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 March 31, 1996
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 (IRS Employer
of incorporation or organization) Identification No.)
777 Mariners Island Blvd., San Mateo, CA 94404
(Address of Principal Executive Offices)
(Zip Code)
(415) 312-2000
(Registrant's telephone number, including area code)
___________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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 such 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: 80,348,334 shares, common stock, par value
$.10 per share at April 30, 1996.
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 prior year amounts have been reclassified to conform to current
year presentation. These financial statements should be read in
conjunction with the Company's audited financial statements for the
fiscal year ended September 30, 1995.
Franklin Resources, Inc.
Consolidated Statements of Income
Unaudited
Three months Six months
ended ended
March 31 March 31
--------- ---------
(Dollars in thousands, except
per share data) 1996 1995 1996 1995
----- ----- ----- -----
Operating revenues:
Investment management fees $215,336 $172,582 $416,971 $347,156
Underwriting commissions,
net 3,739 9,096 6,714 22,209
Transfer, trust and
related fees 22,631 15,520 44,020 31,463
Banking/finance, net and
other 2,924 2,583 3,478 7,186
-------- ---------- --------- ---------
Total operating
revenues 244,630 199,781 471,183 408,014
-------- ---------- --------- ---------
Operating expenses:
General and administrative 121,122 85,003 228,176 181,340
Selling 17,286 19,886 32,811 38,121
Goodwill amortization 4,530 4,640 9,371 9,210
-------- ---------- --------- ---------
Total operating
expenses 142,938 109,529 270,358 228,671
-------- ---------- --------- ---------
Operating income 101,692 90,252 200,825 179,343
Other income/(expense):
Investment and other
income 9,989 5,262 20,654 12,025
Interest expense (3,419) (2,880) (6,042) (6,303)
-------- ---------- --------- ---------
Other income/(expense),
net 6,570 2,382 14,612 5,722
-------- ---------- --------- ---------
Income before taxes on income 108,262 92,634 215,437 185,065
Taxes on income 33,050 29,594 66,274 58,721
-------- ---------- --------- ---------
Net income $75,212 $63,040 $149,163 $126,344
======== ========== ========= =========
Earnings per share:
Primary $0.91 $0.76 $1.79 $1.52
Fully diluted $0.91 $0.76 $1.79 $1.52
Dividends per share $0.11 $0.10 $0.22 $0.20
The accompanying note is an integral part of these financial
statements.
Franklin Resources, Inc.
Consolidated Balance Sheets
Unaudited
March 31 September 30
(Dollars in thousands) 1996 1995
------- ------------
ASSETS:
Current assets:
Cash and cash equivalents $322,953 $246,184
Receivables:
Fees from Franklin Templeton Group 121,268 110,972
Other 43,248 38,407
Investment securities, available for
sale 206,408 208,478
Prepaid expenses and other 11,325 7,167
--------- ---------
Total current assets 705,202 611,208
--------- ---------
Banking/finance group assets:
Cash and cash equivalents 14,629 15,515
Loans receivable, net 385,866 450,013
Investment securities, available for
sale 26,649 23,655
Other assets 6,176 6,876
-------- ---------
Total banking/finance group
assets 433,320 496,059
-------- ---------
Other Assets:
Investments:
Investment securities, available
for sale 18,643 15,291
Real Estate 8,890 8,826
Deferred costs 46,348 17,703
Premises and equipment, net 129,696 118,628
Goodwill, net of $65,027 and $56,375
amortization, respectively 650,982 660,363
Receivable from banking/finance group 253,426 302,273
Other assets 14,955 14,330
-------- ---------
Total other assets 1,122,940 1,137,414
---------- ----------
Total assets $2,261,462 $2,244,681
=========== ============
The accompanying note is an integral part of these financial
statements.
Franklin Resources, Inc.
Consolidated Balance Sheets
Unaudited
March 31 September 30
(Dollars in thousands) 1996 1995
------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Current liabilities:
Trade payables and accrued expenses $121,276 $117,744
Debt payable within one year 30,333 87,204
Dividends payable 8,838 8,123
--------- ---------
Total current liabilities 160,447 213,071
--------- ---------
Banking/finance group liabilities:
Deposits of account holders:
Interest bearing 139,096 159,627
Non-interest bearing 10,110 9,747
Payable to parent 253,426 302,273
Other liabilities 3,343 2,076
--------- --------
Total banking/finance group
liabilities 405,975 473,723
--------- --------
Other Liabilities:
Long-term debt 421,184 382,367
Other liabilities 15,102 14,477
--------- --------
Total other liabilities 436,286 396,844
--------- --------
Total liabilities 1,002,708 1,083,638
----------- ----------
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; 80,349,133 and 80,939,611
shares outstanding, respectively 8,226 8,226
Capital in excess of par value 98,261 92,190
Retained earnings 1,222,678 1,091,204
Less cost of treasury stock (86,360) (48,519)
Other 15,949 17,942
--------- ---------
Total stockholders' equity 1,258,754 1,161,043
---------- ----------
Total liabilities and
stockholders' equity $2,261,462 $2,244,681
=========== ===========
The accompanying note is an integral part of these financial
statements.
Franklin Resources, Inc.
Consolidated Statements of Cash Flows
Unaudited Six months
ended
March 31
--------
(Dollars in thousands) 1996 1995
----- -----
Net income $149,163 $126,344
Adjustments to reconcile net income to net
cash provided by operating activities:
(Increase)/decrease in receivables, prepaid
expenses and other (33,969) 10,611
Increase/(decrease) in trade payables,
accrued expenses and other 23,463 (24,436)
Depreciation and amortization 19,839 20,117
Gains on disposition of assets (5,411) (407)
---------- -----------
Net cash provided by operating activities 153,085 132,229
---------- -----------
Purchases of Franklin Templeton funds, net (2,572) (25,419)
Purchases of banking/finance investment
portfolio (36,850) (67,894)
Liquidations of banking/finance investment
portfolio 33,929 75,076
Originations of banking/finance loans
receivable (21,382) (166.199)
Collections of banking/finance loans
receivable 77,239 69,242
Purchases of other investments, net (3,495) (529)
Purchases of premises and equipment and
other (19,985) (14,906)
---------- -----------
Net cash provided by (used in) investing
activities 26,884 (130,629)
---------- -----------
Increase/(decrease) in deposits of bank
account holders (20,168) 3,805
Exercise of common stock options 1,009 -
Dividends paid on common stock (16,973) (15,453)
Purchases of treasury stock (50,682) (24,194)
Issuance of debt 65,440 44,418
Repayment of debt (82,712) (20,374)
---------- -----------
Net cash used in financing activities (104,086) (11,798)
---------- -----------
Increase (decrease) in cash and cash
equivalents 75,883 (10,198)
Cash and cash equivalents, beginning of the
period 261,699 210,376
--------- ---------
Cash and cash equivalents, end of the period $337,582 $200,178
========== ===========
Supplemental disclosure of non-cash
information:
Value of common stock issued in other
transactions $18,040 $15,857
The accompanying note is an integral part of these financial
statements.
Note to Condensed Consolidated Financial Statements
1. Debt
The Company issued $60 million in medium-term notes during March, 1996,
maturing March, 2001 with coupon rates of 6.56%. The proceeds were
used to retire $20 million in medium-term notes that had matured and
reduce outstanding short-term commercial paper.
The Company's overall effective interest rate at March 31, 1996 was
6.21% on approximately $450 million of outstanding commercial paper,
medium-term notes and subordinated debentures.
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 underlying principal
amounts. At March 31, 1996, the Company had swap agreements
outstanding with an aggregate notional amount of $125 million, maturing
August through September 1999, under which the Company paid fixed rates
of interest ranging from 6.24% to 6.45%. 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. Any potential loss from failure of the counterparties
to perform is deemed to be immaterial.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
Franklin Resources, Inc. and its majority-owned subsidiaries (the
"Company") derives substantially all of its revenue and net income from
providing investment management, administration, distribution and
related services to the Franklin Templeton funds, managed accounts and
other investment products. The Company's revenues are derived largely
from the amount and composition of assets under management. 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 assets under management were $141.4 billion at March 31,
1996, an increase of $10.6 billion (8%) from September 30, 1995 and an
increase of $22.6 billion (19%) from March 31, 1995. These increases
were the result of both net sales and market appreciation.
The Company operates in five geographic areas of the world: the United
States, Canada, the Bahamas, Europe and Asia/Pacific. At March 31,
1996, the Company had offices in 18 countries. The Company continues
to explore opportunities globally to increase its investment research
capabilities and to support global distribution channels.
I. Material Changes in Results of Operations
Results of operations
Three months ended Six months ended
March 31 % March 31 %
(In millions) 1996 1995 Change 1996 1995 Change
------ ----- ------- ------- ------- -------
Net Income $75.2 $63.0 19% $149.2 $126.3 18%
Earnings per share
Primary $.91 $.76 20% $1.79 $1.52 18%
Fully diluted $.91 $.76 20% $1.79 $1.52 18%
Operating margin 42% 45% 43% 44%
The increases in net income were primarily due to increases in
investment management fees as a result of higher average assets under
management. Operating expenses increased at a higher rate than
operating revenues resulting in a 3% and 1% decline in the Company's
operating margins in the periods under review. Operating revenues will
continue to be 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 increase with the Company's ongoing expansion, the increase in
competition and the Company's commitment to improve its products and
services. These endeavors will likely result in an increase in selling
expenses, employment costs and other general and administrative
expenses.
The contributions to the Company's operating profit from its non-U.S.
operations continued to increase principally as a result of increased
fee revenues from investment management services provided by its
foreign subsidiaries in Canada, the Bahamas and the Asia/Pacific
region. This trend will continue to be dependent on the amount and
composition of assets managed by the Company's non-U.S. subsidiaries.
There have been no significant changes to the Company's limited
exposure to fluctuations in global currency markets.
