FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 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: 81,424,533 shares, common stock, par value
$.10 per share at July 31, 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 period amounts have been reclassified to conform to
current period 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 ended Nine months ended
June 30 June 30
(Dollars in thousands, except
per share data) 1996 1995 1996 1995
Operating revenues:
Investment management fees $227,633 $187,114 $644,604 $534,270
Underwriting and
distribution fees 143,649 115,691 415,595 331,630
Transfer, trust and
related fees 23,569 16,747 67,589 48,210
Banking/finance, net and
other 551 274 4,029 7,460
Total operating
revenues 395,402 319,826 1,131,817 921,570
Operating expenses:
Underwriting and
distribution 144,137 107,108 409,369 300,838
General and administrative 121,380 98,097 349,556 279,438
Selling 18,118 15,229 50,929 53,350
Goodwill amortization 4,529 4,582 13,900 13,792
Total operating
expenses 288,164 225,016 823,754 647,418
Operating income 107,238 94,810 308,063 274,152
Other income/(expense):
Investment and other
income 16,611 9,140 37,265 21,166
Interest expense (2,782) (2,874) (8,824) (9,177)
Other income/(expense),
net 13,829 6,266 28,441 11,989
Income before taxes on income 121,067 101,076 336,504 286,141
Taxes on income 40,001 32,047 106,275 90,768
Net income $81,066 $69,029 $230,229 $195,373
Earnings per share:
Primary $0.98 $0.84 $2.77 $2.36
Fully diluted $0.97 $0.83 $2.76 $2.35
Dividends per share $0.11 $0.10 $0.33 $0.30
The accompanying notes are an integral part of these financial
statements.
Franklin Resources, Inc.
Consolidated Balance Sheets
Unaudited
June September
30 30
(Dollars in thousands) 1996 1995
ASSETS:
Current assets:
Cash and cash equivalents $354,597 $246,184
Receivables:
Fees from
Franklin/Templeton Group 127,905 110,972
Other 30,419 38,407
Investment securities,
available for sale 192,929 208,478
Prepaid expenses and other 9,833 7,167
Total current assets 715,683 611,208
Banking/finance group assets:
Cash and cash equivalents 28,729 15,515
Loans receivable, net 367,958 450,013
Investment securities,
available for sale 23,008 23,655
Other assets 5,676 6,876
Total banking/finance
group assets 425,371 496,059
Other Assets:
Investments:
Investment securities,
available for sale 20,715 15,291
Real Estate 8,804 8,826
Deferred costs 34,187 17,703
Premises and equipment, net 142,663 118,628
Goodwill, net of $69,571 and
$56,375 amortization,
respectively 646,438 660,363
Receivable from
banking/finance group 248,282 302,273
Other assets 15,227 14,330
Total other assets 1,116,316 1,137,414
Total assets $2,257,370 $2,244,681
The accompanying notes are an integral part of these financial
statements.
Franklin Resources, Inc.
Consolidated Balance Sheets
Unaudited
June September
30 30
(Dollars in thousands) 1996 1995
LIABILITIES:
Current liabilities:
Trade payables and accrued
expenses $129,602 $117,744
Debt payable within one year 374 87,204
Dividends payable 8,980 8,123
Total current liabilities 138,956 213,071
Banking/finance group liabilities:
Deposits of account
holders:
Interest bearing 135,313 159,627
Non-interest bearing 10,217 9,747
Payable to parent 248,282 302,273
Other liabilities 2,384 2,076
Total banking/finance
group liabilities 396,196 473,723
Other Liabilities:
Long-term debt 379,619 382,367
Other liabilities 16,808 14,477
Total other liabilities 396,427 396,844
Total liabilities 931,579 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;
80,345,492 and 80,939,611 shares
outstanding, respectively 8,226 8,226
Capital in excess of par value 98,933 92,190
Retained earnings 1,294,750 1,091,204
Less cost of treasury stock (86,577) (48,519)
Other 10,459 17,942
Total stockholders' equity 1,325,791 1,161,043
Total liabilities and
stockholders' equity $2,257,370 $2,244,681
The accompanying notes are an integral part of these financial
statements.
Franklin Resources, Inc.
Consolidated Statements of Cash Flows
Unaudited
Nine months ended
June 30
(Dollars in thousands) 1996 1995
Net income $230,229 $195,373
Adjustments to reconcile net income to
net cash provided by operating
activities
(Increase)/decrease in receivables,
prepaid expenses and other (3,791) 2,214
Increase/(decrease) in trade payables,
accrued expenses and other 30,475 (19,309)
Depreciation and amortization 29,962 30,497
Gains on disposition of assets (13,418) (2,604)
Net cash provided by operating
activities 273,457 206,171
Sales/(purchases) of Franklin Templeton
funds, net 11,543 (21,057)
Purchases of banking/finance investment
portfolio (38,605) (100,201)
Liquidations of banking/finance
investment portfolio 39,284 104,283
Originations of banking/finance loans
receivable (21,382) (199,438)
Collections of banking/finance loans
receivable 90,201 110,355
Purchases of other investments, net (4,949) (1,754)
Purchases of premises and equipment and
other (39,977) (26,521)
Net cash provided by (used in)
investing activities 36,115 (134,333)
Decrease in deposits of bank
account holders (23,845) (7,016)
Exercise of common stock options 1,167 -
Dividends paid on common stock (25,826) (23,592)
Purchases of treasury stock (50,682) (41,506)
Issuance of debt 72,701 49,201
Repayment of debt (161,460) (34,833)
Net cash used in financing activities (187,945) (57,746)
Increase (decrease) in cash and cash
equivalents 121,627 14,092
Cash and cash equivalents, beginning of
the period 261,699 210,376
Cash and cash equivalents, end of the
period $383,326 $224,468
Supplemental disclosure of non-cash
information:
Value of common stock issued in other
transactions $17,675 $17,940
The accompanying notes are 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. In June 1996, the Company
retired an additional $20 million in medium-term notes that had
matured.
The Company's overall effective interest rate at June 30, 1996 was
6.48% on approximately $380 million of outstanding commercial paper,
medium-term notes and subordinated debentures.
In July 1996, the Company issued an additional $30 million in medium-
term notes maturing July 1998 with coupon rates from 6.62% to 6.63% in
order to retire $10 million in medium-term notes that had matured in
July 1996 and to replace $20 million in medium-term notes that had
matured in June 1996.
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 June 30, 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 6.451%. These financial instruments are
placed with major financial institutions. The credit worthiness of the
counterparties is subject to continuing review and full performance is
anticipated. Any potential loss from failure of the counterparties to
perform is deemed to be immaterial.
2. Heine Merger
On June 25, 1996, the Company and Heine Securities Corporation, Inc.
("Heine"), the investment advisor to Mutual Series Fund Inc. ("Mutual")
announced they have agreed to a merger of the businesses of Heine and
Franklin. The transaction has received certain government regulatory
approvals and has been approved by the board of Mutual. It is subject
to approval by the shareholders of Mutual at a meeting scheduled to be
held on October 25, 1996.
The transaction has an aggregate value of approximately $610 million.
Heine Securities will receive $550 million in cash, along with 1.1
million shares of Franklin Resources, Inc. common stock which may not
be sold for two years and which are subject to other restrictions.
Heine will initially invest $150 million of the cash proceeds in Mutual
with a minimum balance of $100 million for five years.
The Company expects to finance the cash payment from cash and
securities on hand, as well as its available commercial paper and
medium-term note facilities.
Heine Securities Corporation had approximately $17 billion under
management as of June 30, 1996.
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 $147.6 billion at June 30,
1996, an increase of $16.8 billion (13%) from September 30, 1995 and an
increase of $21.7 billion (17%) from June 30, 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 June 30,
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 Nine months ended
June 30 % June 30 %
(In millions) 1996 1995 Change 1996 1995 Change
Net Income $81.1 $69.0 18% $230.2 $195.4 18%
Earnings per share
Primary $.98 $.84 17% $2.77 $2.36 17%
Fully diluted $.97 $.83 17% $2.76 $2.35 17%
Operating margin 27% 30% 27% 30%
The increases in net income were primarily due to increases in
investment management fees as a result of higher average assets under
management and capital gains realized during the current period.
Operating expenses increased at a higher rate than operating revenues
resulting in a 3% decline in the Company's operating margins in the
periods under review. Previously reported operating margins have been
restated for all periods to conform to the new income statement
presentations. The increases in operating expenses were primarily due
to increases in underwriting and distribution expenses which increased
approximately 35% 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.
The contributions to the Company's operating profit from its non-U.S.
operations remained unchanged from the previous quarter. These results
will continue to be dependent on the amount and composition of assets
managed by the Company's non-U.S. subsidiaries principally in Canada,
the Bahamas and the Asia/Pacific region. There have been no
significant changes to the Company's limited exposure to fluctuations
in global currency markets.
Assets under management* As of
June 30 %
(In billions) 1996 1995 Change
Franklin Templeton Group:
Fixed income funds:
Tax-free $41.7 $39.9 5%
U.S. government (primarily GNMA's) 15.5 16.2 (4%)
Taxable and tax-free money funds 2.8 2.6 8%
Global/international 2.9 2.8 4%
Total fixed-income funds 62.9 61.5 2%
Equity and income funds:
Global/international 45.3 33.5 35%
U.S. equity/income 18.8 15.1 24%
Total equity and income funds 64.1 48.6 32%
Total Franklin Templeton fund assets 127.0 110.1 15%
Franklin Templeton institutional
assets 20.6 15.8 30%
Total Franklin Templeton Group $147.6 $125.9 17%
*Certain prior year amounts have been reclassified to conform to
current year presentation.
Changes in assets under management
Three months ended Nine months ended
June 30 % June 30 %
(In billions) 1996 1995 Change 1996 1995 Change
Assets under management
- beginning $141.4 $118.8 $130.8 $118.2
Sales & reinvestments 9.9 7.0 41% 27.2 21.1 29%
Redemptions (5.6) (5.3) 6% (15.6) (17.4) (10%)
Market
appreciation/
(depreciation) 1.9 5.4 (65%) 5.2 (4.0) 30%
Assets under management
- ending $147.6 $125.9 17% $147.6 $125.9 17%
Average assets under
management $144.7 $122.8 18% $138.6 $118.9 17%
Fixed-income funds represent 43% of assets under management as of June
30, 1996, down from 49% a year ago. This trend generally reflects
investors' preference for equity funds and their relatively higher
level of market appreciation during the periods under review.
Equity and income funds represent 43% of assets under management as of
June 30, 1996, up from 39% a year ago. Global/international equity
funds' assets under management were up 35% from levels a year ago. U.S.
equity/income funds increased 24% from levels a year ago. Both trends
reflect increased sales and market appreciation.
Institutional assets represent 14% of assets under management as of
June 30, 1996 up from 13% a year ago. This increase resulted from an
increase in the number of clients as well as additional investments
from existing clients and market appreciation. The Company is strongly
committed to the institutional business and intends to continue the
expansion of the services it provides in this area.
Operating revenue
Three months ended Nine months ended
June 30 % June 30 %
(In millions) 1996 1995 Change 1996 1995 Change
Investment management
fees $227.6 $187.1 22% $644.6 $534.3 21%
Underwriting and
distribution fees 143.6 115.7 24% 415.6 331.6 25%
Transfer, trust and
related fees 23.6 16.7 41% 67.6 48.2 40%
Banking/finance, net
and other .6 .3 100% 4.0 7.5 (47%)
Total operating
revenues $395.4 $319.8 24% $1,131.8 $921.6 23%
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,
managed accounts and other investment products. 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 18% and 17% increases in average assets
under management during the three-and nine-month periods, respectively.
The relatively higher growth rate of global equity fund assets, which
generally have higher fee rates than fixed-income fund assets, also
contributed to the trends during the periods.
Underwriting and distribution fees include sales commission and
distribution fee revenues earned primarily from fund sales. In the
periods under review, the increase in underwriting and distribution
fees from mutual fund sales was partially offset by a decrease in the
commissions earned on annuity products due to a change in the fee
structure effective September 1, 1995.
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 15% increase in retail fund shareholder accounts to 5.4
million from 4.7 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 ended Nine months ended
June 30 % June 30 %
(In millions) 1996 1995 Change 1996 1995 Change
Revenues $11.5 $13.4 (14%) $36.6 $40.8 (10%)
Provision for loan
losses (4.8) (5.3) (9%) (13.2) (12.3) 7%
Interest expense (6.1) (7.8) (22%) (19.4) (21.0) (8%)
Total banking,finance,
net and other $.6 $.3 100% $4.0 $7.5 (47%)
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 capabilities, 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.
