FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X]
For the fiscal year ended September 30, 1995
OR
[ ]
For the transition period from to
Commission file number 1-9318
FRANKLIN RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2670991
(State of other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
777 Mariners Island Blvd., San Mateo, CA 94404
(Address of principal and executive offices) (Zip Code)
Registrant's telephone number, including Area Code (415 312-2000
Securities registered pursuant
to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
Common Stock,par value $.10 per share New York Stock Exchange
Common Stock,par value $.10 per share Pacific Stock Exchange
Common Stock,par value $.10 per share London Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.10 per share
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) or the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days. YES X NO ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing price of $52.625 on December 15, 1995 on the
New York Stock Exchange was $2,195,642,675. Number of shares of the registrant's
common stock outstanding at December 15, 1995: 80,069,767.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain portions of the registrant's proxy statement for its Annual Meeting
of Stockholders to be held January 25, 1996, which will be filed with the
Commission before, on or subsequent to the date hereof, are incorporated by
reference into Part III of this report.
PART I
Item 1. Business
(a) GENERAL DEVELOPMENT OF BUSINESS
Franklin Resources, Inc. ("FRI") and its predecessors have been engaged in the
financial services business since 1947. FRI was organized in Delaware in
November 1969. The term "Company" as used herein, unless the context otherwise
requires, refers to Franklin Resources, Inc. and its subsidiaries. The Company's
principal executive and administrative offices are at 777 Mariners Island
Boulevard, San Mateo, California 94404. As of September 30, 1995, the Company
employed over 4500 employees on a worldwide basis, consisting of officers,
investment management, distribution, administrative, sales and clerical support
staff. The Company also employs additional temporary help as necessary to meet
unusual requirements. Management believes that its relations with its employees
are excellent.
On October 30, 1992, the Company and certain of its direct and indirect
subsidiaries consummated the acquisition (the "Acquisition") of substantially
all of the assets and liabilities of Templeton, Galbraith & Hansberger Ltd., a
corporation organized under the laws of the Cayman Islands and based in Nassau,
Bahamas ("Old TGH"), which provided diversified investment management and
related services on a worldwide basis directly and through subsidiaries to
various domestic open-end and closed-end investment companies as well as to a
variety of international investment portfolios and to domestic and international
private and institutional accounts. Unless the context otherwise requires,
references herein to "Templeton" are deemed to refer to the business operations
acquired by the Company in connection with the Acquisition. Subsequent to the
Acquisition, the Company has operated the Franklin and Templeton businesses on a
unified basis.
In November 1993, the Company consummated an agreement to manage and advise the
Huntington Funds of Pasadena, California, now called the Franklin Templeton
Global Trust. This open-end investment company of several currency portfolio
series includes the Franklin Templeton Global Currency Fund, the Franklin
Templeton Hard Currency Fund and the Franklin Templeton High Income Currency
Fund, which invests in high quality foreign equivalent money market instruments
in various global currencies, as well as the Franklin Templeton German
Government Bond Fund, which invests in German government bonds and equivalents.
FRI is principally a parent company primarily engaged, through various
subsidiaries, in providing investment management, marketing, distribution,
transfer agency and administrative services to the open-end investment companies
of the Franklin Group of Funds(registered trademark) and the Templeton Family of
Funds and to domestic and international managed and institutional accounts. The
Company also provides investment management and related services to a number of
Franklin and Templeton closed-end investment companies whose shares are traded
on various major domestic and some international stock exchanges. In addition,
the Company provides investment management, marketing and distribution services
to certain sponsored investment companies organized in the Grand Duchy of
Luxembourg (hereinafter referred to as "SICAV Funds"), which are distributed in
marketplaces outside of North America and to certain investment funds and
portfolios in Canada (hereinafter referred to as "Canadian Funds") as well as to
certain other international portfolios in the United Kingdom and elsewhere. The
Franklin Group of Funds consists of thirty-four (34) open-end investment
companies (mutual funds) with multiple portfolios. The Templeton Family of Funds
includes fourteen (14) open-end investment companies (mutual funds) with
multiple portfolios. Certain investment companies in the Franklin Group of Funds
and the Templeton Family of Funds are registered as such under the Investment
Company Act of 1940 (the "40 Act").
The Franklin Group of Funds and the Templeton Family of Funds are hereinafter
referred to individually as a "Franklin fund" or a "Templeton fund" and
collectively as the "Franklin funds" or the "Templeton funds", or, when
applicable to both fund groups, individually as a "Fund" and collectively as the
"Franklin and Templeton funds" or the "Funds". The closed-end investment
companies, the foreign based funds and the other domestic and international
managed and institutional accounts are collectively referred to as the "Other
Assets". The Franklin and Templeton funds along with the Other Assets are
collectively referred to as the "Franklin Templeton Group".
As of September 30, 1995, total assets under management in the Franklin
Templeton Group were $130.8 billion, the make-up of which was approximately as
follows: for the open-end investment companies in the Franklin Group of Funds
(excluding variable annuities), $69.5 billion; for the open-end investment
companies in the Templeton Family of Funds (excluding variable annuities), $28.2
billion; for all the Other Assets (including variable annuities), $33.1 billion.
This makes the Franklin Templeton Group one of the largest investment management
complexes in the United States.
The mix of assets under management by a large financial services complex such as
the Franklin Templeton Group can be segregated by type of assets, type of
investment vehicle, type of investor or geographic location of assets held.
International and domestic equity assets under management, whether held for
growth potential, income potential or various combinations thereof by all types
of investors, including institutional and separate accounts on a worldwide
basis, were approximately $66.7 billion at September 30, 1995 and represent
approximately 51% of total assets under management. Fixed-income assets (both
long and short-term), including money market fund assets, held by all types of
investors on a worldwide basis were approximately $64.1 billion and represented
49% of total assets under management at fiscal year end. Equity growth and
equity income assets in funds primarily sold to non institutional investors were
$53.2 billion and represented 41% of total assets under management at fiscal
year end. A significant portion of these equity assets ($36 billion) held in
funds sold primarily to non institutional investors were in global and
international equity funds. Assets under management for institutional accounts,
whether in institutional mutual funds, separate accounts or other types of
investment products, were approximately $16.9 billion or 13% of total assets
under management at fiscal year end and were primarily invested in global and
international equities. Assets under management by U.S. based closed-end funds
were $3.9 billion at September 30, 1995.
The Company, through certain subsidiaries, also provides advisory services,
variable annuity products, and sponsors and manages public and private real
estate programs. Other subsidiaries offer consumer banking services, insured
deposits, dealer auto loans, and credit cards. The Company also provides
custodial, trustee and fiduciary services to IRA and Keogh plans and to
qualified retirement plans and private trusts. From time to time, the Company
also participates in various investment management joint ventures. On a
consolidated worldwide basis, the Company provides domestic and international
individual and institutional investors with a broad range of investment products
and services designed to meet varying investment objectives, which affords its
clients the opportunity to allocate their investment resources among various
alternative investment products as changing worldwide economic and market
conditions warrant.
Subsidiaries-Investment Management, Administration, Distribution and Related
Services
The Company's principal line of business is providing investment management,
administration, distribution and related services for the Franklin and Templeton
funds and for the Other Assets. This business is primarily conducted through the
principal wholly-owned direct and indirect subsidiary companies described below.
Revenues are generated primarily by subsidiaries that provide advisory and
management services. Revenues are derived primarily from investment management
fees calculated on a sliding scale fund-by-fund basis in relation to fund assets
under management.
Franklin Advisers, Inc.
Franklin Advisers, Inc. ("Advisers") is a California corporation formed in 1985
and is based in San Mateo, California. Advisers is registered as an investment
advisor with the Securities and Exchange Commission ( the "SEC") under the
Investment Advisers Act of 1940 (the "Advisers Act") and is also registered as
an investment advisor in the States of California and New Jersey. Advisers
provides investment advisory, portfolio management and administrative services
under management agreements with most of the Funds in the Franklin Group of
Funds. Advisers manages approximately $77.7 billion, representing approximately
59% of the Company's total assets under management, and generates more than 40%
of total Company revenues.
Templeton, Galbraith & Hansberger Ltd.
Templeton, Galbraith & Hansberger Ltd. ("New TGH") is a Bahamian corporation
located in Nassau, Bahamas formed in connection with the Acquisition and is the
successor company to Old TGH. New TGH is registered as an investment advisor
with the SEC under the Advisers Act. New TGH provides investment advisory,
portfolio management and administrative services under various agreements with
certain of the Templeton funds and Other Assets. New TGH is the principal
investment advisor to the Templeton funds and manages approximately $27.6
billion, representing approximately 21% of the Company's total assets under
management.
Templeton Investment Counsel, Inc.
Templeton Investment Counsel, Inc. ("TICI") is a Florida corporation formed in
October, 1979, based in Ft. Lauderdale, Florida and was acquired by the Company
in connection with the Acquisition. TICI is the principal investment advisor to
the Separate Accounts. In addition, it provides investment advisory portfolio
management services to certain of the Templeton funds and subadvisory services
to certain of the Franklin funds. TICI manages approximately $15.8 billion,
representing 12% of the Company's total assets under management.
Templeton Global Investors, Inc.
Templeton Global Investors, Inc. ("TGII") is a Delaware corporation formed in
October 1987, based in Ft. Lauderdale, Florida and was acquired by the Company
in connection with the Acquisition. TGII provides business management services,
including fund accounting, securities pricing, trading, compliance and other
related administrative activities under various management agreements to certain
of the Franklin and Templeton funds. Revenues are derived from business
management fees calculated on a sliding scale, fund-by-fund basis in relation to
assets under management.
Templeton Asset Management Ltd.
Templeton Asset Management Ltd. ("Templeton Asia") is a corporation organized
under the laws of and based in Singapore and was formed under a different name
in connection with the Acquisition. It is registered as the foreign equivalent
of an investment advisor in Singapore with the Monetary Authority of Singapore
and is also registered with the SEC under the Advisers Act. A subsidiary company
of Templeton Asia is registered as the foreign equivalent of an investment
advisor in Hong Kong and it is anticipated that Templeton Asia will become so
registered through a representative office in Hong Kong upon liquidation of such
subsidiary. Templeton Asia provides investment advisory and related services to
certain Templeton funds and portfolios. Templeton Asia is principally an
investment advisor to emerging market equity portfolios.
Templeton/Franklin Investment Services (Asia) Limited
Templeton/Franklin Investment Services (Asia) Limited is a corporation organized
under the laws of, and is based in, Hong Kong. It was formed in late 1993 to
distribute and service the Company's financial products in Hong Kong and
Southeast Asia.
Templeton Management Limited
Templeton Management Limited is a Canadian corporation formed in October 1982,
which, with its subsidiaries, was purchased in the Acquisition, and is
registered in Canada as the foreign equivalent of an investment advisor and a
mutual fund dealer with the Ontario Securities Commission. It provides
investment advisory, portfolio management, distribution and administrative
services under various management agreements with the Canadian Funds and with
private and institutional accounts.
Franklin/Templeton Distributors, Inc.
Franklin/Templeton Distributors, Inc. ("Distributors") is a New York corporation
formed in 1947 whose name was changed from Franklin Distributors, Inc. in
connection with the post-Acquisition unification of the Templeton and Franklin
organizations. It is registered with the SEC as a broker-dealer and as an
investment advisor and is a member of the National Association of Securities
Dealers, Inc. (the "NASD"). As the underwriter of the shares of most of the
Franklin and Templeton funds, it earns underwriting commissions on the
distribution of shares of the Funds.
Templeton/Franklin Investment Services, Inc.
Templeton/Franklin Investment Services, Inc. ("TFIS") is a Delaware corporation
formed in October 1987 under a different name and was acquired in the
Acquisition. TFIS is registered with the SEC as a broker-dealer and is
registered as an investment advisor. Its principal business activities include:
(i) through its Templeton Portfolio Advisory division, serving as a sponsor of a
comprehensive fee (wrap account) program, in which it provides investment
advisory and broker-dealer services, as well as serving as investment adviser in
other broker-dealer wrap account programs and directly as an adviser for
separate accounts; (ii) serving as a direct marketing broker-dealer for
institutional investors in Franklin Templeton Funds; and (iii) serving as a
broker-dealer through which another subsidiary is paid soft dollar commission
revenues for its quantitative research services.
Franklin/Templeton Investor Services, Inc.
Franklin/Templeton Investor Services, Inc. ("FTIS") is a California corporation
formed in 1981 whose name was changed from Franklin Administrative Services,
Inc. in connection with the post Acquisition unification of operations of the
Templeton and Franklin organizations. FTIS provides shareholder record keeping
services and acts as transfer agent and dividend-paying agent for the Franklin
and Templeton funds. FTIS is registered with the SEC as a transfer agent under
the Securities Exchange Act of 1934 (the "Exchange Act"). FTIS is compensated
under an agreement with each Franklin and Templeton open-end mutual fund on the
basis of a fixed annual fee per account, which varies with the Fund and the type
of services being provided.
Other Templeton Investment Advisory, Distribution, Research and Related
Subsidiaries were acquired or formed in connection with the Acquisition or
subsequent thereto, are organized and/or located in California, Florida,
Australia, the Bahamas, France, Germany, India, Italy, Luxembourg, and the
United Kingdom, and provide investment advisory and related services to other
subsidiaries of the Company and to various domestic and foreign portfolios and
private and institutional accounts. In addition, the Company, through various
Templeton subsidiaries, has opened or is in the process of opening branch
offices or in some instances forming subsidiaries in various other international
locations, including Argentina, Hungary, Mauritius, Russia, South Africa, and
Vietnam.
Franklin Templeton Trust Company
Franklin Templeton Trust Company ("FTTC"), a California corporation formed in
October 1983, is a trust company licensed by the California Superintendent of
Banks. FTTC serves primarily as custodian for Individual Retirement Accounts and
Keogh Plans whose assets are invested in the Franklin and Templeton funds, and
as trustee or fiduciary of private trusts and retirement plans.
Templeton Funds Trust Company
Templeton Funds Trust Company ("TFTC"), a Florida corporation formed in
December, 1985, is a trust company licensed by the Florida Office of the
Comptroller. TFTC provides sub-administration services through Franklin
Templeton Trust Company to Individual Retirement Accounts and Keogh Plans whose
assets are invested in the Templeton Family of Funds, and serves as trustee of
commingled trusts for qualified retirement plans.
Franklin Management, Inc.
Franklin Management, Inc. ("FMI"), a California corporation organized in
February 1978, is a registered investment advisor for private accounts. FMI also
provides advisory services to third party broker-dealer wrap fee programs.
Franklin Institutional Services Corporation
Franklin Institutional Services Corporation ("FISCO") is a California
corporation organized in August 1991. FISCO is a registered investment advisor
and provides services to bank trust departments, municipalities, corporate and
public pension plans and pension consultants.
Franklin Agency, Inc.
Franklin Agency, Inc. ("Agency") is a California corporation organized in
December 1971. Agency provides insurance agency services for the Franklin
Valuemark annuity products.
ILA Financial Services, Inc.
ILA Financial Services, Inc. ("ILA") is an Arizona corporation that is 80% owned
by the Company. It was formed in June 1969 as an insurance holding company. Its
principal subsidiary is Arizona Life Insurance Company ("Arizona Life") based in
Phoenix, Arizona. During the fiscal year, substantially all of the operating
assets of Arizona Life, consisting of term life policies, were sold and Arizona
Life's liabilities thereunder were assumed by the purchaser of such assets. ILA
is presently engaged in the final stages of the sale of Arizona Life's insurance
charter and licenses. ILA specializes in developing and marketing insurance
related products.
Templeton Funds Annuity Company
Templeton Funds Annuity Company ("TFAC") is a Florida corporation formed in
January 1984 and purchased in the Acquisition which offers variable annuity
products. TFAC is principally regulated by the Florida Department of Insurance
and Treasurer.
Templeton Worldwide, Inc.
Templeton Worldwide, Inc. is a Delaware corporation organized in July 1992 as
the parent holding company for all of the Templeton companies acquired or formed
in connection with the Acquisition as well as subsequent thereto.
Subsidiaries-Other Financial Services
In addition to its principal business activity of providing investment
management and related services, during all or portions of the fiscal year, the
Company was also engaged in two (2) other lines of business in the financial
services marketplace conducted through the subsidiaries described below:
consumer lending services and the management of public and private real estate
programs.
Consumer Lending Services
Franklin Bank (the "Bank"), formerly Pacific Union Bank & Trust Company, a
98.2%-owned subsidiary of the Company, is a non-Federal Reserve member
California State chartered bank. The Bank was formed in 1974 and was acquired by
the Company in December 1985. The Bank, with total assets of $185.8 million as
of September 30, 1995, provides consumer banking products and services such as
credit cards, auto loans, deposit accounts and consumer loans. The Bank does not
exercise its commercial lending powers in order to maintain its status as a
"non-bank bank" pursuant to the provisions of the Competitive Equality Banking
Act of 1987 ("CEBA") which permits the Company, a "non banking company" prior to
CEBA, to remain exempt from the Bank Holding Company Act under the
"grandfathering" provisions of CEBA. As a non-bank bank, it is subject to
various regulatory limitations, including limits on the increase in its asset
growth to 7% on an annual basis as well as a prohibition on engaging in any
activity in which it was not engaged in March of 1987.
Franklin Capital Corporation
Franklin Capital Corporation ("FCC") is a Utah corporation formed in November
1993 to expand the Company's auto lending activities. FCC conducts its business
primarily in the Western region of the United States and originates its loans
through a network of auto dealerships representing a wide variety of makes and
models. FCC offers several different loan programs to finance new and used
vehicles. FCC also acquires credit card receivables from the Bank. As of
September 30, 1995, FCC's total assets included $224.8 million of gross
automobile contracts and $71.6 million of gross credit card receivables.
Real Estate Subsidiaries
The Company's real estate related line of business is conducted primarily
through two (2) principal subsidiary corporations. Franklin Properties, Inc.
("FPI") is a real estate investment and management company organized in
California in April 1988, which manages three (3) real estate investment trusts,
which are traded publicly on the American Stock Exchange. Property Resources,
Inc. ("PRI"), a California corporation organized in April 1967 and acquired by
the Company in December 1985, serves as general partner or advisor for certain
other real estate investment programs.
Investment Management
The Franklin Templeton Group accommodates a variety of investment objectives,
including, capital appreciation, growth and income, income, tax-free income and
stability of principal. In seeking to achieve such objectives, each portfolio
emphasizes different investment securities. Portfolios seeking income focus on
taxable and tax-exempt money market instruments, tax-exempt municipal bonds,
fixed-income debt securities of corporations and of the United States government
and its agencies and instrumentalities such as the Government National Mortgage
Association ("GNMA" or "Ginnie Mae"), the Federal National Mortgage Association
("Fannie Mae"), and the Federal Home Loan Mortgage Corporation ("Freddie Mac").
Portfolios that seek capital appreciation invest primarily in equity securities
in a wide variety of international and domestic markets, some seek broad
national market exposure, while others focus on narrower sectors such as
precious metals, health care, emerging technology, mid-cap companies, small-cap
companies, real estate securities and utilities. Still others focus on
investments in particular emerging market countries and regions. A majority of
the assets managed are equity oriented.
In addition to closed-end funds, many of which are described below, the Other
Assets include portfolios managed for the world's largest corporations,
endowments, charitable foundations, pension funds, wealthy individuals and other
institutions. Investment management services for such portfolios focus on
specific client objectives utilizing the various investment techniques offered
by the Franklin Templeton Group.
During the fiscal year ended September 30, 1995, except for the Company's money
market funds, and funds specifically designed for institutional investors, whose
shares are sold without a sales charge at all purchase levels, shares of the
open-end funds in the Franklin and Templeton funds were generally sold at their
respective net asset value per share plus a sales charge, which varies depending
on the individual fund and the amount purchased. In accordance with certain
terms and conditions described in the prospectuses for such Funds, certain
investors are eligible to purchase shares at net asset value or at reduced sales
charges, and investors may generally exchange their shares of a fund at net
asset value for shares of another fund in the Franklin Templeton Group when they
believe such an investment decision is appropriate without the payment of
additional sales charges.
As of September 30, 1995, the net asset holdings of the five largest funds in
the Franklin Templeton Group (some of which are investment companies and some of
which are series of other investment companies) were Franklin California
Tax-Free Income Fund, Inc. ($13.1 billion), Franklin U.S. Government Securities
Fund ($11.1 billion), Templeton Growth Fund ($7.2 billion), Templeton Foreign
Fund ($7.1 billion) and the Franklin Federal Tax-Free Income Fund ($7.0
billion). At September 30, 1995, these five mutual funds represented, in the
aggregate, 35% of all assets under management in the Franklin Templeton Group.
General Fund Description
Set forth in the tables below is a brief description of the Funds and of the
principal investments and investment strategies of such Funds or portfolios
comprising most of the principal Funds or portfolios in the Franklin Templeton
Group separated into 21 different general categories as follows:
(i) Franklin Funds Seeking Preservation of Capital
and Income
(ii) Franklin Funds Seeking Current Income
(iii) Franklin Funds Seeking Tax-Free Income
(iv) Franklin Funds Seeking Growth and Income
(v) Franklin Funds Seeking Capital Growth
(vi) Franklin Funds for Tax-Deferred Investments
(Valuemark variable annuity)
(vii) Franklin Closed-End Funds
(viii)Franklin Funds for Institutional Investors
(ix) Franklin Templeton International Currency
Funds
(x) Templeton Funds Seeking Preservation of
Capital and Income
(xi) Templeton Funds Seeking Capital Growth from
Global Portfolios
(xii) Templeton Funds Seeking Capital Growth from
Domestic Portfolios
(xiii)Templeton Funds Seeking High Current Income
from Global Portfolios
(xiv) Templeton Funds Seeking High Total Return from
Global Portfolios
(xv) Templeton Funds for Tax-Deferred Investments
(xvi) Templeton Contractual Plans
(xvii)Templeton SICAV Funds
(xviii)Templeton Canadian Funds
(xix) Templeton Closed-End Funds
(xx) Templeton Funds for Institutional Investors
(xxi) Representative Templeton International
Portfolios
<TABLE>
<CAPTION>
(i) Franklin Funds Seeking Preservation of Capital and Income
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Franklin California 9/3/85 Invests in short-term California
Tax-Exempt Money Fund municipal securities for double
tax-free dividends.
Franklin Federal Money 5/13/80 Short-term Instruments backed by U.S.
Fund government securities. Invests in
repurchase agreements collateralized
by U.S. government securities.
Franklin Money Fund 5/1/76 Money Market Instruments. Invests in
short-term securities for capital
preservation, liquidity and dividends.
Franklin New York 9/3/85 Invests in short-term New York
Tax-Exempt Money Fund municipal securities for triple
tax-free dividends (free from federal,
N.Y. state and N.Y. city taxes).
Franklin Tax- Exempt 2/18/82 Invests in short-term municipal
Money Fund securities for federally tax-free
dividends.
Franklin Templeton Money 5/1/95 Money Market Instruments. Invests in
Fund II short-term securities for capital
preservation, liquidity and dividends.
Open only to shareholders exchanging out
of Class II shares in other Franklin
Templeton Funds.
<CAPTION>
(ii) Franklin Funds Seeking Current Income
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Franklin Adjustable Rate 12/26/91 Double A rated mortgage-backed
Securities Fund securities. ARMS created by private
issuers as well as Ginnie Mae, Fannie
Mae and Freddie Mac. Seeks high
current income and increased price
stability.
Franklin Adjustable U.S. 10/20/87 Government or government agency
Government Securities guaranteed adjustable rate
Fund mortgage-backed securities. Pooled
adjustable rate mortgage securities
(ARMS). Seeks income with lower
volatility of principal.
Franklin Corporate 1/14/87 Preferred securities. Seeks high
Qualified Dividend Fund after-tax income for corporations
eligible for the dividend received
deduction.
Franklin Global 3/15/88 Global government fixed-income
Government Income Fund securities. Seeks high current income.
Franklin Investment 1/14/87 High grade corporate and U.S.
Grade Income Fund government securities. Seeks high
current income.
Franklin 4/15/87 U.S. government securities. Seeks
Short-Intermediate U.S income and relative stability of
Government Securities principal by investing in less
Fund volatile, shorter term securities of
U.S. government securities carrying
the full faith and credit guarantee of
the U.S. government.
Franklin Tax- Advantaged 5/4/87 Ginnie Mae securities. Seeks high
U.S. Government current income by investing primarily
Securities Fund in Ginnie Mae securities carrying the
full faith and credit guarantee of the
U.S. government, exempt from
non-resident alien taxation.
Franklin Tax-Advantaged 5/4/87 High yielding corporate bonds.
High Yield Securities Designed for non-U.S. investors
Fund seeking income from high yield
corporate bonds, exempt from
non-resident alien taxation.
Franklin Tax-Advantaged 6/9/90 Foreign debt securities. Invests in
International Bond Fund qualifying debt securities and foreign
currency denominated debt securities
of non-U.S. issuers that are not
subject to U.S. federal income tax or
U.S. tax withholding requirements.
Designed for non-U.S. investors.
Franklin Templeton 12/31/92 German government bonds.
German Government Bond
Fund
Franklin's AGE High 12/31/69 High yielding lower rated corporate
Income Fund bonds. Seeks high current income.
U.S. Government 5/31/70 Ginnie Mae Securities. Seeks high
Securities Series (a current income by investing primarily
series of Franklin in Ginnie Mae securities carrying the
Custodian Funds, Inc.) full faith and credit guarantee of the
U.S. government.
<CAPTION>
(iii) Franklin Funds Seeking Tax-Free Income
Federal Tax-Free Funds
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Franklin Federal 9/21/92 Diversified municipal bonds with an
Intermediate-Term average maturity of three to ten years.
Tax-Free Income Fund
Franklin Federal 10/7/83 Diversified municipal bonds. Seeks
Tax-Free Income Fund federal tax-free income by investing
in nationally diversified, investment
quality municipal bonds.
Franklin High Yield 3/18/86 High yielding municipal bonds. Seeks
Tax-Free Income Fund federal tax-free income by investing
in nationally diversified, high yield,
medium and lower rated municipal bonds.
Franklin Insured 4/1/85 Diversified portfolio of insured
Tax-Free Income Fund municipal bonds. Seeks federal
tax-free income by investing in
nationally diversified, insured
municipal bonds.
Franklin Puerto Rico 8/3/85 For U.S. citizens and residents.
Tax-Free Income Fund Seeks to provide a maximum level of
income exempt from federal income tax and
personal income taxes of the majority of
the states.
State Tax-Free Funds
The Company manages insured state tax-free funds established from 1985 to 1995
in the states of Arizona, California, Florida, Massachusetts, Michigan,
Minnesota, New York and Ohio whose principal investments and strategy are the
purchase of insured municipal bonds exempt from federal and specified state
personal income taxes providing an investment vehicle for double tax- free
income from long-term municipal securities. In addition, the Company manages 25
non-insured state tax-free income funds established from 1977 to 1995 providing
double tax-free income from long-term municipal securities to residents of 20
states.
<CAPTION>
(iv) Franklin Funds Seeking Growth and Income
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Franklin Balance Sheet 4/2/90 Undervalued securities of closed-end
Investment Fund funds and common stocks which have
per-share current market values believed
to be below their net asset or book
values.
Franklin Convertible 4/15/87 Convertible bonds and convertible
Securities Fund preferred stock. Seeks high current
income, potential capital growth and
downside protection in declining
markets.
Franklin Equity Income 3/15/88 Common stocks with high dividend
Fund yields. Invests in high yielding
common stocks for greater price
stability, capital appreciation and
high current dividend income.
Franklin Global 7/2/92 Equity and debt securities issued by
Utilities Fund foreign and domestic utilities
companies.
Franklin MicroCap Value 12/12/95 High total return, of which capital
Fund appreciation and income are
components. The Fund seeks to achieve its
objective by investing at least 65% of
its total assets in securities of
companies with market capitalization
under $100 million at the time of
purchase and which the Fund's investment
manager believes possess intrinsic values
in excess of the current market price of
such securities.
Franklin Natural 6/5/95 Stocks of companies that own, produce,
Resources Fund refine, process and market natural
resources.
Franklin Premier Return 12/5/51 Common stocks and options. Invests in
Fund established dividend-paying stocks and
writes covered call options on many of
these stocks to generate additional
return.
Franklin Rising 4/2/90 Growth stocks with increasing
Dividends Fund dividends. Invests in stocks with
consistent, substantial dividend
increases for capital growth.
Franklin Strategic 5/24/94 Domestic and foreign fixed-income
Income Fund securities.
Income Series (a series 3/31/48 High yielding stocks and bonds.
of Franklin Custodian Invests in a diversified portfolio of
Funds, Inc.) high yielding lower rated corporate
bonds, preferred stocks and dividend
paying common stocks.
Utilities Series (a 9/30/48 Growth utilities stocks. Invests in
series of Franklin utility companies located in high
Custodian Funds, Inc.) growth areas.
<CAPTION>
(v) Franklin Funds Seeking Capital Growth
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
DynaTech Series (a 1/1/68 Established and emerging growth
series of Franklin stocks. Invests in the volatile stocks
Custodian Funds, Inc.) of companies engaged in dramatic
break-through areas such as medicine,
telecommunications and electronics or
who have proprietary advantages in
their field.
Franklin California 10/30/91 Primarily in growth stocks or
Growth Fund securities of companies headquartered
in or conducting a majority of
operations in California.
Franklin Equity Fund 1/1/33 Undervalued common stocks. Invests in
common stocks of seasoned companies
with low prices in relation to
earnings growth.
Franklin Global Health 2/14/92 Common stocks of health care companies
Care Fund worldwide.
Franklin Gold Fund 5/19/69 Securities of companies
engaged in mining, processing or dealing
in gold or other precious metals.
Franklin International 9/20/91 Common stocks of companies outside the
Equity Fund U.S.
Franklin Pacific Growth 9/20/91 Common stocks of companies in the
Fund Pacific Rim.
Franklin Real Estate 1/3/94 Equity securities of companies engaged
Securities Fund in the real estate industry, primarily
real estate investment trusts.
Franklin Small Cap 2/14/92 Common Stocks of small capitalization
Growth Fund companies.
Growth Series (a series 3/31/48 Leading growth stocks. Invests in
of the Franklin well-known companies with demonstrated
Custodian Funds, Inc.) growth characteristics.
<CAPTION>
(vi) Franklin Funds for Tax-Deferred Investments
Franklin Valuemark Funds is an open-end management investment company currently
consisting of twenty-one (21) separate series or portfolios which offer a wide
range of investment objectives, strategies, and risks. Shares are currently sold
only to separate accounts of the Allianz Life Insurance Company of North America
and its affiliates to fund the benefits under variable life insurance policies
and variable annuity contracts. Products presently offered include two flexible
premium deferred variable annuities ("Valuemark II" in New York and "Valuemark
III" in all other states), an immediate variable annuity ("Valuemark Income
Plus"), single premium variable life insurance ("Franklin Valuemark Life"), and
flexible premium variable life insurance ("ValueLife"). The portfolios are
managed by Advisers, TICI, New TGH, and Templeton Asia. The investment
objectives and policies of most of the portfolios are similar to those of
corresponding Franklin and Templeton funds, although differences in portfolio
size, investments held, and insurance and expense related differences will cause
the performance of the Valuemark portfolio to differ.
<CAPTION>
(vii) Franklin Closed-End Funds
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Franklin Multi-Income 10/24/89 High yielding, fixed-income corporate
Trust (listed on the securities as well as dividend-paying
NYSE) stocks of companies engaged in the
public utilities industry. Seeks high
current income consistent with
preservation of capital as well as growth
of income through dividend increases and
capital appreciation.
Franklin Universal Trust 9/23/88 Fixed-income debt securities, dividend
(listed on the NYSE) paying stocks and securities of
precious metals and natural resources
companies. Seeks high current income
consistent with preservation of
capital.
Principal Maturity Trust 1/19/89 Mortgage-backed securities, zero
(listed on the New York coupon securities and high income
Stock Exchange "NYSE") producing debt securities. Seeks to
return investors' original capital of $10
per share on or before May 31, 2001,
while providing high monthly income.
<CAPTION>
(viii) Franklin Funds for Institutional Investors
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Adjustable Rate 11/5/91 Mortgage-backed securities. ARMS.
Securities Portfolio
(sold only to other
investment companies)
Franklin Cash Reserves 7/1/94 Money market instruments. Invests in
Fund short-term securities for capital
preservation, liquidity, and dividends.
Franklin Institutional 1/2/92 A portfolio of mortgage-backed
Adjustable Rate securities. Pooled adjustable rate
Securities Fund mortgage securities ("ARMS").
Franklin Institutional 11/1/91 Invests in a portfolio of adjustable
Adjustable U.S. U.S. government or guaranteed agency
Government Securities mortgage-backed securities. ARMS
Fund created by Ginnie Mae, Fannie Mae and
Freddie Mac. Seeks high current
income and increased price stability.
Franklin Late Day Money 1/19/88 Money Market Instruments, including
Market Portfolio repurchase agreements which allow for
investor purchases later in the day
than generally available from other
money funds.
Franklin Strategic 2/1/93 Mortgage-back securities. Pooled
Mortgage Portfolio mortgages issued or guaranteed by
Ginnie Mae, Fannie Mae or Freddie Mac.
Franklin U. S. 2/8/94 Short-term instruments backed by U.S.
Government Agency Money government securities. Invests in
Market Fund repurchase agreements collateralized
by U. S. government securities.
Franklin U.S. Government 1/19/88 Short-term instruments backed by U.S.
Securities Money Market government securities. Invests in
Portfolio repurchase agreements collateralized
by U.S. government securities.
Franklin U.S. Treasury 8/20/91 U.S. Treasury securities. Invests in
Money Market Portfolio short-term U.S. Treasury obligations.
Money Market Portfolio 7/17/85 Money Market Instruments. Invests in
short-term securities for capital
preservation, liquidity and dividends.
The Money Market 7/28/92 Money Market instruments. Invests in
Portfolio (sold only to short-term securities for capital
other investment preservation, liquidity and dividends.
companies)
The U.S. Government 7/28/92 Short-term Instruments backed by U.S.
Securities Money Market government securities. Invests in
Portfolio (sold only to repurchase agreements, collateralized
other investment by U.S. government securities.
companies)
U.S. Government 5/20/91 Mortgage-backed securities. ARMS
Adjustable Rate Mortgage created by Ginnie Mae, Fannie Mae and
Portfolio (sold only to Freddie Mac. Seeks high current
other investment income and increased price stability.
companies)
<CAPTION>
(ix) Franklin Templeton International Currency Funds
Name of Fund Inception Principal
Date Investments/Strategy
Franklin Templeton 6/30/86 High quality money market instruments
Global Currency Fund denominated in three or more of 16
major world currencies seeking to
maximize total return.
Franklin Templeton Hard 11/17/89 High quality money market instruments
Currency Fund denominated in three or more of the
five major currencies of lowest
inflation countries and the Swiss
Franc, seeking to protect against U.S.
dollar depreciation.
Franklin Templeton High 11/17/89 High quality money market instruments
Income Currency Fund denominated in three or more of the ten
highest yielding major currencies,
seeking higher current income than that
of U.S. dollar money market instruments.
<CAPTION>
(x) Templeton Funds Seeking Preservation of Capital and Income
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Templeton Money Fund 10/2/87 Seeks current income, stability of
principal and liquidity by investing
in high quality money market
instruments with maturities not
exceeding 397 days, consisting
primarily of short-term U.S.
Government Securities, bank
certificates of deposit, time
deposits, bankers' acceptances,
commercial paper and repurchase
agreements.
