FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
(x)
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 1995
or
( )
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-9318
FRANKLIN RESOURCES, INC.
(Exact Name of Registrant As Specified In Its Charter)
Delaware 13-2670991
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 Mariners Island Blvd., San Mateo, CA 94404
(Address of Principal Executive Offices)(Zip Code)
Registrant's telephone number, including area code (415) 312-2000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section (13) or 15 (d) of 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 the past 90 days.
YES X NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
YES NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Outstanding: 80,944,529 shares, common stock, par value $.10 per
share at July 31, 1995.
(Title of Class)
Exhibit index - See page [ ]
PART I: FINANCIAL INFORMATION
ITEM 1: CONDENSED FINANCIAL STATEMENTS
In the opinion of management, all appropriate adjustments
necessary to a fair presentation of the results of operations
have been made for the periods shown. All adjustments are of a
normal recurring nature. Certain 1994 amounts have been
reclassified to conform to 1995 presentation. These financial
statements should be read in conjunction with the Company's
audited financial statements for the fiscal year ended September
30, 1994.
<TABLE>
Franklin Resources, Inc.
Consolidated Statements of Income
Unaudited
<CAPTION>
Three months ended Nine months ended
June 30 June 30
(Dollars in thousands, except per share data) 1995 1994 1995 1994
Operating revenues:
<S> <C> <C> <C> <C>
Investment management fees $187,114 $161,762 $534,270 $474,846
Underwriting commissions, net 8,583 21,425 30,792 84,222
Transfer, trust and related fees 16,747 14,388 48,210 39,388
Banking/finance, real estate and other 12,039 7,304 36,097 18,539
Total operating revenues 224,483 204,879 649,369 616,995
Operating expenses:
General and administrative 102,014 93,856 286,992 265,231
Selling expenses 15,229 18,483 53,350 50,517
Amortization of goodwill 4,582 4,598 13,792 13,712
Banking interest expense 2,618 2,382 7,715 7,163
Total operating expenses 124,443 119,319 361,849 336,623
Operating income 100,040 85,560 287,520 280,372
Other income/(expenses):
Investment and other income 9,140 5,781 21,165 16,706
Interest expense (8,104) (7,333) (22,544) (21,846)
Other income/(expense), net 1,036 (1,552) (1,379) (5,140)
Income before taxes on income 101,076 84,008 286,141 275,232
Taxes on income 32,047 23,985 90,768 87,607
Net income $69,029 $60,023 $195,373 $187,625
Earnings per share:
Primary $0.84 $0.72 $2.36 $2.24
Fully diluted $0.83 $0.72 $2.35 $2.24
Dividends per share $0.10 $0.08 $0.30 $0.24
</TABLE>
<TABLE>
Franklin Resources, Inc.
Consolidated Balance Sheets
Unaudited
<CAPTION>
As of As of
June 30 Sept 30
(Dollars in thousands) 1995 1994
ASSETS:
Current assets:
<S> <C> <C>
Cash and cash equivalents $206,691 $190,415
Receivables:
Fees from Franklin Templeton funds 103,439 88,801
Other 26,515 36,160
Investment securities, available for sale 189,668 153,292
Prepaid expenses and other 6,624 8,230
Total current assets 532,937 476,898
Banking/finance group assets:
Cash and cash equivalents 17,777 19,961
Loans receivable, net 467,156 391,824
Investment securities, available for sale 22,644 26,345
Other assets 7,841 5,290
Total banking/finance group assets 515,418 443,420
Other assets:
Investments:
Investment securities, available for sale 11,185 9,144
Real estate 8,727 9,014
Deferred costs 15,212 9,235
Premises and equipment, net 109,592 94,218
Goodwill, net of $51,827 and $38,070 amortization, respectively 664,911 678,668
Other assets 13,778 17,388
Total other assets 823,405 817,667
Total assets $1,871,760 $1,737,985
</TABLE>
<TABLE>
Franklin Resources, Inc.
Consolidated Balance Sheets
Unaudited
<CAPTION>
As of As of
June 30 Sept 30
(Dollars in thousands) 1995 1994
LIABILITIES:
Current liabilities:
<S> <C> <C>
Trade payables and accrued expenses $91,384 $126,809
Debt payable within one year 96,790 84,482
Dividends payable 11,337 6,528
Total current liabilities 199,511 217,819
Banking/finance group liabilities:
Deposits of account holders:
Interest bearing 175,774 172,922
Non-interest bearing 8,108 17,976
Other liabilities 2,110 973
Total banking/finance group liabilities 185,992 191,871
Other Liabilities:
Long-term debt 382,487 383,668
Other liabilities 15,478 13,812
Total other liabilities 397,965 397,480
Total liabilities 783,468 807,170
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 1,000,000 - -
shares authorized; no shares issued or
outstanding
Common stock, $.10 par value, 500,000,000 shares authorized;
82,264,982 shares issued; 80,961,360 and
81,597,450 shares outstanding, respectively 8,226 8,226
Capital in excess of par value 92,086 92,283
Retained earnings 1,025,725 855,513
Less cost of treasury stock (47,872) (25,409)
Other 10,127 202
Total stockholders' equity 1,088,292 930,815
Total liabilities and stockholders' equity $1,871,760 $1,737,985
</TABLE>
<TABLE>
Franklin Resources, Inc.
Consolidated Statements of Cash Flows
Unaudited
<CAPTION>
Nine months ended
June 30
(Dollars in thousands) 1995 1994
<S> <C> <C>
Net income $195,373 $187,625
Adjustments to reconcile net income to net cash provided by
operating activities:
Decrease in receivables, prepaid expenses and other 2,214 11,105
Decrease in trade payables and accrued expenses (19,309) (29,665)
Depreciation and amortization 30,497 26,354
Gains on disposition of investments (2,604) (1,207)
Net cash provided by operating activities 206,171 194,212
Purchases of mutual funds, net (21,057) (18,304)
Purchase of banking/finance investment portfolio (100,201) (53,390)
Liquidation of banking/finance investment portfolio 104,283 80,669
Purchases and originations of banking/finance loans receivable (199,438) (184,744)
Collections of banking/finance loans receivable 110,355 29,115
Liquidations/(purchases) of other investments, net (1,754) (5,297)
Purchases of premises and equipment and other (26,521) (32,162)
Net cash used in investing activities (134,333) (184,113)
Increase in deposits of bank account holders (7,016) 2,995
Dividends paid on common stock (23,592) (18,887)
Acquisitions of treasury stock (41,506) (26,613)
Issuances of commercial paper, net 27,093 299,056
Issuances of notes payable 22,108 15,413
Payments on notes and capital leases (34,833) (366,462)
Net cash used in financing activities (57,746) (94,498)
Net change in cash and cash equivalents 14,092 (84,399)
Cash and cash equivalents, beginning of the period 210,376 302,952
Cash and cash equivalents, end of the period $224,468 $218,553
Supplemental disclosure of non-cash information:
Value of common stock issued in other transactions $17,940 $8,343
</TABLE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Franklin Resources, Inc., the parent company, and its various
operating subsidiaries (the "Company") derives approximately 95%
of its revenue from its principal line of business of providing
investment management, administration 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 management products and
services to meet the needs of a variety of individuals and
institutions. The Company's revenues are derived largely from
the amount and composition of assets under management.
Assets under the Company's management increased during the
quarter from $118.8 billion at March 31, 1995 to $125.9 billion
at June 30, 1995 as a result of net sales and market
appreciation. Industry and Company expectations are for continued
growth over the long term.
At June 30, 1995, the Company had offices in 18 countries.
During the nine-month period ended June 30, 1995, the Company
continued to expand its international distribution and research
capabilities. The following offices were opened with the
specific intent to expand investment research capabilities and,
in some cases, support local distribution activities:
Moscow, Russia Ho Chi Minh City, Vietnam
Milan, Italy Bombay, India
Paris, France Buenos Aires, Argentina
Johannesburg, South Africa
Additional foreign offices are planned for the remainder of the
year.
At June 30, 1995, the Company earned approximately 37% of its
investment management fee revenues from investment management
services provided by its foreign subsidiaries. Despite the
Company's global presence, its exposure to changes in currency
rates is not considered significant because a material portion of
the foreign offices' revenues is U.S. dollar denominated. The
Company's exposure to repatriation risks is not material because
of the minimal amount of fixed assets and U.S. dollar deposits in
those foreign locations. The relative geographic contributions
to operating profits and net earnings have not materially changed
since September 30, 1994.
During the nine-month period ended June 30, 1995, the Company was
a party to financial instruments with off-balance sheet risk in
order to minimize the Company's exposure to adverse changes in
interest rates on the floating rate debt which the Company
originally issued when it purchased the assets of Templeton,
Galbraith & Hansberger Ltd. on October 30, 1992. These financial
instruments are discussed in more detail below.
I. Material Changes in Results of Operations
<TABLE>
RESULTS OF OPERATIONS - TABLE 1
<CAPTION>
Three months ended Nine months ended
June 30 June 30
(Dollars in millions) 1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Operating income $100.0 $85.6 17% $287.5 $280.4 3%
Operating margin 44.6% 41.8% 44.3% 45.4%
Net income $69.0 $60.0 15% $195.4 $187.6 4%
</TABLE>
Increases in operating income and net income are primarily attributable to the
increases in revenue generated by assets under management. Changes in operating
income 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 continue to be
specifically dependent upon the amount and composition of assets under
management, mutual fund sales, and the number of mutual fund investors and
institutional clients. Operating expenses are expected to continue 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 employment costs, general and
administrative expenses, and selling expenses. Operating margins for the three-
month period ended June 30, 1995 increased over the prior year primarily due to
the general increase in assets under management and to the slowing of increases
in operating expenses during the third quarter. The Company continues to
increase the resources dedicated to expanding and enhancing both its product
line and its operating infrastructure, which will likely result in increased
pressure on operating margins.
