As filed with the Securities and Exchange Commission on November 25, 1996.
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. 14 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15 (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 November 25, 1996 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
Declaration Pursuant to Rule 24f-2. The Registrant has registered an indefinite
number or amount of securities under the Securities Act of 1933 pursuant to Rule
24(f)(2) under the Investment Company Act of 1940. The Rule 24f-2 Notice for the
issuer's most recent fiscal year was filed on November 24, 1995.
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 Summary"
3. Condensed Financial "Financial Highlights"; "How
Information does the Fund Measure
Performance?"
4. General Description of "How is the Trust Organized?";
Registrant "How does the Fund Invest its
Assets?"; "What are the Fund's
Potential Risks?"
5. Management of the Fund "Who Manages the Fund?"
5A. Management's Discussion of Contained in Registrant's Annual
Fund Performance Report to Shareholders
6. Capital Stock and Other "How is the Trust Organized?";
Securities "Services to Help You Manage
Your Account"; "What
Distributions Might I Receive
from the Fund?"; "How Taxation
Affects You and the Fund"
7. Purchase of Securities Being "How Do I Buy Shares?"; "May I
Offered Exchange Shares for Shares of
Another Fund?"; "Transaction
Procedures and Special
Requirements"; "Services to Help
You Manage Your Account";
"Useful Terms and Definitions"
8. Redemption or Repurchase "May I Exchange Shares for
Shares of Another Fund?"; "How
Do I Sell Shares?"; "Transaction
Procedures and Special
Requirements"; "Services to Help
You Manage Your Account"
9. Pending Legal Proceedings Not Applicable
Part B: Information Required in
STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and Not Applicable
History
13. Investment Objectives and "How does the Fund Invest its
Policies Assets?"; "Investment
Restrictions"
14. Management of the Registrant "Officers and Trustees"
15. Control Persons and "Officers and Trustees";
Principal Holders of "Investment Advisory and Other
Securities Services"; "Miscellaneous
Information"
16. Investment Advisory and "Investment Advisory and Other
Other Services Services"; "The Fund's
Underwriter"
17. Brokerage Allocation and "How does the Fund Buy Securities
Other Practices For its Portfolio?"
18. Capital Stock and Other See Prospectus "How is the Fund
Securities Organized?"
19. Purchase, Redemption and "How Do I Buy, Sell and Exchange
Pricing of Securities Being Shares?"; "How are Fund Shares
Offered Valued?"; "Financial Statements"
20. Tax Status "Additional Information on
Distributions and Taxes"
21. Underwriters "The Fund's Underwriter"
22. Calculation of Performance "How does the Fund Measure
Data Performance?"
23. Financial Statements "Financial Statements"
PROSPECTUS & APPLICATION
FRANKLIN RISING DIVIDENDS FUND
INVESTMENT STRATEGY
GROWTH & INCOME
FEBRUARY 1, 1996
AS AMENDED NOVEMBER 25, 1996
FRANKLIN MANAGED TRUST
This prospectus describes the Franklin Rising Dividends Fund (the "Fund"), a
series of Franklin Managed Trust (the "Trust"). It contains information you
should know before investing in the Fund. Please keep it for future reference.
The Trust's SAI, dated February 1, 1996, as may be amended from time to time,
includes more information about the Fund's procedures and policies. It has been
filed with the SEC and is incorporated by reference into this prospectus. For a
free copy or a larger print version of this prospectus, call 1-800/DIAL BEN or
write the Fund at the address shown.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE IN WHICH THE OFFERING IS NOT AUTHORIZED. NO SALES REPRESENTATIVE, DEALER,
OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. FURTHER
INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.
FRANKLIN RISING DIVIDENDS FUND
FRANKLIN
RISING DIVIDENDS
FUND
FEBRUARY 1, 1996
AS AMENDED NOVEMBER 25, 1996
WHEN READING THIS PROSPECTUS, YOU WILL SEE CERTAIN TERMS BEGINNING WITH CAPITAL
LETTERS. THIS MEANS THE TERM IS EXPLAINED IN OUR GLOSSARY SECTION.
TABLE OF CONTENTS
ABOUT THE FUND
Expense Summary..................................... 2
Financial Highlights................................ 3
How does the Fund Invest its Assets?................ 6
What are the Fund's Potential Risks?................ 8
Who Manages the Fund?............................... 9
How does the Fund Measure Performance?.............. 11
How is the Trust Organized?......................... 11
How Taxation Affects You and the Fund............... 12
About Your Account
How Do I Buy Shares?................................ 14
May I Exchange Shares for Shares of Another Fund?... 20
How Do I Sell Shares?............................... 23
What Distributions Might I Receive from the Fund?... 25
Transaction Procedures and Special Requirements..... 27
Services to Help You Manage Your Account............ 31
Glossary
Useful Terms and Definitions........................ 35
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo
CA 94403-7777
1-800/DIAL BEN
FRANKLIN RISING DIVIDENDS FUND
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Fund. It is based on the historical expenses of each class for the fiscal year
ended September 30, 1995. The Class II expenses are annualized. Your actual
expenses may vary.
CLASS I CLASS II
A. SHAREHOLDER TRANSACTION EXPENSES+
Maximum Sales Charge
(as a percentage of Offering Price) 4.50% 1.99%
Paid at time of purchase 4.50%++ 1.00%+++
Paid at redemption++++ None 0.99%
Exchange Fee (per transaction) $5.00* $5.00*
B. ANNUAL FUND OPERATING EXPENSE
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.75% 0.75%
Rule 12b-1 Fees 0.46%** 0.93%**
Other Expenses 0.22% 0.22%
Total Fund Operating Expenses 1.43% 1.90%
C. Example
Assume the annual return for each class is 5% and operating expenses are as
described above. For each $1,000 investment, you would pay the following
projected expenses if you sold your shares after the number of years shown.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Class I $59*** $88 $120 $209
Class II $39 $69 $112 $230
For the same Class II investment, you would pay projected expenses of $29 if
you did not sell your shares at the end of the first year. Your projected
expenses for the remaining periods would be the same.
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. Actual expenses and returns may be more or less than those shown.
The Fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends of each class and are not
directly charged to your account.
+If your transaction is processed through your Securities Dealer, you may
be charged a fee by your Securities Dealer for this service.
++There is no front-end sales charge if you invest $1 million or more in
Class I shares.
+++Although Class II has a lower front-end sales charge than Class I, its
Rule 12b-1 fees are higher. Over time you may pay more for Class II shares.
Please see "How Do I Buy Shares? - Deciding Which Class to Buy."
++++A Contingent Deferred Sales Charge of 1% may apply to Class I purchases
of $1 million or more if you sell the shares within one year and any Class
II purchase if you sell the shares within 18 months. The charge is 1% of the
value of the shares sold or the Net Asset Value at the time of purchase,
whichever is less. The number in the table shows the charge as a percentage
of Offering Price. While the percentage is different depending on whether
the charge is shown based on the Net Asset Value or the Offering Price, the
dollar amount paid by you would be the same. See "How Do I Sell Shares? -
Contingent Deferred Sales Charge" for details.
*$5.00 fee is only for Market Timers. We process all other exchanges
without a fee.
**These fees may not exceed 0.50% for Class I and 1.00% for Class II. 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 charge permitted under the NASD's rules.
***Assumes a Contingent Deferred Sales Charge will not apply.
Financial Highlights
This table summarizes the Fund's financial history. The information has been
audited by Tait, Weller and Baker, the Fund's independent auditors. Their audit
report covering each of the most recent five fiscal years appears in the
financial statements in the Trust's Annual Report to Shareholders for the fiscal
year ended September 30, 1995. The Annual Report to Shareholders also includes
more information about the Fund's performance. For a free copy, please call Fund
Information.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 1996
CLASS I SHARES (UNAUDITED) 1995 1994 1993*** 1992 1991 1990 1989 19882 1987**
Per Share Operating Performance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value At Beginning of Period $17.31 $14.67 $15.43 $16.18 $14.91 $11.21 $11.58 $10.01 $8.72 $10.00
Net Investment Income 0.14 0.33 0.28 0.19 0.24 0.28 0.33 0.37 0.33 0.28
Net Realized &
Unrealized Gain (Loss) on Securities 1.489 2.608 (0.800) (0.745) 1.290 3.720 (0.310) 1.560 1.280 (1.370)
Total From Investment Operations 1.629 2.938 (0.520) (0.555) 1.530 4.000 0.020 1.930 1.610 (1.090)
Distributions From Net Investment Income (0.199) (0.298) (0.240) (0.195) (0.260) (0.300) (0.390) (0.360) (0.320) (0.190)
Net Asset Values at End of Period $18.74 $17.31 $14.67 $15.43 $16.18 $14.91 $11.21 $11.58 $10.01 $8.72
Total Return1 9.44% 20.32% (3.38)% (3.43)% 10.38% 35.95% .26% 19.60% 18.80% (11.25)%
Ratios/Supplemental Data
Net Assets at End of Period in (000's) $273,109 $260,917 $261,461 $356,708$197,804 $71,380 $39,907 $40,550 $31,792 $33,418
Ratio of Expenses to Average Net Assets 1.41%* 1.43% 1.43% 1.40%* 1.46% 1.53% 1.60% 1.70% 1.62% 1.79%*
Ratio of Net Income to Average Net Assets 1.52%* 2.10% 1.81% 1.73%* 1.67% 2.16% 2.99% 3.28% 3.44% 3.06%*
Portfolio Turnover Rate 11.75% 14.60% 25.75% 11.48% 12.73% 16.83% 28.87% 26.87% 18.19% 44.57%
</TABLE>
FOR THE SIX
MONTHS ENDED YEAR ENDED
MARCH 31, 1996 SEPTEMBER 30,
CLASS II SHARES (UNAUDITED) 19953
Net Asset Value at Beginning of Period $17.28 $15.47
Net Investment Income 0.12 .011
Net Realized & Unrealized Gain on Securities 1.446 1.826
Total From Investment Operations 1.566 1.936
Distributions From Net Investment Income (0.156) (0.126)
Net Asset Values at End of Period $18.69 $17.28
Total Return1 9.09% 12.56%
Ratios/Supplemental Data
Net Assets at End of Period in (000's) $2,599 $1,060
Ratio of Expenses to Average Net Assets 1.96%* 1.90%*
Ratio of Net Income to Average Net Assets 1.04%* 1.92%*
Portfolio Turnover Rate 11.75% 14.60%
*Annualized
**For the period January 14, 1987 (effective date of registration) to December
31, 1987.
***For the period ended September 30, 1993.
1Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum front-end sales
charge or the Contingent Deferred Sales Charge and assumes reinvestment of
dividends and capital gains, if any, at Net Asset Value.
2On June 28, 1988, the investment manager changed from L.F. Rothschild Fund
Management, Inc. to Franklin Advisers, Inc.
3For the period May 1, 1995 to September 30, 1995.
How does the Fund Invest its Assets?
THE FUND'S INVESTMENT OBJECTIVE
The objective of the Fund is long-term capital appreciation. The objective is a
fundamental policy of the Fund and may not be changed without shareholder
approval. Preservation of capital, while not an objective, is also an important
consideration. Incidental to seeking its investment objective of long-term
capital appreciation, the Fund seeks current income. Of course, there is no
assurance that the Fund's objective will be achieved.
TYPES OF SECURITIES IN WHICH THE FUND MAY INVEST
The Fund seeks to achieve its investment objective of long-term capital
appreciation by investing at least 65% of its total assets in financially sound
companies that have paid consistently rising dividends (as described below)
based on the investment philosophy of Advisory Services that the securities of
such companies, because of their dividend record, have a strong potential to
increase in value. The Fund diversifies its investments among different
companies in different industry segments with no more than 25% of the Fund's
portfolio concentrated in any one industry. Normally, the Fund's investments are
in common stocks, securities convertible into common stocks, or rights or
warrants to subscribe for or purchase common stocks. In any period of stock
market weakness or of uncertain market or economic conditions as determined by
Advisory Services, the Fund may establish a defensive position to preserve
capital by temporarily having all or a part of its assets invested in
short-term, fixed-income securities or retained in cash or cash equivalents.
These investments would include U.S. government securities, bank certificates of
deposit, bankers' acceptances and high-quality commercial paper issued by
domestic corporations.
As a fundamental policy, under normal market conditions at least 65% of the
Fund's portfolio is invested in the securities of companies that meet the
following criteria:
o Consistent dividend increases - A company should have increased its dividend
in at least eight out of the last ten years with no year showing a decrease.
o Substantial dividend increases - A company must have increased its dividend at
least 100% over the past ten years.
o Reinvested earnings - Dividend payout should be less than 65% of current
earnings (except for utility companies).
o Strong balance sheet - Long-term debt should be no more than 30% of total
capitalization (except for utility companies).
o Attractive price - The current price should either be in the lower half of the
stock's price/earnings ratio range for the past ten years or less than the
current market price/earnings ratio of the stocks comprising the Standard &
Poor's 500 Stock Index. This criterion applies only at the time of purchase.
The remaining 35% of the Fund's assets typically are invested in dividend-paying
equity securities with similar characteristics that may not meet all of the
criteria listed above.
Advisory Services also considers other factors, such as return on shareholder's
equity, rate of earnings growth and anticipated price/earnings ratios, in
selecting investments for the Fund.
Advisory Services believes that a focus on companies with a pattern of rising
dividends will help the Fund attain its objective of long-term capital
appreciation. In addition, because capital preservation is an important
consideration, Advisory Services also reviews a company's stability and the
strength of its balance sheet in selecting among eligible growth companies
generally.
Foreign Securities. The Fund may invest in foreign securities, generally by
purchasing sponsored or unsponsored American Depositary Receipts ("ADRs"). ADRs
evidence ownership of, and represent the right to receive, securities of a
foreign issuer deposited in a U.S. bank or a correspondent bank. The Fund
currently intends to limit its foreign investments to no more than 10% of its
net assets. Foreign securities have risks that U.S. securities do not have. For
more information about foreign securities and their risks, please see "What are
the Fund's Potential Risks?"
OTHER INVESTMENT POLICIES OF THE FUND
Repurchase Agreements. For temporary defensive purposes, or as an interim
investment pending longer-term investment in securities meeting the Fund's
special criteria, the Fund may engage in repurchase transactions in which the
Fund purchases a U.S. government security subject to resale to a bank or dealer
at an agreed-upon price and date. The transaction requires the collateralization
of the seller's obligation by the transfer of securities with an initial market
value, including accrued interest, equal to at least 102% of the dollar amount
invested by the Fund in each agreement, with the value of the underlying
security marked-to-market daily to maintain coverage of at least 100%. A default
by the seller might cause the Fund to experience a loss or delay in the
liquidation of the collateral securing the repurchase agreement. The Fund might
also incur disposition costs in liquidating the collateral. The Fund, however,
intends to enter into repurchase agreements only with financial institutions
such as broker-dealers and banks which are deemed creditworthy by Advisory
Services. A repurchase agreement is deemed to be a loan by the Fund under the
1940 Act. The U.S. government security subject to resale (the collateral) will
be held on behalf of the Fund by a custodian approved by the Board and will be
held pursuant to a written agreement.
Illiquid Investments. The Fund may not invest more than 10% of its net assets,
at the time of purchase, in illiquid securities. Illiquid securities are
generally securities that cannot be sold within seven days in the normal course
of business at approximately the amount at which the Fund has valued them.
Percentage Restrictions. If a percentage restriction noted above is adhered to
at the time of investment, a later increase or decrease in the percentage
resulting from a change in value of portfolio securities or the amount of net
assets will not be considered a violation of any of the foregoing policies.
Other Policies and Restrictions. The Fund has a number of additional investment
restrictions that limit its activities to some extent. Some of these
restrictions may only be changed with shareholder approval. For a list of these
restrictions and more information about the Fund's investment policies, please
see "How Do the Funds Invest Their Assets?" and "Investment Restrictions" in the
SAI.
WHAT ARE THE FUND'S POTENTIAL RISKS?