Assets under management*
As of March %
31
(In billions) 1996 1995 Change
-------- ------- -------
Franklin Templeton Group:
Fixed income funds:
Tax-free $41.5 $39.4 5%
U.S. government (primarily GNMA's) 15.8 16.4 (4%)
Taxable and tax-free money funds 3.0 2.8 7%
Global/international 2.8 2.7 4%
-------- ------- -------
Total fixed-income funds 63.1 61.3 3%
-------- ------- -------
Equity and income funds:
Global/international 41.3 30.0 38%
U.S. equity/income 17.9 13.3 35%
-------- ------- -------
Total equity and income funds 59.2 43.3 37%
-------- ------- -------
Total Franklin Templeton fund assets 122.3 104.6 17%
-------- ------- -------
Franklin Templeton institutional
assets 19.1 14.2 35%
-------- ------- -------
Total Franklin Templeton Group $141.4 $118.8 19%
======== ======= =======
*Certain prior year amounts have been reclassified to conform to
current year presentation.
Changes in assets under management
Three months ended Six months ended
March 31 % March 31 %
(In billions) 1996 1995 Change 1996 1995 Change
------ ------ ------ ------ ------ ------
Assets under
management - beginning $135.1 $114.6 18% $130.8 $118.2 11%
Sales & reinvestments 9.9 6.1 62% 17.3 13.6 27%
Redemptions (5.1) (4.9) 4% (10.1) (11.2) (10%)
Market appreciation
/(depreciation) 1.5 3.0 (50%) 3.4 (1.8) 289%
------ ------ ------ ------ ------ ------
Assets under
management - ending $141.4 $118.8 19% $141.4 $118.8 19%
====== ====== ====== ====== ====== ======
Average assets under
management $139.1 $116.4 20% $135.6 $116.4 16%
====== ====== ====== ====== ====== ======
Fixed income funds represent 45% of assets under management as of March
31, 1996, down from 52% a year ago. This trend generally reflects
investors' preference for equity funds and their relatively high level
of market appreciation during the periods under review.
Equity and income funds represent 42% of assets under management as of
March 31, 1996, up from 36% a year ago. Global/international equity
funds' assets under management were up 38% from levels a year ago. U.S.
equity/income funds increased 35% from levels a year ago.
Institutional assets represent 14% of assets under management as of
March 31, 1996 up from 12% a year ago. This increase resulted from both
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.
Operating revenue
Three months Six months
ended ended
March 31 % March 31 %
(In millions) 1996 1995 Change 1996 1995 Change
------ ------ ------ ------ ------ ------
Investment management
fees $215.3 $172.6 25% $417.0 $347.1 20%
Underwriting
commissions, net 3.8 9.1 (58)% 6.7 22.2 (70%)
Transfer, trust and
related fees 22.6 15.5 46% 44.0 31.5 40%
Banking/finance, net
and other 2.9 2.6 12% 3.5 7.2 (51%)
------ ------ ------ ------ ------ ------
Total operating
revenues $244.6 $199.8 22% $471.2 408.0 15%
The Company's revenues from investment management fees are derived
primarily from fixed-fee arrangements based upon the level of assets
under management with open-end and closed-end investment companies and
managed accounts. There have been no significant changes in the
management fee structures for the Franklin Templeton Group in the
periods under review. Investment management fees increased primarily
due to 20% and 16% increases in average assets under management during
the periods.
Underwriting commissions, net includes sales commission and
distribution fee revenues earned primarily from fund sales, offset by
payments to selling intermediaries and amortization of deferred sales
commissions paid by the Company. During the third quarter of the
previous fiscal year, many of the U.S. Franklin and Templeton funds
introduced a new class of shares, Class II shares, which pay brokers a
sales commission and distribution fees that are only partially
recovered by the Company through distribution fee revenues. During the
three- and six-month periods under review, distribution expenses have
grown at a faster rate than distribution revenues because of the
relative growth of Class II shares and other similar products outside
the United States in the Company's sales mix.
While Class II shares have increased the Company's distribution
expenses and utilized the Company's capital resources over the short
term, the Company believes that the new class of shares will result in
an overall increase in assets under management by expanding
distribution of fund shares. Sales of Class II shares represented 12%
of the Company's long-term U.S. mutual fund sales during the first six
months of 1996.
Underwriting commissions, net, also decreased due to a decrease in
commission revenue from sales of annuity products resulting from a
change in commission rates effective September 1, 1995.
The level of underwriting commissions, net can be expected to vary with
the level of sales and the level of assets under management and the
composition of products sold.
Transfer, trust and related fees are generally fixed charges per
account which vary with the particular type of fund and the service
being rendered. Transfer, trust and related fees increased in part as
a result of a 13% increase in retail fund shareholder accounts to 5.2
million from 4.6 million a year ago. Also, effective July 1, 1995,
approximately 85 of the Company's U.S. mutual funds consisting of
approximately 2.3 million shareholder accounts implemented an average
annual fee increase of $4 per shareholder account.
Banking/finance, net and other
Three months Six months
ended ended
March 31 % March 31 %
(In millions) 1996 1995 Change 1996 1995 Change
------ ----- ----- ------ ------- ------
Revenues $12.2 $14.0 (13%) $25.1 $27.4 (8%)
Provision for loan
losses (3.0) (4.4) (32%) (8.3) (7.0) 19%
Interest expense (6.3) (7.0) (10%) (13.3) (13.2) 1%
------ ----- ----- ------ ------- ------
Total banking,
finance, net and other $2.9 $2.6 12% $3.5 $7.2 (51%)
====== ===== ===== ====== ======= ======
Compared to the corresponding three-month period in the prior year,
banking/finance, net and other revenues increased principally due to
decreases in the provision for loan losses and interest expense
attributable to the banking/finance group. Revenues decreased
principally due to a 20% decrease in loans outstanding during the
period. Provision for loan losses decreased due to a decrease from the
previous quarter in delinquencies as a percent of loans outstanding
from 6.5% to 5.7%. Interest expense during the period decreased due to
reduced borrowings by the banking/finance group from the parent as a
result of net paydowns on dealer auto loans.
Compared to the six-month period in the prior year, banking/finance,
net and other revenues declined due to a decrease in revenue as a
result of lower average loan balances and an increase in the provision
for loan losses as a result of rising delinquency and charge-off rates
compared to the same period a year ago.
Operating expenses
Three months Six months
ended ended
March 31 % March 31 %
(In millions) 1996 1995 Change 1996 1995 Change
------ ------ ----- ------ ------- ------
General and
administrative $121.1 $85.0 42% $228.2 $181.3 26%
Selling 17.3 19.9 (13%) 32.8 38.1 (14%)
Goodwill amortization 4.5 4.6 (2%) 9.4 9.2 2%
------ ------ ----- ------ ------- ------
Total operating
expenses $142.9 $109.5 31% $270.4 $228.6 18%
====== ====== ===== ====== ======= ======
Increases in operating expenses principally resulted from the general
expansion of the Company's business, particularly with respect to the
opening of foreign offices and product development.
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
approximately 8% from March 31, 1995 to over 4,700 at March 31, 1996.
Employment costs represent approximately 60% of operating expenses
during the three-and six-month periods ended March 31, 1996 and
represent approximately 75% and 80% of the increases in general and
administrative expenses during the three-and six-month periods,
respectively. Employment costs include incentive based compensation
which will continue to be dependent upon increases in operating profit
margins excluding such compensation.
Selling expenses decreased during the comparative three-and six-month
periods mainly due to periodic variations in media advertising and
marketing campaigns.
Other income/(expense)
Three months Six months
ended ended
March 31 % March 31 %
(In millions) 1996 1995 Change 1996 1995 Change
----- ----- ------ ----- ----- ------
Investment and other
income $10.0 $5.3 89% $20.6 $12.0 72%
Interest expense (3.4) (2.9) 17% (6.0) (6.3) (5%)
----- ----- ------ ----- ----- ------
Other income (expense),
net $6.6 $2.4 175% $14.6 $5.7 156%
===== ===== ====== ===== ===== ======
The increases in investment income resulted from an increase in the
average levels of interest-bearing assets invested as well as capital
gains realized.
The Company's overall effective interest rate at March 31, 1996 was
6.21% on approximately $450 million of outstanding commercial paper,
medium-term notes and subordinated debentures as compared to 6.31% on
$488 million of debt outstanding at March 31, 1995.
The Company has fixed the interest rates it pays on over 85% of its
outstanding debt through its medium-term notes program, its
subordinated debentures and the interest rate swap agreements discussed
below.
The Company entered into interest rate swap agreements to exchange
variable-rate interest payment obligations for fixed-rate interest
payment obligations without exchanging of the underlying principal
amounts. At March 31, 1996, the Company had swap agreements
outstanding with an aggregate notional amount of $125 million, maturing
August through September 1999, under which the Company paid fixed rates
of interest ranging from 6.24% to 6.45%. 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.
The increase in taxes on income is primarily attributable to the
increase in pre-tax income.
II. Material Changes in Financial Condition, Liquidity and Capital
Resources
Selected balance sheet items
As of As of
March September
31 30 %
(In millions) 1996 1995 Change
------ ------- -------
Banking/finance loans
receivable, net $385.9 $450.0 (14%)
Receivable from the
banking/finance group $253.4 $302.3 (16%)
Deferred costs $46.3 $17.7 162%
Debt payable within one year $30.3 $87.2 (65%)
Long term debt $421.2 $382.4 10%
-------- ------- ------
The Company substantially increased its auto loan portfolio during
fiscal year 1994 as it expanded this business activity. Because a
substantial portion of the portfolio was new, the impact of delinquency
and loss trends was not fully reflected in the financial performance of
the Company until fiscal year 1995. As the Company has expanded its
auto loan financing business, it has concurrently strengthened its
collection systems, policies and procedures, as well as its
underwriting criteria and its overall management team. Management is
monitoring the results of its increased efforts in the credit and
collection areas. At March 31, 1996, banking/finance loans receivable,
net decreased due to net paydowns and a decrease in funding of new auto
loans as a result of higher credit requirements.
The net paydowns on loans receivable resulted in a reduction of the
receivable from the banking/finance group.
