portion of any
interest expense that may otherwise be deductible on any
indebtedness incurred or maintained to purchase or carry such
Note.
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Premium
If a U.S. Holder purchases a Note issued with OID at an
"acquisition premium," the U.S. Holder reduces the amount of OID
includible in income in each taxable year by that portion of
acquisition premium allocable to that year. A Note is purchased
at an acquisition premium if, immediately after the purchase, the
purchaser's adjusted basis in the Note is greater than the
adjusted issue price but not greater than all amounts payable on
the instrument after the purchase date (other than qualified
stated interest) (i.e., the Note is not
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purchased at a "bond premium"). In general, the reduction in OID
allocable to acquisition premium is determined by multiplying the
daily portion of OID by a fraction the numerator of which is the
excess of the U.S. Holder's adjusted basis in the Note
immediately after the acquisition over the adjusted issue price
of the Note and the denominator of which is the excess of the sum
of all amounts payable on the Note after the purchase date, other
than payments of qualified stated interest, over the Note's
adjusted issue price. Rather than apply the above fraction, the
U.S. Holder may, as discussed above, elect to treat all interest,
including for this purpose, acquisition premium, as OID.
If a U.S. Holder purchases a Note and, immediately after the
purchase, the adjusted basis of the Note exceeds the sum of all
amounts payable on the instrument after the purchase date, other
than qualified stated interest, the Note has "bond premium." A
U.S. Holder that purchases a Note at a bond premium is not
required to include OID in income. In addition, a U.S. Holder
may elect to amortize such bond premium over the remaining term
of such Note (or, in certain circumstances, until an earlier call
date).
If bond premium is amortized, the amount of interest that
must be included in the U.S. Holder's income for each period
ending on an interest payment date or stated maturity, as the
case may be, will be reduced by the portion of premium allocable
to such period based on the Note's yield to maturity. If such an
election to amortize bond premium is not made, a U.S. Holder must
include the full amount of each interest payment in income in
accordance with its regular method of accounting and will receive
a tax benefit from the premium only in computing its gain or loss
upon the sale or other disposition or payment of the principal
amount of the Note.
An election to amortize premium will apply to amortizable
bond premium on all Notes and other bonds, the interest on which
is includible in the U.S. Holder's gross income, held at the
beginning of the U.S. Holder's first taxable year to which the
election applies or thereafter acquired, and may be revoked only
with the consent of the IRS. The election to treat all interest,
including for this purpose amortizable premium, as OID is deemed
to be an election to amortize premium under section 171(c) of the
Code for purposes of the conformity requirements of that section.
In addition, if the U.S. Holder has already made an election to
amortize premium, the conformity requirements will be deemed
satisfied with respect to any Notes for which the U.S. Holder
makes an election to treat all interest as OID.
Sale, Exchange, Redemption or Repayment of the Notes
Upon the disposition of a Note by sale, exchange,
redemption, or repayment, the U.S. Holder will generally
recognize gain or loss equal to the difference between (i) the
amount realized on the disposition (other than amounts
attributable to accrued interest) and (ii) the U.S. Holder's tax
basis in the Note. A U.S. Holder's tax basis in a Note generally
will equal the cost of the Note (net of accrued interest) to the
U.S. Holder increased by amounts includible in income as OID or
market discount (if the holder elects to include market discount
on a current basis) and reduced by any amortized premium and any
payments other than payments of qualified stated interest (or
fixed periodic interest) made on such Note.
Because the Note is held as a capital asset, such gain or
loss (except to the extent that the market discount rules or
rules relating to certain short term OID notes otherwise provide)
will generally constitute capital gain or loss and will be long-
term capital gain or loss if the U.S. Holder has held such Note
for longer than one year. In certain circumstances, if an Issuer
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were found to have an intention, at the time its debt obligations
were issued, to call such obligations before maturity, gain would
be ordinary income to the extent of any unamortized OID. The OID
Regulations clarify that this rule will not apply to publicly
offered debt instruments.
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Foreign Currency Notes
The following discussion applies to Foreign Currency Notes,
if such Notes are not denominated in or indexed to a currency
that is considered a "hyperinflationary" currency. Special U.S.
tax considerations apply to obligations denominated in or indexed
to a hyperinflationary currency.
In general, a U.S. Holder that uses the cash method of
accounting and holds a Foreign Currency Note will be required to
include in income the U.S. dollar value of the amount of interest
income received whether or not the payment is received in U.S.
dollars or converted into U.S. dollars. The U.S. dollar value of
the amount of interest received is the amount of foreign currency
interest paid translated at the spot rate on the date of receipt.
The U.S. Holder will not have exchange gain or loss on the
interest payment but may have exchange gain or loss when it
disposes of any foreign currency received.
A U.S. Holder on the accrual method of accounting is
generally required to include in income the U.S. dollar value of
interest accrued during the accrual period. Accrual basis U.S.
Holders may determine the amount of income recognized with
respect to such interest in accordance with either of two
methods. Under the first method, the U.S. dollar value of
accrued interest is translated at the average rate for the
interest accrual period (or, with respect to an accrual period
that spans two taxable years, the partial period within the
taxable year). For this purpose, the average rate is the simple
average of spot rates of exchange for each business day of such
period or other average exchange rate for the period reasonably
derived and consistently applied by the U.S. Holder. Under the
second method, a U.S. Holder can elect to accrue interest at the
spot rate on the last day of an accrual period (in the case of a
partial accrual period, the last date of the taxable year) or if
the last day of an accrual period is within five business days of
the receipt, the spot rate on the date of receipt. Any such
election will apply to all debt instruments held by the U.S.
Holder at the beginning of the first taxable year to which the
election applies or thereafter acquired and will be irrevocable
without the consent of the IRS. An accrual basis U.S. Holder
will recognize exchange gain or loss, as the case may be, on the
receipt of a foreign currency interest payment if the exchange
rate on the date payment is received differs from the rate
applicable to the previous accrual of interest income. The
foreign currency gain or loss will generally be treated as U.S
source ordinary income or loss.
Original issue discount on a Note denominated in a foreign
currency is determined in foreign currency and is translated into
U.S. dollars in the same manner that an accrual basis U.S. Holder
translates accrued interest. Exchange gain or loss will be
determined when OID is considered paid to the extent the exchange
rate on the date of payment differs from the exchange rate at
which the OID was accrued.