The value of your shares will increase as the value of the securities owned by
the Fund increases and will decrease as the value of the Fund's investments
decrease. In this way, you participate in any change in the value of the
securities owned by the Fund. In addition to the factors that affect the value
of any particular security that the Fund owns, the value of Fund shares may also
change with movements in the stock market as a whole.
Market Risk. If there is a general market decline, shown for example by a drop
in the Dow Jones Industrials or other equity based index, or in any country
where the Fund may be invested, the Fund's share price may also decline. The
value of worldwide stock markets has increased and decreased in the past. These
changes are unpredictable and may happen again in the future.
Foreign Securities. Foreign investing involves special risks, including currency
fluctuations and economic and political uncertainties. The Fund's current
foreign investment strategy is to focus on purchasing ADRs. Prices of ADRs are
quoted in U.S. dollars, and ADRs are traded in the U.S. on national securities
exchanges or in the over-the-counter market. While ADRs do not eliminate all the
risk associated with foreign investments, by investing in ADRs rather than
directly in the stock of foreign issuers, the Fund will avoid currency risks
during the settlement period for either purchases or sales. In general, there is
a large, liquid market in the U.S. for ADRs quoted on a national securities
exchange or on NASDAQ. The information available for ADRs is subject to the
accounting, auditing and financial reporting standards of the domestic market or
exchange on which they are traded, which standards are more uniform and more
exacting than those to which many foreign issuers may be subject. Please see
"Foreign Securities" in the SAI for more information.
WHO MANAGES THE FUND?
The Board. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations. The
Board also monitors the Fund to ensure no material conflicts exist between the
two classes of shares. While none is expected, the Board will act appropriately
to resolve any material conflict that may arise.
Investment Manager. As of July 1, 1996, Advisory Services manages the Fund's
assets and makes its investment decisions. It is wholly owned by Resources, a
publicly owned company engaged in the financial services industry through its
subsidiaries. Charles B. Johnson and Rupert H. Johnson, Jr. are the principal
shareholders of Resources. Together, Advisory Services and its affiliates manage
over $150 billion in assets. Advisory Services employs the same individuals to
manage the Fund's portfolio as the previous manager. The terms and conditions of
the management services provided to the Fund remain the same. Please see
"Investment Advisory and Other Services" and "Miscellaneous Information" in the
SAI for information on securities transactions and a summary of the Fund's Code
of Ethics.
Management Team. The team responsible for the day-to-day management of the
Fund's portfolio is: Bruce C. Baughman and William Lippman since the Fund's
inception,
Margaret McGee since 1988 and Donald G. Taylor since June 1996.
William Lippman
President of Advisory Services
Mr. Lippman holds a bachelor's degree in business administration from City
College New York and a master's degree in business administration from the
Graduate School of Business Administration of New York University. He has been
with Franklin Templeton Group since 1988.
Bruce C. Baughman
Vice President of Advisory Services
Mr. Baughman holds a bachelor of arts degree from Stanford University and a
master's degree in science - accounting from New York University. He has been
with Franklin Templeton Group since 1988. Mr. Baughman is a member of several
securities industry-related committees and associations.
Margaret McGee
Vice President of Advisory Services
Ms. McGee holds a bachelor of arts degree from William Patterson College. She
has been with Franklin Templeton Group since 1988.
Donald G. Taylor
Portfolio Manager of Advisory Services
Mr. Taylor holds a bachelor of science degree in economics from the Wharton
School of Finance at the University of Pennsylvania. Mr. Taylor has been in the
securities industry for over ten years. He joined the Franklin Templeton Group
in June 1996.
Management Fees. During the fiscal year ended September 30, 1995, management
fees totaling 0.75% of the average daily net assets of the Fund were paid to
Advisers. Total expenses of Class I and Class II shares, including fees paid to
Advisers, were 1.43% and 1.90%, respectively. The Class II expenses are
annualized.
Portfolio Transactions. Advisory Services tries to obtain the best execution on
all transactions. If Advisory Services believes more than one broker or dealer
can provide the best execution consistent with internal policies, it may
consider research and related services and the sale of Fund shares, as well as
shares of other funds in the Franklin Templeton Group of Funds, when selecting a
broker or dealer. Please see "How Do the Funds Purchase Securities For Their
Portfolios?" in the SAI for more information.
Administrative Services. Under an agreement with Advisory Services, FT Services
provides certain administrative services and facilities for the Fund. Please see
"Investment Advisory and Other Services" in the SAI for more information.
THE RULE 12B-1 PLANS
Each class has a distribution plan or "Rule 12b-1 Plan" under which it may pay
or reimburse Distributors or others for activities primarily intended to sell
shares of the class. These expenses may include, among others, distribution or
service fees paid to Securities Dealers or others who have executed a servicing
agreement with the Fund, Distributors or its affiliates, printing prospectuses
and reports used for sales purposes, preparing and distributing sales literature
and advertisements, and a prorated portion of Distributors' overhead expenses.
Payments by the Fund under the Class I plan may not exceed 0.25% per year of
Class I's average daily net assets. All distribution expenses over this amount
will be borne by those who have incurred them. During the first year after
certain Class I purchases made without a sales charge, Distributors may keep the
Rule 12b-1 fees associated with the purchase.
Under the Class II plan, the Fund may pay Distributors up to 0.75% per year of
Class II's average daily net assets to pay Distributors or others for providing
distribution and related services and bearing certain Class II expenses. All
distribution expenses over this amount will be borne by those who have incurred
them. During the first year after a purchase of Class II shares, Distributors
may keep this portion of the Rule 12b-1 fees associated with the purchase.
Each class may also pay a servicing fee of up to 0.25% of the average daily net
assets under its plan. This fee may be used to pay Securities Dealers or others
for, among other things, helping to establish and maintain customer accounts and
records, helping with requests to buy and sell shares, receiving and answering
correspondence, monitoring dividend payments from the Fund on behalf of
customers, and similar servicing and account maintenance activities.
The Rule 12b-1 fees charged to each class are based only on the fees
attributable to that particular class. For more information, please see "The
Trust's Underwriter" in the SAI.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, each class of the Fund advertises its performance. The more
commonly used measures of performance are total return, current yield and
current distribution rate. Performance figures are usually calculated using the
maximum sales charges, but certain figures may not include sales charges.
Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested. Current yield for each
class shows the income per share earned by that class. The current distribution
rate shows the dividends or distributions paid to shareholders of a class. This
rate is usually computed by annualizing the dividends paid per share during a
certain period and dividing that amount by the current Offering Price of the
class. Unlike current yield, the current distribution rate may include income
distributions from sources other than dividends and interest received by the
Fund.
The investment results of each class will vary. Performance figures are always
based on past performance and do not indicate future results. For a more
detailed description of how the Fund calculates its performance figures, please
see "General Information" in the SAI.
HOW IS THE TRUST ORGANIZED?
The Fund is a diversified series of Franklin Managed Trust (the "Trust"), an
open-end management investment company, commonly called a mutual fund. It was
organized as a Massachusetts business trust on July 1, 1986, and is registered
with the SEC under the 1940 Act. The Fund began offering two classes of shares
on May 1, 1995: Franklin Rising Dividends Fund - Class I and Franklin Rising
Dividends Fund - Class II. All shares purchased before that time are considered
Class I shares. Additional classes and series of shares may be offered in the
future.
Shares of each class represent proportionate interests in the assets of the Fund
and have the same voting and other rights and preferences as any other class of
the Fund for matters that affect the Fund as a whole. For matters that only
affect one class, however, only shareholders of that class may vote. Each class
will vote separately on matters (1) affecting only that class, (2) expressly
required to be voted on separately by state law, or (3) required to be voted on
separately by the 1940 Act. Shares of each class of a series have the same
voting and other rights and preferences as the other classes and series of the
Trust for matters that affect the Trust as a whole. The Trust has noncumulative
voting rights. This gives holders of more than 50% of the shares voting the
ability to elect all of the members of the Board. If this happens, holders of
the remaining shares voting will not be able to elect anyone to the Board.
The Trust does not intend to hold annual shareholder meetings. It may hold a
special meeting of a series, however, for matters requiring shareholder approval
under the 1940 Act. A meeting may also be called by the Board in its discretion
or by shareholders holding at least 10% of the outstanding shares. The 1940 Act
requires that we help you communicate with other shareholders in connection with
removing members of the Board.
HOW TAXATION AFFECTS YOU AND THE FUND
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information Regarding
Taxation" in the SAI.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Code. By distributing all of its
income and meeting certain other requirements relating to the sources of its
income and diversification of its assets, the Fund will not be liable for
federal income or excise taxes.
For federal income tax purposes, any income dividends which you receive from the
Fund, as well as any distributions derived from the excess of net short-term
capital gain over net long-term capital loss, are treated as ordinary income
whether you have elected to receive them in cash or in additional shares.
Distributions derived from the excess of net long-term capital gain over net
short-term capital loss are treated as long-term capital gain regardless of the
length of time you have owned Fund shares and regardless of whether you have
received them in cash or in additional shares.
Pursuant to the Code, certain distributions which are declared in October,
November or December but which, for operational reasons, may not be paid to you
until the following January, will be treated for tax purposes as if paid by the
Fund and received by you on December 31 of the calendar year in which they are
declared.
Redemptions and exchanges of Fund shares are taxable events on which you may
realize a gain or a loss. Any loss incurred on the sale or exchange of Fund
shares, held for six months or less, will be treated as a long-term capital loss
to the extent of capital gain dividends received with respect to such shares.
100% of the income dividends paid by the Fund for the fiscal year ended
September 30, 1995 qualified for the corporate dividends-received deduction,
subject to certain holding period and debt financing restrictions imposed under
the Code on the corporation claiming the deduction.
Corporate shareholders should note that dividends paid by the Fund from sources
other than the qualifying dividends it receives will not qualify for the
dividends-received deduction. For example, any interest income and net
short-term capital gain (in excess of any net long-term capital loss or capital
loss carryover) included in investment company taxable income and distributed by
the Fund as a dividend will not qualify for the dividends- received deduction.
Corporate shareholders should also note that availability of the corporate
dividends-
received deduction is subject to certain restrictions. For example, the
deduction is eliminated unless the Fund shares have been held (or deemed held)
for at least 46 days in a substantially unhedged manner. The dividends-received
deduction may also be reduced to the extent interest paid or accrued by a
corporate shareholder is directly attributable to its investment in Fund shares.
The entire dividend, including the portion which is treated as a deduction, is
includable in the tax base on which the federal alternative minimum tax is
computed and may also result in a reduction in the shareholder's tax basis in
its Fund shares, under certain circumstances, if the shares have been held for
less than two years. Corporate shareholders whose investment in the Fund is
"debt financed" for these tax purposes should consult with their tax advisors
concerning the availability of the dividends-received deduction.
The Fund will inform you of the source of your dividends and distributions at
the time they are paid, and will promptly after the close of each calendar year
advise you of the tax status for federal income tax purposes of such dividends
and distributions.
If you are not a U.S. person for purposes of federal income taxation, you should
consult with your financial or tax advisors regarding the applicability of U.S.
withholding or other taxes on distributions received by you from the Fund and
the application of foreign tax laws to these distributions.
You should consult your tax advisor regarding the applicability of state and
local intangible property or income taxes to your shares in the Fund and to
distributions and redemption proceeds you receive from the Fund.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check. Please indicate which class of shares you want to buy. If you do not
specify a class, your purchase will be automatically invested in Class I shares.
MINIMUM
INVESTMENTS*
To Open Your Account $100
To Add to Your Account $ 25
*We may waive these minimums for retirement plans. We may also refuse any order
to buy shares.
DECIDING WHICH CLASS TO BUY
You should consider a number of factors when deciding which class of shares to
buy. If you plan to buy $1 million or more in a single payment or you qualify to
buy Class I shares without a sales charge, you may not buy Class II shares.
Generally, you should consider buying Class I shares if:
o you expect to invest in the Fund over the long term;
o you qualify to buy Class I shares at a reduced sales charge; or
o you plan to buy $1 million or more over time.
You should consider Class II shares if:
o you expect to invest less than $100,000 in the Franklin Templeton Funds; and
o you plan to sell a substantial number of your shares within approximately six
years or less of your investment.
Class I shares are generally more attractive for long-term investors because of
Class II's higher Rule 12b-1 fees. These may accumulate over time to outweigh
the lower Class II front-end sales charge and result in lower income dividends
for Class II shareholders. If you qualify to buy Class I shares at a reduced
sales charge based upon the size of your purchase or through our Letter of
Intent or cumulative quantity discount programs, but plan to hold your shares
less than approximately six years, you should evaluate whether it is more
economical for you to buy Class I or Class II shares.
For purchases of $1 million or more, it is considered more beneficial for you to
buy Class I shares since there is no front-end sales charge, even though these
purchases may be subject to a Contingent Deferred Sales Charge. Any purchase of
$1 million or more is therefore automatically invested in Class I shares. You
may accumulate more than $1 million in Class II shares through purchases over
time, but if you plan to do this you should determine whether it would be more
beneficial for you to buy Class I shares through a Letter of Intent.
Please consider all of these factors before deciding which class of shares to
buy. There are no conversion features attached to either class of shares.
PURCHASE PRICE OF FUND SHARES
For Class I shares, the sales charge you pay depends on the dollar amount you
invest, as shown in the table below. The sales charge for Class II shares is 1%
and, unlike Class I, does not vary based on the size of your purchase.
TOTAL SALES CHARGE AMOUNT PAID
AS A PERCENTAGE OF TO DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE*
CLASS I
Under $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.25%
$250,000 but less than $500,000 2.75% 2.83% 2.50%
$500,000 but less than $1,000,000 2.25% 2.30% 2.00%
$1,000,000 or more** None None None
CLASS II
Under $1,000,000** 1.00% 1.01% 1.00%
*Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages indicated. The Fund continuously offers its
shares through Securities Dealers who have an agreement with Distributors.
Securities Dealers may at times receive the entire sales charge. A Securities
Dealer who receives 90% or more of the sales charge may be deemed an underwriter
under the Securities Act of 1933, as amended.
**A Contingent Deferred Sales Charge of 1% may apply to Class I purchases of $1
million or more and any Class II purchase. Please see "How Do I Sell Shares? -
Contingent Deferred Sales Charge." Please also see "Other Payments to Securities
Dealers" below for a discussion of payments Distributors may make out of its own
resources to Securities Dealers for certain purchases. Purchases of Class II
shares are limited to purchases below $1 million. Please see "Deciding Which
Class to Buy."
SALES CHARGE REDUCTIONS AND WAIVERS
If you qualify to buy shares under one of the sales charge reduction or waiver
categories described below, please include a written statement with each
purchase order explaining which privilege applies. If you don't include this
statement, we cannot guarantee that you will receive the sales charge reduction
or waiver.
Cumulative Quantity Discounts - Class I Only. To determine if you may pay a
reduced sales charge, the amount of your current Class I purchase is added to
the cost or current value, whichever is higher, of your Class I and Class II
shares in the Franklin Templeton Funds, as well as those of your spouse,
children under the age of 21 and grandchildren under the age of 21. If you are
the sole owner of a company, you may also add any company accounts, including
retirement plan accounts. Companies with one or more retirement plans may add
together the total plan assets invested in the Franklin Templeton Funds to
determine the sales charge that applies.
Letter of Intent - Class I Only. You may buy Class I shares at a reduced sales
charge by completing the Letter of Intent section of the shareholder
application. A Letter of Intent is a commitment by you to invest a specified
dollar amount during a 13 month period. The amount you agree to invest
determines the sales charge you pay on Class I shares.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
o You authorize Distributors to reserve 5% of your total intended purchase in
Class I shares registered in your name until you fulfill your Letter.
o You give Distributors a security interest in the reserved shares and appoint
Distributors as attorney-in-fact.
o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
o Although you may exchange your shares, you may not sell reserved shares until
you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct. Our policy of reserving shares does not apply to
certain retirement plans.
