As filed with the Securities and Exchange Commission on April 21,
1995.
File Nos.2-10103
811-334
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. 82 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 18 (X)
FRANKLIN EQUITY FUND
(Exact Name of Registrant as Specified in Charter)
777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (415) 312-2000
Harmon E. Burns, 777 Mariners Island Blvd., San Mateo, CA 94404
(Name and Address of Agent for Service of Process)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X ] on May 1, 1995 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) after filing pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Declaration Pursuant to Rule 24f-2. The issuer has registered an
indefinite number or amount of securities under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. The rule 24f-2 Notice for the issuer's most recent
fiscal year was filed on August 27, 1994.
FRANKLIN EQUITY FUND
CROSS REFERENCE SHEET
FORM N-1A
Part A: Information Required in Prospectus
N-1A Location in
Item No. Item Registration Statement
1. Cover Page Cover Page
2. Synopsis Expense Table
3. Condensed Financial "Financial Highlights";
Information "Performance"
4. General Description "About the Fund";
"Investment Objectives and
Policies of the Fund";
"General Information"
5. Management of the "Management of the Fund"
Fund The response to this item
Management's is Contained in
5A. Discussion of Fund Registrant's Annual Report
Performance to Shareholder
6. Capital Stock and "Distributions to
Other Securities Shareholders"; "General
Information"
7. Purchase of "How to Buy Shares of the
Securities Being Fund"; Telephone
Offered Transactions"; "Taxation of
the Fund and Its
Shareholders"; "Purchasing
Shares of the Fund in
Connection with Retirement
Plans Involving Tax-
Deferred Investments";
"Other Programs and
Privileges Available to
Fund Shareholders"; "How to
Get Information Regarding
an Investment in the Fund";
"Exchange Privilege";
"Valuation of Fund Shares"
8. Redemption or "Exchange Privilege"; "How
Repurchase to Sell Shares of the
Fund"; "Valuation of Fund
Shares"; "Telephone
Transactions"; "How to Get
Information Regarding an
Investment in the Fund";
"General Information"
9. Pending Legal Not Applicable
Proceedings
FRANKLIN EQUITY FUND
CROSS REFERENCE SHEET
FORM N-1A
Part B: Information Required in
Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information Cover Page; About the Fund
and History (See also section "About the
Fund," "General Information"
in the Prospectus)
13. Investment Objectives "The Fund's Investment
Policies Objectives and Restrictions"
(See also the Prospectus
"Investment Objectives and
Policies of the Fund")
14. Management of the "Officers and Directors"
Fund
15. Control Persons and "Officers and Directors"
Principal Holders of
Securities
16. Investment Advisory "Investment Advisory and
and Other Services Other Services" (See also
the Prospectus "Management
of the Fund")
17. Brokerage Allocation "The Fund's Policies
Regarding Brokers Used on
Portfolio Transactions"
18. Capital Stock and See sections "General
Other Securities Information" and "About the
Fund" in the Prospectus
19. Purchase, Redemption "Additional Information
and Pricing of Regarding Fund Shares" (See
Securities also the Prospectus "How to
Buy Shares of the Fund",
"How to Sell Shares of the
Fund", "Valuation of Fund
Shares")
20. Tax Status Additional Information
Regarding Taxation" ( See
section "Taxation of the
Fund and Its Shareholders"
in the Prospectus)
21. Underwriters "The Fund's Underwriter"
22. Calculation of "General Information"
Performance Data
23. Financial Statements Financial Statements
03 P
SUPPLEMENT DATED MAY 1, 1995
TO THE PROSPECTUS FOR
FRANKLIN EQUITY FUND
dated November 1, 1994
as amended January 19, 1995
INTRODUCTION. As of May 1, 1995, the Equity Fund (the "Fund")
offers two classes to its investors: Franklin Equity Fund - Class
I ("Class I") and Franklin Equity Fund - Class II ("Class II").
Investors can choose between Class I shares, which generally bear
a higher front-end sales charge and lower ongoing Rule 12b-1
distribution fees ("Rule 12b-1 fees"), and Class II shares, which
generally have a lower front-end sales charge and higher ongoing
Rule 12b-1 fees. Investors should consider the differences
between the two classes, including the impact of sales charges
and distribution fees, in choosing the more suitable class given
their anticipated investment amount and time horizon.
This Supplement must be read in conjunction with the Prospectus
for this Fund. All investment objectives and policies described
in the Prospectus apply equally to both classes of shares in the
new multiclass structure. Further, all operational procedures
apply equally to both classes, unless otherwise specified in the
following discussion.
THE NEW APPLICATION FORM INCLUDED WITH THIS SUPPLEMENT MUST BE
USED FOR ALL PURCHASES. DO NOT USE THE APPLICATION FORM INCLUDED
IN THE PROSPECTUS.
MULTICLASS FUND STRUCTURE. The Fund has two classes of shares
available for investment: Class I and Class II. ALL FUND SHARES
OUTSTANDING BEFORE THE IMPLEMENTATION OF THE MULTICLASS STRUCTURE
HAVE BEEN REDESIGNATED AS CLASS I SHARES, AND WILL RETAIN THEIR
PREVIOUS RIGHTS AND PRIVILEGES. VOTING RIGHTS ATTRIBUTABLE TO
EACH CLASS WILL, HOWEVER, BE DIFFERENT. See the Prospectus for
more details about Class I shares. Class II shares are explained
in detail in the following discussion. Except as described below,
shares of both classes represent identical interests in the
Fund's investment portfolio.
EXPENSE TABLE
The purpose of this table is to assist an investor in
understanding the various costs and expenses that a shareholder
will bear directly or indirectly in connection with an investment
in the Fund. The figures for both classes of shares are based on
aggregate operating expenses of the Fund's Class I shares for the
fiscal year ended June 30, 1994, except as otherwise noted.
CLASS I CLASS II
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases
(as a percentage of offering 4.50% 1.00%^
price)
NONE^^ 1.00%+
Deferred Sales Charge
Exchange Fee (per transaction) $5.00++ $5.00++
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.53% 0.53%
Rule 12b-1 Fees 0.25%* 1.00%*
Other Expenses:
Shareholder Servicing Costs 0.09% 0.09%
Reports to Shareholders 0.09% 0.09%
Other 0.05% 0.05%
Total Other Expenses 0.23% 0.23%
Total Fund Operating Expenses 1.01% 1.76%
^Although Class II has a lower front-end sales charge than Class
I, over time the higher Rule 12b-1 fee for Class II may cause
shareholders to pay more for Class II shares than for Class I
shares. Given the maximum front-end sales charge and the rate of
Rule 12b-1 fees of each class, it is estimated that this will
take approximately six years or less for shareholders who
maintain total shares valued at less than $100,000 in the
Franklin Templeton Funds. Shareholders with larger investments in
the Franklin Templeton Funds will reach the crossover point more
quickly.
^^Class I investments of $1 million or more are not subject to a
front-end sales charge; however, a contingent deferred sales
charge of 1%, which has not been reflected in the Example below,
is generally imposed on certain redemptions within a "contingency
period" of 12 months of the calendar month following such
investments. See "How to Sell Shares of the Fund - Contingent
Deferred Sales Charge."
+Class II shares redeemed within a "contingency period" of 18
months of the calendar month following such investments are
subject to a 1% contingent deferred sales charge. See "How to
Sell Shares of the Fund - Contingent Deferred Sales Charge."
++$5.00 fee imposed only on Timing Accounts as described under
"Exchange Privilege" in the Prospectus. All other exchanges are
processed without a fee.
* Class I shareholders approved a plan of distribution for class
I shares (the "Class I Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which provides for payments by
the Fund in connection with the distribution of its Class I
shares, up to a maximum annual rate of 0.25% of the Fund's
average daily net assets. See "Management of the Fund - Plan of
Distribution" in the prospectus. Rule 12b-1 fees and total
operating expenses for Class I shares for the fiscal year ended
June 30, 1994 have been restated to reflect the maximum
reimbursement allowed under the Fund's Class I Rule 12b-1 Plan,
as though that Plan had been in effect for the entire fiscal
year. The Class II Rule 12b-1 fee rate is based on the maximum
annual Class II Rule 12b-1 rate, as discussed below. Consistent
with National Association of Securities Dealers, Inc.'s rules, it
is possible that the combination of front-end sales charges and
Rule 12b-1 fees could cause long-term shareholders to pay more
than the economic equivalent of the maximum front-end sales
charges permitted under those same rules.
Investors should be aware that the above table is not intended to
reflect in precise detail the fees and expenses associated with
an individual's own investment in the Fund. Rather the table has
been provided only to assist investors in gaining a more complete
understanding of fees, charges and expenses that an investor in
the classes will bear directly or indirectly. For a more detailed
discussion of these matters, investors should refer to the
appropriate sections of the Prospectus and this Supplement.
EXAMPLE
As required by SEC regulations, the following example illustrates
the expenses, including the maximum front-end sales charge and
applicable contingent deferred sales charge, that apply to a
$1,000 investment in the Fund over various time periods assuming
(1) a 5% annual rate of return and (2) redemption at the end of
each time period.
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
CLASS I $55 $76 $98 $163
CLASS II $38 $65 $104 $215
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES
SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
The operating expenses are borne by the Fund and only indirectly
by shareholders as a result of their investment in the Fund. (See
"Management of the Fund" in the Prospectus for a description of
the Fund's expenses.) In addition, federal securities regulations
require the example to assume an annual return of 5%, but the
Fund's actual return may be more or less than 5%.
FINANCIAL HIGHLIGHTS
The following unaudited financial highlights for the six months
ended December 31, 1994, pertaining to Class I, supplement the
information included under "Financial Highlights" in the
Prospectus. Similar information for Class II will be included
after its shares have been offered to the public for a reasonable
period of time.
Six Months
Ended
December 31,
1994
PER SHARE OPERATING PERFORMANCE (unaudited)
Net asset value at beginning of period $6.53
Net investment income .040
Net realized and unrealized .130
gains(losses) on securities
Total from investment operations .170
Less distributions:
Distributions from net investment (.040)
income
Distributions from capital gains (.620)
Total distributions (.660)
Net asset value at end of period $6.04
TOTAL RETURN* 2.69%
RATIOS AND SUPPLEMENTAL DATA
Net assets at end of period(in 000's) $271,183
Ratio of expenses to average net 1.06%**
assets
Ratio of net investment income to 1.20%**
average net assets
Portfolio turnover rate 51.78%
*Total return measures the change in value of an investment over
the period indicated. It does not include the maximum 4.5% front-
end sales charge and assumes reinvestment of dividends and
capital gains, if any, at net asset value.
**Annualized
DECIDING WHICH CLASS TO PURCHASE. Investors should carefully
evaluate their anticipated investment amount and time horizon
prior to determining which class of shares to purchase.
Generally, an investor who expects to invest less than $100,000
in the Franklin Templeton Funds and who expects to make
substantial redemptions within approximately six years or less of
investment should consider purchasing Class II shares. Over time,
however, the higher annual Rule 12b-1 fees on Class II shares
will accumulate to outweigh the difference in front-end sales
charges. For this reason, Class I shares may be more attractive
to long-term investors even if no sales charge reductions are
available to them. Investors should also consider that the higher
Rule 12b-1 fees for Class II shares will generally result in
lower dividends and consequently lower yields for Class II
shares. See "General Information" in the Statement of Additional
Information ("SAI") for more information regarding the
calculation of dividends and yields.
Investors who qualify to purchase Class I shares at reduced sales
charges definitely should consider purchasing Class I shares,
especially if they intend to hold their shares for six years or
more. Investors who qualify to purchase Class I shares at reduced
sales charges but who intend to hold their shares less than six
years should evaluate whether it is more economical to purchase
Class I shares through a Letter of Intent or under Rights of
Accumulation or other means rather than purchasing Class II
shares. INVESTORS INVESTING $1 MILLION OR MORE IN A SINGLE
PAYMENT AND OTHER INVESTORS WHO QUALIFY TO PURCHASE CLASS I
SHARES AT NET ASSET VALUE WILL BE PRECLUDED FROM PURCHASING CLASS
II SHARES. See "How to Buy Shares of the Fund" in the Prospectus.
Each class represents the same interest in the investment
portfolio of the Fund and has the same rights, except that each
class has a different sales charge, bears the separate expenses
of its Rule 12b-1 distribution plan, and has exclusive voting
rights with respect to such plan. The two classes also have
separate exchange privileges.
Each class also has a separate schedule for compensating
securities dealers for selling Fund shares. Investors should take
all of the factors regarding an investment in each class into
account before deciding which class of shares to purchase.
ALTERNATIVE PURCHASE ARRANGEMENTS. The difference between Class I
and Class II shares lies primarily in their front-end and
contingent deferred sales charges and Rule 12b-1 fees as
described below.
A separate Plan of Distribution has been approved and adopted for
each class ("Class I Plan" and "Class II Plan," respectively)
pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as amended ("1940 Act"). The Rule 12b-1 fees charged to each
class will be based solely on the distribution and servicing fees
attributable to that particular class. Any portion of fees
remaining from either plan distribution to securities dealers up
to the maximum amount permitted under each Plan may be used by
the class to reimburse Franklin Templeton Distributors, Inc.
("Distributors") for routine ongoing promotion and distribution
expenses incurred with respect to such class. See "Plan of
Distribution" in the Prospectus for a description of such
expenses.
CLASS I. Class I shares are generally subject to a variable sales
charge upon purchase and not subject to any sales charge upon
redemption. Class I shares are subject to Rule 12b-1 fees of up
to an annual maximum of .25% of average daily net assets of such
shares. With this structure, Class I shares have higher front-end
sales charges than Class II shares and comparatively lower Rule
12b-1 fees.
PLAN OF DISTRIBUTION. Under the Class I Plan, the Fund will
reimburse Distributors or other securities dealers for expenses
incurred in the promotion, servicing, and distribution of Class I
Fund shares. (See "Plan of Distribution" in the Prospectus and
"Distribution Plan" in the Statement of Additional Information
("SAI")).
QUANTITY DISCOUNTS AND PURCHASES AT NET ASSET VALUE. Class I
shares may be purchased at a reduced front-end sales charge or at
net asset value if certain conditions are met. See "How to Buy
Shares of the Fund."
CONTINGENT DEFERRED SALES CHARGE. In most circumstances, a
contingent deferred sales charge will not be assessed against
redemptions of Class I shares. A contingent deferred sales charge
will be imposed on Class I shares only if shares valued at $1
million or more are purchased after February 1, 1995 without a
sales charge and are subsequently redeemed within 12 months of
the calendar month following their purchase. See "Contingent
Deferred Sales Charge" under "How to Sell Shares of the Fund" in
this Supplement.
CLASS II. The current public offering price of Class II shares is
equal to the net asset value, plus a sales charge of 1% of the
amount invested. Class II shares are also subject to a contingent
deferred sales charge of 1.0% if shares are redeemed within 18
months of the calendar month following purchase. In addition,
Class II shares are subject to Rule 12b-1 fees of up to a maximum
of 1.0% of average daily net assets of such shares. Class II
shares have lower front-end sales charges than Class I shares and
comparatively higher Rule 12b-1 fees.
Purchases of Class II shares are limited to amounts below $1
million. Any purchases of $1 million or more will automatically
be invested in Class I shares, since that is more beneficial to
investors. Such purchases, however, may be subject to a
contingent deferred sales charge. Investors may exceed $1 million
in Class II shares by cumulative purchases over a period of time.
Investors who intend to make investments exceeding $1 million,
however, should consider purchasing Class I shares through a
Letter of Intent instead of purchasing Class II shares. See "How
to Buy Shares of the Fund" in the Prospectus for more
information.
PLAN OF DISTRIBUTION. Class II's operating expenses will
generally be higher under the Class II Plan. During the first
year following a purchase of Class II shares, Distributors will
keep a portion of the Plan fees attributable to those shares to
partially recoup fees Distributors pays to securities dealers.
Distributors, or its affiliates, may pay, from its own resources,
a commission of up to 1% of the amount invested to securities
dealers who initiate and are responsible for purchases of Class
II shares.
CONTINGENT DEFERRED SALES CHARGE. Unless a waiver applies, a
contingent deferred sales charge of 1% will be imposed on Class
II shares redeemed within 18 months of their purchase. See
"Contingent Deferred Sales Charges" under "How to Sell Shares of
the Fund" in this Supplement.
MANAGEMENT OF THE FUND
The subsidiaries of Resources are described as the "Franklin
Templeton Group."
The Board of Directors has carefully reviewed the multiclass
structure to ensure that no material conflict exists between the
two classes of shares. Although the Board does not expect to
encounter material conflicts in the future, the Board will
continue to monitor the Fund and will take appropriate action to
resolve such conflicts if any should later arise.
In developing the multiclass structure, the Fund has retained the
authority to establish additional classes of shares. It is the
Fund's present intention to offer only two classes of shares, but
new classes may be offered in the future.
For more information regarding the responsibilities of the Board
and the management of the Fund, please see "Management of the
Fund" in the Prospectus.
CLASS II PLAN OF DISTRIBUTION
Under the Class II Plan, the maximum amount which the Fund is
permitted to pay to Distributors or others for distribution and
related expenses is 0.75% per annum of Class II shares' average
daily net assets, payable quarterly. All expenses of
distribution, marketing and related services over that amount
will be borne by Distributors or others who have incurred them,
without reimbursement by the Fund. In addition, the Class II Plan
provides for an additional payment by the Fund of up to 0.25% per
annum of the class' average daily net assets as a servicing fee,
payable quarterly. This fee will be used to pay securities
dealers or others for, among other things, assisting in
establishing and maintaining customer accounts and records;
assisting with purchase and redemption requests; receiving and
answering correspondence; monitoring dividend payments from the
Fund on behalf of the customers, or similar activities related to
furnishing personal services and/or maintaining shareholder
accounts.
The Class II Plan also covers any payments to or by the Fund,
Advisers, Distributors, or other parties on behalf of the Fund,
Advisers or Distributors, to the extent such payments are deemed
to be for the financing of any activity primarily intended to
result in the sale of Class II shares issued by the Fund within
the context of Rule 12b-1. The payments under the Plan are
included in the maximum operating expenses which may be borne by
Class II of the Fund.
During the first year after the purchase of Class II shares,
Distributors will keep a portion of the Plan fees assessed on
Class II shares to partially recoup fees Distributors pays to
securities dealers.
See the "Plan of Distribution" discussion in the "Management of
the Fund" section in the Prospectus and in the SAI for more
information about both Class I and Class II Plans.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and capital gains will be calculated and distributed in
the same manner for Class I and Class II shares. The per share
amount of any income dividends will generally differ only to the
extent that each class is subject to different Rule 12b-1 fees.
Because ongoing Rule 12b-1 expenses will be lower for Class I
than Class II, the per share dividends distributed to Class I
shares will generally be higher than those distributed to Class
II shares.
Unless otherwise requested in writing or on the Shareholder
Application, income dividends and capital gain distributions, if
any, will be automatically reinvested in the shareholder's
account in the form of additional shares, valued at the closing
net asset value (without a front-end sales charge) on the
dividend reinvestment date. Dividend and capital gain
distributions are only eligible for investment at net asset value
in the same class of shares of the Fund or the same class of
another of the Franklin Templeton Funds. See "Distributions to
Shareholders" in the Prospectus and the SAI for more information.
HOW TO BUY SHARES OF THE FUND
The following discussion supplements the one included in the
Prospectus under "How to Buy Shares of the Fund." THE APPLICATION
FORM INCLUDED WITH THIS SUPPLEMENT MUST ACCOMPANY ANY PURCHASE OF
SHARES. DO NOT USE THE APPLICATION INCLUDED IN THE PROSPECTUS.
PURCHASE PRICE OF FUND SHARES
Shares of both classes of the Fund are offered at the public
offering price, which is the net asset value per share plus a
front-end sales charge, next computed (1) after the shareholder's
securities dealer receives the order which is promptly
transmitted to the Fund, or (2) after receipt of an order by mail
from the shareholder directly in proper form (which generally
means a completed Shareholder Application accompanied by a
negotiable check).
CLASS I. The sales charge for Class I shares is a variable
percentage of the offering price depending upon the amount of the
sale. On orders for 100,000 shares or more, the offering price
will be calculated to four decimal places. On orders for less
than 100,000 shares, the offering price will be calculated to two
decimal places using standard rounding criteria. A description of
the method of calculating net asset value per share is included
under the caption "Valuation of Fund Shares" in the Prospectus.
Set forth below is a table of total front-end sales charges or
underwriting commissions and dealer concessions for Class I
shares:
TOTAL SALES CHARGE
SIZE OF AS A PERCENTAGE AS A PERCENTAGE DEALER
TRANSACTION AT OF OFFERING OF NET AMOUNT CONCESSION AS A
OFFERING PRICE PRICE INVESTED PERCENTAGE OF
OFFERING
PRICE*, ***
Less than 4.50% 4.71% 4.00%
$100,000
$100,000 but 3.75% 3.90% 3.25%
less than
$250,000
$250,000 but 2.75% 2.83% 2.50%
less than
$500,000
$500,000 but 2.25% 2.30% 2.00%
less than
$1,000,000
$1,000,000 or none none (see below)**
more
*Financial institutions or their affiliated brokers may receive
an agency transaction fee in the percentages set forth above.
**The following commissions will be paid by Distributors, out of
its own resources, to securities dealers who initiate and are
responsible for purchases of $1 million or more: 1.00% on sales
of $1 million but less than $2 million, plus 0.80% on sales of $2
million but less than $3 million, plus 0.50% on sales of $3
million but less than $50 million, plus 0.25% on sales of $50
million but less than $100 million, plus 0.15% on sales of $100
million or more. Dealer concession breakpoints are reset every 12
months for purposes of additional purchases.
***At the discretion of Distributors, all sales charges may at
times be allowed to the securities dealer. If 90% or more of the
sales commission is allowed, such securities dealer may be deemed
to be an underwriter as that term is defined in the Securities
Act of 1933, as amended.
No front-end sales charge applies on investments of $1 million or
more, but a contingent deferred sales charge of 1% is imposed on
certain redemptions of all or a portion of investments of $1
million or more within the contingency period. See "How to Sell
Shares of the Fund - Contingent Deferred Sales Charge" in this
Supplement.
The size of a transaction which determines the applicable sales
charge on the purchase of Class I shares is determined by adding
the amount of the shareholder's current purchase plus the cost or
current value (whichever is higher) of a shareholder's existing
investment in one or more of the funds in the Franklin Group of
Funds(Registered Trademark) and the Templeton Group of Funds.
Included for these aggregation purposes are (a) the mutual funds
in the Franklin Group of Funds except Franklin Valuemark Funds
and Franklin Government Securities Trust (the "Franklin Funds"),
(b) other investment products underwritten by Distributors or its
affiliates (although certain investments may not have the same
schedule of sales charges and/or may not be subject to reduction)
and (c) the U.S. registered mutual funds in the Templeton Group
of Funds except Templeton Capital Accumulator Fund, Inc.,
Templeton Variable Annuity Fund, and Templeton Variable Products
Series Fund (the "Templeton Funds"). (Franklin Funds and
Templeton Funds are collectively referred to as the "Franklin
Templeton Funds.") Sales charge reductions based upon aggregate
holdings of (a), (b) and (c) above ("Franklin Templeton
Investments") may be effective only after notification to
Distributors that the investment qualifies for a discount.
Distributors, or one of its affiliates, may make payments, out of
its own resources, of up to 1% of the amount purchased to
securities dealers who initiate and are responsible for purchases
made at net asset value by certain designated retirement plans
(excluding IRA and IRA rollovers), certain non-designated plans,
certain trust companies and trust departments of banks and
certain retirement plans of organizations with collective
retirement plan assets of $10 million or more. See definitions
under "Description of Special Net Asset Value Purchases" and as
set forth in the SAI.
CLASS II. Unlike Class I shares, the front-end sales charges and
dealer concessions for Class II shares do not vary depending on
the amount of purchase. See table below:
TOTAL SALES CHARGE
AS A DEALER
SIZE OF TRANSACTION AS A PERCENTAGE PERCENTAGE CONCESSION AS
AT OFFERING PRICE OF NET OFFERING OF NET A PERCENTAGE
PRICE AMOUNT OF OFFERING
INVESTED PRICE*
Any amount (less
than $1 million) 1.00% 1.01% 1.00%
* During the first year following a purchase of Class II shares,
Distributors will keep a portion of the Plan fees attributable to
those shares to partially recoup fees Distributors pays to
securities dealers. Distributors, or one of its affiliates, may
make an additional payment to the securities dealer, from its own
resources, of up to 1% of the amount invested.
Class II shares redeemed within eighteen months of their purchase
will be assessed a contingent deferred sales charge of 1.0% on
the lesser of the then-current net asset value or the net asset
value of such shares at the time of purchase, unless such charge
is waived as described below.
PURCHASES AT NET ASSET VALUE
The following section, which supersedes that included in the
Prospectus, describes the categories of investors who may
purchase Class I shares of the Fund at net asset value and when
Class I and Class II shares may be purchased at net asset value.
The sections in the Prospectus titled "Quantity Discounts in
Sales Charges" and "Group Purchases" only apply to Class I
shares. Although sales charges on Class II shares may not be
reduced by through a Letter of Intent or Rights of Accumulation
as described under "Quantity Discounts in Sales Charges," the
value of Class II shares owned by an investor may be included in
determining the appropriate sales charges for Class I shares.
PURCHASES AT NET ASSET VALUE
Class I shares may be purchased without the imposition of either
a front-end sales charge ("net asset value") or a contingent
deferred sales charge by (1) officers, trustees, directors and
full-time employees of the Fund, any of the Franklin Templeton
Funds, or of the Franklin Templeton Group, and by their spouses
and family members, including any subsequent payments by such
parties after cessation of employment; (2) companies exchanging
shares with or selling assets pursuant to a merger, acquisition
or exchange offer; (3) insurance company separate accounts for
pension plan contracts; (4) accounts managed by the Franklin
Templeton Group; (5) shareholders of Templeton Institutional
Funds, Inc. reinvesting redemption proceeds from that fund under
an employee benefit plan qualified under Section 401 of the
Internal Revenue Code of 1986, as amended, in shares of the Fund;
(6) certain unit investment trusts and unit holders of such
trusts reinvesting their distributions from the trusts in the
Fund; (7) registered securities dealers and their affiliates, for
their investment account only, and (8) registered personnel and
employees of securities dealers and by their spouses and family
members, in accordance with the internal policies and procedures
of the employing securities dealer.
