As filed with the Securities and Exchange Commission on April 25,
1995.
File Nos.
33-9994
811-4894
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N- 1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre- Effective Amendment No.
Post Effective Amendment No. 12 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 13 (X)
FRANKLIN MANAGED TRUST
(Exact Name of Registrant as Specified in Charter)
777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (415) 312-
2000
Harmon E. Burns, 777 Mariners Island Blvd., San Mateo, CA 94404
(Name and Address of Agent for Service of Process)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[x] on May 1, 1995 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on [Date] pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on [Date] pursuant to paragraph (a)(ii) of rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
As part of its initial Registration Statement, the Registrant has
elected to register an indefinite number of shares pursuant to
Rule 24f-2 under the Investment Company Act of 1940, as amended
and hereby continues such election. The Registrant filed the
notice required by Rule 24f-2 for its most recent fiscal year on
November 25, 1994.
FRANKLIN MANAGED TRUST
CROSS REFERENCE SHEET
FORM N-1A
Part A: Information Required in Prospectus
(Franklin Rising Dividends Fund)
N-1A Location in
Item No. Item Registration Statement
1. Cover Page Cover Page
2. Synopsis "Expense Table"
3. Condensed Financial "Financial Highlights";
Information "Performance"
4. General Description of "About the Trust";
Registrant "Investment Objective and
Policies of the Fund";
"General Information"
5. Management of the Fund "Management of the Fund"
5A. Managements Discussion Contained in Registrant's
of Fund Performance Annual Report to
Shareholders
6. Capital Stock and "Distributions to
Other Securities Shareholders"; "Taxation
of the Fund and Its
Shareholders"; "General
Information"
7. Purchase of Securities "How to Buy Shares of the
Being Offered Fund"; "Purchasing Shares
of the Fund in Connection
with Retirement Plans
Involving Tax-Deferred
Investments"; "Valuation
of Fund Shares"; "Other
Programs and Privileges
Available to Fund
Shareholders"
8. Redemption or "How to Sell Shares of the
Repurchase Fund"; "Exchange
Privilege"; "Performance";
"How to Get Information
Regarding an Investment in
the Fund"; "General
Information"; "Telephone
Transactions"
9. Pending Legal Not Applicable
Proceedings
Part B: Information Required in
Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information "About the Trust"; "General
and History Information"
13. Investment Objectives "The Investment Objectives
and Policies and Policies of the Trust";
"Investment Restrictions"
14. Management of the "Trustees and Officers";
Registrant "Investment Advisory and
Other Services"
15. Control Persons and "Trustees and Officers";
Principal Holders of "Investment Advisory and
Securities Other Services"
16. Investment Advisory "Investment Advisory and
and Other Services Other Services"
17. Brokerage Allocation "The Trust's Policies
and Other Practices Regarding Brokers Used on
Portfolio Transactions"
18. Capital Stock and "About the Trust";
Other Securities "Additional Information
Regarding Trust Shares"
19. Purchase, Redemption "Additional Information
and Pricing of Regarding Trust Shares";
Securities Being "Financial Statements"
Offered
20. Tax Status "Additional Information
Regarding Taxation"
21. Underwriters "The Trust's Underwriter"
22. Calculation of "General Information"
Performance Data
23. Financial Statements "Financial Statements"
58 P
SUPPLEMENT DATED MAY 1, 1995
TO THE PROSPECTUS FOR
FRANKLIN RISING DIVIDENDS FUND
Franklin Managed Trust
dated February 1, 1995
Introduction. As of May 1, 1995, the Franklin Rising Dividends
Fund (the "Fund") offers two classes to its investors: Franklin
Rising Dividends Fund - Class I ("Class I") and Franklin Rising
Dividends Fund - Class II ("Class II"). Investors can choose
between Class I shares, which generally bear a higher front-end
sales charge and lower ongoing Rule 12b-1 distribution fees
("Rule 12b-1 fees"), and Class II shares, which generally have a
lower front-end sales charge and higher ongoing Rule 12b-1 fees.
Investors should consider the differences between the two
classes, including the impact of sales charges and distribution
fees, in choosing the more suitable class given their anticipated
investment amount and time horizon.
This Supplement must be read in conjunction with the Prospectus
for this Fund. All investment objectives and policies described
in the Prospectus apply equally to both classes of shares in the
new multiclass structure. Further, all operational procedures
apply equally to both classes, unless otherwise specified in the
following discussion.
THE NEW APPLICATION FORM INCLUDED WITH THIS SUPPLEMENT MUST BE
USED FOR ALL PURCHASES. DO NOT USE THE APPLICATION FORM INCLUDED
IN THE PROSPECTUS.
Multiclass Fund Structure. The Fund has two classes of shares
available for investment: Class I and Class II. All Fund shares
outstanding before the implementation of the multiclass structure
have been redesignated as Class I shares, and will retain their
previous rights and privileges. Voting rights attributable to
each class will, however, be different. See the Prospectus for
more details about Class I shares. Class II shares are explained
in detail in the following discussion. Except as described below,
shares of both classes represent identical interests in the
Fund's investment portfolio.
Expense Table
The purpose of this table is to assist an investor in
understanding the various costs and expenses that a shareholder
will bear directly or indirectly in connection with an investment
in the Fund. The figures for both classes of shares are based on
restated aggregate operating expenses of the Class I shares for
the fiscal year ended September 30, 1994.
Shareholder Transaction Expenses
Class I Class II
Maximum Sales Charge Imposed on
Purchases
(as a percentage of offering 4.50% 1.00%^
price)
Deferred Sales Charge NONE^^ 1.00%+
Exchange Fee (per transaction) $5.00++ $5.00++
Annual Fund Operating Expenses**
(as a percentage of average net assets)
Management Fees 0.75% 0.75%
Rule 12b-1 Fees 0.48%* 1.00%*
Other Expenses:
Shareholder Servicing Costs 0.07% 0.07%
Reports to Shareholders 0.06% 0.06%
Other 0.07% 0.07%
Total Other Expenses** 0.20% 0.20%
Total Fund Operating Expenses 1.43% 1.95%^
^Although Class II has a lower front-end sales charge than Class
I, over time the higher Rule 12b-1 fee for Class II may cause
shareholders to pay more for Class II shares than for Class I
shares. Given the maximum front-end sales charge and the rate of
Rule 12b-1 fees of each class, it is estimated that this will
take approximately six years for shareholders who maintain total
shares valued at less than $100,000 in the Franklin Templeton
Funds. Shareholders with larger investments in the Franklin
Templeton Funds will reach the break-even point more quickly.
^^Class I investments of $1 million or more are not subject to a
front-end sales charge; however, a contingent deferred sales
charge of 1%, which has not been reflected in the Example below,
is generally imposed on certain redemptions within a "contingency
period" of 12 months of the calendar month following such
investments. See "How to Sell Shares of the Fund - Contingent
Deferred Sales Charge."
+Class II shares redeemed within a "contingency period" of 18
months of the calendar month following such investments are
subject to a 1% contingent deferred sales charge. See "How to
Sell Shares of the Fund - Contingent Deferred Sales Charge."
++$5.00 fee imposed only on Timing Accounts as described under
"Exchange Privilege" in the Prospectus. All other exchanges are
processed without a fee.
*Consistent with National Association of Securities Dealers,
Inc.'s rules, it is possible that the combination of front-end
sales charges and Rule 12b-1 fees could cause long-term
shareholders to pay more than the economic equivalent of the
maximum front-end sales charges permitted under those same rules.
**"Other Expenses" for Class II shares are estimates based on the
actual expenses incurred by Class I shares for the fiscal year
ended September 30, 1994.
Investors should be aware that the above table is not intended to
reflect in precise detail the fees and expenses associated with
an individual's own investment in the Fund. Rather the table has
been provided only to assist investors in gaining a more complete
understanding of fees, charges and expenses that an investor in
the classes will bear directly or indirectly. For a more detailed
discussion of these matters, investors should refer to the
appropriate sections of the Prospectus and this Supplement.
Example
As required by SEC regulations, the following example illustrates
the expenses, including the maximum front-end sales charge and
applicable contingent deferred sales charge, that apply to a
$1,000 investment in the Fund over various time periods assuming
(1) a 5% annual rate of return and (2) redemption at the end of
each time period.
One Year Three Years Five Years Ten Years
Class I^^ $59 $88 $120 $209
Class II+ $40 $71 $114 $235
This example is based on the restated annual operating expenses
shown above and should not be considered a representation of past
or future expenses, which may be more or less than those shown.
The operating expenses are paid by the Fund and are borne by
shareholders as a result of their investment in the Fund. (See
"Management of the Fund" for a description of the Fund's
expenses.) In addition, federal securities regulations require
the example to assume an annual return of 5%, but the Fund's
actual return may be more or less than 5%.
Deciding Which Class To Purchase. Investors should carefully
evaluate their anticipated investment amount and time horizon
prior to determining which class of shares to purchase.
Generally, an investor who expects to invest less than $100,000
in the Franklin Templeton Funds and who expects to make
substantial redemptions within approximately six years or less of
investment should consider purchasing Class II shares. Over time,
however, the higher annual Rule 12b-1 fees on Class II shares
will accumulate to outweigh the difference in initial sales
charges. For this reason, Class I shares may be more attractive
to long-term investors even if no sales charge reductions are
available to them. Investors should also consider that the higher
Rule 12b-1 fees for Class II shares will generally result in
lower dividends and consequently lower yields for Class II
shares. See "General Information" in the SAI for more information
regarding the calculation of dividends and yields.
Investors who qualify to purchase Class I shares at reduced sales
charges definitely should consider purchasing Class I shares,
especially if they intend to hold their shares for six years or
more. Investors who qualify to purchase Class I shares at reduced
sales charges but who intend to hold their shares less than six
years should evaluate whether it is more economical to purchase
Class I shares through a Letter of Intent or under Rights of
Accumulation or other means rather than purchasing Class II
shares. Investors investing $1 million or more in a single
payment and other investors who qualify to purchase Class I
shares at net asset value will be precluded from purchasing Class
II shares. See "How to Buy Shares of the Fund" in the Prospectus.
Each class represents the same interest in the investment
portfolio of the Fund and has the same rights, except that each
class has a different sales charge, bears the separate expenses
of its Rule 12b-1 distribution plan, and has exclusive voting
rights with respect to such plan. The two classes also have
separate exchange privileges.
Each class also has a separate schedule for compensating
securities dealers for selling Fund shares. Investors should take
all of the factors regarding an investment in each class into
account before deciding which class of shares to purchase.
Alternative Purchase Arrangements. The difference between Class I
and Class II shares lies primarily in their front-end and
contingent deferred sales charges and Rule 12b-1 fees as
described below.
A separate Plan of Distribution has been approved and adopted for
each class ("Class I Plan" and "Class II Plan," respectively)
pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as amended ("1940 Act"). The Rule 12b-1 fees charged to each
class will be based solely on the distribution and servicing fees
attributable to that particular class. Any portion of fees
remaining from either plan distribution to securities dealers up
to the maximum amount permitted under each Plan may be used by
the class to reimburse Franklin Templeton Distributors, Inc.
("Distributors") for routine ongoing promotion and distribution
expenses incurred with respect to such class. See "Plan of
Distribution" in the Prospectus for a description of such
expenses.
Class I. Class I shares are generally subject to a variable sales
charge upon purchase and not subject to any sales charge upon
redemption. Class I shares are subject to Rule 12b-1 fees of up
to an annual maximum of .50% (.25% for distribution and related
expenses and .25% as a servicing fee) of average daily net assets
of such shares. With this structure, Class I shares have higher
front-end sales charges than Class II shares and comparatively
lower Rule 12b-1 fees.
Plan of Distribution. Under the Class I Plan, the Fund will
reimburse Distributors or other securities dealers for expenses
incurred in the promotion, servicing, and distribution of Class I
Fund shares. (See "Plan of Distribution" in the Prospectus and
"Distribution Plan" in the Statement of Additional Information
("SAI")).
Quantity Discounts and Purchases At Net Asset Value. Class I
shares may be purchased at a reduced front-end sales charge or at
net asset value if certain conditions are met. See "How to Buy
Shares of the Fund."
Contingent Deferred Sales Charge. In most circumstances, a
contingent deferred sales charge will not be assessed against
redemptions of Class I shares. A contingent deferred sales charge
will be imposed on Class I shares only if shares valued at $1
million or more are purchased after February 1, 1995 without a
sales charge and are subsequently redeemed within 12 months of
the calendar month following their purchase. See "Contingent
Deferred Sales Charge" under "How to Sell Shares of the Fund" in
this Supplement.
Class II. The current public offering price of Class II shares is
equal to the net asset value, plus a sales charge of 1% of the
amount invested. Class II shares are also subject to a contingent
deferred sales charge of 1.0% if shares are redeemed within 18
months of the calendar month following purchase. In addition,
Class II shares are subject to Rule 12b-1 fees of up to a maximum
of 1.0% of average daily net assets of such shares. Class II
shares have lower front-end sales charges than Class I shares and
comparatively higher Rule 12b-1 fees.
Purchases of Class II shares are limited to amounts below $1
million. Any purchases of $1 million or more will automatically
be invested in Class I shares, since that is more beneficial to
investors. Such purchases, however, may be subject to a
contingent deferred sales charge. Investors may exceed $1 million
in Class II shares by cumulative purchases over a period of time.
Investors who intend to make investments exceeding $1 million,
however, should consider purchasing Class I shares through a
Letter of Intent instead of purchasing Class II shares. See "How
to Buy Shares of the Fund" in the Prospectus for more
information.
Plan of Distribution. Class II's operating expenses will
generally be higher under the Class II Plan. During the first
year following a purchase of Class II shares, Distributors will
keep a portion of the Plan fees attributable to those shares to
partially recoup fees Distributors pays to securities dealers.
Distributors, or its affiliates, may pay, from its own resources,
a commission of up to 1% of the amount invested to securities
dealers who initiate and are responsible for purchases of Class
II shares.
Contingent Deferred Sales Charge. Unless a waiver applies, a
contingent deferred sales charge of 1% will be imposed on Class
II shares redeemed within 18 months of their purchase. See
"Contingent Deferred Sales Charges" under "How to Sell Shares of
the Fund" in this Supplement.
Management of the Fund
The Board of Trustees has carefully reviewed the multiclass
structure to ensure that no material conflict exists between the
two classes of shares. Although the Board does not expect to
encounter material conflicts in the future, the Board will
continue to monitor the Fund and will take appropriate action to
resolve such conflicts if any should later arise.
In developing the multiclass structure, the Fund has retained the
authority to establish additional classes of shares. It is the
Fund's present intention to offer only two classes of shares, but
new classes may be offered in the future.
For more information regarding the responsibilities of the Board
and the management of the Fund, please see "Management of the
Fund" in the Prospectus.
Class II Plan of Distribution
Under the Class II Plan, the maximum amount which the Fund is
permitted to pay to Distributors or others for distribution and
related expenses is 0.75% per annum of Class II shares' daily net
assets, payable to Distributors on a monthly basis and to others
on a quarterly basis. All expenses of distribution, marketing and
related services over that amount will be borne by Distributors
or others who have incurred them, without reimbursement by the
Fund. In addition, the Class II Plan provides for an additional
payment by the Fund of up to 0.25% per annum of the class'
average daily net assets as a servicing fee, payable quarterly.
This fee will be used to pay securities dealers or others for,
among other things, assisting in establishing and maintaining
customer accounts and records; assisting with purchase and
redemption requests; receiving and answering correspondence;
monitoring dividend payments from the Fund on behalf of the
customers, or similar activities related to furnishing personal
services and/or maintaining shareholder accounts.
The Class II Plan also covers any payments to or by the Fund,
Advisers, Distributors, or other parties on behalf of the Fund,
Advisers or Distributors, to the extent such payments are deemed
to be for the financing of any activity primarily intended to
result in the sale of Class II shares issued by the Fund within
the context of Rule 12b-1. The payments under the Plan are
included in the maximum operating expenses which may be borne by
Class II of the Fund.
During the first year after the purchase of Class II shares,
Distributors will keep a portion of the Plan fees assessed on
Class II shares to partially recoup fees Distributors pays to
securities dealers.
See the "Plan of Distribution" discussion in the "Management of
the Fund" section in the Prospectus and in the SAI for more
information about both Class I and Class II Plans.
Distributions to Shareholders
Dividends and capital gains will be calculated and distributed in
the same manner for Class I and Class II shares. The per share
amount of any income dividends will generally differ only to the
extent that each class is subject to different Rule 12b-1 fees.
Because ongoing Rule 12b-1 expenses will be lower for Class I
than Class II, the per share dividends distributed to Class I
shares will generally be higher than those distributed to Class
II shares.
Unless otherwise requested in writing or on the Shareholder
Application, income dividends and capital gain distributions, if
any, will be automatically reinvested in the shareholder's
account in the form of additional shares, valued at the closing
net asset value (without a front-end sales charge) on the
dividend reinvestment date. Dividend and capital gain
distributions are only eligible for investment at net asset value
in the same class of shares of the Fund or the same class of
another of the Franklin Templeton Funds. See "Distributions to
Shareholders" in the Prospectus and the SAI for more information.
How to Buy Shares of the Fund
The following discussion supplements the one included in the
Prospectus under "How to Buy Shares of the Fund." THE APPLICATION
FORM INCLUDED WITH THIS SUPPLEMENT MUST ACCOMPANY ANY PURCHASE OF
SHARES. DO NOT USE THE APPLICATION INCLUDED IN THE PROSPECTUS.
Purchase Price of Fund Shares
Shares of both classes of the Fund are offered at the public
offering price, which is the net asset value per share plus a
front-end sales charge, next computed (1) after the shareholder's
securities dealer receives the order which is promptly
transmitted to the Fund, or (2) after receipt of an order by mail
from the shareholder directly in proper form (which generally
means a completed Shareholder Application accompanied by a
negotiable check).
Class I. The sales charge for Class I shares is a variable
percentage of the offering price depending upon the amount of the
sale. On orders for 100,000 shares or more, the offering price
will be calculated to four decimal places. On orders for less
than 100,000 shares, the offering price will be calculated to two
decimal places using standard rounding criteria. A description of
the method of calculating net asset value per share is included
under the caption "Valuation of Fund Shares" in the Prospectus.
Set forth below is a table of total front-end sales charges or
underwriting commissions and dealer concessions for Class I
shares:
Total Sales Charge
Size of As a Percentage As a Percentage Dealer
Transaction at of Offering of Net Amount Concession as a
Offering Price Price Invested Percentage of
Offering
Price*, ***
Less than 4.50% 4.71% 4.00%
$100,000
$100,000 but 3.75% 3.90% 3.25%
less than
$250,000
$250,000 but 2.75% 2.83% 2.50%
less than
$500,000
$500,000 but 2.25% 2.30% 2.00%
less than
$1,000,000
$1,000,000 or none none (see below)**
more
*Financial institutions or their affiliated brokers may receive
an agency transaction fee in the percentages set forth above.
**The following commissions will be paid by Distributors, out of
its own resources, to securities dealers who initiate and are
responsible for purchases of $1 million or more: 1.00% on sales
of $1 million but less than $2 million, plus 0.80% on sales of $2
million but less than $3 million, plus 0.50% on sales of $3
million but less than $50 million, plus 0.25% on sales of $50
million but less than $100 million, plus 0.15% on sales of $100
million or more. Dealer concession breakpoints are reset every 12
months for purposes of additional purchases.
***At the discretion of Distributors, all sales charges may at
times be allowed to the securities dealer. If 90% or more of the
sales commission is allowed, such securities dealer may be deemed
to be an underwriter as that term is defined in the Securities
Act of 1933, as amended.
No front-end sales charge applies on investments of $1 million or
more, but a contingent deferred sales charge of 1% is imposed on
certain redemptions of all or a portion of investments of $1
million or more within the contingency period. See "How to Sell
Shares of the Fund - Contingent Deferred Sales Charge" in this
Supplement.
The size of a transaction which determines the applicable sales
charge on the purchase of Class I shares is determined by adding
the amount of the shareholder's current purchase plus the cost or
current value (whichever is higher) of a shareholder's existing
investment in one or more of the funds in the Franklin Group of
Fundsr and the Templeton Group of Funds. Included for these
aggregation purposes are (a) the mutual funds in the Franklin
Group of Funds except Franklin Valuemark Funds and Franklin
Government Securities Trust (the "Franklin Funds"), (b) other
investment products underwritten by Distributors or its
affiliates (although certain investments may not have the same
schedule of sales charges and/or may not be subject to reduction)
and (c) the U.S. registered mutual funds in the Templeton Group
of Funds except Templeton Capital Accumulator Fund, Inc.,
Templeton Variable Annuity Fund, and Templeton Variable Products
Series Fund (the "Templeton Funds"). (Franklin Funds and
Templeton Funds are collectively referred to as the "Franklin
Templeton Funds.") Sales charge reductions based upon aggregate
holdings of (a), (b) and (c) above ("Franklin Templeton
Investments") may be effective only after notification to
Distributors that the investment qualifies for a discount.
Distributors, or one of its affiliates, may make payments, out of
its own resources, of up to 1% of the amount purchased to
securities dealers who initiate and are responsible for purchases
made at net asset value by certain designated retirement plans
(excluding IRA and IRA rollovers), certain non-designated plans,
certain trust companies and trust departments of banks and
certain retirement plans of organizations with collective
retirement plan assets of $10 million or more. See definitions
under "Description of Special Net Asset Value Purchases" and as
set forth in the SAI.
Class II. Unlike Class I shares, the front-end sales charges and
dealer concessions for Class II shares do not vary depending on
the amount of purchase. See table below:
Total Sales Charge
As a Dealer
Size of Transaction As a Percentage Percentage Concession As
at Offering Price of Net Offering of Net a Percentage
Price Amount of Offering
Invested Price*
any amount (less
than $1 million) 1.00% 1.01% 1.00%
* During the first year following a purchase of Class II shares,
Distributors will keep a portion of the Plan fees attributable to
those shares to partially recoup fees Distributors pays to
securities dealers. Distributors, or one of its affiliates, may
make an additional payment to the securities dealer, from its own
resources, of up to 1% of the amount invested.
Class II shares redeemed within eighteen months of their purchase
will be assessed a contingent deferred sales charge of 1.0% on
the lesser of the then-current net asset value or the net asset
value of such shares at the time of purchase, unless such charge
is waived as described below.
Purchases at Net Asset Value
The following section, which supersedes that included in the
Prospectus, describes the categories of investors who may
purchase Class I shares of the Fund at net asset value and when
Class I and Class II shares may be purchased at net asset value.
The sections in the Prospectus titled "Quantity Discounts in
Sales Charges" and "Group Purchases" only apply to Class I
shares. Although sales charges on Class II shares may not be
reduced through a Letter of Intent or Rights of Accumulation as
described under "Quantity Discounts in Sales Charges," the value
of Class II shares owned by an investor may be included in
determining the appropriate sales charges for Class I shares.
Purchases at Net Asset Value
Class I shares may be purchased without the imposition of either
a front-end sales charge ("net asset value") or a contingent
deferred sales charge by (1) officers, trustees, directors and
full-time employees of the Fund, any of the Franklin Templeton
Funds, or of the Franklin Templeton Group, and by their spouses
and family members, including any subsequent payments by such
parties after cessation of employment; (2) companies exchanging
shares with or selling assets pursuant to a merger, acquisition
or exchange offer; (3) insurance company separate accounts for
pension plan contracts; (4) accounts managed by the Franklin
Templeton Group; (5) shareholders of Templeton Institutional
Funds, Inc. reinvesting redemption proceeds from that fund under
an employee benefit plan qualified under Section 401 of the
Internal Revenue Code of 1986, as amended, in shares of the Fund;
(6) certain unit investment trusts and unit holders of such
trusts reinvesting their distributions from the trusts in the
Fund; (7) registered securities dealers and their affiliates, for
their investment account only, and (8) registered personnel and
employees of securities dealers and by their spouses and family
members, in accordance with the internal policies and procedures
of the employing securities dealer.
For either Class I or Class II, the same class of shares of the
Fund may be purchased at net asset value by persons who have
redeemed, within the previous 120 days, their shares of the Fund
or another of the Franklin Templeton Funds which were purchased
with a front-end sales charge or assessed a contingent deferred
sales charge on redemption. If a different class of shares is
purchased, the full front-end sales charge must be paid at the
time of purchase of the new shares. An investor may reinvest an
amount not exceeding the redemption proceeds. Credit will be
given for any contingent deferred sales charge paid on the shares
redeemed and subsequently repurchased, but the period for which
such shares may be subject to a contingent deferred sales charge
will begin as of the date the proceeds are reinvested. Shares of
the Fund redeemed in connection with an exchange into another
fund (see "Exchange Privilege") are not considered "redeemed" for
this privilege. In order to exercise this privilege, a written
order for the purchase of shares of the Fund must be received by
the Fund or the Fund's Shareholder Services Agent within 120 days
after the redemption. The 120 days, however, do not begin to run
on redemption proceeds placed immediately after redemption in a
Franklin Bank Certificate of Deposit ("CD") until the CD
(including any rollover) matures. Reinvestment at net asset value
may also be handled by a securities dealer or other financial
institution, who may charge the shareholder a fee for this
service. The redemption is a taxable transaction but reinvestment
without a sales charge may affect the amount of gain or loss
recognized and the tax basis of the shares reinvested. If there
has been a loss on the redemption, the loss may be disallowed if
a reinvestment in the same fund is made within a 30-day period.
Information regarding the possible tax consequences of such a
reinvestment is included in the tax section of the Prospectus and
the SAI.
For either Class I or Class II, the same class of shares of the
Fund or of another of the Franklin Templeton Funds may be
purchased at net asset value and without a contingent deferred
sales charge by persons who have received dividends and capital
gain distributions in cash from investments in that class of
shares of the Fund within 120 days of the payment date of such
distribution. To exercise this privilege, a written request to
reinvest the distribution must accompany the purchase order.
Additional information may be obtained from Shareholder Services
at 1-800/632-2301. See "Distributions in Cash" under
"Distributions to Shareholders" in the Prospectus.
Class I shares may be purchased at net asset value and without
the imposition of a contingent deferred sales charge by investors
who have, within the past 60 days, redeemed an investment in a
mutual fund which is not part of the Franklin Templeton Funds and
which charged the investor a contingent deferred sales charge
upon redemption and which has investment objectives similar to
those of the Fund.
Class I shares may be purchased at net asset value and without
the imposition of a contingent deferred sales charge by broker-
dealers who have entered into a supplemental agreement with
Distributors, or by registered investment advisors affiliated
with such broker-dealers, on behalf of their clients who are
participating in a comprehensive fee program (sometimes known as
a wrap fee program).
Class I shares may be purchased at net asset value and without
the imposition of a contingent deferred sales charge by anyone
who has taken a distribution from an existing retirement plan
already invested in the Franklin Templeton Funds (including
former participants of the Franklin Templeton Profit Sharing
401(k) plan), to the extent of such distribution. In order to
exercise this privilege a written order for the purchase of
shares of the Fund must be received by Franklin Templeton Trust
Company (the "Trust Company"), the Fund or Investor Services,
within 120 days after the plan distribution.
Class I shares may also be purchased at net asset value and
without the imposition of a contingent deferred sales charge by
any state, county, or city, or any instrumentality, department,
authority or agency thereof which has determined that the Fund is
a legally permissible investment and which is prohibited by
applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any
registered management investment company ("an eligible
governmental authority"). SUCH INVESTORS SHOULD CONSULT THEIR OWN
LEGAL ADVISORS TO DETERMINE WHETHER AND TO WHAT EXTENT THE SHARES
OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM. Municipal
investors considering investment of proceeds of bond offerings
into the Fund should consult with expert counsel to determine the
effect, if any, of various payments made by the Fund or its
investment manager on arbitrage rebate calculations. If an
investment by an eligible governmental authority at net asset
value is made through a securities dealer who has executed a
dealer agreement with Distributors, Distributors or one of its
affiliates may make a payment, out of their own resources, to
such securities dealer in an amount not to exceed 0.25% of the
amount invested. Contact Franklin's Institutional Sales
Department for additional information.
Description of Special Net Asset Value Purchases
Class I shares may also be purchased at net asset value and
without the imposition of a contingent deferred sales charge by
certain designated retirement plans, including profit sharing,
pension, 401(k) and simplified employee pension plans
("designated plans"), subject to minimum requirements with
respect to number of employees or amount of purchase, which may
be established by Distributors. Currently those criteria require
that the employer establishing the plan have 200 or more
employees or that the amount invested or to be invested during
the subsequent 13-month period in the Fund or in any of the
Franklin Templeton Investments totals at least $1,000,000.
Employee benefit plans not designated above or qualified under
Section 401 of the Code ("non-designated plans") may be afforded
the same privilege if they meet the above requirements as well as
the uniform criteria for qualified groups previously described
under "Group Purchases" which enable Distributors to realize
economies of scale in its sales efforts and sales related
expenses.
Class I shares may be purchased at net asset value and without
the imposition of a contingent deferred sales charge by trust
companies and bank trust departments for funds over which they
exercise exclusive discretionary investment authority and which
are held in a fiduciary, agency, advisory, custodial or similar
capacity. Such purchases are subject to minimum requirements with
respect to amount of purchase, which may be established by
Distributors. Currently, those criteria require that the amount
invested or to be invested during the subsequent 13-month period
in this Fund or any of the Franklin Templeton Investments must
total at least $1,000,000. Orders for such accounts will be
accepted by mail accompanied by a check or by telephone or other
means of electronic data transfer directly from the bank or trust
company, with payment by federal funds received by the close of
business on the next business day following such order.
Class I shares may be purchased at net asset value and without
the imposition of a contingent deferred sales charge by trustees
or other fiduciaries purchasing securities for certain retirement
plans of organizations with collective retirement plan assets of
$10 million or more, without regard to where such assets are
currently invested.
For a complete understanding of how to buy shares of the Fund,
this Supplement must be read in conjunction with the Prospectus.
Refer to the SAI for further information regarding net asset
value purchases of Class I shares.
Purchasing Class I and Class II Shares
When placing purchase orders, investors should clearly indicate
which class of shares they intend to purchase. A purchase order
that fails to specify a class will automatically be invested in
Class I shares. Initial purchases of $1 million or more in a
single payment will be invested in Class I shares. There are no
conversion features attached to either class of shares.
Investors who qualify to purchase Class I shares at net asset
value should purchase Class I rather than Class II shares. See
the section "Purchases at Net Asset Value" and "Description of
Special Net Asset Value Purchases" above for a discussion of when
shares may be purchased at net asset value.
Other Programs and Privileges Available to Fund Shareholders
With the exception of Systematic Withdrawal Plans, all programs
and privileges detailed under the discussion of "Other Programs
and Privileges Available to the Fund Shareholders" will remain in
effect as described in the Prospectus for the new multiclass
structure. For a complete discussion of these programs, see
"Other Programs and Privileges Available to Fund Shareholders" in
the Prospectus.
Systematic Withdrawal Plans. Subject to the requirements outlined
in the Prospectus, a shareholder may establish a Systematic
Withdrawal Plan for his or her account. With respect to Class I
shares, the contingent deferred sales charge is waived for
redemptions through a Systematic Withdrawal Plan set up prior to
February 1, 1995. With respect to Systematic Withdrawal Plans
set up on or after February 1, 1995, the applicable contingent
deferred sales charge is waived for Class I and Class II share
redemptions of up to 1% monthly of an account's net asset value
(12% annually, 6% semi-annually, 3% quarterly). For example, if
the account maintained an annual balance of $1,000, only $120
could be withdrawn through a once-yearly Systematic Withdrawal
Plan free of charge; any amount over that $120 would be assessed
a 1% (or applicable) contingent deferred sales charge.
Exchange Privilege
Shareholders are entitled to exchange their shares for shares of
the same class of other Franklin Templeton Funds which are
eligible for sale in the shareholder's state of residence and in
conformity with such fund's stated eligibility requirements and
investment minimums. Some funds, however, may not offer Class II
shares. Class I shares may be exchanged for Class I shares of any
Franklin Templeton Funds. Class II shares may be exchanged for
Class II shares of any Franklin Templeton Funds. No exchanges
between different classes of shares will be allowed. A contingent
deferred sales charge will not be imposed on exchanges. If,
however, the exchanged shares were subject to a contingent
deferred sales charge in the original fund purchased and shares
are subsequently redeemed within twelve months (Class I shares)
or eighteen months (Class II shares) of the calendar month of the
original purchase date, a contingent deferred sales charge will
be imposed. Investors should review the prospectus of the fund
they wish to exchange from and the fund they wish to exchange
into for all specific requirements or limitations on exercising
the exchange privilege, for example, minimum holding periods or
applicable sales charges.
Exchanges of Class I Shares
The contingency period of Class I shares will be tolled (or
stopped) for the period such shares are exchanged into and held
in a Franklin or Templeton money market fund. If a Class I
account has shares subject to a contingent deferred sales charge,
Class I shares will be exchanged into the new account on a "first-
in, first-out" basis. See also "How to Sell Shares of the Fund -
Contingent Deferred Sales Charge."
Exchanges of Class II Shares
When an account is composed of Class II shares subject to the
contingent deferred sales charge, and shares that are not, the
shares will be transferred proportionately into the new fund.
Shares received from reinvestment of dividends and capital gains
are referred to as "free shares," shares which were originally
subject to a contingent deferred sales charge but to which the
contingent deferred sales charge no longer applies are called
"matured shares," and shares still subject to the contingent
deferred sales charge are referred to as "CDSC liable shares."
CDSC liable shares held for different periods of time are
considered different types of CDSC liable shares. For instance,
if a shareholder has $1,000 in free shares, $2,000 in matured
shares, and $3,000 in CDSC liable shares, and the shareholder
exchanges $3,000 into a new fund, $500 will be exchanged from
free shares, $1,000 from matured shares, and $1,500 from CDSC
liable shares. Similarly, if CDSC liable shares have been
purchased at different periods, a proportionate amount will be
taken from shares held for each period. If, for example, a
shareholder holds $1,000 in shares bought 3 months ago, $1,000
bought 6 months ago, and $1,000 bought 9 months ago, and the
shareholder exchanges $1,500 into a new fund, $500 from each of
these shares will be deemed exchanged into the new fund.
The only money market fund exchange option available to Class II
shareholders is the Franklin Templeton Money Fund II ("Money Fund
II"), a series of the Franklin Templeton Money Fund Trust. No
drafts (checks) may be written on Money Fund II accounts, nor may
shareholders purchase shares of Money Fund II directly. Class II
shares exchanged for shares of Money Fund II will continue to age
and a contingent deferred sales charge will be assessed if CDSC
liable shares are redeemed. No other money market funds are
available for Class II shareholders for exchange purposes. Class
I shares may be exchanged for shares of any of the money market
funds in the Franklin Templeton Funds except Money Fund II. Draft
writing privileges and direct purchases are allowed on these
other money market funds as described in their respective
prospectuses.
To the extent shares are exchanged proportionately, as opposed to
another method, such as first-in first-out, or free-shares
followed by CDSC liable shares, the exchanged shares may, in some
instances, be CDSC liable even though a redemption of such
shares, as discussed elsewhere herein, may no longer be subject
to a CDSC. The proportional method is believed by management to
more closely meet and reflect the expectations of Class II
shareholders in the event shares are redeemed during the
contingency period. For federal income tax purposes, the cost
basis of shares redeemed or exchanged is determined under the
Code without regard to the method of transferring shares chosen
by the Fund for purposes of exchanging or redeeming shares.
Transfers. Transfers between identically registered accounts in
the same fund and class are treated as non-monetary and non-
taxable events, and are not subject to a contingent deferred
sales charge. The transferred shares will continue to age from
the date of original purchase. Like exchanges, shares will be
moved proportionately from each type of shares in the original
account.
Conversion Rights. It is not presently anticipated that Class II
shares will be converted to Class I shares. A shareholder may,
however, sell his Class II shares and use the proceeds to
purchase Class I shares, subject to all applicable sales charges.
See "Exchange Privilege" in the Prospectus for more information.
How to Sell Shares of the Fund
For a discussion regarding the sale of either class of Fund
shares, refer to the section in the Prospectus titled "How to
Sell Shares of the Fund." In addition, the charges described in
this Supplement will also apply to the sale of all Fund shares.
Contingent Deferred Sales Charge
Class I. In order to recover commissions paid to securities
dealers on investments of $1 million or more, a contingent
deferred sales charge of 1% applies to redemptions of those
investments within the contingency period of 12 months of the
calendar month following their purchase. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of
reinvested dividends and capital gain distributions) or the total
cost of such shares at the time of purchase, and is retained by
Distributors. The contingent deferred sales charge is waived in
certain instances. See below and "Purchases at Net Asset Value"
under "How To Buy Shares of the Fund."
Class II. Class II shares redeemed within the contingency period
of 18 months of the calendar month following their purchase will
be assessed a contingent deferred sales charge, unless one of the
exceptions described below applies. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of
reinvested dividends and capital gain distributions) or the net
asset value at the time of purchase of such shares, and is
retained by Distributors. The contingent deferred sales charge is
waived in certain instances. See below.
Class I and Class II. In determining if a contingent deferred
sales charge applies, shares not subject to a contingent deferred
sales charge are deemed to be redeemed first, in the following
order: (i) Shares representing amounts attributable to capital
appreciation of those shares held less than the contingency
period (12 months in the case of Class I shares and 18 months in
the case of Class II shares); (ii) shares purchased with
reinvested dividends and capital gain distributions; and (iii)
other shares held longer than the contingency period; and
followed by any shares held less than the contingency period, on
a "first in, first out" basis. For tax purposes, a contingent
deferred sales charge is treated as either a reduction in
redemption proceeds or an adjustment to the cost basis of the
shares redeemed.
The contingent deferred sales charge on each class of shares is
waived, as applicable, for: exchanges; any account fees;
distributions to participants in Trust Company qualified
retirement plans due to death, disability or attainment of age 59
1/2; tax-free returns of excess contributions to employee benefit
plans; distributions from employee benefit plans, including
those due to termination or plan transfer; redemptions through a
Systematic Withdrawal Plan set up for shares prior to February 1,
1995, and for Systematic Withdrawal Plans set up thereafter,
redemptions of up to 1% monthly of an account's net asset value
(3% quarterly, 6% semiannually or 12% annually); and redemptions
initiated by the Fund due to a shareholder's account falling
below the minimum specified account size. In addition, shares of
participants in Trust Company retirement plan accounts will, in
the event of death, no longer be subject to the contingent
deferred sales charge.
All investments made during a calendar month, regardless of when
during the month the investment occurred, will age one month on
the last day of that month and each subsequent month.
Requests for redemptions for a specified dollar amount, unless
otherwise specified, will result in additional shares being
redeemed to cover any applicable contingent deferred sales charge
while requests for redemption of a specific number of shares will
result in the applicable contingent deferred sales charge being
deducted from the total dollar amount redeemed.
Valuation of Fund Shares
The following sentence replaces the first sentence of the first
paragraph in this section; the subsequent paragraph is added to
the end of this section.
The net asset value per share of each class of the Fund is
determined as of the scheduled closing time of the New York Stock
Exchange ("Exchange") (generally 1:00 p.m. Pacific time) each day
that the Exchange is open for trading.
Each of the Fund's classes will bear, pro-rata, all of the common
expenses of the Fund. The net asset value of all outstanding
shares of each class of the Fund will be computed on a pro-rata
basis for each outstanding share based on the proportionate
participation in the Fund represented by the value of shares of
such classes, except that the Class I and Class II shares will
bear the Rule 12b-1 expenses payable under their respective
plans. Due to the specific distribution expenses and other costs
that will be allocable to each class, the dividends paid to each
class of the Fund may vary.
How to Get Information Regarding an Investment in the Fund
The following paragraph replaces the second paragraph in this
section of the Prospectus:
From a touch tone phone, shareholders may access the automated
Franklin TeleFACTS system (day or night) at 1-800/247-1753 to
obtain current price, yield or other performance information
specific to a fund in the Franklin Funds, process an exchange as
discussed under the "Exchange Privilege" in the Prospectus, and
request duplicate confirmation or year-end statements, money fund
checks, if applicable, and deposit slips. Current prices for the
Templeton Funds are also available through TeleFACTS. The system
code for the Fund's two classes of shares, which will be needed
to access system information, is 158 for Class I and 258 for
Class II followed by the # sign. The system's automated operator
will prompt the caller with easy to follow step-by-step
instructions from the main menu. Other features may be added in
the future.
Performance (Class II)
Because Class II shares were not offered prior to May 1, 1995, no
performance data is available for these shares. After a
sufficient period of time has passed, Class II performance data
as described in the "Performance" section of the Prospectus will
be available. Except as noted, it is likely that the performance
data relating to Class II shares will reflect lower total return
and yield figures than those for Class I shares because Class II
Rule 12b-1 fees are higher than Class I Rule 12b-1 fees. During
at least the first year of operation Class II share performance
will be higher than Class I in light of the higher initial sales
charge applicable to Class I shares.
General Information
With the exception of Voting Rights, all rights and privileges
detailed under the discussion of "General Information" will
remain in effect as described in the Prospectus for the new
multiclass structure. For a complete discussion of these rights
and privileges, see "General Information" in the Prospectus.
Voting Rights. Shares of each class represent proportionate
interests in the assets of the Fund and have the same voting and
other rights and preferences as the other class of the Fund for
matters that affect the Fund as a whole. For matters that only
affect a certain class of the Fund's shares, however, only
shareholders of that class will be entitled to vote. Therefore,
each class of shares will vote separately on matters (1)
affecting only that class, (2) expressly required to be voted on
separately by the state business trust law, or (3) required to be
voted on separately by the 1940 Act or the rules adopted
thereunder. For instance, if a change to the Rule 12b-1 plan
relating to Class I shares requires shareholder approval, only
shareholders of Class I may vote on changes to the Rule 12b-1
plan affecting that class. Similarly, if a change to the Rule 12b-
1 plan relating to Class II shares requires shareholder approval,
only shareholders of Class II may vote on the change to such
plan. On the other hand, if there is a proposed change to the
investment objective of the Fund, this affects all shareholders,
regardless of which class of shares they hold, and therefore,
each share has the same voting rights. For more information
regarding voting rights, see the "Voting Rights" discussion in
the Prospectus under the heading "General Information."
SUPPLEMENT DATED MAY 1, 1995
TO THE STATEMENT OF ADDITIONAL INFORMATION OF
FRANKLIN MANAGED TRUST
dated February 1, 1995
As described in its Prospectus, the Rising Dividends
Fund (the "Rising Dividends Fund") now offers two classes
of shares to its investors. This new structure allows
investors to consider, among other features, the impact of
sales charges and distribution fees ("Rule 12b-1 fees") on
their investments in this Fund.
ADD THE FOLLOWING AS THE LAST SENTENCE OF THE PARAGRAPH
DESCRIBING FEES PAID TO THE MANAGER UNDER "INVESTMENT ADVISORY
AND OTHER SERVICES":
Each class of the Rising Dividends Fund will pay its share
of the fee as determined by the proportion of the Rising
Dividends Fund that it represents.
EACH CLASS OF SHARES OF THE RISING DIVIDENDS FUND HAS A
SEPARATE DISTRIBUTION PLAN. FOR THIS REASON, THE FIRST
PARAGRAPH OF THE SECTION "THE TRUST'S UNDERWRITER -
DISTRIBUTION PLANS" HAS BEEN REPLACED WITH THE FOLLOWING
PARAGRAPH:
Plans of Distribution
Each class of the Rising Dividends Fund has adopted a
Distribution Plan ("Class I Plan" and "Class II Plan,"
respectively) pursuant to Rule 12b-1 under the 1940 Act. The
Franklin Investment Grade Income Fund (the "Investment Grade
Fund") and the Franklin Corporate Qualified Dividend Fund (the
"Corporate Qualified Fund") have also adopted a Plan
pursuant to Rule 12b-1 (the "Investment Grade Fund Plan" and
the "Corporate Qualified Fund Plan"). The Investment
Grade Fund Plan, the Corporate Qualified Fund Plan, Class I
Plan and Class II Plan may collectively be referred to as the
"Plans." Pursuant to the Class I Plan, the Investment Grade
Fund Plan and the Corporate Qualified Fund Plan, each may pay
up to a maximum of 0.25% per annum (0.25 of 1%) of its
average daily net assets for expenses incurred in the
promotion and distribution of its shares. In addition,
pursuant to the Class I Plan, the Rising Dividends Fund may
pay up to an additional 0.25% per annum (0.25 of 1%) of its
average daily net assets to Distributors or others as a
service fee to reimburse such service providers for
personal services provided to shareholders of the Fund
and/or the maintenance of shareholder accounts. Thus, the
amounts payable under the Class I Plan related to the
Franklin Rising Dividends Fund total 0.50%.
THE NEXT THREE PARAGRAPHS OF THIS SECTION IN THE STATEMENT
OF ADDITIONAL INFORMATION ONLY CONCERN THE CLASS I PLAN, THE
INVESTMENT GRADE FUND PLAN AND THE CORPORATE QUALIFIED FUND
PLAN. THE FOLLOWING PARAGRAPH HAS BEEN ADDED TO THIS
SECTION AFTER THE DISCUSSION OF THE CLASS I PLAN, THE
INVESTMENT GRADE FUND PLAN AND THE CORPORATE QUALIFIED FUND
PLAN TO DESCRIBE THE CLASS II PLAN:
The Class II Plan
Under the Class II Plan, the Rising Dividends Fund is
permitted to pay to Distributors or others annual
distribution fees, payable quarterly to Distributors
and others, of 0.75% of Class II's average daily net
assets, in order to compensate Distributors or others
for providing distribution and related services and
bearing certain expenses of the Class. All expenses of
distribution and marketing over that amount will be
borne by Distributors, or others who have incurred
them, without reimbursement by the Rising Dividends
Fund. In addition to this amount, under the Class II
Plan, the Rising Dividends Fund shall pay 0.25% per
annum, payable quarterly, of the Class II average daily
net assets as a servicing fee. This fee will be used to
pay dealers or others for, among other things,
assisting in establishing and maintaining customer
accounts and records; assisting with purchase and
redemption requests; receiving and answering
correspondence; monitoring dividend payments from the
Rising Dividends Fund on behalf of the customers, and
similar activities related to furnishing personal
services and maintaining shareholder accounts.
Distributors may pay the securities dealer, from its
own resources, a commission of up to 1% of the amount
invested.
THE SUBSEQUENT PARAGRAPHS IN THE SECTION "DISTRIBUTION PLANS"
APPLY EQUALLY TO BOTH CLASS I AND CLASS II PLANS, AND THE
INVESTMENT GRADE FUND PLAN AND THE CORPORATE QUALIFIED FUND
PLAN WITH THE EXCEPTION THAT THE SENTENCE REGARDING
UNREIMBURSED EXPENSES REFERS TO THE CLASS I PLAN, THE
INVESTMENT GRADE FUND PLAN AND THE CORPORATE QUALIFIED FUND
PLAN ONLY.
THE OFFICERS AND TRUSTEES SECTION IS REVISED TO READ AS
FOLLOWS:
Officers and Trustees
The Board of Trustees has the responsibility for the
overall management of the Trust, including general
supervision and review of its investment activities.