If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy and Sell Shares? - Letter of Intent" in the SAI or call
Shareholder Services.
Group Purchases - Class I Only. If you are a member of a qualified group, you
may buy Class I shares at a reduced sales charge that applies to the group as a
whole. The sales charge is based on the combined dollar value of the group
members' existing investments, plus the amount of the current purchase.
A qualified group is one that:
o Was formed at least six months ago,
o Has a purpose other than buying Fund shares at a discount,
o Has more than 10 members,
o Can arrange for meetings between our representatives and group members,
o Agrees to include sales and other Franklin Templeton Fund materials in
publications and mailings to its members at reduced or no cost to Distributors,
o Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and
o Meets other uniform criteria that allow Distributors to achieve cost savings
in distributing shares.
Sales Charge Waivers. The Fund's sales charges (front-end and contingent
deferred) will not apply to certain purchases. For waiver categories 1, 2 or 3
below: (i) the distributions or payments must be reinvested within 365 days of
their payment date, and (ii) Class II distributions may be reinvested in either
Class I or Class II shares. Class I distributions may only be reinvested in
Class I shares.
The Fund's sales charges will not apply if you are buying Class I shares with
money from the following sources or Class II shares with money from the sources
in waiver categories 1 or 4:
1. Dividend and capital gain distributions from any Franklin Templeton Fund or a
REIT sponsored or advised by Franklin Properties, Inc.
2. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds
3. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment option
the Franklin Valuemark Funds, the Templeton Variable Annuity Fund, the Templeton
Variable Products Series Fund, or the Franklin Government Securities Trust. You
should contact your tax advisor for information on any tax consequences that may
apply.
4. Redemptions from any Franklin Templeton Fund if you:
o Originally paid a sales charge on the shares,
o Reinvest the money within 365 days of the redemption date, and
o Reinvest the money in the same class of shares.
An exchange is not considered a redemption for this privilege. The Contingent
Deferred Sales Charge will not be waived if the shares reinvested were subject
to a Contingent Deferred Sales Charge when sold. We will credit your account in
shares, at the current value, in proportion to the amount reinvested for any
Contingent Deferred Sales Charge paid in connection with the earlier redemption,
but a new Contingency Period will begin.
If you immediately placed your redemption proceeds in a Franklin Bank CD, you
may reinvest them as described above. The proceeds must be reinvested within 365
days from the date the CD matures, including any rollover.
5. Redemptions from other mutual funds
If you sold shares of a fund that is not a Franklin Templeton Fund within the
past 60 days, you may invest the proceeds without any sales charge if (a) the
investment objectives were similar to the Fund's, and (b) your shares in that
fund were subject to any front-end or contingent deferred sales charges at the
time of purchase. You must provide a copy of the statement showing your
redemption.
The Fund's sales charges will also not apply to Class I purchases by:
6. Trust companies and bank trust departments agreeing to invest in Franklin
Templeton Funds over a 13 month period at least $1 million of assets held in a
fiduciary, agency, advisory, custodial or similar capacity and over which the
trust companies and bank trust departments or other plan fiduciaries or
participants, in the case of certain retirement plans, have full or shared
investment discretion. We will accept orders for these accounts 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
the order.
7. Group annuity separate accounts offered to retirement plans
8. Retirement plans that (i) are sponsored by an employer with at least 100
employees, (ii) have plan assets of $1 million or more, or (iii) agree to invest
at least $500,000 in the Franklin Templeton Funds over a 13 month period.
Retirement plans that are not Qualified Retirement Plans or SEPS, such as 403(b)
or 457 plans, must also meet the requirements described under "Group Purchases -
Class I Only" above.
9. An Eligible Governmental Authority. Please consult your legal and investment
advisors to determine if an investment in the Fund is permissible and suitable
for you and the effect, if any, of payments by the Fund on arbitrage rebate
calculations.
10. Broker-dealers, registered investment advisors or certified financial
planners, who have entered into a supplemental agreement with Distributors for
clients participating in comprehensive fee programs.
11. Registered Securities Dealers and their affiliates, for their investment
accounts only
12. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer
13 Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies
14. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer
15. Accounts managed by the Franklin Templeton Group
16. Certain unit investment trusts and their holders reinvesting distributions
from the trusts
HOW DO I BUY SHARES IN CONNECTION WITH RETIREMENT PLANS?
Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need an
application other than the one included in this prospectus. For a retirement
plan brochure or application, please call our Retirement Plans Department.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
OTHER PAYMENTS TO SECURITIES DEALERS
The payments below apply to Securities Dealers who initiate and are responsible
for Class II purchases and certain Class I purchases made without a sales
charge. A Securities Dealer may only receive one of these payments for each
qualifying purchase. Securities Dealers who receive payments under items 1, 2
and 3 below will earn the Rule 12b-1 fee associated with the purchase starting
in the thirteenth calendar month after the purchase. The payments described
below are paid by Distributors or one of its affiliates, at its own expense, and
not by the Fund or its shareholders.
1. Securities Dealers may receive up to 1% of the purchase price for Class II
purchases.
2. Securities Dealers will receive up to 1% of the purchase price for Class I
purchases of $1 million or more as follows: 1% on sales of $1 million to $2
million, plus 0.80% on sales over $2 million to $3 million, plus 0.50% on sales
over $3 million to $50 million, plus 0.25% on sales over $50 million to $100
million, plus 0.15% on sales over $100 million. These breakpoints are reset
every 12 months for purposes of additional purchases.
3. Securities Dealers may, in the sole discretion of Distributors, receive up to
1% of the purchase price for Class I purchases made under waiver category 8
above. Please see "How Do I Buy and Sell Shares - Other Payments to Securities
Dealers" in the SAI for any breakpoints that may apply.
4. Securities Dealers may receive up to 0.25% of the purchase price for Class I
purchases made under waiver categories 6, 9 and 10 above.
Securities Dealers may receive additional compensation from Distributors or an
affiliated company in connection with selling shares of the Franklin Templeton
Funds. Compensation may include financial assistance for conferences,
shareholder services, automation, sales or training programs, or promotional
activities. Registered representatives and their families may be paid for travel
expenses, including lodging, in connection with business meetings or seminars.
In some cases, this compensation may only be available to Securities Dealers
whose representatives have sold or are expected to sell significant amounts of
shares. Securities Dealers may not use sales of the Fund's shares to qualify for
this compensation if prohibited by the laws of any state or self-regulatory
agency, such as the NASD.
GENERAL
Securities laws of states in which the Fund's shares are offered for sale may
differ from federal law, and banks and financial institutions selling Fund
shares may be required to register as dealers pursuant to state law.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
If you own Class I shares, you may exchange into any of our money funds except
Franklin Templeton Money Fund II ("Money Fund II"). Money Fund II is the only
money fund exchange option available to Class II shareholders. Unlike our other
money funds, shares of Money Fund II may not be purchased directly and no drafts
(checks) may be written on Money Fund II accounts.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund and its rules and
requirements for exchanges. For example, some Franklin Templeton Funds do not
accept exchanges and others may have different investment minimums. Some
Franklin Templeton Funds do not offer Class II shares.
METHOD STEPS TO FOLLOW
BY MAIL 1. Send us written instructions signed by all account
owners
2. Include any outstanding share certificates for the
shares you're exchanging
BY PHONE Call Shareholder Services or TeleFACTS(R)
If you do not want the ability to
exchange by phone, please let us know.
Through Your Dealer Call your investment representative
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will be exchanged into
the new fund and will be invested at Net Asset Value.
If a substantial number of shareholders should, within a short period sell their
shares of the Fund under the exchange privilege, the Fund might have to sell
portfolio securities it might otherwise hold and incur the additional costs
related to such transactions.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable sales
charge of the new fund. If you have never paid a sales charge on your shares
because, for example, they have always been held in a money fund, you will pay
the Fund's applicable sales charge no matter how long you have held your shares.
These charges may not apply if you qualify to buy shares without a sales charge.
We will not impose a Contingent Deferred Sales Charge when you exchange shares.
Any shares subject to a Contingent Deferred Sales Charge at the time of
exchange, however, will remain so in the new fund. See the discussion on
Contingent Deferred Sales Charges below and under "How Do I Sell Shares?"
Contingent Deferred Sales Charge - Class I. For accounts with Class I shares
subject to a Contingent Deferred Sales Charge, shares are exchanged into the new
fund in the order they were purchased. If you exchange Class I shares into one
of our money funds, the time your shares are held in that fund will not count
towards the completion of any Contingency Period.
Contingent Deferred Sales Charge - Class II. For accounts with Class II shares
subject to a Contingent Deferred Sales Charge, shares are exchanged into the new
fund proportionately based on the amount of shares subject to a Contingent
Deferred Sales Charge and the length of time the shares have been held. For
example, suppose you own $1,000 in shares that have never been subject to a
Contingent Deferred Sales Charge, such as shares from the reinvestment of
dividends and capital gains ("free shares"), $2,000 in shares that are no longer
subject to a Contingent Deferred Sales Charge because you have held them for
longer than 18 months ("matured shares"), and $3,000 in shares that are still
subject to a Contingent Deferred Sales Charge ("CDSC liable shares"). If you
exchange $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.
Likewise, CDSC liable shares purchased at different times will be exchanged into
a new fund proportionately. For example, assume you purchased $1,000 in shares 3
months ago, 6 months ago, and 9 months ago. If you exchange $1,500 into a new
fund, $500 will be exchanged from shares purchased at each of these three
different times.
While Class II shares are exchanged proportionately, they are redeemed in the
order purchased. In some cases, this means exchanged shares may be CDSC liable
even though they would not be subject to a Contingent Deferred Sales Charge if
they were sold. We believe the proportional method of exchanging Class II shares
more closely reflects the expectations of Class II shareholders if shares are
sold during the Contingency Period. The tax consequences of a sale or exchange
are determined by the Code and not by the method used by the Fund to transfer
shares.
If you exchange your Class II shares for shares of Money Fund II, the time your
shares are held in that fund will count towards the completion of any
Contingency Period.
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
o You may only exchange shares within the same class.
o The accounts must be identically registered. You may exchange shares from a
Fund account requiring two or more signatures into an identically registered
money fund account requiring only one signature for all transactions. Please
notify us in writing if you do not want this option to be available on your
account(s). Additional procedures may apply. Please see "Transaction Procedures
and Special Requirements."
o Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact our Retirement Plans Department for information on exchanges
within these plans.
o The fund you are exchanging into must be eligible for sale in your state.
o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
o Your exchange may be restricted or refused if you: (i) request an exchange out
of the Fund within two weeks of an earlier exchange request, (ii) exchange
shares out of the Fund more than twice in a calendar quarter, or (iii) exchange
shares equal to at least $5 million, or more than 1% of the Fund's net assets.
Shares under common ownership or control are combined for these limits. If you
exchange shares as described in this paragraph, you will be considered a Market
Timer. Each exchange by a Market Timer, if accepted, will be charged $5.00. Some
of our funds do not allow investments by Market Timers.
Because excessive trading can hurt Fund performance and shareholders, we may
refuse any exchange purchase if (i) we believe the Fund would be harmed or
unable to invest effectively, or (ii) the Fund receives or anticipates
simultaneous orders that may significantly affect the Fund.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
METHOD STEPS TO FOLLOW
By Mail 1. Send us written instructions signed by all account owners
2. Include any outstanding share certificates for the shares you
are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts may need to send
additional documents. Accounts under court jurisdiction may have
additional requirements.
By Phone
(Only available if you have completed and sent to us the telephone redemption
agreement included with this prospectus)
Call Shareholder Services
Telephone requests will be accepted:
o If the request is $50,000 or less. Institutional accounts may
exceed $50,000 by completing a separate agreement. Call
Institutional Services to receive a copy.
o If there are no share certificates issued for the shares you
want to sell or you have already returned them to the Fund
o Unless you are selling shares in a Trust Company retirement
plan account
o Unless the address on your account was changed by phone within
the last 30 days
Through Your
Dealer Call your investment representative
We will send your redemption check within seven days after we receive your
request in proper form. If you sell your shares by phone, the check may only be
made payable to all registered owners on the account and sent to the address of
record. We are not able to receive or pay out cash in the form of currency.
If you sell shares you just purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call our Retirement Plans Department.
CONTINGENT DEFERRED SALES CHARGE
For Class I purchases, if you did not pay a front-end sales charge because you
invested $1 million or more or agreed to invest $1 million or more under a
Letter of Intent, a Contingent Deferred Sales Charge may apply if you sell all
or a part of your investment within the Contingency Period. Once you have
invested $1 million or more, any additional Class I investments you make without
a sales charge may also be subject to a Contingent Deferred Sales Charge if they
are sold within the Contingency Period. For any Class II purchase, a Contingent
Deferred Sales Charge may apply if you sell the shares within the Contingency
Period. The charge is 1% of the value of the shares sold or the Net Asset Value
at the time of purchase, whichever is less.
We will first redeem shares not subject to the charge in the following order:
1) A calculated number of shares equal to the capital appreciation on shares
held less than the Contingency Period,
2) Shares purchased with reinvested dividends and capital gain distributions,
and
3) Shares held longer than the Contingency Period.
We then redeem shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated dollar amount, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated number of shares, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.
Waivers. We waive the Contingent Deferred Sales Charge for:
o Exchanges
o Account fees
o Sales of shares purchased pursuant to a sales charge waiver
o Redemptions by the Fund when an account falls below the minimum required
account size
o Redemptions following the death of the shareholder or beneficial owner
o Redemptions through a systematic withdrawal plan set up before February 1,
1995
o Redemptions through a systematic withdrawal plan set up on or after February
1, 1995, up to 1% a month of an account's Net Asset Value (3% quarterly, 6%
semiannually or 12% annually). For example, if you maintain an annual balance of
$1 million in Class I shares, you can withdraw up to $120,000 annually through a
systematic withdrawal plan free of charge. Likewise, if you maintain an annual
balance of $10,000 in Class II shares, $1,200 may be withdrawn annually free of
charge.
o Distributions from individual retirement plan accounts due to death or
disability or upon periodic distributions based on life expectancy
o Tax-free returns of excess contributions from employee benefit plans
o Distributions from employee benefit plans, including those due to termination
or plan transfer
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
YOU MAY RECEIVE TWO TYPES OF DISTRIBUTIONS FROM THE FUND:
1. Income dividends. The Fund receives income generally in the form of
dividends, interest and other income derived from its investments. This income,
less the expenses incurred in the Fund's operations, is its net investment
income from which income dividends may be distributed. Thus, the amount of
dividends paid per share may vary with each distribution.
2. Capital gain distributions. The Fund may derive capital gains or losses in
connection with sales or other dispositions of its portfolio securities.
Distributions by the Fund derived from net short-term and net long-term capital
gains (after taking into account any net capital loss carryovers) may generally
be made once a year in December to reflect any net short-term and net long-term
capital gains realized by the Fund as of October 31 of the current fiscal year
and any undistributed capital gains from the prior fiscal year. The Fund may
make more than one distribution derived from net short-term and net long-term
capital gains in any year or adjust the timing of these distributions for
operational or other reasons.
The Fund declares dividends from its net investment income quarterly in March,
June, September and December to shareholders of record on the last business day
of that month and pays them on or about the 15th day of the next month. Capital
gains, if any, may be distributed annually, usually in December.
Dividends and capital gains are calculated and distributed the same way for each
class. The amount of any income dividends per share will differ, however,
generally due to the difference in the Rule 12b-1 fees of each class.
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. The Fund does not pay "interest" or guarantee any
fixed rate of return on an investment in its shares.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution
DISTRIBUTION OPTIONS
You may receive your distributions from the Fund in any of these ways:
1. Buy additional shares of the Fund - You may buy additional shares of the same
class of the Fund (without a sales charge or imposition of a Contingent Deferred
Sales Charge) by reinvesting capital gain distributions, or both dividend and
capital gain distributions. If you own Class II shares, you may also reinvest
your distributions in Class I shares of the Fund. This is a convenient way to
accumulate additional shares and maintain or increase your earnings base.