<TABLE>
ASSETS UNDER MANAGEMENT - TABLE 2
<CAPTION>
As of
June 30 $ %
(Dollars in millions) 1995 1994 Change Change
Franklin Templeton Group
Fixed income funds:
<S> <C> <C> <C> <C>
Tax-free income $39,918 $39,532 $386 1%
U.S. government fixed income 13,930 15,285 (1,355) -9%
Money funds 2,596 3,311 (715) -22%
Global/international fixed income 2,089 2,396 (307) -13%
Total fixed income 58,533 60,524 (1,991) -3%
Equity and income funds:
Global/international equity 32,126 23,987 8,139 34%
U.S. equity/income 19,463 16,722 2,741 16%
Total equity and income 51,589 40,709 10,880 27%
Total Franklin Templeton funds 110,122 101,233 8,889 9%
Franklin Templeton institutional assets 15,766 11,790 3,976 34%
Total Franklin Templeton Group $125,888 $113,023 $12,865 11%
</TABLE>
<TABLE>
MOVEMENTS IN ASSETS UNDER MANAGEMENT - TABLE 3
<CAPTION>
Three months ended Nine months ended
June 30 % June 30 %
(Dollars in millions) 1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Assets under management - beginning $118,788 $112,700 5% $118,172 $107,500 10%
Sales & reinvestments 6,549 9,273 -29% 19,672 31,594 -38%
Redemptions (4,852) (6,893) -30% (15,973) (22,465) -29%
Market appreciation/(depreciation) 5,403 (2,057) 363% 4,017 (3,606) 211%
Assets under management - ending $125,888 $113,023 11% $125,888 $113,023 11%
Average assets under management $122,769 $113,148 9% $118,869 $111,428 7%
</TABLE>
I. Material Changes in Results of Operations (continued)
As shown in Table 2, the composition of assets under management has changed
since June 30, 1994, continuing a trend of the past two years. This development
is a result of movements in relative sales, redemptions and market value among
the specific asset classes. Table 3 highlights these overall movements in
assets under management during the corresponding three- and nine-month periods.
This table also indicates the volatility that has occurred during the periods
reported as evidenced by significant changes in sales, redemptions and market
appreciation/ depreciation. The Company's operating revenues and results of
operations will continue to be affected by these factors.
Fixed income funds represent 46% of assets under management as of June 30, 1995,
down from 54% a year ago. Equity and income funds and institutional assets
represent 54% of assets under management as of June 30, 1995, up from 46% a year
ago. The increase in U.S. interest rates during 1994 resulted in a combination
of both net redemptions and market depreciation in various fixed income funds.
The current stabilization of U.S. interest rates in 1995 has begun to reverse
that trend. Assets under management of the Company's fixed income funds declined
3% from levels a year ago. Assets under management in the Company's money funds
decreased 22% from levels a year ago.
Assets under management in the Company's equity and income funds as of June 30,
1995 increased 27% from levels at June 30, 1994. Global/international equity
funds' assets under management represented most of this increase, up 34% from
levels a year ago. This growth results from continued net sales and market
appreciation.
Institutional assets under management increased 34% from levels as of June 30,
1994. This increase resulted principally from an increase in the number of
clients as well as additional investments from existing clients. The Company
is strongly committed to the institutional account area and intends to continue
the expansion of the services it provides in this area.
<TABLE>
OPERATING REVENUE - TABLE 4
<CAPTION>
Three months ended Nine months ended
June 30 % June 30 %
(Dollars in millions) 1995 1994 Change 1995 1994 Change
Operating revenues:
<S> <C> <C> <C> <C> <C> <C>
Investment management fees $187.1 $161.8 16% $534.3 $474.8 13%
Underwriter commissions, net 8.6 21.4 -60% 30.8 84.2 -63%
Transfer, trust and related fees 16.7 14.4 16% 48.2 39.4 22%
Banking/finance, real estate and other 12.0 7.3 64% 36.1 18.5 95%
Total operating revenues $224.4 $204.9 10% $649.4 $616.9 5%
</TABLE>
Investment management fees increased as a result of an increase in and the
change in composition of average assets under management during the current
reporting periods as compared to the corresponding periods in 1994. Table 2
shows the change in asset composition to the higher fee-based equity and income
funds and institutional assets for the period ended June 30, 1995.
I. Material Changes in Results of Operations (continued)
The decreases in net underwriting commissions were due primarily to the 29% and
the 36% decreases in mutual fund sales during the three- and nine-month periods,
respectively, as compared to the corresponding periods in the previous year,
which was consistent with industry results. An additional factor causing the
decreases was the change in the composition of sales to fund products with lower
underwriting commission retention rates. Furthermore, during the quarter ended
June 30,1994, the Franklin Group of Funds implemented a distribution plan
pursuant to Rule 12b-1 of the Investment Company Act of 1940 while
simultaneously eliminating sales charges on fund dividend reinvestments. This
change has made underwriting commissions dependent upon absolute mutual fund
sales levels rather than mutual fund investor dividend reinvestment rates which
was the case prior to the change in pricing structure.
Many of the Franklin and Templeton mutual funds introduced a 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 7% of total 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 Material Changes in Financial Condition, Liquidity and
Capital Resources.
The increases in transfer, trust and related fees is related principally to the
11% increase to 4.7 million retail fund shareholder accounts over the twelve
month period ended June 30, 1995. Effective July 1, 1995, approximately 85 of
the Company's U.S. mutual funds consisting of approximately 2.5 million
shareholder accounts will implement an average annual fee increase of $4 per
shareholder account.
The number of institutional clients continued to increase but had an immaterial
impact on transfer, trust and related fees because these types of accounts
generally require only investment management services.
SHAREHOLDER ACCOUNTS - TABLE 5
As of
June 30 %
(In thousands) 1995 1994 Change
Number of Retail Fund Shareholder Accounts 4,738 4,253 11%
Compared to the corresponding periods in the prior year, the increases in
banking/finance, real estate and other revenues were due principally to the 109%
and 163% increases in the average auto and credit card loans outstanding during
the three- and nine-month periods, respectively. The banking/finance activities
are further discussed below.
<TABLE>
OPERATING EXPENSES - TABLE 6
<CAPTION>
Three months ended Nine months ended
June 30 % June 30 %
(Dollars in millions) 1995 1994 Change 1995 1994 Change
Operating expenses:
<S> <C> <C> <C> <C> <C> <C>
General and administrative $102.0 $93.9 9% $287.0 $265.2 8%
Selling expenses 15.2 18.5 -18% 53.4 50.5 6%
Amortization of goodwill 4.6 4.6 0% 13.8 13.7 1%
Banking interest expense 2.6 2.4 8% 7.7 7.2 7%
Total operating expenses $124.4 $119.4 4% $361.9 $336.6 8%
</TABLE>
Increases in operating expenses principally resulted from the general expansion
of the Company's business and are more fully described below.
General and administrative expenses increased during the period due to higher
employment, technology and facilities costs related to the expansion of the
Company's business. Employee count increased to 4,522 at June 30, 1995 compared
to 3,995 at June 30, 1994. Employment costs represent approximately 51% of
operating expenses for the nine-month period ended June 30, 1995.
Selling expenses decreased during the comparative three month period mainly due
to periodic variations in media advertising and special non-recurring marketing
campaigns. Selling expenses increased during the nine-month period when compared
to the prior year reflecting the general expansion of the Company's domestic and
international products.
The Company has evaluated the potential impairment of goodwill on the basis of
the expected future operating cash flows 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.
Banking interest expense increased due to an increase in the cost of funds
during the periods.
As shown in Table 11, gross loans outstanding increased by 20% since September
30, 1994 to $474.4 million. As discussed below under Material Changes in
Financial Condition, Liquidity and Capital Resources, the Company has
experienced an increase in delinquency rates since September 30, 1994 which has
resulted in an increase in charge-offs and provisions as shown in Table 7 below.
<TABLE>
CHARGE-OFFS AND PROVISIONS - TABLE 7
<CAPTION>
Three months ended Nine months ended
June 30 June 30
(Dollars in thousands) 1995 1994 1995 1994
Combined net charge-offs:
<S> <C> <C> <C> <C>
Auto loans $2,953 $77 $6,337 $410
Credit cards 1,251 681 3,140 2,203
Other 29 23 186 92
Total net charge-offs $4,233 $781 $9,663 $2,705
Combined provisions:
Auto loans $4,578 $1,277 $9,929 $1,598
Credit cards 633 655 2,070 2,115
Other 28 23 253 72
Total provisions $5,239 $1,955 $12,252 $3,785
</TABLE>
<TABLE>
OTHER INCOME/(EXPENSE) - TABLE 8
<CAPTION>
Three months ended Nine months ended
June 30 % June 30 %
(Dollars in millions) 1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Investment and other income $9.1 $5.8 57% $21.2 $16.7 27%
Interest expense (8.1) (7.3) 11% (22.5) (21.8) 3%
Other income (expense), net $1.0 ($1.5) -167% ($1.3) ($5.1) -75%
</TABLE>
The increases in investment income for the three- and nine-month periods
resulted from increases in the average levels of assets invested and interest
and dividend rates on investments as well as capital gains realized on the sale
of investments.
Interest expense for the three- and nine-month periods increased due to
increased rates and higher average debt outstanding. The Company's effective
interest rate at June 30, 1995 was 6.27% on $476.8 million of outstanding
commercial paper, medium-term notes and subordinated debentures as compared to
5.13% on $449.1 million of debt outstanding at June 30, 1994. At June 30, 1995,
commercial paper comprised $246.8 million of total debt outstanding with an
effective interest rate of 5.83% including swaps and 5.97% excluding swaps, as
compared to $299.1 million outstanding at June 30, 1994 with an effective
interest rate of 4.50% including swaps and 4.38% excluding swaps. Medium-term
notes comprised $80 million of the debt outstanding with an effective borrowing
rate of 6.5% at June 30, 1995. There were no medium-term notes outstanding at
June 30, 1994. Subordinated 6.25% debentures, due August 3, 2002, comprised $150
million of the total debt outstanding at June 30, 1995 and 1994 with an
effective interest rate of 6.66% and 6.63%, respectively.