Deferred costs increased due to a $15.6 million increase in deferred
commissions related to Canada-based funds and Class II shares. They
also increased as a result of $11.2 million in costs related to the
purchase of a building which will house the Company's operations in
Singapore.
Debt payable within one year decreased as a result of the Company using
the proceeds from a $40 million issuance of medium-term notes and
approximately $17 million in cash from operations to reduce outstanding
short-term commercial paper. The Company used the proceeds from an
additional issuance of $20 million in medium-term notes to retire notes
that matured March 15, 1996. The Company also issued $5.4 million in
short term notes and repaid them during the period.
Selected cash flow items
Six months
ended
March 31
(In millions) 1996 1995
------- ------
Cash flows from operating
activities $153.1 $132.2
Cash flows from investing
activities $26.9 ($130.6)
Cash flows from financing
activities ($104.1) ($11.8)
The increase in cash flows from operating activities was primarily the
result of an increase in net income and an increase in the net change
in trade payables and accrued expenses.
The cash flows from investing and financing activities during the
period were affected primarily by the decrease in the Company's funding
of auto and credit card loans of the banking/finance group, purchases
of premises and equipment, repayment of debt 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 six-month period ended March 31, 1996, the Company purchased
954,755 Franklin Resources, Inc. shares for $50.7 million. On March
14, 1996, the Board of Directors of the Company authorized up to an
additional 3,000,000 shares under its repurchase program. At March 31,
1996, the Company had 3,914,511 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 has required the Company to advance a
one percent dealer commission which is expected to 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 has been
deferred and amortized on a straight-line basis over the eighteen-month
contingent deferred sales charge period. The Company has funded these
advances through operating cash flows and existing debt facilities. The
Company anticipates increased sales of Class II shares which will
result in increased advances of dealer commissions.
At March 31, 1996, the Company held liquid assets of $735.2 million,
including $337.6 million in cash and cash equivalents as compared to
$643.2 million, including $261.7 million in cash and cash equivalents
at September 30, 1995, respectively.
FRANKLIN RESOURCES, INC.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders
(a) The Annual Meeting of Stockholders of Franklin Resources, Inc. was
held at 10:00 a.m., Pacific Standard Time, on January 25, 1996 at the
offices of the Corporation at 777 Mariners Island Boulevard, San Mateo,
California 94404.
The three (3) proposals presented at the meeting were:
1. The election of nine (9) directors to hold office until the
next Annual Meeting of Stockholders or until their successors
are elected and shall qualify.
2. The ratification of the appointment by the Board of Directors
of Coopers & Lybrand, L.L.P. as the Company's independent
certified accountants for the current fiscal year ending
September 30, 1996.
3. The transaction of such other business as properly may
come before the Meeting or any adjournments or
postponements thereof.
(b) Each of the nine nominees for director was elected and received
the number of votes set forth below:
Name For Withheld
Harmon E. Burns 72,645,467 362,138
Judson R. Grosvenor 72,624,017 383,588
F. Warren Hellman 72,648,746 358,859
Charles B. Johnson 72,645,110 362,495
Charles E. Johnson 72,644,467 363,138
Rupert H. Johnson, Jr. 72,644,808 362,797
Harry O. Kline 72,553,475 454,130
Peter M. Sacerdote 72,557,828 449,777
Louis E. Woodworth 72,663,631 343,974
The ratification of the appointment of Coopers & Lybrand,
L.L.P. as the Company's independent certified accountants for
the fiscal year ending September 30, 1996, was approved by a
vote of 72,975,914 in favor, , 20,016 shares against, and
11,675 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of the report:
Exhibit (3)(i)(a)Registrant's Certificate of Incorporation, as filed
November 28, 1969, incorporated by reference to Exhibit (3)(i)
to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1994 (the "1994 Annual Report")
Exhibit 3(i)(b) Registrant's Certificate of Amendment of Certificate
of Incorporation, as filed March 1, 1985, incorporated by
reference to Exhibit (3)(ii) to the 1994 Annual Report
Exhibit (3)(i)(c) Registrant's Certificate of Amendment of Certificate
of Incorporation, as filed April 1, 1987, incorporated by
reference to Exhibit (3)(iii) to the 1994 Annual Report
Exhibit (3)(i)(d) Registrant's Certificate of Amendment of Certificate
of Incorporation, as filed February 2, 1994, incorporated by
reference to Exhibit (3)(iv) to the 1994 Annual Report
Exhibit (3)(ii) Registrant's By-Laws are incorporated by reference to
Exhibit 3(v) to Registrant's Form 10-Q for the Quarterly Period
ended December 31, 1994.
Exhibit 4: Instruments defining the rights of holders, including
indentures
i) Form of Indenture-Exhibit No. 4 to the Company's
Registration Statement on Form S-3 (33-53147) filed by the
Company electronically on April 14, 1994 (the "MTN S-3"),
incorporated by reference in its entirety.
ii) Form of Fixed Rate Note-Exhibit No.4.1 to Amendment No. 1
to the MTN S-3, filed by the Company electronically on May 19,
1994, incorporated by reference in its entirety.
iii) Form of Floating Rate Note-Exhibit 4.2 to Amendment No.
1 to the MTN S-3, filed by the Company electronically on May
19, 1994, incorporated by reference in its entirety.
Exhibit 10.1 Representative Investment Management Agreement between
Templeton Global Strategy SICAV and Templeton Global Advisors
Limited.
Exhibit 10.2 Representative Investment Management Agreement between
Templeton Global Strategy SICAV and Franklin Advisors, Inc.
Exhibit 10.3 Representative Investment Management Agreement between
Templeton Russian and Eastern European Debt Fund and Templeton
Investment Management Limited, Inc.
Exhibit 10.4 Representative Service Agreement between Templeton Russian and
Eastern European Debt Fund and Templeton Global Strategic
Services S.A.
Exhibit 11 Computations of per share earnings. (See page )
Exhibit 12 Computations of ratios of earnings to fixed charges (See page)
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K dated April 26, 1996 reporting under Item 5 Other
Events the filing of an earnings press release by the Company
on April 25, 1996 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: May 14, 1996 /S/ Martin L. Flanagan
----------------------
MARTIN L. FLANAGAN
Senior Vice President,
Treasurer and Chief
Financial Officer
INDEX TO EXHIBITS
Exhibit
(3) The following exhibits are filed as part of this report:
Exhibit (3)(i)(a) Registrant's Certificate of Incorporation,
as filed November 28, 1969, incorporated by
reference to Exhibit (3)(i) to the Company's
Annual Report on Form 10-K for the fiscal year
ended September 30, 1994 (the "1994 Annual
Report")
Exhibit 3(i)(b) Registrant's Certificate of Amendment of
Certificate of Incorporation, as filed March 1,
1985, incorporated by reference to Exhibit (3)(ii)
to the 1994 Annual Report
Exhibit (3)(i)(c) Registrant's Certificate of Amendment of
Certificate of Incorporation, as filed April 1,
1987, incorporated by reference to Exhibit
(3)(iii) to the 1994 Annual Report
Exhibit (3)(i)(d) Registrant's Certificate of Amendment of
Certificate of Incorporation, as filed February 2,
1994, incorporated by reference to Exhibit (3)(iv)
to the 1994 Annual Report
Exhibit (3)(ii) Registrant's By-Laws are incorporated by
reference to Exhibit 3(v) to Registrant's Form 10-Q for the
Quarterly Period ended December 31, 1994.
Exhibit 4: Instruments defining the rights of
holders, including indentures
i) Form of Indenture-Exhibit No. 4 to
the Company's Registration Statement on Form S-3
(33-53147) filed by the Company electronically on
April 14, 1994 (the "MTN S-3"), incorporated by
reference in its entirety.
ii) Form of Fixed Rate Note-Exhibit
No.4.1 to Amendment No. 1 to the MTN S-3, filed
by the Company electronically on May 19, 1994,
incorporated by reference in its entirety.
iii) Form of Floating Rate Note-
Exhibit 4.2 to Amendment No. 1 to the MTN S-3,
filed by the Company electronically on May 19,
1994, incorporated by reference in its entirety.
Exhibit 10.1 Representative Investment Management
Agreement between Templeton Global Strategy SICAV
and Templeton Global Advisors Limited.
Exhibit 10.2 Representative Investment Management
Agreement between Templeton Global Strategy SICAV
and Franklin Advisors, Inc.
Exhibit 10.3 Representative Investment Management
Agreement between Templeton Russian and Eastern
European Debt Fund and Templeton Investment
Management Limited, Inc.
Exhibit 10.4 Representative Service Agreement
between Templeton Russian and Eastern European
Debt Fund and Templeton Global Strategic Services
S.A.
Exhibit 11 Computations of per share earnings. (See page )
Exhibit 12 Computations of ratios of earnings to fixed charges (See page)
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K dated April 26, 1996 reporting under Item 5 Other
Events the filing of an earnings press release by the Company
on April 25, 1996 and including said press release as
an Exhibit under Item 7 Financial Statements and Exhibits.
Exhibit 10.1
INVESTMENT MANAGEMENT AGREEMENT
_______________________________
THIS AGREEMENT is made the 15th day of February, 1996
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 GLOBAL ADVISORS LIMITED, a company
incorporated under the laws of the Commonwealth of
the Bahamas. whose principal office is located at
Lyford Cay, Nassau, Bahamas,
(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 to
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 acquisition, holding or
disposal of investments to the extent that 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 willful 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 Manager 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 corporations
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 Clauses 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 connection
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.
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 agent 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 endeavours 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 proving 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
/s/ Charles E. Johnson
______________________
By : Charles E. Johnson
/s/ Gregory E. McGowan
_______________________
By : Gregory E. McGowan
TEMPLETON GLOBAL ADVISORS LIMITED
/s/ Charles E. Johnson
_______________________
By: Charles E. Johnson
/s/ Greogry E. McGowan
_______________________
By : Gregory E. McGowan
APPENDIX
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 Property Securities Fund 1.75%
The fee referred to hereabove is payable monthly in arrears
to the Investment Manager with respect to each relevant
class of shares of the Company.