2. Buy shares of other Franklin Templeton Funds - You may direct your
distributions to buy the same class of shares of another Franklin Templeton Fund
(without a sales charge or imposition of a Contingent Deferred Sales Charge). If
you own Class II shares, you may also direct your distributions to buy Class I
shares of another Franklin Templeton Fund. Many shareholders find this a
convenient way to diversify their investments.
3. Receive distributions in cash - You may receive dividends, or both dividend
and capital gain distributions in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee. If you send
the money to a checking account, please see "Electronic Fund Transfers" under
"Services to Help You Manage Your Account."
To select one of these options, please complete sections 6 and 7 of the
shareholder application included with this prospectus or tell your investment
representative which option you prefer. If you do not select an option, we will
automatically reinvest dividend and capital gain distributions in the same class
of the Fund. For Trust Company retirement plans, special forms are required to
receive distributions in cash. You may change your distribution option at any
time by notifying us by mail or phone. Please allow at least seven days prior to
the record date for us to process the new option.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
HOW AND WHEN SHARES ARE PRICED
The Fund is open for business each day the Exchange is open. We determine the
Net Asset Value per share of each class as of the scheduled close of the
Exchange, generally 1:00 p.m. Pacific time. You can find the prior day's closing
Net Asset Value and Offering Price for each class in many newspapers.
The Net Asset Value of all outstanding shares of each class is calculated on a
pro rata basis. It is based on each class' proportionate participation in the
Fund, determined by the value of the shares of each class. Each class, however,
bears the Rule 12b-1 fees payable under its Rule 12b-1 plan. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. The Fund's assets are
valued as described under "How are Fund Shares Valued?" in the SAI.
THE PRICE WE USE WHEN YOU BUY OR SELL SHARES
You buy shares at the Offering Price of the class you wish to purchase, unless
you qualify to buy shares at a reduced sales charge or with no sales charge. The
Offering Price of each class is based on the Net Asset Value per share of the
class and includes the maximum sales charge. We calculate it to two decimal
places using standard rounding criteria. You sell shares at Net Asset Value.
We will use the Net Asset Value next calculated after we receive your
transaction request in proper form. If you buy or sell shares through your
Securities Dealer, however, we will use the Net Asset Value next calculated
after your Securities Dealer receives your request, which is promptly
transmitted to the Fund. Your redemption proceeds will not earn interest between
the time we receive the order from your dealer and the time we receive any
required documents.
PROPER FORM
An order to buy shares is in proper form when we receive your signed shareholder
application and check. Written requests to sell or exchange shares are in proper
form when we receive written instructions signed by all registered owners, with
a signature guarantee if necessary. We must also receive any outstanding share
certificates for those shares.
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
o Your name,
o The Fund's name,
o The class of shares,
o A description of the request,
o For exchanges, the name of the fund you're exchanging into,
o Your account number,
o The dollar amount or number of shares, and
o A telephone number where we may reach you during the day, or in the evening if
preferred.
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature and may be
obtained from certain banks, brokers or other eligible guarantors. You should
verify that the institution is an eligible guarantor prior to signing. A
notarized signature is not sufficient.
SHARE CERTIFICATES
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed, you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form. In this case, you should send the certificate and assignment
form in separate envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
We may only be liable for losses resulting from unauthorized telephone
transactions if we do not follow reasonable procedures designed to verify the
identity of the caller. When you call, we will request personal or other
identifying information, and will also record calls. For your protection, we may
delay a transaction or not implement one if we are not reasonably satisfied that
telephone instructions are genuine. If this occurs, we will not be liable for
any loss.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send written
instructions to us, as described elsewhere in this prospectus. If you are unable
to execute a transaction by telephone, we will not be liable for any loss.
Trust Company Retirement Plan Accounts. You may not sell shares or change
distribution options on Trust Company retirement plans by phone. While you may
exchange shares of Trust Company IRA and 403(b) retirement accounts by phone,
certain restrictions may be imposed on other retirement plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call our Retirement Plans Department.
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, you need to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
Joint Ownership. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, all owners must sign instructions to process transactions and changes to
the account. Even if the law in your state says otherwise, you will not be able
to change owners on the account unless all owners agree in writing. If you would
like another person or owner to sign for you, please send us a current power of
attorney.
Gifts and Transfers to Minors. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
Trusts. If you register your account as a trust, you should have a valid written
trust document to avoid future disputes or possible court action over who owns
the account.
Required Documents. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
TYPE OF ACCOUNT DOCUMENTS REQUIRED
CORPORATION Corporate Resolution
PARTNERSHIP 1. The pages from the partnership agreement that identify
the general partners, or
2. A certification for a partnership agreement
TRUST 1. The pages from the trust document that identify the
trustees, or
2. A certification for trust
Street or Nominee Accounts. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we will not process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
Electronic Instructions. If there is a Securities Dealer or other representative
of record on your account, we are authorized to use and execute electronic
instructions. We can accept electronic instructions directly from your dealer or
representative without further inquiry. Electronic instructions may be processed
through the services of the NSCC, which currently include the NSCC's
"Networking," "Fund/SERV," and "ACATS" systems, or through Franklin/Templeton's
PCTrades II(TM) System.
TAX IDENTIFICATION NUMBER
For tax reasons, we must have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the automatic investment plan application
included with this prospectus or contact your investment representative. The
market value of the Fund's shares may fluctuate and a systematic investment plan
such as this will not assure a profit or protect against a loss. You may
discontinue the program at any time by notifying Investor Services by mail or
phone.
AUTOMATIC PAYROLL DEDUCTION
You may have money transferred from your paycheck to the Fund to buy additional
shares. Your investments will continue automatically until you instruct the Fund
and your employer to discontinue the plan. To process your investment, we must
receive both the check and payroll deduction information in required form. Due
to different procedures used by employers to handle payroll deductions, there
may be a delay between the time of the payroll deduction and the time we receive
the money.
SYSTEMATIC WITHDRAWAL PLAN
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum payment
amount for each withdrawal must be at least $50. For retirement plans subject to
mandatory distribution requirements, the $50 minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account. If you choose to have the money sent to a
checking account, please see "Electronic Fund Transfers" below. There are no
service charges for establishing or maintaining a systematic withdrawal plan.
Once your plan is established, any distributions paid by the Fund will be
automatically reinvested in your account. Payments under the plan will be made
from the redemption of an equivalent amount of shares in your account, generally
on the first business day of the month in which a payment is scheduled for
payments before February 1997 and on the 25th day of the month beginning with
your February 1997 payment. If the 25th falls on a weekend or holiday, we will
process the redemption on the next business day for Class I shares and on the
prior business day for Class II shares. If the processing dates are different,
the date of the Net Asset Value used to redeem the shares will also be different
for Class I and Class II shares. You will generally receive your payment by the
fifth business day of the month in which a payment is scheduled. Beginning with
your February 1997 payment, however, you will generally receive your payment by
the end of the month in which a payment is scheduled. When you sell your shares
under a systematic withdrawal plan, it is a taxable transaction.
Because of the front-end sales charge, you may not want to set up a systematic
withdrawal plan if you plan to buy shares on a regular basis. Shares sold under
the plan may also be subject to a Contingent Deferred Sales Charge. Please see
"Contingent Deferred Sales Charge" under "How Do I Sell Shares?"
Redeeming shares through a systematic withdrawal plan may reduce or exhaust the
shares in your account if payments exceed distributions received from the Fund.
This is especially likely to occur if there is a market decline. If a withdrawal
amount exceeds the value of your account, your account will be closed and the
remaining balance in your account will be sent to you. Because the amount
withdrawn under the plan may be more than your actual yield or income, part of
the payment may be a return of your investment.
You may discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us in writing at
least seven business days before the end of the month preceding a scheduled
payment.
The Fund may discontinue a systematic withdrawal plan by notifying you in
writing and will automatically terminate a systematic withdrawal plan if all
shares in your account are withdrawn or if the Fund receives notification of the
shareholder's death or incapacity.
ELECTRONIC FUND TRANSFERS
You may choose to have dividend and capital gain distributions from Class I
shares of the Fund or payments under a systematic withdrawal plan sent directly
to a checking account. If the checking account is with a bank that is a member
of the Automated Clearing House, the payments may be made automatically by
electronic funds transfer. If you choose this option, please allow at least
fifteen days for initial processing. We will send any payments made during that
time to the address of record on your account.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS system (day or night) at
1-800/247-1753 to:
o obtain information about your account;
o obtain price and performance information about any Franklin Templeton Fund;
o exchange shares between identically registered Franklin accounts; and
o request duplicate statements and deposit slips.
You will need the code number for each class to use TeleFACTS. The code numbers
for Class I and Class II are 158 and 258, respectively.
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
o Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. Please verify the
accuracy of your statements when you receive them.
o Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports or an interim quarterly
report.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. For further information, call Institutional
Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor Services
at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California 94403-7777.
The Fund, Distributors and Advisory Services are also located at this address.
You may also contact us by phone at one of the numbers listed below.
HOURS OF OPERATION (PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/342-5236) 6:30 a.m. to 2:30 p.m. (Saturday)
Retirement Plans 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1940 Act - Investment Company Act of 1940, as amended
Advisers - Franklin Advisers, Inc., the Fund's former investment manager
Advisory Services - Franklin Advisory Services, Inc., the Fund's investment
manager
Board - The Board of Trustees of the Trust
CD - Certificate of deposit
Class I and Class II - The Fund offers two classes of shares, designated "Class
I" and "Class II." The two classes have proportionate interests in the Fund's
portfolio. They differ, however, primarily in their sales charge structures and
Rule 12b-1 plans.
Code - Internal Revenue Code of 1986, as amended
Contingency Period - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the contingency
period is 18 months. Regardless of when during the month you purchased shares,
they will age one month on the last day of that month and each following month.
Contingent Deferred Sales Charge (CDSC) - A sales charge of 1% that may apply if
you sell your shares within the Contingency Period.
Distributors - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
Eligible Governmental Authority - Any state or local government or any
instrumentality, department, authority or agency thereof that has determined the
Fund is a legally permissible investment and that can only buy shares of the
Fund without paying sales charges.
Exchange - New York Stock Exchange
Franklin Funds - The mutual funds in the Franklin Group of Funds(R) except
Franklin Valuemark Funds and the Franklin Government Securities Trust
Franklin Templeton Funds - The Franklin Funds and the Templeton Funds
Franklin Templeton Group - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
Franklin Templeton Group of Funds - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds
FT Services - Franklin Templeton Services, Inc., the Fund's administrator
Investor Services - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
Letter - Letter of Intent
Market Timer(s) - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.
NASD - National Association of Securities Dealers, Inc.
Net Asset Value (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NSCC - National Securities Clearing Corporation
Offering Price - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge. The maximum
front-end sales charge is 4.50% for Class I and 1% for Class II.
Qualified Retirement Plan(s) - An employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
REIT - Real Estate Investment Trust
Resources - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
Securities Dealer - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
SEP - An employer sponsored simplified employee pension plan established under
section 408(k) of the Code
TeleFACTS(R) - Franklin Templeton's automated customer servicing system
Templeton Funds - 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
Trust Company - Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. - United States
We/Our/Us - Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
SUPPLEMENT DATED NOVEMBER 25, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION OF
FRANKLIN MANAGED TRUST
(Franklin Rising Dividends Fund, Franklin Investment Grade Income Fund and
Franklin Corporate Qualified Dividend Fund)
dated February 1, 1996
I. The next to last paragraph in the section "Officers and Trustees" is replaced
with the following:
As of October 31, 1996, the officers and trustees, as a group, owned of
record and beneficially approximately 1,948 shares of the Investment Grade
Fund and 61,835 shares of the Rising Dividends Fund Class I, or less than
1% of the total outstanding shares of each of those Funds and no shares of
Corporate Qualified Fund. Many of the trustees also own shares in other
funds in the Franklin Templeton Group of Funds. Charles B. Johnson and
Rupert H. Johnson, Jr. are brothers.
II. The section "Investment Advisory And Other Services" is revised as follows:
Investment Management. Effective July 1, 1996, the Board of Trustees of the
Trust approved new investment management agreements on behalf of Rising
Dividends Fund, Investment Grade Fund and Corporate Qualified Fund (the
"Funds") with Franklin Advisory Services, Inc. ("Advisory Services"), One
Parker Plaza, Sixteenth Floor, Fort Lee, New Jersey, 07024. Advisory
Services, a registered investment advisor, is a wholly owned subsidiary of
Franklin Resources, Inc. ("Resources"), the parent company of Franklin
Advisers, Inc., the Funds' previous investment manager. Under the terms and
conditions of the new investment management agreements, which remain the
same as the previous agreements, Advisory Services will provide investment
research and portfolio management services for the Funds.
Fund Administration. Franklin Templeton Services, Inc. ("FT Services"), a
wholly owned subsidiary of Resources, provides certain administrative
services and facilities for the Funds, including preparing and maintaining
books, records and tax and financial reports, and monitoring compliance
with regulatory requirements. FT Services receives a monthly fee equal to
an annual rate of 0.15% of each Fund's average daily net assets up to $200
million, 0.135% of average daily net assets over $200 million up to $700
million, 0.10% of average daily net assets over $700 million up to $1.2
billion, and 0.075% of average daily net assets in excess of $1.2 billion.
These fees are not separate expenses of the Funds, but are paid by Advisory
Services.
III. The fourth paragraph on page 13 is replaced with the following:
Bank of New York, Mutual Funds Division, 90 Washington Street, New York,
New York, 10286, acts as custodian of the securities and other assets of
each Fund. Bank of America NT & SA, 555 California Street, 4th Floor, San
Francisco, California 94104, acts as custodian for cash received in
connection with the purchase of each Fund's shares. 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.
IV. The two paragraphs under "How Do I Buy and Sell Shares?, Other Payments to
Securities Dealers - Class I of the Investment Grade Fund and the Rising
Dividends Fund Only" are replaced in their entirety with the following:
Either Distributors or one of its affiliates may pay, out of its own
resources, 0.25% of the purchase price to securities dealers who initiate
and are responsible for purchases of the Investment Grade Fund and Rising
Dividends Fund - Class I by trust companies and bank trust departments
agreeing to invest in Franklin Templeton Funds over a 13 month period at
least $1 million of its assets held in a fiduciary, agency, advisory,
custodial or similar capacity and over which the trust companies and bank
trust departments or other plan fiduciaries or participants, in the case of
certain retirement plans, have full or shared investment discretion.
Either Distributors or one of its affiliates may pay the following amounts,
out of its own resources, to securities dealers who initiate and are
responsible for purchases of the Investment Grade Fund and Rising Dividends
Fund - Class I by certain retirement plans pursuant to a sales charge
waiver, as discussed in the Funds' prospectuses: 1% on sales of $500,000 to
$2 million, plus 0.80% on sales over $2 million to $3 million, plus 0.50%
on sales over $3 million to $50 million, plus 0.25% on sales over $50
million to $100 million, plus 0.15% on sales over $100 million.
Distributors may make these payments in the form of contingent advance
payments, which may be recovered from the securities dealer or set off
against other payments due to the dealer if shares are sold within 12
months of the calendar month of purchase. Other conditions may apply. All
terms and conditions may be imposed by an agreement between Distributors,
or one of its affiliates, and the securities dealer. These breakpoints are
reset every 12 months for purposes of additional purchases.