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 18% decrease in loans outstanding during the
period. Provision for loan losses decreased due to a 4% decrease in
delinquencies. 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 nine-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 increased delinquency and charge-off
rates compared to the same period a year ago.
Operating expenses
Three months ended Nine months ended
June 30 % June 30 %
(In millions) 1996 1995 Change 1996 1995 Change
Underwriting and
distribution $144.1 $107.1 35% $409.4 $300.8 36%
General and
administrative 121.4 98.1 24% 349.6 279.4 25%
Selling 18.1 15.2 19% 50.9 53.4 (5%)
Goodwill
amortization 4.6 4.6 -% 13.9 13.8 1%
Total operating
expenses $288.2 $225.0 28% $823.8 $647.4 27%
Increases in operating expenses principally resulted from an increase
in underwriting and distribution costs as well as the general expansion
of the Company's business.
Underwriting and distribution include sales commissions and
distribution fees paid to third party intermediaries. 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 nine-month periods under review,
distribution expenses have grown at a faster rate than distribution
revenues because of the relatively higher growth in the sales of Class
II shares and similar products sold primarily in Canada.
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 13%
of the Company's long-term U.S. mutual fund sales during the first nine
months of 1996.
The level of underwriting and distribution expenses can be expected to
vary with the level of sales, the level of assets under management and
the composition of products sold.
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 June 30, 1995 to over 4,800 at June 30, 1996.
Employment costs represent approximately 30% of operating expenses
during the three-and nine-month periods ended June 30, 1996 and
represent approximately 90% and 85% of the increases in general and
administrative expenses during the three-and nine-month periods,
respectively. Employment costs include incentive-based compensation
which will continue to be dependent upon changes in operating profits.
Changes in selling expense during the comparative three-and nine-month
periods were due mainly to periodic variations in media advertising and
marketing campaigns.
Other income/(expense)
Three months ended Nine months ended
June 30 % June 30 %
(In millions) 1996 1995 Change 1996 1995 Change
Investment and other
income $16.6 $9.1 82% $37.2 $21.2 75%
Interest expense (2.8) (2.8) -% (8.8) (9.2) (4%)
Other income (expense),
net $13.8 $6.3 119% $28.4 $12.0 137%
The increases in investment income resulted from an increase in the
average levels of interest-bearing assets invested, as well as $5.7
million and $13.4 million of capital gains realized during the three-
and nine-month periods, respectively.
The Company's overall effective interest rate at June 30, 1996 was
6.48% on approximately $380 million of outstanding commercial paper,
medium-term notes and subordinated debentures as compared to 6.27% on
$478 million of debt outstanding at June 30, 1995. The Company has
fixed the interest rates it pays on 99% of its outstanding debt through
its medium-term note program, its subordinated debentures and interest
rate swap agreements.
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
June 30 September 30 %
(In millions) 1996 1995 Change
Banking/finance loans
receivable, net $368.0 $450.0 (18%)
Receivable from the
banking/finance group $248.3 $302.3 (18%)
Deferred costs $34.2 $17.7 93%
Debt payable within one year $.4 $87.2 (100%)
Interest bearing deposits of
bank account holders $135.3 $159.6 (15%)
At June 30, 1996, banking/finance loans receivable, net decreased due
to net paydowns and a decrease in funding of new auto loans as a result
of more stringent credit requirements. The proceeds from net paydowns
of loans were used to reduce the receivable from the banking/finance
group.
Deferred costs increased principally due to an increase in deferred
commissions on sale of Canada-based funds and Class II shares.
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 $47 million in cash from operations and sales of
investments to reduce outstanding short-term commercial paper.
Both interest bearing and non-interest bearing deposits are gathered
for purposes of funding loans and purchasing securities. The decrease
in interest bearing deposits was a result of decreased funding needs
due to the sale of bank credit card receivables and the paydown of auto
loan receivables.
Selected cash flow items
Nine months ended
June 30
(In millions) 1996 1995
Cash flows from operating activities $273.5 $206.2
Cash flows from investing activities $36.1 ($134.3)
Cash flows from financing activities ($187.9) ($57.7)
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, decrease in deposits of
bank account holders and purchases of Company shares. The Company
continues to fund these activities primarily from operating cash flows
while utilizing its commercial paper and medium-term note facilities
when appropriate.
During the nine-month period ended June 30, 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 the purchase
of up to an additional 3,000,000 shares under its repurchase program.
At June 30, 1996, the Company had 3,914,511 shares available 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 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 1% 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 June 30, 1996, the Company held liquid assets of $757.6 million,
including $383.3 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 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 10.1 Representative WRAP Account Supplement to Dealer's
Agreement with Franklin/Templeton Distributors, Inc.
Exhibit 10.2 Representative Master Custody Agreement between Bank of
New York and Franklin/Templeton funds.
Exhibit 10.3 Representative Management Agreement between Franklin
Advisory Services, Inc. and certain Franklin funds.
Exhibit 10.4 Amendment to Representative Investment Management
Agreement between Templeton Global Strategy SICAV and
Franklin Advisers, Inc.
Exhibit 10.5 Representative Investment Management Agreement between
Templeton Global Investment Trust and Templeton
Investment Counsel, Inc.
Exhibit 11 Computations of per share earnings.
Exhibit 12. Computations of ratios of earnings to fixed charges
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K:
(i) 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.
(ii) Form 8-K dated June 25, 1996 as amended by Form
8-K/A dated June 26, 1996 reporting under Item 5 Other
Events the filing of an Agreement to Merge the
Businesses of Heine Securities Corporation, Elmore
Securities Corporation and Franklin Resources, Inc., and
the accompanying press release issued June 25, 1996 by
the Company and including said Agreement and press
release as an Exhibit under Item 7 Financial Statements
and Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FRANKLIN RESOURCES, INC.
Registrant
Date: August 14, 1996 /S/ Martin L. Flanagan
---------------------------
MARTIN L. FLANAGAN
Senior Vice President,
Treasurer and Chief
Financial Officer
INDEX TO EXHIBITS
Exhibit
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 10.1 Representative WRAP Account Supplement to Dealer's
Agreement with Franklin/Templeton Distributors, Inc.
Exhibit 10.2 Representative Master Custody Agreement between Bank of
New York and Franklin/Templeton funds.
Exhibit 10.3 Representative Management Agreement between Franklin
Advisory Services, Inc. and certain Franklin funds.
Exhibit 10.4 Amendment to Representative Investment Management
Agreement between Templeton Global Strategy SICAV and
Franklin Advisers, Inc.
Exhibit 10.5 Representative Investment Management Agreement between
Templeton Global Investment Trust and Templeton
Investment Counsel, Inc.
Exhibit 11 Computations of per share earnings.
Exhibit 12. Computations of ratios of earnings to fixed charges
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K:
(i) 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.
(ii) Form 8-K dated June 25, 1996 as amended by Form
8-K/A dated June 26, 1996 reporting under Item 5 Other
Events the filing of an Agreement to Merge the
Businesses of Heine Securities Corporation, Elmore
Securities Corporation and Franklin Resources, Inc., and
the accompanying press release issued June 25, 1996 by
the Company and including said Agreement and press
release as an Exhibit under Item 7 Financial Statements
and Exhibits.
Exhibit 10.1
WRAP ACCOUNT SUPPLEMENT TO DEALER'S AGREEMENT WITH
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
AGREEMENT, dated this _________ day of
__________________, 199__, between _______________,
("Dealer"), and Franklin/Templeton Distributors, Inc.
("Distributors").
WITNESSETH
WHEREAS, Dealer wishes to use shares of open-end funds
distributed by Distributors (the "Funds") in a fee-based
wrap program (the "Program") made available by Dealer to
clients of Dealer (the "Wrap Account");
WHEREAS, Dealer wishes to afford its fee-based clients
the opportunity to qualify for the ability to purchase
shares of the Funds at net asset value; and
WHEREAS, Distributors is willing to allow Dealer to
purchase shares of the Funds for clients in the Wrap Account
subject to the provisions of this Agreement;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by both parties, Dealer and
Distributors hereby agree as follows:
1. Subject to Paragraph 2 hereof, Dealer may sell
shares of any Funds made available by Distributors, from
time to time, at net asset value to bona fide clients of
Dealer for use solely in their Wrap Account. Dealer will
earn no discount concession, commission, finder's fees or
similar payments on any such sale.
2. Distributors, after consulting Dealer, will
determine, from time to time, which Funds it will make
available to Dealer for use in the Wrap Account. Dealer
will comply with all provisions of the then current
Prospectus of each Fund, as in effect from time to time.
3. For any Wrap Account customer eligible to purchase
Fund shares at net asset value, Distributors understands
that Dealer shall charge an annual fee to the customer of
_________________ to _________________ of average net
assets. Dealer shall not prepare, use or distribute
brochures, written materials or advertising in any form that
refers to sales of the Funds as "no-load", "available
without sales charge", "at net asset value" or any similar
phrase, except in the case of brochures, which may refer to
the Funds as "available at net asset value" if the fees and
expenses of the Wrap Account are given at least equal
prominence. Notwithstanding the foregoing, in connection
with explaining the fees and expenses of the Wrap Account,
representatives of Dealer may describe to customers the
option of purchasing Fund shares through the Program at net
asset value.
4. Distributors warrants that all necessary
disclosures regarding the sale of shares at net asset value
will be set forth in the then current Prospectus (as in
effect from time to time) of the Funds available under this
Agreement.
5. Dealer will (a) include descriptions (approved in
advance by Distributors) of all Funds offered through the
Wrap Account in internal sales materials used in conjunction
with the Wrap Account, (b) include representatives from
Distributors on Dealer's internal sales lines and conference
calls on a regular basis, and (c) use its best efforts to
motivate its representatives to recommend suitable Funds for
clients of the Wrap Account.
6. This Agreement shall be governed and interpreted
in accordance with the laws of The State of California.
This Agreement shall not relieve Dealer or Distributors from
any obligations either may have under any other agreements
between them, including but not limited to the Dealer's
Agreement, which (except for the second sentence of
Paragraph 2 hereof) shall control in case of any conflict
with this Agreement. All sales of Fund shares hereunder
shall be subject to the provisions of the Dealer's Agreement
as that agreement shall be amended from time to time.
7. The Funds to which this Agreement pertains will be
those designated by Distributors and accepted by Dealer,
from time to time, subject to the provisions of each Fund's
then current Prospectus (as in effect from time to time),
state and federal securities laws and regulations and
applicable rules and regulations of the National Association
of Securities Dealers, Inc.
8. Distributors is not endorsing, recommending or
otherwise involved in providing any investment product of
dealer (including but not limited to the Wrap Account).
Distributors is merely affording Dealer the opportunity to
use shares of the Funds distributed by Distributors as an
investment medium for the Wrap Account. Dealer acknowledges
that it is solely responsible for the Program and Dealer
agrees to indemnify, hold harmless and defend the Funds,
Distributors and their respective affiliates from and
against any and all claims, losses, damages or costs
(including attorney's fees) arising from the operation of
the Program.
9. This Agreement is not exclusive and may be
terminated by either party upon sixty (60) days prior
written notice to the other party. It shall terminate
automatically upon termination of the Dealer's Agreement
between the parties. This Agreement may be amended only by
a written instrument, signed by both parties.
IN WITNESS WHEREOF, this Agreement has been executed as
of the date set forth above by a duly authorized officer of
each party.
_____________________
Company Name
By:
X_________________________________
Printed Name:
___________________________
Title:
__________________________________
FRANKLIN/TEMPLETON DISTRIBUTORS,
INC.
By:
___________________________________
_
Gregory E. Johnson
Its: President
Exhibit 10.2
MASTER CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and entered into
as of February 16, 1996, by and between each Investment Company listed
on Exhibit A, for itself and for each of its Series listed on Exhibit
A, and BANK OF NEW YORK, a New York corporation authorized to do a
banking business (the "Custodian").
RECITALS
A. Each Investment Company is an investment company
registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act") that invests and reinvests, for itself or on
behalf of its Series, in Domestic Securities and Foreign Securities.