Exhibit 10.2
INVESTMENT MANAGEMENT AGREEMENT
________________________________
THIS AGREEMENT is made the 15th day of February, 1996.
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: FRANKLIN ADVISERS, INC., a company incorporated in
California whose principal office is located at
777 Mariners Island Blvd, San Mateo, CA 94404,
(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 to
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 acquisition, holding or
disposal of investments to the extent that 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 willful 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 Manager 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 corporations
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 Clauses 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 connection
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.
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 agent 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 endeavours 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 proving 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
/s/ Charles E. Johnson
----------------------
By : Charles E. Johnson
/s/ Gregory E. McGowan
______________________
By: Gregory E. McGowan
FRANKLIN ADVISERS, INC.
/s/ Deborah R. Gatzek
_____________________
By: Deborah R. Gatzek
/s/ Harmon E. Burns
______________________
By: Harmon E. Burns
APPENDIX
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.
Franklin Templeton High Yield Fund 0.80%
Franklin Templeton US Government Fund 0.65%
Franklin Templeton International Bond Fund 0.90%
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.
AMENDMENT TO
INVESTMENT MANAGEMENT AGREEMENT DATED MARCH 1, 1996
BETWEEN TEMPLETON GLOBAL STRATEGY SICAV
AND FRANKLIN ADVISERS, INC.
The parties hereto agree that the Investment Management
Agreement dated March 1, 1996, shall be and hereby is
amended by adding a third paragraph to Clause 6 (a) to read
as follows:
The Investment Manager may waive all or a portion of its
fees provided for hereunder and such waiver shall be treated
as a reduction in purchase price for its services. The
Investment Manager shall contractually bound hereunder by
the terms of any publicly announced waiver of its fee, or
any limitation of the Fund's expenses, as if such waiver or
limitation were full set forth herein.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their officers designated below
as of the day and year first written above.
TEMPLETON GLOBAL STRATEGY SICAV
/s/ Charles E. Johnson
-----------------------
By : Charles E. Johnson
/s/ Gregory E. McGowan
_______________________
By : Gregory E. McGowan
FRANKLIN ADVISERS, INC.
/s/ Deborah R. Gatzek
______________________
By: Deborah R. Gatzek
/s/ Harmon E. Burns
______________________
By: Harmon E. Burns
Exhibit 10.3
THIS AGREEMENT is made on 1 March, 1996 BETWEEN:
(1) TEMPLETON RUSSIAN AND EASTERN EUROPEAN DEBT FUND having its
Registered Office at 13 Rue Goethe, L-1637 Luxembourg, Grand-
Duchy of Luxembourg (hereinafter called "the Company") of
the first part,
and
(2) TEMPLETON INVESTMENT MANAGEMENT LIMITED, incorporated under
the Companies Acts and having its Registered Office at
Plumtree Court, London EC4A 4HT (hereinafter called "TIML")
of the second part.
WHEREAS:
(A) The Company wishes to appoint TIML as investment manager of
the Company on the terms and conditions hereinafter set
forth.
(B) TIML is a member of IMRO and as such regulated by IMRO in
the conduct of investment business.
NOW THEREFORE THE PARTIES HEREBY AGREE as follows:-
1. APPOINTMENT
1.01 The Company hereby appoints TIML as investment manager of
the Company and its subsidiaries and TIML agrees to such
appointment ("appointment"). In this capacity TIML shall
manage the assets of the Company and its subsidiaries ("the
Assets").
1.02 TIML agrees to act as investment manager on the terms of
this Agreement.
1.03 This Agreement shall commence on 12 March, 1996 (the
"Commencement Date") notwithstanding the date of this
Agreement and shall take immediate effect with respect to
the Assets the initial value of which shall be equal to the
net proceeds of the placing of up to 20,000,000 shares in
the Company pursuant to a prospectus to be issued by the
Company and dated 1 March 1996 ("the Prospectus").
2. AUTHORITY OF TIML
2.01 During the continuance of TIML's appointment hereunder, TIML
shall have full authority without prior reference to the
Company to manage, invest, realise and reinvest the Assets
in accordance with the Investment Objective and Policies,
Investment Restrictions and Dividend Policy as set out in
the Prospectus and subject to any restrictions set out in
the Prospectus or in the Articles of Incorporation of the
Company or imposed by Luxembourg law and further subject to
any amendment or variation made in accordance with Clause
2.02.
2.02 (a) Subject to Clause 2.01, TIML shall have complete
discretion, without prior reference to the Company, to
purchase and sell investments and otherwise to manage
the Assets in such manner as TIML may determine.
(b) Any variations in the Investment Objective and
Policies, Investment Restrictions and Dividend Policy
shall be made by the Directors (as defined in the
Prospectus) and shall be notified in writing by or on
behalf of the Company to TIML.
(c) The Company may also give TIML specific prior
instructions to buy, sell or retain any investment, or
exercise (or refrain from exercising) any rights in
respect of any investment.
2.03 (a) TIML shall not be liable to the Company or its
subsidiaries in any way and the Company will not be
entitled to terminate this Agreement (otherwise than
in accordance with Clause 9) by reason of the
Investment Objectives not being achieved otherwise
than by reason of TIML not adhering to the Investment
Objective and Policies and Dividend Policy of the
Company.
(b) TIML shall in no way be responsible for any loss or
depreciation in the value of any of the Assets which
may arise by reason or in consequence of the exercise
or non-exercise of the powers, duties and discretion
hereby given or undertaken by TIML unless such loss or
depreciation shall arise by reason of the fraud or
negligence of TIML or any of TIML's officers or staff
or the officers or employees of any Associate nor
shall TIML be responsible for any loss resulting from
the acts, omissions or insolvency of any broker,
trader, market maker or other dealer or any custodian,
sub-custodian, depository, agent or nominee unless
acting in accordance with TIML's instructions.
2.04 The Company acknowledges that unless the Company gives
prior written notice to TIML in accordance with the terms
of this Agreement of any intended restriction:
(i) the Company places no restrictions on any type of
investment which TIML may include in the Assets at any
time, other than in terms of Clause 2.01;
(ii) there are no restrictions on the markets on which the
Company wishes transactions to be effected by TIML on
the Company's behalf, other than in terms of Clause
2.01; and
(iii)there is no restriction made by the Company on
the amount of any one investment or on the proportion
of the Assets which any one investment or any
particular kinds of investment may represent, other
than in terms of Clause 2.01.
2.05 The day to day management of the Assets shall be carried out
by one or more of TIML's designated staff or officers who
may be required, at the Company's expense, to attend
meetings with the Company to discuss the Investment
Objective and Policies, Investment Restrictions and Dividend
Policy of the Company.
2.06 TIML may in performing TIML's services hereunder
("services") use such broker, trader, market maker or other
dealer (in either case including any Associate) as TIML may
select and any systems of settlement or delivery appropriate
to the investment concerned.
2.07 For purposes of performing its services hereunder, TIML
shall be entitled to appoint an investment adviser to act as
its investment adviser and to provide it with investment
advice which shall include, but not be limited to, sharing
market information, assisting in the selection of
investments and providing consultation services as required
and initially TIML shall retain as investment adviser, for
an initial period of one year, Templeton Global Bond
Managers, a division of Templeton Investment Counsel, Inc.,
Broward Financial Centre, Ft. Lauderdale, Florida 33394-
3091, USA and TIML shall also be entitled to retain the
services of other sub-advisers or consultants as and when
TIML considers it appropriate to do so and initially TIML
shall retain Global Fund Management S.A., 5/1 Ulitsa Leo
Tolstoy, Moscow 119862, Russia and ICFI-Moscow Partners, 3rd
Fronzenskaya 6, Moscow 119279, Russia as sub-advisers to
provide it with services including but not limited to
furnishing advice and making recommendations regarding the
purchase and sale of securities traded in the markets in
which the Company operates, providing statistical, research
and other factual data, identifying regulatory and other
applicable governmental requirements and monitoring the
execution and settlement of transactions.
2.08 TIML will provide, on receipt of reasonable notice from the
Company, access to all books of account and records which
are within TIML's possession and control relating solely to
the Assets as the Company may reasonably require.
3. REGULATORY STATUS
3.01 TIML is a member of Investment Management Regulatory
Organisation Limited ("IMRO") and is regulated by IMRO in
carrying on TIML's investment business.
3.02 TIML shall use its best endeavours to maintain its status
as an authorised person for the purposes of the Financial
Services Act 1986.
3.03 In accepting this Agreement, the Company confirms that the
Company has the status of a Non-private Customer (as defined
in the Rules of IMRO ("IMRO Rules")) in relation to the
services which TIML shall provide. Unless the context
otherwise requires, terms defined in the IMRO Rules shall
have the same meanings in this Agreement.
3.04 The regulatory matters that IMRO require TIML to include in
this Agreement as well as other matters that apply to TIML's
appointment are set out in Schedule 2 hereto but are subject
always to Clause 2.
4. FEES AND EXPENSES
4.01 The fee ("Management Fee") which the Company shall pay as
consideration for TIML's services together with VAT (if
applicable) or any similar tax where appropriate is set out
in Schedule 1 hereto. The Management Fee shall be payable
quarterly in arrears on the Relevant Date(s) (as defined in
paragraph 4 of Schedule 2) and TIML shall submit quarterly
invoices to Templeton Global Strategic Services S.A. as the
Administrator ("the Administrator") of the Company within 14
days following the Relevant Date(s). The Company or the
Administrator shall either send or otherwise provide TIML
with a cheque in respect of the Management Fee within three
business days of submission of each quarterly invoice,
failing which TIML is authorised to draw the relevant sum
from the cash held within the Assets.
4.02 Subject to Clause 4.03, TIML will pay the costs incurred by
TIML in connection with the services out of TIML's
remuneration and the fees of any investment adviser, sub-
adviser or consultant it engages .
