As filed with the Securities and Exchange Commission on April 18,
1995.
File Nos.
33-39088
811- 6243
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. 13 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 16 (X)
FRANKLIN STRATEGIC SERIES
(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 after filing pursuant to paragraph (a)(i)
[ ] on (date) 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 24(f)(2) under the Investment
Company Act of 1940. The Rule 24f-2 Notice for the issuer`s most
recent fiscal year was filed on June 29, 1994.
FRANKLIN STRATEGIC SERIES
CROSS REFERENCE SHEET
FORM N-1A
Part A: Information Required in Prospectus
(Franklin Global Utilities Fund)
N- 1A Location in
Item No. Item Registration Statement
1. Cover Page Cover Page
2. Synopsis Expense Table
3. Condensed Financial "Financial Highlights";
Information "Performance"
4. General Description "About the Fund";
"Investment Objectives and
Policies of the Fund";
"General Information"
5. Management of the "Management of the Fund"
Fund
6. Capital Stock and "Distributions to
Other Securities Shareholders"; "General
Information"; "Taxation of
the Fund and Its
Shareholders"
7. Purchase of "How to Buy Shares of the
Securities Being Fund"; "Purchasing Shares of
Offered the Fund in Connection with
Retirement Plans Involving
Tax-Deferred Investments";
"Other Programs and
Privileges Available to Fund
Shareholders"; "Exchange
Privilege"; "Valuation of
Fund Shares"
8. Redemption or "Exchange Privilege"; "How
Repurchase to Sell Shares of the Fund";
"How to Get Information
Regarding an Investment in
the Fund"
9. Pending Legal Not Applicable
Proceedings
FRANKLIN STRATEGIC SERIES
CROSS REFERENCE SHEET
FORM N- 1A
Part B: Information Required in
Statement of Additional Information
(Franklin Global Utilities Fund)
N- 1A Location in
Item No. Item Registration Statement
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information Cover Page; "About the Fund"
and History (See also the Prospectus
"About the Fund"; "General
Information")
13. Investment Objectives "The Fund's Investment
and Policies Objective and Restrictions"
(See also the Prospectus
"Investment Objective and
Policies of the Fund")
14. Management of the "Officers and Trustees"
Fund
15. Control Persons and "Officers and Trustees"
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 "General Information"
Other Securities and "Information 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
also the Prospectus
"Taxation of the Fund and
Its Shareholders")
21. Underwriters "The Fund's Underwriter"
22. Calculation of "General Information"
Performance Data
23. Financial Statements Financial Statements
97 P
SUPPLEMENT DATED MAY 1, 1995
TO THE PROSPECTUS FOR
FRANKLIN GLOBAL UTILITIES FUND
Franklin Strategic Series
dated September 1, 1994, as amended December 30, 1994
Introduction. As of May 1, 1995, the Franklin Global Utilities
Fund (the "Fund") offers two classes to its investors: Franklin
Global Utilities Fund - Class I ("Class I") and Franklin Global
Utilities Fund - Class II ("Class II"). Investors can choose
between Class I shares, which generally bear a higher front-end
sales charge and lower ongoing Rule 12b-1 distribution fees
("Rule 12b-1 fees"), and Class II shares, which generally have a
lower front-end sales charge and higher ongoing Rule 12b-1 fees.
Investors should consider the differences between the two
classes, including the impact of sales charges and distribution
fees, in choosing the more suitable class given their anticipated
investment amount and time horizon.
This Supplement must be read in conjunction with the Prospectus
for this Fund. All investment objectives and policies described
in the Prospectus apply equally to both classes of shares in the
new multiclass structure. Further, all operational procedures
apply equally to both classes, unless otherwise specified in the
following discussion.
THE NEW APPLICATION FORM INCLUDED WITH THIS SUPPLEMENT MUST BE
USED FOR ALL PURCHASES. DO NOT USE THE APPLICATION FORM INCLUDED
IN THE PROSPECTUS.
Multiclass Fund Structure. The Fund has two classes of shares
available for investment: Class I and Class II. All Fund shares
outstanding before the implementation of the multiclass structure
have been redesignated as Class I shares, and will retain their
previous rights and privileges. Voting rights attributable to
each class will, however, be different. See the Prospectus for
more details about Class I shares. Class II shares are explained
in detail in the following discussion. Except as described below,
shares of both classes represent identical interests in the
Fund's investment portfolio.
Expense Table
The purpose of this table is to assist an investor in
understanding the various costs and expenses that a shareholder
will bear directly or indirectly in connection with an investment
in the Fund. The figures for both classes of shares are based on
restated aggregate operating expenses of the Class I shares
before fee waivers and expense reductions for the fiscal year
ended April 30, 1994.
Shareholder Transaction Expenses
Class I Class II
Maximum Sales Charge Imposed on
Purchases
(as a percentage of offering 4.50% 1.00%^
price)
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 0.62% 0.62%
Rule 12b-1 Fees 0.24%* 1.00%*
Other Expenses:
Professional Fees 0.10% 0.10%
Registration Fees 0.10% 0.10%
Other 0.22% 0.22%
Total Other Expenses 0.42% 0.42%
Total Fund Operating Expenses 1.28% 2.04%^
^Although Class II has a lower front-end sales charge than Class
I, over time the higher Rule 12b-1 fee for Class II may cause
shareholders to pay more for Class II shares than for Class I
shares. Given the maximum front-end sales charge and the rate of
Rule 12b-1 fees of each class, it is estimated that this will
take approximately six years for shareholders who maintain total
shares valued at less than $100,000 in the Franklin Templeton
Funds. Shareholders with larger investments in the Franklin
Templeton Funds will reach the break-even point more quickly.
^^Class I investments of $1 million or more are not subject to a
front-end sales charge; however, a contingent deferred sales
charge of 1%, which has not been reflected in the Example below,
is generally imposed on certain redemptions within a "contingency
period" of 12 months of the calendar month following such
investments. See "How to Sell Shares of the Fund - Contingent
Deferred Sales Charge."
+Class II shares redeemed within a "contingency period" of 18
months of the calendar month following such investments are
subject to a 1% contingent deferred sales charge. See "How to
Sell Shares of the Fund - Contingent Deferred Sales Charge."
++$5.00 fee imposed only on Timing Accounts as described under
"Exchange Privilege" in the Prospectus. All other exchanges are
processed without a fee.
*Consistent with National Association of Securities Dealers,
Inc.'s rules, it is possible that the combination of front-end
sales charges and Rule 12b-1 fees could cause long-term
shareholders to pay more than the economic equivalent of the
maximum front-end sales charges permitted under those same rules.
**As noted, figures are estimates for the current fiscal year.
During the fiscal year ended April 30, 1994, the investment
manager agreed in advance to limit its management fees and to
assume responsibility for making payments to offset certain
operating expenses otherwise payable by Class I shares. With this
reduction, management fees and total operating expenses
represented 0.30% and 0.84%, respectively, of the average net
assets of Class I shares during that period. This arrangement may
be terminated by the investment manager at any time. "Other
Expenses" for Class II shares are estimates based on the actual
expenses that would have been incurred by the Class I shares
absent the aforementioned waiver for its fiscal year ended April
30, 1994.
Investors should be aware that the above table is not intended to
reflect in precise detail the fees and expenses associated with
an individual's own investment in the Fund. Rather the table has
been provided only to assist investors in gaining a more complete
understanding of fees, charges and expenses that an investor in
the classes will bear directly or indirectly. For a more detailed
discussion of these matters, investors should refer to the
appropriate sections of the Prospectus and this Supplement.
Example
As required by SEC regulations, the following example illustrates
the expenses, including the maximum front-end sales charge and
applicable contingent deferred sales charge, that apply to a
$1,000 investment in the Fund over various time periods assuming
(1) a 5% annual rate of return and (2) redemption at the end of
each time period.
One Year Three Years Five Years Ten Years
Class I $57 $84 $112 $193
Class II $41 $73 $119 $245
This example is based on the restated annual operating expenses,
before fee waivers or expense reductions, 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 unadited financial highlights for the six months
ended November 30, 1994, pertaining to Class I, supplements 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
October 31,
1994
(Unaudited)
Per Share Operating Performance
Net asset value at beginning of period $12.60
Net investment income 0.19
Net realized and unrealized gain on 0.044
securities
Total from investment operations 0.234
Distributions from net investment income (0.173)
Distributions from Capital Gains (0.331)
Total Distributions (0.504)
Net asset value at end of period 12.33
Total Return* 2.07%
Ratios/Supplemental Data
Net assets at end of period(in 000's) 127,283
Ratio of expenses to average net assets 1.09%+
Ratio of net investment income to average 3.19%+
net assets
Portfolio turnover rate 10.37%
*Total return measures the change in value of an investment over
the period indicated. It does not include the maximum front-end
charge, but 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 initial sales
charges. For this reason, Class I shares may be more attractive
to long-term investors even if no sales charge reductions are
available to them. Investors should also consider that the higher
Rule 12b-1 fees for Class II shares will generally result in
lower dividends and consequently lower yields for Class II
shares. See "General Information" in the SAI for more information
regarding the calculation of dividends and yields.
Investors who qualify to purchase Class I shares at reduced sales
charges definitely should consider purchasing Class I shares,
especially if they intend to hold their shares for six years or
more. Investors who qualify to purchase Class I shares at reduced
sales charges but who intend to hold their shares less than six
years should evaluate whether it is more economical to purchase
Class I shares through a Letter of Intent or under Rights of
Accumulation or other means rather than purchasing Class II
shares. Investors investing $1 million or more in a single
payment and other investors who qualify to purchase Class I
shares at net asset value will be precluded from purchasing Class
II shares. See "How to Buy Shares of the Fund" in the Prospectus.
Each class represents the same interest in the investment
portfolio of the Fund and has the same rights, except that each
class has a different sales charge, bears the separate expenses
of its Rule 12b-1 distribution plan, and has exclusive voting
rights with respect to such plan. The two classes also have
separate exchange privileges.
Each class also has a separate schedule for compensating
securities dealers for selling Fund shares. Investors should take
all of the factors regarding an investment in each class into
account before deciding which class of shares to purchase.
Alternative Purchase Arrangements. The difference between Class I
and Class II shares lies primarily in their front-end and
contingent deferred sales charges and Rule 12b-1 fees as
described below.
A separate Plan of Distribution has been approved and adopted for
each class ("Class I Plan" and "Class II Plan," respectively)
pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as amended ("1940 Act"). The Rule 12b-1 fees charged to each
class will be based solely on the distribution and servicing fees
attributable to that particular class. Any portion of fees
remaining from either plan distribution to securities dealers up
to the maximum amount permitted under each Plan may be used by
the class to reimburse Franklin Templeton Distributors, Inc.
("Distributors") for routine ongoing promotion and distribution
expenses incurred with respect to such class. See "Plan of
Distribution" in the Prospectus for a description of such
expenses.
Class I. Class I shares are generally subject to a variable sales
charge upon purchase and not subject to any sales charge upon
redemption. Class I shares are subject to Rule 12b-1 fees of up
to an annual maximum of .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 Trustees has carefully reviewed the multiclass
structure to ensure that no material conflict exists between the
two classes of shares. Although the Board does not expect to
encounter material conflicts in the future, the Board will
continue to monitor the Fund and will take appropriate action to
resolve such conflicts if any should later arise.
In developing the multiclass structure, the Fund has retained the
authority to establish additional classes of shares. It is the
Fund's present intention to offer only two classes of shares, but
new classes may be offered in the future.
For more information regarding the responsibilities of the Board
and the management of the Fund, please see "Management of the
Fund" in the Prospectus.
Class II Plan of Distribution
Under the Class II Plan, the maximum amount which the Fund is
permitted to pay to Distributors or others for distribution and
related expenses is 0.75% per annum of Class II shares' daily net
assets, payable 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
Fundsr and the Templeton Group of Funds. Included for these
aggregation purposes are (a) the mutual funds in the Franklin
Group of Funds except Franklin Valuemark Funds and Franklin
Government Securities Trust (the "Franklin Funds"), (b) other
investment products underwritten by Distributors or its
affiliates (although certain investments may not have the same
schedule of sales charges and/or may not be subject to reduction)
and (c) the U.S. registered mutual funds in the Templeton Group
of Funds except Templeton Capital Accumulator Fund, Inc.,
Templeton Variable Annuity Fund, and Templeton Variable Products
Series Fund (the "Templeton Funds"). (Franklin Funds and
Templeton Funds are collectively referred to as the "Franklin
Templeton Funds.") Sales charge reductions based upon aggregate
holdings of (a), (b) and (c) above ("Franklin Templeton
Investments") may be effective only after notification to
Distributors that the investment qualifies for a discount.