I. Material Changes in Results of Operations (continued)
The Company has entered into interest rate swap agreements to exchange variable
rate interest payment obligations for fixed-rate interest payment obligations
without the exchange of the underlying principal amounts in order to minimize
the Company's exposure to adverse changes in interest rate movements. At June
30, 1995, the Company had swap agreements outstanding with an aggregate notional
amount of $30 million, maturing January 1996, under which the Company paid a
fixed rate of 5.015 percent and received a floating rate of 5.6875 percent from
banks. 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 period, 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 - TABLE 9
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%
II. Material Changes in Financial Condition, Liquidity and
Capital Resources
<TABLE>
SELECTED BALANCE SHEET ITEMS - TABLE 10
<CAPTION>
As of As of
June 30 Sept 30 $ %
(Dollars in millions) 1995 1994 Change Change
Receivables:
<S> <C> <C> <C> <C>
Fees from Franklin Templeton Group $103.4 $88.8 $14.6 16%
Other $26.5 $36.2 ($9.7) -27%
Investments securities, available for sale $200.9 $162.4 $38.5 24%
Banking/finance loans receivable, net $467.2 $391.8 $75.4 19%
Premises and equipment, net $109.6 $94.2 $15.4 16%
Trade payables and accrued expenses $91.4 $126.8 ($35.4) -28%
Debt payable within one year $96.8 $84.5 $12.3 15%
Retained earnings $1,025.7 $855.5 $170.2 20%
</TABLE>
The increase in fees receivable from the Franklin Templeton Group primarily
resulted from an increase in investment management fees.
The decrease in other receivables was related primarily to the collection of
advances on deferred sales charges on Canadian based mutual funds.
The increase in investment securities, available for sale was the result of
increased investment of the Company's cash from operating activities.
Banking/finance loans receivable, net increased primarily due to a $78.3 million
increase in dealer auto loans as shown in Table 11 below.
<TABLE>
BANKING/FINANCE LOANS OUTSTANDING - TABLE 11
<CAPTION>
As of As of
June 30 Sept 30 $ %
(Dollars in millions) 1995 1994 Change Change
Loan Portfolio:
<S> <C> <C> <C> <C>
Credit cards $92.4 $89.4 $3.0 3%
Dealer auto loans 372.3 294.0 78.3 27%
Other 9.7 11.6 (1.9) -16%
Gross loans outstanding 474.4 395.0 79.4 3%
Allowance for loan losses (7.3) (3.2) (4.1) 128%
Net loans outstanding $467.2 $391.8 $75.4 19%
Loan originator:
Franklin Bank loans outstanding 160.5 $169.6 $(9.1) -5%
Franklin Capital Corp. loans outstanding $313.9 225.4 88.5 39%
Gross loans outstanding $474.4 $395.0 $79.4 20%
</TABLE>
II. Material Changes in Financial Condition, Liquidity and
Capital Resources (continued)
<TABLE>
DELINQUENCY RATE ANALYSIS - TABLE 12
<CAPTION>
As of As of
June 30 Sept 30 $ %
Days Past Due (Dollars in millions): 1995 1994 Change Change
<S> <C> <C> <C> <C>
30-59 Days $12.5 $4.8 $7.7 160%
60-89 Days 3.9 1.6 2.3 144%
90+ Days 4.1 2.4 1.7 71%
Total loans past due $20.5 $8.8 $11.7 133%
Total banking/finance loans outstanding $474.4 $395.0 $79.4 20%
Percentage of outstanding loans past due 4% 2%
</TABLE>
The auto loan portfolio consists of approximately 50% new cars and 50% used
cars. At June 30, 1995, approximately 50% of the auto loans outstanding were in
California, approximately 20% in New Mexico, and the balance distributed
throughout the United States. The Company has experienced an increase in
delinquency rates since September 30, 1994. In response, the Company is
expanding its auto loan collection efforts and enhancing the systems supporting
those activities.
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 continues to review the possibility of alternative
funding sources such as securitization of the auto loan portfolio. The use of
securitization will be dependent on the fixed income market, the performance of
the loan portfolio and the relative economies of a securitized and an
unsecuritized portfolio.
Premises and equipment increased primarily as a result of investments in new
building construction and computer equipment.
Trade payables and accrued expenses decreased due to the payment of various
employee related accruals since year end.
Debt payable within one year increased primarily due to a $13.9 million increase
in short-term commercial paper.
Retained earnings increased as a result of net income for the period.
SELECTED CASH FLOW ITEMS - TABLE 13
Nine months ended
June 30
(Dollars in millions) 1995 1994
Cash flows from operating activities $206.2 $194.2
Cash flows from investing activities ($134.3) ($184.1)
Cash flows from financing activities ($57.7) ($94.5)
The increase in cash flows from operating activities was primarily the result of
an increase in net income and a decrease in the change in trade payables and
accrued expenses.
The cash flows from investing and financing activities during the period were
affected primarily by the Company's funding of auto and credit card loans of the
banking/finance group, purchases of premises and equipment, dividends paid on
common stock and purchase of treasury shares. The Company continues to fund
these activities primarily from operating cash flows while utilizing its
commercial paper and medium-term notes facilities when appropriate.
During the nine-month period ended June 30, 1995, the Company purchased
1,125,934 Franklin Resources, Inc. shares for $41.5 million. The Company has
1,874,066 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.
Distribution of Class II shares will require the Company to advance a one
percent dealer commission which will be recouped substantially during the
subsequent twelve-month period primarily through a .75% and .50% asset based
charge on equity and fixed income funds, respectively. The one per cent dealer
commission will be deferred and amortized on a straight-line basis over the
eighteen-month contingent deferred sales charge period. The Company will fund
these advances through operating cash flows and existing debt facilities. From
the Class II introduction on May 1, 1995 through June 30, 1995, the Company has
advanced $.6 million in dealer commissions. The Company anticipates increased
sales of Class II shares which will result in increased advances of dealer
commissions.
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. Orange County has extended the maturity date with
consideration of increased interest rates on these obligations. 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 has limited
additional exposure to Orange County securities in the assets under its
management and does not anticipate any additional purchases of Orange County
securities from those assets.
At June 30, 1995, the Company held liquid assets of $566.7 million, including
$220.0 million in cash and cash equivalents as compared to $515.0 million,
including $210.4 million in cash and cash equivalents at September 30, 1994,
respectively.
FRANKLIN RESOURCES, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of the
report:
Exhibit (3)(i): 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)
Exhibit (3)(ii): 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
Exhibit (3)(iii):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
Exhibit (3)(iv): 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
Exhibit (3)(v): Registrant's By-Laws, as filed
February 14, 1995, incorporated by reference
to Exhibit (3)(v) to the Company's Quarterly
Report on Form 10-Q for the quarter ended
December 31, 1994
Exhibit 10.1 Representative Amended and Restated
Distribution Agreement between Franklin/Templeton
Distributors, Inc. and Franklin Federal Tax-Free
Income Fund, dated March 29, 1995
Exhibit 10.2 Representative Distribution 12b-1 Plan
for Class II shares between Franklin/Templeton
Distributors, Inc. and Franklin Federal Tax-Free
Income Fund, dated March 30,. 1995
Exhibit 10.3 Representative Investment Management
Agreement between Templeton Global Strategy SICAV
and Templeton Investment Management Limited, dated
February 2, 1995
Exhibit 10.4 Representative Sub-distribution
Agreement between Templeton,Galbraith & Hansberger
Ltd. and BAC Corp. Securities, dated May 8, 1995
Exhibit 10.5 Representative sample of Dealer
Agreement between Franklin/Templeton Distributors,
Inc. and Dealer, effective May 1, 1995
Exhibit 10.6 Representative sample of Investment
Management Agreement between Templeton Investment
Counsel, Inc. and Client (ERISA)
Exhibit 10.7 Representative sample of Investment
Management Agreement between Templeton Investment
Counsel, Inc. and Client (NON-ERISA)
Exhibit 11: Computation of per share earnings
(See page [__])
Exhibit 12 Computation of ratio of earnings to
fixed charges (See page [__])
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K:
(i) Form 8-K dated April 7, 1995 reporting under
Item 5. Other Events the filing of an exhibit to a
Registration Statement on Form S-3 filed by
Franklin Resources, Inc. for the registration of
debt securities (No. 33-53147), and including said
exhibit as an Exhibit under Item 7. Financial
Statements and Exhibits.
(ii) Form 8-K dated April 28, 1995 reporting under
Item 5. Other Events the filing of an earnings
press release by the Company on April 28, 1995 and
including said press release as an Exhibit under
Item 7. Financial Statements and Exhibits.
SIGNATURES
Pursuant to the requirements 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.
Registrant
Date: August 14, 1995 /s/ Martin L. Flanagan
----------------------
MARTIN L. FLANAGAN
Senior Vice President,
Treasurer and Chief
Financial Officer
INDEX TO EXHIBITS
Exhibit Page
Exhibit (3)(i): 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)
Exhibit (3)(ii): 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
Exhibit (3)(iii):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
Exhibit (3)(iv): 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
Exhibit (3)(v): Registrant's By-Laws, as filed
February 14, 1995, incorporated by reference
to Exhibit (3)(v) to the Company's Quarterly
Report on Form 10-Q for the quarter ended
December 31, 1994
Exhibit 10.1 Representative Amended and Restated
Distribution Agreement between Franklin/
Templeton Distributors, Inc. and Franklin
Federal Tax-Free Income Fund, dated March 29,
1995
Exhibit 10.2 Representative Distribution 12b-1
Plan for Class II shares between Franklin/
Templeton Distributors, Inc. and Franklin
Federal Tax-Free Income Fund, dated March 30,
1995
Exhibit 10.3 Representative Investment Management
Agreement between Templeton Global Strategy
SICAV and Templeton Investment Management
Limited, dated February 2, 1995
Exhibit 10.4 Representative Sub-distribution
Agreement between Templeton, Galbraith &
Hansberger Ltd. and BAC Corp. Securities,
dated May 8, 1995
Exhibit 10.5 Representative sample of Dealer
Agreement between Franklin/Templeton
Distributors, Inc. and Dealer, effective
May 1, 1995
Exhibit 10.6 Representative sample of Investment
Management Agreement between Templeton
Investment Counsel, Inc. and Client (ERISA)
Exhibit 10.7 Representative sample of Investment
Management Agreement between Templeton
Investment Counsel, Inc. and Client (NON-ERISA)
Exhibit 11: Computation of per share earnings [__]
Exhibit 12: Computation of ratio of
earnings to fixed charges [__]
Exhibit 27: Financial Data Schedule
EXHIBIT 10.1
FRANKLIN FEDERAL TAX-FREE INCOME FUND
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 FEDERAL TAX-FREE INCOME FUND
By: /s/ Deborah R. Gatzek
Accepted:
Franklin/Templeton Distributors, Inc.