4.03 TIML shall not be liable to bear the following expenses,
which shall be for the Company's account:-
(a) stamp duties, taxes, governmental charges, brokerage,
commissions, penalties, transfer fees, registration
fees and other charges payable in respect of the
acquisition, holding or realisation of, or income
arising on the Assets including charges for the
transfer of Assets or delivery instructions by telex,
facsimile, cable or telephone;
(b) interest on and charges and expenses of arranging, and
arising out of, all or any borrowings made on behalf of
the Company in accordance with this Agreement;
(c) any charges or expenses of any bank, nominee or
custodian in connection with the safe custody of the
Assets;
(d) any directors' fees and expenses, it being understood
that there are no such fees payable initially;
(e) any charges in connection with the safe custody,
insurance (including premiums) of any Asset;
(f) the Company's audit fees and legal expenses incurred in
connection with its corporate existence and corporate
and financial structure of the Company and relations
with its shareholders and third parties and all other
professional fees incurred by it;
(g) costs and expenses of advertising and publicity; and
(h) any other expenses that TIML incurs in carrying out its
duties as the Directors may authorise as being payable
or reimbursable by the Company.
5. LIABILITY AND INDEMNITY
5.01 To the extent permitted by law, TIML, in TIML's capacity as
investment manager, shall not be liable for any loss
suffered by the Company unless such loss arises from TIML's
negligence, bad faith or wilful default.
5.02 The Company shall indemnify and hold TIML harmless against
all costs, claims, demands or expenses which may be brought
against or incurred or suffered by TIML by reason of TIML's
performance of TIML's duties hereunder and shall ratify and
confirm all lawful acts and things done by TIML in the
performance of TIML's duties hereunder. The indemnity shall
extend to any such claim arising as a result of loss, delay,
misdelivery or error in transmission of any communication or
as a result of acting upon any forged transfer, but not to
any claim arising from any negligence, bad faith or wilful
default by TIML.
5.03 TIML shall exercise all reasonable care and diligence in the
choice of counterparties. In the event that any
counterparty fails to account to TIML or the Custodian for
any Assets for whatever reason, TIML shall take all
reasonable steps in TIML's power to pursue, on behalf of and
at the Company's expense, all appropriate legal remedies
against such counterparty to recover such Assets or obtain
compensation. Subject thereto, TIML shall not be liable for
any such failure to account unless and to the extent that
TIML has been negligent or wilfully in default in TIML's
choice of counterparties.
5.04 TIML may in the performance of TIML's duties and in the
exercise of TIML's powers and discretions hereunder act by
responsible officer(s) and, provided it is reasonable for
TIML so to do in the circumstances, may instruct, act by, or
rely upon the opinion or advice or any information or
services provided by any broker, lawyer, valuer, accountant
or other consultant or expert whether reporting to the
Company or TIML or not and TIML shall not be responsible for
any loss occasioned because of so acting in good faith.
5.05 TIML shall not be liable for anything done or suffered by
TIML to be done in good faith in accordance with or in
pursuance of any of the Company's requests or instructions
as set out in paragraph 12 of Schedule 2 hereto.
5.06 Provided that TIML shall have used all reasonable care in
the appointment, instruction, supervision and control of any
person, firm or corporation to supply services in connection
with TIML's duties hereunder, TIML shall be entitled to rely
on any advice or information or services provided by such
person, firm or corporation (including any adviser, sub-
adviser or consultant it engages pursuant to Clause 2.07)
without liability to the Company for any loss suffered by
the Company as a result thereof provided that (a) it was
reasonable for TIML to rely on such advice, information or
services in the circumstances and (b) this sub-Clause shall
not be interpreted as permitting any delegation by TIML of
TIML's duties hereunder as the investment manager of the
Assets.
5.07 TIML shall not be required to take any legal or other action
which might make TIML liable for the payment of money or
liable in any other way, unless TIML is fully indemnified to
TIML's reasonable satisfaction for all TIML's reasonable
costs, liabilities and expenses, as a pre-requisite to
taking action.
6. ASSIGNMENT
6.01 Neither the Company nor TIML shall assign, transfer or
novate any rights or obligations under this Agreement
without the prior written consent of the other.
7. NOTICES
7.01 Unless otherwise provided, any communication or other notice
to be given by the Company or TIML shall be given in
writing, or orally and thereafter confirmed in writing.
7.02 Any such communication or other notice shall be deemed to be
given if delivered by hand or posted first class post
prepaid in the UK and air mail if outside the UK or sent by
facsimile transmission by the party giving notice to the
address of the other party as set out above or to such other
address as may from time to time be notified in writing to
it by the other party. Such communication or other notice
so posted shall be deemed to have been duly received
48 hours (if posted and received within the UK) and 120
hours (if posted and/or received outside the UK using
airmail) after it is posted and any such communication or
notice delivered or given by facsimile transmission shall be
deemed given upon delivery or transmission and in proving
service it shall be sufficient to prove that the envelope
containing the communication on other notice was properly
addressed and posted or, as the case may be, that it was
delivered to the correct address, or that it was sent by
facsimile transmission to the correct number.
8. JURISDICTION
8.01 This Agreement shall be subject to and construed in
accordance with the law of England. Disputes shall be
subject to the jurisdiction of the English Courts to which
the Company and TIML submit.
9. TERMINATION
9.01 (a) The Company shall not terminate TIML's appointment
during the life of the Company except where the Company
resolves to do so at a general meeting of the Company
by a shareholder resolution with a majority consisting
of 75% or more of the total number of votes cast for
and against such resolution .
(b) TIML shall be entitled to terminate its appointment by
giving the Company not less than 90 days notice in
writing so as to expire at any time after the first
anniversary of the Commencement Date, but only in
circumstances where TIML has selected another
investment manager for the Company who is acceptable to
the Directors and who has agreed to enter into an
investment management agreement with the Company to
take over the responsibilities as the investment
managers of the Company.
9.02 Either the Company or TIML may terminate this Agreement
immediately without penalty by notice in writing to the
other if:-
(a) an order is made or an effective order is made or
resolution is passed for the winding-up of the other
party otherwise than for the purpose of its
amalgamation or reconstruction on terms approved in
advance in writing by the first party which approval
shall not be unreasonably withheld or delayed; or
(b) the other party shall become or be declared insolvent;
or
(c) a receiver of the other party or any of its assets is
appointed; or
(d) the other party commits a material breach of the
Agreement.
9.03 This Agreement shall terminate immediately if TIML fails to
maintain TIML's status as an authorised person for the
purposes of the Financial Services Act 1986 (as amended) in
relation to this Agreement PROVIDED THAT in the event of
TIML temporarily ceasing to maintain its status as such an
authorised person in circumstances previously approved in
writing by the Company shall not result in the termination
of this Agreement.
9.04 Termination shall not affect any action taken by TIML and
permitted under this Agreement, prior to the date of
termination or any warranty or indemnity given by the
Company under this Agreement or implied by law and shall be
without prejudice to any other rights, obligations or
remedies of either the Company or TIML in respect of any
matters arising under this Agreement prior to such
termination. Termination will be without prejudice to the
completion of transactions already initiated which will be
completed by TIML as soon as practicable.
9.05 On termination by either the Company or TIML, TIML shall be
entitled to receive from the Company all fees, costs,
charges and expenses arising under this Agreement up to the
date of termination including any additional expenses
necessarily incurred in settling outstanding obligations or
terminating this Agreement whether they occur before or
after the date of termination.
9.06 If the Company wishes to give less notice than provided for
in Clause 9.01, it is agreed that, in consideration of
TIML's accepting a lesser period of notice, the Company
shall pay to TIML on the expiry of such agreed shorter
period of notice any remuneration remaining due and unpaid
in respect of TIML's services and an amount (together with
Value Added Tax) equal to the remuneration which would have
been payable to TIML in respect of the period by which the
agreed shorter period of notice is less than the full
period of notice, based on the Net Asset Value of the
Company pursuant to the provisions of paragraph 2 of
Schedule 1 hereto.
9.07 Upon termination hereof by either party and for whatever
reason the Company hereby agrees if requested to do so by
TIML to commence the procedures necessary to change its
name to a name unconnected with TIML or any Associate as at
the date hereof and to use its best endeavours to obtain
the consent of its shareholders to the change of name if
necessary.
10. CONFIDENTIALITY
10.01 Neither the Company or TIML shall disclose to any
person (except with the Company's authority or unless
required by law or any regulatory authority) any
information relating to the business, assets or finances or
other matters of a confidential nature of the other party
which it may have in its possession during the period of
this Agreement.
IN WITNESS WHEREOF this Agreement typewritten on this and
the nine preceding pages together with the two Schedules
annexed on pages 11 to 18 has been entered into the day and
year first above written:
Signed for and on behalf of
the said TEMPLETON RUSSIAN
AND EASTERN EUROPEAN DEBT FUND
by:
/s/ Charles E. Johnson ..... Director
Charles E. Johnson.......... Full Name
/s/ J. Mark Mobius...........Director/Secretary
J. B. Mark Mobius.............. Full Name
Signed for and on behalf of
the said TEMPLETON INVESTMENT
MANAGEMENT LIMITED by:
/s/ D. W. Adams ........... Director
Douglas William Adams....... Full Name
/s/ Gerard W. Kerr...........Director/Secretary
Gerard William Kerr......... Full Name
SCHEDULE 1
referred to in Clause 4 of the foregoing Investment Management
Agreement
Management Fee
1. The Management Fee payable to TIML under this Agreement
shall be in respect of successive annual periods (or parts
of such periods) beginning on the Commencement Date.
2. The Management Fee shall be payable at the rate of 1.85 per
cent per annum of the Net Asset Value of the Company (as
defined in the Prospectus and determined in accordance with
the valuation principles referred to in paragraph 4(d) of
Schedule 2) and shall be payable quarterly in arrears at
the Relevant Date(s) (together with any applicable Value
Added Tax) on the basis of the average of the Net Asset
Value of the Company on each weekly Valuation Date (as
defined in the Prospectus) in the period from the last
Relevant Date down to the Relevant Date concerned except in
connection with the first period where the average will be
calculated from the Commencement Date and the last period
where the average will be calculated down to the date of
termination.