The trustees, in turn, elect the officers of the Trust
who are responsible for administering the day-to-day
operations of the Trust. The affiliations of the
officers and trustees and their principal occupations
for the past five years are listed below. Trustees who
are deemed to be "interested persons" of the Trust, as
defined in the 1940 Act, are indicated by an asterisk
(*).
Frank T. Crohn (70)
7251 West Palmetto Park Road
Boca Raton, FL 33433
Trustee
Chairman and Chief Executive Officer, Financial Benefit
Life Insurance Company and Financial Benefit Group,
Inc.; Director, Unity Mutual Life Insurance Company;
and trustee of three of the investment companies in the
Franklin Group of Funds.
*William J. Lippman (70)
One Parker Plaza
Fort Lee, NJ 07024
President and Trustee
Senior Vice President, Franklin Resources, Inc.,
Franklin Advisers, Inc., Franklin Templeton
Distributors, Inc. and Franklin Management, Inc.;
officer and/or director or trustee of six of the
investment companies in the Franklin Group of Funds.
Charles Rubens II (65)
18 Park Road
Scarsdale, NY 10583
Trustee
Private Investor; and trustee of three of the
investment companies in the Franklin Group of Funds.
Leonard Rubin (69)
501 Broad Avenue
Ridgefield, NJ 07657
Trustee
Chairman of the Board, Carolace Embroidery Co., Inc.;
President, F.N.C Textiles, Inc.; Vice President,
Trimtex Co. Inc.; and trustee of three of the
investment companies in the Franklin Group of Funds.
Harmon E. Burns (50)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Executive Vice President, Secretary and Director,
Franklin Resources, Inc.; Executive Vice President and
Director, Franklin Templeton Distributors, Inc.;
Executive Vice President, Franklin Advisers, Inc.;
Director, Franklin/Templeton Investor Services, Inc.;
officer and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and officer
and/or director or trustee of 41 of the investment
companies in the Franklin Templeton Group of Funds.
Kenneth V. Domingues (62)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President - Financial Reporting and Accounting
Standards
Senior Vice President, Franklin Resources, Inc.,
Franklin Advisers, Inc., and Franklin Templeton
Distributors, Inc.; officer and/or director, as the
case may be, of other subsidiaries of Franklin
Resources, Inc.; and Officer and/or managing general
partner, as the case may be, of 36 of the investment
companies in the Franklin Group of Funds.
Martin L. Flanagan (34)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and
Treasurer, Franklin Resources, Inc.; Executive Vice
President, Templeton Worldwide, Inc.; Senior Vice
President and Treasurer, Franklin Advisers, Inc. and
Franklin Templeton Distributors, Inc.; Senior Vice
President, Franklin/Templeton Investor Services, Inc.;
officer of most other subsidiaries of Franklin
Resources, Inc.; and officer of 60 of the investment
companies in the Franklin Templeton Group of Funds.
Deborah R. Gatzek (46)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Secretary
Senior Vice President - Legal, Franklin Resources, Inc.
and Franklin Templeton Distributors, Inc.; Vice
President, Franklin Advisers, Inc. and officer of 36 of
the investment companies in the Franklin Group of
Funds.
Rupert H. Johnson, Jr. (54)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Executive Vice President and Director, Franklin
Resources, Inc. and Franklin Templeton Distributors,
Inc.; President and Director, Franklin Advisers, Inc.;
Director, Franklin/Templeton Investor Services, Inc.;
and officer and/or director, trustee or managing
general partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc. and of 42 of
the investment companies in the Franklin Templeton
Group of Funds.
Diomedes Loo-Tam (56)
777 Mariners Island Blvd.
San Mateo, CA 94404
Treasurer and Principal Accounting Officer
Employee of Franklin Advisers, Inc.; and officer of 36
of the investment companies in the Franklin Group of
Funds.
Edward V. McVey (57)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President/National Sales Manager, Franklin
Templeton Distributors, Inc.; and officer of 31 of the
investment companies in the Franklin Group of Funds.
R. Martin Wiskemann (68)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President, Portfolio Manager and Director,
Franklin Advisers, Inc.; Senior Vice President,
Franklin Management, Inc.; Vice President, Treasurer
and Director, ILA Financial Services, Inc. and Arizona
Life Insurance Company of America; and officer and/or
director, as the case may be, of 19 of the investment
companies in the Franklin Group of Funds.
Trustees not affiliated with the investment manager
("nonaffiliated trustees") are currently paid fees of
$1,800 per quarter plus $900 per meeting attended.
During the fiscal year ended September 30, 1994, fees
totaling $29,850 were paid to nonaffiliated trustees of
the Trust. As indicated above, certain of the trustees
and officers hold positions with other companies in the
Franklin Group of Fundsr and the Templeton Funds
("Franklin Templeton Funds"). The following table shows
the fees paid by the Trust to its nonaffiliated
trustees and the total fees paid to such trustees by
the Trust and other Franklin Templeton Funds for which
they serve as directors, trustees or managing general
partners.
Total
Compensation
from
Number of Franklin
Franklin Templeton
Templeton Funds,
Aggregate Funds Boards including
Compensation on Which the
Name From Trust* Each Serves Trust**
Frank Crohn $9,450 3 $14,700
Charles Rubens II $10,200 3 $15,900
Leonard Rubin $10,200 3 $15,900
*For the fiscal year ended September 30, 1994.
**For the calendar year ended December 31,1994.
Nonaffiliated trustees are also reimbursed for expenses
incurred in connection with attending Board meetings,
paid pro rata by each Franklin Templeton Fund for which
they serve as directors, trustees or managing general
partners. No officer or trustee received any other
compensation directly from the Trust.
As of April 7, 1995, the trustees and officers, as a
group, owned of record and beneficially approximately
79,080 shares of the Rising Dividends Fund and 1,810
shares of the Investment Grade Fund or less than 1% of
the total outstanding shares of each respective Fund.
The trustees and officers did not own any shares of the
Corporate Qualified Fund. In addition, many of the
Trust's trustees own shares in various of the other
funds in the Franklin Group of Funds and the Templeton
Group of Funds. Certain officers or trustees who are
shareholders of Franklin Resources, Inc. may be deemed
to receive indirect remuneration by virtue of their
participation, if any, in the fees paid to its
subsidiaries.
From time to time, the number of each Fund's shares
held in "street name" accounts of various securities dealers for
the benefit of their clients or in centralized securities
depositories may exceed 5% of the total shares outstanding. To
the best of the Funds' knowledge, as of April 7, 1995, no
shareholders of any of the Funds, beneficial or of record, owned
5% or more of any of the Funds' shares.
THE FOLLOWING REPLACES THE SUBSECTION "ADDITIONAL INFORMATION
REGARDING PURCHASES" UNDER "ADDITIONAL INFORMATION REGARDING
TRUST SHARES":
Special Net Asset Value Purchases. As discussed in the
Prospectuses of the Rising Dividends Fund and the
Investment Grade Fund under "How to Buy Shares of the
Fund - Description of Special Net Asset Value
Purchases," certain categories of investors may
purchase shares of the Rising Dividends Fund (Class I)
and the Investment Grade Fund at net asset value
(without a front-end or contingent deferred sales
charge). Distributors or one of its affiliates may make
payments, out of its own resources, to securities
dealers who initiate and are responsible for such
purchases, as indicated below. Distributors may make
these payments in the form of contingent advance
payments, which may require reimbursement from the
securities dealers with respect to certain redemptions
made within 12 months of the calendar month following
purchase, as well as other conditions, all of which may
be imposed by an agreement between Distributors, or its
affiliates, and the securities dealer.
The following amounts will be paid by Distributors or
one of its affiliates, out of its own resources, to
securities dealers who initiate and are responsible for
(i) purchases of most equity and fixed-income Franklin
Templeton Funds made at net asset value by certain
designated retirement plans (excluding IRA and IRA
rollovers): 1.00% on sales of $1 million but less than
$2 million, plus 0.80% on sales of $2 million but less
than $3 million, plus 0.50% on sales of $3 million but
less than $50 million, plus 0.25% on sales of $50
million but less than $100 million, plus 0.15% on sales
of $100 million or more; and (ii) purchases of most
fixed-income Franklin Templeton Funds made at net asset
value by non-designated retirement plans: 0.75% on
sales of $1 million but less than $2 million, plus
0.60% on sales of $2 million but less than $3 million,
plus 0.50% on sales of $3 million but less than $50
million, plus 0.25% on sales of $50 million but less
than $100 million, plus 0.15% on sales of $100 million
or more. These payment breakpoints are reset every 12
months for purposes of additional purchases. With
respect to purchases made at net asset value by certain
trust companies and trust departments of banks and
certain retirement plans of organizations with
collective retirement plan assets of $10 million or
more, Distributors, or one of its affiliates, out of
its own resources, may pay up to 1% of the amount
invested.
Letter of Intent
An investor may qualify for a reduced sales charge on
the purchase of shares of the Rising Dividends Fund
(Class I), the Investment Grade Fund and the Corporate
Qualified Fund as described in the Prospectuses. At any
time within 90 days after the first investment which
the investor wants to qualify for the reduced sales
charge, a signed Shareholder Application, with the
Letter of Intent ("Letter") section completed, may be
filed with the Rising Dividends Fund, the Investment
Grade Fund or the Corporate Qualified Fund. After the
Letter is filed, each additional investment made will
be entitled to the sales charge applicable to the level
of investment indicated on the Letter. Sales charge
reductions based upon purchases in more than one
company in the Franklin Templeton Group will be
effective only after notification to Distributors that
the investment qualifies for a discount. The
shareholder's holdings in the Franklin Templeton Group,
including Class II shares, acquired more than 90 days
before the Letter of Intent is filed will be counted
towards completion of the Letter of Intent but will not
be entitled to a retroactive downward adjustment of
sales charge. Any redemptions made by the shareholder,
other than by a qualifying employee benefit plan (the
"Benefit Plan"), during the 13-month period will be
subtracted from the amount of the purchases for
purposes of determining whether the terms of the Letter
have been completed. If the Letter is not completed
within the 13-month period, there will be an upward
adjustment of the sales charge, depending upon the
amount actually purchased (less redemptions) during the
period. The upward adjustment does not apply to
qualifying employee benefit plans. An investor who
executes a Letter prior to a change in the sales charge
structure for the Rising Dividends Fund, the Investment
Grade Fund or the Corporate Qualified Fund will be
entitled to complete the Letter at the lower of (i) the
new sales charge structure; or (ii) the sales charge
structure in effect at the time the Letter was filed
with the Rising Dividends Fund, the Investment Grade
Fund or the Corporate Qualified Fund.
As mentioned in the Trust's Prospectuses, five percent
(5%) of the amount of the total intended purchase will
be reserved in shares of the Rising Dividends Fund, the
Investment Grade Fund or the Corporate Qualified Fund
registered in the investor's name unless the investor
is a Benefit Plan. If the total purchases, less
redemptions, equal the amount specified under the
Letter, the reserved shares will be deposited to an
account in the name of the investor or delivered to the
investor or the investor's order. If the total
purchases, less redemptions, exceed the amount
specified under the Letter and is an amount which would
qualify for a further quantity discount, a retroactive
price adjustment will be made by Distributors and the
dealer through whom purchases were made pursuant to the
Letter (to reflect such further quantity discount) on
purchases made within 90 days before and on those made
after filing the Letter. The resulting difference in
offering price will be applied to the purchase of
additional shares at the offering price applicable to a
single purchase or the dollar amount of the total
purchases. If the total purchases, less redemptions,
are less than the amount specified under the Letter,
the investor will remit to Distributors an amount equal
to the difference in the dollar amount of sales charge
actually paid and the amount of sales charge which
would have applied to the aggregate purchases if the
total of such purchases had been made at a single time.
Upon such remittance the reserved shares held for the
investor's account will be deposited to an account in
the name of the investor or delivered to the investor
or to the investor's order. If within 20 days after
written request such difference in sales charge is not
paid, the redemption of an appropriate number of
reserved shares to realize such difference will be
made. In the event of a total redemption of the account
prior to fulfillment of the Letter of Intent, the
additional sales charge due will be deducted from the
proceeds of the redemption, and the balance will be
forwarded to the investor.
If a Letter of Intent is executed on behalf of a
benefit plan (such plans are described under "Purchases
at Net Asset Value" in the Prospectus), the level and
any reduction in sales charge for these employee
benefit plans will be based on actual plan
participation and the projected investments in the
Franklin Templeton Group under the Letter. Benefit
Plans are not subject to the requirement to reserve 5%
of the total intended purchase, or to any penalty as a
result of the early termination of a plan, nor are
Benefit Plans entitled to receive retroactive
adjustments in price for investments made before
executing Letters.
THE "PURCHASES AND REDEMPTIONS THROUGH SECURITIES DEALERS" AND
"CALCULATION OF NET ASSET VALUE" SUBSECTIONS ARE MODIFIED TO REFLECT
THAT THE NET ASSET VALUE FOR THE INVESTMENT GRADE FUND, THE
CORPORATE QUALIFIED FUND AND EACH CLASS OF THE RISING DIVIDENDS FUND
IS CALCULATED SEPARATELY AS OF THE SCHEDULED CLOSING OF THE NEW YORK
STOCK EXCHANGE (GENERALLY 1:00 P.M. PACIFIC TIME).
The current Prospectus in the case of Franklin Managed Trust is
incorporated herein by reference to Form Type 497 filed
electronically by Registrant with the U.S. Securities and
Exchange Commission on March 13, 1995, Accession Number
0000805650-95-000004.
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
FRANKLIN INVESTMENT GRADE INCOME FUND
FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1995
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN
The Franklin Managed Trust (the "Trust") is an open-end
management investment company consisting of three separate
diversified series (each known as a "Fund" or collectively the
"Funds"): the Franklin Rising Dividends Fund, the Franklin
Investment Grade Income Fund and the Franklin Corporate Qualified
Dividend Fund. The investment objective of the Franklin Rising
Dividends Fund is to seek long-term capital appreciation
primarily through investments in equity securities of companies
that have paid consistently rising dividends over the past ten
years. The investment objective of the Franklin Investment Grade
Income Fund is to seek a maximum level of income consistent with
prudent exposure to risk, through a diversified investment in
debt securities and dividend-paying common and preferred stocks,
with at least 75% of its assets in investment grade issues. The
investment objective of the Franklin Corporate Qualified Dividend
Fund, which is offered only to corporate investors, is to seek
high after-tax income by investing primarily in equity securities
of domestic companies that generate dividend income qualifying
for the 70% dividends-received deduction under current federal
income tax law.
A separate Prospectus for each Fund, dated February 1, 1995, each
as may be amended from time to time, provides the basic
information an investor should know before investing in the Trust
and may be obtained without charge from the Trust or from the
Trust's principal underwriter, Franklin/Templeton Distributors,
Inc. ("Distributors"), at the address shown above.
THIS STATEMENT OF ADDITIONAL INFORMATION (THE "SAI") IS NOT A
PROSPECTUS. IT CONTAINS INFORMATION IN ADDITION TO AND IN MORE
DETAIL THAN SET FORTH IN THE PROSPECTUSES. THIS SAI IS INTENDED
TO PROVIDE INVESTORS WITH ADDITIONAL INFORMATION REGARDING THE
ACTIVITIES AND OPERATIONS OF THE FUNDS, AND SHOULD BE READ IN
CONJUNCTION WITH THE FUNDS' PROSPECTUSES.
CONTENTS PAGE
About the Trust
The Investment Objectives and
Policies of the Funds
Investment Restrictions
Trustees and Officers
Investment Advisory and Other Services
The Trust's Policies Regarding Brokers
Used on Portfolio Transactions
Additional Information Regarding Trust Shares
Additional Information Regarding Taxation
The Trust's Underwriter
General Information
Appendix
Financial Statements
ABOUT THE TRUST
The Trust, which was organized as a Massachusetts business trust
on July 1, 1986, is an open-end management investment company and
has registered with the Securities and Exchange Commission (the
"SEC") under the Investment Company Act of 1940 (the "1940 Act").
The Trust issues its shares of beneficial interest with a par
value of $.01 per share in separate series. This SAI pertains to
all three series of the Trust: the Franklin Rising Dividends
Fund, the Franklin Investment Grade Income Fund, and the Franklin
Corporate Qualified Dividend Fund.
THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The investment objective of each Fund is described in greater
detail in its separate Prospectus. The following discussion
supplements the discussion of each Fund's investment objective
and policies as set forth in that Fund's Prospectus. There can be
no assurance that the objective of any of the Funds will be
attained.
FRANKLIN INVESTMENT GRADE INCOME FUND
As stated in its Prospectus, the Franklin Investment Grade Income
Fund may engage in various options and hedging transactions as
described below.
Options on Securities. To earn additional income, the Franklin
Investment Grade Income Fund may write (i.e., sell) covered call
and put options with respect to optionable securities of the type
in which it may invest. A call option written by the Fund
obligates the Fund to sell specified securities to the holder of
the option at a specified price at any time before the expiration
date. All call options written by the Fund are covered, which
means that the Fund will own the securities subject to the option
(or comparable securities satisfying the cover requirements of
the securities exchanges) so long as the option is outstanding
and the Fund has not terminated its obligation with a closing
purchase transaction, as explained below. While the purpose of
writing covered call options is to realize greater income than
would be realized on portfolio securities transactions alone, the
Fund may forego the opportunity to profit from an increase in the
market price of the underlying security.
A put option written by the Fund obligates the Fund to purchase
specified securities from the option holder at a specified price
at any time before the expiration date. All put options written
by the Fund are covered, which means that the Fund has deposited
with its custodian cash, U.S. government securities or other
liquid securities with a value at least equal to the exercise
price of the put option. The purpose of writing such options is
to generate additional income. In return for the option premium,
however, the Fund accepts the risk that it will be required to
purchase the underlying securities at a price in excess of the
securities' market value at the time of purchase.
The Fund may also purchase put and call options on securities,
but only for limited purposes. The Fund may purchase call options
for the purpose of offsetting its obligations pursuant to
previously written call options. Such purchases are referred to
as closing purchase transactions. The Fund may purchase put
options only on U.S. government securities in its portfolio in
anticipation of a decline in the market value of such securities
and then only in amounts not exceeding 10% of its total assets.
Effectively, the Fund's ability to purchase put options allows it
to protect unrealized gains in appreciated U.S. government
securities in its portfolio without actually selling the
securities and while continuing to receive interest income on the
securities.
The writing and purchasing of options is a highly specialized
activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities
transactions. The Fund will pay brokerage commissions or spreads
in connection with its options transactions, as well as for
purchases and sales of underlying securities. The writing of
options could result in significant increases in the Fund's
portfolio turnover rate.
One of the principal risks associated with the Fund's options
activities is the risk that a liquid secondary market on an
options exchange may not exist for any particular option at any
particular time, and for some options no secondary market may
exist on an exchange or elsewhere. If the Fund is unable to
effect a closing purchase transaction with respect to covered
options it has written, the Fund will not be able to sell the
underlying securities or dispose of assets held in a segregated
account until the options expire or are exercised. Similarly, if
the Fund is unable to effect a closing sale transaction with
respect to options it has purchased, it would have to exercise
the options in order to realize any profit and may incur
transaction costs upon the purchase or sale of underlying
securities. The Fund expects to purchase and write only exchange
traded options until such time as its investment manager
determines that the over-the-counter market in options is
sufficiently developed and appropriate disclosure is furnished to
prospective and existing shareholders. Transactions in options
are generally considered "derivative securities."
Options on Futures. For bona fide hedging purposes, the Fund may
purchase put and call options on interest rate futures contracts
which are traded on exchanges that are licensed and regulated by
the Commodities Futures Trading Commission ("CFTC") for the
purposes of options trading. A "call" option on a futures
contract gives the purchaser the right, in return for the premium
paid, to purchase a futures contract (assume a "long" position)
at a specified exercise price at any time before the option
expires. A "put" option gives the purchaser the right, in return
for the premium paid, to sell a futures contract (assume a
"short" position) for a specified exercise price at any time
before the option expires. Interest rate futures contracts are
contracts for the future delivery of U.S. government securities
and index-based futures contracts that are, in the opinion of the
Fund's investment manager, sufficiently correlated with the
Fund's portfolio to permit effective hedging against adverse
changes in interest rates.
Upon the exercise of a call option, the writer of the option is
obligated to sell the futures contract (i.e., to deliver a "long"
position to the Fund as the option holder) at the option exercise
price, which will presumably be lower than the current market
price of the contract in the futures market. Upon exercise of a
put option, the writer of the option is obligated to purchase the
futures contract (i.e., deliver a "short" position to the Fund as
the option holder) at the option exercise price, which will
presumably be higher than the current market price of the
contract in the futures market.
The Fund is entitled to be paid the amount of any gain realized
by it with respect to any option it has purchased upon the
exercise of the option. Most participants in the options markets,
however, do not seek to realize their gains or losses by exercise
of their options rights. Instead, the holder of an option will
usually realize a gain or loss by buying or selling an offsetting
option at a market price that will reflect an increase or a
decrease from the premium originally paid. The Fund's ability to
establish and close out options positions at fairly established
prices is subject to the maintenance of a liquid market.
Options on futures can be used by the Fund to hedge the same
risks as might be hedged by the direct purchase or sale of the
underlying futures contracts. If the Fund purchases an option on
a futures contract, it may obtain benefits similar to those that
would result if it held the futures position itself. But, in
contrast to a futures transaction in which only transaction costs
are involved, the benefits received in an option transaction will
be reduced by the amount of the premium and transaction costs
paid by the Fund. There may also be circumstances when the
purchase of an option on an interest rate futures contract would
result in a loss to the Fund when the purchase (or sale) of the
futures contract itself would not result in a loss, such as when
there is no movement in the price of the futures contract or the
underlying security. In the event of an adverse market movement,
however, the Fund will not be subject to a risk of loss on the
option transaction beyond the price of the premium paid, plus any
transaction costs.
At the time the Fund enters into a futures contract, it will
maintain, with its custodian, assets in a segregated account to
cover its obligations with respect to such contract to the extent
required by SEC rules. Such securities may consist of cash, cash
equivalents or high quality debt securities from its portfolio in
an amount equal to the difference between the fluctuating market
value of such futures contract and the aggregate value of the
initial and variation margin payments made by the Fund with
respect to such futures contract.
In addition to the risks which apply to all options transactions,
there are several special risks relating to options on futures
contracts. The principal risk, as stated in the Fund's Prospectus
and discussed above in connection with options on securities, is
the possibility that no liquid market for the option will exist
to permit the Fund to establish and close out its positions.
Transactions in options on futures are generally considered
"derivative securities."
Limitations on Futures Transactions. The Fund has represented to
the CFTC that it will purchase options on interest rate futures
contracts solely for bona fide hedging purposes within the
meaning of CFTC regulations. The Fund has also represented to the
CFTC that it will not purchase any options on interest rate
futures contracts if, as a result, the sum of premiums paid for
the options the Fund has purchased would exceed 5% of the Fund's
total assets. This limitation on the Fund's options transactions
is not fundamental and may be changed by the Board of Trustees as
the CFTC permits.
Foreign Securities. Investments in debt securities issued by
foreign corporations, governments and their instrumentalities,
and by supranational entities offer potential benefits not
available from investments solely in securities issued by the
U.S. government. These benefits include the opportunity to invest
in foreign countries with economic policies or business cycles
different from those of the United States, or the opportunity to
reduce fluctuations in portfolio value by taking advantage of
foreign markets that do not move in a manner parallel to U.S.
markets.
Investments in debt securities of foreign governments present
special risks and considerations not typically associated with
investments in securities issued by the U.S. government. Such
risks include: reductions of income as a result of foreign taxes;
fluctuation in value of foreign portfolio investments due to
changes in currency rates and control regulations (e.g., currency
blockage); transaction charges for currency exchange; lack of
information about foreign governments; lack of uniform
accounting, auditing and financial reporting standards comparable
to those applicable to the U.S. government; less volume on
foreign exchanges than on U.S. exchanges; greater volatility and
less liquidity on foreign markets than in the U.S.; less
regulation of foreign issuers, stock exchanges and brokers than
in the U.S.; greater difficulty in commencing lawsuits; higher
brokerage commission rates than in the U.S.; increased risk of
delays in settlement of portfolio transactions or loss of
certificates for portfolio securities because of the lesser speed
and reliability of mail service; possibilities of expropriation,
confiscatory taxation, political, financial or social instability
or adverse diplomatic developments; and differences (which may be
favorable or unfavorable) between the U.S. economy and foreign
economies.
In the past, U.S. government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be
reimposed. While the Fund may invest in foreign securities
without limitation, the Fund's current operating policy is not to
invest more than 25% of its assets in the debt securities of
foreign governments.
Additional Information on Rates of Return. Since the end of World
War II, bonds have typically provided a return averaging about 6%
above the inflation rate. The following table demonstrates the
real rate of return from corporate bonds rated "A" by Moody's
Investors Service ("Moody's") over the past ten years. Investors
should note that the Fund's portfolio is not comprised
exclusively of such bonds. Accordingly, the table is for
illustrative purposes only. The table is not indicative of the
Fund's past, present or future performance. Moreover, historical
returns are not indicative of future returns. The source of this
information is the U.S. Bureau of Labor Statistics and Moody's:
REAL RATES OF RETURN
MOODY'S CORPORATE INFLATION REAL RATE
A BOND INDEX* RATE (CPI)** OF RETURN
1984 12.92% 3.95% 8.97%
1985 11.19 3.80 7.39
1986 9.41 1.10 8.31
1987 10.62 4.43 6.19
1988 10.11 4.42 5.69
1989 9.39 4.65 4.74
1990 9.64 6.11 3.53
1991 8.82 3.06 5.76
1992 8.37 2.90 5.47
1993 7.31 2.75 4.56
Average 9.78 3.72 6.06
*Moody's Corporate A Bond Index Yields are year-end yields.
Investors cannot invest directly in an index.
**Inflation rate is demonstrated by annual rates of the Consumer
Price Index (CPI).
RATINGS OF ELIGIBLE PORTFOLIO SECURITIES
As stated in the Prospectus, the Franklin Investment Grade Income
Fund will invest in debt securities (and to a more limited
extent, dividend paying common and preferred stocks) with the
objective of generating a maximum level of income consistent with
prudent exposure to risk and will generally invest (i.e., invest
at least 75% of its net assets) in debt securities in one of the
four highest rating categories of Moody's or Standard & Poor's
Corporation ("S&P") or in unrated securities that are of
equivalent quality. The Franklin Corporate Qualified Dividend
Fund will invest at least 95% of its net assets in issuers whose
long-term debt securities are either in one of the four highest
rating categories or, if unrated, are of equivalent quality as
determined by the Fund's investment manager. An Appendix
discussing these ratings is included at the back of this SAI.
The Franklin Investment Grade Income Fund may invest up to 25% of
its portfolio in debt securities with lower ratings or in unrated
securities that are of lower equivalent quality (sometimes
referred to as "junk bonds" in the popular media). The Fund,
however, will not invest (i) in any debt securities rated lower
than B by Moody's or S&P, (ii) in any equity securities of an
issuer if a majority of the debt securities of such issuer is
rated lower than B by Moody's or S&P, or (iii) in any unrated
debt securities that the Fund's investment manager considers to
be of lower equivalent quality than securities rated B by Moody's
or S&P. The market values of such securities tend to reflect
individual corporate developments to a greater extent than do
higher rated securities, which react primarily to fluctuations in
the general level of interest rates. Such lower rated securities
also tend to be more sensitive to economic conditions than higher
rated securities. Debt securities rated B by Moody's are regarded
as generally lacking the characteristics of desirable investments
and, in Moody's judgment, assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small. Debt securities rated BB or
B by S&P are regarded, on balance, as predominantly speculative
with respect to the capacity to pay interest and repay principal
in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and B the second lowest degree of
speculation. In S&P's judgment, while such debt will likely have
some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse
conditions.
Companies that issue high yielding, fixed-income securities are
often highly leveraged and may not have more traditional methods
of financing available to them. Therefore, the risk associated
with acquiring the securities of such issuers is generally
greater than is the case with higher rated securities. For
example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of high yielding
securities may experience financial stress. During such periods,
such issuers may not have sufficient earnings to meet their
interest payment obligations. The issuer's ability to service its
debt obligations may also be adversely affected by specific
corporate developments, the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional
financing. The risk of loss due to default by the issuer may be
significantly greater for the holders of high yielding securities
because such securities are generally unsecured and are often
subordinated to other creditors of the issuer. The current
economic downturn has disrupted the market for high yield bonds
and adversely affected the value of outstanding bonds and the
ability of issuers of such bonds to repay principal and interest.
Future economic downturns could have the same effect.
High yielding, fixed-income securities frequently have call or
buy-back features which would permit an issuer to call or
repurchase the security from the Fund. Although such securities
are typically not callable for a period from three to five years
after their issuance, if a call were exercised by the issuer
during periods of declining interest rates, the Fund would likely
have to replace such called security with a lower yielding
security, thus decreasing the net investment income and
distributions to shareholders. The premature disposition of a
high yielding security due to a call or buy-back feature, the
deterioration of the issuer's creditworthiness, or a default may
also make it more difficult for the Fund to manage the timing of
its receipt of income, which may have tax implications.
The Fund may have difficulty disposing of certain high yielding
securities because there may be a thin trading market for a
particular security at any given time. The market for lower rated
fixed-income securities generally tends to be concentrated among
a smaller number of dealers than is the case for securities which
trade in a broader secondary retail market. Generally, purchasers
of these securities are predominantly dealers and other
institutional buyers, rather than individuals. To the extent a
secondary trading market for high yielding, fixed-income
securities does exist, it is generally not as liquid as the
secondary market for higher rated securities. Reduced liquidity
in the secondary market may have an adverse impact on market
price and the Fund's ability to dispose of particular issues when
necessary to meet the Fund's liquidity needs, or in response to a
specific economic event, such as the deterioration in the
creditworthiness of the issuer. Reduced liquidity in the
secondary market for certain securities may also make it more
difficult for the Fund to obtain market quotations based on
actual trades for purposes of valuing the Fund's portfolio.
Current value for these high yield issues are obtained from
pricing services and/or a limited number of dealers and may be
based upon factors other than actual sales.
Factors adversely impacting the market value of high yielding
securities could adversely impact the net asset value of the Fund
to the extent of any such securities held in its portfolio. In
addition, the Fund could incur additional expenses to the extent
it is required to seek recovery upon a default in the payment of
principal or interest on its portfolio holdings. The Fund will
rely on the investment manager's judgment, analysis and
experience in evaluating the creditworthiness of an issuer. In
this evaluation, the investment manager will take into
consideration, among other things, the issuer's financial
resources, its sensitivity to economic conditions and trends, its
operating history, the quality of the issuer's management and
regulatory matters.
FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
The Franklin Corporate Qualified Dividend Fund is specially
designed for corporate investors, including banks and savings and
loan associations, that may not deduct certain interest expenses
under tax laws and that may be seeking an enhanced investment
return through use of the corporate dividends-received deduction.
As stated in its Prospectus, the Franklin Corporate Qualified
Dividend Fund may invest in adjustable rate and auction rate
preferred stocks. The characteristics of these two types of
preferred stocks are discussed below.
Adjustable Rate Preferred Stocks. In May 1982, several major U.S.
corporations, including some of the largest U.S. bank holding
companies, began issuing preferred stocks with cumulative and
adjustable dividends. These securities have specific
characteristics differing from other types of preferred stocks.
Regardless of the issuer, adjustable rate preferred stocks
generally have the same terms and provisions, except for the
specific adjustment formula used to determine their quarterly
dividend rate. Such formulas vary in regard to (i) the fixed
amount of premium or discount in relation to a particular U.S.
Treasury instrument rate and (ii) the minimum and maximum range
within which the dividend rate may fluctuate. The rate for each
quarterly dividend period is referred to by all issuers as the
"Applicable Rate."
The Applicable Rate is determined by the issuer at the beginning
of each quarterly dividend period. It is calculated, in part, by
adding or subtracting (depending upon the terms of the issue)
either a fixed number of basis points (a basis point being equal
to 1/100 of 1%) or a percentage calculation to the highest of
three specified rates, namely a "Treasury Bill Rate," a "10-Year
Constant Maturity Rate" and a "20-Year Constant Maturity Rate."
The Treasury Bill Rate is based upon the average market discount
rate of three-month U.S. Treasury bills. The other rates are
based upon the average yields to maturity of ten-year and twenty-
year U.S. Treasury fixed interest rate securities. Such data is
published weekly by the Federal Reserve Board, and the issuers of
the adjustable rate preferred stocks, in setting their next
Applicable Rate, generally use the two most recent weekly figures
published immediately prior to the 10 calendar days preceding a
new quarterly dividend period. The premium or discount to be
added to or subtracted from the highest of the three rates is
fixed by the issuer at the time the adjustable rate preferred
stocks are issued and cannot be changed. At issuance, however,
the issuer sets a maximum and minimum Applicable Rate which may
be paid for any dividend period.
While most issues of adjustable rate preferred stocks are rated
by the major rating services, the Fund may invest in any
adjustable rate preferred stock regardless of its rating or non-
rating. The Fund's investment manager will, however, consider
such rating or non-rating as one of the factors in selecting
issues for the Fund's portfolio. Generally, the Fund will invest
in adjustable rate preferred stocks of issuers whose long-term
debt securities are either rated in one of the four highest
rating categories of Moody's or S&P or, if unrated, are of
equivalent quality as determined by the Fund's investment
manager. See "Ratings of Eligible Portfolio Securities" above or
the Appendix to this SAI for a further discussion of ratings.
Auction Rate Preferred Stocks. Auction rate preferred stocks are
similar to short-term, corporate money market instruments in that
the auction rate preferred stockholder normally has the
opportunity to liquidate at par every 49 days, at which time the
dividend rate is reset. Generally, the maximum dividend rate
ranges from 110% to 250%, depending on quality, of the 60-day
"AA" Composite Commercial Paper Rate and the minimum rate is 56%
of the same rate. In this type of auction, bids are made by
broker-dealers, either as agent for their customers or for their
own account, for a certain amount of shares at a specified yield.
The dividend rate set by the auction is the lowest rate that
includes enough bids to cover all the shares being sold. This
procedure is designed to enable auction rate preferred shares to
be purchased and sold at their par value.
The shares generally are redeemable at par value plus accrued
dividends at the option of the issuer if certain conditions are
met regarding the dividend rate set by the auction.
Auction rate preferred shares may be purchased or sold by the
Fund pursuant to a bid or a sell order placed in an auction. If
there are insufficient bids to cover all sell orders at any
auction, then the sellers, which may include the Fund, may only
be able to sell a portion of the shares submitted for sale, or
perhaps none at all. To date, most, but not all, auctions have
included sufficient bids to accommodate all shares submitted for
sale. If a future auction at which the Fund has submitted shares
for sale fails to contain sufficient bids, the Fund's investment
manager believes that the Fund would be able to sell its shares
in the marketplace.
The Fund may at any time sell its auction rate preferred stock to
another purchaser outside of the auction process at a price which
will reflect the share's par value plus a mutually agreed upon
yield factor. Such purchaser must have signed a Purchaser's
Letter to the designated depository stating that: (a) the
Purchaser understands the terms of the auction and agrees to
participate under such terms; (b) the Purchaser will sell,
transfer, or dispose of the shares of the auction rate preferred
stock only pursuant to the terms regarding the issue; and (c) the
ownership of the shares will be maintained in book-entry form
pursuant to the provisions in the issuer's prospectus.
While all current issues of auction rate preferred stocks are
rated by the major rating services, the Fund may invest in any
auction rate preferred stock regardless of its rating or future
non-rating. The Fund's investment manager will, however, consider
such rating or non-rating as one of the factors in selecting
issues for the Fund's portfolio. Generally, the Fund will only
invest in auction rate preferred stocks of issuers whose long-
term debt securities are either rated in one of the four highest
rating categories of Moody's or S&P or, if unrated, are of
equivalent quality as determined by the Fund's investment
manager. An Appendix discussing these ratings is included at the
back of this SAI.
FRANKLIN RISING DIVIDENDS FUND
Foreign Securities. As noted in its Prospectus, the Franklin
Rising Dividends Fund may invest in foreign securities. When
purchasing foreign securities, the Fund will ordinarily purchase
securities which are traded in the United States or purchase
sponsored or unsponsored American Depositary Receipts ("ADRs"),
which are certificates issued by U.S. banks representing the
right to receive securities of a foreign issuer deposited with
that bank or a correspondent bank. A sponsored ADR is an ADR in
which establishment of the issuing facility is brought about by
the participation of the issuer and the depositary institution
pursuant to a deposit agreement which sets out the rights and
responsibilities of the issuer, the depositary and the ADR
holder. Under the terms of most sponsored arrangements,
depositaries agree to distribute notices of shareholder meetings
and voting instructions, thereby ensuring that ADR holders will
be able to exercise voting rights through the depositary with
respect to the deposited securities. An unsponsored ADR has no
sponsorship by the issuing facility and additionally, more than
one depositary institution may be involved in the issuance of the
unsponsored ADR. It typically clears, however, through the
Depositary Trust Company and therefore, there should be no
additional delays in selling the security or in obtaining
dividends. Although not required, the depositary normally
requests a letter of non-objection from the issuer. In addition,
the depositary is not required to distribute notices of
shareholders' meetings or financial information to the purchaser.
The Fund may also purchase the securities of foreign issuers
directly in foreign markets so long as, in the investment
manager's judgment, an established public trading market exists
(that is, there are a sufficient number of shares traded
regularly relative to the number of shares to be purchased by the
Fund).
Any investments made by the Fund in foreign securities where
delivery takes place outside the United States will be made in
compliance with applicable United States and foreign currency
restrictions and other tax laws and laws limiting the amount and
types of foreign investments. Changes of governmental
administrations, economic or monetary policies in the United
States or abroad, or changed circumstances in dealings between
nations could result in investment losses for the Fund and could
adversely affect the Fund's operations. The Fund's purchase of
securities in foreign countries will involve currencies of the
U.S. and of foreign countries; consequently, changes in exchange
rates, currency convertibility and repatriation may favorably or
adversely affect the Fund. Although current regulations do not,
in the opinion of the Fund's investment manager, seriously limit
the Fund's investment activities, if such regulations are changed
in the future, they may restrict the ability of the Fund to make
its investments or impair the liquidity of the Fund's
investments.
Securities which are acquired by the Fund outside of the United
States and which are publicly traded in the United States or on a
foreign securities exchange or in a foreign securities market are
not considered by the Fund to be illiquid assets if (a) the Fund
reasonably believes it can readily dispose of the securities for
cash in the U.S. or foreign market or (b) current market
quotations are readily available. The Fund will not acquire the
securities of foreign issuers outside of the United States under
circumstances where, at the time of acquisition, the Fund has
reason to believe that it could not resell the securities in a
public trading market. Investors should recognize that foreign
securities are often traded with less frequency and volume, and
therefore may have greater price volatility, than is the case
with many U.S. securities. Notwithstanding the fact that the Fund
intends to acquire the securities of foreign issuers only where
there are public trading markets, investments by the Fund in the
securities of foreign issuers may tend to increase the risks with
respect to the liquidity of the Fund's portfolio and the Fund's
ability to meet a large number of shareholders' redemption
requests should there be economic or political turmoil in a
country in which the Fund has its assets invested or should
relations between the United States and a foreign country
deteriorate markedly.
ADDITIONAL INFORMATION RELEVANT TO ALL FUNDS
Lending of Portfolio Securities. As noted in the Prospectuses,
each Fund may lend up to 30% of its portfolio securities in order
to generate additional income. Each Fund may pay reasonable
administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the income earned on the cash to
the borrower or placing broker. Loans are subject to termination
at the option of the Fund or the borrower at any time, including
when necessary to enable such Fund to be the record owner for
each dividend paid by the issuer thereof. A Fund would not have
the right to vote securities on loan, but would terminate the
loan and regain the right to vote if that were considered
important with respect to the investment.
Portfolio Turnover. The Franklin Investment Grade Income Fund's
portfolio turnover rate may exceed 100% per year. Because a
higher turnover rate increases transaction costs and may increase
taxable capital gains, the investment manager will consider the
potential benefits of investing in treasury rolls against these
considerations. The Franklin Rising Dividends Fund and the
Franklin Corporate Qualified Dividend Fund's portfolio turnover
rate may vary from year to year, as well as within a year and
should ordinarily not exceed 100%, but this rate should not be
considered a limiting factor. The portfolio turnover of the Funds
for the fiscal year ended December 31, 1992, for the nine-month
period ended September 30, 1993, and for the fiscal year ended
September 30, 1994 was as follows:
FUND 1994 1993 1992
Franklin Corporate 32.17% 27.46% 29.01%
Qualified Dividend Fund
Franklin Rising Dividends 25.75 11.48% 12.73%
Fund
Franklin Investment Grade 10.57 53.19% 27.28%
Income Fund
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been
adopted by each Fund and (unless otherwise noted) are fundamental
and cannot be changed without the affirmative vote of a majority
of that Fund's outstanding voting securities as defined in the
1940 Act. A Fund MAY NOT:
1. Invest in the securities of any one issuer (other than the
U.S. government and its agencies and instrumentalities), if
immediately after and as a result of such investment (a) more
than 5% of the total assets of the Fund would be invested in such
issuer or (b) more than 10% of the outstanding voting securities
of such issuer would be owned by the Fund.
2. Make loans to others, except (a) through the purchase of debt
securities in accordance with its investment objectives and
policies, (b) through the lending of its portfolio securities as
described above and in its Prospectus, or (c) to the extent the
entry into a repurchase agreement is deemed to be a loan.
3. (a) Borrow money, except temporarily for extraordinary or
emergency purposes from a bank and then not in excess of 15% of
its total assets (at the lower of cost or fair market value) or
(b) mortgage, pledge or hypothecate any of its assets except in
connection with any such borrowings.. Any such borrowing will be
made only if immediately thereafter there is an asset coverage of
at least 300% of all borrowings, and no additional investments
may be made while any such borrowings are in excess of 5% of
total assets.
4. Purchase securities on margin, sell securities short,
participate on a joint or joint and several basis in any
securities trading account, or underwrite securities. (Does not
preclude a Fund from obtaining such short-term credit as may be
necessary for the clearance of purchases and sales of its
portfolio securities.)
5. Buy or sell interests in oil, gas or mineral exploration or
development programs, or real estate. (Does not preclude
investments in marketable securities of companies engaged in such
activities.)
6. Purchase or hold securities of any issuer if, at the time of
purchase or thereafter, any of the trustees or officers of the
Trust or the Fund's investment manager owns beneficially more
than one-half of 1%, and all such trustees or officers holding
more than one-half of 1% together own beneficially more than 5%
of the issuer's securities.
7. Invest more than 5% of the value of its total assets in
securities of any issuer which has not had a record, together
with predecessors, of at least three years of continuous
operation. (This is an operating policy which may be changed
without shareholder approval.)
8. Purchase or sell commodities or commodity contracts or invest
in put, call, straddle or spread options. (Does not preclude bona
fide hedging transactions by the Franklin Investment Grade Income
Fund, including the purchase or sale of options and options on
futures contracts.)
9. With respect to the Franklin Investment Grade Income Fund and
Franklin Corporate Qualified Dividend Fund, invest in securities
of other investment companies, except as they may be acquired as
part of a merger, consolidation or acquisition of assets. With
respect to the Franklin Rising Dividends Fund, it may invest up
to 10% of its assets in the securities of other investment
companies, subject to the limitations of the 1940 Act, or more as
they may be acquired pursuant to a merger, consolidation or
acquisition of assets. (This is an operating policy which may be
changed without shareholder approval.)
10. Invest more than 10% of its assets in securities with legal
or contractual restrictions on resale, securities which are not
readily marketable, and repurchase agreements with more than
seven days to maturity.
11. Invest in any issuer for purposes of exercising control or
management.
12. Invest more than 25% of the market value of its assets in the
securities of companies engaged in any one industry. (Does not
apply to investment in the securities of the U.S. government, its
agencies or instrumentalities.)
13. Issue senior securities, as defined in the 1940 Act, except
that this restriction shall not be deemed to prohibit any Fund
from (a) making any permitted borrowings, mortgages or pledges,
or (b) entering into repurchase transactions. (This is an
operating policy which may be changed without shareholder
approval.)
Other Policies. Pursuant to an undertaking given to the Texas
State Securities Board, each Fund may not invest in excess of
5.0% of the value of a Fund's net assets in warrants. No more
than 2.0% of the value of a Fund's net assets may be invested in
warrants (valued at the lower of cost or market) which are not
listed on the New York or American Stock Exchanges. Warrants
acquired by a Fund in units or attached to securities will be
deemed to be without value.
TRUSTEES AND OFFICERS
The Board of Trustees has the responsibility for the overall
management of the Trust, including general supervision and review
of its investment activities. The trustees, in turn, elect the
officers of the Trust who are responsible for administering day-
to-day operations of the Trust. The affiliations of the officers
and trustees and their principal occupations for the past five
years are listed below. Trustees who are deemed to be "interested
persons" of the Trust, as defined in the 1940 Act, are indicated
by an asterisk (*).
POSITIONS AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH THE TRUST DURING PAST FIVE YEARS
*William J. Lippman
One Parker Plaza
Fort Lee, NJ 07024
President, Chief Executive Officer and Trustee
Senior Vice President, Franklin Resources, Inc., Franklin
Advisers, Inc., Franklin/Templeton Distributors, Inc. and
Franklin Management, Inc.; officer and/or director or trustee of
many funds in the Franklin Group of Funds.
Frank T. Crohn
7251 West Palmetto Park Road
Boca Raton, FL 33433
Trustee
Chairman and Chief Executive Officer, Financial Benefit Life
Insurance Company and Financial Benefit Group, Inc.; Director,
Unity Mutual Life Insurance Company; Trustee, Franklin Managed
Trust, The Portfolios Trust and Franklin Balance Sheet Investment
Fund.
Charles Rubens II
18 Park Road
Scarsdale, NY 10583
Trustee
Private Investor; Trustee, Franklin Managed Trust, The Portfolios
Trust and Franklin Balance Sheet Investment Fund.
Leonard Rubin
501 Broad Avenue
Ridgefield, NJ 07657
Trustee
Chairman of the Board, Carolace Embroidery Co., Inc.; President,
F.N.C. Textiles, Inc.; Vice President, Trimtex Co. Inc.; Trustee,
Franklin Managed Trust, The Portfolios Trust and Franklin Balance
Sheet Investment Fund.
Rupert H. Johnson, Jr.
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Executive Vice President and Director, Franklin Resources, Inc.
and Franklin/Templeton Distributors, Inc.; President and
Director, Franklin Advisers, Inc.; Director, Franklin/Templeton
Investor Services, Inc.; director of certain of the investment
companies in the Templeton Group of Funds; and officer and/or
director, trustee or managing general partner, as the case may
be, of most other subsidiaries of Franklin Resources, Inc. and of
most of the investment companies in the Franklin Group of Funds.
Harmon E. Burns
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Executive Vice President, Secretary and Director, Franklin
Resources, Inc.; Executive Vice President and Director,
Franklin/Templeton Distributors, Inc.; Executive Vice President,
Franklin Advisers, Inc.; Director, Franklin/Templeton Investor
Services, Inc.; director of certain of the investment companies
in the Templeton Group of Funds; officer and/or director, as the
case may be, of other subsidiaries of Franklin Resources, Inc.;
and officer and/or director or trustee of all the investment
companies in the Franklin Group of Funds.