V. The subsections "Total Return", "Current Yield" and "Current Distribution
Rate" under the section "General Information" are revised as follows:
Total Return
Average Annual Compounded Rates of Return for the Periods Ended
March 31, 1996
From Fund Name One-Year Five-Year Inception
Corporate Qualified Fund.............. 3.58% 8.35% 6.01%
Rising Dividends Fund
Class I.............................. 18.78% 8.44% 9.07%
Class II............................. n/a n/a n/a
Investment Grade Fund................. 2.83% 6.47% 5.69%
Total Rates of Return for the Periods Ended March 31, 1996
From Fund Name One-Year Five-Year Inception
Corporate Qualified Fund................ 3.58% 49.34% 71.23%
Rising Dividends Fund
Class I................................ 18.78% 49.97% 122.61%
Class II............................... n/a n/a 20.85%*
Investment Grade Fund................... 2.83% 36.80% 66.57%
*Inception date 5/1/95
Current Yield
For the 30-Day Period Ended March 31, 1996
Fund Name Yield
Corporate Qualified Fund....................... 4.49%
Rising Dividends Fund
Class I....................................... 1.42%
Class II...................................... 0.94%
Investment Grade Fund.......................... 4.30%
The taxable equivalent yield for the 30-day period ended on March 31, 1996
for the Corporate Qualified Fund was 6.18%.
Current Distribution Rate
For the 30-Day Period Ended March 31, 1996
Distribution
Fund Name Rate
Corporate Qualified Fund.........................5.01%
Rising Dividends Fund
Class I.........................................1.43%
Class II........................................0.99%
Investment Grade Fund............................4.20%
VI. Add the following paragraph under "Financial Statements":
The unaudited financial statements contained in the Semi-Annual Report to
Shareholders of the Trust, for the six-month period ended March 31, 1996,
are incorporated herein by reference.
FRANKLIN
MANAGED TRUST
Franklin Rising Dividends Fund
Franklin Investment Grade Income Fund
Franklin Corporate Qualified Dividend Fund
STATEMENT OF
ADDITIONAL INFORMATION
FEBRUARY 1, 1996
777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777 1-800/DIAL BEN
- --------------------------------------------------------------------------------
Contents Page
How Do the Funds Invest Their Assets?............. 2
What Are the Funds' Potential Risks?.............. 6
Investment Restrictions........................... 8
Officers and Trustees............................. 9
Investment Advisory and Other Services............ 12
How Do the Funds Purchase
Securities For Their Portfolios?................. 13
How Do I Buy and Sell Shares?..................... 14
How Are Fund Shares Valued?....................... 17
Additional Information
Regarding Taxation............................... 18
The Trust's Underwriter........................... 21
General Information............................... 23
Financial Statements.............................. 27
Appendix.......................................... 27
Franklin Managed Trust (the "Trust") is an open-end management investment
company consisting of three separate diversified series: the Franklin Rising
Dividends Fund (the "Rising Dividends Fund"), the Franklin Investment Grade
Income Fund (the "Investment Grade Fund") and the Franklin Corporate Qualified
Dividend Fund (the "Corporate Qualified Fund"). (Each series may also be
referred to as the "Fund" or "Funds.")
A separate Prospectus for each Fund, dated February 1, 1996, each as may be
amended from time to time, provides the basic information you should know before
investing in the Funds and may be obtained without charge from the Trust or from
its principal underwriter, Franklin/Templeton Distributors, Inc.
("Distributors"), at the address or telephone number shown above.
THIS STATEMENT OF ADDITIONAL INFORMATION ("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 YOU WITH ADDITIONAL INFORMATION
REGARDING THE ACTIVITIES AND OPERATIONS OF THE FUNDS, AND SHOULD BE READ IN
CONJUNCTION WITH THE FUNDS' PROSPECTUSES.
HOW DO THE FUNDS INVEST THEIR ASSETS?
The following supplements the discussion of each Fund's investment objective and
policies as set forth in each Fund's Prospectus. There can be no assurance that
the objective of any of the Funds will be achieved.
INVESTMENT GRADE FUND
As stated in its Prospectus, the Investment Grade Fund may engage in various
options and hedging transactions as described below.
Options on Securities. To earn additional income, the Investment Grade Fund may
write (i.e., sell) covered call and put options. 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 bank 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. See "What
Are the Funds' Potential Risks? - Options."
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 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 an option on a futures contract, it will
maintain, with its custodian bank, 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.
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 U.S., 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. 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. See "What
are the Funds' Pontential Risks? - Foreign Securities."
Putable bonds. When purchasing obligations that entitle a holder to require the
obligor to redeem the securities at the holder's option on a date or dates prior
to the final stated maturity ("putable" bonds), the Fund may consider the
optional redemption date or dates as the effective maturity of the obligations.
When purchasing obligations that require the obligor to prepay periodically
portions of the obligation prior to the stated final maturity (whether by
operation of a fixed known pro rata sinking fund or, as in collateralized
securities, by the periodic passing through of variable payments made to the
issuer on the underlying collateral), the expected average life or average term
of the investment may also be deemed to be its effective maturity. This is not a
fundamental policy of the Fund and may be changed by the Board of Trustees.
Additional Information on Rates of Return. Since the end of World War II, bonds
have typically provided a return averaging about 5.37% 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
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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
1994............................. 8.28 2.67 5.61
Average.......................... 9.31 3.59 5.73
*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).
The Investment Grade Fund may invest up to 25% of its portfolio in debt
securities with lower ratings or in unrated securities that are of comparable
quality. 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. See "What Are the Funds' Potential Risks? - High Yield
Securities."
CORPORATE QUALIFIED FUND
The Corporate Qualified 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 Corporate Qualified 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 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 comparable quality as determined by the Fund's investment
manager. See the Appendix 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 or none of the shares submitted for
sale. 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 the 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 comparable quality as determined by the Fund's investment
manager. Please see the Appendix for a discussion of these ratings.
RISING DIVIDENDS FUND
Foreign Securities. As noted in its Prospectus, the Rising Dividends Fund may
invest in foreign securities. When purchasing foreign securities, the Fund will
ordinarily purchase securities which are traded in the U.S. 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. An unsponsored ADR has no
sponsorship by the issuing facility and, additionally, more than one depositary
institution may be involved in its issuance. It typically clears, however,
through the Depositary Trust Company and therefore, there should be no delays in
selling the security or in obtaining dividends. Although not required, the
depositary normally requests a letter of non-objection from the issuer. 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
(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 U.S. will be made in compliance with applicable U.S. 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 U.S. 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 U.S. and which are
publicly traded in the U.S. 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 U.S. 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 U.S.
and a foreign country deteriorate markedly.
ADDITIONAL INFORMATION RELEVANT TO ALL FUNDS
Lending of Portfolio Securities. As noted in the Prospectuses, each Fund is
permitted to lend up to 30% of its portfolio securities but each currently
intends to limit such activity to no more than 5% of each Fund's assets. Under
this arrangement, the borrower must deposit with a Fund's custodian bank
collateral with an initial market value of at least 102% of the initial market
value of the securities loaned, including any accrued interest, with the value
of the collateral and loaned securities marked-to-market daily to maintain
collateral coverage of at least 100%. Such collateral shall consist of cash,
securities issued by the U.S. government, its agencies or instrumentalities, or
irrevocable letters of credit. The lending of securities is a common practice in
the securities industry. A Fund may engage in security loan arrangements with
the primary objective of increasing the Fund's income either through investing
the cash collateral in short-term, interest bearing obligations or by receiving
a loan premium from the borrower. Under the securities loan agreement, the Fund
continues to be entitled to all dividends or interest on any loaned securities.
As with any extension of credit, there are risks of delay in recovery and loss
of rights in the collateral should the borrower of the security fail
financially.
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.
WHAT ARE THE FUNDS' POTENTIAL RISKS?
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High Yield Securities. The market value of lower rated, fixed-income securities
and unrated securities of comparable quality, commonly known as junk bonds,
tends to reflect individual developments affecting the issuer to a greater
extent than the market value of higher rated securities, which react primarily
to fluctuations in the general level of interest rates. Lower rated securities
also tend to be more sensitive to economic conditions than higher rated
securities. These lower rated fixed-income securities are considered by the
rating agencies, on balance, to be predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation and will generally involve more credit risk than
securities in the higher rating categories. Even bonds rated BBB by S&P or Baa
by Moody's, ratings which are considered investment grade, possess some
speculative characteristics.
Issuers of 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 these periods, such issuers may not have sufficient cash flow to meet
their interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific developments affecting
the issuer, 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.
High yielding, fixed-income securities frequently have call or buy-back features
which permit an issuer to call or repurchase the securities from the Investment
Grade Fund. 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 be required
under the Code and U.S. Treasury regulations to accrue income for income tax
purposes on defaulted obligations and to distribute such income to the Fund's
shareholders even though the Fund is not currently receiving interest or
principal payments on such obligations. In order to generate cash to satisfy any
or all of these distribution requirements, 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.
Factors adversely impacting the market value of high yielding securities could
adversely impact the net asset value of the Investment Grade 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.
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 the secondary trading market for
a particular high yielding, fixed-income security 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 a
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 values 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.
The high yield securities market is relatively new and much of its growth prior
to 1990 paralleled a long economic expansion. The recession, which began in
1990, disrupted the market for high yielding securities and the ability of
issuers of such securities to meet their obligations. Although the economy has
improved considerably and high yield securities have been more consistent
performers since that time, there is no guarantee that the adverse effects
previously experienced will not occur again. Factors adversely impacting the
market value of high yielding securities will adversely impact the Fund's net
asset value. For example, the highly publicized defaults of some high yield
issuers during 1989 and 1990, and concerns regarding a sluggish economy which
continued into 1993, depressed the prices for many of these securities. However,
while market prices may be temporarily depressed due to these factors, the
ultimate security price will generally reflect the true operating results of the
issuer 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.
Foreign Securities. 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.
Options. 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 contracts. 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."
INVESTMENT RESTRICTIONS
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Each Fund has adopted the following restrictions as fundamental policies (unless
otherwise noted), which means that they may not be changed without the approval
of a majority of the outstanding voting securities of the affected Fund. Under
the Investment Company Act of 1940, as amended (the "1940 Act"), a "vote of a
majority of the outstanding voting securities" of the Fund means the affirmative
vote of the lesser of (i) more than 50% of the outstanding shares of the Fund or
(ii) 67% or more of the shares of the Fund present at a shareholder meeting if
more than 50% of the outstanding shares of the Fund are represented at the
meeting in person or by proxy. 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 Funds'
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 Investment Grade Fund, including the purchase or sale of options and options
on futures contracts.)
9. With respect to the Investment Grade Fund and Corporate Qualified 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 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% of the value of a Fund's net
assets in warrants. No more than 2% 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.
OFFICERS AND TRUSTEES
- --------------------------------------------------------------------------------
The Board of Trustees ("Board") 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 (*).
Positions and Offices Principal Occupations During
Name, Age and Address with the Trust During Past Five Years
- --------------------------------------------------------------------------------
Frank T. Crohn (71) Trustee
7251 West Palmetto Park Road
Boca Raton, FL 33433
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) President
One Parker Plaza and Trustee
Fort Lee, NJ 07024
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) Trustee
18 Park Road
Scarsdale, NY 10583
Private Investor; and trustee of three of the investment companies in the
Franklin Group of Funds.
- --------------------------------------------------------------------------------
Leonard Rubin (70) Trustee
501 Broad Avenue
Ridgefield, NJ 07657
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) Vice President
777 Mariners Island Blvd.
San Mateo, CA 94404
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 43 of the investment companies in the Franklin Templeton Group of Funds.
- --------------------------------------------------------------------------------
Kenneth V. Domingues (63) Vice President -
777 Mariners Island Blvd. Financial Reporting
San Mateo, CA 94404 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 37 of the investment companies
in the Franklin Group of Funds.
- --------------------------------------------------------------------------------
Martin L. Flanagan (35) Vice President
777 Mariners Island Blvd. and Chief
San Mateo, CA 94404 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 61 of the investment companies in the Franklin Templeton Group of
Funds.
- --------------------------------------------------------------------------------
Deborah R. Gatzek (47) Vice President
777 Mariners Island Blvd. and Secretary
San Mateo, CA 94404
Senior Vice President - Legal, Franklin Resources, Inc. and Franklin Templeton
Distributors, Inc.; Vice President, Franklin Advisers, Inc. and officer of 37 of
the investment companies in the Franklin Group of Funds.
- --------------------------------------------------------------------------------
Rupert H. Johnson, Jr. (55) Vice President
777 Mariners Island Blvd.
San Mateo, CA 94404
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 43 of the investment companies
in the Franklin Templeton Group of Funds.
- --------------------------------------------------------------------------------
Diomedes Loo-Tam (56) Treasurer
777 Mariners Island Blvd. and Principal
San Mateo, CA 94404 Accounting Officer
Employee of Franklin Advisers, Inc.; and officer of 37 of the investment
companies in the Franklin Group of Funds.
- --------------------------------------------------------------------------------
Edward V. McVey (58) Vice President
777 Mariners Island Blvd.
San Mateo, CA 94404
Senior Vice President/National Sales Manager, Franklin Templeton Distributors,
Inc.; and officer of 32 of the investment companies in the Franklin Group of
Funds.
- --------------------------------------------------------------------------------
R. Martin Wiskemann (69) Vice President
777 Mariners Island Blvd.
San Mateo, CA 94404
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 20 of the
investment companies in the Franklin Group of Funds.
- --------------------------------------------------------------------------------
The preceding table indicates those officers and trustees who are also
affiliated persons of Distributors and the Funds' investment manager. Trustees
not affiliated with the investment manager ("nonaffiliated trustees") are
currently paid fees of $1,800 per month plus $900 per meeting attended. As
indicated above, certain of the Trust's nonaffiliated trustees also serve as
directors, trustees or managing general partners of other investment companies
in the Franklin Group of Funds(R) and the Templeton Group of Funds (the
"Franklin Templeton Group of Funds") from which they may receive fees for their
services. The following table indicates the total fees paid to nonaffiliated
trustees by the Trust and by other funds in the Franklin Templeton Group of
Funds.
Number of
Total Fees Boards in the
Total Fees Received from the Franklin Templeton
Received Franklin Templeton Group of Funds on
Name from the Trust* Group of Funds** Which Each Serves***
- -------------------------------------------------------------------------------
Frank T. Crohn......... $10,800 $15,600 3
Charles Rubens, II..... 11,700 15,600 3
Leonard Rubin.......... 11,700 15,600 3
*For the fiscal year ended September 30, 1995.
**For the calendar year ended December 31, 1995.
***The number of boards is based on the number of registered investment
companies in the Franklin Templeton Group of Funds and does not include the
total number of series or funds within each investment company for which the
trustees are responsible. The Franklin Templeton Group of Funds currently
includes 61 registered investment companies, consisting of approximately 162
U.S. based funds or series.
Nonaffiliated trustees are reimbursed for expenses incurred in connection with
attending board meetings, paid pro rata by each fund in the Franklin Templeton
Group of Funds for which they serve as director, trustee or managing general
partner. No officer or trustee received any other compensation directly from the
Trust. Certain officers or directors 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.
As of November 3, 1995, the officers and trustees, as a group, owned of record
and beneficially approximately 155,402 shares of Class I of the Rising Dividends
Fund (approximately 1% of its total outstanding shares) and 1,862 shares of the
Investment Grade Fund (less than 1% of its total outstanding shares). Many of
the Trust's trustees also own shares in various of the other funds in the
Franklin Templeton Group of Funds.
From time to time, the number of Fund 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 Fund, no other person holds beneficially or of record more
than 5% of the Fund's outstanding 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 (the "Exchange"). Resources owns several
other subsidiaries that are involved in investment management and shareholder
services.
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 (the "Board") to whom the Manager renders periodic reports of
each Fund's investment activities. Under the terms of the management agreements,
the Manager provides 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. Please see the Statement of
Operations in the financial statements included in the Fund's Annual Report to
Shareholders dated September 30, 1995.
The Manager also provides management services to numerous other investment
companies or funds pursuant to management agreements with each fund. The Manager
may give advice and take action with respect to any of the other funds it
manages, or for its own account, which may differ from action taken by the
Manager on behalf of the Funds. Similarly, with respect to the Funds, the
Manager is not obligated to recommend, purchase or sell, or to refrain from
recommending, purchasing or selling any security that the Manager and access
persons, as defined under the 1940 Act, may purchase or sell for its or their
own account or for the accounts of any other fund. Furthermore, the Manager is
not obligated to refrain from investing in securities held by the Fund or other
funds which it manages or administers. Of course, any transactions for the
accounts of the Manager and other access persons will be made in compliance with
the Fund's Code of Ethics.