3. TIML shall compute the amount of the Management Fee based
on information supplied by the Administrator and shall
submit invoices to the Company for payment in accordance
with Clause 4.01 of the Agreement.
4. If for any reason the period for which a payment is due is
less or more than a complete quarter, the part of the
remuneration attributable to the number of whole weeks in
such quarter shall be based on the average of the Net Asset
Value of the Company on each weekly Valuation Date during
such number of whole weeks and for any remaining period of
less than one week shall be 1/7th part of the aggregate of
the Management Fee payable for such week .
5. The value of any holdings in investment trusts, unit
trusts, funds and similar schemes, both closed and open-
ended, which are managed by TIML or any Associate of TIML
shall be excluded from the value of the Assets for the
purpose of calculating the Management Fee.
SCHEDULE 2
referred to in Clause 3.04 of the foregoing Investment
Management Agreement
1. Contingent Liability Transactions
(a) The services to be provided by TIML shall include
effecting, without prior reference to the Company,
Contingent Liability Transactions (being transactions
relating to Futures, Options and Contracts for
Differences (within the meaning of Schedule 1 to the
Financial Services Act 1986) or to any right or
interest in such an investment) and transactions in
units in Unregulated Collective Investment Schemes.
Margins and payments for Contingent Liability
Transactions may be made in the form of cash or other
investments of the Company provided that TIML may not
commit the Company to any obligation which would at
the time of commitment be in breach of any limits or
restrictions set out in the Prospectus or in the
Articles of Incorporation of the Company or imposed by
Luxembourg law. TIML will have discretion as to the
circumstances in which TIML may, without reference to
the Company, make contractual or other arrangements to
settle or close out obligations entered into in
accordance with this paragraph.
(b) TIML may effect Contingent Liability Transactions with
or for the Company otherwise than under the rules of a
Recognised or Designated Investment Exchange and in a
contract traded thereon if TIML is permitted to do so
under Rule 3.13(1) of Chapter II of the IMRO Rules.
2. Complaints
(a) TIML has in operation a written procedure in
accordance with the Rules of IMRO for the effective
consideration and proper handling of complaints from
customers.
(b) Any complaint by the Company arising from the services
performed by TIML hereunder should be notified in
writing to TIML's Compliance Officer who will
investigate it and give his response. Once a
complaint has been responded to in writing, if no
indication has been received from the Company that the
Company are not satisfied with the response, then
after four weeks from the date of response TIML may
treat the complaint as settled and resolved. The
Company shall at all times have the right to complain
directly to the Investment Ombudsman and shall inform
TIML of the terms of any complaint the Company make
direct to the Investment Ombudsman at the time such
complaint is made. The foregoing shall be without
prejudice to the provisions of the said Agreement.
(c) The Company may request, and TIML shall provide as
soon as reasonably practicable thereafter, a statement
describing the Company's rights to compensation in the
event of TIML's inability to meet any liabilities to
the Company.
3. Soft Commission Arrangements
TIML does not intend to effect transactions with or through
the agency of another person with whom TIML has an
arrangement under which that other person will from time to
time provide or procure for TIML or an Associate services
or other benefits, the nature of which are such that their
provision results, or is designed to result, in the
improvement of TIML's or such Associate's performance in
providing services for its clients or customers and for
which TIML or such Associate make no direct payment but
instead undertakes to place business (including business on
behalf of TIML's or such Associate's customers, including
the Company) with that person.
4. Periodic Statements
(a) TIML shall arrange for the Administrator to send to
the Company written periodic statements of the
composition and value of the Assets within five
business days of the dates specified below (the
"Relevant Dates" and individually a "Relevant Date")
as follows:
(i) quarterly statements as at 31 March, 30 June, 30
September and 31 December in each year;
(ii) an annual statement as at 31 March in each year;
and
(iii) a final statement on the date of termination
of this Agreement.
TIML shall also arrange for the Administrator to send
to the Company further such periodic statements on a
weekly basis
(b) For the avoidance of doubt the parties hereto agree
that the relevant provisions of the IMRO Rules as to
the content of periodic statements shall not apply.
(c) The valuations referred to in the foregoing paragraphs
shall (unless otherwise agreed with the Company) be
determined by the Administrator in conjunction with
TIML in accordance with the valuation principles to be
applied in determining the Net Asset Value of the
Company as described under the heading of "Valuation
of Net Assets" in Part VI of the Prospectus, as from
time to time amended.
(d) TIML or the Administrator on behalf of TIML shall
submit the contract notes and other details of
transactions in respect of the Assets to the Company
not later than the end of each calendar month or as
soon as reasonably practicable thereafter.
(e) TIML should provide the Company with such other
periodic reports as may be agreed upon from time to
time.
5. Stabilisation
The Company agrees that TIML has the right to effect
transactions in accordance with Rule 3.2(2) of Chapter II
of the IMRO Rules in investments the prices of which may be
subject to stabilisation.
6. Borrowings
Subject to the restrictions on borrowings set out in the
Prospectus and the Articles of Incorporation of the
Company, TIML may commit the Company and its subsidiaries
to supplement the Assets either by borrowing on the
Company's behalf in connection with repurchases of shares
of the Company or tender offers or to pay dividends or
distributions required for tax purposes or for other
temporary purposes that are for facilitating timely
settlement of investment and foreign exchange transactions,
whether or not on the security of documents of title or
documents which evidence title to the Assets, or otherwise
that commit the Company to a contract the performance of
which may not be possible without such a supplement when
TIML consider such supplement to be appropriate for the
purpose of carrying out the Investment Objectives in
respect of the Assets.
7. Underwriting
(a) TIML shall be entitled to commit the Company to any
obligation to underwrite or sub-underwrite any issue or
offer for sale of securities without any restriction on the
categories of securities which may be so underwritten or
any financial limits on the extent of such underwriting,
except as otherwise stated in the Agreement.
(b) TIML may without prior reference to the Company acquire or
dispose of investments for the account of the Assets of
which an issue or offer for sale was underwritten, managed
or arranged by TIML or an Associate thereof during the
preceding twelve months.
8. Custodian
(a) TIML is not authorised either to accept delivery of
cash or securities of the Company or its subsidiaries
or to establish or maintain custodial arrangements for
the Assets.
(b) In particular, the Company shall direct the Custodian
to segregate the Assets and to invest, realise and
reinvest them in accordance with the directions given
by TIML. Such directions shall be transmitted in a
manner to be agreed between the Custodian and TIML.
(c) Subject to paragraph (d) below, investments comprised
in the Assets shall be registered in the Company's
name or in the name of a subsidiary of the Company or
the name of the Custodian or in the name of a nominee
company which is a subsidiary of the Custodian or in
such other manner as may be agreed to by the Company
from time to time.
(d) Investments comprised in the Assets which are issued
under the laws of any country or state outside the
United Kingdom shall be registered either in the
Company's name or in the name of a subsidiary of the
Company or the name of the Custodian or of a
subsidiary of the Custodian or in the name of such
other bank, trustee company or nominee company as may
be agreed from time to time by the Company, and the
bank or company concerned shall be entitled to charge
the Company at its normal rates for the provision of
such nominee services.
(e) The provisions of paragraphs (c) and (d) above shall
apply to investments in bearer form and to documents
of title to investments as though references to the
deposit of such investments or documents of title with
any such company as may be specified in those
paragraphs were in each case substituted for
references in the said paragraphs to the registration
of investments in the name of such company.
(f) Except with the Company's prior consent in writing, no
investment, money or other assets comprised in the
Assets nor any document of title thereto shall be lent
to or deposited with any person (whether by way of
security or otherwise) other than a subsidiary of the
Company or as provided
(i) in the preceding provisions of this paragraph 8;
or
(ii) in the case of money, paragraph 10 below.
(g) TIML does not accept liability for any act, default or
omission on the part of the Custodian or any
subsidiary of it or agent thereof or any other bank,
trustee company, depositories, nominee company or
other person in whose name or with whom any investment
or documents of title may at any time be registered or
deposited.
(h) Subject to the foregoing provisions of this paragraph,
TIML will be entitled to instruct the Custodian or
such other bank, trustee company, nominee company or
other person in whose name or with whom any
investments or documents of title have been registered
or deposited to make delivery of such documents of
title when settling transactions.
(i) TIML will take all reasonable steps to reclaim or, as
appropriate, to assist the Custodian to reclaim all
refunds which shall be due of tax paid by way of
deduction from dividends and interest or otherwise in
respect of the Assets.
9. Voting and Other Rights Of Investments
(a) TIML shall be entitled at TIML's discretion and
without prior reference to the Company to exercise or
refrain from:-
(i) exercising (or leave unexercised) voting and
other rights, privileges and options attaching to
or in any way arising in connection with any of
the investments comprised in the Assets;
(ii) making payment in respect thereof, charging or
deducting the amounts paid to the Company or its
subsidiaries;
(iii) consenting to, or participating in,
liquidations, reorganisations, amalgamations,
mergers and sales, affecting any of the
investments in the Assets; and
(iv) in such connection paying assessments,
subscriptions and other sums, and charge the
amounts paid or payable to the Company or its
subsidiaries.
Provided that the Company reserves the right at the
Company's discretion to direct TIML how to exercise
any such rights in relation to any particular
investment and TIML hereby undertakes to comply with
any such direction.
(b) For the purposes of paragraph (a), voting rights shall
be deemed to include not only the right to vote at a
meeting but any consent to or approval of any
arrangement, scheme or resolution or any exercise of,
alteration in or abandonment of any rights attaching
to any investment comprised in the Assets and the
right to requisition or join in a requisition to
convene any meeting to give notice of any resolution
or to consent to any short notice of a meeting or to
demand or join in demanding any poll at a meeting.