B. The Custodian is, and has represented to each Investment
Company that the Custodian is, a "bank" as that term is defined in
Section 2(a)(5) of the Investment Company Act of 1940, as amended, and
is eligible to receive and maintain custody of investment company
assets pursuant to Section 17(f) and Rule 17f-2 thereunder.
C. The Custodian and each Investment Company, for itself and
for each of its Series, desire to provide for the retention of the
Custodian as a custodian of the assets of each Investment Company and
each Series, on the terms and subject to the provisions set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1.0 FORM OF AGREEMENT
Although the parties have executed this Agreement in the form
of a Master Custody Agreement for administrative convenience, this
Agreement shall create a separate custody agreement for each Investment
Company and for each Series designated on Exhibit A, as though each
Investment Company had separately executed an identical custody
agreement for itself and for each of its Series. No rights,
responsibilities or liabilities of any Investment Company or Series
shall be attributed to any other Investment Company or Series.
Section 1.1 DEFINITIONS
For purposes of this Agreement, the following terms shall
have the respective meanings specified below:
"Agreement" shall mean this Custody Agreement.
"Board" shall mean the Board of Trustees, Directors or
Managing General Partners, as applicable, of an Investment Company.
"Business Day" with respect to any Domestic Security means
any day, other than a Saturday or Sunday, that is not a day on which
banking institutions are authorized or required by law to be closed in
The City of New York and, with respect to Foreign Securities, a London
Business Day. "London Business Day" shall mean any day on which
dealings and deposits in U.S. dollars are transacted in the London
interbank market.
"Custodian" shall mean Bank of New York.
"Domestic Securities" shall have the meaning provided in
Subsection 2.1 hereof.
"Executive Committee" shall mean the executive committee of a
Board.
"Foreign Custodian" shall have the meaning provided in
Section 4.1 hereof.
"Foreign Securities" shall have the meaning provided in
Section 2.1 hereof.
"Foreign Securities Depository" shall have the meaning
provided in Section 4.1 hereof.
"Fund" shall mean an entity identified on Exhibit A as an
Investment Company, if the Investment Company has no series, or a
Series.
"Investment Company" shall mean an entity identified on
Exhibit A under the heading "Investment Company."
"Investment Company Act" shall mean the Investment Company
Act of 1940, as amended.
"Securities" shall have the meaning provided in Section 2.1
hereof.
"Securities System" shall have the meaning provided in
Section 3.1 hereof.
"Securities System Account" shall have the meaning provided
in Subsection 3.8(a) hereof.
"Series" shall mean a series of an Investment Company which
is identified as such on Exhibit A.
"Shares" shall mean shares of beneficial interest of the
Investment Company.
"Subcustodian" shall have the meaning provided in Subsection
3.7 hereof, but shall not include any Foreign Custodian.
"Transfer Agent" shall mean the duly appointed and acting
transfer agent for each Investment Company.
"Writing" shall mean a communication in writing, a
communication by telex, facsimile transmission, bankwire or other
teleprocess or electronic instruction system acceptable to the
Custodian.
Section 2. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS
2.1 Appointment of Custodian. Each Investment Company
hereby appoints and designates the Custodian as a custodian of the
assets of each Fund, including cash denominated in U.S. dollars or
foreign currency ("cash"), securities the Fund desires to be held
within the United States ("Domestic Securities") and securities it
desires to be held outside the United States ("Foreign Securities").
Domestic Securities and Foreign Securities are sometimes referred to
herein, collectively, as "Securities." The Custodian hereby accepts
such appointment and designation and agrees that it shall maintain
custody of the assets of each Fund delivered to it hereunder in the
manner provided for herein.
2.2 Delivery of Assets. Each Investment Company may deliver
to the Custodian Securities and cash owned by the Funds, payments of
income, principal or capital distributions received by the Funds with
respect to Securities owned by the Funds from time to time, and the
consideration received by the Funds for such Shares or other securities
of the Funds as may be issued and sold from time to time. The
Custodian shall have no responsibility whatsoever for any property or
assets of the Funds held or received by the Funds and not delivered to
the Custodian pursuant to and in accordance with the terms hereof. All
Securities accepted by the Custodian on behalf of the Funds under the
terms of this Agreement shall be in "street name" or other good
delivery form as determined by the Custodian.
2.3 Subcustodians. The Custodian may appoint BNY Western
Trust Company as a Subcustodian to hold assets of the Funds in
accordance with the provisions of this Agreement. In addition, upon
receipt of Proper Instructions and a certified copy of a resolution of
the Board or of the Executive Committee, and certified by the Secretary
or an Assistant Secretary, of an Investment Company, the Custodian may
from time to time appoint one or more other Subcustodians or Foreign
Custodians to hold assets of the affected Funds in accordance with the
provisions of this Agreement.
2.4 No Duty to Manage. The Custodian, a Subcustodian or a
Foreign Custodian shall not have any duty or responsibility to manage
or recommend investments of the assets of any Fund held by them or to
initiate any purchase, sale or other investment transaction in the
absence of Proper Instructions or except as otherwise specifically
provided herein.
Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS OF THE
FUNDS HELD BY THE CUSTODIAN
3.1 Holding Securities. The Custodian shall hold and
physically segregate from any property owned by the Custodian, for the
account of each Fund, all non-cash property delivered by each Fund to
the Custodian hereunder other than Securities which, pursuant to
Subsection 3.8 hereof, are held through a registered clearing agency, a
registered securities depository, the Federal Reserve's book-entry
securities system (referred to herein, individually, as a "Securities
System"), or held by a Subcustodian, Foreign Custodian or in a Foreign
Securities Depository.
3.2 Delivery of Securities. Except as otherwise
provided in Subsection 3.5 hereof, the Custodian, upon receipt of
Proper Instructions, shall release and deliver Securities owned by a
Fund and held by the Custodian in the following cases or as otherwise
directed in Proper Instructions:
(a) except as otherwise provided herein, upon sale of
such Securities for the account of the Fund and receipt by the
Custodian, a Subcustodian or a Foreign Custodian of payment therefor;
(b) upon the receipt of payment by the Custodian, a
Subcustodian or a Foreign Custodian in connection with any repurchase
agreement related to such Securities entered into by the Fund;
(c) in the case of a sale effected through a Securities
System, in accordance with the provisions of Subsection 3.8 hereof;
(d) to a tender agent or other authorized agent in
connection with (i) a tender or other similar offer for Securities
owned by the Fund, or (ii) a tender offer or repurchase by the Fund of
its own Shares;
(e) to the issuer thereof or its agent when such
Securities are called, redeemed, retired or otherwise become payable;
provided, that in any such case, the cash or other consideration is to
be delivered to the Custodian, a Subcustodian or a Foreign Custodian;
(f) to the issuer thereof, or its agent, for transfer
into the name or nominee name of the Fund, the name or nominee name of
the Custodian, the name or nominee name of any Subcustodian or Foreign
Custodian; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate face
amount or number of units; provided that, in any such case, the new
Securities are to be delivered to the Custodian, a Subcustodian or
Foreign Custodian;
(g) to the broker selling the same for examination in
accordance with the "street delivery" custom;
(h) for exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, or reorganization of the
issuer of such Securities, or pursuant to a conversion of such
Securities; provided that, in any such case, the new Securities and
cash, if any, are to be delivered to the Custodian or a Subcustodian;
(i) in the case of warrants, rights or similar
securities, the surrender thereof in connection with the exercise of
such warrants, rights or similar Securities or the surrender of interim
receipts or temporary Securities for definitive Securities; provided
that, in any such case, the new Securities and cash, if any, are to be
delivered to the Custodian, a subcustodian or a Foreign Custodian;
(j) for delivery in connection with any loans of
Securities made by the Fund, but only against receipt by the Custodian,
a Subcustodian or a Foreign Custodian of adequate collateral as
determined by the Fund (and identified in Proper Instructions
communicated to the Custodian), which may be in the form of cash or
obligations issued by the United States government, its agencies or
instrumentalities, except that in connection with any loans for which
collateral is to be credited to the account of the Custodian, a
Subcustodian or a Foreign Custodian in the Federal Reserve's book-entry
securities system, the Custodian will not be held liable or responsible
for the delivery of Securities owned by the Fund prior to the receipt
of such collateral;
(k) for delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets by the Fund, but
only against receipt by the Custodian, a Subcustodian or a Foreign
Custodian of amounts borrowed;
(l) for delivery in accordance with the provisions of
any agreement among the Fund, the Custodian, a Subcustodian or a
Foreign Custodian and a broker-dealer relating to compliance with the
rules of registered clearing corporations and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Fund;
(m) for delivery in accordance with the provisions of
any agreement among the Fund, the Custodian, a Subcustodian or a
Foreign Custodian and a futures commission merchant, relating to
compliance with the rules of the Commodity Futures Trading Commission
and/or any contract market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Fund;
(n) upon the receipt of instructions from the Transfer
Agent for delivery to the Transfer Agent or to the holders of Shares in
connection with distributions in kind in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(o) for any other proper purpose, but only upon receipt
of Proper Instructions, and a certified copy of a resolution of the
Board or of the Executive Committee certified by the Secretary or an
Assistant Secretary of the Fund, specifying the securities to be
delivered, setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper purpose, and naming the
person or persons to whom delivery of such securities shall be made.
3.3 Registration of Securities. Securities held by the
Custodian, a Subcustodian or a Foreign Custodian (other than bearer
Securities) shall be registered in the name or nominee name of the
appropriate Fund, in the name or nominee name of the Custodian or in
the name or nominee name of any Subcustodian or Foreign Custodian.
Each Fund agrees to hold the Custodian, any such nominee, Subcustodian
or Foreign Custodian harmless from any liability as a holder of record
of such Securities.
3.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts for each Fund, subject only to draft
or order by the Custodian acting pursuant to the terms of this
Agreement, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it hereunder from or for the
account of each Fund, other than cash maintained by a Fund in a bank
account established and used in accordance with Rule 17f-3 under the
Fund Act. Funds held by the Custodian for a Fund may be deposited by
it to its credit as Custodian in the banking departments of the
Custodian, a Subcustodian or a Foreign Custodian. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity. In the event a
Fund's account for any reason becomes overdrawn, or in the event an
action requested in Proper Instructions would cause such an account to
become overdrawn, the Custodian shall immediately notify the affected
Fund.
3.5 Collection of Income; Trade Settlement; Crediting of
Accounts. The Custodian shall collect income payable with respect to
Securities owned by each Fund, settle Securities trades for the account
of each Fund and credit and debit each Fund's account with the
Custodian in connection therewith as stated in this Subsection 3.5.
This Subsection shall not apply to repurchase agreements, which are
treated in Subsection 3.2(b), above.
(a) Upon receipt of Proper Instructions, the Custodian
shall effect the purchase of a Security by charging the account of the
Fund on the contractual settlement date, and by making payment against
delivery. If the seller or selling broker fails to deliver the Security
within a reasonable period of time, the Custodian shall notify the Fund
and credit the transaction amount to the account of the Fund, but the
Custodian shall have no further liability or responsibility for the
transaction.
(b) Upon receipt of Proper Instructions, the Custodian
shall effect the sale of a Security by withdrawing a certificate or
other indicia of ownership from the account of the Fund and by making
delivery against payment, and shall credit the account of the Fund with
the amount of such proceeds on the contractual settlement date. If the
purchaser or the purchasing broker fails to make payment within a
reasonable period of time, the Custodian shall notify the Fund, debit
the Fund's account for any amounts previously credited to it by the
Custodian as proceeds of the transaction and, if delivery has not been
made, redeposit the Security into the account of the Fund.
(c) The Fund is responsible for ensuring that the
Custodian receives timely and accurate Proper Instructions to enable
the Custodian to effect settlement of any purchase or sale. If the
Custodian does not receive such instructions within the required time
period, the Custodian shall have no liability of any kind to any
person, including the Fund, for failing to effect settlement on the
contractual settlement date. However, the Custodian shall use its best
reasonable efforts to effect settlement as soon as possible after
receipt of Proper Instructions.