<CAPTION>
(xi) Templeton Funds Seeking Capital Growth from Global Portfolios
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Franklin Templeton Japan 7/28/94 Long-term capital growth achieved by
Fund investing primarily in securities of
companies domiciled in Japan and
traded in Japanese securities markets.
Templeton Developing 10/17/91 Invests in stock of issuers in
Markets Trust countries with developing markets.
Templeton Foreign Fund 10/5/82 Invests in stocks and bonds of foreign
issuers
Templeton Global 3/14/94 Long-term capital growth achieved by
Infrastructure Fund investing primarily in securities of
domestic and foreign companies that are
principally engaged in or related to the
development, operation or rehabilitation
of the physical and social
infrastructures of various nations
throughout the world.
Templeton Global 2/28/90 Invests in securities issued by
Opportunities Trust companies and governments of any nation
Templeton Greater 5/8/95 Long-term capital appreciation
European Fund achieved by investing primarily in
equity securities of companies in Greater
Europe (Western, Central and Eastern
Europe and Russia).
Templeton Growth Fund 11/29/54 Invests in stocks and bonds issued by
companies and governments of any
nation.
Templeton Latin America 5/8/95 Long-term capital appreciation
Fund achieved by investing primarily in
equity securities and debt obligations
of issuers in Latin American countries.
Templeton Real Estate 9/18/89 Invests in securities of domestic and
Securities Fund foreign companies engaged in or
related to the real estate industry
Templeton Smaller 6/1/81 Invests in common stocks of smaller
Companies Growth Fund companies of any nation.
Templeton World Fund 1/17/78 Invests in stocks and
bonds of foreign and domestic companies.
<CAPTION>
(xii) Templeton Funds Seeking Capital Growth From Domestic Portfolios
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Templeton American Trust 3/27/91 Invests no less than 65% of assets in
stocks and bonds of U.S. companies and
the U.S. government
<CAPTION>
(xiii) Templeton Funds Seeking High Current Income from Global Portfolios
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Templeton Americas 6/27/94 High level of current income. Total
Government Securities return is a secondary objective. The
Fund fund seeks to achieve its objectives
by investing qt least 65% of its total
assets in debt securities issued or
guaranteed by governments, government
agencies, political subdivisions, and
other government entities of countries
located in the Western Hemisphere (i.e.,
North, South and Central America and the
surrounding waters).
Templeton Income Fund 9/24/86 Invests in bonds and dividend paying
stocks of companies and governments of
any nation.
(xiv) Templeton Funds Seeking High Total Return from Global Portfolios
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Templeton Growth and 3/14/94 High total return achieved through a
Income Fund(formerly flexible policy of investing primarily
Templeton Global Rising in equity and debt securities of
Dividends Fund) domestic and foreign countries.
<CAPTION>
(xv) Templeton Funds for Tax-Deferred Investments
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Templeton Asset 8/31/88 High level of total return achieved
Allocation Fund through a flexible policy of investing
in stocks of companies in any nation,
debt obligations of companies and
governments of any nation, and in money
market instruments.
Templeton Bond Fund 8/31/88 High current income achieved through a
flexible policy of investing primarily
in debt securities of companies,
governments and government agencies of
various nations throughout the world,
and in debt securities which are
convertible into common stock of such
companies.
Templeton International 5/1/92 Long-term capital growth achieved
Fund through a flexible policy of investing
in stocks and debt obligations of
companies and governments outside the
United States.
Templeton Money Market 8/31/88 Current income, stability of principal
Fund and liquidity by investing in money
market instruments with maturities not
exceeding 397 days, consisting primarily
of short-term U.S. Government securities,
certificates of deposit, time deposits,
bankers' acceptances, commercial paper
and repurchase agreements.
Templeton Stock Fund 8/31/88 Capital growth
achieved through a policy of investing
primarily in common stocks issued by
companies, large and small, in various,
in various nations throughout the world.
Templeton Variable 2/16/88 Long-term capital growth achieved
Annuity Fund through a flexible policy of investing
primarily in stocks and debt
obligations of companies and
governments of any nation, including
the United States.
<CAPTION>
(xvi) Templeton Contractual Plans
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Templeton Capital 3/1/91 Seeks long-term capital growth through
Accumulator Fund, Inc. a flexible policy of investing in
stocks and debt obligations of
companies and governments of any
nation.
<CAPTION>
(xvii) Templeton SICAV Funds
Templeton Global Strategy SICAV)
Equity Funds (denominated in U.S. Dollars unless otherwise noted)
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Templeton Deutschemark 4/26/91 Seeks long-term capital growth by
Global Growth Fund investing mainly in shares of
companies of any size found in any
nation (denominated in Deutschemarks).
Templeton Emerging 2/28/91 Seeks long-term capital growth by
Markets Fund investing in the shares and debt
obligations of corporations and
governments of developing or emerging
nations.
Templeton European Fund 4/17/91 Seeks long-term
capital growth by investing mainly in
shares of companies of all sizes based in
European countries (denominated in Swiss
francs).
Templeton Far East Fund 6/30/91 Seeks long-term
capital growth by investing mainly in
shares of companies of all sizes which
are based or derive significant profits
from the Far East.
Templeton Global Growth 2/28/91 Seeks long-term capital growth by
Fund investing mainly in the shares of
companies of any size found in any
nation.
Templeton Pan American 2/28/91 Seeks long-term capital growth by
Fund investing mainly in shares of
companies of all sizes based in the
North or South American continents.
Templeton Smaller 7/8/91 Seeks long-term capital growth by
Companies Fund investing mainly in shares of
companies with a market capitalization of
less than $1 billion found in any nation.
<CAPTION>
Fixed Income Funds (denominated in U.S. Dollars unless otherwise noted)
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Templeton Deutschemark 2/28/91 Seeks to maximize total investment
Global Bond Fund return by investing in a wide variety
of fixed-interest securities,
including those issued by supranational
bodies such as The World Bank
(denominated in Deutschemarks).
Templeton Emerging 7/5/91 Seeks to maximize total investment
Markets Fixed Income Fund return by investing mainly in dollar
and non-dollar denominated debt
obligations of emerging markets.
Templeton Global Income 2/28/91 Seeks to maximize current income by
Fund investing mainly in fixed-interest
securities of governments and
companies worldwide.
Templeton Haven Fund 7/8/91 Seeks to maintain a
stable share price by investing in
short-term high quality transferable debt
securities (denominated in Swiss francs).
Templeton US Government 2/28/91 Seeks security of capital and income
Fund by investing in bonds issued by the US
government and its agencies.
<CAPTION>
Templeton Worldwide Investments SICAV
<S> <C> <C>
Growth Portfolio 8/21/89 Seeks long term capital
growth by investing in all types of
securities issued by companies or
governments of any nation.
Income Portfolio 8/21/89 Seeks high current income and relative
stability of net asset value by
investing in high quality money market
instruments and debt securities with
remaining maturities in excess of two
years.
<CAPTION>
(xviii) Templeton Canadian Funds
Non-Institutional Funds
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Templeton Balanced Fund 04/07/83 Seeks to achieve long term capital
appreciation consistent with
reasonable security of capital. It
invests primarily in a combination of
Canadian common and preferred shares,
bonds, and debentures; managed to
comply with eligibility requirements
under Canadian law regarding
retirement and other tax deferred
plans.
Templeton Canadian Asset 9/14/94 Seeks high level of total return
Allocation Fund through a flexible policy of investing
in primarily Canadian shares, debt
obligations and short-term
instruments; managed to comply with
eligibility requirements under
Canadian law regarding retirement and
other tax-deferred plans.
Templeton Canadian Bond 01/02/90 Seeks high current income and capital
Fund appreciation by investing primarily in
publicly traded debt securities issued
or guaranteed by Canadian governments
or their agencies, or issued by
Canadian municipalities or
corporations.
Templeton Canadian Stock 01/03/89 Seeks capital appreciation through
Fund investment in a diversified portfolio
of Canadian equity securities
primarily managed to comply with
eligibility requirements of the
Canadian law regarding retirement and
other tax deferred plans.
Templeton Emerging 09/20/91 Seeks long-term capital appreciation
Markets Fund by investing primarily in emerging
country equity securities.
Templeton Global 9/14/94 Seeks high level of total return
Balanced Fund through a flexible policy of investing
in shares, debt obligations and
short-term instruments of companies
and governments of any nation,
including Canada and the United States.
Templeton Global Bond 06/07/88 Seeks to provide high current income
Fund by investing primarily in a portfolio
of fixed income securities of issuers
throughout the world.
Templeton Global Smaller 01/03/89 Seeks capital appreciation by
Companies Fund investing primarily in equity
securities of emerging growth
companies throughout the world.
Templeton Growth Fund, 09/01/54 Seeks long-term capital growth through
Ltd. a flexible policy of investing in
stock and debt obligations of
companies and governments of any
nation.
Templeton International 9/14/94 Seeks high level of total return
Balanced Fund through a flexible policy of investing
in shares, debt obligations and
short-term instruments of companies
and governments of any nation other
than Canada and the United States.
Templeton International 01/03/89 Seeks long-term total return through a
Stock Fund flexible policy of investing in shares
and debt obligations of companies and
governments outside of Canada and the
United States.
Templeton Treasury Bill 02/29/88 Seeks a high level of current income
Fund consistent with preservation of
capital and liquidity through
investments in Canadian government or
agency debt obligations and high
quality short-term money market
instruments.
<CAPTION>
Funds for Institutional
Investors
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Templeton Global Equity 07/06/90 Seeks long-term capital appreciation
Trust (non-taxable) by investing in stocks and bonds
issued by companies and governments of
any nation.
Templeton International 07/06/90 Seeks long-term capital appreciation
Equity Trust(non-taxable) by investing in stocks and bonds
issued by companies and governments
outside of Canada and the United
States.
Templeton International 07/06/90 Seeks long-term total return through a
Stock Trust (taxable) flexible policy of investing in stocks
and bonds issued by companies and
governments outside of Canada and the
United States.
Closed-End Funds
Name of Fund Inception Principal
Date Investments/Strategy
Templeton Emerging 6/21/94 Long-term capital appreciation, by
Markets Appreciation investing in equity securities and
Fund (listed on Toronto debt obligations of issuers in
Stock Exchange and emerging market countries.
Montreal Stock Exchange)
<CAPTION>
(xix) Templeton Closed-End Funds
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Templeton China World 9/9/93 Long-term capital appreciation, by
Fund, Inc. (listed on investing primarily in equity
the NYSE) securities of companies organized
under the laws of or with a principal
office in the People's Republic of China
("PRC"), Hong Kong or Taiwan collectively
"Greater China", for which the principal
trading market is in Greater China, and
which derive at least 50% of their
revenues from goods or services sold or
produced in, or have at least 50% of
their assets in, the PRC.
Templeton Dragon Fund, 9/21/94 Long-term capital appreciation
Inc. (Listed on NYSE achieved by investing at least 45% of
and Osaka Securities its total assets in the equity
Exchange) securities of companies (i) organized
under the laws of, or with a principal
office in, the People's Republic of China
or Hong Kong, or the principal business
activities of which are conducted in
China or Hong Kong or for which the
principal equity securities trading
market is in China or Hong Kong, and (ii)
that derive at least 50% of their
revenues from goods or services sold or
produced, or have at least 50% of their
assets in China or Hong Kong.
Templeton Emerging 4/29/94 Capital appreciation achieved by
Markets Appreciation investing substantially all of its
Fund, Inc. (Listed on assets in a portfolio of equity
NYSE) securities and debt obligations of
issuers in emerging market countries.
Templeton Emerging 2/26/87 Long-term capital appreciation
Markets Fund, Inc. achieved by investing primarily in
(listed on the NYSE and emerging markets equity securities.
Pacific Stock Exchange
"PSE")
Templeton Emerging 9/23/93 High current income with a secondary
Markets Income Fund, investment objective of capital
Inc. (listed on the NYSE) appreciation achieved by investing
primarily in a portfolio of high yielding
debt obligations of sovereign or
sovereign-related entities and private
sector companies in emerging market
countries.
Templeton Global 11/22/88 High level of current income
Governments Income Trust consistent with the preservation of
(listed on the NYSE) capital achieved by investing at least
65% of its total assets in debt
securities issued or guaranteed by
governments, government agencies
supranational entities, political
subdivisions and other government
entities of various nations throughout
the world.
Templeton Global Income 3/17/88 High current income with a secondary
Fund, Inc. (listed on investment objective of capital
the NYSE and PSE) appreciation when consistent with its
principal objective by investing
primarily in a portfolio of
fixed-income securities (including
debt securities and preferred stock)
of U.S. and foreign issuers.
Templeton Global 5/23/90 High level of total return (income
Utilities, Inc. (listed plus capital appreciation),without
on the AMEX and the undue risk, through investment of at
Midwest Stock Exchange) least 65% of its total assets in
equity and debt securities issued by
domestic and foreign companies in the
utility industries.
Templeton Russia Fund, 6/15/95 Long-term capital appreciation
Inc. (Listed on NYSE) achieved by investing primarily in
equity securities of Russian Companies.
Templeton Vietnam 9/15/94 Long-term capital appreciation
Opportunities Fund, achieved by investing in the equity
Inc. (Listed on NYSE) securities of Vietnam Companies.
<CAPTION>
(xx) Templeton Funds for Institutional Investors
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Templeton Emerging 5/3/93 Long-term capital growth achieved by
Markets Series investing in securities of issuers of
countries having emerging markets.
Templeton Foreign Equity 10/18/90 Long-term capital growth achieved by
Series investing in stocks and debt
obligations of companies and
governments outside the United States.
Templeton Foreign Equity 5/3/93 Long-term capital growth achieved by
(South Africa Free) investing in stocks and debt
Series obligations of companies and
governments outside both the U.S. and
South Africa.
Templeton Growth Series 5/3/93 Long-term capital
growth achieved by investing in stocks
and debt obligations of companies and
governments of any nation.
<CAPTION>
(xxi) Representative Templeton International Portfolios
Name of Fund Inception Principal
Date Investments/Strategy
<S> <C> <C>
Asian Development Equity 01/22/88 Seeks to maximize overall long-term
Fund return by investing, directly or
indirectly, mainly in shares, convertible
bonds, warrants, and other equity related
securities of entities in the Asian
developing countries.
Templeton Asia Fund 11/14/89 Seeks to achieve long-term capital
appreciation by investing primarily in
equity securities of entities which
either are listed on recognized
exchanges in capital markets of the
Asia/Oceania Region or which have
their area of primary activity in
those same capital markets.
Templeton Emerging Asia 06/24/93 Seeks to achieve long-term capital
Fund appreciation by investing primarily in
equity securities of companies which are
either listed on recognized exchanges in
capital markets in emerging Asian
countries or companies which have their
primary activity in those same capital
markets.
Templeton Emerging 06/19/89 Seeks long term capital appreciation
Markets Investment Trust through investing in companies
Plc. operating or trading in emerging
market countries. (Closed End)
Templeton Global 08/29/88 Seeks to provide income through an
Balanced Trust internationally diversified portfolio
of equities, fixed interest, and
convertible stocks. (Unit Trust)
Templeton Global Growth 08/29/88 Seeks to maximize total investment
Trust return by investing in an
internationally diversified portfolio
of equity shares and convertible
stocks. (Unit Trust)
Templeton Global Income 07/13/88 Seeks to achieve high current income
Portfolio, Ltd. by investing primarily in a portfolio
of fixed income securities (including
debt securities and preferred stock) of
issuers throughout the world.
Templeton Latin America 5/3/94 Seeks long-term capital growth by
Investment Trust Plc. investing in companies listed on stock
exchanges in Latin America or that
have substantial trading interests in
that region. (Closed End)
Templeton Value Trust 06/08/89 Seeks maximum total
investment return by investing in all
geographic and economic sectors.
Templeton/National Bank 04/06/93 Growth Portfolio - Seeks long term
of Greece Trans-European capital growth through investments in
Fund stock and debt securities of companies
and governments primarily located in the
European Economic Community. Income
Portfolio - Seeks high current income and
relative stability of principal through
investments in debt securities of
companies and governments located
primarily in the European Economic
Community.
</TABLE>
Recent Fund Introductions
The funds referenced above include five (5) new funds introduced by the Franklin
Templeton Group during the fiscal year ended September 30, 1995: Franklin
Templeton Money Fund II, Franklin Natural Resources Fund, Templeton Russia Fund,
Inc. (closed-end), Templeton Greater European Fund and Templeton Latin America
Fund.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Information on the Company's operations in various geographic areas of the world
and a breakout of business segment information is contained in Footnote 5 to the
Consolidated Financial Statements contained in Item 8. herein.
(c) NARRATIVE DESCRIPTION OF BUSINESS
Investment Management and Administrative Services
The Company, through its various subsidiaries described above, provides
investment advisory, portfolio management, transfer agent and administrative
services to the Franklin Templeton Group. Such services are provided pursuant to
agreements in effect with each of the U.S. registered Franklin and Templeton
open-end and closed-end investment companies. Comparable agreements are in
effect with foreign registered Funds and with other managed accounts. The
management agreements for the U.S. registered Franklin and Templeton funds
continue in effect for successive annual periods, providing such continuance is
specifically approved at least annually by a majority vote cast in person at a
meeting of such Funds' Boards of Trustees or Directors called for that purpose,
or by a vote of the holders of a majority of the Funds' outstanding voting
securities, and in either event, by a majority of such Funds' trustees or
directors who are not parties to such agreement or interested persons of the
Funds or the Company within the meaning of the 40 Act. Trustees and directors of
Funds' boards are hereinafter referred to as "directors". Foreign registered
Funds have various termination rights and provisions.
Each such agreement automatically terminates in the event of its "assignment"
(as defined in the 40 Act) and either party may terminate the agreement without
penalty after written notice ranging from 30 to 60 days. "Assignment" is defined
in the 40 Act as including any direct or indirect transfer of a controlling
block of voting stock. Control is defined as the power to exercise a controlling
influence over the management or policies of a company.
If there were to be a termination of a significant number of the management
agreements between the Franklin and Templeton funds and the Company's
subsidiaries or with respect to a significant portion of the Other Assets, such
termination would have a material adverse impact upon the Company. To date, no
management agreements of the Company or any of its subsidiaries with any of the
Franklin and Templeton funds have been involuntarily terminated. Changes in the
customer base of institutional investors occur on a regular basis. Since the
Templeton acquisition to date, assets under management in the category of Other
Assets set forth above have in the aggregate continued to grow.
As of September 30, 1995, substantially all of the shares of the various
directly and indirectly owned subsidiary companies were owned directly by the
Company or subsidiaries thereof, except for nominal numbers of shares with
respect to certain foreign entities required to be owned by nationals of such
countries in accordance with foreign law and certain other limited minority
ownership of ILA and Franklin Bank. Charles B. Johnson, Rupert H. Johnson, Jr.
and R. Martin Wiskemann beneficially own approximately 20.1%, 16.0% and 9.9%,
respectively, of the outstanding voting common stock of the Company. Charles B.
Johnson and his brother Rupert H. Johnson, Jr. serve on the Board of Directors
of the Company as well as on most of the Franklin funds' boards and some of the
Templeton funds' boards. Charles E. Johnson, the son of Charles B. Johnson and
the nephew of Rupert H. Johnson, Jr. serves on the Board of Directors of the
Company and on some of the Franklin and Templeton funds' boards.
Under the terms of the management agreements with the Franklin and Templeton
funds, the various subsidiary companies described above generally supervise and
implement such Funds' investment activities and provide the administrative
services and facilities which are necessary to the operation of such Funds'
business. Such subsidiary companies also conduct research and provide investment
advisory services and, subject to and in accordance with any directions such
Funds' boards may issue from time to time, such subsidiary companies determine
which securities such Funds will purchase, hold or sell. In addition, such
subsidiary companies take all steps necessary to implement such decisions,
including the selection of brokers and dealers to execute transactions for such
Funds, in accordance with detailed criteria set forth in the management
agreement for such Funds and applicable law and practice. Similar services are
rendered with respect to the Other Assets.
Generally, the Company or a subsidiary provides and pays the salaries of
personnel who serve as officers of the Franklin and Templeton funds, including
the President and such other administrative personnel as are necessary to
conduct such Funds' day-to-day business operations, including maintaining a
Fund's portfolio records, answering shareholder inquiries, providing
information, creating and publishing literature, compliance with securities
regulations, accounting systems and controls, preparation of annual reports and
other administrative activities.
The Funds generally pay their own expenses such as legal and auditing fees,
reporting and board and shareholder meeting costs, SEC and state registration
and similar expenses. Generally, the Funds pay advisory companies a fee payable
monthly based upon a Fund's net assets. Annual rates under the various
investment management agreements range from .15% to a maximum of 2.00% and are
generally reduced as average net assets exceed various threshold levels.
The investment management agreements permit advisory companies to act as an
advisor to more than one Fund so long as such companies' ability to render
services to each of such Funds is not impaired, and so long as purchases and
sales appropriate for all such Funds are made on a proportionate or other
equitable basis. Management of the Company and the directors of the Funds
regularly review the Fund fee structures in light of Fund performance, the level
and range of services provided, industry conditions and other relevant factors.
Advisory fees are generally waived or voluntarily reduced when a new Fund is
first established and then increased to contractual levels with the growth in
net assets.
The investment advisory services provided by such advisory companies include
fundamental investment research and valuation analyses, encompassing original
country, industry and company research, company visits and inspections, and the
utilization of such sources as company public records and activities, management
interviews, company prepared information, and other publicly available
information, as well as analyses of suppliers, customers and competitors. In
addition, research services provided by brokerage firms are used to support
other research. In this regard, some brokerage business from the Funds is
allocated in recognition of value-added research services received.
Fixed-income research includes economic analysis, credit analysis and value
analysis. The economic analysis function monitors and evaluates numerous factors
that influence the supply and demand for credit on a worldwide basis. Credit
analysts research the credit worthiness of debt issuers and their individual
short-term and long-term debt issues. Yield spread differential analysis reviews
the relative value of market sectors that represent buying and selling
opportunities.
Additional shareholder administrative services are provided by FTIS, which
receives administrative fees from the Funds for providing shareholder record
keeping services and for acting as transfer and dividend-paying agent for the
Funds. As of September 30, 1995, such compensation was based upon an annual fee
per shareholder account, ranging between $10.00 and $18.00, a pro-rated portion
of which was paid monthly.
Distribution and Marketing
Distributors acts as the principal underwriter and distributor of shares of the
Franklin and Templeton open-end funds. Pursuant to underwriting agreements with
the Funds, Distributors generally pays the expenses of distribution of Fund
shares. Although the Company does significant advertising and sales promotions
through media sources, Fund shares are sold primarily through a large network of
independent participating securities dealers. As of September 30, 1995,
approximately 3500 local, regional and national securities brokerage firms
offered shares of the Franklin and Templeton funds for sale to the investing
public. The Company has approximately 48 "wholesalers" who interface with the
broker-dealer community. Fund shares are offered to individual investors,
qualified groups, trustees, IRA and Keogh plans, employee benefit plans, trust
companies, bank trust departments and institutional investors. In addition,
various management and advisory services, commingled and pooled accounts, wrap
fee arrangements and various other private investment management services are
offered to certain private and institutional investors.
Broker-dealers are paid various fees for services in matching investors with
Funds whose investment objectives match such investors' goals. Broker-dealers
also assist in explaining the operations of the Funds, in servicing the account
and in various other distribution services.
Most of the Franklin and Templeton Funds have a multi-class share structure
whereby Class I shares are sold with a maximum front-end sales charge which
ranges from a low of 1.50% to a high of 5.75%. Reductions in the maximum sales
charges may be available depending upon the amount invested and the type of
investor. Class II shares, which were introduced during the fiscal year, have a
hybrid, level load structure combining aspects of conventional front-end,
back-end and level-load pricing. Class II shares are subject to an initial sales
charge of 1% and are generally subject to a 1% contingent deferred sales charge
on redemptions within 18 months of purchase and to higher on-going Rule 12b-1
fees described below. The multi-class structure was adopted to provide investors
greater payment alternatives in implementing their investment programs. The
Company's money market and institutional funds are sold to investors without a
sales charge.
Most of the U.S registered Templeton funds and most of the U.S. registered
Franklin funds, with the exception of certain Franklin and Templeton money
market funds, have also adopted distribution plans (the "Plans") under Rule
12b-1 promulgated under the 40 Act ("Rule 12b-1"). Class II shares generally
have higher on-going Rule 12b-1 fees. The Plans are established for an initial
term of one year and, thereafter, must be approved annually by the Fund boards
and by a majority of disinterested directors. All such Plans are subject to
termination at any time by a majority vote of the disinterested directors or by
the Funds' shareholders. The Plans permit the Funds to bear certain expenses
relating to the distribution of their shares.
Fees under the Plans for Class I shares range in amount from a low of .10% per
annum of average daily net assets to a high of .50% while Class II share fees
range between .65% to 1 %. The implementation of the Plans provided for a lower
fee on Class I shares acquired prior to the adoption of such Plans. Fees from
the Plans are paid primarily to third party dealers who provide service to their
shareholder accounts, as well as engage in distribution activities. Distributors
may also receive reimbursement from the Funds for expenses involved in
distributing the Funds, such as advertising and reimbursement for a 1% payment
to dealers on sales of Class II shares, subject to the Plans' limitations on
amounts.
The financial effects on the Company of the distribution of the new class of
shares is discussed in more detail under Item 7, "Management's Discussion of
Analysis of Financial Condition and Results of Operation" (the "MD&A"), below.
As of September 30, 1995, there were approximately 4.7 million shareholder
accounts in the Franklin and Templeton Funds.
Revenues
As shown in the table below, the Company's revenues are derived primarily from
its investment management activities. Total operating revenues are set forth in
the table below. Revenues from investment management fees have comprised
approximately 86%, 80% and 78% in 1995, 1994 and 1993, respectively, of total
operating revenue for each of the three fiscal years reported. Underwriting
commissions, net from gross sales and reinvestments of products subject to
commissions contributed to revenues approximately 4%, 12% and 14% in 1995, 1994
and 1993, respectively. Transfer, trust and related fees from mutual fund
activities contributed 8%, 7% and 7% in 1995, 1994 and 1993, respectively.
Operating Revenues
Years Ended September 30,
($ in millions)
1995 1994 1993
Investment management fees $731.3 $647.7 $489.7
Underwriting commissions, net 37.1 96.6 87.1
Transfer, trust and related fees 68.7 54.6 45.1
Banking/finance, net and other 8.7 13.9 9.4
--- ---- ---
Totals $845.8 $812.8 $631.4
====== ====== ======
Other Financial Services
The Company's consumer lending, dealer auto loan and real estate businesses do
not as yet contribute significantly to either the revenues or the net income of
the Company. Franklin Bank's operations are limited by national banking laws and
no immediate significant increase in revenues is anticipated. The real estate
operations have incurred net losses since inception and the Company does not
anticipate any immediate improvement in this line of business. The Company's
dealer auto loan business has required the infusion of significant working
capital during the prior two fiscal years, either in the form of inter-company
loans or by contributions to the capital of FCC by the Company. At the same
time, the Company has experienced an increase in delinquency rates in such loans
during the fiscal year ended September 30, 1995 and, in response, has expanded
its auto loan collection efforts. A more detailed financial analysis of the
financial effects of loan losses and delinquency rates, as well as the funding
of this activity, is contained in the MD&A.
Regulatory Considerations
Virtually all aspects of the Company's businesses are subject to various
foreign, federal and state laws and regulations. As discussed above, the Company
and a number of its subsidiaries are registered with various foreign, federal
and state governmental agencies. Foreign, federal and state laws and regulations
grant such supervisory agencies broad administrative powers, including the power
to limit or restrict the Company from carrying on its business if it fails to
comply with such laws and regulations. In such event, the possible sanctions
which may be imposed include the suspension of individual employees, limitations
on the Company's (or a subsidiary's) engaging in business for specified periods
of time, the revocation of the investment advisor or broker-dealer registrations
of subsidiaries and censures and fines.
The Company's officers, directors and employees may from time to time own
securities which are also held by the Funds. The Company's internal policies
with respect to individual investments require prior clearance and reporting of
transactions and restrict certain transactions so as to reduce the possibility
of conflicts of interest.
To the extent that existing or future regulations affecting the sale of Fund
shares or other investment products or their investment strategies cause or
contribute to reduced sales of Fund shares or investment products or impair the
investment performance of the Funds or such other investment products, the
Company's aggregate assets under management and its revenues might be adversely
affected. Changes in regulations affecting free movement of international
currencies might also adversely affect the Company.
In 1993, the NASD received SEC approval for a new Rule of Fair Practice which
limits the amount of aggregate sales charges which may be paid in connection
with the purchase and holding of investment company shares sold through brokers.
The Rule provides that funds with an asset-based sales charge (most commonly
provided in Distribution Plans pursuant to SEC 40 Act Rule 12b-1) may impose no
more than 6.25% - 7.25% (depending upon whether or not the fund also pays
"service fees") in combined front-end, deferred sales charges and asset-based
sales charges. The effect of that Rule might be to limit the amount of fees that
could be paid pursuant to a fund's 12b-1 Plan in a situation where a fund has
no, or limited new sales for a prolonged period of time. In that event, it is
possible that a fund which was experiencing weak sales would have the situation
exacerbated by the fact that it would have to limit fees to brokers under its
12b-1 Plan, or reduce its up front sales charge. None of the Franklin or
Templeton funds are in, or close to, that situation at the present time.
Competition
The financial services industry is highly competitive. In the United States,
there are over 5,600 mutual funds of varying sizes, investment policies and
objectives whose shares are being offered to the public. During the past three
fiscal years, assets under management in the mutual fund industry increased by
over $1.09 trillion, a 69.2% growth rate. Over this same time period, the
Company experienced an approximate .48% decline in overall market share. While
the Company's assets and associated revenues still grew substantially during
this time period, substantial asset under management growth occurred for other
fund management companies whose asset bases were more heavily oriented to
domestic equities. Such growth was due to record domestic equity market
appreciation during this period as well as increased asset flows into domestic
equity products. The substantial returns available in the domestic equity
marketplace had a negative effect on sales of fixed-income products. The
combined effect of these two events were a significant factor in the Company's
market share decline. The Company believes that its strong fixed-income base
coupled with its strong global presence will serve its competitive needs well
over time. The Company continues its focus on service to customers, performance
on investments and extensive marketing activities with its strong broker-dealer
and other financial institution distribution network.
The Company advertises the Franklin Templeton Group in major national financial
publications, as well as on radio and television to promote name recognition and
to assist its distribution network. Such activities included purchasing network
and cable programming, sponsorship of sporting events, sponsorship of The
Nightly Business Report on public television and extensive newspaper and
magazine advertising.
Competition for sales of Fund shares is influenced by various factors, including
general securities market conditions, government regulations, global economic
conditions, portfolio performance, advertising and sales promotional efforts,
share distribution channels and the type and quality of dealer and shareholder
services. Many securities dealers, whose large retail distribution systems play
an important role in the sale of shares in the Franklin and Templeton funds,
also sponsor competing proprietary mutual funds. The Company believes that such
securities dealers value the ability to offer customers a broad selection of
investment alternatives and will continue to sell Franklin and Templeton funds,
notwithstanding the availability of proprietary products. However, to the extent
that these firms limit or restrict the sale of Franklin and Templeton funds
shares through their brokerage systems in favor of their proprietary mutual
funds, assets under management might decline and the Company's revenues might be
adversely affected.
Although the Company believes that it has substantially improved its competitive
position and has substantially benefited from the Templeton Acquisition and the
wide variety of global investment products now available to its customers, the
shift in asset mix from primarily a fixed-income base to a combination of
fixed-income and global equities has increased the possibility of volatility in
the Company's managed portfolios due to the increased percentage of equity
investments held.
Another element of competition among mutual funds is the rates at which fees and
sales charges are imposed. The Company believes that its investment management
and other fee structures are already relatively competitive and does not
presently anticipate significant competitive pressures for further reductions.
However, a number of mutual fund sponsors presently market their funds without
sales charges. As investor interest in the mutual fund industry has increased,
competitive pressures have increased on sales charges of broker-dealer
distributed funds. The Company believes that, although this trend will continue,
a significant portion of the investing public still relies on the services of
the broker-dealer community, particularly during weaker market conditions.
However, in response to competitive pressures or for other similar reasons, the
Company might be forced to lower or further adjust sales charges which are
currently substantially reallowed to broker-dealers. The reduction in such sales
charges could make the sale of shares of the Franklin and Templeton funds
somewhat less attractive to the broker-dealer community, which could in turn
have a material adverse effect on the Company's revenues. The Company believes
that it is well positioned to deal with such changes in marketing trends as a
result of its already extensive advertising activities and broad based
marketplace recognition.
In addition to competition from other investment company managers and investment
advisors, the Company and the investment company industry are in competition
with the financial services and other investment alternatives offered by stock
brokerage and investment banking firms, insurance companies, banks, savings and
loan associations and other financial institutions. Many of these competitors
have substantially greater resources than the Company. Although the banking
industry continues to expand its sponsorship of proprietary funds distributed
through third party distributors, the Company has and continues to actively
pursue sales relationships with banks and insurance companies to broaden its
distribution network in response to such competitive pressures. However, as with
proprietary products offered by the Company's broker-dealer network, to the
extent that banks limit or restrict the sale of Franklin and Templeton share
through their distribution systems in favor of their proprietary mutual funds,
assets under management might decline and the Company's revenues might be
adversely affected. In addition, competitive pressures have led to increased
demands for distribution costs for broker-dealer distributed funds, which could
have a negative impact on the Company's profit margins and net income.
Special Considerations
General
As discussed above, the Company's revenues are derived primarily from investment
management activities. Broadly speaking, the direction and amount of change in
the net assets of the Funds are dependent upon two factors: (1) the level of
sales of shares of the funds as compared to redemptions of shares of the funds;
and (2) the increase or decrease in the market value of the securities owned by
the Funds. A significant portion of the Company's assets under management are
fixed-income securities. Fluctuations in interest rates and in the yield curve
will have an effect on fixed-income assets under management as well as on the
flow of monies to and from fixed-income funds and, therefore, on the Company's
revenues from such funds.
Templeton Acquisition
As a result of the Templeton Acquisition, the portfolio mix of the Company's
assets under management changed from primarily fixed-income oriented to a
combination of both equity and fixed-income, increasing the potential impact of
changes in the equity marketplace on the assets under management of the combined
entity. On the other hand, the Company believes that the more diverse Franklin
Templeton Group is more competitive as a result of a greater diversity of
product mix available to its customers. Market values are affected by many
things, including the general condition of national and world economics and the
direction and volume of changes in interest rates and/or inflation rates. The
effects of these factors on equity funds and fixed-income funds often operate
inversely and it is, therefore, difficult to predict the net effect of any
particular set of conditions on the level of assets under management.
Although the Company and its assets under management are subject to political
and currency risks, due to its international activities, as is discussed in more
detail in the MD&A, its exposure to fluctuations in foreign currency markets and
to fixed-asset value depreciation is limited.
Item 2. Properties
General
The Company owns or leases offices and facilities in ten (10) locations in the
immediate vicinity of its principal executive and administrative offices located
at 777 Mariners Island Boulevard, San Mateo, California. In addition, the
Company owns four (4) buildings near Sacramento, California, as well as two (2)
buildings in St. Petersburg, Florida and one (1) building in Nassau, Bahamas.