10. Bank Accounts
Any money which is at any time comprised in the Assets
shall be placed to the credit of one or more bank accounts,
which may be with a branch in the United Kingdom or
overseas. Money so deposited shall be held in the
Company's name and accordingly shall not be client money
for the purposes of the Financial Services (Clients' Money)
Regulations 1991 (as such Regulations may be amended or re-
enacted). The Company shall grant mandates in TIML's
favour with regard to the operation of such accounts so as
to permit TIML to perform TIML's duties under the
Agreement.
11. Material Interests And Conflicts Of Interest
(a) TIML may effect, without prior reference to the
Company, transactions with or for the Company in which
TIML has directly or indirectly a material interest
(other than an interest arising solely from TIML's
participation in the transaction) or a relationship of
any description with another party which may involve a
conflict with TIML's duty to the Company, except that
TIML shall not invest any part of the Assets in any
investment trust company or Collective Investment
Scheme managed by TIML or any Associate of TIML
without prior notification to the Company. For the
avoidance of doubt, in providing its services to the
Company, TIML may use any broker, trader, market maker
or other dealer from whom TIML receives advice or
other services in accordance with Clause 2.07 of the
Agreement.
(b) TIML or any Associate may without prior reference
(other than in respect of any transaction within the
exception stipulated in paragraph (a) hereof) to the
Company:-
(i) sell an investment to, or buy an investment from,
the Company for the account of the Assets as a
principal or as an agent (including as agent for
an Associate) or on behalf of another of TIML's
clients; and
(ii) have directly or indirectly a material interest
of any description, or have a relationship with
another person such as to place TIML or it in a
position where TIML's or its duty to or interest
in relation to that other person conflicts or may
conflict with TIML's or its duty to the Company;
or
(iii) act both as an agent for the Company and
also as an agent for the counterparty,
(iv) enter into a transaction jointly on the Company's
behalf and on behalf of other person(s) for whom
TIML act as investment manager.
The terms of any such transaction shall be determined
by TIML or the Associate, or, as the case may be,
agreed with the other principal concerned taking into
account the normal profits of any third party in
respect of such a transaction provided that TIML or
the Associate reasonably believes that the terms of
the transaction is no less favourable to the Company
than it would have been had it been a transaction at
arm's length with a third party which is not an
Associate in the open market.
(c) Notwithstanding Clause 6.01 of the Agreement TIML may,
in TIML's absolute discretion, without prior reference
to the Company, instruct as TIML's agent any Associate
to arrange any transaction in connection with the
management of the Assets.
(d) Subject to the other provisions of the Agreement, TIML
may acquire or dispose of units for the account of the
Assets in any Collective Investment Scheme operated or
advised by TIML or any Associate thereof or investment
company which is, or the custodian, trustee or manager
of which, is, an Associate.
(e) Any transaction in investments in Collective
Investment Schemes will be effected at the relevant
price quoted by the operator of the scheme (subject to
TIML's duty of best execution if more than one price
is quoted).
(f) Subject as provided in paragraph (a) above, any
Associate of TIML may retain any commission, the
benefit of any mark-up or mark-down or any other sum
derived from any transaction carried out for the
Company in any Collective Investment Scheme managed by
an Associate in accordance with this paragraph and
neither TIML nor any Associate shall be liable to
account to the Company for any profit, commission,
brokerage or other remuneration made or received from
or by reason of any transaction or any connected
transaction in relation to the Assets whether from any
other client of TIML's or an Associate or otherwise,
and accordingly the Management Fee set out in Schedule
1 shall neither be supplemented nor abated by reason
of any such commission, profit, brokerage or other
remuneration.
(g) Neither TIML nor any Associate shall be required to
disclose to the Company details of any amounts TIML or
they receive from transactions effected under this
Agreement (other than amounts expressly charged to the
Company) nor details of any connected transaction nor
of any other customer or counterparty involved in a
transaction.
(h) Nothing in this Agreement shall be deemed to limit or
restrict TIML'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, or to
render investment management services or services of
any kind to any other client.
(i) The Company acknowledges that TIML provides investment
management services to numerous other private
accounts. The Company also acknowledges that TIML may
give advice and take action with respect to any of
TIML's other clients or for TIML's own account which
may differ from the timing or nature of action taken
by TIML with respect to the Assets.
(j) Nothing herein contained shall prevent TIML, TIML's
directors or employees or any Associate of TIML from
buying, holding and dealing in any investments upon
their own account, notwithstanding that the same or
similar investments may be held for the account of the
Assets and no such person shall be liable to account
for any benefit to the Company by reason of such
interest.
(k) Nothing in this Agreement shall impose upon TIML any
obligation to purchase or sell or to recommend for
purchase or sale, with respect to the Assets, any
security which TIML, or TIML's shareholders,
directors, officers, employees or Associates may
purchase or sell for its or their own account(s) or
for the account of any other client.
12. Authorised Signatories and Instructions
(a) The Company shall, at TIML's request, provide TIML
with:
(i) any authority necessary to enable TIML to fulfil
TIML's obligations under this Agreement; and
(ii) a list and description of authorised persons from
whom TIML may accept instructions, together with
specimen signatures of such persons.
(b) The Company may give TIML instructions from time to
time by way of a letter (receipt of which instructions
TIML shall acknowledge in writing).
(c) TIML are authorised to rely on, may act on and treat
as fully authorised by the Company, any instruction,
confirmation or communication which purports to have
been given (and which is accepted by TIML in good
faith as having been given) by or on behalf of the
persons notified by the Company from time to time to
TIML as being authorised to instruct the Company by
whatever means transmitted and whether or not in
writing and notwithstanding that it shall subsequently
be shown that the same was not given, signed or sent
by an authorised person and, unless TIML shall have
received written notice to the contrary, whether or
not the authority of such person shall have been
terminated.
(d) TIML may, if TIML so wishes, request instructions from
the Company in regard to any particular transaction
which it proposes to effect or generally and may
refrain from effecting such proposed transaction or
any transaction until TIML shall have received
instructions, in writing if so requested.
/s/ Charles E. Johnson /s/ J. Mark Mobius
______________________ __________________
Charles E. Johnson J. Mark Mobius
/s/ D. W. Adams /s/ Gerard W. Kerr
_______________ __________________
D. W. Adams Gerard W. Kerr
EXHIBIT 10.4
SERVICE AGREEMENT
____________________
This Agreement has been made on 1st March, 1996
Between
1. TEMPLETON RUSSIAN AND EASTERN EUROPEAN DEBT FUND, a
Societe d'Investissement a Capital Variable,
incorporated under the laws of the Grand-Duchy of
Luxembourg and having its registered office in
Luxembourg, 30, Grand-Rue, (hereinafter called the
'Fund") on the one part,
and
2. TEMPLETON GLOBAL STRATEGIC SERVICES S.A., a Societe
Anonyme, incorporated under the laws of the Grand-Duchy
of Luxembourg and also having its registered office in
Luxembourg (hereinafter called the "Agent") on the
other part,
WHEREAS;
(A) The Fund has been incorporated as an investment
Fund for the investment and reinvestment of its assets in
certain types of securities, as more fully described in its
Articles of Incorporation;
(B) The Board of Directors of the Fund has selected
the Agent to act as, registrar and transfer, corporate and
domiciliary agent for the Fund and to provide certain
administrative services;
(C) The Agent is ready and willing to act as registrar
and transfer, corporate and domiciliary agent and to provide
administrative services as aforesaid, subject to and in
accordance with the provisions of the law of 30th March 1988
(the "law') and the provisions set forth in this agreement
NOW IT IS HEREBY AGREED AS FOLLOWS:
I. Registrar and Transfer Agency
1.) Appointment
The Fund hereby appoints the Agent as its registrar and
transfer agent. subject to the provisions hereof, and will
deliver, or cause to be delivered, forthwith upon request to
the Agent all documents and papers necessary under
Luxembourg law, under the Articles of incorporation of the
Fund as from time to time amended, and as may be required
for the due performance of the duties of the Agent
hereunder, or for the due performance of such additional
duties as may from time to time be agreed upon between the
Agent and the Fund.
2.) Functions of the Registrar and Transfer Agent
As registrar and transfer agent the Agent shall have
and perform the following powers and duties:
A. Maintenance of Records
To keep safely and to maintain in current form, as
required by Luxembourg law, the register of shareholders of
the Fund as well as the certificates for shares of the Fund
to deal with requests for transfer of shares whether through
the Luxembourg Stock Exchange or otherwise and to maintain
and keep safely such other records as may, be required or
requested by proper instructions from time to time and as
may further be required by the laws of Luxembourg.
B. Disposition of Certificates
To keep safely all share certificates of the Fund, as
may be designated for safekeeping prior to issue from time
to time by the Fund; to accept or keep certificates,
tendered for exchange, replacement, repurchase or transfer
by the holders thereof in accordance with the provisions of
the Articles of Incorporation of the Fund and the
requirements of Luxembourg law; to accept and keep safely
such forms and documents as may be submitted to it in
connection with any such tender; to deliver as agent,
subject to the conditions set forth hereafter. share
certificates of the Fund, whether by way of original issue
to new shareholders or in exchange, replacement or further
to a transfer subject to the provisions of the Articles of
Incorporation of the Fund and to Luxembourg law.
C. Subscriptions and Repurchases
To handle the processing of subscriptions to shares in
the Fund, to deal with requests for repurchases and with
resales of repurchased shares and to make such transfers of
funds, or to give instructions with respect to such
transfers, and to rake such actions as shall be necessary in
order to effect such sales and repurchases. In this
connection the Agent shall have regard to the
specific provisions of the Prospectus relating to the issue,
transfer, redemption and holding of shares comprising, inter
alia, restrictions on ownership and minimum holding by
certain types of shareholders.
D. Conditions for Delivery and Repurchase
To deliver share certificates (i) by way of original
issue, or (ii) further to a transfer, conversion,
replacement or exchange only after receipt (x) by the
receiving bank designated by the Fund -from time to time of
payment therefor. or (y) of share certificates for an
equivalent number of shares. For this purpose cheques,
drafts and similar instruments of payment will be considered
as good funds if and when collected.