The amount of market discount on a Foreign Currency Note
includible in income will generally be determined by computing
the market discount in foreign currency and translating that
amount into U.S. dollars on the spot rate on the date the Foreign
Currency Note is retired or otherwise disposed of. If the U.S.
Holder accrues market discount currently, the amount of market
discount which accrues during any accrual period is determined in
the foreign currency and translated into U.S. dollars on the
basis of the average exchange rate in effect during the accrual
period. Exchange gain or loss may be recognized to the extent
that the rate of exchange on the date of the retirement or
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disposition of the Note differs from the rate of exchange at
which the market discount was accrued.
Amortizable premium on a Foreign Currency Note is also
computed in units of foreign currency and, if the U.S Holder
elects, will reduce interest income in units of foreign currency.
At the time amortized bond premium offsets interest income,
exchange gain or loss is realized measured by this difference
between exchange rates at that time and at the time of the
acquisition of the Note.
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In the case of a Note denominated in foreign currency, the
cost of the Note to the U.S. Holder will be the U.S. dollar value
of the foreign currency purchase price translated at the spot
rate for the date of purchase (or, in some cases, the settlement
date). The conversion of U.S. dollars to a foreign currency and
the immediate use of that currency to purchase a Foreign Currency
Note generally will not result in a taxable gain or loss for a
U.S. Holder. A U.S. Holder who purchases a Note with previously
owned foreign currency generally will recognize exchange gain or
loss on such currency equal to the difference between the U.S.
Holder's tax basis in the currency and the fair market value of
the currency determined on the date of purchase.
With respect to the sale, exchange, retirement, or repayment
of a Note denominated in a foreign currency, the foreign currency
amount realized will be considered to be the payment of accrued
but unpaid interest (on which exchange gain or loss is recognized
as described above), accrued but unpaid original issue discount
(on which exchange gain or loss is recognized as described
above), and, finally, as a payment of principal on which (i) gain
or loss is computed in foreign currency and translated on the
date of retirement or disposition; and (ii) exchange gain or loss
is separately computed on the foreign currency amount of
principal (reduced by amortizable premium) that is repaid to the
extent that the rate of exchange on the date of retirement or
disposition differs from the rate of exchange on the date the
Note was acquired or deemed acquired. Exchange gain or loss
computed on accrued interest, OID, accrued market discount and
principal shall be recognized, however, only to the extent of
total gain or loss on the transaction. For purposes of
determining the total gain or loss on the transaction, a U.S.
Holder's tax basis in the Note generally will equal the U.S.
dollar cost of the Note (as determined above) increased by the
U.S. dollar amounts includible in income as accrued interest,
OID, or market discount (if the Holder elects to include such
market discount on a current basis) and reduced by the U.S.
dollar amount of amortized premium and of any payments other than
payments of qualified stated interest. A U.S. Holder will have a
tax basis in any foreign currency received on the sale, exchange
or retirement of a Note equal to the U.S. dollar value of such
currency on the date of receipt.
Backup Withholding
A U.S. Holder of a Note may be subject to U.S. backup
withholding at the rate of 31% with respect to interest paid on
the Note, unless such U.S. Holder (i) is a corporation or comes
within certain other exempt categories and, when required,
demonstrates this fact or (ii) provides a correct taxpayer
identification number, certifies as to no loss of exemption from
backup withholding and otherwise complies with the applicable
requirements of the backup withholding rules. U.S. Holders of
Notes should consult their tax advisors as to their qualification
for exemption from U.S. backup withholding and the procedure for
obtaining such an exemption. Any amount paid as backup
withholding will be creditable against the U.S. Holder's U.S.
federal income tax liability.
NON-U.S. HOLDERS
The following is a summary of the U.S. federal income tax
consequences of the ownership and disposition of the Notes by
Non-U.S. Holders. This discussion does not consider all aspects
of U.S. federal income and estate taxation that may be relevant
to the purchase, ownership or disposition of the Notes by such
Non-U.S. Holder in light of such holder's personal circumstances,
including holding the Notes through a partnership. For example,
persons who are partners in foreign partnerships and
beneficiaries of foreign trusts or estates who are subject to
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U.S. federal income tax because of their own status, such as
United States residents or foreign persons engaged in a trade or
business in the United States, may be subject to U.S. federal
income tax even though the entity is not subject to income tax on
the disposition of its Note.
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For purposes of the following discussion, interest
(including OID) and gain on the sale, exchange or other
disposition of the Note will be considered "U.S. trade or
business income" if such income or gain is (i) effectively
connected with the conduct of a U.S. trade or business or (ii) in
the case of a treaty resident, attributable to a U.S. permanent
establishment (or in the case of an individual treaty resident, a
fixed base) in the United States.
Interest and Original Issue Discount
Generally, any interest or OID paid to a Non-U.S. Holder of
a Note that is not "U.S. trade or business income" will not be
subject to U.S. federal income tax if the interest (or original
interest discount) qualifies as "portfolio interest." Generally,
interest on registered Notes will qualify as portfolio interest
if (i) the Non-U.S. Holder does not actually or constructively
own 10% or more of the total voting power of all voting stock of
the Company and is not a controlled foreign corporation with
respect to which the Company is a "related person" within the
meaning of the Code, and (ii) the beneficial owner, under penalty
of perjury, certifies that the beneficial owner is not a United
States person and such certificate provides the beneficial
owner's name and address.
The gross amount of payments to a Non-U.S. Holder of
interest or OID that do not qualify for the portfolio interest
exception and that are not U.S. trade or business income will be
subject to U.S. federal income tax at the rate of 30% unless a
U.S. income tax treaty applies to reduce or eliminate
withholding. U.S. trade or business income will be taxed on a
net basis at regular U.S. rates rather than the 30% gross rate.
To claim the benefit of a tax treaty or to claim exemption from
withholding because the income is U.S. trade or business income,
the Non-U.S. Holder must provide a properly executed Form 1001 or
Form 4224, as applicable, prior to the payment of interest or
OID. The Forms 1001 and 4224 must be periodically updated.