By: /s/ Gregory E. Johnson
DATED: March 29, 1995
EXHIBIT 10.2
CLASS II DISTRIBUTION PLAN
I. Investment Company: FRANKLIN FEDERAL TAX-FREE INCOME FUND
II. Fund: FRANKLIN FEDERAL TAX-FREE INCOME FUND
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: 0.50%
B. Service Fee: 0.15%
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: March 30, 1995
Investment Company
By: /s/ Deborah R. Gatzek
Franklin/Templeton Distributors, Inc.
By: /s/ Gregory E. Johnson
EXHIBIT 10.3
INVESTMENT MANAGEMENT AGREEMENT
THIS AGREEMENT is made the 2nd day of February, 1995
BETWEEN: TEMPLETON GLOBAL STRATEGY SICAV, a Societe
d'Investissement a Capital Variable, incorporated
in the Grand Duchy of Luxembourg, whose registered
office is at Centre Neuberg, 30, Grand-Rue, L-1660
Luxembourg
(hereinafter called the "Company"), of the first
part
AND: TEMPLETON INVESTMENT MANAGEMENT LIMITED, a company
incorporated in the U.K. whose principal office is
located at Saltire Court, 20, Castle Terrace,
Edinburgh EH1 2EH, Scotland, U.K.
(hereinafter called the "Investment Manager") of
the second part.
WHEREAS:
(A) The Company was incorporated on 6th November, 1990 as a
Societe d'Investissement a Capital Variable ("SICAV")
under the law of 30th March 1988 concerning collective
investment undertakings.
(B) The Company is engaged in the business of investment
and re-investment of its assets in investments and
securities of all types in accordance with the
investment objectives, subject to the restrictions and
limitations, specified in its Articles of Incorporation
("Articles") and in its Prospectus ("Prospectus") in
such manner and to such extent as may from time to time
be determined by the Board of Directors ("Board") of
the Company.
(C) The Company is desirous of being provided with
investment management and advisory services and the
Investment Manager is willing to provide the same.
(D) This Agreement shall supercede all prior agreements
between the parties.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. Appointment
The Company hereby appoints the Investment Manager to act as the investment
manager and investment adviser of the Company upon the terms and conditions
hereinafter appearing and the Investment Manager agrees to accept such
appointment.
2. Control of Directors
The Directors of the Company may at all times give the Investment Manager
guidelines and/or directions relating to the conduct of the business of the
Company, both in regard to the general policy of the Company and in regard to
specific matters and the Investment Manager shall exercise its powers and duties
hereunder subject at all times to the control of and review by the Directors of
the Company. In particular, the management of the relevant assets of the
Company shall be subject to any specific or general directions which the
Directors of the Company may give to the Investment Manager with regard to the
Directors of the Company may at any time and from time to time take over either
generally or to a limited extent and either in collaboration with or to the
exclusion of the Investment Manager the making, varying or disposal of any or
all of the investments and securities of the Company.
3. Management of Investments
(a) Subject to the provisions of Clause 2 above, the Investment Manager shall
manage the investment, realisation and reinvestment of the assets of the Company
corresponding to the relevant classes of shares of the Company as are described
in the Appendix attached hereto ("assets") with power on behalf of and in the
name of the Company at its discretion to purchase, subscribe to, otherwise
acquire or deal in investments and securities and to sell, redeem, exchange,
vary or transpose the same provided that, as manager of the assets of the
Company, the Investment Manager shall observe and comply with the Articles of
the Company, all regulations set out in the Prospectus of the Company and the
laws and regulations under which the Company is incorporated.
(b) Subject to the provisions of Clause 2 above, all rights of voting conferred
by investments and securities of the Company shall be exercised in such manner
as the Investment Manager may determine and the Investment Manager may in its
discretion refrain from the exercise of such voting rights. The Company shall
from time to time execute and deliver to the Investment Manager or procure the
Custodian of the Company to execute and deliver such powers of attorney or
proxies as may reasonably be required authorising such attorney or proxies to
vote, consent or otherwise act in respect of (or any part of) the investments
and securities of the Company.
(c) The Investment Manager may enter into such contracts in the name of the
Company as may be necessary to carry out its duties hereunder.
(d) The Company shall ratify and confirm all and whatever the Investment
Manager (or any Adviser appointed pursuant to Clause 5 hereof) shall lawfully do
or cause to be done in good faith in the proper performance of its duties
hereunder and the Company shall at all times keep the Investment Manager
indemnified against all actions, proceedings, claims and liabilities whatsoever
arising out of the proper performance of its duties as aforesaid which may be
brought against or prosecuted against or incurred by the Investment Manager save
in the case of wilful default, gross negligence, bad faith or reckless disregard
of duty.
(e) The Investment Manager shall render to the Directors written reports of the
composition of the assets of the Company as often as the Directors shall
reasonably require.
(f) It is hereby expressly declared and understood that the appointment of the
Investment Manager as manager of the assets of the Company shall in no way
discharge or relieve the Directors of the Company from their general liabilities
and obligations to the shareholders of the Company.
(g) The Investment Manager shall forthwith, on receipt, pay to or deposit with
the Custodian of the Company all moneys, investments and securities received by
it on behalf of the Company.
4. Investment Advice
(a) The Investment Manager shall, as investment adviser, advise the Company
concerning the investment, realisation and reinvestment of the assets of the
Company and Company's general investment policy.
(b) In connection with its obligations hereunder, the Investment Manager shall,
with regard to the relevant classes of shares of the Company as are described in
the Appendix hereto:
(i) evaluate investments and securities which appear to the Investment Manager
as being appropriate for the Company, and on the price movements in respect of
such investments and securities and on such other factors relating thereto as
the Investment Manager considers relevant for its management of the investment,
realisation and reinvestment of the assets of the Company;
(ii) analyse continually the progress of all investments and securities which
are for the time being and from time to time represented in the portfolio of
investments and securities of the Company and provide reports requested by the
Board of the Company from time to time;
(iii) analyse the manner in which moneys required for redemptions of shares or
other purposes of the Company should be realised;
(iv) analyse all actions which it appears to the Investment Manger it should
take in order to carry into effect the investment objectives of the Company in
relation to investments and securities for the time being and from time to time
forming part of the assets of the Company;
(v) prepare material for inclusion in any reports required by the Board of the
Company; and
(vi) advise the Company concerning all actions which it appears to the
Investment Manager should be taken to carry out the investment policies of the
Company.
5. Delegation
(a) The Investment Manager shall be entitled to seek advice from and to
delegate its functions, powers, discretions, privileges and duties hereunder or
any of them to one or more persons, firms or corporation approved by the Company
(hereinafter referred to as "Adviser") and any such delegation may be on such
terms and conditions as the Investment Manager shall think fit, provided always
that the Investment Manager shall remain liable to the Company for the acts and
omissions of the Adviser and its Directors, Officers, Employees and agents in
such capacity.
(b) The Investment Manager shall be entitled to instruct the Company to pay any
Adviser from the consideration payable to the Investment Manager hereunder and
any such amounts so paid shall be deducted from the amount of the consideration
payable to the Investment Manager hereunder pursuant to Clause 6 below.
(c) The Investment Manager (or any Adviser appointed pursuant to Clause 5
hereof) shall be at liberty in the performance of its duties and in the exercise
of the powers, discretions, privileges and duties vested in it hereunder to act
by responsible officers or a responsible officer for the time being and to
employ and pay an agent to perform or concur in performing any of the services
required to be performed hereunder and may act or rely in good faith upon the
reasonable opinion or advice or any information obtained from any broker,
lawyer, valuer, surveyor, auctioneer or expert reporting to the Company.
6. Remuneration
(a) For the investment management and advisory services rendered by the
Investment Manager pursuant to Clause 3 and 4 hereof, the Company shall pay to
the Investment Manager a fee calculated as a percentage of the average net asset
value of each relevant class of shares during each month. The relevant classes
of shares concerned by the present Agreement and the rates of fees applicable to
each class of shares are described in the Appendix attached hereto.
For the purpose of this Clause, the net asset value of each relevant class of
shares shall be determined in the manner laid down in Article 23 of the Articles
of the Company.
(b) In the event of any dispute arising as to the calculation of the fee
payable hereunder the same shall be referred to the Auditors for the time being
of the Company whose decision shall be final and binding on the parties hereto.
7. Costs to be borne by the Investment Manager
Except as provided in Clause 6 and 8 hereof, the Investment Manager shall pay
all its own expenses incurred in the provision of its services hereunder
including the fees, charges and expenses of any Adviser.
8. Costs to be borne by the Company
The Company shall pay all its own expenses (whether incurred directly or by the
Investment Manager or any Adviser) including without limitation:
(i) fees and expenses of the Directors of the Company including traveling
expenses;
(ii) charges and expenses of the Custodian;
(iii) charges and expenses incurred in determining the value of the net assets
of the Company and the keeping of its books and records;
(iv) charges and expenses of Auditors, Legal Advisers and other professional
advisers of the Company;
(v) charges and expenses of the agents and representatives of the Company
along with any and all appropriate insurance policies;
(vi) all taxes, corporate fees and governmental charges and duties payable by
the Company in Luxembourg or elsewhere;
(vii) the cost of preparing, printing and distributing share certificates,
interim and annual reports, prospectuses and any marketing material of the
Company;
(viii)the fees and expenses involved in registering (and maintaining the
registration of) the Company with governmental agencies or stock exchanges to
permit the sale of or dealing in its shares including the preparation, printing
and filing of the prospectuses or similar material for use in any particular
jurisdiction;
(ix) any advertising and promotional costs;
(x) brokerage commissions, fiscal or governmental charges or duties in respect
of or in connections with the acquisition, holding or disposal of any of the
assets of the Company or otherwise in connection with its business;
(xi) the expenses of any fiscal and governmental charges and duties relating to
the purchase, sale, issue, transfer or redemption of shares in the Company and
of making any distributions to the shareholders;
(xii) any interest, fees or charges payable on account of any borrowing by the
Company;
(xiii)all expenses of shareholders' and Directors' meetings and of preparing and
printing reports to shareholders; and
(xiv) all other expenses not related to the functions undertaken by the
Investment Manager hereunder.
9. Duties of Investment Manager
(a) In carrying out their duties and functions hereunder, the Investment
Manager (and any Adviser appointed pursuant to Clause 5 hereof) shall act for
the benefit of the Company and shall act with all reasonable care and diligence
normally expected of an investment manager.