Distributors, or one of its affiliates, may make payments, out of
its own resources, of up to 1% of the amount purchased to
securities dealers who initiate and are responsible for purchases
made at net asset value by certain designated retirement plans
(excluding IRA and IRA rollovers), certain non-designated plans,
certain trust companies and trust departments of banks and
certain retirement plans of organizations with collective
retirement plan assets of $10 million or more. See definitions
under "Description of Special Net Asset Value Purchases" and as
set forth in the SAI.
Class II. Unlike Class I shares, the front-end sales charges and
dealer concessions for Class II shares do not vary depending on
the amount of purchase. See table below:
Total Sales Charge
As a Dealer
Size of Transaction As a Percentage Percentage Concession As
at Offering Price of Net Offering of Net a Percentage
Price Amount of Offering
Invested Price*
any amount (less
than $1 million) 1.00% 1.01% 1.00%
* During the first year following a purchase of Class II shares,
Distributors will keep a portion of the Plan fees attributable to
those shares to partially recoup fees Distributors pays to
securities dealers. Distributors, or one of its affiliates, may
make an additional payment to the securities dealer, from its own
resources, of up to 1% of the amount invested.
Class II shares redeemed within eighteen months of their purchase
will be assessed a contingent deferred sales charge of 1.0% on
the lesser of the then-current net asset value or the net asset
value of such shares at the time of purchase, unless such charge
is waived as described below.
Purchases at Net Asset Value
The following section, which supersedes that included in the
Prospectus, describes the categories of investors who may
purchase Class I shares of the Fund at net asset value and when
Class I and Class II shares may be purchased at net asset value.
The sections in the Prospectus titled "Quantity Discounts in
Sales Charges" and "Group Purchases" only apply to Class I
shares. Although sales charges on Class II shares may not be
reduced 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 a
Class I account maintained an annual balance of $1,000,000, only
$120,000 could be withdrawn through a once-yearly Systematic
Withdrawal Plan free of charge; any amount over that $120,000
would be assessed a 1% (or applicable) contingent deferred sales
charge. Likewise, if a Class II 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 $120 would be assessed a 1% (or applicable) contingent
deferred sales charge.
Exchange Privilege
Shareholders are entitled to exchange their shares for shares of
the same class of other Franklin Templeton Funds which are
eligible for sale in the shareholder's state of residence and in
conformity with such fund's stated eligibility requirements and
investment minimums. Some funds, however, may not offer Class II
shares. Class I shares may be exchanged for Class I shares of any
Franklin Templeton Funds. Class II shares may be exchanged for
Class II shares of any Franklin Templeton Funds. No exchanges
between different classes of shares will be allowed. A contingent
deferred sales charge will not be imposed on exchanges. If,
however, the exchanged shares were subject to a contingent
deferred sales charge in the original fund purchased and shares
are subsequently redeemed within twelve months (Class I shares)
or eighteen months (Class II shares) of the calendar month of the
original purchase date, a contingent deferred sales charge will
be imposed. Investors should review the prospectus of the fund
they wish to exchange from and the fund they wish to exchange
into for all specific requirements or limitations on exercising
the exchange privilege, for example, minimum holding periods or
applicable sales charges.
Exchanges of Class I Shares
The contingency period of Class I shares will be tolled (or
stopped) for the period such shares are exchanged into and held
in a Franklin or Templeton money market fund. If a Class I
account has shares subject to a contingent deferred sales charge,
Class I shares will be exchanged into the new account on a "first-
in, first-out" basis. See also "How to Sell Shares of the Fund -
Contingent Deferred Sales Charge."
Exchanges of Class II Shares
When an account is composed of Class II shares subject to the
contingent deferred sales charge, and shares that are not, the
shares will be transferred proportionately into the new fund.
Shares received from reinvestment of dividends and capital gains
are referred to as "free shares," shares which were originally
subject to a contingent deferred sales charge but to which the
contingent deferred sales charge no longer applies are called
"matured shares," and shares still subject to the contingent
deferred sales charge are referred to as "CDSC liable shares."
CDSC liable shares held for different periods of time are
considered different types of CDSC liable shares. For instance,
if a shareholder has $1,000 in free shares, $2,000 in matured
shares, and $3,000 in CDSC liable shares, and the shareholder
exchanges $3,000 into a new fund, $500 will be exchanged from
free shares, $1,000 from matured shares, and $1,500 from CDSC
liable shares. Similarly, if CDSC liable shares have been
purchased at different periods, a proportionate amount will be
taken from shares held for each period. If, for example, a
shareholder holds $1,000 in shares bought 3 months ago, $1,000
bought 6 months ago, and $1,000 bought 9 months ago, and the
shareholder exchanges $1,500 into a new fund, $500 from each of
these shares will be deemed exchanged into the new fund.
The only money market fund exchange option available to Class II
shareholders is the Franklin Templeton Money Fund II ("Money Fund
II"), a series of the Franklin Templeton Money Fund Trust. No
drafts (checks) may be written on Money Fund II accounts, nor may
shareholders purchase shares of Money Fund II directly. Class II
shares exchanged for shares of Money Fund II will continue to age
and a contingent deferred sales charge will be assessed if CDSC
liable shares are redeemed. No other money market funds are
available for Class II shareholders for exchange purposes. Class
I shares may be exchanged for shares of any of the money market
funds in the Franklin Templeton Funds except Money Fund II. Draft
writing privileges and direct purchases are allowed on these
other money market funds as described in their respective
prospectuses.
To the extent shares are exchanged proportionately, as opposed to
another method, such as first-in first-out, or free-shares
followed by CDSC liable shares, the exchanged shares may, in some
instances, be CDSC liable even though a redemption of such
shares, as discussed elsewhere herein, may no longer be subject
to a CDSC. The proportional method is believed by management to
more closely meet and reflect the expectations of Class II
shareholders in the event shares are redeemed during the
contingency period. For federal income tax purposes, the cost
basis of shares redeemed or exchanged is determined under the
Code without regard to the method of transferring shares chosen
by the Fund for purposes of exchanging or redeeming shares.
Transfers. Transfers between identically registered accounts in
the same fund and class are treated as non-monetary and non-
taxable events, and are not subject to a contingent deferred
sales charge. The transferred shares will continue to age from
the date of original purchase. Like exchanges, shares will be
moved proportionately from each type of shares in the original
account.
Conversion Rights. It is not presently anticipated that Class II
shares will be converted to Class I shares. A shareholder may,
however, sell his Class II shares and use the proceeds to
purchase Class I shares, subject to all applicable sales charges.
See "Exchange Privilege" in the Prospectus for more information.
How to Sell Shares of the Fund
For a discussion regarding the sale of either class of Fund
shares, refer to the section in the Prospectus titled "How to
Sell Shares of the Fund." In addition, the charges described in
this Supplement will also apply to the sale of all Fund shares.
Contingent Deferred Sales Charge
Class I. In order to recover commissions paid to securities
dealers on investments of $1 million or more, a contingent
deferred sales charge of 1% applies to redemptions of those
investments within the contingency period of 12 months of the
calendar month following their purchase. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of
reinvested dividends and capital gain distributions) or the total
cost of such shares at the time of purchase, and is retained by
Distributors. The contingent deferred sales charge is waived in
certain instances. See below and "Purchases at Net Asset Value"
under "How To Buy Shares of the Fund."
Class II. Class II shares redeemed within the contingency period
of 18 months of the calendar month following their purchase will
be assessed a contingent deferred sales charge, unless one of the
exceptions described below applies. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of
reinvested dividends and capital gain distributions) or the net
asset value at the time of purchase of such shares, and is
retained by Distributors. The contingent deferred sales charge is
waived in certain instances. See below.
Class I and Class II. In determining if a contingent deferred
sales charge applies, shares not subject to a contingent deferred
sales charge are deemed to be redeemed first, in the following
order: (i) Shares representing amounts attributable to capital
appreciation of those shares held less than the contingency
period (12 months in the case of Class I shares and 18 months in
the case of Class II shares); (ii) shares purchased with
reinvested dividends and capital gain distributions; and (iii)
other shares held longer than the contingency period; and
followed by any shares held less than the contingency period, on
a "first in, first out" basis. For tax purposes, a contingent
deferred sales charge is treated as either a reduction in
redemption proceeds or an adjustment to the cost basis of the
shares redeemed.
The contingent deferred sales charge on each class of shares is
waived, as applicable, for: exchanges; any account fees;
distributions to participants in Trust Company qualified
retirement plans due to death, disability or attainment of age 59
1/2; tax-free returns of excess contributions to employee benefit
plans; distributions from employee benefit plans, including
those due to termination or plan transfer; redemptions through a
Systematic Withdrawal Plan set up for shares prior to February 1,
1995, and for Systematic Withdrawal Plans set up thereafter,
redemptions of up to 1% monthly of an account's net asset value
(3% quarterly, 6% semi-annually or 12% annually); and redemptions
initiated by the Fund due to a shareholder's account falling
below the minimum specified account size. In addition, shares of
participants in Trust Company retirement plan accounts will, in
the event of death, no longer be subject to the contingent
deferred sales charge.
All investments made during a calendar month, regardless of when
during the month the investment occurred, will age one month on
the last day of that month and each subsequent month.
Requests for redemptions for a specified dollar amount, unless
otherwise specified, will result in additional shares being
redeemed to cover any applicable contingent deferred sales charge
while requests for redemption of a specific number of shares will
result in the applicable contingent deferred sales charge being
deducted from the total dollar amount redeemed.
Valuation of Fund Shares
The following sentence replaces the first sentence of the first
paragraph in this section; the subsequent paragraph is added to
the end of this section.
The net asset value per share of each class of the Fund is
determined as of the scheduled closing time of the New York Stock
Exchange ("Exchange") (generally 1:00 p.m. Pacific time) each day
that the Exchange is open for trading.
Each of the Fund's classes will bear, pro-rata, all of the common
expenses of the Fund. The net asset value of all outstanding
shares of each class of the Fund will be computed on a pro-rata
basis for each outstanding share based on the proportionate
participation in the Fund represented by the value of shares of
such classes, except that the Class I and Class II shares will
bear the Rule 12b-1 expenses payable under their respective
plans. Due to the specific distribution expenses and other costs
that will be allocable to each class, the dividends paid to each
class of the Fund may vary.
How to Get Information Regarding an Investment in the Fund
The following paragraph replaces the second paragraph in this
section of the Prospectus:
From a touch tone phone, shareholders may access the automated
Franklin TeleFACTS system (day or night) at 1-800/247-1753 to
obtain current price, yield or other performance information
specific to a fund in the Franklin Funds, process an exchange as
discussed under the "Exchange Privilege" in the Prospectus, and
request duplicate confirmation or year-end statements, money fund
checks, if applicable, and deposit slips. Current prices for the
Templeton Funds are also available through TeleFACTS. The system
code for the Fund's two classes of shares, which will be needed
to access system information, is 197 for Class I and 297 for
Class II followed by the # sign. The system's automated operator
will prompt the caller with easy to follow step-by-step
instructions from the main menu. Other features may be added in
the future.
Performance (Class II)
Because Class II shares were not offered prior to May 1, 1995, no
performance data is available for these shares. After a
sufficient period of time has passed, Class II performance data
as described in the "Performance" section of the Prospectus will
be available. Except as noted, it is likely that the performance
data relating to Class II shares will reflect lower total return
and yield figures than those for Class I shares because Class II
Rule 12b-1 fees are higher than Class I Rule 12b-1 fees. During
at least the first year of operation Class II share performance
will be higher than Class I in light of the higher initial sales
charge applicable to Class I shares.
General Information
With the exception of Voting Rights, all rights and privileges
detailed under the discussion of "General Information" will
remain in effect as described in the Prospectus for the new
multiclass structure. For a complete discussion of these rights
and privileges, see "General Information" in the Prospectus.