For either Class I or Class II, the same class of shares of the
Fund may be purchased at net asset value by persons who have
redeemed, within the previous 120 days, their shares of the Fund
or another of the Franklin Templeton Funds which were purchased
with a front-end sales charge or assessed a contingent deferred
sales charge on redemption. If a different class of shares is
purchased, the full front-end sales charge must be paid at the
time of purchase of the new shares. An investor may reinvest an
amount not exceeding the redemption proceeds. Credit will be
given for any contingent deferred sales charge paid on the shares
redeemed and subsequently repurchased, but the period for which
such shares may be subject to a contingent deferred sales charge
will begin as of the date the proceeds are reinvested. Shares of
the Fund redeemed in connection with an exchange into another
fund (see "Exchange Privilege") are not considered "redeemed" for
this privilege. In order to exercise this privilege, a written
order for the purchase of shares of the Fund must be received by
the Fund or the Fund's Shareholder Services Agent within 120 days
after the redemption. The 120 days, however, do not begin to run
on redemption proceeds placed immediately after redemption in a
Franklin Bank Certificate of Deposit ("CD") until the CD
(including any rollover) matures. Reinvestment at net asset value
may also be handled by a securities dealer or other financial
institution, who may charge the shareholder a fee for this
service. The redemption is a taxable transaction but reinvestment
without a sales charge may affect the amount of gain or loss
recognized and the tax basis of the shares reinvested. If there
has been a loss on the redemption, the loss may be disallowed if
a reinvestment in the same fund is made within a 30-day period.
Information regarding the possible tax consequences of such a
reinvestment is included in the tax section of the Prospectus and
the SAI.
For either Class I or Class II, the same class of shares of the
Fund or of another of the Franklin Templeton Funds may be
purchased at net asset value and without a contingent deferred
sales charge by persons who have received dividends and capital
gain distributions in cash from investments in that class of
shares of the Fund within 120 days of the payment date of such
distribution. To exercise this privilege, a written request to
reinvest the distribution must accompany the purchase order.
Additional information may be obtained from Shareholder Services
at 1-800/632-2301. See "Distributions in Cash" under
"Distributions to Shareholders."
Class I shares may be purchased at net asset value and without
the imposition of a contingent deferred sales charge by investors
who have, within the past 60 days, redeemed an investment in a
mutual fund which is not part of the Franklin Templeton Funds and
which charged the investor a contingent deferred sales charge
upon redemption and which has investment objectives similar to
those of the Fund.
Class I shares may be purchased at net asset value and without
the imposition of a contingent deferred sales charge by broker-
dealers who have entered into a supplemental agreement with
Distributors, or by registered investment advisors affiliated
with such broker-dealers, on behalf of their clients who are
participating in a comprehensive fee program (sometimes known as
a wrap fee program).
Class I shares may be purchased at net asset value and without
the imposition of a contingent deferred sales charge by anyone
who has taken a distribution from an existing retirement plan
already invested in the Franklin Templeton Funds (including
former participants of the Franklin Templeton Profit Sharing
401(k) plan), to the extent of such distribution. In order to
exercise this privilege a written order for the purchase of
shares of the Fund must be received by Franklin Templeton Trust
Company (the "Trust Company"), the Fund or Investor Services,
within 120 days after the plan distribution.
Class I shares may also be purchased at net asset value and
without the imposition of a contingent deferred sales charge by
any state, county, or city, or any instrumentality, department,
authority or agency thereof which has determined that the Fund is
a legally permissible investment and which is prohibited by
applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any
registered management investment company ("an eligible
governmental authority"). SUCH INVESTORS SHOULD CONSULT THEIR OWN
LEGAL ADVISORS TO DETERMINE WHETHER AND TO WHAT EXTENT THE SHARES
OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM. Municipal
investors considering investment of proceeds of bond offerings
into the Fund should consult with expert counsel to determine the
effect, if any, of various payments made by the Fund or its
investment manager on arbitrage rebate calculations. If an
investment by an eligible governmental authority at net asset
value is made through a securities dealer who has executed a
dealer agreement with Distributors, Distributors or one of its
affiliates may make a payment, out of their own resources, to
such securities dealer in an amount not to exceed 0.25% of the
amount invested. Contact Franklin's Institutional Sales
Department for additional information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES
Class I shares may also be purchased at net asset value and
without the imposition of a contingent deferred sales charge by
certain designated retirement plans, including profit sharing,
pension, 401(k) and simplified employee pension plans
("designated plans"), subject to minimum requirements with
respect to number of employees or amount of purchase, which may
be established by Distributors. Currently those criteria require
that the employer establishing the plan have 200 or more
employees or that the amount invested or to be invested during
the subsequent 13-month period in the Fund or in any of the
Franklin Templeton Investments totals at least $1,000,000.
Employee benefit plans not designated above or qualified under
Section 401 of the Code ("non-designated plans") may be afforded
the same privilege if they meet the above requirements as well as
the uniform criteria for qualified groups previously described
under "Group Purchases" which enable Distributors to realize
economies of scale in its sales efforts and sales related
expenses.
Class I shares may be purchased at net asset value and without
the imposition of a contingent deferred sales charge by trust
companies and bank trust departments for funds over which they
exercise exclusive discretionary investment authority and which
are held in a fiduciary, agency, advisory, custodial or similar
capacity. Such purchases are subject to minimum requirements with
respect to amount of purchase, which may be established by
Distributors. Currently, those criteria require that the amount
invested or to be invested during the subsequent 13-month period
in this Fund or any of the Franklin Templeton Investments must
total at least $1,000,000. Orders for such accounts will be
accepted by mail accompanied by a check or by telephone or other
means of electronic data transfer directly from the bank or trust
company, with payment by federal funds received by the close of
business on the next business day following such order.
Class I shares may be purchased at net asset value and without
the imposition of a contingent deferred sales charge by trustees
or other fiduciaries purchasing securities for certain retirement
plans of organizations with collective retirement plan assets of
$10 million or more, without regard to where such assets are
currently invested.
For a complete understanding of how to buy shares of the Fund,
this Supplement must be read in conjunction with the Prospectus.
Refer to the SAI for further information regarding net asset
value purchases of Class I shares.
PURCHASING CLASS I AND CLASS II SHARES
When placing purchase orders, investors should clearly indicate
which class of shares they intend to purchase. A purchase order
that fails to specify a class will automatically be invested in
Class I shares. Initial purchases of $1 million or more in a
single payment will be invested in Class I shares. There are no
conversion features attached to either class of shares.
Investors who qualify to purchase Class I shares at net asset
value should purchase Class I rather than Class II shares. See
the section "Purchases at Net Asset Value" and "Description of
Special Net Asset Value Purchases" above for a discussion of when
shares may be purchased at net asset value.
OTHER PROGRAMS AND PRIVILEGES AVAILABLE TO FUND SHAREHOLDERS
With the exception of Systematic Withdrawal Plans, all programs
and privileges detailed under the discussion of "Other Programs
and Privileges Available to the Fund Shareholders" will remain in
effect as described in the Prospectus for the new multiclass
structure. For a complete discussion of these programs, see
"Other Programs and Privileges Available to Fund Shareholders" in
the Prospectus.
SYSTEMATIC WITHDRAWAL PLANS. Subject to the requirements outlined
in the Prospectus, a shareholder may establish a Systematic
Withdrawal Plan for his or her account. With respect to Class I
shares, the contingent deferred sales charge is waived for
redemptions through a Systematic Withdrawal Plan set up prior to
February 1, 1995. With respect to Systematic Withdrawal Plans
set up on or after February 1, 1995, the applicable contingent
deferred sales charge is waived for Class I and Class II share
redemptions of up to 1% monthly of an account's net asset value
(12% annually, 6% semi-annually, 3% quarterly). For example, if
the account maintained an annual balance of $10,000, only $1,200
could be withdrawn through a once-yearly Systematic Withdrawal
Plan free of charge; any amount over that $1,200 would be
assessed a 1% (or applicable) contingent deferred sales charge.
EXCHANGE PRIVILEGE
Shareholders are entitled to exchange their shares for shares of
the same class of other Franklin Templeton Funds which are
eligible for sale in the shareholder's state of residence and in
conformity with such fund's stated eligibility requirements and
investment minimums. Some funds, however, may not offer Class II
shares. Class I shares may be exchanged for Class I shares of any
Franklin Templeton Funds. Class II shares may be exchanged for
Class II shares of any Franklin Templeton Funds. No exchanges
between different classes of shares will be allowed. A contingent
deferred sales charge will not be imposed on exchanges. If,
however, the exchanged shares were subject to a contingent
deferred sales charge in the original fund purchased and shares
are subsequently redeemed within twelve months (Class I shares)
or eighteen months (Class II shares) of the calendar month of the
original purchase date, a contingent deferred sales charge will
be imposed. Investors should review the prospectus of the fund
they wish to exchange from and the fund they wish to exchange
into for all specific requirements or limitations on exercising
the exchange privilege, for example, minimum holding periods or
applicable sales charges.
EXCHANGES OF CLASS I SHARES
The contingency period of Class I shares will be tolled (or
stopped) for the period such shares are exchanged into and held
in a Franklin or Templeton money market fund. If a Class I
account has shares subject to a contingent deferred sales charge,
Class I shares will be exchanged into the new account on a "first-
in, first-out" basis. See also "How to Sell Shares of the Fund -
Contingent Deferred Sales Charge."
EXCHANGES OF CLASS II SHARES
When an account is composed of Class II shares subject to the
contingent deferred sales charge, and shares that are not, the
shares will be transferred proportionately into the new fund.
Shares received from reinvestment of dividends and capital gains
are referred to as "free shares," shares which were originally
subject to a contingent deferred sales charge but to which the
contingent deferred sales charge no longer applies are called
"matured shares," and shares still subject to the contingent
deferred sales charge are referred to as "CDSC liable shares."
CDSC liable shares held for different periods of time are
considered different types of CDSC liable shares. For instance,
if a shareholder has $1,000 in free shares, $2,000 in matured
shares, and $3,000 in CDSC liable shares, and the shareholder
exchanges $3,000 into a new fund, $500 will be exchanged from
free shares, $1,000 from matured shares, and $1,500 from CDSC
liable shares. Similarly, if CDSC liable shares have been
purchased at different periods, a proportionate amount will be
taken from shares held for each period. If, for example, a
shareholder holds $1,000 in shares bought 3 months ago, $1,000
bought 6 months ago, and $1,000 bought 9 months ago, and the
shareholder exchanges $1,500 into a new fund, $500 from each of
these shares will be deemed exchanged into the new fund.
The only money market fund exchange option available to Class II
shareholders is the Franklin Templeton Money Fund II ("Money Fund
II"), a series of the Franklin Templeton Money Fund Trust. No
drafts (checks) may be written on Money Fund II accounts, nor may
shareholders purchase shares of Money Fund II directly. Class II
shares exchanged for shares of Money Fund II will continue to age
and a contingent deferred sales charge will be assessed if CDSC
liable shares are redeemed. No other money market funds are
available for Class II shareholders for exchange purposes. Class
I shares may be exchanged for shares of any of the money market
funds in the Franklin Templeton Funds except Money Fund II. Draft
writing privileges and direct purchases are allowed on these
other money market funds as described in their respective
prospectuses.
To the extent shares are exchanged proportionately, as opposed to
another method, such as first-in first-out, or free-shares
followed by CDSC liable shares, the exchanged shares may, in some
instances, be CDSC liable even though a redemption of such
shares, as discussed elsewhere herein, may no longer be subject
to a CDSC. The proportional method is believed by management to
more closely meet and reflect the expectations of Class II
shareholders in the event shares are redeemed during the
contingency period. For federal income tax purposes, the cost
basis of shares redeemed or exchanged is determined under the
Code without regard to the method of transferring shares chosen
by the Fund.
TRANSFERS
Transfers between identically registered accounts in the same
fund and class are treated as non-monetary and non-taxable
events, and are not subject to a contingent deferred sales
charge. The transferred shares will continue to age from the date
of original purchase. Like exchanges, shares will be moved
proportionately from each type of shares in the original account.
CONVERSION RIGHTS
It is not presently anticipated that Class II shares will be
converted to Class I shares. A shareholder may, however, sell his
Class II shares and use the proceeds to purchase Class I shares,
subject to all applicable sales charges.
See "Exchange Privilege" in the Prospectus for more information.
HOW TO SELL SHARES OF THE FUND
For a discussion regarding the sale of either class of Fund
shares, refer to the section in the Prospectus titled "How to
Sell Shares of the Fund." In addition, the charges described in
this Supplement will also apply to the sale of all Fund shares.
CONTINGENT DEFERRED SALES CHARGE
CLASS I. In order to recover commissions paid to securities
dealers on investments of $1 million or more, a contingent
deferred sales charge of 1% applies to redemptions of those
investments within the contingency period of 12 months of the
calendar month following their purchase. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of
reinvested dividends and capital gain distributions) or the total
cost of such shares at the time of purchase, and is retained by
Distributors. The contingent deferred sales charge is waived in
certain instances. See below and "Purchases at Net Asset Value"
under "How To Buy Shares of the Fund."
CLASS II. Class II shares redeemed within the contingency period
of 18 months of the calendar month following their purchase will
be assessed a contingent deferred sales charge, unless one of the
exceptions described below applies. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of
reinvested dividends and capital gain distributions) or the net
asset value at the time of purchase of such shares, and is
retained by Distributors. The contingent deferred sales charge is
waived in certain instances. See below.
CLASS I AND CLASS II. In determining if a contingent deferred
sales charge applies, shares not subject to a contingent deferred
sales charge are deemed to be redeemed first, in the following
order: (i) Shares representing amounts attributable to capital
appreciation of those shares held less than the contingency
period (12 months in the case of Class I shares and 18 months in
the case of Class II shares); (ii) shares purchased with
reinvested dividends and capital gain distributions; and (iii)
other shares held longer than the contingency period; and
followed by any shares held less than the contingency period, on
a "first in, first out" basis. For tax purposes, a contingent
deferred sales charge is treated as either a reduction in
redemption proceeds or an adjustment to the cost basis of the
shares redeemed.
The contingent deferred sales charge on each class of shares is
waived, as applicable, for: exchanges; any account fees;
distributions to participants in Trust Company qualified
retirement plans due to death, disability or attainment of age 59
1/2; tax-free returns of excess contributions to employee benefit
plans; distributions from employee benefit plans, including
those due to termination or plan transfer; redemptions through a
Systematic Withdrawal Plan set up for shares prior to February 1,
1995, and for Systematic Withdrawal Plans set up thereafter,
redemptions of up to 1% monthly of an account's net asset value
(3% quarterly, 6% semiannually or 12% annually); and redemptions
initiated by the Fund due to a shareholder's account falling
below the minimum specified account size. In addition, shares of
participants in Trust Company retirement plan accounts will, in
the event of death, no longer be subject to the contingent
deferred sales charge.
All investments made during a calendar month, regardless of when
during the month the investment occurred, will age one month on
the last day of that month and each subsequent month.
REQUESTS FOR REDEMPTIONS FOR A SPECIFIED DOLLAR AMOUNT, UNLESS
OTHERWISE SPECIFIED, WILL RESULT IN ADDITIONAL SHARES BEING
REDEEMED TO COVER ANY APPLICABLE CONTINGENT DEFERRED SALES CHARGE
WHILE REQUESTS FOR REDEMPTION OF A SPECIFIC NUMBER OF SHARES WILL
RESULT IN THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE BEING
DEDUCTED FROM THE TOTAL DOLLAR AMOUNT REDEEMED.
VALUATION OF FUND SHARES
The following sentence replaces the first sentence of the first
paragraph in this section; the subsequent paragraph is added to
the end of this section.
The net asset value per share of each class of the Fund is
determined as of the scheduled closing time of the New York Stock
Exchange ("Exchange") (generally 1:00 p.m. Pacific time) each day
that the Exchange is open for trading.
Each of the Fund's classes will bear, pro-rata, all of the common
expenses of the Fund. The net asset value of all outstanding
shares of each class of the Fund will be computed on a pro-rata
basis for each outstanding share based on the proportionate
participation in the Fund represented by the value of shares of
such classes, except that the Class I and Class II shares will
bear the Rule 12b-1 expenses payable under their respective
plans. Due to the specific distribution expenses and other costs
that will be allocable to each class, the dividends paid to each
class of the Fund may vary.
HOW TO GET INFORMATION REGARDING AN INVESTMENT IN THE FUND
The following paragraph replaces the second paragraph in this
section of the Prospectus:
From a touch tone phone, shareholders may access the automated
Franklin TeleFACTS system (day or night) at 1-800/247-1753 to
obtain current price, yield or other performance information
specific to a fund in the Franklin Funds, process an exchange as
discussed under the "Exchange Privilege" in the Prospectus, and
request duplicate confirmation or year-end statements, money fund
checks, if applicable, and deposit slips. Current prices for the
Templeton Funds are also available through TeleFACTS. The system
codes for the Fund's two classes of shares, which will be needed
to access system information, are 103 for Class I and 234 for
Class II followed by the # sign. The system's automated operator
will prompt the caller with easy to follow step-by-step
instructions from the main menu. Other features may be added in
the future.
PERFORMANCE (CLASS II)
Because Class II shares were not offered prior to May 1, 1995, no
performance data is available for these shares. After a
sufficient period of time has passed, Class II performance data
as described in the "Performance" section of the Prospectus will
be available. Except as noted, it is likely that the performance
data relating to Class II shares will reflect lower total return
and yield figures than those for Class I shares because Class II
Rule 12b-1 fees are higher than Class I Rule 12b-1 fees. During
at least the first year of operation Class II share performance
will be higher than Class I in light of the higher front-end
sales charge applicable to Class I shares.
GENERAL INFORMATION
With the exception of Voting Rights, all rights and privileges
detailed under the discussion of "General Information" will
remain in effect as described in the Prospectus for the new
multiclass structure. For a complete discussion of these rights
and privileges, see "General Information" in the Prospectus.
VOTING RIGHTS. Shares of each class represent proportionate
interests in the assets of the Fund and have the same voting and
other rights and preferences as the other class of the Fund for
matters that affect the Fund as a whole. For matters that only
affect a certain class of the Fund's shares, however, only
shareholders of that class will be entitled to vote. Therefore,
each class of shares will vote separately on matters (1)
affecting only that class, (2) expressly required to be voted on
separately by the state corporation law, or (3) required to be
voted on separately by the 1940 Act or the rules adopted
thereunder. For instance, if a change to the Rule 12b-1 plan
relating to Class I shares requires shareholder approval, only
shareholders of Class I may vote on changes to the Rule 12b-1
plan affecting that class. Similarly, if a change to the Rule 12b-
1 plan relating to Class II shares requires shareholder approval,
only shareholders of Class II may vote on the change to such
plan. On the other hand, if there is a proposed change to the
investment objective of the Fund, this affects all shareholders,
regardless of which class of shares they hold, and therefore,
each share has the same voting rights. For more information
regarding voting rights, see the "Voting Rights" discussion in
the Prospectus under the heading "General Information."
03 S
SUPPLEMENT DATED MAY 1, 1995
TO THE STATEMENT OF ADDITIONAL INFORMATION OF
FRANKLIN EQUITY FUND
dated November 1, 1994
As described in the Prospectus, this Fund now offers two
classes of shares to its investors. This new structure
allows investors to consider, among other features, the
impact of sales charges and distribution fees ("Rule 12b-1
fees") on their investments in this Fund.
ADD THE FOLLOWING AS THE LAST SENTENCE OF THE PARAGRAPH
DESCRIBING FEES PAID TO THE MANAGER UNDER "INVESTMENT
ADVISORY AND OTHER SERVICES":
Each class will pay its share of the fee as determined by
the proportion of the Fund that it represents.
EACH NEW CLASS OF SHARES HAS A SEPARATE DISTRIBUTION PLAN. FOR
THIS REASON, THE TITLE AND FIRST PARAGRAPH UNDER THE SECTION
"DISTRIBUTION PLAN" HAS BEEN REPLACED WITH THE FOLLOWING
PARAGRAPH:
PLANS OF DISTRIBUTION
Each class of the Fund has adopted a Distribution Plan
("Class I Plan" and "Class II Plan," respectively, or
"Plans") pursuant to Rule 12b-1 under the 1940 Act.
Pursuant to the Class I Plan, the Fund may pay up to a
maximum of 0.25% per annum (0.25 of 1%) of its average
daily net assets for expenses incurred in the promotion
and distribution of its shares.
THE NEXT THREE PARAGRAPHS OF THIS SECTION IN THE STATEMENT
OF ADDITIONAL INFORMATION ONLY CONCERN THE CLASS I PLAN. THE
FOLLOWING PARAGRAPHS HAVE BEEN ADDED TO THIS SECTION AFTER
THE DISCUSSION OF THE CLASS I PLAN TO DESCRIBE CLASS II:
THE CLASS II PLAN
Under the Class II Plan, the Fund is permitted to pay
to Distributors or others annual distribution fees,
payable quarterly, of .75% per annum of Class II's
average daily net assets, in order to compensate
Distributors or others for providing distribution and
related services and bearing certain expenses of the
Class. All expenses of distribution and marketing over
that amount will be borne by Distributors, or others
who have incurred them, without reimbursement by the
Fund. In addition to this amount, under the Class II
Plan, the Fund shall pay .25% per annum, payable
quarterly, of the Class' average daily net assets as a
servicing fee. This fee will be used to pay dealers or
others for, among other things, assisting in
establishing and maintaining customer accounts and
records; assisting with purchase and redemption
requests; receiving and answering correspondence;
monitoring dividend payments from the Fund on behalf of
the customers, and similar activities related to
furnishing personal services and maintaining
shareholder accounts. Distributors may pay the
securities dealer, from its own resources, a commission
of up to 1% of the amount invested.
THE SUBSEQUENT PARAGRAPHS IN THE SECTION "DISTRIBUTION PLAN"
APPLY EQUALLY TO BOTH CLASS I AND CLASS II PLANS, WITH THE
EXCEPTION THAT THE SENTENCE REGARDING UNREIMBURSED EXPENSES
REFERS TO THE CLASS I PLAN ONLY.
THE OFFICERS AND DIRECTORS SECTION IS REVISED TO READ AS
FOLLOWS:
OFFICERS AND DIRECTORS
The Board of Directors has the responsibility for the
overall management of the Fund, including general
supervision and review of its investment activities. The
directors, in turn, elect the officers of the Fund, who are
responsible for administering the day-to-day operations of
the Fund. The affiliations of the officers and directors and
their principal occupations for the past five years are
listed below. Directors who are deemed to be "interested
persons" of the Fund, as defined in the 1940 Act, are
indicated by an asterisk (*).
NAME, ADDRESS & AGE
POSITIONS AND OFFICES WITH THE FUND
PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
Frank H. Abbott, III
1045 Sansome St.
San Francisco, CA 94111
74
Director
President and Director, Abbott Corporation (an investment
company); and director, trustee or managing general partner,
as the case may be, of 30 of the investment companies in the
Franklin Group of Funds.
Harris J. Ashton
General Host Corporation
Metro Center, 1 Station Place
Stamford, CT 06904-2045
62
Director
President, Chief Executive Officer and Chairman of the
Board, General Host Corporation (nursery and craft centers);
Director, RBC Holdings, Inc. (a bank holding company) and
Bar-S Foods; and director, trustee or managing general
partner, as the case may be, of 54 of the investment
companies in the Franklin Templeton Group of Funds.
S. Joseph Fortunato
Park Avenue at Morris County
P. O. Box 1945
Morristown, NJ 07962-1945
62
Director
Member of the law firm of Pitney, Hardin, Kipp & Szuch;
Director of General Host Corporation; director, trustee or
managing general partner, as the case may be, of 56 of the
investment companies in the Franklin Templeton Group of
Funds.
David W. Garbellano
111 New Montgomery St., #402
San Francisco, CA 94105
80
Director
Private Investor; Assistant Secretary/Treasurer and
Director, Berkeley Science Corporation (a venture capital
company); and director, trustee or managing general partner,
as the case may be, of 29 of the investment companies in the
Franklin Group of Funds.
*Charles B. Johnson
777 Mariners Island Blvd.
San Mateo, CA 94404
62
Chairman of the Board and Director
President and Director, Franklin Resources, Inc.; Chairman
of the Board and Director, Franklin Advisers, Inc. and
Franklin Templeton Distributors, Inc.; Director,
Franklin/Templeton Investor Services, Inc. and General Host
Corporation; 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 55 of the
investment companies in the Franklin Templeton Group of
Funds.
*Charles E. Johnson
777 Mariners Island Blvd.
San Mateo CA 94404
38
President and Director
Senior Vice President and Director, Franklin Resources,
Inc.; Senior Vice President, Franklin Templeton
Distributors, Inc.; President and Director, Templeton
Worldwide, Inc. and Franklin Institutional Services
Corporation; officer and/or director, as the case may be, of
some of the subsidiaries of Franklin Resources, Inc. and
officer and/or director or trustee, as the case may be, of
24 of the investment companies in the Franklin Templeton
Group of Funds.
*Rupert H. Johnson, Jr.
777 Mariners Island Blvd.
San Mateo, CA 94404
54
Vice President and Director
Executive Vice President and Director, Franklin Resources,
Inc. and Franklin Templeton Distributors, Inc.; President
and Director, Franklin Advisers, Inc.; Director,
Franklin/Templeton Investor Services, Inc.; and officer
and/or director, trustee or managing general partner, as the
case may be, of most other subsidiaries of Franklin
Resources, Inc. and of 42 of the investment companies in the
Franklin Templeton Group of Funds.
Frank W. T. LaHaye
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014
66
Director
General Partner, Peregrine Associates and Miller & LaHaye,
which are General Partners of Peregrine Ventures and
Peregrine Ventures II (venture capital firms); Chairman of
the Board and Director, Quarterdeck Office Systems, Inc.;
Director, FischerImaging Corporation; and director or
trustee, as the case may be, of 25 of the investment
companies in the Franklin Group of Funds.
*R. Martin Wiskemann
777 Mariners Island Blvd.
San Mateo, CA 94404
68
Vice President and Director
Senior Vice President, Portfolio Manager and Director,
Franklin Advisers, Inc.; Senior Vice President, Franklin
Management, Inc.; Vice President, Treasurer and Director,
ILA Financial Services, Inc. and Arizona Life Insurance
Company of America; and officer and/or director, as the case
may be, of 19 of the investment companies in the Franklin
Group of Funds.