The Investment Manager shall not deal with the Company on the sale or
purchase of investments to or from the Company or otherwise deal with the
Company as principal without the consent of the Directors.
(b) Generally, the Investment Manager will select brokers or dealers to execute
securities transactions for the Company that the Investment Manager reasonably
believes will provide best price and execution for each transaction. Certain of
these brokers may refer advisory clients to the Investment Manager or recommend
the purchase of shares of the Company. These referrals or recommendations may
provide a direct or indirect benefit to the Investment Manager in addition to
the remuneration described in Clause 6 of this Agreement and the Appendix
thereto. In addition, the Investment Manager may direct brokerage transactions
for the Company's account to brokers who provide research services to the
Investment Manager and who may charge higher commissions than other brokers.
Commissions paid by the Company to such brokers may be used to pay for research
that is not used in managing the assets of the Company.
(c) The Investment Manager is a member of Investment Management Regulatory
Organisation Limited ("IMRO") and is regulated by IMRO in carrying on its
investment business, including investment management and the giving of
investment advice. The Investment Manager undertakes that it shall at all times
use its best endeavours to maintain its status as an authorised person for the
purposes of the Financial Services Act 1986. The Company hereby confirms that
it has the status of Non-private Customer as defined in the Rules of IMRO in
relation to the services to be provided under this Agreement. Unless the
context otherwise requires, terms defined in the IMRO Rules shall bear the same
meanings in this Agreement. Appendix 2 to this Agreement sets out the Form of
Statement of Protection which the Investment Manager is obliged to provide to
the Company before providing any investment services to the Company pursuant to
the terms of Rule 2.3(2) of Chapter II of the Rules of IMRO.
10. Conflicts of Interest
(a) Any director, officer or employee of the Company or of the Investment
Manager or any Adviser may act in the capacity of director, officer, employee or
agent of the other and the services being supplied by the Investment manager or
any Adviser under this Agreement to the Company may, at the option of the
Investment Manager or Adviser, be supplied through directors, officers,
employees or agents acting in such capacity.
(b) The directors, officers and employees of the Investment Manager or any
Adviser who may or may not also be directors, officers or employees of the
Company, may engage simultaneously with their activities as such in other
businesses and may render services for other individuals, companies, trusts or
persons. No such director, officer or employee shall be deemed to have an
individual interest which is in conflict with the interests of the Company or of
the Investment Manager by reason of rendering or of having any interest in or
position with any person directly or indirectly rendering to the Company, the
Investment Manager or any Adviser investment advisory management office or
clerical services, banking, custodian, accounting, or transfer services, legal
or auditing services or engaging in the sale and distribution of the Company's
shares.
(c) As described in Clause 9, the Investment Manager may refer transactions for
the Company's account to brokers or dealers that refer advisory clients to the
Investment Manager or that recommend the purchase of shares of the Company,
provided that in each case the Investment Manager reasonably believes the broker
or dealer will provide best price and execution for the transaction. This
practice may result in a potential conflict of interest between the Company's
interest in obtaining best price and execution and the Investment Manager's
interest in obtaining client referrals and selling additional shares of the
Company. A similar conflict of interest may arise when the Investment Manager
causes transactions for the Company to be executed through brokers that provide
research services to the Investment Manager.
11. Duration
This Agreement shall become effective on the date as of which it is made and
shall continue and remain in force and effect unless and until terminated by
either party thereto giving not less than three months prior written notice (or
such shorter notice as the parties hereto may agree to accept) to the other,
provided that this Agreement may be terminated by the Company forthwith by
notice in writing if:
(i) the Investment Manager commits a material breach of its obligations under
this Agreement and fails to make good such breach within thirty days of receipt
of notice from the Company requiring it to do so, or
(ii) the Investment Manager goes into liquidation or becomes subject to
moratorium proceedings (except a voluntary liquidation for the purpose of
reconstruction or amalgamation upon terms previously approved by the Company) or
if a receiver is appointed over any of its assets.
12. Assignment
This Agreement shall not be assigned by either party, save with the prior
written consent of the other party, provided, however, that a transaction which
does not result in a change of actual control or management of the Investment
Manager shall not be an assignment for purposes of this Clause 12.
13. Confidentiality
Neither of the parties hereto shall, either before or after the termination of
this Agreement, disclose to any person not authorised by the relevant party to
receive the same any information relating to such party or to the affairs of
such party of which the party disclosing the same shall have become possessed
during the period of this Agreement and each party shall use its best endeavors
to prevent any such disclosures aforesaid.
14. Notices
Any notice required to be given hereunder may be served by being left at or sent
by recorded delivery to the registered office for the time being of the party on
which it is to be served and any notice given by post shall be deemed to have
been served at the expiration of seven days after it is posted and in providing
such service it shall be sufficient to prove that the envelope containing the
notice was properly addressed and sent by recorded delivery.
15. Proper Law
This Agreement shall be governed by and construed in accordance with the laws of
the Grand Duchy of Luxembourg and the parties submit to the non-exclusive
jurisdiction of the Courts of Luxembourg.
16. Counterparts
This Agreement shall be executed in two counterparts, one such counterpart to be
retained by the Company and Investment Manager respectively.
AS WITNESS the hands of the duly authorised representatives of the parties
hereto on the day and year first before written.
TEMPLETON GLOBAL STRATEGY SICAV
By: /s/ Charles E. Johnson
Charles E. Johnson
By: /s/ Gregory E. McGowan
Gregory E. McGowan
TEMPLETON INVESTMENT MANAGEMENT LIMITED
By: /s/ D. B. Anderson
D. B. Anderson
By: /s/ Gerard W. Kerr
Gerard W. Kerr
APPENDIX 1
Relating to the different classes of shares concerned by the foregoing Agreement
and the rates of fees payable to the Investment Manager as provided under Clause
6 of the Agreement.
* Templeton Global Growth Fund 1.20%
* Templeton Deutsche Mark Global Growth Fund 1.20%
* Templeton Smaller Companies Fund 1.35%
* Templeton European Fund 1.20%
The fees referred to hereabove are payable monthly in arrears to the Investment
Manager with respect to each relevant class of shares of the Company.
CONDUCT OF BUSINESS RULES
CHAPTER II: SECTION 2
Accepting Customers
for Investment Business
APPENDIX 2.4(2)(b)
FORM OF STATEMENT OF PROTECTION
IMRO Rules required that the terms on which we, as a Member of IMRO, provide you
with any Investment Services be evidenced in writing: as a Non-private Customer
you are entitled, if you so wish, to require such services to be provided on the
terms set out below.
You may prefer a different form of agreement; but, unless we agree between us
that some provision will be made for the terms listed, you will lose some of the
protection which the Rules offer. You should, therefore, consider whether you
wish your agreement to contain any of the following provisions.
PART I
GENERAL REQUIREMENTS
(1) Membership a statement that the Member is a member
of IMRO and is regulated in the conduct
of its Investment Business by IMRO;
(2) Services a description of the nature of the
services that the Member will provide;
(3) Remuneration in respect of any remuneration payable by
the Customer to the Member, provisions on
(a) the basis of calculation; and
(b) how it is to be paid and collected;
and
(c) how frequently it is to be paid; and
(d) whether or not any fees are to
supplement or be abated by any other
remuneration receivable by the Member in
connection with any transactions effected
by the Member with or for the Customer;
(4) Commencement provision as to when and how the
of the agreement is to enter into force;
Agreement
(5) Termination provision as to how the agreement may be
Method terminated, including a statement:
(a) that termination will be without
prejudice to the completion of
transactions already initiated; and
(b) of any agreed time after which, or
any agreed event upon which, the
agreement will terminate; and
(c) that if the Member or the Customer
has the right to terminate the agreement,
he may do so by notice given to the
Customer or, as the case may be, the
Member and a statement of the minimum
period, if any, of such notice;
(6) Termination provision as to the way in which
Consequences transactions in progress are to be dealt
with upon termination;
(7) Complaints quidance on how to complain to the
Procedure Member, including a statement that the
Customer also has a right of complaint
direct to IMRO.
PART II
PARTICULAR REQUIREMENTS
In addition, your Customer Agreement should contain some provision on each of
the following matters if they are relevant to the services to be provided by us
as a Member of IMRO.
(8) the holding of the Customer's money outside the United Kingdom;
(9) Contingent Liability Transactions and transactions in units in Unregulated
Collective Investment Schemes;
(10) BES Schemes;
(11) Material Interests and conflicts of interest of the Member;
(12) the use of Soft Commission Agreement;
(13) the Member acting as principal;
(14) the Member contracting out of "Bust Execution";
(15) restrictions on the Investments comprising any Discretionary Managed
Portfolio;
(16) Periodic Statements of the contents and valuation of any Managed Portfolio;
(17) borrowing to which the Customer may be committed to supplement the funds in
a Discretionary Managed Portfolio;
(18) underwriting commitments to which the Member may commit its Customer.
Note: Certain of the terms used in this Statement (which have initial
capital letters) are defined in the IMRO Rules. We will give you an explanation
of these terms should you so require.
EXHIBIT 10.4
SUB-DISTRIBUTION AGREEMENT
THIS AGREEMENT, made as of the 8th day of May, 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 BAC CORP. SECURITIES 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 (and, therefore,
accept orders for the purchase or redemption of Shares,
respond to shareholder inquiries and perform other related
functions) 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. No person is authorized to
distribute any sales material relating to the SICAV without
the prior written approval of such sales material by the
Principal Distributor.
The Principal Distributor shall provide Sub-
Distributor with copies of the Prospectus, Reports to
Shareholders and available printed information in reasonable
quantities upon request. No person is authorized to
distribute any sales material to investors relating to the
SICAV without the prior written approval of such sales
material by the Principal Distributor.
5. Compensation. As compensation for such services
hereunder, the Principal Distributor will, during the period
of effectiveness of this Agreement, (i) pay Sub-Distributor
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 average daily
net assets 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. Payments due hereunder shall be made no less frequently
than semiannually. 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 Principal Distributor
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 governing the distribution of
Prospectuses to persons to whom Sub-Distributor offers Shares.
Sub-Distributor further agrees to deliver, upon Principal
Distributor's request, copies of any amended Prospectus to
purchasers whose Shares Sub-Distributor is holding as record
owner and to deliver 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 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 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 which 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. 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 Addendum 3, 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 defined in the
Prospectus and 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.
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.