Voting Rights. Shares of each class represent proportionate
interests in the assets of the Fund and have the same voting and
other rights and preferences as the other class of the Fund for
matters that affect the Fund as a whole. For matters that only
affect a certain class of the Fund's shares, however, only
shareholders of that class will be entitled to vote. Therefore,
each class of shares will vote separately on matters (1)
affecting only that class, (2) expressly required to be voted on
separately by the state business trust law, or (3) required to be
voted on separately by the 1940 Act or the rules adopted
thereunder. For instance, if a change to the Rule 12b-1 plan
relating to Class I shares requires shareholder approval, only
shareholders of Class I may vote on changes to the Rule 12b-1
plan affecting that class. Similarly, if a change to the Rule 12b-
1 plan relating to Class II shares requires shareholder approval,
only shareholders of Class II may vote on the change to such
plan. On the other hand, if there is a proposed change to the
investment objective of the Fund, this affects all shareholders,
regardless of which class of shares they hold, and therefore,
each share has the same voting rights. For more information
regarding voting rights, see the "Voting Rights" discussion in
the Prospectus under the heading "General Information."
97 S
SUPPLEMENT DATED MAY 1, 1995
TO THE STATEMENT OF ADDITIONAL INFORMATION OF
FRANKLIN GLOBAL UTILITIES FUND
dated September 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 FIRST PARAGRAPH OF THE SECTION "THE FUND'S
UNDERWRITER - 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 THE PLAN FOR 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 0.75% of Class II's 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 TRUSTEES SECTION IS REVISED TO READ AS FOLLOWS:
OFFICERS AND TRUSTEES
The Board of Trustees has the responsibility for the
overall management of the Fund, including general
supervision and review of its investment activities.
The trustees, 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 trustees and their principal occupations
for the past five years are listed below. Trustees who
are deemed to be "interested persons" of the Fund, as
defined in the 1940 Act, are indicated by an asterisk
(*).
Frank H. Abbott, III
1045 Sansome St.
San Francisco, CA 94111
Trustee
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
Trustee
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.
*Harmon E. Burns
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Trustee
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.
S. Joseph Fortunato
Park Avenue at Morris County
P. O. Box 1945
Morristown, NJ 07962-1945
Trustee
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
Trustee
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
Chairman of the Board and Trustee
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.
*Rupert H. Johnson, Jr.
777 Mariners Island Blvd.
San Mateo, CA 94404
President and Trustee
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
Trustee
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.
Gordon S. Macklin
8212 Burning Tree Road
Bethesda, MD 20817
Trustee
Chairman, White River Corporation (information
services); Director, Fund American Enterprises
Corporation, Martin Marietta Corporation, MCI
Communications Corporation, MedImmune, Inc.
(biotechnology), Infovest Corporation (information
services), and Fusion Systems Corporation (industrial
technology); and director, trustee or managing general
partner, as the case may be, of 51 of the investment
companies in the Franklin Templeton Group of Funds;
formerly, Chairman, Hambrecht and Quist Group;
Director, H & Q Healthcare Investors; and President,
National Association of Securities Dealers, Inc.
Kenneth V. Domingues
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President - Financial Reporting and Accounting
Standards
Senior Vice President, Franklin Resources, Inc.,
Franklin Advisers, Inc., and Franklin Templeton
Distributors, Inc.; officer and/or director, as the
case may be, of other subsidiaries of Franklin
Resources, Inc.; and Officer and/or managing general
partner, as the case may be, of 36 of the investment
companies in the Franklin Group of Funds.
Martin L. Flanagan
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and
Treasurer, Franklin Resources, Inc.; Executive Vice
President, Templeton Worldwide, Inc.; Senior Vice
President and Treasurer, Franklin Advisers, Inc. and
Franklin Templeton Distributors, Inc.; Senior Vice
President, Franklin/Templeton Investor Services, Inc.;
officer of most other subsidiaries of Franklin
Resources, Inc.; and officer of 60 of the investment
companies in the Franklin Templeton Group of Funds.
Deborah R. Gatzek
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Secretary
Senior Vice President - Legal, Franklin Resources, Inc.
and Franklin Templeton Distributors, Inc.; Vice
President, Franklin Advisers, Inc. and officer of 36 of
the investment companies in the Franklin Group of
Funds.
Charles E. Johnson
777 Mariners Island Blvd.
San Mateo CA 94404
Vice President
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.
Diomedes Loo-Tam
777 Mariners Island Blvd.
San Mateo, CA 94404
Treasurer and Principal Accounting Officer
Employee of Franklin Advisers, Inc.; and officer of 36
of the investment companies in the Franklin Group of
Funds.
Edward V. McVey
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President/National Sales Manager, Franklin
Templeton Distributors, Inc.; and officer of 31 of the
investment companies in the Franklin Group of Funds.
Trustees 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 trustees and officers hold positions with
other companies in the Franklin Group of Funds(Registered
Trademark) and the Templeton Funds. For the calendar year
ended December 31, 1994, Messrs. Abbott, Ashton,
Fortunato, Garbellano, LaHaye and Macklin received total
fees of $176,870, $3l9,925, $336,065, $153,300, $150,817
and $303,685, respectively, from the various Franklin and
Templeton Funds for which they serve as directors,
trustees or managing general partners and for which they
spent significant time in preparation for and attendance
at the meetings which are scheduled at least once per
month. No officer or trustee received any other
compensation directly from the Fund. As of [February 28,]
1995, the trustees and officers did not own any
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 B. Johnson and Rupert H. Johnson,
Jr. 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, the only entity holding beneficially
or of record more than 5% of the Fund's outstanding
shares is Franklin Resources, Inc., 777 Mariners Island
Boulevard, San Mateo, California 94404, which holds
205,442 shares (13.75%).]
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":
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 SUBSTITUTES THE SUBSECTION "REINVESTMENT DATE":
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 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 March 3, 1995, Accession Number 0000872625-
95-000001.
FRANKLIN STRATEGIC SERIES
File Nos. 33-39088
811-6243
FORM N-1A
PART C
Other Information
Item 24 Financial Statements and Exhibits
a) Financial Statements
1. Unaudited Financial Statements for Franklin Strategic
Series dated October 31, 1994, included herein as Exhibit
99-A(1)
(i) Statement of Investments in Securities and Net
Assets, October 31, 1994
(ii) Statements of Assets and Liabilities, October 31,
1994
(iii) Statements of Operations for six months ended
October 31, 1994
(iv) Statements of Changes in Net Assets for the six
months ended October 31, 1994 and for the year
ended April 30, 1994
2. Audited Financial Statements for Franklin Strategic Series
dated April 30, 1994 are incorporated herein by reference
to the Statement of Additional Information Form Type 497
filed electronically by Registrant with the U.S. Securities
and Exchange Commission on March 3, 1995, Accession Number
0000083297-95-000004.
(i) Report of Independent Auditors - June 3, 1994
(ii) Statements of Investments in Securities and Net
Assets, April 30, 1994
(iii) Statements of Assets and Liabilities, April 30,
1994
(iv) Statements of Operations for the year ended April
30, 1994.
(v) Statements of Changes in Net Assets for the years
ended April 30, 1994 and 1993.
b) Exhibits:
(1) copies of the charter as now in effect;
(i) Agreement and Declaration of Trust of Franklin
California 250 Growth Index Fund as of January
22, 1991
(ii) Certificate of Trust of Franklin California
250 Growth Index Fund dated January 22, 1991
(iii) Certificate of Amendment of the Certificate of
Trust of Franklin California 250 Growth Fund
dated November 19, 1991
(iv) Certificate of Amendment to the Certificate of
Trust of Franklin Strategic Series dated May
14, 1992
(2) copies of the existing By-Laws or instruments
corresponding thereto;
(i) Amended and Restated By-Laws of Franklin
California 250 Growth Index Fund as of April
25, 1991
(ii) Amendment to By-Laws dated October 27, 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 on
behalf of Franklin Small Cap Growth Fund,
Franklin Global Healthcare Fund, Franklin
Global Utilities Fund and Franklin Advisers,
Inc. dated February 24, 1992
(ii) Administration Agreement between Registrant on
behalf of Franklin MidCap Growth Fund and
Franklin Advisers, Inc.
(iii) Administration Agreement between Registrant on
behalf of FISCO MidCap Growth Fund and
Franklin Advisers, Inc. dated August 17, 1993
(iv) Management Agreement between Registrant on
behalf of Franklin Strategic Income Fund and
Franklin Advisers, Inc. effective May 24, 1994
(v) Subadvisory Agreement between Franklin
Advisers, Inc. and Templeton Investment
Counsel, Inc., providing for services to
Franklin Strategic Income Fund dated May 24,
1994
(vi) Amended and Restated Management Agreement
between Franklin Advisers, Inc. and the
Registrant, on behalf of Franklin California
Growth Fund effective July 12, 1993
(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. on
behalf of all Series except Franklin Strategic
Income Series
(ii) Form of Amended and Restated Distribution
Agreement between Registrant and
Franklin/Templeton Distributors, Inc. on
behalf of Franklin Strategic Income Series
(iii) Forms of Dealer Agreements between
Franklin/Templeton Distributors, Inc. and
dealers is incorporated by reference to:
Registrant: Franklin Federal Tax-Free Income
Fund
Filing: Post-Effective Amendment No. 17 to
Registration Statement on Form N-1A
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 Trustees or officers of the
Registrant in their capacity as such; any such plan
that is not set forth in a formal document, furnish a
reasonably detailed description thereof;
Not applicable
(8) copies of all custodian agreements and depository
contracts under Section 17(f) of the Investment
Company Act of 1940 (the "1940 Act"), with respect to
securities and similar investments of the Registrant,
including the schedule of remuneration;
(i) Custodian Agreement between Registrant and Bank
of America NT & SA dated August 20, 1991
(ii) 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 on Form N-1A
File Nos. 33-39088 & 811-6243
Filing Date: February 22, 1995
(iii) Custodian Agreement between Registrant & Bank
of America (Franklin Small Cap Growth Fund)
dated February 14, 1992
(iv) Custodian Agreement between Registrant & Bank
of America (Franklin Global Health Care) dated
February 14, 1992
(v) Custodian Agreement between Registrant & Bank
of America (Franklin Global Utilities Fund)
dated July 2, 1992
(vi) Form of Custodian Agreement between Registrant,
on behalf of the Franklin Strategic Income Fund,
and Bank of America
(vii) Amendment to Custodian Agreement between
Registrant and Bank of America NT & SA dated
December 1, 1994
Registrant: Franklin Premier Return Fund
Filing: Post-Effective Amendment No. 54 to
Registration on Form N-1A
File No. 2-12647
Filing Date: February 27, 1995
(9) copies of all other material contracts not made in
the ordinary course of business which are to be
performed in whole or in part at or after the date of
filing the Registration Statement;
Not Applicable
(10) an opinion and consent of counsel as to the legality
of the securities being registered, indicating
whether they will when sold be legally issued, fully
paid and nonassessable;
Not Applicable
(11) Copies of any other opinions, appraisals or rulings
and consents to the use thereof relied on in the
preparation of this registration statement and
required by Section 7 of the 1933 Act;
(i) Consent of Independent 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 August 20, 1991.
(ii) Letter of Understanding dated April 12, 1995.
(14) copies of the model plan used in the establishment of
any retirement plan in conjunction with which
Registrant offers its securities, any instructions
thereto and any other documents making up the model
plan. Such form(s) should disclose the costs and fees
charged in connection therewith;
(i) copy of model retirement plan:
Registrant: AGE High Income Fund, Inc.
Filing: Post-effective Amendment No. 26 to
Registration Statement on Form N-1A
File No. 2-30203
Filing Date: August 1, 1989
(15) copies of any plan entered into by Registrant
pursuant to Rule 12b-l under the 1940 Act, which
describes all material aspects of the financing of
distribution of Registrant's shares, and any
agreements with any person relating to implementation
of such plan.
(i) Amended and Restated Distribution Plan between
Franklin Strategic Series and Franklin Templeton
Distributors, Inc. on behalf of Franklin
California Growth Fund, Franklin Small Cap
Growth Fund, Franklin Global Health Care Fund
and Franklin Global Utilities Fund dated July 1,
1993.
(ii) Form of Distribution Plan between Franklin
Strategic Series and Franklin Templeton
Distributors, Inc. on behalf of Franklin Global
Utilities Fund-Class II
(iii) Distribution Plan pursuant to Rule 12b-1 between
Registrant, on behalf of the Franklin Strategic
Income Fund, and Franklin Distributors, Inc.
dated May 24, 1994
(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 and
Quotations
Registrant: Franklin Tax Advantaged U.S.