The Company also leases facilities in various locations on a national and
worldwide basis. Since the Company is operated on a unified basis, corporate
activities, fund related activities, accounting operations, sales, real estate
and banking operations, auto loans and credit cards, management information
system activities, publishing and printing operations, shareholder service
operations and other business activities and operations take place in a variety
of such locations. The Company or its subsidiaries lease office space in
Florida, New York, and Utah and in several other states. In addition, the
Company or its subsidiaries lease office space in Argentina, Australia, Bermuda,
Canada, France, Germany, Hong Kong, India, Italy, Luxembourg, Poland, Russia,
South Africa, Singapore, the United Kingdom and Vietnam. The Company is in the
process of leasing new office space in Hungary and Poland.
Property Description
Leased
The Company leases approximately 177,000 square feet of space at the 777
Mariners Island Boulevard location for an approximate monthly rental of $489,000
under a lease expiring February 16, 2001. The lease is subject to adjustment to
market value rent in 1996. The Company also leases approximately 121,000 square
feet of office/warehouse space at 1147 and 1149 Chess Drive in Foster City,
California, at an approximate monthly rental of $126,000, expiring in June 2000.
In addition, the Company leases approximately 47,000 square feet of office space
at 1810 Gateway Drive, San Mateo, California, at an approximate monthly rental
of $63,000, expiring in late 1997. The Company also leases approximately 37,000
square feet of office space pursuant to several lease agreements at 901 and 951
Mariners Island Boulevard, San Mateo, California, at an approximate monthly
rental of $63,000. These leases expire at various times between September 1996
and April 2000. The Company also leases approximately 49,000 square feet at 2
Waters Drive, San Mateo, California, at an approximate monthly rental of
$74,000, expiring in July 1999 and approximately 23,000 square feet of office
space at 1850 Gateway Drive, San Mateo, California, at an approximate monthly
rental of $34,000, expiring in July 2000.
The principal Templeton offices are located in approximately 88,000 square feet
of space in Ft. Lauderdale, Florida, at an approximate monthly rental of
$178,000 under various leases expiring in December 2000. The Company leases an
aggregate of approximately 40,000 square feet in other locations throughout the
United States. The Company also leases approximately 74,000 square feet of
office space for its foreign operations, 29,000 square feet of which are in
Toronto, Canada.
Owned
The Company maintains a customer service facility in the property that it owns
at 10600 White Rock Road, Rancho Cordova, California, near Sacramento,
California and occupies 75,000 square feet in this property. The Company has
leased out 46,000 square feet to a third party until February 2000 at an
approximate monthly rental of $65,000. The Company owns an additional
twenty-seven (27) acres of adjoining undeveloped land on which it has
constructed two (2) office buildings of approximately 67,000 square feet each
and a data center/warehouse facility of approximately 162,000 square feet.
Tenant improvements for the data center/warehouse facility are presently being
installed, with completion estimated by the end of December 1995. The Company
plans to develop additional facilities on this property, but has not yet
commenced construction. The Company also owns and occupies an office building
with approximately 69,000 square feet of office space at 1800 Gateway Drive, San
Mateo, California.
The Company owns two (2) facilities in St. Petersburg, Florida: an approximate
90,000 square foot office building primarily devoted to shareholder servicing
activities; and an approximate 117,000 square foot facility devoted to a
computer data center, training and mailing operations. The Company also owns an
approximate 14,000 square foot office building in Nassau, Bahamas, as well as a
nearby condominium residence.
Other
The Company is the sole limited partner with a 60% partnership interest in
Mariner Partners, a California limited partnership formed in 1984 to develop,
operate and hold the property occupied by the Company at 777 Mariners Island
Boulevard. Mariner Partners obtained 30-year non-recourse financing for the
property from Metropolitan Life Insurance Company at an interest rate of 8-7/8%.
The principal balance outstanding as of September 30, 1995 was $26.0 million.
The loan is due in November 1996. The Company anticipates that Mariner Partners
will have no difficulty in refinancing the loan secured by the property.
Item 3. Pending Legal Proceedings
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Company or any of its
subsidiaries was a party, or of which any of their property is the subject; nor
are any such proceedings known to be contemplated by any governmental
authorities.
Item 4. Submission of Matters to a Vote of Security Owners
During the fourth quarter of the fiscal year covered by this report, no matter
was submitted to a vote of security holders.
<TABLE>
<CAPTION>
Executive Officers of Registrant
The executive officers of the Company are:
Name Age Principal Occupation
<S> <C> <C>
Charles B. Johnson 62 President, Chief Executive Officer and
Director of the Company; Chairman and
Director, Franklin Advisers, Inc. and
Franklin/Templeton Distributors, Inc.;
Director, Templeton Worldwide, Inc.,
Franklin Bank, and Franklin/Templeton
Investor Services, Inc.; officer and/or
director, as the case may be, of most other
principal domestic subsidiaries of the
Company; director, trustee or managing
general partner, as the case may be, of 34
of the investment companies in the Franklin
Group of Funds and 24 of the investment
companies in the Templeton Family of Funds,
and officer of most of such investment
companies; and Director, General Host
Corporation;.
Harmon E. Burns 50 Executive Vice President, Director and
Secretary of the Company; Executive Vice
President, Franklin Advisers, Inc. and
Franklin/Templeton Distributors, Inc.;
Director, Templeton Worldwide, Inc.,
Franklin/Templeton Investor Services, Inc.,
and Franklin Bank; officer and/or director,
as the case may be, of most other principal
domestic subsidiaries of the Company;
director, trustee or managing general
partner, as the case may be, of all of the
investment companies in the Franklin Group
of Funds and 6 of the investment companies
in the Templeton Family of Funds; and
officer of all of the investment companies
in the Franklin Group of Funds.
Rupert H. Johnson, Jr. 55 Executive Vice President and Director of
the Company; Director and President,
Franklin Advisers, Inc.; Director and
Executive Vice President,
Franklin/Templeton Distributors, Inc.;
Director, Franklin/Templeton Investor
Services, Inc., Templeton Worldwide, Inc.,
and Franklin Bank; officer and/or director,
as the case may be, of most other principal
domestic subsidiaries of the Company;
director, trustee or managing general
partner, as the case may be, of 34 of the
investment companies in the Franklin Group
of Funds and 6 of the investment companies
in the Templeton Family of Funds, and
officer of all of the investment companies
in the Franklin Group of Funds.
Kenneth V. Domingues 63 Senior Vice President of the Company; Chief
Financial Officer and Chief Accounting
Officer from August 1986 to March 1993;
officer of some of the other principal
domestic subsidiaries of the Company;
director, trustee or managing general
partner, as the case may be, of 3 of the
investment companies in the Franklin Group
of Funds; and officer of all the investment
companies in the Franklin Group of Funds.
Martin L. Flanagan 35 Senior Vice President, Chief Financial and
Accounting Officer and Treasurer of the
Company; Executive Vice President and
Director of Templeton Worldwide, Inc.;
President, Chief Executive Officer and
Director of Templeton Global Investors,
Inc.; officer of most the subsidiaries of
the Company since March, 1993; director or
trustee of 24 of the investment companies
in the Templeton Family of Funds; and
officer of all of the investment companies
in the Franklin Group of Funds and 24 of
the investment companies in the Templeton
Family of Funds. From January 1992 through
October 1992, Executive Vice President,
Director and Chief Operating Officer of Old
TGH. For more than five (5) years, prior
to that, Mr. Flanagan served as Chief
Financial Officer and in various executive
capacities with Old TGH.
Deborah R. Gatzek 47 Senior Vice President of the Company since
March 1990; Vice President of the Company
from March, 1986 to March 1990; Senior Vice
President, Franklin/Templeton Distributors,
Inc.; Vice President, Franklin Advisers,
Inc.; and an officer of most other
principal domestic subsidiaries of the
Company; officer of all the investment
companies in the Franklin Group of Funds.
Charles E. Johnson 39 Senior Vice President of the Company;
President and Director, Templeton
Worldwide, Inc.; President, Franklin
Institutional Services Corporation; Senior
Vice President, Franklin/Templeton
Distributors Inc.; Chairman, Franklin
Agency, Inc.; Vice President, Franklin
Advisers, Inc.; officer and/or director, as
the case may be, of other domestic and
international subsidiaries of the Company;
director, trustee or managing general
partner, as the case may be, of 8 of the
investment companies in the Franklin Group
of Funds and 5 of the investment companies
in the Templeton Family of Funds, and
officer of some of such investment
companies; employed in various capacities
by the Company or its subsidiaries since
1985.
William J. Lippman 70 Senior Vice President since March
1990; Senior Vice President,
Franklin Advisers, Inc. and
Franklin/Templeton Distributors, Inc.;
Director, Templeton Worldwide, Inc.;
officer and director, trustee or managing
general partner, as the case may be, of
some of the investment companies in the
Franklin Group of Funds. Until June 1988,
President, Chief Executive Officer, and
Director of L.F. Rothschild Fund
Management, Inc., Director of L.F.
Rothschild Asset Management, Inc.,
Administrative Managing Director and
Director of L.F. Rothschild & Co.,
Incorporated.
Jennifer J. Bolt 31 Vice President of the Company since June
1994; Executive Vice President, Franklin
Bank since August 1993 and Senior Credit
Officer; President, Franklin Capital
Corporation, since November 1993; employed
by the Company in various other capacities
for more than the past five (5) years.
Loretta Fry 63 Vice President of the
Company; Vice President,
Franklin/Templeton Distributors, Inc.;
employed by the Company in various
administrative and operations capacities
for more than five years.
Donna S. Ikeda 39 Vice President since October
1993; re-joined the Company in
August 1993. Previously employed
from 1982 to 1990 as Director of Human
Resources and also held position as
Manager/AVP of Shareholder Services,
Retirement Plan Phone Service and Customer
New Accounts. From 1990 until August 1993,
Vice President, Human Resources for G.T.
Capital Management, Inc. and G.T. Global
Financial Services, Inc., mutual fund
management and financial services companies.
Gregory E. Johnson 34 Vice President of the Company since June
1994; President, Franklin/Templeton
Distributors, Inc. since September 1994;
Senior Vice President, Franklin Advisers,
Inc. Prior to that time, Senior Vice
President and Assistant National Sales
Manager, Franklin/Templeton Distributors,
Inc.
Gordon F. Jones 48 Vice President and Chief Information
Officer of the Company since March 1995.
From March 1990 to March 1995, Vice
President of Novell, Inc., a worldwide
network systems company; Vice President and
Chief Information Officer of Novell, Inc.
from March 1994 to March 1995.
Leslie M. Kratter 50 Vice President of the Company since March
1993. Employed by the Company since
January 1992. Secretary of Franklin
Advisers, Inc., Franklin/Templeton
Distributors, Inc., Templeton Worldwide,
Inc., and a number of the Company's
subsidiaries. For more than five (5) years
prior to that time, Mr. Kratter served as
Executive Vice President and General
Counsel of IASCO, a privately held company
engaged in providing aviation services,
municipal governmental services and
agricultural investments.
</TABLE>
Charles B. Johnson and Rupert H. Johnson, Jr. are brothers. Peter M. Sacerdote,
a director of the Company, is a brother-in-law of Charles B. Johnson and Rupert
H. Johnson, Jr. Charles E. Johnson is the son of Charles B. Johnson and the
nephew of Rupert H. Johnson, Jr. and Peter Sacerdote. Gregory E. Johnson is the
son of Charles B. Johnson, the nephew of Rupert H. Johnson, Jr. and Peter
Sacerdote and the brother of Jennifer Bolt and Charles E. Johnson. Jennifer Bolt
is the daughter of Charles B. Johnson, the niece of Rupert H. Johnson, Jr. and
Peter Sacerdote, and the sister of Charles E. Johnson and Gregory E. Johnson.
Leslie M. Kratter is the spouse of Deborah R. Gatzek.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Company's common stock is traded on the New York Stock Exchange ("NYSE"),
the Pacific Stock Exchange (Symbol: BEN) and the London Stock Exchange. On
September 30, 1995, the closing price of the Company's common stock on the NYSE
was $57 5/8 per share. At December 12, 1995, there were approximately 1,800
shareholders of record. In addition, the Company estimates that there are
approximately 12,000 beneficial shareholders whose shares are held in street
name. The high and low sales prices by quarter for the 1995 and 1994 fiscal
years, as traded on the NYSE Composite Tape, were as follows:
<TABLE>
<CAPTION>
1995 FISCAL YEAR 1994 Fiscal Year
QUARTER HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
Oct-Dec 41 3/8 34 51 7/8 41 3/8
Jan-Mar 40 33 51 39 3/4
Apr-June 46 1/8 38 1/4 40 5/8 33 5/8
July-Sept 58 42 1/2 40 1/4 34 1/4
</TABLE>
The Company paid dividends of $0.40 per share in fiscal 1995 and $0.32 per share
in fiscal 1994. The Company expects to continue paying dividends on a quarterly
basis to common stockholders depending upon earnings and other relevant factors.
Item 6. Selected Financial Highlights
(in 000's, except Assets under Management and per share amounts )
<TABLE>
<CAPTION>
September 30, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Operating revenues $845,803 $812,770 $631,388 $370,943 $300,604
Net Income $268,945 $251,308 $175,522 $124,051 $98,236
Financial Data:
Total assets $2,244,681 $1,968,758 $1,581,534 $834,287 $578,610
Notes payable and leases $469,571 $468,150 $506,536 $155,541 $5,551
Stockholders' equity $1,161,043 $930,815 $720,378 $467,209 $363,014
Assets Under Management
(in millions) $130,837 $118,172 $ 107,490 $ 69,218 $57,877
Per Common Share*:
Earnings
Primary $3.24 $3.00 $2.12 $1.59 $1.26
Fully diluted $3.20 $3.00 $2.10 $1.59 $1.26
Cash dividends $.40 $.32 $.28 $.26 $.23
Stockholders' equity $13.82 $11.09 $8.77 $5.99 $4.66
</TABLE>
* Amounts are restated to reflect a 2-for-1 stock split in March 1992.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
GENERAL
Franklin Resources, Inc. and its majority-owned subsidiaries (the "Company")
derives substantially all of its revenue and net income from providing
investment management, administration, distribution and related services to the
Franklin Templeton funds, managed accounts and other investment products. The
Company has a diversified base of assets under management and a full range of
investment products and services to meet the needs of most individuals and
institutions.
During 1995, assets under the Company's management grew to $130.8 billion, an
increase of $12.7 billion (11%) over September 30, 1994, which was the result of
both net sales and market appreciation.
The Company operates in five geographic areas of the world: the United States,
Canada, the Bahamas, Europe and Asia/Pacific. At September 30, 1995, the Company
had offices in 18 countries. The following offices were opened with the intent
of widening investment research capabilities, as well as, in some cases,
supporting local distribution activities:
Bombay, India Milan, Italy
Buenos Aires, Argentina Moscow, Russia
Ho Chi Minh City, Vietnam Paris, France
Johannesburg, South Africa Warsaw, Poland
The contributions to the Company's operating profits from non-U.S. operations
increased in 1995 principally as a result of an increase in fee revenues from
investment management services provided by its foreign subsidiaries. In the
future, the contribution to operating revenue, as well as the contribution to
operating profit, will be dependent upon the amount and composition of assets
managed by its subsidiaries.
Despite the Company's global presence, its exposure to adverse fluctuations in
foreign currency markets is limited because a material portion of the foreign
subsidiaries' revenues and the majority of their monetary assets are U.S. dollar
denominated, while fixed assets in those locations are not significant.
Furthermore, custody of a material portion of the foreign subsidiaries' monetary
assets are held with U.S. financial institutions. In 1995, 93% of the Company's
operating revenue was earned in U.S. dollars. The Company has not deemed it
necessary to enter into foreign currency hedging transactions.
The Company participates in the financial derivatives markets to manage its
exposure to interest rate fluctuations. The Company has entered into interest
rate swap agreements to convert interest payment obligations under variable rate
debt instruments to fixed-rate interest payment obligations.
RESULTS OF OPERATIONS
Net income for the year ended September 30, 1995 was $268.9 million, an increase
of $17.6 million (7%) from $251.3 million in 1994, and an increase of $75.8
million (43%) from $175.5 million in 1993.
These increases were primarily attributable to increases in revenue generated by
assets under management. Results of operations will continue to be dependent
upon general economic growth, the strength of capital markets and the Company's
ability to meet market demands with competitive products and services. Operating
revenues will be specifically dependent upon the amount and composition of
assets under management, and mutual fund sales, as well as the number of mutual
fund investors and institutional clients. Operating expenses are expected to
increase with the Company's continued expansion, the increase in competition and
the Company's continued commitment to improve its products and services. These
endeavors will likely result in an increase in selling expenses, employment
costs, and other general and administrative expenses.
Assets under management
(in millions)
YEAR ENDED SEPTEMBER 30,
1995 1994 1993
FRANKLIN TEMPLETON GROUP:
FIXED-INCOME FUNDS:
Tax-free income $40,487 $39,432 $40,741
U.S. government fixed income
(primarily GNMAs) 14,679 14,676 18,430
Taxable and tax-free money funds 2,792 2,629 2,342
Global/international fixed-income 2,784 2,491 2,429
TOTAL FIXED-INCOME FUNDS 60,742 59,228 63,942
EQUITY AND INCOME FUNDS:
Global/international equity 35,977 28,049 19,463
U.S. equity/income 17,258 17,559 15,515
TOTAL EQUITY AND INCOME FUNDS 53,235 45,608 34,978
TOTAL FRANKLIN TEMPLETON
FUND ASSETS 113,977 104,836 98,920
FRANKLIN TEMPLETON
INSTITUTIONAL ASSETS 16,860 13,336 8,570
TOTAL FRANKLIN TEMPLETON GROUP $130,837 $118,172 $107,490
Changes in assets under management
(in millions)
1995 1994 1993
Assets under management - beginning $118,172 $107,490 $69,218
Merger with Templeton - - 20,372
Sales and reinvestments 27,934 41,121 42,537
Redemptions (22,461) (28,760) (31,057)
Market appreciation/(depreciation) 7,192 (1,679) 6,420
ASSETS UNDER MANAGEMENT - ENDING $130,837 $118,172 $107,490
Assets under the Company's management increased by $12.7 billion (11%) in fiscal
1995, $10.7 billion (10%) in fiscal 1994 and $38.3 billion (55%) in fiscal 1993,
respectively. The merger with the Templeton organization on October 30, 1992
increased the Company's assets under management at the time of the merger in
fiscal 1993 by over $20 billion dollars.
As shown in the tables above, the composition of assets under management has
changed over the past three years. This development is a result of changes in
relative sales, redemptions and market value among the specific asset classes.
The volatility of these factors will continue to affect operating revenues and
results of operations in the future.
Fixed-income funds represented 46% of assets under management at September 30,
1995 as compared to 50% and 59% at September 30, 1994 and 1993, respectively.
The trend of net redemptions and market depreciation in various fixed-income
funds during the first six months of fiscal year 1995 began to reverse during
the second six months of the year. In 1995, investors showed more interest in
tax-free income funds due to higher income tax rates which became effective
during 1994, regaining most of the decline in assets in 1994 as compared to
1993. Net assets in U.S. government fixed-income funds remained unchanged
compared to 1994 after a decline compared to 1993. The Company maintains a
conservative investment philosophy which does not utilize derivative securities
to any material degree to enhance yields of fixed-income portfolios.
Equity and income funds represented 41% of assets under management at September
30, 1995 as compared to 39% and 33% at September 30, 1994 and 1993,
respectively. This relative increase was primarily a result of the growth in the
Templeton Family of Funds. Net assets of global/international equity funds were
$36.0 billion at September 30, 1995, an increase of $7.9 billion (28%) over 1994
and an increase of $8.6 billion (44%) over 1993. Investors seeking increased
diversity and the prospect of above-average investment returns have been
attracted to international equity funds during these periods.
Institutional assets under management, comprised of predominantly
global/international equity portfolios, represented 13%, 11% and 8% of the
Company's assets under management at September 30, 1995, 1994 and 1993,
respectively. The growth was primarily the result of an increase in the number
of clients during these periods. The Company continues expansion of the services
it provides in this area.
OPERATING REVENUES
Investment management fees:
(in millions)
1995 1994 1993
Revenues $731.3 $647.7 $489.7
12-month average assets
under management $121,614 $115,443 $96,834
The Company's revenues from investment management fees are derived primarily
from fixed-fee arrangements based upon the level of assets under management with
open-end and closed-end investment companies and managed accounts. Annual rates,
under the various investment management agreements, vary and generally decline
as the average net assets of the portfolios exceed various threshold levels.
There have been no significant changes in the management fee structures for the
Franklin Templeton Group in the periods under review.
Investment management fees for the period ended September 30, 1995 increased
$83.6 million (13%) over 1994, which increased $158.0 million (32%) over 1993.
This was the result of an increase in, and a shift in composition of, average
assets under management to higher fee equity and income funds during the three
years under consideration.
Underwriting commissions, net:
(in millions)
1995 1994 1993
Revenues $37.1 $96.6 $87.1
Gross fund sales and
reinvestments of products
subject to commissions $15,458 $22,460 $20,200
Revenues from underwriting commissions are earned primarily from fund sales.
Most sales of Franklin Templeton funds include a sales commission, of which a
significant portion is reallowed to selling intermediaries.
Net underwriting commissions for the year ended September 30, 1995 decreased
$59.5 million (62%) from 1994, which increased $9.5 million (11%) over 1993. The
decrease in 1995 from 1994 was primarily due to a 31% decrease in fund sales. An
additional factor causing the decrease was the change in the composition of
sales of fund products sold in the U.S. and Canada to those products with lower
underwriting commission retention rates. The increase in underwriting
commissions in 1994 as compared to 1993 resulted primarily from an increase in
fund sales during that period.
During 1995, the boards of directors and/or shareholders of many of the Franklin
and Templeton funds approved proposals to offer multiple classes of shares. Many
of the Franklin Templeton funds introduced the new class of shares, called Class
II, during the third quarter of the current fiscal year. Class II shares are
intended to expand the distribution of fund shares to a broader audience of
investors who have different pricing preferences, but who share similar
investment objectives. While the new class of shares will increase distribution
expenses to the Company as compared to the existing class of shares and will
utilize the Company's capital resources over the short term, the Company
believes that Class II shares will result in an overall increase in assets under
management by expanding distribution of fund shares. Sales of Class II shares
have represented 8% of total long-term U.S. mutual fund sales for the Company
since their introduction in May, 1995. The financial impact of Class II shares
is further discussed under Financial Condition, Liquidity and Capital Resources.
During 1994, many of the shareholders of the Franklin Group of Funds(R) approved
distribution plans pursuant to Rule 12b-1 of the Investment Company Act of 1940.
In conjunction with the implementation of these plans, the Franklin mutual fund
sales commission structure was modified to eliminate sales charges on reinvested
dividends and to replace them with an increased front-end sales charge. These
changes are expected to provide a more competitive sales
structure while making underwriting commission revenues more sensitive to sales
levels.
Transfer, trust and related fees:
(in millions)
1995 1994 1993
Revenues $68.7 $54.6 $45.1
Number of accounts 4.7 4.4 3.3
Transfer, trust and related fees are generally fixed charges per account which
vary with the particular type of fund and the service being rendered.
Consequently, these fees are principally dependent upon the number of
shareholder accounts.
Transfer, trust and related fees for the period ended September 30, 1995
increased $14.1 million (26%) as compared to 1994, an increase of $9.5 million
(21%) over 1993. The increases were related principally to increases in retail
fund shareholder accounts. Retail fund shareholder accounts increased to 4.7
million as of September 30, 1995 from 4.4 million and 3.3 million as of
September 30, 1994 and 1993, respectively. On July 1, 1995, approximately 85 of
the Company's U.S. mutual funds consisting of approximately 2.5 million
shareholder accounts implemented an average annual increase of $4 per
shareholder account. During 1993, the Company combined its transfer agency
activities into a single entity which has, and should continue to result in,
improved efficiencies and services.
Banking/finance, net and other:
(in millions)
1995 1994 1993
Revenues $54.5 $31.5 $22.9
Provision for loan losses (17.2) (5.4) (4.1)
Interest expense (28.6) (12.2) (9.4)
---------------------
$8.7 $13.9 $9.4
YIELD ON AVERAGE EARNING ASSETS 9.0% 9.6% 9.7%
COST OF AVERAGE INTEREST-BEARING LIABILITIES 5.9% 4.7% 5.0%
Banking/finance, net and other for the year ended September 30, 1995 decreased
$5.2 million (37%) over 1994, as compared to an increase of $4.5 million (48%)
over 1993. The decrease in 1995 was due to an $11.8 million increase in the
provision for loan losses and a $16.4 million increase in interest expense
attributable to the banking/finance group, partially offset by a $22.3 million
increase in banking/finance group gross revenues due to a 110% increase in
average loans outstanding during the period. The increase in 1994 over 1993 was
primarily due to a 72% increase in average loans outstanding during the period.
Interest expense of the banking subsidiary for the year ended September 30, 1995
was $10.2 million, an increase of $0.8 million (9%) as compared to 1994 and
1993. During 1995 and 1994, a portion of the banking/finance group's loans
receivable were financed through the Company. The interest expense on the amount
funded by the Company was $18.3 million and $2.9 million in 1995 and 1994,
respectively. The increase during 1995 was a result of increased borrowings
related to the growth in auto loan and credit card portfolios.
OPERATING EXPENSES
Operating expenses:
(dollars in millions)
1995 1994 1993
General and administrative $389.2 $358.7 $277.4
Selling 70.2 69.1 52.1
Amortization of goodwill 18.3 18.3 17.0
----------------------
$477.7 $446.1 $346.5
Operating margins 44% 45% 45%
Operating expenses for the year ended September 30, 1995 increased $31.6 million
(7%) over 1994, an increase of $99.6 million (29%) over 1993. These increases
principally resulted from the general expansion of the organization. Operating
income as a percentage of operating revenue was 44% for the year ended September
30, 1995 as compared to 45% for the years ended September 30, 1994 and 1993.
General and administrative expenses were $389.2 million for the year ended
September 30, 1995, an increase of $30.5 million (9%) as compared to 1994, and
an increase of $81.3 million (29%) over 1993. These increases were due to higher
employment, technology and facility costs related to the general expansion of
the business. In 1994, the Company implemented an annual incentive plan which
provides eligible employees payment of both cash and restricted stock. The costs
associated with the annual incentive plan are charged to income currently. Costs
associated with restricted stock awards granted prior to the adoption of the
annual incentive plan are amortized over the contract period. Deferred
incentives vest through 1998. Employment costs represented 55%, 56% and 52% of
total operating expenses in 1995, 1994 and 1993, respectively.
The Company has evaluated the potential impairment of goodwill on the basis of
the expected future operating cash flows to be derived from this intangible
asset in relation to the Company's carrying value and has determined that there
is no impairment. The Company will periodically review the carrying value of
goodwill for potential impairment.
OTHER INCOME (EXPENSES)
Investment and other income for the year ended September 30, 1995 was $29.7
million, an increase of $7.0 million (31%) from 1994, and an increase of $4.4
million (24%) from $18.3 million in 1993. The net increases in investment income
during 1995 and 1994 resulted from a combination of factors, including the
increase in average balances of cash equivalents and investment securities, an
increase in the average level of interest rates and the realization of capital
gains as compared to prior years.
Interest expense, exclusive of banking/finance group interest, for the year
ended September 30, 1995 was $11.2 million, a decrease of $15.7 million (58%)
from 1994, which decreased $1.9 million from 1993. The decrease in interest
expense during 1995 and 1994 is primarily due to the Company's paydown of
outstanding debt used to finance operations.
The Company has entered into interest rate swap agreements to convert interest
payments under variable rate commercial paper to fixed-rate interest payment
obligations without exchanging the underlying principal amounts. At September
30, 1995, the Company had swap agreements outstanding with an aggregate notional
amount of $155 million, maturing at various times over a forty-eight month
period from the balance sheet date. The fixed rates of interest range from
5.015% to 6.451%. These financial instruments are placed with major financial
institutions. The credit worthiness of the counterparties is subject to
continuing review and full performance is anticipated.
During the year ended September 30, 1995, the Company had the following interest
rate swap agreements outstanding. The interest differential between the fixed
rate and floating rate to be paid or received is accrued as an increase or
decrease to interest expense over the period of the agreements.
Swap agreements:
Issue Maturity Notional Fixed
Date Date Amount Rate
3/8/93 1/30/95 $75 million 4.44%
3/8/93 1/29/96 $30 million 5.015%
8/14/95 8/14/99 $75 million 6.451%
9/7/95 9/7/99 $50 million 6.24%
The Company's effective interest rate at September 30, 1995, including interest
on the banking/finance group debt, was 6.17% on $465.9 million of outstanding
commercial paper, medium-term notes and subordinated debentures as compared to
5.70% on $462.9 million of debt outstanding at September 30, 1994. At September
30, 1995, commercial paper comprised $235.9 million of debt outstanding with an
effective interest rate of 6.37% including swaps and 5.87% excluding swaps, as
compared to $232.9 million outstanding at September 30, 1994 with an effective
interest rate of 4.75% including swaps and 4.77% excluding swaps. Medium-term
notes comprised $80 million of the total debt outstanding with an effective
interest rate of 6.50% at September 30, 1995 and 1994. Subordinated 6.25%
debentures, due August 3, 2002, comprised $150 million of the total debt
outstanding at September 30, 1995 and 1994 with and effective interest rate of
6.65% and 6.61%, respectively.
TAXES ON INCOME
The Company's effective tax rate was 30.4%, 30.7% and 36.0% in 1995, 1994 and
1993, respectively. The Company's effective tax rate differs from the U.S.
statutory rates as a substantial portion of the undistributed earnings of the
Company's foreign subsidiaries has been reinvested. The effective tax rate will
continue to be sensitive to the relative contribution to taxable income of
foreign earnings which are subject to reduced tax rates and are not currently
includable in U.S. taxable income. The Company does not provide taxes on these
earnings.
FINANCIAL CONDITION, LIQUIDITY
AND CAPITAL RESOURCES
Stockholders' equity was $1,161.0 million at September 30, 1995, an increase of
$230.2 million (25%) from $930.8 million at year end 1994, and an increase of
$210.4 million (29%) from $720.4 million at year end 1993.
Cash provided by operating activities for the period ended September 30, 1995
was $296.3 million, an increase of $21.7 million (8%) compared to $274.8 million
in 1994. The increase in fees receivable from the Franklin Templeton funds
primarily resulted from an increase in investment management fee revenue.
Net cash expended in investing activities in 1995 was $152.0 million, including
a net $39.3 million used to purchase corporate investments in the Franklin
Templeton funds and other investments and $40.4 million used to purchase
premises and equipment. The Company anticipates that 1996 property and equipment
acquisitions, currently expected to be at levels comparable to 1995, will be
funded from liquid assets currently available and from future operating cash
inflows. Most of the remainder of cash used in investing activities funded net
increases in the banking/finance group's loans receivable. Banking/finance loans
receivable, net, increased during 1995 and 1994 primarily due to $72.5 million
and $255.9 increases in dealer auto loans, respectively.
As of September 30, 1995, the auto loan portfolio consisted of approximately 50%
new and 50% used cars. Approximately 50% of the auto loans outstanding were in
California, approximately 20% in New Mexico and the balance distributed
throughout the western United States. The Company has experienced an increase in
delinquency rates since September 30, 1994 and, in response, has expanded its
auto loan collection efforts and enhanced the systems supporting those
activities. The following is an analysis of the allowance for loan losses,
delinquency rates and credit losses.
Banking/finance allowance for loan losses:
(dollars in millions)
1995 1994 1993
Beginning balance $3.2 $1.5 $2.1
Provision:
Dealer auto 13.6 2.5 1.0
Credit card 3.3 2.8 3.0
Other 0.3 0.1 0.1
--------------------
17.2 5.4 4.1
Net charge-offs:
Dealer auto 8.8 0.6 1.0
Credit card 2.2 3.0 3.5
Other 0.3 0.1 0.2
---------------------
(11.3) (3.7) (4.7)
ENDING BALANCE $9.1 $3.2 $1.5
% of gross receivables 1.8% 0.7% 1.1%
TOTAL LOANS PAST DUE $26.5 $9.0 $2.8
Total banking/finance loans outstanding
% past due 5.3% 2.1% 2.0%
The Company anticipates continued increases in its investment in credit card and
dealer auto loan portfolios. The Company intends to continue funding these
investments through operating cash flows and existing debt facilities.
Additionally, the Company will continue to review alternative funding sources
such as securitization of the auto loan portfolio.
The Company used net cash of $93.0 million in 1995 for financing activities. The
issuance of $34.5 million in commercial paper was offset by $32.8 million in
payments on debt. The Company paid $31.7 million in dividends to stockholders.
During the year ended September 30, 1995, the Company purchased 1,125,934
Franklin Resources, Inc. shares for $41.7 million and employees exercised
options on 18,404 shares for $0.4 million. The Company has 1,869,266 shares
remaining under its authorized repurchase program. The Company will continue
from time to time to purchase its own shares in the open market and in private
transactions for use in connection with various corporate employee incentive
programs and when it believes the market price of its shares merits such action.
At September 30, 1995, the Company held liquid assets of $643.2 million,
including $261.7 million of cash and cash equivalents as compared to $515.0
million and $210.4 million, respectively, at September 30, 1994.
Distribution of Class II shares requires the Company to advance a one percent
dealer commission which will be recouped substantially during the subsequent
twelve-month period primarily through a 0.75% and 0.50% asset-based sales charge
on equity and fixed-income funds, respectively. The one percent dealer
commission is deferred and amortized on a straight-line basis over an
eighteen-month period. From the introduction of Class II shares on May 1, 1995
through September 30, 1995, the Company has advanced $3.9 million in dealer
commissions. During 1995, the Company's Canadian subsidiary advanced
approximately $3.7 million in dealer commissions earned from the sale of
similarly priced products. The five percent dealer commission payable on the
Canadian products is deferred and amortized on a straight-line basis over a
forty-month period. The Company anticipates increased sales of Class II shares
as well as similarly priced products in Canada and Europe which will result in
increased advances of dealer commissions. The Company has and will fund such
advances through operating cash flows and existing debt facilities.
Financing for the $786 million Templeton acquisition in 1993 was provided by the
proceeds of $150 million of subordinated debentures with option rights, issued
prior to the 1993 fiscal year specifically to finance the purchase, a $360
million term loan, approximately $87 million in Franklin stock issued to
Templeton management and employee shareholders, and approximately $189 million
of additional cash.
The $150 million of subordinated debentures bear interest at the rate of 6.25%
per annum, payable in semiannual installments of approximately $4.7 million. The
debentures are redeemable at the election of the holder, anytime on or after
August 3, 1997, at a price ranging from 92.22% to 100% of face value. At
September 30, 1995, the effective interest rate on the subordinated debentures
was 6.65%.
In May 1994, the Company replaced the $360 million term note facility with a
more flexible financing structure comprised of a $300 million commercial paper
program and a $300 million medium-term note program. As a part of this new
financing structure, the Company established two revolving credit and
competitive auction facilities as back-up for the commercial paper program. The
total bank credit facilities are $300 million, divided evenly between a 364-day
and a five-year revolving credit facility.
On December 8, 1994, the Company announced that it had applied for and received
approval from the Securities and Exchange Commission to purchase $7.1 million of
unsecured Orange County obligations from two of its money market mutual funds.
The Company purchased these securities on a voluntary basis to alleviate any
concerns by those funds' shareholders and does not anticipate any significant
losses as a result. The maturity date on such obligations has been extended in
consideration of increased interest rates. Orange County continues to service
the notes and the Company believes that it will fully recover principal and
interest due on the obligations.
The Company does not utilize foreign exchange contracts or options to hedge its
foreign currency exposures.