Kenneth V. Domingues
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President, Treasurer and Chief Financial & Accounting
Officer
Senior Vice President, Franklin Resources, Inc., Franklin
Advisers, Inc., and Franklin/Templeton Distributors, Inc.;
officer and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and officer and/or
managing general partner, as the case may be, of all the
investment companies in the Franklin Group of Funds.
Edward V. McVey
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President/National Sales Manager, Franklin/Templeton
Distributors, Inc.; and officer of many of the investment
companies in the Franklin Group of Funds.
R. Martin Wiskemann
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President, Portfolio Manager and Director, Franklin
Advisers, Inc.; Senior Vice President, Franklin Management, Inc.;
Vice President, Treasurer and Director, ILA Financial Services,
Inc. and Arizona Life Insurance Company of America; and officer
and/or director, as the case may be, of many of the investment
companies in the Franklin Group of Funds.
Deborah R. Gatzek
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Secretary
Senior Vice President - Legal, Franklin Resources, Inc. and
Franklin/Templeton Distributors, Inc.; Vice President, Franklin
Advisers, Inc.; and officer of all the investment companies in
the Franklin Group of Funds.
As indicated above, certain of the trustees and officers hold
positions with other companies in the Franklin Group of
Funds(Registered Trademark) and the Templeton Group of Funds.
Trustees not affiliated with the investment manager are currently
paid fees of $1,800 per quarter plus $900 per meeting attended
and are reimbursed for expenses incurred in connection with
attending such meetings. During the fiscal year ended September
30, 1994, fees and expenses totaling $32,016 were paid to
trustees of the Trust who are not affiliated with the investment
manager. No officer or trustee received any other compensation
directly from the Trust. As of November 3, 1994, the trustees and
officers, as a group, owned of record and beneficially
approximately 23,076 shares of the Franklin Rising Dividends Fund
and 1,771 shares of the Franklin Investment Grade Income Fund or
less than 1% of the total outstanding shares of each Fund. The
trustees and officers did not own any shares of the Franklin
Corporate Qualified Dividend Fund. Certain officers or trustees
who are shareholders of Franklin Resources, Inc. may be deemed to
receive indirect remuneration by virtue of their participation,
if any, in the fees paid to its subsidiaries.
From time to time, the number of each Fund's shares held in the
"street name" accounts of various securities dealers for the
benefit of their clients or in centralized securities
depositories may exceed 5% of the total shares outstanding. To
the best knowledge of the Funds, as of November 3, 1994, no
shareholders of any of the Funds, beneficial or of record, owned
5% or more of any of the Funds' shares.
INVESTMENT ADVISORY AND OTHER SERVICES
The investment manager of each of the Funds is Franklin Advisers,
Inc. ("Advisers" or "Manager"). Advisers is a wholly-owned
subsidiary of Franklin Resources, Inc. ("Resources"), a publicly
owned holding company whose shares are listed on the New York
Stock Exchange ("Exchange"). Resources owns several other
subsidiaries which are involved in investment management and
shareholder services. The Manager and other subsidiary companies
of Resources currently manage over $114 billion in assets for
more than 3.7 million shareholders. The preceding table indicates
those officers and trustees who are also affiliated persons of
Distributors and Advisers.
Pursuant to separate management agreements for each Fund, the
Manager provides investment research and portfolio management
services, including the selection of securities for each Fund to
purchase, hold or sell and the selection of brokers through whom
each Fund's portfolio transactions are executed. The Manager's
activities are subject to the review and supervision of the
Trust's Board of Trustees to whom the Manager renders periodic
reports of each Fund's investment activities. The Manager, at its
own expense, furnishes each Fund with office space and office
furnishings, facilities and equipment required for managing the
business affairs of each Fund; maintains all internal
bookkeeping, clerical, secretarial and administrative personnel
and services; and provides certain telephone and other mechanical
services. The Manager is covered by fidelity insurance on its
officers, directors and employees for the protection of the
Trust. Each Fund bears all of its expenses not assumed by the
Manager. See the Statement of Operations in the financial
statements at the end of this SAI for additional details of these
expenses.
Pursuant to their respective management agreements, the Franklin
Corporate Qualified Dividend Fund and the Franklin Investment
Grade Income Fund are each obligated to pay the Manager a monthly
fee computed at the annual rate of 0.50% of average daily net
assets of each Fund on the first $500 million of net assets,
0.45% on the next $500 million and 0.40% on net assets in excess
of $1 billion. Pursuant to its management agreement, the Franklin
Rising Dividends Fund is obligated to pay the Manager a monthly
fee computed at the annual rate of 0.75% of average daily net
assets of the Fund on the first $500 million of net assets,
0.625% on the next $500 million and 0.50% on net assets in excess
of $1 billion. The management agreements also provide for the
payment of $40,000 per year by each Fund to Advisers for the
provision of certain accounting, bookkeeping and recordkeeping
functions for each Fund. The management agreements specify that
the management fee will be reduced to the extent necessary to
comply with the most stringent limits on the expenses which may
be borne by each Fund as prescribed by any state in which a
Fund's shares are offered for sale. The most stringent current
limit requires the Manager to reduce or eliminate its fee to the
extent that aggregate operating expenses of each Fund (excluding
interest, taxes, brokerage commissions and extraordinary expenses
such as litigation costs) would otherwise exceed in any fiscal
year 2.5% of the first $30 million of average net assets of a
Fund, 2% of the next $70 million of average net assets of a Fund
and 1.5% of average net assets of a Fund in excess of $100
million. Expense reductions have not been necessary based on
state requirements.
Management fees for the fiscal year ended December 31, 1992, for
the period ended September 30, 1993, and for the fiscal year
ended September 30, 1994 were $126,523, $122,313, and $164,449,
respectively, for the Franklin Corporate Qualified Dividend Fund;
$845,234, $1,746,035, and $2,279,672, respectively, for the
Franklin Rising Dividends Fund; and $124,750, $136,977, and
155,866, respectively, for the Franklin Investment Grade Income
Fund.
The management agreements are in effect until March 31, 1995.
Thereafter, they may continue in effect for successive annual
periods providing such continuance is specifically approved at
least annually by a vote of the Trust's Board of Trustees or by a
vote of the holders of a majority of each Fund's outstanding
voting securities, and in either event by a majority vote of the
trustees who are not parties to the management agreements or
interested persons of any such party (other than as trustees of
the Trust), cast in person at a meeting called for that purpose.
Each management agreement may be terminated without penalty at
any time by a Fund or by the Manager on 60 days' written notice
and will automatically terminate in the event of its assignment,
as defined in the 1940 Act.
Franklin/Templeton Investor Services, Inc. ("Investor Services"
or "Shareholder Services Agent"), a wholly-owned subsidiary of
Resources, is the shareholder servicing agent for the Trust and
acts as the Trust's transfer agent and dividend-paying agent.
Investor Services is compensated on the basis of a fixed fee per
account.
Bank of America NT & SA, 555 California Street, 4th Floor, San
Francisco, California 94104, acts as custodian of the securities
and other assets of each Fund. Citibank Delaware, One Penn's Way,
New Castle, Delaware 19720, acts as custodian in connection with
transfer services through bank automated clearing houses. The
custodians do not participate in decisions relating to the
purchase and sale of portfolio securities.
Tait, Weller & Baker, Two Penn Center Plaza, Suite 700,
Philadelphia, Pennsylvania 19102, are the Trust's independent
auditors. During the fiscal year ended September 30, 1994, their
auditing services consisted of rendering an opinion on the
financial statements of the Trust included in the Trust's Annual
Report and this SAI.
THE TRUST'S POLICIES REGARDING BROKERS
USED ON PORTFOLIO TRANSACTIONS
Under the current management agreements with Advisers, the
selection of brokers and dealers to execute transactions in each
Fund's portfolio is made by the Manager in accordance with
criteria set forth in the management agreements and any
directions which the Trust's Board of Trustees may give.
When placing a portfolio transaction, the Manager attempts to
obtain the best net price and execution of the transaction. On
portfolio transactions which are done on a securities exchange,
the amount of commission paid by a Fund is negotiated between the
Manager and the broker executing the transaction. The Manager
seeks to obtain the lowest commission rate available from brokers
which are felt to be capable of efficient execution of the
transactions. The determination and evaluation of the
reasonableness of the brokerage commissions paid in connection
with portfolio transactions are based to a large degree on the
professional opinions of the persons responsible for the
placement and review of such transactions. These opinions are
formed on the basis of, among other things, the experience of
these individuals in the securities industry and information
available to them concerning the level of commissions being paid
by other institutional investors of comparable size. The Manager
will ordinarily place orders for the purchase and sale of over-
the-counter securities on a principal rather than agency basis
with a principal market maker unless, in the opinion of the
Manager, a better price and execution can otherwise be obtained.
Purchases of portfolio securities from underwriters will include
a commission or concession paid by the issuer to the underwriter,
and purchases from dealers will include a spread between the bid
and ask price. As a general rule, the Trust does not purchase
bonds in underwritings where it is not given any choice, or only
limited choice, in the designation of dealers to receive the
commission. The Trust seeks to obtain prompt execution of orders
at the most favorable net price.
The amount of commission is not the only relevant factor to be
considered in the selection of a broker to execute a trade. If it
is felt to be in a Fund's best interests, the Manager may place
portfolio transactions with brokers who provide the types of
services described below, even if it means the Fund will have to
pay a higher commission than would be the case if no weight were
given to the broker's furnishing of these services. This will be
done only if, in the opinion of the Manager, the amount of any
additional commission is reasonable in relation to the value of
the services. Higher commissions will be paid only when the
brokerage and research services received are bona fide and
produce a direct benefit to a Fund or assist the Manager in
carrying out its responsibilities to a Fund, or when it is
otherwise in the best interest of a Fund to do so, whether or not
such data may also be useful to the Manager in advising other
clients.
When it is felt that several brokers are equally able to provide
the best net price and execution, the Manager may decide to
execute transactions through brokers who provide quotations and
other services to each of the Funds, specifically including the
quotations necessary to determine the value of a Fund's net
assets, in such amount of total brokerage as may reasonably be
required in light of such services, and through brokers who
supply research, statistical and other data to the Funds and
Manager in such amount of total brokerage as may reasonably be
required.
It is not possible to place a dollar value on the special
executions or on the research services received by Advisers from
dealers effecting transactions in portfolio securities. The
allocation of transactions in order to obtain additional research
services permits Advisers to supplement its own research and
analysis activities and to receive the views and information of
individuals and research staff of other securities firms. As long
as it is lawful and appropriate to do so, the Manager and its
affiliates may use this research and data in their investment
advisory capacities with other clients. Provided that the Trust's
officers are satisfied that the best execution is obtained, the
sale of shares of the Funds may also be considered as a factor in
the selection of broker-dealers to execute the Funds' portfolio
transactions.
Because Distributors is a member of the National Association of
Securities Dealers, it is sometimes entitled to obtain certain
fees when a Fund tenders portfolio securities pursuant to a
tender-offer solicitation. As a means of recapturing brokerage
for the benefit of a Fund, any portfolio securities tendered by
such Fund will be tendered through Distributors if it is legally
permissible to do so. In turn, the next management fee payable to
Advisers under a Fund's management agreement will be reduced by
the amount of any fees received by Distributors in cash, less any
costs and expenses incurred in connection therewith.
If purchases or sales of securities of a Fund and one or more
other investment companies or clients supervised by the Manager
are considered at or about the same time, transactions in such
securities will be allocated among the several investment
companies and clients in a manner deemed equitable to all by the
Manager, taking into account the respective sizes of the funds
and the amount of securities to be purchased or sold. It is
recognized that in some cases this procedure could possibly have
a detrimental effect on the price or volume of the security so
far as a Fund is concerned. In other cases it is possible that
the ability to participate in volume transactions and to
negotiate lower brokerage commissions will be beneficial to a
Fund.
During the fiscal year ended December 31, 1992, the period ended
September 30, 1993, and the fiscal year ended September 30, 1994,
the Franklin Rising Dividends Fund paid total brokerage
commissions of $160,540, $227,754, and $219,703, respectively,
and the Franklin Investment Grade Income Fund and the Franklin
Corporate Qualified Dividend Fund paid no brokerage commissions,
except for the fiscal years ended December 31, 1992 and September
30, 1994, the Franklin Corporate Qualified Dividend Fund paid
brokerage commissions of $13,571 and $498, respectively. As of
September 30, 1994, the Funds did not own securities of their
regular broker-dealers.
ADDITIONAL INFORMATION REGARDING TRUST SHARES
All checks, drafts, wires and other payment mediums used for
purchasing or redeeming shares of a Fund must be denominated in
U.S. dollars. Each Fund reserves the right, in its sole
discretion, to either (a) reject any order for the purchase or
sale of shares denominated in any other currency, or (b) honor
the transaction or make adjustments to a shareholder's account
for the transaction as of a date and with a foreign currency
exchange factor determined by the drawee bank.
In connection with exchanges (see the Prospectus "Exchange
Privilege"), it should be noted that since the proceeds from the
sale of shares of an investment company generally are not
available until the fifth business day following the redemption,
the funds into which Fund shareholders are seeking to exchange
reserve the right to delay issuing shares pursuant to an exchange
until said fifth business day. The redemption of shares of a Fund
to complete an exchange for shares of any of the investment
companies will be effected at the close of business on the day
the request for exchange is received in proper form at the net
asset value then effective.
Dividend checks which are returned to a Fund marked "unable to
forward" by the postal service will be deemed to be a request by
the shareholder to change the dividend option and the proceeds
will be reinvested in additional shares at net asset value until
new instructions are received.
Each Fund may deduct from a shareholder's account the costs of
its efforts to locate a shareholder if mail is returned as
undeliverable or the Fund is otherwise unable to locate the
shareholder or verify the current mailing address. These costs
may include a percentage of the account when a search company
charges a percentage fee in exchange for its location services.
Under agreements with certain banks in Taiwan, Republic of China,
each Fund's shares are available to such banks' discretionary
trust funds at net asset value. The banks may charge service fees
to their customers who participate in the discretionary trusts.
Pursuant to agreements, a portion of such service fees may be
paid to Distributors, or an affiliate of Distributors, to help
defray expenses of maintaining a service office in Taiwan,
including expenses related to local literature fulfillment and
communication facilities.
Shares of each Fund may be offered to investors in Taiwan through
securities firms known locally as Securities Investment
Consulting Enterprises. In conformity with local business
practices in Taiwan, shares of each Fund will be offered with the
following schedule of sales charges:
SIZE OF PURCHASE SALES CHARGE
Up to U.S. $100,000 3%
U.S. $100,000 to U.S. $1,000,000 2%
Over U.S. $1,000,000 1%
PURCHASES AND REDEMPTIONS THROUGH SECURITIES DEALERS
Orders for the purchase of shares of a Fund received in proper
form prior to 1:00 p.m. Pacific time any business day that the
Exchange is open for trading and promptly transmitted to such
Fund will be based upon the public offering price determined that
day. Purchase orders received by securities dealers or other
financial institutions after 1:00 p.m. Pacific time will be
effected at the Fund's public offering price on the day it is
next calculated. The use of the term "securities dealer" herein
shall include other financial institutions which, pursuant to an
agreement with Distributors (directly or through affiliates),
handle customer orders and accounts with the Fund. Such
reference, however, is for convenience only and does not indicate
a legal conclusion of capacity.
Orders for the redemption of shares are effected at net asset
value subject to the same conditions concerning time of receipt
in proper form. It is the securities dealer's responsibility to
transmit the order in a timely fashion and any loss to the
customer resulting from failure to do so must be settled between
the customer and the securities dealer.
ADDITONAL INFORMATION REGARDING PURCHASES
Special Net Asset Value Purchases. As discussed in the
Prospectuses of the Franklin Investment Grade Income Fund and the
Franklin Rising Dividends Fund under "How to Buy Shares of the
Fund - Description of Special Net Asset Value Purchases," certain
categories of investors may purchase shares of such Funds at net
asset value (without a front-end or contingent deferred sales
charge). Distributors or one of its affiliates may make payments,
out of its own resources, to securities dealers who initiate and
are responsible for such purchases, as indicated below. As a
condition of these payments, Distributors or its affiliates may
require reimbursement from the securities dealers with respect to
certain redemptions made within 12 months of the calendar month
following purchase, as well as other conditions, all of which may
be imposed by an agreement between Distributors, or its
affiliates, and the securities dealer.
The following amounts will be paid by Distributors or one of its
affiliates, out of its own resources, to securities dealers who
initiate and are responsible for (i) purchases of most equity and
fixed-income Franklin Templeton Funds made at net asset value by
certain designated retirement plans (excluding IRA and IRA
rollovers): 1.00% on sales of $1 million but less than $2
million, plus 0.80% on sales of $2 million but less than $3
million, plus 0.50% on sales of $3 million but less than $50
million, plus 0.25% on sales of $50 million but less than $100
million, plus 0.15% on sales of $100 million or more; and (ii)
purchases of most fixed-income Franklin Templeton Funds made at
net asset value by non-designated retirement plans: 0.75% on
sales of $1 million but less than $2 million, plus 0.60% on sales
of $2 million but less than $3 million, plus 0.50% on sales of $3
million but less than $50 million, plus 0.25% on sales of $50
million but less than $100 million, plus 0.15% on sales of $100
million or more. These payment breakpoints are reset every 12
months for purposes of additional purchases. With respect to
purchases made at net asset value by certain trust companies and
trust departments of banks and certain retirement plans of
organizations with collective retirement plan assets of $10
million or more, Distributors, or one of its affiliates, out of
its own resources, may pay up to 1% of the amount invested.
Letter of Intent. An investor may qualify for a reduced sales
charge on the purchase of shares of a Fund, as described in the
Prospectuses. At any time within 90 days after the first
investment which the investor wants to qualify for the reduced
sales charge, a signed Shareholder Application, with the Letter
of Intent section completed, may be filed with a Fund. After the
Letter of Intent is filed, each additional investment will be
entitled to the sales charge applicable to the level of
investment indicated on the Letter of Intent. Sales charge
reductions based upon purchases in more than one of the Franklin
Templeton Funds will be effective only after notification to
Distributors that the investment qualifies for a discount. The
shareholder's holdings in the Franklin Templeton Funds acquired
more than 90 days before the Letter of Intent is filed will be
counted towards completion of the Letter of Intent but will not
be entitled to a retroactive downward adjustment in the sales
charge. Any redemptions made by the shareholder, other than by a
designated benefit plan during the 13-month period will be
subtracted from the amount of the purchases for purposes of
determining whether the terms of the Letter of Intent have been
completed. If the Letter of Intent is not completed within the
13-month period, there will be an upward adjustment of the sales
charge, depending upon the amount actually purchased (less
redemptions) during the period. The upward adjustment does not
apply to designated benefit plans. An investor who executes a
Letter of Intent prior to a change in the sales charge structure
for a Fund will be entitled to complete the Letter of Intent at
the lower of (i) the new sales charge structure; or (ii) the
sales charge structure in effect at the time the Letter of Intent
was filed with the Fund.
As mentioned in the Prospectuses, five percent (5%) of the amount
of the total intended purchase will be reserved in shares of a
Fund registered in the investor's name, unless the investor is a
designated benefit plan. If the total purchases, less
redemptions, equal the amount specified under the Letter, the
reserved shares will be deposited to an account in the name of
the investor or delivered to the investor or the investor's
order. If the total purchases, less redemptions, exceed the
amount specified under the Letter of Intent and is an amount
which would qualify for a further quantity discount, a
retroactive price adjustment will be made by Distributors and the
dealer through whom purchases were made pursuant to the Letter of
Intent (to reflect such further quantity discount) on purchases
made within 90 days before and on those made after filing the
Letter. The resulting difference in offering price will be
applied to the purchase of additional shares at the offering
price applicable to a single purchase or the dollar amount of the
total purchases. If the total purchases, less redemptions, are
less than the amount specified under the Letter, the investor
will remit to Distributors an amount equal to the difference in
the dollar amount of sales charge actually paid and the amount of
sales charge which would have applied to the aggregate purchases
if the total of such purchases had been made at a single time.
Upon such remittance, the reserved shares held for the investor's
account will be deposited to an account in the name of the
investor or delivered to the investor or to the investor's order.
If within 20 days after written request such difference in sales
charge is not paid, the redemption of an appropriate number of
reserved shares to realize such difference will be made. In the
event of a total redemption of the account prior to fulfillment
of the Letter of Intent, the additional sales charge due will be
deducted from the proceeds of the redemption, and the balance
will be forwarded to the investor.
If a Letter of Intent is executed on behalf of a benefit plan
(such plans are described under "Purchases at Net Asset Value" in
the Prospectuses of the Franklin Investment Grade Income Fund and
the Franklin Rising Dividends Fund), the level and any reduction
in sales charge for these designated benefit plans will be based
on actual plan participation and the projected investments in the
Franklin Templeton Funds under the Letter of Intent. Benefit
plans are not subject to the requirement to reserve 5% of the
total intended purchase, or to any penalty as a result of the
early termination of a plan, nor are benefit plans entitled to
receive retroactive adjustments in price for investments made
before executing the Letter of Intent.
REDEMPTIONS IN KIND
Each Fund has committed itself to pay in cash (by check) all
requests for redemption by any shareholder of record, limited in
amount, however, during any 90-day period to the lesser of
$250,000 or 1% of the value of the Fund's net assets at the
beginning of such period. Such commitment is irrevocable without
the prior approval of the SEC. In the case of requests for
redemption in excess of such amounts, the trustees reserve the
right to make payments in whole or in part in securities or other
assets of the Fund from which the shareholder is redeeming, in
case of an emergency, or if the payment of such a redemption in
cash would be detrimental to the existing shareholders of such
Fund. In such circumstances, the securities distributed would be
valued at the price used to compute the Fund's net assets. Should
a Fund do so, a shareholder may incur brokerage fees in
converting the securities to cash. The Funds do not intend to
redeem illiquid securities in kind; however, should it happen,
shareholders may not be able to timely recover their investment
and may also incur brokerage costs in selling such securities.
REDEMPTIONS BY THE FUNDS
Due to the relatively high cost of handling small investments,
each Fund reserves the right to redeem, involuntarily, at net
asset value, the shares of any shareholder whose account has a
value of less than one-half of the initial minimum investment
required for that shareholder, but only where the value of such
account has been reduced by the shareholder's prior voluntary
redemption of shares. Until further notice, it is the present
policy of each Fund not to exercise this right with respect to
any shareholder whose account has a value of $50 or more in the
Franklin Rising Dividends Fund or the Franklin Investment Grade
Income Fund and $12,500 in the Franklin Corporate Qualified
Dividend Fund. In any event, before a Fund redeems such shares
and sends the proceeds to the shareholder, it will notify the
shareholder that the value of the shares in the account is less
than the minimum amount and allow the shareholder 30 days to make
an additional investment in an amount which will increase the
value of the account to at least $100 in the Franklin Rising
Dividends Fund or the Franklin Investment Grade Income Fund and
$25,000 in the Franklin Corporate Qualified Dividend Fund.
CALCULATION OF NET ASSET VALUE
As noted in the Prospectuses, each Fund generally calculates net
asset value as of 1:00 p.m. Pacific time each day that the
Exchange is open for trading. As of the date of this SAI, the
Trust is informed that the Exchange observes the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
The Funds' portfolio securities are valued as stated in each
Fund's Prospectus. Generally, trading in corporate bonds, U.S.
government securities and money market instruments is
substantially completed each day at various times prior to the
close of the Exchange. The values of such securities used in
computing the net asset value of each Fund's shares are
determined as of such times. Occasionally, events affecting the
values of such securities may occur between the times at which
they are determined and 1:00 p.m. Pacific time which will not be
reflected in the computation of a Fund's net asset value. If
events materially affecting the value of such securities occur
during such period, then these securities will be valued at their
fair value as determined in good faith by the Board of Trustees.
REINVESTMENT DATE
Shares acquired through the reinvestment of dividends will be
purchased at net asset value determined on the business day
following the dividend record date (sometimes known as the "ex-
dividend date"). The processing date for the reinvestment of
dividends may vary from month to month, and does not affect the
amount or value of the shares acquired.
SPECIAL SERVICES
The Trust and Institutional Services Division of Distributors
provides specialized services, including recordkeeping, for
institutional investors of the Funds. The cost of these services
is not borne by the Funds.
Investor Services may pay certain financial institutions which
maintain omnibus accounts with the Funds on behalf of numerous
beneficial owners for recordkeeping operations performed with
respect to such beneficial owners. For each beneficial owner in
the omnibus account, a Fund may reimburse Investor Services an
amount not to exceed the per account fee which the Fund normally
pays Investor Services. Such financial institutions may also
charge a fee for their services directly to their clients.
ADDITIONAL INFORMATION REGARDING TAXATION
As stated in the Prospectuses, each of the Funds has elected to
be treated as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code").
The trustees reserve the right not to maintain the qualification
of a Fund as a regulated investment company if they determine
such course of action to be beneficial to shareholders. In such
case, a Fund will be subject to federal and possibly state
corporate taxes on its taxable income and gains, and
distributions to shareholders will be taxable to the extent of
the Fund's available earnings and profits.
Subject to the limitations discussed below, all or a portion of
the income distributions paid by a Fund may be treated by
corporate shareholders as qualifying dividends for purposes of
the dividends-received deduction under federal income tax law. If
the aggregate qualifying dividends received by a Fund (generally,
dividends from U.S. domestic corporations, the stock in which is
not debt-financed by the Fund and is held for at least a minimum
holding period) is less than 100% of its distributable income,
then the amount of the Fund's dividends paid to corporate
shareholders which may be designated as eligible for such
deduction will not exceed the aggregate qualifying dividends
received by the Fund for the taxable year. The amount or
percentage of income qualifying for the corporate dividends-
received deduction will be provided by a Fund annually in a
notice to shareholders mailed shortly after the end of the Fund's
fiscal year.
The Code requires all funds to distribute at least 98% of their
taxable ordinary income earned during the calendar year and at
least 98% of their capital gain net income earned during the
twelve month period ending October 31 of each year (in addition
to amounts from the prior year that were neither distributed nor
taxed to a Fund) to shareholders by December 31 of each year in
order to avoid the imposition of a federal excise tax. Under
these rules, certain distributions which are declared in October,
November or December but which, for operational reasons, may not
be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by a Fund and received by the
shareholder on December 31 of the calendar year in which they are
declared. Each Fund intends as a matter of policy to declare such
dividends, if any, in December and to pay these dividends in
December or January to avoid the imposition of this tax, but does
not guarantee that its distributions will be sufficient to avoid
any or all federal excise taxes.
Redemptions and exchanges of Fund shares are taxable transactions
for federal and state income tax purposes. For most shareholders,
gain or loss will be recognized in an amount equal to the
difference between the shareholder's basis in the shares and the
amount received, subject to the rules described below. If such
shares are a capital asset in the hands of the shareholder, gain
or loss will be capital gain or loss and will be long-term for
federal income tax purposes if the shares have been held for more
than one year.
All or a portion of the sales charge incurred in purchasing
shares of a Fund will not be included in the federal tax basis of
such shares sold or exchanged within ninety (90) days of their
purchase (for purposes of determining gain or loss with respect
to such shares) if the sales proceeds are reinvested in the Fund
or in another fund in the Franklin Templeton Funds and a sales
charge which would otherwise apply to the reinvestment is reduced
or eliminated. Any portion of such sales charge excluded from the
tax basis of the shares sold will be added to the tax basis of
the shares acquired in the reinvestment. Shareholders should
consult with their tax advisors concerning the tax rules
applicable to the redemption or exchange of Fund shares.
All or a portion of a loss realized upon a redemption of shares
will be disallowed to the extent other shares of a Fund are
purchased (through reinvestment of dividends or otherwise) within
30 days before or after such redemption. Any loss disallowed
under these rules will be added to the tax basis of the shares
purchased.
The Investment Grade Income Fund's investment in options and
futures contracts are subject to many complex and special tax
rules. For example, the Fund's treatment of options on futures
contracts, regulated futures contracts, and certain foreign
currency forward contracts and options thereon is generally
governed by Section 1256 of the Code.
Absent a tax election to the contrary, each such Section 1256
position held by the Investment Grade Income Fund will be marked-
to-market (i.e., treated as if it were sold for fair market
value) on the last business day of the Fund's fiscal year, and
all gain or loss associated with mark-to-market positions at
fiscal year end (except certain foreign currency gain or loss
covered by Section 988 of the Code) will generally be treated as
60% long-term capital gain or loss and 40% short-term capital
gain or loss. The effect of Section 1256 mark-to-market rules may
be to accelerate income or to convert what otherwise would have
been long-term capital gains into short-term capital gains or
short-term capital losses into long-term capital losses within
the Fund. The acceleration of income on Section 1256 positions
may require the Fund to recognize taxable income without the
corresponding receipt of cash. In order to generate cash to
satisfy the distribution requirements of the Code, the Fund may
be required to dispose of portfolio securities that it otherwise
would have continued to hold or to use cash flows from other
sources such as the sale of Fund shares. In these ways, any or
all of these rules may affect both the amount, character and
timing of income distributed to shareholders by the Fund.
When the Investment Grade Income Fund holds an option or contract
which substantially diminishes the Fund's risk of loss with
respect to another position of the Fund (as might occur in some
hedging transactions), this combination of positions could be
treated as a "straddle" for tax purposes, resulting in possible
deferral of losses, adjustments in the holding periods of Fund
securities and conversion of short-term capital losses into long-
term capital losses. Certain tax elections exist for mixed
straddles (i.e., straddles comprised of at least one Section 1256
position and at least one non-Section 1256 position) which may
reduce or eliminate the operation of these straddle rules.
As a regulated investment company, a Fund is also subject to the
requirement that less than 30% of its annual gross income be
derived from the sale or other disposition of securities and
certain other investments held for less than three months ("short-
short income"). This requirement may limit a Fund's ability to
engage in options, straddles, hedging transactions and forward or
futures contracts because these transactions are often
consummated in less than three months, may require the sale of
portfolio securities held less than three months and may, as in
the case of short sales of portfolio securities, reduce the
holding periods of certain securities within the Fund, resulting
in additional short-short income for a Fund.
The Investment Grade Income Fund will monitor its transactions in
such options and contracts and may make certain other tax
elections in order to mitigate the effect of the above rules and
to prevent disqualification of the Fund as a regulated investment
company under Subchapter M of the Code.
Foreign exchange gains and losses realized by the Investment
Grade Income Fund in connection with certain transactions
involving foreign currencies, foreign currency payables or
receivables, foreign currency-denominated debt securities,
foreign currency forward contracts, and options or futures
contracts on foreign currencies are subject to special tax rules
which may cause such gains and losses to be treated as ordinary
income and losses rather than capital gains and losses and may
affect the amount and timing of the Fund's income or loss from
such transactions and in turn its distributions to shareholders.
In order for a Fund to qualify as a regulated investment company,
at least 90% of the Fund's annual gross income must consist of
dividends, interest and certain other types of qualifying income,
and no more than 30% of its annual gross income may be derived
from the sale or other disposition of securities or certain other
instruments held for less than 3 months. Foreign exchange gains,
derived by a Fund with respect to a Fund's business of investing
in stock or securities, or options or futures with respect to
such stock or securities, constitutes qualifying income for
purposes of the 90% limitation.
Currency speculation or the use of currency forward contracts or
other currency instruments for non-hedging purposes may generate
gains deemed to be not directly related to a Fund's principal
business of investing in stock or securities and related options
or futures. Under current law, non-directly-related gains arising
from foreign currency positions or instruments held for less than
3 months are treated as derived from the disposition of
securities held less than 3 months in determining a Fund's
compliance with the 30% limitation. A Fund will limit its
activities involving foreign exchange gains to the extent
necessary to comply with these requirements.
Foreign securities which meet the definition in the Code of a
Passive Foreign Investment Company ("PFIC") may subject a Fund to
an income tax and interest charge with respect to such
investments. To the extent possible, a Fund will avoid such
treatment by not investing in PFIC securities or by adopting
other tax strategies for any PFIC securities it does purchase.
If a Fund owns shares in a foreign corporation that constitutes a
PFIC for federal income tax purposes and the Fund does not elect
to treat the foreign corporation as a "qualified electing fund"
within the meaning of the Code, the Fund may be subject to U.S.
federal income taxation on a portion of any "excess distribution"
it receives from the PFIC or any gain it derives from the
disposition of such shares, even if such income is distributed as
a taxable dividend by the Fund to its U.S. shareholders. A Fund
may also be subject to additional interest charges in respect of
deferred taxes arising from such distributions or gains. Any
federal income tax paid by a Fund as a result of its ownership of
shares in a PFIC will not give rise to a deduction or credit to
the Fund or to any shareholder. A PFIC means any foreign
corporation if, for the taxable year involved, either (i) it
derives at least 75% of its gross income from "passive income"
(including, but not limited to, interest, dividends, royalties,
rents and annuities), or (ii) on average, at least 50% of the
value (or adjusted basis, if elected) of the assets held by the
corporation produce "passive income."
On April 1, 1992, proposed U.S. Treasury regulations were issued
regarding a special mark-to-market election for regulated
investment companies. Under these regulations, the annual mark-to-
market gain, if any, on shares of stock held by a Fund in a PFIC
would be treated as an excess distribution received by the Fund
in the current year, eliminating the deferral and the related
interest charge. Such excess distribution amounts are treated as
ordinary income, which a Fund will be required to distribute to
shareholders even though the Fund has not received any cash to
satisfy this distribution requirement. These regulations would be
effective for taxable years ending after promulgation of the
proposed regulations as final regulations.
The Investment Grade Income Fund may be subject to foreign
withholding taxes on income from certain of its foreign
securities. Because the Fund has invested and intends in the
future to invest 50% or less of its total assets in securities of
foreign corporations, it is not entitled under the Code to pass
through to its shareholders their pro rata share of the foreign
taxes paid by the Fund. These taxes will be taken as a deduction
by the Fund.
Gain realized by a Fund from transactions entered into after
April 30, 1993 that are deemed to constitute "conversion
transactions" under the Code and which would otherwise produce
capital gain may be recharacterized as ordinary income to the
extent that such gain does not exceed an amount defined by the
Code as the "applicable imputed income amount." A conversion
transaction is any transaction in which substantially all of a
Fund's expected return is attributable to the time value of the
Fund's net investment in such transaction and any one of the
following criteria are met: 1) there is an acquisition of
property with a substantially contemporaneous agreement to sell
the same or substantially identical property in the future; 2)
the transaction is an applicable straddle; 3) the transaction was
marketed or sold to the Fund on the basis that it would have the
economic characteristics of a loan but would be taxed as capital
gain; or 4) the transaction is specified in Treasury regulations
to be promulgated in the future. The applicable imputed income
amount, which represents the deemed return on the conversion
transaction based upon the time value of money, is computed using
a yield equal to 120 percent of the applicable federal rate,
reduced by any prior recharacterizations under this provision or
Section 263(g) of the Code concerning capitalized carrying costs.
THE TRUST'S UNDERWRITER
Distributors acts as principal underwriter in a continuous public
offering for shares of each Fund pursuant to agreements with the
Funds. The underwriting agreements are in effect until March 31,
1995 and will continue in effect for successive annual periods
provided that their continuance is specifically approved at least
annually by a vote of the Trust's Board of Trustees, or by a vote
of the holders of a majority of each Fund's outstanding voting
securities, and in either event by a majority vote of the Trust's
trustees who are not parties to the underwriting agreements or
interested persons of any such party (other than as trustees of
the Trust), cast in person at a meeting called for that purpose.
The underwriting agreements terminate automatically in the event
of their assignment and may be terminated by either party on 60
days' written notice.
Distributors pays the expenses of distribution of each Fund's
shares, including advertising expenses and the costs of printing
sales material and prospectuses used to offer shares to the
public. Each Fund pays the expenses of preparing and printing
amendments to its registration statements and prospectuses (other
than those necessitated by the activities of Distributors) and of
sending prospectuses to existing shareholders.
Distributors allows the entire underwriting commission on the
sale of each Fund's shares to the securities dealer of record, if
any, on an account.
In connection with the offering of the Funds' shares, aggregate
underwriting commissions for the fiscal year ended December 1992,
for the period ended September 30, 1993, and for the fiscal year
ended September 30, 1994 were $4,146,555, $6,255,358, and
$1,346,600 respectively. After allowances to dealers,
Distributors retained $0, $1,536 and $16,095, during the fiscal
year ended December 1992, the period ended September 30, 1993 and
the fiscal year ended September 30, 1994, respectively.
Distributors may be entitled to reimbursement under the
distribution plans of the Funds as discussed below. Except as
noted, Distributors received no other compensation from the Funds
for acting as underwriter.
DISTRIBUTION PLANS
The Funds have each adopted a Distribution Plan pursuant to Rule
12b-1 under the 1940 Act (the "Plans" or "Plan") whereby each
Fund may pay up to a maximum of 0.25% per annum of the Fund's
average daily net assets for expenses incurred in the promotion
and distribution of Fund shares. In addition, for the Rising
Dividends Fund, the Plan provides that up to an additional 0.25%
may be paid to Distributors or others as a service fee to
reimburse such service providers for personal services provided
to shareholders of the Fund and/or the maintenance of shareholder
accounts. Thus, the amounts payable under the Plan relating to
the Rising Dividends Fund total 0.50%.
Pursuant to each Plan, Distributors or others will be entitled to
be reimbursed each quarter (up to the maximum as stated above)
for actual expenses incurred in the distribution and promotion of
a Fund's shares, including, but not limited to, the printing of
prospectuses and reports used for sales purposes, expenses of
preparing and distributing sales literature and related expenses,
advertisements, and other distribution-related expenses,
including a prorated portion of Distributors' overhead expenses
attributable to the distribution of Fund shares, as well as any
distribution or service fees paid to securities dealers or their
firms or others who have executed a servicing agreement with a
Fund, Distributors or its affiliates.
In addition to the payments to which Distributors or others are
entitled under each Plan, the Plans also provide that to the
extent a Fund, the Manager or Distributors or other parties on
behalf of a Fund, the Manager or Distributors make payments that
are deemed to be payments for the financing of any activity
primarily intended to result in the sale of shares of the Fund
within the context of Rule 12b-1 under the 1940 Act, then such
payments shall also be deemed to have been made pursuant to the
Plan.
In no event shall the aggregate asset-based sales charges which
include payments made under the Plans, plus any other payments
deemed to be made pursuant to the Plans, exceed the amount
permitted to be paid pursuant to the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., Article
III, Section 26(d)4.
The terms and provisions of the Plans relating to required
reports, term, and approval are consistent with Rule 12b-1. The
Plans do not permit unreimbursed expenses incurred in a
particular year to be carried over to or reimbursed in subsequent
years.
To the extent fees are for distribution or marketing functions,
as distinguished from administrative servicing or agency
transactions, certain banks will not be entitled to participate
in the Plans as a result of applicable federal law prohibiting
certain banks from engaging in the distribution of mutual fund
shares. Such banking institutions, however, are permitted to
receive fees under the Plans for administrative servicing or for
agency transactions. If a bank were prohibited from providing
such services, its customers who are shareholders would be
permitted to remain shareholders of the Funds and alternate means
for continuing the servicing of such shareholders would be
sought. In such an event, changes in the services provided might
occur and such shareholders might no longer be able to avail
themselves of any automatic investment or other services then
being provided by the bank. It is not expected that shareholders
would suffer any adverse financial consequences as a result of
any of these changes. Securities laws of states in which the
Funds' shares are offered for sale may differ from the
interpretations of federal law expressed herein, and banks and
financial institutions selling shares of the Funds may be
required to register as dealers pursuant to state law.
Each Plan has been approved by Resources, the initial shareholder
of the Trust, and by the trustees of the Trust, including those
trustees who are not interested persons, as defined in the 1940
Act. Each Plan is effective through March 31, 1995 and renewable
annually by a vote of the Trust's Board of Trustees, including a
majority vote of the trustees who are non-interested persons of
the Trust and who have no direct or indirect financial interest
in the operation of the Plan, cast in person at a meeting called
for that purpose. It is also required that the selection and
nomination of such trustees be done by the non-interested
trustees. Each Plan and any related agreement may be terminated
at any time, without any penalty, by vote of a majority of the
non-interested trustees on not more than 60 days' written notice,
by Distributors on not more than 60 days' written notice, or by
any act that constitutes an assignment of the management
agreement with the Manager or the underwriting agreement with
Distributors, or by vote of a majority of a Fund's outstanding
shares. Distributors or any dealer or other firm may also
terminate their respective distribution or service agreement at
any time upon written notice.
The Plans and any related agreements may not be amended to
increase materially the amount to be spent for distribution
expenses without approval by a majority of the respective Fund's
outstanding shares, and all material amendments to the Plans or
any related agreements shall be approved by a vote of the non-
interested trustees, cast in person at a meeting called for the
purpose of voting on any such amendment.
Distributors is required to report in writing to the Board of
Trustees at least quarterly on the amounts and purpose of any
payment made under each Plan and any related agreements, as well
as to furnish the Board of Trustees with such other information
as may reasonably be requested in order to enable the Board of
Trustees to make an informed determination of whether the Plan
should be continued.
For the period ended September 30, 1994, the total amounts paid
by the Funds to Distributors, pursuant to each Plan, to reimburse
Distributors for service fees paid to dealers were:
FUND AMOUNT
Franklin Corporate Qualified $ 75,399
Dividend Fund
Franklin Rising Dividends Fund $1,449,195
Franklin Investment Grade $ 72,868
Income Fund
GENERAL INFORMATION
PERFORMANCE
As noted in the Prospectuses, each Fund may from time to time
quote various performance figures to illustrate the Fund's past
performance. Each Fund may occasionally cite statistics to
reflect its volatility or risk.
Performance quotations by investment companies are subject to
rules adopted by the SEC. These rules require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by a Fund be
accompanied by certain standardized performance information
computed as required by the SEC. Current yield, equivalent fully
taxable yield, and average annual compounded total return
quotations used by a Fund are based on the standardized methods
of computing performance mandated by the SEC. An explanation of
those and other methods used by each Fund to compute or express
performance follows.
TOTAL RETURN
The average annual total return is determined by finding the
average annual compounded rates of return over one-, five- and
ten-year periods, or fractional portion thereof, that would
equate an initial hypothetical $1,000 investment to its ending
redeemable value. The calculation assumes the maximum sales
charge is deducted from the initial $1,000 purchase order, and
income dividends and capital gains are reinvested at net asset
value. The quotation assumes the account was completely redeemed
at the end of each one-, five- and ten-year period and the
deduction of all applicable charges and fees. If a change is made
in the sales charge structure of a Fund, historical performance
information will be restated to reflect the maximum sales charge
in effect currently.
In considering the quotations of total return by the Funds,
investors should remember that the maximum sales charge reflected
in each quotation is a one time fee (charged on all direct
purchases) which will have its greatest impact during the early
stages of an investor's investment in a Fund. The actual
performance of an investment will be affected less by this charge
the longer an investor retains an investment in a Fund. The
average annual compounded rates of return for each Fund for the
indicated periods ended on the date of the financial statements
included herein was as follows:
ONE- FIVE- FROM
FUND NAME YEAR YEAR INCEPTION
Franklin Corporate Qualified
Dividend Fund -0.78% 8.50% 6.25%
Franklin Rising Dividends
Fund -7.75% 6.15% 7.04%
Franklin Investment Grade
Income Fund -5.19% 6.95% 5.45%
These figures were calculated according to the SEC formula:
P(1+T)n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the one-, five- or ten-year
periods at the end of the one-, five-, or ten-year periods
(or fractional portion thereof)
As discussed in each Prospectus, each Fund may quote total rates
of return in addition to its average annual total return. Such
quotations are computed in the same manner as the Funds' average
annual compounded rate, except that such quotations will be based
on each Fund's actual return for a specified period rather than
on its average return over one-, five- and ten-year periods, or
fractional portion thereof. The total rates of return for each
Fund for the indicated periods ended on the date of the financial
statements included herein were as follows:
ONE- FIVE- FROM
FUND NAME YEAR YEAR INCEPTION
Franklin Corporate Qualified
Dividend Fund -0.78% 50.38% 59.67%
Franklin Rising Dividends
Fund -7.75% 34.80% 69.06%
Franklin Investment Grade
Income Fund -5.19% 39.92% 50.63%
YIELD
Current yield reflects the income per share earned by each Fund's
portfolio investments.
Current yield is determined by dividing the net investment income
per share earned during a 30-day base period by the maximum
offering price per share on the last day of the period and
annualizing the result. Expenses accrued for the period include
any fees charged to all shareholders of a Fund during the base
period. The yield for each Fund for the 30-day period ended on
the date of the financial statements included herein was as
follows:
FUND YIELD
Franklin Corporate Qualified
Dividend Fund 4.44%
Franklin Rising Dividends Fund 1.84%
Franklin Investment Grade
Income Fund 5.06%
These figures were obtained using the following SEC formula:
Yield = 2[( a-b +1)6 - 1]
cd
where
a = dividends and interest earned during the period
b = net expenses accrued for the period
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
The Franklin Corporate Qualified Dividend Fund may also quote an
equivalent fully taxable yield which demonstrates the taxable
yield necessary to produce an after-tax yield equivalent to that
of a fund which invests in instruments which qualify for the 70%
corporate dividends-received deduction and assumes an effective
maximum federal tax rate of 10.5% on dividend income received
from the Fund. This tax rate is based on the maximum corporate
tax rate of 35% for 1994. Such yield is computed by dividing a
current net asset value by the amount of after-tax income
received at the current yield (computed as described above and
assuming 100% of the yield qualifies for the corporate dividends-
received deduction) divided by one minus the applicable corporate
tax rate. The equivalent fully taxable yield would not be an
appropriate comparison for individuals.
CURRENT DISTRIBUTION RATE
Yield, which is calculated according to a formula prescribed by
the SEC, is not indicative of the amounts which were or will be
paid to the Funds' shareholders. Amounts paid to shareholders are
reflected in the quoted current distribution rate. The current
distribution rate is computed by dividing the total amount of
dividends per share paid by a Fund during the past 12 months by a
current maximum offering price. The Franklin Corporate Qualified
Dividend Fund may also quote an equivalent fully taxable
distribution rate which demonstrates the taxable distribution
rate equivalent to the Franklin Corporate Qualified Dividend
Fund's current distribution rate (calculated as indicated above).
Under certain circumstances, such as when there has been a change
in the amount of dividend payout or a fundamental change in
investment policies, it might be appropriate to annualize the
dividends paid over the period such policies were in effect,
rather than using the dividends during the past 12 months. The
current distribution rate differs from the current yield
computation because it may include distributions to shareholders
from sources other than dividends and interest, such as premium
income from option writing and short-term capital gains, and is
calculated over a different period of time. The current
distribution rate for each Fund for the fiscal year ended
September 30, 1994 was as follows:
FUND AMOUNT
Franklin Corporate Qualified 4.14%
Dividend Fund
Franklin Rising Dividends Fund 1.56%
Franklin Investment Grade 4.30%
Income Fund
VOLATILITY
Occasionally statistics may be used to specify Fund volatility or
risk. Measures of volatility or risk are generally used to
compare a Fund's net asset value or performance relative to a
market index. One measure of volatility is beta. Beta is the
volatility of a fund relative to the total market as represented
by the S&P 500 Stock Index. A beta of more than 1.00 indicates
volatility greater than the market, and a beta of less than 1.00
indicates volatility less than the market. Another measure of
volatility or risk is standard deviation. Standard deviation is
used to measure variability of net asset value or total return
around an average, over a specified period of time. The premise
is that greater volatility connotes greater risk undertaken in
achieving performance.