Government Securities Fund
Filing: Post affect amendment No. 8 to
registration statement of registrant on Form N-
1A
File No.: 33-11963
Filing Date: March 1, 1995
(17) (i) Power of Attorney dated February 16, 1995 is
incorporated herein by reference to Part A of
Form Type 485APOS filed by Registrant with the
U.S. Securities and Exchange Commission on March
28, 1995 Accession Number 0000872625-95-000004
(ii) Certificate of Secretary dated February 16, 1995
is incorporated herein by reference to Part A of
Form Type 485APOS filed by Registrant with the
U.S. Securities and Exchange Commission on March
28, 1995 Accession Number 0000872625-95-000004
Item 25 Persons Controlled by or under Common Control with
Registrant
None
Item 26 Number of Holders of Securities
Except as noted, as of February 28, 1995 the number of record
holders of the only classes of securities of the Registrant were
as follows:
Number of Number of
Title of Class Record Record
Holders Holders
Class I Class II
Shares of Beneficial Interest
Franklin Global Utilities Fund 18,152
Item 27 Indemnification
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Trustees, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling
person in connection with securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court or
appropriate jurisdiction the question whether such
indemnification 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
a) Franklin Advisers, Inc.
The officers and Directors of the Registrant's manager also serve
as officers and/or directors for (1) the manager's corporate
parent, Franklin Resources, Inc., and/or (2) other investment
companies in the Franklin Group of Funds (Registered Trademark).
In addition, Mr. Charles B. Johnson is a director of General
Host Corporation. For additional information please see Part B
and Schedules A and D of Form ADV of the Funds' Investment
Manager (SEC File 801-26292), incorporated herein by reference,
which sets forth the officers and directors of the Investment
Manager and information as to any business, profession, vocation
or employment of a substantial nature engaged in by those
officers and directors during the past two years.
b) Templeton Investment Counsel, Inc.
Templeton Investment Counsel, Inc. ("TICI"), an indirect, wholly
owned subsidiary of Franklin Resources, Inc., serves as the
Franklin Strategic Income Fund's Sub-adviser, furnishing to
Franklin Advisers, Inc. in that capacity, portfolio management
services and investment research. For additional information
please see Part B and Schedules A and D of Form ADV of the
Franklin Strategic Income Fund's Sub-adviser (SEC File 801-
15125), incorporated herein by reference, which sets forth the
officers and directors of the Sub-adviser and information as to
any business, profession, vocation or employment of a substantial
nature engaged in by those officers and directors during the past
two years.
Item 29 Principal Underwriters
a) Franklin/Templeton Distributors, Inc., ("Distributors")
also acts as principal underwriter of shares of AGE High Income
Fund, Inc., Franklin Custodian Funds, Inc., Franklin Equity Fund,
Franklin Money Fund, Franklin Federal Money Fund, Franklin Tax-
Exempt Money Fund, Institutional Fiduciary Trust, Franklin
Strategic Mortgage Portfolio, Franklin California Tax-Free Income
Fund, Inc., 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 Municipal Securities
Trust, 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 Trust, 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 Global
Investment Trust, Templeton Developing Markets Trust, Templeton
Variable Annuity Fund and Franklin Templeton Japan 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 Registrant or its shareholder services agent,
Franklin/Templeton Investor Services, Inc., both of whose address
is 777 Mariners Island Blvd., San Mateo, CA. 94404.
Item 31 Management Services
There are no management-related service contracts not discussed
in Part A or Part B.
Item 32 Undertakings
(a) The Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting upon the
question of removal of any trustee or trustees when
requested in writing to do so by the record holders of not
less than 10 per cent of the Registrant's outstanding
shares to assist its shareholders in the communicating
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.
(c) The Registrant hereby undertakes to file a post-effective
amendment using financial statements which need not be
certified, within four to six months from the effective
date of Registrant's Registration Statement under the
Securities Act of 1933.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that
it meets all of the requirements for effectiveness of this Post-
Effective Amendment to its Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City
of San Mateo and the State of California, on the 18th day of
April, 1995.
Franklin Strategic Series
(Registrant)
By: Rupert H. Johnson, Jr., President
Rupert H. Johnson, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to Registrant's Registration Statement
has been signed below by the following persons in the capacities
and on the dates indicated:
Rupert H. Johnson, Jr.* Principal Executive Officer and
Rupert H. Johnson, Jr. Trustee
Dated: April 18, 1995
Martin L. Flanagan* Principal Financial Officer
Martin L. Flanagan Dated: April 18, 1995
Diomedes Loo-Tam* Principal Accounting Officer
Diomedes Loo-Tam Dated: April 18, 1995
Frank H. Abbott III* Trustee
Frank H. Abbott III Dated: April 18, 1995
Harris J. Ashton* Trustee
Harris J. Ashton Dated: April 18, 1995
Harmon E. Burns* Trustee
Harmon E. Burns Dated: April 18, 1995
S. Joseph Fortunato* Trustee
S. Joseph Fortunato Dated: April 18, 1995
David W. Garbellano* Trustee
David W. Garbellano Dated: April 18, 1995
Charles B. Johnson* Trustee
Charles B. Johnson Dated: April 18, 1995
Frank W.T. LaHaye* Trustee
Frank W.T. LaHaye Dated: April 18, 1995
Gordon S. Macklin* Trustee
Gordon S. Macklin Dated: April 18, 1995
*By s/s Larry L. Greene
Larry L. Greene, Attorney-in-Fact
*Pursuant to Power of Attorney filed herewith.
FRANKLIN STRATEGIC SERIES
REGISTRATION STATEMENT
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION PAGE NO. IN
SEQUENTIAL
NUMBERING
SYSTEM
EX-99.B1(i) Agreement and Declaration Attached
of Trust of Franklin
California 250 Growth
Index Fund as of January
25, 1991
EX-99.B1(ii) Certificate of Trust of Attached
Franklin California 250
Growth Index Fund dated
January 22, 1991
EX-99.B1(iii) Certificate of Amendment Attached
of Certificate of Trust of
Franklin California 250
Growth Index Fund dated
August 20, 1991
EX-99.B1(iv) Certificate of Amendment Attached
to the Certificate of
Trust of Franklin
Strategic Series dated May
14, 1992
EX-99.B2(i) Amended and Restated Attached
Bylaws of Franklin
California 250 Growth
Index Fund as of April 25,
1991
EX-99.B2(ii) Amendment to By-Laws dated Attached
October 27, 1994
EX-99.B5(i) Management Agreement Attached
between Registrant on
behalf of Franklin Small
Cap Growth Fund, Franklin
Global Healthcare Fund,
Franklin Global Utilities
Fund and Franklin
Advisers, Inc. dated
February 24, 1992
EX-99.B5(ii) Administration Agreement Attached
between Registrant on
behalf of Franklin MidCap
Growth Fund and Franklin
Advisers, Inc.
EX-99.B5(iii) Administration Agreement Attached
between Registrant on
behalf of FISCO MidCap
Growth Fund and Franklin
Advisers, Inc. dated
August 17, 1993
EX-99.B5(iv) Management Agreement Attached
between Registrant on
behalf of Franklin
Strategic Income Fund and
Franklin Advisers, Inc.
effective May 24, 1994
EX-99.B5(v) Subadvisory Agreement Attached
between Franklin Advisers,
Inc. and Templeton
Investment Counsel, Inc.,
providing for services to
Franklin Strategic Income
Fund dated May 24, 1994
EX-99.B5(vi) Amended and Restated Attached
Management Agreement
between Franklin Advisers,
Inc. and the Registrant,
on behalf of Franklin
California Growth Fund
effective July 12, 1993
EX-99.B6(i) Form of Amended and Attached
Restated Distribution
Agreement between
Registrant and
Franklin/Templeton
Distributors, Inc. on
behalf of all Series
except Franklin Strategic
Income Series
EX-99.B6(ii) Form of Amended and Attached
Restated Distribution
Agreements between
Registrant and
Franklin/Templeton
Distributors, Inc. on
behalf of Franklin
Strategic Income Series
Ex-99.B6(iii) Forms of Dealer Agreements *
between Franklin/Templeton
Distributors, Inc and
dealers
EX-99.B8(i) Custodian Agreement Attached
between Registrant and
Bank of America NT & SA
dated August 20, 1991
EX-99.B8(ii) Custodian Agreement **
between Registrant and
Citibank Delaware
EX-99.B8(iii) Custodian Agreement Attached
between Registrant and
Bank of America (Franklin
Small Cap Growth Fund)
dated February 14, 1992
EX-99.B8(iv) Custodian Agreement Attached
between Registrant & Bank
of America (Franklin
Global Health Care Fund)
dated February 14, 1992
EX-99.B8(v) Custodian Agreement Attached
between Registrant & Bank
of America (Franklin
Global Utilities Fund)
dated July 2, 1992
EX-99.B8(vi) Form of Custodian Attached
Agreement between
Registrant, on behalf of
the Franklin Strategic
Income Fund, and Bank of
America
EX-99.B8(vii) Amendment to Custodian **
Agreement between
Registrant and Bank of
America NT & SA dated
December 1, 1994
EX-99.B11(i) Consent of Independent Attached
Auditors
EX-99.B13(i) Letter of Understanding Attached
dated August 20, 1991
EX-99.B13(ii) Letter of Understanding Attached
dated April xx, 1995
EX-99.B14(i) Franklin IRA Form ***
EX-99.B15(i) Amended and Restated Attached
Distribution Plan between
Franklin Strategic Series
and Franklin Templeton
Distributors, Inc. on
behalf of Franklin
California Growth Fund,
Franklin Small Cap Growth
Fund, Franklin Global
Health Care Fund and
Franklin Global Utilities
Fund dated July 1, 1993
EX-99.B15(ii) Form of Distribution Plan Attached
between Franklin Strategic
Series and Franklin
Templeton Distributors,
Inc. on behalf of Franklin
Global Utilities Fund-
Class II
EX-99.B15(iii) Distribution Plan pursuant Attached
to Rule 12b-1 between
Registrant, on behalf of
the Franklin Strategic
Income Fund, and Franklin
Distributors, Inc. dated
May 24, 1994
EX-99.B16(i) Schedule for Computation Attached
EX-99.B17(i) Power of Attorney dated ****
February 16, 1995 is
incorporated herein by
reference to Part A of
Form Type 485APOS filed by
Registrant with the U.S.
Securities and Exchange
Commission on March 28,
1995 Accession Number
0000872625-95-000004
EX-99.B17(ii) Certificate of Secretary ****
dated February 16, 1995 is
incorporated herein by
reference to Part A of
Form Type 485APOS filed by
Registrant with the U.S.