CHANGES IN ACCOUNTING PRINCIPLES
During fiscal 1993, the Company adopted Statements of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," and No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." The cumulative effects of
adopting these standards were immaterial.
Item 8. Financial Statements and Supplementary Data
Index Of Consolidated Financial Statements for the years ended September 30,
1995, 1994 and 1993
CONTENTS
Consolidated Financial Statements of Franklin Resources, Inc.:
Pages
Report of Independent Accountants
Consolidated Balance Sheets
September 30, 1995 and 1994
Consolidated Statements of Income, for the years ended
September 30, 1995, 1994, and 1993
Consolidated Statements of Stockholders' Equity,
for the years ended September 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows,
for the years ended September 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
All schedules have been omitted as the information is provided in the
financial statements or in related notes thereto or is not required to be filed
as the information is not applicable.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Franklin Resources, Inc.:
We have audited the consolidated financial statements of Franklin
Resources, Inc. and subsidiaries as of September 30, 1995 and 1994, and
the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended September
30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Franklin Resources, Inc. and subsidiaries as of September 30, 1995
and 1994, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended September 30,
1995, in conformity with generally accepted accounting principles.
San Francisco, California
October 27, 1995
Consolidated Balance Sheets
September 30, 1995 and 1994 (Dollars in thousands) 1995 1994
ASSETS
Current Assets:
Cash and cash equivalents $246,184 $190,415
Receivables:
Fees from Franklin Templeton funds 110,972 88,801
Other 38,407 36,160
Investment securities, available-for-sale 208,478 153,292
Prepaid expenses and other 7,167 8,230
TOTAL CURRENT ASSETS 611,208 476,898
Banking/Finance Assets:
Cash and cash equivalents 15,515 19,961
Loans receivable, net 450,013 391,824
Investment securities, available-for-sale 23,655 26,345
Other assets 6,876 5,290
TOTAL BANKING/FINANCE ASSETS 496,059 443,420
Other Assets:
Investments:
Investment securities, available-for-sale 15,291 9,144
Real estate 8,826 9,014
Deferred costs 17,703 9,235
Premises and equipment, net 118,628 94,218
Goodwill, net of $56,375 and $38,070
accumulated amortization, respectively 660,363 678,668
Receivable from banking/finance group 302,273 230,773
Other assets 14,330 17,388
TOTAL OTHER ASSETS 1,137,414 1,048,440
TOTAL ASSETS $2,244,681 $1,968,758
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
Consolidated Balance Sheets
September 30, 1995 and 1994
(Dollars in thousands, except share data) 1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade payables and accrued expenses $117,744 $126,809
Debt payable within one year 87,204 84,482
Dividends payable 8,123 6,528
TOTAL CURRENT LIABILITIES 213,071 217,819
Banking/Finance Liabilities:
Deposits of bank account holders:
Interest bearing demand deposits 7,039 7,727
Non-interest bearing demand deposits 9,747 17,976
Savings and time deposits 152,588 165,195
Payable to parent 302,273 230,773
Other liabilities 2,076 973
TOTAL BANKING/FINANCE LIABILITIES 473,723 422,644
Other Liabilities:
Long-term debt 382,367 383,668
Other liabilities 14,477 13,812
TOTAL OTHER LIABILITIES 396,844 397,480
TOTAL LIABILITIES 1,083,638 1,037,943
Commitments (Note 9)
Stockholders' Equity:
Preferred stock, $1.00 par value, 1,000,000 shares
authorized; none issued -- --
Common stock, $.10 par value, 500,000,000 shares
authorized; 82,264,982 shares issued, and 80,939,611
and 81,597,450 shares outstanding, for 1995 and 1994,
respectively 8,226 8,226
Capital in excess of par value 92,190 92,283
Retained earnings 1,091,204 855,513
Less cost of treasury stock (48,519) (25,409)
Other 17,942 202
TOTAL STOCKHOLDERS' EQUITY 1,161,043 930,815
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,244,681 $1,968,758
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
Consolidated Statements of Income
for the years ended September 30, 1995, 1994 and 1993
(Dollars in thousands, except per share data) 1995 1994 1993
OPERATING REVENUES:
<S> <C> <C> <C>
Investment management fees $731,252 $647,675 $489,735
Underwriting commissions, net 37,147 96,570 87,119
Transfer, trust and related fees 68,701 54,613 45,089
Banking/finance, net and other 8,703 13,912 9,445
TOTAL OPERATING REVENUES 845,803 812,770 631,388
OPERATING EXPENSES:
General and administrative 389,219 358,685 277,413
Selling 70,138 69,073 52,119
Amortization of goodwill 18,305 18,311 16,988
TOTAL OPERATING EXPENSES 477,662 446,069 346,520
Operating income 368,141 366,701 284,868
OTHER INCOME (EXPENSES):
Investment and other income 29,673 22,703 18,290
Interest expense (11,159) (26,883) (28,760)
OTHER INCOME (EXPENSES), NET 18,514 (4,180) (10,470)
Income before taxes on income 386,655 362,521 274,398
Taxes on income 117,710 111,213 98,876
NET INCOME $268,945 $251,308 $175,522
EARNINGS PER SHARE:
Primary $3.24 $3.00 $2.12
Fully diluted $3.20 $3.00 $2.10
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
Consolidated Statements of Stockholders' Equity
for the years ended Capital in
September 30, 1995, 1994 and 1993 Common Stock Excess of Retained Treasury Stock
(Shares and dollars in thousands) Shares Amount Par Value Earnings Shares Amount Other Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 1, 1992 78,807 $7,881 - $477,861 (809) $(18,533) - $467,209
Net income 175,522 175,522
Unrealized gain on investment
securities, net of tax $6,242 6,242
Foreign currency translation adjustment 179 179
Cash dividends on common stock (22,984) (22,984)
Exercise of options 17 2 (3,648) 235 5,816 2,170
Issuance of stock for
Templeton acquisition 2,894 289 87,331 87,620
Issuance of restricted shares,
less amortization of $4,420 381 38 574 12,717 (8,335) 4,420
Balance, September 30, 1993 82,099 8,210 83,683 630,399 - - (1,914) 720,378
Net income 251,308 251,308
Unrealized gain on investment
securities, net of tax 1,836 1,836
Foreign currency translation adjustment 352 352
Purchase of treasury stock (672) (26,410) (26,410)
Cash dividends on common stock (26,194) (26,194)
Exercise of options 11 1 157 158
Issuance of stock for acquisition 36 4 1,646 1,650
Issuance of restricted shares,
less amortization of $6,318 119 11 6,797 5 1,001 (72) 7,737
Balance, September 30, 1994 82,265 8,226 92,283 855,513 (667) (25,409) 202 930,815
Net income 268,945 268,945
Unrealized gain on investment
securities, net of tax 13,745 13,745
Foreign currency translation adjustment 835 835
Purchase of treasury stock (1,126) (41,749) (41,749)
Cash dividends on common stock (33,254) (33,254)
Exercise of options (307) 18 682 375
Issuance of stock for acquisition 262 19 836 1,098
Issuance of restricted shares,
less amortization of $5,189 (48) 431 17,121 3,160 20,233
Balance, September 30, 1995 82,265 $8,226 $92,190 $1,091,204 (1,325) $(48,519) $17,942 $1,161,043
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
Consolidated Statements of Cash Flows
for the years ended September 30, 1995, 1994 and 1993 (Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Net income $268,945 $251,308 $175,522
Adjustments to reconcile net income to net cash provided by operating
activities:
Decrease (increase) in receivables, prepaid expenses and other (14,947) 142 (22,900)
Increase (decrease) in trade payables and accrued expenses 3,512 (3,594) 15,481
Increase (decrease) in deferred taxes, net 608 (8,346) 4,021
Depreciation and amortization 40,940 36,693 24,286
Losses (gains) on real estate investments (2,604) (1,396) 2,969
NET CASH PROVIDED BY OPERATING ACTIVITIES 296,454 274,807 199,379
Liquidation (purchase) of Franklin Templeton funds, net (37,383) (8,132) 131,073
Purchase of banking/finance investment portfolio (110,163) (97,570) (60,877)
Liquidation of banking/finance investment portfolio 113,265 140,547 39,013
Purchases and originations of banking/finance loans receivable (222,341) (310,744) (84,079)
Collections of banking/finance loans receivable 146,963 42,529 85,807
Purchase of premises and equipment and other (40,365) (39,153) (20,138)
Liquidation (purchase) of real estate and other investments, net (1,942) (874) 1,385
Acquisition of Templeton, net of cash acquired -- -- (631,944)
NET CASH USED IN INVESTING ACTIVITIES (151,966) (273,397) (539,760)
Increase (decrease) in deposits of bank account holders (21,525) (3,937) 17,573
Exercise of common stock options 375 158 1,997
Dividends paid on common stock (31,688) (25,415) (22,307)
Purchase of treasury stock (41,749) (26,410) --
Issuance of debt 34,254 399,431 360,000
Payments on debt (32,832) (437,813) (22,574)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (93,165) (93,986) 334,689
Increase (decrease) in cash and cash equivalents 51,323 (92,576) (5,692)
Cash and cash equivalents, beginning of year 210,376 302,952 308,644
CASH AND CASH EQUIVALENTS, END OF YEAR $261,699 $210,376 $302,952
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest, including banking/finance group interest $28,129 $31,004 $34,577
Income taxes $125,496 $98,691 $94,963
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION:
Value of common stock issued in Templeton acquisition -- -- $100,376
Value of common stock issued in other transactions $18,546 $8,044 --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
</TABLE>
Notes to Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The consolidated financial statements include the accounts of Franklin
Resources, Inc. and its majority-owned subsidiaries (the "Company"). The
acquired Templeton, Galbraith & Hansberger Ltd. ("Templeton") operations are
included from the acquisition date, October 30, 1992. All material intercompany
accounts and transactions are eliminated from the consolidated financial
statements except the intercompany payable from the banking/finance group to the
parent to fund auto and credit card loans.
Foreign Currency Translation:
Assets and liabilities of foreign subsidiaries are translated at current
exchange rates as of the end of the accounting period, and related revenues and
expenses are translated at average exchange rates in effect during the period.
Net exchange gains and losses resulting from translation are excluded from
income and are recorded as a separate component of stockholders' equity. Foreign
currency transaction gains and losses are reflected in income currently.
Major Customers:
Substantially all revenues earned by the Company are from providing investment
management, underwriting, stock transfer and trust services to the Franklin
Templeton funds that operate in the United States, Canada, Europe and other
international markets under various rules and regulations set forth by the
Securities and Exchange Commission, individual state agencies and foreign
governments. All services provided to the Franklin Templeton funds are under
contracts that definitively set forth the fees to be charged for these services.
The majority of these contracts are subject to periodic review and approval by
each fund's Board of Directors/Trustees and shareholders. Currently, no fund
represents more than 10% of total revenues.
Recognition of Revenues:
Investment management, transfer, trust fees and investment income are all
accrued as earned. Underwriting commissions on the sale of Franklin Templeton
fund shares are recorded on the trade date, net of amounts paid to unaffiliated
intermediaries. Operating revenues of the banking/finance group are presented
net of interest expense and the provision for loan losses.
Interest expense:
Reported interest expense excludes interest expense attributable to the
banking/finance group, which is included in banking/finance, net and other
revenue.
Loans receivable:
Interest on auto installment loans is accrued principally using the rule of 78s
method, which approximates the interest method. Interest on all other loans is
accrued using the simple interest method.
Allowance for loan losses:
An allowance for loan losses is established as required based on historical
experience, including delinquency and loss trends. A loan is charged to the
allowance when it is deemed to be uncollectible, taking into consideration the
value of the collateral, the financial condition of the borrower and other
factors. Recoveries on loans previously charged off as uncollectible are
credited to the allowance for loan losses.
Deferred Costs:
Deferred costs result from the sale of certain U.S., Canadian and European based
Franklin Templeton funds which have deferred sales charges and distribution
fees. Amortization of such deferred costs is charged against underwriting
commission revenues on a straight-line basis over a period of up to eighteen
months for the U.S. based funds, forty months for the Canadian based funds and
four years for the European funds. Deferred costs related to the issuance of
debt are amortized to interest expense over the life of the related debt.
Taxes on Income:
Effective October 1, 1992, the Company changed its method of accounting for
income taxes from the income method to the liability method required by
Financial Accounting Standards Board Statement of Financial Accounting Standards
(SFAS) No. 109. The effect of adopting SFAS No. 109 on income in the year of
adoption was immaterial, as was the cumulative effect of the accounting change
on prior years.
Cash and Cash Equivalents:
Cash and cash equivalents include cash on hand, demand deposits with banks or
other high credit quality financial institutions, debt instruments with original
maturities of three months or less, and other highly liquid investments,
including money market funds, which are readily convertible into cash. Due to
the relatively short-term nature of these instruments, the carrying value
approximates fair value.
Investment Valuation:
The Company's investments in the Franklin Templeton funds and other securities
available-for-sale are carried at market value. Market values for investments in
Franklin Templeton funds are based on the last reported net asset value. Market
values for other investments are based on the last reported price on the
exchange on which they are traded. Investments not traded on an exchange are
carried at management's estimate of market value. Investments in real estate are
carried at the lower of cost or net realizable value, with depreciation provided
using the straight-line method over the estimated useful lives of the assets.
Realized gains and losses are recognized on the specific identification method
and are included in investment income currently. Unrealized gains and losses are
reported net of tax as a separate component of stockholders' equity until
realized.
Financial Instruments
with Off-Balance Sheet Risk:
The Company is a party to interest rate swap agreements in effect on a portion
of its long-term debt. The differential to be paid or received is accrued as the
interest rates change and is recognized over the term of the agreements. The
carrying value of these instruments approximated fair value.
Premises and Equipment:
Premises and equipment are recorded at cost and are depreciated on the
straight-line basis over their estimated useful lives. Expenditures for repairs
and maintenance are charged to expense when incurred. Leasehold improvements are
amortized on the straight-line basis over their estimated useful lives or the
lease term, whichever is shorter.
Goodwill:
The excess of cost over fair market value of the Company's acquisition of
Templeton is amortized on a straight-line basis over a period of forty years.
The Company has evaluated the potential impairment of goodwill on the basis of
the expected future operating cash flows to be derived from this intangible
asset in relation to the Company's carrying value and has determined that there
is no impairment. Periodically, the Company will review the carrying value of
goodwill for potential impairment.
Earnings Per Share:
Earnings per share is computed by dividing net income by the weighted average
number of shares of common stock and common stock equivalents (stock options and
debenture option rights) considered outstanding during each year. The weighted
average number of shares outstanding (rounded to the nearest thousand) during
1995, 1994 and 1993 was 81,243,000, 81,932,000 and 81,595,000, respectively.
Common stock equivalents (rounded to the nearest thousand) utilized in computing
earnings per share in 1995, 1994 and 1993 were 1,871,000, 1,777,000 and
1,262,000 for primary and 2,788,000, 1,777,000 and 2,117,000 for fully diluted,
respectively.
Reclassifications:
Certain amounts in the 1994 and 1993 financial statements have been reclassified
to correspond to the 1995 presentation. These reclassifications did not affect
previously reported net income or retained earnings.
2. BANKING/FINANCE GROUP LOANS
AND ALLOWANCE FOR LOAN LOSSES
The banking/finance group's loans at
September 30, 1995 and 1994 consisted of the following:
(Dollars in thousands): 1995 1994
Auto $400,867 $328,396
Credit card 95,040 89,409
Real estate 4,855 4,467
Other 1,145 5,799
501,907 428,071
Unearned fees and discounts (42,813) (33,077)
Allowance for loan losses (9,081) (3,170)
Loans receivable, net $450,013 $391,824
Activity in the banking/finance group's allowance for loan losses for the years
ended September 30, 1995, 1994, and 1993 was as follows:
(Dollars in thousands) 1995 1994 1993
Beginning balance $3,170 $1,472 $2,055
Provision for loan losses 17,189 5,415 4,093
Loans charged off (14,879) (4,390) (5,273)
Recoveries 3,601 673 597
Ending balance $9,081 $3,170 $1,472
For the years ended September 30, 1995, 1994 and 1993, the interest expense of
the banking/finance group included in banking/finance, net and other revenues
were $28.6 million, $12.2 million, and $9.4 million in 1995, 1994, and 1993,
respectively.
The fair values of the banking/finance group's performing residential mortgage
loans and home equity loans are estimated using current market comparable
information for securitizable mortgages, adjusting for credit and other relevant
characteristics. The fair value of consumer loans is estimated using interest
rates that consider the current credit and interest rate risk inherent in the
loans and current economic and lending conditions. At September 30, 1995 and
1994, the carrying value of loans receivable approximated fair value.
The fair values of the banking subsidiary's deposits subject to immediate
withdrawal are equal to the amount payable on demand at the reporting date. Fair
values for fixed-rate certificates of deposit are estimated using interest rates
currently offered on time deposits with similar remaining maturities. At
September 30, 1995 and 1994, the carrying values of deposits subject to
immediate withdrawal and of fixed-rate certifcates of deposit approximated fair
value.
3. INVESTMENTS
Investments at September 30, 1995 and 1994 consisted of the following:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
(Dollars in thousands)COST GAINS LOSSES MARKET
1995
Investment securities,
available-for-sale:
Franklin Templeton
funds $125,253 $14,638 $(5,957) $133,934
Debt securities 21,031 638 (563) 21,106
Equity securities 2,366 23,895 (68) 26,193
Other investments 26,991 255 (1) 27,245
---------------------------------------------
$175,641 $39,426 $(6,589) $208,478
Banking/finance group
investment portfolio:
U.S. agencies securities $6,051 $6 $(134) $5,923
U.S. Treasury securities 17,624 85 (88) 17,621
Other marketable
securities 110 1 0 111
-------------------------------------------
$23,785 $92 $(222) $23,655
Investment Securities,
available-for-sale:
Restricted securities $14,504 $839 $(52) $15,291
1994
Investment securities,
available-for-sale:
Franklin Templeton
funds $97,379 $6,547 $(6,186) $97,740
Debt securities 17,990 567 (121) 18,436
Equity securities 22,818 14,300 (2) 37,116
--------------------------------------------
$138,187 $21,414 $(6,309) $153,292
Banking/finance group
investment portfolio:
U.S. agencies securities $20,765 $5 $(322) $20,448
U.S. Treasury securities 6,012 0 (225) 5,787
Other marketable
securities 110 0 0 110
------------------------------------------
$26,887 $5 $(547) $26,345
Investment Securities,
available-for-sale:
Restricted securities $9,607 $112 $(575) $9,144
Investments in the Franklin Templeton funds are shares of investment companies
for which the Company acts as investment manager.
Proceeds from the sale of corporate investment securities for 1995, 1994 and
1993 were $90.9 million, $67.4 million and $57.2 million, respectively. Gains
(losses) of $2.5 million, $1.4 million and $(2.7) million were realized on these
sales for 1995, 1994 and 1993, respectively.
At September 30, 1995, debt securities of the banking/finance group's investment
portfolio at amortized cost and estimated market value have scheduled maturities
as follows:
AMORTIZED ESTIMATED
(Dollars in thousands) COST MARKET
Maturity:
0-1 year $1,000 $1,000
1-5 years 22,729 22,594
Greater than 5 years 56 61
------------------
$23,785 $23,655
Other debt securities have scheduled maturities as follows:
AMORTIZED ESTIMATED
(Dollars in thousands) COST MARKET
Maturity:
0-1 year $8,741 $8,224
1-5 years 5,383 5,556
5-10 years 5,731 5,981
Greater than 10 years 6,086 7,073
----------------
$25,941 $26,834
4. PREMISES AND EQUIPMENT
The following is a summary of premises and equipment at September 30, 1995 and
1994:
ESTIMATED
USEFUL LIVES
(Dollars in thousands) IN YEARS 1995 1994
Furniture and equipment 3-5 $88,769 $68,247
Premises and leasehold
improvements 5-35 70,011 55,386
Leased equipment 5 7,456 7,256
Land -- 9,984 7,423
-----------------
176,220 138,312
Less: Accumulated depreciation
and amortization (57,592) (44,094)
------------------
$118,628 $94,218
5. SEGMENT INFORMATION
The Company conducts operations in five principal geographic areas of the world:
USA, Canada, the Bahamas, Europe and Asia/Pacific. Revenue by geographic area
includes fees and commissions charged to customers and fees charged to
affiliates. Identifiable assets are those assets used exclusively in the
operations of each geographic area.
Information is summarized below:
<TABLE>
<CAPTION>
ADJUSTMENT
ASIA/ AND
(Dollars in thousands) USA CANADA BAHAMAS EUROPE PACIFIC ELIMINATIONS CONSOLIDATED
1995
Revenues from:
<S> <C> <C> <C> <C> <C> <C> <C>
Unaffiliated
customers $581,201 $37,802 $131,464 $13,251 $82,085 -- $845,803
Affiliates 17,080 492 1,606 10,903 7,160 $(37,241) --
Total $598,281 $38,294 $133,070 $24,154 $89,245 $(37,241) $845,803
Operating
income/
(loss) $185,020 $21,871 $112,388 $(7,849) $56,711 -- $368,141
Identifiable
assets $819,287 $43,589 $438,859 $23,681 $138,213 -- $1,463,629
Corporate
assets 781,052
Total assets $2,244,681
1994
Revenues from:
Unaffiliated
customers $609,206 $29,679 $103,037 $17,764 $53,084 -- $812,770
Affiliates 8,699 510 1,040 567 6,214 $(17,030) --
Total $617,905 $30,189 $104,077 $18,331 $59,298 $(17,030) $812,770
Operating
income/
(loss) $231,953 $17,839 $ 77,732 $(1,391) $40,568 -- $366,701
Identifiable
assets $726,224 $39,500 $448,205 $22,443 $139,748 -- $1,376,120
Corporate
assets 592,638
Total assets $1,968,758
1993
Revenues from:
Unaffiliated
customers $526,834 $15,815 $66,580 $8,743 $13,416 -- $ 631,388
Affiliates 2,877 302 597 28 5,411 (9,215) --
Total $529,711 $16,117 $67,177 $8,771 $18,827 (9,215) $ 631,388
Operating
income/
(loss) $238,729 $5,023 $38,491 $(3,729) $6,639 $(285) $284,868
Identifiable
assets $505,268 $14,617 $459,848 $22,304 $128,240 $1,062 $1,131,339
Corporate
assets 450,195
Total assets $1,581,534
</TABLE>
Summarized below are the business segments:
Identifiable Operating
(Dollars in thousands) Assets Revenue Income (loss)
1995
Mutual funds and
institutional management $935,230 $837,100 $379,288
Banking/finance 495,086 6,841 (10,217)
Real estate and other 33,313 1,862 (930)
Company totals $1,463,629 $845,803 $368,141
1994
Mutual funds and
institutional management $917,727 $798,858 $365,566
Banking/finance 443,420 12,625 2,537
Real estate and other 14,973 1,287 (1,402)
Company totals $1,376,120 $812,770 $366,701
1993
Mutual funds and
institutional management $875,558 $621,943 $286,692
Banking/finance 211,156 8,394 967
Real estate and other 44,625 1.051 (2,791)
Company totals $1,131,339 $631,388 $284,868
The mutual funds and institutional management segment's assets are primarily
receivables from, and investments in, Franklin Templeton funds and goodwill from
the acquisition of Templeton. The banking/finance segment's assets are primarily
investment securities and consumer loans.
6. DEBT
Debt at September 30, 1995 and 1994 was as follows:
1995 WEIGHTED
AVERAGE EFFECTIVE
(Dollars in thousands) INTEREST RATE 1995 1994
Debt payable within one year:
Current maturities of other
notes and capital lease
obligations -- $1,283 $1,582
Commercial paper 5.87% 85,921 82,900
Total debt payable within
one year $87,204 $84,482
Long-term debt:
Notes payable 6.50% $80,000 $80,000
Commercial paper issued
under long-term borrowing
agreements 5.87% 150,000 150,000
Subordinated debentures 6.65% 150,000 150,000
Other notes and capital lease
obligations 2,367 3,668
Total long-term debt $382,367 $383,668
Maturities of long-term debt excluding other notes and capital lease obligations
are as follows (in thousands):
1996 $230,000
After 2000 150,000
--------
$380,000
During 1994, the Company repaid $296 million in outstanding senior bank debt
with the proceeds from $300 million in commercial paper offerings. The Company
has two credit agreements with a group of commercial banks that will allow it at
its option to refinance the commercial paper up to five years from the closing
date, May 19, 1994. In accordance with the Company's intention and ability to
refinance these obligations on a long-term basis, $150 million of the
outstanding balance has been classified long-term. The credit agreements include
various restrictive covenants, including: a capitalization ratio, interest
coverage ratio, minimum working capital and limitation on additional debt. The
Company was in compliance with all covenants as of September 30, 1995.
The Company has interest rate swap agreements which effectively fix interest
rates on $155.0 million of commercial paper over a three to forty-eight month
period from the balance sheet date. The fixed rates of interest range from
5.015% to 6.451%.
During 1994, the Company initiated a $300 million medium-term note program.
Notes totaling $80 million were issued maturing during fiscal year 1996. In
accordance with the Company's intention and ability to refinance these
obligations on a long-term basis, the entire balance maturing in 1996 has been
classified long-term.
The subordinated debentures mature on August 3, 2002 and have a fixed interest
rate of 6.25% per annum. Under certain circumstances, all or a portion of the
debentures could pay additional interest, increasing to a maximum rate of 7.77%.
The subordinated debentures have non-detachable option rights which allow the
holder to purchase common shares of the Company at any time during the term of
the debentures, for cash or in redemption of the debentures. The Company may
redeem the debentures any time after August 3, 1997, or sooner, to the extent
options are exercised. The maximum number of shares purchasable under the option
rights was 5,119,454 shares at September 30, 1995. The option price ranges from
$29.30 to $31.77 per share and the redemption price ranges from 92.22% to 100%
of face value, over the term of the debentures.
The fair values of long-term debt are estimated using interest rates currently
offered to the Company for debt with similar remaining maturities. The fair
value of the option rights attached to the subordinated debentures is calculated
based on the Company's closing stock price and the option and redemption prices
at the reporting date. At September 30, 1995, and 1994, the carrying values of
long-term debt approximated fair value.
7. INVESTMENT INCOME
(Dollars in thousands) 1995 1994 1993
Dividends $9,648 $10,969 $11,162
Interest 11,440 6,538 3,678
Realized gains (losses),
net 2,499 1,396 809
Foreign exchange gains (losses), net (355) (420) (174)
Partnership income 3,550 840 1,399
Other income 2,891 3,380 1,416
-----------------------------
$29,673 $22,703 $18,290
Substantially all of the Company's dividend income was generated by investments
in the Franklin Templeton funds.
8. TAXES ON INCOME
Taxes on income for the years ended September 30, 1995, 1994 and 1993 are
comprised of the following:
(Dollars in thousands) 1995 1994 1993
Current:
Federal $76,350 $87,951 $74,958
State 19,969 22,257 17,807
Foreign 20,018 13,717 4,342
Deferred 1,373 (12,712) 1,769
Total provision $117,710 $111,213 $98,876
Included in income before taxes is $161.7 million, $115.3 million and $31.6
million of foreign income for the years ended September 30, 1995, 1994 and 1993,
respectively.
The major components of the net deferred tax asset (liability) as of September
30, 1995 and 1994 were as follows :
(Dollars in thousands) 1995 1994
Deferred tax assets:
State taxes expensed currently, deductible
in following year $5,543 $6,089
Temporary differences on investment losses 3,278 3,278
Loan loss reserves 3,868 637
Deferred compensation 486 5,062
Restricted stock compensation plan 17,700 10,150
Net operating loss carryforwards 16,180 8,121
Other 1,478 4,101
Total deferred tax assets 48,533 37,438
Valuation allowance for net operating
loss carryforwards (16,180) (8,121)
Deferred tax assets, net of valuation
allowance 32,353 29,317
Deferred tax liabilities:
Temporary differences on partnership
earnings 5,516 4,489
Capitalized compensation costs 6,992 5,681
Unrealized gains on securities 11,942 5,845
Depreciation on fixed assets 4,963 3,103
Prepaid expenses 3,309 2,381
Other 1,899 4,500
Total deferred tax liabilities 34,621 25,999
Net deferred tax asset (liability) ($2,268) $3,318
There are approximately $17.8 million of foreign net operating loss
carryforwards which do not expire. In addition, there are approximately $149.7
million in state net operating loss carryforwards that expire between 2005 and
2010. A valuation allowance has been recognized to offset the related deferred
tax assets due to the uncertainty of realizing the benefit of the loss
carryforwards.
A substantial portion of the undistributed earnings of the Company's foreign
subsidiaries has been reinvested and is not expected to be remitted to the
parent company. Accordingly, no U.S. Federal or state income taxes have been
provided thereon. At September 30, 1995, the cumulative amount of reinvested
income for which no U.S. taxes have been provided is approximately $218 million.
Determination of the amount of unrecognized deferred U.S. income tax liability
related to such reinvested income is not practicable because of the complexities
associated with this hypothetical calculation; however, foreign tax credits
would be available to reduce some portion of this amount.
The following is a reconciliation between the amount of tax expense at the
federal statutory rate and taxes on income as reflected in operations for the
years ended September 30, 1995, 1994 and 1993, respectively:
(Dollars in thousands) 1995 1994 1993
U.S. Federal statutory rate 35% 35% 34.75%
Federal taxes at statutory rate $135,329 $126,882 $95,353
State taxes, net of federal
tax effect 12,747 12,944 11,166
Foreign earnings subject to
reduced tax rates for which
no U.S. tax is provided (32,956) (25,194) (6,591)
Other 2,590 (3,419) (1,052)
Actual tax provision $117,710 $111,213 $98,876
Effective tax rate 30.4% 30.7% 36.0%
9. COMMITMENTS
The Company leases office space (including space from an unconsolidated
affiliate) and equipment under long-term operating leases expiring at various
dates through fiscal year 2001. Lease expenses were $21.8 million, $15.1 million
and $12.1 million for the fiscal years ended September 30, 1995, 1994 and 1993,
respectively. At September 30, 1995, remaining operating lease commitments are
as follows (in thousands):
1996 $15,992
1997 14,725
1998 13,324
1999 12,303
2000 9,526
Thereafter 7,890
-------
$73,760
The Company has also entered into capital leases for certain equipment
(primarily computer equipment) with a cost of $7.5 million and accumulated
amortization of $4.4 million at September 30, 1995. Future minimum payments
under such leases as of September 30, 1995 are as follows (in thousands):
1996 $2,078
1997 1,213
1998 359
1999 13
------
3,663
Less imputed interest 291
------
Net $3,372
At September 30, 1995, the Company's banking/finance group had commitments to
extend credit as follows (in thousands):
Credit card lines $480,872
Real estate equity lines 1,500
Consumer lines 389
--------
$482,761
The Company through certain subsidiaries acts as fiduciary for retirement and
employee benefit plans. At September 30, 1995 assets held in trust were
approximately $10.3 billion.
10. STOCKHOLDERS' EQUITY
During the years ended September 30, 1995, 1994 and 1993, the Company paid
dividends to common stockholders of $0.40, $0.32, and $0.28 per share,
respectively.
11. EMPLOYEE STOCK OPTION PLANS
The stockholders have adopted stock option plans which provide for the grant of
options to purchase up to 2,358,250 shares of the Company's common stock to
officers and other key employees of the Company. Terms and conditions (including
price, exercise date and number of shares) are determined by the Board of
Directors, which administers the plans. Information on the plans for the three
years ended September 30, 1995, adjusted to reflect the 1992 stock split, is as
follows:
(Shares and total NUMBER OPTION PRICE
dollars in thousands) OF SHARES PER SHARE TOTAL
Outstanding options at
October 1, 1992 217 $5.75 to $15.25 $1,531
Granted 170 $14.04 to $30.04 3,463
Exercised (212) $5.75 to $15.25 (1,455)
Outstanding options at
September 30, 1993 175 $8.96 to $30.04 3,539
Exercised (11) $8.96 to $30.04 (158)
Outstanding options at
September 30, 1994 164 $14.04 to $30.04 3,381
Granted 79 $36.82 to $45.13 3,099
Exercised (18) $17.30 to $30.00 (375)
Outstanding options at
September 30, 1995 225 $14.04 to $45.13 $6,105
There were 1,099,123 unoptioned shares available for the granting of options
under the plans at September 30, 1995. The Company recognizes a charge to income
in connection with the plans to the extent that the options granted are below
the fair market value of the common stock at the time of grant.
12. EMPLOYEE BENEFIT AND INCENTIVE PLANS
The Company has defined contribution profit sharing plans covering all eligible
U.S. employees who are not covered by a collective bargaining agreement.
Contributions are based on the Company's prior year's results of operations and
are made at the discretion of the Company's Board of Directors. The Company
contributed $12.8 million, $9.1 million and $6.5 million during 1995, 1994 and
1993, respectively, that related to the 1994, 1993 and 1992 plan years.
The Company sponsors a 401(k) defined contribution pension plan in which certain
U.S. employees are eligible to participate. The Company funds the 401(k) plan by
matching employee contributions, subject to statutory limitations. Employer
contributions were $1.1 million, $1.0 million and $0.8 million for each of the
years ended September 30, 1995, 1994 and 1993, respectively.
In 1994, the Company implemented an annual incentive plan which provides
eligible employees payment of both cash and restricted stock. The costs
associated with the annual incentive plan are charged to income currently. Costs
associated with restricted stock awards granted prior to the adoption of the
annual incentive plan are amortized on a straight-line basis to the date the
stock vests with the employees. The unamortized cost of the restricted shares of
$5.2 million as of September 30, 1995, is shown as a reduction of stockholders'
equity.
13. QUARTERLY RESULTS
OF OPERATIONS (UNAUDITED)
(Dollars in thousands, Fiscal Quarter
except per share amounts) FIRST SECOND THIRD FOURTH
1995
Revenues $208,233 $199,781 $212,718 $225,071
Net income $63,304 $63,040 $69,029 $73,572
Earnings per share:
Primary $.76 $.76 $.84 $.89
Fully diluted $.76 $.76 $.83 $.88
1994
Revenues $195,678 $211,547 $200,676 $204,869
Net income $59,001 $68,601 $60,023 $63,683
Earnings per share:
Primary $.70 $.82 $.72 $.76
Fully diluted $.70 $.82 $.72 $.76
1993
Revenues $124,592 $151,273 $160,381 $195,142
Net income $34,764 $42,233 $44,798 $53,727
Earnings per share:
Primary $.43 $.51 $.54 $.64
Fully diluted $.43 $.51 $.54 $.62
14. MERGER WITH TEMPLETON
On October 30, 1992, the Company acquired substantially all of the assets and
liabilities of Templeton, which through its subsidiaries was the manager of the
Templeton Family of Funds and private accounts. The acquisition was accounted
for as a purchase, with a purchase price of approximately $786 million of which
approximately $713 million was allocated to goodwill. The purchase was financed
by $360 million in bank debt, $150 million in subordinated debentures with
option rights, $189 million in cash and $87 million in the Company's common
stock.
Pro forma results for the year ended Septem-
ber 30, 1993, as if the acquisition had been made on October 1, 1992, are not
presented as they would not be materially different from the reported results
which include the operations of Templeton for the period from October 30, 1992
to September 30, 1993.
PART III
Items 10-13 are incorporated by reference to the Company's definitive proxy
statement to be mailed to stockholders in connection with the Annual Meeting of
Stockholders to be held January 25, 1996.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Please see the index in Item 8 for a list of the financial statements
filed as part of this report.
(2) Please see the index in Item 8 for a list of the financial statement
schedules filed as part of this report.