OTHER PERFORMANCE QUOTATIONS
With respect to those categories of investors who are permitted
to purchase shares of a Fund at net asset value, sales literature
pertaining to a Fund may quote a current distribution rate,
yield, total return, average annual total return and other
measures of performance as described elsewhere in this SAI with
the substitution of net asset value for the public offering
price.
Sales literature referring to the use of each Fund as a potential
investment for Individual Retirement Accounts (IRAs), Business
Retirement Plans, and other tax-advantaged retirement plans may
quote a total return based upon compounding of dividends on which
it is presumed no federal income tax applies.
Regardless of the method used, past performance is not
necessarily indicative of future results, but is an indication of
the return to shareholders only for the limited historical period
used.
A Fund may include in its advertising or sales material
information relating to investment objectives and performance
results of funds belonging to the Templeton Group of Funds.
Resources is the parent company of the advisers and underwriter
of both the Franklin Group of Funds and Templeton Group of Funds.
COMPARISONS
To help investors better evaluate how an investment in a Fund
might satisfy their investment objective, advertisements and
other materials regarding each Fund may discuss various measures
of a Fund's performance as reported by various financial
publications. Materials may also compare performance (as
calculated above) to performance as reported by other
investments, indices, and averages. Such comparisons may include,
but are not limited to, the following examples:
a) Dow Jones Composite Average or its component averages - an
unmanaged index composed of 30 blue-chip industrial corporation
stocks (Dow Jones Industrial Average), 15 utilities company
stocks (Dow Jones Utilities Average), and 20 transportation
company stocks. Comparisons of performance assume reinvestment of
dividends.
b) Standard & Poor's 500 Stock Index or its component indices -
an unmanaged index composed of 400 industrial stocks, 40
financial stocks, 40 utilities stocks, and 20 transportation
stocks. Comparisons of performance assume reinvestment of
dividends.
c) The New York Stock Exchange composite or component indices -
unmanaged indices of all industrial, utilities, transportation,
and finance stocks listed on the New York Stock Exchange.
d) Wilshire 5000 Equity Index - represents the return on the
market value of all common equity securities for which daily
pricing is available. Comparisons of performance assume
reinvestment of dividends.
e) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed
Income Fund Performance Analysis - measure total return and
average current yield for the mutual fund industry and rank
individual mutual fund performance over specified time periods,
assuming reinvestment of all distributions, exclusive of any
applicable sales charges.
f) CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc. - analyzes price, current yield, risk, total
return, and average rate of return (average annual compounded
growth rate) over specified time periods for the mutual fund
industry.
g) Mutual Fund Source Book, published by Morningstar, Inc. -
analyzes price, yield, risk, and total return for equity funds.
h) Financial publications: The Wall Street Journal and Business
Week, Changing Times, Financial World, Forbes, Fortune, and Money
magazines - provide performance statistics over specified time
periods.
i) Consumer Price Index (or Cost of Living Index), published by
the U.S. Bureau of Labor Statistics - a statistical measure of
change, over time, in the price of goods and services in major
expenditure groups.
j) Stocks, Bonds, Bills, and Inflation, published by Ibbotson
Associates - historical measure of yield, price, and total return
for common and small company stock, long-term government bonds,
Treasury bills, and inflation.
k) Savings and Loan Historical Interest Rates - as published in
the U.S. Savings & Loan League Fact Book.
l) Historical data supplied by the research departments of First
Boston Corporation, the J. P. Morgan companies, Salomon Brothers,
Merrill Lynch, Pierce, Fenner & Smith, Lehman Brothers and
Bloomberg L.P.
m) Standard & Poor's 100 Stock Index - an unmanaged index based
on the prices of 100 blue-chip stocks, including 92 industrials,
one utility, two transportation companies, and 5 financial
institutions. The S&P 100 Stock Index is a smaller more flexible
index for options trading.
From time to time, advertisements or information for a Fund may
include a discussion of certain attributes or benefits to be
derived by an investment in a Fund. Such advertisements or
information may include symbols, headlines, or other material
which highlight or summarize the information discussed in more
detail in the communication.
Advertisements or information may also compare a Fund's
performance to the return on certificates of deposit or other
investments. Investors should be aware, however, that an
investment in the Funds involves the risk of fluctuation of
principal value, a risk generally not present in an investment in
a certificate of deposit issued by a bank. For example, as the
general level of interest rates rise, the value of a Fund's fixed-
income investments, as well as the value of its shares which are
based upon the value of such portfolio investments, can be
expected to decrease. Conversely, when interest rates decrease,
the value of a Fund's shares can be expected to increase.
Certificates of deposit are frequently insured by an agency of
the U.S. government. An investment in a Fund is not insured by
any federal, state or private entity.
In assessing such comparisons of performance an investor should
keep in mind that the composition of the investments in the
reported indices and averages is not identical to the Funds'
portfolios, that the indices and averages are generally
unmanaged, and that the items included in the calculations of
such averages may not be identical to the formula used by the
Funds to calculate their figures. In addition there can be no
assurance that the Fund will continue this performance as
compared to such other averages.
From time to time, advertisements or information for the Franklin
Rising Dividends Fund may include a discussion of certain
attributes of investing in a fund with its investment philosophy
of investing in public companies that constantly raise their
dividends and should, over time, also enjoy increases in the
price of their stock.
OTHER FEATURES AND BENEFITS
Each Fund may help investors achieve various investment goals
such as accumulating money for retirement, saving for a down
payment on a home, college cost and/or other long-term goals. The
Franklin College Costs Planner may assist an investor in
determining how much money must be invested on a monthly basis in
order to have a projected amount available in the future to fund
a child's college education. (Projected college cost estimates
are based upon current costs published by the College Board.) The
Franklin Retirement Planning Guide leads an investor through the
steps to start a retirement savings program. Of course, an
investment in the Funds cannot guarantee that such goals will be
met.
MISCELLANEOUS INFORMATION
The Funds of the Trust are members of the Franklin Templeton
Group, one of the largest mutual fund organizations in the United
States and may be considered in a program for diversification of
assets. Founded in 1947, Franklin, one of the oldest mutual fund
organizations, has managed mutual funds for over 47 years and now
services more than 2.5 million shareholder accounts. In 1992,
Franklin, a leader in managing fixed-income mutual funds and an
innovator in creating domestic equity funds, joined forces with
Templeton Worldwide, Inc., a pioneer in international investing.
Together, the Franklin Templeton Group has over $114 billion in
assets under management for more than 3.7 million shareholder
accounts and offers 111 U.S.-based mutual funds. The Fund may
identify itself by its NASDAQ or CUSIP number.
The Dalbar Surveys, Inc. broker/dealer survey has ranked Franklin
number one in service quality for five of the past seven years.
The shareholders of a Massachusetts business trust could, under
certain circumstances, be held personally liable as partners for
its obligations. The Trust's Agreement and Declaration of Trust,
however, contains an express disclaimer of shareholder liability
for acts or obligations of the Trust. The Declaration of Trust
also provides for indemnification and reimbursement of expenses
out of each Fund's assets for any shareholder held personally
liable for obligations of that Fund or the Trust. The Declaration
of Trust provides that the Trust shall, upon request, assume the
defense of any claim made against any shareholder for any act or
obligation of a Fund or the Trust and shall satisfy any judgment
thereon. All such rights are limited to the assets of the Fund of
which a shareholder holds shares. The Declaration of Trust
further provides that the Trust may maintain appropriate
insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of the Trust, its shareholders,
trustees, officers, employees and agents to cover possible tort
and other liabilities. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which both inadequate insurance exists and the
Fund itself is unable to meet its obligations.
The Franklin Corporate Qualified Dividend Fund changed its name
from the Franklin Corporate Cash Portfolio effective May 1, 1991.
OWNERSHIP AND AUTHORITY DISPUTES
In the event of disputes involving multiple claims of ownership
or authority to control a shareholder's account, a Fund has the
right (but has no obligation) to: (a) freeze the account and
require the written agreement of all persons deemed by the Fund
to have a potential property interest in the account, prior to
executing instructions regarding the account; (b) interplead
disputed funds or accounts with a court of competent
jurisdiction; or (c) surrender ownership of all or a portion of
the account to the Internal Revenue Service in response to a
Notice of Levy.
APPENDIX
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt-edged." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have predominantly
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments
may be very moderate and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
AAA - This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay
principal and interest.
AA - Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from AAA
issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to
pay principal and interest for bonds in this category than for
bonds in the A category.
BB, B, CCC, CC - Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligations. BB indicates the
lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
VALUE
SHARES FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND (NOTE 1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)ADJUSTABLE RATE PREFERRED STOCKS 18.5%
COMMERCIAL BANKS & BANK HOLDING COMPANIES 3.1%
22,400 Marine Midland Bank, Inc., 6.00% adj. rate pfd., Series A....................... $ 971,600
-----------
ELECTRIC UTILITIES 8.2%
10,000 Arizona Public Service Co., 6.00% adj. rate pfd., Series Q ...................... 830,000
3,300 Cleveland Electric Illuminating Co., 7.16% adj. rate pfd., Series L ............. 231,000
22,500 Niagara Mohawk Power Corp., 8.40% cum. adj. rate pfd., Series C ................. 517,500
50,100 Toledo Edison Co., 8.14% cum. adj. rate pfd., Series A .......................... 1,039,575
-----------
2,618,075
-----------
INDUSTRIAL 3.5%
22,275 USX Corp., 8.15% cum. adj. rate pfd. ............................................ 1,110,966
-----------
INSURANCE 3.7%
12,000 SunAmerica Corp., 7.10% cum. adj. rate pfd., Series A ........................... 1,191,000
-----------
TOTAL ADJUSTABLE RATE PREFERRED STOCKS (Cost $6,393,965) ................ 5,891,641
-----------
(b)AUCTION RATE PREFERRED STOCKS 31.6%
10(c) CNA Financial Corp., 3.596%, Series F .......................................... 1,004,499
10(c) General Electric Capital Corp., 3.585%, Series F ............................... 1,003,784
10(c) Houston Lighting & Power Co., 3.659%, Series A ................................. 1,003,151
1,000(d) Morgan (JP), Inc., 3.53%, Series C ............................................. 1,002,255
10(c) Northern Trust Corp., 3.615%, Series C ......................................... 1,003,113
15(c) Sara Lee Corp., 3.59%, Series B ................................................ 1,503,440
10(c) Southern California Gas Co., 3.61%, Series A ................................... 1,004,412
15(c) Transamerica Co., 3.69%, Series A-1 ............................................ 1,502,614
10(c) Virginia Electric & Power Co., 3.654%, Series 92-A ............................. 1,004,143
-----------
TOTAL AUCTION RATE PREFERRED STOCKS (COST $10,000,000) ................. 10,031,411
-----------
FIXED RATE PREFERRED STOCKS 24.3%
COMMERCIAL BANKS 4.6%
28,000 Bankers Trust New York, 7.375% flex rate pfd., Series J ........................ 1,457,142
-----------
FINANCIAL 7.7%
14(c) Ford Holdings, Inc., 4.95% flex rate auction pfd., Series K .................... 1,394,221
10,000 Household Finance Financial Co., 7.25% pfd., Series A .......................... 1,045,000
-----------
2,439,221
-----------
INDUSTRIAL 2.6%
28,913 McDermott, Inc., $2.60 cum. S.F., pfd., Series B ............................... 849,319
-----------
PHARMACEUTICALS 4.7%
15(c) Rhone-Poulenc Rorer, 4.70% flex rate auction pfd., Series 1 .................... 1,493,175
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, SEPTEMBER 30, 1994
(CONT.)
<TABLE>
<CAPTION>
VALUE
SHARES FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND (NOTE 1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FIXED RATE PREFERRED STOCKS (CONT.)
UTILITIES 4.7%
15,000 Louisiana Power & Light Co., 7.00% S. F., pfd. ................................. $ 1,483,125
-----------
TOTAL FIXED RATE PREFERRED STOCKS (COST $7,853,184) .................... 7,721,982
-----------
TOTAL ADJUSTABLE, AUCTION & FIXED RATE PREFERRED STOCKS
(COST $24,247,149) ................................................... 23,645,034
-----------
FACE
AMOUNT
- ----------
(e,f)RECEIVABLES FROM REPURCHASE AGREEMENTS 21.7%
$7,092,138 Joint Repurchase Agreement, 4.782%, 10/03/94 (Maturity Value $6,909,777)
(COST $6,907,025)
Collateral: U.S. Treasury Bills, 03/16/95 - 03/30/95
U.S. Treasury Notes, 3.875% - 9.375%, 11/15/94 - 03/31/99 ........ 6,907,025
-----------
TOTAL INVESTMENTS (COST $31,154,174) 96.1% ............................ 30,552,059
OTHER ASSETS AND LIABILITIES, NET 3.9% ................................ 1,238,307
-----------
NET ASSETS 100.0% ..................................................... $31,790,366
===========
At September 30, 1994, the net unrealized depreciation based on the cost of
investments for income tax purposes of $31,154,174 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost ....................................... $ 97,836
Aggregate gross unrealized depreciation for all investments in which there
was an excess of tax cost over value ....................................... (699,951)
-----------
Net unrealized depreciation ................................................. $ (602,115)
===========
</TABLE>
PORTFOLIO ABBREVIATION:
S.F. - Sinking Fund
(a)Dividend rates adjust quarterly in reference to various U.S. Treasury
benchmarks.
(b)Dividend rates adjust in response to periodic auctions, normally on a 49-day
cycle.
(c)1 share = $100,000 par value
(d)1 share = $1,000 par value
(e)Face amount for repurchase agreements is for the underlying collateral.
(f)See Note 1(f) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
VALUE
SHARES FRANKLIN RISING DIVIDENDS FUND (NOTE 1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 89.0%
BANKS 17.9%
172,700 Banc One Corp. ................................................................. $ 5,159,413
153,500 CoreStates Financial Corp. ..................................................... 4,086,938
260,000 Mercantile Bankshares Corp. .................................................... 5,752,500
226,000 National Commerce Bancorp. ..................................................... 5,424,000
89,900 River Forest Bancorp, Inc. ..................................................... 3,124,025
104,000 State Street Boston Corp. ...................................................... 3,796,000
387,000 TrustCo Bank Corp., New York ................................................... 8,223,750
248,700 Washington Federal Savings & Loan Association .................................. 5,067,263
234,000 Wilmington Trust Corp. ......................................................... 6,084,000
-----------
46,717,889
-----------
CONSUMER GOODS 14.9%
6,000 Alberto-Culver Co., Class A .................................................... 135,000
91,000 Campbell Soup Co. .............................................................. 3,594,500
376,000 Dibrell Brothers, Inc. ......................................................... 7,426,000
142,000 Philip Morris Cos., Inc. ....................................................... 8,679,750
62,000 Roto-Rooter, Inc. .............................................................. 1,519,000
368,800 Stride Rite Corp. .............................................................. 5,163,200
180,000 Universal Corp. ................................................................ 4,410,000
283,000 UST, Inc. ...................................................................... 8,100,875
-----------
39,028,325
-----------
DRUGS/HEALTH CARE 8.7%
100,000 Bristol-Myers Squibb Co. ....................................................... 5,737,500
181,000 Merck & Co., Inc. .............................................................. 6,425,500
67,000 Pfizer, Inc. ................................................................... 4,631,375
85,000 Schering-Plough Corp. .......................................................... 6,035,000
-----------
22,829,375
-----------
ENERGY 1.7%
40,000 Royal Dutch Petroleum Co., New York Shares ..................................... 4,295,000
-----------
FINANCIAL SERVICES 1.9%
64,200 Federal National Mortgage Association .......................................... 5,055,750
-----------
INDUSTRIAL 12.2%
104,000 Genuine Parts Co. .............................................................. 3,653,000
313,200 Hanson, Plc., ADR .............................................................. 5,676,750
144,500 Kimball International, Inc., Class B ........................................... 3,395,750
62,300 Loctite Corp. .................................................................. 2,678,900
117,000 Masco Corp. .................................................................... 2,822,625
75,000 Monsanto Co. ................................................................... 6,028,125
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, SEPTEMBER 30, 1994
(CONT.)
<TABLE>
<CAPTION>
VALUE
SHARES FRANKLIN RISING DIVIDENDS FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
INDUSTRIAL (CONT.)
121,250 Myers Industries, Inc. ......................................................... $ 2,091,563
252,000 Newell Co. ..................................................................... 5,607,000
------------
31,953,713
------------
INSURANCE - LIFE & HEALTH 2.6%
152,000 Torchmark Corp. ................................................................ 6,669,000
------------
INSURANCE - PROPERTY CASUALTY 12.9%
160,100 Allied Group, Inc. ............................................................. 4,843,025
86,000 Chubb Corp. .................................................................... 6,116,750
20,000 Cincinnati Financial Corp. ..................................................... 1,045,000
270,000 Mercury General Corp. .......................................................... 7,762,500
205,000 RLI Corp. ...................................................................... 4,433,125
83,000 SAFECO Corp. ................................................................... 4,274,500
210,000 Selective Insurance Group, Inc. ................................................ 5,355,000
------------
33,829,900
------------
PRINTING/PUBLISHING 1.4%
28,300 Dun & Bradstreet Corp. ......................................................... 1,627,250
46,000 Reader's Digest Association, Inc., Class A ..................................... 2,024,000
------------
3,651,250
------------
RETAIL 9.5%
343,500 Family Dollar Stores, Inc. ..................................................... 3,907,313
150,000 Melville Corp. ................................................................. 5,343,750
292,300 Rite Aid Corp. ................................................................. 6,065,225
220,500 The Limited, Inc. .............................................................. 4,327,312
140,400 Walgreen Co. ................................................................... 5,282,550
------------
24,926,150
------------
TRANSPORTATION 4.0%
331,500 Arnold Industries, Inc. ........................................................ 6,298,500
68,000 Norfolk Southern Corp. ......................................................... 4,233,000
------------
10,531,500
------------
UTILITIES 1.3%
122,000 Alltel Corp. ................................................................... 3,294,000
------------
TOTAL COMMON STOCKS (COST $224,445,091) ................................ 232,781,852
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, SEPTEMBER 30, 1994
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN RISING DIVIDENDS FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(e,f)RECEIVABLES FROM REPURCHASE AGREEMENTS 9.3%
$24,849,798 Joint Repurchase Agreement, 4.782%, 10/03/94 (Maturity Value $24,214,186)
(COST $24,204,542)
Collateral: U.S. Treasury Bills, 03/16/95 - 03/30/95
U.S. Treasury Notes, 3.875% - 9.375%, 11/15/94 - 03/31/99 ........ $ 24,204,542
------------
TOTAL INVESTMENTS (COST $248,649,633) 98.3% ........................... 256,986,394
OTHER ASSETS AND LIABILITIES, NET 1.7% ................................ 4,474,747
------------
NET ASSETS 100.0% ..................................................... $261,461,141
============
At September 30, 1994, the net unrealized appreciation based on the cost of
investments for income tax purposes of $248,649,633 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost ....................................... $ 22,040,761
Aggregate gross unrealized depreciation for all investments in which there
was an excess of tax cost over value ....................................... (13,704,000)
------------
Net unrealized appreciation ................................................. $ 8,336,761
============
</TABLE>
(e)Face amount for repurchase agreements is for the underlying collateral.
(f)See Note 1(f) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INVESTMENT GRADE INCOME FUND (NOTE 1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES 55.4%
$3,000,000 U.S. Treasury Notes, 3.875%, 10/31/95 .......................................... $ 2,932,500
4,000,000 U.S. Treasury Notes, 4.625%, 02/15/96 .......................................... 3,913,748
1,000,000 U.S. Treasury Notes, 7.75%, 03/31/96 ........................................... 1,020,000
500,000 U.S. Treasury Notes, 7.375%, 05/15/96 .......................................... 507,344
1,000,000 U.S. Treasury Notes, 7.875%, 06/30/96 .......................................... 1,023,125
1,000,000 U.S. Treasury Notes, 7.00%, 09/30/96 ........................................... 1,008,125
3,000,000 U.S. Treasury Notes, 8.00%, 01/15/97 ........................................... 3,081,561
3,000,000 U.S. Treasury Notes, 5.50%, 09/30/97 ........................................... 2,890,311
-----------
TOTAL U.S. GOVERNMENT SECURITIES (COST $17,186,993) .................... 16,376,714
-----------
FOREIGN GOVERNMENT SECURITIES 3.5%
1,000,000 Province of Manitoba, Canada, notes (putable* 07/17/96), 7.75%, 07/17/16
(COST $1,059,510) ............................................................. 1,016,480
-----------
CORPORATE BONDS 29.3%
AUTOMOTIVE 4.4%
1,250,000 General Motors Corp., senior notes (putable* 03/01/98), 8.80%, 03/01/21 ........ 1,312,171
-----------
CONSUMER GOODS 3.2%
1,000,000 Heinz (H.J.) Co., notes, 5.50%, 09/15/97 ....................................... 957,527
-----------
ELECTRIC UTILITIES 4.9%
1,500,000 Southern California Edison Co., 1st. & ref. mtg. bonds, 6.125%, 07/15/97 ....... 1,458,753
-----------
FINANCIAL 4.7%
1,000,000 International Lease Financial Co., notes, 6.375%, 11/01/96 ..................... 987,744
400,000 Transamerica Financial Corp., notes, 5.85%, 07/15/96 ........................... 393,640
-----------
1,381,384
-----------
SEMICONDUCTOR MANUFACTURERS 2.7%
750,000 Motorola, Inc., deb. (putable* 08/15/01), 8.40%, 08/15/31 ...................... 785,291
-----------
TELECOMMUNICATION EQUIPMENT 1.7%
500,000 Northern Telecommunications, Ltd., notes, 8.25%, 06/13/96 ...................... 511,824
-----------
TELEPHONE UTILITIES 7.7%
500,000 Chesapeake Potomac Telephone of Maryland, deb. (putable* 10/15/96),
8.00%, 10/15/29 ............................................................... 515,604
1,800,000 GTE California, 1st. mtg. bonds, 6.25%, 01/15/98 ............................... 1,746,662
-----------
2,262,266
-----------
TOTAL CORPORATE BONDS (COST $8,936,496) ................................ 8,669,216
-----------
TOTAL LONG TERM SECURITIES (COST $27,182,999) .......................... 26,062,410
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, SEPTEMBER 30, 1994
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INVESTMENT GRADE INCOME FUND (NOTE 1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS
CORPORATE BONDS 3.4%
$1,000,000 Virginia Electric Power Co., 1st. mtg. bonds, 6.375%, 03/01/95
(COST $997,500) ............................................................... $ 1,002,301
-----------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $28,180,499) ...... 27,064,711
-----------
(e,f)RECEIVABLES FROM REPURCHASE AGREEMENTS 6.9%
2,101,990 Joint Repurchase Agreement, 4.782%, 10/03/94 (Maturity Value $2,047,855)
(COST $2,047,039)
Collateral: U.S. Treasury Bills, 03/16/95 - 03/30/95
U.S. Treasury Notes, 3.875% - 9.375%, 11/15/94 - 03/31/99 ........ 2,047,039
-----------
TOTAL INVESTMENTS (COST $30,227,538) 98.5% ........................ 29,111,750
OTHER ASSETS AND LIABILITIES, NET 1.5% ............................ 441,591
-----------
NET ASSETS 100.0% ................................................. $29,553,341
===========
At September 30, 1994 the net unrealized depreciation based on the cost of
investments for income tax purposes of $30,227,538 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost ....................................... $ 46,474
Aggregate gross unrealized depreciation for all investments in which there
was an excess of tax cost over value ....................................... (1,162,262)
-----------
Net unrealized depreciation .................................................. $(1,115,788)
===========
</TABLE>
(*)Holder may choose either to redeem at par on put date or, if more
advantageous, to hold to final stated maturity.
(e)Face amount for repurchase agreements is for the underlying collateral.
(f)See Note 1(f) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
CORPORATE FRANKLIN INVESTMENT
QUALIFIED RISING DIVIDENDS GRADE INCOME
DIVIDEND FUND FUND FUND
------------- ---------------- ------------
<S> <C> <C> <C>
Assets:
Investments in securities:
At identified cost...................................... $ 24,247,149 $224,445,091 $28,180,499
============ ============ ===========
At value................................................ 23,645,034 232,781,852 27,064,711
Receivables from repurchase agreements at value and cost.. 6,907,025 24,204,542 2,047,039
Cash...................................................... 74,177 -- 18,678
Receivables:
Dividends and interest.................................. 94,569 965,183 460,727
Investment securities sold.............................. 1,100,000 4,430,651 --
Capital shares sold..................................... 9,863 209,490 4,884
------------ ------------ -----------
Total assets 31,830,668 262,591,718 29,596,039
------------ ------------ -----------
Liabilities:
Payables:
Investment securities purchased......................... -- 133,705 --
Capital shares repurchased.............................. -- 581,138 5,169
Management fees......................................... 13,414 166,141 12,348
Distribution fees....................................... 11,360 200,995 11,420
Shareholder servicing costs............................. 268 16,175 925
Accrued expenses and other liabilities.................... 15,260 32,423 12,836
------------ ------------ -----------
Total liabilities................................... 40,302 1,130,577 42,698
------------ ------------ -----------
Net assets, at value........................................ $ 31,790,366 $261,461,141 $29,553,341
============ ============ ===========
Net assets consist of:
Undistributed net investment income....................... $ 231,300 $ 664,042 $ 266,049
Unrealized appreciation (depreciation) on investments..... (602,115) 8,336,761 (1,115,788)
Accumulated net realized loss............................. (10,410,804) (10,725,516) (849,852)
Capital shares............................................ 13,420 178,265 33,512
Additional paid-in capital................................ 42,558,565 263,007,589 31,219,420
------------ ------------ -----------
Net assets, at value........................................ $ 31,790,366 $261,461,141 $29,553,341
============ ============ ===========
Capital shares outstanding.................................. 1,342,017 17,826,523 3,351,180
============ ============ ===========
Net asset value per share................................... $23.69 $14.67 $8.82
============ ============ ===========
Representative computation (Corporate Qualified Dividend
Fund) of net asset value and offering price per share:
Net asset value and redemption price per share:
($31,790,366 / 1,342,017).................................. $23.69
============
Maximum offering price (100/98.5 of $23.69)+*............... $24.05
============
</TABLE>
+On sales of $100,000 or more for the Rising Dividends Fund and Investment Grade
Income Fund and on sales of $500,000 or more for the Corporate Qualified
Dividend Fund, the offering price is reduced as stated in the section of
each Prospectus entitled "How to Buy Shares of the Fund."
*The maximum offering prices for Franklin Rising Dividends Fund and Investment
Grade Income Fund are calculated at 100/95.5 and 100/95.75 of $14.67 and $8.82,
respectively.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
CORPORATE FRANKLIN INVESTMENT
QUALIFIED RISING DIVIDENDS GRADE INCOME
DIVIDEND FUND FUND FUND
------------- ---------------- ------------
<S> <C> <C> <C>
Investment income:
Interest.................................................. $ 242,523 $ 1,497,136 $ 1,857,941
Dividends................................................. 1,466,438 8,360,695 --
------------ ------------ -----------
Total income........................................ 1,708,961 9,857,831 1,857,941
------------ ------------ -----------
Expenses:
Management fees (Note 5).................................. 164,449 2,279,672 155,866
Distribution fees (Note 5)................................ 75,399 1,449,195 72,868
Accounting fees (Note 5).................................. 40,000 40,000 40,000
Shareholder servicing costs (Note 5)...................... 3,202 223,100 10,904
Registration and filing fees.............................. 16,887 91,790 12,663
Professional fees......................................... 11,320 25,928 9,366
Reports to shareholders................................... 8,419 167,066 13,869
Custodian fees............................................ 3,495 32,605 3,292
Trustees' fees and expenses............................... 2,851 26,448 2,717
Other..................................................... 3,800 20,355 5,829
------------ ------------ -----------
Total expenses...................................... 329,822 4,356,159 327,374
------------ ------------ -----------
Net investment income............................... 1,379,139 5,501,672 1,530,567
------------ ------------ -----------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss).................................. (328,483) (6,786,530) 44,247
Net unrealized depreciation during the year............... (815,985) (10,342,790) (1,862,578)
------------ ------------ -----------
Net realized and unrealized loss on investments..... (1,144,468) (17,129,320) (1,818,331)
------------ ------------ -----------
Net increase (decrease) in net assets resulting from
operations................................................ $ 234,671 $(11,627,648) $ (287,764)
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1993
<TABLE>
<CAPTION>
FRANKLIN CORPORATE FRANKLIN RISING
QUALIFIED DIVIDEND FUND DIVIDENDS FUND
---------------------------------------- ----------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993 SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ..................... $ 1,379,139 $ 997,328 $ 5,501,672 $ 4,024,333
Net realized gain (loss) from
security transactions.................... (328,483) 303,971 (6,786,530) (2,343,396)
Net unrealized appreciation
(depreciation) during the year .......... (815,985) 728,420 (10,342,790) (10,399,457)
Net increase (decrease) in net
assets resulting from operations .... 234,671 2,029,719 (11,627,648) (8,718,520)
Distributions to shareholders
from undistributed net investment
income (Note 1) ........................... (1,296,853) (1,054,709) (4,837,881) (4,028,211)
Increase (decrease) in net assets from
capital share transactions (Note 2) ....... (996,529) 3,430,088 (78,781,141) 171,650,263
Net increase (decrease)
in net assets ....................... (2,058,711) 4,405,098 (95,246,670) 158,903,532
Net assets:
Beginning of year............................ 33,849,077 29,443,979 356,707,811 197,804,279
----------- ----------- ------------ ------------
End of year.................................. $31,790,366 $33,849,077 $261,461,141 $356,707,811
=========== =========== ============ ============
Undistributed net investment income
included in net assets:
Beginning of year .......................... $ 149,014 $ 206,395 $ 251 $ 4,129
=========== =========== ============ ============
End of year................................. $ 231,300 $ 149,014 $ 664,042 $ 251
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEAR ENDED SEPTEMBER 30, 1994
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1993
<TABLE>
<CAPTION>
FRANKLIN INVESTMENT GRADE INCOME FUND
-----------------------------------------
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------ ------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................................................... $ 1,530,567 $ 1,533,008
Net realized gain from security transactions ........................................ 44,247 1,353,230
Net unrealized appreciation (depreciation) during the year .......................... (1,862,578) 91,909
----------- -----------
Net increase (decrease) in net assets resulting from operations ................. (287,764) 2,978,147
Distributions to shareholders from undistributed net investment income (Note 1) ....... (1,374,547) (1,587,547)
Increase (decrease) in net assets from capital share transactions (Note 2) ............ (4,753,942) 5,211,827
----------- -----------
Net increase (decrease) in net assets ........................................... (6,416,253) 6,602,427
Net assets:
Beginning of year ..................................................................... 35,969,594 29,367,167
----------- -----------
End of year ........................................................................... $29,553,341 $35,969,594
=========== ===========
Undistributed net investment income included in net assets:
Beginning of year ..................................................................... $ 110,029 $ 164,568
=========== ===========
End of year ........................................................................... $ 266,049 $ 110,029
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Managed Trust (the Trust) is an open-end, diversified management
investment company (mutual fund) registered under the Investment Company Act of
1940 as amended. The Trust's shares are offered in three different Series
(hereinafter Funds), each of which represents a separate fund. The Trust is
required to account for the assets of each Fund separately and to allocate
general expenses of the Trust to each Fund based upon the net assets of each
Fund.
On March 24, 1993, the Board of Trustees authorized a change in the fiscal year
end of the Trust from December 31 of each year to September 30.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
A. SECURITY VALUATION: Portfolio securities listed on a securities exchange or
on the NASDAQ National Market System for which market quotations are readily
available are valued at the last quoted sale price of the day or, if there is
no such reported sale, within the range of the most recent quoted bid and asked
prices. Other securities for which market quotations are readily available are
valued at current market values, obtained from pricing services, which are
based on a variety of factors, including recent trades, institutional size
trading in similar types of securities (considering yield, risk and maturity)
and/or developments related to specific securities. Portfolio securities which
are traded both in the over-the-counter market and on a securities exchange are
valued according to the broadest and most representative market as determined
by the Manager. Other securities for which market quotations are not available,
if any, are valued in accordance with procedures established by the Board of
Trustees. Short-term securities and similar investments with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
value.
The value of auction rate preferred stock is determined based upon quotations
readily available in the marketplace. If there are no readily available
quotations, the value will be based upon the values of comparable traded
securities. When market quotations are not readily available for securities
held by the Fund, or for comparable securities, then such securities will be
valued at par value plus an accrual of the dividend to be received on the next
dividend payment date, as approved by the Board of Trustees.
B. INCOME TAXES: The Trust intends to continue to qualify for the tax
treatment applicable to regulated investment companies under the Internal
Revenue Code and to make the requisite distributions to its shareholders which
will be sufficient to relieve it from income and excise taxes. Therefore, no
income tax provision is required. Each Fund is treated as a separate entity in
the determination of compliance with the Internal Revenue Code.
C. SECURITY TRANSACTIONS: Security transactions are accounted for on the date
the securities are purchased or sold (trade date). Realized gains and losses on
security transactions are determined on the basis of specific identification
for both financial statement and income tax purposes.
D. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS: Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Bond discount and premium, if
any, are amortized as required by the Internal Revenue Code.
E. EXPENSE ALLOCATION: Common expenses incurred by the Trust are allocated
among the Funds based on the ratio of net assets of each Fund to the combined
net assets. In all other respects, expenses are charged to each Fund as
incurred on a specific identification basis.
F. REPURCHASE AGREEMENTS: The Funds may enter into a Joint Repurchase
Agreement whereby its uninvested cash balance is deposited into a joint cash
account to be used to invest in one or more repurchase agreements with
government securities dealers recognized by the Federal Reserve Board and/or
member banks of the Federal Reserve System. The value and face amount of the
Joint Repurchase Agreement has been allocated to each Fund based on its
pro-rata interest at September 30, 1994.
20
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
1. SIGNIFICANT ACCOUNTING POLICIES (CONT.)
f. REPURCHASE AGREEMENTS: (CONT.)
In a repurchase agreement, the Funds purchase a U.S. government security from a
dealer or bank subject to an agreement to resell it at a mutually agreed upon
price and date. Such a transaction is accounted for as a loan by the Funds to
the seller, collateralized by the underlying security. The transaction requires
the initial collateralization of the seller's obligation by U.S. government
securities with market value, including accrued interest, of at least 102% of
the dollar amount invested by the Funds, with the value of the underlying
security marked to market daily to maintain coverage of at least 100%. The
collateral is delivered to the Funds' custodian and held until resold to the
dealer or bank. At September 30, 1994, all outstanding joint repurchase
agreements held by the Funds had been entered into on that date.
2. TRUST SHARES
At September 30, 1994, there was an unlimited number of $.01 par value shares
of beneficial interest authorized. Transactions in each of the Funds' shares
for the year ended September 30, 1994, and the nine months ended September 30,
1993 are as follows:
<TABLE>
<CAPTION>
FRANKLIN CORPORATE FRANKLIN RISING FRANKLIN INVESTMENT
QUALIFIED DIVIDEND FUND DIVIDENDS FUND GRADE INCOME FUND
------------------------ ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ------------ --------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Year ended September 30, 1994
Shares sold................................ 642,504 $(15,490,848 2,324,785 $(34,973,066 573,667 $ 5,191,694
Shares issued in reinvestment
of distributions......................... 46,825 1,128,951 234,159 3,491,298 92,093 831,361
Shares redeemed............................ (588,984) (14,223,026) (4,407,643) (65,658,112) (1,125,867) (10,294,292)
Changes from exercise of
exchange privilege:
Shares sold............................ 33,305 801,733 1,261,176 19,012,227 583,017 5,280,721
Shares redeemed........................ (174,643) (4,195,035) (4,707,327) (70,599,620) (635,548) (5,763,426)
-------- ------------ ---------- ------------ ---------- ------------
Net decrease............................... (40,993) $ (996,529) (5,294,850) $(78,781,141) (512,638) $ (4,753,942)
======== ============ ========== ============ ========== ============
Nine months ended
September 30, 1993
Shares sold................................ 566,898 $(13,681,855 10,928,358 $171,283,829 1,136,189 $ 10,412,673
Shares issued in reinvestment
of distributions......................... 37,629 908,786 178,862 2,768,095 112,938 1,032,030
Shares redeemed............................ (422,574) (10,231,875) (1,768,216) (27,335,956) (904,575) (8,336,945)
Changes from exercise of
exchange privilege:
Shares sold............................ 11,089 270,434 4,622,774 72,137,609 959,210 8,833,975
Shares redeemed........................ (49,806) (1,199,112) (3,063,179) (47,203,314) (727,531) (6,729,906)
-------- ------------ ----------- ------------ --------- -----------
Net increase............................... 143,236 $ 3,430,088 10,898,599 $171,650,263 576,231 $ 5,211,827
======== ============ =========== ============ ========= ===========
</TABLE>
21
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At September 30, 1994 for tax purposes, the Funds had accumulated capital loss
carryovers as follows:
<TABLE>
<CAPTION>
Franklin Corporate Franklin Rising Franklin Investment
Qualified Dividend Fund Dividends Fund Grade Income Fund
----------------------- --------------- -------------------
<S> <C> <C> <C>
Capital loss carryovers
Expiring in: 1995 ....... $ 2,056,972 -- $178,611
1996 ....... 5,376,536 -- 124,885
1997 ....... 1,251,202 -- 274,652
1998 ....... 794,958 $ 1,576,911 139,900
1999 ....... 226,936 -- 131,804
2000 ....... 375,717 -- --
2001 ....... -- 2,343,396 --
2002 ....... 328,483 6,805,209 --
----------- ----------- --------
$10,410,804 $10,725,516 $849,852
=========== =========== ========
</TABLE>
For tax purposes, the aggregate cost of securities and unrealized appreciation
(depreciation) of the Trust are the same as for financial statement purposes at
September 30, 1994.
4. PURCHASES AND SALES OF SECURITIES
<TABLE>
<CAPTION>
Franklin Corporate Franklin Rising Franklin Investment
Qualified Dividend Fund Dividends Fund Grade Income Fund
----------------------- --------------- -------------------
<S> <C> <C> <C>
Aggregate purchases and
sales of securities
(excluding purchases
and sales of short-term
securities) for the year
ended September 30, 1994,
were as follows:
Purchases ............. $ 8,505,000 $ 67,223,865 $2,999,572
=========== ============ ==========
Sales.................. $12,052,084 $102,235,244 $3,792,618
=========== ============ ==========
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., under the terms of a management agreement, provides
investment advice, administrative services, office space and facilities to each
Fund, and receives fees computed monthly on the net assets of the Franklin
Corporate Qualified Dividend Fund and the Franklin Investment Grade Income Fund
at the annualized rate of 0.50% of the Funds' first $500 million in average
daily net assets, 0.45% on the next $500 million, and 0.40% on net assets in
excess of $1 billion; and receives fees computed monthly on the net assets of
the Franklin Rising Dividends Fund at the annual rate of 0.75% of the Fund's
first $500 million in average daily net assets, 0.625% on the next $500
million, and 0.50% on net assets in excess of $1 billion. Fees incurred by the
Funds aggregated $2,599,987 for the year ended September 30, 1994. Pursuant to
the terms of the Management Agreement, each of the Funds also pays accounting
fees of $40,000 per year to Franklin Advisers, Inc. for the provision of
certain accounting, bookkeeping and recordkeeping functions for the Funds. The
terms of the management agreement provide that aggregate annual expenses of the
Funds be limited to the extent necessary to comply with the limitations set
forth in the laws, regulations and administrative interpretations of the states
in which the Funds' shares are registered. There were no reimbursements to the
Funds under this provision for the year ended September 30, 1994.
22
<PAGE>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENT (CONT.)
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
In its capacity as underwriter for the shares of the Trust, Franklin/Templeton
Distributors, Inc. received commissions on sales of the Funds' shares for the
year ended September 30, 1994 totalling $1,346,600, of which $1,330,505 was
paid to other dealers. Commissions are deducted from the gross proceeds
received from the sale of the shares of the Trust, and as such are not expenses
of the Funds.
Under the terms of a Distribution Agreement pursuant to Rule 12b-1 of the
Investment Company Act of 1940, the Franklin Rising Dividends Fund will
reimburse Franklin/Templeton Distributors, Inc., in an amount up to 0.50% per
annum of the Fund's average daily net assets, while Franklin Corporate
Qualified Dividend Fund and Franklin Investment Grade Income Fund will
reimburse up to 0.25% per annum of the Funds' average daily net assets, for
costs incurred in the promotion, offering and marketing of the Funds' shares.
Costs incurred by the Funds under the agreement aggregated $1,597,462 for the
year ended September 30, 1994.
Under the terms of a shareholder servicing agreement with Franklin/Templeton
Investor Services, Inc., the Trust pays costs on a per shareholder account
basis. Shareholder servicing costs incurred by the Funds for the year ended
September 30, 1994 aggregated $237,206, of which $195,061 was paid to
Franklin/Templeton Investor Services, Inc.
Certain officers and trustees of the Trust are also officers and/or directors
of Franklin/Templeton Distributors, Inc., Franklin Advisers, Inc. and
Franklin/Templeton Investor Services, Inc., all wholly owned subsidiaries of
Franklin Resources, Inc.
6. SUBSEQUENT EVENTS
On September 26, 1994 the Board of Trustees declared dividends from net
investment income as follows (amounts per share):
<TABLE>
<CAPTION>
FRANKLIN CORPORATE FRANKLIN INVESTMENT GRADE
RECORD DATE EX DATE PAYMENT DATE QUALIFIED DIVIDEND FUND INCOME FUND
- ----------- -------- ------------ ----------------------- -------------------------
<S> <C> <C> <C> <C>
09/30/94 10/03/94 10/14/94 .083 .033
7. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout each
period are set forth in the Prospectus under the caption "Financial Highlights."
The percentage of income dividends paid by the Funds during the year ended September 30, 1994 which
qualified for the 70% dividends-received deduction for the corporations were as follows:
Franklin Corporate Qualified Dividend Fund 100%
Franklin Rising Dividends Fund 100%
</TABLE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees
of Franklin Managed Trust:
We have audited the accompanying statements of assets and
liabilities of the three funds comprising the Franklin Managed Trust, including
each Fund's statement of investments in securities and net assets, as
of September 30, 1994, and the related statements of operations for
the year then ended, the statements of changes in net assets for the year
then ended and for the nine months ended September 30, 1993 and the
financial highlights included under the caption "Financial Highlights" for
the period indicated thereon. These financial statements and financial
highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1994 by
correspondence with custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the three funds comprising the Franklin Managed Trust as of
September 30, 1994, the results of each Fund's operation for the year then
ended, the changes in their net assets for the year then ended and for the
nine months ended September 30, 1993, and the financial highlights for the
periods indicated thereon, in conformity with generally accepted accounting
principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 28, 1994
Franklin Managed Trust
File Nos. 33-9994
811-4894
FORM N-1A
PART C
Other Information
Item 24 Financial Statements and Exhibits
(a) Financial Statements filed in part B.
(i) Report of Certified Public Accountants - October
28, 1994.
(ii) Statements of Investments in Securities and Net
Assets - September 30, 1994.
(iii)Statements of Assets and Liabilities - September
30, 1994.
(iv) Statements of Operations - for the year ended
September 30, 1994.
(v) Statements of Changes in Net Assets - for the year
ended September 30, 1994 and the nine months ended
September 30, 1993.
(vi) Notes to Financial Statements
(b) Exhibits:
(1) copies of the charter as now in effect;
(i) Amended and Restated Agreement and Declaration of
Trust dated October 30, 1986
(ii) Certificate of Amendment of Agreement and
Declaration of Trust dated June 28, 1988
(iii) Certificate of Amendment of Agreement and
Declaration of Trust dated March 13, 1995
(2) copies of the existing By-Laws or instruments
corresponding thereto;
(i) By-Laws
(3) copies of any voting trust agreement with respect to more
than five percent of any class of equity securities of the
Registrant;
N/A
(4) specimens or copies of each security issued by the
Registrant, including copies of all constituent
instruments, defining the rights of the holders of such
securities, and copies of each security being registered;
N/A
(5) copies of all investment advisory contracts relating to
the management of the assets of the Registrant;
(i) Management Agreement between Franklin Rising
Dividends Portfolio and Franklin Advisers, Inc.
dated June 28, 1988
(ii) Management Agreement between Franklin Investment
Grade Income Portfolio and Franklin Advisers, Inc.
dated June 28, 1988
(iii) Management Agreement between Franklin Corporate
Cash Portfolio and Franklin Advisers, Inc. dated
June 28, 1988
(6) copies of each underwriting or distribution contract
between the Registrant and a principal underwriter, and
specimens or copies of all agreements between principal
underwriters and dealers;
(i) Form of amended and restated distribution agreement
between Franklin/Templeton Distributors, Inc. and
Franklin Managed Trust
(ii) Forms of dealer agreements between
Franklin/Templeton distributors, Inc. and dealers:
Registrant: Franklin Federal Tax-Free Income Fund,
Filing: Post-Effective Amendment No. 17 to
Registration on Form N-1A
File No. 2-75925
Filing Date: April 20 28, 1995
(7) copies of all bonus, profit sharing, pension or other
similar contracts or arrangements wholly or partly for the
benefit of directors or officers of the Registrant in
their capacity as such; any such plan that is not set
forth in a formal document, furnish a reasonably detailed
description thereof;
N/A
(8) copies of all custodian agreements and depository
contracts under Section 17(f) of the 1940 Act, with
respect to securities and similar investments of the
Registrant, including the schedule of renumeration;
(i) Custodian Agreement between Registrant and Bank of
America NT & SA dated June 12, 1991
(ii) Amendment to Custodian Agreement between
Registrant and Bank of America NT & SA
dated December 1, 1994 is Incorporated
by reference to:
Registrant: Franklin Premier Return Fund
Filing: Post-Effective Amendment No. 54 to
Registration on Form N-1A
File No. 2-12647
Filing Date: February 27, 1995
(iii) Copy of Custodian Agreements between Registrant and
Citibank Delaware:
1. Citicash Management ACH Customer Agreement
2. Citibank Cash Management Services Master
Agreement
3. Short Form Bank Agreement - Deposits and
Disbursements of Funds are
Incorporated by reference to:
Registrant: Franklin Premier Return Fund
Filing: Post-Effective Amendment No. 54 to
Registration on Form N-1A
File No. 2-12647
Filing Date: February 27, 1995
(9) copies of all other material contracts not made in the
ordinary course of business which are to be performed in
whole or in part at or after the date of filing the
Registration Statement;
N/A
(10) an opinion and consent of counsel as to the legality of
the securities being registered, indicating whether they
will when sold be legally issued, fully paid and
nonassessable;
N/A
(11) copies of any other opinions, appraisals or rulings and
consents to the use thereof relied on in the preparation
of this registration statement and required by Section 7
of the 1933 Act;
(i) Consent of Independent Certified Public Accountants
dated April 19, 1995
(12) all financial statements omitted from Item 23;
N/A
(13) copies of any agreements or understandings made in
consideration for providing the initial capital between or
among the Registrant, the underwriter, adviser, promoter
or initial stockholders and written assurances from
promoters or initial stockholders that their purchases
were made for investment purposes without any present
intention of redeeming or reselling;
(i) Letter of Understanding dated April 12, 1995
(14) copies of the model plan used in the establishment of any
retirement plan in conjunction with which Registrant
offers its securities, any instructions thereto and any
other documents making up the model plan. Such form(s)
should disclose the costs and fees charged in connection
therewith;
(i) Copy of model retirement plan:
Registrant: AGE High Income Fund, Inc.