Harmon E. Burns
777 Mariners Island Blvd.
San Mateo, CA 94404
50
Vice President
Executive Vice President, Secretary and Director, Franklin
Resources, Inc.; Executive Vice President and Director,
Franklin Templeton Distributors, Inc.; Executive Vice
President, Franklin Advisers, Inc.; Director,
Franklin/Templeton Investor Services, Inc.; officer and/or
director, as the case may be, of other subsidiaries of
Franklin Resources, Inc.; and officer and/or director or
trustee of 41 of the investment companies in the Franklin
Templeton Group of Funds.
Kenneth V. Domingues
777 Mariners Island Blvd.
San Mateo, CA 94404
62
Vice President - Financial Reporting and Accounting
Standards
Senior Vice President, Franklin Resources, Inc., Franklin
Advisers, Inc., and Franklin Templeton Distributors, Inc.;
officer and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and Officer and/or
managing general partner, as the case may be, of 36 of the
investment companies in the Franklin Group of Funds.
Martin L. Flanagan
777 Mariners Island Blvd.
San Mateo, CA 94404
34
Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and
Treasurer, Franklin Resources, Inc.; Executive Vice
President, Templeton Worldwide, Inc.; Senior Vice President
and Treasurer, Franklin Advisers, Inc. and Franklin
Templeton Distributors, Inc.; Senior Vice President,
Franklin/Templeton Investor Services, Inc.; officer of most
other subsidiaries of Franklin Resources, Inc.; and officer
of 60 of the investment companies in the Franklin Templeton
Group of Funds.
Deborah R. Gatzek
777 Mariners Island Blvd.
San Mateo, CA 94404
46
Vice President and Secretary
Senior Vice President - Legal, Franklin Resources, Inc. and
Franklin Templeton Distributors, Inc.; Vice President,
Franklin Advisers, Inc. and officer of 36 of the investment
companies in the Franklin Group of Funds.
Diomedes Loo-Tam
777 Mariners Island Blvd.
San Mateo, CA 94404
56
Treasurer and Principal Accounting Officer
Employee of Franklin Advisers, Inc.; and officer of 36 of
the investment companies in the Franklin Group of Funds.
Edward V. McVey
777 Mariners Island Blvd.
San Mateo, CA 94404
57
Vice President
Senior Vice President/National Sales Manager,
Franklin/Templeton Distributors, Inc.; and officer of 31 of
the investment companies in the Franklin Group of Funds.
Directors not affiliated with the investment manager
may be but are not currently paid fees or expenses
incurred in connection with attending meetings. As
indicated above, certain of the directors and officers
hold positions with other companies in the Franklin
Group of Funds(Registered Trademark) and the Templeton
Funds. The following table indicates the total fees
received by such directors from other Franklin
Templeton Funds for which they serve as directors,
trustees or managing general partners.
<TABLE>
<CAPTION>
NUMBER OF
FRANKLIN
TEMPLETON
BOARDS
COMPENSATION TOTAL
AGGREGATE ON WHICH FROM FRANKLIN
NAME COMPENSATION EACH SERVES TEMPLETON FUNDS**
<S> <C> <C> <C>
Mr. Abbott FROM FUND* 30 $176,870
Mr. Ashton $4,800 54 $319,925
Mr. Fortunato $4,800 56 $336,065
Mr.
Garbellano $4,800 29 $153,300
Mr. LaHaye $5,000 25 $150,817
</TABLE>
* For the fiscal year ended June 30, 1994.
** For the calendar year ended December 31, 1994.
No officer or director received any other compensation
directly from the Fund. As of March 31, 1995, the
directors and officers, as a group, owned of record and
beneficially approximately less than 1% of the total
outstanding shares of the Fund. 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. Charles E. Johnson is the son and nephew,
respectively, of Charles B. Johnson and Rupert H. Johnson,
Jr., who are brothers.
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 of the Fund's
knowledge, no other person holds beneficially or of
record more than 5% of the Fund's outstanding shares.
THE FOLLOWING SUBSTITUTES SUBSECTION "PURCHASES AT NET ASSET VALUE"
UNDER "ADDITIONAL INFORMATION REGARDING FUND SHARES":
SPECIAL NET ASSET VALUE PURCHASES. As discussed in the
Prospectus under "How to Buy Shares of the Fund -
Description of Special Net Asset Value Purchases,"
certain categories of investors may purchase Class I
shares of the Fund at net asset value (without a front-
end or contingent deferred sales charge). Distributors
or one of its affiliates may make payments, out of its
own resources, to securities dealers who initiate and
are responsible for such purchases, as indicated below.
Distributors may make these payments in the form of
contingent advance payments, which may require
reimbursement from the securities dealers with respect
to certain redemptions made within 12 months of the
calendar month following purchase, as well as other
conditions, all of which may be imposed by an agreement
between Distributors, or its affiliates, and the
securities dealer.
The following amounts will be paid by Distributors or
one of its affiliates, out of its own resources, to
securities dealers who initiate and are responsible for
(i) purchases of most equity and fixed-income Franklin
Templeton Funds made at net asset value by certain
designated retirement plans (excluding IRA and IRA
rollovers): 1.00% on sales of $1 million but less than
$2 million, plus 0.80% on sales of $2 million but less
than $3 million, plus 0.50% on sales of $3 million but
less than $50 million, plus 0.25% on sales of $50
million but less than $100 million, plus 0.15% on sales
of $100 million or more; and (ii) purchases of most
fixed-income Franklin Templeton Funds made at net asset
value by non-designated retirement plans: 0.75% on
sales of $1 million but less than $2 million, plus
0.60% on sales of $2 million but less than $3 million,
plus 0.50% on sales of $3 million but less than $50
million, plus 0.25% on sales of $50 million but less
than $100 million, plus 0.15% on sales of $100 million
or more. These payment breakpoints are reset every 12
months for purposes of additional purchases. With
respect to purchases made at net asset value by certain
trust companies and trust departments of banks and
certain retirement plans of organizations with
collective retirement plan assets of $10 million or
more, Distributors, or one of its affiliates, out of
its own resources, may pay up to 1% of the amount
invested.
THE FOLLOWING PARAGRAPHS ARE ADDED TO "ADDITIONAL INFORMATION
REGARDING FUND SHARES":
The Fund may impose a $10 charge for each returned item ,
against any shareholder account which, in connection with
the purchase of Fund shares, submits a check or a draft
which is returned unpaid to the Fund.
LETTER OF INTENT
An investor may qualify for a reduced sales charge on
the purchase of Class I shares, as described in the
Prospectus. At any time within 90 days after the first
investment which the investor wants to qualify for the
reduced sales charge, a signed Shareholder Application,
with the Letter of Intent ("Letter") section completed,
may be filed with the Fund. After the Letter is filed,
each additional investment made will be entitled to the
sales charge applicable to the level of investment
indicated on the Letter. Sales charge reductions based
upon purchases in more than one company in the Franklin
Templeton Group will be effective only after
notification to Distributors that the investment
qualifies for a discount. The shareholder's holdings in
the Franklin Templeton Group, including Class II
shares, acquired more than 90 days before the Letter of
Intent is filed will be counted towards completion of
the Letter of Intent but will not be entitled to a
retroactive downward adjustment of sales charge. Any
redemptions made by the shareholder, other than by a
qualifying employee benefit plan (the "Benefit Plan"),
during the 13-month period will be subtracted from the
amount of the purchases for purposes of determining
whether the terms of the Letter have been completed.
If the Letter is not completed within the 13-month
period, there will be an upward adjustment of the sales
charge, depending upon the amount actually purchased
(less redemptions) during the period. The upward
adjustment does not apply to qualifying employee
benefit plans. An investor who executes a Letter prior
to a change in the sales charge structure for the Fund
will be entitled to complete the Letter at the lower of
(i) the new sales charge structure; or (ii) the sales
charge structure in effect at the time the Letter was
filed with the Fund.
As mentioned in the Prospectus, five percent (5%) of
the amount of the total intended purchase will be
reserved in shares of the Fund registered in the
investor's name unless the investor is a Benefit Plan.
If the total purchases, less redemptions, equal the
amount specified under the Letter, the reserved shares
will be deposited to an account in the name of the
investor or delivered to the investor or the investor's
order. If the total purchases, less redemptions, exceed
the amount specified under the Letter and is an amount
which would qualify for a further quantity discount, a
retroactive price adjustment will be made by
Distributors and the dealer through whom purchases were
made pursuant to the Letter (to reflect such further
quantity discount) on purchases made within 90 days
before and on those made after filing the Letter. The
resulting difference in offering price will be applied
to the purchase of additional shares at the offering
price applicable to a single purchase or the dollar
amount of the total purchases. If the total purchases,
less redemptions, are less than the amount specified
under the Letter, the investor will remit to
Distributors an amount equal to the difference in the
dollar amount of sales charge actually paid and the
amount of sales charge which would have applied to the
aggregate purchases if the total of such purchases had
been made at a single time. Upon such remittance the
reserved shares held for the investor's account will be
deposited to an account in the name of the investor or
delivered to the investor or to the investor's order.
If within 20 days after written request such difference
in sales charge is not paid, the redemption of an
appropriate number of reserved shares to realize such
difference will be made. In the event of a total
redemption of the account prior to fulfillment of the
Letter of Intent, the additional sales charge due will
be deducted from the proceeds of the redemption, and
the balance will be forwarded to the investor.
If a Letter of Intent is executed on behalf of a
benefit plan (such plans are described under "Purchases
at Net Asset Value" in the Prospectus), the level and
any reduction in sales charge for these employee
benefit plans will be based on actual plan
participation and the projected investments in the
Franklin Templeton Group under the Letter. Benefit
Plans are not subject to the requirement to reserve 5%
of the total intended purchase, or to any penalty as a
result of the early termination of a plan, nor are
Benefit Plans entitled to receive retroactive
adjustments in price for investments made before
executing Letters.
THE "PURCHASES AND REDEMPTIONS THROUGH SECURITIES DEALERS" AND
"CALCULATION OF NET ASSET VALUE" SUBSECTIONS ARE MODIFIED TO REFLECT
THAT THE FUND'S NET ASSET VALUE IS CALCULATED FOR EACH CLASS
SEPARATELY AS OF THE SCHEDULED CLOSING OF THE NEW YORK STOCK
EXCHANGE (GENERALLY 1:00 P.M. PACIFIC TIME).
THE FOLLOWING LANGUAGE IS SUBSTITUTED FOR THE DISCUSSION
"REINVESTMENT DATE" UNDER "ADDITIONAL INFORMATION REGARDING FUND
SHARES":
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 "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.
THE FOLLOWING LANGUAGE IS ADDED UNDER "GENERAL INFORMATION" UNDER
THE DISCUSSION "TOTAL RETURN":
YIELD
Current yield reflects the income per share earned by the
Fund's portfolio investments.
Current yield is determined by dividing the net investment
income per share earned during a 30- day base period by the
maximum offering price per share on the last day of the
period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during
the base period. The yield for the Fund for the 30- day
period ended on June 30, 1994 was 1.06%.
This figure was obtained using the following SEC formula:
Yield = 2 [( a- b + 1)6 - 1]
cd
where:
a = dividends and interest earned during the period
.
b = expenses accrued for the period (net of reimbursements)
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
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 Fund's 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 the Fund during the past 12 months by
a current maximum offering price. Under certain circumstances,
such as when there has been a change in the amount of dividend
payout, or a fundamental change in investment policies, it might
be appropriate to annualize the dividends paid over the period
such policies were in effect, rather than using the dividends
during the past 12 months. The current distribution rate differs
from the current yield computation because it may include
distributions to shareholders from sources other than dividends
and interest, such as premium income from option writing and
short-term capital gains and is calculated over a different
period of time. The distribution rate for the fiscal year ended
June 30, 1994 was 1.53%.
FINANCIAL STATEMENTS
The unaudited financial statements of the Fund for the six months
ended December 31, 1994, are incorporated herein by reference.
The current Prospectus and Statement of Additional Information
are incorporated herein by reference to Form Type 497 filed
electronically by Registrant with the U.S. Securities and
Exchange Commission on February 28, 1995, Accession Number
0000083297 - 95 - 000004.
FRANKLIN EQUITY FUND
File Nos. 2-10103
811-334
FORM N-1A
PART C
Other Information
Item 24 Financial Statements and Exhibits
a) Unaudited Financial Statements incorporated herein by
reference to the Registrant's Semi-Annual Report to
Shareholders dated December 31, 1994 as filed with the
SEC on Form Type N-30D on February 24, 1995
(i) Statement of Investments in Securities and Net
Assets - December 31, 1994
(ii) Statements of Assets and Liabilities - December
31, 1994
(iii)Statements of Operations - for the six months
ended December 31, 1994
(iv) Statements of Changes in Net Assets - for the six
months ended December 31, 1994 and the year ended
June 30, 1994
(v) Notes to Financial Statements
b) Audited Financial Statements for dated June 30, 1994 are
incorporated herein by reference to Part B of Form Type 497 filed
by Registrant with the U.S. Securities and Exchange Commission on
February 28, 1995, Accession Number: 0000083297-95-000004
(i) Report of Independent Auditors - August 3, 1994
(ii) Statement of Investments in Securities and Net
Assets - June 30, 1994
(iii) Statements of Assets and Liabilities - June 30,
1994
(iv) Statements of Operations - for the year ended
June 30, 1994
(v) Statements of Changes in Net Assets - for the
years ended June 30, 1994 and 1993
(vi) Notes to Financial Statements
b) Exhibits:
The following exhibits are attached herewith, except 6(ii),
8(iii), 13(i), 14(i), (ii), (iii), (iv), (v), and 16(i), which
are incorporated by reference.
(1) copies of the charter as now in effect;
(i) Articles of Incorporation dated August 28, 1984
Registrant on Form N-1A
(ii) Certificate of Amendment of Articles of
Incorporation dated March 17, 1995
(2) copies of the existing By-Laws or instruments
corresponding thereto;
(i) By-Laws
(ii) Amendment to By-Laws dated September 29, 1987
(iii) Amendment to By-Laws dated November 17, 1987
(iv) Amendment to By-Laws dated January 18, 1994
(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 Registrant and
Franklin Advisers, Inc. dated November 1, 1986
(6) copies of each underwriting or distribution contract between
the Registrant and a principal underwriter, and specimens or
copies of all agreements between principal underwriters and
dealers;
(i) Form of Amended and Restated Distribution
Agreement between Registrant and
Franklin/Templeton Distributors, Inc.
(ii) Form of Dealer Agreement between Franklin/
Templeton Distributors, Inc. and securities
dealers
Registrant: Franklin Federal Tax-Free Income
Fund
Filing: Post Effective Amendment No. 17 to
Registration Statement on Form N1-A
File No. 2-75925
Filing Date: March 28, 1995
(7) copies of all bonus, profit sharing, pension or other similar
contracts or arrangements wholly or partly for the benefit of
directors or officers of the Registrant in their capacity as
such; any such plan that is not set forth in a formal
document, furnish a reasonably detailed description thereof;
Not Applicable
(8) copies of all custodian agreements and depository contracts
(i) Custodian Agreement between Registrant and Bank
of America NT & SA dated April 1, 1995
(ii) Amendment to Custodian Agreement
(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
Registrant: Franklin Premier Return Fund
Filing: Post Effective Amendment No. 54 to
Registration Statement of Registrant on Form
N-1A
File No. 2-12647
Filing Date: February 27, 1995
(9) copies of all other material contracts not made in the
ordinary course of business which are to be performed in
whole or in part at or after the date of filing the
Registration Statement;
(i) Agreement of Merger between Franklin Equity Fund
and Research Equity Fund, Inc. dated October 24,
1984
(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 Auditors
(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 2121
(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) Franklin IRA Form
Filing: Post-effective Amendment No. 26 to
Registration Statement on Form N-1A
File No. 2-30203
Filing Date: August 1, 1989
(ii) Franklin 403(b) Retirement Plan
Filing: Post-effective Amendment No. 26 to
Registration Statement on Form N-1A
File No. 2-30203
Filing Date: August 1, 1989
(iii)Franklin Trust Company Insured CD IRA
Filing: Post-effective Amendment No. 26 to
Registration Statement on Form N-1A
File No. 2-30203
Filing Date: August 1, 1989
(iv)Franklin Business Retirement Plans
Filing: Post-effective Amendment No. 26 to
Registration Statement on Form N-1A
File No. 2-30203
Filing Date: August 1, 1989
(v) Franklin SEP-IRA (5305-SEP and 5305A-SEP)
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) Distribution Plan pursuant to Rule 12b-1 between
Registrant and Franklin/Templeton Distributors,
Inc. effective May 1, 1994
(ii)Form of Class II Distribution Plan pursuant to Rule
12b-1
(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 on Form N-1A
File No. 33-11963
Filing Date: March 1, 1995
(17)Power of Attorney
(i) Power of Attorney dated February 16, 1995
(ii) Certificate of Secretary dated February 16, 1995
Item 25 Persons Controlled by or under Common Control with
Registrant
None
Item 26 Number of Holders of Securities
As of February 28, 1995, the number of record holders of the
only class of securities of the Registrant was as follows:
Title of Class Record Holders
Class I Class II
Capital Stock 42,900 None
Item 27 Indemnification
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
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
director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding)
is asserted by such director, 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 is against public policy as expressed
in the Act and will be governed by the final adjudication of
such issue.
Item 28 Business and Other Connections of Investment Adviser
The officers and directors of the Registrant's investment
adviser also serve as officers and/or directors for (1) the
adviser's corporate parent, Franklin Resources, Inc., and/or
(2) other investment companies in the Franklin Group of
Funds. In addition, Mr. Charles B. Johnson is a director of
General Host Corporation. For additional information please
see Part B.
Item 29 Principal Underwriters
a) Franklin/Templeton Distributors, Inc.("Distributors")
also acts as principal underwriter of shares of AGE High
Income Fund, Inc., Franklin Custodian Funds, Inc., Franklin
Gold Fund, Franklin Municipal Securities Trust, Franklin
California Tax-Free Income Fund, Inc., Institutional
Fiduciary Trust, Franklin Money Fund, Franklin Federal Money
Fund, Franklin Tax Exempt Money Fund, Franklin Real Estate
Securities Fund, Franklin Strategic Mortgage Portfolio,
Franklin New York Tax-Free Income Fund, Inc., Franklin
California Tax-Free Trust, Franklin Investors Securities
Trust, Franklin Premier Return Fund, Franklin Tax-Free
Trust, Franklin New York Tax-Free Trust, Franklin Strategic
Mortgage Portfolio, Franklin Strategic Series, Franklin
International Trust, Franklin Tax-Advantaged International
Bond Fund, Franklin Tax-Advantaged U.S. Government
Securities Fund, Franklin Tax-Advantaged High Yield
Securities Fund, Franklin Managed Trust, Franklin Balance
Sheet Investment Fund, Franklin Federal Tax-Free Income
Fund,Franklin Real Estate Securities Fund, Franklin
Templeton Global Trust, Templeton Variable Products Series
Fund, Templeton Real Estate Securities Fund, Templeton
Growth Fund, Inc., Templeton Funds, Inc., Templeton Smaller
Companies Growth Fund, Inc., Templeton Income Trust,
Templeton Global Opportunities Trust, Templeton
Institutional Funds, Inc., Templeton American Trust, Inc.,
Templeton Capital Accumulator Fund, Inc., Templeton
Developing Markets Trust, Franklin Templeton Japan Fund,
Templeton Global Investment Trust and Templeton Variable
Annuity 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 Investors Services, Inc., both of
whose address is 777 Mariners Island Blvd., San Mateo, CA
94404.
Item 31 Management Services
There are no management-related service contracts not
discussed in Part A or Part B.
Item 32 Undertakings
a) The Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting upon the
question of removal of any director or directors when
requested in writing to do so by the record holders of not
less than 10 per cent of the Registrant's outstanding shares
and to assist its shareholders in the communication with
other shareholders in accordance with the requirements of
Section 16(c) of the Investment Company Act of 1940.
b) The Registrant hereby undertakes to comply with the
information requirement in Item 5A of the Form N-1A by
including the required information in the Fund's annual
report and to furnish each person to whom a prospectus is
delivered a copy of the annual report upon request and
without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all of the requirements for effectiveness
of this Post-Effective Amendment to the 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 21th day of April 1995.
FRANKLIN EQUITY FUND
(Registrant)
By: Charles E. Johnson*
Charles E. Johnson, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
Charles E. Johnson* Principal Executive Officer and Director
Charles E. Johnson Dated: April 21, 1995
Martin L. Flanagan* Principal Financial Officer
Martin L. Flanagan Dated: April 21, 1995
Diomedes Loo-Tam* Principal Accounting Officer
Diomedes Loo-Tam Dated: April 21, 1995
Charles B. Johnson* Director
Charles B. Johnson Dated: April 21, 1995
Frank H. Abbott III* Director
Frank H. Abbott III Dated: April 21, 1995
Harris J. Ashton* Director
Harris J. Ashton Dated: April 21, 1995
S. Joseph Fortunato* Director
S. Joseph Fortunato Dated: April 21, 1995
David W. Garbellano* Director
David W. Garbellano Dated: April 21, 1995
Rupert H. Johnson, Jr.* Director
Rupert H. Johnson, Jr. Dated: April 21, 1995
Frank W.T. LaHaye* Director
Frank W.T. LaHaye Dated: April 21, 1995
R. Martin Wiskemann* Director
R. Martin Wiskemann Dated: April 21, 1995
*By/s/Larry L. Greene
Larry L. Greene, Attorney-in-Fact
(Pursuant to Power of Attorney filed herewith)
Equityex.doc
FRANKLIN EQUITY
FUND REGISTRATION
STATEMENT
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION
LOCATION
EX-99.B1(i) Articles of Incorporation Attached
dated August 28, 1984
EX-99.B1(ii) Amendment to Articles of Attached
Incorporation dated March
17, 1995
EX-99.B2(i) By-Laws Attached
EX-99.B2(ii) Amendment to By-Laws dated Attached
September 29, 1987
EX-99.B2(iii) Amendment to By-Laws dated Attached
November 17, 1987
EX-99.B2(iv) Amendment to By-Laws dated Attached
February 28, 1994
EX-99.B5(i) Management Agreement Attached
between Registrant and
Franklin Advisers, Inc.
dated November 1, 1986
EX-99.B6(i) Amended and Restated Attached
Distribution Agreement
between Registrant and
Franklin Distributors
dated April 20, 1993
EX-99.B8(i) Custodian Agreement between Attached
Registrant and Bank of
America NT & SA dated
February 1, 1983
EX-99.B8(ii) Amendment to Custodian Attached
Agreement between
Registrant and Bank of
America NT & SA dated
April 2, 1990
EX-99.B8(iii) Amendment to Custodian *
Agreement between
Registrant and Bank of
America NT & SA dated
December 1, 1994
EX-99.B9(i) Agreement of Merger dated Attached
October 24, 1984
EX-99.B11(i) Consent of Independent Attached
Auditors dated April 14,
1995
EX-99.B13(i) Letter of Understanding Attached
dated April 12, 1995
EX-99.B14(i) Franklin IRA Form filed *
August 1, 1989
EX-99.B14(ii) Franklin 403(b) Retirement *
Plan filed August 1, 1989
EX Franklin Trust Company *
99.B14(iii) Insured CD IRA filed August
1, 1989
EX-99.B14(iv) Franklin Business *
Retirement Plans filed
August 1, 1989
EX-99.B14(v) Franklin SEP-IRA (5305-SEP *
and 5305A-SEP) filed August
1, 1989
EX-99B.15(i) Distribution Plan between Attached
Franklin Equity Fund and
Franklin/Templeton
Distributors, Inc. dated
May 1, 1994
EX-99B.15(ii) Class II Distribution Plan Attached
between Franklin Equity Fund and
Franklin/Templeton
Distributors, Inc. dated
March 30, 1995
EX-99B.17(i) Power of Attorney dated Attached
February 16, 1995
EX-99B.17(ii) Certificate of Secretary Attached
dated February 16, 1995
*Incorporated by Reference
ARTICLES OF INCORPORATION
OF
FRANKLIN EQUITY FUND
I
The name of this corporation is Franklin Equity Fund.
II
The purpose of this corporation is to engage in any lawful
act or activity for which a corporation may be organized under
the General Corporation Law of California other than the banking
business, the trust company business, or the practice of a
profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this
corporation's initial agent for service of process is: HARMON E.
BURNS, 155 Bovet Road, San Mateo, California 94402.
IV
This corporation is authorized to issue only one class of
shares of stock, to wit, common stock, and the total number of
shares of common stock which this corporation is authorized to
issue is Five Billion (5,000,000,000).
V
The shares of common stock of the corporation shall be
subject to redemption as hereinafter set forth:
(1) Redemption by Shareholders:
(a) Each shareholder of this corporation at any time
may redeem all or any portion of such shareholder's shares by
tendering the shares to be redeemed in such manner as the Board
of Directors of the corporation may determine, and to receive the
redemption price next determined after a proper tender is made to
the corporation. The redemption price shall be determined in
accordance with the provisions set forth in the current
prospectus of the corporation, and shall be paid in cash or in
kind in such manner as the Board of Directors shall determine.
(b) The right of redemption by the shareholder may be
suspended (i) for any periods during which the New York Stock
Exchange is closed (other than for customary weekend and holiday
closings), (ii) when trading in the markets the corporation
normally utilizes is restricted or when an emergency exists as
determined by the United States Securities and Exchange
Commission as a result of which disposal of the corporation's
portfolio securities or a fair determination of the value of the
corporation's net assets is not reasonably practicable; or (iii)
for such other periods as the United States Securities and
Exchange Commission by order may permit for protection of the
corporation's shareholders.
(2) Redemption by Corporation:
(a) At the option of the corporation, to be exercised
at the discretion of the Board of Directors, the corporation may
redeem the shares owned by a shareholder if at any time the
shares of such shareholder do not have a total value (per share
net asset value times the number of shares held) of at least $75.
The Board of Directors shall cause written notice to be mailed to
any such shareholder at the address of such shareholder as then
reflected on the books of the corporation of the corporation's
intention to exercise its option of redemption, and, unless such
shareholder within six months following the mailing of such
notice purchases such additional number of shares so that the
value of all such shares then owned by such shareholder is at
least $75, the corporation shall on the date specified in such
written notice, have the right to redeem all shares owned by such
shareholder at the aggregate per share redemption price next
determined as provided in the current prospectus of the
corporation. Said redemption price shall be paid in cash or in
kind in such manner as the Board of Directors shall determine.