9. Record Keeping. Sub-Distributor shall (i)
maintain all records required by law 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 rules of each jurisdiction
in which it sells Shares and with the terms and conditions of
the Prospectus, as well as the rules and regulations 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 and the Principal Distributor from and against any
suits, actions or legal proceedings 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 its acts or 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 or any failure on Sub-Distributor's part
to comply with any applicable laws, and hold the SICAV and the
Principal Distributor, including any and all affiliates,
harmless from loss or damage resulting from any failure on
Sub-Distributor's part to comply with any applicable laws.
Sub-Distributor further agrees that the indemnity contained in
this Agreement shall survive any termination or cancellation
of this Agreement.
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 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 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 New York 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. Integration. 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.
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:
BAC CORP. SECURITIES
848 Brickell Avenue, Penthouse
Miami, FL 33131
Attention: Mr. George Aroche
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:/s/ Mark G. Holowesko
Mark G. Holowesko
Attest: /s/ Alexandra Ricketts (CORPORATE SEAL)
Alexandra Ricketts
BAC CORP. SECURITIES
BY: /s/__________________________________
(Authorised Signer)
Attest: /s/_____________________________ (CORPORATE SEAL)
(Attestor)
ADDENDUM 1
TO SUB-DISTRIBUTION AGREEMENT DATED 8 MAY, 1995
WITH BAC CORP. SECURITIES
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 BAC CORP. SECURITIES ninety percent (90%) of the
initial sales charge applicable to sales by BAC CORP. SECURITIES of the SICAV.
TEMPLETON GLOBAL STRATEGY SICAV - Pricing & Commissions Grid*
Shareholder
FUND Initial Processing/
Sales Servicing
Charge Fee
Templeton Global Growth Fund* 5.75% 0.25%
Templeton Deutsche Mark Global Growth
Fund* 5.75% 0.25%
Templeton Smaller Companies Fund* 5.75% 0.25%
Templeton Global Infrastructure and
Communications Fund* 5.75% 0.25%
Templeton Pan-American Fund* 5.75% 0.25%
Templeton European Fund* 5.75% 0.25%
Templeton Asian Growth Fund* 5.75% 0.25%
Templeton Asian Smaller Companies
Fund* 5.75% 0.25%
Templeton China Fund* 5.75% 0.25%
Templeton Korean Fund* 5.75% 0.25%
Templeton Emerging Markets Fund* 5.75% 0.25%
Templeton Global Utilities Fund* 5.75% 0.25%
Templeton Global Convertible Fund* 5.75% 0.25%
Templeton Global Balanced Fund* 5.75% 0.25%
Templeton Global Income Fund** 4.50% 0.15%
Templeton Deutsche Mark Global Bond
Fund** 4.50% 0.15%
Templeton U.S. Government Fund** 4.50% 0.15%
Templeton Emerging Markets Fixed
Income Fund** 4.50% 0.15%
Templeton Haven Fund*** 1.00% 0.10%
Templeton U.S. Dollar Liquid Reserve
Fund*** 0.0% 0.10%
Templeton Deutsche Mark Liquid
Reserve Fund*** 0.0% 0.10%
ADDENDUM 1 TO SUB-DISTRIBUTION AGREEMENT
DATED 8 MAY, 1995
WITH BAC CORP. SECURITIES
Page Two
______________
* Subject to breakpoints at the following levels:
US $50,000 to US $100,000 4.50%
US $100,000 to US $250,000 3.50%
US $250,000 to US $500,000 2.50%
US $500,000 to US $1,000,000 2.00%
greater than US $1,000,000 none
** Subject to breakpoints at the following levels:
US $100,000 to US $250,000 3.50%
US $250,000 to US $500,000 2.50%
US $500,000 to US $1,000,000 2.00%
greater than US $1,000,000 none
*** Not subject to breakpoints.
ADDENDUM 2
TO SUB-DISTRIBUTION AGREEMENT DATED 8 MAY, 1995
WITH BAC CORP. SECURITIES
There is no initial sales charge with respect to Class "B" Shares; however, BAC
CORP. SECURITIES will receive 100% of the commission paid on Class "B" Shares.
In addition, BAC CORP. SECURITIES will receive the shareholder
processing/servicing fee as more fully described below.* 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
FUND Up Processing/
Front Servicing
Commission Fee
Templeton Global Growth Fund 3% 0.25%
Templeton Smaller Companies Fund 3% 0.25%
Templeton Pan-American Fund 3% 0.25%
Templeton Emerging Markets Fund 3% 0.25%
Templeton Global Income Fund 3% 0.25%
Templeton Emerging Markets Fixed
Income Fund 3% 0.25%
*The Shareholder Servicing Fee will be paid after 13 months.
ADDENDUM 3
TO SUB-DISTRIBUTION AGREEMENT DATED 8 MAY, 1995
WITH BAC CORP. SECURITIES
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
defined 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 10.5
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 customersO 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 purchaserOs 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 FundOs 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 FundsO 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 FundsO 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 FundOs
prospectus. You will be obligated to comply with any additional exchange
policies described in each FundOs 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 FundOs 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 FundOs prospectus, which amount shall be a
specified percent of the value of the FundOs net assets held in your customersO
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 FundsO 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 FundsO 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) daysO 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 FundOs
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 FundOs 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
FundOs 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 partiesO 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
partyOs 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 10.6
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of ___________, 1995, by and
between TEMPLETON INVESTMENT COUNSEL, INC. (the "Manager"), a
Florida corporation, and _______________________________________
("Client").
1. Appointment. Client hereby appoints the Manager as an
investment manager to manage such of Client's assets as Client
shall from time to time assign to it, the proceeds from the sale of
such assets, and the income attributable to such assets (the
"Account"). The Account as of the date hereof shall consist of the
assets listed on Exhibit A hereto. Client shall promptly notify
the Manager in writing of any increase or reduction in the amount
of the Account's assets subject to the Manager's investment
direction. [Each of Client's duties and authorities under this
Agreement may be performed or exercised in lieu thereof by the
____________________________ Committee appointed by Client.]
2. Authority of Manager. The Manager is authorized to
supervise and direct the investment and reinvestment of the assets
in the Account, subject to such limitations as are contained in the
Guidelines described in Section 3 of this Agreement, as they may be
from time to time amended, and subject to Client's right to direct
the investment of the Account by means of Instructions as described
in Section 3 of this Agreement. The Manager, as Client's agent and
attorney-in-fact with respect to the Account, when it deems
appropriate and without prior consultation with Client, may (a)
buy, sell, exchange, convert and otherwise trade in any stocks,
bonds and other securities including money market instruments,
whether the issuer is organized in the United States or (subject to
the restrictions of Section 11 of this Agreement) outside the
United States, (b) place orders for the execution of such
securities transactions with or through such brokers, dealers or
issuers as the Manager may select and (c) purchase, sell, exchange
or convert foreign currency in the spot or forward markets as
necessary to facilitate transactions in international securities
for the Account. The Manager is not authorized (a) to accept
delivery of cash or securities for the Account or (b) to establish
or maintain custodial arrangements for the Account. Client shall
choose a custodian (the "Custodian") to hold physical custody of
the Account. Client shall direct the Custodian to segregate the
assets in the Account and to invest and reinvest them in accordance
with the directions transmitted by the Manager and received by the
Custodian. Such directions shall be given in writing, or given
orally and confirmed in writing as soon thereafter as possible.
3. Guidelines and Instructions. Attached hereto as Exhibit
B is a statement of the investment objectives of Client together
with a statement of any and all specific investment restrictions
applicable to the investment of the Account (the "Guidelines").
Client shall have the right at all times to modify the
Guidelines or to give the Manager Instructions to buy, sell or
retain any investment, but no modification of the Guidelines and no
Instructions or modifications of Instructions will be binding upon
the Manager until the Manager has received written notice of them.
The Guidelines and all Instructions, unless they expressly provide
otherwise, shall continue effective until duly cancelled by
subsequent modifications duly communicated to the Manager.
4. ERISA Compliance. The Manager hereby acknowledges that
with respect to the Account it is a "fiduciary" of the Account
within the meaning of and for the purposes of the Employee
Retirement Income Security Act of 1974 ("ERISA"), and confirms that
it is registered as an investment adviser under the Investment
Advisers Act of 1940. The Manager has obtained and agrees to
maintain during the period of this Agreement any bonds required by
Section 412 of ERISA.
Notwithstanding the foregoing, Client acknowledges that the
Manager has not been delegated the authority to alter or deviate
from the Guidelines, as they may be modified from time to time, or
any Instruction (as herein defined) issued pursuant to this
Agreement, and has not been given and does not accept fiduciary
duties with respect to, or responsibilities or liabilities for, any
effect on the Account of the Guidelines or such Instructions.
5. Conflicts. Nothing in this Agreement shall be deemed to
limit or restrict the Manager's right, or the right of any of its
officers, directors or employees, to engage in any other business
or to devote time and attention to the management or other aspects
of any business, whether of a similar or dissimilar nature, or to
render investment advisory services or services of any kind to any
other corporation, firm, association or individual.
Client understands that the Manager provides investment
advisory services to numerous other private accounts. Client also
understands that the Manager may give advice and take action with
respect to any of its other clients or for its own account which
may differ from the timing or nature of action taken by the Manager
with respect to the Account.
Nothing in this Agreement shall impose upon the Manager any
obligation to purchase or sell or to recommend for purchase or
sale, with respect to the Account, any security which the Manager,
or its shareholders, directors, officers, employees or affiliates
may purchase or sell for its or their own account(s) or for the
account of any other client.
6. Liability of the Manager. Client understands that the
value of investments made for the Account may go up as well as down
and are not guaranteed. Client further understands and
acknowledges that investment decisions made on behalf of Client's
Account by Manager are subject to various market, currency,
economic and business risks, as well as the risk that those
investment decisions will not always be profitable or prove to have
been wise. Except as may otherwise be provided by law, the Manager
shall not be liable for (a) any loss that Client may suffer by
reason of any investment decision made or other action taken or
omitted in good faith and with that degree of care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent person acting in a like capacity would use in the conduct
of an enterprise of a like character and with like aims; (b) any
loss arising only from its compliance with the Guidelines or
Instructions of the Client; or (c) any act or failure to act by any
broker or other person with whom the Manager or Client may deal in
connection with the subject matter of this Agreement. Client
agrees that the Manager has not made and is not making any
guarantees, including without limitation a guarantee as to any
specific level of performance of the Account.