Indexed Notes
The IRS has stated that it is considering various issues
relating to the treatment of Non-U.S. Holders of contingent
payment debt obligations, including "the possibility of tax
avoidance that may arise when a contingent payment debt
obligation is structured with payments that approximate the yield
on an equity security or an index and the proper characterization
of gain recognized by a foreign holder on the disposition of a
debt instrument in certain cases" (including coordination with
the rules for taxation of foreign investment in U.S. real
property). Subject to certain exceptions, recently enacted
legislation provides that the portfolio interest exception from
withholding tax does not apply to certain payments of contingent
interest if: (1) the amount of interest is determined by
reference to (i) receipts, sales or other cash flows of the
Company or a related person, (ii) any income or profits of the
Company or a related person, (iii) any change in the value of any
property of the Company or a related person, or (iv) any
dividend, partnership distributions, or similar payments made by
the Company or a related person; or (2) the interest is
identified in regulations not yet issued as contingent interest
for which the portfolio interest exception should be denied.
Gain from the sale of certain contingent payment debt obligations
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is also treated as interest under draft proposed regulations that
were released by the IRS but were withdrawn pending review.
Sale of Notes
Except as described below and subject to the discussion
concerning backup withholding and Indexed Notes, any gain
realized by a Non-U.S. Holder on the sale or exchange of a Note
generally will not be subject to U.S. federal income tax, unless
(i) such gain is U.S. trade or business income, (ii) subject to
certain exceptions, the Non-U.S. Holder is an individual who
holds the Note as a capital asset and is present in the
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United States for 183 days or more in the taxable year of the
disposition, or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to certain
U.S. expatriates.
Federal Estate Tax
Except with respect to Notes that bear contingent interest
that is not eligible for the portfolio interest exception, Notes
held (or treated as held) by an individual who is a Non-U.S.
Holder at the time of his death will not be subject to U.S.
federal estate tax provided that the individual does not actually
or constructively own 10% or more of the total voting power of
all voting stock of the Company.
Information Reporting and Backup Withholding
The Company must report annually to the IRS and to each Non-
U.S. Holder any interest and original issue discount that is
subject to withholding or that is exempt from U.S. withholding
tax pursuant to a tax treaty or the portfolio interest exception.
Copies of these information returns may also be made available
under the provisions of a specific treaty or agreement to the tax
authorities of the country in which the Non-U.S. Holder resides.
In the case of payments of principal on the Notes by the
Company to a Non-U.S. Holder, the regulations provide that backup
withholding and information reporting will not apply to payments
if the Holder certifies to it non-U.S. status under penalties of
perjury or otherwise establishes an exemption (provided that
neither the Company nor its paying agent has actual knowledge
that the holder is a United States person or that the conditions
of any other exemption are not, in fact, satisfied).
The payment of the proceeds from the disposition of Notes to
or through the U.S. office of any broker, U.S. or foreign, will
be subject to information reporting and possible backup
withholding unless the owner certifies its non-U.S. status under
penalty of perjury or otherwise establishes an exemption,
provided that the broker does not have actual knowledge that the
Holder is a U.S. person or that the conditions of any other
exemption are not, in fact, satisfied. The payment of the
proceeds from the disposition of a Note to or through a non-U.S.
office of a non-U.S. broker will not be subject to information
reporting or backup withholding if the broker is not a U.S.
related person. For this purpose, a "U.S. related person" is (i)
a "controlled foreign corporation" for U.S. federal income tax
purposes, or (ii) a foreign person 50% or more of whose gross
income from all sources for the three-year period ending with the
close of its taxable year preceding the payment (or for such part
of the period that the broker has been in existence) is derived
from activities that are effectively connected with the conduct
of a United States trade or business.
In the case of the payment of proceeds from the disposition
of Notes through a non-U.S. office of a broker that is either a
U.S. person or a "U.S. related person," existing regulations
require information reporting on the payment, unless the broker
has documentary evidence in its files that the owner is a Non-
U.S. Holder and the broker has no knowledge to the contrary.
Backup withholding will not apply to payments made through
foreign offices of a broker that is a U.S. person or a U.S.
related person (absent actual knowledge that the payee is a U.S.
person).
Any amounts withheld under the backup withholding rules from
a payment to a Non-U.S. Holder will be allowed as a refund or a
credit against such Non-U.S. Holder's U.S. federal income tax
liability, provided that certain required information is
furnished to the IRS.
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PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale
by the Company, through the Agents, who will purchase the Notes,
as principal, from the Company from time to time, for resale to
investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by
each Agent, or, if so specified in the applicable Pricing
Supplement, for resale at a fixed public offering price. Unless
otherwise specified in the applicable Pricing Supplement, any
Note sold to an Agent as principal will be purchased by such
Agent at a price equal to 100% of the principal amount thereof
less a percentage of the principal amount equal to the commission
applicable to an agency sale (as described below) of a Note of
identical maturity. If agreed to by the Company and an Agent,
such Agent may utilize its reasonable efforts on an agency basis
to solicit offers to purchase the Notes at 100% of the principal
amount thereof, unless otherwise specified in the applicable
Pricing Supplement. The Company will pay a commission to the
Agents, ranging from .125% to .875% of the principal amount of
each Note, depending upon its stated maturity, sold through the
Agents. Commissions with respect to Notes with stated maturities
in excess of 40 years that are sold through the Agents will be
negotiated between the Company and the Agents at the time of such
sale.
The Agents may sell Notes they have purchased from the
Company as principal to other dealers for resale to investors and
other purchasers, and may allow any portion of the discount
received in connection with such purchase from the Company to
such dealers. After the initial public offering of Notes, the
public offering price (in the case of Notes to be resold at a
fixed public offering price), the concession and the discount may
be changed.
The Company reserves the right to withdraw, cancel or modify
the offer made hereby without notice and may reject orders in
whole or in part (whether placed directly with the Company or
through an Agent). The Agents will have the right, in their
discretion reasonably exercised, to reject in whole or in part
any offer to purchase Notes received by it on an agency basis.
Unless otherwise specified in the applicable Pricing
Supplement, payment of the purchase price of the Notes will be
required to be made in immediately available funds in the
applicable Specified Currency in The City of New York on the date
of settlement. See "Description of Notes--General."