Pursuant to their respective management agreements, the Corporate Qualified Fund
and the Investment Grade 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 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. Each class of the Rising Dividend Fund will pay its share of the fees
as determined by the proportion of the Fund that it represents.
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, 2.0% 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 paid by the Funds for the past three fiscal years were as
follows:
Fiscal Year September 30
- --------------------------------------------------------------------------------
Fund 1993* 1994 1995
- --------------------------------------------------------------------------------
Corporate
Qualified
Fund......... $ 122,313 $ 164,449 $ 141,798
Rising
Dividends
Fund......... 1,746,035 2,279,672 1,866,215
Investment
Grade
Fund......... 136,977 155,866 144,062
*Covers only a nine-month period due to a change in the Trust's fiscal year end.
The management agreements are in effect until March 31, 1996. Thereafter, they
may continue in effect for successive annual periods providing such continuance
is specifically approved at least annually by a vote of the Board or by a vote
of the holders of a majority of a 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 the
Board or by a vote of the holders of a majority of a Fund's outstanding shares,
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"), 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, 1995, their auditing services consisted of rendering an
opinion on the financial statements of the Trust included in the Trust's Annual
Report to Shareholders dated September 30, 1995.
How Do the Funds Purchase
Securities For Their Portfolios?
- --------------------------------------------------------------------------------
Under the current management agreements, 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 Board may give.
When placing a portfolio transaction, the Manager attempts to obtain the best
net price and execution of the transaction. On portfolio transactions 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 that 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. 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
interest, the Manager may place portfolio transactions with brokers who provide
the types of services described below, even if it means the Fund will pay a
higher commission than 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
services 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 the Manager 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 the 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. Brokerage commissions paid by the
Funds for the past three fiscal years were as follows:
Fiscal Year September 30
- --------------------------------------------------------------------------------
Fund 1993* 1994 1995
- --------------------------------------------------------------------------------
Corporate
Qualified
Fund......... 0 $ 498 $ 204
Rising
Dividends
Fund......... $227,754 219,703 140,209
Investment
Grade
Fund......... 0 0 0
*Covers a nine-month period.
As of September 30, 1995, the Funds did not own securities of their regular
broker-dealers.
How Do I Buy and Sell 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 your account for the transaction as of a
date and with a foreign currency exchange factor determined by the drawee bank.
In connection with exchanges, it should be noted that since the proceeds from
the sale of shares of an investment company are generally not available until
the fifth business day following the redemption, the funds into which you 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 the Funds to
complete an exchange 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. Please see "What If My Investment Outlook Changes? - Exchange
Privilege" in the Prospectus for each Fund.
If, in connection with the purchase of Fund shares, you submit a check or a
draft that is returned unpaid to a Fund, the Fund may impose a $10 charge
against your account for each returned item.
Dividend checks returned to a Fund marked "unable to forward" by the postal
service will be deemed to be a request to change your dividend option to
reinvest all distributions and the proceeds will be reinvested in additional
shares at net asset value until new instructions are received.
The Funds may deduct from your account the costs of their efforts to locate you
if mail is returned as undeliverable or the Funds are otherwise unable to locate
you or verify your 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, the Funds'
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 one of its affiliates to help defray expenses of
maintaining a service office in Taiwan, including expenses related to local
literature fulfillment and communication facilities.
Class I shares of the Funds 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, Class I shares will be
offered with the following schedule of sales charges:
Sales
Size of Purchase - U.S. dollars Charge
- --------------------------------------------------------------------------------
Up to $100,000................................. 3%
$100,000 to $1,000,000......................... 2%
Over $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 the
scheduled close of the Exchange (generally 1:00 p.m. Pacific time) any business
day that the Exchange is open for trading and promptly transmitted to the Fund
will be based upon the public offering price determined that day. Purchase
orders received by securities dealers or other financial institutions after the
scheduled close of the Exchange 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, either directly or
through affiliates, have an agreement with Distributors to 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 you resulting from the failure to do so must be settled between you
and your securities dealer.
Other Payments to Securities Dealers - Class I
of the Investment Grade Fund and the Rising Dividends Fund Only
As discussed in the Prospectuses of the Investment Grade Fund and the Rising
Dividends Fund under "How Do I Buy Shares? General," either Distributors or one
of its affiliates may make payments, out of its own resources, to securities
dealers who initiate and are responsible for purchases of Class I shares made at
net asset value by certain trust companies and trust departments of banks,
certain designated retirement plans (excluding IRA and IRA Rollovers), certain
non-designated plans, and certain retirement plans of organizations with
collective retirement plan assets of $10 million or more, as described below.
Distributors may make these payments in the form of contingent advance payments,
which may be recovered from the securities dealer or set off against other
payments due to the securities dealer in the event shares are redeemed within 12
months of the calendar month of purchase. Other conditions may apply. All terms
and conditions may be imposed by an agreement between Distributors, or one of
its affiliates, and the securities dealer.
Either Distributors or one of its affiliates may pay the following amounts, out
of its own resources, to securities dealers who initiate and are responsible for
purchases of Class I shares of made at net asset value by certain designated
retirement plans (excluding IRA and IRA rollovers): 1% 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 for purchases of Class I shares made at net asset value by
certain 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 of Class I shares 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, either Distributors or one of its affiliates, out of its
own resources, may pay up to 1% of the amount invested.
Letter of Intent
You may qualify for a reduced sales charge on the purchase of Class I shares of
the Funds, as described in the Prospectuses. At any time within 90 days after
the first investment which you want to qualify for a reduced sales charge, you
may file with the Fund a signed Shareholder Application with the Letter of
Intent (the "Letter") section completed. After the Letter is filed, each
additional investment 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 of the Franklin Templeton Funds will be effective
only after notification to Distributors that the investment qualifies for a
discount. Your holdings in the Franklin Templeton Funds, including Class II
shares, acquired more than 90 days before the Letter is filed, will be counted
towards completion of the Letter but will not be entitled to a retroactive
downward adjustment in the sales charge. Any redemptions you make, unless by a
designated retirement 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 designated retirement plans. If you execute a
Letter prior to a change in the sales charge structure for the Fund, you will be
entitled to complete the Letter at the lower of the new sales charge structure
or the sales charge structure in effect at the time the Letter was filed.
As mentioned in the Prospectus for each Fund, five percent (5%) of the amount of
the total intended purchase will be reserved in Class I shares of the Fund
registered in your name. This policy of reserving shares does not apply to a
designated retirement plan. If the total purchases, less redemptions, equal the
amount specified under the Letter, the reserved shares will be deposited to an
account in your name or delivered to you or your 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 securities 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, you 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 that 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 your
account will be deposited to an account in your name or delivered to you or your
order. If within 20 days after written request the difference in sales charge is
not paid, the redemption of an appropriate number of reserved shares to realize
the difference will be made. In the event of a total redemption of the account
prior to fulfillment of the Letter, the additional sales charge due will be
deducted from the proceeds of the redemption, and the balance will be forwarded
to you.
If a Letter is executed on behalf of a designated retirement plan, the level and
any reduction in sales charge for these plans will be based on actual plan
participation and the projected investments in the Franklin Templeton Funds
under the Letter. These 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 these plans entitled to receive retroactive
adjustments in price for investments made before executing the Letter.
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 the 90-day period. This commitment is irrevocable
without the prior approval of the Securities and Exchange Commission ("SEC"). In
the case of redemption requests in excess of these amounts, the trustees reserve
the right to make payments in whole or in part in securities or other assets of
the Fund, in case of an emergency, or if the payment of such a redemption in
cash would be detrimental to the existing shareholders of the Fund. In such
circumstances, the securities distributed would be valued at the price used to
compute the Fund's net assets. Should the Fund do so, you may incur brokerage
fees in converting the securities to cash. The Funds do not intend to redeem
illiquid securities in kind. Should it happen, however, you may not be able to
recover your investment in a timely manner and you may incur brokerage costs in
selling the securities.
Redemptions by the Funds
Due to the relatively high cost of handling small investments, each Fund
reserves the right to involuntarily redeem your shares at net asset value, if
your account has a value of less than one-half of the initial minimum investment
required, but only where the value of your account has been reduced by the 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 Rising Dividends Fund or the
Investment Grade Fund and $12,500 in the Corporate Qualified Fund. In any event,
before a Fund redeems your shares and sends you the proceeds, it will notify you
that the value of the shares in your account is less than the minimum amount and
allow you 30 days to make an additional investment in an amount which will
increase the value of your account to at least the minimum investment required
($100 in the Rising Dividends Fund or the Investment Grade Fund and $25,000 in
the Corporate Qualified Fund).
Reinvestment Date
Shares acquired through the reinvestment of dividends will be purchased at the
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.
Reports to Shareholders
The Funds send annual and semiannual reports regarding their performance and
portfolio holdings to shareholders. If you would like to receive an interim
quarterly report, you may phone Fund Information at 1-800/DIAL BEN.
Special Services
The Franklin Templeton Institutional Services Department 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 that maintain omnibus
accounts with the Funds on behalf of numerous beneficial owners for
recordkeeping operations performed with respect to such owners. For each
beneficial owner in the omnibus account, the Funds may reimburse Investor
Services an amount not to exceed the per account fee which the Funds normally
pay Investor Services. These financial institutions may also charge a fee for
their services directly to their clients.
How Are Fund Shares Valued?
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As noted in the Prospectus, each Fund calculates the net asset value of each
class as of the scheduled close of the Exchange (generally 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.
For the purpose of determining the aggregate net assets of each Fund, cash and
receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date. 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 ask prices. Over-the-counter portfolio securities are
valued within the range of the most recent quoted bid and ask prices. Portfolio
securities which are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market as
determined by the Manager.
Portfolio securities underlying actively traded call options are valued at their
market price as determined above. The current market value of any option held by
a Fund is its last sale price on the relevant exchange prior to the time when
assets are valued. Lacking any sales that day or if the last sale price is
outside the bid and ask prices, the options are valued within the range of the
current closing bid and ask prices if such valuation is believed to fairly
reflect the contract's market value.
The value of a foreign security is determined as of the close of trading on the
foreign exchange on which it is traded or as of the scheduled close of trading
on the Exchange, if that is earlier, and that value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in effect at noon, New York
time, on the day the value of the foreign security is determined. If no sale is
reported at that time, the mean between the current bid and ask prices is used.
Occasionally events which affect the values of foreign securities and foreign
exchange rates may occur between the times at which they are determined and the
close of the exchange and will, therefore, not be reflected in the computation
of a Fund's net asset value. If events which materially affect the values of
these foreign securities occur during such period, then these securities will be
valued in accordance with procedures established by the Board.
Auction rate preferred stocks held by the Corporate Qualified Fund are valued
based upon quotations readily available in the marketplace, but if there are no
such readily available quotations with respect to a given security, such
security is valued based upon the market value of comparable securities, if any,
traded in the market place. As a practical matter, the value of auction rate
preferred stock in the secondary market has a consistent history, to date, of
trading at its par value plus an accrual of the dividend income to be received
on the issuer's next dividend payment date plus or minus some adjustment for
possible changes in interest rates or as a commission. Accordingly, when market
values based upon readily available market quotations are not determinable for
such securities held by the Fund, or for comparable securities, then such
securities may be valued at their par value plus an accrual of the dividends to
be received on the next dividend payment date. The Manager, on behalf of the
Board, may also assign a fair value different from par value (plus an accrual of
dividend income due) to any auction rate preferred stock for which a market
quotation is not readily available if the Manager believes the value of such
security has been materially affected by changes in the issuer's
creditworthiness or in the market place for trades in such security. The Board
continually reviews this procedure and makes such changes as it feels are needed
to enable the Fund to best reflect the daily fair value of its portfolio
securities.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times prior to
the scheduled close of the Exchange. The value of these securities used in
computing the net asset value of a Fund's shares is determined as of such times.
Occasionally, events affecting the values of such securities may occur between
the times at which they are determined and the scheduled close of the Exchange
which will not be reflected in the computation of the Fund's net asset value. If
events materially affecting the values of these securities occur during such
period, then the securities will be valued at their fair value as determined in
good faith by the Board.
Other securities for which market quotations are readily available are valued at
the current market price, which may be obtained from a pricing service, 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 issues. Securities and other assets for which
market prices are not readily available are valued at fair value as determined
following procedures approved by the Board. With the approval of trustees, the
Fund may utilize a pricing service, bank or securities dealer to perform any of
the above described functions.
Additional Information Regarding Taxation
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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 you until the following January, will be treated for
tax purposes as if paid by a Fund and received by you 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. You should
consult with your tax advisor 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 you 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 you.
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
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Pursuant to underwriting agreements in effect until March 31, 1996, Distributors
acts as principal underwriter in a continuous public offering for shares of each
series and class of the Trust. The underwriting agreements will continue in
effect for successive annual periods provided that their continuance is
specifically approved at least annually by a vote of the Board, 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 the 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. The Funds pay the expenses of
preparing and printing amendments to the Trust's registration statement and the
Funds' prospectuses (other than those necessitated by the activities of
Distributors) and of sending prospectuses to existing shareholders.
Until April 30, 1994, Distributors allowed the entire underwriting commission on
the sale of each Fund's shares to the securities dealer of record, if any, on an
account. After April 30, 1994, the Corporate Qualified Fund was the only series
of the Trust which continued to do so while the Rising Dividends and Investment
Grade Funds changed their sales charges and dealer reallowance structure. The
following table shows the aggregate underwriting commissions for the past three
fiscal years:
Amount
Retained
After Payment
Underwriting to Securities
Fund Commissions Dealers
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Corporate Qualified Fund
Fiscal Year September 30
1993*..................... $ 80,044 $ 210
1994...................... 123,950 0
1995...................... 112,146 299
Rising Dividends Fund
1993*..................... 5,954,053 2,342
1994...................... 1,072,849 14,686
1995...................... 398,797 43,504
Investment Grade Fund
1993*..................... 190,069 378
1994...................... 149,801 1,572
1995...................... 75,773 4,992
*Covers a nine-month period.
Effective February 1, 1995, Distributors may be entitled to retain net
underwriting discounts and commissions in connection with redemptions or
repurchases of shares. None were retained for the period ending on September 30,
1995. 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 Corporate Qualified Fund, the Investment Grade Fund and each class of the
Rising Dividends Fund have adopted separate distribution plans pursuant to Rule
12b-1 under the 1940 Act. (The following discussion will refer to the "Class I
Plan" for all Funds, "Class II Plan" for Class II Rising Dividends Fund only, or
"Plan[s]").
The Class I Plans
Pursuant to the Class I Plans, each Fund may pay up to a maximum of 0.25% per
annum of the Fund's average daily net assets, payable monthly, for expenses
incurred in the promotion and distribution of Class I shares.
Pursuant to the Class I Plans, Distributors or others will be entitled to be
reimbursed each quarter (up to the maximum stated above) for actual expenses
incurred in the distribution and promotion of Class I 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
Class I 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
the Fund, Distributors or its affiliates. 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%.
The Class I Plans do not permit unreimbursed expenses incurred in a particular
year to be carried over to or reimbursed in subsequent years.
The Class II Plan
Under the Class II Plan, the Rising Dividends Fund pays to Distributors up to
0.75% per annum of the average daily net assets of Class II, payable quarterly,
for distribution and related expenses. These fees may be used to compensate
Distributors or others for providing distribution and related services and
bearing certain Class II expenses. All expenses of distribution and marketing
over this amount will be borne by Distributors or others who have incurred them
without reimbursement by the Fund. Under the Class II Plan, the Fund also pays
an additional 0.25% per annum of the average daily net assets of Class II,
payable quarterly, 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
Fund on behalf of customers; and similar activities related to furnishing
personal services and maintaining shareholder accounts. At the time of
investment, Distributors may pay the securities dealer a commission of up to 1%
of the amount invested out of its own resources.