(b) At the option of the corporation, to be exercised
by the Board of Directors, the corporation may redeem all or a
portion of the shares owned by a shareholder if at any time in
the opinion of the Board of Directors ownership of the
corporation's shares has or may fail to qualify for tax treatment
applicable to a "regulated investment company" under Subchapter M
of the United States Internal Revenue Code of 1954, as amended,
or any successor statute. No shareholder (or group of
shareholders deemed to be a single shareholder under said
Subchapter M) holding less than 5% of the net asset value of the
corporation shall be subject to redemption under this paragraph.
Such option shall be exercised by the Board of Directors causing
written notice to be mailed to such shareholder at the
shareholder's address as then reflected on the books of the
corporation of its intention to redeem all or a portion of such
shares, and the corporation shall redeem such shares upon the
date specified in such notice at the redemption price thereof
next determined as provided in the current prospectus of the
corporation.
(3) General
Upon redemption by the shareholder or by the
corporation as provided hereunder, the shareholder shall have no
further rights relative to or interest in the shares redeemed,
including without limitation the right to vote such shares or to
receive further dividends in respect thereto, other than the
right to receive payment of the redemption price on the date and
in the manner specified by the Board of Directors.
DATED: August 28, 1984
/s/ Harmon E. Burns
By: Harmon E. Burns, Incorporator
I hereby declare that I am the person who executed the
foregoing Articles of Incorporation, which execution is my act
and deed.
/s/ Harmon E. Burns
By: Harmon E. Burns
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
FRANKLIN EQUITY FUND
CHARLES E. JOHNSON and DEBORAH R. GATZEK certify that:
1. They are the President and Secretary, respectively, of
FRANKLIN EQUITY FUND, a California corporation.
2. Article IV and the lead-in language of Article V of the
Articles of Incorporation of this corporation are hereby amended
to read as follows:
IV
"The total number of shares of capital stock which the
corporation shall have authority to issue is Five
Billion (5,000,000,000) shares of capital stock, no par
value. The shares shall be issued in one class, to be
known as the "Franklin Equity Series" and all Five
Billion (5,000,000,000) shares shall be allocated to
such class.
Subject to the provisions of these Articles of
Incorporation, the Board of Directors shall have the
power to issue shares of stock of the corporation from
time to time, at prices not less than the net asset
value or par value thereof, whichever is greater, for
such consideration as may be fixed from time to time
pursuant to the director of the Board of Directors.
The Franklin Equity Fund Series shall be issued in two
or more series, and the initial two series are
"Franklin Equity Fund - Class I" ("Class I") and
"Franklin Equity Fund - Class II" ("Class II"). Two
Billion (2,000,000,000) shares shall be allocated to
each such series, and each outstanding share or
fractional share of the corporation shall be
reclassified as one share or fractional share of the
corporation shall be reclassified as one share or
fractional share of Class I. Pursuant to Sections 202,
203.5, 400 and 401 of the California General
Corporation Law, the Board of Directors of the
corporation shall have the power (subject to any
applicable rule, regulation or order of the Securities
and Exchange Commission or other applicable law or
regulation) to create additional series of shares, to
determine or alter the rights, preferences, privileges
and restrictions granted to or imposed upon any wholly
unissued series, to determine the designation of such
series and to fix the number of shares of such series.
The Board of Directors is also hereby expressly granted
authority to increase or decrease the number of shares
of any series provided that the number of shares in any
series shall not be decreased below the number of
shares thereof then issued and outstanding.
Each share of a series shall have equal rights with
each other share of that series with respect to the
assets of the corporation pertaining to that series.
The dividends payable to the holders of any series
(subject to any applicable rules, regulation or order
of the Securities and Exchange Commission or any other
applicable law or regulation) may be charged with any
pro rata portion of distribution expenses paid pursuant
to a Plan of Distribution adopted by such series in
accordance with Investment Company Act of 1940 Rule 12b-
1 (or any successor thereto), which dividend shall abe
determined as directed by the Board and need not be
individually declared, but may be declared by the Board
or a duly authorized committee thereof and paid in
accordance with a formula adopted by the Board. Except
as otherwise provided herein, all references in these
Articles of Incorporation to stock or series of stock
shall apply without discrimination to the shares of
each series of stock.
The shares of Class I and Class II and of any
subsequent series of the Franklin Equity Fund Series
subsequently authorized by the Board shall represent
proportionate interests in the same portfolio of
investments. The shares of Class I and Class II shall
have the same rights and privileges, and shall be
subject to the same limitations and priorities, all as
set forth herein, provided that dividends paid on the
share of Class I shall not reflect any reduction for
payment of fees under the Distribution Plan of Class
II, and dividend paid on the shares of Class II shall
not reflect reduction for payment of fees under the
Distribution Plan of Class I, adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as
amended, and provided further, that the shares of Class
I shall not vote upon or with respect to any matter
relating to or arising from any Distribution Plan of
Class II, and the shares of Class II shall not vote
upon or with respect to any matter relating to or
arising from any Distribution Plan of Class I.
The holder of each share of stock of the corporation
shall be entitled to one vote for each full share, and
a fractional vote for each fractional share of stock.
On any matter submitted to a vote of shareholders, all
shares of the corporation then issued and outstanding
and entitled to vote, irrespective of the series, shall
be voted in the aggregate and not by series except (1)
when otherwise expressly provided by the California
General Corporation Law, or (2) when required by the
Investment Company Act of 1940, as amended, shares
shall be voted by series and (3) when the matter does
not affect any interest of the particular series, then
only shareholders of the affected series shall be
entitled to vote thereon.
V
The shares of capital stock of the Corporation shall be
subject to redemption as hereinafter set forth:"
3. The foregoing Amendments of the Articles of
Incorporation have been duly approved by the corporation's Board
of Directors.
4. The foregoing Amendments of the Articles of
Incorporation have been duly approved by the required vote of
shareholders in accordance with Section 902 of the California
General Corporation Law. The total number of outstanding shares
of the corporation entitled to vote was 45,303,905.133 and the
number of shares voting in favor of the Amendments was in excess
of the vote required. The percentage vote required was a
majority of the outstanding shares.
/s/ Charles E. Johnson
Charles E. Johnson
/s/ Deborah R. Gatzek
Deborah R. Gatzek
The undersigned declare under penalty of perjury that the
matters set forth in the foregoing Certificate are true of their
own knowledge.
Executed at San Mateo, California on March 17, 1995.
/s/ Charles E. Johnson
Charles E. Johnson
/s/ Deborah R. Gatzek
Deborah R. Gatzek
BY LAWS
OF
FRANKLIN EQUITY FUND
A California Corporation
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICES. The Board of Directors shall
fix the location of the principal executive office of the
corporation at any place within or outside the State of
California. If the principal executive office is located outside
this state and the corporation has one or more business offices
in this state the Board of Directors shall fix and designate a
principal business office in the State of California.
Section 2. OTHER OFFICES. The Board of Directors may at
any time establish branch or subordinate offices at any place or
places where the corporation is qualified to do business.
ARTICLE II
MEETINGS 0F SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders
shall be held at any place within or outside the State of
California designated by the Board of Directors. In the absence
of any such designation, shareholder's meetings shall be held at
the principal executive office of the corporation.
Section 2. ANNUAL MEETING. The annual meeting of
shareholders shall be held each year at 10:00 a.m. on the fourth
Wednesday of the fourth month following the end of the
corporation's fiscal year, or at such other time and date as the
Board of Directors may set by resolution. However, if this day
falls on a legal holiday, then the meeting shall be held at the
same time and place on the next succeeding full business day. At
this meeting director shall be elected and any other proper
business may be transacted.
Section 3. SPECIAL MEETING. A special meeting of the
shareholders may be called at any time by the Board of Directors
or by the chairman of the board or by the president or by one or
more shareholders holding shares of the aggregate entitled to
cast not less than ten (10%) percent of the votes at that
meeting.
If a special meeting is called by any person or persons
other than the Board of Directors, the request shall be in
writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted and shall be
delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the chairman of the board the
president, any vice president or the secretary of the
corporation. The officer receiving the request shall cause notice
to be promptly given to the shareholders entitled to vote, in
accordance with the provisions of Sections 4 and 5 of this
Article II, that a meeting shall be held at the time requested by
the person or persons calling the meeting not less than thirty-
five (35) nor more than sixty (60) days after the receipt of the
request. If the notice is not given within twenty (20) days
after receipt of the request, the person or persons requesting
the meeting may give the notice. Nothing contained in this
paragraph of this Section 3 shall be construed as limiting,
fixing or affecting the time when a meeting of the shareholders
called by action of the Board of Directors may be held.
Section 4. NOTICE OF SHAREHOLDERS' MEETING. All notices of
meetings of shareholders shall be sent or otherwise given in
accordance with Section 5 of this Article II not less than ten
(10) nor more than sixty (60) days before the date of the
meeting. The notice shall specify the place, date and hour of the
meeting and (i) in the case of a special meeting, the general
nature of the business to be transacted, or (ii) in the case of
the annual meeting, those matters which the Board of Directors at
the time of giving the notice, intends to present for action by
the shareholders. The notice of any meeting at which directors
are to be elected shall include the name of any nominee or
nominees whom at the time of the notice management intends to
present for election.
If action is proposed to be taken at any meeting for
approval of (i) a contract or transaction in which a director has
a direct or indirect financial interest, (ii) an amendment of the
Articles of Incorporation, (iii) a reorganization of the
corporation, (iv) a voluntary dissolution of the corporation, or
(v) a distribution in dissolution other than in accordance with
the rights of outstanding preferred shares, the notice shall also
state the general nature of that proposal.
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Notice of any meeting of shareholders shall be given either
personally or by first-class mail or telegraphic or other written
communication, charges prepaid, addressed to the shareholder at
the address of that shareholder appearing on the books of the
corporation or given by the shareholder to the corporation for
the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have
been given if sent to that shareholder by first-class mail or
telegraphic or other written communication to the corporation's
principal executive office, or if published at least once in a
newspaper of general circulation in the county where that office
is located. Notice shall be deemed to have been given at the
time when delivered personally or deposited in the mail or sent
by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of
that shareholder appearing on the books of the corporation is
returned to the corporation by the United States Postal Service
marked to indicate that the United States Postal Service is
unable to deliver the notice to the shareholder at that address,
a11 future notices or reports shall be deemed to have been duly
given without further mailing if these shall be available to the
shareholder on written demand of the shareholder at the principal
execute office of the corporation for a period of one year from
the date of the giving of the notice.
An affidavit of the mailing or other means of giving any
notice of any shareholder's meeting shall be executed by the
secretary, assistant secretary or any transfer agent of the
corporation giving the notice and shall be filed and maintained
in the minute book of the corporation.
Section 6. QUORUM. The presence in person or by proxy of
the holders of a majority of the shares entitled to vote at any
meeting of shareholders shall constitute a quorum for the
transaction of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue
to do business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum.
Section 7. ADJOURNED MEETING; NOTICE. Any shareholder's
meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by
proxy, but in the absence of a quorum no other business may be
transacted at that meeting, except as provided in Section 6 of
this Article II.
When any meeting of shareholders, either annual or special,
is adjourned to another time or place, notice need not be given
of the adjourned meeting at which the adjournment is taken,
unless a new record date of the adjourned meeting is fixed or
unless the adjournment is for more than forty-five (45) days from
the date set for the original meeting, in which case the Board of
Directors shall set a new record date. Notice of any such
adjourned meeting shall be given to each shareholder of record
entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 4 and 5 of this Article II. At any
adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting.
Section 8. VOTING. The shareholders entitled to vote at
any meeting of shareholders shall be determined in accordance
with the provisions of Section 11 of this Article II, subject to
the provisions of the Corporations Code of California relating to
voting shares held by a fiduciary in the name of a corporation or
in joint ownership. The shareholders' vote may be by voice vote
or by ballot, provided, however, that any election for directors
must be by ballot if demanded by any shareholder before the
voting has begun. On any matter other than elections of directors
any shareholder may vote part of the shares in favor of the
proposal and refrain from voting the remaining shares or vote
them against the proposal, but if the shareholder fails to
specify the number of shares which the shareholder is voting
affirmatively, it will be conclusively presumed that the
shareholder's approving vote is with respect total shares that
the shareholder is entitled to vote. If a quorum is present, the
affirmative vote of the majority of the shares represented at the
meeting and entitled to vote on any matter (other than the
election of directors) shall be the act of the shareholders,
unless the vote of a greater number or voting by classes is
required by the California General Corporation Law or by the
Articles of Incorporation.
At a shareholder's meeting at which directors are to be
elected, no shareholder shall be entitled to cumulate votes
(i.e., cast for any one or more candidates a number of votes
greater than the number of the shareholder's shares) unless the
candidates' names have been placed in nomination prior to
commencement of the voting and a shareholder has given notice
prior to commencement of the voting of the shareholder's
intention to cumulate votes. If any shareholder has given such a
notice, then every shareholder entitled to vote may cumulate
votes for candidates in nomination and give one candidate a
number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's
shares are entitled, or distribute the shareholder's votes on the
same principle among any or all of the candidates as the
shareholder thinks fit. The candidates receiving the highest
number of votes up to the number of directors to be elected shall
be elected.
Section 9. WAIVER OF NOTICE OF CONSENT BY ABSENT
SHAREHOLDERS. The transactions of the meeting of shareholders,
either annual or special, however called and noticed and wherever
held shall be as valid as though had at a meeting duly held after
regular call and notice if a quorum be present either in person
or by proxy and if either before or after the meeting, each
person entitled to vote who was not present in person or by proxy
signs a written waiver of notice or a consent to a holding of the
meeting or an approval of the minutes. The waiver of notice or
consent need not specify either the business to be transacted or
the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for
approval of any of those matters specified in the second
paragraph of Section 4 of this Article II, the waiver of notice
or consent shall state the general nature of the proposal. All
such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a
waiver of notice of that meeting, except when the person objects
at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened
and except that attendance at a meeting is not a waiver of any
right to object to the consideration of matters not included in
the notice of the meeting if that objection is expressly made at
the meeting.
Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING. Any action which may be taken at any annual or special
meeting of shareholders may be taken without a meeting and
without prior notice if a consent in writing setting forth the
action so taken is signed by the holders of outstanding shares
having not less than the minimum number of votes that would be
necessary to authorize or take that action at a meeting at which
all shares entitled to vote on that action were present and
voted. In the case of election of directors, such a consent shall
be effective only if signed by the holder of all outstanding
shares entitled to vote for the election of directors; provided
however, that a director may be elected at any time to fill a
vacancy on the Board of Directors that has not been filled by the
directors by the written consent of the holders of a majority of
the outstanding shares entitled to vote for the election of
directors. All such consents shall be filed with the Secretary
of the corporation and shall be maintained in the corporate
records. Any shareholder giving a written consent or the
shareholder's proxy holders or a transferee of the shares or a
personal representative of the shareholder or their respective
proxy holders may revoke the consent by a writing received by the
Secretary of the corporation before written consents of the
number of shares required to authorize the proposed action have
been filed with the Secretary.
If the consents of all shareholders entitled to vote have
not been solicited in writing and if the unanimous written
consent of all such shareholders shall not have been received,
the Secretary shall give prompt notice of the corporate action
approved by the shareholders without a meeting. This notice shall
be given in the manner specified in Section 5 of this Article II.
In the case of approval of (i) contracts or transactions in which
a director has a direct or indirect financial interest, (ii)
indemnification of agents of the corporation, (iii) a
reorganization of the corporation, and (iv) a distribution in
dissolution other than in accordance with the rights of
outstanding preferred shares, the notice shall be given at least
ten (10) days before the consummation of any action authorized by
that approval.
Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND
GIVING CONSENTS. For purposes of determining the shareholders
entitled to notice of any meeting or to vote or entitled to give
consent to corporate action without a meeting, the Board of
Directors may fix in advance a record date which shall not be
more than sixty (60) days nor less than ten (10) days before the
date of any such meeting nor more than sixty (60) days before
such action without a meeting and in this event only shareholders
of record on the date so fixed are entitled to notice and to vote
or to give consents as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the
record date, except as otherwise provided in the California
General Corporation Law.
If the Board of Directors does not so fix a record date:
(a) The record date for determining shareholders entitled
to notice of or to vote at a meeting of shareholders
shall be at the close of business on the business day
next preceding the day on which notice is given or if
notice is waived at the close of business on the
business day next preceding the day on which the
meeting is held.
(b) The record date for determining shareholders entitled
to give consent to corporate action in writing without
a meeting, (i) when no prior action by the Board of
Directors has been taken, shall be the day on which the
first written consent is given, or (ii) when prior
action of the Board of Directors has been taken, shall
be at the close of business on the day on which the
Board of Directors adopt the resolution relating to
that action or the sixtieth day before the date of such
other action, whichever is later.
Section 12. PROXIES. Every person entitled to vote for
directors or on any other matter shall have the right to do so
either in person or by one or more agents authorized by a written
proxy signed by the person and filed with the Secretary of the
corporation. A proxy shall be deemed signed if the shareholder's
name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the
shareholder or the shareholder's attorney-in-fact. A validly
executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (i) revoked by the
person executing it before the vote pursuant to that proxy by a
writing delivered to the corporation stating that the proxy is
revoked or by a subsequent proxy executed by or attendance at the
meeting and voting in person by the person executing that proxy;
or (ii) written notice of the death or incapacity of the maker of
that proxy is received by the corporation before the vote
pursuant to that proxy is counted; provided however, that no
proxy shall be valid after the expiration of eleven (11) months
from the date of the proxy unless otherwise provided in the
proxy. The revocability of a proxy that states on its face that
it is irrevocable shall be governed by the provisions of the
California General Corporation Law.
Section 13. INSPECTORS OF ELECTION. Before any meeting of
shareholders the Board of Directors may appoint any persons other
than nominees for office to act as inspectors of election at the
meeting or its adjournment. If no inspectors of election are so
appointed, the chairman of the meeting may and on the request of
any shareholder or a shareholder's proxy shall appoint inspectors
of election at the meeting. The number of inspectors shall be
either one (1) or three (3). If inspectors are appointed at a
meeting on the request of one or more shareholders or proxies,
the holders of a majority of shares of their proxies present at
the meeting shall determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as
inspector fails to appear or fails or refuses to act, the
chairman of the meeting may and on the request of any shareholder
or a shareholder's proxy, shall appoint a person to fill the
vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the
voting power of each, the shares represented at
the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in
any way arising in connection with the right to
vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct
the election or vote with fairness to all
shareholders.
ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to the provisions of the
California General Corporation Law and any limitations in the
Articles of Incorporation and these By-Laws relating to action
required to be approved by the shareholders or by the outstanding
shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under
the direction of the Board of Directors.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The
authorized number of directors shall be not less than five (5)
nor more than nine (9), until changed by a duly adopted amendment
to the Articles of Incorporation or by an amendment to this By-
Law adopted by the vote or written consent of holders of a
majority of the outstanding shares entitled to vote; provided
however, that an amendment reducing the number of directors to a
fixed number or a minimum number less than five (5) cannot be
adopted if the votes cast against its adoption at a meeting or
the shares not consenting in the case of action by written
consent are equal to more than sixteen and two-thirds (16 2/3%)
percent of the outstanding shares entitled to vote. The Board of
Directors shall by resolution fix the exact number of directors
within the limits set forth herein.
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS.
Directors shall be elected at each annual meeting of the
shareholders to hold office until the next annual meeting. Each
director, including a director elected to fill a vacancy, shall
hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 4. VACANCIES. Vacancies in the Board of Directors
may be filled by a majority of the remaining directors, though
less than a quorum, or by a sole remaining director, except that
a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be
filled only by the vote of a majority of the shares entitled to
vote represented at a duly held meeting at which a quorum is
present or by the written consent of holders of a majority of the
outstanding shares entitled to vote. Each director so elected
shall hold office until the next annual meeting of the
shareholders and until a successor has been elected and
qualified.
A vacancy or vacancies in the Board of Directors shall be
deemed to exist in the event of the death, resignation or removal
of any director, or if the Board of Directors by resolution
declares vacant the office of a director who has been declared of
unsound mind by an order of court or convicted of a felony or if
the authorized number of directors is increased or if the
shareholders fail at any meeting of shareholders at which any
director or directors are elected to elect the number of
directors to be voted for at that meeting.
The shareholders may elect a director or directors at any
time to fill any vacancy or vacancies not filled by the
directors, but any such election by written consent shall require
the consent of a majority of the outstanding shares entitled to
vote; provided, however, that any vacancy created by removal of
any director may be filled by written consent only by unanimous
written consent of all shares entitled to vote for the election
of directors.
Any director may resign effective on giving written notice
to the chairman of the board, the president, the secretary or the
Board of Directors unless the notice specifies a later time for
that resignation to become effective. If the resignation of a
director is effective at a future time, the Board of Directors
may elect a successor to take office when the resignation becomes
effective.
No reduction of the authorized number of directors shall
have the effect of removing any director before that director's
term of office expires.
In the event that at any time less than a majority of the
directors of the corporation holding office at that time were so
elected by the holders of the outstanding voting securities, the
Board of Directors of the corporation shall forthwith cause to be
held as promptly as possible, and in any event within sixty (60)
days, a meeting of such holders for the purpose of electing
directors to fill any existing vacancies in the Board of
Directors, unless such period is extended by order of the United
States Securities and Exchange Commission.
Notwithstanding the above, whenever and for so long as the
corporation is a participant in or otherwise has in effect a Plan
under which the corporation may be deemed to bear expenses of
distributing its shares as that practice is described in Rule 12b-
1 under the Investment Company Act of 1940, then the selection
and nomination of the directors who are not interested persons of
the corporation (as that term is defined in the Investment
Company Act of 1940) shall be, and is, committed to the
discretion of such disinterested directors.
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE.
Regular meetings of the Board of Directors may be held at any
place within or outside the State of California that has been
designated from time to time by resolution of the board. In the
absence of such a designation, regular meetings shall be held at
the principal executive office of the corporation. Special
meetings of the board shall be held at any place within or
outside the State of California that has been designated in the
notice of the meeting or if not stated in the notice or there is
no notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all
directors participating in the meeting can hear one another and
a11 such directors shall be deemed to be present in person at the
meeting.
Section 6. ANNUAL MEETING. Immediately following each
annual meeting of shareholders, the Board of Directors shall hold
a regular meeting of the purpose of organization, any desired
election of officers, and the transaction of other business.
Notice of this meeting shall not be required.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings
of the Board of Directors shall be held without call at such time
as shall from time to time be fixed by the Board of Directors.
Such regular meetings may be held without notice.
Section 8. SPECIAL MEETINGS. Special meetings of the Board
of Directors for any purpose or purposes may be called at any
time by the chairman of the board or the president or any vice
president or the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent by
first-class mail or telegram, charges prepaid, addressed to each
director at that director's address as it is shown on the records
of the corporation. In case the notice is mailed, it shall be
deposited in the United States mail at least four (4) days before
the time of the holding of the meeting. In case the notice is
delivered personally or by telephone or to the telegraph company,
it shall be given at least forty-eight (48) hours before the time
of the holding of the meeting. Any oral notice given personally
or by telephone may be communicated either to the director or to
a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the
director. The notice need not specify the purpose of the meeting
or the place if the meeting is to be held at the principal
executive office of the corporation.
Section 9. QUORUM. A majority of the authorized number of
directors shall constitute a quorum for the transaction of
business, except to adjourn as provided in Section 11 of this
Article III. Every act or decision done or made by a majority of
the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors,
subject to the provisions of the California General Corporation
Law relating to approval of contracts or transactions in which a
director has a direct or indirect material financial interest, to
appointment of committee, and to indemnification of directors. A
meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors if
any action taken is approved by a least a majority of the
required quorum for that meeting.
Section 10. WAIVER OF NOTICE. Notice of any meeting need
not be given to any director who either before or after the
meeting signs a written waiver of notice, a consent to holding
the meeting or an approval of the minutes. The waiver of notice
or consent need not specify the purpose of the meeting. All such
waivers, consents and approval shall be filed with the corporate
records or made a part of the minutes of the meeting. Notice of
a meeting shall also be deemed given to any director who attends
the meeting without protesting before or at its commencement the
lack of notice to that director.
Section 11. ADJOURNMENT. A majority of the directors
present, whether or not constituting a quorum, may adjourn any
meeting to another time and place.
Section 12. NOTICE OF ADJOURNMENT. Notice of the time and
place of holding an adjourned meeting need not be given unless
the meeting is adjourned for more than twenty-four (24) hours, in
which case notice of the time and place shall be given before the
time of the adjourned meeting in the manner specified in Section
8 of this Article III to the directors who were present at the
time of the adjournment.
Section 13. ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the Board of Directors may be taken
without a meeting if all members of the Board of Directors shall
individually or collectively consent in writing to that action.
Such action by written consent shall have the same force and
effect as a unanimous vote of the Board of Directors. Such
written consent or consents shall be filed with the minutes of
the proceedings of the Board of Directors.
Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors
and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be
fixed or determined by resolution of the Board of Directors. This
Section 14 shall not be construed to preclude any director from
serving the corporation in any other capacity as an officer,
agent, employee or otherwise and receiving compensation for those
services.
ARTICLE IV
COMMITTEE
Section 1. COMMITTEES OF DIRECTORS. The Board of Directors
may by resolution adopted by a majority of the authorized number
of directors designate one or more committees, each consisting of
two (2) or more directors, to serve at the pleasure of the board.