Upon issuance, the Notes will not have an established
trading market. Unless otherwise specified, the Notes will not
be listed on any securities exchange. The Agents may from time
to time purchase and sell Notes in the secondary market, but the
Agents are not obligated to do so, and there can be no assurance
that there will be a secondary market for the Notes or liquidity
in the secondary market if one develops. From time to time, the
Agents may make a market in the Notes, but the Agents are not
obligated to do so and may discontinue any market-making activity
at any time.
The Agents may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the
"Securities Act"). The Company has agreed to indemnify the
Agents against certain liabilities (including liabilities under
the Securities Act), or to contribute to payments the Agents may
be required to make in respect thereof. The Company has agreed
to reimburse the Agents for certain other expenses.
Concurrently with the offering of Notes described herein,
the Company may issue other Debt Securities described in the
accompanying Prospectus pursuant to the Indenture.
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PROSPECTUS
$300,000,000
FRANKLIN RESOURCES, INC.
DEBT SECURITIES
Franklin Resources, Inc. (the "Company") may, from time to time,
offer or solicit offers to purchase its unsecured debt securities
(the "Debt Securities") in an aggregate principal amount (or net
proceeds in the case of securities issued at an original issue
discount) not to exceed $300,000,000 or, if applicable, the
equivalent thereof in one or more foreign or composite
currencies. The Debt Securities may be offered in one or more
series with the same or various maturities on terms to be
determined at the time of sale.
The specific designation, aggregate principal amount, authorized
denominations, purchase price, maturity, rate or rates (which may
be fixed or variable), and time of payment of any interest, any
terms for mandatory or optional redemption (including any sinking
fund), any listing on a securities exchange and any other
specific terms of the Debt Securities in respect of which this
Prospectus is being delivered, together with the terms of
offering of such Debt Securities, will be set forth in one or
more supplements to this Prospectus (each, a "Prospectus
Supplement") and one or more pricing supplements (each, a
"Pricing Supplement") accompanying this Prospectus. The
Prospectus Supplement will also contain information, where
applicable, about certain U.S. federal income tax, accounting and
other considerations relating to the Debt Securities covered by
it. As used herein, Debt Securities shall include debt
securities denominated in United States dollars or, if so
specified in an applicable Prospectus Supplement, in any other
currency or in composite currencies or in amounts determined by
reference to an index. See "Description of Debt Securities."
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Debt Securities may be offered through underwriters, agents
or dealers, or directly to purchasers by the Company or
subsidiaries of the Company. Such underwriters, agents or
dealers may include, and may include a group of underwriters
managed by one or both of, Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co. If
an underwriter, agent or dealer is involved in the offering of
any Debt Securities, the underwriter's discount, agent's
commission or dealer's purchase price will be described in an
applicable Prospectus Supplement, and the net proceeds to the
Company from such offering will be the public offering price of
the offered Debt Securities less such discount in the case of an
underwriter, the purchase price of the offered Debt Securities
less such commission in the case of an agent or the purchase
price of the offered Debt Securities in the case of a dealer, and
less, in each case, the other expenses of the Company associated
with the issuance and distribution of such Debt Securities. See
"Plan of Distribution."
____________________
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF
DEBT SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT
____________________
The date of this Prospectus is May 19, 1994.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and, in accordance therewith, files annual and quarterly reports,
proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and at the Commission's Regional Offices in New York
(Seven World Trade Center, 13th Floor, New York, New York 10048),
and Chicago (500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511). Copies of these materials may be obtained
from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, reports, proxy statements and other information
concerning the Company may be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York
10005 and the Pacific Stock Exchange, Incorporated, 115 Sansome
Street, Suite 1104, San Francisco, California 94104.
This Prospectus constitutes a part of a Registration
Statement filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus omits certain of the information contained in the
Registration Statement in accordance with the rules and
regulations of the Commission. Reference is hereby made to the
Registration Statement and related exhibits for further
information with respect to the Company and the Debt Securities.
Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by
such reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with
the Commission and are incorporated herein by reference: (i) the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1993, (ii) the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1993, (iii) the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1994, (iv) a Current Report on Form 8-K filed April 14, 1994 and
(v) a Current Report on Form 8-K filed April 28, 1994.
All documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date hereof and prior to the termination of the
offering of the Debt Securities, shall be deemed to be
incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any
statement or document so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute part
of this Prospectus.
The Company will furnish without charge to each person to
whom this Prospectus is delivered, upon request, a copy of any
and all of the documents described above other than exhibits to
such documents which are not specifically incorporated by
reference in such documents. Written or telephone requests
should be directed to: Harmon E. Burns, Executive Vice
President, Legal and Administrative, Franklin Resources, Inc.,
777 Mariners Island Boulevard, San Mateo, California 94404;
telephone number (415) 312-3000.
THE COMPANY
The Company is a diversified financial services holding
company which, primarily through its various domestic and
international subsidiaries principally provides investment
management, financial advisory and related services to mutual
funds, closed end investment companies, private accounts,
qualified retirement plans and private trusts. The Company also
provides advisory services to and sponsors and manages public and
private real estate programs, offers consumer banking services,
insured deposits and credit cards and provides custodial, trustee
and fiduciary services to IRA and Keogh plans and to qualified
retirement plans and private trusts.
The wide range of financial services offered by the Company
gives both domestic and international institutional and
individual investors a variety of investment alternatives
designed to meet varying investment objectives, affording
customers the opportunity both to allocate and to modify their
investment resources among investment products as changing
economic and market conditions warrant.
The Company's principal office is located at 777 Mariners
Island Boulevard, San Mateo, California 94404 and its telephone
number is (415) 312-3000.