Securities and Exchange
Commission on March 28,
1995 Accession Number
0000872625-95-000004
* Incorporated by reference to Franklin Federal Tax-Free Income
Fund
** Incorporated by reference to Franklin Premier Return Fund
*** Incorporated by Reference to AGE High Income Fund, Inc.
**** Incorporated by Reference to Franklin Strategic Series
AGREEMENT AND DECLARATION OF TRUST
of
FRANKLIN CALIFORNIA 250 GROWTH INDEX FUND
a Delaware Business Trust
Principal Place of Business:
777 Mariners Island Boulevard
San Mateo, California 94404
TABLE OF CONTENTS
FRANKLIN CALIFORNIA 250 GROWTH INDEX FUND
AGREEMENT AND DECLARATION OF TRUST
ARTICLE I Name and Definitions
1. Name
2. Definitions
(a) Trust
(b) Trust Property
(c) Trustees
(d) Shares
(e) Shareholder
(f) Person
(g) 1940 Act
(h) Commission and Principal Underwriter
(i) Declaration of Trust
(j) By-Laws
(k) Interested Person
(1) Investment Manager
(m) Series
ARTICLE II Purpose of Trust
ARTICLE III Shares
1. Division of Beneficial Interest
2. Ownership of Shares
3. Investments in the Trust
4. Status of Shares and Limitation of
Personal Liability
5. Power of Board of Trustees to Change
Provisions Relating to Shares
6. Establishment and Designation of Series
(a) Assets With Respect to a Particular Series
(b) Liabilities Held With Respect to a
Particular Series
(c) Dividends, Distributions, Redemptions,
and Repurchases
(d) Voting
(e) Equality
(f) Fractions
(g) Exchange Privilege
(h) Combination of Series
(i) Elimination of Series
7. Indemnification of Shareholders
ARTICLE IV The Board of Trustees
1. Number, Election and Tenure
2. Effect of Death, Resignation, etc.
of a Trustee
3. Powers
4. Payment of Expenses by the Trust
5. Payment of Expenses by Shareholders
6. Ownership of Assets of the Trust
7. Service Contracts
ARTICLE V Shareholders' Voting Powers and Meetings
1. Voting Powers
2. Voting Power and Meeting
3. Quorum and Required Vote
4. Action by Written Consent
5. Record Dates
6. Additional Provisions
ARTICLE VI Net Asset Value, Distributions,
and Redemptions
1. Determination of Net Asset Value, Net
Income and Distributions
2. Redemptions and Repurchases
3. Redemptions at the Option of the Trust
ARTICLE VII Compensation and Limitation of
Liability of Trustees
1. Compensation
2. Indemnification and Limitation of Liability
3. Trustee's Good Faith Action, Expert
Advice, No Bond or Surety
4. Insurance
ARTICLE VIII Miscellaneous
1. Liability of Third Persons Dealing
with Trustees
2. Termination of Trust or Series
3. Merger and Consolidation
4. Amendments
5. Filing of Copies, References, Headings
6. Applicable Law
7. Provisions in Conflict with Law or Regulations
8. Business Trust Only
9. Use of the Names "Franklin" and
"250 Growth Index"
AGREEMENT AND DECLARATION OF TRUST
OF
FRANKLIN CALIFORNIA 250 GROWTH INDEX FUND
WHEREAS, THIS AGREEMENT AND DECLARATION OF TRUST is
made and entered into as of the date set forth below by the
Trustees named hereunder for the purpose of forming a Delaware
business trust in accordance with the provisions hereinafter set
forth,
NOW, THEREFORE, the Trustees hereby direct that a
Certificate of Trust be filed with Office of the Secretary of
State of the State of Delaware and do hereby declare that the
Trustees will hold IN TRUST all cash, securities and other assets
which the Trust now possesses or may hereafter acquire from time
to time in any manner and manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the
holders of Shares in this Trust.
ARTICLE I
Name and Definitions
Section 1. Name. This Trust shall be known as FRANKLIN
CALIFORNIA 250 GROWTH INDEX FUND and the Trustees shall conduct
the business of the Trust under that name or any other name as
they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless
otherwise required by the context or specifically provided:
(a) The "Trust" refers to the Delaware business trust
established by this Agreement and Declaration of Trust, as
amended from time to time;
(b) The "Trust Property" means any and all property,
real or personal, tangible or intangible, which is owned or held
by or for the account of the Trust, including without limitation
the rights referenced in Article VIII, Section 9 hereof;
(c) "Trustees" refers to the persons who have signed
this Agreement and Declaration of Trust, so long as they continue
in office in accordance with the terms hereof, and all other
persons who may from time to time be duly elected or appointed to
serve on the Board of Trustees in accordance with the provisions
hereof, and reference herein to a Trustee or the Trustees shall
refer to such person or persons in their capacity as trustees
hereunder;
(d) "Shares" means the shares of beneficial interest
into which the beneficial interest in the Trust shall be divided
from time to time and includes fractions of Shares as well as
whole Shares;
(e) "Shareholder" means a record owner of outstanding
Shares;
(f) "Person" means and includes individuals,
corporations, partnerships, trusts, associations, joint ventures,
estates and other entities, whether or not legal entities, and
governments and agencies and political subdivisions thereof,
whether domestic or foreign;
(g) The "1940 Act" refers to the Investment Company Act
of 1940 and the Rules and Regulations thereunder, all as amended
from time to time;
(h) The terms "Commission" and "Principal Underwriter"
shall have the meanings given them in the 1940 Act;
(i) "Declaration of Trust" shall mean this Agreement
and Declaration of Trust, as amended or restated from time to
time;
(j) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time and incorporated herein by reference;
(k) The term "Interested Person" has the meaning given
it in Section 2(a)(19) of the 1940 Act;
(1) "Investment Manager" or "Manager" means a party
furnishing services to the Trust pursuant to any contract
described in Article IV, Section 7(a) hereof;
(m) "Series" refers to each Series of Shares
established and designated under or in accordance with the
provisions of Article III.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to conduct, operate and
carry on the business of a management investment company
registered under the 1940 Act through one or more Series
investing primarily in securities.
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The
beneficial interest in the Trust shall at all times be divided
into an unlimited number of Shares, with a par value of $ .01 per
Share. The Trustees may authorize the division of Shares into
separate Series and the division of Series into separate classes
of Shares. The different Series shall be established and
designated, and the variations in the relative rights and
preferences as between the different Series shall be fixed and
determined, by the Trustees. If only one or no Series (or
classes) shall be established, the Shares shall have the rights
and preferences provided for herein and in Article III, Section 6
hereof to the extent relevant and not otherwise provided for
herein, and all references to Series (and classes) shall be
construed (as the context may require) to refer to the Trust.
Subject to the provisions of Section 6 of this Article
III, each Share shall have voting rights as provided in Article V
hereof, and holders of the Shares of any Series shall be entitled
to receive dividends, when, if and as declared with respect
thereto in the manner provided in Article VI, Section 1 hereof.
No Shares shall have any priority or preference over any other
Share of the same Series with respect to dividends or
distributions upon termination of the Trust or of such Series
made pursuant to Article VIII, Section 4 hereof. All dividends
and distributions shall be made ratably among all Shareholders of
a particular (class of a) particular Series from the assets held
with respect to such Series according to the number of Shares of
such (class of such) Series held of record by such Shareholder on
the record date for any dividend or distribution or on the date
of termination, as the case may be. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares
or other securities issued by the Trust or any Series. The
Trustees may from time to time divide or combine the Shares of
any particular Series into a greater or lesser number of Shares
of that Series without thereby materially changing the
proportionate beneficial interest of the Shares of that Series in
the assets held with respect to that Series or materially
affecting the rights of Shares of any other Series.
Section 2. Ownership of Shares. The ownership of Shares
shall be recorded on the books of the Trust or a transfer or
similar agent for the Trust, which books shall be maintained
separately for the Shares of each Series(or class). No
certificates certifying the ownership of Shares shall be issued
except as the Board of Trustees may otherwise determine from time
to time. The Trustees may make such rules as they consider
appropriate for the transfer of Shares of each Series (or class)
and similar matters. The record books of the Trust as kept by the
Trust or any transfer or similar agent, as the case may be, shall
be conclusive as to who are the Shareholders of each Series (or
class) and as to the number of Shares of each Series (or class)
held from time to time by each.
Section 3. Investments in the Trust. Investments may be
accepted by the Trust from such Persons, at such times, on such
terms, and for such consideration as the Trustees from time to
time may authorize.
Section 4. Status of Shares and Limitation of Personal
Liability. Shares shall be deemed to be personal property giving
only the rights provided in this instrument. Every Shareholder by
virtue of having become a Shareholder shall be held to have
expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the
existence of the Trust shall not operate to terminate the Trust,
nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against
the Trust or the Trustees, but entitles such representative only
to the rights of said deceased Shareholder under this Trust.
Ownership of Shares shall not entitle the Shareholder to any
title in or to the whole or any part of the Trust Property or
right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the
Shareholders as partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power
to bind personally any Shareholders, nor, except as specifically
provided herein, to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.
Section 5. Power of Board of Trustees to Change
Provisions Relating to Shares. Notwithstanding any other
provision of this Declaration of Trust and without limiting the
power of the Board of Trustees to amend the Declaration of Trust
as provided elsewhere herein, the Board of Trustees shall have
the power to amend this Declaration of Trust, at any time and
from time to time, in such manner as the Board of Trustees may
determine in their sole discretion, without the need for
Shareholder action, so as to add to delete, replace or otherwise
modify any provisions relating to the Shares contained in this
Declaration of Trust, provided that before adopting any such
amendment without Shareholder approval the Board of Trustees
shall determine that it is consistent with the fair and equitable
treatment of all Shareholders or that Shareholder approval is not
otherwise required by the 1940 Act or other applicable law. If
Shares have been issued, Shareholder approval shall be required
to adopt any amendments to this Declaration of Trust which would
adversely affect to a material degree the rights and preferences
of the Shares of any Series (or class) or to increase or decrease
the par value of the Shares of any Series (or class).
Subject to the foregoing Paragraph, the Board of
Trustees may amend the Declaration of Trust to amend any of the
provisions set forth in paragraphs (a) through (i) of Section 6
of this Article III.
Section 6. Establishment and Designation of Series. The
establishment and designation of any Series (or class) of Shares
shall be effective upon the resolution by a majority of the then
Trustees, adopting a resolution which sets forth such
establishment and designation and the relative rights and
preferences of such Series (or class). Each such resolution shall
be incorporated herein by reference upon adoption.
Shares of each Series (or class) established pursuant
to this Section 6, unless otherwise provided in the resolution
establishing such Series, shall have the following relative
rights and preferences:
(a) Assets Held With Respect to a Particular Series.
All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which
such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof from whatever source
derived, including, without limitation, any proceeds derived from
the sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably be held with
respect to that Series for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of
account of the Trust. Such consideration, assets, income,
earnings, profits and proceeds thereof, from whatever source
derived, including, without limitation, any proceeds derived from
the sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds, in
whatever form the same may be, are herein referred to as "assets
held with respect to" that Series. In the event that there are
any assets, income, earnings, profits and proceeds thereof, funds
or payments which are not readily identifiable as assets held
with respect to any particular Series (collectively "General
Assets"), the Trustees shall allocate such General Assets to,
between or among any one or more of the Series in such manner and
on such basis as the Trustees, in their sole discretion, deem
fair and equitable, and any General Asset so allocated to a
particular Series shall be held with respect to that Series. Each
such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all Series for all purposes.
(b) Liabilities Held With Respect to a Particular
Series. The assets of the Trust held with respect to each
particular Series shall be charged against the liabilities of the
Trust held with respect to that Series and all expenses, costs,
charges and reserves attributable to that Series, and any general
liabilities of the Trust which are not readily identifiable as
being held with respect to any particular Series shall be
allocated and charged by the Trustees to and among any one or
more of the Series in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. The
liabilities, expenses, costs, charges, and reserves so charged to
a Series are herein referred to as "liabilities held with respect
to" that Series. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and
binding upon the holders of all Series for all purposes. All
Persons who have extended credit which has been allocated to a
particular Series, or who have a claim or contract which has been
allocated to any particular Series, shall look, and shall be
required by contract to look exclusively, to the assets of that
particular Series for payment of such credit, claim, or contract.
In the absence of an express contractual agreement so limiting"
the claims of such creditors, claimants and contract providers,
each creditor claimant and contract provider will be deemed
nevertheless to have impliedly agreed to such limitation unless
an express provision to the contrary has been incorporated in the
written contract or other document establishing the claimant
relationship.
(c) Dividends, Distributions, Redemptions, and
Repurchases. Notwithstanding any other provisions of this
Declaration of Trust, including, without limitation, Article VI,
no dividend or distribution including, without limitation, any
distribution paid upon termination of the Trust or of any Series
(or class) with respect to, nor any redemption or repurchase of,
the Shares of any Series (or class) shall be effected by the
Trust other than from the assets held with respect to such
Series, nor, except as specifically provided in Section 7 of this
Article III, shall any Shareholder of any particular Series
otherwise have any right or claim against the assets held with
respect to any other Series except to the extent that such
Shareholder has such a right or claim hereunder as a Shareholder
of such other Series. The Trustees shall have full discretion, to
the extent not inconsistent with the 1940 Act, to determine which
items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and
binding upon the Shareholders.
(d) Voting. All Shares of the Trust entitled to vote on
a matter shall vote separately by Series (and, if applicable, by
class): that is, the Shareholders of each Series (or class) shall
have the right to approve or disapprove matters affecting the
Trust and each respective Series (or class) as if the Series (or
classes) were separate companies. There are, however, two
exceptions to voting by separate Series (or classes). First, if
the 1940 Act requires all Shares of the Trust to be voted in the
aggregate without differentiation between the separate Series (or
classes), then all the Trust's Shares shall be entitled to vote
on a one-vote-per-Share basis. Second, if any matter affects only
the interests of some but not all Series (or classes), then only
the Shareholders of such affected Series (or classes) shall be
entitled to vote on the matter.