To make payment or to cause payment to be made of
repurchase proceeds only after all the conditions as
described by the Articles of incorporation of the Fund and
other valid documents, as amended from time to time, are
fully met.
E. Destruction of Certificates
To destroy by cremation or any other means share
certificates which have been cancelled or mutilated or which
are no longer of good delivery for any other reason. Such
destruction shall be evidenced by an affidavit duly signed
by two witnesses.
F. Circulars to Shareholders
To provide and supervise services with regard to the
dispatch of statements, reports, notices, announcements,
proxies and other documents to the shareholders of the Fund
and to maintain such records with regard thereto as may from
time to time be required by the Fund or by Luxembourg law.
II. Corporate and Domiciliary Agent Agreement
1 . The Agent allows the Fund to fix its registered office
at the address of the Agent at Centre Neuberg, 30,
Grand-Rue Luxembourg. The Agency will act as corporate
and domiciliary agent for the Fund and will provide
related services for the benefit of the Fund (in which
capacity the agent is hereinafter called the
"Domiciliary Agent").
2. The Fund will, on request, deliver or cause to be
delivered to the Agent all the books, records,
agreements, forms, papers, files and other corporate
documents required by Luxembourg law and the Articles
of Incorporation of the Fund necessary to the
Domiciliary Agent for the due performance of its
duties.
As Domiciliary Agent the Agent will have the following
duties:
a) To receive and keep safely any and all notices,
correspondence, telegrams, telex messages,
telephonic advice or ocher representations and
communications received for account of the Company
the Agent being authorized to open the mail no
received at its address and obtain knowledge of its
contents.
b) To provide such facilities as may from time to time
be necessary in the course of the day-to-day
administration of the Company, including such
meetings of its officers, directors and/or
shareholders as may be convened in Luxembourg.
c) To provide and supervise facilities and services for
the preparation and dispatch of statements, notices.
announcements, proxies and other documents to the
shareholders of the Fund and to maintain such
records with regard thereto as may from time to time
be required by the Company or by Luxembourg law.
d) To draw up the minutes of the general meetings, to
provide for legal publications and file any tax
returns. To perform such ocher services as may be
agreed upon from time to time between the Agent and
the Fund with regard to the maintenance of any and
all records or books required to be kept at the
principal office of the Fund.
e) To take, upon instruction of the Fund and at its
expense, all actions necessary to defend the Fund's
nationality and domicile.
3 . As compensation for the performance of its duties under
this agreement, the Agent will be entitled to charge
out of the Fund's assets a fee as may be agreed from
time to time among the parties hereto.
IV. Administrative Agency
The Fund appoints the Agent, and the Agent hereby
accepts such appointment, as Administrative Agent of
the Fund. In such capacity the Administrative Agent
shall perform the following Administrative services:
a) the bookkeeping of the Fund in accordance with general
accounting principles and legal provisions;
b) the determination of the net asset value of the shares
of the different Funds in accordance with the
provisions of the articles of incorporation and the
Prospectus issued from time to time by the Fund.
c) the preparation of the annual accounts and the
periodical financial statements and reports in
accordance with Luxembourg law and the requirements of
the Luxembourg Monetary Institute.
d) the liaison with the Independent Public Accountant.
V. General
1.) Use of the Agent's name
The Fund agrees not to use the Agent's name in any
document, publication or publicity material., including but
not limited to prospectuses, notices, circulars, sales
literature, stationery. advertisements etc. without the
prior consent of the Agent.
2.) Submission to Law
The Fund undertakes to submit to any and all applicable
laws, regulations and administrative rulings of the Grand
Duchy of Luxembourg and of any other country in which the
Fund conducts business.
3.) Right to receive advice
If the Agent shall at any time be in doubt as to any
action to be taken or omitted by it, it may, with the
consent of the Fund, request and receive advice, at the
expense of the Fund. from legal counsel selected by the
Fund, and may, but shall not be required to, act thereon.
4.) Proper Instructions
"Proper instructions" shall be deemed to have been
received by the Agent in respect of any of the matters
referred to in this Agreement upon receipt of written,
cabled or telexed Instructions given by any two directors or
by such one or more person or persons as the Board of
Directors of the Fund shall from time to time have
authorized to give the particular class of instructions in
question. A certified copy of a resolution of the Board of
Directors of the Fund may be received and accepted by the
Agent as conclusive evidence of the authority of any such
person or persons to act, and may be considered as in full
force and effect until receipt of written notice to the
contrary. The Agent shall not be liable for the execution
of instructions which the Agent will have accepted in good
faith as being proper instructions.
5.) Books and records
The books and records of the Agent relating to the
Fund's business shall be open to inspection and audited at
reasonable times by officers and auditors employed by the
Fund.
6.) Indemnification
The Fund agrees that it will indemnify and hold
harmless the Agent and its officers and directors from any
and all cost, liability and expense resulting from the fact
that the Agent has acted in accordance with the terms of
this Agreement pursuant to the receipt of proper
instructions.
The Agent shall be liable to the fund for any acts or
omissions involving an intentional or negligent failure to
exercise due care by the Agent or its employees, officers or
directors contrary to the terms of this Agreement, except
such acts or omissions as are required by court order or
other legal process or regulation of any governmental body.
The Agent agrees that it will indemnify and hold harmless
the Fund and its employees, officers and directors from any
and all loss, damage, liability and expense arising out of
negligence or intentional misconduct of the Agent, any of
its employees, officers or directors.
7.) Compensation
The Agent will be entitled to debit the Fund's accounts
in order to receive payment. as compensation for the
performance of its duties under this Agreement, for all fees
as may be agreed upon from
time to time.
8.) Lien
The Agent acknowledges that, unless otherwise agreed
from time to time with the Fund, it has no right to a lien
or to a right of retention over the documents of title or
certificates evidencing title to any of the assets of the
Fund.
9.) Disbursements
The Agent will be entitled to be refunded all expenses
properly incurred in the performance of its duties under
this Agreement. The Agent will from time to time give
details of such expenses to the Fund in writing.
10.) Termination
Either Party may terminate this Agreement by notice in
writing, delivered or dispatched by registered mail to the
other party hereto, not less than 60 days prior to the date
upon which such termination becomes effective. However,
breach of any clause contained in this Agreement by either
party shall entitle the other party to terminate this
Agreement upon thirty days' prior written notice unless such
breach is cured within such period. Upon termination hereof
the Fund shall pay to the Agent such compensation as may be
due as of the date of such termination and shall likewise
reimburse the Agent for its costs, expenses and
disbursements properly incurred. The Agent shall, in the
event of such termination, deliver or cause to be delivered
to the Fund, or as the Fund may direct, if so required by
proper instructions, all documents and papers of the Fund
then held hereunder. and all funds or other properties of
the Fund deposited with or held by it hereunder.
11.) Notices to the Fund
Notices may be delivered or dispatched by mail, or may
be cabled or telexed to the Fund's address in Luxembourg,
and such Fund then held hereunder, and all funds or other
properties of the fund deposited with or held by it
hereunder.
12.) Notices to the Agent
Notices may be delivered or dispatched by mail, or may
be telexed to the Agent's address in Luxembourg. Such
notices shall be deemed to have been properly delivered or
given hereunder and shall be effective and the date of
delivery if delivered, cabled or telexed or, if dispatched
by registered mail. on the day on which the same have been
tendered for delivery by the post.
13.) Proper Law
This Agreement shall be subject to and construed in
accordance with Luxembourg law.
This Agreement has been executed in two counterparts
and shall become effective on 1st March, 1996.
/s/ J. Mark Mobius
-------------------
J.Mark Mobius
TEMPLETON RUSSIAN AND
EASTERN EUROPEAN DEBT FUND
/s/ Charles E. Johnson
-----------------------
By: Charles E. Johnson
TEMPLETON RUSSIAN AND
EASTERN EUROPEAN DEBT FUND
/s/ D. B. Anderson
-------------------
D. B. Anderson
/s/ D. W. Adams
----------------
D. W. Adams
Exhibit 11
COMPUTATIONS OF PER SHARE EARNINGS
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 Six months
ended ended
March 31 March 31
(Dollars and shares in
thousands) 1996 1995 1996 1995
----------- ---------- -------- -------
Average outstanding shares 80,345 81,375 80,584 81,489
Common stock equivalents
Primary 2,573 1,335 2,536 1,335
Fully diluted 2,721 1,502 2,721 1,502
Total shares
Primary 82,918 82,710 83,120 82,824
Fully diluted 83,065 82,878 83,305 82,991
Net income $75,212 $63,040 $149,163 $126,344
Earnings per share:
Primary $0.91 $0.76 $1.79 $1.52
Fully diluted $0.91 $0.76 $1.79 $1.52
Exhibit 12
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
For three months For six months
ended ended
March 31 March 31
(Dollars and shares in
thousands) 1996 1995 1996 1995
-------- -------- --------- ---------
Income before taxes $108,262 $92,634 $215,437 $185,065
Add fixed charges:
Interest expense 7,537 7,353 14,902 14,440
Interest factor on
rent 2,063 1,905 3,950 3,398
-------- -------- ---------- ---------
Total fixed charges 9,600 9,258 18,852 17,838
Earnings before fixed
charges and taxes on
income $117,862 $101,892 $234,289 $202,903
======== ======== ========= =========
Ratio of earnings to
fixed charges 12.3 11.0 12.4 11.4
======== ======== ========= =========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 337,582
<SECURITIES> 206,408
<RECEIVABLES> 164,516
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 705,202
<PP&E> 129,696
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,261,462
<CURRENT-LIABILITIES> 160,447
<BONDS> 0
<COMMON> 8,226
0
0
<OTHER-SE> 1,250,528
<TOTAL-LIABILITY-AND-EQUITY> 2,261,462
<SALES> 0
<TOTAL-REVENUES> 471,183
<CGS> 0
<TOTAL-COSTS> 270,358
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,042
<INCOME-PRETAX> 215,437
<INCOME-TAX> 66,274
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 149,163
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.79
</TABLE>