The Company was incorporated under the laws of the State of
Delaware in November 1969, and is the successor by merger to
businesses previously conducted since 1947.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus
Supplement, the Company intends to use the net proceeds from the
sale of the Debt Securities to repay certain long-term
indebtedness, bearing interest at an effective rate of 4.04% per
annum as of April 30, 1994, and maturing on
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June 28, 1998, and for general corporate purposes, which may
include additions to working capital, the repayment of short-term
indebtedness and investments in, or extensions of credit to,
subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges was (i) 10.4, 43.0,
64.3, 66.3 and 61.6 for the fiscal years ended September 30,
1993, 1992, 1991, 1990 and 1989, respectively, and (ii) 12.2 for
the six months ended March 31, 1994. These ratios were
calculated by dividing the sum of fixed charges into the sum of
earnings before taxes and fixed charges. Fixed charges for these
purposes consist of all interest expense, the portion of rentals
representative of the interest factor and certain other
immaterial expenses.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture (the
"Indenture") to be entered into between the Company and Chemical
Bank, as Trustee (the "Trustee"), a copy of which is filed as an
exhibit to the Registration Statement. The following summaries
of certain provisions of the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety
by reference to, all provisions of the Indenture, including the
definitions therein of certain terms. Wherever particular
Sections or defined terms of the Indenture are referred to, it is
intended that such Sections or defined terms (including, unless
otherwise indicated herein, definitions of terms capitalized in
these summaries) shall be incorporated herein by reference. The
following sets forth certain general terms and provisions of the
Debt Securities to which any Prospectus Supplement may relate.
The particular terms of the Debt Securities offered by any
Prospectus Supplement and the extent, if any, to which such
general provisions may apply to the Debt Securities so offered,
will be described in the Prospectus Supplement relating to such
Debt Securities.
The Company's assets consist principally of the stock in its
subsidiaries. Therefore, its rights and the rights of its
creditors, including the holders of Debt Securities, to
participate in the assets of any subsidiary upon the latter's
liquidation or recapitalization or otherwise will be subject to
the prior claims of the subsidiary's creditors, except to the
extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and
advances from certain subsidiaries to the Company may be
restricted by net capital requirements under the Exchange Act and
under rules of certain regulatory bodies.
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GENERAL
The Indenture does not limit the aggregate principal amount
of Debt Securities which may be issued thereunder and provides
that Debt Securities may be issued from time to time in one or
more series. The Debt Securities will be unsecured obligations
of the Company. Neither the Indenture nor the Debt Securities
will limit or otherwise restrict the amount of other indebtedness
which may be incurred or other securities which may be issued by
the Company or any of its subsidiaries. The Debt Securities will
rank on a parity with all other unsecured unsubordinated
indebtedness of the Company.
Reference is made to the Prospectus Supplement relating to
the particular series of Debt Securities offered thereby for the
following terms: (1) the title of such Debt Securities; (2) any
limit on the aggregate principal amount of such Debt Securities;
(3) the price or prices (expressed as a percentage of the
aggregate principal amount thereof) at which such Debt Securities
will be issued; (4) the date or dates, or the method or methods,
if any, by which such date or dates shall be determined, on which
such Debt Securities will mature; (5) the rate or rates (which
may be fixed or variable) per annum at which such Debt Securities
will bear interest, if any, or the method or methods, if any, by
which such rate or rates are to be determined; (6) the date or
dates from which such interest, if any, on such Debt Securities
will accrue or the method or methods, if any, by which such date
or dates are to be determined, the dates on which such interest,
if any, will be payable, the date on which payment of such
interest, if any, will commence and the Regular Record Dates for
such Interest Payment Dates, if any; (7) the dates, if any, on
which and the price or prices at which the Debt Securities will,
pursuant to any mandatory sinking fund provisions, or may,
pursuant to any optional sinking fund or to any purchase fund
provisions, be redeemed by the Company, and the other detailed
terms and provisions of such sinking and/or purchase funds; (8)
the date, if any, after which and the price or prices at which
the Debt Securities may, pursuant to any optional redemption
provisions, be redeemed at the option of the Company or of the
holder thereof and the other detailed terms and provisions of
such optional redemption; (9) the extent to which any of the Debt
Securities will be issuable in temporary or permanent global form
and, if so, the identity of the depositary for such global Debt
Security, or the manner in which any interest payable on a
temporary or permanent global Debt Security will be paid; (10)
the denomination or denominations in which such Debt Securities
are authorized to be issued; (11) whether such Debt Securities
will be issued in registered or bearer form or both and, if in
bearer form, the terms and conditions relating thereto and any
limitations on issuance of such bearer Debt Securities (including
exchange for registered Debt Securities of the same series); (12)
information with respect to book-entry procedures; (13) whether
any of the Debt Securities will be issued as Original Issue
Discount Securities; (14) each office or agency where, subject to
the terms of the Indenture, such Debt Securities may be presented
for registration of transfer or exchange; (15) the currencies or
currency units in which such Debt Securities are issued and in
which the principal of, interest on and additional amounts, if
any, in respect of such Debt Securities will be payable; (16)
whether the amount of payments of principal of, and interest and
additional amounts, if any, on such Debt Securities may be
determined with reference to an index, formula or other method or
methods (which index, formula or method or methods may, but need
not be, based on one or more currencies, currency units or
composite currencies, commodities, equity indices or other
indices) and the manner in which such amounts shall be
determined; (17) whether the Company or a holder may elect
payment of the principal of or interest on such Debt Securities
in a currency, currencies, currency unit or units or composite
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currency or currencies other than that in which such Debt
Securities are denominated or stated to be payable, the period or
periods within which, and the terms and conditions upon which,
such election may be made, and the time and manner of determining
the exchange rate between the currency, currencies, currency unit
or units or composite currency or currencies in which such Debt
Securities are denominated or stated to be payable and the
currency, currencies, currency unit or units or composite
currency or currencies in which such Debt Securities are to be so
payable; (18) if other than the Trustee, the identity of each
Security Registrar, Paying Agent and Authenticating Agent; (19)
if applicable, the defeasance of certain obligations by the
Company pertaining to Debt Securities of the series; (20) the
person to
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whom any interest on any registered Debt Security of the series
shall be payable, if other than the person in whose name that
Debt Security (or one or more predecessor Debt Securities) is
registered at the close of business on the Regular Record Date
for such interest, the manner in which, or the person to whom,
any interest on any bearer Debt Security of the series shall be
payable, if otherwise than upon presentation and surrender of the
coupons appertaining thereto as they severally mature, and the
extent to which, or the manner in which, any interest payable on
a temporary global Debt Security on an Interest Payment Date will
be paid if other than in the manner provided in the Indenture;
(21) whether and under what circumstances the Company will pay
additional amounts as contemplated by Section 1004 of the
Indenture (the term "interest," as used in this Prospectus, shall
include such additional amounts) on such Debt Securities to any
holder who is not a United States person (including any
modification to the definition of such term as contained in the
Indenture as originally executed) in respect of any tax,
assessment or governmental charge and, if so, whether the Company
will have the option to redeem such Debt Securities rather than
pay such additional amounts (and the terms of any such option);
(22) any deletions from, modifications of or additions to the
Events of Default or covenants of the Company with respect to any
of such Debt Securities; and (23) any other terms of the series
(which will not be inconsistent with the provisions of the
Indenture).