(3) The following exhibits are filed as part of this report:
(3)(i)(a) Registrant's Certificate of Incorporation, as filed November
28, 1969, incorporated by reference to Exhibit (3)(i) to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1994 (the "1994 Annual Report")
(3)(i)(b) Registrant's Certificate of Amendment of Certificate of
Incorporation, as filed March 1, 1985, incorporated by
reference to Exhibit (3)(ii) to the 1994 Annual Report
(3)(i)(c) Registrant's Certificate of Amendment of Certificate of
Incorporation, as filed April 1, 1987, incorporated by
reference to Exhibit (3)(iii) to the 1994 Annual Report
(3)(i)(d) Registrant's Certificate of Amendment of Certificate of
Incorporation, as filed February 2, 1994, incorporated by
reference to Exhibit (3)(iv) to the 1994 Annual Report
(3)(ii) Registrant's By-Laws are incorporated by reference to Form 10
(File No. 06952), incorporated by reference to Exhibit (3)(v)
to the 1994 Annual Report
10.1 Representative Distribution Plan between Templeton Growth
Fund, Inc. and Franklin/Templeton Investor Services, Inc.
incorporated by reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993 (the "1993 Annual Report")
10.2 Representative Business Management Agreement between Templeton
Growth Fund, Inc. and Templeton Global Investors, Inc.
incorporated by reference to Exhibit 10.2 to the 1993
Annual Report
10.3 Representative Transfer Agent Agreement between Templeton
Growth Fund, Inc. and Franklin/Templeton Investor
Services, Inc. incorporated by reference to Exhibit 10.3 to
the 1993 Annual Report
10.4 Representative Investment Management Agreement between
Templeton Growth Fund, Inc. and Templeton, Galbraith &
Hansberger Ltd. incorporated by reference to Exhibit 10.5 to
the 1993 Annual Report
10.5 Representative Management Agreement between Advisers and the
Franklin Group of Funds incorporated by reference to Exhibit
10.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1992 (the "1992 Annual
Report")
10.6 Representative Distribution 12b-1 Plan between Distributors
and the Franklin Group of Funds incorporated by reference to
Exhibit 10.3 to the 1992 Annual Report
10.7 Registrant's Amended Annual Incentive Compensation Plan
approved January 24, 1995 incorporated by reference to the
Company's Proxy Statement filed under cover of Schedule 14A on
December 28, 1994 in connection with its Annual Meeting of
Stockholders held on January 24, 1995.
10.8 Registrant's Universal Stock Plan approved January 19, 1994
incorporated by reference to the Company's 1995 Proxy
Statement filed under cover of Schedule 14A on December 29,
1993 in connection with its Annual Meeting of Stockholders
held on January 19, 1994.
10.9 Representative Amended and Restated Distribution Agreement
between Franklin/Templeton Distributors, Inc. and Franklin
Federal Tax-Free Income Fund, incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1995 (the "June 1995
Quarterly Report")
10.10 Representative Distribution 12b-1 Plan for Class II shares
between Franklin/Templeton Distributors, Inc. and Franklin
Federal Tax-Free Income Fund, incorporated by reference
to Exhibit 10.2 to the June 1995 Quarterly Report
10.11 Representative Investment Management Agreement between
Templeton Global Strategy SICAV and
Templeton Investment Management Limited, incorporated by
reference to Exhibit 10.3 to the
June 1995 Quarterly Report
10.12 Representative Sub-Distribution Agreement between Templeton,
Galbraith & Hansberger Ltd. and
BAC Corp. Securities, incorporated by reference
to Exhibit 10.4 to the June 1995
Quarterly Report
10.13 Representative Dealer Agreement between Franklin/Templeton
Distributors, Inc. and Dealer, incorporated by reference to
Exhibit 10.5 to the June 1995 Quarterly Report
10.14 Representative Investment Management Agreement between
Templeton Investment Counsel, Inc.
and Client (ERISA), incorporated by reference to Exhibit
10.6 to the June 1995 Quarterly Report
10.15 Representative Investment Management Agreement between
Templeton Investment Counsel, Inc.
and Client (NON-ERISA), incorporated by reference to
Exhibit 10.7 to the June 1995 Quarterly Report
10.16 Representative Amended and Restated Transfer Agent
and Shareholder Services Agreement between
Franklin/Templeton Investor Services, Inc. and
Franklin Custodian Funds, Inc., dated July 1, 1995
10.17 Representative Amended and Restated Distribution Agreement
between Franklin/Templeton Distributors, Inc. and Franklin
Custodian Funds, Inc.
10.18 Representative Class II Distribution Plan between
Franklin/Templeton Distributors, Inc. and
Franklin Custodian Funds, Inc., on behalf of its Growth Series
10.19 Representative Dealer Agreement between Franklin/Templeton
Distributors, Inc. and Dealer
10.20 Representative Mutual Fund Purchase and Sales Agreement for
Accounts of Bank and Trust Company Customers, effective
July 1, 1995
10.21 Representative Management Agreement between Franklin Value
Investors Trust, on behalf of Franklin MicroCap Value Fund,
and Franklin Advisers, Inc.
10.22 Representative Sub-Distribution Agreement between Templeton,
Galbraith & Hansberger Ltd. and Sub-Distributor
10.23 Representative Non-Exclusive Underwriting Agreement between
Templeton Funds, Inc. and Templeton Franklin Investment
Services (Asia) Limited, dated September 18, 1995
10.24 Representative Shareholder Services Agreement between
Franklin/Templeton Investor Services,
Inc. and Templeton Franklin Investment Services (Asia)
Limited, dated September 18, 1995
12 Computation of Ratios of Earnings to Fixed Charges
21 List of Subsidiaries
23 Consent of Independent Accountant
27 Financial Data Schedule
(b) A Current Report on Form 8-K dated July 27, 1995 was filed on
July 27, 1995 attaching Registrant's press release dated
July 27, 1995 under Items 5 and 7.
(c) See Item 14(a)(3) above.
(d) No separate financial statements are required; schedules are
included in Item 8.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
FRANKLIN RESOURCES, INC.
Date: December 29, 1995 By /s/ Charles B. Johnson
Charles B. Johnson, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Date: December 29, 1995 By /s/ Charles B. Johnson
Charles B. Johnson, Principal
Executive Officer and Director
Date: December 29, 1995 By /s/ Harmon E. Burns
Harmon E. Burns, Executive Vice
President-Legal and Adminis-
trative,Secretary and Director
Date: December 29, 1995 By /s/ Martin L. Flanagan
Martin L. Flanagan, Treasurer
and Chief Financial Officer
Date: December 29, 1995 By /s/ Kenneth A. Lewis
Kenneth A. Lewis, Controller
Date: December 29, 1995 By /s/ Judson R. Grosvenor
Judson R. Grosvenor, Director
Date: December 29, 1995 By /s/ F. Warren Hellman
F. Warren Hellman, Director
Date: December 29, 1995 By /s/ Charles E. Johnson
Charles E. Johnson, Director
Date: December 29, 1995 By /s/ Rupert H. Johnson, Jr.
Rupert H.Johnson, Jr., Director
Date: December 29, 1995 By /s/ Harry O. Kline
Harry O. Kline, Director
Date: December 29, 1995 By /s/ Louis E. Woodworth
Louis E. Woodworth, Director
Date: December 29, 1995 By /s/ Peter M. Sacerdote
Peter M. Sacerdote, Director
Exhibit Index
ITEM
(3)(i)(a) Registrant's Certificate of Incorporation, as filed November 28,
1969, incorporated by reference to Exhibit (3)(i) to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1994 (the "1994 Annual Report")
(3)(i)(b) Registrant's Certificate of Amendment of Certificate of
Incorporation, as filed March 1, 1985, incorporated by reference
to Exhibit (3)(ii) to the 1994 Annual Report
(3)(i)(c) Registrant's Certificate of Amendment of Certificate of
Incorporation, as filed April 1, 1987, incorporated by reference
to Exhibit (3)(iii) to the 1994 Annual Report
(3)(i)(d) Registrant's Certificate of Amendment of Certificate of
Incorporation, as filed February 2, 1994, incorporated by
reference to Exhibit (3)(iv) to the 1994 Annual Report
(3)(ii) Registrant's By-Laws are incorporated by reference to Form 10
(File No. 06952), incorporated by reference to Exhibit
(3)(v) to the 1994 Annual Report
10.1 Representative Distribution Plan between Templeton Growth
Fund, Inc. and Franklin/Templeton Investor Services, Inc.
incorporated by reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the fiscal
year ended September 30, 1993 (the "1993 Annual Report")
10.2 Representative Business Management Agreement between Templeton
Growth Fund, Inc. and Templeton Global Investors, Inc.
incorporated by reference to Exhibit 10.2 to the 1993 Annual
Report
10.3 Representative Transfer Agent Agreement between Templeton Growth
Fund, Inc. and Franklin/Templeton Investor Services, Inc.
incorporated by reference to Exhibit 10.3 to the
1993 Annual Report
10.4 Representative Investment Management Agreement between Templeton
Growth Fund, Inc. and Templeton, Galbraith and Hansberger Ltd.
incorporated by reference to Exhibit 10.5 to the
1993 Annual Report
10.5 Representative Management Agreement between Advisers and the
Franklin Group of Funds incorporated by reference to Exhibit
10.1 to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1992 (the "1992 Annual Report")
10.6 Representative Distribution 12b-1 Plan between Distributors and
the Franklin Group of Funds incorporated by reference to Exhibit
10.3 to the 1992 Annual Report
10.7 Registrant's Amended Annual Incentive Compensation Plan approved
January 24, 1995 incorporated by reference to the Company's
Proxy Statement filed under cover of Schedule 14A on December
28, 1994 in connection with its Annual Meeting of Stockholders
held on January 24, 1995.
10.8 Registrant's Universal Stock Plan approved January 19, 1994
incorporated by reference to the Company's 1995 Proxy Statement
filed under cover of Schedule 14A on December 29, 1993 in
connection with its Annual Meeting of Stockholders held on
January 19, 1994.
10.9 Representative Amended and Restated Distribution Agreement
between Franklin/Templeton Distributors, Inc. and Franklin
Federal Tax-Free Income Fund, incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1995 (the "June 1995
Quarterly Report")
10.10 Representative Distribution 12b-1 Plan for Class II shares
between Franklin/Templeton Distributors, Inc. and Franklin
Federal Tax-Free Income Fund, incorporated by reference to
Exhibit 10.2 to the June 1995 Quarterly Report
10.11 Representative Investment Management Agreement between Templeton
Global Strategy SICAV and
Templeton Investment Management Limited, incorporated by
reference to Exhibit 10.3 to the June 1995 Quarterly Report
10.12 Representative Sub-Distribution Agreement between Templeton,
Galbraith & Hansberger Ltd. and
BAC Corp. Securities, incorporated by reference to Exhibit 10.4
to the June 1995 Quarterly Report
10.13 Representative Dealer Agreement between Franklin/Templeton
Distributors, Inc. and Dealer, incorporated by reference to
Exhibit 10.5 to the June 1995 Quarterly Report
10.14 Representative Investment Management Agreement between Templeton
Investment Counsel, Inc. and
Client (ERISA), incorporated by reference to Exhibit 10.6 to the
June 1995 Quarterly Report
10.15 Representative Investment Management Agreement between Templeton
Investment Counsel, Inc. and Client (NON-ERISA), incorporated by
reference to Exhibit 10.7 to the June 1995 Quarterly
Report
10.16 Representative Amended and Restated Transfer Agent and
Shareholder Services Agreement between
Franklin/Templeton Investor Services, Inc. and Franklin
Custodian Funds, Inc., dated July 1, 1995
10.17 Representative Amended and Restated Distribution Agreement
between Franklin/Templeton
Distributors, Inc. and Franklin Custodian Funds, Inc.
10.18 Representative Class II Distribution Plan between
Franklin/Templeton Distributors, Inc. and
Franklin Custodian Funds, Inc., on behalf of its Growth Series
10.19 Representative Dealer Agreement between Franklin/Templeton
Distributors, Inc. and Dealer
10.20 Representative Mutual Fund Purchase and Sales Agreement
for Accounts of Bank and Trust Company
Customers, effective July 1, 1995
10.21 Representative Management Agreement between
Franklin Value Investors Trust, on behalf of
Franklin MicroCap Value Fund, and Franklin Advisers, Inc.
10.22 Representative Sub-Distribution Agreement between
Templeton, Galbraith & Hansberger Ltd. and
Sub-Distributor
10.23 Representative Non-Exclusive Underwriting Agreement
between Templeton Growth Fund, Inc. and
Templeton Franklin Investment Services (Asia) Limited, dated
September 18, 1995
10.24 Representative Shareholder Services Agreement between
Franklin/Templeton Investor Services,
Inc. and Templeton Franklin Investment
Services (Asia) Limited, dated September 18, 1995
12 Computation of Ratios of Earnings to Fixed Charges
21 List of Subsidiaries
23 Consent of Independent Accountant
27 Financial Data Schedule
EXHIBIT 10.16
FRANKLIN/TEMPLETON INVESTOR SERVICES, INC.
AMENDED AND RESTATED
TRANSFER AGENT AND SHAREHOLDER SERVICES AGREEMENT
Investment Company: Franklin Custodian Funds, Inc.
Date: As of July 1, 1995
The parties to this Agreement are the Investment Company named above
("Investment Company"), an open-end investment company registered as such under
the Investment Company Act of 1940 ("1940 Act"), on behalf of each class of
shares of each series of the Investment Company which now exists or may
hereafter be created (collectively, the "Funds") and FRANKLIN/TEMPLETON INVESTOR
SERVICES, INC. ("FTIS"), a registered transfer agent formerly known as Franklin
Administrative Services, Inc. This Agreement supersedes prior Shareholder
Services Agreements between the parties, as stated below in section 16(d).
W I T N E S E T H:
That for and in consideration of the mutual promises hereinafter set forth,
the Investment Company and FTIS agree as follows:
1. Definitions. Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Articles" shall mean the Articles of Incorporation, Declaration
of Trust or Agreement of Limited Partnership, as appropriate, of the Investment
Company as the same may be amended from time to time;
(b) "Authorized Person" shall be deemed to include any person, whether
or not such person is an officer or employee of the Investment Company, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Investment Company, as indicated in a resolution of the Investment Company's
Board which was valid at the time of this Agreement, or as indicated in a
certificate furnished to FTIS pursuant to Section 4(c) hereof;
(c) "Board" shall mean the Investment Company's Board of Directors,
Board of Trustees or Managing General Partners, as appropriate;
(d) "Custodian" shall mean a custodian and any sub-custodian of
securities and other property which the Investment Company may from time to time
deposit, or cause to be deposited or held under the name or account of such
custodian pursuant to the Custody Agreement;
(e) "Oral Instructions" shall mean instructions (including without
limitation instructions received by telephone, facsimile, electronic mail or
other electronic mail), other than written instructions, actually received by
FTIS from a person reasonably believed by FTIS to be an Authorized Person;
(f) "Shares" shall mean shares of each class of capital stock,
beneficial interest or limited partnership interest, as appropriate, of each
series of the Investment Company; and
(g) "Written Instructions" shall mean a written communication signed
by a person reasonably believed by FTIS to be an Authorized Person and actually
received by FTIS.
2. Appointment of FTIS. The Investment Company hereby appoints FTIS as
transfer agent for Shares of the Investment Company, as service agent in
connection with dividend and distribution functions, and as shareholder
servicing agent for the Investment Company, and FTIS accepts such appointment
and agrees to perform the following duties.
3. Compensation.
(a) The Investment Company will compensate FTIS for the performance of
its obligations hereunder in accordance with the fees set forth in the written
schedule of fees annexed hereto as Schedule A and incorporated herein. Schedule
A does not include out-of-pocket disbursements of FTIS for which FTIS shall be
separately reimbursed by the Investment Company. FTIS will bill the Investment
Company as soon as practicable after the end of each calendar month, in
accordance with Schedule A. The Investment Company will promptly pay to FTIS the
amount of such billing.
Out-of-pocket disbursements shall include, but shall not be limited
to, the items specified in the written schedule of out-of-pocket expenses
annexed hereto as Schedule B and incorporated herein. Unspecified out-of-pocket
expenses shall be limited to those out-of-pocket expenses reasonably incurred by
FTIS in the performance of its obligations hereunder, subject to approval by the
Board. Reimbursement by the Investment Company for expenses incurred by FTIS in
any month shall be made as soon as practicable after the receipt of an itemized
bill from FTIS.
(b) Any compensation agreed to hereunder may be adjusted from time to
time by mutual agreement by attaching revised Schedules A or B to this
Agreement.
4. Documents. In connection with the appointment of FTIS, the Investment
Company shall, within a reasonable period of time for FTIS to prepare to perform
its duties hereunder, deliver to FTIS the following documents:
(a) If applicable, specimens of the certificates for the Shares;
(b) All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered by the
Investment Company;
(c) A certificate identifying the Authorized Persons and specimen
signatures of Authorized Persons who will sign Written Instructions; and
(d) All documents and papers necessary under the laws of the Investment
Company's state of domicile, under the Investment Company's Articles, and as may
be required for the due performance of FTIS's duties under this Agreement or for
the due performance of additional duties as may from time to time be agreed upon
between the Investment Company and FTIS.
5. Duties of the Transfer Agent. FTIS shall be responsible for
administering and/or performing transfer agent functions; for acting as service
agent in connection with dividend and distribution functions; and for performing
shareholder account and administrative agent functions in connection with the
issuance, transfer, exchange, redemption or repurchase (including coordination
with the Custodian) of Shares. FTIS shall be bound to follow its usual and
customary operating standards and procedures, as they may be amended from time
to time, and each current prospectus and Statement of Additional Information
(hereafter, collectively, the "prospectus") of the Investment Company. Without
limiting the generality of the foregoing, FTIS agrees to perform the specific
duties listed on Schedule C.
The duties to be performed by FTIS shall not include the engagement,
supervision or compensation of any service providers, or any registrations or
fees of any kind, which are required by the laws of any foreign country in which
the Fund may choose to invest portfolio assets or sell Shares.
6. (a) Distributions Payable in Shares. In the event that the Board of the
Investment Company shall declare a distribution payable in Shares, the
Investment Company shall deliver to FTIS written notice of such declaration
signed on behalf of the Investment Company by an officer thereof, upon which
FTIS shall be entitled to rely for all purposes, certifying (i) the number of
Shares involved, and (ii) that all appropriate action has been taken to effect
such distribution.
(b) Distributions Payable in Cash; Redemption Payments. In the event
that the Board of the Investment Company shall declare a distribution payable in
cash, the Investment Company shall deliver to FTIS written notice of such
declaration signed on behalf of the Investment Company by an officer thereof,
upon which FTIS shall be entitled to rely for all purposes, certifying (i) the
amount per share to be distributed, (ii) the record and payment dates for the
distribution, and (iii) that all appropriate action has been taken to effect
such distribution. Once the amount and validity of any dividend or redemption
payments to shareholders have been determined, the Investment Company shall
transfer the payment amounts from the Investment Company's accounts to an
account or accounts held in the name of FTIS, as paying agent for the
shareholders, in accordance with any applicable laws or regulations, and FTIS
shall promptly cause payments to be made to the shareholders.
7. Recordkeeping and Other Information. FTIS shall create, maintain and
preserve all necessary records in accordance with all applicable laws, rules and
regulations. Such records are the property of the Investment Company, and FTIS
will promptly surrender them to the Investment Company upon request or upon
termination of this Agreement. In the event of such a request or termination,
FTIS shall be entitled to make and retain copies of all records surrendered, and
to be reimbursed by the Investment Company for reasonable expenses actually
incurred in making such copies. FTIS will take reasonable actions to maintain
the confidentiality of the Investment Company's records, which may nevertheless
be disclosed to the extent required by law or by this Agreement, or to the
extent permitted by the Investment Company.
8. Other Duties. In addition, FTIS shall perform such other duties and
functions, and shall be paid such amounts therefor, as may from time to time be
agreed upon in writing between the Investment Company and FTIS. Such other
duties and functions shall be reflected in a written amendment to Schedule C,
and the compensation for such other duties and functions shall be reflected in a
written amendment to Schedule A.
9. Reliance by Transfer Agent; Instructions.
(a) FTIS will be protected in acting upon Written or Oral Instructions
reasonably believed to have been executed or orally communicated by an
Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from an
officer of the Investment Company. FTIS will also be protected in processing
Share certificates which it reasonably believes to bear the proper manual or
facsimile signatures of the officers of the Investment Company and the proper
countersignature of FTIS.
(b) At any time FTIS may apply to any Authorized Person of the
Investment Company for Written Instructions, or may seek advice at the
Investment Company's expense from legal counsel for the Investment Company, with
respect to any matter arising in connection with this Agreement. FTIS shall not
be liable for any action taken or not taken or suffered by it in good faith in
accordance with such Written Instructions or in accordance with the opinion of
counsel for the Investment Company. Written Instructions requested by FTIS will
be provided by the Investment Company within a reasonable period of time.
10. Acts of God, etc. FTIS will not be liable or responsible for delays or
errors by reason of circumstances beyond its control, including acts of civil or
military authority, national emergencies, labor difficulties, fire, mechanical
breakdown beyond its control, earthquake, flood or catastrophe, acts of God,
insurrection, war, riots or failure beyond its control of transportation,
communication or power supply.
11. Duty of Care and Indemnification. FTIS will indemnify the Investment
Company against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from any claim, demand, action or suit resulting from willful
misfeasance, bad faith or gross negligence on the part of FTIS, and arising out
of, or in connection with, its duties hereunder. However, FTIS shall have no
liability for or obligation to indemnify the Investment Company against any
losses, claims, damages, liabilities or expenses (including reasonable counsel
fees and expenses) incurred by the Investment Company as a result of: (i) any
action taken in accordance with Written or Oral Instructions; (ii) any action
taken in accordance with written or oral advice reasonably believed by FTIS to
have been given by counsel for the Investment Company; (iii) any action taken as
a result of any error or omission in any record (including but not limited to
magnetic tapes, computer printouts, hard copies and microfilm copies) delivered,
or caused to be delivered by the Investment Company to FTIS in connection with
this Agreement; or (iv) any action taken in accordance with shareholder
instructions which meet the standards described in the Investment Company's
current prospectus, including without limitation oral instructions which meet
the standards described in the section of the prospectus dealing with telephone
transactions, so long as FTIS believes such instructions to be genuine. The
obligations of the parties hereto under this Section shall survive the
termination of this Agreement.
12. Term and Termination.
(a) This Agreement shall be effective as of the date first written
above, shall continue through December 31, 1996, and thereafter shall continue
automatically for successive annual periods ending on December 31 of each year,
provided such continuance is specifically approved at least annually by the
Investment Company's Board.
(b) Either party hereto may terminate this Agreement by giving to the
other party a notice in writing specifying the date of such termination, which
shall be not less than 60 days after the date of receipt of such notice. Upon
such termination, FTIS will (i) deliver to such successor a certified list of
shareholders of the Investment Company (with names and addresses) and an
historical record of the account of each Shareholder and the status thereof;
(ii) surrender all other relevant records in accordance with section 7 of this
Agreement, above, and (iii) cooperate in the transfer of such duties and
responsibilities, including provisions for assistance from FTIS's personnel in
the establishment of books, records and other data by such successor or
successors. FTIS shall be entitled to charge the Investment Company a reasonable
fee for services rendered and expenses actually incurred in performing its
duties under this paragraph.
13. Amendment. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
14. Subcontracting. The Investment Company agrees that FTIS may, in its
discretion, subcontract for all or any portion of the services described under
this Agreement or the Schedules hereto; provided that the appointment of any
such agent shall not relieve FTIS of its responsibilities hereunder.
15. Data Processing System, Program and Information
(a) The Investment Company shall not, solely by virtue of this
Agreement, obtain any rights, title and interest in and to the computer systems
and programs, including all related documentation, employed by FTIS in
connection with rendering services hereunder; provided however, that the records
prepared, maintained and preserved by FTIS pursuant to this Agreement shall be
the property of the Investment Company.
(b) Any modifications, changes and improvements in the automatic data
processing system (the "System") or in the manner in which the services are
rendered shall be made or provided as follows, and provided further that
modifications for which the Investment Company will be required to bear any
expenses shall be made only as set forth herein.
(i) FTIS shall, at no expense to the Investment Company, make any
revisions in the System necessary to (1) perform the services which it has
contracted to perform and (2) create and maintain the records which it has
contracted to create and maintain hereunder or (3) enhance or update the System
to the extent and in the manner necessary to maintain said System. However, if
specific reprogramming, coding or other changes are necessary in the records of
the Investment Company or in its shareholder accounts in order to complete a
system revision, the costs for completing work specific to the Investment
Company shall be subject to a subsequent agreement between the parties. The
System is at all times to be competitive with that which is generally available
to the mutual fund industry from transfer agents.
(ii) To the extent that the System is modified to comply with
changes in the accounting or record-keeping rules applicable to mutual funds,
the Investment Company agrees to pay a reasonable pro rata portion of the costs
of the design, revision and programming of the System; provided, however, that
if the Investment Company's pro rata portion exceeds $1,000 per 12 month period,
the Investment Company's obligation to pay a reasonable pro rata portion shall
be conditioned upon FTIS's having obtained prior Written Instructions from the
Investment Company for any charge. The determination that such modifications or
revisions are necessary, and that the System as so modified produces records
which comply with the record-keeping requirements, as amended, shall be by
mutual agreement; provided, however, that upon written request by the Investment
Company, FTIS will provide the Investment Company with a written opinion of
counsel to FTIS to the effect that the modifications were required by changes in
the applicable laws or regulations and that the System, as modified, complies
with the laws or regulations as amended. Upon completion of the changes FTIS
shall render a statement to the Investment Company, in reasonably detailed form,
identifying the nature of the revisions, the services, expenses and costs, and
the basis for determining the Investment Company's reasonable pro rata portion.
Any determination by FTIS of the Investment Company's pro rata portion based
upon the ratio of the number of shareholder accounts of the Investment Company
to the total number of shareholder accounts of all clients for which FTIS
provides comparable services shall conclusively be presumed to be reasonable
unless the nature of the change to the System relates to certain types of
shareholder accounts, in which case the pro rata portion will be determined on a
mutually agreeable basis.
(iii) If system improvements are requested by the Investment
Company and are not otherwise required under this subsection 15(b), FTIS shall
be entitled to request a reasonable fee before agreeing to make the improvements
and shall be entitled to refuse to make any requested improvements which FTIS
reasonably believes to be incompatible with its systems providing services to
other funds.
16. Miscellaneous.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Investment Company or FTIS shall be
sufficiently given if addressed to that party and received by it at its office
at the place described in the Investment Company's most recent registration
statement or at such other place as it may from time to time designate in
writing.
(b) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by either party without the written
consent of the other party.
(c) This Agreement shall be construed in accordance with the laws of
the State of California applicable to contracts between California residents
which are to be performed primarily within California.
(d) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original; but such counterparts shall,
together, constitute only one instrument. This Agreement supersedes all prior
Shareholder Services Agreements between the parties, and supersedes all prior
agreements between the parties relating to the subject matters of this Agreement
to the extent they are inconsistent with this Agreement.
(e) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(f) It is understood and expressly stipulated that neither the holders
of Shares of the Investment Company nor any Director, officer, agent or employee
of the Investment Company shall be personally liable hereunder, nor shall any
resort be had to other private property for the satisfaction of any claim or
obligation hereunder, but the Investment Company only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized as of
the day and year first above written.
FRANKLIN CUSTODIAN FUNDS, FRANKLIN/TEMPLETON
INC. INVESTOR SERVICES, INC.
BY: _______________________ _____________________
NAME: Deborah R. Gatzek Frank J. Isola
TITLE: Vice President and President
Assistant Secretary
Schedule A
FEES
Shareholder account maintenance (per annum,
pro-rated payable monthly)
Money Market Funds $ 18.00
Other Funds - Monthly Dividends $ 11.00
Other Funds - Less Frequent Dividends $ 10.00
Schedule B
OUT-OF-POCKET EXPENSES
The Investment Company shall reimburse FTIS monthly for the following
out-of-pocket expenses:
o postage, mailing and freight
o forms for shareholder transactions and
shareholder communications
o outgoing wire charges
o telephone
o ACH and Federal Reserve charges for check
clearance and wire transfers
o magnetic tape (or other means for storing
information electronically)
o retention of records
o microfilm/microfiche
o stationery for shareholder mailings
o insurance against loss of Share certificates
when in transit
o if applicable, terminals, transmitting lines and
any expenses incurred in connection with
such terminals and lines
o all other miscellaneous expenses reasonably
incurred by FTIS in the performance of its
obligations under the Agreement
o NSCC Networking/Commission Settlement Expenses
This Schedule B may be amended by FTIS upon not less than 30 days' written
notice to the Investment Company, subject to approval by the Board.
Schedule C
DUTIES
AS TRANSFER AGENT FOR THE INVESTMENT COMPANY, FTIS WILL:
o Upon receipt of proper authorization, record the issuance and sale of
Investment Company Shares in its transfer records in such names and
for such number of authorized but hitherto unissued Shares of the
Investment Company;
o Upon receipt of proper authorization, transfer ownership of record of
certificated or uncertificated Investment Company Shares whether now
outstanding or hereafter issued;
o Upon receipt of proper authorization, redeem Shares, debit shareholder
accounts and provide for payment to shareholders; and
o If the Investment Company issues certificated shares, upon receipt of
proper authorization, countersign as transfer agent and deliver
certificates upon issuance, countersign certificates to reflect
ownership transfers, and cancel certificates when redeemed.
AS SHAREHOLDER SERVICE AGENT FOR THE INVESTMENT COMPANY, FTIS WILL:
o Receive from the Investment Company, from the Investment Company's
Principal Underwriter or from a Shareholder, on a form acceptable to
FTIS, information necessary to record sales and redemptions and to
generate sale and/or redemption confirmations;
o Mail sale and/or redemption confirmations using standard forms;
o Accept and process cash payments from investors and their
broker-dealers or other agents, clear checks which represent
payments for the purchase of Shares;
o Support the use of automated systems for payment and other share
transactions, including NSCC Fund/Serv, PC Trades and other systems
which may be reasonably requested by FTIS customers;
o Keep records as necessary to implement any deferred sales charges,
exchange restrictions or other policies of the Investment Company
affecting share transactions, including without limitation any
restrictions or policies applicable to certain classes of shares, as
stated in the applicable prospectus;
o Requisition Shares in accordance with instructions of the Principal
Underwriter of the Shares of the Investment Company;
o Produce periodic reports reflecting the accounts receivable and the
paid pending (free stock) items;
o Open, maintain and close Shareholder accounts;
o Establish registration of ownership of Shares in accordance with
generally accepted form;
o Maintain records of (i) issued Shares and (ii) number of Shareholders
and their aggregate Shareholdings classified according to their
residence in each State of the United States or foreign country;
o Accept and process telephone exchanges and redemptions for Shares in
accordance with a Fund's Telephone Exchange and Redemption
Privileges as described in the Fund's current prospectus.
o Maintain and safeguard records for each Shareholder showing name(s),
address, number of any certificates issued, and number of Shares
registered in such name(s), together with continuous proof of the
outstanding Shares, and dealer identification, and reflecting all
current changes. On request, provide information as to an investor's
qualification for Cumulative Quantity Discount. Provide all accounts
with year-to-date and year-end historical confirmation statements;
o Provide on request a duplicate set of records for file maintenance in
the Investment Company's office;
o Provide for the proper allocation of proceeds of share sales to the
Investment Company and to the Principal Underwriter, in accordance
with the applicable prospectus;
o Redeem Shares and provide for the preparation and delivery of
liquidation proceeds;
o Provide for the processing of redemption checks, and maintain checking
account records;
o Exercise reasonable and good-faith business judgment in the
registration of Share transfers, pledges and releases from pledges
in accordance with the California Uniform Commercial Code - -
Investment Securities;
o From time to time make transfers of certificates for such Shares as
may be surrendered for transfer properly endorsed, and countersign
new certificates issued in lieu thereof;
o Upon receipt of proper documentation, place stop transfers, obtain
necessary insurance forms, and reissue replacement certificates
against lost, stolen or destroyed Share certificates;
o Check surrendered certificates for stop transfer restrictions.
Although FTIS cannot insure the genuineness of certificates
surrendered for cancellation, it will employ all due reasonable care
in deciding the genuineness of such certificates and the guarantor
of the signature(s) thereon;
o Cancel surrendered certificates and record and countersign new
certificates;
o Certify outstanding Shares to auditors;
o In connection with any meeting of Shareholders, upon receiving
appropriate detailed instructions and written materials prepared by
the Investment Company and proxy proofs checked by the Investment
Company, provide for: (a) the printing of proxy cards, (b) the
delivery to Shareholders of all reports, prospectuses, proxy cards
and related proxy materials of suitable design for enclosing, (c)
the receipt and tabulation of executed proxies, and (d) delivery of
a list of Shareholders for the meeting;
o Answer routine correspondence and telephone inquiries about individual
accounts. Prepare monthly reports for correspondence volume and
correspondence data necessary for the Investment Company's Semi-Annual
Report on Form N-SAR;
o Provide for the preparation and delivery of dealer commission
statements and checks;
o Maintain and furnish the Investment Company and its Shareholders
with such information as the Investment Company may reasonably
request for the purpose of compliance by the Investment Company with
the applicable tax and securities laws of applicable jurisdictions;
o Mail confirmations of transactions to investors and dealers in a
timely fashion;
o Provide for the payment or reinvestment of income dividends and/or
capital gains distributions to Shareholders of record, in accordance
with the Investment Company's and/or Shareholder's instructions,
provided that:
(a) The Investment Company shall notify FTIS in writing
promptly upon declaration of any such dividend and/or
distribution, and in any event at least forty-eight (48)
hours before the record date;
(b) Such notification shall include the declaration date,
the record date, the payable date, the rate, and, if
applicable, the reinvestment date and the reinvestment
price to be used; and
(c) Prior to the payable date, the Investment Company shall
furnish FTIS with sufficient fully and finally collected
funds to make such distribution;
o Prepare and file annual U.S. information returns of dividends and
capital gain distributions, gross redemption proceeds, foreign
person's U.S. source income, and other U.S. federal and state
information returns as required, and mail payee copies to
shareholders; report and pay U.S. backup withholding on all reportable
payments; report and pay U.S. federal income taxes withheld from
distributions and other payments made to nonresidents of the U.S.;
prepare and mail to shareholders any notice required by the Internal
Revenue Code as to taxable dividends, tax-exempt interest dividends,
realized net capital gains distributed and/ or retained, foreign taxes
paid and foreign source income distributed or deemed distributed, U.S.
source income and any tax withheld on such income, dividends received
deduction information, or other applicable tax information appropriate
for dissemination to shareholders of the Trust;
o Comply with all U.S. federal income tax requirements regarding the
collection of tax identification numbers and other required
shareholder certifications and information pertaining to shareholder
accounts; respond to all notifications from the U.S. Internal Revenue
Service regarding the application of the U.S. backup withholding
requirements including tax identification number solicitation
requirements;
o Prepare transfer journals;
o Set up wire order Share transactions on file;
o Provide for receipt of payment for Share transactions, and update the
transaction file;
o Produce delinquency and other trade file reports;
o Provide dealer commission statements and provide for payments thereof
for the Principal Underwriter;
o Sort and print shareholder information by state, social code, price
break, etc.; and
o Mail promptly the Statement of Additional Information of the
Investment Company to each Shareholder who requests it, at no cost to
the Shareholder.