Filing: Post-effective Amendment No. 26 to
Registration Statement on Form N-1A
File No. 2-30203
Filing Date: August 1, 1989
(15) copies of any plan entered into by Registrant pursuant to
Rule 12b-1 under the 1940 Act, which describes all
material aspects of the financing of distribution of
Registrant's shares, and any agreements with any person
relating to implementation of such plan.
(i) Amended and Restated Distribution Plan between
Franklin Rising Dividends Fund and Franklin
Distributors, Inc. dated July 1, 1993
(ii) Amended and Restated Distribution Plan between
Franklin Investment Grade Income Fund and Franklin
Distributors, Inc. dated July 1, 1993
(iii) Amended and Restated Distribution Plan between
Franklin Corporate Qualified Dividend Fund and
Franklin/Templeton Distributors, Inc. dated July 1,
1993
(iv) Form of Class II Distribution Plan pursuant to Rule
12-b1
(16) schedule for computation of each performance quotation
provided in the registration statement in response to Item
22 (which need not be audited).
(i) Schedule for computation of performance quotation
Registrant: Franklin Tax-Advantaged U.S.
Government Securities Fund
Filing: Post Effective Amendment No. 8 to
Registration Statement of Registrant on Form N-1A
File No. 33-11963
Filing Dated: March 1, 1995
(17) Power of Attorney
(i) Power of Attorney dated March 13, 1995
(ii) Certificate of Secretary dated March 13, 1995
Item 25 Persons Controlled by or under Common Control with
Registrant
None
Item 26 Number of Holders of Securities
As of September 30, 1994 the number of record holders of the
only class of securities of the Registrant was as follows:
Number of
Title of Class Record Holders
Shares of Beneficial
Interest
Franklin Corporate Qualified Dividend Fund 512
Franklin Rising Dividends Fund 29,066
Franklin Investment Grade Income Fund 1,788
Item 27 Indemnification
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court or appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue. See also Section Article VI of the
By-Laws of the Trust and Section 16 of the Distribution
Agreement, previously filed.
Item 28 Business and Other Connections of Investment Adviser
The officers and directors of the Registrant's investment
advisor also serve as officers and/or directors for (1) the
advisor's corporate parent, Franklin Resources, Inc., and/or (2)
other investment companies in the Franklin Group of Funds. In
addition, Messrs. Charles B. Johnson and Harris J. Ashton are
directors of General Host Corporation. For additional information
please see Part B.
Item 29 Principal Underwriters
a) Franklin/Templeton Distributors, Inc. ("FTDI") also acts
as principal underwriter of shares of AGE High Income Fund, Inc.,
Franklin Custodian Funds, Inc., Franklin Equity Fund, Franklin
Gold Fund, Franklin Municipal Securities Trust, Franklin
California Tax- Free Income Fund, Inc., Franklin New York Tax-
Free Income Fund, Inc., Franklin Pennsylvania Investors Fund,
Franklin California Tax-Free Trust, Franklin Investors Securities
Trust, Franklin Premier Return Fund, Franklin Tax-Free Trust,
Franklin New York Tax-Free Trust, Franklin Strategic Mortgage
Portfolio, Franklin Strategic Series, Franklin International
Trust, Franklin Tax-Advantaged International Bond Fund, Franklin
Tax-Advantaged U.S. Government Securities Fund, Franklin Tax-
Advantaged High Yield Securities Fund, Franklin Balance Sheet
Investment Fund, Franklin Federal Tax- Free Income Fund,
Templeton Variable Products Series Fund, Templeton Tax Free
Trust, Templeton Real Estate Securities Fund, Templeton Growth
Fund, Inc., Templeton Funds, Inc., Templeton Smaller Companies
Growth Fund, Inc., Templeton Income Trust, Templeton Global
Opportunities Trust, Templeton Institutional Funds, Inc.,
Templeton American Trust, Inc., Templeton Capital Accumulator
Fund, Inc., Templeton Value Fund, Inc., and Templeton Developing
Markets Trust, Institutional Fiduciary Trust, Franklin Money
Fund, Franklin Federal Money Fund and Franklin Tax Exempt Money
Fund.
b) The information required by this Item 29 with respect to
each director and officer of FTDI is incorporated by reference to
Part B of this N-1A and Schedule A of Form BD filed by
Distributors with the Securities and exchange Commission pursuant
to the Securities Act of 1934 (SEC File No. 8-5889).
c) Not Applicable. Registrant's principal underwriter is
an affiliated person of an affiliated person of the Registrant.
The principal business address of the persons listed is 777
Mariners Island Blvd., San Mateo, California.
Item 30 Location of Accounts and Records
The accounts, books or other documents required to be
maintained by Section 31 (a) of the Investment Company Act of
1940 are kept by the Fund or its shareholder services agent,
Franklin/Templeton Investor Services, Inc., both of whose address
is 777 Mariners Island Blvd., San Mateo, CA. 94404.
Item 31 Management Services
There are no management-related service contracts not
discussed in Part A or Part B.
Item 32 Undertakings
The Registrant hereby undertakes to comply with the
information requirement in Item 5A of the Form N-1A by including
the required information in the Fund's annual report and to
furnish each person to whom a prospectus is delivered a copy of
the annual report upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly
caused this amendment to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized in
the City of San Mateo and the State of California, on the 21rst
day of April, 1995.
FRANKLIN MANAGED TRUST
(Registrant)
By: William J. Lippman *
William J. Lippman, President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to its Registration Amendment has been signed
below by the following persons in the capacities and on the dates
indicated:
William J. Lippman* Principal Executive Officer and
William J. Lippman Trustee
Dated: April 21, 1995
Martin L. Flanagan* Principal Financial Officer
Martin L. Flanagan Dated: April 21, 1995
Diomedes Loo-Tam* Principal Accounting Officer
Diomedes Loo-Tam Dated: April 21, 1995
Frank T. Crohn* Trustee
Frank T. Crohn Dated: April 21, 1995
Charles Rubens, II* Trustee
Charles Rubens, II Dated: April 21, 1995
Leonard Rubin* Trustee
Leonard Rubin Dated: April 21, 1995
*by /s/ Larry L. Greene
(Larry L. Greene, Attorney-in-Fact
Pursuant to Powers of Attorney filed herewith)
Legal\Forms\177....\FMTEXH95.DOC
FRANKLIN MANAGED TRUST
REGISTRATION STATEMENT
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION PAGE NO. IN
SEQUENTIAL
NUMBERING
SYSTEM
EX-99.B1(i) Amended and Restated Attached
Agreement and Declaration of
Trust dated October 30, 1986
EX-99.B1(ii) Certificate of Amendment of Attached
Agreement and Declaration of
Trust dated June 28, 1988
EX-99.B1(iii) Certificate of Amendment of Attached
Agreement and Declaration of
Trust dated March 13, 1995
EX-99.B2(i) By-Laws Attached
EX-99.B5(i) Management Agreement between Attached
Franklin Rising Dividends
Portfolio and Franklin
Advisers, Inc. dated June
28, 1988
EX-99.B5(ii) Management Agreement between Attached
Franklin Investment Grade
Income Portfolio and
Franklin Advisers, Inc.
dated June 28, 1988
EX-99.B5(iii) Management Agreement between Attached
Franklin Corporate Cash
Portfolio and Franklin
Advisers, Inc. dated June
28, 1988
EX-99.B6(i) Form of amended and restated Attached
distribution agreement
between Franklin/Templeton
Distributors, Inc. and
Franklin Managed Trust
EX-99.B6(ii) Forms of dealer agreements *
between Franklin/Templeton
Distributors, Inc. and
dealers is incorporated in
reference to Franklin
Federal Tax-Free Income Fund
EX-99.B8(i) Custodian Agreement between Attached
Registrant and Bank of
America NT & SA dated June
12, 1991
EX-99.B8(ii) Amendment to Custodian **
Agreement between Registrant
and Bank of America NT & SA
dated December 1, 1994 is
incorporated by reference to
Franklin Premier Return Fund
EX-99.B8(iii) Copy of Custodian Agreements **
between Registrant and
Citibank Delaware is
incorporated by reference to
Franklin Premier Return Fund
EX-99.B11(i) Consent of Independent Attached
Auditors
EX-99.B13(i) Letter of Understanding Attached
dated April 12, 1995
EX-99.B14(i) Copy of model retirement ***
plan is incorporated by
Reference to Age High Income
Fund, Inc.
EX-99.B15(i) Amended and Restated Attached
Distribution Plan between
Franklin Rising Dividends
Fund and Franklin
Distributors, Inc. dated
July 1, 1993
EX-99.B15(ii) Amended and Restated Attached
Distribution Plan between
Franklin Investment Grade
Income Fund and Franklin
Distributors, Inc. dated
July 1, 1993
EX-99.B15(iii) Amended and Restated Attached
Distribution Plan between
Franklin Corporate Qualified
Dividend Fund and
Franklin/Templeton
Distributors, Inc. dated
July 1, 1993
EX-99.B15(iv) Form of Class II Attached
Distribution Plan pursuant
to Rule 12b-1
EX-99.B16(i) Schedule of computation of *
performance quotation
EX-99.B17(i) Power of Attorney dated Attached
March 13, 1995
EX-99.B17(ii) Certificate of Secretary Attached
dated March 13, 1995
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
of
L.F. ROTHSCHILD, UNTERBERG, TOWBIN INVESTMENT TRUST
a Massachusetts Business Trust
Dated: October 30, 1986
TABLE OF CONTENTS
L.F. ROTHSCHILD, UNTERBERG, TOWBIN INVESTMENT TRUST
AGREEMENT AND DECLARATION OF TRUST
ARTICLE I Name and Definitions
1. Name
2. Definitions
(a) Trust
(b) Trustees
(c) Shares
(d) Shareholder
(e) 1940 Act
(f) Commission and Principal Underwriter
(g) Declaration of Trust
(h) By-Laws
(i) Series Company
(j) Series
ARTICLE II Purpose of Trust
ARTICLE III Shares
1. Division of Beneficial Interest
2. Ownership of Shares
3. Investments in the Trust
4. Status of Shares and Limitation of Personal Liability
5. Power of Trustees to Change Provisions Relating to Shares
6. Establishment and Designation of Series
(a) Assets Belonging to Series
(b) Liabilities Belonging to Series
(c) Dividends, Distributions, Redemptions, and
Repurchases
(d) Voting
(e) Equality
(f) Fractions
(g) Exchange Privilege
(h) Combination of Series
(i) Elimination of Series
7. Indemnification of Shareholders
8. Initial Designation of Series
ARTICLE IV The Trustees
1. Election and Tenure
2. Effect of Death, Resignation, etc. of a Trustee
3. Powers
4. Payment of Expenses by the Trust
5. Payment of Expenses by Shareholders
6. Ownership of Assets of the Trust
7. Service Contracts
ARTICLE V Shareholders' Voting Powers and Meetings
1. Voting Powers
2. Voting Power and Meetings
3. Quorum and Required Vote
4. Action by Written Consent
5 Record Dates
6. Additional Provisions
ARTICLE VI Net Asset Value, Distributions, and Redemptions
1. Determination of Net Asset Value, Net Income and Distributions
2. Redemptions and Repurchases
3. Redemptions at the Option of the Trust
ARTICLE VII Compensation and Limitation of Liability of
Trustees
1. Compensation
2. Limitation of Liability
3. Indemnification
ARTICLE VIII Miscellaneous
1. Trustees, Shareholders, etc. Not Personally Liable; Notice.
2. Trustee's Good Faith Action, Expert Advice, No Bond or Surety
3. Liability of Third Persons Dealing with Trustees
4. Termination of Trust or Series
5. Merger and Consolidation
6. Filing of Copies, References, Headings
7. Applicable Law
8. Amendments
9. Trust Only
10. Use of the Name "L.F. Rothschild, Unterberg, Towbin".
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF
L.F. ROTHSCHILD, UNTERBERG TOWBIN INVESTMENT TRUST
THIS AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST is made
and entered into as of this 30th day of October, 1986 by the Trustees
named hereunder.
WHEREAS the Trustees desire and have agreed to manage all property
coming into their hands as trustees of a Massachusetts business trust in
accordance with the provisions hereinafter set forth,
NOW, THEREFORE, the Trustees hereby direct that this Amended and
Restated Agreement and Declaration of Trust be filed with the Secretary
of The Commonwealth of Massachusetts and do hereby declare that they will
hold all cash, securities and other assets, which they may from time to
time acquire in any manner as Trustees hereunder, IN TRUST, and manage
and dispose of the same upon the following terms and conditions for the
pro rata benefit of the holders of Shares in this Trust.
ARTICLE I
Name and Definitions
Section 1. Name. This Trust, formerly known as Rising Dividend
Shares, shall henceforth be known as the L.F. ROTHSCHILD, UNTERBERG,
TOWBIN INVESTMENT TRUST and the Trustees shall conduct the business of
the Trust under that name or any other name as they may from time to time
determine.
Section 2. Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust
established by this Agreement and Declaration of Trust, as amended from
time to time;
(b) "Trustees" refers to the persons named at the end of this
Declaration of Trust and constituting the Board of Trustees of the Trust,
so long as they continue in office in accordance with the terms hereof,
and all other persons who may from time to time be duly elected or
appointed to serve on the Board of Trustees in accordance with Article IV
hereof;
(c) "Shares" means the equal proportionate units of interest into
which the beneficial interest in the Trust or in the Trust property
belonging to any Series of the Trust (as the context may require) shall
be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 and
the Rules and Regulations thereunder, all as amended from time to time;
(f) The terms "Commission" and "Principal Underwriter" shall have
the meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and Declaration
of Trust, as amended or restated from time to time;
(h) "By-Laws" shall mean the By-Laws of the Trust as amended from
time to time;
(i) "Series Company" refers to the form of registered open-end
investment company described in Section 18(f)(2) of the 1940 Act or in
any successor statutory provision; and
(j) "Series" refers to each Series of Shares established and
designated under or in accordance with the provisions of Article III.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the
business of a managed investment company registered under the 1940 Act
through one or more portfolios invested primarily in securities.
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The beneficial
interest in the Trust shall at all times be divided into an unlimited
number of Shares, with a par value of $ .01 per Share. Subject to the
provisions of Section 6 of this Article III, each Share shall have voting
rights as provided in Article V hereof, and holders of the Shares of any
Series shall be entitled to receive dividends, when and as declared with
respect thereto in the manner provided in Article VI, Section 1 hereof.
No Shares shall have any priority or preference over any other Share of
the same Series with respect to dividends or distributions upon
termination of the Trust or of such Series made pursuant to Article VIII,
Section 4 hereof. All dividends and distributions shall be made ratably
among all Shareholders of a particular Series from the assets belonging
to such Series according to the number of Shares of such Series held of
record by such Shareholder on the record date for any dividend or on the
date of termination, as the case may be. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or any Series. The Trustees may from time
to time divide or combine the Shares of any particular Series into a
greater or lesser number of Shares of that Series without thereby
changing the proportionate beneficial interest of the Shares of that
Series in the assets belonging to that Series or in any way affecting the
rights of Shares of any other Series.
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each
Series. No certificates certifying the ownership of Shares shall be
issued except as the Board of Trustees may otherwise determine from time
to time. The Trustees may make such rules as they consider appropriate
for the transfer of Shares of each Series and similar matters. The
record books of the Trust as kept by the Trust or any transfer or similar
agent, as the case may be, shall be conclusive as to who are the
Shareholders of each Series and as to the number of Shares of each Series
held from time to time by each.
Section 3. Investments in the Trust. The Trustees may accept
investments in the Trust from such persons, at such times, on such terms,
and for such consideration as they from time to time authorize.
Section 4. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights
provided in this instrument. Every Shareholder by virtue of having
become a Shareholder shall be held to have expressly assented and agreed
to the terms hereof and to have become a party hereto. The death of a
Shareholder during the existence of the Trust shall not operate to
terminate the Trust, nor entitle the representative of any deceased
Shareholder to an accounting or to take any action in court or elsewhere
against the Trust or the Trustees, but entitles such representative only
to the rights of said deceased Shareholder under this Trust. Ownership
of Shares shall not entitle the Shareholder to any title in or to the
whole or any part of the Trust property or right to call for a partition
or division of the same or for an accounting, nor shall the ownership of
Shares constitute the Shareholders as partners. Neither the Trust nor
the Trustees, nor any officer, employee or agent of the Trust shall have
any power to bind personally any Shareholders, nor, except as
specifically provided herein, to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as
the Shareholder may at any time personally agree to pay.
Section 5. Power of Board of Trustees to Change Provisions Relating
to Shares. Notwithstanding any other provision of this Declaration of
Trust and without limiting the power of the Board of Trustees to amend
the Declaration of Trust as provided elsewhere herein the Board of
Trustees shall have the power to amend this Declaration of Trust, at any
time and from time to time, in such manner as the Board of Trustees may
determine in their sole discretion, without the need for Shareholder
action, so as to add to, delete, replace or otherwise modify any
provisions relating to the Shares contained in this Declaration of Trust,
provided that before adopting any such amendment without Shareholder
approval the Board of Trustees shall determine that it is consistent with
the fair and equitable treatment of all Shareholders or that Shareholder
approval is not otherwise required by the 1940 Act or other applicable
law.
Without limiting the generality of the foregoing, the Board of
Trustees may, for the above-stated purposes, amend the Declaration of
Trust to:
(a) create one or more Series of Shares (in addition to any Series
already existing or otherwise) with such rights and preferences and such
eligibility requirements for investment therein as the Trustees shall
determine and reclassify any or all outstanding Shares as shares of a
particular Series in accordance with such eligibility requirements;
(b) amend any of the provisions set forth in paragraphs (a) through
(i) of Section 6 of this Article III;
(c) combine one or more Series of Shares into a single Series on
such terms and conditions as the Trustees shall determine;
(d) change or eliminate any eligibility requirements for investment
in Shares of any Series, including without limitation, to provide for the
issue of Shares of any Series in connection with any merger or
consolidation of the Trust with another trust or company or any
acquisition by the Trust of part or all of the assets of another trust or
investment company;
(e) change the designation of any Series of Shares;
(f) change the method of allocating dividends among the various
Series of Shares;
(g) allocate any specific assets or liabilities of the
Trust or any specific items of income or expense of the Trust to one or
more Series of Shares;
(h) specifically allocate assets to any or all Series of Shares or
create one or more additional Series of Shares which are preferred over
all other Series of Shares in respect of assets specifically allocated
thereto or any dividends paid by the Trust with respect to any net
income, however determined, earned from the investment and reinvestment
of any assets so allocated or otherwise and provide for any special
voting or other rights with respect to such Series.
Section 6. Establishment and Designation of Series. Except as set
forth in Section 8 of this Article III, the establishment and designation
of any other Series of Shares shall be effective upon the resolution by a
majority of the then Trustees, setting forth such establishment and
designation and the relative rights and preferences of such Series, or as
otherwise provided in such resolution. Such establishment and
designation shall be set forth in an amendment to this Declaration of
Trust as provided in Section 8 of Article VIII.
Shares of each Series established pursuant to this Section 6, unless
otherwise provided in the resolution establishing such Series, shall have
the following relative rights and preferences:
(a) Assets Belonging to Series. All consideration received by the
Trust for the issue or sale of Shares of a particular Series, together
with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof from whatever source
derived, including, without limitation, any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to that Series for all purposes, subject
only to the rights of creditors, and shall be so recorded upon the books
of account of the Trust. Such consideration, assets, income, earnings,
profits and proceeds thereof, from whatever source derived, including,
without limitation, any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, are
herein referred to as "assets belonging to" that Series. In the event
that there are any assets, income, earnings, profits and proceeds
thereof, funds or payments which are not readily identifiable as
belonging to any particular Series (collectively "General Assets"), the
Trustees shall allocate such General Assets to, between or among any one
or more of the Series in such manner and on such basis as they, in their
sole discretion, deem fair and equitable, and any General Asset so
allocated to a particular Series shall belong to that Series. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
(b) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged with the liabilities of the Trust in
respect to that Series and all expenses, costs, charges and reserves
attributable to that Series, and any general liabilities of the Trust
which are not readily identifiable as belonging to any particular Series
shall be allocated and charged by the Trustees to and among any one or
more of the Series in such manner and on such basis as the Trustees in
their sole discretion deem fair and equitable. The liabilities,
expenses, costs, charges, and reserves so charged to a Series are herein
referred to as "liabilities belonging to" that Series. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the holders of all Series for all
purposes. Under no circumstances shall the assets allocated or belonging
to any particular Series be charged with liabilities attributable to any
other Series. All persons who have extended credit which has been
allocated to a particular Series, or who have a claim or contract which
has been allocated to any particular Series, shall look only to the
assets of that particular Series for payment of such credit, claim, or
contract.
(c) Dividends, Distributions, Redemptions, and Repurchases.
Notwithstanding any other provisions of this Declaration of Trust,
including, without limitation, Article VI, no dividend or distribution
(including, without limitation, any distribution paid upon termination of
the Trust or of any Series) with respect to, nor any redemption or
repurchase of, the Shares of any Series shall be effected by the Trust
other than from the assets belonging to such Series, nor, except as
specifically provided in Section 7 of this Article III, shall any
Shareholder of any particular Series otherwise have any right or claim
against the assets belonging to any other Series except to the extent
that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series. The Trustees shall have full
discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders.
(d) Voting. All Shares of the Trust entitled to vote on a matter
shall vote separately by Series. That is, the Shareholders of each
Series shall have the right to approve or disapprove matters affecting
the Trust and each respective Series as if the Series were separate
companies. There are, however, two exceptions to voting by separate
Series. First, if the 1940 Act requires all Shares of the Trust to be
voted in the aggregate without differentiation between the separate
Series, then all the Trust's Shares shall be entitled to vote on a one-
vote-per-Share basis. Second, if any matter affects only the interests
of some but not all Series, then only the Shareholders of such affected
Series shall be entitled to vote on the matter.
(e) Equality. All the Shares of each particular Series shall
represent an equal proportionate interest in the assets belonging to that
Series (subject to the liabilities belonging to that Series), and each
Share of any particular Series shall be equal to each other Share of that
Series.
(f) Fractions. Any fractional Share of a Series shall carry
proportionately all the rights and obligations of a whole share of that
Series, including rights with respect to voting, receipt of dividends and
distributions, redemption of Shares and termination of the Trust.
(g) Exchange Privilege. The Trustees shall have the authority to
provide that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series of Shares in
accordance with such requirements and procedures as may be established by
the Trustees.
(h) Combination of Series. The Trustees shall have the authority,
without the approval of the Shareholders of any Series unless otherwise
required by applicable law, to combine the assets and liabilities
belonging to any two or more Series into assets and liabilities belonging
to a single Series.
(i) Elimination of Series. At any time that there are no Shares
outstanding of any particular Series previously established and
designated, the Trustees may amend this Declaration of Trust to abolish
that Series and to rescind the establishment and designation thereof,
such amendment to be effected in the manner provided in Section 5 of this
Article III.
Section 7. Indemnification of Shareholders. In case any
Shareholder or former Shareholder shall be held to be personally liable
solely by reason of his or her being or having been a Shareholder and not
because of his or her acts or omissions or for some other reason, the
Shareholder or former Shareholder (or his or her heirs, executors,
administrators, or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets of the Trust to be held harmless from
and indemnified against all loss and expense arising from such liability.
Section 8. Initial Designation of Series. Subject to the relative
rights and preferences and other terms of this Agreement and Declaration
of Trust, the Trustees authorize the establishment of three (3) initial
Series to be designated as follows: the Rising Dividends Portfolio, the
Income Portfolio, and the Corporate Cash Portfolio
ARTICLE IV
The Board of Trustees
Section 1. Number, Election and Tenure. The number of Trustees
constituting the Board of Trustees shall be five (5), unless such number
shall be changed from time to time by a written instrument signed by a
majority of the Board of Trustees, provided, however, that the number of
Trustees shall in no event be less than one nor more than 15. The Board
of Trustees, by action of a majority of the then Trustees at a duly
constituted meeting, may fill vacancies in the Board of Trustees or
remove Trustees with or without cause. Each Trustee shall serve during
the continued lifetime of the Trust until he dies, resigns, is declared
bankrupt or incompetent by a court of appropriate jurisdiction, or is
removed, or, if sooner, until the next meeting of Shareholders called for
the purpose of electing Trustees and until the election and qualification
of his successor. Any Trustee may resign at any time by written
instrument signed by him and delivered to any officer of the Trust or to
a meeting of the Trustees. Such resignation shall be effective upon
receipt unless specified to be effective at some other time. Except to
the extent expressly provided in a written agreement with the Trust, no
Trustee resigning and no Trustee removed shall have any right to any
compensation for any period following his resignation or removal, or any
right to damages on account of such removal. The Shareholders may fix
the number of Trustees and elect Trustees at any meeting of Shareholders
called by the Trustees for that purpose.
Section 2. Effect of Death, Resignation, etc. of a Trustee. The
death, declination, resignation, retirement, removal, or incapacity of
one or more Trustees, or all of them, shall not operate to annul the
Trust or to revoke any existing agency created pursuant to the terms of
this Declaration of Trust. Whenever a vacancy in the Board of Trustees
shall occur, until such vacancy is filled as provided in Article IV,
Section 1, the Trustees in office, regardless of their number, shall have
all the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Declaration of Trust. As conclusive
evidence of such vacancy, a written instrument certifying the existence
of such vacancy may be executed by an officer of the Trust or by a
majority of the Board of Trustees. In the event of the death,
declination, resignation, retirement, removal, or incapacity of all the
then Trustees within a short period of time and without the opportunity
for at least one Trustee being able to appoint additional Trustees to
fill vacancies, the Trust's investment adviser or investment advisers
jointly, if there is more than one, are empowered to appoint new Trustees
subject to the provisions of Section 16(a) of the 1940 Act.
Section 3. Powers. Subject to the provisions of this Declaration
of Trust, the business of the Trust shall be managed by the Board of
Trustees, and such Board shall have all powers necessary or convenient to
carry out that responsibility including the power to engage in securities
transactions of all kinds on behalf of the Trust. Without limiting the
foregoing, the Trustees may: adopt By-Laws not inconsistent with this
Declaration of Trust providing for the regulation and management of the
affairs of the Trust and may amend and repeal them to the extent that
such By-Laws do not reserve that right to the Shareholders; fill
vacancies in or remove from their number, and may elect and remove such
officers and appoint and terminate such agents as they consider
appropriate; appoint from their own number and establish and terminate
one or more committees consisting of two or more Trustees which may
exercise the powers and authority of the Board of Trustees to the extent
that the Trustees determine; employ one or more custodians of the assets
of the Trust and may authorize such custodians to employ subcustodians
and to deposit all or any part of such assets in a system or systems for
the central handling of securities or with a Federal Reserve Bank, retain
a transfer agent or a shareholder servicing agent, or both; provide for
the issuance and distribution of Shares by the Trust directly or through
one or more Principal Underwriters or otherwise; redeem, repurchase and
transfer Shares pursuant to applicable law; set record dates for the
determination of Shareholders with respect to various matters; declare
and pay dividends and distributions to Shareholders of each Series from
the assets of such Series; and in general delegate such authority as they
consider desirable to any officer of the Trust, to any committee of the
Trustees and to any agent or employee of the Trust or to any such
custodian, transfer or shareholder servicing agent, or Principal
Underwriter. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In
construing the Provisions of this Declaration of Trust, the presumption
shall be in favor of a grant of power to the Trustees.
Without limiting the foregoing, the Board of Trustees shall have
power and authority:
(a) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire,
own, hold, pledge, sell, assign, transfer, exchange, distribute, write
options on, lend or otherwise deal in or dispose of contracts for the
future acquisition or delivery of fixed income or other securities, and
securities of every nature and kind, including, without limitation, all
types of bonds, debentures, stocks, negotiable or non-negotiable
instruments, obligations, evidences of indebtedness, certificates of
deposit or indebtedness, commercial paper, repurchase agreements,
bankers' acceptances, and other securities of any kind, issued created,
guaranteed or sponsored by any and all persons, including, without
limitation, states, territories, and possessions of the United States and
the District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political
subdivision of the U.S. Government or any foreign government, or any
international instrumentality, or by any bank or savings institution, or
by any corporation or organization organized under the laws of the United
States or of any state, territory, or possession thereof, or by any
corporation or organization organized under any foreign law, or in "when
issued" contracts for any such securities, to change the investments of
the assets of the Trust; and to exercise any and all rights, powers, and
privileges of ownership or interest in respect of any and all such
investments of every kind and description, including, without limitation,
the right to consent and otherwise act with respect thereto, with power
to designate one or more persons, firms, associations, or corporations to
exercise any of said rights, powers, and privileges in respect of any of
said instruments;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease,
or write options with respect to or otherwise deal in any property rights
relating to any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power
and discretion with relation to securities or property as the Trustees
shall deem proper;
(d) To exercise powers and right of subscription or otherwise which
in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in
its own name or in the name of a custodian or subcustodian or a nominee
or nominees or otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase or sale of property by such corporation or issuer; and to pay
calls or subscriptions with respect to any security held in the Trust;
(g) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that
connection to deposit any security with, or transfer any security to, any
such committee, depositary or trustee, and to delegate to them such power
and authority with relation to any security (whether or not so deposited
or transferred) as the Trustees shall deem proper, and to agree to pay,
and to pay, such portion of the expenses and compensation of such
committee, depositary or trustee as the Trustees shall deem proper;
(h) To compromise, arbitrate or otherwise adjust claims in favor of
or against the Trust or any matter in controversy, including but not
limited to claims for taxes;
(i) To enter into joint ventures, general or limited partnerships
and any other combinations or associations;
(j) To borrow funds or other property in the name of the Trust
exclusively for Trust purposes;
(k) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship,
or otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies insuring
the assets of the Trust or payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, principal
underwriters, or independent contractors of the Trust, individually
against all claims and liabilities of every nature arising by reason of
holding, being or having held any such office or position, or by reason
of any action alleged to have been taken or omitted by any such person as
Trustee, officer, employee, agent, investment adviser, principal
underwriter, or independent contractor, including any action taken or
omitted that may be determined to constitute negligence, whether or not
the Trust would have the power to indemnify such person against
liability; and
(m) To adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive
and benefit plans, trusts and provisions, including the purchasing of
life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust or one or more of
its Series. The Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investment by fiduciaries.
The Trustees shall not be required to obtain any court order to deal with
any assets of the Trust or take any other action hereunder.
Section 4. Payment of Expenses by the Trust. The Trustees are
authorized to pay or cause to be paid out of the principal or income of
the Trust, or partly out of the principal and partly out of income, as
they deem fair, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Trust, or in connection with
the management thereof, including, but not limited to, the trustees
compensation and such expenses and charges for the services of the
Trust's officers, employees, investment adviser or manager, principal
underwriter, auditors, counsel, custodian, transfer agent, Shareholder
servicing agent, and such other agents or independent contractors and
such other expenses and charges as the Trustees may deem necessary or
proper to incur.
Section 5. Payment of Expenses by Shareholders. The Trustees shall
have the power, as frequently as they may determine, to cause each
Shareholder, or each Shareholder of any particular Series, to pay
directly, in advance or arrears, for charges of the Trust's custodian or
transfer, Shareholder servicing or similar agent, an amount fixed from
time to time by the Trustees, by setting off such charges due from such
Shareholder from declared but unpaid dividends owed such Shareholder
and/or by reducing the number of shares in the account of such
Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such
Shareholder.
Section 6. Ownership of Assets of the Trust. Title to all of the
assets of the Trust shall at all times be considered as vested in the
Trustees.
Section 7. Service Contracts
(a) Subject to such requirements and restrictions as may be set
forth in the By-Laws, the Trustees may, at any time and from time to
time, contract for exclusive or nonexclusive advisory and/or management
services for the Trust or for any Series with any corporation, trust,
association or other organization (the "Manager"); and any such contract
may contain such other terms as the Trustees may determine, including
without limitation, authority for the Manager to determine from time to
time without prior consultation with the Trustees what investments shall
be purchased, held, sold or exchanged and what portion, if any, of the
assets of the Trust shall be held uninvested and to make changes in the
Trust's investments.
(b) The Trustees may also, at any time and from time to time,
contract with any corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or Principal
Underwriter for the Shares of one or more of the Series. Every such
contract shall comply with such requirements and restrictions as may be
set forth in the By-Laws; and any such contract may contain such other
terms as the Trustees may determine.
(c) The Trustees are also empowered, at any time and from time to
time, to contract with any corporations, trusts, associations or other
organizations, appointing it or them the custodian, transfer agent and/or
shareholder servicing agent for the Trust or one or more of its Series.
Every such contract shall comply with such requirements and restrictions
as may be set forth in the By-Laws or stipulated by resolution of the
Trustees.
(d) The Trustees are further empowered, at any time and from time to
time, to contract with any entity to provide such other services to the
Trust or one or more of the Series, as the Trustees determine to be in
the best interests of the Trust and the applicable Series.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter, distributor, or affiliate or agent of or
for any corporation, trust, association, or other organization, or for
any parent or affiliate of any organization with which an advisory or
management contract, or principal underwriter's or distributor's
contract, or transfer, shareholder servicing or other type of service
contract may have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a Shareholder or has
an interest in the Trust, or that
(ii) any corporation, trust, association or other organization
with which an advisory or management contract or principal underwriter's
or distributor's contract, or transfer, shareholder servicing or other
type of service contract may have been or may hereafter be made also has
an advisory or management contract, or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other
service contract with one or more other corporations, trust,
associations, or other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or
executing the same, or create any liability or accountability to the
Trust or its Shareholders, provided approval of each such contract is
made pursuant to the requirements of the 1940 Act.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Subject to the provisions of Article
III, Section 6(d), the Shareholders shall have power to vote only (i) for
the election of Trustees as provided in Article IV, Section 1, (ii) to
the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class
action on behalf of the Trust or the Shareholders, (iii) with respect to
the termination of the Trust or any Series to the extent and as provided
in Article VIII, Section 4, and (iv) with respect to such additional
matters relating to the Trust as may be required by this Declaration of
Trust, the By-Laws or any registration of the Trust with the Commission
(or any successor agency) or any state, or as the Trustees may consider
necessary or desirable. Each whole Share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional
Share shall be entitled to a proportionate fractional vote. There shall
be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy. A proxy with respect to Shares held in the name
of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. At any time when no Shares of a
Series are outstanding, the Trustees may exercise all rights of
Shareholders of that Series with respect to matters affecting that
Series, take any action required by law, this Declaration of Trust or the
By-Laws, to be taken by the Shareholders.
Section 2. Voting Power and Meetings. Meetings of the Shareholders
may be called by the Trustees for the purpose of electing Trustees as
provided in Article IV, Section 1 and for such other purposes as may be
prescribed by law, by this Declaration of Trust or by the By-Laws.
Meetings of the Shareholders may also be called by the Trustees from time
to time for the purpose of taking action upon any other matter deemed by
the Trustees to be necessary or desirable. A meeting of Shareholders may
be held at any place designated by the Trustees. Written notice of any
meeting of Shareholders shall be given or caused to be given by the
Trustees by mailing such notice at least seven (7) days before such
meeting, postage prepaid, stating the time and place of the meeting, to
each Shareholder at the Shareholder's address as it appears on the
records of the Trust. Whenever notice of a meeting is required to be
given to a Shareholder under this Declaration of Trust or the By-Laws, a
written waiver thereof, executed before or after the meeting by such
Shareholder or his attorney thereunto authorized and filed with the
records of the meeting, shall be deemed equivalent to such notice.
Section 3. Quorum and Required Vote. Except when a larger quorum
is required by applicable law, by the By-Laws or by this Declaration of
Trust, forty percent (40%) of the Shares entitled to vote shall
constitute a quorum at a Shareholders' meeting. When any one or more
Series is to vote as a single class separate from any other Shares which
are to vote on the same matters as a separate class or classes, forty
percent (40%) of the Shares of each such Series entitled to vote shall
constitute a quorum at a Shareholder's meeting of that Series. Any
meeting of Shareholders may be adjourned from time to time by a majority
of the votes properly cast upon the question of adjourning a meeting to
another date and time, whether or not a quorum is present, and the
meeting may be held as adjourned within a reasonable time after the date
set for the original meeting without further notice. Subject to the
provisions of Article III, Section 6(d), when a quorum is present at any
meeting, a majority of the Shares voted shall decide any questions and a
plurality shall elect a Trustee, except when a larger vote is required by
any provision of this Declaration of Trust or the By-Laws or by
applicable law.
Section 4. Action by Written Consent. Any action taken by
Shareholders may be taken without a meeting if Shareholders holding a
majority of the Shares entitled to vote on the matter (or such larger
proportion thereof as shall be required by any express provision of this
Declaration of Trust or by the By-Laws) and holding a majority (or such
larger proportion as aforesaid) of the Shares of any Series entitled to
vote separately on the matter consent to the action in writing and such
written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote
taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the
Shareholders of any Series who are entitled to vote or act at any meeting
or any adjournment thereof, the Trustees may from time to time fix a
time, which shall be not more than ninety (90) days before the date of
any meeting of Shareholders, as the record date for determining the
Shareholders of such Series having the right to notice of and to vote at
such meeting and any adjournment thereof, and in such case only
Shareholders of record on such record date shall have such right,
notwithstanding any transfer of shares on the books of the Trust after
the record date. For the purpose of determining the Shareholders of any
Series who are entitled to receive payment of any dividend or of any
other distribution, the Trustees may from time to time fix a date, which
shall be before the date for the payment of such dividend or such other
payment, as the record date for determining the Shareholders of such
Series having the right to receive such dividend or distribution.
Without fixing a record date the Trustees may for voting and/or
distribution purposes close the register or transfer books for one or
more Series for all or any part of the period between a record date and a
meeting of Shareholders or the payment of a distribution. Nothing in
this Section shall be construed as precluding the Trustees from setting
different record dates for different Series.
Section 6. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Net Asset Value, Distributions, and Redemptions
Section 1. Determination of Net Asset Value, Net Income, and
Distributions. Subject to Article III, Section 6 hereof, the Trustees,
in their absolute discretion, may prescribe and shall set forth in the By-
Laws or in a duly adopted vote of the Trustees such bases and time for
determining the per Share or net asset value of the Shares of any Series
or net income attributable to the Shares of any Series, or the
declaration and payment of dividends and distributions on the Shares of
any Series, as they may deem necessary or desirable.
Section 2. Redemptions and Repurchases. The Trust shall purchase
such Shares as are offered by any Shareholder for redemption, upon the
presentation of a proper instrument of transfer together with a request
directed to the Trust or a person designated by the Trust that the Trust
purchase such Shares or in accordance with such other procedures for
redemption as the Trustees may from time to time authorize; and the Trust
will pay therefor the net asset value thereof, as determined in
accordance with the By-Laws and applicable law, next determined. Payment
for said Shares shall be made by the Trust to the Shareholder within
seven days after the date on which the request is made in proper form.
The obligation set forth in this Section 2 is subject to the provision
that in the event that any time the New York Stock Exchange is closed for
other than weekends or holidays, or if permitted by the Rules of the
Commission during periods when trading on the Exchange is restricted or
during any emergency which makes it impracticable for the Trust to
dispose of the investments of the applicable Series or to determine
fairly the value of the net assets belonging to such Series or during any
other period permitted by order of the Commission for the protection of
investors, such obligations may be suspended or postponed by the
Trustees.
The redemption price may in any case or cases be paid wholly or
partly in kind if the Trustees determine that such payment is advisable
in the interest of the remaining Shareholders of the Series for which the
Shares are being redeemed. Subject to the foregoing, the fair value,
selection and quantity of securities or other property so paid or
delivered as all or part of the redemption price may be determined by or
under authority of the Trustees. In no case shall the Trust be liable
for any delay of any corporation or other person in transferring
securities selected for delivery as all or part of any payment in kind.
Section 3. Redemptions at the Option of the Trust. The Trust shall
have the right at its option and at any time to redeem Shares of any
Shareholder at the net asset value thereof as described in Section 1 of
this Article VI: (i) if at such time such Shareholder owns Shares of any
Series having an aggregate net asset value of less than an amount
determined from time to time by the Trustees, but not to exceed $1,000;
or (ii) to the extent that such Shareholder owns Shares equal to or in
excess of a percentage, determined from time to time by the Trustees, of
the outstanding Shares of the Trust or of any Series.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust, and they may fix the amount of
such compensation. Nothing herein shall in any way prevent the
employment of any Trustee for advisory, management, legal, accounting,
investment banking or other services and payment for the same by the
Trust.
Section 2. Limitation of Liability. The Trustees shall not be
responsible or liable in any event for any neglect or wrong-doing of any
officer, agent, employee, manager or Principal Underwriter of the Trust,
nor shall any Trustee be responsible for the act or omission of any other
Trustee, but nothing herein contained shall protect any Trustee against
any liability to which he would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Every note, bond, contract, instrument, certificate or undertaking
and every other act or thing whatsoever issued, executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the
Trust shall be conclusively deemed to have been issued, executed or done
only in or with respect to their or his capacity as Trustees or Trustee,
and such Trustees or Trustee shall not be personally liable thereon.
Section 3. Indemnification. The Trustees shall be entitled and
empowered to the fullest extent permitted by law to purchase with Trust
assets insurance for and to provide by resolution or in the By-Laws for
indemnification out of Trust assets for liability and for all expenses
reasonably incurred or paid or expected to be paid by a Trustee or
officer in connection with any claim, action, suit or proceeding in which
he becomes involved by virtue of his capacity or former capacity with the
Trust. The provisions, including any exceptions and limitations
concerning indemnification, may be set forth in detail in the By-Laws or
in a resolution of the Board of Trustees.
ARTICLE VIII
Miscellaneous
Section 1. Trustees, Shareholders, etc. Not Personally Liable;
Notice. All persons extending credit to, contracting with or having any
claim against the Trust or any Series shall look only to the assets of
the Trust, or, to the extent that the liability of the Trust may have
been expressly limited by contract to the assets of a particular Series,
only to the assets belonging to the relevant Series, for payment under
such credit, contract or claim; and neither the Shareholders nor the
Trustees, nor any of the Trust's officers, employees or agents, whether
past, present or future, shall be personally liable therefor. Nothing in
this Declaration of Trust shall protect any Trustee against any liability
to which such Trustee would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking
made or issued on behalf of the Trust by the Board of Trustees, by any
officers or officer or otherwise may include a notice that this
Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts and may recite that the note, bond, contract, instrument,
certificate, or undertaking was executed or made by or on behalf of the
Trust or by them as Trustee or Trustees or as officers or officer or
otherwise and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders
individually but are binding only upon the assets and property of the
Trust or upon the assets belonging to the Series for the benefit of which
the Trustees have caused the note, bond, contract, instrument,
certificate or undertaking to be made or issued, and may contain such
further recital as he or they may deem appropriate, but the omission of
any such recital shall not operate to bind any Trustee or Trustees or
officer or officers or Shareholders or any other person individually.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall be
liable solely for his own wilful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of the office
of Trustee, and shall not be liable for errors of judgment or mistakes of
fact or law. The Trustees may take advice of counsel or other experts
with respect to the meaning and operation of this Declaration of Trust,
and shall be under no liability for any act or omission in accordance
with such advice nor for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor any surety if a bond
is required.
Section 3. Liability of Third Persons Dealing with Trustees. No
person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or property
transferred to the Trust or upon its order.
Section 4. Termination of Trust or Series. Unless terminated as
provided herein, the Trust shall continue without limitation of time.
The Trust may be terminated at any time by vote of at least two-thirds
(66-2/3%) of the Shares of each Series entitled to vote, voting
separately by Series, or by the Trustees by written notice to the
Shareholders. Any Series may be terminated at any time by vote of at
least two-thirds (66-2/3%) of the Shares of that Series or by the
Trustees by written notice to the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may be),
after paying or otherwise providing for all charges, taxes, expenses and
liabilities belonging, severally, to each Series (or the applicable
Series, as the case may be), whether due or accrued or anticipated as may
be determined by the Trustees, the Trust shall, in accordance with such
procedures as the Trustees consider appropriate, reduce the remaining
assets belonging, severally, to each Series (or the applicable Series, as
the case may be), to distributable form in cash or shares or other
securities, or any combination thereof, and distribute the proceeds
belonging to each Series (or the applicable Series, as the case may be),
to the Shareholders of that Series, as a Series, ratably according to the
number of Shares of that Series held by the several Shareholders on the
date of termination.
Section 5. Merger and Consolidation. The Trustees may cause the
Trust or one or more of its Series to be merged into or consolidated with
another Trust or company or the Shares exchanged under or pursuant to any
state or Federal statute, if any, or otherwise to the extent permitted by
law. Such merger or consolidation or Share exchange must be authorized
by vote of a majority of the outstanding Shares of the Trust, as a whole,
or any affected Series, as may be applicable; provided that in all
respects not governed by statute or applicable law, the Trustees shall
have power to prescribe the procedure necessary or appropriate to
accomplish a sale of assets, merger or consolidation.
Section 6. Filing of Copies, References, Headings. The original or
a copy of this instrument and of each amendment hereto shall be kept at
the office of the Trust where it may be inspected by any Shareholder. A
copy of this instrument and of each amendment hereto shall be filed by
the Trust with the Secretary of The Commonwealth of Massachusetts and
with any other governmental office where such filing may from time to
time be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such
amendments have been made and as to any matters in connection with the
Trust hereunder; and, with the same effect as if it were the original,
may rely on a copy certified by an officer of the Trust to be a copy of
this instrument or of any such amendments. In this instrument and in any
such amendment, references to this instrument, and all expressions like
"herein", "hereof" and "hereunder", shall be deemed to refer to this
instrument as amended or affected by any such amendments. Headings are
placed herein for convenience of reference only and shall not be taken as
a part hereof or control or affect the meaning, construction or effect of
this instrument. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 7. Applicable Law. This Agreement and Declaration of Trust
is created under and is to be governed by and construed and administered
according to the laws of The Commonwealth of Massachusetts. The Trust
shall be of the type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
Section 8. Amendments. This Declaration of Trust may be amended at
any time by an instrument in writing signed by a majority of the then
Trustees.