Debt Securities may be issued as Original Issue Discount
Securities to be sold at a substantial discount below their
principal amount. In the event of an acceleration of the
maturity of any Original Issue Discount Security, the amount
payable to the holder of such Original Issue Discount Security,
upon such acceleration will be determined in accordance with the
applicable Prospectus Supplement, the terms of such Debt Security
and the Indenture, but will be an amount less than the amount
payable at the maturity of the principal of such Original Issue
Discount Security. Special federal income tax and other
considerations applicable thereto will be described in the
Prospectus Supplement relating thereto.
The Indenture does not contain any provisions that would
limit the ability of the Company to incur indebtedness or that
would afford holders of Debt Securities protection in the event
of a highly leveraged or similar transaction involving the
Company. Reference is made to the Prospectus Supplement relating
to the particular series of Debt Securities offered thereby for
information with respect to any deletions from, modifications of
or additions to the Events of Default described below or
covenants of the Company contained in the Indenture, including
any addition of a covenant or other provision providing event
risk or similar protection.
REGISTRATION, TRANSFER, PAYMENT AND PAYING AGENT
Unless otherwise indicated in the Prospectus Supplement,
each series of Debt Securities will be issued in registered form
only, without coupons. The Indenture, however, provides that the
Company may also issue Debt Securities in bearer form only, or in
both registered and bearer form. Debt Securities in bearer form
shall not be offered, sold, resold or delivered in connection
with their original issuance in the United States or to any
United States person (as defined below) other than offices
located outside the United States of certain United States
financial institutions. As used herein, "United States person"
means any citizen or resident of the United States, any
corporation, partnership or other entity created or organized in
or under the laws of the United States, or any estate or trust,
the income of which is subject to United States federal income
taxation regardless of its source, and "United States" means the
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United States of America (including the States and the District
of Columbia), its territories, its possessions and other areas
subject to its jurisdiction. Purchasers of Debt Securities in
bearer form will be subject to certification procedures and may
be affected by certain limitations under United States tax laws.
Such procedures and limitations will be described in the
Prospectus Supplement relating to the offering of the Debt
Securities in bearer form.
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<PAGE>
Unless otherwise indicated in the applicable Prospectus
Supplement, registered Debt Securities will be issued in
denominations of $1,000 or any integral multiple thereof and
bearer Debt Securities will be issued in denominations of $5,000.
No service charge will be made for any transfer or exchange of
the Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable
in connection therewith.
Unless otherwise described in the Prospectus Supplement
relating thereto, the principal, premium, if any, and interest,
if any, of or on the Debt Securities will be payable, and
transfer of the Debt Securities will be registrable, at the
corporate trust office of Chemical Bank, as Paying Agent and
Security Registrar under the Indenture, in The City of New York,
New York, provided that payments of interest may be made at the
option of the Company by check mailed to the address appearing in
the Security Register of the person in whose name such registered
Debt Security is registered at the close of business on the
Regular Record Date (Sections 305, 307 and 1002).
Unless otherwise indicated in the applicable Prospectus
Supplement, payment of principal of, premium, if any, and
interest, if any, on Debt Securities in bearer form will be made
payable, subject to any applicable laws and regulations, at such
office outside the United States as specified in the Prospectus
Supplement and as the Company may designate from time to time, at
the option of the holder, by check or by transfer to an account
maintained by the payee with a bank located outside the United
States. Unless otherwise indicated in the applicable Prospectus
Supplement, payment of interest and certain additional amounts on
Debt Securities in bearer form will be made only against
surrender of the coupon relating to such Interest Payment Date.
No payment with respect to any Debt Security in bearer form will
be made at any office or agency of the Company in the United
States or by check mailed to any address in the United States or
by transfer to an account maintained with a bank located in the
United States.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in
part in the form of one or more global securities ("Global Debt
Securities") that will be deposited with, or on behalf of, a
depositary (the "Depositary") identified in the Prospectus
Supplement relating to such series. Global Debt Securities may
be issued in either registered or bearer form and in either
temporary or permanent form. Unless and until it is exchanged in
whole or in part for individual certificates evidencing Debt
Securities in definitive form represented thereby, a Global Debt
Security may not be transferred except as a whole by the
Depositary for such Global Debt Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or
any such nominee to a successor of such Depositary or a nominee
of such successor.
The specific terms of the depositary arrangement with
respect to a series of Global Debt Securities and certain
limitations and restrictions relating to a series of bearer
Global Debt Securities, will be described in the Prospectus
Supplement relating to such series.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with
respect to Debt Securities of any series: (a) failure to pay
principal of or any premium on any Debt Security of that series
when due; (b) failure to pay any interest on any Debt Security of
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that series when due, continued for 30 days; (c) failure to
deposit any sinking fund payment, when due, in respect of any
Debt Security of that series; (d) breach of any other covenant or
warranty of the Company in the Indenture (other than a covenant
or warranty included in the Indenture solely for
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<PAGE>
the benefit of series of Debt Securities other than that series),
continued for 60 days after written notice as provided in the
Indenture; (e) certain events in bankruptcy, insolvency or
reorganization involving the Company or any Material Subsidiary
(as hereinafter defined); (f) acceleration of indebtedness in a
principal amount in excess of $10,000,000 for money borrowed by
the Company or any Material Subsidiary under the terms of the
instrument under which such indebtedness was issued or secured,
if such acceleration is not annulled within 30 days after written
notice as provided in the Indenture; and (g) any other Event of
Default provided with respect to Debt Securities of that series
(Section 501). If an Event of Default with respect to Debt
Securities of any series at the time Outstanding occurs and is
continuing, either the Trustee or the holders of at least 25% in
aggregate principal amount of the Outstanding Debt Securities of
that series may declare the principal amount of all the Debt
Securities of that series to be due and payable immediately. At
any time after a declaration of acceleration with respect to Debt
Securities of any series has been made, but before a judgment or
decree based on acceleration has been obtained, the holders of a
majority in aggregate principal amount of Outstanding Debt
Securities of that series may rescind and annul such
acceleration, provided that, among other things, all Events of
Default with respect to such series, other than payment defaults
caused by such acceleration, have been cured or waived as
provided in the Indenture (Section 502).