(d) The Custodian shall credit the account of the Fund
with interest income payable on interest bearing Securities on payable
date. Dividends and other amounts payable with respect to Domestic
Securities and Foreign Securities shall be credited to the account of
the Fund when received by the Custodian. The Custodian shall not be
required to commence suit or collection proceedings or resort to any
extraordinary means to collect such income and other amounts payable
with respect to Securities owned by the Fund. The collection of income
due the Fund on Domestic Securities loaned pursuant to the provisions
of Subsection 3.2(j) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith,
other than to provide the Fund with such information or data as may be
necessary to assist the Fund in arranging for the timely delivery to
the Custodian of the income to which the Fund is entitled. The
Custodian shall have no liability to any person, including the Fund, if
the Custodian credits the account of the Fund with such income or other
amounts payable with respect to Securities owned by the Fund (other
than Securities loaned by the Fund pursuant to Subsection 3.2(j)
hereof) and the Custodian subsequently is unable to collect such income
or other amounts from the payors thereof within a reasonable time
period, as determined by the Custodian in its sole discretion. In such
event, the Custodian shall be entitled to reimbursement of the amount
so credited to the account of the Fund.
3.6 Payment of Fund Monies. Upon receipt of Proper
Instructions the Custodian shall pay out monies of a Fund in the
following cases or as otherwise directed in Proper Instructions:
(a) upon the purchase of Securities, futures contracts
or options on futures contracts for the account of the Fund but only,
except as otherwise provided herein, (i) against the delivery of such
securities, or evidence of title to futures contracts or options on
futures contracts, to the Custodian or a Subcustodian registered
pursuant to Subsection 3.3 hereof or in proper form for transfer; (ii)
in the case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Subsection 3.8 hereof; or
(iii) in the case of repurchase agreements entered into between the
Fund and the Custodian, another bank or a broker-dealer (A) against
delivery of the Securities either in certificated form to the Custodian
or a Subcustodian or through an entry crediting the Custodian's account
at the appropriate Federal Reserve Bank with such Securities or (B)
against delivery of the confirmation evidencing purchase by the Fund of
Securities owned by the Custodian or such broker-dealer or other bank
along with written evidence of the agreement by the Custodian or such
broker-dealer or other bank to repurchase such Securities from the
Fund;
(b) in connection with conversion, exchange or
surrender of Securities owned by the Fund as set forth in Subsection
3.2 hereof;
(c) for the redemption or repurchase of Shares issued
by the Fund;
(d) for the payment of any expense or liability
incurred by the Fund, including but not limited to the following
payments for the account of the Fund: custodian fees, interest, taxes,
management, accounting, transfer agent and legal fees and operating
expenses of the Fund whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses; and
(e) for the payment of any dividends or distributions
declared by the Board with respect to the Shares.
3.7 Appointment of Subcustodians. The Custodian may appoint
BNY Western Trust Company or, upon receipt of Proper Instructions,
another bank or trust company, which is itself qualified under the
Investment Company Act to act as a custodian (a "Subcustodian"), as the
agent of the Custodian to carry out such of the duties of the Custodian
hereunder as a Custodian may from time to time direct; provided,
however, that the appointment of any Subcustodian shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
3.8 Deposit of Securities in Securities Systems. The
Custodian may deposit and/or maintain Domestic Securities owned by a
Fund in a Securities System in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
(a) the Custodian may hold Domestic Securities of the
Fund in the Depository Trust Company or the Federal Reserve's book
entry system or, upon receipt of Proper Instructions, in another
Securities System provided that such securities are held in an account
of the Custodian in the Securities System ("Securities System
Account") which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for customers;
(b) the records of the Custodian with respect to
Domestic Securities of the Fund which are maintained in a Securities
System shall identify by book-entry those Domestic Securities belonging
to the Fund;
(c) the Custodian shall pay for Domestic Securities
purchased for the account of the Fund upon (i) receipt of advice from
the Securities System that such securities have been transferred to the
Securities System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer Domestic Securities
sold for the account of the Fund upon (A) receipt of advice from the
Securities System that payment for such securities has been transferred
to the Securities System Account, and (B) the making of an entry on the
records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Securities System
of transfers of Domestic Securities for the account of the Fund shall
be maintained for the Fund by the Custodian and be provided to the
Fund at its request. Upon request, the Custodian shall furnish the
Fund confirmation of the transfer to or from the account of the Fund in
the form of a written advice or notice; and
(d) upon request, the Custodian shall provide the Fund
with any report obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures for
safeguarding domestic securities deposited in the Securities System.
3.9 Segregated Account. The Custodian shall upon receipt of
Proper Instructions establish and maintain a segregated account or
accounts for and on behalf of a Fund, into which account or accounts
may be transferred cash and/or Securities, including Securities
maintained in an account by the Custodian pursuant to Section 3.8
hereof, (i) in accordance with the provisions of any agreement among
the Fund, the Custodian and a broker-dealer or futures commission
merchant, relating to compliance with the rules of registered clearing
corporations and of any national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for
purposes of segregating cash or securities in connection with options
purchased, sold or written by the Fund or commodity futures contracts
or options thereon purchased or sold by the Fund, and (iii) for other
proper corporate purposes, but only, in the case of this clause (iii),
upon receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board or of the Executive Committee certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
3.10 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of income or
other payments with respect to domestic securities of each Fund held by
it and in connection with transfers of such securities.
3.11 Proxies. The Custodian shall, with respect to the
Securities held hereunder, promptly deliver to each Fund all proxies,
all proxy soliciting materials and all notices relating to such
Securities. If the Securities are registered otherwise than in the
name of a Fund or a nominee of a Fund, the Custodian shall use its best
reasonable efforts, consistent with applicable law, to cause all
proxies to be promptly executed by the registered holder of such
Securities in accordance with Proper Instructions.
3.12 Communications Relating to Fund Portfolio Securities.
The Custodian shall transmit promptly to each Fund all written
information (including, without limitation, pendency of calls and
maturities of Securities and expirations of rights in connection
therewith and notices of exercise of put and call options written by
the Fund and the maturity of futures contracts purchased or sold by the
Fund) received by the Custodian from issuers of Securities being held
for the Fund. With respect to tender or exchange offers, the Custodian
shall transmit promptly to each Fund all written information received
by the Custodian from issuers of the Securities whose tender or
exchange is sought and from the party (or its agents) making the tender
or exchange offer. If a Fund desires to take action with respect to
any tender offer, exchange offer or any other similar transaction, the
Fund shall notify the Custodian at least three Business Days prior to
the date of which the Custodian is to take such action.
3.13 Reports by Custodian. The Custodian shall each
business day furnish each Fund with a statement summarizing all
transactions and entries for the account of the Fund for the preceding
day. At the end of every month, the Custodian shall furnish each Fund
with a list of the cash and portfolio securities showing the quantity
of the issue owned, the cost of each issue and the market value of each
issue at the end of each month. Such monthly report shall also contain
separate listings of (a) unsettled trades and (b) when-issued
securities. The Custodian shall furnish such other reports as may be
mutually agreed upon from time-to-time.
Section 4. CERTAIN DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS
OF THE FUNDS HELD OUTSIDE THE UNITED STATES
4.1 Custody Outside the United States. Each Fund authorizes
the Custodian to hold Foreign Securities and cash in custody accounts
which have been established by the Custodian with (i) its foreign
branches, (ii) foreign banking institutions, foreign branches of United
States banks and subsidiaries of United States banks or bank holding
companies (each a "Foreign Custodian") and (iii) Foreign Securities
depositories or clearing agencies (each a "Foreign Securities
Depository"); provided, however, that the appropriate Board or
Executive Committee has approved in advance the use of each such
Foreign Custodian and Foreign Securities Depository and the contract
between the Custodian and each Foreign Custodian and that such approval
is set forth in Proper Instructions and a certified copy of a
resolution of the Board or of the Executive Committee certified by the
Secretary or an Assistant Secretary of the appropriate Investment
Company. Unless expressly provided to the contrary in this Section 4,
custody of Foreign Securities and assets held outside the United States
by the Custodian, a Foreign Custodian or through a Foreign Securities
Depository shall be governed by this Agreement, including Section 3
hereof.
4.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of its foreign
branches, Foreign Custodians and Foreign Securities Depositories to:
(i) "foreign securities", as defined in paragraph (c) (1) of Rule 17f-5
under the Fund Act, and (ii) cash and cash equivalents in such amounts
as the Custodian or an affected Fund may determine to be reasonably
necessary to effect the Fund's Foreign Securities transactions.
4.3 Omitted.
4.4 Segregation of Securities. The Custodian shall identify
on its books and records as belonging to the appropriate Fund, the
Foreign Securities of each Fund held by each Foreign Custodian.
4.5 Agreements with Foreign Custodians. Each agreement
between the Custodian and a Foreign Custodian shall be substantially in
the form as delivered to the Investment Companies for their Boards'
review, and shall not be amended in a way that materially adversely
affects any Fund without the prior written consent of the Fund. Upon
request, the Custodian shall certify to the Funds that an agreement
between the Custodian and a Foreign Custodian meets the requirements of
Rule 17f-5 under the 1940 Act.
4.6 Access of Independent Accountants of the Funds. Upon
request of a Fund, the Custodian will use its best reasonable efforts
to arrange for the independent accountants or auditors of the Fund to
be afforded access to the books and records of any Foreign Custodian
insofar as such books and records relate to the custody by any such
Foreign Custodian of assets of the Fund.
4.7 Transactions in Foreign Custody Accounts. Upon receipt
of Proper Instructions, the Custodian shall instruct the appropriate
Foreign Custodian to transfer, exchange or deliver Foreign Securities
owned by a Fund, but, except to the extent explicitly provided herein,
only in any of the cases specified in Subsection 3.2. Upon receipt of
Proper Instructions, the Custodian shall pay out or instruct the
appropriate Foreign Custodian to pay out monies of a Fund in any of the
cases specified in Subsection 3.6. Notwithstanding anything herein to
the contrary, settlement and payment for Foreign Securities received
for the account of a Fund and delivery of Foreign Securities maintained
for the account of a Fund may be effected in accordance with the
customary or established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer. Foreign Securities maintained in the custody of a
Foreign Custodian may be maintained in the name of such entity or its
nominee name to the same extent as set forth in Section 3.3 of this
Agreement and each Fund agrees to hold any Foreign Custodian and its
nominee harmless from any liability as a holder of record of such
securities.
4.8 Liability of Foreign Custodian. Each agreement between
the Custodian and a Foreign Custodian shall, unless otherwise mutually
agreed to by the Custodian and a Fund, require the Foreign Custodian to
exercise reasonable care or, alternatively, impose a contractual
liability for breach of contract without an exception based upon a
standard of care in the performance of its duties and to indemnify and
hold harmless the Custodian from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
Foreign Custodian's performance of such obligations, excepting,
however, Citibank, N.A., and its subsidiaries and branches, where the
indemnification is limited to direct money damages and requires that
the claim be promptly asserted. At the election of a Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claims against a Foreign Custodian as a consequence of any such
loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim, unless such subrogation is prohibited by
local law.
4.9 Monitoring Responsibilities.
(a) The Custodian will promptly inform each Fund in the
event that the Custodian learns of a material adverse change in the
financial condition of a Foreign Custodian or learns that a Foreign
Custodian's financial condition has declined or is likely to decline
below the minimum levels required by Rule 17f-5 of the 1940 Act.
(b) The custodian will furnish such information as may
be reasonably necessary to assist each Investment Company's Board in
its annual review and approval of the continuance of all contracts or
arrangements with Foreign Subcustodians.
Section 5. PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper Instructions"
means instructions of a Fund received by the Custodian via telephone or
in Writing which the Custodian believes in good faith to have been
given by Authorized Persons (as defined below) or which are transmitted
with proper testing or authentication pursuant to terms and conditions
which the Custodian may specify. Any Proper Instructions delivered to
the Custodian by telephone shall promptly thereafter be confirmed in
accordance with procedures, and limited in subject matter, as mutually
agreed upon by the parties. Unless otherwise expressly provided, all
Proper Instructions shall continue in full force and effect until
canceled or superseded. If the Custodian requires test arrangements,
authentication methods or other security devices to be used with
respect to Proper Instructions, any Proper Instructions given by the
Funds thereafter shall be given and processed in accordance with such
terms and conditions for the use of such arrangements, methods or
devices as the Custodian may put into effect and modify from time to
time. The Funds shall safeguard any testkeys, identification codes or
other security devices which the Custodian shall make available to
them. The Custodian may electronically record any Proper Instructions
given by telephone, and any other telephone discussions, with respect
to its activities hereunder. As used in this Agreement, the term
"Authorized Persons" means such officers or such agents of a Fund as
have been properly appointed pursuant to a resolution of the
appropriate Board or Executive Committee, a certified copy of which has
been provided to the Custodian, to act on behalf of the Fund under this
Agreement. Each of such persons shall continue to be an Authorized
Person until such time as the Custodian receives Proper Instructions
that any such officer or agent is no longer an Authorized Person.