In connection with the Investment Company's Systematic Withdrawal Plan,
FTIS will:
o Make payment of amounts withdrawn periodically by the Shareholder
pursuant to the Program by redeeming Shares, and confirm such
redemptions to the Shareholder; and
o Provide confirmations of all redemptions, reinvestment of dividends
and distributions, and any additional investments in the Program,
including a summary confirmation at the year-end.
Exhibit 10.17
FRANKLIN CUSTODIAN FUNDS, INC.
777 Mariners Island Blvd.
San Mateo, California 94404
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404
Re: Amended and Restated Distribution Agreement
Gentlemen:
We (the "Fund") are a corporation or business trust operating as an open-end
management investment company or "mutual fund", which is registered under the
Investment Company Act of 1940 (the "1940 Act") and whose shares are registered
under the Securities Act of 1933 (the "1933 Act"). We desire to issue one or
more series or classes of our authorized but unissued shares of capital stock or
beneficial interest (the "Shares") to authorized persons in accordance with
applicable Federal and State securities laws. The Fund's Shares may be made
available in one or more separate series, each of which may have one or more
classes.
You have informed us that your company is registered as a broker-dealer under
the provisions of the Securities Exchange Act of 1934 and that your company is a
member of the National Association of Securities Dealers, Inc. You have
indicated your desire to act as the exclusive selling agent and distributor for
the Shares. We have been authorized to execute and deliver this Distribution
Agreement ("Agreement") to you by a resolution of our Board of Directors or
Trustees ("Board") passed at a meeting at which a majority of Board members,
including a majority who are not otherwise interested persons of the Fund and
who are not interested persons of our investment adviser, its related
organizations or with you or your related organizations, were present and voted
in favor of the said resolution approving this Agreement.
1. Appointment of Underwriter. Upon the execution of this Agreement and in
consideration of the agreements on your part herein expressed and upon the terms
and conditions set forth herein, we hereby appoint you as the exclusive sales
agent for our Shares and agree that we will deliver such Shares as you may sell.
You agree to use your best efforts to promote the sale of Shares, but are not
obligated to sell any specific number of Shares.
However, the Fund and each series retain the right to make direct sales of
its Shares without sales charges consistent with the terms of the then current
prospectus and applicable law, and to engage in other legally authorized
transactions in its Shares which do not involve the sale of Shares to the
general public. Such other transactions may include, without limitation,
transactions between the Fund or any series or class and its shareholders only,
transactions involving the reorganization of the Fund or any series, and
transactions involving the merger or combination of the Fund or any series with
another corporation or trust.
2. Independent Contractor. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no authority
or power to obligate or bind us by your actions, conduct or contracts except
that you are authorized to promote the sale of Shares. You may appoint
sub-agents or distribute through dealers or otherwise as you may determine from
time to time, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase on our behalf or
otherwise act as our agent for any purpose.
3. Offering Price. Shares shall be offered for sale at a price equivalent
to the net asset value per share of that series and class plus any applicable
percentage of the public offering price as sales commission or as otherwise set
forth in our then current prospectus. On each business day on which the New York
Stock Exchange is open for business, we will furnish you with the net asset
value of the Shares of each available series and class which shall be determined
in accordance with our then effective prospectus. All Shares will be sold in the
manner set forth in our then effective prospectus and statement of additional
information, and in compliance with applicable law.
4. Compensation.
A. Sales Commission. You shall be entitled to charge a sales
commission on the sale or redemption, as appropriate, of each series and class
of each Fund's Shares in the amount of any initial, deferred or contingent
deferred sales charge as set forth in our then effective prospectus. You may
allow any sub-agents or dealers such commissions or discounts from and not
exceeding the total sales commission as you shall deem advisable, so long as any
such commissions or discounts are set forth in our current prospectus to the
extent required by the applicable Federal and State securities laws. You may
also make payments to sub-agents or dealers from your own resources, subject to
the following conditions: (a) any such payments shall not create any obligation
for or recourse against the Fund or any series or class, and (b) the terms and
conditions of any such payments are consistent with our prospectus and
applicable federal and state securities laws and are disclosed in our prospectus
or statement of additional information to the extent such laws may require.
B. Distribution Plans. You shall also be entitled to compensation for your
services as provided in any Distribution Plan adopted as to any series and class
of any Fund's Shares pursuant to Rule 12b-1 under the 1940 Act.
5. Terms and Conditions of Sales. Shares shall be offered for sale only in
those jurisdictions where they have been properly registered or are exempt from
registration, and only to those groups of people which the Board may from time
to time determine to be eligible to purchase such shares.
6. Orders and Payment for Shares. Orders for Shares shall be directed to
the Fund's shareholder services agent, for acceptance on behalf of the Fund. At
or prior to the time of delivery of any of our Shares you will pay or cause to
be paid to the custodian of the Fund's assets, for our account, an amount in
cash equal to the net asset value of such Shares. Sales of Shares shall be
deemed to be made when and where accepted by the Fund's shareholder services
agent. The Fund's custodian and shareholder services agent shall be identified
in its prospectus.
7. Purchases for Your Own Account. You shall not purchase our Shares for
your own account for purposes of resale to the public, but you may purchase
Shares for your own investment account upon your written assurance that the
purchase is for investment purposes and that the Shares will not be resold
except through redemption by us.
8. Sale of Shares to Affiliates. You may sell our Shares at net asset value
to certain of your and our affiliated persons pursuant to the applicable
provisions of the federal securities statutes and rules or regulations
thereunder (the "Rules and Regulations"), including Rule 22d-1 under the 1940
Act, as amended from time to time.
9. Allocation of Expenses. We will pay the expenses:
(a) Of the preparation of the audited and certified financial
statements of our company to be included in any Post-Effective
Amendments ("Amendments") to our Registration Statement under
the 1933 Act or 1940 Act, including the prospectus and
statement of additional information included therein;
(b) Of the preparation, including legal fees, and printing of all
Amendments or supplements filed with the Securities and
Exchange Commission, including the copies of the prospectuses
included in the Amendments and the first 10 copies of the
definitive prospectuses or supplements thereto, other than
those necessitated by your (including your "Parent's")
activities or Rules and Regulations related to your activities
where such Amendments or supplements result in expenses which
we would not otherwise have incurred;
(c) Of the preparation, printing and distribution of any reports or
communications which we send to our existing shareholders; and
(d) Of filing and other fees to Federal and State securities
regulatory authorities necessary to continue offering our
Shares.
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any supplements
thereto and statements of additional information which are
necessary to continue to offer our Shares;
(b) Of the preparation, excluding legal fees, and printing of all
Amendments and supplements to our prospectuses and statements
of additional information if the Amendment or supplement
arises from your (including your "Parent's") activities or
Rules and Regulations related to your activities and those
expenses would not otherwise have been incurred by us;
(c) Of printing additional copies, for use by you as sales
literature, of reports or other communications which we have
prepared for distribution to our existing shareholders; and
(d) Incurred by you in advertising, promoting and selling our Shares.
10. Furnishing of Information. We will furnish to you such information with
respect to each series and class of Shares, in such form and signed by such of
our officers as you may reasonably request, and we warrant that the statements
therein contained, when so signed, will be true and correct. We will also
furnish you with such information and will take such action as you may
reasonably request in order to qualify our Shares for sale to the public under
the Blue Sky Laws of jurisdictions in which you may wish to offer them. We will
furnish you with annual audited financial statements of our books and accounts
certified by independent public accountants, with semi-annual financial
statements prepared by us, with registration statements and, from time to time,
with such additional information regarding our financial condition as you may
reasonably request.
11. Conduct of Business. Other than our currently effective prospectus, you
will not issue any sales material or statements except literature or advertising
which conforms to the requirements of Federal and State securities laws and
regulations and which have been filed, where necessary, with the appropriate
regulatory authorities. You will furnish us with copies of all such materials
prior to their use and no such material shall be published if we shall
reasonably and promptly object.
You shall comply with the applicable Federal and State laws and
regulations where our Shares are offered for sale and conduct your affairs with
us and with dealers, brokers or investors in accordance with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
12. Redemption or Repurchase Within Seven Days. If Shares are tendered to
us for redemption or repurchase by us within seven business days after your
acceptance of the original purchase order for such Shares, you will immediately
refund to us the full sales commission (net of allowances to dealers or brokers)
allowed to you on the original sale, and will promptly, upon receipt thereof,
pay to us any refunds from dealers or brokers of the balance of sales
commissions reallowed by you. We shall notify you of such tender for redemption
within 10 days of the day on which notice of such tender for redemption is
received by us.
13. Other Activities. Your services pursuant to this Agreement shall not be
deemed to be exclusive, and you may render similar services and act as an
underwriter, distributor or dealer for other investment companies in the
offering of their shares.
14. Term of Agreement. This Agreement shall become effective on the date of
its execution, and shall remain in effect for a period of two (2) years. The
Agreement is renewable annually thereafter, with respect to the Fund or, if the
Fund has more than one series, with respect to each series, for successive
periods not to exceed one year (i) by a vote of (a) a majority of the
outstanding voting securities of the Fund or, if the Fund has more than one
series, of each series, or (b) by a vote of the Board, and (ii) by a vote of a
majority of the members of the Board who are not parties to the Agreement or
interested persons of any parties to the Agreement (other than as members of the
Board), cast in person at a meeting called for the purpose of voting on the
Agreement.
This Agreement may at any time be terminated by the Fund or by any
series without the payment of any penalty, (i) either by vote of the Board or by
vote of a majority of the outstanding voting securities of the Fund or any
series on 90 days' written notice to you; or (ii) by you on 90 days' written
notice to the Fund; and shall immediately terminate with respect to the Fund and
each series in the event of its assignment.
15. Suspension of Sales. We reserve the right at all times to suspend or
limit the public offering of Shares upon two days' written notice to you.
16. Miscellaneous. This Agreement shall be subject to the laws of the State
of California and shall be interpreted and construed to further promote the
operation of the Fund as an open-end investment company. This Agreement shall
supersede all Distribution Agreements and Amendments previously in effect
between the parties. As used herein, the terms "Net Asset Value," "Offering
Price," "Investment Company," "Open-End Investment Company," "Assignment,"
"Principal Underwriter," "Interested Person," "Parent," "Affiliated Person," and
"Majority of the Outstanding Voting Securities" shall have the meanings set
forth in the 1933 Act or the 1940 Act and the Rules and Regulations thereunder.
Nothing herein shall be deemed to protect you against any liability to us or to
our securities holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties hereunder, or by reason of your reckless disregard of your obligations
and duties hereunder.
If the foregoing meets with your approval, please acknowledge your acceptance by
signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
FRANKLIN CUSTODIAN FUNDS, INC.
By:_______________________________
Accepted:
Franklin/Templeton Distributors, Inc.
By:__________________________________
DATED: ______________
EXHIBIT 10.18
CLASS II DISTRIBUTION PLAN
I. Investment Company: FRANKLIN CUSTODIAN FUNDS, INC.
II. Fund and Class: GROWTH SERIES - CLASS II
III. Maximum Per Annum Rule 12b-1 Fees for Class II Shares
(as a percentage of average daily net assets of the class)
A. Distribution Fee: 0.75%
B. Service Fee: 0.25%
Preamble to Class II Distribution Plan
The following Distribution Plan (the "Plan") has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by the
Investment Company named above ("Investment Company") for the class II shares
(the "Class") of each Fund named above ("Fund"), which Plan shall take effect as
of the date class II shares are first offered (the "Effective Date of the
Plan"). The Plan has been approved by a majority of the Board of Directors or
Trustees of the Investment Company (the "Board"), including a majority of the
Board members who are not interested persons of the Investment Company and who
have no direct, or indirect financial interest in the operation of the Plan (the
"non-interested Board members"), cast in person at a meeting called for the
purpose of voting on such Plan.
In reviewing the Plan, the Board considered the schedule and nature of
payments and terms of the Management Agreement between the Investment Company
and Franklin Advisers, Inc. and the terms of the Underwriting Agreement between
the Investment Company and Franklin/Templeton Distributors, Inc.
("Distributors"). The Board concluded that the compensation of Advisers, under
the Management Agreement, and of Distributors, under the Underwriting Agreement,
was fair and not excessive. The approval of the Plan included a determination
that in the exercise of their reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plan will benefit
the Fund and its shareholders.
Distribution Plan
1. (a) The Fund shall pay to Distributors a quarterly fee not to exceed the
above-stated maximum distribution fee per annum of the Class' average daily net
assets represented by shares of the Class, as may be determined by the Board
from time to time.
(b) In addition to the amounts described in (a) above, the Fund shall
pay (i) to Distributors for payment to dealers or others, or (ii) directly to
others, an amount not to exceed the above-stated maximum service fee per annum
of the Class' average daily net assets represented by shares of the Class, as
may be determined by the Fund's Board from time to time, as a service fee
pursuant to servicing agreements which have been approved from time to time by
the Board, including the non-interested Board members.
2. (a) Distributors shall use the monies paid to it pursuant to Paragraph
1(a) above to assist in the distribution and promotion of shares of the Class.
Payments made to Distributors under the Plan may be used for, among other
things, the printing of prospectuses and reports used for sales purposes,
expenses of preparing and distributing sales literature and related expenses,
advertisements, and other distribution-related expenses, including a pro-rated
portion of Distributors' overhead expenses attributable to the distribution of
Class shares, as well as for additional distribution fees paid to securities
dealers or their firms or others who have executed agreements with the
Investment Company, Distributors or its affiliates, which form of agreement has
been approved from time to time by the Trustees, including the non-interested
trustees. In addition, such fees may be used to pay for advancing the commission
costs to dealers or others with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include, among
other things, assisting in establishing and maintaining customer accounts and
records; assisting with purchase and redemption requests; arranging for bank
wires; monitoring dividend payments from the Fund on behalf of customers;
forwarding certain shareholder communications from the Fund to customers;
receiving and answering correspondence; and aiding in maintaining the investment
of their respective customers in the Class. Any amounts paid under this
paragraph 2(b) shall be paid pursuant to a servicing or other agreement, which
form of agreement has been approved from time to time by the Board.
3. In addition to the payments which the Fund is authorized to make
pursuant to paragraphs 1 and 2 hereof, to the extent that the Fund, Advisers,
Distributors or other parties on behalf of the Fund, Advisers or Distributors
make payments that are deemed to be payments by the Fund for the financing of
any activity primarily intended to result in the sale of Class shares issued by
the Fund within the context of Rule 12b-1 under the Act, then such payments
shall be deemed to have been made pursuant to the Plan.
In no event shall the aggregate asset-based sales charges which include
payments specified in paragraphs 1 and 2, plus any other payments deemed to be
made pursuant to the Plan under this paragraph, exceed the amount permitted to
be paid pursuant to the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., Article III, Section 26(d).
4. Distributors shall furnish to the Board, for its review, on a quarterly
basis, a written report of the monies reimbursed to it and to others under the
Plan, and shall furnish the Board with such other information as the Board may
reasonably request in connection with the payments made under the Plan in order
to enable the Board to make an informed determination of whether the Plan should
be continued.
5. The Plan shall continue in effect for a period of more than one year
only so long as such continuance is specifically approved at least annually by
the Board, including the non-interested Board members, cast in person at a
meeting called for the purpose of voting on the Plan.
6. The Plan, and any agreements entered into pursuant to this Plan, may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of the Fund or by vote of a majority of the
non-interested Board members, on not more than sixty (60) days' written notice,
or by Distributors on not more than sixty (60) days' written notice, and shall
terminate automatically in the event of any act that constitutes an assignment
of the Management Agreement between the Fund and Advisers.
7. The Plan, and any agreements entered into pursuant to this Plan, may not
be amended to increase materially the amount to be spent for distribution
pursuant to Paragraph 1 hereof without approval by a majority of the Fund's
outstanding voting securities.
8. All material amendments to the Plan, or any agreements entered into
pursuant to this Plan, shall be approved by the non-interested Board members
cast in person at a meeting called for the purpose of voting on any such
amendment.
9. So long as the Plan is in effect, the selection and nomination of the
Fund's non-interested Board members shall be committed to the discretion of such
non-interested Board members.
This Plan and the terms and provisions thereof are hereby accepted and
agreed to by the Investment Company and Distributors as evidenced by their
execution hereof.
Date: __________________, 1995
Investment Company
By:________________________________
Franklin/Templeton Distributors, Inc.
By:________________________________
EXHIBIT 10.19
DEALER AGREEMENT
Effective: May 1, 1995
Dear Securities Dealer:
Franklin/Templeton Distributors, Inc. ("we" or "us") invites you to
participate in the distribution of shares of the Franklin and Templeton mutual
funds (the "Funds") for which we now or in the future serve as principal
underwriter, subject to the terms of this Agreement. We will notify you from
time to time of the Funds which are eligible for distribution and the terms of
compensation under this Agreement. This Agreement supersedes any prior dealer
agreements between us, as stated in paragraph 18, below.
1. Licensing.
(a) You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and are presently licensed to
the extent necessary by the appropriate regulatory agency of each state in which
you will offer and sell shares of the Funds. You agree that termination or
suspension of such membership with the NASD, or of your license to do business
by any state or federal regulatory agency, at any time shall terminate or
suspend this Agreement forthwith and shall require you to notify us in writing
of such action. If you are not a member of the NASD but are a dealer subject to
the laws of a foreign country, you agree to conform to the rules of fair
practice of such association. This Agreement is in all respects subject to Rule
26 of the Rules of Fair Practice of the NASD which shall control any provision
to the contrary in this Agreement.
(b) You agree to notify us immediately in writing if at any time you are not a
member in good standing of the Securities Investor Protection Corporation
("SIPC").
2. Sales of Fund Shares. You may offer and sell shares of each Fund and class
only at the public offering price which shall be applicable to, and in effect at
the time of, each transaction. The procedures relating to all orders and the
handling of them shall be subject to the terms of the then current prospectus
and statement of additional information (hereafter, the "prospectus") and new
account application, including amendments, for each such Fund, and our written
instructions from time to time. This Agreement is not exclusive, and either
party may enter into similar agreements with third parties.
3. Duties of Dealer: In General. You agree:
(a) To act as principal, or as agent on behalf of your customers, in all
transactions in shares of the Funds except as provided in paragraph 4 hereof.
You shall not have any authority to act as agent for the issuer (the Funds), for
the Principal Underwriter, or for any other dealer in any respect, nor will you
represent to any third party that you have such authority or are acting in such
capacity.
(b) To purchase shares only from us or from your customers.
(c) To enter orders for the purchase of shares of the Funds only from us and
only for the purpose of covering purchase orders you have already received from
your customers or for your own bona fide investment.
(d) To maintain records of all sales and redemptions of shares made through
you and to furnish us with copies of such records on request.
(e) To distribute prospectuses and reports to your customers in compliance
with applicable legal requirements, except to the extent that we expressly
undertake to do so on your behalf.
(f) That you will not withhold placing customers' orders for shares so as to
profit yourself as a result of such withholding or place orders for shares in
amounts just below the point at which sales charges are reduced so as to benefit
from a higher sales charge applicable to an amount below the breakpoint.
(g) That if any shares confirmed to you hereunder are repurchased or redeemed
by any of the Funds within seven business days after such confirmation of your
original order, you shall forthwith refund to us the full concession allowed to
you on such orders. We shall forthwith pay to the appropriate Fund our share, if
any, of the "charge" on the original sale and shall also pay to such Fund the
refund from you as herein provided. We shall notify you of such repurchase or
redemption within a reasonable time after settlement. Termination or
cancellation of this Agreement shall not relieve you or us from the requirements
of this subparagraph.
(h) That if payment for the shares purchased is not received within the time
customary or the time required by law for such payment, the sale may be canceled
forthwith without any responsibility or liability on our part or on the part of
the Funds, or at our option, we may sell the shares which you ordered back to
the Funds, in which latter case we may hold you responsible for any loss to the
Funds or loss of profit suffered by us resulting from your failure to make
payment as aforesaid. We shall have no liability for any check or other item
returned unpaid to you after you have paid us on behalf of a purchaser. We may
refuse to liquidate the investment unless we receive the purchaser's signed
authorization for the liquidation.
(i) That you shall assume responsibility for any loss to the Funds caused by a
correction made subsequent to trade date, provided such correction was not based
on any error, omission or negligence on our part, and that you will immediately
pay such loss to the Funds upon notification.
(j) That if on a redemption which you have ordered, instructions in proper
form, including outstanding certificates, are not received within the time
customary or the time required by law, the redemption may be canceled forthwith
without any responsibility or liability on our part or on the part of any Fund,
or at our option, we may buy the shares redeemed on behalf of the Fund, in which
latter case we may hold you responsible for any loss to the Fund or loss of
profit suffered by us resulting from your failure to settle the redemption.
4. Duties of Dealer: Retirement Accounts. In connection with orders for the
purchase of shares on behalf of an Individual Retirement Account, Self-Employed
Retirement Plan or other retirement accounts, by mail, telephone, or wire, you
shall act as agent for the custodian or trustee of such plans (solely with
respect to the time of receipt of the application and payments), and you shall
not place such an order until you have received from your customer payment for
such purchase and, if such purchase represents the first contribution to such a
plan, the completed documents necessary to establish the plan. You agree to
indemnify us and Franklin Templeton Trust Company and/or Templeton Funds Trust
Company as applicable for any claim, loss, or liability resulting from incorrect
investment instructions received from you which cause a tax liability or other
tax penalty.
5. Conditional Orders; Certificates. We will not accept from you any conditional
orders for shares of any of the Funds. Delivery of certificates for shares
purchased shall be made by the Funds only against constructive receipt of the
purchase price, subject to deduction for your concession and our portion of the
sales charge, if any, on such sale. No certificates will be issued unless
specifically requested.
6. Dealer Compensation.
(a) On each purchase of shares by you from us, the total sales charges and
your dealer concessions shall be as stated in each Fund's then current
prospectus, subject to NASD rules and applicable state and federal laws. Such
sales charges and dealer concessions are subject to reductions under a variety
of circumstances as described in the Funds' prospectuses. For an investor to
obtain these reductions, we must be notified at the time of the sale that the
sale qualifies for the reduced charge. If you fail to notify us of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither we nor any of the Funds will be liable for amounts necessary to
reimburse any investor for the reduction which should have been effected.
(b) In accordance with the Funds' prospectuses, we or our affiliates may, but
are not obligated to, make payments to dealers from our own resources as
compensation for certain sales which are made at net asset value and are not
subject to any contingent deferred sales charges ("Qualifying Sales"). If you
notify us of a Qualifying Sale, we may make a contingent advance payment up to
the maximum amount available for payment on the sale. If any of the shares
purchased in a Qualifying Sale are redeemed within twelve months of the end of
the month of purchase, we shall be entitled to recover any advance payment
attributable to the redeemed shares by reducing any account payable or other
monetary obligation we may owe to you or by making demand upon you for repayment
in cash. We reserve the right to withhold advances to any dealer, if for any
reason we believe that we may not be able to recover unearned advances from such
dealer. In addition, dealers will generally be required to enter into a
supplemental agreement with us with respect to such compensation and the
repayment obligation prior to receiving any payments.
7. Redemptions. Redemptions or repurchases of shares will be made at the net
asset value of such shares, less any applicable deferred sales or redemption
charges, in accordance with the applicable prospectuses. Except as permitted by
applicable law, you agree not to purchase any shares from your customers at a
price lower than the redemption or repurchase prices then computed by the Funds.
You shall, however, be permitted to sell shares for the account of the record
owner to the Funds at the repurchase price then currently in effect for such
shares and may charge the owner a fair commission for handling the transaction.
8. Exchanges. Telephone exchange orders will be effective only for shares in
plan balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. You may charge the shareholder a fair
commission for handling an exchange transaction. Exchanges from a Fund sold with
no sales charge to a Fund which carries a sales charge, and exchanges from a
Fund sold with a sales charge to a Fund which carries a higher sales charge may
be subject to a sales charge in accordance with the terms of each Fund's
prospectus. You will be obligated to comply with any additional exchange
policies described in each Fund's prospectus, including without limitation any
policy restricting or prohibiting "Timing Accounts" as therein defined.
9. Transaction Processing. All orders are subject to acceptance by us and by the
Fund or its transfer agent, and become effective only upon confirmation by us.
If required by law, each transaction shall be confirmed in writing on a fully
disclosed basis and if confirmed by us, a copy of each confirmation shall be
sent simultaneously to you if you so request. All sales are made subject to
receipt of shares by us from the Funds. We reserve the right in our discretion,
without notice, to suspend the sale of shares or withdraw the offering of shares
entirely. Telephone orders will be effected at the price(s) next computed on the
day they are received from you if, as set forth in each Fund's current
prospectus, they are received prior to the time the price of its shares is
calculated. Orders received after that time will be effected at the price(s)
computed on the next business day. All orders must be accompanied by payment in
U.S. dollars. Orders payable by check must be drawn payable in U.S. dollars on a
U.S. bank, for the full amount of the investment.
10. Multiple Classes. We may from time to time provide to you written compliance
guidelines or standards relating to the sale or distribution of Funds offering
multiple classes of shares with different sales charges and distribution-related
operating expenses. In addition, you will be bound by any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of mutual funds offering multiple classes of
shares.
11. Rule 12b-1 Plans. You are also invited to participate in all Plans adopted
by the Funds (the "Plan Funds") pursuant to Rule 12b-1 under the 1940 Act.
To the extent you provide administrative and other services, including, but
not limited to, furnishing personal and other services and assistance to your
customers who own shares of a Plan Fund, answering routine inquiries regarding a
Fund, assisting in changing account designations and addresses, maintaining such
accounts or such other services as a Fund may require, to the extent permitted
by applicable statutes, rules, or regulations, we shall pay you a Rule 12b-1
servicing fee. To the extent that you participate in the distribution of Fund
shares which are eligible for a Rule 12b-1 distribution fee, we shall also pay
you a Rule 12b-1 distribution fee. All Rule 12b-1 servicing and distribution
fees shall be based on the value of shares attributable to customers of your
firm and eligible for such payment, and shall be calculated on the basis and at
the rates set forth in the compensation schedule then in effect. Without prior
approval by a majority of the outstanding shares of a Fund, the aggregate annual
fees paid to you pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in each Fund's prospectus, which amount shall be a
specified percent of the value of the Fund's net assets held in your customers'
accounts which are eligible for payment pursuant to this Agreement (determined
in the same manner as each Fund uses to compute its net assets as set forth in
its effective Prospectus).
You shall furnish us and each Fund with such information as shall reasonably
be requested by the Boards of Directors, Trustees or Managing General Partners
(hereinafter referred to as "Directors") of such Funds with respect to the fees
paid to you pursuant to the Schedule. We shall furnish to the Boards of
Directors of the Plan Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plans and the purposes for which such
expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between us and the Plan Funds, and/or the management or administration agreement
between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and the Plan Funds. In the event of the termination of the Plans for
any reason, the provisions of this Agreement relating to the Plans will also
terminate.
Continuation of the Plans and provisions of this Agreement relating to such
Plans are conditioned on Rule 12b-1 Directors being ultimately responsible for
selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Boards of Directors are able to conclude that
the Plans will benefit the Plan Funds. Absent such yearly determination the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a Fund
pursuant to this Agreement shall be limited in all cases to the assets of such
Fund and no person shall seek satisfaction thereof from shareholders of a Fund.
You agree to waive payment of any amounts payable to you by us under a Fund's
Plan of Distribution pursuant to Rule 12b-1 until such time as we are in receipt
of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and us, insofar
as they relate to Plans, shall control over the provisions of this Agreement in
the event of any inconsistency.
12. Registration of Shares. Upon request, we shall notify you of the states or
other jurisdictions in which each Fund's shares are currently registered or
qualified for sale to the public. We shall have no obligation to register or
qualify, or to maintain registration or qualification of, Fund shares in any
state or other jurisdiction. We shall have no responsibility, under the laws
regulating the sale of securities in any U.S. or foreign jurisdiction, for the
qualification or status of persons selling Fund shares or for the manner of sale
of Fund shares. Except as stated in this paragraph, we shall not, in any event,
be liable or responsible for the issue, form, validity, enforceability and value
of such shares or for any matter in connection therewith, and no obligation not
expressly assumed by us in this Agreement shall be implied. Nothing in this
Agreement, however, shall be deemed to be a condition, stipulation or provision
binding any person acquiring any security to waive compliance with any provision
of the Securities Act of 1933, or of the rules and regulations of the Securities
and Exchange Commission, or to relieve the parties hereto from any liability
arising under the Securities Act of 1933.
13. Additional Registrations. If it is necessary to register or qualify the
shares in any foreign jurisdictions in which you intend to offer the shares of
any Funds, it will be your responsibility to arrange for and to pay the costs of
such registration or qualification; prior to any such registration or
qualification, you will notify us of your intent and of any limitations that
might be imposed on the Funds, and you agree not to proceed with such
registration or qualification without the written consent of the Funds and of
ourselves.
14. Fund Information. No person is authorized to give any information or make
any representations concerning shares of any Fund except those contained in the
Fund's current prospectus or in materials issued by us as information
supplemental to such prospectus. We will supply prospectuses, reasonable
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. You agree not to use other advertising or sales material
relating to the Funds except that which (a) conforms to the requirements of any
applicable laws or regulations of any government or authorized agency in the
U.S. or any other country, having jurisdiction over the offering or sale of
shares of the Funds, and (b) is approved in writing by us in advance of such
use. Such approval may be withdrawn by us in whole or in part upon notice to
you, and you shall, upon receipt of such notice, immediately discontinue the use
of such sales literature, sales material and advertising. You are not authorized
to modify or translate any such materials without our prior written consent.
15. Indemnification. You further agree to indemnify, defend and hold harmless
the Principal Underwriter, the Funds, their officers, directors and employees
from any and all losses, claims, liabilities and expenses arising out of (1) any
alleged violation of any statute or regulation (including without limitation the
securities laws and regulations of the United States or any state or foreign
country) or any alleged tort or breach of contract, in or related to the offer
and sale by you of shares of the Funds pursuant to this Agreement (except to the
extent that our negligence or failure to follow correct instructions received
from you is the cause of such loss, claim, liability or expense), (2) any
redemption or exchange pursuant to telephone instructions received from you or
your agent or employees, or (3) the breach by you of any of the terms and
conditions of this Agreement.
16. Termination; Succession; Amendment. Each party to this Agreement may cancel
its participation in this Agreement by giving written notice to the other
parties. Such notice shall be deemed to have been given and to be effective on
the date on which it was either delivered personally to the other parties or any
officer or member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other parties' Chief Legal Officers at the
addresses shown herein or in the most recent NASD Manual. This Agreement shall
terminate immediately upon the appointment of a Trustee under the Securities
Investor Protection Act or any other act of insolvency by you. The termination
of this Agreement by any of the foregoing means shall have no effect upon
transactions entered into prior to the effective date of termination. A trade
placed by you subsequent to your voluntary termination of this Agreement will
not serve to reinstate the Agreement. Reinstatement, except in the case of a
temporary suspension of a dealer, will only be effective upon written
notification by us. Unless terminated, this Agreement shall be binding upon each
party's successors or assigns. This Agreement may be amended by us at any time
by written notice to you and your placing of an order or acceptance of payments
of any kind after the effective date and receipt of notice of any such Amendment
shall constitute your acceptance of such Amendment.
17. Setoff; Dispute Resolution. Should any of your concession accounts with us
have a debit balance, we may offset and recover the amount owed from any other
account you have with us, without notice or demand to you. In the event of a
dispute concerning any provision of this Agreement, either party may require the
dispute to be submitted to binding arbitration under the commercial arbitration
rules of the NASD or the American Arbitration Association. Judgment upon any
arbitration award may be entered by any state or federal court having
jurisdiction. This Agreement shall be construed in accordance with the laws of
the State of California, not including any provision which would require the
general application of the law of another jurisdiction.
18. Acceptance; Cumulative Effect. This Agreement is cumulative and supersedes
any agreement previously in effect. It shall be binding upon the parties hereto
when signed by us and accepted by you. If you have a current dealer agreement
with us, your first trade or acceptance of payments from us after receipt of
this Agreement, as it may be amended pursuant to paragraph 16, above, shall
constitute your acceptance of its terms. Otherwise, your signature below shall
constitute your acceptance of its terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
- --------------------------------------------------------------------------------
Greg Johnson, President
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
415/312-2000
700 Central Avenue
St. Petersburg, Florida 33701-3628
813/823-8712
- --------------------------------------------------------------------------------
Dealer: If you have not previously signed a Dealer Agreement with us, please
complete and sign this section and return the original to us.
- --------------------------------------------------------------------------------
DEALER NAME
By:
- --------------------------------------------------------------------------------
(Signature)
Name:
- --------------------------------------------------------------------------------
Title:
Address:
- --------------------------------------------------------------------------------
Telephone:
NASD CRD
Franklin Templeton Dealer #
- --------------------------------------------------------------------------------
(Internal Use Only)
95.89/104 (05/95)
EXHIBIT 10.20
MUTUAL FUND PURCHASE AND SALES AGREEMENT
FOR ACCOUNTS OF BANK AND TRUST COMPANY CUSTOMERS
Effective: July 1, 1995
1. INTRODUCTION
The parties to this Agreement are a bank or trust company ("Bank") and
Franklin/Templeton Distributors, Inc. ("FTDI"). This Agreement sets forth the
terms and conditions under which FTDI will execute purchases and redemptions of
shares of the Franklin or Templeton mutual funds for which FTDI now or in the
future serves as principal underwriter ("Funds"), at the request of the Bank
upon the order and for the account of Bank's customers ("Customers"). In this
Agreement, "Customer" shall include the beneficial owners of an account and any
agent or attorney-in-fact duly authorized or appointed to act on the owners'
behalf with respect to the account. FTDI will notify Bank from time to time of
the Funds which are eligible for distribution and the terms of compensation
under this Agreement. This Agreement is not exclusive, and either party may
enter into similar agreements with third parties. This Agreement supersedes any
prior agreements between the parties, as stated in paragraph 6(j), below.
2. REPRESENTATIONS AND WARRANTIES OF BANK
Bank warrants and represents to FTDI and the Funds that:
a) Bank is a "bank" as defined in Section 3(a)(6) of the Securities and Exchange
Act of 1934, as amended (the "34 Act"):
"The term `bank' means (A) a banking institution organized under the laws
of the United States, (B) a member bank of the Federal Reserve System, (C) any
other banking institution, whether incorporated or not, doing business under the
law of any State or of the United States, a substantial portion of the business
of which consists of receiving deposits or exercising a fiduciary power similar
to those permitted to national banks under the authority of the Comptroller of
the Currency pursuant to the first section of Public Law 87-722 (12 U.S.C. 92a),
and which is supervised and examined by State or Federal authority having
supervision over banks, and which is not operated for the purpose of evading the
provisions of this title, and (D) a receiver, conservator, or other liquidating
agent of any institution or firm included in clauses (A), (B) or (C) of this
paragraph."
b) Bank is authorized to enter into this Agreement, and Bank's performance of
its obligations and receipt of consideration under this Agreement will not
violate any law, regulation, charter, agreement, or regulatory restriction to
which Bank is subject.
c) Bank has received all regulatory agency approvals and taken all legal and
other steps necessary for offering the services Bank will provide to Customers
in connection with this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL UNDERWRITER
FTDI warrants and represents to Bank that:
a) FTDI is a broker/dealer registered under the '34 Act.
b) FTDI is the principal underwriter of the Funds.