"Material Subsidiary" means (a) Franklin Advisers, Inc., a
California corporation, (b) Franklin/Templeton Distributors,
Inc., a New York corporation, (c) Franklin/Templeton Investor
Services, Inc., a California corporation, (d) Templeton,
Galbraith & Hansberger, Ltd., a Bahamas corporation, (e)
Templeton Investment Counsel, Inc., a Florida corporation, (f)
any other Subsidiary which owns, directly or indirectly, any of
the capital stock of any corporation listed in (a) through (e)
above or any successor entity and (g) any other Subsidiary with
which any corporation listed in (a) through (e) above or any
successor entity is merged or consolidated or which acquires or
succeeds to a significant portion of the business, properties or
assets of any corporation listed in (a) through (e) above or any
successor entity.
ADDITIONAL PROVISIONS
The Indenture provides that, subject to the duty of the
Trustee during default to act with the required standard of care,
the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction
of any of the holders, unless such holders shall have offered to
the Trustee reasonable indemnity (Section 601). Subject to such
provisions for the indemnification of the Trustee and certain
other conditions, the holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of any series
will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Debt Securities of that series
(Section 512).
No holder of any Debt Security of any series will have any
right to institute any proceeding with respect to the Indenture
or for any remedy thereunder, unless: (i) such holder shall have
previously given to the Trustee written notice of a continuing
Event of Default with respect to Debt Securities of that series;
(ii) the holders of not less than 25% in aggregate principal
amount of the Outstanding Debt Securities of that series shall
have made written request, and offered reasonable indemnity, to
the Trustee to institute such proceeding as trustee; (iii) the
Trustee shall have failed to institute such proceeding within 60
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days after receipt of such written request; and (iv) the Trustee
shall not have received from the holders of a majority in
principal amount of the Outstanding Debt Securities of that
series a direction inconsistent with such request (Section 507).
However, the holder of any Debt Security will have an absolute
right to receive payment of the principal of (and premium, if
any) and interest on such Debt Security on or after the due dates
expressed in such Debt Security and to institute suit for the
enforcement of any such payment (Section 508).
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<PAGE>
The Company is required to furnish to the Trustee annually a
statement as to performance by the Company of certain of its
obligations under the Indenture and as to any default in such
performance. The Company is also required to deliver to the
Trustee, within five days after the occurrence thereof, written
notice of any event which after notice or lapse of time or both
would constitute an Event or Default (Section 1009).
OUTSTANDING DEBT SECURITIES
In determining whether the holders of the requisite
principal amount of Outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or
waiver under the Indenture, (i) the portion of the principal
amount of an Original Issue Discount Security that shall be
deemed to be Outstanding for such purposes shall be that portion
of the principal amount thereof that could be declared to be due
and payable pursuant to the terms of such Original Issue Discount
Security as of the date of such determination, (ii) the principal
amount of any Indexed Security shall be the principal face amount
of such Indexed Security determined on the date of its original
issuance and (iii) any Debt Security owned by the Company or any
obligor on such Debt Security or any Affiliate of the Company or
such other obligor, shall be deemed not to be Outstanding
(Section 101).
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by
the Company and the Trustee with the consent of the holders of 66
2/3% in aggregate principal amount of the Outstanding Debt
Securities of each series affected by such modification or
amendment: provided, however, that no such modification or
-------- -------
amendment may, without the consent of the holder of each
Outstanding Debt Security affected thereby: (a) change the
stated maturity date of the principal of, or any installment of
principal or interest on, any Debt Security; (b) reduce the
principal amount of, or any premium or interest on, any Debt
Security; (c) reduce the amount of principal of an Original Issue
Discount Security payable upon acceleration of the maturity
thereof or the amount thereof provable in bankruptcy; (d)
adversely affect the right of repayment at the option of any
holder; (e) change the place of payment of, currency of payment
of principal of, or any premium or interest on, any Debt
Security; (f) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt
Security; or (g) reduce the percentage in principal amount of
Outstanding Debt Securities of any series the consent of whose
holders is required for modification or amendment of the
Indenture or for waiver of compliance with certain provisions of
the Indenture or for waiver of certain defaults (Section 902).
The holders of a majority in aggregate principal amount of
the Outstanding Debt Securities of each series may, on behalf of
all holders of Debt Securities of that series, waive, insofar as
that series is concerned, compliance by the Company with certain
restrictive provisions of the Indenture (Section 1008). The
holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of each series may, on behalf of all
holders of Debt Securities of that series, waive any past default
under the Indenture with respect to Debt Securities of that
series, except a default in the payment of principal or any
premium or interest, or a default in respect of a provision which
under the Indenture cannot be modified or amended without the
consent of the holder of each affected Outstanding Debt Security
of that series (Section 513).
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Modification and amendment of the Indenture may be made by
the Company and the Trustee without the consent of any holder for
any of the following purposes: (i) to evidence the succession of
another corporation to the Company; (ii) to add to the covenants
of the Company for the benefit of the holders of all or any
series of Debt Securities; (iii) to add Events of Default; (iv)
to add or change any provisions of the Indenture to facilitate
the issuance of bearer Debt Securities; (v) to add to, delete
from or revise the conditions, limitations and restrictions on
the authorized amount, terms or purposes of issue, authentication
and delivery of Debt Securities;
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(vi) to establish the form or terms of Debt Securities of any
series and any related coupons; (vii) to provide for the
acceptance of appointment by a successor Trustee; (viii) to cure
any ambiguity, defect or inconsistency in the Indenture, provided
such action does not adversely affect the interests of holders of
Debt Securities of any series or any related coupons in any
material respect; (ix) to supplement any of the provisions of the
Indenture to such extent as shall be necessary to permit or
facilitate the defeasance and discharge of any series of Debt
Securities, provided such action does not adversely affect the
interests of holders of Debt Securities of such series or any
related coupons in any material respect; (x) to secure the Debt
Securities; and (xi) to amend or supplement any provision
contained in the Indenture or in any supplemental indenture,
provided that such amendment or supplement does not materially
adversely affect the interests of the holders of any Debt
Securities then Outstanding (Section 901).