Section 9. Trust Only. It is the intention of the Trustees to
create only the relationship of Trustee and beneficiary between the
Trustees and each Shareholder from time to time. It is not the intention
of the Trustees to create a general partnership, limited partnership,
joint stock association, corporation, bailment, or any form of legal
relationship other than a trust. Nothing in this Agreement and
Declaration of Trust shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 10. Use of the Name "L.F. Rothschild, Unterberg, Towbin."
The Manager has consented to the use by the Trust of the identifying
words or name "L.F. Rothschild, Unterberg, Towbin" as part of the name of
the Trust and in the name of any Series of Shares. Such consent is
conditioned upon the employment of the Manager, of an affiliate of said
Company, as Manager of the Trust and said Series. The name or
identifying words "L.F. Rothschild, Unterberg, Towbin or any variation
thereof may be used from time to time in other connections and for other
Purposes by the Manager or affiliated entities. The Manager has the
right to require the Trust to cease using "L.F. Rothschild, Unterberg,
Towbin" as the name of the Trust and in the names of its Series if the
Trust and said Series cease to employ, for any reason, the Manager, or an
affiliate of said Company, as the investment manager or adviser of the
Trust or such Series. Future names adopted by the Trust for itself and
its Series shall be the property of the Manager and its affiliates, and
the use of such names shall be subject to the same conditions set forth
in this Section insofar as such name or identifying words require the
consent of the Manager.
IN WITNESS WHEREOF, the Trustees named below do hereby set their
hands as of the 30th day of October, 1986.
WILLIAM J. LIPPMAN A. ROBERT TOWBIN
FRANK T. CROHN CHARLES RUBENS II
LEONARD RUBIN
CERTIFICATE OF AMENDMENT
OF
AGREEMENT AND DECLARATION OF TRUST
OF
L.F. ROTHSCHILD MANAGED TRUST
The undersigned certify that:
1. They constitute a majority of the Board of Trustees.
2. They hereby adopt the following amendments to this
Agreement and Declaration of Trust of this Trust:
A. Article I, Section 1 is amended to read as
follows:
Section 1. Name. This Trust, formerly known
as the L.F. Rothschild Managed Trust, shall
henceforth be known as the FRANKLIN MANAGED TRUST
and the Trustees shall conduct the business of the
Trust under the name or any other name as they may
from time to time determine.
B. The first paragraph of Article III, Section 6 is
amended to delete the second sentence thereof and
to read as follows:
Section 6. Establishment and Designation of
Series. Except as set forth in Section 8 of this
Article III, the establishment and designation of
any other Series of Shares or change in the
existing Series shall be effective upon the
resolution by a majority of the then Trustees,
setting forth such amendment, establishment and
designation and the relative rights and
preferences of such Series, or as otherwise
provided in such resolution.
C. Article VIII, Section 10 is amended to read as
follows:
Section 10. Use of the name "Franklin."
Franklin Advisers, Inc. (the "Manager") has
consented to the use by the Trust of the
identifying word or name "Franklin" as part of the
name of the Trust and in the name of any Series of
Shares. Such consent is conditioned upon the
employment of the Manager, or an affiliate of said
Company, as Manager of the Trust and said Series.
The name or identifying words "Franklin" or any
variation thereof may be used from time to time in
other connections and for other purposes by the
Manager or affiliated entities. The Manager has
the right to require the Trust to cease using
"Franklin" as the name of the Trust and in the
names of its Series if the Trust and said Series
cease to employ, for any reasons, the Manager, or
any affiliate of said Company, as the investment
manager or adviser of the Trust or such Series.
Future names adopted by the Trust for itself and
its Series shall be the property of the manager
and its affiliates, and the use of such manes
shall be subject to the same conditions set forth
in this Section insofar as such name or
identifying words require the consent of the
Manager.
3. It is the determination of the Trustees that approval
of the shareholders of the Trust is not required by the
Investment Company Act of 1940, as amended, or other
applicable law. These amendments are made pursuant to
Article III, Section 5 and Article VIII, Section 8 of
the Agreement and Declaration of Trust which empower
the Trustees to change provisions relating to shares
and, in general, to amend the Agreement and Declaration
of Trust, respectively. Pursuant to Article VIII,
Section 6, this Certificate of Amendment may be
executed in counterparts.
IN WITNESS WHEREOF, the Trustees named below do
hereby set their hands as of the 28th day of June, 1988.
/s/ FRANK T. CROHN /s/ CHARLES RUBENS II
FRANK T. CROHN CHARLES RUBENS II
/s/ WILLIAM J. LIPPMAN /s/ LEONARD RUBIN
WILLIAM J. LIPPMAN LEONARD RUBIN
CERTIFICATE OF AMENDMENT
OF
AGREEMENT AND DECLARATION OF TRUST
OF
FRANKLIN MANAGED TRUST
The undersigned certify that:
THEY CONSTITUTE A MAJORITY OF THE TRUSTEES OF
FRANKLIN MANAGED TRUST, A MASSACHUSETTS BUSINESS TRUST (THE
"TRUST").
THEY HEREBY ADOPT THE FOLLOWING AMENDMENT TO THE
AGREEMENT AND DECLARATION OF TRUST OF THE TRUST, WHICH DELETES IN
ITS ENTIRETY THE SECTION OF THE AGREEMENT AND DECLARATION OF
TRUST ENTITLED "SECTION 1. DIVISION OF BENEFICIAL INTEREST." OF
ARTICLE III AND REPLACES SUCH SECTION OF ARTICLE III WITH THE
FOLLOWING:
"Section 1. Division of Beneficial Interest.
The beneficial interest in the Trust shall at all times
be divided into an unlimited number of Shares, with a
par value of $.01 per Share. The Trustees may
authorize the division of the Shares into separate
Series and the division of Series into separate classes
or sub-series of Shares (subject to any applicable
rule, regulation or order of the Commission or other
applicable law or regulation). The different Series
and classes shall be established and designated and
shall have such preference, conversion or other rights,
voting powers, restrictions, limitations as to
dividends, qualifications, terms and conditions of
redemption and other characteristics as the Trustees
may determine.
Notwithstanding the provisions of Section 6(d) of this
Article III or any other provision of this Agreement
and Declaration of Trust, if any matter submitted to
shareholders for a vote affects only the interests of
one class of a Series then only such affected class
shall be entitled to vote on the matter. Each Share of
a Series shall have equal rights with each other Share
of that Series with respect to the assets of the Trust
pertaining to that Series. Notwithstanding any other
provision of this Agreement and Declaration of Trust,
the dividends payable to the holders of any Series (or
class) (subject to any applicable rule, regulation or
order of the Commission or any other applicable law or
regulation) shall be determined by the Trustees and
need not be individually declared, but may be declared
and paid in accordance with a formula adopted by the
Trustees. Except as otherwise provided herein, all
references in this Agreement and Declaration of Trust
to Shares or Series of Shares shall apply without
discrimination to the Shares of each Series.
Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities
issued by the Trust or any Series or class. The
Trustees may from time to time divide or combine the
Shares of any particular Series or class into a greater
or lesser number of Shares of that Series or class
without thereby changing the proportionate beneficial
interest of the Shares of that Series or class in the
assets belonging to that Series or class or in any way
affecting the rights of Shares of any other Series or
class."
IT IS THE DETERMINATION OF THE TRUSTEES THAT
APPROVAL OF THE SHAREHOLDERS OF THE TRUST IS NOT REQUIRED BY THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED, OR OTHER APPLICABLE
LAW. THIS AMENDMENT IS MADE PURSUANT TO ARTICLE III, SECTION 5
OF THIS AGREEMENT AND DECLARATION OF TRUST WHICH EMPOWERS THE
TRUSTEES TO CHANGE PROVISIONS RELATING TO SHARES OF THE TRUST.
We declare under penalty of perjury that the matters
set forth in this certificate are true and correct of our own
knowledge.
Dated March 13, 1995
/s/ Frank T. Crohn /s/ William J. Lippman
Frank T. Crohn William J. Lippman
/s/ Charles Rubens, II /s/ Leonard Rubin
Charles Rubens, II Leonard Rubin
BY-LAWS
for the regulation, except as
otherwise provided by statute or
the Agreement and Declaration of Trust of
L.F. ROTHSCHILD, UNTERBERG, TOWBIN INVESTMENT TRUST
a Massachusetts Business Trust
Exhibt B
TABLE OF CONTENTS
BY-LAWS
L.F. ROTHSCHILD, UNTERBERT, TOWBIN INVESTMENT TRUST
ARTICLE I Offices
1. Principal Office
2. Other Offices
ARTICLE II Meetings of Shareholders
1. Place of Meetings
2. Call of Meeting
3. Notice of Shareholders' Meeting
4. Manner of Giving Notice; Affidavit
of Notice
5. Adjourned Meeting; Notice
6. Voting
7. Waiver of Notice of Consent by
absent Shareholders
8. Shareholder Action by Written
Consent without a Meeting
9. Record Date for Shareholder Notice,
Voting and Fiving Consents
10. Proxies
11. Inspectors of Election
ARTICLE III Trustees
1. Powers
2. Number of Trustees
3. Vacancies
4. Place of Meetings and Meetings by
Telephone
5. Regular Meetings
6. Special Meetings
7. Quorum
8. Waiver of Notice
9. Adjournment
10. Notice of Adjournment
11. Action Without a Meeting
12. Fees and Compensation of Trustees
13. Delegation of Power to Other
Trustees
ARTICLE IV Committees
1. Committees of Trustees
2. Meetings and Action of Committees
ARTICLE V Officers
1. Officers
2. Election of Officers
3. Subordinate Officers
4. Removal and Regisnation of Officers
5. Vacancies in Offices
6. Chairman of the Board
7. President
8. Vice President
9. Secretary
10. Treasurer
ARTICLE VI Indemnification of Trustees, Officers,
Employees and Other Agents
1. Agents, Proceedings and Expenses
2. Actions Other than by Trust
3. Actions by the Trust
4. Exclusion and Indemnification
5. Successful Defense by Agent
6. Required Approval
7. Authorization of Indemnification and
Determination of Reasonableness
8. Advance of Expenses
9. Other Contractual Rights
10. Limitations
11. Insurance
12. Fiduciaries of Corporate Employee
Benefit Plan
ARTICLE VII Recorda and Reports
1. Maintenance and Inspection of Share
Register
2. Maintenance and Inspection of
By-Laws
3. Maintenance and Inspection of Other
Records
4. Inspection by Trustees
5. Financial Statements
ARTICLE VIII GENERAL MATTERS
1. Checks, Drafts, Evidence of
Indebtedness
2. Contracts and Instruments; How
Executed
3. Certificate of Shares
4. Lost Certificates
5. Representation of Shares of Other
Entities
6. Fiscal Year
ARTICLE IX Amendments
1. Amendments by Shareholders
2. Amendments by Trustees
BY-LAWS
OF
L.F. ROTHSCHILD, UNTERBERG, TOWBIN INVESTMENT TRUST
A Massachusetts Business Trust
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The Board of Trustees shall fix
and, from time to time, may change the location of the principal
executive office of the Trust at any place within or outside The
Commonwealth of Massachusetts.
Section 2. OTHER OFFICES. The Board of Trustees may at any time
establish branch or subordinate offices at any place or places where
the Trust intends to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be
held at any place within or outside The Commonwealth of Massachusetts
designated by the Board of Trustees. In the absence of any such
designation, shareholders' meetings shall be held at the principal
executive office of the Trust.
Section 2. CALL OF MEETING. A meeting of the shareholders may
be called at any time by the Board of Trustees or by the chairman of
the Board or by the president.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of
meetings of shareholders shall be sent or otherwise given in
accordance with Section 4 of this Article II not less than seven (7)
nor more than seventy-five (75) days before the date of the meeting.
The notice shall specify (i) the place, date and hour of the meeting,
and (ii) the general nature of the business to be transacted. The
notice of any meeting at which Trustees are to be elected also shall
include the name of any nominee or nominees whom at the time of the
notice are intended to be presented for election.
If action is proposed to be taken at any meeting for approval of
(i) a contract or transaction in which a Trustee has a direct or
indirect financial interest, (ii) an amendment of the Declaration of
Trust, (iii) a reorganization of the Trust, or (iv) a voluntary
dissolution of the Trust, the notice shall also state the general
nature of that proposal.
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice
of any meeting of shareholders shall be given either personally or by
first-class mail or telegraphic or other written communication,
charges prepaid, addressed to the shareholder at the address of that
shareholder appearing on the books of the Trust or its transfer agent
or given by the shareholder to the Trust for the purpose of notice. If
no such address appears on the Trust's books or is given, notice shall
be deemed to have been given if sent to that shareholder by first-
class mail or telegraphic or other written communication to the
Trust's principal executive office, or if published at least once in a
newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or
other means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Trust is returned to the
Trust by the United States Postal Service marked to indicate that the
Postal Service is unable to deliver the notice to the shareholder at
that address, all future notices or reports shall be deemed to have
been duly given without further mailing if these shall be available to
the shareholder on written demand of the shareholder at the principal
executive office of the Trust for a period of one year from the date
of the giving of the notice.
An affidavit of the mailing or other means of giving any notice
of any shareholder's meeting shall be executed by the secretary,
assistant secretary or any transfer agent of the Trust giving the
notice and shall be filed and maintained in the minute book of the
Trust.
Section 5. ADJOURNED MEETING; NOTICE. Any shareholder's
meeting, whether or not a quorum is present, may be adjourned from
time to time by the vote of the majority of the shares represented at
that meeting, either in person or by proxy.
When any meeting of shareholders is adjourned to another time or
place, notice need not be given of the adjourned meeting at which the
adjournment is taken, unless a new record date of the adjourned
meeting is fixed or unless the adjournment is for more than sixty (60)
days from the date set for the original meeting, in which case the
Board of Trustees shall set a new record date. Notice of any such
adjourned meeting shall be given to each shareholder of record
entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 3 and 4 of this Article II. At any adjourned
meeting, the Trust may transact any business which might have been
transacted at the original meeting.
Section 6. VOTING. The shareholders entitled to vote at any
meeting of shareholders shall be determined in accordance with the
provisions of the Declaration of Trust, as in effect at such time. The
shareholders' vote may be by voice vote or by ballot, provided,
however, that any election for Trustees must be by ballot if demanded
by any shareholder before the voting has begun. On any matter other
than elections of Trustees, any shareholder may vote part of the
shares in favor of the proposal and refrain from voting the remaining
shares or vote them against the proposal, but if the shareholder fails
to specify the number of shares which the shareholder is voting
affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to the total shares that the
shareholder is entitled to vote on such proposal.
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS.
The transactions of the meeting of shareholders, however called and
noticed and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice if a quorum be present
either in person or by proxy and if either before or after the
meeting, each person entitled to vote who was not present in person or
by proxy signs a written waiver of notice or a consent to a holding of
the meeting or an approval of the minutes. The waiver of notice or
consent need not specify either the business to be transacted or the
purpose of any meeting of shareholders.
Attendance by a person at a meeting shall also constitute a
waiver of notice of that meeting, except when the person objects at
the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters not included in the notice of the meeting if
that objection is expressly made at the beginning of the meeting.
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING. Any action which may be taken at any meeting of shareholders
may be taken without a meeting and without prior notice if a consent
in writing setting forth the action so taken is signed by the holders
of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take that action at a meeting
at which all shares entitled to vote on that action were present and
voted. All such consents shall be filed with the Secretary of the
Trust and shall be maintained in the Trust's records. Any shareholder
giving a written consent or the shareholder's proxy holders or a
transferee of the shares or a personal representative of the
shareholder or their respective proxy holders may revoke the consent
by a writing received by the Secretary of the Trust before written
consents of the number of shares required to authorize the proposed
action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not
been solicited in writing and if the unanimous written consent of all
such shareholders shall not have been received, the Secretary shall
give prompt notice of the action approved by the shareholders without
a meeting. This notice shall be given in the manner specified in
Section 4 of this Article II. In the case of approval of (i) contracts
or transactions in which a Trustee has a direct or indirect financial
interest, (ii) indemnification of agents of the Trust, and (iii) a
reorganization of the Trust, the notice shall be given at least ten
(10) days before the consummation of any action authorized by that
approval.
Section 9. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING
CONSENTS. For purposes of determining the shareholders entitled to
notice of any meeting or to vote or entitled to give consent to action
without a meeting, the Board of Trustees may fix in advance a record
date which shall not be more than ninety (90) days nor less than seven
(7) days before the date of any such meeting as provided in the
Declaration of Trust.
If the Board of Trustees does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be
at the close of business on the business day next preceding
the day on which notice is given or if notice is waived, at
the close of business on the business day next preceding the
day on which the meeting is held.
(b) The record date for determining shareholders entitled to
give consent to action in writing without a meeting, (i)
when no prior action by the Board of Trustees has been
taken, shall be the day on which the first written consent
is given, or (ii) when prior action of the Board of Trustees
has been taken, shall be at the close of business on the day
on which the Board of Trustees adopt the resolution relating
to that action or the seventy-fifth day before the date of
such other action, whichever is later.
Section 10. PROXIES. Every person entitled to vote for Trustees
or on any other matter shall have the right to do so either in person
or by one or more agents authorized by a written proxy signed by the
person and filed with the Secretary of the Trust. A proxy shall be
deemed signed if the shareholder's name is placed on the proxy
(whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the shareholder or the shareholder's attorney-in-fact. A
validly executed proxy which does not state that it is irrevocable
shall continue in full force and effect unless (i) revoked by the
person executing it before the vote pursuant to that proxy by a
writing delivered to the Trust stating that the proxy is revoked or by
a subsequent proxy executed by or attendance at the meeting and voting
in person by the person executing that proxy; or (ii) written notice
of the death or incapacity of the maker of that proxy is received by
the Trust before the vote pursuant to that proxy is counted; provided
however, that no proxy shall be valid after the expiration of eleven
(11) months from the date of the proxy unless otherwise provided in
the proxy. The revocability of a proxy that states on its face that it
is irrevocable shall be governed by the provisions of the Texas
Business Corporation Act.
Section 11. INSPECTORS OF ELECTION. Before any meeting of
shareholders, the Board of Trustees may appoint any persons other than
nominees for office to act as inspectors of election at the meeting or
its adjournment. If no inspectors of election are so appointed, the
chairman of the meeting may and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election at the
meeting. The number of inspectors shall be either one (l) or three
(3). If inspectors are appointed at a meeting on the request of one or
more shareholders or proxies, the holders of a majority of shares or
their proxies present at the meeting shall determine whether one (1)
or three (3) inspectors are to be appointed. If any person appointed
as inspector fails to appear or fails or refuses to act, the chairman
of the meeting may and on the request of any shareholder or a
shareholder's proxy, shall appoint a person to fill the vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the
existence of a quorum and the authenticity, validity and
effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE III
TRUSTEES
Section 1. POWERS. Subject to the applicable provisions of the
Declaration of Trust and these By-Laws relating to action required to
be approved by the shareholders or by the outstanding shares, the
business and affairs of the Trust shall be managed and all powers
shall be exercised by or under the direction of the Board of Trustees.
Section 2. NUMBER OF TRUSTEES. The exact number of Trustees
shall be that set forth in the Agreement and Declaration of Trust and
shall be such, until changed by a duly adopted amendment to the
Declaration of Trust.
Section 3. VACANCIES. Vacancies in the Board of Trustees may be
filled by a majority of the remaining Trustees, though less than a
quorum, or by a sole remaining Trustee, unless the Board of Trustees
calls a meeting of shareholders for the purposes of electing Trustees.
In the event that at any time less than a majority of the Trustees
holding office at that time were so elected by the holders of the
outstanding voting securities of the Trust, the Board of Trustees
shall forthwith cause to be held as promptly as possible, and in any
event within sixty (60) days, a meeting of such holders for the
purpose of electing Trustees to fill any existing vacancies in the
Board of Trustees, unless such period is extended by order of the
United States Securities and Exchange Commission.
Notwithstanding the above, whenever and for so long as the Trust
is a participant in or otherwise has in effect a Plan under which the
Trust may be deemed to bear expenses of distributing its shares as
that practice is described in Rule 12b-1 under the Investment Company
Act of 1940, then the selection and nomination of the Trustees who are
not interested persons of the Trust (as that term is defined in the
Investment Company Act of 1940) shall be, and is, committed to the
discretion of such disinterested Trustees.
Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All
meetings of the Board of Trustees may be held at any place within or
outside The Commonwealth of Massachusetts that has been designated
from time to time by resolution of the Board. In the absence of such a
designation, regular meetings shall be held at the principal executive
office of the Trust. Any meeting, regular or special, may be held by
conference telephone or similar communication equipment, so long as
all Trustees participating in the meeting can hear one another and all
such Trustees shall be deemed to be present in person at the meeting.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Trustees shall be held without call at such time as shall from time to
time be fixed by the Board of Trustees. Such regular meetings may be
held without notice.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Trustees for any purpose or purposes may be called at any time by the
chairman of the board or the president or any vice president or the
secretary or any two (2) Trustees.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each Trustee or sent by first-
class mail or telegram, charges prepaid, addressed to each Trustee at
that Trustee's address as it is shown on the records of the Trust. In
case the notice is mailed, it shall be deposited in the United States
mail at least four (4) days before the time of the holding of the
meeting. In case the notice is delivered personally or by telephone or
to the telegraph company, it shall be given at least forty-eight (48)
hours before the time of the holding of the meeting. Any oral notice
given personally or by telephone may be communicated either to the
Trustee or to a person at the office of the Trustee who the person
giving the notice has reason to believe will promptly communicate it
to the Trustee. The notice need not specify the purpose of the meeting
or the place if the meeting is to be held at the principal executive
office of the Trust
Section 7. QUORUM. A majority of the authorized number of
Trustees shall constitute a quorum for the transaction of business,
except to adjourn as provided in Section 10 of this Article III.
Every act or decision done or made by a majority of the Trustees
present at a meeting duly held at which a quorum is present shall be
regarded as the act of the Board of Trustees, subject to the
provisions of the Declaration of Trust. A meeting at which a quorum is
initially present may continue to transact business notwithstanding
the withdrawal of Trustees if any action taken is approved by a least
a majority of the required quorum for that meeting
Section 8. WAIVER OF NOTICE. Notice of any meeting need not be
given to any Trustee who either before or after the meeting signs a
written waiver of notice, a consent to holding the meeting, or an
approval of the minutes. The waiver of notice or consent need not
specify the purpose of the meeting. All such waivers, consents, and
approvals shall be filed with the records of the Trust or made a part
of the minutes of the meeting. Notice of a meeting shall also be
deemed given to any Trustee who attends the meeting without protesting
before or at its commencement the lack of notice to that Trustee.
Section 9. ADJOURNMENT. A majority of the Trustees present,
whether or not constituting a quorum, may adjourn any meeting to
another time and place.
Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place
of holding an adjourned meeting need not be given unless the meeting
is adjourned for more than forty-eight (48) hours, in which case
notice of the time and place shall be given before the time of the
adjourned meeting in the manner specified in Section 7 of this Article
III to the Trustees who were present at the time of the adjournment.
Section 11. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the Board of Trustees may be taken without a
meeting if a majority of the members of the Board of Trustees shall
individually or collectively consent in writing to that action. Such
action by written consent shall have the same force and effect as a
majority vote of the Board of Trustees. Such written consent or
consents shall be filed with the minutes of the proceedings of the
Board of Trustees.
Section 12. FEES AND COMPENSATION OF TRUSTEES. Trustees and
members of committees may receive such compensation, if any, for their
services and such reimbursement of expenses as may be fixed or
determined by resolution of the Board of Trustees. This Section 12
shall not be construed to preclude any Trustee from serving the Trust
in any other capacity as an officer, agent, employee, or otherwise and
receiving compensation for those services.
Section 13. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee
may, by power of attorney, delegate his power for a period not
exceeding six (6) months at any one time to any other Trustee or
Trustees; provided that in no case shall fewer than two (2) Trustees
personally exercise the powers granted to the Trustees under this
Declaration of Trust except as otherwise expressly provided herein or
by resolution of the Board of Trustees.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF TRUSTEES. The Board of Trustees may by
resolution adopted by a majority of the authorized number of Trustees
designate one or more committees, each consisting of two (2) or more
Trustees, to serve at the pleasure of the Board. The Board may
designate one or more Trustees as alternate members of any committee
who may replace any absent member at any meeting of the committee. Any
committee to the extent provided in the resolution of the Board, shall
have the authority of the Board, except with respect to:
(a) the approval of any action which under applicable law also
requires shareholders' approval or approval of the
outstanding shares, or requires approval by a majority of
the entire Board or certain members of said Board;
(b) the filling of vacancies on the Board of Trustees or in any
committee;
(c) the fixing of compensation of the Trustees for serving on
the Board of Trustees or on any committee;
(d) the amendment or repeal of the Declaration of Trust or of
the By-Laws or the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board of
Trustees which by its express terms is not so amendable or
repealable;
(f) a distribution to the shareholders of the Trust, except at a
rate or in a periodic amount or within a designated range
determined by the Board of Trustees; or
(g) the appointment of any other committees of the Board of
Trustees or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and
action of committees shall be governed by and held and taken in
accordance with the provisions of Article III of these By-Laws, with
such changes in the context thereof as are necessary to substitute the
committee and its members for the Board of Trustees and its members,
except that the time of regular meetings of committees may be
determined either by resolution of the Board of Trustees or by
resolution of the committee. Special meetings of committees may also
be called by resolution of the Board of Trustees. Alternate members
shall be given notice of meetings of committees and shall have the
right to attend all meetings of committees. The Board of Trustees may
adopt rules for the government of any committee not inconsistent with
the provisions of these By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the Trust shall be a
president, a secretary, and a treasurer. The Trust may also have, at
the discretion of the Board of Trustees, a chairman of the board, one
or more vice presidents, one or more assistant secretaries, one or
more assistant treasurers, and such other officers as may be appointed
in accordance with the provisions of Section 3 of this Article V. Any
number of offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the Trust,
except such officers as may appointed in accordance with the
provisions of Section 3 or Section 5 of this Article V, shall be
chosen by the Board of Trustees, and each shall serve at the pleasure
of the Board of Trustees, subject to the rights, if any, of an officer
under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Trustees may
appoint and may empower the president to appoint such other officers
as the business of the Trust may require, each of whom shall hold
office for such period, have such authority and perform such duties as
are provided in these By-Laws or as the Board of Trustees may from
time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any
officer may be removed, either with or without cause, by the Board of
Trustees at any regular or special meeting of the Board of Trustees or
by the principal executive officer or by such other officer upon whom
such power of removal may be conferred by the Board of Trustees.
Any officer may resign at any time by giving written notice to
the Trust. Any resignation shall take effect at the date of the
receipt of that notice or at any later time specified in that notice;
and unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective. Any
resignation is without prejudice to the rights, if any, of the Trust
under any contract to which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office
because of death, resignation, removal, disqualification or other
cause shall be filled in the manner prescribed in these By-Laws for
regular appointment to that office. The president may make temporary
appointments to a vacant office pending action by the Board of
Trustees.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if
such an officer is elected, shall if present preside at meetings of
the Board of Trustees and exercise and perform such other powers and
duties as may be from time to time assigned to him by the Board of
Trustees or prescribed by the By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the Board of Trustees to the chairman of the
board, if there be such an officer, the president shall be the chief
executive officer of the Trust and shall, subject to the control of
the Board of Trustees, have general supervision, direction and control
of the business and the officers of the Trust. He shall preside at all
meetings of the shareholders and in the absence of the chairman of the
board or if there be none, at all meetings of the Board of Trustees.
He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such
other powers and duties as may be prescribed by the Board of Trustees
or these By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as
fixed by the Board of Trustees or if not ranked, the executive vice
president (who shall be considered first ranked) and such other vice
presidents as shall be designated by the Board of Trustees, shall
perform all the duties of the president and when so acting shall have
all powers of and be subject to all the restrictions upon the
president. The vice presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for
them respectively by the Board of Trustees or the president or the
chairman of the board or by these By-Laws.
Section 9. SECRETARY. The secretary shall keep or cause to be
kept at the principal executive office of the Trust or such other
place as the Board of Trustees may direct a book of minutes of all
meetings and actions of Trustees, committees of Trustees and
shareholders with the time and place of holding, whether regular or
special, and if special, how authorized, the notice given, the names
of those present at Trustees' meetings or committee meetings, the
number of shares present or represented at shareholders' meetings, and
the proceedings.
The secretary shall keep or cause to be kept at the principal
executive office of the Trust or at the office of the Trust's transfer
agent or registrar, a share register or a duplicate share register
showing the names of all shareholders and their addresses, the number
and classes of shares held by each, the number and date of
certificates issued for the same and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give or cause to be given notice of all
meetings of the shareholders and of the Board of Trustees required to
be given by these By-Laws or by applicable law and shall have such
other powers and perform such other duties as may be prescribed by the
Board of Trustees or by these By-Laws.
Section 10. TREASURER. The treasurer shall be the chief
financial officer of the Trust and shall keep and maintain or cause to
be kept and maintained adequate and correct books and records of
accounts of the properties and business transactions of the Trust,
including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares.
The books of account shall at all reasonable times be open to
inspection by any Trustee.
The treasurer shall deposit all monies and other valuables in the
name and to the credit of the Trust with such depositaries as may be
designated by the Board of Trustees. He shall disburse the funds of
the Trust as may be ordered by the Board of Trustees, shall render to
the president and Trustees, whenever they request it, an account of
all of his transactions as chief financial officer and of the
financial condition of the Trust and shall have other powers and
perform such other duties as may be prescribed by the Board of
Trustees or these By-Laws.
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of
this Article, "agent" means any person who is or was a Trustee,
officer, employee or other agent of this Trust or is or was serving at
the request of this Trust as a Trustee, director, officer, employee or
agent of another foreign or domestic corporation, partnership, joint
venture, trust or other enterprise or was a Trustee, director,
officer, employee or agent of a foreign or domestic corporation which
was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or
completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes without
limitation attorney's fees and any expenses of establishing a right to
indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. This Trust shall
indemnify any person who was or is a party or is threatened to be made
a party to any proceeding (other than an action by or in the right of
this Trust) by reason of the fact that such person is or was an agent
of this Trust, against expenses, judgments, fines, settlements and
other amounts actually and reasonably incurred in connection with such
proceeding, if it is determined that person acted in good faith and
reasonably believed: (a) in the case of conduct in his official
capacity as a Trustee of the Trust, that his conduct was in the
Trust's best interests and (b), in all other cases, that his conduct
was at least not opposed to the Trust's best interests and (c) in the
case of a criminal proceeding, that he had no reasonable cause to
believe the conduct of that person was unlawful. The termination of
any proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in the best interests of
this Trust or that the person had reasonable cause to believe that the
person's conduct was unlawful.
Section 3. ACTIONS BY THE TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action by or in the right of this
Trust to procure a judgment in its favor by reason of the fact that
that person is or was an agent of this Trust, against expenses
actually and reasonably incurred by that person in connection with the
defense or settlement of that action if that person acted in good
faith, in a manner that person believed to be in the best interests of
this Trust and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any
provision to the contrary contained herein, there shall be no right to
indemnification for any liability arising by reason of willful
misfeasance, bad faith, gross negligence, or the reckless disregard of
the duties involved in the conduct of the agent's office with this
Trust.
No indemnification shall be made under Sections 2 or 3 of this
Article:
(a) In respect of any claim, issue, or matter as to which that
person shall have been adjudged to be liable on the basis
that personal benefit was improperly received by him,
whether or not the benefit resulted from an action taken in
the person's official capacity: or
(b) In respect of any claim, issue or matter as to which that
person shall have been adjudged to be liable in the
performance of that person's duty to this Trust, unless and
only to the extent that the court in which that action was
brought shall determine upon application that in view of all
the circumstances of the case, that person was not liable by
reason of the disabling conduct set forth in the preceding
paragraph and is fairly and reasonably entitled to indemnity
for the expenses which the court shall determine; or
(c) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court
approval, or of expenses incurred in defending a threatened
or pending action which is settled or otherwise disposed of
without court approval, unless the required approval set
forth in Section 6 of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an
agent of this Trust has been successful on the merits in defense of
any proceeding referred to in Sections 2 or 3 of this Article or in
defense of any claim, issue or matter therein, before the court or
other body before whom the proceeding was brought, the agent shall be
indemnified against expenses actually and reasonably incurred by the
agent in connection therewith, provided that the Board of Trustees,
including a majority who are disinterested, non-party Trustees, also
determines that based upon a review of the facts, the agent was not
liable by reason of the disabling conduct referred to in Section 4 of
this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5
of this Article, any indemnification under this Article shall be made
by this Trust only if authorized in the specific case on a
determination that indemnification of the agent is proper in the
circumstances because the agent has met the applicable standard of
conduct set forth in Sections 2 or 3 of this Article and is not
prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of Trustees who are
not parties to the proceeding and are not interested persons
of the Trust (as defined in the Investment Company Act of
1940); or
(b) A written opinion by an independent legal counsel.
Section 7. AUTHORIZATION OF INDEMNIFICATION AND DETERMINATION OF
REASONABLENESS. An authorization of indemnification and determination
as to reasonableness of expenses must be made in the same manner as
set forth in Section 6 of this Article for the determination that
indemnification is permissable, except that if the determination that
indemnification is permissable is made by independent legal counsel,
authorization of indemnification and determination as to
reasonableness of expenses must be made by a majority vote of a quorum
consisting of Trustees who, at the time of the vote, are not named
defendants or respondents in the proceeding; or if such a quorum
cannot be obtained, by a majority vote of a committee of the Board of
Trustees, designated to act in the matter by a majority vote of all
Trustees, consisting solely of two or more Trustees who, at the time
of the vote, are not named defendants or respondents in the
proceeding.
Section 8. ADVANCE OF EXPENSES. Expenses incurred in defending
any proceeding may be advanced by this Trust before the final
disposition of the proceeding (a) receipt of a written affirmation by
the Trustee of his good faith belief that he has met the standard of
conduct necessary for indemnification under this Article and a written
undertaking by or on behalf of the agent, such undertaking being an
unlimited general obligation to repay the amount of the advance if it
is ultimately determined that he has not met those requirements, and
(b) a determination that the facts then known to those making the
determination would not preclude indemnification under this Article.
Determinations and authorizations of payments under this Section must
be made in the manner specified in Section 6 of this Article for
determining that the indemnification is permissable.
Section 9. OTHER CONTRACTUAL RIGHTS. Nothing contained in this
Article shall affect any right to indemnification to which persons
other than Trustees and officers of this Trust or any subsidiary
hereof may be entitled by contract or otherwise.
Section 10. LIMITATIONS. No indemnification or advance shall be
made under this Article, except as provided in Sections 5 or 6 in any
circumstances where it appears:
(a) That it would be inconsistent with a provision of the
Declaration of Trust, a resolution of the shareholders, or
an agreement in effect at the time of accrual of the alleged
cause of action asserted in the proceeding in which the
expenses were incurred or other amounts were paid which
prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 11. INSURANCE. Upon and in the event of a determination
by the Board of Trustees of this Trust to purchase such insurance,
this Trust shall purchase and maintain insurance on behalf of any
agent of this Trust against any liability asserted against or incurred
by the agent in such capacity or arising out of the agent's status as
such, but only to the extent that this Trust would have the power to
indemnify the agent against that liability under the provisions of
this Article.
Section 12. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article
does not apply to any proceeding against any Trustee, investment
manager or other fiduciary of an employee benefit plan in that
person's capacity as such, even though that person may also be an
agent of this Trust as defined in Section 1 of this Article. Nothing
contained in this Article shall limit any right to indemnification to
which such a Trustee, investment manager, or other fiduciary may be
entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. This
Trust shall keep at its principal executive office or at the office of
its transfer agent or registrar, if either be appointed and as
determined by resolution of the Board of Trustees, a record of its
shareholders, giving the names and addresses of all shareholders and
the number and series of shares held by each shareholder.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust
shall keep at its principal executive office the original or a copy of
these By-Laws as amended to date, which shall be open to inspection by
the shareholders at all reasonable times during office hours.
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The
accounting books and records and minutes of proceedings of the
shareholders and the Board of Trustees and any committee or committees
of the Board of Trustees shall be kept at such place or places
designated by the Board of Trustees or in the absence of such
designation, at the principal executive office of the Trust. The
minutes shall be kept in written form and the accounting books and
records shall be kept either in written form or in any other form
capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the
written demand of any shareholder or holder of a voting trust
certificate at any reasonable time during usual business hours for a
purpose reasonably related to the holder's interests as a shareholder
or as the holder of a voting trust certificate. The inspection may be
made in person or by an agent or attorney and shall include the right
to copy and make extracts.
Section 4. INSPECTION BY TRUSTEES. Every Trustee shall have the
absolute right at any reasonable time to inspect all books, records,
and documents of every kind and the physical properties of the Trust.
This inspection by a Trustee may be made in person or by an agent or
attorney and the right of inspection includes the right to copy and
make extracts of documents.
Section 5. FINANCIAL STATEMENTS. A copy of any financial
statements and any income statement of the Trust for each quarterly
period of each fiscal year and accompanying balance sheet of the Trust
as of the end of each such period that has been prepared by the Trust
shall be kept on file in the principal executive office of the Trust
for at least twelve (12) months and each such statement shall be
exhibited at all reasonable times to any shareholder demanding an
examination of any such statement or a copy shall be mailed to any
such shareholder.
The quarterly income statements and balance sheets referred to in
this section shall be accompanied by the report, if any, of any
independent accountants engaged by the Trust or the certificate of an
authorized officer of the Trust that the financial statements were
prepared without audit from the books and records of the Trust.
ARTICLE VIII
GENERAL MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All
checks, drafts, or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the
Trust shall be signed or endorsed in such manner and by such person or
persons as shall be designated from time to time in accordance with
the resolution of the Board of Trustees.
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board
of Trustees, except as otherwise provided in these By-Laws, may
authorize any officer or officers, agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
Trust and this authority may be general or confined to specific
instances; and unless so authorized or ratified by the Board of
Trustees or within the agency power of an officer, no officer, agent,
or employee shall have any power or authority to bind the Trust by any
contract or engagement or to pledge its credit or to render it liable
for any purpose or for any amount.
Section 3. CERTIFICATES FOR SHARES. A certificate or
certificates for shares of beneficial interest in any series of the
Trust may be issued to a shareholder upon his request when such shares
are fully paid. All certificates shall be signed in the name of the
Trust by the chairman of the board or the president or vice president
and by the treasurer or an assistant treasurer or the secretary or any
assistant secretary, certifying the number of shares and the series of
shares owned by the shareholders. Any or all of the signatures on the
certificate may be facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed
on a certificate shall have ceased to be that officer, transfer agent,
or registrar before that certificate is issued, it may be issued by
the Trust with the same effect as if that person were an officer,
transfer agent or registrar at the date of issue. Notwithstanding the
foregoing, the Trust may adopt and use a system of issuance,
recordation and transfer of its shares by electronic or other means.
Section 4. LOST CERTIFICATES. Except as provided in this
Section 4, no new certificates for shares shall be issued to replace
an old certificate unless the latter is surrendered to the Trust and
cancelled at the same time. The Board of Trustees may in case any
share certificate or certificate for any other security is lost,
stolen, or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the Board of Trustees may
require, including a provision for indemnification of the Trust
secured by a bond or other adequate security sufficient to protect the
Trust against any claim that may be made against it, including any
expense or liability on account of the alleged loss, theft, or
destruction of the certificate or the issuance of the replacement
certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY
TRUST. The chairman of the board, the president or any vice president
or any other person authorized by resolution of the Board of Trustees
or by any of the foregoing designated officers, is authorized to vote
or represent on behalf of the Trust any and all shares of any
corporation, partnership, trusts, or other entities, foreign or
domestic, standing in the name of the Trust. The authority granted may
be exercised in person or by a proxy duly executed by such designated
person.
Section 6. FISCAL YEAR. The fiscal year of the Trust shall be
fixed and refixed or changed from time to time by resolution of the
Trustees. The fiscal year of the Trust shall be the taxable year of
each Series of the Trust.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. These By-Laws may be
amended or repealed by the affirmative vote or written consent of a
majority of the outstanding shares entitled to vote, except as
otherwise provided by applicable law or by the Declaration of Trust or
these By-Laws.
Section 2. AMENDMENT BY TRUSTEES. Subject to the right of
shareholders as provided in Section 1 of this Article to adopt, amend
or repeal By-Laws, and except as otherwise provided by applicable law
or by the Declaration of Trust, these By-Laws may be adopted, amended,
or repealed by the Board of Trustees.
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made as of the 28th day of June,
1988, by and between the FRANKLIN RISING DIVIDENDS PORTFOLIO
(hereinafter called the "Fund") a series of the Franklin Managed
Trust, a Massachusetts business trust (hereinafter called the
"Trust"), and FRANKLIN ADVISERS, INC., a corporation organized
and existing under the laws of the State of California
(hereinafter called the "Manager").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment
company, registered as such under the Investment Company Act of
1940; and
WHEREAS, the Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, and is engaged in the
business of supplying investment advice, investment management
and administrative services, as an independent contractor; and
WHEREAS, the Trust desires to retain the Manager to render
advice and services to the Fund pursuant to the terms and
provisions of this Agreement, and the Manager is interested in
furnishing said advice and services.
NOW, THEREFORE, in consideration of the covenants and the
mutual promises hereinafter set forth, the parties hereto,
intending to be legally bound hereby, mutually agree as follows:
1. The Trust hereby employs the Manager and the Manager
hereby accepts such employment, to render investment advice and
investment management services with respect to the assets of the
Fund, subject to the supervision and direction of the Trust's
Board of Trustees. The Manager shall, except as otherwise
provided for herein, render or make available all administrative
services needed for the management and operation of the Fund, and
shall, as part of its duties hereunder, (i) furnish the Fund with
advice and recommendations with respect to the investment of the
Fund's assets and the purchase and sale of its portfolio
securities, including the taking of such other steps as may be
necessary to implement such advice and recommendations, (ii)
furnish the Fund with reports, statements and other data on
securities, economic conditions and other pertinent subjects
which the Trust's Board of Trustees may request, (iii) furnish
such office space and personnel as is needed by the Fund, and
(iv) in general superintend and manage the investments of the
Fund, subject to the ultimate supervision and direction of the
Trust's Board of Trustees.
2. The Manager shall use its best judgment and efforts in
rendering the advice and services to the Fund as contemplated by
this Agreement.
3. The Manager shall, for all purposes herein, be deemed
to be an independent contractor, and shall, unless otherwise
expressly provided and authorized, have no authority to act for
or represent the Fund in any way, or in any way be deemed an
agent for the Fund. It is expressly understood and agreed that
the services to be rendered by the Manager to the Fund under the
provisions of this Agreement are not to be deemed exclusive, and
the Manager shall be free to render similar or different services
to others so long as its ability to render the services provided
for in this Agreement shall not be impaired thereby.
4. The Manager agrees to use its best efforts in the
furnishing of such advice and recommendations to the Fund, in the
preparation of reports and information, and in the management of
the Fund's assets, all pursuant to this Agreement, and for this
purpose the Manager shall, at its own expense, maintain such
staff and employ or retain such personnel and consult with such
other persons as it shall from time to time determine to be
necessary to the performance of its obligations under this
Agreement. Without limiting the generality of the foregoing, the
staff and personnel of the Manager shall be deemed to include
persons employed or retained by the Manager to furnish
statistical, research, and other factual information, advice
regarding economic factors and trends, information with respect
to technical and scientific developments, and such other
information, advice and assistance as the Manager may desire and
request.
5. The Fund will from time to time furnish to the Manager
detailed statements of the investments and assets of the Fund and
information as to its investment objectives and needs, and will
make available to the Manager such financial reports, proxy
statements, legal and other information relating to its
investments as may be in the possession of the Fund or available
to it and such other information as the Manager may reasonably
request.
6. The Manager shall bear and pay the costs of rendering
the services to be performed by it under this Agreement including
the fees and costs of any sub-adviser with which the Manager has
contracted. The Fund shall bear and pay for all other expenses of
its operation, including, but not limited to, expenses incurred
in connection with the issuance, registration and transfer of its
shares; fees of its custodian, transfer and shareholder servicing
agent; costs and expenses of pricing and calculating its daily
net asset value and of maintaining its books of account required
by the Investment Company Act of 1940; expenditures in connection
with meetings of the Fund's Shareholders and Board of Trustees,
except those called solely to accommodate the Manager; salaries
of officers and fees and expenses of Board of Trustees or members
of any advisory board or committee of the Fund who are not
members of, affiliated with or interested persons of the Manager;
salaries of personnel (who may be employed by the Manager)
involved in placing orders for the execution of the Fund's
portfolio transactions or in maintaining registration of its
shares under applicable securities laws; insurance premiums on
property or personnel of the Fund which inure to its benefit; the
cost of preparing and printing reports, proxy statements,
prospectuses and statements of additional information of the Fund
or other communications for distribution to its shareholders;
expenses incurred in the distribution of the Fund's shares
pursuant to the Rule 12b-1 Distribution Plan between the Fund and
Franklin Distributors, Inc.; legal, auditing and accounting fees;
trade association dues; fees and expenses of registering and
maintaining registration of its shares for sale under federal and
applicable state and foreign securities laws; and all other
charges and costs of its operation plus any extraordinary and non-
recurring expenses, except as herein otherwise prescribed. The
Fund is obligated to pay for certain accounting, bookkeeping and
recordkeeping functions which are performed by the Manager. The
Fund shall pay to the Manager a separate fee of $40,000 per year
for the performance of such services. To the extent the Manager
or an affiliate thereof incurs any other costs or performs any
other services which are an obligation of the Fund, as set forth
herein, the Fund shall promptly reimburse the Manager or such
affiliate for such costs and expenses.
7. (a) The Fund agrees to pay to the Manager, and the
Manager agrees to accept, as full compensation for all
administrative and investment management services furnished or
provided to the Fund and as full reimbursement for all expenses
assumed by the Manager, a management fee computed at the rate of
0.75% per annum on the first $500 million of the average daily
net assets of the Fund, 0.625% per annum on the next $500 million
of the average daily net assets of the Fund, and 0.50% per annum
on the average daily net assets of the Fund in excess of $1
billion.
(b) The management fee shall be accrued daily by the
Fund and paid to the Manager on the first business day of the
succeeding month. The initial monthly fee under this Agreement
shall be payable on the first business day of the first month
following the effective date of this Agreement. The fee to the
Manager shall be prorated for the portion of any month in which
this Agreement is in effect which is not a complete month
according to the proportion which the number of calendar days in
the month during which the Agreement is in effect bears to the
number of calendar days in the month. If this Agreement is
terminated prior to the end of any month, the fee to the Manager
shall be payable within ten (10) days after the date of
termination.
(c) To the extent that the gross operating costs and
expenses of the Fund (excluding any interest, taxes, brokerage
commissions, amortization of organization expense, 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 reimburse the Fund for the amount of such excess.
(d) The Manager may waive any portion of the
compensation or reimbursement of expenses due to it pursuant to
this Agreement. Any such waiver shall be applicable only with
respect to the specific items waived and shall not constitute a
waiver of any future compensation or reimbursement due to the
Manager hereunder.