4. COVENANTS OF BANK
For each Transaction under this Agreement, Bank will:
a) be authorized to engage in the Transaction;
b) act as agent for the Customer;
c) act solely at the request of and for the account of the Customer;
d) not submit an order unless Bank has already received the order from
the Customer;
e) not submit a purchase order unless Bank has already delivered to the
Customer a copy of the then current prospectus for the Fund(s) whose
shares are to be purchased;
f) not withhold placing any Customer's order for the purpose of profiting
from the delay;
g) have no beneficial ownership of the securities in any purchase Transaction
(the Customer will have the full beneficial ownership), unless Bank is the
Customer (in which case, Bank will not engage in the Transaction unless the
Transaction is legally permissible for Bank); and
h) not accept or withhold any Fee otherwise allowed under Sections 5(d) and
(e) of this Agreement, if prohibited by the Employee Retirement Income
Security Act ("ERISA") or trust or similar laws to which Bank is subject,
in the case of purchases or redemptions (hereinafter, "Transactions") of
Fund shares involving retirement plans, trusts, or similar accounts.
i) maintain records of all sales and redemptions of shares made through Bank
and to furnish FTDI with copies of such records on request.
j) distribute prospectuses, statements of additional information and reports
to Bank's customers in compliance with applicable legal requirements,
except to the extent that FTDI expressly undertakes to do so on behalf of
Bank.
While this Agreement is in effect, Bank will:
k) not purchase any shares from any person at a price lower than the
redemption price then quoted by the applicable Fund;
l) repay FTDI the full Fee received by Bank under Sections 5(d) and (e) of
this Agreement, for any shares purchased under this Agreement which are
repurchased by the Fund within 7 business days after the purchase; in turn,
FTDI shall pay to the Fund the amount repaid by Bank and will notify Bank
of any such repurchase within a reasonable time;
m) in connection with orders for the purchase of shares on behalf of an
Individual Retirement Account, Self-Employed Retirement Plan or other
retirement accounts, by mail, telephone, or wire, Bank shall act as agent
for the custodian or trustee of such plans (solely with respect to the time
of receipt of the application and payments) and shall not place such an
order until Bank has received from its customer payment for such purchase
and, if such purchase represents the first contribution to such a plan, the
completed documents necessary to establish the plan. Bank agrees to
indemnify FTDI and Franklin Templeton Trust Company and/or Templeton Funds
Trust Company as applicable for any claim, loss, or liability resulting
from incorrect investment instructions received from Bank which cause a tax
liability or other tax penalty.
n) be responsible for compliance with all laws and regulations, including
those of the applicable federal and state bank regulatory authorities, with
regard to Bank and Bank's Customers; and
o) immediately notify FTDI in writing at the address given below, should Bank
cease to be a bank as set forth in Section 2(a) of this Agreement.
5. TERMS AND CONDITIONS FOR TRANSACTIONS
a) Price
Transaction orders received from Bank will be accepted only at the public
offering price and in compliance with procedures applicable to each order as set
forth in the then current prospectus and statement of additional information
(hereinafter, collectively, "prospectus") for the applicable Fund. All orders
must be accompanied by payment in U.S. dollars. Orders payable by check must be
drawn payable in U.S. dollars on a U.S. bank, for the full amount of the
investment. All sales are made subject to receipt of shares by FTDI from the
Funds. FTDI reserves the right in its discretion, without notice, to suspend the
sale of shares or withdraw the offering of shares entirely.
b) Orders and Confirmations
All purchase orders are subject to acceptance or rejection by FTDI and by
the Fund or its transfer agent at their sole discretion, and become effective
only upon confirmation by FTDI. Transaction orders shall be made using the
procedures and forms required by FTDI from time to time. Orders received on any
business day after the time for calculating the price of Fund shares as set
forth in each Fund's current prospectus will be effected at the price determined
on the next business day. A written confirming statement will be sent to Bank
and to Customer upon settlement of each Transaction.
c) Multiple Class Guidelines
FTDI may from time to time provide to Bank written compliance guidelines
or standards relating to the sale or distribution of Funds offering multiple
classes of shares with different sales charges and distribution-related
operating expenses. In addition, Bank will be bound by any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of mutual funds offering multiple classes of
shares.
d) Payments by Bank for Purchases
On the settlement date for each purchase, Bank shall either (i) remit the
full purchase price by wire transfer to an account designated by FTDI, or (ii)
following FTDI's procedures, wire the purchase price less the Fee allowed by
Section 5(e) of this Agreement. Twice monthly, FTDI will pay Bank Fees not
previously paid to or withheld by Bank. Each calendar month, FTDI, as
applicable, will prepare and mail an activity statement summarizing all
Transactions.
e) Fees and Payments
Where permitted by the prospectus for each Fund, a charge, concession, or
fee ("Fee") may be paid to Bank, related to services provided by Bank in
connection with Transactions. The amount of the Fee, if any, is set by the
relevant prospectus. Adjustments in the Fee are available for certain purchases,
and Bank is solely responsible for notifying FTDI when any purchase order is
qualified for such an adjustment. If Bank fails to notify FTDI of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither FTDI nor any of the Funds will be liable for amounts necessary
to reimburse any investor for the reduction which should have been effected.
In accordance with the Funds' prospectuses, FTDI or its affiliates may,
but are not obligated to, make payments from their own resources to banks or
dealers as compensation for certain sales which are made at net asset value and
are not subject to any contingent deferred sales charges ("Qualifying Sales").
If Bank notifies FTDI of a Qualifying Sale, FTDI may make a contingent advance
payment up to the maximum amount available for payment on the sale. If any of
the shares purchased in a Qualifying Sale are redeemed within twelve months of
the end of the month of purchase, FTDI shall be entitled to recover any advance
payment attributable to the redeemed shares by reducing any account payable or
other monetary obligation FTDI may owe to Bank or by making demand upon Bank for
repayment in cash. FTDI reserves the right to withhold advances to any bank or
dealer, if for any reason it believes that it may not be able to recover
unearned advances from such bank or dealer. In addition, banks and dealers will
generally be required to enter into a supplemental agreement with FTDI with
respect to such compensation and the repayment obligation prior to receiving any
payments.
f) Rule 12b-1 Plans
Bank is also invited to participate in all Plans adopted by the Funds
(the "Plan Funds") pursuant to Rule 12b-1 under the 1940 Act.
To the extent Bank provides administrative and other services, including,
but not limited to, furnishing personal and other services and assistance to
Bank's customers who own shares of a Plan Fund, answering routine inquiries
regarding a Fund, assisting in changing account designations and addresses,
maintaining such accounts or such other services as a Fund may require, to the
extent permitted by applicable statutes, rules, or regulations, FTDI shall pay
Bank Rule 12b-1 fees. All Rule 12b-1 fees shall be based on the value of shares
attributable to customers of Bank and eligible for such payment, and shall be
calculated on the basis and at the rates set forth in the compensation schedule
then in effect. Without prior approval by a majority of the outstanding shares
of a Fund, the aggregate annual fees paid to Bank pursuant to each Plan shall
not exceed the amounts stated as the "annual maximums" in each Fund's
prospectus, which amount shall be a specified percent of the value of the Fund's
net assets held in Bank's customers' accounts which are eligible for payment
pursuant to this Agreement (determined in the same manner as each Fund uses to
compute its net assets as set forth in its effective Prospectus).
Bank shall furnish FTDI and each Fund with such information as shall
reasonably be requested by the Board of Directors, Trustees or Managing General
Partners (hereinafter referred to as "Directors") of such Funds with respect to
the fees paid to Bank pursuant to the Schedule. FTDI shall furnish to the Boards
of Directors of the Plan Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plans and the purposes for which such
expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between FTDI and the Plan Funds, and/or the management or administration
agreement between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc.
or their affiliates and the Plan Funds. In the event of the termination of the
Plans for any reason, the provisions of this Agreement relating to the Plans
will also terminate.
Continuation of the Plans and provisions of this Agreement relating to
such Plans are conditioned on Rule 12b-1 Directors being ultimately responsible
for selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Boards of Directors are able to conclude that
the Plans will benefit the Plan Funds. Absent such yearly determination, the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a Fund
pursuant to this Agreement shall be limited in all cases to the assets of such
Fund and no person shall seek satisfaction thereof from shareholders of a Fund.
Bank agrees to waive payment of any amounts payable to Bank by FTDI under a
Fund's Plan of Distribution pursuant to Rule 12b-1 until such time as FTDI is in
receipt of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and FTDI,
insofar as they relate to Plans, shall control over the provisions of this
Agreement in the event of any inconsistency.
g) Other Distribution Services
From time to time, FTDI may offer telephone and other augmented services
in connection with Transactions under this Agreement. If Bank uses any such
service, Bank will be subject to the procedures applicable to the service,
whether or not Bank has executed any agreement required for the service.
h) Conditional Orders; Certificates
FTDI will not accept any conditional Transaction orders. Delivery of
certificates or confirmations for shares purchased shall be made by the Fund
conditional upon receipt of the purchase price, subject to deduction of any Fee.
No certificates will be issued unless specifically requested.
i) Cancellation of Orders
If payment for shares purchased is not received within the time customary
or the time required by law for such payment, the sale may be canceled without
notice or demand, and neither FTDI nor the Fund(s) shall have any responsibility
or liability for such a cancellation; alternatively, the unpaid shares may be
sold back to the Fund, and Bank shall be liable for any resulting loss to FTDI
or to the Fund(s). FTDI shall have no liability for any check or other item
returned unpaid to Bank after Bank has paid FTDI on behalf of a purchaser. FTDI
may refuse to liquidate the investment unless it receives the purchaser's signed
authorization for the liquidation.
j) Order Corrections
Bank shall assume responsibility for any loss to a Fund(s) caused by a
correction made subsequent to trade date, provided such correction was not based
on any error, omission or negligence on FTDI's part, and Bank will immediately
pay such loss to the Fund(s) upon notification.
k) Redemptions; Cancellation
Redemptions or repurchases of shares will be made at the net asset value
of such shares, less any applicable deferred sales or redemption charges, in
accordance with the applicable prospectuses. As agent, Bank may sell shares for
the account of the record owner to the Funds at the repurchase price then
currently in effect for such shares and may charge the owner a fair fee for
handling the transaction. If on a redemption which Bank has ordered,
instructions in proper form, including outstanding certificates, are not
received within the time customary or the time required by law, the redemption
may be canceled forthwith without any responsibility or liability on the part of
FTDI or any Fund, or at its option FTDI may buy the shares redeemed on behalf of
the Fund, in which latter case it may hold Bank responsible for any loss to the
Fund or loss of profit suffered by FTDI resulting from Bank's failure to settle
the redemption.
l) Exchanges
Telephone exchange orders will be effective only for shares in plan
balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. Bank may charge the shareholder a fair fee
for handling an exchange transaction. Exchanges from a Fund sold with no sales
charge to a Fund which carries a sales charge, and exchanges from a Fund sold
with a sales charge to a Fund which carries a higher sales charge may be subject
to a sales charge in accordance with the terms of each Fund's prospectus. Bank
will be obligated to comply with any additional exchange policies described in
each Fund's prospectus, including without limitation any policy restricting or
prohibiting "Timing Accounts" as therein defined.
m) Qualification of Shares; Indemnification
Upon request, FTDI shall notify Bank of the states or other jurisdictions
in which each Fund's shares are currently registered or qualified for sale to
the public. FTDI shall have no obligation to register or qualify, or to maintain
registration or qualification of, Fund shares in any state or other
jurisdiction. FTDI shall have no responsibility, under the laws regulating the
sale of securities in any U.S. or foreign jurisdiction, for the qualification or
status of persons selling Fund shares or for the manner of sale of Fund shares.
Except as stated in this paragraph, FTDI shall not, in any event, be liable or
responsible for the issue, form, validity, enforceability and value of such
shares or for any matter in connection therewith, and no obligation not
expressly assumed by FTDI in this Agreement shall be implied. If it is necessary
to register or qualify shares of any Fund in any foreign jurisdictions in which
Bank intends to offer such shares, it will be Bank's responsibility to arrange
for and to pay the costs of such registration or qualification; prior to any
such registration or qualification Bank will notify FTDI of its intent and of
any limitations that might be imposed on the Funds and Bank agrees not to
proceed with such registration or qualification without the written consent of
the Funds and of FTDI.
Bank further agrees to indemnify, defend and hold harmless the Principal
Underwriter, the Funds, their officers, directors and employees from any and all
losses, claims, liabilities and expenses, arising out of (1) any alleged
violation of any statute or regulation (including without limitation the
securities laws and regulations of the United States or any state or foreign
country) or any alleged tort or breach of contract, in or related to the offer
and sale by Bank of shares of the Funds pursuant to this Agreement (except to
the extent that FTDI's negligence or failure to follow correct instructions
received from Bank is the cause of such loss, claim, liability or expense), (2)
any redemption or exchange pursuant to telephone instructions received from Bank
or its agents or employees, or (3) the breach by Bank of any of the terms and
conditions of this Agreement.
However, nothing in this Agreement shall be deemed to be a condition,
stipulation, or provision binding any person acquiring any security to waive
compliance with any provision of the Securities Act of 1933, or of the rules and
regulations of the Securities and Exchange Commission, or to relieve the parties
hereto from any liability arising under the Securities Act of 1933.
n) Prospectus and Sales Materials; Limit on Advertising
No person is authorized to give any information or make any
representations concerning shares of any Fund except those contained in the
Fund's current prospectus or in materials issued by FTDI as information
supplemental to such prospectus. FTDI will supply prospectuses, reasonable
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. Bank agrees not to use other advertising or sales
material relating to the Funds except that which (a) conforms to the
requirements of any applicable laws or regulations of any government or
authorized agency in the U.S. or any other country, having jurisdiction over the
offering or sale of shares of the Funds, and (b) is approved in writing by FTDI
in advance of such use. Such approval may be withdrawn by FTDI in whole or in
part upon notice to Bank, and Bank shall, upon receipt of such notice,
immediately discontinue the use of such sales literature, sales material and
advertising. Bank is not authorized to modify or translate any such materials
without the prior written consent of FTDI.
o) Customer Information
(1) Definition. For purposes of this paragraph 5(h)(iv), `Customer
Information' means customer names and other identifying information pertaining
to Bank's mutual fund customers which is furnished by Bank to FTDI in the
ordinary course of business under this Agreement. Customer Information shall not
include any information obtained from other sources.
(2) Permitted Uses. FTDI may use Customer Information to fulfill its
obligations under this Agreement, the Distribution Agreements between the Funds
and FTDI, the Funds' prospectuses, or other duties imposed by law. In addition,
FTDI or its affiliates may use Customer Information in communications to
shareholders to market the Funds or other investment products or services,
including without limitation variable annuities, variable life insurance, and
retirement plans and related services. FTDI may also use Customer Information if
it obtains Bank's prior written consent.
(3) Prohibited Uses. Except as stated above, FTDI shall not disclose
Customer Information to third parties, and shall not use Customer Information in
connection with any advertising, marketing or solicitation of any products or
services, provided that Bank offers or soon expect to offer comparable products
or services to mutual fund customers and have so notified FTDI.
(4) Survival; Termination. The agreements described in this paragraph
5(h)(iv) shall survive the termination of this Agreement, but shall terminate as
to any account upon FTDI's receipt of valid notification of either the
termination of that account with Bank or the transfer of that account to another
bank or dealer.
6. GENERAL
a) Successors and Assignments
This Agreement binds Bank and FTDI and their respective heirs, successors
and assigns. Bank may not assign its right and duties under this Agreement
without the advance, written authorization of FTDI.
b) Paragraph Headings
The paragraph headings of this Agreement are for convenience only, and
shall not be deemed to define, limit, or describe the scope or intent of this
Agreement.
c) Severability
Should any provision of this Agreement be determined to be invalid or
unenforceable under any law, rule, or regulation, that determination shall not
affect the validity or enforceability of any other provision of this Agreement.
d) Waivers
There shall be no waiver of any provision of this Agreement except a
written waiver signed by Bank and FTDI. No written waiver shall be deemed a
continuing waiver or a waiver of any other provision, unless the waiver
expresses such intention.
e) Sole Agreement
This Agreement is the entire agreement of Bank and FTDI and supersedes
all oral negotiations and prior writings.
f) Governing Law
This Agreement shall be construed in accordance with the laws of the
State of California, not including any provision which would require the general
application of the law of another jurisdiction, and shall be binding upon the
parties hereto when signed by FTDI and accepted by Bank, either by Bank's
signature in the space provided below or by Bank's first trade entered after
receipt of this Agreement.
g) Arbitration
Should any of Bank's concession accounts with FTDI have a debit balance,
FTDI may offset and recover the amount owed from any other account Bank has with
FTDI, without notice or demand to Bank. Either party may submit any dispute
under this Agreement to binding arbitration under the commercial arbitration
rules of the American Arbitration Association. Judgment upon any arbitration
award may be entered by any state or federal court having jurisdiction.
h) Amendments
FTDI may amend this Agreement at any time by depositing a written notice
of the amendment in the U.S. mail, first class postage pre-paid, addressed to
Bank's address given below. Bank's placement of any Transaction order or
acceptance of any payments after the effective date and receipt of notice of any
such amendment shall constitute Bank's acceptance of the amendment.
i) Term and Termination
This Agreement shall continue in effect until terminated. FTDI or Bank
may terminate this Agreement at any time by written notice to the other, but
such termination shall not affect the payment or repayment of Fees on
Transactions prior to the termination date. Termination also will not affect the
indemnities given under this Agreement.
j) Acceptance; Cumulative Effect
This Agreement is cumulative and supersedes any agreement previously in
effect. It shall be binding upon the parties hereto when signed by FTDI and
accepted by Bank. If Bank has a current agreement with FTDI, Bank's first trade
or acceptance of payments from FTDI after receipt of this Agreement, as it may
be amended pursuant to paragraph 6(h), above, shall constitute Bank's acceptance
of the terms of this Agreement. Otherwise, Bank's signature below shall
constitute Bank's acceptance of these terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
- --------------------------------------------------------------------------------
Greg Johnson, President
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
415/312-2000
700 Central Avenue
St. Petersburg, Florida 33701-3628
813/823-8712
- --------------------------------------------------------------------------------
To the Bank or Trust Company: If you have not previously signed an agreement
with us for the sale of mutual fund shares to your customers, please complete
and sign this section and return the original to us.
BANK or TRUST COMPANY
- --------------------------------------------------------------------------------
(Firm's name)
By:
- --------------------------------------------------------------------------------
(Signature)
Name:
- --------------------------------------------------------------------------------
Title:
Address:
Telephone:
#
95.89/108(06/95)
EXHIBIT 10.21
FRANKLIN VALUE INVESTORS TRUST
on behalf of
FRANKLIN MICROCAP VALUE FUND
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between Franklin Value Investors Trust, a
Massachusetts business trust (the "Trust"), on behalf of Franklin MicroCap Value
Fund (the "Fund"), a series of the Trust, and FRANKLIN ADVISERS, INC., a
California corporation, (the "Manager").
WHEREAS, the Trust has been organized and intends to operate as an
investment company registered under the Investment Company Act of 1940 (the
"1940 Act") for the purpose of investing and reinvesting its assets in
securities, as set forth in its Agreement and Declaration of Trust, its By-Laws
and its Registration Statements under the 1940 Act and the Securities Act of
1933, all as heretofore and hereafter amended and supplemented; and the Trust
desires to avail itself of the services, information, advice, assistance and
facilities of an investment manager and to have an investment manager perform
various management, statistical, research, investment advisory and other
services for the Fund; and,
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, is engaged in the business of rendering
management, investment advisory, counseling and supervisory services to
investment companies and other investment counseling clients, and desires to
provide these services to the Fund.
NOW THEREFORE, in consideration of the terms and conditions hereinafter set
forth, it is mutually agreed as follows:
l. Employment of the Manager. The Trust hereby employs the Manager to
manage the investment and reinvestment of the Fund's assets and to administer
its affairs, subject to the direction of the Board of Trustees and the officers
of the Trust, for the period and on the terms hereinafter set forth. The Manager
hereby accepts such employment and agrees during such period to render the
services and to assume the obligations herein set forth for the compensation
herein provided. The Manager shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Fund or the Trust in any way or otherwise be deemed an agent of the Fund or the
Trust.
2. Obligations of and Services to be Provided by the Manager. The Manager
undertakes to provide the services hereinafter set forth and to assume the
following obligations:
A. Administrative Services. The Manager shall furnish to the Fund
adequate (i) office space, which may be space within the offices of the Manager
or in such other place as may be agreed upon from time to time, (ii) office
furnishings, facilities and equipment as may be reasonably required for managing
the affairs and conducting the business of the Fund, including conducting
correspondence and other communications with the shareholders of the Fund,
maintaining all internal bookkeeping, accounting and auditing services and
records in connection with the Fund's investment and business activities. The
Manager shall employ or provide and compensate the executive, secretarial and
clerical personnel necessary to provide such services. The Manager shall also
compensate all officers and employees of the Trust who are officers or employees
of the Manager or its affiliates.
B. Investment Management Services.
(a) The Manager shall manage the Fund's assets subject to and in
accordance with the investment objectives and policies of the Fund and any
directions which the Trust's Board of Trustees may issue from time to time. In
pursuance of the foregoing, the Manager shall make all determinations with
respect to the investment of the Fund's assets and the purchase and sale of its
investment securities, and shall take such steps as may be necessary to
implement the same. Such determinations and services shall include determining
the manner in which any voting rights, rights to consent to corporate action and
any other rights pertaining to the Fund's investment securities shall be
exercised. The Manager shall render or cause to be rendered regular reports to
the Trust, at regular meetings of its Board of Trustees and at such other times
as may be reasonably requested by the Trust's Board of Trustees, of (i) the
decisions made with respect to the investment of the Fund's assets and the
purchase and sale of its investment securities, (ii) the reasons for such
decisions and (iii) the extent to which those decisions have been implemented.
(b) The Manager, subject to and in accordance with any directions
which the Trust's Board of Trustees may issue from time to time, shall place, in
the name of the Fund, orders for the execution of the Fund's securities
transactions. When placing such orders, the Manager shall seek to obtain the
best net price and execution for the Fund, but this requirement shall not be
deemed to obligate the Manager to place any order solely on the basis of
obtaining the lowest commission rate if the other standards set forth in this
section have been satisfied. The parties recognize that there are likely to be
many cases in which different brokers are equally able to provide such best
price and execution and that, in selecting among such brokers with respect to
particular trades, it is desirable to choose those brokers who furnish research,
statistical, quotations and other information to the Fund and the Manager in
accordance with the standards set forth below. Moreover, to the extent that it
continues to be lawful to do so and so long as the Board of Trustees determines
that the Fund will benefit, directly or indirectly, by doing so, the Manager may
place orders with a broker who charges a commission for that transaction which
is in excess of the amount of commission that another broker would have charged
for effecting that transaction, provided that the excess commission is
reasonable in relation to the value of "brokerage and research services" (as
defined in Section 28(e) (3) of the Securities Exchange Act of 1934) provided by
that broker.
Accordingly, the Trust and the Manager agree that the Manager shall select
brokers for the execution of the Fund's transactions from among:
(i) Those brokers and dealers who provide quotations and other services to
the Fund, specifically including the quotations necessary to determine
the Fund's net assets, in such amount of total brokerage as may
reasonably be required in light of such services; and
(ii) Those brokers and dealers who supply research, statistical and other
data to the Manager or its affiliates which the Manager or its
affiliates may lawfully and appropriately use in their investment
advisory capacities, which relate directly to securities, actual or
potential, of the Fund, or which place the Manager in a better
position to make decisions in connection with the management of the
Fund's assets and securities, whether or not such data may also be
useful to the Manager and its affiliates in managing other portfolios
or advising other clients, in such amount of total brokerage as may
reasonably be required. Provided that the Trust's officers are
satisfied that the best execution is obtained, the sale of shares of
the Fund may also be considered as a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions.
(c) When the Manager has determined that the Fund should tender securities
pursuant to a "tender offer solicitation," Franklin/Templeton Distributors, Inc.
("Distributors") shall be designated as the "tendering dealer" so long as it is
legally permitted to act in such capacity under the federal securities laws and
rules thereunder and the rules of any securities exchange or association of
which Distributors may be a member. Neither the Manager nor Distributors shall
be obligated to make any additional commitments of capital, expense or personnel
beyond that already committed (other than normal periodic fees or payments
necessary to maintain its corporate existence and membership in the National
Association of Securities Dealers, Inc.) as of the date of this Agreement. This
Agreement shall not obligate the Manager or Distributors (i) to act pursuant to
the foregoing requirement under any circumstances in which they might reasonably
believe that liability might be imposed upon them as a result of so acting, or
(ii) to institute legal or other proceedings to collect fees which may be
considered to be due from others to it as a result of such a tender, unless the
Trust on behalf of the Fund shall enter into an agreement with the Manager
and/or Distributors to reimburse them for all such expenses connected with
attempting to collect such fees, including legal fees and expenses and that
portion of the compensation due to their employees which is attributable to the
time involved in attempting to collect such fees.
(d) The Manager shall render regular reports to the Trust, not more
frequently than quarterly, of how much total brokerage business has been placed
by the Manager, on behalf of the Fund, with brokers falling into each of the
categories referred to above and the manner in which the allocation has been
accomplished.
(e) The Manager agrees that no investment decision will be made
or influenced by a desire to provide brokerage for allocation in accordance with
the foregoing, and that the right to make such allocation of brokerage shall not
interfere with the Manager's paramount duty to obtain the best net price and
execution for the Fund.
C. Provision of Information Necessary for Preparation of Securities
Registration Statements, Amendments and Other Materials. The Manager, its
officers and employees will make available and provide accounting and
statistical information required by the Fund in the preparation of registration
statements, reports and other documents required by federal and state securities
laws and with such information as the Fund may reasonably request for use in the
preparation of such documents or of other materials necessary or helpful for the
underwriting and distribution of the Fund's shares.
D. Other Obligations and Services. The Manager shall make its officers and
employees available to the Board of Trustees and officers of the Trust for
consultation and discussions regarding the administration and management of the
Fund and its investment activities.
3. Expenses of the Fund. It is understood that the Fund will pay all of its
own expenses other than those expressly assumed by the Manager herein, which
expenses payable by the Fund shall include:
A. Fees and expenses paid to the Manager as provided herein;
B. Expenses of all audits by independent public accountants;
C. Expenses of transfer agent, registrar, custodian, dividend disbursing
agent and shareholder record-keeping services, including the expenses of issue,
repurchase or redemption of its shares;
D. Expenses of obtaining quotations for calculating the value of the Fund's
net assets;
E. Salaries and other compensations of executive officers of the Trust who
are not officers, directors, stockholders or employees of the Manager or its
affiliates;
F. Taxes levied against the Fund;
G. Brokerage fees and commissions in connection with the purchase and sale
of securities for the Fund;
H. Costs, including the interest expense, of borrowing money;
I. Costs incident to meetings of the Board of Trustees and shareholders of
the Fund, reports to the Fund's shareholders, the filing of reports with
regulatory bodies and the maintenance of the Fund's and the Trust's legal
existence;
J. Legal fees, including the legal fees related to the registration and
continued qualification of the Fund's shares for sale;
K. Trustees' fees and expenses to trustees who are not directors, officers,
employees or stockholders of the Manager or any of its affiliates;
L. Costs and expense of registering and maintaining the registration of the
Fund and its shares under federal and any applicable state laws; including the
printing and mailing of prospectuses to its shareholders;
M. Trade association dues; and
N. The Fund's pro rata portion of fidelity bond, errors and omissions, and
trustees and officer liability insurance premiums.
4. Compensation of the Manager. The Fund shall pay a management fee in cash
to the Manager based upon a percentage of the value of the Fund's net assets,
calculated as set forth below, as compensation for the services rendered and
obligations assumed by the Manager, during the preceding month, on the first
business day of the month in each year.
A. For purposes of calculating such fee, the value of the net assets
of the Fund shall be determined in the same manner as the Fund uses to compute
the value of its net assets in connection with the determination of the net
asset value of its shares, all as set forth more fully in the Fund's current
prospectus and statement of additional information. The rate of the management
fee payable by the Fund shall be calculated daily at the rate of .75% (.75 of
1%) of the Fund's average daily net assets.
B. The management fee payable by the Fund shall be reduced or
eliminated to the extent that Distributors has actually received cash payments
of tender offer solicitation fees less certain costs and expenses incurred in
connection therewith and to the extent necessary to comply with the limitations
on expenses which may be borne by the Fund as set forth in the laws, regulations
and administrative interpretations of those states in which the Fund's shares
are registered. The Manager may waive all or a portion of its fees provided for
hereunder and such waiver shall be treated as a reduction in purchase price of
its services. The Manager shall be contractually bound hereunder by the terms of
any publicly announced waiver of its fee, or any limitation of the Fund's
expenses, as if such waiver or limitation were fully set forth herein.
C. If this Agreement is terminated prior to the end of any month,
the accrued management fee shall be paid to the date of termination.
5. Activities of the Manager. The services of the Manager to the Fund
hereunder are not to be deemed exclusive, and the Manager and any of its
affiliates shall be free to render similar services to others. Subject to and in
accordance with the Agreement and Declaration of Trust and By-Laws of the Trust
and Section 10(a) of the 1940 Act, it is understood that trustees, officers,
agents and shareholders of the Trust are or may be interested in the Manager or
its affiliates as directors, officers, agents or stockholders; that directors,
officers, agents or stockholders of the Manager or its affiliates are or may be
interested in the Trust as trustees, officers, agents, shareholders or
otherwise; that the Manager or its affiliates may be interested in the Fund as
shareholders or otherwise; and that the effect of any such interests shall be
governed by said Agreement and Declaration of Trust, By-Laws and the 1940 Act.
6. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of obligations or duties hereunder on the part of the
Manager, the Manager shall not be subject to liability to the Trust or the Fund
or to any shareholder of the Fund for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security by the Fund.
B. Notwithstanding the foregoing, the Manager agrees to reimburse the
Trust for any and all costs, expenses, and counsel and trustees' fees reasonably
incurred by the Trust in the preparation, printing and distribution of proxy
statements, amendments to its Registration Statement, holdings of meetings of
its shareholders or trustees, the conduct of factual investigations, any legal
or administrative proceedings (including any applications for exemptions or
determinations by the Securities and Exchange Commission) which the Trust incurs
as the result of action or inaction of the Manager or any of its affiliates or
any of their officers, directors, employees or stockholders where the action or
inaction necessitating such expenditures (i) is directly or indirectly related
to any transactions or proposed transaction in the stock or control of the
Manager or its affiliates (or litigation related to any pending or proposed or
future transaction in such shares or control) which shall have been undertaken
without the prior, express approval of the Trust's Board of Trustees; or, (ii)
is within the control of the Manager or any of its affiliates or any of their
officers, directors, employees or stockholders. The Manager shall not be
obligated pursuant to the provisions of this Subparagraph 6(B), to reimburse the
Trust for any expenditures related to the institution of an administrative
proceeding or civil litigation by the Trust or a shareholder seeking to recover
all or a portion of the proceeds derived by any stockholder of the Manager or
any of its affiliates from the sale of his shares of the Manager, or similar
matters. So long as this Agreement is in effect, the Manager shall pay to the
Trust the amount due for expenses subject to this Subparagraph 6(B) within 30
days after a bill or statement has been received by the Manager therefor. This
provision shall not be deemed to be a waiver of any claim the Trust may have or
may assert against the Manager or others for costs, expenses or damages
heretofore incurred by the Trust or for costs, expenses or damages the Trust may
hereafter incur which are not reimbursable to it hereunder.
C. No provision of this Agreement shall be construed to protect any
trustee or officer of the Trust, or director or officer of the Manager, from
liability in violation of Sections 17(h) and (i) of the 1940 Act.
7. Renewal and Termination.
A. This Agreement shall become effective on the date written below and
shall continue in effect for two (2) years thereafter, unless sooner terminated
as hereinafter provided and shall continue in effect thereafter for periods not
exceeding one (1) year so long as such continuation is approved at least
annually (i) by a vote of a majority of the outstanding voting securities of
each Fund or by a vote of the Board of Trustees of the Trust, and (ii) by a vote
of a majority of the Trustees of the Trust who are not parties to the Agreement
(other than as Trustees of the Trust), cast in person at a meeting called for
the purpose of voting on the Agreement.
B. This Agreement:
(i) may at any time be terminated without the payment of any
penalty either by vote of the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to the Manager;
(ii) shall immediately terminate with respect to the Fund
in the event of its assignment; and
(iii) may be terminated by the Manager on 60 days' written
notice to the Fund.
C. As used in this Paragraph the terms "assignment," "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the meanings set forth for any such terms in the 1940 Act.
D. Any notice under this Agreement shall be given in writing addressed
and delivered, or mailed post-paid, to the other party at any office of such
party.
8. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and effective on the 12th day of December, 1995.
FRANKLIN VALUE INVESTORS TRUST
By:
FRANKLIN ADVISERS, INC.
By:
EXHIBIT 10.22
SUB-DISTRIBUTION AGREEMENT
THIS AGREEMENT, made as of the ____ day of _____________, 1995 by and
between TEMPLETON, GALBRAITH & HANSBERGER LTD., a company incorporated under the
laws of the Commonwealth of the Bahamas, with its principal office in Nassau,
Bahamas, which serves as Principal Distributor (the "Principal Distributor") of
the Templeton Global Strategy SICAV, a Societe d'investissement a capital
variable, incorporated under the laws of the Grand-Duchy of Luxembourg, with its
registered office at Centre Neuberg, 30 Grand-rue, Luxembourg (hereinafter the
"SICAV") and __________________ who shall serve as a sub-distributor for sales
of shares of the SICAV (the "Sub-Distributor"). The SICAV is offering its shares
("Shares") to the public through the Principal Distributor in accordance with
the terms and conditions contained in the Prospectus of the SICAV. The term
"Prospectus" used herein refers to the Prospectus on file with the Institut
Monetaire Luxembourgois as such may be supplemented or amended for use in any
given jurisdiction. In connection with the foregoing, the Sub-Distributor may
serve as a participating sub-distributor for the Principal Distributor. In this
capacity, Sub-Distributor accepts orders for the purchase or redemption of
Shares, responds to shareholder inquiries and performs other related functions.
In addition, the Sub-Distributor is charged with the obligation to render
ongoing assistance to those clients from which it has procured orders. All of
the functions of the Sub-Distributor will be performed on the following terms
and conditions:
1. APPOINTMENT. Principal Distributor hereby appoints Sub-Distributor as a
nonexclusive distributor for the sale of the Shares in compliance with all
applicable laws and prior qualification of SICAV Shares for sale in each
particular jurisdiction where necessary, subject in all cases to the delivery of
the Prospectus.
2. MANDATE. Sub-Distributor agrees to use its best efforts to bring about
and maintain a broad distribution of the Shares among bona fide investors
(except United States citizens and residents).
3. SALES OF SHARES. All of the shares sold under this Agreement shall be
sold only at the offering price in effect at the time of such sale as described
in the current Prospectus.
4. LIMITATION OF AUTHORITY. No person is authorized to make any
representations concerning the SICAV or the Shares except those contained in the
Prospectus and in such printed information as the Principal Distributor may
subsequently prepare or approve in writing without the express prior written
approval of the Principal Distributor. No person is authorized to distribute any
sales material relating to the SICAV without the express prior written approval
of such sales material by the Principal Distributor.
5. COMPENSATION. As compensation for such services hereunder with respect
to sales of "Class A" Shares, the Principal Distributor shall, during the period
of effectiveness of this Agreement, (i) re-allow to Sub-Distributor xx percent
(xx%) of the applicable initial sales charges as set forth in Addendum 1 to this
Agreement which is incorporated by reference herein and (ii) pay Sub-Distributor
a shareholder processing and servicing fee computed at an annual rate of the
value of the average daily net assets representing "Class A" Shares of each
SICAV sub-fund maintained by Sub-Distributor's customers in shareholder accounts
with the custodian/transfer agent of the SICAV during the period of
effectiveness of this Agreement and as set forth in Addendum 1. Such payments
shall be made semi-annually in arrears.