Section 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express
authority from a Fund:
(a) make payments to itself or others for minor
expenses of handling Securities or other similar items relating to its
duties under this Agreement, provided that all such payments shall be
accounted for to the Fund;
(b) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments; and
(c) in general, attend to all non-discretionary details
in connection with the sale, exchange, substitution, purchase, transfer
and other dealings with the Securities and property of the Fund except
as otherwise provided in Proper Instructions.
Section 7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any
instructions (conveyed by telephone or in Writing), notice, request,
consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly given or executed by or on behalf of
a Fund. The Custodian may receive and accept a certified copy of a
resolution of a Board or Executive Committee as conclusive evidence (a)
of the authority of any person to act in accordance with such
resolution or (b) of any determination or of any action by the Board or
Executive Committee as described in such resolution, and such
resolution may be considered as in full force and effect until receipt
by the Custodian of written notice by an Authorized Person to the
contrary.
Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary
information in its possession (to the extent permissible under
applicable law) to the entity or entities appointed by the appropriate
Board to keep the books of account of a Fund and/or compute the net
asset value per Share of the outstanding Shares of a Fund.
Section 9. RECORDS
The Custodian shall create and maintain all records relating
to its activities under this Agreement which are required with respect
to such activities under Section 31 of the Investment Company Act and
Rules 31a-1 and 31a-2 thereunder. All such records shall be the
property of the appropriate Investment Company and shall at all times
during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the
Investment Company and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at a Fund's request, supply
the Fund with a tabulation of Securities and Cash owned by the Fund and
held by the Custodian and shall, when requested to do so by the Fund
and for such compensation as shall be agreed upon between the Fund and
the Custodian, include certificate numbers in such tabulations.
Section 10. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation
for its services and expenses as Custodian, as agreed upon from time to
time between each Investment Company, on behalf of each Fund, and the
Custodian. In addition, should the Custodian in its discretion advance
funds (to include overdrafts) to or on behalf of a Fund pursuant to
Proper Instructions, the Custodian shall be entitled to prompt
reimbursement of any amounts advanced. In the event of such an
advance, and to the extent permitted by the 1940 Act and the Fund's
policies, the Custodian shall have a continuing lien and security
interest in and to the property of the Fund in the possession or
control of the Custodian or of a third party acting in the Custodian's
behalf, until the advance is reimbursed. Nothing in this Agreement
shall obligate the Custodian to advance funds to or on behalf of a
Fund, or to permit any borrowing by a Fund except for borrowings for
temporary purposes, to the extent permitted by the Fund's policies.
Section 11. RESPONSIBILITY OF CUSTODIAN
The Custodian shall be responsible for the performance of
only such duties as are set forth herein or contained in Proper
Instructions and shall use reasonable care in carrying out such duties.
The Custodian shall be liable to a Fund for any loss which shall occur
as the result of the failure of a Foreign Custodian engaged directly or
indirectly by the Custodian to exercise reasonable care with respect to
the safekeeping of securities and other assets of the Fund to the same
extent that the Custodian would be liable to the Fund if the Custodian
itself were holding such securities and other assets. Nothing in this
Agreement shall be read to limit the responsibility or liability of the
Custodian or a Foreign Custodian for their failure to exercise
reasonable care with regard to any decision or recommendation made by
the Custodian or Subcustodian regarding the use or continued use of a
Foreign Securities Depository. In the event of any loss to a Fund by
reason of the failure of the Custodian or a Foreign Custodian engaged
by such Foreign Custodian or the Custodian to utilize reasonable care,
the Custodian shall be liable to the Fund to the extent of the Fund's
damages, to be determined based on the market value of the property
which is the subject of the loss at the date of discovery of such loss
and without reference to any special conditions or circumstances. The
Custodian shall be held to the exercise of reasonable care in carrying
out this Agreement, and shall not be liable for acts or omissions
unless the same constitute negligence or willful misconduct on the part
of the Custodian or any Foreign Custodian engaged directly or
indirectly by the Custodian. Each Fund agrees to indemnify and hold
harmless the Custodian and its nominees from all taxes, charges,
expenses, assessments, claims and liabilities (including legal fees and
expenses) incurred by the Custodian or its nominess in connection with
the performance of this Agreement with respect to such Fund, except
such as may arise from any negligent action, negligent failure to act
or willful misconduct on the part of the indemnified entity or any
Foreign Custodian. The Custodian shall be entitled to rely, and may
act, on advice of counsel (who may be counsel for a Fund) on all
matters and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. The Custodian need not maintain
any insurance for the benefit of any Fund.
All collections of funds or other property paid or
distributed in respect of Securities held by the Custodian, agent,
Subcustodian or Foreign Custodian hereunder shall be made at the risk
of the Funds. The Custodian shall have no liability for any loss
occasioned by delay in the actual receipt of notice by the Custodian,
agent, Subcustodian or by a Foreign Custodian of any payment,
redemption or other transaction regarding securities in respect of
which the Custodian has agreed to take action as provided in Section 3
hereof. The Custodian shall not be liable for any action taken in good
faith upon Proper Instructions or upon any certified copy of any
resolution of the Board and may rely on the genuineness of any such
documents which it may in good faith believe to be validly executed.
Notwithstanding the foregoing, the Custodian shall not be liable for
any loss resulting from, or caused by, the direction of a Fund to
maintain custody of any Securities or cash in a foreign country
including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, civil disturbance, acts of war or
terrorism, insurrection, revolution, nuclear fusion, fission or
radiation or other similar occurrences, or events beyond the control of
the Custodian. Finally, the Custodian shall not be liable for any
taxes, including interest and penalties with respect thereto, that may
be levied or assessed upon or in respect of any assets of any Fund held
by the Custodian.
Section 12. LIMITED LIABILITY OF EACH INVESTMENT COMPANY
The Custodian acknowledges that it has received notice of and
accepts the limitations of liability as set forth in each Investment
Company's Agreement and Declaration of Trust, Articles of
Incorporation, or Agreement of Limited Partnership. The Custodian
agrees that each Fund's obligation hereunder shall be limited to the
assets of the Fund, and that the Custodian shall not seek satisfaction
of any such obligation from the shareholders of the Fund nor from any
Board Member, officer, employee, or agent of the Fund or the Investment
Company on behalf of the Fund.
Section 13. EFFECTIVE PERIOD; TERMINATION
This Agreement shall become effective as of the date of its
execution and shall continue in full force and effect until terminated
as hereinafter provided. This Agreement may be terminated by each
Investment Company, on behalf of a Fund, or by the Custodian by 90 days
notice in Writing to the other provided that any termination by an
Investment Company shall be authorized by a resolution of the Board, a
certified copy of which shall accompany such notice of termination, and
provided further, that such resolution shall specify the names of the
persons to whom the Custodian shall deliver the assets of the affected
Funds held by the Custodian. If notice of termination is given by the
Custodian, the affected Investment Companies shall, within 90 days
following the giving of such notice, deliver to the Custodian a
certified copy of a resolution of the Boards specifying the names of
the persons to whom the Custodian shall deliver assets of the affected
Funds held by the Custodian. In either case the Custodian will deliver
such assets to the persons so specified, after deducting therefrom any
amounts which the Custodian determines to be owed to it hereunder
(including all costs and expenses of delivery or transfer of Fund
assets to the persons so specified). If within 90 days following the
giving of a notice of termination by the Custodian, the Custodian does
not receive from the affected Investment Companies certified copies of
resolutions of the Boards specifying the names of the persons to whom
the Custodian shall deliver the assets of the Funds held by the
Custodian, the Custodian, at its election, may deliver such assets to a
bank or trust company doing business in the State of California to be
held and disposed of pursuant to the provisions of this Agreement or
may continue to hold such assets until a certified copy of one or more
resolutions as aforesaid is delivered to the Custodian. The
obligations of the parties hereto regarding the use of reasonable care,
indemnities and payment of fees and expenses shall survive the
termination of this Agreement.
Section 14. MISCELLANEOUS
14.1 Relationship. Nothing contained in this Agreement shall
(i) create any fiduciary, joint venture or partnership relationship
between the Custodian and any Fund or (ii) be construed as or
constitute a prohibition against the provision by the Custodian or any
of its affiliates to any Fund of investment banking, securities dealing
or brokerages services or any other banking or financial services.
14.2 Further Assurances. Each party hereto shall furnish to
the other party hereto such instruments and other documents as such
other party may reasonably request for the purpose of carrying out or
evidencing the transactions contemplated by this Agreement.
14.3 Attorneys' Fees. If any lawsuit or other action or
proceeding relating to this Agreement is brought by a party hereto
against the other party hereto, the prevailing party shall be entitled
to recover reasonable attorneys' fees, costs and disbursements
(including allocated costs and disbursements of in-house counsel), in
addition to any other relief to which the prevailing party may be
entitled.
14.4 Notices. Except as otherwise specified herein, each
notice or other communication hereunder shall be in Writing and shall
be delivered to the intended recipient at the following address (or at
such other address as the intended recipient shall have specified in a
written notice given to the other parties hereto):
if to a Fund or Investment Company: if to the Custodian:
[Fund or Investment Company] The Bank of New York
c/o Franklin Resources, Inc. Mutual Fund Custody
Manager
777 Mariners Island Blvd. BNY Western Trust Co.
San Mateo, CA 94404 550 Kearney St., Suite 60
Attention: Chief Legal Officer San Francisco, CA 94108
14.5 Headings. The underlined headings contained herein
are for convenience of reference only, shall not be deemed to be a part
of this Agreement and shall not be referred to in connection with the
interpretation hereof.
14.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and both of
which, when taken together, shall constitute one agreement.
14.7 Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State
of New York (without giving effect to principles of conflict of laws).
14.8 Force Majeure. Notwithstanding the provisions of
Section 11 hereof regarding the Custodian's general standard of care,
no failure, delay or default in performance of any obligation hereunder
shall constitute an event of default or a breach of this agreement, or
give rise to any liability whatsoever on the part of one party hereto
to the other, to the extent that such failure to perform, delay or
default arises out of a cause beyond the control and without negligence
of the party otherwise chargeable with failure, delay or default;
including, but not limited to: action or inaction of governmental,
civil or military authority; fire; strike; lockout or other labor
dispute; flood; war; riot; theft; earthquake; natural disaster;
breakdown of public or common carrier communications facilities;
computer malfunction; or act, negligence or default of the other party.
This paragraph shall in no way limit the right of either party to this
Agreement to make any claim against third parties for any damages
suffered due to such causes.
14.9 Successors and Assigns. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and
their respective successors and assigns, if any.
14.10 Waiver. No failure on the part of any person to
exercise any power, right, privilege or remedy hereunder, and no delay
on the part of any person in the exercise of any power, right,
privilege or remedy hereunder, shall operate as a waiver thereof; and
no single or partial exercise of any such power, right, privilege or
remedy shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy.
14.11 Amendments. This Agreement may not be amended,
modified, altered or supplemented other than by means of an agreement
or instrument executed on behalf of each of the parties hereto.
14.12 Severability. In the event that any provision of this
Agreement, or the application of any such provision to any person or
set of circumstances, shall be determined to be invalid, unlawful, void
or unenforceable to any extent, the remainder of this Agreement, and
the application of such provision to persons or circumstances other
than those as to which it is determined to be invalid, unlawful, void
or unenforceable, shall not be impaired or otherwise affected and shall
continue to be valid and enforceable to the fullest extent permitted by
law.
14.13 Parties in Interest. None of the provisions of this
Agreement is intended to provide any rights or remedies to any person
other than the Investment Companies, for themselves and for the Funds,
and the Custodian and their respective successors and assigns, if any.
14.14 Pre-Emption of Other Agreements. In the event of any
conflict between this Agreement, including without limitation any
amendments hereto, and any other agreement which may now or in the
future exist between the parties, the provisions of this Agreement
shall prevail.
14.15 Variations of Pronouns. Whenever required by the
context hereof, the singular number shall include the plural, and vice
versa; the masculine gender shall include the feminine and neuter
genders; and the neuter gender shall include the masculine and feminine
genders.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above
written.