8. The Manager agrees that neither it nor any of its
officers or employees shall take any short position in the shares
of the Fund. This prohibition shall not prevent the purchase of
such shares by any of the officers and directors or bona fide
employees of the Manager or any trust, pension, profit sharing or
other benefit plan for such persons or affiliates thereof, at a
price not less than the net asset value thereof at the time of
purchase, as allowed pursuant to rules promulgated under the
Investment Company Act of 1940, as amended.
9. Nothing herein contained shall be deemed to require the
Fund to take any action contrary to its Declaration of Trust or
By-Laws or any applicable statute or regulation, or to relieve or
deprive the Board of Trustees of the Trust of its responsibility
for and control of the conduct of the affairs of the Fund.
10. (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
Fund for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security by the
Fund.
(b) Notwithstanding the foregoing, the Manager agrees
to reimburse the Fund for any and all costs, expenses, and
counsel fees reasonably incurred by the Fund in the preparation,
printing and distribution of proxy statements, amendments to its
Registration Statement, the holding of meetings of the
shareholders, or Board of 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
shareholders where the action or inaction necessitating such
expenditures (i) is directly or indirectly related to any
transactions or proposed transaction in the shares or control of
the Manager or its affiliates (or litigation related to any
pending or proposed future transaction in such shares or control)
which shall have been undertaken without the prior, express
approval of the Trust's Board of Trustees; or (ii) is within the
sole control of the Manager or any of its affiliates or any of
their officers, directors, employees or shareholders. The Manager
shall not be obligated pursuant to the provisions of this
Subparagraph 10(b), to reimburse the Fund for any expenditures
related to the institution of an administrative proceeding or
civil litigation by the Fund or a Fund shareholder seeking to
recover all or a portion of the proceeds derived by any
shareholder 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 10(b) within
thirty (30) days after a bill or statement has been received by
the Fund 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 Trust, or officer,
director or employee of the Manager, from liability in violation
of Sections 17(h) and (i) of the Investment Company Act of 1940,
as amended.
11. This Agreement shall remain in effect for a period of
two years from its effective date, unless sooner terminated as
hereinafter provided, and shall continue in effect thereafter for
periods not exceeding one year so long as such continuation is
approved at least annually by (i) the Board of Trustees of the
Trust or by the vote of a majority of the outstanding voting
securities of the Trust, and (ii) the vote of a majority of the
Trustees of the Trust who are not parties to this Agreement or
interested persons thereof, cast in person at a meeting called
for the purpose of voting on such approval.
12. This Agreement may be terminated at any time, without
payment of any penalty, by the Board of Trustees of the Trust or
by vote of a majority of the outstanding voting securities of the
Fund, upon sixty (60) days' written notice to the Manager, and by
the Manager upon sixty (60) days' written notice to the Trust.
13. This Agreement shall terminate automatically in the
event of any transfer or assignment thereof, as defined in the
Investment Company Act of 1940, as amended.
14. This Agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged without the affirmative
vote or written consent of the holders of a majority of the
outstanding voting securities of the Fund.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
16. 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.
17. The term "majority of the outstanding voting securities"
of the Fund shall have the meaning as set forth in the Investment
Company Act of 1940, as amended.
18. In consideration of the execution of this Agreement, the
Manager hereby grants to the Fund and to the Trust the right to
use the name "Franklin" as part of their names. The Trust agrees
that in the event this Agreement is terminated, the Fund shall
immediately take such steps as are necessary to remove the
reference to "Franklin" from its name.
19. The Manager acknowledges that it has received notice of
and accepts the limitations of liability set forth in the
Declaration of Trust of the Trust, and it agrees that the Fund's
obligations hereunder shall be limited to the Fund and the assets
of the Fund, and no party shall seek satisfaction of any such
obligation from any shareholder, Trustee, officer, employee or
agent of the Trust.
20. This Agreement shall be entered into and take effect
upon consummation of the sale of all of the issued and
outstanding stock of L.F. Rothschild Fund Management, Inc. to the
Manager's parent.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers,
all on the day and year first above written.
FRANKLIN MANAGED TRUST on behalf
of the FRANKLIN RISING DIVIDENDS
PORTFOLIO
/s/ William J. Lippman
By: William J. Lippman
President
FRANKLIN ADVISERS, INC.
/s/ Harmon E. Burns
By: Harmon E. Burns
Senior Vice President
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made as of the 28th day of June, 1988, by
and between the FRANKLIN INVESTMENT GRADE INCOME PORTFOLIO (hereinafter
called the "Fund") a series of the Franklin Managed Trust, a
Massachusetts business trust (hereinafter called the "Trust"), and
FRANKLIN ADVISERS, INC., a corporation organized and existing under the
laws of the State of California (hereinafter called the "Manager").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company,
registered as such under the Investment Company Act of 1940; and
WHEREAS, the Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, and is engaged in the business of
supplying investment advice, investment management and administrative
services, as an independent contractor; and
WHEREAS, the Trust desires to retain the Manager to render advice
and services to the Fund pursuant to the terms and provisions of this
Agreement, and the Manager is interested in furnishing said advice and
services.
NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto, intending to be
legally bound hereby, mutually agree as follows:
1. The Trust hereby employs the Manager and the Manager hereby
accepts such employment, to render investment advice and investment
management services with respect to the assets of the Fund, subject to
the supervision and direction of the Trust's Board of Trustees. The
Manager shall, except as otherwise provided for herein, render or make
available all administrative services needed for the management and
operation of the Fund, and shall, as part of its duties hereunder, (i)
furnish the Fund with advice and recommendations with respect to the
investment of the Fund's assets and the purchase and sale of its
portfolio securities, including the taking of such other steps as may be
necessary to implement such advice and recommendations, (ii) furnish the
Fund with reports, statements and other data on securities, economic
conditions and other pertinent subjects which the Trust's Board of
Trustees may request, (iii) furnish such office space and personnel as
is needed by the Fund, and (iv) in general superintend and manage the
investments of the Fund, subject to the ultimate supervision and
direction of the Trust's Board of Trustees.
2. The Manager shall use its best judgment and efforts in
rendering the advice and services to the Fund as contemplated by this
Agreement.
3. The Manager shall, for all purposes herein, be deemed to be an
independent contractor, and shall, unless otherwise expressly provided
and authorized, have no authority to act for or represent the Fund in
any way, or in any way be deemed an agent for the Fund. It is expressly
understood and agreed that the services to be rendered by the Manager to
the Fund under the provisions of this Agreement are not to be deemed
exclusive, and the Manager shall be free to render similar or different
services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
4. The Manager agrees to use its best efforts in the furnishing
of such advice and recommendations to the Fund, in the preparation of
reports and information, and in the management of the Fund's assets, all
pursuant to this Agreement, and for this purpose the Manager shall, at
its own expense, maintain such staff and employ or retain such personnel
and consult with such other persons as it shall from time to time
determine to be necessary to the performance of its obligations under
this Agreement. Without limiting the generality of the foregoing, the
staff and personnel of the Manager shall be deemed to include persons
employed or retained by the Manager to furnish statistical, research,
and other factual information, advice regarding economic factors and
trends, information with respect to technical and scientific
developments, and such other information, advice and assistance as the
Manager may desire and request.
5. The Fund will from time to time furnish to the Manager
detailed statements of the investments and assets of the Fund and
information as to its investment objectives and needs, and will make
available to the Manager such financial reports, proxy statements, legal
and other information relating to its investments as may be in the
possession of the Fund or available to it and such other information as
the Manager may reasonably request.
6. The Manager shall bear and pay the costs of rendering the
services to be performed by it under this Agreement including the fees
and costs of any sub-adviser with which the Manager has contracted. The
Fund shall bear and pay for all other expenses of its operation,
including, but not limited to, expenses incurred in connection with the
issuance, registration and transfer of its shares; fees of its
custodian, transfer and shareholder servicing agent; costs and expenses
of pricing and calculating its daily net asset value and of maintaining
its books of account required by the Investment Company Act of 1940;
expenditures in connection with meetings of the Fund's Shareholders and
Board of Trustees, except those called solely to accommodate the
Manager; salaries of officers and fees and expenses of Board of Trustees
or members of any advisory board or committee of the Fund who are not
members of, affiliated with or interested persons of the Manager;
salaries of personnel (who may be employed by the Manager) involved in
placing orders for the execution of the Fund's portfolio transactions or
in maintaining registration of its shares under applicable securities
laws; insurance premiums on property or personnel of the Fund which
inure to its benefit; the cost of preparing and printing reports, proxy
statements, prospectuses and statements of additional information of the
Fund or other communications for distribution to its shareholders;
expenses incurred in the distribution of the Fund's shares pursuant to
the Rule 12b-1 Distribution Plan between the Fund and Franklin
Distributors, Inc.; legal, auditing and accounting fees; trade
association dues; fees and expenses of registering and maintaining
registration of its shares for sale under federal and applicable state
and foreign securities laws; and all other charges and costs of its
operation plus any extraordinary and non-recurring expenses, except as
herein otherwise prescribed. The Fund is obligated to pay for certain
accounting, bookkeeping and recordkeeping functions which are performed
by the Manager. The Fund shall pay to the Manager a separate fee of
$40,000 per year for the performance of such services. To the extent the
Manager or an affiliate thereof incurs any other costs or performs any
other services which are an obligation of the Fund, as set forth herein,
the Fund shall promptly reimburse the Manager or such affiliate for such
costs and expenses.
7. (a) The Fund agrees to pay to the Manager, and the Manager
agrees to accept, as full compensation for all administrative and
investment management services furnished or provided to the Fund and as
full reimbursement for all expenses assumed by the Manager, a management
fee computed at the rate of 0.50% per annum on the first $500 million of
the average daily net assets of the Fund, 0.45% per annum on the next
$500 million of the average daily net assets of the Fund, and 0.40% per
annum on the average daily net assets of the Fund in excess of $1
billion.
(b) The management fee shall be accrued daily by the Fund and
paid to the Manager on the first business day of the succeeding month.
The initial monthly fee under this Agreement shall be payable on the
first business day of the first month following the effective date of
this Agreement. The fee to the Manager shall be prorated for the portion
of any month in which this Agreement is in effect which is not a
complete month according to the proportion which the number of calendar
days in the month during which the Agreement is in effect bears to the
number of calendar days in the month. If this Agreement is terminated
prior to the end of any month, the fee to the Manager shall be payable
within ten (10) days after the date of termination.
(c) To the extent that the gross operating costs and expenses
of the Fund (excluding any interest, taxes, brokerage commissions,
amortization of organization expense, 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 reimburse the Fund for
the amount of such excess.
(d) The Manager may waive any portion of the compensation or
reimbursement of expenses due to it pursuant to this Agreement. Any such
waiver shall be applicable only with respect to the specific items
waived and shall not constitute a waiver of any future compensation or
reimbursement due to the Manager hereunder.
8. The Manager agrees that neither it nor any of its officers or
employees shall take any short position in the shares of the Fund. This
prohibition shall not prevent the purchase of such shares by any of the
officers and directors or bona fide employees of the Manager or any
trust, pension, profit sharing or other benefit plan for such persons or
affiliates thereof, at a price not less than the net asset value thereof
at the time of purchase, as allowed pursuant to rules promulgated under
the Investment Company Act of 1940, as amended.
9. Nothing herein contained shall be deemed to require the Fund
to take any action contrary to its Declaration of Trust or By-Laws or
any applicable statute or regulation, or to relieve or deprive the Board
of Trustees of the Trust of its responsibility for and control of the
conduct of the affairs of the Fund.
10. (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 Fund for any act or omission in
the course of, or connected with, rendering services hereunder or for
any losses that may be sustained in the purchase, holding or sale of any
security by the Fund.
(b) Notwithstanding the foregoing, the Manager agrees to
reimburse the Fund for any and all costs, expenses, and counsel fees
reasonably incurred by the Fund in the preparation, printing and
distribution of proxy statements, amendments to its Registration
Statement, the holding of meetings of the shareholders, or Board of
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
shareholders where the action or inaction necessitating such
expenditures (i) is directly or indirectly related to any transactions
or proposed transaction in the shares or control of the Manager or its
affiliates (or litigation related to any pending or proposed future
transaction in such shares or control) which shall have been undertaken
without the prior, express approval of the Trust's Board of Trustees; or
(ii) is within the sole control of the Manager or any of its affiliates
or any of their officers, directors, employees or shareholders. The
Manager shall not be obligated pursuant to the provisions of this
Subparagraph 10(b), to reimburse the Fund for any expenditures related
to the institution of an administrative proceeding or civil litigation
by the Fund or a Fund shareholder seeking to recover all or a portion of
the proceeds derived by any shareholder 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
10(b) within thirty (30) days after a bill or statement has been
received by the Fund 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 Trust, or officer, director or
employee of the Manager, from liability in violation of Sections 17(h)
and (i) of the Investment Company Act of 1940, as amended.
11. This Agreement shall remain in effect for a period of two years
from its effective date, unless sooner terminated as hereinafter
provided, and shall continue in effect thereafter for periods not
exceeding one year so long as such continuation is approved at least
annually by (i) the Board of Trustees of the Trust or by the vote of a
majority of the outstanding voting securities of the Trust, and (ii) the
vote of a majority of the Trustees of the Trust who are not parties to
this Agreement or interested persons thereof, cast in person at a
meeting called for the purpose of voting on such approval.
12. This Agreement may be terminated at any time, without payment
of any penalty, by the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Fund, upon sixty
(60) days' written notice to the Manager, and by the Manager upon sixty
(60) days' written notice to the Trust.
13. This Agreement shall terminate automatically in the event of
any transfer or assignment thereof, as defined in the Investment Company
Act of 1940, as amended.
14. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged without the affirmative vote or written
consent of the holders of a majority of the outstanding voting
securities of the Fund.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
16. 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.
17. The term "majority of the outstanding voting securities" of the
Fund shall have the meaning as set forth in the Investment Company Act
of 1940, as amended.
18. In consideration of the execution of this Agreement, the
Manager hereby grants to the Fund and to the Trust the right to use the
name "Franklin" as part of their names. The Trust agrees that in the
event this Agreement is terminated, the Fund shall immediately take such
steps as are necessary to remove the reference to "Franklin" from its
name.
19. The Manager acknowledges that it has received notice of and
accepts the limitations of liability set forth in the Declaration of
Trust of the Trust, and it agrees that the Fund's obligations hereunder
shall be limited to the Fund and the assets of the Fund, and no party
shall seek satisfaction of any such obligation from any shareholder,
Trustee, officer, employee or agent of the Trust.
20. This Agreement shall be entered into and take effect upon
consummation of the sale of all of the issued and outstanding stock of
L.F. Rothschild Fund Management, Inc. to the Manager's parent.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their duly authorized officers, all on the day
and year first above written.
FRANKLIN MANAGED TRUST on behalf of the
FRANKLIN INVESTMENT GRADE INCOME
PORTFOLIO
/s/ William J. Lippman
By: William J. Lippman,
President
FRANKLIN ADVISERS, INC.
/s/ Harmon E. Burns
By: Harmon E. Burns,
Senior Vice President
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made as of the 28th day of June, 1988, by
and between the FRANKLIN CORPORATE CASH PORTFOLIO (hereinafter called
the "Fund") a series of the Franklin Managed Trust, a Massachusetts
business trust (hereinafter called the "Trust"), and FRANKLIN ADVISERS,
INC., a corporation organized and existing under the laws of the State
of California (hereinafter called the "Manager").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company,
registered as such under the Investment Company Act of 1940; and
WHEREAS, the Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, and is engaged in the business of
supplying investment advice, investment management and administrative
services, as an independent contractor; and
WHEREAS, the Trust desires to retain the Manager to render advice
and services to the Fund pursuant to the terms and provisions of this
Agreement, and the Manager is interested in furnishing said advice and
services.
NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto, intending to be
legally bound hereby, mutually agree as follows:
1. The Trust hereby employs the Manager and the Manager hereby
accepts such employment, to render investment advice and investment
management services with respect to the assets of the Fund, subject to
the supervision and direction of the Trust's Board of Trustees. The
Manager shall, except as otherwise provided for herein, render or make
available all administrative services needed for the management and
operation of the Fund, and shall, as part of its duties hereunder, (i)
furnish the Fund with advice and recommendations with respect to the
investment of the Fund's assets and the purchase and sale of its
portfolio securities, including the taking of such other steps as may be
necessary to implement such advice and recommendations, (ii) furnish the
Fund with reports, statements and other data on securities, economic
conditions and other pertinent subjects which the Trust's Board of
Trustees may request, (iii) furnish such office space and personnel as
is needed by the Fund, and (iv) in general superintend and manage the
investments of the Fund, subject to the ultimate supervision and
direction of the Trust's Board of Trustees.
2. The Manager shall use its best judgment and efforts in
rendering the advice and services to the Fund as contemplated by this
Agreement
3. The Manager shall, for all purposes herein, be deemed to be an
independent contractor, and shall, unless otherwise expressly provided
and authorized, have no authority to act for or represent the Fund in
any way, or in any way be deemed an agent for the Fund. It is expressly
understood and agreed that the services to be rendered by the Manager to
the Fund under the provisions of this Agreement are not to be deemed
exclusive, and the Manager shall be free to render similar or different
services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
4. The Manager agrees to use its best efforts in the furnishing
of such advice and recommendations to the Fund, in the preparation of
reports and information, and in the management of the Fund's assets, all
pursuant to this Agreement, and for this purpose the Manager shall, at
its own expense, maintain such staff and employ or retain such personnel
and consult with such other persons as it shall from time to time
determine to be necessary to the performance of its obligations under
this Agreement. Without limiting the generality of the foregoing, the
staff and personnel of the Manager shall be deemed to include persons
employed or retained by the Manager to furnish statistical, research,
and other factual information, advice regarding economic factors and
trends, information with respect to technical and scientific
developments, and such other information, advice and assistance as the
Manager may desire and request.
5. The Fund will from time to time furnish to the Manager
detailed statements of the investments and assets of the Fund and
information as to its investment objectives and needs, and will make
available to the Manager such financial reports, proxy statements, legal
and other information relating to its investments as may be in the
possession of the Fund or available to it and such other information as
the Manager may reasonably request.
6. The Manager shall bear and pay the costs of rendering the
services to be performed by it under this Agreement including the fees
and costs of any sub-adviser with which the Manager has contracted. The
Fund shall bear and pay for all other expenses of its operation,
including, but not limited to, expenses incurred in connection with the
issuance, registration and transfer of its shares; fees of its
custodian, transfer and shareholder servicing agent; costs and expenses
of pricing and calculating its daily net asset value and of maintaining
its books of account required by the Investment Company Act of 1940;
expenditures in connection with meetings of the Fund's Shareholders and
Board of Trustees, except those called solely to accommodate the
Manager; salaries of officers and fees and expenses of Board of Trustees
or members of any advisory board or committee of the Fund who are not
members of, affiliated with or interested persons of the Manager;
salaries of personnel (who may be employed by the Manager) involved in
placing orders for the execution of the Fund's portfolio transactions or
in maintaining registration of its shares under applicable securities
laws; insurance premiums on property or personnel of the Fund which
inure to its benefit; the cost of preparing and printing reports, proxy
statements, prospectuses and statements of additional information of the
Fund or other communications for distribution to its shareholders;
expenses incurred in the distribution of the Fund's shares pursuant to
the Rule 12b-1 Distribution Plan between the Fund and Franklin
Distributors, Inc.; legal, auditing and accounting fees; trade
association dues; fees and expenses of registering and maintaining
registration of its shares for sale under federal and applicable state
and foreign securities laws; and all other charges and costs of its
operation plus any extraordinary and non-recurring expenses, except as
herein otherwise prescribed. The Fund is obligated to pay for certain
accounting, bookkeeping and recordkeeping functions which are performed
by the Manager. The Fund shall pay to the Manager a separate fee of
$40,000 per year for the performance of such services. To the extent the
Manager or an affiliate thereof incurs any other costs or performs any
other services which are an obligation of the Fund, as set forth herein,
the Fund shall promptly reimburse the Manager or such affiliate for such
costs and expenses.
7. (a) The Fund agrees to pay to the Manager, and the Manager
agrees to accept, as full compensation for all administrative and
investment management services furnished or provided to the Fund and as
full reimbursement for all expenses assumed by the Manager, a management
fee computed at the rate of 0.50% per annum on the first $500 million of
the average daily net assets of the Fund, 0.45% per annum on the next
$500 million of the average daily net assets of the Fund, and 0.40% per
annum on the average daily net assets of the Fund in excess of $1
billion.
(b) The management fee shall be accrued daily by the Fund and
paid to the Manager on the first business day of the succeeding month.
The initial monthly fee under this Agreement shall be payable on the
first business day of the first month following the effective date of
this Agreement. The fee to the Manager shall be prorated for the portion
of any month in which this Agreement is in effect which is not a
complete month according to the proportion which the number of calendar
days in the month during which the Agreement is in effect bears to the
number of calendar days in the month. If this Agreement is terminated
prior to the end of any month, the fee to the Manager shall be payable
within ten (10) days after the date of termination.
(c) To the extent that the gross operating costs and expenses
of the Fund (excluding any interest, taxes, brokerage commissions,
amortization of organization expense, 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 reimburse the Fund for
the amount of such excess.
(d) The Manager may waive any portion of the compensation or
reimbursement of expenses due to it pursuant to this Agreement. Any such
waiver shall be applicable only with respect to the specific items
waived and shall not constitute a waiver of any future compensation or
reimbursement due to the Manager hereunder.
8. The Manager agrees that neither it nor any of its officers or
employees shall take any short position in the shares of the Fund. This
prohibition shall not prevent the purchase of such shares by any of the
officers and directors or bona fide employees of the Manager or any
trust, pension, profit sharing or other benefit plan for such persons or
affiliates thereof, at a price not less than the net asset value thereof
at the time of purchase, as allowed pursuant to rules promulgated under
the ,Investment Company Act of 1940, as amended.
9. Nothing herein contained shall be deemed to require the Fund
to take any action contrary to its Declaration of Trust or By-Laws or
any applicable statute or regulation, or to relieve or deprive the Board
of Trustees of the Trust of its responsibility for and control of the
conduct of the affairs of the Fund.
10. (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 Fund for any act or omission in
the course of, or connected with, rendering services hereunder or for
any losses that may be sustained in the purchase, holding or sale of any
security by the Fund.
(b) Notwithstanding the foregoing, the Manager agrees to
reimburse the Fund for any and all costs, expenses, and counsel fees
reasonably incurred by the Fund in the preparation, printing and
distribution of proxy statements, amendments to its Registration
Statement, the holding of meetings of the shareholders, or Board of
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
shareholders where the action or inaction necessitating such
expenditures (i) is directly or indirectly related to any transactions
or proposed transaction in the shares or control of the Manager or its
affiliates (or litigation related to any pending or proposed future
transaction in such shares or control) which shall have been undertaken
without the prior, express approval of the Trust's Board of Trustees; or
(ii) is within the sole control of the Manager or any of its affiliates
or any of their officers, directors, employees or shareholders. The
Manager shall not be obligated pursuant to the provisions of this
Subparagraph 10(b), to reimburse the Fund for any expenditures related
to the institution of an administrative proceeding or civil litigation
by the Fund or a Fund shareholder seeking to recover all or a portion of
the proceeds derived by any shareholder 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
10(b) within thirty (30) days after a bill or statement has been
received by the Fund 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 Trust, or officer, director or
employee of the Manager, from liability in violation of Sections 17(h)
and (i) of the Investment Company Act of 1940, as amended.
11. This Agreement shall remain in effect for a period of two
years from its effective date, unless sooner terminated as hereinafter
provided, and shall continue in effect thereafter for periods not
exceeding one year so long as such continuation is approved at least
annually by (i) the Board of Trustees of the Trust or by the vote of a
majority of the outstanding voting securities of the Trust, and (ii) the
vote of a majority of the Trustees of the Trust who are not parties to
this Agreement or interested persons thereof, cast in person at a
meeting called for the purpose of voting on such approval.
12. This Agreement may be terminated at any time, without payment
of any penalty, by the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Fund, upon sixty
(60) days' written notice to the Manager, and by the Manager upon sixty
(60) days' written notice to the Trust.
13. This Agreement shall terminate automatically in the event of
any transfer or assignment thereof, as defined in the Investment Company
Act of 1940, as amended.
14. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged without the affirmative vote or
written consent of the holders of a majority of the outstanding voting
securities of the Fund.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
16. 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.
17. The term "majority of the outstanding voting securities" of
the Fund shall have the meaning as set forth in the Investment Company
Act of 1940, as amended.
18. In consideration of the execution of this Agreement, the
Manager hereby grants to the Fund and to the Trust the right to use the
name "Franklin" as part of their names. The Trust agrees that in the
event this Agreement is terminated, the Fund shall immediately take such
steps as are necessary to remove the reference to "Franklin" from its
name.
19. The Manager acknowledges that it has received notice of and
accepts the limitations of liability set forth in the Declaration of
Trust of the Trust, and it agrees that the Fund's obligations hereunder
shall be limited to the Fund and the assets of the Fund, and no party
shall seek satisfaction of any such obligation from any shareholder,
Trustee, officer, employee or agent of the Trust.
20. This Agreement shall be entered into and take effect upon
consummation of the sale of all of the issued and outstanding stock of
L.F. Rothschild Fund Management, Inc. to the Manager's parent.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their duly authorized officers, all on the day
and year first above written.
FRANKLIN MANAGED TRUST on behalf of the
FRANKLIN CORPORATE CASH PORTFOLIO
/s/ William J. Lippman
By: William J. Lippman,
President
FRANKLIN ADVISERS, INC.
/s/ Harmon E. Burns
By: Harmon E. Burns,
Senior Vice President
FRANKLIN MANAGED TRUST
777 Mariners Island Blvd.
San Mateo, California 94404
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404
Re: Amended and Restated Distribution Agreement
Gentlemen:
We (the "Fund") are a corporation or business trust operating as
an open-end management investment company or "mutual fund", which
is registered under the Investment Company Act of 1940 (the "1940
Act") and whose shares are registered under the Securities Act of
1933 (the "1933 Act"). We desire to issue one or more series or
classes of our authorized but unissued shares of capital stock or
beneficial interest (the "Shares") to authorized persons in
accordance with applicable Federal and State securities laws.
The Fund's Shares may be made available in one or more separate
series, each of which may have one or more classes.
You have informed us that your company is registered as a broker-
dealer under the provisions of the Securities Exchange Act of
1934 and that your company is a member of the National
Association of Securities Dealers, Inc. You have indicated your
desire to act as the exclusive selling agent and distributor for
the Shares. We have been authorized to execute and deliver this
Distribution Agreement ("Agreement") to you by a resolution of
our Board of Directors or Trustees ("Board") passed at a meeting
at which a majority of Board members, including a majority who
are not otherwise interested persons of the Fund and who are not
interested persons of our investment adviser, its related
organizations or with you or your related organizations, were
present and voted in favor of the said resolution approving this
Agreement.
1. Appointment of Underwriter. Upon the execution of this
Agreement and in consideration of the agreements on your part
herein expressed and upon the terms and conditions set forth
herein, we hereby appoint you as the exclusive sales agent for
our Shares and agree that we will deliver such Shares as you may
sell. You agree to use your best efforts to promote the sale of
Shares, but are not obligated to sell any specific number of
Shares.
However, the Fund and each series retain the right to make
direct sales of its Shares without sales charges consistent with
the terms of the then current prospectus and applicable law, and
to engage in other legally authorized transactions in its Shares
which do not involve the sale of Shares to the general public.
Such other transactions may include, without limitation,
transactions between the Fund or any series or class and its
shareholders only, transactions involving the reorganization of
the Fund or any series, and transactions involving the merger or
combination of the Fund or any series with another corporation or
trust.
2. Independent Contractor. You will undertake and
discharge your obligations hereunder as an independent contractor
and shall have no authority or power to obligate or bind us by
your actions, conduct or contracts except that you are authorized
to promote the sale of Shares. You may appoint sub-agents or
distribute through dealers or otherwise as you may determine from
time to time, but this Agreement shall not be construed as
authorizing any dealer or other person to accept orders for sale
or repurchase on our behalf or otherwise act as our agent for any
purpose.
3. Offering Price. Shares shall be offered for sale at a
price equivalent to the net asset value per share of that series
and class plus any applicable percentage of the public offering
price as sales commission or as otherwise set forth in our then
current prospectus. On each business day on which the New York
Stock Exchange is open for business, we will furnish you with the
net asset value of the Shares of each available series and class
which shall be determined in accordance with our then effective
prospectus. All Shares will be sold in the manner set forth in
our then effective prospectus and statement of additional
information, and in compliance with applicable law.
4. Compensation.
A. Sales Commission. You shall be entitled to charge
a sales commission on the sale or redemption, as appropriate, of
each series and class of each Fund's Shares in the amount of any
initial, deferred or contingent deferred sales charge as set
forth in our then effective prospectus. You may allow any sub-
agents or dealers such commissions or discounts from and not
exceeding the total sales commission as you shall deem advisable,
so long as any such commissions or discounts are set forth in our
current prospectus to the extent required by the applicable
Federal and State securities laws. You may also make payments to
sub-agents or dealers from your own resources, subject to the
following conditions: (a) any such payments shall not create any
obligation for or recourse against the Fund or any series or
class, and (b) the terms and conditions of any such payments are
consistent with our prospectus and applicable federal and state
securities laws and are disclosed in our prospectus or statement
of additional information to the extent such laws may require.
B. Distribution Plans. You shall also be entitled to
compensation for your services as provided in any Distribution
Plan adopted as to any series and class of any Fund's Shares
pursuant to Rule 12b-1 under the 1940 Act.
5. Terms and Conditions of Sales. Shares shall be offered
for sale only in those jurisdictions where they have been
properly registered or are exempt from registration, and only to
those groups of people which the Board may from time to time
determine to be eligible to purchase such shares.
6. Orders and Payment for Shares. Orders for Shares shall
be directed to the Fund's shareholder services agent, for
acceptance on behalf of the Fund. At or prior to the time of
delivery of any of our Shares you will pay or cause to be paid to
the custodian of the Fund's assets, for our account, an amount in
cash equal to the net asset value of such Shares. Sales of
Shares shall be deemed to be made when and where accepted by the
Fund's shareholder services agent. The Fund's custodian and
shareholder services agent shall be identified in its prospectus.
7. Purchases for Your Own Account. You shall not purchase
our Shares for your own account for purposes of resale to the
public, but you may purchase Shares for your own investment
account upon your written assurance that the purchase is for
investment purposes and that the Shares will not be resold except
through redemption by us.
8. Sale of Shares to Affiliates. You may sell our Shares
at net asset value to certain of your and our affiliated persons
pursuant to the applicable provisions of the federal securities
statutes and rules or regulations thereunder (the "Rules and
Regulations"), including Rule 22d-1 under the 1940 Act, as
amended from time to time.
9. Allocation of Expenses. We will pay the expenses:
(a) Of the preparation of the audited and
certified financial statements of our company to
be included in any Post-Effective Amendments
("Amendments") to our Registration Statement under
the 1933 Act or 1940 Act, including the prospectus
and statement of additional information included
therein;
(b) Of the preparation, including legal
fees, and printing of all Amendments or
supplements filed with the Securities and Exchange
Commission, including the copies of the
prospectuses included in the Amendments and the
first 10 copies of the definitive prospectuses or
supplements thereto, other than those necessitated
by your (including your "Parent's") activities or
Rules and Regulations related to your activities
where such Amendments or supplements result in
expenses which we would not otherwise have
incurred;
(c) Of the preparation, printing and
distribution of any reports or communications
which we send to our existing shareholders; and
(d) Of filing and other fees to Federal and
State securities regulatory authorities necessary
to continue offering our Shares.
You will pay the expenses:
(a) Of printing the copies of the
prospectuses and any supplements thereto and
statements of additional information which are
necessary to continue to offer our Shares;
(b) Of the preparation, excluding legal
fees, and printing of all Amendments and
supplements to our prospectuses and statements of
additional information if the Amendment or
supplement arises from your (including your
"Parent's") activities or Rules and Regulations
related to your activities and those expenses
would not otherwise have been incurred by us;
(c) Of printing additional copies, for use
by you as sales literature, of reports or other
communications which we have prepared for
distribution to our existing shareholders; and
(d) Incurred by you in advertising,
promoting and selling our Shares.
10. Furnishing of Information. We will furnish to you such
information with respect to each series and class of Shares, in
such form and signed by such of our officers as you may
reasonably request, and we warrant that the statements therein
contained, when so signed, will be true and correct. We will
also furnish you with such information and will take such action
as you may reasonably request in order to qualify our Shares for
sale to the public under the Blue Sky Laws of jurisdictions in
which you may wish to offer them. We will furnish you with
annual audited financial statements of our books and accounts
certified by independent public accountants, with semi-annual
financial statements prepared by us, with registration statements
and, from time to time, with such additional information
regarding our financial condition as you may reasonably request.
11. Conduct of Business. Other than our currently
effective prospectus, you will not issue any sales material or
statements except literature or advertising which conforms to the
requirements of Federal and State securities laws and regulations
and which have been filed, where necessary, with the appropriate
regulatory authorities. You will furnish us with copies of all
such materials prior to their use and no such material shall be
published if we shall reasonably and promptly object.
You shall comply with the applicable Federal and State
laws and regulations where our Shares are offered for sale and
conduct your affairs with us and with dealers, brokers or
investors in accordance with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
12. Redemption or Repurchase Within Seven Days. If Shares
are tendered to us for redemption or repurchase by us within
seven business days after your acceptance of the original
purchase order for such Shares, you will immediately refund to us
the full sales commission (net of allowances to dealers or
brokers) allowed to you on the original sale, and will promptly,
upon receipt thereof, pay to us any refunds from dealers or
brokers of the balance of sales commissions reallowed by you. We
shall notify you of such tender for redemption within 10 days of
the day on which notice of such tender for redemption is received
by us.
13. Other Activities. Your services pursuant to this
Agreement shall not be deemed to be exclusive, and you may render
similar services and act as an underwriter, distributor or dealer
for other investment companies in the offering of their shares.
14. Term of Agreement. This Agreement shall become
effective on the date of its execution, and shall remain in
effect for a period of two (2) years. The Agreement is renewable
annually thereafter, with respect to the Fund or, if the Fund has
more than one series, with respect to each series, for successive
periods not to exceed one year (i) by a vote of (a) a majority of
the outstanding voting securities of the Fund or, if the Fund has
more than one series, of each series, or (b) by a vote of the
Board, and (ii) by a vote of a majority of the members of the
Board who are not parties to the Agreement or interested persons
of any parties to the Agreement (other than as members of the
Board), cast in person at a meeting called for the purpose of
voting on the Agreement.
This Agreement may at any time be terminated by the
Fund or by any series without the payment of any penalty, (i)
either by vote of the Board or by vote of a majority of the
outstanding voting securities of the Fund or any series on 90
days' written notice to you; or (ii) by you on 90 days' written
notice to the Fund; and shall immediately terminate with respect
to the Fund and each series in the event of its assignment.
15. Suspension of Sales. We reserve the right at all times
to suspend or limit the public offering of Shares upon two days'
written notice to you.
16. Miscellaneous. This Agreement shall be subject to the
laws of the State of California and shall be interpreted and
construed to further promote the operation of the Fund as an open-
end investment company. This Agreement shall supersede all
Distribution Agreements and Amendments previously in effect
between the parties. As used herein, the terms "Net Asset
Value," "Offering Price," "Investment Company," "Open-End
Investment Company," "Assignment," "Principal Underwriter,"
"Interested Person," "Parent," "Affiliated Person," and "Majority
of the Outstanding Voting Securities" shall have the meanings set
forth in the 1933 Act or the 1940 Act and the Rules and
Regulations thereunder.
Nothing herein shall be deemed to protect you against any
liability to us or to our securities holders to which you would
otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of your duties hereunder,
or by reason of your reckless disregard of your obligations and
duties hereunder.
If the foregoing meets with your approval, please acknowledge
your acceptance by signing each of the enclosed copies, whereupon
this will become a binding agreement as of the date set forth
below.
Very truly yours,
FRANKLIN MANAGED TRUST
By:_______________________________
Accepted:
Franklin/Templeton Distributors, Inc.
By:__________________________________
DATED: _______________
CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and entered
into as of June 12, 1991, by and between Franklin Managed Trust,
a Massachusetts business trust (the "Trust"), and Bank of America
National Trust and Savings Association, a banking association
organized under the laws of the United States (the "Custodian").
RECITALS
A. The Trust is an investment company registered under
the Investment Company Act of 1940, as amended (the "Investment
Company Act") that invests and reinvests, on behalf of its
various series, in Domestic Securities and Foreign Securities.
B. The Custodian is, and has represented to the Trust
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 Trust and the Custodian desire to provide for
the retention of the Custodian as the custodian of the assets of
the Trust's three current series, Franklin Corporate Qualified
Dividend Fund, Franklin Investment Grade Income Portfolio,
Franklin Rising Dividends Portfolio, and such subsequent series
as the parties hereto may determine from time-to-time, 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. DEFINITIONS
For purposes of this Agreement, the following terms
shall have the respective meanings specified below:
"Agreement" shall mean this Custody Agreement.
"Board of Trustees" shall mean the Board of Trustees of
the Trust.
"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 America National Trust and
Savings Association.
"Domestic Securities" shall have the meaning provided in
Subsection 2.1 hereof.
"Executive Committee" shall mean the executive committee
of the Board of Trustees.
"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.
"Guidelines" shall have the meaning provided in
Subsection 3.5(a) hereof.
"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.
"Shares" shall mean shares of beneficial interest of the
Trust.
"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 the Trust.
"Trust" shall mean the Franklin Managed Trust and any
separate series of the Trust hereinafter organized.
"U.S." shall mean United States.
"Writing" shall mean a communication in writing, a
communication by telex, the Custodian's Global Custody
Instruction SystemTM, 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. The Trust hereby
appoints and designates the Custodian as the custodian of the
assets of the Trust including cash, securities the Trust 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 the Trust delivered to it hereunder in the manner
provided for herein.
2.2 Delivery of Assets. The Trust agrees to deliver to
the Custodian Securities and cash owned by the Trust, payments of
income, principal or capital distributions received by the Trust
with respect to Securities owned by the Trust from time to time,
and the consideration received by it for such Shares or other
securities of the Trust as may be issued and sold from time to
time. The Custodian shall have no responsibility whatsoever for
any property or assets of the Trust held or received by the Trust
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 Trust under the terms of this Agreement shall be
in "street name" or other good delivery form as determined by the
Custodian.
2.3 Subcustodians. Upon receipt of Proper Instructions
and a certified copy of a resolution of the Board of Trustees or
of the Executive Committee certified by the Secretary or an
Assistant Secretary of the Trust, the Custodian may from time to
time appoint one or more Subcustodians or Foreign Custodians to
hold assets of the Trust 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 the Trust
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 TRUST 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 the Trust, all non-cash property delivered by
the Trust 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 the Trust 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
Trust 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 Trust;
(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 Trust, or (ii) a
tender offer or repurchase by the Trust 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 Trust,
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 Trust, but only against
receipt by the Custodian, a Subcustodian or a Foreign
Custodian of adequate collateral as determined by the
Trust (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 Trust prior to
the receipt of such collateral;
(k) for delivery as security in connection
with any borrowings by the Trust requiring a pledge of
assets by the Trust, 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 Trust, 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 Trust;
(m) for delivery in accordance with the
provisions of any agreement among the Trust, 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 Trust;
(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 Trustees or of the
Executive Committee certified by the Secretary or an
Assistant Secretary of the Trust, 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 Trust, in the name or nominee name of the Custodian
or in the name or nominee name of any Subcustodian or Foreign
Custodian. The Trust 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 the Trust,
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 the Trust, other than
cash maintained by the Trust in a bank account established and
used in accordance with Rule 17f-3 under the Investment Company
Act. Funds held by the Custodian for the Trust may be deposited
by it to its credit as Custodian in the banking departments of
the Custodian, a Subcustodian or a Foreign Custodian. It is
understood and agreed by the Custodian and the Trust that the
rate of interest, if any, payable on such funds (including
foreign currency deposits) that are deposited with the Custodian
may not be a market rate of interest and that the rate of
interest payable by the Custodian to the Trust shall be agreed
upon by the Custodian and the Trust from time to time. Such
funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
3.5 Collection of Income; Trade Settlement; Crediting
of Accounts. The Custodian shall collect income payable with
respect to Securities owned by the Trust, settle Securities
trades for the account of the Trust and credit and debit the
Trust's account with the Custodian in connection therewith as
follows:
(a) Upon receipt of Proper Instructions, the
Custodian shall effect the purchase of a Security by
charging the account of the Trust on the contractual
settlement date; provided, however, that in the case of
Foreign Securities, Proper Instructions are provided to
the Custodian by the Trust prior to the contractual
settlement date in accordance with, and within the time
period specified in the "Global Custody Guidelines for
the Franklin Managed Trust" (the "Guidelines") which
may be adopted for the use of this Trust, as may be
amended by the Custodian from time to time in its sole
discretion. The Custodian shall have no liability of
any kind to any person, including the Trust, if the
Custodian effects payment on behalf of the Trust as
provided for herein or in Proper Instructions, and the
seller or selling broker fails to deliver the
Securities purchased.
(b) Upon receipt of Proper Instructions, the
Custodian shall effect the sale of a Security by
delivering a certificate or other indicia of ownership,
and shall credit the account of the Trust with the
proceeds of such sale on the contractual settlement
date; provided, however, that in the case of Foreign
Securities, Proper Instructions are provided to the
Custodian by the Trust prior to the contractual
settlement date in accordance with, and within the time
period specified in, the Guidelines. The Custodian
shall have no liability of any kind to any person,
including the Trust, if the Custodian delivers such a
certificate(s) or other indicia of ownership as
provided for herein or in Proper Instructions, and the
purchaser or purchasing broker fails to effect payment
to the Trust 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 Trust in connection with such sale.
(c) The Trust 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 Trust, 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 Trust with interest income payable on interest
bearing Securities on payable date. Interest income on
cash balances will be credited monthly to the account
of the Trust on the first Business Day (on which the
Custodian is open for business) following the end of
each month. Dividends and other amounts payable with
respect to Domestic Securities and Foreign Securities
shall be credited to the account of the Trust 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 Trust. The collection of
income due the Trust on Domestic Securities loaned
pursuant to the provisions of Subsection 3.2(j) shall
be the responsibility of the Trust. The Custodian
will have no duty or responsibility in connection
therewith, other than to provide the Trust with such
information or data as may be necessary to assist the
Trust in arranging for the timely delivery to the
Custodian of the income to which the Trust is entitled.
The Custodian shall have no liability to any person,
including the Trust, if the Custodian credits the
account of the Trust with such income or other amounts
payable with respect to Securities owned by the Trust
(other than Securities loaned by the Trust 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 Trust.
3.6 Payment of Trust Monies. Upon receipt of Proper
Instructions the Custodian shall pay out monies of the Trust 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 Trust 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 Trust 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 Trust 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 Trust;
(b) in connection with conversion, exchange
or surrender of Securities owned by the Trust as set
forth in Subsection 3.2 hereof;
(c) for the redemption or repurchase of
Shares issued by the Trust;
(d) for the payment of any expense or
liability incurred by the Trust, including but not
limited to the following payments for the account of
the Trust: custodian fees, interest, taxes,
management, accounting, transfer agent and legal fees
and operating expenses of the Trust 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 of Trustees with
respect to the Shares.
3.7 Appointment of Subcustodians. The Custodian may,
upon receipt of Proper Instructions, appoint 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 the 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 the Trust 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 Trust 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 Trust which are
maintained in a Securities System shall identify by
book-entry those Domestic Securities belonging to the
Trust;
(c) the Custodian shall pay for Domestic
Securities purchased for the account of the Trust 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 Trust. The Custodian
shall transfer Domestic Securities sold for the account
of the Trust 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 Trust. Copies of all advices from the
Securities System of transfers of Domestic Securities
for the account of the Trust shall be maintained for
the Trust by the Custodian and be provided to the
Trust at its request. Upon request, the Custodian
shall furnish the Trust confirmation of each transfer
to or from the account of the Trust in the form of a
written advice or notice; and
(d) upon request, the Custodian shall
provide the Trust 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 the Trust,
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 Trust, 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 Trust, (ii)
for purposes of segregating cash or securities in connection with
options purchased, sold or written by the Trust or commodity
futures contracts or options thereon purchased or sold by the
Trust 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 of Trustees 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 the Trust 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 the Trust all
proxies, all proxy soliciting materials and all notices relating
to such Securities. If the Securities are registered otherwise
than in the name of the Trust or a nominee of the Trust, 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 Trust Portfolio
Securities. The Custodian shall transmit promptly to the Trust
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 Trust and the maturity of futures
contracts purchased or sold by the Trust) received by the
Custodian from issuers of Securities being held for the Trust.
With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Trust 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 the Trust desires to take action
with respect to any tender offer, exchange offer or any other
similar transaction, the Trust 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 supply
to the Trust the daily, weekly and monthly reports described in
the Guidelines as well as any other reports which the Custodian
and the Trust may agree upon from time to time.
Section 4. CERTAIN DUTIES OF THE CUSTODIAN WITH RESPECT
TO ASSETS OF THE TRUST HELD OUTSIDE THE UNITED
STATES
4.1 Custody outside the United States. The Trust
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 Board of Trustees or the 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 of Trustees or of the Executive Committee
certified by the Secretary or an Assistant Secretary of the
Trust. 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 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 Investment Company Act,
and (ii) cash and cash equivalents in such amounts as the
Custodian or the Trust may determine to be reasonably necessary
to effect the Trust's Foreign Securities transactions.
4.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Custodian and the
Trust, assets of the Trust shall be maintained in Foreign
Securities Depositories only through arrangements implemented by
the Custodian or Foreign Custodians pursuant to the terms hereof.
4.4 Segregation of Securities. The Custodian shall
identify on its books and records as belonging to the Trust, the
Foreign Securities of the Trust held by each Foreign Custodian.
4.5 Agreements with Foreign Custodians. Each
agreement with a Foreign Custodian shall provide generally that:
(a) the Trust's assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the
Foreign Custodian or its creditors, except a claim of payment for
their safe custody or administration; (b) beneficial ownership
for the Trust's assets will be freely transferable without the
payment of money or value other than for custody or
administration; (c) adequate records will be maintained
identifying the assets as belonging to the Trust; (d) the
independent public accountants for the Trust, will be given
access to the records of the Foreign Custodian relating to the
assets of the Trust or confirmation of the contents of those
records; (e) the disposition of assets of the Trust held by the
Foreign Custodian will be subject only to the instructions of the
Custodian or its agents; (f) the Foreign Custodian shall
indemnify and hold harmless the Custodian and the Trust from and
against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the Foreign Custodian's
performance of its obligations under such agreement; (g) to the
extent practicable, the Trust's assets will be adequately insured
in the event of loss; and (h) the Custodian will receive periodic
reports with respect to the safekeeping of the Trust's assets,
including notification of any transfer to or from the Trust's
account.
4.6 Access of Independent Accountants of the Trust.
Upon request of the Trust, the Custodian will use its best
reasonable efforts to arrange for the independent accountants of
the Trust 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 Trust.
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 the Trust, 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 the Trust 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 the Trust and delivery of Foreign
Securities maintained for the account of the Trust 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 the Trust 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 require the
Foreign Custodian to exercise reasonable care in the performance
of its duties and to indemnify and hold harmless the Custodian
and the Trust 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. At the
election of the Trust, 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
Trust has not been made whole for any such loss, damage, cost,
expense, liability or claim.