Class I and Class II Plans. In addition to the payments that Distributors or
others are entitled to under the Plans, each Plan also provides that to the
extent the Fund, the Manager or Distributors or other parties on behalf of the
Fund, the Manager or Distributors make payments that are deemed to be for the
financing of any activity primarily intended to result in the sale of shares of
each class within the context of Rule 12b-1 under the 1940 Act, then such
payments shall be deemed to have been made pursuant to the Plan. The terms and
provisions of the Plans relating to required reports, term, and approval are
consistent with Rule 12b-1.
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.
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 you are a
customer of a bank that is prohibited from providing such services, you would be
permitted to remain a shareholder of the Fund, and alternate means for
continuing the servicing would be sought. In such an event, changes in the
services provided might occur and you might no longer be able to avail yourself
of any automatic investment or other services then being provided by the bank.
It is not expected that you would suffer any adverse financial consequences as a
result of any of these changes.
The Plans have been approved in accordance with the provisions of Rule 12b-1.
The Plans are effective through and renewable annually by a vote of the Board,
including a majority vote of the trustees who are non-interested persons of the
Fund and who have no direct or indirect financial interest in the operation of
the Plans, 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. The Plans and any related agreement may be terminated
at any time, without 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, by any act that constitutes an assignment of the
management agreement with the Manager or by vote of a majority of the
outstanding shares of the class. 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 outstanding shares of the class, 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 at least quarterly on
the amounts and purpose of any payment made under the Plans and any related
agreements, as well as to furnish the Board with such other information as may
reasonably be requested in order to enable the Board to make an informed
determination of whether the Plans should be continued.
For the fiscal year ended September 30, 1995 the total amount paid pursuant to
each Plan was $62,121 by the Corporate Qualified Fund, $1,136,963 by Class I
Rising Dividend Fund, $1,508 by Class II Rising Dividend Fund and $61,588 by
Investment Grade Fund, which amounts were all paid by Distributors in the
aggregate to broker-dealers.
General Information
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Performance
As noted in the Prospectuses, each series or class of the Trust may from time to
time quote various performance figures to illustrate past performance of a
series or class and 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
each series or class be accompanied by certain standardized performance
information computed as required by the SEC. Current yield and average annual
compounded total return quotations used by the series or class are based on the
standardized methods of computing performance mandated by the SEC. An
explanation of those and other methods used by the series or class 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 front-end 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
on the sales charge structure, historical performance information will be
restated to reflect the maximum front-end sales charge currently in effect.
In considering the quotations of total return by a series or class, you should
remember that the maximum front-end 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 your investment in a Fund. This charge will
affect actual performance less the longer you retain your investment in a Fund.
The average annual compounded rates of return for each Fund for the indicated
periods ended on September 30, 1995 was as follows:
One- Five- From
Fund Name Year Year Inception
- --------------------------------------------------------------------------------
Corporate
Qualified Fund......... 3.68% 9.89% 6.14%+
Rising Dividends
Fund, Class I.......... 14.91% 12.82% 8.49%+
Rising Dividends
Fund, Class II......... n/a n/a 12.56%*+
Franklin
Investment Grade
Income Fund............ 3.62% 7.34% 5.76%+
+inception date 1/14/87
*inception date 5/1/95
These figures were calculated according to the SEC formula:
n
P(1+T) = 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 Fund's Prospectus, each series or class may quote total
rates of return in addition to its average annual total return. These quotations
are computed in the same manner as the average annual compounded rate for the
series or class, except they will be based on the actual return for a specified
period rather than on the average return over one-, five- and ten-year periods,
or fractional portion thereof. The total rates of return for each series or
class for the indicated periods ended on September 30, 1995 was as follows:
One- Five- From
Fund Name Year Year Inception
- --------------------------------------------------------------------------------
Corporate
Qualified Fund........ 3.68% 60.25% 68.07%+
Rising Dividends
Fund Class I.......... 14.91% 82.76% 103.40%+
Rising Dividends
Fund Class II......... n/a n/a 12.56%*
Investment
Grade Fund............ 3.62% 42.52% 62.99%+
+inception date 1/14/87
*inception date 5/1/95
Current Yield
The current yield of each Fund and class reflects the income per share earned by
a Fund's portfolio investments and is determined by dividing the net investment
income per share of each class 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 class during the base period. The yield for the 30-day period
ended on September 31, 1995 was as follows:
Fund Amount
- --------------------------------------------------------------------------------
Corporate Qualified Fund...................... 4.82%
Rising Dividends Fund, Class I................ 1.76%
Rising Dividends Fund, Class II............... 1.31%
Investment Grade Fund......................... 4.63%
These figures were obtained using the following SEC formula:
6
Yield = 2 [( a-b + 1 ) - 1]
----
cd
where
a = dividends and interest earned during the period
b = expenses accrued for the period (net of any waiver)
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 Corporate Qualified 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 1995. 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. The taxable equivalent
yield, computed as noted above, for the 30-day period ended on September 30,
1995 was 6.64%.
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 Corporate Qualified Fund may also quote an
equivalent fully taxable distribution rate which demonstrates the taxable
distribution rate equivalent to the Corporate Qualified 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.
Volatility
Occasionally statistics may be used to specify Fund volatility or risk. Measures
of volatility or risk are generally used to compare Fund 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 an
index considered representative of the types of securities in which a Fund
invests. 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
For investors who are permitted to purchase Class I shares at net asset value,
sales literature pertaining to Class I 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 a 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.
The Funds may include in their 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 advisors
and underwriter of both the Franklin Group of Funds and Templeton Group of
Funds.
Comparisons
To help you better evaluate how an investment in one of the Funds might satisfy
your investment objective, advertisements and other materials regarding a Fund
may discuss various measures of Fund 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 - an unmanaged
index 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, 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, 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
the 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 the performance of a class to the
return on certificates of deposit or other investments. You 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 comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to the Funds' portfolios, the indices and averages are generally
unmanaged, and the items included in the calculations of the 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 Funds will continue this
performance as compared to such other averages.
From time to time, advertisements or information for the 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
The Fund may help you achieve various investment goals such as accumulating
money for retirement, saving for a down payment on a home, college costs and/or
other long-term goals. The Franklin College Costs Planner may assist you 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 you 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 of Funds, 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 48 years and now services more than 2.4 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 $135 billion in assets under management for more than
3.9 million U.S. based mutual fund shareholders and other accounts. The Franklin
Group of Funds and the Templeton Group of Funds offers to the public 114 U.S.
based mutual funds. The Funds may identify themselves by their NASDAQ symbols or
CUSIP numbers.
The Dalbar Surveys, Inc. broker-dealer survey has ranked Franklin number one in
service quality for five of the past seven years.
Employees of Resources or its subsidiaries who are access persons under the 1940
Act are permitted to engage in personal securities transactions subject to the
following general restrictions and procedures: (i) the trade must receive
advance clearance from a compliance officer and must be completed within 24
hours after clearance; (ii) copies of all brokerage confirmations must be sent
to a compliance officer and, within 10 days after the end of each calendar
quarter, a report of all securities transactions must be provided to the
compliance officer; and (iii) access persons involved in preparing and making
investment decisions must, in addition to (i) and (ii) above, file annual
reports of their securities holdings each January and inform the compliance
officer (or other designated personnel) if they own a security that is being
considered for a fund or other client transaction or if they are recommending a
security in which they have an ownership interest for purchase or sale by a fund
or other client.
As a shareholder of a Massachusetts business trust, you could, under certain
circumstances, be held personally liable as a partner 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 Funds. The
Declaration of Trust also provides for indemnification and reimbursement of
expenses out of the Funds' assets if you are held personally liable for
obligations of the Funds. The Declaration of Trust provides that the Funds
shall, upon request, assume the defense of any claim made against you for any
act or obligation of the Funds and satisfy any judgment thereon. All such rights
are limited to the assets of the Funds. The Declaration of Trust further
provides that the Funds may maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Funds, its shareholders, trustees, officers, employees and agents to cover
possible tort and other liabilities. Furthermore, the activities of the Funds as
investment companies, as distinguished from operating companies, would not
likely give rise to liabilities in excess of the Funds' total assets. Thus, the
risk of you incurring financial loss on account of shareholder liability is
limited to the unlikely circumstances in which both inadequate insurance exists
and the Funds themselves are unable to meet its obligations.
The Corporate Qualified 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.
Financial Statements
- --------------------------------------------------------------------------------
The audited financial statements contained in the Annual Report to Shareholders
of the Trust dated September 30, 1995, including the auditors' report, are
incorporated herein by reference.
Appendix
- --------------------------------------------------------------------------------
Description of Corporate Bond Ratings
Moody's
Aaa - Bonds 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 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 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, 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.
A - Bonds rated A possess many favorable investment attributes and are
considered 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 rated Baa are considered medium grade obligations. 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 rated Ba are judged to have predominantly speculative elements and
their future cannot be considered well assured. Often the protection of interest
and principal payments is 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 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 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 rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond ratings. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; modifier 2 indicates a mid-range ranking; and modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.
S&P
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,
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.
D - Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
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 incorporated herein by reference to:
(1) The Registrant's Annual Report to Shareholders dated September 30,
1995 as filed with the SEC electronically on form type N-30D on
November 29, 1995.
(i) Report of Certified Public Accountants - October 27, 1995
(ii) Statements of Investments in Securities and Net Assets -
September 30, 1995.
(iii)Statements of Assets and Liabilities - September 30, 1995.
(iv) Statements of Operations - for the year ended September 30,
1995.
(v) Statements of Changes in Net Assets - for the years ended
September 30, 1995 and 1994
(vi) Notes to Financial Statements
(2) The Registrant's unaudited Semi-Annual Report to Shareholders dated
March 30, 1996 as filed with the SEC electronically on form type
N-30D on May 15, 1996.
(i) Statement of Investments in Securities and Net Assets -
March 31, 1996.
(ii) Statement of Assets and Liabilities - March 31, 1996.
(iii)Statement of Operations - for the six months ended March 31,
1996.
(v) Statement of Changes in Net Assets - for the six months ended
March 31, 1996 and the year ended September 30, 1995.
(vi) Notes to Financial Statements
(b) The following exhibits, are incorporated by reference as noted,
except for 5(i), 5(ii), 5(iii), 6(i), 11(i) and, 18(i) which are
attached.
(1) copies of the charter as now in effect;
(i) Amended and Restated Agreement and Declaration of Trust
dated October 30, 1986
Filing: Post-Effective Amendment No. 12 to Registration
Statement of Registrant
on Form N-1A
File No. 33-9994
Filing Date: April 24, 1995
(ii) Certificate of Amendment of Agreement and Declaration of
Trust dated June 28, 1988
Filing: Post-Effective Amendment No. 12 to Registration
Statement of Registrant
on Form N-1A
File No. 33-9994
Filing Date: April 24, 1995
(iii)Certificate of Amendment of Agreement and Declaration of
Trust dated March 13, 1995
Filing: Post-Effective Amendment No. 12 to Registration
Statement of Registrant
on Form N-1A
File No. 33-9994
Filing Date: April 24, 1995
(2) copies of the existing By-Laws or instruments corresponding
thereto;
(i) By-Laws
Filing: Post-Effective Amendment No. 12 to Registration
Statement of Registrant
on Form N-1A
File No. 33-9994
Filing Date: April 24, 1995
(3) copies of any voting trust agreement with respect to more than five
percent of any class of equity securities of the Registrant;
Not Applicable
(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;
Not Applicable
(5) copies of all investment advisory contracts relating to the
management of the assets of the Registrant;
(i) Management Agreement between Franklin Rising Dividends Fund
and Franklin Advisory Services, Inc., dated July 1, 1996
(ii) Management Agreement between Franklin Investment Grade
Income Fund and Franklin Advisory Services, Inc., dated
July 1, 1996.
(iii)Management Agreement between Franklin Corporate Qualified
Dividend Fund and Franklin Advisory Services, Inc., dated
July 1, 1996.
(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) Amended and Restated Distribution agreement between
Franklin/Templeton Distributors, Inc., and Franklin Managed
Trust dated April 23, 1995.
(ii) Forms of dealer agreements between Franklin/Templeton
Distributors, Inc., and Securities Dealers:
Registrant: Franklin Tax-Free Trust
Filing: Post-Effective Amendment No. 22 to Registration on
Form N-1A
File No. 2-94222
Filing Date: March 14, 1996
(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;
Not Applicable
(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
remuneration;
(i) Custodian Agreement between Registrant and Bank of America
NT & SA dated June 12, 1991
Filing: Post-Effective Amendment No. 12 to Registration
Statement of Registrant
on Form N-1A
File No. 33-9994
Filing Date: April 24, 1995
(ii) Amendment to Custodian Agreement between Registrant and Bank
of America NT & SA dated April 12, 1995
Filing: Post-Effective Amendment No. 13 to Registration
Statement on Form N-1A
File No. 33-9994
Filing Date: November 30, 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 Asset Allocation Fund
Filing: Post-Effective Amendment No. 55 to Registration on
Form N-1A
File No. 2-12647
Filing Date: May 17, 1996
(iv) Master Custody Agreement between Registrant and Bank of New
York dated February 16, 1996
Registrant: Franklin New York Tax-Free Trust
Filing: Post-Effective Amendment No. 13 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: March 1, 1996
(v) Terminal Link Agreement between Registrant and Bank of New
York dated February 16, 1996
Registrant: Franklin New York Tax-Free Trust
Filing: Post-Effective Amendment No. 13 to Registration
Statement on Form N-1A
File No. 33-7785
Filing Date: March 1, 1996
(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;
Not Applicable
(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;
Not Applicable
(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 Accountants
(12) all financial statements omitted from Item 23;
Not Applicable
(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
Filing: Post-Effective Amendment No. 12 to Registration
Statement of Registrant
on Form N-1A
File No. 33-9994
Filing Date: April 24, 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/Templeton Distributors,
Inc., dated July 1, 1993
Filing: Post-Effective Amendment No. 12 to Registration
Statement of Registrant
on Form N-1A
File No. 33-9994
Filing Date: April 24, 1995
(ii) Amended and Restated Distribution Plan between Franklin
Investment Grade Income Fund and Franklin/Templeton
Distributors, Inc., dated July 1, 1993
Filing: Post-Effective Amendment No. 12 to Registration
Statement of Registrant
on Form N-1A
File No. 33-9994
Filing Date: April 24, 1995
(iii)Amended and Restated Distribution Plan between Franklin
Corporate Qualified Dividend Fund and Franklin/Templeton
Distributors, Inc., dated July 1, 1993
Filing: Post-Effective Amendment No. 12 to Registration
Statement of Registrant
on Form N-1A
File No. 33-9994
Filing Date: April 24, 1995
(iv) Class II Distribution Plan between Franklin Managed Trust on
behalf of Franklin Rising Dividends Fund - Class II, and
Franklin/Templeton Distributors, Inc., pursuant to Rule
12-b1 dated March 30, 1995
Filing: Post-Effective Amendment No. 13 to Registration
Statement on Form N-1A
File No. 33-9994
Filing Date: November 30, 1995
(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
Filing: Post-Effective Amendment No. 12 to Registration
Statement of Registrant
on Form N-1A
File No. 33-9994
Filing Date: April 24, 1995
(ii) Certificate of Secretary dated March 13, 1995
Filing: Post-Effective Amendment No. 12 to Registration
Statement of Registrant
on Form N-1A
File No. 33-9994
Filing Date: April 24, 1995
(18) Copies of any plan entered into by Registrant pursuant to Rule
18f-3 under the 1940 Act
(i) Multiple Class Plan
(27) Financial Data Schedule
Not Applicable
ITEM 25 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26 NUMBER OF HOLDERS OF SECURITIES
As of October 31, 1996 the number of record holders of the only class of
securities of the Registrant was as follows:
Number of Record Holders
TITLE OF CLASS CLASS I CLASS II
Shares of Beneficial Interest
Franklin Corporate Qualified Dividend Fund 451 N/A
Franklin Rising Dividends Fund 22,823 371
Franklin Investment Grade Income Fund 1,894 N/A
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 manager also serve as officers
and/or directors for (1) the manager's corporate parent, Franklin Resources,
Inc., and/or (2) other investment companies in the Franklin Group of Funds(R).