(e) Equality. All the Shares of each particular Series
shall represent an equal proportionate interest in the assets
held with respect to that Series (subject to the liabilities held
with respect to that Series and such rights and preferences as
may have been established and designated with respect to classes
of Shares within such Series), and each Share of any particular
Series shall be equal to each other Share of that Series.
(f) Fractions. Any fractional Share of a Series shall
carry proportionately all the rights and obligations of a whole
share of that Series, including rights with respect to voting,
receipt of dividends and distributions, redemption of Shares and
termination of the Trust.
(g) Exchange Privilege. The Trustees shall have the
authority to provide that the holders of Shares of any Series
shall have the right to exchange said Shares for Shares of one or
more other Series of Shares in accordance with such requirements
and procedures as may be established by the Trustees.
(h) Combination of Series. The Trustees shall have the
authority, without the approval of the Shareholders of any Series
unless otherwise required by applicable law, to combine the
assets and liabilities held with respect to any two or more
Series into assets and liabilities held with respect to a single
Series.
(i) Elimination of Series. At any time that there are
no Shares outstanding of any particular Series (or class)
previously established and designated, the Trustees may by
resolution of a majority of the then Trustees abolish that Series
(or class) and rescind the establishment and designation thereof.
Section 7. Indemnification of Shareholders. If any
Shareholder or former Shareholder shall be exposed to liability
by reason of a claim or demand relating to his or her being or
having been a Shareholder, and not because of his or her acts or
omissions, the Shareholder or former Shareholder (or his or her
heirs, executors, administrators, or other legal representatives
or in the case of a corporation or other entity, its corporate or
other general successor) shall be entitled to be held harmless
from and indemnified out of the assets of the Trust against all
loss and expense arising from such claim or demand.
ARTICLE IV
The Board of Trustees
Section 1. Number, Election and Tenure. The number of
Trustees constituting the Board of Trustees shall be fixed from
time to time by a written instrument signed, or by resolution
approved at a duly constituted meeting, by a majority of the
Board of Trustees, provided, however, that the number of Trustees
shall in no event be less than one (1) nor more than fifteen
(15). The Board of Trustees, by action of a majority of the then
Trustees at a duly constituted meeting, may fill vacancies in the
Board of Trustees or remove Trustees with or without cause. Each
Trustee shall serve during the continued lifetime of the Trust
until he or she dies, resigns, is declared bankrupt or
incompetent by a court of appropriate jurisdiction, or is
removed, or, if sooner, until the next meeting of Shareholders
called for the purpose of electing Trustees and until the
election and qualification of his or her successor. Any Trustee
may resign at any time by written instrument signed by him and
delivered to any officer of the Trust or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless
specified to be effective at some other time. Except to the
extent expressly provided in a written agreement with the Trust,
no Trustee resigning and no Trustee removed shall have any right
to any compensation for any period following his or her
resignation or removal, or any right to damages on account of
such removal. The Shareholders may fix the number of Trustees and
elect Trustees at any meeting of Shareholders called by the
Trustees for that purpose. Any Trustee may be removed at any
meeting of Shareholders by a vote of two-thirds of the
outstanding Shares of the Trust. A meeting of Shareholders for
the purpose of electing or removing one or more Trustees may be
called (i) by the Trustees upon their own vote, or (ii) upon the
demand of Shareholders owning 10% or more of the Shares of the
Trust in the aggregate.
Section 2. Effect of Death, Resignation, etc. of a
Trustee. The death, declination, resignation, retirement,
removal, or incapacity of one or more Trustees, or all of them,
shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of
Trust. Whenever a vacancy in the Board of Trustees shall occur,
until such vacancy is filled as provided in Article IV, Section
1, the Trustees in office, regardless of their number, shall have
all the powers granted to the Trustees and shall discharge all
the duties imposed upon the Trustees by this Declaration of
Trust. As conclusive evidence of such vacancy, a written
instrument certifying the existence of such vacancy may be
executed by an officer of the Trust or by a majority of the Board
of Trustees. In the event of the death, declination, resignation,
retirement, removal, or incapacity of all the then Trustees
within a short period of time and without the opportunity for at
least one Trustee being able to appoint additional Trustees to
fill vacancies, the Trust's Investment Manager(s) are empowered
to appoint new Trustees subject to the provisions of Section
16(a) of the 1940 Act.
Section 3. Powers. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed
by the Board of Trustees, and such Board shall have all powers
necessary or convenient to carry out that responsibility
including the power to engage in securities transactions of all
kinds on behalf of the Trust. Without limiting the foregoing, the
Trustees may: adopt By-Laws not inconsistent with this
Declaration of Trust providing for the regulation and management
of the affairs of the Trust and may amend and repeal them to the
extent that such By-Laws do not reserve that right to the
Shareholders; fill vacancies in or remove from their number, and
may elect and remove such officers and appoint and terminate such
agents as they consider appropriate; appoint from their own
number and establish and terminate one or more committees
consisting of two or more Trustees which may exercise the powers
and authority of the Board of Trustees to the extent that the
Trustees determine; employ one or more custodians of the assets
of the Trust and may authorize such custodians to employ
subcustodians and to deposit all or any part of such assets in a
system or systems for the central handling of securities or with
a Federal Reserve Bank, retain a transfer agent or a shareholder
servicing agent, or both; provide for the issuance and
distribution of Shares by the Trust directly or through one or
more Principal Underwriters or otherwise; redeem, repurchase and
transfer Shares pursuant to applicable law; set record dates for
the determination of Shareholders with respect to various
matters; declare and pay dividends and distributions to
Shareholders of each Series from the assets of such Series; and
in general delegate such authority as they consider desirable to
any officer of the Trust, to any committee of the Trustees and to
any agent or employee of the Trust or to any such custodian,
transfer or shareholder servicing agent, or Principal
Underwriter. Any determination as to what is in the interests of
the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the
Trustees. Unless otherwise specified or required by law, any
action by the Board of Trustees shall be deemed effective if
approved or taken by a majority of the Trustees then in office.
Without limiting the foregoing, the Trust shall have
power and authority:
(a) To invest and reinvest cash, to hold cash
uninvested, and to subscribe for, invest in, reinvest in,
purchase or otherwise acquire, own, hold, pledge, sell, assign,
transfer, exchange, distribute, write options on, lend or
otherwise deal in or dispose of contracts for the future
acquisition or delivery of fixed income or other securities, and
securities of every nature and kind, including, without
limitation, all types of bonds, debentures, stocks, negotiable or
non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial
paper, repurchase agreements, bankers' acceptances, and other
securities of any kind, issued, created, guaranteed, or sponsored
by any and all Persons, including, without limitation, states,
territories, and possessions of the United States and the
District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political
subdivision of the U.S. Government or any foreign government, or
any international instrumentality, or by any bank or savings
institution, or by any corporation or organization organized
under the laws of the United States or of any state, territory,
or possession thereof, or by any corporation or organization
organized under any foreign law, or in "when issued" contracts
for any such securities, to change the investments of the assets
of the Trust; and to exercise any and all rights, powers, and
privileges of ownership or interest in respect of any and all
such investments of every kind and description, including,
without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons, to
exercise any of said rights, powers, and privileges in respect of
any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage,
hypothecate, lease, or write options with respect to or otherwise
deal in any property rights relating to any or all of the assets
of the Trust or any Series;
(c) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property;
and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to
such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(d) To exercise powers and right of subscription or
otherwise which in any manner arise out of ownership of
securities;
(e) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or other
negotiable form, or in its own name or in the name of a custodian
or subcustodian or a nominee or nominees or otherwise;
(f) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
issuer of any security which is held in the Trust; to consent to
any contract, lease, mortgage, purchase or sale of property by
such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
(g) To join with other security holders in acting
through a committee, depositary, voting trustee or otherwise, and
in that connection to deposit any security with, or transfer any
security to, any such committee, depositary or trustee, and to
delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;
(h) To compromise, arbitrate or otherwise adjust claims
in favor of or against the Trust or any matter in controversy,
including but not limited to claims for taxes;
(i) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) To borrow funds or other property in the name of
the Trust exclusively for Trust purposes;
(k) To endorse or guarantee the payment of any notes or
other obligations of any Person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof;
(1) To purchase and pay for entirely out of Trust
Property such insurance as the Trustees may deem necessary or
appropriate for the conduct of the business, including, without
limitation, insurance policies insuring the assets of the Trust
or payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers,
principal underwriters, or independent contractors of the Trust,
individually against all claims and liabilities of every nature
arising by reason of holding Shares, holding, being or having
held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such Person as
Trustee, officer, employee, agent, investment adviser, principal
underwriter, or independent contractor, including any action
taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such
Person against liability; and
(m) To adopt, establish and carry out pension, profit-
sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions,
including the purchasing of life insurance and annuity contracts
as a means of providing such retirement and other benefits, for
any or all of the Trustees, officers, employees and agents of the
Trust.
The Trust shall not be limited to investing in
obligations maturing before the possible termination of the Trust
or one or more of its Series The Trust shall not in any way be
bound or limited by any present or future law or custom in regard
to investment by fiduciaries. The Trust shall not be required to
obtain any court order to deal with any assets of the Trust or
take any other action hereunder.
Section 4. Payment of Expenses by the Trust. The
Trustees are authorized to pay or cause to be paid out of the
principal or income of the Trust, or partly out of the principal
and partly out of income, as they deem fair, all expenses, fees,
charges, taxes and liabilities incurred or arising in connection
with the Trust, or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and
such expenses and charges for the services of the Trust's
officers, employees, investment adviser or manager, principal
underwriter, auditors, counsel, custodian, transfer agent,
Shareholder servicing agent, and such other agents or independent
contractors and such other expenses and charges as the Trustees
may deem necessary or proper to incur.
Section 5. Payment of Expenses by Shareholders. The
Trustees shall have the power, as frequently as they may
determine, to cause each Shareholder, or each Shareholder of any
particular Series, to pay directly, in advance or arrears, for
charges of the Trust's custodian or transfer, Shareholder
servicing or similar agent, an amount fixed from time to time by
the Trustees, by setting off such charges due from such
Shareholder from declared but unpaid dividends owed such
Shareholder and/or by reducing the number of shares in the
account of such Shareholder by that number of full and/or
fractional Shares which represents the outstanding amount of such
charges due from such Shareholder.
Section 6. Ownership of Assets of the Trust. Title to
all of the assets of the Trust shall at all times be considered
as vested in the Trust, except that the Trustees shall have power
to cause legal title to any Trust Property to be held by or in
the name of one or more of the Trustees, or in the name of the
Trust, or in the name of any other Person as nominee, on such
terms as the Trustees may determine. The right, title and
interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee.
Upon the resignation, removal or death of a Trustee he or she
shall automatically cease to have any right, title or interest in
any of the Trust Property, and the right, title and interest of
such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall
be effective whether or not conveyancing documents have been
executed and delivered.
Section 7. Service Contracts.
(a) Subject to such requirements and restrictions as
may be set forth in the By-Laws, the Trustees may, at any time
and from time to time, contract for exclusive or nonexclusive
advisory, management and/or administrative services for the Trust
or for any Series with any corporation, trust, association or
other organization; and any such contract may contain such other
terms as the Trustees may determine, including without
limitation, authority for the Investment Manager or administrator
to determine from time to time without prior consultation with
the Trustees what investments shall be purchased, held, sold or
exchanged and what portion, if any, of the assets of the Trust
shall be held uninvested and to make changes in the Trust's
investments, or such other activities as may specifically be
delegated to such party.
(b) The Trustees may also, at any time and from time to
time, contract with any corporation, trust, association or other
organization, appointing it exclusive or nonexclusive distributor
or Principal Underwriter for the Shares of one or more of the
Series (or classes) or other securities to be issued by the
Trust. Every such contract shall comply with such requirements
and restrictions as may be set forth in the By-Laws; and any such
contract may contain such other terms as the Trustees may
determine.
(c) The Trustees are also empowered, at any time and
from time to time, to contract with any corporations, trusts,
associations or other organizations, appointing it or them the
custodian, transfer agent and/or shareholder servicing agent for
the Trust or one or more of its Series. Every such contract shall
comply with such requirements and restrictions as may be set
forth in the By-Laws or stipulated by resolution of the Trustees.