7. Brokerage. Where the Manager places orders, or directs
the placement of orders, for the purchase or sale of portfolio
securities for the Account, in selecting brokers or dealers to
execute such orders, the Manager is expressly authorized to
consider the fact that a broker or dealer has furnished
statistical, research or other information or services which
enhance the Manager's investment research and portfolio management
capability generally. It is further understood in accordance with
Section 28(e) of the Securities Exchange Act of 1934, as amended,
that the Manager may negotiate with and assign to a broker a
commission which may exceed the commission which another broker
would have charged for effecting the transaction if the Manager
determines in good faith that the amount of commission charged was
reasonable in relation to the value of brokerage and/or research
services (as defined in Section 28(e)) provided by such broker,
viewed in terms either of the Account or the Manager's overall
responsibilities to the Manager's discretionary accounts.
8. Confidential Relationship. All information and
recommendations furnished by either party to the other shall at all
times be treated in strictest confidence and shall not be disclosed
to third persons except as may be required by law, or except upon
the prior written approval of the other party to this Agreement.
9. Reports. The Manager shall send to Client a written
report of the Account as of the last trading day of each calendar
quarter (the "Valuation Date"). As used in this Agreement, the
term "trading day" means a day on which the New York Stock Exchange
is open for trading. Such reports ("Quarterly Reports") shall be
submitted not later than 15 business days following each Valuation
Date and shall set forth, for the period since the last previous
Valuation Date, a list or a statement of each of the following:
(i) the cash and securities comprising the Account; (ii) all
unrealized gains and losses; and (iii) a description of the form in
which the assets in the Account are maintained, including the
number of units or shares and the book value and market value of
the securities held by or on behalf of Client as of that date. For
the purposes of all reports made by the Manager to Client, foreign
securities denominated in foreign currencies will be valued in
United States dollars.
10. Valuation. Any equity security traded on the New York
Stock Exchange or the American Stock Exchange will be valued at the
last sale price on such exchange on the appropriate Valuation Date,
or if there has been no sale that day, at the last known sale price
previous to that day. Any other security or asset shall be valued
in a manner determined in good faith by the Manager to reflect its
fair market value.
11. Foreign Securities. The Custodian is only authorized to
maintain the indicia of ownership of any of the assets in the
Account outside the jurisdiction of the District Courts of the
United States (the "Jurisdiction") in accordance with the
requirements of 29 CFR Section 2550.404b-1 or any regulations
successor thereto (the "Foreign Assets Regulations"). The
Custodian is authorized, but the Manager is not, to select an
entity or entities outside the Jurisdiction to hold such indicia of
ownership. Accordingly, the Manager is authorized to direct the
investment of the assets in the Account in securities or other
instruments issued by entities organized outside the United States
the indicia of ownership of which are to be held outside the United
States only to the extent the Custodian has informed the Manager
that such securities or other instruments are such that the indicia
of ownership thereof may be maintained by the Custodian outside the
Jurisdiction in compliance with the Foreign Assets Regulations.
The Manager shall at all times cooperate with the Custodian to
enable the Custodian to comply with the Foreign Assets Regulations.
12. Fees and Expenses. As full compensation for its
services under this Agreement, the Manager shall be paid quarterly
a fee based on the asset value of the Account as of the last day of
each calendar quarter equal to one-fourth of the annual rates
specified in Exhibit C. The compensation of the Manager shall be
paid upon receipt of the Manager's statement for such compensation.
If the Manager shall serve for less than the whole of any
quarter, its compensation shall be determined as provided above on
the basis of the value of the assets in the Account on the date of
termination and shall be payable on a pro rata basis for the period
of the quarter for which it served as Manager hereunder.
13. Proxies and Other Legal Notices. Decisions on proxy
voting will be made by the Manager unless such decisions are
expressly reserved to Client's trustee or a named fiduciary of
Client's Account. However, the Manager will not be expected or
required to take any action other than the rendering of investment-
related advice with respect to lawsuits involving securities
presently or formerly held in the Account, or the issuers thereof,
including actions involving bankruptcy.
14. Acknowledgment of Investment Risk. Client recognizes
and acknowledges that investing in securities of companies in
foreign countries involves certain special considerations which
are not typically associated with investing in securities of U.S.
companies. Such risk considerations include but are not limited
to, foreign currency considerations, investment and repatriation
restrictions and economic and political risks.
Although the Manager intends to invest in companies located in
countries which the Manager considers to have relatively stable and
friendly governments, Client is cognizant of and hereby accepts the
possibility that countries in which the Manager invests may
expropriate or nationalize properties of foreigners or impose
confiscatory taxation or exchange controls (which may include
suspension of the ability to transfer currency from a given
country.) Moreover, the countries in which the Portfolio may
invest also may be subject to political or social instability or
diplomatic developments that could affect investments in securities
of issuers in those countries.
Client recognizes and acknowledges that this account is
designed for investors seeking international diversification, and
is not intended as a complete investment program.
15. Termination; Survival. This Agreement may be terminated
by either party upon thirty days' written notice to the other
party. This Agreement may be amended solely by a written instrument
executed by both parties. Upon any termination of this Agreement,
the Manager shall have no further obligations hereunder, provided
that any liability under this Agreement of one party to the other
shall survive and remain in full force and effect, notwithstanding
such termination, with respect to any claim or matter on which
either of the parties has given the other written notice prior to
such termination (except that the Manager may render to Client a
statement of fees due the Manager through the date of termination
after such date), until such liability has been finally settled.
16. Assignment. This Agreement may not be assigned, in
whole or in part, by either party without the prior written consent
of the other, and any purported assignment in violation of this
provision will be void.
17. Communications. All reports and other communications
required hereunder to be in writing shall be delivered in person or
sent by first-class mail postage prepaid.
If to Client:
Attention:_________________________________
If to Manager:
Templeton Investment Counsel, Inc.
500 East Broward Boulevard, Suite 2100
Fort Lauderdale, Florida 33394-3091
Attention:___________________________________
Either party to this Agreement may, by written notice given at
any time, designate a different address for the receipt of reports
and other communications due hereunder.
18. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the United
States and with the laws of the State of Florida without giving
effect to the choice of law or conflict of law provisions thereof.
19. Entire Agreement; Modification. This Agreement (i) sets
forth the entire understanding of the parties with respect to the
subject matter hereof; (ii) incorporates and merges any and all
previous agreements, understandings and communications, oral or
written; and (iii) may not be modified, amended, or waived except
by a specific written instrument duly executed by the party against
whom such modification, amendment, or waiver is sought to be
enforced.
20. Headings. The headings of the sections of this
Agreement are for convenience of reference only and will not affect
the meaning or operation of this Agreement.
21. Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original,
but all of which together will constitute one and the same
instrument.
22. Severability. In the event that any provision of this
Agreement will be considered void, voidable, illegal, or invalid
for any reason, such provision will be of no force and effect only
to the extent that it is so declared void, voidable, illegal, or
invalid. All of the provisions of this Agreement not specifically
found to be so deficient will remain in full force and effect.
IN WITNESS WHEREOF the parties hereto have set their hands and
seals the day and year first above written.
CLIENT
By:_____________________________
(Name of officer and title)
TEMPLETON INVESTMENT COUNSEL, INC.
By: _____________________________________
EXHIBIT A
List of Assets Market Value
EXHIBIT B
Statement of Investment Objectives
Statement of Client Account Restrictions
EXHIBIT C
Fee Schedule:
On amounts
up to $_________ .__%
Next $_________ .__%
Next $_________ .__%
Next $_________ .__%
Next $_________ .__%
Over $_________ .__%
EXHIBIT 10.7
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this ________ day of ______________, 1994, by
and between Templeton Investment Counsel, Inc. (the "Manager"), a
Florida corporation, and ________________________________________
("Client").
1. Appointment. Client hereby appoints the Manager as an
investment manager to manage such of Client's assets as Client
shall from time to time assign to it, the proceeds from the sale
of such assets, and the income attributable to such assets (the
"Account"). The Account as of the date hereof shall consist of the
assets listed on Exhibit A hereto. Client shall promptly notify
the Manager in writing of any increase or reduction in the amount
of the Account's assets subject to the Manager's investment
direction.
2. Authority of Manager. The Manager is authorized to
supervise and direct the investment and reinvestment of the assets
in the Account, subject to such limitations as are contained in the
Guidelines described in Section 3 of this Agreement, as they may be
from time to time amended, and subject to Client's right to direct
the investment of the Account by means of Instructions as described
in Section 3 of this Agreement. The Manager, as Client's agent and
attorney-in-fact with respect to the Account, when it deems
appropriate and without prior consultation with Client, may (a)
buy, sell, exchange, convert and otherwise trade in any stocks,
bonds and other securities including money market instruments,
whether the issuer is organized in the United States or outside the
United States, (b) place orders for the execution of such
securities transactions with or through such brokers, dealers or
issuers as the Manager may select and (c) purchase, sell, exchange
or convert foreign currency in the spot or forward markets as
necessary to facilitate transactions in international securities
for the Account. The Manager is not authorized (a) to accept
delivery of cash or securities for the Account or (b) to establish
or maintain custodial arrangements for the Account. Client shall
choose a custodian (the "Custodian") to hold physical custody of
the Account. Client shall direct the Custodian to segregate the
assets in the Account and to invest and reinvest them in accordance
with the directions transmitted by the Manager and received by the
Custodian. Such directions shall be given in writing, or given
orally and confirmed in writing as soon thereafter as possible.
3. Guidelines and Instructions. Attached hereto as Exhibit
B is a statement of the investment objectives of Client together
with a statement of any and all specific investment restrictions
applicable to the investment of the Account (the "Guidelines").
Client shall have the right at all times to modify the
Guidelines or to give the Manager Instructions to buy, sell or
retain any investment, but no modification of the Guidelines and no
Instructions or modifications of Instructions will be binding upon
the Manager until the Manager has received written notice of them.
The Guidelines and all Instructions, unless they expressly provide
otherwise, shall continue effective until duly canceled by
subsequent modifications duly communicated to the Manager.
4. Conflicts. Nothing in this Agreement shall be deemed to
limit or restrict the Manager's right, or the right of any of its
officers, directors or employees, to engage in any other business
or to devote time and attention to the management or other aspects
of any business, whether of a similar or dissimilar nature, or to
render investment advisory services or services of any kind to any
other corporation, firm, association or individual.