The board may designate one or more directors as alternate
members of any committee who may replace any absent member at any
meeting of the committee. Any committee to the extent provided
in the resolution of the board shall have the authority of the
board, except with respect to:
(a) the approval of any action which under the California
General Corporation Law also requires shareholders'
approval or approval of the outstanding shares;
(b) the filling of vacancies on the Board of Directors or
in any committee;
(c) the fixing of compensation of the directors for serving
on the Board of Directors or on any committee;
(d) the amendment or repeal of By-Laws or the adoption of
new By-Laws;
(e) the amendment or repeal of any resolution of the Board
of Directors which by its express terms is not so
amendable or repealable;
(f) a distribution to the shareholders of the corporation,
except at a rate or in a periodic amount or within a
price range determined by the Board of Directors; or
(g) the appointment of any other committees of the Board of
Directors or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and
action of committees shall be governed by and held and taken in
accordance with the provisions of Article III of these By-Laws,
with such changes in the context thereof as are necessary to
substitute the committee and its members for the Board of
Directors and its members, except that the time of regular
meetings of committees may be determined either by resolution of
the Board of Directors or by resolution of the committee. Special
meetings of committees may also be called by resolution of the
Board of Directors, and notice of special meetings of committees
shall also be given to all alternate members who shall have the
right to attend all meetings of the committee. The Board of
Directors may adopt rules for the government of any committee not
inconsistent with the provisions of these By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall
be a president, a secretary, and a chief financial officer. The
corporation may also, have at the discretion of the Board of
Directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant
treasurers, one or more assistant financial officers and such
other officers as may be appointed in accordance with the
provisions of Section 3 of this Article V. Any number of offices
my be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the
corporation, except such officers as may appointed in accordance
with the provisions of Section 3 or Section 5 of this Article V,
shall be chosen by the Board of Directors, and each shall serve
at the pleasure of the Board of Directors, subject to the rights,
if any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Directors
may appoint and may empower the president to appoint such other
officers as the business of the corporation may require, each of
whom shall hold office for such period, have such authority and
perform such duties as are provided in the By-Laws or as the
Board of Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to
the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without
cause, by the Board of Directors at any regular or special
meeting of the Board of Directors or except in the case of an
officer upon whom such power or removal may be conferred by the
Board of Directors.
Any officer may resign at any time by giving written notice
to the corporation. Any resignation shall take effect at the
date of the receipt of that notice or at any later time specified
in that notice; and unless otherwise specified in that notice,
the acceptance of the resignation shall not be necessary to make
it effective. Any resignation is without prejudice to the rights,
if any, of the corporation under any contract to which the
officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office
because of death, resignation, removal, disqualification or other
cause shall be filled in the manner prescribed in these By-Laws
for regular appointment to that office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the
board, if such an officer is elected, shall if present preside at
meetings of the Board of Directors and exercise and perform such
other powers and duties as may be from time to time assigned to
him by the Board of Directors or prescribed by the By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers,
if any, as may be given by the Board of Directors to the chairman
of the board, if there be such an officer, the president shall be
the chief executive officer of the corporation and shall subject
to the control of the Board of Directors, have general
supervision, direction and control of the business and the
officers of the corporation. He shall preside at all meetings of
the shareholders and in the absence of the chairman of the board
or if there be none, at all meetings of the Board of Directors.
He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have
such other powers and duties as may be prescribed by the Board of
Directors or the By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability
of the president, the vice presidents, if any, in order of their
rank as fixed by the Board of Directors or if not ranked, a vice
president designated by the Board of Directors, shall perform all
the duties of the president and when so acting shall have all
powers of and be subject to all the restrictions upon the
president. The vice presidents shal1 have such other powers and
perform such other duties as from time to time may be prescribed
for them respectively by the Board of Directors or by the By-Laws
and the president or the chairman of the board.
Section 9. SECRETARY. The secretary shall keep or cause to
be kept at the principal executive office or such other place as
the Board of Directors may direct a book of minutes of all
meetings and actions of directors, committees of directors and
shareholders with the time and place of holding, whether regular
or special, and if special, how authorized, the notice given the
names of those present at directors' meetings or committee
meetings, the number of shares present or represented at
shareholders' meetings and the proceedings.
The secretary shall keep or cause to be kept at the
principal executive office or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the
Board of Directors, a share register or a duplicate share
register showing the names of all shareholders and their
addresses, the number and classes of shares held by each, the
number and date of certificates issued for the same and the
number and date of cancellation of every certificate surrendered
for cancellation.
The secretary shall give or cause to be given notice of all
meetings of the shareholders and of the Board of Directors
required by the By-Laws or by law to be given and he shall keep
the seal of the corporation if one be adopted in safe custody and
shall have such other powers and perform such other duties as may
be prescribed by the Board of Directors or by the By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. The chief financial
officer shall keep and maintain or cause to be kept and
maintained adequate and correct books and records of accounts of
the properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and
shares. The books of account shall at all reasonable times be
open to inspection by any director.
The chief financial officer shall deposit all monies and
other valuables in the name and to the credit of the corporation
with such depositaries as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the
president and directors, whenever they request it, an account of
all of his transactions as chief financial officer and of the
financial condition of the corporation and shall have other
powers and perform such other duties as may be prescribed by the
Board of Directors or the By-Laws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the
purpose of this Article, "agent" means any person who is or was a
director, officer, employee or other agent of this corporation or
is or was serving at the request of this corporation as a
director, officer, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other
enterprise or was a director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor
corporation of this corporation or of another enterprise at the
request of such predecessor corporation; "proceeding" means any
threatened, pending or completed action or proceeding, whether
civil, criminal, administrative or investigative; and "expenses"
includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY CORPORATION. This
corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any proceeding (other than an
action by or in the right of this corporation) by reason of the
fact that such person is or was an agent of this corporation,
against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with such
proceeding if that person acted in good faith and in a manner
that person reasonably believed to be in the best interests of
this corporation and in the case of a criminal proceeding had no
reasonable cause to believe the conduct of that person was
unlawful. The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the
person did not act in good faith and in a manner which the person
reasonably believed to be in the best interests of this
corporation or that the person had reasonable cause to believe
that the person's conduct was unlawful.
Section 3. ACTIONS BY THE CORPORATION. This corporation
shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action
by or in the right of this corporation to procure a judgment in
its favor by reason of the fact that that person is or was an
agent of this corporation, against expenses actually and
reasonably incurred by that person in connection with the defense
or settlement of that action if that person acted in good faith,
in a manner that person believed to be in the best interests of
this corporation and with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would
use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding
any provision to the contrary contained herein, there shall be no
right to indemnification for any liability arising by reason of
willful misfeasance, bad faith, gross negligence, or the reckless
disregard of the duties involved in the conduct of the agent's
office with the corporation.
No indemnification shall be made under Sections 2 or 3 of
this Article:
(a) In respect of any claim, issue or matter as to which
that person shall have been adjudged to be liable in the
performance of that person's duty to this corporation,
unless and only to the extent that the court in which
that action was brought shall determine upon application
that in view of all the circumstances of the case that
person was not liable by reason of the disabling conduct
set forth in the preceding paragraph and is fairly and
reasonably entitled to indemnity for the expenses which
the court shall determine; or
(b) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court
approval, or of expenses incurred in defending a
threatened or pending action which is settled or
otherwise disposed of without court approval, unless the
required approval set forth in Section 6 of this Article
is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that
an agent of this corporation has been successful on the merits in
defense of any proceeding referred to in Sections 2 or 3 of this
Article or in defense of any claim, issue or matter therein,
before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually
and reasonably incurred by the agent in connection therewith,
provided that the Board of Directors, including a majority who
are disinterested, non-party directors, also determines that
based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this
Article.
Section 6. REQUIRED APPROVAL. Except as provided in
Section 5 of this Article, any indemnification under this Article
shall be made by this corporation only if authorized in the
specific case on a determination that indemnification of the
agent is proper in the circumstances because the agent has met
the applicable standard of conduct set forth in Sections 2 or 3
of this Article and is not prohibited from indemnification
because of the disabling conduct set forth in Section 4 of this
Article, by:
(a) A majority vote of a quorum consisting of directors who are
not parties to the proceeding and are not interested persons
of the corporation as defined in the Investment Company Act
of 1940;
(b) Approval by the affirmative vote of a majority of the shares
of this corporation entitled to vote represented at a duly
held meeting at which a quorum is present or by the written
consent of holders of a majority of the outstanding shares
entitled to vote. For this purpose the shares owned by the
person to be indemnified shall not be considered outstanding
or entitled to vote thereon;
(c) The court in which the proceeding is or was pending, on
application made by this corporation or the agent or the
attorney or other person rendering services in connection
with the defense, whether or not such application by the
agent, attorney or other person is opposed by this
corporation; or
(d) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in
defending any proceeding may be advanced by this corporation
before the final disposition of the proceeding on receipt of an
undertaking by or on behalf of the agent to repay the amount of
the advance unless it shall be determined ultimately that the
agent is entitled to be indemnified as authorized in this
Article, provided the agent provides a security for his
undertaking, or a majority of a quorum of the disinterested non-
party directors, or an independent legal counsel in a written
opinion, determine that based on a review of readily available
facts there is reason to believe that said agent ultimately will
be found entitled to indemnification.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in
this Article shall affect any right to indemnification to which
persons other than directors and officers of this corporation or
any subsidiary hereof may be entitled by contract or otherwise.
Section 9. LIMITATIONS. No indemnification or advance
shall be made under this Article, except as provided in Section 5
or Section 6(c) in any circumstances where it appears:
(a) That it would be inconsistent with a provision of the
Articles of Incorporation, a resolution of the
shareholders or an agreement in effect at the time of
accrual of the alleged cause of action asserted in the
proceeding in which the expenses were incurred or other
amounts were paid which prohibits or otherwise limits
indemnification; or
(b) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a
determination by the Board of Directors of this corporation to
purchase such insurance, this corporation shall purchase and
maintain insurance on behalf of any agent of the corporation
against any liability asserted against or incurred by the agent
in such capacity or arising out of the agent's status as such,
but only to the extent that this corporation would have the power
to indemnify the agent against that liability under the
provisions of this Article.
Section 11. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN.
This Article does not apply to any proceeding against any
trustee, investment manager or other fiduciary of an employee
benefit plan in that person's capacity as such, even though that
person may also be an agent of the corporation as defined in
Section 1 of this Article. Nothing contained in this Article
shall limit any right to indemnification to which such a trustee,
investment manager or other fiduciary may be entitled by contract
or otherwise which shall be enforceable to the extent permitted
by applicable law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER.
The corporation shall keep at its principal executive office or
at the office of its transfer agent or registrar, if either be
appointed and as determined by resolution of the Board of
Directors, a record of its shareholders giving the names and
addresses of all shareholders and the number and class of shares
held by each shareholder.
A shareholder or shareholders of the corporation holding at
least five percent (5%) in the aggregate of the outstanding
voting shares of the corporation may (i) inspect and copy the
records of shareholders' names and addresses and shareholdings
during usual business hours on five (5) days' prior written
demand on the corporation, and (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of
such transfer agent's usual charges for such list, a list of the
shareholder's names and addresses who are entitled to vote for
the election of directors and their shareholdings as of the most
recent record date for which that list has been compiled or as of
a date specified by the shareholder after the date of demand.
This list shall be made available to any such shareholder by the
transfer agent on or before the later of five (5) days after the
demand is received or the date specified in the demand as the
date as of which the list is to be compiled. The record of
shareholders shall also be open to inspection on the written
demand of any shareholder or holder of a voting trust certificate
at any time during usual business hours for a purpose reasonably
related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. Any inspection and copying
under this Section 1 may be made in person or by an agent or
attorney of the shareholder or holder of voting trust certificate
making the demand.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The
corporation shall keep at its principal executive office or if
its principal executive office is not in the State of California
at its principal business office in this state, the original or a
copy of the By-Laws as amended to date, which shall be open to
inspection by the shareholders at all reasonable times during
office hours. If the principal executive office of the
corporation is outside the State of California and the
corporation has no principal business office in this state, the
secretary shall upon the written request of any shareholder
furnish to that shareholder a copy of the By-Laws as amended to
date.
Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE
RECORDS. The accounting books and records and minutes of
proceedings of the shareholders and the Board of Directors and
any committee or committees of the Board of Directors shall be
kept at such place or places designated by the Board of Directors
or in the absence of such designation at the principal executive
office of the corporation. The minutes shall be kept in written
form and the accounting books and records shall be kept either in
written form or in any other form capable of being converted into
written form. The minutes and accounting books and records shall
be open to inspection upon the written demand of any shareholder
or holder of a voting trust certificate at any reasonable time
during usual business hours for a purpose reasonably related to
the holder's interests as a shareholder or as the holder of a
voting trust certificate. The inspection may be made in person or
by an agent or attorney and shall include the right to copy and
make extracts. These rights of inspection shall extend to the
records of each subsidiary corporation of the corporation.
Section 4. INSPECTION BY DIRECTORS. Every director shall
have the absolute right at any reasonable time to inspect all
books, records, and documents of every kind and the physical
properties of the corporation and each of its subsidiary
corporations. This inspection by a director may be made in person
or by an agent or attorney and the right of inspection includes
the right to copy and make extracts of documents.
Section 5. ANNUAL REPORT TO SHAREHOLDERS. The annual
report to shareholders referred to in the California General
Corporation Law is expressly dispensed with, but nothing herein
shall be interpreted as prohibiting the Board of Directors from
issuing annual or other periodic reports to the shareholders of
the corporation as they consider appropriate.
Section 6. FINANCIAL STATEMENTS. A copy of any annual
financial statements and any income statement of the corporation
for each quarterly period of each fiscal year and accompanying
balance sheet of the corporation as of the end of each such
period that has been prepared by the corporation shall be kept on
file in the principal executive office of the corporation for
twelve (12) months and each such statement shall be exhibited at
all reasonable times to any shareholder demanding an examination
of any such statement or a copy shall be mailed to any such
shareholder.
If a shareholder or shareholders holding at least five
percent (5%) of the outstanding shares of any class of stock of
the corporation makes a written request to the corporation for an
income statement of the corporation for the three (3) -month, six
(6) -month, or nine (9) -month period of the then current fiscal
year ended more than thirty (30) days before the date of the
request and a balance sheet of the corporation as of the end of
that period, the chief financial officer shall cause that
statement to be prepared, if not already prepared, and shall
deliver personally or mail that statement or statements to the
person making the request within thirty (30) days after the
receipt of the request. If the corporation has not sent to the
shareholders its annual report for the last fiscal year, this
report shall likewise be delivered or mailed to the shareholder
or shareholders within thirty (30) days after the request.
The corporation shall also on the written request of any
shareholder mail to the shareholder a copy of the last annual,
semi-annual or quarterly income statement which it has prepared
and a balance sheet as of the end of that period.
The quarterly income statements and balance sheets referred
to in this section shall be accompanied by the report, if any, of
any independent accountants engaged by the corporation or the
certificate of an authorized officer of the corporation that the
financial statements were prepared without audit from the books
and records of the corporation.
Section 7. ANNUAL STATEMENT OF GENERAL INFORMATION. The
corporation shall during the month in which the anniversary of
its incorporation occurs in each year, file with the California
Secretary of State on the prescribed form a statement setting
forth the authorized number of directors, the names and complete
business or residence addresses of all incumbent directors, the
names and complete business or residence addresses of the chief
executive officer, secretary and chief financial officer, the
street address of its principal executive office or principal
business office in this state and the general type of business
constituting the principal business activity of the corporation,
together with a designation of the agent of the corporation for
the purpose of service of process, all in compliance with the
California General Corporation Law.
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND
VOTING. For purposes of determining the shareholders entitled to
receive payment of any dividend or other distribution or
allotment of any rights or entitled to exercise any rights in
respect of any other lawful action (other than action by
shareholders by written consent without a meeting), the Board of
Directors may fix in advance a record date which shall not be
more than sixty (60) days before any such action and in that case
only shareholders of record on the date so fixed are entitled to
receive the dividend, distribution or allotment of rights or to
exercise the rights as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the
record date so fixed, except as provided in the California
General Corporations Law.
If the Board of Directors does not so fix a record date, the
record date for determining shareholders for any such purpose
shall be at the close of business on the day on which the Board
of Directors adopts the applicable resolution or the sixtieth day
before the date of that action, whichever is later.
Section 2. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All
checks, drafts, or other orders for payment of money, notes or
other evidences of indebtedness issued in the name of or payable
to the corporation shall be signed or endorsed by such person or
persons and in such manner as from time to time shall be
determined by resolution of the Board of Directors.
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW
EXECUTED. The Board of Directors, except as otherwise provided
in these By-Laws, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in
the name of and on behalf of the corporation and this authority
may be general or confined to specific instances; and unless so
authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent, or employee shall
have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it
liable for any purpose or for any amount.
Section 4. CERTIFICATES FOR SHARES. A certificate or
certificates for shares of the capital stock of the corporation
shall be issued to each shareholder when any of these shares if
fully paid and the Board of Directors may authorize the issuance
of certificates or shares as partly paid provided that these
certificates shall state the amount of the consideration to be
paid for them and the amount paid. All certificates shall be
signed in the name of the corporation by the chairman of the
board or vice chairman of the board or the president or vice
president and by the chief financial officer or an assistant
treasurer or the secretary or any assistant secretary certifying
the number of shares and the class or series of shares owned by
the shareholders. Any or all of the signatures on the certificate
may be facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been
placed on a certificate shall have ceased to be that officer,
transfer agent, or registrar before that certificate is issued,
it may be issued by the corporation with the same effect as if
that person were an officer, transfer agent or registrar at the
date of issue. Notwithstanding the foregoing, the corporation may
adopt and use a system of issuance, recordation and transfer of
its shares by electronic or other means as provided in the
General Corporation Law.
Section 5. LOST CERTIFICATES. Except as provided in this
Section 5, no new certificates for shares shall be issued to
replace an old certificate unless the latter is surrendered to
the corporation and cancelled at the same time. The Board of
Directors may in case any share certificate or certificate for
any other security is lost, stolen, or destroyed, authorize the
issuance of a replacement certificate on such terms and
conditions as the Board of Directors may require, including a
provision for indemnification of the corporation secured by a
bond or other adequate security sufficient to protect the
corporation against any claim that may be made against it,
including any expense or liability on account of the alleged
loss, theft, or destruction of the certificate or the issuance of
the replacement certificate.
Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairman of the board, the president or any vice president or
any other person authorized by resolution of the Board of
Directors or by any of the foregoing designated officers is
authorized to vote on behalf of the corporation any and all
shares of any other corporation or corporations, foreign or
domestic, standing in the name of the corporation. The authority
granted to these officers to vote or represent on behalf of the
corporation any and all shares held by the corporation in any
other corporation or corporations may be exercised by any of
these officers in person or by any person authorized to do so by
a proxy duly executed by these officers.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. New By-Laws may be
amended or repealed by the affirmative vote or written consent of
a majority of the outstanding shares entitled to vote, except as
otherwise provided by law or by the Articles of Incorporation or
these By-Laws.
Section 2. AMENDMENT BY DIRECTORS. Subject to the right of
shareholders as provided in Section 1 of this Article to adopt,
amend or repeal By-Laws, and except as otherwise provided by law
or by the Articles of Incorporation, these By-Laws, other than a
By-Law or amendment thereof changing the maximum or minimum
number of directors, may be adopted, amended, or repealed by the
Board of Directors.
ARTICLE X
REIMBURSEMENT OF EXPENSES
Section 1. DISALLOWED EXPENSES. Any payments made to or on
behalf of an officer of the corporation, such as salary, bonus,
interest, rent, medical, entertainment or travel expenses, which
shall be disallowed in whole or in part as a deductible expense
to the corporation by the Internal Revenue Service, shall be
reimbursed by such officer to the corporation to the full extent
of such disallowance. It shall be the duty of the Board of
Directors to enforce payment of such amount disallowed. In lieu
of payment by the officer, subject to the determination of the
Board of Directors, proportionate amounts may be withheld from
such officer's future compensation payments until the amount owed
to the corporation has been recovered.
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, Secretary of Franklin Equity Fund ("the
Fund"), a corporation organized under the laws of the State of
California, do hereby certify that the following resolution was adopted
by a majority of the directors present at a meeting held at the offices
of the Fund at 777 Mariners Island Boulevard, San Mateo, California, on
September 29, 1987.
RESOLVED, that Article II, Section 7 of the Fund's By-Laws be
amended to read as follows:
Compensation: The Board of Directors may by resolution
prescribe that each director, except a director who is
affiliated with the corporation's investment adviser or
principal underwriter, may receive such a fee or fees as may
be fixed by resolution by the Board of Directors and the
expenses of attendance, if any, at each regular or special
meeting of the Board. Any director receiving compensation
under these provisions shall not be barred from serving the
Corporation in any other capacity and receiving reasonable
compensation for such other services.
I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.
/s/ Deborah R. Gatzek
Dated: September 29, 1987 By: Deborah R. Gatzek
Secretary
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, Secretary of Franklin Equity Fund (the
"Fund"), a corporation organized under the laws of the State of
California, do hereby certify that the following resolution was
adopted by a majority of the directors present at a meeting held
at the offices of the Fund at 777 Mariners Island Boulevard, San
Mateo, California, on November 17, 1987.
RESOLVED, that Section 2, Article II of the By-Laws of the
Fund, be amended to read as follows:
"Section 2. ANNUAL MEETINGS. The annual meeting of
shareholders shall be held on a date and at a time as
the Board of Directors shall determine, provided that
annual meetings of shareholders need not be held in any
year in which such is not required by the Investment
Company Act of 1940."
I declare under penalty of perjury that the matters set forth in
this certificate are true and correct of my own knowledge.
/s/ Deborah R. Gatzek
By: Deborah R. Gatzek
Secretary
Dated: 11/17/87
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, Secretary of Franklin Equity Fund (the
"Fund"), a business trust organized under the laws of the State
of Massachusetts, do hereby certify that the following resolution
was adopted by a majority of the directors present at a meeting
held at the offices of the Fund at 777 Mariners Island Boulevard,
San Mateo, California, on January 18, 1994.
WHEREAS, the Directors have determined that it is necessary
to amend Section 5 of Article II in order to remove the
requirement of using first class mail for notice of any
meeting of shareholders to the extent permitted under
applicable California corporate law; it is
RESOLVED, that in accordance with Article IX, Section 2 of
the Fund's By-Laws, Section 5 of Article II is hereby
amended to read as follows:
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF
NOTICE. Notice of any meeting of shareholders shall be
given either personally or by first-class mail, or, if
the corporation has outstanding shares held of record
by five hundred (500) or more persons (determined as
provided in Section 605 of the California Corporations
Code) on the record date for such meeting, notice may
be sent by third-class mail, or by telegraphic or other
written communication, charges prepaid, addressed to
the shareholder at the address of that shareholder
appearing on the books of the corporation or given by
the shareholder to the corporation for the purpose of
notice. If no such address appears on the
corporation's books or is given, notice shall be deemed
to have been given if sent to that shareholder by first-
class mail or by third-class mail or by telegraphic or
other written communication (as provided herein) to the
corporation's principal executive office, or if
published at least once in a newspaper of general
circulation in the county where that office is located.
Notice shall be deemed to have been given at the time
when delivered personally or deposited in the mail or
sent by telegram or other means of written
communication.
If any notice addressed to a shareholder at the address
of that shareholder appearing on the books of the
corporation is returned to the corporation by the
United States Postal Service marked to indicate that
the United States Postal Service is unable to deliver
the notice to the shareholder at that address, all
future notices or reports shall deemed to have been
duly given without further mailing if these shall be
available to the shareholder on written demand of the
shareholder at the principal executive office of the
corporation for a period of one year from the date of
the giving of the notice.
An affidavit of the mailing or other means of giving
any notice of any shareholder's meeting shall be
executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice and
shall be filed and maintained in the minute book of the
corporation.
and it is
FURTHER RESOLVED, that the officers of the Fund be, and they
hereby are, authorized and directed to execute and deliver
any and all documents and take any and all other actions
that they may deem necessary or advisable in order to
effectuate the foregoing resolution.
I declare under penalty of perjury that the matters set forth in
this certificate are true and correct of my own knowledge.
/s/ Deborah R. Gatzek
Dated: February 28, 1994 Deborah R. Gatzek
Secretary
FRANKLIN EQUITY FUND
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN EQUITY FUND, a
California Corporation, hereinafter called the "Fund" and
FRANKLIN ADVISERS, INC., a California Corporation, hereinafter
called the "Manager."
WHEREAS, the Fund has been organized and operates as an
investment company registered under the Investment Company Act of
1940 for the purpose of investing and reinvesting its assets in
securities, as set forth in its Articles of Incorporation, its By-
Laws and its Registration Statements under the Investment Company
Act of 1940 and the Securities Act of 1933, all as heretofore
amended and supplemented; and the Fund desires to avail itself of
the services, information, advice, assistance and facilities of
an investment manager and to have an investment manager perform
for its various management, statistical, research, investment
advisory and other services; and,
WHEREAS, the Manager is registered as an investment adviser under
the Investment Advisor's Act of 1940, is engaged in the business
of rendering management, investment advisory, counselling and
supervisory services to investment companies and other investment
counselling clients, and desires to provide these services to the
Fund.
NOW THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Manager. The Fund hereby employs the
Manager to manage the investment and reinvestment of the Fund's
assets and to administer its affairs, subject to the direction of
the Board of Directors and the officers of the Fund, for the
period and on the terms hereinafter set forth. The Manager
hereby accepts such employment and agrees during such period to
render the services and to assume the obligations herein set
forth for the compensation herein provided. The Manager shall
for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether
herein or otherwise), have no authority to act for or represent
the Fund in any way or otherwise be deemed an agent of the Fund.
2. Obligations of and Services to be Provided by the Manager.
The Manager undertakes to provide the services hereinafter set
forth and to assume the following obligations:
A. Office Space, Furnishings, Facilities, Equipment, and
Personnel. The Manager shall furnish to the Fund adequate
(i) office space, which may be space within the offices of
the Manager or in such other place as may be agreed upon from
time to time, (ii) office furnishings, facilities and
equipment as may be reasonably required for managing the
corporate affairs and conducting the business of the Fund,
including complying with the corporate and securities
reporting requirements of the United States and the various
states in which the Fund does business, conducting the
business of the Fund, including complying with the corporate
and securities reporting requirements of the United States
and the various states in which the Fund does business,
conducting correspondence and other communications with the
shareholders of the Fund, maintaining all internal
bookkeeping, accounting and auditing services and records in
connection with the Fund's investment and business
activities, and computing net asset value. The Manager shall
employ or provide and compensate the executive, secretarial
and clerical personnel necessary to provide such services.
The Manager shall also compensate all officers and employees
of the Fund who are officers or employees of the Manager.