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may consolidate or merge with or into, or
transfer its assets substantially as an entirety to, any
corporation organized under the laws of any domestic
jurisdiction, provided that the successor corporation assumes the
Company's obligations on the Debt Securities and under the
Indenture, that after giving effect to the transaction no Event
of Default, and no event which, after notice or lapse of time,
would become an Event of Default, shall have occurred and be
continuing, and that certain other conditions are met (Section
801).
CONCERNING THE TRUSTEE
The Company and certain of its subsidiaries maintain banking
relationships with the Trustee in the ordinary course of their
businesses.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities being offered
hereby: (i) directly to purchasers; (ii) through agents; (iii)
through underwriters; (iv) through dealers; or (v) through a
combination of any such methods of sale. Such underwriters,
agents or dealers may include, and may include a group of
underwriters managed by one or both of, Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman,
Sachs & Co. Only underwriters named in the Prospectus Supplement
are deemed to be underwriters in connection with the Debt
Securities offered hereby.
The distribution of the Debt Securities may be effected from
time to time in one or more transactions: (i) at a fixed price
or prices, which may be changed; (ii) at market prices prevailing
at the time of sale; (iii) at prices related to such prevailing
market prices; or (iv) at negotiated prices.
Offers to purchase Debt Securities may be solicited directly
by the Company or by agents designated by the Company from time
to time. Any such agent, which may be deemed to be an
underwriter as that term is defined in the Securities Act,
involved in the offer or sale of the Debt Securities in respect
of which this Prospectus is delivered will be named, and any
commissions payable by the Company to such agent will be set
forth, in the Prospectus Supplement. Unless otherwise indicated
in the Prospectus Supplement, any such agent will be acting on a
reasonable efforts basis.
If an underwriter or underwriters are utilized in the sale,
the Company will execute an underwriting agreement with such
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underwriters at the time of sale to them and the names of the
underwriters and the terms of the transaction will be set forth
in the Prospectus Supplement, which will be used by the
underwriters to make resales of the Debt Securities in respect of
which this Prospectus is delivered to the public.
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If a dealer is utilized in the sale of the Debt Securities
in respect of which this Prospectus is delivered, the Company
will sell such Debt Securities to the dealer, as principal. The
dealer may then resell such Debt Securities to the public at
varying prices to be determined by such dealer at the time of
resale.
Certain of the underwriters, dealers or agents may be
customers of, engage in transactions with, and perform services
for, the Company or one or more of its affiliates in the ordinary
course of business. Underwriters, dealers, agents and other
persons may be entitled, under agreements which may be entered
into with the Company, to indemnification against certain civil
liabilities, including liabilities under the Securities Act.
If so indicated in the Prospectus Supplement, the Company
will authorize agents and underwriters to solicit offers by
certain institutions to purchase Debt Securities from the Company
at the public offering price set forth in the Prospectus
Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date stated in the
Prospectus Supplement. Each Contract will be for an amount not
less than, and, unless the Company otherwise agrees, the
aggregate principal amount of Debt Securities sold pursuant to
Contracts shall be not less nor more than, the respective amounts
stated in the Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and
savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and other
institutions, but shall in all cases be subject to the approval
of the Company. Contracts will not be subject to any conditions
except that the purchase by an institution of the Debt Securities
covered by its Contract shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United
States to which such institution is subject. A commission
indicated in the Prospectus Supplement will be paid to
underwriters and agents soliciting purchases of Debt Securities
pursuant to Contracts accepted by the Company.
LEGAL OPINIONS
The legality of the Debt Securities offered hereby will be
passed upon for the Company by Weil, Gotshal & Manges (a
partnership including professional corporations), New York, New
York and for the underwriters or agents by Brown & Wood, New
York, New York.
EXPERTS
The audited consolidated financial statements and schedules
of the Company as of September 30, 1992 and 1993 and for each of
the three years in the period ended September 30, 1993, have been
incorporated herein by reference in reliance on the report of
Coopers & Lybrand, independent accountants, given the authority
of that firm as experts in accounting and auditing.
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============================== ==============================
No dealer, salesperson or
other individual has been au-
thorized to give any informa-
tion or to make any repre-
sentations not contained or
incorporated by reference in
this Prospectus Supplement,
the applicable Pricing
Supplement or the Prospectus $300,000,000
in connection with the offer
made by this Prospectus
Supplement, the applicable
Pricing Supplement and the
Prospectus. If given or made,
such information or represen-
tations must not be relied
upon as having been authorized
by the Company or the Agents.
Neither the delivery of this FRANKLIN RESOURCES, INC.
Prospectus Supplement, the
applicable Pricing Supplement
or the Prospectus nor any sale
made hereunder and thereunder
shall under any circumstance Medium-Term Notes
create an implication that
there has not been any change
in the affairs of the Company
since the date hereof. This
Prospectus Supplement, the
applicable Pricing Supplement
and the Prospectus do not
constitute an offer or solici-
tation by anyone in any state
in which such offer or
solicitation is not authorized
or in which the person making
such offer is not qualified to
do so or to anyone to whom it
is unlawful to make such offer
or solicitation.
_______________ -----------------------
TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
Page
---- ------------------------
Prospectus Supplement
Description of Notes . . S-2
Special Provisions and
Risks Relating to
Foreign Currency Notes. S-20
Certain United States MERRILL LYNCH & CO.
Federal Income GOLDMAN, SACHS & CO.
Tax Considerations . S-24
Plan of Distribution . S-33
Prospectus
Available Information . 2
Incorporation of Certain
Documents By Reference. 3
The Company. . . . . . 3
Use of Proceeds . . . 4
Ratio of Earnings to Fixed
Charges . . . . . . . . 4
Description of Debt
Securities 4
Plan of Distribution . 11
Legal Opinions . . . . 12 May 19, 1994
Experts . . . . . . . . 12
============================== ===============================