In addition, Mr. Charles B. Johnson is a director of General Host Corporation.
For additional information please see Part B and Schedules A and D of Form ADV
of the Funds' Investment Manager (SEC File 801-26292), incorporated herein by
reference, which sets forth the officers and directors of the Investment Manager
and information as to any business, profession, vocation or employment of a
substantial nature engaged in by those officers and directors during the past
two years.
ITEM 29 PRINCIPAL UNDERWRITERS
a) Franklin/Templeton Distributors, Inc., ("Distributors") also acts as
principal underwriter of shares of:
Franklin Asset Allocation Fund
Franklin California Tax-Free Income Fund, Inc.
Franklin California Tax-Free Trust
Franklin Custodian Funds, Inc.
Franklin Equity Fund
Franklin Federal Money Fund
Franklin Federal Tax-Free Income Fund
Franklin Gold Fund
Franklin High Income Trust
Franklin Investors Securities Trust
Franklin Money Fund
Franklin Mutual Series Fund Inc.
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund, Inc.
Franklin New York Tax-Free Trust
Franklin Real Estate Securities Trust
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
Franklin Tax-Advantaged High Yield Securities Fund
Franklin Tax-Advantaged International Bond Fund
Franklin Tax-Advantaged U.S. Government Securities Fund
Franklin Tax-Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Institutional Fiduciary Trust
Franklin Templeton Japan Fund
Templeton American Trust, Inc.
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund, Inc.
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, Inc.
Templeton Variable Products Series Fund
b) The information required by this Item 29 with respect to each director
and officer of Distributors 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.
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 principal address is 777 Mariners Island Blvd., San , 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 informat ion
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 certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and 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 22nd day of November, 1996.
FRANKLIN MANAGED TRUST
(Registrant)
By: /S/ 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 Trustee
William J. Lippman Dated: November 22, 1996
MARTIN L. FLANAGAN* Principal Financial Officer
Martin L. Flanagan Dated: November 22, 1996
DIOMEDES LOO-TAM* Principal Accounting Officer
Diomedes Loo-Tam Dated: November 22, 1996
FRANK T. CROHN* Trustee
Frank T. Crohn Dated: November 22, 1996
CHARLES RUBENS, II* Trustee
Charles Rubens, II Dated: November 22, 1996
LEONARD RUBIN* Trustee
Leonard Rubin Dated: November 22, 1996
*by: /s/ (Larry L. Greene, Attorney-in-Fact
(Pursuant to Powers of Attorney previously filed)
FRANKLIN MANAGED TRUST
REGISTRATION STATEMENT
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.B1(i) Amended and Restated Agreement and declaration *
of trust dated October 30, 1986
EX-99.B1(ii) Certificate of Amendment of Agreement and *
Declaration of Trust dated June 28, 1988
EX-99.B1(iii) Certificate of Amendment of Agreement and *
Declaration of Trust dated March 13, 1995
EX-99.B2(i) By-Laws *
EX-99.B5(i) Management Agreement between Franklin Rising Attached
Dividends Fund and Franklin Advisory Services,
Inc., dated July 1, 1996
EX-99.B5(ii) Management Agreement between Franklin Attached
Investment Grade Income Fund and Franklin
Advisory Services, Inc., dated July 1, 1996
EX-99.B5(iii) Management Agreement between Franklin Attached
Corporate Qualified Dividend Fund and Franklin
Advisory Services, Inc., dated July 1, 1996
EX-99.B6(i) Amended and Restated Distribution Agreement Attached
between Franklin/Templeton Distributors, Inc.,
and
Franklin Managed Trust dated April 23, 1995
EX-99.B6(ii) Forms of Dealer Agreements between *
Franklin/Templeton Distributors, Inc., and
Securities Dealers
EX-99.B8(i) Custodian Agreement between 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
April 12, 1995
EX-99.B8(iii) Copy of Custodian Agreements between *
Registrant and Citibank Delaware
EX-99.B8(iv) Master Custody Agreement between Registrant *
and Bank of New York dated February 16, 1996
EX-99.B8(v) Terminal Link Agreement between Registrant and *
Bank of New York dated February 16, 1996
EX-99.B11(i) Consent of Independent Certified Public Attached
Accountants
EX-99.B13(i) Letter of Understanding dated April 12, 1995 *
EX-99.B14(i) Copy of model retirement plan *
EX-99.B15(i) Amended and Restated Distribution Plan between *
Franklin Rising Dividends Fund and
Franklin/Templeton Distributors, Inc., dated
July 1, 1993
EX-99.B15(ii) Amended and Restated Distribution Plan between *
Franklin Investment Grade Income Fund and
Franklin/Templeton Distributors, Inc., dated
July 1, 1993
EX-99.B15(iii) Amended and Restated Distribution Plan between *
Franklin Corporate Qualified Dividend Fund and
Franklin/Templeton Distributors, Inc., dated
July 1, 1993
EX-99.B15(iv) Class II Distribution Plan between Franklin *
Managed Trust on behalf of Franklin Rising
Dividends Fund - Class II, and
Franklin/Templeton Distributors, Inc., dated
March 30, 1995
EX-99.B16(i) Schedule for computation performance quotation *
EX-99.B17(i) Power of Attorney dated March 13, 1995 *
EX-99.B17(ii) Certificate of Secretary dated March 13, 1995 *
EX-99.B18(i) Multiple Class Plan Attached
* Incorporated by reference
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between the FRANKLIN RISING DIVIDENDS FUND
(hereinafter called the "Fund") a series of the Franklin Managed Trust, a
Massachusetts business trust (hereinafter called the "Trust"), and FRANKLIN
ADVISORY SERVICES, INC., a corporation organized and existing under the laws of
the State of Delaware (hereinafter called the "Manager").
W I T N E S S E T H :
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 Delaware.
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 1st day of July, 1996.
FRANKLIN MANAGED TRUST on behalf of the
FRANKLIN RISING DIVIDENDS FUND
By: /S/WILLIAM J. LIPPMAN
William J. Lippman
Title: President
FRANKLIN ADVISORY SERVICES, INC.
By: /S/HARMON E. BURNS
Harmon E. Burns
Title: Executive Vice President
Termination of Agreement
Franklin Managed Trust and Franklin Advisers, Inc. hereby agree that the
Management Agreement between them dated as of June 28, 1988, regarding the
Franklin Rising Dividends Fund, is terminated effective as of the Management
Agreement above.
FRANKLIN MANAGED TRUST on behalf of the
FRANKLIN RISING DIVIDENDS FUND
By: /S/WILLIAM J. LIPPMAN
William J. Lippman
Title: President
FRANKLIN ADVISORS, INC.
By: /S/HARMON E. BURNS
Harmon E. Burns
Title: Executive Vice President
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN INVESTMENT GRADE INCOME FUND
(hereinafter called the "Fund") a series of the Franklin Managed Trust, a
Massachusetts business trust (hereinafter called the "Trust"), and FRANKLIN
ADVISORY SERVICES, INC., a Delaware corporation, (hereinafter called the
"Manager").
W I T N E S S E T H :
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 Delaware.
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 1st day of July, 1996.
FRANKLIN MANAGED TRUST on behalf of
FRANKLIN INVESTMENT GRADE INCOME FUND
By: /S/WILLIAM J. LIPPMAN
William J. Lippman
Title: President
FRANKLIN ADVISORY SERVICES, INC.
By: /S/HARMON E. BURNS
Harmon E. Burns
Executive Vice President
TERMINATION OF AGREEMENT
Franklin Managed Trust and Franklin Advisers, Inc., hereby agree that the
Management Agreement between them dated June 28, 1988, regarding the Franklin
Investment Grade Income Fund, is terminated effective as of the date of the
Management Agreement above.
Franklin Managed Trust
By: /S/WILLIAM J. LIPPMAN
William J. Lippman
Title: President
Franklin Advisers, Inc.
By: /S/HARMON E. BURNS
Harmon E. Burns
Title: Executive Vice President
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN INVESTMENT GRADE INCOME FUND
(hereinafter called the "Fund") a series of the Franklin Managed Trust, a
Massachusetts business trust (hereinafter called the "Trust"), and FRANKLIN
ADVISORY SERVICES, INC., a Delaware corporation, (hereinafter called the
"Manager").
W I T N E S S E T H :
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 Delaware.
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 1st day of July, 1996.
FRANKLIN MANAGED TRUST on behalf of
FRANKLIN INVESTMENT GRADE INCOME FUND
By: /S/WILLIAM J. LIPPMAN
William J. Lippman
Title: President
FRANKLIN ADVISORY SERVICES, INC.
By: /S/HARMON E. BURNS
Harmon E. Burns
Executive Vice President
TERMINATION OF AGREEMENT
Franklin Managed Trust and Franklin Advisers, Inc., hereby agree that the
Management Agreement between them dated June 28, 1988, regarding the Franklin
Investment Grade Income Fund, is terminated effective as of the date of the
Management Agreement above.
Franklin Managed Trust
By: /S/WILLIAM J. LIPPMAN
William J. Lippman
Title: President
Franklin Advisers, Inc.
By: /S/HARMON E. BURNS
Harmon E. Burns
Title: Executive Vice President
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between the FRANKLIN CORPORATE QUALIFIED
DIVIDEND FUND, formerly known as 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 ADVISORY SERVICES,
INC., a corporation organized and existing under the laws of the State of
Delaware (hereinafter called the "Manager").
W I T N E S S E T H :
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 Delaware.
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 1st day of July, 1996.
FRANKLIN MANAGED TRUST on behalf of the
FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
By: /S/WILLIAM J. LIPPMAN
William J. Lippman
President
FRANKLIN ADVISORY SERVICES, INC.
By: /S/HARMON E. BURNS
Harmon E. Burns
Executive Vice President
TERMINATION OF AGREEMENT
Franklin Managed Trust and Franklin Advisers, Inc. hereby agree that the
Management Agreement between them dated as of June 28, 1988, regarding the
Franklin Corporate Qualified Dividend Fund, formerly known as Franklin Corporate
Cash Portfolio, is terminated effective as of the Management
Agreement above.
FRANKLIN MANAGED TRUST
By: /S/WILLIAM J. LIPPMAN
William J. Lippman
Title: President
FRANKLIN ADVISORS, INC.
By: /S/HARMON E. BURNS
Harmon E. Burns
Title: Executive 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: /S/DEBORAH R. GATZEK
Deborah R. Gatzek
Vice President & Secretary
Accepted:
Franklin/Templeton Distributors, Inc.
By: /S/HARMON E. BURNS
Harmon E. Burns
Executive Vice President
DATED: April 23, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment No. 14
to the Registration Statement of Franklin Managed Trust on Form N-1A File Nos.
33-9994 and 811-4894 of our report dated October 27, 1995 on the financial
statements and financial highlights of Franklin Managed Trust which report is
included in the Annual Report to Shareholders for the year ended September 30,
1995 which is incorporated by reference in the Registration Statement.
/s/ TAIT, WELLER AND BAKER
Philadelphia, Pennsylvania
November 11, 1996
Multiple Class Plan
This Multiple Class Plan (the "Plan") has been adopted by a majority of
each of the Boards of Directors or Trustees ("Boards") of the Franklin Funds and
Fund series listed on the attached Schedule A (the "Funds"). The Boards have
determined that the Plan is in the best interests of each class and each Fund as
a whole. The Plan sets forth the provisions relating to the establishment of
multiple classes of shares for each Fund.
1. Each Fund shall offer two classes of shares, to be known as Class I and
Class II.
2. Class I shares shall carry a front-end sales charge ranging from 0% -
4.50%, and Class II shares shall carry a front-end sales charge 1.00%, all as
set forth in each Fund's Prospectus.
3. Class I shares shall not be subject to a contingent deferred sales
charge ("CDSC") except in the following limited circumstances. On investments of
$1 million or more, a contingent deferred sales charge of 1.00% of the lesser of
the then-current net asset value or the original net asset value at the time of
purchase applies to redemptions of those investments within the contingency
period of 12 months from the calendar month following their purchase. The CDSC
is waived in certain circumstances, as described in each Fund's prospectus.
4. Class II shares redeemed within 18 months of their purchase shall be
assessed a CDSC of 1.00% of the lesser of the then-current net asset value or
the original net asset value at the time of purchase. The CDSC is waived in
certain circumstances as described in each Fund's prospectus.
5. The Rule 12b-1 Plan associated with Class I shares may be used to
reimburse Franklin/Templeton Distributors, Inc. (the "Distributor") or other for
expenses incurred in the promotion and distribution of the shares of Class I.
Such expenses include, but are 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 the Distributor's overhead expenses
attributable to the distribution of Class I 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 the Fund for Class I shares or with the
Distributor or its affiliates.
The Rule 12b-1 Plan associated with Class II shares has two components. The
first component is a shareholder servicing fee, to be paid to broker-dealers,
banks, trust companies and others who will provide personal assistance to
shareholders in servicing their accounts. The second component is an asset-based
sales charge to be retained by the Distributor during the first year after sale
of shares, and, in subsequent years, to be paid to dealers or retained by the
Distributor to be used in the promotion and distribution of Class II shares, in
a manner similar to that described above for Class I shares.
The Plans shall operate in accordance with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., Article III, section
26(d).
6. The only difference in expenses as between Class I and Class II shares
shall relate to differences in the Rule 12b-1 plan expenses of each class, as
described in each class' Rule 12b-1 Plan.
7. There shall be no conversion features associated with the Class I and
Class II shares.
8. Shares of either Class may be exchanged for shares of another investment
company within the Franklin Templeton Group of Funds according to the terms and
conditions stated in each fund's prospectus, as it may be amended from time to
time, to the extent permitted by the Investment Company Act of 1940 and the
rules and regulations adopted thereunder.
9. Each Class will vote separately with respect to the Rule 12b-1 Plan
related to that Class.
10. On an ongoing basis, each Fund's Board pursuant to the fiduciary
responsibilities under the 1940 Act and otherwise, will monitor each Fund for
the existence of any material conflicts between the interests of the two classes
of shares. Each Board, including a majority of the independent Board members,
shall take such action as is reasonably necessary to eliminate any such conflict
that may develop. Franklin Advisers, Inc. and Franklin/Templeton Distributors,
Inc. shall be responsible for alerting the Board to any material conflicts that
arise.
11. All material amendments to this Plan must be approved by a majority of
the Board members of each Fund, including a majority of the Board members who
are not interested persons of each Fund.
I, Deborah R. Gatzek, Secretary of the Franklin Funds, do hereby certify
that this Multiple Class Plan has been adopted by a majority of each of the
Boards of Directors or Trustees of the Franklin Funds and Fund series listed on
the attached Schedule A on April 18, 1995.
Date: October 19, 1995 By: /s/ Deborah R. Gatzek
Deborah R. Gatzek
Secretary
<TABLE>
<CAPTION>
INVESTMENT COMPANY FUND & CLASS; TITAN NUMBER
<S> <C>
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 Fund -Class II; 216
Income Fund
Franklin Managed Trust Franklin Rising Dividends Fund - Class II; 258
Franklin California Tax-Free Trust Franklin California Insured Tax-Free
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 Trust Franklin Global Government Income
Fund - Class II; 235
Franklin Strategic Series Franklin Global Utilities Fund - Class II; 297
Franklin Real Estate Securities Trust Franklin Real Estate Securities Fund - Class II; 292
INVESTMENT COMPANY FUND AND CLASS; TITAN NUMBER
Franklin Tax-Free Trust Franklin Alabama Tax-Free Income Fund - Class II; 264
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>