B. Investment Management Services.
(a) The Manager shall manage the Fund's assets and portfolio
subject to and in accordance with the investment objectives
and policies of the Fund and any directions which the Fund's
Board of Directors may issue from time to time. In pursuance
of the foregoing, the Manager shall make all determinations
with respect to the investment of the Fund's assets and the
purchase and sale of portfolio securities, and shall take
such steps as may be necessary to implement the same. Such
determinations and services shall also include determining
the manner in which voting rights, rights to consent to
corporate action and any other rights pertaining to the
Fund's portfolio securities shall be exercised. The Manager
shall render regular reports to the Fund, at regular meetings
of the Board of Directors and at such other times as may be
reasonably requested by the Fund's Board of Directors, of (i)
the decisions which it has made with respect to the
investment of the Fund's assets and the purchase and sale of
portfolio securities, (ii) the reasons for such decisions and
(iii) the extent to which those decisions have been
implemented.
(b) The Manager, subject to and in accordance with any
directions which the Fund's Board of Directors may issue from
time to time, shall place, in the name of the Fund, orders
for the execution of the Fund's portfolio transactions. When
placing such orders the Manager shall seek to obtain the best
net price and execution for the Fund, but this requirement
shall not be deemed to obligate the Manager to place any
order solely on the basis of obtaining the lowest commission
rate if the other standards set forth in this section have
been satisfied. The parties recognize that there are likely
to be many cases in which different brokers are equally able
to provide such best price and execution and that, in
selecting among such brokers with respect to particular
trades, it is desirable to choose those brokers who furnish
research, statistical quotations and other information to the
Fund and the Manager in accord with the standards set forth
below. Moreover, to the extent that it continues to be
lawful to do so and so long as the Board determines that the
Fund will benefit, directly or indirectly, by doing so, the
Manager may place orders with a broker who charges a
commission for that transaction which is in excess of the
amount of commission that another broker would have charged
for effecting that transaction, provided that the excess
commission is reasonable in relation to the value of
"brokerage and research services" (as defined in Section 28
(e)(3) of the Securities Exchange Act of 1934) provided by
that broker. Accordingly, the Fund and the Manager agree
that the Manager shall select brokers for the execution of
the Fund's portfolio transactions from among:
(i) Those brokers and dealers who provide quotations and
other services to the Fund, specifically including the
quotations necessary to determine the Fund's net assets, in
such amount of total brokerage as may reasonably be
required in light of such services;
(ii) Those brokers and dealers who supply research,
statistical and other data to the Manager or its affiliates
which relate directly to portfolio securities, actual or
potential, of the Fund or which place the Manager in a
better position to make decisions in connection with the
management of the Fund's assets and portfolio whether or
not such data may also be useful to the Manager and its
affiliates in managing other portfolios or advising other
clients, in such amount of total brokerage as may
reasonably be required.
Provided that the Fund's officers are satisfied that the best
execution is obtained, the sale of Fund shares may also be
considered as a factor in the selection of broker-dealers to
execute the Fund's portfolio transactions.
(c) When the Manager has determined that the Fund should
tender securities pursuant to a "tender offer solicitation,"
Franklin Distributors, Inc. ("Distributors") shall be
designated as the "tendering dealer" so long as it is legally
permitted to act in such capacity under the Federal
securities laws and rules thereunder and the rules of any
securities exchange or association of which it may be a
member. Neither the Manager nor Distributors shall be
obligated to make any additional commitments of capital,
expense or personnel beyond that already committed (other
than normal periodic fees or payments necessary to maintain
its corporate existence and membership in the National
Association of Securities Dealers, Inc.) as of the date of
this Agreement and this Agreement shall not obligate the
Manager or Distributors (i) to act pursuant to the foregoing
requirement under any circumstances in which they might
reasonably believe that liability might be imposed upon them
as a result of so acting, or (ii) to institute legal or other
proceedings to collect fees which may be considered to be due
from others to it as a result of such a tender, unless the
Fund shall enter into an agreement with the Manager to
reimburse them for all expenses connected with attempting to
collect such fees including legal fees and expenses and that
portion of the compensation due to their employees which is
attributable to the time involved in attempting to collect
such fees.
(d) The Manager shall render regular reports to the Fund,
not more frequently than quarterly, of how much total
brokerage business has been placed by the Manager with
brokers falling into each of the foregoing categories and the
manner in which the allocation has been accomplished.
(e) The Manager agrees that no investment decision will be
made or influenced by a desire to provide brokerage for
allocation in accordance with the foregoing, and that the
right to make such allocation of brokerage shall not
interfere with the Manager's paramount duty to obtain the
best net price and execution for the Fund.
C. Provisions of Information Necessary for Preparation of
Securities Registration Statements, Amendments and Other
Materials. The Manager, its officers and employees will make
available and provide accounting and statistical information
required by the Underwriter in the preparation of
registration statements, reports and other documents required
by Federal and state securities laws and with such
information as the Underwriter may reasonably request for use
in the preparation of such documents or of other materials
necessary or helpful for the underwriting and distribution of
the Fund's shares.
D. Other Obligations and Services. The Manager shall make
available its officers and employees to the Board of
Directors and officers of the Fund for consultation and
discussions regarding the administrative management of the
Fund and its investment activities.
3. Expenses of the Fund. It is understood that the Fund will pay
all its expenses other than those expressly assumed by the
Manager herein, which expenses payable by the Fund shall include:
A. Fees to the Manager as provided herein;
B. Expenses of all audits by independent public
accountants;
C. Expenses of transfer agent, registrar, custodian,
dividend disbursing agent and shareholder record-
keeping services;
D. Expenses of obtaining quotations for calculating the
value of the Fund's net assets;
E. Salaries and other compensation of any of its executive
officers who are not officers, directors, stockholders
or employees of the Manager;
F. Taxes levied against the Fund;
G. Brokerage fees and commissions in connection with the
purchase and sale of portfolio securities for the Fund;
H. Costs, including the interest expense, of borrowing
money;
I. Costs incident to corporate meetings of the Fund,
reports to the Fund to is shareholders, the filing of
reports with regulatory bodies and the maintenance of
the Fund's corporate existence;
J. Legal fees, including the legal fees related to the
registration and continued qualification of the Fund
shares for sale;
K. Costs of printing stock certificates representing
shares of the Fund;
L. Directors' fees and expenses to directors who are not
directors, officers, employees or stockholders of the
Manager or any of its affiliates; and
M. Its pro rata portion of the fidelity bond insurance
premium.
4. Compensation of the Manager. The Fund shall pay a monthly
management fee in cash to the Manager based upon a percentage of
the value of the Fund's net assets, calculated as set forth
below, on the first business day of each month in each year as
compensation for the services rendered and obligations assumed by
the Manager during the preceding month. The initial management
fee under this Agreement shall be payable on the first business
day of the first month following the effective date of this
Agreement, and shall be reduced by the amount of any advance
payments made by the Fund relating to the previous month.
A. For purposes of calculating such fee, the value of the net
assets of the Fund shall be the net assets computed as of the
close of business on the last business day of the month
preceding the month in which the payment is being made,
determined in the same manner as the Fund uses to compute the
value of its net assets in connection with the determination
of the net asset value of Fund shares, all as set forth more
fully in the Fund's current prospectus. The rate of the
monthly management fee shall be as follows:
5/96 of 1% of the value of net assets up to and including
$100,000,000; and
1/24 of 1% of the value of net assets over $100,000,000 and
not over $250,000,000; and
9/240 of 1% of the value of net assets in excess of
$250,000,000.
B. The Management fee payable by the Fund shall be reduced or
eliminated to the extent that Franklin Distributors, Inc. has
actually received cash payments of tender offer solicitation
fees less certain costs and expenses incurred in connection
therewith; and to the extent necessary to comply with the
limitations on expenses which may be borne by the Fund as set
forth in the laws, regulations and administrative
interpretations of those states in which the Fund's shares
are registered.
C. If this Agreement is terminated prior to the end of any month,
the monthly management fee 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 fiscal quarter during which
the Agreement is in effect bears to the number of calendar
days in the month, and shall be payable within 10 days after
the date of termination.
5. Activities of the Manager. The services of the Manager to the
Fund hereunder are not to be deemed exclusive, and Manager and
any of its affiliates shall be free to render similar services to
others. Subject to and in accordance with the Articles of
Incorporation and By-Laws of the Fund and to Section 10(a) of the
Investment Company Act of 1940, it is understood that directors,
officers, agents and stockholders of the Fund are or may be
interested in the Manager or its affiliates as directors,
officers, agents or stockholders, and that directors, officers,
agents or stockholders of the Manager or its affiliates are or
may be interested in the Fund as directors, officers, agents,
stockholders or otherwise, that the Manager or its affiliates may
be interested in the Fund as stockholders or otherwise; and that
the effect of any such interests shall be governed by said
Articles of Incorporation, the By-Laws and the Act.
6. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties
hereunder on the part of the Manager, the Manager shall not
be subject to liability to the Fund or to any shareholder of
the 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 and
directors' fees reasonably incurred by the Fund in the
preparation, printing and distribution of proxy statements,
amendments to its Registration Statement, holdings of
meetings of its shareholders or directors, the conduct of
factual investigation, any legal or administrative
proceedings (including any applications for exemption or
determinations by the Securities and Exchange Commission)
which the Fund incurs as the result of action or inaction of
the Manager or any of its affiliates or any of their
officers, directors, employees or 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 or future transaction in such shares or control)
which shall have been undertaken without the prior, express
approval of the Fund's Board of Directors; or, (ii) is within
the 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 Subsection 6(B), to reimburse the Fund for any
expenditures related to the institution of an administrative
proceeding or civil litigation by the Fund or a 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 Subsection 6(B) Agreement within 30 days
after a bill or statement has been received by the Fund
therefore. 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 director or officer of the Fund, or the Manager, from
liability in violation of Sections 17(h) and (i) of the
Investment Company Act of 1940.
7. Renewal and Termination.
A. This Agreement shall become effective on the date written
below and shall continue in effect for two years. The
Agreement is renewable annually thereafter for successive
periods not to exceed one year (i) by a vote of a majority of
the outstanding voting securities of the Fund or by a vote of
the Board of Directors of the Fund, and (ii) by a vote of a
majority of the directors of the Fund who are not parties to
the Agreement or interested persons of any parties to the
Agreement (other than as Directors of the Fund) cast in
person at a meeting called for the purpose of voting on the
Agreement.
B. This Agreement.
(i) may at any time be terminated without the payment of any
penalty either by vote of the Board of Directors of the fund
or by vote of a majority of the outstanding voting securities
of the Fund, on 30 days' written notice to the Manager;
(ii) shall immediately terminate in the event of its
assignment; and
(iii) may be terminated by the Manager on 30 days' written
notice to the Fund.
C. As used in this Section the terms "assignment," "interested
person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth for any such
terms in the Investment Company Act of 1940, as amended.
D. Any notice under this Agreement shall be given in writing
addressed and delivered, or mailed post-paid, to the other
party at any office of such party.
8. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed the 1st day of November, 1986.
FRANKLIN EQUITY FUND
/s/ Charles B. Johnson
By: Charles B. Johnson
FRANKLIN ADVISERS, INC.
/s/ Rupert H. Johnson, Jr.
By: Rupert H. Johnson, Jr.
FRANKLIN EQUITY FUND
777 Mariners Island Blvd.
San Mateo, California 94404
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404
Re: Amended and Restated Distribution Agreement
Gentlemen:
We (the "Fund") are a corporation or business trust operating as
an open-end management investment company or "mutual fund", which
is registered under the Investment Company Act of 1940 (the "1940
Act") and whose shares are registered under the Securities Act of
1933 (the "1933 Act"). We desire to issue one or more series or
classes of our authorized but unissued shares of capital stock or
beneficial interest (the "Shares") to authorized persons in
accordance with applicable Federal and State securities laws.
The Fund's Shares may be made available in one or more separate
series, each of which may have one or more classes.
You have informed us that your company is registered as a broker-
dealer under the provisions of the Securities Exchange Act of
1934 and that your company is a member of the National
Association of Securities Dealers, Inc. You have indicated your
desire to act as the exclusive selling agent and distributor for
the Shares. We have been authorized to execute and deliver this
Distribution Agreement ("Agreement") to you by a resolution of
our Board of Directors or Trustees ("Board") passed at a meeting
at which a majority of Board members, including a majority who
are not otherwise interested persons of the Fund and who are not
interested persons of our investment adviser, its related
organizations or with you or your related organizations, were
present and voted in favor of the said resolution approving this
Agreement.
1. Appointment of Underwriter. Upon the execution of this
Agreement and in consideration of the agreements on your part
herein expressed and upon the terms and conditions set forth
herein, we hereby appoint you as the exclusive sales agent for
our Shares and agree that we will deliver such Shares as you may
sell. You agree to use your best efforts to promote the sale of
Shares, but are not obligated to sell any specific number of
Shares.
However, the Fund and each series retain the right to make
direct sales of its Shares without sales charges consistent with
the terms of the then current prospectus and applicable law, and
to engage in other legally authorized transactions in its Shares
which do not involve the sale of Shares to the general public.
Such other transactions may include, without limitation,
transactions between the Fund or any series or class and its
shareholders only, transactions involving the reorganization of
the Fund or any series, and transactions involving the merger or
combination of the Fund or any series with another corporation or
trust.
2. Independent Contractor. You will undertake and
discharge your obligations hereunder as an independent contractor
and shall have no authority or power to obligate or bind us by
your actions, conduct or contracts except that you are authorized
to promote the sale of Shares. You may appoint sub-agents or
distribute through dealers or otherwise as you may determine from
time to time, but this Agreement shall not be construed as
authorizing any dealer or other person to accept orders for sale
or repurchase on our behalf or otherwise act as our agent for any
purpose.
3. Offering Price. Shares shall be offered for sale at a
price equivalent to the net asset value per share of that series
and class plus any applicable percentage of the public offering
price as sales commission or as otherwise set forth in our then
current prospectus. On each business day on which the New York
Stock Exchange is open for business, we will furnish you with the
net asset value of the Shares of each available series and class
which shall be determined in accordance with our then effective
prospectus. All Shares will be sold in the manner set forth in
our then effective prospectus and statement of additional
information, and in compliance with applicable law.
4. Compensation.
A. Sales Commission. You shall be entitled to charge
a sales commission on the sale or redemption, as appropriate, of
each series and class of each Fund's Shares in the amount of any
initial, deferred or contingent deferred sales charge as set
forth in our then effective prospectus. You may allow any sub-
agents or dealers such commissions or discounts from and not
exceeding the total sales commission as you shall deem advisable,
so long as any such commissions or discounts are set forth in our
current prospectus to the extent required by the applicable
Federal and State securities laws. You may also make payments to
sub-agents or dealers from your own resources, subject to the
following conditions: (a) any such payments shall not create any
obligation for or recourse against the Fund or any series or
class, and (b) the terms and conditions of any such payments are
consistent with our prospectus and applicable federal and state
securities laws and are disclosed in our prospectus or statement
of additional information to the extent such laws may require.
B. Distribution Plans. You shall also be entitled to
compensation for your services as provided in any Distribution
Plan adopted as to any series and class of any Fund's Shares
pursuant to Rule 12b-1 under the 1940 Act.
5. Terms and Conditions of Sales. Shares shall be offered
for sale only in those jurisdictions where they have been
properly registered or are exempt from registration, and only to
those groups of people which the Board may from time to time
determine to be eligible to purchase such shares.
6. Orders and Payment for Shares. Orders for Shares shall
be directed to the Fund's shareholder services agent, for
acceptance on behalf of the Fund. At or prior to the time of
delivery of any of our Shares you will pay or cause to be paid to
the custodian of the Fund's assets, for our account, an amount in
cash equal to the net asset value of such Shares. Sales of
Shares shall be deemed to be made when and where accepted by the
Fund's shareholder services agent. The Fund's custodian and
shareholder services agent shall be identified in its prospectus.
7. Purchases for Your Own Account. You shall not purchase
our Shares for your own account for purposes of resale to the
public, but you may purchase Shares for your own investment
account upon your written assurance that the purchase is for
investment purposes and that the Shares will not be resold except
through redemption by us.
8. Sale of Shares to Affiliates. You may sell our Shares
at net asset value to certain of your and our affiliated persons
pursuant to the applicable provisions of the federal securities
statutes and rules or regulations thereunder (the "Rules and
Regulations"), including Rule 22d-1 under the 1940 Act, as
amended from time to time.
9. Allocation of Expenses. We will pay the expenses:
(a) Of the preparation of the audited and
certified financial statements of our company to
be included in any Post-Effective Amendments
("Amendments") to our Registration Statement under
the 1933 Act or 1940 Act, including the prospectus
and statement of additional information included
therein;
(b) Of the preparation, including legal
fees, and printing of all Amendments or
supplements filed with the Securities and Exchange
Commission, including the copies of the
prospectuses included in the Amendments and the
first 10 copies of the definitive prospectuses or
supplements thereto, other than those necessitated
by your (including your "Parent's") activities or
Rules and Regulations related to your activities
where such Amendments or supplements result in
expenses which we would not otherwise have
incurred;
(c) Of the preparation, printing and
distribution of any reports or communications
which we send to our existing shareholders; and
(d) Of filing and other fees to Federal and
State securities regulatory authorities necessary
to continue offering our Shares.
You will pay the expenses:
(a) Of printing the copies of the
prospectuses and any supplements thereto and
statements of additional information which are
necessary to continue to offer our Shares;
(b) Of the preparation, excluding legal
fees, and printing of all Amendments and
supplements to our prospectuses and statements of
additional information if the Amendment or
supplement arises from your (including your
"Parent's") activities or Rules and Regulations
related to your activities and those expenses
would not otherwise have been incurred by us;
(c) Of printing additional copies, for use
by you as sales literature, of reports or other
communications which we have prepared for
distribution to our existing shareholders; and
(d) Incurred by you in advertising,
promoting and selling our Shares.
10. Furnishing of Information. We will furnish to you such
information with respect to each series and class of Shares, in
such form and signed by such of our officers as you may
reasonably request, and we warrant that the statements therein
contained, when so signed, will be true and correct. We will
also furnish you with such information and will take such action
as you may reasonably request in order to qualify our Shares for
sale to the public under the Blue Sky Laws of jurisdictions in
which you may wish to offer them. We will furnish you with
annual audited financial statements of our books and accounts
certified by independent public accountants, with semi-annual
financial statements prepared by us, with registration statements
and, from time to time, with such additional information
regarding our financial condition as you may reasonably request.
11. Conduct of Business. Other than our currently
effective prospectus, you will not issue any sales material or
statements except literature or advertising which conforms to the
requirements of Federal and State securities laws and regulations
and which have been filed, where necessary, with the appropriate
regulatory authorities. You will furnish us with copies of all
such materials prior to their use and no such material shall be
published if we shall reasonably and promptly object.
You shall comply with the applicable Federal and State
laws and regulations where our Shares are offered for sale and
conduct your affairs with us and with dealers, brokers or
investors in accordance with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
12. Redemption or Repurchase Within Seven Days. If Shares
are tendered to us for redemption or repurchase by us within
seven business days after your acceptance of the original
purchase order for such Shares, you will immediately refund to us
the full sales commission (net of allowances to dealers or
brokers) allowed to you on the original sale, and will promptly,
upon receipt thereof, pay to us any refunds from dealers or
brokers of the balance of sales commissions reallowed by you. We
shall notify you of such tender for redemption within 10 days of
the day on which notice of such tender for redemption is received
by us.
13. Other Activities. Your services pursuant to this
Agreement shall not be deemed to be exclusive, and you may render
similar services and act as an underwriter, distributor or dealer
for other investment companies in the offering of their shares.
14. Term of Agreement. This Agreement shall become
effective on the date of its execution, and shall remain in
effect for a period of two (2) years. The Agreement is renewable
annually thereafter, with respect to the Fund or, if the Fund has
more than one series, with respect to each series, for successive
periods not to exceed one year (i) by a vote of (a) a majority of
the outstanding voting securities of the Fund or, if the Fund has
more than one series, of each series, or (b) by a vote of the
Board, and (ii) by a vote of a majority of the members of the
Board who are not parties to the Agreement or interested persons
of any parties to the Agreement (other than as members of the
Board), cast in person at a meeting called for the purpose of
voting on the Agreement.
This Agreement may at any time be terminated by the
Fund or by any series without the payment of any penalty, (i)
either by vote of the Board or by vote of a majority of the
outstanding voting securities of the Fund or any series on 90
days' written notice to you; or (ii) by you on 90 days' written
notice to the Fund; and shall immediately terminate with respect
to the Fund and each series in the event of its assignment.
15. Suspension of Sales. We reserve the right at all times
to suspend or limit the public offering of Shares upon two days'
written notice to you.
16. Miscellaneous. This Agreement shall be subject to the
laws of the State of California and shall be interpreted and
construed to further promote the operation of the Fund as an open-
end investment company. This Agreement shall supersede all
Distribution Agreements and Amendments previously in effect
between the parties. As used herein, the terms "Net Asset
Value," "Offering Price," "Investment Company," "Open-End
Investment Company," "Assignment," "Principal Underwriter,"
"Interested Person," "Parent," "Affiliated Person," and "Majority
of the Outstanding Voting Securities" shall have the meanings set
forth in the 1933 Act or the 1940 Act and the Rules and
Regulations thereunder.
Nothing herein shall be deemed to protect you against any
liability to us or to our securities holders to which you would
otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of your duties hereunder,
or by reason of your reckless disregard of your obligations and
duties hereunder.
If the foregoing meets with your approval, please acknowledge
your acceptance by signing each of the enclosed copies, whereupon
this will become a binding agreement as of the date set forth
below.
Very truly yours,
FRANKLIN EQUITY FUND
By:_______________________________
Accepted:
Franklin/Templeton Distributors, Inc.
By:__________________________________
DATED: ______________
CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and
entered into as of April 1, 1995, by and between FRANKLIN EQUITY
FUND, a California corporation (the "Fund"), and BANK OF AMERICA
NT & SA, a banking association organized under the laws of the
United States (the "Custodian").
RECITALS
A. The Fund is an investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"),
and invests and reinvests in Domestic Securities and Foreign
Securities.
B. The Custodian is, and has represented to the Fund
that the Custodian is a "bank" as that term is defined in Section
2(a)(5) of the 1940 Act and is eligible to receive and maintain
custody of investment company assets pursuant to Section 17(f)
and Rule 17f-2 thereunder.
C. The Fund and the Custodian desire to provide for
the retention of the Custodian as a custodian of the assets of
the Fund as the parties hereto may determine from time-to-time,
on the terms and subject to the provisions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual
covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS
For purposes of this Agreement, the following terms
shall have the respective meanings specified below:
"Board of Directors" shall mean the Board of Directors
of the Fund.
"Business Day" with respect to any Domestic Security
means any day, other than a Saturday or Sunday, that is not a day
on which banking institutions are authorized or required by law
to be closed in The City of New York and, with respect to Foreign
Securities, a London Business Day. "London Business Day" shall
mean any day on which dealings and deposits in U.S. dollars are
transacted in the London interbank market.
"Domestic Securities" shall have the meaning provided
in Subsection 2.1 hereof.
"Executive Committee" shall mean the executive
committee of the Board of Directors.
"Foreign Custodian" shall have the meaning provided in
Section 4.1 hereof.
"Foreign Securities" shall have the meaning provided in
Section 2.1 hereof.
"Foreign Securities Depository" shall have the meaning
provided in Section 4.1 hereof.
"Securities" shall have the meaning provided in Section
2.1 hereof.
"Securities System" shall have the meaning provided in
Section 3.1 hereof.
"Securities System Account" shall have the meaning
provided in Subsection 3.8(a) hereof.
"Shares" shall mean shares of capital stock of the
Fund.
"Subcustodian" shall have the meaning provided in
Subsection 3.7 hereof, but shall not include any Foreign
Custodian.
"Transfer Agent" shall mean the duly appointed and
acting transfer agent for the Fund.
"Writing" shall mean a communication in writing, a
communication by telex, the Custodian's Global Custody
Instruction SystemTM, facsimile transmission, bankwire or other
teleprocess or electronic instruction system acceptable to the
Custodian.
Section 2. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS
2.1 Appointment of Custodian. The Fund hereby
appoints and designates the Custodian as a custodian of the
assets of the Fund including cash, securities the Fund desires to
be held within the United States ("Domestic Securities") and
securities it desires to be held outside the United States
("Foreign Securities"). Domestic Securities and Foreign
Securities are sometimes referred to herein, collectively, as
"Securities." The Custodian hereby accepts such appointment and
designation and agrees that it shall maintain custody of the
assets of the Fund delivered to it hereunder in the manner
provided for herein.
2.2 Delivery of Assets. The Fund agrees to deliver to
the Custodian Securities and cash owned by the Fund, payments of
income, principal or capital distributions received by the Fund
with respect to Securities owned by the Fund from time to time,
and the consideration received by it for such Shares or other
securities of the Fund as may be issued and sold from time to
time. The Custodian shall have no responsibility whatsoever for
any property or assets of the Fund held or received by the Fund
and not delivered to the Custodian pursuant to and in accordance
with the terms hereof. All Securities accepted by the Custodian
on behalf of the Fund under the terms of this Agreement shall be
in "street name" or other good delivery form as determined by the
Custodian.
2.3 Subcustodians. Upon receipt of Proper
Instructions and a certified copy of a resolution of the Board of
Directors or of the Executive Committee certified by the
Secretary or an Assistant Secretary of the Fund, the Custodian
may from time to time appoint one or more Subcustodians or
Foreign Custodians to hold assets of the Fund in accordance with
the provisions of this Agreement.
2.4 No Duty to Manage. The Custodian, a Subcustodian
or a Foreign Custodian shall not have any duty or responsibility
to manage or recommend investments of the assets of the Fund held
by them or to initiate any purchase, sale or other investment
transaction in the absence of Proper Instructions or except as
otherwise specifically provided herein.
Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO
ASSETS OF THE FUND HELD BY THE CUSTODIAN
3.1 Holding Securities. The Custodian shall hold and
physically segregate from any property owned by the Custodian,
for the account of the Fund, all non-cash property delivered by
the Fund to the Custodian hereunder other than Securities which,
pursuant to Subsection 3.8 hereof, are held through a registered
clearing agency, a registered securities depository, the Federal
Reserve's book-entry securities system (referred to herein,
individually, as a "Securities System"), or held by a
Subcustodian, Foreign Custodian or in a Foreign Securities
Depository.