4.9 Monitoring Responsibilities.
(a) The Custodian will promptly inform the
Trust in the event that the Custodian learns of a
material adverse change in the financial condition of a
Foreign Custodian or is notified by (i) a foreign
banking institution employed as a Foreign Custodian
that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200
million or that its shareholders' equity has declined
below $200 million (in each case computed in accordance
with generally accepted United States accounting
principles) and denominated in U.S. dollars, or (ii) a
subsidiary of a United States bank or bank holding
company acting as a Foreign Custodian that there
appears to be a substantial likelihood that its
shareholders' equity will decline below $100 million or
that its shareholders' equity has declined below $100
million (in each case computed in accordance with
generally accepted United States accounting principles)
and denominated in U.S. dollars.
(b) The custodian will furnish such
information as may be reasonably necessary to assist
the Trust's Board of Trustees 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 the Trust 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
Writing by an Authorized Person, but the Trust will hold the
Custodian harmless for its failure to send such confirmation in
writing, the failure of such confirmation to conform to the
telephone instructions received or the Custodian's failure to
produce such confirmation at any subsequent time. Unless
otherwise expressly provided, all Proper Instructions shall
continue in full force and effect until cancelled 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 Trust
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 Trust shall safeguard any testkeys, identification
codes or other security devices which the Custodian shall make
available to it. 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 the Trust as have been designated by a
resolution of the Board of trustees or of the Executive
Committee, a certified copy of which has been provided to the
Custodian, to act on behalf of the Trust 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 the Trust:
(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 Trust;
(b) endorse for collection, in the name of
the Trust, 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 Trust
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 the Trust. The Custodian may receive
and accept a certified copy of a resolution of the Board of
Trustees 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 of
Trustees 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 Board
of Trustees to keep the books of account of the Trust and/or
compute the net asset value per Share of the outstanding Shares
of the Trust.
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 Trust 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 Trust and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Trust's
request, supply the Trust with a tabulation of Securities owned
by the Trust and held by the Custodian and shall, when requested
to do so by the Trust and for such compensation as shall be
agreed upon between the Trust 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 the Trust and the
Custodian.
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 the Trust for any
loss which shall occur as the result of the failure of a Foreign
Custodian or a Foreign Securities Depository engaged by such
Foreign Custodian or the Custodian to exercise reasonable care
with respect to the safekeeping of securities and other assets of
the Trust to the same extent that the Custodian would be liable
to the Trust if the Custodian itself were holding such securities
and other assets. In the event of any loss to the Trust by
reason of the failure of the Custodian, a Foreign Custodian or a
Foreign Securities Depository engaged by such Foreign Custodian
or the Custodian to utilize reasonable care, the Custodian shall
be liable to the Trust to the extent of the Trust'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. The Trust 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 any of them in connection
with the performance of this Agreement, 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 or Foreign Securities Depository. The Custodian shall
be entitled to rely, and may act, on advice of counsel (who may
be counsel for the Trust) 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 the Trust.
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 Trust. 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 of Trustees and may rely on the genuineness of any such
documents which it may in good faith believe to be validly
executed. The Custodian shall not be liable for any loss
resulting from, or caused by, the direction of the Trust 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 the Trust held by
the Custodian.
Section 12. LIMITED LIABILITY OF THE TRUST
The Custodian acknowledges that it has received notice
of and accepts the limitations of the Trust's liability as set
forth in its Agreement and Declaration of Trust. The Custodian
agrees that the Trust's obligation hereunder shall be limited to
the assets of the Trust, and that the Custodian shall not seek
satisfaction of any such obligation from the shareholders of the
Trust nor from any Trustee, officer, employee, or agent of the
Trust.
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 the Trust or the Custodian by 60 days notice in
Writing to the other provided that any termination by the Trust
shall be authorized by a resolution of the Board of Trustees, 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 Trust held by it. If notice of
termination is given by the Custodian, the Trust shall, within 60
days following the giving of such notice, deliver to the
Custodian a certified copy of a resolution of the Board of
Trustees specifying the names of the persons to whom the
Custodian shall deliver assets of the Trust held by it. 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 Trust assets to the
persons so specified). If within 60 days following the giving of
a notice of termination by the Custodian, the Custodian does not
receive from the Trust a certified copy of a resolution of the
Board of Trustees specifying the names of the persons to whom the
Custodian shall deliver the assets of the Trust held by it, 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 the Trust or (ii) be
construed as or constitute a prohibition against the provision by
the Custodian or any of its affiliates to the Trust 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 the Trust :
Franklin Managed Trust
c/o Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Trust Manager
if to the Custodian:
Bank of America NT&SA
International Securities Services
25 Cannon Street
London EC4P HN
England
Attention: Manager
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 California (without giving effect to
principles of conflict of laws).
14.8 Force Majeure. Subject to 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 Trust and the Custodian and their
respective successors and assigns, if any.
14.14 Entire Agreement. This Agreement sets forth the
entire understanding of the parties hereto and supersedes all
prior agreements and understandings between the parties hereto
relating to the subject matter hereof.
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.
"Custodian": BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ John B. Housen
Its
"Trust" Franklin Managed Trust
By /s/ Rupert H. Johnson, Jr.
Its Vice President
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated October 28,
1994 on the financial statements and financial highlights
for the periods indicated thereon of Franklin Corporate
Qualified Dividend Fund, Franklin Rising Dividends Fund, and
Franklin Investment Grade Income Fund, each a series of
shares of Franklin Managed Trust. Such financial statements
and financial highlights appear in the 1994 Annual Report to
Shareholders which is included in the Statement of
Additional Information filed in the Post-Effective Amendment
Number 12 to the Registration Statement on Form N-1A of
Franklin Managed Trust. We also consent to the references
to our Firm in such Registration Statement and Prospectus.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 19, 1995
To: All Franklin Templeton Funds Listed on Schedule A
777 Mariners Island Blvd.
San Mateo, CA 94404
Gentlemen:
We propose to invest $100.00 in the Class II shares (the "Shares") of
each of the Funds listed on the attached Schedule A (the "Funds"), on the
business day immediately preceding the effective date for each Fund's Class
II shares, at a purchase price per share equivalent to the net asset value
per share of each Fund's Class I shares on the date of purchase. We will
purchase the Shares in a private offering prior to the effectiveness of the
post-effective amendment to the Form N-1A registration statement under which
each Fund's Class II shares are initially offered, as filed by the Fund under
the Securities Act of 1933. The Shares are being purchased to serve as the
seed money for each Fund's Class II shares prior to the commencement of the
public offering of Class II shares.
In connection with such purchase, we understand that we, the purchaser,
intend to acquire the Shares for our own account as the sole beneficial owner
thereof and have no present intention of redeeming or reselling the Shares so
acquired.
We consent to the filing of this Investment Letter as an exhibit to the
form N-1A registration statement of each Fund.
Sincerely,
FRANKLIN RESOURCES, INC.
By: /s/ Harmon E. Burns
Harmon E. Burns
Executive Vice President
Date: April 12, 1995
<TABLE>
<CAPTION>
SCHEDULE A
<S> <C>
INVESTMENT COMPANY FUND & CLASS; TITAN NUMBER
Franklin Gold Fund Franklin Gold Fund - Class II; 232
Franklin Equity Fund Franklin Equity Fund - Class II; 234
AGE High Income Fund, Inc. AGE High Income Fund - Class II; 205
Franklin Custodian Funds, Inc. Growth Series - Class II; 206
Utilities Series - Class II; 207
Income Series - Class II; 209
U.S. Government Securities
Series - Class II; 210
Franklin California Tax-Free Franklin California Tax-Free Income
Income Fund, Inc. Fund - Class II; 212
Franklin New York Tax-Free Franklin New York Tax-Free Income
Income Fund, Inc. Fund - Class II; 215
Franklin Federal Tax-Free Franklin Federal Tax-Free Income
Income Fund Fund -Class II; 216
Franklin Managed Trust Franklin Rising Dividends
Fund - Class II; 258
Franklin California Tax-Free Franklin California Insured Tax-Free
Trust
Income Fund - Class II; 224
Franklin New York Tax-Free Trust Franklin New York Insured Tax-Free
Income Fund - Class II; 281
Franklin Investors Securities Franklin Global Government Income
Trust
Fund - Class II; 235
Franklin Equity Income
Fund - Class II; 239
Franklin Strategic Series Franklin Global Utilities
Fund - Class II; 297
Franklin Real Estate Securities Franklin Real Estate Securities
Trust
Fund - Class II; 292
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT COMPANY FUND AND CLASS; TITAN NUMBER
Franklin Tax-Free Franklin Alabama Tax-Free Income Fund - Class II; 264
Trust Franklin Arizona Tax-Free Income Fund - Class II; 226
Franklin Colorado Tax-Free Income Fund - Class II; 227
Franklin Connecticut Tax Free Income
Fund - Class II; 266
Franklin Florida Tax-Free Income Fund - Class II; 265
Franklin Georgia Tax-Free Income Fund - Class II; 228
Franklin High Yield Tax-Free Income Fund - Class II; 230
Franklin Insured Tax-Free Income Fund - Class II; 221
Franklin Louisiana Tax-Free Income Fund - Class II; 268
Franklin Maryland Tax-Free Income Fund - Class II; 269
Franklin Massachusetts Insured Tax-Free Income
Fund - Class II; 218
Franklin Michigan Insured Tax-Free Income
Fund - Class II; 219
Franklin Minnesota Insured Tax-Free Income
Fund - Class II; 220
Franklin Missouri Tax-Free Income Fund - Class II; 260
Franklin New Jersey Tax-Free Income
Fund - Class II; 271
Franklin North Carolina Tax-Free Income
Fund - Class II; 270
Franklin Ohio Insured Tax-Free Income
Fund - Class II; 222
Franklin Oregon Tax-Free Income Fund - Class II; 261
Franklin Pennsylvania Tax-Free Income
Fund - Class II; 229
Franklin Puerto Rico Tax-Free Income
Fund - Class II; 223
Franklin Texas Tax-Free Income Fund - Class II; 262
Franklin Virginia Tax-Free Income Fund - Class II; 263
</TABLE>
FRANKLIN RISING DIVIDENDS FUND
(A Series of the Franklin Managed Trust)
Amended and Restated Distribution Plan
The following Amended and Restated Distribution Plan (the
"Plan") has been adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Act") by the Franklin Rising
Dividends Fund (the "Fund"), a series of the Franklin Managed
Trust (the "Trust"). The Plan has been approved by a majority
vote of the Board of Trustees of the Trust (the "Board of
Trustees"), including a majority of the trustees who are not
interested persons of the Trust or the Fund and who have no
direct or indirect financial interest in the operation of the
Plan (the "non-interested Trustees"), cast in person at a meeting
called for the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees considered the
schedule and nature of payments and terms of the Management
Agreement between the Trust, on behalf of the Fund, and Franklin
Advisers, Inc. (the "Manager") and the terms of the Underwriting
Agreement between the Trust, on behalf of the Fund, and
Franklin/Templeton Distributors Inc. (the "Underwriter"). The
Board of Trustees concluded that the compensation of the Manager
under the Management Agreement was fair and not excessive;
however, the Board of Trustees also recognized that uncertainty
may exist from time to time with respect to whether payments to
be made by the Fund to the Manager, Underwriter or others under
agreements with the Funds or by the Manager and the Underwriter
to others, may be deemed to constitute distribution expenses.
Accordingly, the Board of Trustees determined that the Plan also
should provide for such payments and that adoption of the Plan
would be prudent and in the best interests of the Fund and its
shareholders.
Such approval included a determination that in the exercise
of their reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders. The amount of
compensation and a plan with similar terms has also been approved
by a vote of at least a majority of the Fund's outstanding voting
securities, as defined in the Act.
The provisions of the Plan are:
1. The Fund shall pay the Underwriter or others an amount
equal to 0.25% per annum of the average daily net assets of the
Fund as reimbursement for expenses incurred by the Underwriter or
others for the promotion and distribution of the shares of the
Fund, including, but not limited to, the printing of
prospectuses, statements of additional information and reports
used for sales purposes, expenses of preparation and distribution
of sales literature and related expenses, advertisements and
other distribution-related expenses, including a prorated portion
of the Underwriter's overhead expenses attributable to the
distribution of Fund shares. Payments shall be made monthly at a
rate of 0.25% per annum of the Fund's average net assets for that
month.
2. The Fund shall also pay to the Underwriter or directly
to others a service fee to reimburse the Underwriter, dealers or
others for personal services provided to shareholders of the Fund
and/or the maintenance of shareholder accounts. The total amount
of service fees paid by the Fund shall not exceed 0.25% per annum
of the average daily net assets of the Fund. All payments
pursuant to this paragraph 2 shall be made, if by the Underwriter
to dealers pursuant to a form of Distribution and Service
Agreement, substantially in the form of Exhibit "A" attached
hereto, if by the Underwriter to other-than-dealers, pursuant to
a form of Service Agreement attached hereto as Exhibit "B," if by
the Fund directly to other-than-dealers, pursuant to a form of
Service Agreement attached hereto as Exhibit "C," each of which
is incorporated by reference herein, or pursuant to other
agreements which, from time to time, are approved by the Board of
Trustees, including the non-interested Trustees.
3. The maximum amount which the Fund may annually pay
pursuant to paragraphs 1 and 2 above, and as service fees for the
promotion and distribution of shares of the Fund shall be 0.50%
per annum of the average daily net assets of the Fund. Payments
in excess of reimbursable expenses under Paragraph 1 of this Plan
in any year shall be refunded. Expenses of the Underwriter in
excess of 0.25% per annum of the Fund's average net assets that
otherwise qualify for payment may not be carried forward into
successive annual periods.
4. In addition to the payments which the Fund is
authorized to make pursuant to paragraphs 1, 2 and 3 hereof, to
the extent that the Manager, the Underwriter or other parties on
behalf of the Manager or Underwriter make payments that are
deemed to be payments for the financing of any activity primarily
intended to result in the sale of shares issued by the Fund
within the context of Rule 12b-1 under the Act, then such
payments shall be deemed to have been made pursuant to the Plan.
In no event shall the aggregate asset-based sales
charges, which include payments specified in paragraphs 1 and 2,
plus any other payments deemed to be made pursuant to the Plan
under this paragraph, exceed the amount permitted to be paid
pursuant to the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., Article III, Section
26(d).
5. The Underwriter shall furnish to the Board of Trustees,
for their review, on a quarterly basis, a written report of the
monies paid to it and to others under the Plan, and shall furnish
the Board of Trustees with such other information as the Board of
Trustees may reasonably request in connection with the payments
made under the Plan in order to enable the Board of Trustees to
make an informed determination of whether the Plan should be
continued.
6. The Plan, any Distribution and Service Agreements, any
Service Agreements or any other agreement related to the Plan may
be terminated at any time, without penalty, by vote of a majority
of the outstanding voting securities of the Fund or by vote of a
majority of the mon-interested Trustees on not more than sixty
(60) days' written notice or by the Underwriter on not more than
sixty (60) days' written notice and shall terminate automatically
in the event of any act that constitutes an assignment of the
Management Agreement between the Fund and the Manager or the
Underwriting Agreement between the Fund and the Underwriter.
7. The Plan, any Distribution and Service Agreement, any
Service Agreements or any of the agreements entered into pursuant
to this Plan may not be amended to increase materially the amount
to be spent for distribution and servicing of Fund shares
pursuant to Paragraph 3 hereof without approval by a majority of
the outstanding voting securities of the Fund.
8. All material amendments to the Plan, any Distribution
and Service Agreements, any Service Agreements or any other
agreements related to this Plan entered into with third parties
shall be approved by a vote of the non-interested Trustees, cast
in person at a meeting called for the purpose of voting on any
such amendment.
9. So long as the Plan is in effect, the selection and
nomination of the Trust's non-interested Trustees shall be
committed to the discretion of such non-interested Trustees.
10. In accordance with the limitations of liability
contained in the Declaration of Trust of the Trust, notice and
acceptance of which is hereby acknowledged, the Fund's
obligations under the Plan shall be limited to the Fund and the
assets of the Fund, and no party shall seek satisfaction of any
such obligation from any shareholder, Trustee, officer, employee
or agent of the Fund or the Trust.
This Amended and Restated Plan shall be entered into and
take effect upon execution, following approval by a majority of
the Board of Trustees including the non-interested Trustees and,
unless sooner terminated, shall continue in effect for a period
of more than one year from the date of its execution only so long
as such continuance is specifically approved at least annually by
the Board of Trustees, including the non-interested Trustees,
cast in person at a meeting called for the purpose of voting on
such continuance.
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Trust, on behalf of the Fund, and
the Underwriter, as evidenced by their execution hereof, this 1st
day of July, 1993.
FRANKLIN MANAGED TRUST on behalf of the FRANKLIN
RISING DIVIDENDS FUND
By: /s/ William J. Lippman
William J. Lippman,
President
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By: /s/ Harmon E. Burns
Harmon E. Burns,
Executive Vice-President
FRANKLIN MANAGED TRUST
Distribution and Service Agreement
Gentlemen:
This Distribution and Service Agreement has been adopted
pursuant to Rule l2b-l under the Investment Company Act of 1940
(the "Act") by Franklin Managed Trust (the "Trust") as part of a
Plan pursuant to said Rule (the "Plan") on behalf of the Franklin
Rising Dividends Fund of the Trust (the "Fund"). The Plan has
been approved by a majority of the Trustees who are not
interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plan (the
"non-interested Trustees"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval included a
determination that in the exercise of the reasonable business
judgment of the Board of Trustees and in light of the Trustees'
fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders. The amount of
compensation and a plan with similar terms have also been
approved by a vote of at least a majority of the outstanding
voting securities of the Fund, as defined in the Act.
1. To the extent you provide personal services to
shareholders including, but not limited to, furnishing services
and assistance to your customers who own Fund shares, answering
routine inquiries regarding the Fund, or assisting in the
maintenance of shareholder's accounts including assisting in
changing account designations and addresses, we shall pay you a
fee based on the net asset value of the shares of the Fund which
are attributable to customers of your firm (all such shares being
hereinafter referred to as "qualified assets") calculated on the
basis and at the rate set forth in the Schedule attached hereto
and made a part of this Agreement, provided that the average
aggregate value of the shares of the Fund held in your customer's
accounts (measured at the end of each month, unless otherwise
specified in the attached Schedule) has equaled or exceeded
$500,000 for at least 12 consecutive months and continues to do
so on a rolling 12-month basis.
2. Without prior approval by a majority of the outstanding
shares of the Fund, the aggregate annual fee paid to you pursuant
to the Schedule attached hereto shall not exceed the amount
stated as the "annual maximum" on the Schedule, which amount
shall be a specified percent of the value of the Fund's net
assets held in your customers' accounts which are eligible for
payment pursuant to this Agreement (determined in the same manner
as the Fund uses to compute its net assets as set forth in its
then effective Prospectus).
3. You shall furnish us and the Fund with such information
EXHIBIT "A"
as shall reasonably be requested by the Board of Trustees with
respect to the fees paid to you pursuant to the Schedule.
4. We shall furnish to the Board of Trustees, for their
review, on a quarterly basis, a written report of the amounts
expended under the Plan by us with respect to the Fund and the
purposes for which such expenditures were made.
5. This Agreement may be terminated by us or by you, by the
vote of a majority of the Trustees of the Trust who are non-
interested Trustees, or by a vote of a majority of the
outstanding shares of the Fund, on sixty (60) days' written
notice all without payment of any penalty. This Agreement shall
also be terminated automatically by its assignment or by any act
that terminates the Fund's Underwriting Agreement with its
Underwriter or the Fund's Management Agreement with its Manager,
or upon termination of the plan.
6. The provisions of the Plan between the Fund and us,
insofar as they relate to you, are incorporated herein by
reference.
7 This Agreement shall take effect on the date set forth on
the attached Schedule.
8. The terms and provisions of the current Prospectus and
Statement of Additional Information for the Fund are hereby
accepted and agreed to by you as evidenced by your execution
hereof.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
Agreed and Accepted:
(Name)
By:
(Authorized Officer)
FRANKLIN MANAGED TRUST
SCHEDULE TO DISTRIBUTION AND SERVICE AGREEMENT
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
AND
(Name)
Pursuant to the provisions of the Distribution and Service
Agreement between the above parties with respect to the Franklin
Rising Dividends Fund of the Franklin Managed Trust,
Franklin/Templeton Distributors, Inc. shall pay a fee to the
above-named party based on the net asset value of Fund shares
during the period indicated which are attributable to the above-
named party calculated as follows:
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
(Name)
By: By:
(Authorized Officer)
Dated:
FRANKLIN MANAGED TRUST
Service Agreement
Gentlemen:
This Service Agreement has been adopted pursuant to Rule l2b-
l under the Investment Company Act of 1940 (the "Act") by
Franklin Managed Trust (the "Trust") as part of a Plan pursuant
to said Rule (the "Plan") on behalf of the Franklin Rising
Dividends Fund of the Trust (the "Fund"). The Plan has been
approved by a majority of the Trustees who are not interested
persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan (the "non-interested
Trustees"), cast in person at a meeting called for the purpose of
voting on such Plan. Such approval included a determination that
in the exercise of the reasonable business judgment of the Board
of Trustees and in light of the Trustees' fiduciary duties, there
is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders. The amount of compensation and a plan with
similar terms have also been approved by a vote of at least a
majority of the outstanding voting securities of the Fund, as
defined in the Act.
1. To the extent you provide personal services to
shareholders including, but not limited to, furnishing services
and assistance to your customers who own Fund shares, answering
routine inquiries regarding the Fund, or assisting in the
maintenance of shareholder accounts including assisting in
changing account designations and addresses, we shall pay you a
fee based on the net asset value of the shares of the Fund which
are attributable to customers of your firm (all such shares being
hereinafter referred to as "qualified assets") calculated on the
basis and at the rate set forth in the Schedule attached hereto
and made a part of this Agreement, provided that the average
aggregate value of the shares of the Fund held in your customer's
accounts (measured at the end of each month, unless otherwise
specified in the attached Schedule) has equaled or exceeded
$500,000 for at least 12 consecutive months and continues to do
so on a rolling 12-month basis.
2. Without prior approval by a majority of the outstanding
shares of the Fund, the aggregate annual fee paid to you pursuant
to the Schedule attached hereto shall not exceed the amount
stated as the "annual maximum" on the Schedule, which amount
shall be a specified percent of the value of the Fund's net
assets held in your customers' accounts which are eligible for
payment pursuant to this Agreement (determined in the same manner
as the Fund uses to compute its net assets as set forth in its
then effective Prospectus).
3. You shall furnish us and the Fund with such information
EXHIBIT "B"
as shall reasonably be requested by the Board of Trustees with
respect to the fees paid to you pursuant to the Schedule.
4. We shall furnish to the Board of Trustees, for their
review, on a quarterly basis, a written report of the amounts
expended under the Plan by us with respect to the Fund and the
purposes for which such expenditures were made.
5. This Agreement may be terminated by us or by you, by the
vote of a majority of the Trustees of the Trust who are non-
interested Trustees, or by a vote of a majority of the
outstanding shares of the Fund, on sixty (60) days' written
notice all without payment of any penalty. This Agreement shall
also be terminated automatically by its assignment or by any act
that terminates the Fund's Underwriting Agreement with its
Underwriter or the Fund's Management Agreement with its Manager,
or upon termination of the plan.
6. The provisions of the Plan between the Fund and us,
insofar as they relate to you, are incorporated herein by
reference.
7 This Agreement shall take effect on the date set forth on
the attached Schedule.
8. The terms and provisions of the current Prospectus and
Statement of Additional Information for the Fund are hereby
accepted and agreed to by you as evidenced by your execution
hereof.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
Agreed and Accepted:
(Name)
By:
(Authorized Officer)
FRANKLIN MANAGED TRUST
SCHEDULE TO SERVICE AGREEMENT
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
AND
(Name)
Pursuant to the provisions of the Service Agreement between
the above parties with respect to the Franklin Rising Dividends
Fund series of the Franklin Managed Trust, Franklin/Templeton
Distributors, Inc. shall pay a fee to the above-named party based
on the net asset value of Fund shares during the period indicated
which are attributable to the above-named party calculated as
follows:
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
(Name)
By: By:
(Authorized Officer)
Dated:
FRANKLIN MANAGED TRUST
Service Agreement
Gentlemen:
This Service Agreement has been adopted pursuant to Rule l2b-
l under the Investment Company Act of 1940 (the "Act") by
Franklin Managed Trust (the "Trust") as part of a Plan pursuant
to said Rule (the "Plan") on behalf of the Franklin Rising
Dividends Fund of the Trust (the "Fund"). The Plan has been
approved by a majority of the Trustees who are not interested
persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan (the "non-interested
Trustees"), cast in person at a meeting called for the purpose of
voting on such Plan. Such approval included a determination that
in the exercise of the reasonable business judgment of the Board
of Trustees and in light of the Trustees' fiduciary duties, there
is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders. The amount of compensation and a plan with
similar terms have also been approved by a vote of at least a
majority of the outstanding voting securities of the Fund, as
defined in the Act.
1. To the extent you provide personal services to
shareholders including, but not limited to, furnishing services
and assistance to your customers who own Fund shares, answering
routine inquiries regarding the Fund, or assisting in the
maintenance of shareholder accounts including assisting in
changing account designations and addresses, the Fund shall pay
you a fee based on the net asset value of the shares of the Fund
which are attributable to customers of your firm (all such shares
being hereinafter referred to as "qualified assets") calculated
on the basis and at the rate set forth in the Schedule attached
hereto and made a part of this Agreement, provided that the
average aggregate value of the shares of the Fund held in your
customer's accounts (measured at the end of each month, unless
otherwise specified in the attached Schedule) has equaled or
exceeded $500,000 for at least 12 consecutive months and
continues to do so on a rolling 12-month basis.
2. Without prior approval by a majority of the outstanding
shares of the Fund, the aggregate annual fee paid to you pursuant
to the Schedule attached hereto shall not exceed the amount
stated as the "annual maximum" on the Schedule, which amount
shall be a specified percent of the value of the Fund's net
assets held in your customers' accounts which are eligible for
payment pursuant to this Agreement (determined in the same manner
as the Fund uses to compute its net assets as set forth in its
then effective Prospectus).
3. You shall furnish the Fund in written form with such
EXHIBIT "C"
information as shall reasonably be requested by the Board of
Trustees with respect to the fees paid to you pursuant to the
Schedule to enable the Trustees to review, on a quarterly basis,
the amounts expended under the Plan and the purposes for which
such expenditures were made.
4. This Agreement may be terminated by you or by the Fund,
by the vote of a majority of the Trustees of the Trust who are
non-interested Trustees, or by a vote of a majority of the
outstanding shares of the Fund, on sixty (60) days' written
notice all without payment of any penalty. This Agreement shall
also be terminated automatically by its assignment or by any act
that terminates the Plan.
5. The provisions of the Fund's Plan, insofar as they
relate to you, are incorporated herein by reference.
6. This Agreement shall take effect on the date set forth on
the attached Schedule.
7. The terms and provisions of the current Prospectus and
Statement of Additional Information for the Fund are hereby
accepted and agreed to by you as evidenced by your execution
hereof.
FRANKLIN MANAGED TRUST,
By:
Agreed and Accepted:
(Name)
By:
(Authorized Officer)
FRANKLIN MANAGED TRUST
SCHEDULE TO SERVICE AGREEMENT
FRANKLIN MANAGED TRUST
AND
(Name)
Pursuant to the provisions of the Service Agreement between
the above parties with respect to the Franklin Rising Dividends
Fund of Franklin Managed Trust, the Franklin Rising Dividends
Fund shall pay a fee to the above-named party based on the net
asset value of Fund shares during the period indicated which are
attributable to the above-named party calculated as follows:
FRANKLIN MANAGED TRUST
(Name)
By: By:
(Authorized Officer)
Dated:
FRANKLIN MANAGED TRUST
Preamble to Amended and Restated Distribution Plan.
The following amended and restated Distribution Plan (the
"Plan") has been adopted pursuant to Rule l2b-l under the
Investment Company Act of 1940 (the "Act") by the Franklin
Investment Grade Income Fund (the "Fund"), a series of the
Franklin Managed Trust (the "Trust"). The Plan has been approved
by a majority vote of the Board of Trustees of the Trust (the
"Board of Trustees"), including a majority of the trustees who
are not interested persons of the Trust or the Fund and who have
no direct or indirect financial interest in the operation of the
Plan (the "non-interested trustees"), cast in person at a meeting
called for the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees considered the
schedule and nature of payments and terms of the Management
Agreement between the Fund and Franklin Advisers, Inc. (the
"Manager") and of the Underwriting Agreement between the Fund and
Franklin/Templeton Distributors, Inc. (the "Underwriter"). The
Board of Trustees, including the non-interested trustees,
concluded that the proposed compensation of the Manager, under
the Management Agreement was fair and not excessive; however, the
Board also recognized that uncertainty may exist from time to
time with respect to whether payments to be made by the Fund to
the Manager or others under agreements with the Fund or by the
Manager and the Underwriter to others, may be deemed to
constitute distribution expenses outside of this Plan.
Accordingly, the Board of Trustees determined that the Plan also
should provide for such payments and that adoption of the Plan
would be prudent and in the best interests of the Fund and its
shareholders. Such approval included a determination that, in
the exercise of the trustees' reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood
that the Plan will benefit the Fund and its shareholders. The
Plan has also been approved by a vote of at least a majority of
the Fund's outstanding voting securities, as defined in the Act.
AMENDED AND RESTATED DISTRIBUTION PLAN
1. The Fund shall pay the Underwriter or others an amount to
0.25% per annum of the average daily net assets of the Fund as
reimbursement for expenses incurred by the Underwriter or others
for the promotion and distribution of the shares of the Fund,
including, but not limited to, the printing of prospectuses,
statements of additional information and reports used for sales
purposes, expenses of preparation and distribution of sales
literature and related expenses, advertisements, other
distribution-related expenses, including a prorated portion of
the Underwriter's overhead expenses attributable to the
distribution of Fund shares as well as any fees paid to dealers
or others as a distribution or service fee for shareholders of
the Fund, pursuant to a form of servicing agreement, which has
been approved from time to time by the trustees, including non-
interested trustees. Payments shall be made monthly at a rate of
0.25% per annum of the Fund's average net assets for that month.
2. The maximum amount which the Fund may annually pay to the
Underwriter or others for the promotion and distribution of
shares of the Fund shall be 0.25% per annum of the average daily
net assets of the Fund. Payments in excess of reimbursable
expenses under this Plan in any year shall be refunded. Expenses
in excess of 0.25% per annum of the Fund's average net assets
that otherwise qualify for payment may not be carried forward
into successive annual periods.
3. In addition to the payments which the Fund is authorized to
make pursuant to paragraphs 1 and 2 hereof, to the extent that
the Fund, the Manager, the Underwriter or other parties on behalf
of the Fund, the Manager, or the Underwriter make payments that
are deemed to be payments for the financing of any activity
primarily intended to result in the sale of shares issued by the
Fund within the context of Rule 12b-1 under the Act, then such
payments shall be deemed to have been made pursuant to the Plan.
In no event shall the aggregate asset-based sales charges,
which include payments specified in paragraphs 1 and 2, plus any
other payments deemed to be made pursuant to the Plan under this
paragraph, exceed the amount permitted to be paid pursuant to the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc., Article III, Section 26(d).
4. The Underwriter shall furnish to the Board of Trustees, for
their review, on a quarterly basis, a written report of the
monies paid to it and to others under the Plan, and shall furnish
the Board of Trustees with such other information as the Board of
Trustees may reasonably request in connection with the payments
made under the Plan in order to enable the Board of Trustees to
make an informed determination of whether the Plan should be
continued.
5. The Plan, or any agreements entered into pursuant to the
Plan, may be terminated at any time, without penalty, by vote of
a majority of the outstanding voting securities of the Fund with
respect to the Fund only, or by vote of a majority of the non-
interested trustees, on not more than sixty (60) days' written
notice, or by the Underwriter, on not more than (60) sixty days'
written notice, and shall terminate automatically in the event of
any act that constitutes an assignment of the Management
Agreement between the Fund and the Manager or the Underwriting
Agreement between the Fund and the Underwriter.
6. The Plan, or any agreements entered into pursuant to the
Plan, may not be amended to increase materially the amount to be
spent for distribution and servicing of Fund shares pursuant to
Paragraph 2 hereof without approval by a majority of the Fund's
outstanding voting securities.
7. All material amendments to the Plan, or any agreement
entered into pursuant to this Plan, shall be approved by a vote
of the non-interested trustees, cast in person at a meeting
called for the purpose of voting on any such amendment.
8. So long as the Plan is in effect, the selection and
nomination of the Trust's non-interested trustees shall be
committed to the discretion of such non-interested trustees.
9. In accordance with the limitations of liability contained in
the Declaration of Trust of the Trust, notice and acceptance of
which is hereby acknowledged, the Fund's obligations under the
Plan shall be limited to the Fund and the assets of the Fund, and
no party shall seek satisfaction of any such obligation from any
shareholder, Trustee, officer, employee or agent of the Fund or
the Trust.
10. This Plan shall take effect on the 1st day of July, 1993.
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Fund and the Underwriter, as
evidenced by their execution hereof, this 1st day of July 1993.
FRANKLIN MANAGED TRUST on behalf of the
FRANKLIN INVESTMENT GRADE INCOME FUND
By: /s/ William J. Lippman
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By: /s/ Harmon E. Burns
FRANKLIN MANAGED TRUST
Preamble to Amended and Restated Distribution Plan
The following amended and restated Distribution Plan (the
"Plan") has been adopted pursuant to Rule l2b-l under the
Investment Company Act of 1940 (the "Act") by the Franklin
Corporate Qualified Dividend Fund (the "Fund"), a series of the
Franklin Managed Trust (the "Trust"). The Plan has been approved
by a majority vote of the Board of Trustees of the Trust (the
"Board of Trustees"), including a majority of the trustees who
are not interested persons of the Trust or the Fund and who have
no direct or indirect financial interest in the operation of the
Plan (the "non-interested Trustees"), cast in person at a meeting
called for the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees considered the
schedule and nature of payments and terms of the Management
Agreement between the Fund and Franklin Advisers, Inc. (the
"Manager") and the terms of the Underwriting Agreement between
the Fund and Franklin/Templeton Distributors, Inc. (the
"Underwriter"). The Board of Trustees, including the non-
interested Trustees, concluded that the proposed compensation of
the Manager under the Management Agreement was fair and not
excessive; however, the Board of Trustees also recognized that
uncertainty may exist from time to time with respect to whether
payments to be made by the Fund to the Manager or others under
agreements with the Fund, or by the Manager and the Underwriter
to others, may be deemed to constitute distribution expenses
outside of this Plan. Accordingly, the Board of Trustees
determined that the Plan also should provide for such payments
and that adoption of the Plan would be prudent and in the best
interests of the Fund and its shareholders. Such approval
included a determination that in the exercise of the trustees'
reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders. The Plan has also been
approved by a vote of at least a majority of the Fund's
outstanding voting securities, as defined in the Act.
AMENDED AND RESTATED DISTRIBUTION PLAN
1. The Fund shall pay the Underwriter or others an amount equal
to O.25% per annum of the average daily net assets of the Fund as
reimbursement for expenses incurred by the Underwriter or others
for the promotion and distribution of the shares of the Fund,
including, but not limited to, the printing of prospectuses,
statements of additional information and reports used for sales
purposes, expenses of preparation and distribution of sales
literature and related expenses, advertisements, other
distribution-related expenses, including a prorated portion of
Distributors' overhead expenses attributable to the distribution
of Fund shares, as well as any fees paid to dealers or others as
a distribution or service fee for shareholders of the Fund,
pursuant to a form of servicing agreement. Payments shall be made
monthly at a rate of O.25% per annum of the Fund's average net
assets for that month.
2. The maximum amount which the Fund may annually pay to the
Underwriter or others for the promotion and distribution of
shares of the Fund shall be O.25% per annum of the average daily
net assets of the Fund. Payments in excess of reimbursable
expenses under this Plan in any year shall be refunded. Expenses
in excess of O.25% per annum of the Fund's average net assets
that otherwise qualify for payment may not be carried forward
into successive annual periods.
3. In addition to the payments which the Fund is authorized to
make pursuant to paragraphs 1 and 2 hereof, to the extent that
the Fund, the Manager, the Underwriter or other parties on behalf
of the Fund, the Manager or the Underwriter make payments that
are deemed to be payments for the financing of any activity
primarily intended to result in the sale of shares issued by the
Fund within the context of Rule 12b-1 under the Act, then such
payments shall be deemed to have been made pursuant to the Plan.
In no event shall the aggregate asset-based sales charges,
which include payments specified in paragraphs 1 and 2, plus any
other payments deemed to be made pursuant to the Plan under this
paragraph, exceed the amount permitted to be paid pursuant to the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc., Article III, Section 26(d).
4. The Underwriter shall furnish to the Board of Trustees, for
their review, on a quarterly basis, a written report of the
monies paid to it and to others under the Plan, and shall furnish
the Board of Trustees with such other information as the Board of
Trustees may reasonably request in connection with the payments
made under the Plan in order to enable the Board of Trustees to
make an informed determination of whether the Plan should be
continued.
5. The Plan, and any agreements entered into pursuant to the
Plan, may be terminated at any time, without penalty, by vote of
a majority of the outstanding voting securities of the Fund, or
by vote of a majority of the non-interested trustees, on not more
than sixty (60) days' written notice, or by the Underwriter, on
not more than sixty (60) days' written notice, and shall
terminate automatically in the event of any act that constitutes
an assignment of the Management Agreement between the Fund and
the Manager or the Underwriting Agreement between the Fund and
the Underwriter.
6. The Plan, or any agreements entered into pursuant to the
Plan, may not be amended to increase materially the amount to be
spent for distribution and servicing of Fund shares pursuant to
Paragraph 2 hereof without approval by a majority of the
outstanding voting securities of the Fund.
7. All material amendments to the Plan, or any agreement
entered into pursuant to the Plan, shall be approved by a vote of
the non-interested trustees, cast in person at a meeting called
for the purpose of voting on any such amendment.
8. So long as the Plan is in effect, the selection and
nomination of the Trust's non-interested trustees shall be
committed to the discretion of such non-interested Board of
Trustees.
9. In accordance with the limitations of liability contained in
the Declaration of Trust of the Trust, notice and acceptance of
which is hereby acknowledged, the Fund's obligations under the
Plan shall be limited to the Fund and the assets of the Fund, and
no party shall seek satisfaction of any such obligation from any
shareholder, Trustee, officer, employee or agent of the Fund or
the Trust.
10. This Plan shall take effect on the 1st day of July, 1993.
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Fund and the Underwriter, as
evidenced by their execution hereof, this 1st day of July, 1993.
FRANKLIN MANAGED TRUST on behalf of
the FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
By: /s/ William J. Lippman
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By: Harmon E. Burns, Vice President
CLASS II DISTRIBUTION PLAN
I. Investment Company: FRANKLIN MANAGED TRUST
II. Fund: FRANKLIN RISING DIVIDENDS FUND
III. Maximum Per Annum Rule 12b-1 Fees for Class II Shares
(as a percentage of average daily net assets of the class)
A. Distribution Fee: 0.75%
B. Service Fee: 0.25%
PREAMBLE TO CLASS II DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been
adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "Act") by the Investment Company named above
("Investment Company") for the class II shares (the "Class") of
each Fund named above ("Fund"), which Plan shall take effect as
of the date class II shares are first offered (the "Effective
Date of the Plan"). The Plan has been approved by a majority of
the Board of Directors or Trustees of the Investment Company (the
"Board"), including a majority of the Board members who are not
interested persons of the Investment Company and who have no
direct, or indirect financial interest in the operation of the
Plan (the "non-interested Board members"), cast in person at a
meeting called for the purpose of voting on such Plan.
In reviewing the Plan, the Board considered the schedule and
nature of payments and terms of the Management Agreement between
the Investment Company and Franklin Advisers, Inc. and the terms
of the Underwriting Agreement between the Investment Company and
Franklin/Templeton Distributors, Inc. ("Distributors"). The
Board concluded that the compensation of Advisers, under the
Management Agreement, and of Distributors, under the Underwriting
Agreement, was fair and not excessive. The approval of the Plan
included a determination that in the exercise of their reasonable
business judgment and in light of their fiduciary duties, there
is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders.
DISTRIBUTION PLAN
1. (a) The Fund shall pay to Distributors a quarterly fee
not to exceed the above-stated maximum distribution fee per annum
of the Class' average daily net assets represented by shares of
the Class, as may be determined by the Board from time to time.
(b) In addition to the amounts described in (a) above,
the Fund shall pay (i) to Distributors for payment to dealers or
others, or (ii) directly to others, an amount not to exceed the
above-stated maximum service fee per annum of the Class' average
daily net assets represented by shares of the Class, as may be
determined by the Fund's Board from time to time, as a service
fee pursuant to servicing agreements which have been approved
from time to time by the Board, including the non-interested
Board members.
2. (a) Distributors shall use the monies paid to it
pursuant to Paragraph 1(a) above to assist in the distribution
and promotion of shares of the Class. Payments made to
Distributors under the Plan may be used for, among other things,
the printing of prospectuses and reports used for sales purposes,
expenses of preparing and distributing sales literature and
related expenses, advertisements, and other distribution-related
expenses, including a pro-rated portion of Distributors' overhead
expenses attributable to the distribution of Class shares, as
well as for additional distribution fees paid to securities
dealers or their firms or others who have executed agreements
with the Investment Company, Distributors or its affiliates,
which form of agreement has been approved from time to time by
the Trustees, including the non-interested trustees. In
addition, such fees may be used to pay for advancing the
commission costs to dealers or others with respect to the sale of
Class shares.
(b) The monies to be paid pursuant to paragraph 1(b)
above shall be used to pay dealers or others for, among other
things, furnishing personal services and maintaining shareholder
accounts, which services include, among other things, assisting
in establishing and maintaining customer accounts and records;
assisting with purchase and redemption requests; arranging for
bank wires; monitoring dividend payments from the Fund on behalf
of customers; forwarding certain shareholder communications from
the Fund to customers; receiving and answering correspondence;
and aiding in maintaining the investment of their respective
customers in the Class. Any amounts paid under this paragraph
2(b) shall be paid pursuant to a servicing or other agreement,
which form of agreement has been approved from time to time by
the Board.
3. In addition to the payments which the Fund is authorized
to make pursuant to paragraphs 1 and 2 hereof, to the extent that
the Fund, Advisers, Distributors or other parties on behalf of
the Fund, Advisers or Distributors make payments that are deemed
to be payments by the Fund for the financing of any activity
primarily intended to result in the sale of Class shares issued
by the Fund within the context of Rule 12b-1 under the Act, then
such payments shall be deemed to have been made pursuant to the
Plan.
In no event shall the aggregate asset-based sales charges
which include payments specified in paragraphs 1 and 2, plus any
other payments deemed to be made pursuant to the Plan under this
paragraph, exceed the amount permitted to be paid pursuant to the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc., Article III, Section 26(d).
4. Distributors shall furnish to the Board, for its review,
on a quarterly basis, a written report of the monies reimbursed
to it and to others under the Plan, and shall furnish the Board
with such other information as the Board may reasonably request
in connection with the payments made under the Plan in order to
enable the Board to make an informed determination of whether the
Plan should be continued.
5. The Plan shall continue in effect for a period of more
than one year only so long as such continuance is specifically
approved at least annually by the Board, including the non-
interested Board members, cast in person at a meeting called for
the purpose of voting on the Plan.
6. The Plan, and any agreements entered into pursuant to
this Plan, may be terminated at any time, without penalty, by
vote of a majority of the outstanding voting securities of the
Fund or by vote of a majority of the non-interested Board
members, on not more than sixty (60) days' written notice, or by
Distributors on not more than sixty (60) days' written notice,
and shall terminate automatically in the event of any act that
constitutes an assignment of the Management Agreement between the
Fund and Advisers.
7. The Plan, and any agreements entered into pursuant to
this Plan, may not be amended to increase materially the amount
to be spent for distribution pursuant to Paragraph 1 hereof
without approval by a majority of the Fund's outstanding voting
securities.
8. All material amendments to the Plan, or any agreements
entered into pursuant to this Plan, shall be approved by the non-
interested Board members cast in person at a meeting called for
the purpose of voting on any such amendment.
9. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested Board members shall be
committed to the discretion of such non-interested Board members.
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Investment Company and Distributors
as evidenced by their execution hereof.
Date: __________________, 1995
Investment Company
By:________________________________
Franklin/Templeton Distributors, Inc.
By:_____________________________________
POWER OF ATTORNEY
The undersigned officers and trustees of FRANKLIN MANAGED
TRUST (the "Registrant") hereby appoint MARK H. PLAFKER, HARMON
E. BURNS, DEBORAH R. GATZEK, KAREN L. SKIDMORE AND LARRY L.
GREENE (with full power to each of them to act alone) his
attorney-in-fact and agent, in all capacities, to execute, and to
file any of the documents referred to below relating to Post-
Effective Amendments to the Registrant's registration statement
on Form N-1A under the Investment Company Act of 1940, as
amended, and under the Securities Act of 1933 covering the sale
of shares by the Registrant under prospectuses becoming effective
after this date, including any amendment or amendments increasing
or decreasing the amount of securities for which registration is
being sought, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory
authority. Each of the undersigned grants to each of said
attorneys, full authority to do every act necessary to be done in
order to effectuate the same as fully, to all intents and
purposes as he could do if personally present, thereby ratifying
all that said attorneys-in-fact and agents, may lawfully do or
cause to be done by virtue hereof.
The undersigned officers and trustees hereby execute this
Power of Attorney as of this 13th day of March 1995.
/s/ William J. Lippman /s/ Frank T. Crohn
William J. Lippman, Frank T. Crohn,
Principal Executive Trustee
Officer and Trustee
/s/ Charles Rubens, II /s/ Leonard Rubin
Charles Rubens, II, Leonard Rubin,
Trustee Trustee
/s/ Martin L. Flanagan /s/ Diomedes Loo-Tam
Martin L. Flanagan, Diomedes Loo-Tam,
Principal Financial Officer Principal Accounting
Officer
Cert.FMT
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, certify that I am Secretary of
Franklin Managed Trust (the "Trust").
As Secretary of the Trust, I further certify that the
following resolution was adopted by a majority of the Trustees of
the Trust present at a meeting held at 7251 West Palmetto Park
Rd., Boca Raton, Florida, on March 13, 1995.
RESOLVED, that a Power of Attorney, substantially in
the form of the Power of Attorney presented to this
Board, appointing Harmon E. Burns, Deborah R. Gatzek,
Karen L. Skidmore, Larry L. Greene and Mark H. Plafker
as attorneys-in-fact for the purpose of filing
documents with the Securities and Exchange Commission,
be executed by each Trustee and designated officer.
I declare under penalty of perjury that the matters set
forth in this certificate are true and correct of my own
knowledge.
Dated: March 13, 1995 /s/ Deborah R. Gatzek
Deborah R. Gatzek
Secretary