Client understands that the Manager provides investment
advisory services to numerous other private accounts. Client also
understands that the Manager may give advice and take action with
respect to any of its other clients or for its own account which
may differ from the timing or nature of action taken by the Manager
with respect to the Account.
Nothing in this Agreement shall impose upon the Manager any
obligation to purchase or sell or to recommend for purchase or
sale, with respect to the Account, any security which the Manager,
or its shareholders, directors, officers, employees or affiliates
may purchase or sell for its or their own account(s) or for the
account of any other client.
5. Liability of the Manager. Client understands that the
value of investments made for the Account may go up as well as down
and are not guaranteed. Client further understands and
acknowledges that investment decisions made on behalf of Client's
Account by Manager are subject to various market, currency economic
and business risks, as well as the risk that those investment
decisions will not always be profitable or prove to have been wise.
Except as may otherwise be provided by law, the Manager shall not
be liable for (a) any loss that Client may suffer by reason of any
investment decision made or other action taken or omitted in good
faith and with that degree of care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person
acting in a like capacity would use in the conduct of an enterprise
of a like character and with like aims; (b) any loss arising only
from its compliance with the Guidelines or Instructions of the
Client; or (c) any act or failure to act by any broker or other
person with whom the Manager or Client may deal in connection with
the subject matter of this Agreement. Client agrees that the
Manager has not made and is not making any guarantees, including
without limitation a guarantee as to any specific level of
performance of the Account.
6. Brokerage. Where the Manager places orders, or directs
the placement of orders, for the purchase or sale of portfolio
securities for the Account, in selecting brokers or dealers to
execute such orders, the Manager is expressly authorized to
consider the fact that a broker or dealer has furnished
statistical, research or other information or services which
enhance the Manager's investment research and portfolio management
capability generally. It is further understood in accordance with
Section 28(e) of the Securities Exchange Act of 1934, as amended,
that the Manager may negotiate with and assign to a broker a
commission which may exceed the commission which another broker
would have charged for effecting the transaction if the Manager
determines in good faith that the amount of commission charged was
reasonable in relation to the value of brokerage and/or research
services (as defined in Section 28(e)) provided by such broker,
viewed in terms either of the Account or the Manager's overall
responsibilities to the Manager's discretionary accounts.
7. Confidential Relationship. All information and
recommendations furnished by either party to the other shall at all
times be treated in strictest confidence and shall not be disclosed
to third persons except as may be required by law, or except upon
the prior written approval of the other party to this Agreement.
8. Reports. The Manager shall send to Client a written
report of the Account as of the last trading day of each calendar
quarter (the "Valuation Date"). As used in this Agreement, the
term "trading day" means a day on which the New York Stock Exchange
is open for trading. Such reports ("Quarterly Reports") shall be
submitted not later than 15 business days following each Valuation
Date and shall set forth, for the period since the last previous
Valuation Date, a list or a statement of each of the following:
(i) the cash and securities comprising the Account; (ii) all
unrealized gains and losses; and (iii) a description of the form in
which the assets in the Account are maintained, including the
number of units or shares and the book value and market value of
the securities held by or on behalf of Client as of that date. For
the purposes of all reports made by the Manager to Client, foreign
securities denominated in foreign currencies will be valued in
United States dollars.
9. Valuation. Any equity security traded on the New York
Stock Exchange or the American Stock Exchange will be valued at the
last sale price on such exchange on the appropriate Valuation Date,
or if there has been no sale that day, at the last known sale price
previous to that day. Any other security or asset shall be valued
in a manner determined in good faith by the Manager to reflect its
fair market value.
10. Fees and Expenses. As full compensation for its
services under this Agreement, the Manager shall be paid quarterly
a fee based on the asset value of the Account as of the last day of
each calendar quarter equal to one-fourth of the annual rates
specified in Exhibit C. The compensation of the Manager shall be
paid upon receipt of the Manager's statement for such compensation.
If the Manager shall serve for less than the whole of any
quarter, its compensation shall be determined as provided above on
the basis of the value of the assets in the Account on the date of
termination and shall be payable on a pro rata basis for the period
of the quarter for which it served as Manager hereunder.
11. Proxies and Other Legal Notices. Decisions on proxy
voting will be made by the Manager unless such decisions are
expressly reserved to Client's trustee or a named fiduciary of
Client's Account. However, the Manager will not be expected or
required to take any action other than the rendering of investment-
related advice with respect to lawsuits involving securities
presently or formerly held in the Account, or the issuers thereof,
including actions involving bankruptcy.
12. Acknowledgment of Investment Risk. Client recognizes
and acknowledges that investing in securities of companies in
foreign countries involves certain special considerations which
are not typically associated with investing in securities of U.S.
companies. Such risk considerations include but are not limited
to, foreign currency considerations, investment and repatriation
restrictions and economic and political risks.
Although the Manager intends to invest in companies located in
countries which the Manager considers to have relatively stable and
friendly governments, Client is cognizant of and hereby accepts the
possibility that countries in which the Manager invests may
expropriate or nationalize properties of foreigners or impose
confiscatory taxation or exchange controls (which may include
suspension of the ability to transfer currency from a given
country.) Moreover, the countries in which the Portfolio may
invest also may be subject to political or social instability or
diplomatic developments that could affect investments in securities
of issuers in those countries.
Client recognizes and acknowledges that this account is
designed for investors seeking international diversification, and
is not intended as a complete investment program.
13. Termination; Survival. This Agreement may be terminated
by either party upon thirty days' written notice to the other
party. This Agreement may be amended solely by a written instrument
executed by both parties. Upon any termination of this Agreement,
the Manager shall have no further obligations hereunder, provided
that any liability under this Agreement of one party to the other
shall survive and remain in full force and effect, notwithstanding
such termination, with respect to any claim or matter on which
either of the parties has given the other written notice prior to
such termination (except that the Manager may render to Client a
statement of fees due the Manager through the date of termination
after such date), until such liability has been finally settled.
14. Assignment. This Agreement may not be assigned, in
whole or in part, by either party without the prior written consent
of the other, and any purported assignment in violation of this
provision will be void.
15. Communications. All reports and other communications
required hereunder to be in writing shall be delivered in person or
sent by first-class mail postage prepaid
If to Client:
Attention: _______________________________
If to Manager:
Templeton Investment Counsel, Inc.
500 East Broward Boulevard, Suite 2100
Fort Lauderdale, Florida 33394-3091
Attention:______________________________
Either party to this Agreement may, by written notice given at
any time, designate a different address for the receipt of reports
and other communications due hereunder.
16. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the United
States and with the laws of the State of Florida without giving
effect to the choice of law or conflict of law provisions thereof.
17. Entire Agreement; Modification. This Agreement (i) sets
forth the entire understanding of the parties with respect to the
subject matter hereof; (ii) incorporates and merges any and all
previous agreements, understandings and communications, oral or
written; and (iii) may not be modified, amended, or waived except
by a specific written instrument duly executed by the party against
whom such modification, amendment, or waiver is sought to be
enforced.
18. Headings. The headings of the sections of this
Agreement are for convenience of reference only and will not affect
the meaning or operation of this Agreement.
19. Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original,
but all of which together will constitute one and the same
instrument.
20. Severability. In the event that any provision of this
Agreement will be considered void, voidable, illegal, or invalid
for any reason, such provision will be of no force and effect only
to the extent that it is so declared void, voidable, illegal, or
invalid. All of the provisions of this Agreement not specifically
found to be so deficient will remain in full force and effect.
IN WITNESS WHEREOF the parties hereto have set their hands and
seals the day and year first above written.
CLIENT
By:______________________________
(Name of officer and title)
TEMPLETON INVESTMENT COUNSEL, INC.
By:__________________________________
EXHIBIT A
List of Assets Market Value
EXHIBIT B
Statement of Investment Objectives
Statement of Client Account Restrictions
EXHIBIT C
Fee Schedule
On amounts
up to $_________ .__%
Next $_________ .__%
Next $_________ .__%
Next $_________ .__%
Next $_________ .__%
Over $_________ .__%
<TABLE>
COMPUTATIONS OF PER SHARE EARNINGS Exhibit 11
<CAPTION>
Earnings per share are based on net income divided by the average number of
shares outstanding including common stock equivalents during the period.
Three months ended Nine months ended
June 30 June 30
(Dollars and shares in thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Average outstanding shares 81,053 81,788 81,344 82,044
Common stock equivalents
Primary 1,487 1,872 1,487 1,872
Fully diluted 1,926 1,872 1,926 1,872
Total shares
Primary 82,540 83,660 82,830 83,916
Fully diluted 82,979 83,660 83,269 83,916
Net income $69,029 $60,023 $195,373 $187,625
Earnings per share:
Primary $0.84 $0.72 $2.36 $2.24
Fully diluted $0.83 $0.72 $2.35 $2.24
Dividends per share $0.10 $0.08 $0.30 $0.24
</TABLE>
<TABLE>
COMPUTATIONS OF EARNINGS TO FIXED CHARGES Exhibit 12
<CAPTION>
Three months ended Nine months ended
June 30 June 30
(Dollars in thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Income before taxes $101,076 $84,008 $286,141 $275,232
Add fixed charges:
Interest expense 8,104 7,333 22,544 21,846
Interest factor on rent 1,918 1,417 5,316 4,043
Total fixed charges 10,022 8,750 27,860 25,889
Earnings before fixed charges
and taxes on income $111,098 $92,758 $314,001 $301,121
Ratio of earnings to fixed charges 11.1 10.6 11.3 11.6
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 224,468
<SECURITIES> 232,224
<RECEIVABLES> 597,110
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 532,297
<PP&E> 109,592
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,871,760
<CURRENT-LIABILITIES> 199,511
<BONDS> 382,487
<COMMON> 8,226
0
0
<OTHER-SE> 1,080,066
<TOTAL-LIABILITY-AND-EQUITY> 1,871,760
<SALES> 0
<TOTAL-REVENUES> 670,534
<CGS> 0
<TOTAL-COSTS> 361,849
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,544
<INCOME-PRETAX> 286,141
<INCOME-TAX> 90,768
<INCOME-CONTINUING> 195,373
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 195,373
<EPS-PRIMARY> 2.36
<EPS-DILUTED> 2.35
</TABLE>