3.2 Delivery of Securities. Except as otherwise
provided in Subsection 3.5 hereof, the Custodian, upon receipt of
Proper Instructions, shall release and deliver Securities owned
by the Fund and held by the Custodian in the following cases or
as otherwise directed in Proper Instructions:
(a) except as otherwise provided herein, upon
sale of such Securities for the account of the Fund and receipt
by the Custodian, a Subcustodian or a Foreign Custodian of
payment therefor;
(b) upon the receipt of payment by the Custodian,
a Subcustodian or a Foreign Custodian in connection with any
repurchase agreement related to such Securities entered into by
the Fund;
(c) in the case of a sale effected through a
Securities System, in accordance with the provisions of
Subsection 3.8 hereof;
(d) to a tender agent or other authorized agent
in connection with (i) a tender or other similar offer for
Securities owned by the Fund, or (ii) a tender offer or
repurchase by the Fund of its own Shares;
(e) to the issuer thereof or its agent when such
Securities are called, redeemed, retired or otherwise become
payable; provided, that in any such case, the cash or other
consideration is to be delivered to the Custodian, a Subcustodian
or a Foreign Custodian;
(f) to the issuer thereof, or its agent, for
transfer into the name or nominee name of the Fund, the name or
nominee name of the Custodian, the name or nominee name of any
Subcustodian or Foreign Custodian; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new Securities are to be
delivered to the Custodian, a Subcustodian or Foreign Custodian;
(g) to the broker selling the same for
examination in accordance with the "street delivery" custom;
(h) for exchange or conversion pursuant to any
plan of merger, consolidation, recapitalization, or
reorganization of the issuer of such Securities, or pursuant to a
conversion of such Securities; provided that, in any such case,
the new Securities and cash, if any, are to be delivered to the
Custodian or a Subcustodian;
(i) in the case of warrants, rights or similar
securities, the surrender thereof in connection with the exercise
of such warrants, rights or similar Securities or the surrender
of interim receipts or temporary Securities for definitive
Securities; provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian, a
subcustodian or a Foreign Custodian;
(j) for delivery in connection with any loans of
Securities made by the Fund, but only against receipt by the
Custodian, a Subcustodian or a Foreign Custodian of adequate
collateral as determined by the Fund (and identified in Proper
Instructions communicated to the Custodian), which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be credited
to the account of the Custodian, a Subcustodian or a Foreign
Custodian in the Federal Reserve's book-entry securities system,
the Custodian will not be held liable or responsible for the
delivery of Securities owned by the Fund prior to the receipt of
such collateral;
(k) for delivery as security in connection with
any borrowings by the Fund requiring a pledge of assets by the
Fund, but only against receipt by the Custodian, a Subcustodian
or a Foreign Custodian of amounts borrowed;
(l) for delivery in accordance with the
provisions of any agreement among the Fund, the Custodian, a
Subcustodian or a Foreign Custodian and a broker-dealer relating
to compliance with the rules of registered clearing corporations
and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
(m) for delivery in accordance with the
provisions of any agreement among the Fund, the Custodian, a
Subcustodian or a Foreign Custodian and a futures commission
merchant, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any contract market, or any
similar organization or organizations, regarding account deposits
in connection with transactions by the Fund;
(n) upon the receipt of instructions from the
Transfer Agent for delivery to the Transfer Agent or to the
holders of Shares in connection with distributions in kind in
satisfaction of requests by holders of Shares for repurchase or
redemption; and
(o) for any other proper purpose, but only upon
receipt of Proper Instructions, and a certified copy of a
resolution of the Board of Directors or of the Executive
Committee certified by the Secretary or an Assistant Secretary of
the Fund, specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom delivery of such securities shall be
made.
3.3 Registration of Securities. Securities held by
the Custodian, a Subcustodian or a Foreign Custodian (other than
bearer Securities) shall be registered in the name or nominee
name of the Fund, in the name or nominee name of the Custodian or
in the name or nominee name of any Subcustodian or Foreign
Custodian. The Fund agrees to hold the Custodian, any such
nominee, Subcustodian or Foreign Custodian harmless from any
liability as a holder of record of such Securities.
3.4 Bank Accounts. The Custodian shall open and
maintain a separate bank account or accounts for the Fund,
subject only to draft or order by the Custodian acting pursuant
to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by
it hereunder from or for the account of the Fund, other than cash
maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the 1940 Act. Funds held by the
Custodian for the Fund may be deposited by it to its credit as
Custodian in the banking departments of the Custodian, a
Subcustodian or a Foreign Custodian. It is understood and agreed
by the Custodian and the Fund that the rate of interest, if any,
payable on such funds (including foreign currency deposits) that
are deposited with the Custodian may not be a market rate of
interest and that the rate of interest payable by the Custodian
to the Fund shall be agreed upon by the Custodian and the Fund
from time to time. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable
by the Custodian only in that capacity.
3.5 Collection of Income; Trade Settlement; Crediting
of Accounts. The Custodian shall collect income payable with
respect to Securities owned by the Fund, settle Securities trades
for the account of the Fund and credit and debit the Fund's
account with the Custodian in connection therewith as follows:
(a) Upon receipt of Proper Instructions, the
Custodian shall effect the purchase of a Security by charging the
account of the Fund on the contractual settlement date. The
Custodian shall have no liability of any kind to any person,
including the Fund, if the Custodian effects payment on behalf of
the Fund as provided for herein or in Proper Instructions, and
the seller or selling broker fails to deliver the Securities
purchased.
(b) Upon receipt of Proper Instructions, the
Custodian shall effect the sale of a Security by delivering a
certificate or other indicia of ownership, and shall credit the
account of the Fund with the proceeds of such sale on the
contractual settlement date. The Custodian shall have no
liability of any kind to any person, including the Fund, if the
Custodian delivers such a certificate(s) or other indicia of
ownership as provided for herein or in Proper Instructions, and
the purchaser or purchasing broker fails to effect payment to
the Fund within a reasonable time period, as determined by the
Custodian in its sole discretion. In such event, the Custodian
shall be entitled to reimbursement of the amount so credited to
the account of the Fund in connection with such sale.
(c) The Fund is responsible for ensuring that the
Custodian receives timely and accurate Proper Instructions to
enable the Custodian to effect settlement of any purchase or
sale. If the Custodian does not receive such instructions within
the required time period, the Custodian shall have no liability
of any kind to any person, including the Fund, for failing to
effect settlement on the contractual settlement date. However,
the Custodian shall use its best reasonable efforts to effect
settlement as soon as possible after receipt of Proper
Instructions.
(d) The Custodian shall credit the account of the
Fund with interest income payable on interest bearing Securities
on the payable date. Interest income on cash balances will be
credited monthly to the account of the Fund on the first Business
Day (on which the Custodian is open for business) following the
end of each month. Dividends and other amounts payable with
respect to Domestic Securities and Foreign Securities shall be
credited to the account of the Fund when received by the
Custodian. The Custodian shall not be required to commence suit
or collection proceedings or resort to any extraordinary means to
collect such income and other amounts payable with respect to
Securities owned by the Fund. The collection of income due the
Fund on Domestic Securities loaned pursuant to the provisions of
Subsection 3.2(j) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information
or data as may be necessary to assist the Fund in arranging for
the timely delivery to the Custodian of the income to which the
Fund is entitled. The Custodian shall have no liability to any
person, including the Fund, if the Custodian credits the account
of the Fund with such income or other amounts payable with
respect to Securities owned by the Fund (other than Securities
loaned by the Fund pursuant to Subsection 3.2(j) hereof) and the
Custodian subsequently is unable to collect such income or other
amounts from the payors thereof within a reasonable time period,
as determined by the Custodian in its sole discretion. In such
event, the Custodian shall be entitled to reimbursement of the
amount so credited to the account of the Fund.
3.6 Payment of Fund Monies. Upon receipt of Proper
Instructions the Custodian shall pay out monies of the Fund in
the following cases or as otherwise directed in Proper
Instructions:
(a) upon the purchase of Securities, futures
contracts or options on futures contracts for the account of the
Fund but only, except as otherwise provided herein, (i) against
the delivery of such securities, or evidence of title to futures
contracts or options on futures contracts, to the Custodian or a
Subcustodian registered pursuant to Subsection 3.3 hereof or in
proper form for transfer; (ii) in the case of a purchase effected
through a Securities System, in accordance with the conditions
set forth in Subsection 3.8 hereof; or (iii) in the case of
repurchase agreements entered into between the Fund and the
Custodian, another bank or a broker-dealer (A) against delivery
of the Securities either in certificated form to the Custodian or
a Subcustodian or through an entry crediting the Custodian's
account at the appropriate Federal Reserve Bank with such
Securities or (B) against delivery of the confirmation evidencing
purchase by the Fund of Securities owned by the Custodian or such
broker-dealer or other bank along with written evidence of the
agreement by the Custodian or such broker-dealer or other bank to
repurchase such Securities from the Fund;
(b) in connection with conversion, exchange or
surrender of Securities owned by the Fund as set forth in
Subsection 3.2 hereof;
(c) for the redemption or repurchase of Shares
issued by the Fund;
(d) for the payment of any expense or liability
incurred by the Fund, including but not limited to the following
payments for the account of the Fund: custodian fees, interest,
taxes, management, accounting, transfer agent and legal fees and
operating expenses of the Fund whether or not such expenses are
to be in whole or part capitalized or treated as deferred
expenses; and
(e) for the payment of any dividends or
distributions declared by the Board of Directors with respect to
the Shares.
3.7 Appointment of Subcustodians. The Custodian may,
upon receipt of Proper Instructions, appoint another bank or
trust company, which is itself qualified under the 1940 Act to
act as a custodian (a "Subcustodian"), as the agent of the
Custodian to carry out such of the duties of the Custodian
hereunder as a Custodian may from time to time direct; provided,
however, that the appointment of any Subcustodian shall not
relieve the Custodian of its responsibilities or liabilities
hereunder.
3.8 Deposit of Securities in Securities Systems. The
Custodian may deposit and/or maintain Domestic Securities owned
by the Fund in a Securities System in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following
provisions:
(a) the Custodian may hold Domestic Securities of
the Fund in the Depository Trust Company or the Federal Reserve's
book-entry system or, upon receipt of Proper Instructions, in
another Securities System provided that such securities are held
in an account of the Custodian in the Securities System
("Securities System Account") which shall not include any assets
of the Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;
(b) the records of the Custodian with respect to
Domestic Securities of the Fund which are maintained in a
Securities System shall identify by book-entry those Domestic
Securities belonging to the Fund;
(c) the Custodian shall pay for Domestic
Securities purchased for the account of the Fund upon (i)
receipt of advice from the Securities System that such securities
have been transferred to the Securities System Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund.
The Custodian shall transfer Domestic Securities sold for the
account of the Fund upon (A) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Securities System Account, and (B) the making
of an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Fund. Copies of all
advices from the Securities System of transfers of Domestic
Securities for the account of the Fund shall be maintained for
the Fund by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund
in the form of a written advice or notice; and
(d) upon request, the Custodian shall provide the
Fund with any report obtained by the Custodian on the Securities
System's accounting system, internal accounting control and
procedures for safeguarding domestic securities deposited in the
Securities System.
3.9 Segregated Account. The Custodian shall upon
receipt of Proper Instructions establish and maintain a
segregated account or accounts for and on behalf of the Fund,
into which account or accounts may be transferred cash and/or
Securities, including Securities maintained in an account by the
Custodian pursuant to Section 3.8 hereof, (i) in accordance with
the provisions of any agreement among the Fund, the Custodian and
a broker-dealer or futures commission merchant, relating to
compliance with the rules of registered clearing corporations and
of any national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii)
for purposes of segregating cash or securities in connection with
options purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold by the
Fund and (iii) for other proper corporate purposes, but only, in
the case of this clause (iii), upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the
Board of Directors or of the Executive Committee certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes
to be proper corporate purposes.
3.10 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection
with receipt of income or other payments with respect to domestic
securities of the Fund held by it and in connection with
transfers of such securities.
3.11 Proxies. The Custodian shall, with respect to
the Securities held hereunder, promptly deliver to the Fund all
proxies, all proxy soliciting materials and all notices relating
to such Securities. If the Securities are registered otherwise
than in the name of the Fund or a nominee of the Fund, the
Custodian shall use its best reasonable efforts, consistent with
applicable law, to cause all proxies to be promptly executed by
the registered holder of such Securities in accordance with
Proper Instructions.
3.12 Communications Relating to Fund Portfolio
Securities. The Custodian shall transmit promptly to the Fund
all written information (including, without limitation, pendency
of calls and maturities of Securities and expirations of rights
in connection therewith and notices of exercise of put and call
options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from
issuers of Securities being held for the Fund. With respect to
tender or exchange offers, the Custodian shall transmit promptly
to the Fund all written information received by the Custodian
from issuers of the Securities whose tender or exchange is sought
and from the party (or its agents) making the tender or exchange
offer. If the Fund desires to take action with respect to any
tender offer, exchange offer or any other similar transaction,
the Fund shall notify the Custodian at least three Business Days
prior to the date of which the Custodian is to take such action.
3.13 Reports by Custodian. Custodian shall each
business day furnish the Fund with a statement summarizing all
transactions and entries for the account of the Fund for the
preceding day. At the end of every month Custodian shall furnish
the Fund with a list of the portfolio securities showing the
quantity of each issue owned, the cost of each issue and the
market value of each issue at the end of each month. Such
monthly report shall also contain separate listings of (a)
unsettled trades and (b) when-issued securities. Custodian shall
furnish such other reports as may be mutually agreed upon from
time-to-time.
Section 4. CERTAIN DUTIES OF THE CUSTODIAN WITH RESPECT TO
ASSETS OF THE FUND HELD OUTSIDE THE UNITED STATES
4.1 Custody outside the United States. The Fund
authorizes the Custodian to hold Foreign Securities and cash in
custody accounts which have been established by the Custodian
with (i) its foreign branches, (ii) foreign banking institutions,
foreign branches of United States banks and subsidiaries of
United States banks or bank holding companies (each a "Foreign
Custodian") and (iii) Foreign Securities depositories or clearing
agencies (each a "Foreign Securities Depository"); provided,
however, that the Board of Directors or the Executive Committee
has approved in advance the use of each such Foreign Custodian
and Foreign Securities Depository and the contract between the
Custodian and each Foreign Custodian and that such approval is
set forth in Proper Instructions and a certified copy of a
resolution of the Board of Directors or of the Executive
Committee certified by the Secretary or an Assistant Secretary of
the Fund. Unless expressly provided to the contrary in this
Section 4, custody of Foreign Securities and assets held outside
the United States by the Custodian, a Foreign Custodian or
through a Foreign Securities Depository shall be governed by
Section 3 hereof.
4.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of its
foreign branches, Foreign Custodians and Foreign Securities
Depositories to: (i) "foreign securities," as defined in
paragraph (c) (1) of Rule 17f-5 under the 1940 Act, and (ii) cash
and cash equivalents in such amounts as the Custodian or the Fund
may determine to be reasonably necessary to effect the Fund's
Foreign Securities transactions.
4.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Custodian and the
Fund, assets of the Fund shall be maintained in Foreign
Securities Depositories only through arrangements implemented by
the Custodian or Foreign Custodians pursuant to the terms hereof.
4.4 Segregation of Securities. The Custodian shall
identify on its books and records as belonging to the Fund, the
Foreign Securities of the Fund held by each Foreign Custodian.
4.5 Agreements with Foreign Custodians. Each
agreement with a Foreign Custodian shall provide generally that:
(a) the Fund's assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the
Foreign Custodian or its creditors, except a claim of payment for
their safe custody or administration; (b) beneficial ownership
for the Fund's assets will be freely transferable without the
payment of money or value other than for custody or
administration; (c) adequate records will be maintained
identifying the assets as belonging to the Fund; (d) the
independent public accountants for the Fund will be given access
to the records of the Foreign Custodian relating to the assets of
the Fund or confirmation of the contents of those records; (e)
the disposition of assets of the Fund held by the Foreign
Custodian will be subject only to the instructions of the
Custodian or its agents; (f) the Foreign Custodian shall
indemnify and hold harmless the Custodian and the Fund from and
against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the Foreign Custodian's
performance of its obligations under such agreement; (g) to the
extent practicable, the Fund's assets will be adequately insured
in the event of loss; and (h) the Custodian will receive periodic
reports with respect to the safekeeping of the Fund's assets,
including notification of any transfer to or from the Fund's
account.
4.6 Access of Independent Accountants of the Fund.
Upon request of the Fund, the Custodian will use its best
reasonable efforts to arrange for the independent accountants of
the Fund to be afforded access to the books and records of any
Foreign Custodian insofar as such books and records relate to the
custody by any such Foreign Custodian of assets of the Fund.
4.7 Transactions in Foreign Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall instruct the
appropriate Foreign Custodian to transfer, exchange or deliver
Foreign Securities owned by the Fund, but, except to the extent
explicitly provided herein, only in any of the cases specified in
Subsection 3.2. Upon receipt of Proper Instructions, the
Custodian shall pay out or instruct the appropriate Foreign
Custodian to pay out monies of the Fund in any of the cases
specified in Subsection 3.6. Notwithstanding anything herein to
the contrary, settlement and payment for Foreign Securities
received for the account of the Fund and delivery of Foreign
Securities maintained for the account of the Fund may be effected
in accordance with the customary or established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of
receiving later payment for such securities from such purchaser
or dealer. Foreign Securities maintained in the custody of a
Foreign Custodian may be maintained in the name of such entity or
its nominee name to the same extent as set forth in Section 3.3
of this Agreement and the Fund agrees to hold any Foreign
Custodian and its nominee harmless from any liability as a holder
of record of such securities.
4.8 Liability of Foreign Custodian. Each agreement
between the Custodian and a Foreign Custodian shall require the
Foreign Custodian to exercise reasonable care in the performance
of its duties and to indemnify and hold harmless the Custodian
and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the
Foreign Custodian's performance of such obligations. At the
election of the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claims against a
Foreign Custodian as a consequence of any such loss, damage,
cost, expense, liability or claim if and to the extent that the
Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
4.9 Monitoring Responsibilities.
(a) The Custodian will promptly inform the Fund
in the event that the Custodian learns of a material adverse
change in the financial condition of a Foreign Custodian or is
notified by (i) a foreign banking institution employed as a
Foreign Custodian that there appears to be a substantial
likelihood that its shareholders' equity will decline below $200
million or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally
accepted United States accounting principles) and denominated in
U.S. dollars, or (ii) a subsidiary of a United States bank or
bank holding company acting as a Foreign Custodian that there
appears to be a substantial likelihood that its shareholders'
equity will decline below $100 million or that its shareholders'
equity has declined below $100 million (in each case computed in
accordance with generally accepted United States accounting
principles) and denominated in U.S. dollars.
(b) The custodian will furnish such information
as may be reasonably necessary to assist the Fund's Board of
Directors in its annual review and approval of the continuance of
all contracts or arrangements with Foreign Subcustodians.
Section 5. PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper
Instructions" means instructions of the Fund received by the
Custodian via telephone or in Writing which the Custodian
believes in good faith to have been given by Authorized Persons
(as defined below) or which are transmitted with proper testing
or authentication pursuant to terms and conditions which the
Custodian may specify. The Custodian reserves the right to
require that any Proper Instructions delivered to the Custodian
by telephone shall promptly thereafter be confirmed in Writing by
an Authorized Person, but the Fund will hold the Custodian
harmless for its failure to send such confirmation in writing,
the failure of such confirmation to conform to the telephone
instructions received or the Custodian's failure to produce such
confirmation at any subsequent time. Unless otherwise expressly
provided, all Proper Instructions shall continue in full force
and effect until canceled or superseded. If the Custodian
requires test arrangements, authentication methods or other
security devices to be used with respect to Proper Instructions,
any Proper Instructions given by the Fund thereafter shall be
given and processed in accordance with such terms and conditions
for the use of such arrangements, methods or devices as the
Custodian may put into effect and modify from time to time. The
Fund shall safeguard any testkeys, identification codes or other
security devices which the Custodian shall make available to it.
The Custodian may electronically record any Proper Instructions
given by telephone, and any other telephone discussions, with
respect to its activities hereunder. As used in this Agreement,
the term "Authorized Persons" means such officers or such agents
of the Fund as have been designated by a resolution of the Board
of Directors or of the Executive Committee, a certified copy of
which has been provided to the Custodian, to act on behalf of the
Fund under this Agreement. Each of such persons shall continue
to be an Authorized Person until such time as the Custodian
receives Proper Instructions that any such officer or agent is no
longer an Authorized Person.
Notwithstanding anything to the contrary contained in
this Agreement, if the Fund has executed or is otherwise bound by
a funds transfer service agreement, electronic trade payment
service agreement, license agreement for electronic access,
MicroWire service agreement or similar agreement, and any related
addenda and amendments thereto (each, a "Service Agreement"),
between the Fund and the Custodian, with regard to the transfer
of funds to and/or disbursement of funds from an account of the
Fund, then any electronic instruction on the part of the Fund and
the Custodian's obligations relating thereto shall be governed by
the applicable Service Agreement. To the extent that anything in
this Agreement relating to electronic instructions to transfer
and/or disburse funds is inconsistent with any provision of the
Service Agreement, the Service Agreement shall control.
Section 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express
authority from the Fund:
(a) make payments to itself or others for minor
expenses of handling Securities or other similar items relating
to its duties under this Agreement, provided that all such
payments shall be accounted for to the Fund;
(b) endorse for collection, in the name of the
Fund, checks, drafts and other negotiable instruments; and
(c) in general, attend to all non-discretionary
details in connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the Securities and
property of the Fund except as otherwise provided in Proper
Instructions.
Section 7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any
instructions (conveyed by telephone or in Writing), notice,
request, consent, certificate or other instrument or paper
believed by it to be genuine and to have been properly given or
executed by or on behalf of the Fund. The Custodian may receive
and accept a certified copy of a resolution of the Board of
Directors or Executive Committee as conclusive evidence (a) of
the authority of any person to act in accordance with such
resolution or (b) of any determination or of any action by the
Board of Directors or Executive Committee as described in such
resolution, and such resolution may be considered as in full
force and effect until receipt by the Custodian of written notice
by an Authorized Person to the contrary.
Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary
information in its possession (to the extent permissible under
applicable law) to the entity or entities appointed by the Board
of Directors to keep the books of account of the Fund and/or
compute the net asset value per Share of the outstanding Shares
of the Fund.
Section 9. RECORDS
The Custodian shall create and maintain all records
relating to its activities under this Agreement which are
required with respect to such activities under Section 31 of the
1940 Act and Rules 31a-1 and 31a-2 thereunder. All such records
shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of
the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply
the Fund with a tabulation of Securities owned by the Fund and
held by the Custodian and shall, when requested to do so by the
Fund and for such compensation as shall be agreed upon between
the Fund and the Custodian, include certificate numbers in such
tabulations.
Section 10. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Fund and the Custodian.
Section 11. RESPONSIBILITY OF CUSTODIAN
The Custodian shall be responsible for the performance
of only such duties as are set forth herein or contained in
Proper Instructions and shall use reasonable care in carrying out
such duties. The Custodian shall be liable to the Fund for any
loss which shall occur as the result of the failure of a Foreign
Custodian or a Foreign Securities Depository engaged by such
Foreign Custodian or the Custodian to exercise reasonable care
with respect to the safekeeping of securities and other assets of
the Fund to the same extent that the Custodian would be liable to
the Fund if the Custodian itself were holding such securities and
other assets. In the event of any loss to the Fund by reason of
the failure of the Custodian, a Foreign Custodian or a Foreign
Securities Depository engaged by such Foreign Custodian or the
Custodian to utilize reasonable care, the Custodian shall be
liable to the Fund to the extent of the Fund's damages, to be
determined based on the market value of the property which is the
subject of the loss at the date of discovery of such loss and
without reference to any special conditions or circumstances.
The Custodian shall be held to the exercise of reasonable care in
carrying out this Agreement. The Fund agrees to indemnify and
hold harmless the Custodian and its nominees from all taxes,
charges, expenses, assessments, claims and liabilities (including
legal fees and expenses) incurred by any of them in connection
with the performance of this Agreement, except such as may arise
from any negligent action, negligent failure to act or willful
misconduct on the part of the indemnified entity or any Foreign
Custodian or Foreign Securities Depository. The Custodian shall
be entitled to rely, and may act, on advice of counsel (who may
be counsel for the Fund) on all matters and shall be without
liability for any action reasonably taken or omitted pursuant to
such advice. The Custodian need not maintain any insurance for
the benefit of the Fund.
All collections of funds or other property paid or
distributed in respect of Securities held by the Custodian,
agent, Subcustodian or Foreign Custodian hereunder shall be made
at the risk of the Fund. The Custodian shall have no liability
for any loss occasioned by delay in the actual receipt of notice
by the Custodian, agent, Subcustodian or by a Foreign Custodian
of any payment, redemption or other transaction regarding
securities in respect of which the Custodian has agreed to take
action as provided in Section 3 hereof. The Custodian shall not
be liable for any action taken in good faith upon Proper
Instructions or upon any certified copy of any resolution of the
Board of Directors and may rely on the genuineness of any such
documents which it may in good faith believe to be validly
executed. The Custodian shall not be liable for any loss
resulting from, or caused by, the direction of the Fund to
maintain custody of any Securities or cash in a foreign country
including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, civil
disturbance, acts of war or terrorism, insurrection, revolution,
nuclear fusion, fission or radiation or other similar occurrences
or events beyond the control of the Custodian. Finally, the
Custodian shall not be liable for any taxes, including interest
and penalties with respect thereto, that may be levied or
assessed upon or in respect of any assets of the Fund held by the
Custodian.
Section 12. LIMITED LIABILITY OF THE FUND
The Custodian acknowledges that it has received notice
of and accepts the limitations of the Fund's liability as set
forth in its Articles of Incorporation and By-Laws. The
Custodian agrees that the Fund's obligation hereunder shall be
limited to the assets of the Fund, and that the Custodian shall
not seek satisfaction of any such obligation from the
shareholders of the Fund nor from any director, officer,
employee, or agent of the Fund.