THE BANK OF NEW YORK
By: _____________________________
Its: _____________________________
THE INVESTMENT COMPANIES LISTED ON EXHIBIT A
By: ______________________________
Harmon E. Burns
Their: Vice President
By: ______________________________
Deborah R. Gatzek
heir: Vice President & Secretary
THE BANK OF NEW YORK
MASTER CUSTODY AGREEMENT
EXHIBIT A
The following is a list of the Investment Companies and their
respective Series for which the Custodian shall serve under the Master
Custody Agreement dated as of February 16, 1996.
<TABLE>
<S> <C> <C>
INVESTMENT COMPANY ORGANIZATION SERIES ---(if applicable)
Adjustable Rate Delaware U.S. Government Adjustable Rate
Securities Business Mortgage Portfolio
Portfolios Trust Adjustable Rate Securities
Portfolio
AGE High Income Colorado
Fund, Inc. Corporation
Franklin California Maryland
Tax-Free Income Corporation
Fund, Inc.
Franklin California Massachusetts Franklin California Insured Tax-
Tax-Free Trust Business Free Income Fund
Trust Franklin California Tax-Exempt
Money Fund
Franklin California Intermediate-
Term Tax-Free
Income Fund
Franklin Custodian Maryland Growth Series
Funds, Inc. Corporation Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
INVESTMENT COMPANY ORGANIZATION SERIES ---(if applicable)
Franklin Equity California
Fund Corporation
Franklin Federal California
Money Fund Corporation
Franklin Federal California
Tax- Free Income Corporation
Fund
Franklin Gold Fund California
Corporation
Franklin Government Massachusetts
Securities Trust Business
Trust
Franklin Templeton Delaware Templeton Pacific Growth Fund
International Trust Business Franklin International Equity Fund
Trust
Franklin Investors Massachusetts Franklin Global Government Income
Securities Trust Business Fund
Trust Franklin Short-Intermediate U.S.
Gov't Securities Fund
Franklin Convertible Securities
Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin Equity Income Fund
Franklin Adjustable Rate
Securities Fund
INVESTMENT COMPANY ORGANIZATION SERIES ---(if applicable)
Franklin Managed Massachusetts Franklin Corporate Qualified
Trust Business Dividend Fund
Trust Franklin Rising Dividends Fund
Franklin Investment Grade Income
Fund
Franklin Institutional Rising
Dividends Fund
Franklin Money Fund California
Corporation
Franklin Municipal Delaware Franklin Hawaii Municipal Bond
Securities Trust Business Fund
Trust Franklin California High Yield
Municipal Fund
Franklin Washington Municipal Bond
Fund
Franklin Tennessee Municipal Bond
Fund
Franklin Arkansas Municipal Bond
Fund
Franklin New York New York
Tax-Free Income Corporation
Fund, Inc.
Franklin New York Massachusetts Franklin New York Tax-Exempt Money
Tax-Free Trust Business Fund
Trust Franklin New York Intermediate-
Term Tax-Free
Income Fund
Franklin New York Insured Tax-Free
Income Fund
INVESTMENT COMPANY ORGANIZATION SERIES ---(if applicable)
Franklin Tax- California
Advantaged Limited
International Bond Partnership
Fund
Franklin Tax- California
Advantaged U.S. Limited
Government Partnership
Securities Fund
Franklin Tax- California
Advantaged High Limited
Yield Securities Partnership
Fund.
Franklin Premier California
Return Fund Corporation
Franklin Real Delaware Franklin Real Estate Securities
Estate Securities Business Fund
Trust Trust
Franklin Strategic Delaware
Mortgage Portfolio Business
Trust
Franklin Strategic Delaware Franklin California Growth Fund
Series Business Franklin Strategic Income Fund
Trust Franklin MidCap Growth Fund
Franklin Institutional MidCap
Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Tax-Exempt California
Money Fund Corporation
INVESTMENT COMPANY ORGANIZATION SERIES---(if applicable)
Franklin Tax-Free Massachusetts Franklin Massachusetts Insured Tax-
Trust Business Free Income Fund
Trust Franklin Michigan Insured Tax-Free
Income Fund
Franklin Minnesota Insured Tax-
Free Income Fund
Franklin Insured Tax-Free Income
Fund
Franklin Ohio Insured Tax-Free
Income Fund
Franklin Puerto Rico Tax-Free
Income Fund
Franklin Arizona Tax-Free Income
Fund
Franklin Colorado Tax-Free Income
Fund
Franklin Georgia Tax-Free Income
Fund
Franklin Pennsylvania Tax-Free
Income Fund
Franklin High Yield Tax-Free
Income Fund
Franklin Missouri Tax-Free Income
Fund
Franklin Oregon Tax-Free Income
Fund
Franklin Texas Tax-Free Income
Fund
Franklin Virginia Tax-Free Income
Fund
Franklin Alabama Tax-Free Income
Fund
Franklin Florida Tax-Free Income
Fund
Franklin Connecticut Tax-Free
Income Fund
Franklin Indiana Tax-Free Income
Fund
Franklin Louisiana Tax-Free Income
Fund
Franklin Maryland Tax-Free Income
Fund
INVESTMENT COMPANY ORGANIZATION SERIES ---(if applicable)
Franklin Tax-Free Massachusetts Franklin North Carolina Tax-Free
Trust Business Income Fund
(cont.) Trust Franklin New Jersey Tax-Free
Income Fund
Franklin Kentucky Tax-Free Income
Fund
Franklin Federal Intermediate-Term
Tax-Free Income Fund
Franklin Arizona Insured Tax-Free
Income Fund
Franklin Florida Insured Tax-Free
Income fund
Franklin Templeton Massachusetts Franklin Templeton German
Global Trust Business Government Bond Fund
Trust Franklin Templeton Global Currency
Fund
Franklin Templeton Hard Currency
Fund
Franklin Templeton High Income
Currency Fund
Franklin Templeton Delaware Franklin Templeton Money Fund II
Money Fund Trust Business
Trust
Franklin Value Massachusetts Franklin Balance Sheet Investment
Investors Trust Business Fund
Trust Franklin MicroCap Value Fund
Franklin Value Fund
INVESTMENT COMPANY ORGANIZATION SERIES ---(if applicable)
Franklin Valuemark Massachusetts Money Market Fund
Funds Business Growth and Income Fund
Trust Precious Metals Fund
Real Estate Securities Fund
Utility Equity Fund
High Income Fund
Templeton Global Income Securities
Fund
Investment Grade Intermediate Bond
Fund
Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Fund - 2000
Zero Coupon Fund - 2005
Zero Coupon Fund - 2010
Adjustable U.S. Government Fund
Rising Dividends Fund
Templeton Pacific Growth Fund
Templeton International Equity
Fund
Templeton Developing Markets
Equity Fund
Templeton Global Growth Fund
Templeton Global Asset Allocation
Fund
Small Cap Fund
INVESTMENT COMPANY ORGANIZATION SERIES ---(if applicable)
Institutional Massachusetts Money Market Portfolio
Fiduciary Trust Business Franklin Late Day Money Market
Trust Portfolio
Franklin U.S. Government
Securities Money Market
Portfolio
Franklin U.S. Treasury Money
Market Portfolio
Franklin Institutional Adjustable
U.S. Government
Securities Fund
Franklin Institutional Adjustable
Rate Securities Fund
Franklin U.S. Government Agency
Money Market Fund
Franklin Cash Reserves Fund
MidCap Growth Delaware
Portfolio Business
Trust
The Money Market Delaware The Money Market Portfolio
Portfolios Business The U.S. Government Securities
Trust Money Market Portfolio
CLOSED END FUNDS:
Franklin Multi- Massachusetts
Income Trust Business
Trust
Franklin Principal Massachusetts
Maturity Trust Business
Trust
Franklin Universal Massachusetts
Trust Business
Trust
</TABLE>
Exhibit 10.3
FRANKLIN VALUE INVESTORS TRUST
on behalf of
FRANKLIN BALANCE SHEET INVESTMENT FUND
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN VALUE INVESTORS
TRUST, formerly known as Franklin Balance Sheet Investment Fund, a
Massachusetts Business Trust, on behalf of its series FRANKLIN BALANCE
SHEET INVESTMENT FUND, hereinafter called the "Fund", and FRANKLIN
ADVISORY SERVICES, INC., a Delaware corporation, hereinafter called the
"Manager."
WHEREAS, the Fund has been organized and intends to operate as an
investment company registered under the Investment Company Act of 1940
(the "Act") for the purpose of investing and reinvesting its assets in
securities, as set forth in its Agreement and Declaration of Trust, its
By-Laws and its Registration Statements under the Act and the
Securities Act of 1933, all as heretofore and hereafter amended and
supplemented; and the Fund desires to avail itself of the services,
information, advice, assistance and facilities of an investment manager
and to have an investment manager perform various management,
statistical, research, investment advisory and other services for the
Fund and any separate series of the Fund of the Fund hereafter
organized; and,
WHEREAS, the Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, is engaged in the business of
rendering management, investment advisory, counseling and supervisory
services to investment companies and other investment counseling
clients, and desires to provide these services to the Fund.
NOW THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is mutually agreed as follows:
1. Employment of the manager. The Fund hereby employs the
Manager to manage the investment and reinvestment of the Fund's assets
and to administer its affairs, subject to the direction of the Board of
Trustees and the officers of the Fund, for the period and on the terms
hereinafter set forth. The Manager hereby accepts such employment and
agrees during such period to render the services and to assume the
obligations herein set forth for the compensation herein provided. The
Manager shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the
Fund.
2. Obligations of and Services to be Provided by the Manager.
The Manager undertakes to provide the services hereinafter set forth
and to assume the following obligations:
A. Administrative Services. The Manager shall furnish to
the Fund adequate (i) office space, which may be space within the
offices of the Manager or in such other place as may be agreed upon
from time to time, and (ii) office furnishings, facilities and
equipment as may be reasonably required for managing the affairs and
conducting the business of the Fund, including conducting
correspondence and other communications with the shareholders of or
Contract Holders investing in the Fund, maintaining all internal
bookkeeping, accounting and auditing services and records in connection
with the Fund's investment and business activities. The Manager shall
employ or provide and compensate the executive, secretarial and
clerical personnel necessary to provide such services. The Manager
shall also compensate all officers and employees of the Fund who are
officers or employees of the Manager or its affiliates.
B. Investment Management Services.
(a) The Manager shall manage the Fund's assets subject
to and in accordance with the investment objectives and policies of the
Fund and any directions which the Fund's Board of Trustees may issue
from time to time. In pursuance of the foregoing, the Manager shall
make all determinations with respect to the investment of the Fund's
assets and the purchase and sale of their investment securities, and
shall take such steps as may be necessary to implement the same. Such
determinations and services shall include determining the manner in
which any voting rights, rights to consent to corporate action and any
other rights pertaining to the Fund's investment securities shall be
exercised. The Manager shall render regular reports to the Fund, at
regular meetings of its Board of Trustees and at such other times as
may be reasonably requested by the Fund's Board of Trustees, of (i) the
decisions which it has made with respect to the investment of the
Fund's assets and the purchase and sale of their investment securities,
(ii) the reasons for such decisions and (iii) the extent to which those
decisions have been implemented.
(b) The Manager, subject to and in accordance with any
directions which the Fund's Board of Trustees may issue from time to
time, shall place, orders for the execution of the Fund's securities
transactions. When placing such orders the Manager shall seek to
obtain the best net price and execution for the Fund, but this
requirement shall not be deemed to obligate the Manager to place any
order solely on the basis of obtaining the lowest commission rate if
the other standards set forth in this section have been satisfied. The
parties recognize that there are likely to be many cases in which
different brokers are equally able-to provide such best price and
execution and that, in selecting among such brokers with respect to
particular trades, it is desirable to choose those brokers who furnish
research, statistical, quotations and other information to the Fund and
the Manager in accord with the standards set forth below. Moreover, to
the extent that it continues to be lawful to do so and so long as the
Board of Trustees determines that the Fund will benefit, directly or
indirectly, by doing so, the Manager may place orders with a broker who
charges a commission for that transaction which is in excess of the
amount of commission that another broker would have charged for
effecting that transaction, provided that the excess commission is
reasonable in relation to the value of "brokerage and research
services" (as defined in Section 28(e)(3) of the Securities Exchange
Act of 1934) provided by that broker. Accordingly, the Fund and the
Manager agree that the Manager shall select brokers for the execution
of the Fund's transactions from among:
(I) Those brokers and dealers who provide
quotations and other services to the Fund,
specifically including the quotations necessary
to determine the Fund's net assets, in such
amount of total brokerage as may reasonably be
required in light of such services; and
(ii) Those brokers and dealers who supply
research, statistical and other data to the
Manager or its affiliates which the Manager or
its affiliates may lawfully and appropriately use
in their investment advisory capacities, which
relate directly to securities, actual or
potential, of the Fund, or which place the
Manager in a better position to make decisions in
connection with the management of the Fund's
assets and securities, whether or not such data
may also be useful to the Manager and its
affiliates in managing other portfolios or
advising other clients, in such amount of total
brokerage as may reasonably be required.