As compensation for such services hereunder with respect to sales of
"Class B" Shares, the Principal Distributor shall, during the period of
effectiveness of this Agreement, (i) pay to Sub-Distributor the applicable
commissions as set forth in Addendum 2 which is incorporated by reference herein
and (ii) pay Sub-Distributor a shareholder processing and servicing fee computed
at an annual rate of the value of the average daily net assets representing
"Class B" Shares of each SICAV sub-fund maintained by Sub-Distributor's
customers in shareholder accounts with the custodian/transfer agent of the SICAV
during the period of effectiveness of this Agreement and as set forth in
Addendum 2. Such payments shall be made semi-annually in arrears commencing with
the thirteenth (13th) month after the effective date of this Agreement. No such
shareholder processing and servicing fee will be payable with respect to the
initial twelve (12) months after the effective date of this Agreement.
Sales commissions are subject to change without notice by Principal
Distributor. Orders accepted by Sub-Distributor shall be accepted by Principal
Distributor at the address of the SICAV. All orders are subject to acceptance by
Principal Distributor, and the Board of Directors of the SICAV reserves the
right in its sole discretion to reject any order. Orders shall be placed with
the SICAV in immediately available U.S. Dollar, Deutsche Mark or Swiss Franc
funds according to the terms of the Prospectus and accompanied by such customer
information as Principal Distributor may from time to time require.
6. PROSPECTUS AND REPORTS. Sub-Distributor agrees to comply with all
applicable laws and regulations governing the distribution of Prospectuses to
persons to whom Sub-Distributor offers Shares. Sub-Distributor further agrees to
deliver promptly upon Principal Distributor's request and in the event of
Principal Distributor not so delivering, copies of any amended Prospectus to
purchasers whose Shares Sub-Distributor is holding as record owner and to
deliver in the event of Principal Distributor not so delivering to such persons
copies of the SICAV's annual and interim reports and other materials as required
from time to time by the SICAV. Principal Distributor agrees to furnish to
Sub-Distributor as many copies of each Prospectus, annual and interim reports
and other available printed materials as Sub-Distributor may reasonably request.
7. QUALIFICATION TO ACT. Sub-Distributor agrees that it will not offer
Shares to persons in any jurisdiction in which Sub-Distributor or the SICAV may
not lawfully make such offer due to the fact that Sub-Distributor or the SICAV
may not have registered under, or is not exempt from, the applicable
registration, qualification or licensing requirements of such jurisdiction.
Sub-Distributor also agrees that it will place orders immediately upon receipt
and will not withhold any order so as to profit therefrom. In determining the
amounts payable to Sub-Distributor hereunder, Principal Distributor reserves the
right to exclude any sales that Principal Distributor may reasonably determine
were not made in accordance with the terms of the Prospectus or provisions of
this Agreement.
8. LIMITATION ON SALES. (a) The Shares are not registered under the
Securities Act of 1933, and the SICAV is not registered under the Investment
Company Act of 1940. Neither Sub-Distributor nor any person acting on its
behalf, including any affiliate or sales or marketing agent, will offer to sell,
offer for sale or sell, directly or indirectly, or solicit any offer to buy any
Shares in the United States of America (including its territories and
possessions), or Canada, or to or for the benefit of U.S. persons, as described
in the Prospectus and in Addendum 3 herein, without the prior written consent of
the SICAV and the Principal Distributor. Sub-Distributor shall obtain written
assurances from each subscriber for Shares that such subscriber is not a United
States person as described in the Prospectus and Addendum 3 herein, and
Sub-Distributor shall obtain from each subscriber who is offered shares by
Sub-Distributor a certificate as to the matters set forth in Addendum 3 hereto.
(b) The Sub-Distributor shall offer or make available Shares only:
(i) to Sub-Distributor's customers or clients in circumstances
where the Sub-Distributor has satisfied itself that the due diligence
required pursuant to IML Circular 94/112 (the "Circular") as may be
amended from time to time has been carried out;
(ii) when Sub-Distributor has no reason to know or suspect that
the source of the funds would not comply with the requirements of the
Circular and the European Communities Council Directive 91/308/EEC (the
"Directive");
(iii) when Sub-Distributor is aware of the identity of such
customers or clients; and
(iv) when Sub-Distributor has made available to its clients and
received from those clients a fully completed Addendum 3 to this Agreement
which Addendum must accompany each and every Application Form that is
transmitted to the SICAV.
(c) The Sub-Distributor agrees to comply with all laws, regulations
and requirements that apply or, in any material way, relate to its performance
under this Agreement, including but not limited to all laws, regulations and
requirements of the United States of America applicable to the Sub-Distributor
regarding ascertaining, documenting and keeping records of the identity of each
customer of Sub-Distributor and monitoring and reporting on transactions of each
such customer.
(d) Owing to money laundering regulations passed in financial centers
around the world, Sub-Distributor further agrees to use due diligence to learn
the essential facts relative to each customer (whether a natural person or
entity) for whom Sub-Distributor accepts or processes orders for the purchase of
the Shares. In particular, Sub-Distributor shall not open an account on behalf
of or accept or process orders for the purchase of Shares for any customer until
a designated supervisory person of Sub-Distributor has been personally informed
as to the essential facts relative to such customer and the nature of the
account (including the customer's activities and the purpose of the intended
business relationship with the customer) and has indicated approval on a
document that is maintained as part of Sub-Distributor's records. For the
purpose of detecting suspicious transactions, Sub-Distributor also shall monitor
transactions by each customer on whose behalf Sub-Distributor has opened an
account or has accepted or processed orders for the purchase or redemption of
Shares. In the event that the SICAV or the Principal Distributor is required by
the relevant authorities in Luxembourg to satisfy itself or such authorities as
to the identity of any such customer or in the event that any form of money
laundering is suspected by the SICAV, the Principal Distributor or the
Sub-Distributor, Sub-Distributor agrees to make a full disclosure, supported by
any conclusive identification documents, to the SICAV or the Principal
Distributor, as the case may be, and all appropriate authorities as relevant.
(e) Sub-Distributor agrees to indemnify and hold harmless the SICAV,
the Principal Distributor, their affiliates, officers, directors, employees,
agents and authorized representatives for any and all liabilities, losses,
claims, damages, actions and related expenses arising out of or as a result of
Sub-Distributor's failure to comply with the requirements of, or breach of, the
agreements, covenants and warranties contained in this Section 8. Such
indemnification shall survive any termination of this Agreement.
9. RECORD KEEPING. Sub-Distributor shall (i) maintain all records required
by all applicable laws and regulations to be kept by Sub-Distributor relating to
transactions in Shares and, upon request by Principal Distributor or the SICAV,
promptly make these records available to Principal Distributor or the SICAV as
Principal Distributor or the SICAV may reasonably request in connection with
their operations and (ii) promptly notify Principal Distributor if
Sub-Distributor experiences any difficulty in maintaining the records described
in the foregoing clauses in an accurate and complete manner.
10. APPLICABLE LAWS. Sub-Distributor agrees to comply with all applicable
laws and regulations of each jurisdiction in which it sells Shares and with the
terms and conditions of the Prospectus, as well as all applicable rules,
regulations and any other applicable requirements of the government and all
authorized agencies having jurisdiction over the sales of the Shares made by
Sub-Distributor. Sub-Distributor agrees to indemnify, hold harmless and defend
the SICAV, the Principal Distributor, their affiliates, and their officers,
directors, employees, agents and authorized representatives from and against any
suits, actions, legal proceedings or claims of any kind brought against the
SICAV or the Principal Distributor by or on account of any person howsoever
arising, directly or indirectly, caused by, or incident to, or growing out of
this Agreement, for acts or omissions of the Sub-Distributor caused by its
willful misfeasance, bad faith, or negligence in the performance of its duties
or by reckless disregard of its obligations under this Agreement or any failure
on Sub-Distributor's part to comply with any applicable laws, regulations or
other requirements, and hold the SICAV and the Principal Distributor, their
affiliates, and their officers, directors, employees, agents and authorized
representatives, harmless from loss or damage resulting from any failure on
Sub-Distributor's part to comply with any applicable laws, regulations, or other
requirements. Sub-Distributor further agrees that the indemnity contained in
this Agreement shall survive any termination or cancellation of this Agreement
and that any legal costs incurred by Sub-Distributor in connection herewith
shall be borne by Sub-Distributor.
If it is necessary to register or qualify the Shares in the
jurisdiction in which Sub-Distributor intends to offer the Shares, prior to any
such registration or qualification Sub-Distributor will notify Principal
Distributor of Sub-Distributor's intent and of any limitations that might be
imposed on the SICAV or the Principal Distributor; and Sub-Distributor agrees
not to proceed with any sales efforts, registration or qualification without the
written consent of the SICAV and of the Principal Distributor.
11. TERMINATION OF AGREEMENT. Either party shall have the right to
terminate this Agreement without the payment of any penalty upon sixty (60)
days' notice in writing to the other.
12. CONFLICT RESOLUTION AND JURISDICTION. In the event of a dispute
concerning any provision of this Agreement, Principal Distributor may require
the dispute to be submitted to binding arbitration after giving seven (7) days
prior notice of its intention to do so under the commercial arbitration rules of
the American Arbitration Association. Judgment upon any arbitration award may be
entered by any court of competent jurisdiction. This Agreement shall be
construed in accordance with the laws of Luxembourg and shall be binding upon
the parties hereto when signed by Principal Distributor and accepted by
Sub-Distributor with Sub-Distributor's signature in the space provided below.
13. GENERAL. (a) This Agreement embodies the entire understanding between
the parties relating to the subject matter hereof and thereof, whether written
or oral, and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof. This
Agreement may be amended only in writing signed by both parties hereto.
(b) No duties, interests, obligations or rights of Sub-Distributor
under this Agreement may be assigned or transferred without prior express
written consent of Principal Distributor.
(c) Sub-Distributor agrees at all times to act in good faith and with
the highest professional integrity, including the maintenance of the highest
possible standards.
(d) In the event of termination of this Agreement, Sub-Distributor
shall have no further rights with regard to any fee payable for procuring
orders, either with reference to initial sales charges, commissions or
shareholder processing and servicing fees after the effective date of
termination.
(e) Upon termination of this Agreement, Sub-Distributor shall be
obliged to return any and all documentation relating to the Franklin Templeton
Group as well as documentation relating to Shares sold to any of its customers.
14. ADDRESSES OF THE PARTIES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand (and duly receipted) or mailed, certified or
registered mail, return receipt requested, as follows:
If as to the Principal Distributor:
TEMPLETON, GALBRAITH & HANSBERGER LTD.
Post Office Box N-7759
Nassau, Bahamas
Attention: Ms. Patti Albury
If as to Sub-Distributor:
Attention:
or to such other person or address as any party may furnish or designate to the
other in writing in accordance hereto. Notice given by mail shall be deemed to
have been given upon the date shown on the certified or registered postal
receipt showing delivery to the recipient.
IN WITNESS WHEREOF, the parties hereto have caused this
Sub-Distribution Agreement to be duly executed by their duly authorized officers
and their respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON, GALBRAITH & HANSBERGER LTD.
BY:___________________________________
Attest:________________________________ (CORPORATE SEAL)
BY:___________________________________
Attest:________________________________ (CORPORATE SEAL)
ADDENDUM 1
TO SUB-DISTRIBUTION AGREEMENT DATED ________, 1995
WITH ____________________
With respect to "Class A" Shares of the following funds, the initial sales
charge shall be the difference between the offering price and the net asset
value which the Principal Distributor is entitled to retain provided that such
amounts will not exceed those that are set forth in the then current prospectus
or prospectuses approved by the SICAV. The Principal Distributor will re-allow
to __________________ xx percent (xx%) of the initial sales charge applicable to
sales by __________________ of the SICAV. In addition, with respect to "Class A"
Shares of the following funds, __________________ will receive a shareholder
processing/servicing fee payable semi-annually in arrears as set forth in this
Agreement and more fully described below.
TEMPLETON GLOBAL STRATEGY SICAV -- Pricing & Commissions Grid*
"CLASS A" SHARES
Shareholder
Initial Processing/
FUND Sales Servicing
Charge Fee
Templeton Global Growth Fund* XXX% XXX%
Templeton Deutsche Mark Global Growth Fund*
XXX% XXX%
Templeton Smaller Companies Fund* XXX% XXX%
Templeton Global Infrastructure and
Communications Fund* XXX% XXX%
Templeton Pan-American Fund* XXX% XXX%
Templeton European Fund* XXX% XXX%
Templeton Asian Growth Fund* XXX% XXX%
Templeton Asian Smaller Companies Fund*
XXX% XXX%
Templeton China Fund* XXX% XXX%
Templeton Korean Fund* XXX% XXX%
Templeton Emerging Markets Fund* XXX% XXX%
Templeton Global Utilities Fund* XXX% XXX%
Templeton Global Convertible Fund* XXX% XXX%
Templeton Global Balanced Fund* XXX% XXX%
Templeton Global Income Fund** XXX% XXX%
Templeton Deutsche Mark Global Bond Fund**
XXX% XXX%
Templeton U.S. Government Fund** XXX% XXX%
Templeton Emerging Markets Fixed Income Fund**
XXX% XXX%
Templeton Haven Fund*** XXX% XXX%
Templeton U.S. Dollar Liquid Reserve Fund***
XXX% XXX%
Templeton Deutsche Mark Liquid Reserve Fund***
XXX% XXX%
ADDENDUM 1 TO SUB-DISTRIBUTION AGREEMENT
DATED ________, 1995
WITH ____________________
Page Two
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* Subject to breakpoints at the following levels:
US $50,000 to US $100,000 XX%
US $100,000 to US $250,000 XX%
US $250,000 to US $500,000 XX%
US $500,000 to US $1,000,000 XX%
greater than US $1,000,000 XX%
** Subject to breakpoints at the following levels:
US $100,000 to US $250,000 XX%
US $250,000 to US $500,000 XX%
US $500,000 to US $1,000,000 XX%
greater than US $1,000,000 XX%
*** Not subject to breakpoints.
ADDENDUM 2
TO SUB-DISTRIBUTION AGREEMENT DATED _________, 1995
WITH ____________________
There is no initial sales charge with respect to "Class B" Shares; however,
__________________ will receive 100% of the commission paid on "Class B" Shares.
In addition, __________________ will receive, commencing with the thirteenth
month after the effective date of this Agreement and payable semi-annually in
arrears, a shareholder processing/servicing fee of XX basis points (XX%) in the
case of equity funds and XX basis points (XX%) in the case of fixed income funds
as more fully described below. No such shareholder processing and servicing fee
will be payable with respect to the initial twelve (12) months after the
effective date of this Agreement. Sales of shares in individual funds totaling
one (1) million U.S. Dollars or more will not be eligible as a "Class B" Shares
transaction but instead will be processed as a "Class A" Shares transaction.
TEMPLETON GLOBAL STRATEGY SICAV -- Pricing & Commissions Grid
"CLASS B" SHARES
Shareholder
Up Processing/
FUND Front Servicing
Commission Fee
Templeton Global Growth Fund XXX% XXX%
Templeton Smaller Companies Fund XXX% XXX%
Templeton Pan-American Fund XXX% XXX%
Templeton Emerging Markets Fund XXX% XXX%
Templeton Global Income Fund XXX% XXX%
Templeton Emerging Markets Fixed Income
Fund XXX% XXX%
ADDENDUM 3
TO SUB-DISTRIBUTION AGREEMENT DATED _________, 1995
WITH ____________________
1. I/We have received and read the Prospectus dated ____________________ of
Templeton Global Strategy SICAV (the "Company").
2. I/We declare that I am/we are not a "United States person" as described
in the Prospectus and that I am/we are not applying for shares of the Company
(the "Shares") as the nominee(s) for or on behalf of any such person(s). I/We
will notify the Company immediately if I/we become a United States person or
become aware that any person for whom I/we hold Shares has become a United
States person.
3. I/We represent that I/we have not been solicited to purchase Shares
while present in the United States, its territories or possessions nor have the
funds to be utilized for such purchase been obtained from any United States
person.
4. I/We represent that the Shares are being acquired for investment
purposes and that neither the Shares nor any interest therein will be
transferred to a United States person or be transferred within the United
States, its territories and possessions.
The term "United States Person" means generally: (a) any individual who is a
citizen or resident of the United States for federal income tax purposes; (b) a
corporation, partnership or other entity created or organized under the laws of
or existing in the United States; (c) an estate or trust, the income of which is
subject to United States federal income tax regardless of whether such income is
effectively connected with a United States trade or business; or (d) any
corporation, partnership, trust, estate or other entity in which one or more
individuals or entities described in (a), (b) or (c) acting singly or as a group
has or have a controlling beneficial interest whether directly or indirectly
and, in the case of a corporation or partnership, which is formed principally
for the purpose of investing in securities not registered under the United
States federal securities laws.
EXHIBIT 10.23
NON-EXCLUSIVE UNDERWRITING AGREEMENT
AGREEMENT made as of the 18th day of September, 1995, between TEMPLETON
FUNDS, INC., a Maryland corporation (herein referred to as the "Company") on
behalf of Templeton World Fund and Templeton Foreign Fund (each a "Fund" and
collectively, the "Funds"), and TEMPLETON FRANKLIN INVESTMENT SERVICES (ASIA)
LIMITED, a corporation organized and existing under the laws of Hong Kong,
office address 2701 Shui On Centre, Hong Kong, (herein referred to as the
"Selling Company").
FIRST: The Selling Company shall be a non-exclusive underwriter of shares
of capital stock of the Fund (the "Shares") in Hong Kong and other parts of Asia
(the "Territory") with the functions hereinafter stated, and agrees to use its
best efforts to bring about and maintain a broad distribution of the Shares
among bona fide investors in the Territory (except United States citizens) (the
"Investors").
SECOND: The Selling Company shall solicit responsible dealers for orders to
purchase the Shares as agent for their clients, and may sign selling contracts
with any such dealer, the forms of such contracts to be as mutually agreed upon
between the Fund and the Selling Company. The Selling Company also may sell
Shares directly to Investors. While this Agreement is in force, the Fund through
its principal underwriter, Franklin Templeton Distributors, Inc., may solicit
sales or sell the Shares to any person in the Territory, including Shares sold
by dealers who are member firms of the United States National Association of
Securities Dealers, Inc., ("NASD") and may retain the sales commission on such
sales.
THIRD: All of the Shares sold under this Agreement shall be sold only at
the Offering Price in effect at the time of such sale (as described in the then
current prospectus or prospectuses and statements of additional information,
effective under the applicable laws of a country or jurisdiction within the
Territory, and approved by the Fund) and the Fund shall receive not less than
the full net asset value thereof, as defined in the Fund's Articles of
Incorporation ("Charter") or By-Laws. The difference between Offering Price and
net asset value shall be retained by the Selling Company, it being understood
that such amounts will not exceed those that are set forth in the then current
prospectus or prospectuses approved by the Fund (the "Sales Commission"). The
Selling Company agrees to return the Sales Commission to the Fund when an
Investor revokes his/her purchase pursuant to any applicable foreign investment
laws.
FOURTH: The Fund shall pay all costs and expenses incident to registering
and qualifying, and maintaining the registration and qualification of, the
Shares for sale under the laws of the countries within the Territory as well as,
insofar as applicable, the laws of the United States (including the cost of
preparing, setting-up, printing and distributing to the existing Shareholders
residing in each country within the Territory an initial and annual supply of
the respective prospectuses effective under the laws of each such country, and
for preparing, setting-up, printing and distributing an initial and annual
supply of reports in the appropriate language for existing Shareholders in the
Territory or in the English language where appropriate). The Selling Company is
liable for the cost of printing and delivering copies of prospectuses and
reports for selling purposes to dealers and prospective new Investors in
countries within the Territory. The Selling Company is also liable for the cost
of the preparation, excluding legal fees, and printing of all post-effective
amendments and supplements to the Fund's prospectuses and statement of
additional information if the post-effective amendment or supplement arises from
the Selling Company's (including its parent's) activities or rules and
regulations under 1940 Act related to the Selling Company's activities and those
expenses would not otherwise have been incurred by the Fund. In addition, the
Selling Company is liable for the cost of printing additional copies, for its
use as sales literature, of reports or other communications which the Fund has
prepared for distribution to its existing shareholders.
FIFTH: The Selling Company may re-allow to dealers all or any part of the
discount it is allowed.
SIXTH: The Selling Company shall be entitled to receive a contingent
deferred sales charge or distribution fee from the proceeds of redemption of
Shares of the Fund on such terms and in such amounts as are set forth in the
then current prospectus of the Fund. In addition, the Selling Company may retain
any amounts authorized for payment to the Selling Company under the Fund's
Distribution Plan.
SEVENTH: If Shares are tendered to the Fund for redemption or repurchase by
the Fund within seven business days after the Selling Company's acceptance of
the original purchase order for such Shares, the Selling Company will
immediately refund to the Fund the full sales commission (net of allowances to
dealers or brokers) allowed to the Selling Company on the original sale, and
will promptly, upon receipt thereof, pay to the Fund any refunds from dealers or
brokers of the balance of sales commissions reallowed by the Selling Company.
The Fund shall notify the Selling Company of such tender for redemption within
10 days of the day on which notice of such tender for redemption is received by
the Fund.
EIGHTH: The Selling Company will conduct its business in strict accordance
with the applicable requirements of the Charter and the By-Laws of the Fund as
from time to time amended, and in strict accordance with all applicable laws,
rules and regulations, including the Rules of Fair Practice of the NASD. The
Selling Company shall endeavor to see that dealers buying Shares resell the same
only to bona fide Investors and that the methods and materials used in selling
Shares are sound and conservative, and in accordance with the Fund's current
prospectus.
Advertisements with respect to the Fund prepared by the Selling Company
shall not contain any untrue statements of material fact or omit to state a
material fact required to be stated therein or necessary to make such statements
not misleading and will conform to the U.S. Investment Company Act of 1940, as
amended, and the regulations thereunder, and to the Rules of Fair Practice of
the NASD pertaining to the content of such material.
No person is authorized to make any representations concerning shares of
the Fund except those contained in the current prospectus, statement of
additional information, and printed information issued by the Fund.
NINTH: The Selling Company shall at all times use reasonable care and act
in good faith in performing its duties hereunder. The Selling Company shall not
be liable or responsible for delays or errors occurring by reason of
circumstances beyond its control, including acts of civil or military authority,
national emergencies, fire, flood or other catastrophes, acts of God,
insurrection, war or riots.
TENTH: This Agreement shall be effective from the date hereof, subject to
registration of the Shares under the laws of the respective countries within the
Territory and other applicable laws as provided in Article FOURTH above. If the
number of Shareholders in any country is not sufficient in the opinion of the
Fund, then such registration may be discontinued, including its obligations
under Article FOURTH above.
ELEVENTH: Either party shall have the right to terminate this Agreement
without the payment of any penalty upon sixty (60) days' notice in writing to
the other, provided, however, that such termination on the part of the Fund
shall be directed or approved either by the affirmative vote of a majority of
the Board of Directors in office at the time or by the affirmative vote of a
majority (as defined in Section 2(a)(42) of the U.S. Investment Company Act of
1940) of the outstanding Shares. This Agreement shall continue in effect from
the date hereof until September 18, 1997, and from year to year thereafter,
provided that such continuance is specifically approved at least annually by the
Board of Directors or by a vote of a majority of the outstanding Shares (as
defined in the U.S. Investment Company Act of 1940) and also, in either event,
approved by a majority of those Directors who are not parties to the Agreement
or interested persons of any such party, in person at a meeting called for the
purpose of voting on such approval.
TWELFTH: The Selling Company agrees at all times to indemnify, save
harmless and defend the Fund from and against all claims for loss, damage or
injury and from and against any suits, actions, or legal proceedings of any kind
brought against the Fund by or on account of any person whosoever arising
directly or indirectly caused by, or incident to, or growing out of this
Agreement for its acts and omissions caused by its willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reckless
disregard of its obligations under this Agreement.
THIRTEENTH: The Selling Company, upon request of the Fund (made at
reasonable times and in a reasonable manner), will provide the Fund with copies
of its books and records relating to the Fund and/or allow inspection of such
books and records by representatives of the Fund.
The Selling Company shall at all times maintain books and records relating
to the Fund at its principal place of business and will comply substantially
with Section 31 of the U.S. Investment Company Act of 1940, as amended, and the
regulations pursuant to such Section.
FOURTEENTH: This Agreement shall automatically and immediately terminate in
the event of its assignment by the Selling Company. The term "assignment" as
used herein includes any transfer of a controlling block of the voting stock of
the Selling Company.
FIFTEENTH: All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand (and duly receipted) or mailed, certified or registered mail,
return receipt requested, as follows:
if to the Fund Templeton Funds, Inc.
700 Central Avenue
St. Petersburg, Florida 33701-3628
Attention: Thomas M. Mistele,
Secretary
if to the Selling Templeton Franklin Investment
Company Services (Asia) Ltd.
2701 Shui On Centre
Hong Kong
Attention: Murray L. Simpson
Managing Director
or to such other person or address as any party may furnish or designate to the
other in writing in accordance herewith. Notice given by mail shall be deemed to
have been given upon the date shown on the certified or registered postal
receipt showing delivery to the recipient.
SIXTEENTH: The Fund reserves the right at all times to suspend or limit the
public offering of the Shares of the Fund upon two day's written notice to the
Selling Company.
SEVENTEENTH: This Agreement shall be governed by the laws of the State of
California, without reference to principles of conflicts of laws and the U.S.
Securities laws, including the U.S. Investment Company Act of 1940, as amended
from time to time, and the regulations thereunder. Venue for any dispute
hereunder shall be San Mateo, California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers and their respective corporate
seals to be hereunto duly affixed and attested.
ATTEST: TEMPLETON FUNDS, INC.
By:
Thomas M. Mistele John R. Kay
Secretary Vice President
ATTEST: TEMPLETON FRANKLIN INVESTMENT
SERVICES (ASIA) LIMITED
By:
Murray L. Simpson
Managing Director
EXHIBIT 10.24
SHAREHOLDER SERVICES AGREEMENT
THIS AGREEMENT IS MADE AS OF THE _____ DAY OF __________, 199__
BETWEEN
FRANKLIN TEMPLETON INVESTOR SERVICES, INC., a California corporation with
offices located at 700 Central Avenue, St. Petersburg, Florida 33701-8030
(hereinafter called "the Transfer Agent");
AND
TEMPLETON FRANKLIN INVESTMENT SERVICES (ASIA) LIMITED, incorporated under the
laws of Hong Kong with its registered office at 2701 Shui On Centre, Hong Kong
(hereinafter called "the Agent").
WHEREAS
(A) the Transfer Agent provides shareholder services ("the Services") for
Templeton Growth Fund, Inc. and Templeton Funds, Inc., (on behalf of
Templeton World Fund and Templeton Foreign Fund), which are incorporated
under the laws of Maryland and registered under the US Investment Company
Act of 1940 as open-end, diversified management investment companies ("the
Funds") and in respect of the shares of the Funds ("the Shares");
(B) the Services are provided in accordance with the terms and conditions
contained in the current Prospectuses of the Funds as such may be
supplemented or amended; and
(C) the Agent has agreed to undertake part of the Services on behalf of the
Transfer Agent with respect to investors located in Asia (hereafter called
"Asian Shareholders") on the following terms and conditions.
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. Appointment
The Transfer Agent hereby appoints the Agent as a non-exclusive
shareholder services agent with respect to Asian Shareholders.
2. Mandate
The Agent shall undertake part of the Services, namely
(a) to deal with requests for the purchase, transfer, exchange or redemption of
Shares by Asian Shareholders;
(b) to accept and forward to the Transfer Agent Share certificates tendered
for exchange, replacement, repurchase or transfer by the Asian
Shareholders; to accept and forward to the Transfer Agent such forms and
documents as may be submitted to it in connection with any such tender;
(c) to assist in the processing of subscriptions for Shares and to assist in
dealing with requests for repurchases of Shares;
(d) to provide and supervise services with regard to the dispatch of
statements, reports, notices, announcements and other documents to
shareholders of the Funds and to maintain such records with regard thereto
as may be required from time to time by the Funds;
(e) to respond to relevant inquiries concerning the Funds; and
(f) to perform such other services as may be agreed upon from time to time
among the parties.
3. Limitation of Authority
No person is authorized to make any representations concerning the Funds
or the Shares except those contained in the current Prospectuses of the
Funds and in such printed information as may subsequently be prepared or
approved in writing on behalf of the Funds. No person is authorized to
distribute any sales material on behalf of the Funds. The Agent shall
indemnify and hold the Transfer Agent harmless from and against any and
all damages, claims, loss, liability or expense to the Transfer Agent or
the Funds arising out of or related to the part of the Services undertaken
by the Agent. The Transfer Agent shall indemnify and hold the Agent
harmless from and against any and all damages, claims, loss, liability or
expense arising out of or related to the Services other than the part
undertaken by the Agent.
4. Compensation
As compensation for the part of the Services undertaken by the Agent it shall
receive a shareholder services fee as specified in Appendix 1 to this Agreement.
5. Qualification to Act
The Agent agrees that it will not act as shareholder services agent for
any persons to whom the Funds may not lawfully offer Shares.
6. Record Keeping
In respect of the Services undertaken by the Agent, it shall maintain all
records required by law and upon request promptly make these records
available to the Transfer Agent or the Funds.
7. Applicable Laws
The Agent agrees to comply with all applicable United States Federal and
State laws and rules, as well as the rules and regulations of any and all
governments or authorized agencies having jurisdiction over the Agent.
8. Termination of the Agreement
Any party shall have the right to terminate this Agreement without the
payment of any penalty upon 60 days notice in writing to the other
parties.
9. Jurisdiction and Venue
This Agreement shall be governed by the laws of California. Venue for any
dispute hereunder shall be San Mateo, California.
10. Integration
This Agreement embodies the entire understanding between the parties
relating to the subject matter hereof and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect
to the subject matter hereof.
11. Addresses of the Parties
All notices, requests, demands and other communication hereunder shall be
in writing and shall be deemed to have been duly given if delivered by
hand (and duly receipted) or mailed, certified or registered mail, return
receipt requested, as follows:
If to the Transfer Agent:
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
700 Central Avenue
St. Petersburg, Florida 33701-8030
If to the Agent:
TEMPLETON FRANKLIN INVESTMENT
SERVICES (ASIA) LIMITED
2701 Shui On Centre
Hong Kong
or to such other person or address as any party may furnish or designate
to the other in writing in accordance hereto. Notice given by mail shall
be deemed to have been given upon the date shown on the certified or
registered postal receipt showing delivery to the recipient.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their duly authorized officers on the date first above written.
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
By:
Thomas M. Mistele
TEMPLETON FRANKLIN INVESTMENT SERVICES (ASIA) LIMITED
By:
Murray L. Simpson
APPENDIX 1
SHAREHOLDER SERVICES FEE
In respect of the Services, the Transfer Agent shall pay the Agent an annual fee
calculated US $12.00 per Shareholder account. Such fees shall be paid to the
Agent quarterly in arrears.
Exhibit 12
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
For the years ended
(Dollars in thousands) 1995 1994 1993
Income before taxes $386,655 $362,521 $274,398
Add fixed charges:
Interest expense 29,495 29,765 28,760
Interest factor on rent 7,271 5,026 4,555
Total fixed charges 36,766 34,791 33,315
Earnings before fixed charges
and taxes on income $423,421 $397,312 $307,713
Ratio of earnings to fixed
charges 11.5 11.4 9.2
EXHIBIT 21
FRANKLIN RESOURCES, INC.
FOR FISCAL YEAR ENDED SEPTEMBER 30, 1994
LIST OF PRINCIPAL SUBSIDIARIES*
State or
Nation
of Incor-
Name poration
Continental Property Management Company California
FCC Receivables Corp. Delaware
Franklin Advisers, Inc. California
Franklin Agency, Inc. California
Franklin Bank California
Franklin Capital Corporation Utah
Franklin Institutional Services Corporation California
Franklin Management, Inc. California
Franklin Partners, Inc. California
Franklin Properties, Inc. California
Franklin Real Estate Management, Inc. California
Franklin Templeton Trust Company California
Franklin Templeton Holding Limited Mauritius
Franklin/Templeton Distributors, Inc. New York
Franklin/Templeton Investor Services, Inc. California
Franklin/Templeton Travel, Inc. California
FS Capital Group California
FS Properties Inc. California
ILA Financial Services, Inc. Arizona
Property Resources, Inc. California
T.G.H. Holdings Ltd. Bahamas
Templeton Asset Management India Pvt. Ltd. India
Templeton Funds Annuity Company Florida
Templeton Funds Trust Company Florida
Templeton Global Investors Limited England
Templeton Global Investors, Inc. Delaware
Templeton Global Strategic Services
(Deutschland) GmbH Germany
Templeton Global Strategic Services S.A. Luxembourg
Templeton Heritage Limited Canada
Templeton Holdings Limited England
Templeton International, Inc. Delaware
Templeton Investment Counsel, Inc. Florida
Templeton Investment Management (Australia) Limited
Australia
Templeton Asset Management Ltd. Singapore
Templeton Investment Management Limited England
Templeton Italia, Srl. Italy
Templeton Management (Lux) S.A. Luxembourg
Templeton Management Limited Canada
Templeton (Poland) S.A. Poland
Templeton S.A. France
Templeton Unit Trust Managers Limited England
Templeton Worldwide, Inc. Delaware
Templeton, Galbraith & Hansberger Ltd. Bahamas
Templeton/Franklin Investment Services
(Asia) Limited Hong Kong
Templeton/Franklin Investment Services, Inc. Delaware
*All subsidiaries currently do business only under their corporate name except
for Templeton Quantitative Advisors, Inc., which also operates under the assumed
name, "The DAIS Group"; Templeton Investment Counsel, Inc. which also operates
under the name "Templeton Global Bond Managers"; and Templeton/Franklin
Investment Services, Inc. which also operates under the assumed name, "Templeton
Portfolio Advisory". All Templeton subsidiaries also on occasion use the name
Templeton Worldwide.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Franklin Resources, Inc. on Form S-3 for the issuance of medium term notes, Form
S-3 filed September 30, 1994 for the registration of 1,411,736 shares, Form S-8
for the 1988 Restricted Stock Plan, Form S-8 for the Franklin Resources, Inc.
Universal Stock Plan, Form S-8 for Franklin Resources, Inc. United Kingdom Stock
Option Plan #1 and Form S-8 for the Canada Stock Option Plan of our report dated
October 27, 1995, on our audits of the consolidated financial statements of
Franklin Resources, Inc. as of September 30, 1995 and 1994 and for the years
ended September 30, 1995, 1994, and 1993, which report is included in this
Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
San Francisco, California
December 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 261,699
<SECURITIES> 208,478
<RECEIVABLES> 149,379
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 611,208
<PP&E> 176,220
<DEPRECIATION> 57,592
<TOTAL-ASSETS> 2,244,681
<CURRENT-LIABILITIES> 213,071
<BONDS> 0
<COMMON> 8,226
0
0
<OTHER-SE> 1,152,817
<TOTAL-LIABILITY-AND-EQUITY> 2,244,681
<SALES> 0
<TOTAL-REVENUES> 845,803
<CGS> 0
<TOTAL-COSTS> 477,662
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,159
<INCOME-PRETAX> 386,655
<INCOME-TAX> 117,710
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 268,945
<EPS-PRIMARY> 3.24
<EPS-DILUTED> 3.20
</TABLE>