Section 13. EFFECTIVE PERIOD; TERMINATION
This Agreement shall become effective as of the date of
its execution and shall continue in full force and effect until
terminated as hereinafter provided. This Agreement may be
terminated by the Fund or the Custodian by 60 days notice in
Writing to the other provided that any termination by the Fund
shall be authorized by a resolution of the Board of Directors, a
certified copy of which shall accompany such notice of
termination, and provided further, that such resolution shall
specify the names of the persons to whom the Custodian shall
deliver the assets of the Fund held by it. If notice of
termination is given by the Custodian, the Fund shall, within 60
days following the giving of such notice, deliver to the
Custodian a certified copy of a resolution of the Board of
Directors specifying the names of the persons to whom the
Custodian shall deliver assets of the Fund held by it. In either
case the Custodian will deliver such assets to the persons so
specified, after deducting therefrom any amounts which the
Custodian determines to be owed to it hereunder (including all
costs and expenses of delivery or transfer of Fund assets to the
persons so specified). If within 60 days following the giving of
a notice of termination by the Custodian, the Custodian does not
receive from the Fund a certified copy of a resolution of the
Board of Directors specifying the names of the persons to whom
the Custodian shall deliver the assets of the Fund held by it,
the Custodian, at its election, may deliver such assets to a bank
or trust company doing business in the State of California to be
held and disposed of pursuant to the provisions of this Agreement
or may continue to hold such assets until a certified copy of one
or more resolutions as aforesaid is delivered to the Custodian.
The obligations of the parties hereto regarding the use of
reasonable care, indemnities and payment of fees and expenses
shall survive the termination of this Agreement.
Section 14. MISCELLANEOUS
14.1 Relationship. Nothing contained in this Agreement
shall (i) create any fiduciary, joint venture or partnership
relationship between the Custodian and the Fund or (ii) be
construed as or constitute a prohibition against the provision by
the Custodian or any of its affiliates to the Fund of investment
banking, securities dealing or brokerages services or any other
banking or financial services.
14.2 Further Assurances. Each party hereto shall
furnish to the other party hereto such instruments and other
documents as such other party may reasonably request for the
purpose of carrying out or evidencing the transactions
contemplated by this Agreement.
14.3 Attorneys' Fees. If any lawsuit or other action
or proceeding relating to this Agreement is brought by a party
hereto against the other party hereto, the prevailing party shall
be entitled to recover reasonable attorneys' fees, costs and
disbursements (including allocated costs and disbursements of in-
house counsel), in addition to any other relief to which the
prevailing party may be entitled.
14.4 Notices. Except as otherwise specified herein,
each notice or other communication hereunder shall be in Writing
and shall be delivered to the intended recipient at the following
address (or at such other address as the intended recipient shall
have specified in a written notice given to the other parties
hereto):
if to the Fund:
Franklin Equity Fund
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, CA 94403-7777
Attention: Fund Manager
if to the Custodian:
Bank of America NT&SA
1455 Market Street
16th Floor, Dept. 5014
San Francisco, CA 94104
14.5 Headings. The underlined headings contained
herein are for convenience of reference only, shall not be deemed
to be a part of this Agreement and shall not be referred to in
connection with the interpretation hereof.
14.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and each
of which, when taken together, shall constitute one agreement.
14.7 Governing Law. This Agreement shall be
construed in accordance with, and governed in all respects by,
the laws of the State of California (without giving effect to
principles of conflict of laws).
14.8 Force Majeure. Subject to the provisions of
Section 11 hereof regarding the Custodian's general standard of
care, no failure, delay or default in performance of any
obligation hereunder shall constitute an event of default or a
breach of this agreement, or give rise to any liability
whatsoever on the part of one party hereto to the other, to the
extent that such failure to perform, delay or default arises out
of a cause beyond the control and without negligence of the party
otherwise chargeable with failure, delay or default; including,
but not limited to: action or inaction of governmental, civil or
military authority; fire; strike; lockout or other labor dispute;
flood; war; riot; theft; earthquake; natural disaster; breakdown
of public or common carrier communications facilities; computer
malfunction; or act, negligence or default of the other party.
This paragraph shall in no way limit the right of either party to
this Agreement to make any claim against third parties for any
damages suffered due to such causes.
14.9 Successors and Assigns. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns, if any.
14.10 Waiver. No failure on the part of any person to
exercise any power, right, privilege or remedy hereunder, and no
delay on the part of any person in the exercise of any power,
right, privilege or remedy hereunder, shall operate as a waiver
thereof; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further
exercise thereof or of any other power, right, privilege or
remedy.
14.11 Amendments. This Agreement may not be amended,
modified, altered or supplemented other than by means of an
agreement or instrument executed on behalf of each of the parties
hereto.
14.12 Severability. In the event that any provision
of this Agreement, or the application of any such provision to
any person or set of circumstances, shall be determined to be
invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such
provision to persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent
permitted by law.
14.13 Parties in Interest. None of the provisions of
this Agreement is intended to provide any rights or remedies to
any person other than the Fund and the Custodian and their
respective successors and assigns, if any.
14.14 Entire Agreement. This Agreement sets forth the
entire understanding of the parties hereto, and supersedes all
prior custody agreements between the parties hereto relating to
the subject matter hereof to the extent inconsistent herewith.
14.15 Variations of Pronouns. Whenever required by
the context hereof, the singular number shall include the plural,
and vice versa; the masculine gender shall include the feminine
and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above
written.
"Custodian": BANK OF AMERICA NT & SA
By /s/ illegible By: /s/ Thomas E. Vinson
Its Assistant Vice President Its Vice President
"Fund": FRANKLIN EQUITY FUND
By By: /s/ Deborah R. Gatzek
Its Its Vice President
FRANKLIN
GROUP OF FUNDS
(FRANKLIN LOGO)
777 Mariners Island Blvd.
San Mateo, CA 94404-1585
415/570-3000
April 2, 1990
Lee D. Harbert, Vice President & Mgr.
Bank of America NT & SA
555 California St. 4th Floor
San Francisco, CA 94104
Dear Lee:
This will confirm our agreement to modify the Custodian
Agreement for the funds listed below as follows:
Section 6(a) (4) will be modified to read: "Periodic
payments of interest and/or of partial principal on GNMA
instruments (other than payments on final maturity) shall be
credited to the account of the Fund on payable date plus two."
FRANKLIN GROUP OF FUNDS
Franklin Investors Securities Trust
Franklin Tax-Free Trust
Franklin California Tax-Free Income Fund, Inc.
Franklin Federal Tax-Free Income Fund
AGE High Income Fund, Inc.
Franklin New York Tax-Free Income Fund, Inc.
Franklin Equity Fund
Franklin California Tax-Free Trust
Institutional Fiduciary Trust
Franklin Gold Fund
Franklin Tax-Exempt Money Fund
Franklin Pennsylvania Investors Fund
Franklin Money Fund
Franklin Federal Money Fund
Franklin Custodian Funds, Inc.
Franklin Option Fund
Franklin Tax-Advantaged U.S. Government Securities Fund
Franklin Tax-Advantaged High Yield Securities Fund
Franklin Managed Trust
Franklin Valuemark Funds
Franklin Government Securities Trust
Franklin New York Tax-Exempt Money Fund
Franklin Balance Sheet Investment Fund
Please sign the enclosed copy of this letter in the space
indicated and return it to me. If you have any questions,
please call me.
Sincerely,
/s/ Deborah R. Gatzek
Deborah R. Gatzek
Approved and agreed:
/s/ Lee D. Harbert
By: Lee D. Harbert
AGREEMENT OF MERGER
BETWEEN
FRANKLIN EQUITY FUND
and
RESEARCH EQUITY FUND, INC.
This agreement of Merger is entered into between Franklin
Equity Fund, a California corporation (herein "Surviving
Corporation") and Research Equity Fund, Inc., a Maryland
corporation (herein "Merging corporation").
The parties hereto mutually agree as follows:
1. Merging Corporation shall be merged into Surviving
corporation, which shall be governed by the laws of the State of
California.
2. Each outstanding share and any fractional shares of
Merging Corporation shall be converted to an equivalent number of
shares of Surviving Corporation.
3. The outstanding shares of Surviving Corporation, if any,
immediately prior to the effectiveness of the merger shall be
redeemed and canceled upon payment to the holders thereof of cash
equal to such shares' respective proportionate interest in the
net assets of the corporation at such time.
4. Merging corporation shall from time to time, as and when
requested by Surviving Corporation, execute and deliver all such
documents and instruments and take all such action necessary or
desirable to evidence or carry out this merger.
5. The effect of the merger and the effective date of the
merger are as prescribed by law.
IN WITNESS WHEREOF, the parties have executed this Agreement
this 24th day of October, 1984.
FRANKLIN EQUITY FUND
/s/ Charles B. Johnson
By: Charles B. Johnson, President
/s/ Harmon E. Burns
By: Harmon E. Burns, Secretary
RESEARCH EQUITY FUND, INC.
/s/ Charles B. Johnson
By: Charles B. Johnson, President
/s/ Harmon E. Burns
By: Harmon E. Burns, Secretary
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors of
Franklin Equity Fund
We consent to the incorporation by reference in Post-Effective
Amendment No. 82 to the Registration Statement of Franklin Equity
Fund on Form N-1A (File No. 2-10103) of our report dated August
3, 1994 on our audit of the financial statements and financial
highlights of the Fund, which report is included in the Annual
Report to Shareholders for the year ended June 30, 1994, which is
incorporated by reference in the Registration Statement.
/s/ COOPERS & LYBRAND L.L.P.
San Francisco, California
April 14, 1995
To: All Franklin Templeton Funds Listed on Schedule A
777 Mariners Island Blvd.
San Mateo, CA 94404
Gentlemen:
We propose to invest $100.00 in the Class II shares (the "Shares") of
each of the Funds listed on the attached Schedule A (the "Funds"), on the
business day immediately preceding the effective date for each Fund's Class
II shares, at a purchase price per share equivalent to the net asset value
per share of each Fund's Class I shares on the date of purchase. We will
purchase the Shares in a private offering prior to the effectiveness of the
post-effective amendment to the Form N-1A registration statement under which
each Fund's Class II shares are initially offered, as filed by the Fund under
the Securities Act of 1933. The Shares are being purchased to serve as the
seed money for each Fund's Class II shares prior to the commencement of the
public offering of Class II shares.
In connection with such purchase, we understand that we, the purchaser,
intend to acquire the Shares for our own account as the sole beneficial owner
thereof and have no present intention of redeeming or reselling the Shares so
acquired.
We consent to the filing of this Investment Letter as an exhibit to the
form N-1A registration statement of each Fund.
Sincerely,
FRANKLIN RESOURCES, INC.
By: /s/ Harmon E. Burns
Harmon E. Burns
Executive Vice President
Date: April 12, 1995
<TABLE>
<CAPTION>
SCHEDULE A
<S> <C>
INVESTMENT COMPANY FUND & CLASS; TITAN NUMBER
Franklin Gold Fund Franklin Gold Fund - Class II; 232
Franklin Equity Fund Franklin Equity Fund - Class II; 234
AGE High Income Fund, Inc. AGE High Income Fund - Class II; 205
Franklin Custodian Funds, Inc. Growth Series - Class II; 206
Utilities Series - Class II; 207
Income Series - Class II; 209
U.S. Government Securities
Series - Class II; 210
Franklin California Tax-Free Franklin California Tax-Free Income
Income Fund, Inc. Fund - Class II; 212
Franklin New York Tax-Free Franklin New York Tax-Free Income
Income Fund, Inc. Fund - Class II; 215
Franklin Federal Tax-Free Franklin Federal Tax-Free Income
Income Fund Fund -Class II; 216
Franklin Managed Trust Franklin Rising Dividends
Fund - Class II; 258
Franklin California Tax-Free Franklin California Insured Tax-Free
Trust
Income Fund - Class II; 224
Franklin New York Tax-Free Trust Franklin New York Insured Tax-Free
Income Fund - Class II; 281
Franklin Investors Securities Franklin Global Government Income
Trust
Fund - Class II; 235
Franklin Equity Income
Fund - Class II; 239
Franklin Strategic Series Franklin Global Utilities
Fund - Class II; 297
Franklin Real Estate Securities Franklin Real Estate Securities
Trust
Fund - Class II; 292
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT COMPANY FUND AND CLASS; TITAN NUMBER
Franklin Tax-Free Franklin Alabama Tax-Free Income Fund - Class II; 264
Trust Franklin Arizona Tax-Free Income Fund - Class II; 226
Franklin Colorado Tax-Free Income Fund - Class II; 227
Franklin Connecticut Tax Free Income
Fund - Class II; 266
Franklin Florida Tax-Free Income Fund - Class II; 265
Franklin Georgia Tax-Free Income Fund - Class II; 228
Franklin High Yield Tax-Free Income Fund - Class II; 230
Franklin Insured Tax-Free Income Fund - Class II; 221
Franklin Louisiana Tax-Free Income Fund - Class II; 268
Franklin Maryland Tax-Free Income Fund - Class II; 269
Franklin Massachusetts Insured Tax-Free Income
Fund - Class II; 218
Franklin Michigan Insured Tax-Free Income
Fund - Class II; 219
Franklin Minnesota Insured Tax-Free Income
Fund - Class II; 220
Franklin Missouri Tax-Free Income Fund - Class II; 260
Franklin New Jersey Tax-Free Income
Fund - Class II; 271
Franklin North Carolina Tax-Free Income
Fund - Class II; 270
Franklin Ohio Insured Tax-Free Income
Fund - Class II; 222
Franklin Oregon Tax-Free Income Fund - Class II; 261
Franklin Pennsylvania Tax-Free Income
Fund - Class II; 229
Franklin Puerto Rico Tax-Free Income
Fund - Class II; 223
Franklin Texas Tax-Free Income Fund - Class II; 262
Franklin Virginia Tax-Free Income Fund - Class II; 263
</TABLE>
FRANKLIN EQUITY FUND
Preamble to Distribution Plan
The following Distribution Plan (the "Plan") has been
adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "Act") by Franklin Equity Fund (the "Fund"), which
Plan shall take effect on the 1st day of May, 1994 (the
"Effective Date of the Plan"). The Plan has been approved by a
majority of the Board of Directors of the Fund (the "Board of
Directors"), including a majority of the directors who are not
interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan (the "non-
interested directors"), cast in person at a meeting called for
the purpose of voting on such Plan.
In reviewing the Plan, the Board of Directors considered the
schedule and nature of payments and terms of the Management
Agreement between the Fund and Franklin Advisers, Inc.
("Advisers") and the terms of the Underwriting Agreement between
the Fund and Franklin/Templeton Distributors, Inc.
("Distributors"). The Board of Directors concluded that the
compensation of Advisers, under the Management Agreement, and of
Distributors, under the Underwriting Agreement, was fair and not
excessive; however, the Board of Directors also recognized that
uncertainty may exist from time to time with respect to whether
payments to be made by the Fund to Advisers, Distributors, or
others or by Advisers or Distributors to others may be deemed to
constitute distribution expenses of the Fund. Accordingly, the
Board of Directors determined that the Plan should provide for
such payments and that adoption of the Plan would be prudent and
in the best interest of the Fund and its shareholders. Such
approval included a determination that in the exercise of their
reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders.
DISTRIBUTION PLAN
1. The Fund shall reimburse Distributors or others for all
expenses incurred by Distributors or others in the promotion and
distribution of the shares of the Fund, including but not limited
to, the printing of prospectuses and reports used for sales
purposes, expenses of preparing and distributing sales literature
and related expenses, advertisements, and other distribution-
related expenses, including a prorated portion of Distributors'
overhead expenses attributable to the distribution of Fund
shares, as well as any distribution or service fees paid to
securities dealers or their firms or others who have executed a
servicing agreement with the Fund, Distributors or its
affiliates, which form of agreement has been approved from time
to time by the directors, including the non-interested directors.
2. The maximum amount which may be reimbursed by the Fund to
Distributors or others pursuant to Paragraph 1 herein shall be
0.25% per annum of the average daily net assets of the Fund. Said
reimbursement shall be made quarterly by the Fund to Distributors
or others.
3. In addition to the payments which the Fund is authorized to
make pursuant to paragraphs 1 and 2 hereof, to the extent that
the Fund, Advisers, Distributors or other parties on behalf of
the Fund, Advisers or Distributors make payments that are deemed
to be payments by the Fund for the financing of any activity
primarily intended to result in the sale of shares issued by the
Fund within the context of Rule 12b-1 under the Act, then such
payments shall be deemed to have been made pursuant to the Plan.
In no event shall the aggregate asset-based sales charges
which include payments specified in paragraphs 1 and 2, plus any
other payments deemed to be made pursuant to the Plan under this
paragraph, exceed the amount permitted to be paid pursuant to the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc., Article III, Section 26(d).
4. Distributors shall furnish to the Board of Directors, for
their review, on a quarterly basis, a written report of the
monies reimbursed to it and to others under the Plan, and shall
furnish the Board of Directors with such other information as the
Board of Directors may reasonably request in connection with the
payments made under the Plan in order to enable the Board of
Directors to make an informed determination of whether the Plan
should be continued.
5. The Plan shall continue in effect for a period of more than
one year only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors,
including the non-interested directors, cast in person at a
meeting called for the purpose of voting on the Plan.
6. The Plan, and any agreements entered into pursuant to this
Plan, may be terminated at any time, without penalty, by vote of
a majority of the outstanding voting securities of the Fund or by
vote of a majority of the non-interested directors, on not more
than sixty (60) days' written notice, or by Distributors on not
more than sixty (60) days' written notice, and shall terminate
automatically in the event of any act that constitutes an
assignment of the Management Agreement between the Fund and
Advisers.
7. The Plan, and any agreements entered into pursuant to this
Plan, may not be amended to increase materially the amount to be
spent for distribution pursuant to Paragraph 2 hereof without
approval by a majority of the Fund's outstanding voting
securities.
8. All material amendments to the Plan, or any agreements
entered into pursuant to this Plan, shall be approved by a vote
of the non-interested directors cast in person at a meeting
called for the purpose of voting on any such amendment.
9. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested directors shall be
committed to the discretion of such non-interested directors.
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Fund and Distributors as evidenced
by their execution hereof.
FRANKLIN EQUITY FUND
By: /s/ Deborah R. Gatzek
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By: /s/ Harmon E. Burns
CLASS II DISTRIBUTION PLAN
I. Investment Company: FRANKLIN EQUITY FUND
II. Fund and Class: FRANKLIN EQUITY FUND - CLASS II
III. Maximum Per Annum Rule 12b-1 Fees for Class II Shares
(as a percentage of average daily net assets of the
class)
A. Distribution Fee: 0.75%
B. Service Fee: 0.25%
PREAMBLE TO CLASS II DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been
adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "Act") by the Investment Company named above
("Investment Company") for the class II shares (the "Class") of
each Fund named above ("Fund"), which Plan shall take effect as
of the date class II shares are first offered (the "Effective
Date of the Plan"). The Plan has been approved by a majority
of the Board of Directors or Trustees of the Investment Company
(the "Board"), including a majority of the Board members who
are not interested persons of the Investment Company and who
have no direct, or indirect financial interest in the operation
of the Plan (the "non-interested Board members"), cast in
person at a meeting called for the purpose of voting on such
Plan.
In reviewing the Plan, the Board considered the schedule
and nature of payments and terms of the Management Agreement
between the Investment Company and Franklin Advisers, Inc. and
the terms of the Underwriting Agreement between the Investment
Company and Franklin/Templeton Distributors, Inc.
("Distributors"). The Board concluded that the compensation of
Advisers, under the Management Agreement, and of Distributors,
under the Underwriting Agreement, was fair and not excessive.
The approval of the Plan included a determination that in the
exercise of their reasonable business judgment and in light of
their fiduciary duties, there is a reasonable likelihood that
the Plan will benefit the Fund and its shareholders.
DISTRIBUTION PLAN
1. (a) The Fund shall pay to Distributors a quarterly fee
not to exceed the above-stated maximum distribution fee per
annum of the Class' average daily net assets represented by
shares of the Class, as may be determined by the Board from
time to time.
(b) In addition to the amounts described in (a) above,
the Fund shall pay (i) to Distributors for payment to dealers
or others, or (ii) directly to others, an amount not to exceed
the above-stated maximum service fee per annum of the Class'
average daily net assets represented by shares of the Class, as
may be determined by the Fund's Board from time to time, as a
service fee pursuant to servicing agreements which have been
approved from time to time by the Board, including the non-
interested Board members.
2. (a) Distributors shall use the monies paid to it
pursuant to Paragraph 1(a) above to assist in the distribution
and promotion of shares of the Class. Payments made to
Distributors under the Plan may be used for, among other
things, the printing of prospectuses and reports used for sales
purposes, expenses of preparing and distributing sales
literature and
related expenses, advertisements, and other distribution-
related expenses, including a pro-rated portion of
Distributors' overhead expenses attributable to the
distribution of Class shares, as well as for additional
distribution fees paid to securities dealers or their firms or
others who have executed agreements with the Investment
Company, Distributors or its affiliates, which form of
agreement has been approved from time to time by the Trustees,
including the non-interested trustees. In addition, such fees
may be used to pay for advancing the commission costs to
dealers or others with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b)
above shall be used to pay dealers or others for, among other
things, furnishing personal services and maintaining
shareholder accounts, which services include, among other
things, assisting in establishing and maintaining customer
accounts and records; assisting with purchase and redemption
requests; arranging for bank wires; monitoring dividend
payments from the Fund on behalf of customers; forwarding
certain shareholder communications from the Fund to customers;
receiving and answering correspondence; and aiding in
maintaining the investment of their respective customers in the
Class. Any amounts paid under this paragraph 2(b) shall be
paid pursuant to a servicing or other agreement, which form of
agreement has been approved from time to time by the Board.
3. In addition to the payments which the Fund is
authorized
to make pursuant to paragraphs 1 and 2 hereof, to the extent
that the Fund, Advisers, Distributors or other parties on
behalf of the Fund, Advisers or Distributors make payments that
are deemed to be payments by the Fund for the financing of any
activity primarily intended to result in the sale of Class
shares issued by the Fund within the context of Rule 12b-1
under the Act, then such payments shall be deemed to have been
made pursuant to the Plan.
In no event shall the aggregate asset-based sales charges
which include payments specified in paragraphs 1 and 2, plus
any other payments deemed to be made pursuant to the Plan under
this paragraph, exceed the amount permitted to be paid pursuant
to the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., Article III, Section 26(d).
4. Distributors shall furnish to the Board, for its
review,
on a quarterly basis, a written report of the monies reimbursed
to it and to others under the Plan, and shall furnish the Board
with such other information as the Board may reasonably request
in connection with the payments made under the Plan in order to
enable the Board to make an informed determination of whether
the Plan should be continued.
5. The Plan shall continue in effect for a period of more
than one year only so long as such continuance is specifically
approved at least annually by the Board, including the non
interested Board members, cast in person at a meeting called
for the purpose of voting on the Plan.
6. The Plan, and any agreements entered into pursuant to
this Plan, may be terminated at any time, without penalty, by
vote of a majority of the outstanding voting securities of the
Fund or by vote of a majority of the non-interested Board
members, on not more than sixty (60) days' written notice, or
by Distributors on not more than sixty (60) days' written
notice, and shall terminate automatically in the event of any
act that constitutes an assignment of the Management Agreement
between the
Fund and Advisers.
7. The Plan, and any agreements entered into pursuant to
this Plan, may not be amended to increase materially the amount
to be spent for distribution pursuant to Paragraph 1 hereof
without approval by a majority of the Fund's outstanding voting
securities.
8. All material amendments to the Plan, or any agreements
entered into pursuant to this Plan, shall be approved by the
noninterested Board members cast in person at a meeting called
for the purpose of voting on any such amendment.
9. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested Board members shall be
committed to the discretion of such non-interested Board
members.
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Investment Company and
Distributors as evidenced by their execution hereof.
Date: March 30, 1995
Investment Company
By:/s/Deborah R. Gatzek
Franklin/Templeton Distributors, Inc.
By:/s/Gregory E. Johnson
POWER OF ATTORNEY
The undersigned officers and directors of FRANKLIN EQUITY
FUND
hereby appoint MARK H. PLAFKER, HARMON E. BURNS, DEBORAH R.
GATZEK, KAREN L. SKIDMORE AND LARRY L. GREENE (with full
power to each of them to act alone) his attorney-in-fact and
agent, in all capacities, to execute, and to file any of the
documents referred to below relating to Post-Effective
Amendments to the Registrant's registration statement on
Form N-1A under the Investment Company Act of 1940, as
amended, and under the Securities Act of 1933 covering the
sale of shares by the Registrant under prospectuses becoming
effective after this date, including any amendment or
amendments increasing or decreasing the amount of securities
for which registration is being sought, with all exhibits
and any and all documents required to be filed with respect
thereto with any regulatory authority. Each of the
undersigned grants to each of said attorneys, full authority
to do every act necessary to be done in order to effectuate
the same as fully, to all intents and purposes as he could
do if personally present, thereby ratifying all that said
attorneys-infact and agents, may lawfully do or cause to be
done by virtue hereof.
The undersigned officers and directors hereby execute this
Power of Attorney as of this 16th day of February 1995.
/s/ Charles E. Johnson /s/ Charles B. Johnson
Charles E. Johnson, Principal Charles B. Johnson,
Executive Officer and Director Director
/s/ Frank H. Abbott, III /s/ Harris J. Ashton
Frank H. Abbott, III, Harris J. Ashton,
Director Director
/s/ S. Joseph Fortunato /s/ David W. Garbellano
S. Joseph Fortunato, David W. Garbellano,
Director Director
/s/ Rupert H. Johnson, Jr. /s/ Frank W. T. LaHaye
Rupert H. Johnson, Jr., Frank W. T. LaHaye,
Director Director
/s/ R. Martin Wiskemann /s/ Martin L. Flanagan
R. Martin Wiskemann, Martin L. Flanagan,
Director Principal Financial
Officer
/s/ Diomedes Loo-Tam
Diomedes Loo-Tam,
Principal Accounting Officer
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, certify that I am Secretary of Franklin
Equity Fund (the "Fund").
As Secretary of the Fund, I further certify that the following
resolution was adopted by a majority of the Directors of the Fund
present at a meeting held at 777 Mariners Island Boulevard, San
Mateo, California, on February 16, 1995.
RESOLVED, that a Power of Attorney, substantially in
the form of the Power of Attorney presented to this
Board, appointing Harmon E. Burns, Deborah R. Gatzek,
Karen L. Skidmore, Larry L. Greene and Mark H. Plafker
as attorneys-in-fact for the purpose of filing
documents with the Securities and Exchange Commission,
be executed by each Director and designated officer.
I declare under penalty of perjury that the matters set forth in
this certificate are true and correct of my own knowledge.
/s/ Deborah R. Gatzek
Dated: February 16, 1995 Deborah R. Gatzek
Secretary