(c) When the Manager has determined that the Fund
should tender securities pursuant to a "tender offer solicitation," the
Manager shall designate Franklin Distributors, Inc. ("Distributors") as
the "tendering dealer" so long as it is legally permissible for the
Manager to do so, and act in such capacity under the Federal securities
laws and rules thereunder and the rules of any securities exchange or
association of which Distributors may be a member. Distributors shall
not be obligated to make any additional commitments of capital, expense
or personnel beyond that already committed (other than normal periodic
fees or payments necessary to maintain its corporate existence and
membership in the National Association of Securities Dealers, Inc.) as
of the date of this Agreement. This Agreement shall not obligate the
Manager or Distributors (i) to act pursuant to the foregoing
requirement under any circumstances in which they might reasonably
believe that liability might be imposed upon them as a result of so
acting, or (ii) to institute legal or other proceedings to collect fees
which may be considered to be due from others to it as a result of such
a tender, unless the Fund shall enter into an agreement with the
Manager and/or Distributors to reimburse them for all such expenses
connected with attempting to collect such fees, including legal fees
and expenses and that portion of the compensation due to their
employees which is attributable to the time involved in attempting to
collect such fees.
(d) The Manager shall render regular reports to the
Fund, not more frequently than quarterly, of how much total brokerage
business has been placed by the Manager with brokers falling into each
of the categories referred to above and the manner in which the
allocation has been accomplished.
(e) The Manager agrees that no investment decision will
be made or influenced by a desire to provide brokerage for allocation
in accordance with the foregoing, and that the right to make such
allocation of brokerage shall not interfere with the Manager's
paramount duty to obtain the best net price and execution for the Fund.
C. Provision of Information Necessary for Preparation
of Securities Registration Statements, Amendments and Other Materials.
The Manager, its officers and employees will make available and provide
accounting and statistical information required by the Fund in the
preparation of registration statements, reports and other documents
required by Federal and state securities laws and with such information
as the Fund may reasonably request for use in the preparation of such
documents or of other materials necessary or helpful for the offering
of the Fund's shares.
D. Other Obligations and Services. The Manager shall
make its officers and employees available to the Board of Trustees and
officers of the Fund for consultation and discussions regarding the
administration and management of the Fund and their investment
activities.
3. Expenses of the Fund. It is understood that the Fund will
pay all of its own expenses other than those expressly assumed by the
Manager herein, which expenses payable by the Fund shall include:
A. Fees and expenses paid to the Manager as provided
herein;
B. Expenses of all audits by independent public
accountants;
C. Expenses of transfer agent, registrar, custodian,
dividend disbursing agent and shareholder record-keeping services,
including the expenses of issue, repurchase or redemption of their
shares;
D. Expenses of obtaining quotations for calculating the
value of the Fund's net assets;
E. Salaries and other compensations of executive officers
of the Fund who are not officers, directors, stockholders or employees
of the Manager or its affiliates;
F. Taxes levied against the Fund;
G. Brokerage fees and commissions in connection with
the purchase and sale of securities for the Fund;.
H. Costs, including the interest expense, of borrowing
money;
I. Costs incident to meetings of Board of Trustees and
shareholders of the Fund, reports to the Fund's shareholders, the
filing of reports with regulatory bodies and the maintenance of the
Fund's legal existence;
J. Legal fees, including the legal fees related to the
registration and continued qualification of the Fund's shares for sale;
K. Trustees' fees and expenses to trustees who are not
directors, officers, employees or stockholders of the Manager or any of
its affiliates;
L. Costs and expense of registering and maintaining the
registration of the Fund and their shares under Federal and any
applicable state laws; including the printing and mailing of
prospectuses to its shareholders;
M. Trade association dues; and
N. The Fund's pro rata portion of fidelity bond, errors and
omissions, and trustees and officer liability insurance premiums.
4. Compensation of the Manager. The Fund shall pay a management
fee in cash to the Manager based upon a percentage of the value of the
Fund's net assets, calculated as set forth below, as compensation for
the services rendered and obligations assumed by the Manager, payable
monthly at the request of the Manager.
A. For purposes of calculating such fee, the value of the
net assets of the Fund shall be determined in the same manner as that
the Fund uses to compute the value of its net assets in connection with
the determination of the net asset value of its shares, all as set
forth more fully in the Fund's current prospectus and statement of
additional information. The rate of the management fee payable by the
Fund shall be calculated daily at the following annual rates:
.625 of 1% of the value of net assets up to and
including $100,000,000;
.50 of 1% of the value of net assets over
$100,000,000 up to and including $250,000,000; and
.45 of 1% of the value of net assets over
$250,000,000 up to and including $10,000,000,000; and
.44 of 1% of the value of net assets over
$10,000,000,000 up to and including $12,500,000,000;
and
.42 of 1% of the value of net assets over
$12,500,000,000 up to and including $15,000,000,000;
and
.40 of 1% of the value of net assets over
$15,000,000,000.
B. The Management fee payable by the Fund shall be reduced
or eliminated to the extent that Distributors has actually received
cash payments of tender offer solicitation fees less certain costs and
expenses incurred in connection therewith as set forth in paragraph
2.B.(c) of this Agreement. The Manager may, from time to time,
voluntarily reduce or waive any management fee due to it hereunder.
C. To the extent that the gross operating costs and
expenses of the Fund (excluding any interest, taxes, brokerage
commissions, amortization of organization expense, expenses under the
Distribution Plan, and, with the prior written approval of any state
securities commission requiring same, any extraordinary expenses, such
as litigation), exceed the most stringent expense limitation
requirements of the states in which shares of the Fund are qualified
for sale, the Manager shall reduce its fees by the amount of such
excess.
5. Activities of the Manager. The services of the Manager to
the Fund hereunder are not to be deemed exclusive, and the Manager and
'any of its affiliates shall be free to render similar services to
others. Subject to and in accordance with the Agreement and
Declaration of Trust and By-Laws of the Fund and Section 10(a) of the
Act, it is understood that trustees, officers, agents and shareholders
of the Fund are or may be interested in the Manager or its affiliates
as directors, officers, agents or stockholders; that directors,
officers, agents or stockholders of the Manager or its affiliates are
or may be interested in the Fund as trustees, officers, agents,
shareholders or otherwise; that the Manager or its affiliates may be
interested in the Fund as shareholders or otherwise; and that the
effect of any such interests shall be governed by said Agreement and
Declaration of Trust, By-Laws and the Act.
6. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Manager, the Manager shall not be subject
to liability to the Fund or to any shareholder of the Trust for any act
or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security by the Fund.
B. Notwithstanding the foregoing, the Manager agrees
to reimburse the Fund for any and all costs, expenses, and counsel and
trustees' fees reasonably incurred by the Fund in the preparation,
printing and distribution of proxy statements, amendments to its
Registration Statement, holdings of meetings of its shareholders or
trustees, the conduct of factual investigations, any legal or
administrative proceedings (including any applications for exemptions
or determinations by the Securities and Exchange Commission) which the
Fund incurs as the result of action or inaction of the Manager or any
of its affiliates or any of their officers, directors, employees or
stockholders where the action or inaction necessitating such
expenditures (i) is directly or indirectly related to any transactions
or proposed transaction in the stock or control of the Manager or its
affiliates (or litigation related to any pending or proposed or future
transaction in such shares or control) which shall have been undertaken
without the prior, express approval of the Fund's Board of Trustees;
or, (ii) is within the control of the Manager or any of its affiliates
or any of their officers, directors, employees or stockholders. The
Manager shall not be obligated pursuant to the provisions of this
Subparagraph 6(B), to reimburse the Fund for any expenditures related
to the institution of an administrative proceeding or civil litigation
by the Fund or a shareholder or policyholder investing in the Fund
seeking to recover all or a portion of the proceeds derived by any
stockholder of the Manager or any of its affiliates from the sale of
his shares of the Manager, or similar matters. So long as this
Agreement is in effect, the Manager shall pay to the Fund the amount
due for expenses subject to this Subparagraph 6(B) within 30 days after
a bill or statement has been received by the Manager therefor. This
provision shall not be deemed to be a waiver of any claim the Fund may
have or may assert against the Manager or others for costs, expenses or
damages heretofore incurred by the Fund or for costs, expenses or
damages the Fund may hereafter incur which are not reimbursable to it
hereunder.
C. No provision of this Agreement shall be construed
to protect any trustee or officer of the Fund, or director or officer
of the Manager, from liability in violation of Sections 17(h) and (i)
of the Act.
7. Renewal and Termination.
A. This Agreement shall become effective on the date
written below and shall continue in effect for two (2) years. The
Agreement is renewable annually thereafter for successive periods not
to exceed one (1) year (i) by a vote of a majority of the outstanding
voting securities of the Fund or by a vote of the Board of Trustees of
the Fund, and (ii) by a vote of a majority of the Trustees of the Fund
who are not parties to the Agreement (other than as Trustees of the
Fund), cast in person at a meeting called for the purpose of voting on
the Agreement.
B. This Agreement:
(i) may at any time be terminated without the payment
of any penalty either by vote of the Board of Trustees of the Fund or
by vote of a majority of the outstanding voting securities of the Fund
seeking to terminate the Agreement, on 60 days' written notice to the
Manager;
(ii) shall immediately terminate with respect to the
Fund in the event of its assignment; and
(iii) may be terminated by the Manager on 60 days'
written notice to the Fund.
C. As used in this Paragraph the terms "assignment,"
"interested person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth for any such terms in the
Act.
D. Any notice under this Agreement shall be given in
writing addressed and delivered, or mailed post-paid, to the other
party at any office of such party.
8. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
10. Limitation of Liability. The Manager acknowledges that it has
received notice of and accepts the limitations of the Fund's liability
as set forth in Article VIII of its Agreement and Declaration of Trust.
The Manager agrees that the Fund's obligations hereunder shall be
limited to the assets of the Fund, and that the Manager shall not seek
satisfaction of any such obligation from any shareholders of the Fund
nor from any trustee, officer, employee or agent of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and effective on the 1st day of July, 1996.
FRANKLIN VALUE INVESTORS TRUST
By:__________________________
William J. Lippman
President
FRANKLIN ADVISORY SERVICES, INC.
By:___________________________
Harmon E. Burns
Executive Vice President
Termination of Agreement
Franklin Value Investors Trust, formerly known as Franklin Balance
Sheet Investment Fund, and Franklin Advisers, Inc., hereby agree that
the Management Agreement between them dated as of April 2, 1990, is
terminated effective as of the date of the Management Agreement above.
FRANKLIN VALUE INVESTORS TRUST
formerly known as Franklin Balance Sheet Investment Fund
By:_________________________
William J. Lippman
Title: President
FRANKLIN ADVISERS, INC.
By:__________________________
Harmon E. Burns
Title: Executive Vice President
Exhibit 10.4
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
________________________
By : Charles E. Johnson
_______________________
By : Gregory E. McGowan
FRANKLIN ADVISERS, INC.
________________________
By :
________________________
By:
Exhibit 10.5
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 28th day of June, 1996,
between TEMPLETON GLOBAL INVESTMENT TRUST (hereinafter
referred to as the "Trust"), on behalf of Templeton Latin
America Fund (the "Fund"), and TEMPLETON INVESTMENT COUNSEL,
INC., (hereinafter referred to as the "Investment Manager").
In consideration of the mutual agreements herein
made, the Trust on behalf of the Fund and the Investment
Manager
understand and agree as follows:
(1) The Investment Manager agrees, during the
life of this Agreement, to manage the investment and
reinvestment of the Fund's assets consistent with the
provisions of the Trust Instrument of the Trust and the
investment policies adopted and declared by the Trust's
Board of Trustees. In pursuance of the foregoing, the
Investment Manager shall make all determinations with
respect to the investment of the Fund's assets and the
purchase and sale of its investment securities, and shall
take such steps as may be necessary to implement those
determinations. Such determinations and services shall
include determining the manner in which any voting rights,
rights to consent to corporate action and any other rights
pertaining to the Fund's investment securities shall be
exercised, subject to guidelines adopted by the Board of
Trustees.