(d) The Trustees are further empowered, at any time and
from time to time, to contract with any entity to provide such
other services to the Trust or one or more of the Series, as the
Trustees determine to be in the best interests of the Trust and
the applicable Series.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers
of the Trust is a shareholder, director, officer,
partner, trustee, employee, Manager, adviser, Principal
Underwriter, distributor, or affiliate or agent of or
for any corporation, trust, association, or other
organization, or for any parent or affiliate of any
organization with which an advisory, management or
administration contract, or principal underwriter's or
distributor's contract, or transfer, shareholder
servicing or other type of service contract may have
been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other
organization with which an advisory, management or
administration contract or principal underwriter's or
distributor's contract, or transfer, shareholder
servicing or other type of service contract may have
been or may hereafter be made also has an advisory,
management or administration contract, or principal
underwriter's or distributor's contract, or transfer,
shareholder servicing or other service contract with
one or more other corporations, trust, associations, or
other organizations, or has other business or
interests,
shall not affect the validity of any such contract or disqualify
any Shareholder, Trustee or officer of the Trust from voting upon
or executing the same, or create any liability or accountability
to the Trust or its Shareholders, provided approval of each such
contract is made pursuant to the requirements of the 1940 Act.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Subject to the provisions of
Article III, Section 6(d), the Shareholders shall have power to
vote only (i) for the election or removal of Trustees as provided
in Article IV, Section 1, and (ii) with respect to such
additional matters relating to the Trust as may be required by
this Declaration of Trust, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any state,
or as the Trustees may consider necessary or desirable. Each
whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote. There shall be no
cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy. A proxy with respect to Shares held
in the name of two or more persons shall be valid if executed by
any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on behalf of
a Shareholder shall be deemed valid unless challenged at or prior
to its exercise and the burden of proving invalidity shall rest
on the challenger.
Section 2. Voting Power and Meetings. Meetings of the
Shareholders may be called by the Trustees for the purpose of
electing Trustees as provided in Article IV, Section 1 and for
such other purposes as may be prescribed by law, by this
Declaration of Trust or by the By-Laws. Meetings of the
Shareholders may also be called by the Trustees from time to time
for the purpose of taking action upon any other matter deemed by
the Trustees to be necessary or desirable. A meeting of
Shareholders may be held at any place designated by the Trustees.
Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees by mailing such notice at
least seven (7) days before such meeting, postage prepaid,
stating the time and place of the meeting, to each Shareholder at
the Shareholder's address as it appears on the records of the
Trust. Whenever notice of a meeting is required to be given to a
Shareholder under this Declaration of Trust or the By-Laws, a
written waiver thereof, executed before or after the meeting by
such Shareholder or his or her attorney thereunto authorized and
filed with the records of the meeting, shall be deemed equivalent
to such notice.
Section 3. Quorum and Required Vote. Except when a
larger quorum is required by applicable law, by the By-Laws or by
this Declaration of Trust, forty percent (40%) of the Shares
entitled to vote shall constitute a quorum at a Shareholders'
meeting. When any one or more Series (or classes) is to vote as a
single class separate from any other Shares, forty percent (40%)
of the Shares of each such Series (or classes) entitled to vote
shall constitute a quorum at a Shareholder's meeting of that
Series. Any meeting of Shareholders may be adjourned from time to
time by a majority of the votes properly cast upon the question
of adjourning a meeting to another date and time, whether or not
a quorum is present, and the meeting may be held as adjourned
within a reasonable time after the date set for the original
meeting without further notice. Subject to the provisions of
Article III, Section 6(d), when a quorum is present at any
meeting, a majority of the Shares voted shall decide any
questions and a plurality shall elect a Trustee, except when a
larger vote is required by any provision of this Declaration of
Trust or the By-Laws or by applicable law.
Section 4. Action by Written Consent. Any action taken
by Shareholders may be taken without a meeting if Shareholders
holding a majority of the Shares entitled to vote on the matter
(or such larger proportion thereof as shall be required by any
express provision of this Declaration of Trust or by the By-Laws)
and holding a majority (or such larger proportion as aforesaid)
of the Shares of any Series (or class) entitled to vote
separately on the matter consent to the action in writing and
such written consents are filed with the records of the meetings
of Shareholders. Such consent shall be treated for all purposes
as a vote taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining
the Shareholders of any Series (or class) who are entitled to
vote or act at any meeting or any adjournment thereof, the
Trustees may from time to time fix a time, which shall be not
more than ninety (90) days before the date of any meeting of
Shareholders, as the record date for determining the Shareholders
of such Series (or class) having the right to notice of and to
vote at such meeting and any adjournment thereof, and in such
case only Shareholders of record on such record date shall have
such right, notwithstanding any transfer of shares on the books
of the Trust after the record date. For the purpose of
determining the Shareholders of any Series (or class) who are
entitled to receive payment of any dividend or of any other
distribution, the Trustees may from time to time fix a date,
which shall be before the date for the payment of such dividend
or such other payment, as the record date for determining the
Shareholders of such Series (or class) having the right to
receive such dividend or distribution. Without fixing a record
date the Trustees may for voting and/or distribution purposes
close the register or transfer books for one or more Series for
all or any part of the period between a record date and a meeting
of Shareholders or the payment of a distribution. Nothing in this
Section shall be construed as precluding the Trustees from
setting different record dates for different Series (or classes).
Section 6. Additional Provisions. The By-Laws may include
further provisions for Shareholders' votes and meetings and
related matters.
ARTICLE VI
Net Asset Value, Distributions, and Redemptions
Section 1. Determination of Net Asset Value, Net
Income, and Distributions. Subject to Article III, Section 6
hereof, the Trustees, in their absolute discretion, may prescribe
and shall set forth in the By-laws or in a duly adopted vote of
the Trustees such bases and time for determining the per Share or
net asset value of the Shares of any Series or net income
attributable to the Shares of any Series, or the declaration and
payment of dividends and distributions on the Shares of any
Series, as they may deem necessary or desirable.
Section 2. Redemptions and Repurchases. The Trust shall
purchase such Shares as are offered by any Shareholder for
redemption, upon the presentation of a proper instrument of
transfer together with a request directed to the Trust or a
Person designated by the Trust that the Trust purchase such
Shares or in accordance with such other procedures for redemption
as the Trustees may from time to time authorize; and the Trust
will pay therefor the net asset value thereof, in accordance with
the By-Laws and applicable law. Payment for said Shares shall be
made by the Trust to the Shareholder within seven days after the
date on which the request is made in proper form. The obligation
set forth in this Section 2 is subject to the provision that in
the event that any time the New York Stock Exchange (the
"Exchange") is closed for other than weekends or holidays, or if
permitted by the Rules of the Commission during periods when
trading on the Exchange is restricted or during any emergency
which makes it impracticable for the Trust to dispose of the
investments of the applicable Series or to determine fairly the
value of the net assets held with respect to such Series or
during any other period permitted by order of the Commission for
the protection of investors, such obligations may be suspended or
postponed by the Trustees.
The redemption price may in any case or cases be paid
wholly or partly in kind if the Trustees determine that such
payment is advisable in the interest of the remaining
Shareholders of the Series for which the Shares are being
redeemed. Subject to the foregoing, the fair value, selection and
quantity of securities or other property so paid or delivered as
all or part of the redemption price may be determined by or under
authority of the Trustees. In no case shall the Trust be liable
for any delay of any corporation or other Person in transferring
securities selected for delivery as all or part of any payment in
kind.
Section 3. Redemptions at the option of the Trust. The
Trust shall have the right at its option and at any time to
redeem Shares of any Shareholder at the net asset value thereof
as described in Section 1 of this Article VI: (i) if at such time
such Shareholder owns Shares of any Series having an aggregate
net asset value of less than an amount determined from time to
time by the Trustees prior to the acquisition of said Shares; or
(ii) to the extent that such Shareholder owns Shares of a
particular Series equal to or in excess of a percentage of the
outstanding Shares of that Series determined from time to time by
the Trustees; or (iii) to the extent that such Shareholder owns
Shares equal to or in excess of a percentage, determined from
time to time by the Trustees, of the outstanding Shares of the
Trust or of any Series.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees as such shall be
entitled to reasonable compensation from the Trust, and they may
fix the amount of such compensation. Nothing herein shall in any
way prevent the employment of any Trustee for advisory,
management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Indemnification and Limitation of Liability.
The Trustees shall not be responsible or liable in any event for
any neglect or wrong-doing of any officer, agent, employee,
Manager or Principal Underwriter of the Trust, nor shall any
Trustee be responsible for the act or omission of any other
Trustee, and the Trust out of its assets shall indemnify and hold
harmless each and every Trustee from and against any and all
claims and demands whatsoever arising out of or related to each
Trustee's performance of his or her duties as a Trustee of the
Trust; provided that nothing herein contained shall indemnify,
hold harmless or protect any Trustee from or against any
liability to the Trust or any Shareholder to which he or she
would otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever issued,
executed or done by or on behalf of the Trust or the Trustees or
any of them in connection with the Trust shall be conclusively
deemed to have been issued, executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee,
and such Trustees or Trustee shall not be personally liable
thereon.
Section 3. Trustee's Good Faith Action, Expert Advice,
No Bond or Surety. The exercise by the Trustees of their powers
and discretions hereunder shall be binding upon everyone
interested. A Trustee shall be liable to the Trust and to any
Shareholder solely for his or her own wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and shall not
be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect
to the meaning and operation of this Declaration of Trust, and
shall be under no liability for any act or omission in accordance
with such advice nor for failing to follow such advice. The
Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.
Section 4. Insurance. The Trustees shall be entitled
and empowered to the fullest extent permitted by law to purchase
with Trust assets insurance for liability and for all expenses
reasonably incurred or paid or expected to be paid by a Trustee
or officer in connection with any claim, action, suit or
proceeding in which he or she becomes involved by virtue of his
or her capacity or former capacity with the Trust.
ARTICLE VIII
Miscellaneous
Section 1. Liability of Third Persons Dealing with
Trustees. No Person dealing with the Trustees shall be bound to
make any inquiry concerning the validity of any transaction made
or to be made by the Trustees or to see to the application of any
payments made or property transferred to the Trust or upon its
order.
Section 2. Termination of Trust or Series. Unless
terminated as provided herein, the Trust shall continue without
limitation of time. The Trust may be terminated at any time by
vote of a majority of the Shares of each Series entitled to vote,
voting separately by Series, or by the Trustees by written notice
to the Shareholders. Any Series may be terminated at any time by
vote of a majority of the Shares of that Series or by the
Trustees by written notice to the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the
case may be), after paying or otherwise providing for all
charges, taxes, expenses and liabilities held, severally, with
respect to each Series (or the applicable Series, as the case may
be), whether due or accrued or anticipated as may be determined
by the Trustees, the Trust shall, in accordance with such
procedures as the Trustees consider appropriate, reduce the
remaining assets held, severally, with respect to each Series (or
the applicable Series, as the case may be), to distributable form
in cash or shares or other securities, or any combination
thereof, and distribute the proceeds held with respect to each
Series (or the applicable Series, as the case may be), to the
Shareholders of that Series, as a Series, ratably according to
the number of Shares of that Series held by the several
Shareholders on the date of termination.
Section 3. Merger and Consolidation. The Trustees may
cause (i) the Trust or one or more of its Series to the extent
consistent with applicable law to be merged into or consolidated
with another Trust or company, (ii) the Shares of the Trust or
any Series to be converted into beneficial interests in another
business trust (or series thereof) created pursuant to this
Section 3 of Article VIII, or (iii) the Shares to be exchanged
under or pursuant to any state or federal statute to the extent
permitted by law. Such merger or consolidation, Share conversion
or Share exchange must be authorized by vote of a majority of the
outstanding Shares of the Trust, as a whole, or any affected
Series, as may be applicable; provided that in all respects not
governed by statute or applicable law, the Trustees shall have
power to prescribe the procedure necessary or appropriate to
accomplish a sale of assets, merger or consolidation including
the power to create one or more separate business trusts to which
all or any part of the assets, liabilities, profits or losses of
the Trust may be transferred and to provide for the conversion of
Shares of the Trust or any Series into beneficial interests in
such separate business trust or trusts (or series thereof).