(2) The Investment Manager is not required to
furnish any personnel, overhead items or facilities for the
Fund, including trading desk facilities or daily pricing of
the Fund's portfolio.
(3) The Investment Manager shall be responsible
for selecting members of securities exchanges, brokers and
dealers (such members, brokers and dealers being hereinafter
referred to as "brokers") for the execution of the Fund's
portfolio transactions consistent with the Trust's brokerage
policies and, when applicable, the negotiation of
commissions in connection therewith.
All decisions and placements shall be made in
accordance with the following principles:
A. Purchase and sale orders will
usually be placed with brokers which are
selected by the Investment Manager as able to
achieve "best execution" of such orders.
"Best execution" shall mean prompt and
reliable execution at the most favorable
security price, taking into account the other
provisions hereinafter set forth. The
determination of what may constitute best
execution and price in the execution of a
securities transaction by a broker involves a
number of considerations, including, without
limitation, the overall direct net economic
result to the Fund (involving both price paid
or received and any commissions and other
costs paid), the efficiency with which the
transaction is effected, the ability to
effect the transaction at all where a large
block is involved, availability of the broker
to stand ready to execute possibly difficult
transactions in the future, and the financial
strength and stability of the broker. Such
considerations are judgmental and are weighed
by the Investment Manager in determining the
overall reasonableness of brokerage
commissions.
B. In selecting brokers for portfolio
transactions, the Investment Manager shall
take into account its past experience as to
brokers qualified to achieve "best
execution," including brokers who specialize
in any foreign securities held by the Fund.
C. The Investment Manager is
authorized to allocate brokerage business to
brokers who have provided brokerage and
research services, as such services are
defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for
the Fund and/or other accounts, if any, for
which the Investment Manager exercises
investment discretion (as defined in
Section 3(a)(35) of the 1934 Act) and, as to
transactions for which fixed minimum
commission rates are not applicable, to cause
the Fund to pay a commission for effecting a
securities transaction in excess of the
amount another broker would have charged for
effecting that transaction, if the Investment
Manager determines in good faith that such
amount of commission is reasonable in
relation to the value of the brokerage and
research services provided by such broker,
viewed in terms of either that particular
transaction or the Investment Manager's
overall responsibilities with respect to the
Fund and the other accounts, if any, as to
which it exercises investment discretion. In
reaching such determination, the Investment
Manager will not be required to place or
attempt to place a specific dollar value on
the research or execution services of a
broker or on the portion of any commission
reflecting either of said services. In
demonstrating that such determinations were
made in good faith, the Investment Manager
shall be prepared to show that all
commissions were allocated and paid for
purposes contemplated by the Trust's
brokerage policy; that the research services
provide lawful and appropriate assistance to
the Investment Manager in the performance of
its investment decision-making
responsibilities; and that the commissions
paid were within a reasonable range. Whether
commissions were within a reasonable range
shall be based on any available information
as to the level of commission known to be
charged by other brokers on comparable
transactions, but there shall be taken into
account the Trust's policies that
(i) obtaining a low commission is deemed
secondary to obtaining a favorable securities
price, since it is recognized that usually it
is more beneficial to the Fund to obtain a
favorable price than to pay the lowest
commission; and (ii) the quality,
comprehensiveness and frequency of research
studies that are provided for the Investment
Manager are useful to the Investment Manager
in performing its advisory services under
this Agreement. Research services provided
by brokers to the Investment Manager are
considered to be in addition to, and not in
lieu of, services required to be performed by
the Investment Manager under this Agreement.
Research furnished by brokers through which
the Fund effects securities transactions may
be used by the Investment Manager for any of
its accounts, and not all research may be
used by the Investment Manager for the Fund.
When execution of portfolio transactions is
allocated to brokers trading on exchanges
with fixed brokerage commission rates,
account may be taken of various services
provided by the broker.
D. Purchases and sales of portfolio
securities within the United States other
than on a securities exchange shall be
executed with primary market makers acting as
principal, except where, in the judgment of
the Investment Manager, better prices and
execution may be obtained on a commission
basis or from other sources.
E. Sales of the Fund's shares (which
shall be deemed to include also shares of
other registered investment companies which
have either the same adviser or an investment
adviser affiliated with the Investment
Manager) by a broker are one factor among
others to be taken into account in deciding
to allocate portfolio transactions (including
agency transactions, principal transactions,
purchases in underwritings or tenders in
response to tender offers) for the account of
the Fund to that broker; provided that the
broker shall furnish "best execution," as
defined in subparagraph A above, and that
such allocation shall be within the scope of
the Trust's policies as stated above;
provided further, that in every allocation
made to a broker in which the sale of Fund
shares is taken into account, there shall be
no increase in the amount of the commissions
or other compensation paid to such broker
beyond a reasonable commission or other
compensation determined, as set forth in
subparagraph C above, on the basis of best
execution alone or best execution plus
research services, without taking account of
or placing any value upon such sale of the
Trust's shares.
(4) The Fund agrees to pay to the Investment
Manager a monthly fee in dollars at an annual rate of 1.25%
of the Fund's average daily net assets, payable at the end
of each calendar month. 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 of
its services. The Investment Manager shall be contractually
bound hereunder by the terms of any publicly announced
waiver of its fee, or any limitation of the Fund's expenses,
as if such waiver or limitation were fully set forth herein.
Notwithstanding the foregoing, if the total
expenses of the Fund (including the fee to the Investment
Manager) in any fiscal year of the Trust exceed any expense
limitation imposed by applicable State law, the Investment
Manager shall reimburse the Fund for such excess in the
manner and to the extent required by applicable State law.
The term "total expenses," as used in this paragraph, does
not include interest, taxes, litigation expenses,
distribution expenses, brokerage commissions or other costs
of acquiring or disposing of any of the Fund's portfolio
securities or any costs or expenses incurred or arising
other than in the ordinary and necessary course of the
Fund's business. When the accrued amount of such expenses
exceeds this limit, the monthly payment of the Investment
Manager's fee will be reduced by the amount of such excess,
subject to adjustment month by month during the balance of
the Trust's fiscal year if accrued expenses thereafter fall
below the limit.
(5) This Agreement is dated as of the 28th day of
June, 1996 and shall continue in effect until April 30,
1998. If not sooner terminated, this Agreement shall
continue in effect for successive periods of 12 months each
thereafter, provided that each such continuance shall be
specifically approved annually by the vote of a majority of
the Trust's Board of Trustees who are not parties to this
Agreement or "interested persons" (as defined in Investment
Company Act of 1940 (the "1940 Act")) of any such party,
cast in person at a meeting called for the purpose of voting
on such approval and either the vote of (a) a majority of
the outstanding voting securities of the Fund, as defined in
the 1940 Act, or (b) a majority of the Trust's Board of
Trustees as a whole.
(6) Notwithstanding the foregoing, this Agreement
may be terminated by either party at any time, without the
payment of any penalty, on sixty (60) days' written notice
to the other party, provided that termination by the Trust
is approved by vote of a majority of the Trust's Board of
Trustees in office at the time or by vote of a majority of
the outstanding voting securities of the Fund (as defined by
the 1940 Act).
(7) This Agreement will terminate automatically
and immediately in the event of its assignment (as defined
in the 1940 Act).
(8) In the event this Agreement is terminated and
the Investment Manager no longer acts as Investment Manager
to the Fund, the Investment Manager reserves the right to
withdraw from the Fund the use of the name "Templeton" or
any name misleadingly implying a continuing relationship
between the Fund and the Investment Manager or any of its
affiliates.
(9) Except as may otherwise be provided by the
1940 Act, neither the Investment Manager nor its officers,
directors, employees or agents shall be subject to any
liability for any error of judgment, mistake of law, or any
loss arising out of any investment or other act or omission
in the performance by the Investment Manager of its duties
under the Agreement or for any loss or damage resulting from
the imposition by any government of exchange control
restrictions which might affect the liquidity of the Fund's
assets, or from acts or omissions of custodians, or
securities depositories, or from any war or political act of
any foreign government to which such assets might be
exposed, or for failure, on the part of the custodian or
otherwise, timely to collect payments, except for any
liability, loss or damage resulting from willful
misfeasance, bad faith or gross negligence on the Investment
Manager's part or by reason of reckless disregard of the
Investment Manager's duties under this Agreement. It is
hereby understood and acknowledged by the Trust that the
value of the investments made for the Fund may increase as
well as decrease and are not guaranteed by the Investment
Manager. It is further understood and acknowledged by the
Trust that investment decisions made on behalf of the Fund
by the Investment Manager are subject to a variety of
factors which may affect the values and income generated by
the Fund's portfolio securities, including general economic
conditions, market factors and currency exchange rates, and
that investment decisions made by the Investment Manager
will not always be profitable or prove to have been correct.
(10) It is understood that the services of the
Investment Manager are not deemed to be exclusive, and
nothing in this Agreement shall prevent the Investment
Manager, or any affiliate thereof, from providing similar
services to other investment companies and other clients,
including clients which may invest in the same types of
securities as the Fund, or, in providing such services, from
using information furnished by others. When the Investment
Manager determines to buy or sell the same security for the
Fund that the Investment Manager or one or more of its
affiliates has selected for clients of the Investment
Manager or its affiliates, the orders for all such security
transactions shall be placed for execution by methods
determined by the Investment Manager, with approval by the
Trust's Board of Trustees, to be impartial and fair.
(11) This Agreement shall be construed in
accordance with the laws of the State of Delaware, provided
that nothing herein shall be construed as being inconsistent
with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(12) If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be
affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as
constituting the Investment Manager an agent of the Trust.
(14) It is understood and expressly stipulated
that neither the holders of shares of the Fund nor any
Trustee, officer, agent or employee of the Trust shall be
personally liable hereunder, nor shall any resort be had to
other private property for the satisfaction of any claim or
obligation hereunder, but the Trust only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their duly authorized
officers and their respective corporate seals to be hereunto
duly affixed and attested.
TEMPLETON GLOBAL INVESTMENT TRUST
By:_______________________________
John R. Kay
Vice President
TEMPLETON INVESTMENT COUNSEL, INC.
By:_________________________________
Charles E. Johnson
Chairman
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 ended Nine months ended
June 30 June 30
(Dollars and shares in thousands) 1996 1995 1996 1995
Average outstanding shares 80,350 81,053 80,506 81,344
Common stock equivalents
Primary 2,682 1,487 2,729 1,487
Fully diluted 3,015 1,926 3,015 1,926
Total shares
Primary 83,032 82,540 83,235 82,830
Fully diluted 83,365 82,979 83,521 83,269
Net income $81,066 $69,029 $230,229 $195,373
Earnings per share:
Primary $0.98 $0.84 $2.77 $2.36
Fully diluted $0.97 $0.83 $2.76 $2.35
Exhibit 12
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
Three months ended Nine months ended
June 30 June 30
(Dollars and shares in
thousands) 1996 1995 1996 1995
Income before taxes $121,067 $101,076 $336,504 $286,141
Add fixed charges:
Interest expense 6,844 8,104 21,746 22,544
Interest factor on rent 2,072 1,918 6,022 5,316
Total fixed charges $8,916 $10,022 $27,768 $27,860
Earnings before fixed
charges and taxes on income $129,983 $111,098 $364,272 $314,001
Ratio of earnings to fixed
charges 14.6 11.1 13.1 11.3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 383,326
<SECURITIES> 192,929
<RECEIVABLES> 158,324
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 715,683
<PP&E> 209,467
<DEPRECIATION> 66,804
<TOTAL-ASSETS> 2,257,370
<CURRENT-LIABILITIES> 138,956
<BONDS> 0
<COMMON> 8,226
0
0
<OTHER-SE> 1,317,565
<TOTAL-LIABILITY-AND-EQUITY> 2,257,370
<SALES> 0
<TOTAL-REVENUES> 1,131,817
<CGS> 0
<TOTAL-COSTS> 823,754
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,824
<INCOME-PRETAX> 336,504
<INCOME-TAX> 106,275
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 230,229
<EPS-PRIMARY> 2.77
<EPS-DILUTED> 2.76
</TABLE>