Section 4. Amendments. This Declaration of Trust may be
restated and/or amended at any time by an instrument in writing
signed by a majority of the then Trustees and, if required, by
approval of such amendment by Shareholders in accordance with
Article V, Section 3 hereof. Any such restatement and/or
amendment hereto shall be effective immediately upon execution
and approval. The Certificate of Trust of the Trust may be
restated and/or amended by a similar procedure, and any such
restatement and/or amendment shall be effective immediately upon
filing with the Office of the Secretary of State of the State of
Delaware or upon such future date as may be stated therein.
Section 5. Filing of Copies, References, Headings. The
original or a copy of this instrument and of each restatement
and/or amendment hereto shall be kept at the office of the Trust
where it may be inspected by any Shareholder. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as
to whether or not any such restatements and/or amendments have
been made and as to any matters in connection with the Trust
hereunder; and, with the same effect as if it were the original,
may rely on a copy certified by an officer of the Trust to be a
copy of this instrument or of any such restatements and/or
amendments. In this instrument and in any such restatements
and/or amendment, references to this instrument, and all
expressions like "herein", "hereof" and "hereunder", shall be
deemed to refer to this instrument as amended or affected by any
such restatements and/or amendments. Headings are placed herein
for convenience of reference only and shall not be taken as a
part hereof or control or affect the meaning, construction or
effect of this instrument. Whenever the singular number is used
herein, the same shall include the plural; and the neuter,
masculine and feminine genders shall include each other, as
applicable. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 6. Applicable Law. This Agreement and
Declaration of Trust is created under and is to be governed by
and construed and administered according to the laws of the State
of Delaware and the Delaware Business Trust Act, as amended from
time to time (the "Act"). The Trust shall be a Delaware business
trust pursuant to such Act, and without limiting the provisions
hereof, the Trust may exercise all powers which are ordinarily
exercised by such a business trust.
Section 7. Provisions in Conflict with Law or
Regulations.
(a) The provisions of the Declaration of Trust are
severable, and if the Trustees shall determine, with the advice
of counsel, that any of such provisions is in conflict with the
1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to
have constituted a part of the Declaration of Trust; provided,
however, that such determination shall not affect any of the
remaining provisions of the Declaration of Trust or render
invalid or improper any action taken or omitted prior to such
determination.
(b) If any provision of the Declaration of Trust
shall be held invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall attach only to such
provision in such jurisdiction and shall not in any manner affect
such provision in any other jurisdiction or any other provision
of the Declaration of Trust in any jurisdiction.
Section 8. Business Trust Only. It is the intention of
the Trustees to create a business trust pursuant to the Delaware
Business Trust Act, as amended from time to time (the "Act"), and
thereby to create only the relationship of trustee and beneficial
owners within the meaning of such Act between the Trustees and
each Shareholder. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock
association, corporation, bailment, or any form of legal
relationship other than a business trust pursuant to such Act.
Nothing in this Declaration of Trust shall be construed to make
the Shareholders, either by themselves or with the Trustees,
partners or members of a joint stock association.
Section 9.. Use of the Names "Franklin" and "250 Growth
Index." The names "Franklin" and "250 Growth Index" and all
rights to the use of the names "Franklin" and "250 Growth Index"
belong to Franklin Resources, Inc. ("Franklin"), the sponsor of
the Trust. Franklin has consented to the use by the Trust of the
identifying words "Franklin" and "250 Growth Index" and has
granted to the Trust a non-exclusive license to use the names
"Franklin" and "250 Growth Index" as part of the name of the
Trust and the name of any Series of Shares. In the event Franklin
or an affiliate of Franklin is not appointed as Manager and/or
Principal Underwriter or ceases to be the Manager and/or
Principal Underwriter of the Trust or of any Series using such
names, the non-exclusive license granted herein may be revoked by
Franklin and the Trust shall cease using the names "Franklin" and
"250 Growth Index" as part of its name or the name of any Series
of Shares, unless otherwise consented to by Franklin or any
successor to its interests in such names.
[The remainder of this page has been
left blank intentionally. ]
IN WITNESS WHEREOF, the Trustees named below do hereby
make and enter into this Declaration of Trust as of the 22nd day
of January 1991.
/s/ Frank H. Abbott, III /s/ Charles B. Johnson
Frank H. Abbott, III Charles B. Johnson
/s/ Harris J. Ashton /s/ Rupert H. Johnson, Jr.
Harris J. Ashton Rupert H. Johnson, Jr.
/s/ S. Joseph Fortunato /s/ Edmund H. Kerr
S. Joseph Fortunato Edmund H. Kerr
/s/ David W. Garbellano /s/ Frank W. T. LaHaye
David W. Garbellano Frank W. T. LaHaye
/s/ Henry L. Jamieson /s/ Johannes R. Krahmer
Henry L. Jamieson Johannes R. Krahmer
THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS 777 Mariners
Island Boulevard, San Mateo, California 94404
CERTIFICATE OF TRUST
FRANKLIN CALIFORNIA 250 GROWTH INDEX FUND
This Certificate of Trust of FRANKLIN CALIFORNIA GROWTH
INDEX FUND, a business trust (hereafter called the "Business
Trust"), executed by the undersigned trustees, one of whom has a
residence in the State of Delaware, and filed under and in
accordance with the provisions of the Delaware Business Trust Act
(12 Del. C. section 3801 et seq.), sets forth the following:
FIRST: The name of the Business Trust is FRANKLIN CALIFORNIA
250 GROWTH INDEX FUND.
SECOND: The name and business address of the Delaware
resident trustee of the Business Trust required by 12 Del. C.
section 3807 is as follows:
Name Business Address
Johannes R. Krahmer Morris, Nichols, Arsht
& Tunnell
1201 N. Market Street
Wilmington, Delaware 19899
-1347
The name and business address of each of the other trustees
of the Business Trust is as follows:
Name Business Address
Frank H. Abbott, III 1045 Sansome Street
San Francisco, California
94025
Harris J. Ashton 22 Gate House Road
Stamford, Connecticut 06902
S. Joseph Fortunato Park Avenue at Morris County
P.O. Box 1945
Morristown, New Jersey
07962-1945
David W. Garbellano 111 New Montgomery St. #402
San Francisco, California
94105
Henry L. Jamieson 777 Mariners Island Blvd.
San Mateo, California 94404
Charles B. Johnson 777 Mariners Island Blvd.
San Mateo, California 94404
Rupert H. Johnson, Jr. 777 Mariners Island Blvd.
San Mateo, California 94404
Edmund H. Kerr 1 Liberty Plaza
New York, New York 10006
Frank W. T. LaHaye 20833 Stevens Creek Blvd.
Suite 102
Cupertino, California 95014
THIRD: The nature of the business or purpose or purposes of
the Business Trust as set forth in its governing instrument is to
conduct, operate and carry on the business of a management
investment company registered under the Investment Company Act of
1940, as amended, through one or more series of shares of
beneficial interest, investing primarily in securities.
FOURTH: The trustees of the Business Trust, as set forth in
its governing instrument, reserve the right to amend, alter,
change or repeal any provision contained in this Certificate of
Trust, in the manner now or hereafter prescribed by statute.
FIFTH: This Certificate of Trust shall become effective
immediately upon filing with the Office of the Secretary of State
of the State of Delaware.
[The remainder of this page has been left
intentionally blank.]
IN WITNESS WHEREOF, the undersigned, being all of the
trustees of Franklin California 250 Growth Index Fund, have duly
executed this Certificate of Trust as of this 22nd day January
1991.
/s/ Frank H. Abbott, III
Frank H Abbott, III
/s/ Harris J. Ashton
Harris J. Ashton
/s/ S. Joseph Fortunato
S. Joseph Fortunato
/s/ David W. Garbellano
David W. Garbellano
/s/ Henry L. Jamieson
Henry L. Jamieson
/s/ Charles B. Johnson
Charles B. Johnson
/s/ Rupert H. Johnson, Jr.
Rupert H. Johnson, Jr.
/s/ Edmund H. Kerr
Edmund H. Kerr
/s/ Frank W. T. LaHaye
Frank W. T. LaHaye
/s/ Johannes R. Krahmer
Johannes R. Krahmer
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF TRUST
OF
FRANKLIN CALIFORNIA 250 GROWTH FUND
The undersigned certifies that:
1. The name of the business trust is FRANKLIN CALIFORNIA 250
GROWTH FUND (the "Business Trust").
2. The amendment to the Certificate of Trust of the Business
Trust set forth below has been duly authorized by the Board
of Trustees of the Business Trust.
The First Article of the Certificate of Trust is hereby
amended to read as follows:
"The name of the Business Trust is "FRANKLIN STRATEGIC
SERIES".
3. Pursuant to 12 Del. Code (section) 3810(b) (1)c, this
Certificate of Amendment to the Certificate of Trust of the
Business Trust shall become effective immediately upon
filing with the Office of the Secretary of State of the
State of Delaware.
4. This Amendment is made pursuant to the Fourth Article of the
Certificate of Trust which reserves to the Trustees the
right to amend, alter, change or repeal any provisions
contained in the Certificate of Trust.
IN WITNESS WHEREOF, the undersigned, being a trustee of the
Business Trust, has duly executed this Certificate of Amendment
this 19th day of November 1991.
/s/ Rupert H. Johnson, Jr.
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF TRUST
OF
FRANKLIN STRATEGIC SERIES
The undersigned certifies that:
1. The name of the business trust is the Franklin Strategic
Series (the "Business Trust").
2. The amendment to the Certificate of Trust of the Business
Trust set forth below (the "Amendment") has been duly
authorized by the Board of Trustees of the Business Trust.
The following Article is hereby added to the Certificate of
Trust:
SIXTH: Pursuant to section 3804 of the Delaware Business
Trust Act, Del. Code. Ann. tit. 12, sec. 3801-3819 (the
"Act"), the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect
to each particular series of the Trust, whether such series
is now existing or is hereinafter created, shall be
enforceable against the assets of such series only, and not
against the assets of the Trust generally.
3. Pursuant to Section 3810(b)(1)(c) of the Act, this
Certificate of Amendment to the Certificate of Trust of the
Business Trust shall become effective immediately upon
filing with the Office of the Secretary of State of the
State of Delaware.
4. The Amendment is made pursuant to the authority granted to
the Trustees of the Business Trust under Section 3810(b) (2)
of the Act and pursuant to the authority set forth in the
governing instrument of the Business Trust
IN WITNESS WHEREOF, the undersigned being a trustee of the
Business Trust, has duly executed this Certificate of Amendment
this 14th day of May 1992.
/s/ Charles B. Johnson
Charles B. Johnson
Trustee
AMENDED AND RESTATED
BY-LAWS
for the regulation, except as
otherwise provided by statute or
the Agreement and Declaration of Trust of
FRANKLIN CALIFORNIA
250 GROWTH INDEX FUND
a Delaware Business Trust
(As of April 25, 1991)
TABLE OF CONTENTS
BY-LAWS
FRANKLIN CALIFORNIA
250 GROWTH INDEX FUND
ARTICLE I Offices
1. Principal Office
2. Delaware Office
3. Other Offices
ARTICLE II
Meetings of Shareholders
1. Place of Meetings
2. Call of Meeting
3. Notice of Shareholders' Meeting
4. Manner of Giving Notice; Affidavit of Notice
5. Adjourned Meeting; Notice
6. Voting
7. Waiver of Notice of Consent by Absent Shareholders
8. Shareholder Action by Written Consent without a Meeting
9. Record Date for Shareholder Notice, Voting and Giving
Consents
10. Proxies
11. Inspectors of Election
ARTICLE III Trustees
1. Powers
2. Number of Trustees
3. Vacancies
4. Place of Meetings and Meetings by Telephone
5. Regular Meetings
6. Special Meetings
7. Quorum
8. Waiver of Notice
9. Adjournment
10. Notice of Adjournment
11. Action Without a Meeting
12. Fees and Compensation of Trustees
13. Delegation of Power to Other Trustees
ARTICLE IV Committees
1. Committees of Trustees
2. Meetings and Action of Committees
ARTICLE V Officers
1. Officers
2. Election of Officers
3. Subordinate Officers
4. Removal and Resignation of Officers
5. Vacancies in Offices
6. Chairman of the Board
7. President
8. Vice President
9. Secretary
10. Treasurer
ARTICLE VI Indemnification of Trustees, Officers
Employees and Other Agents
1. Agents, Proceedings and Expenses
2. Actions Other than by Trust
3. Actions by the Trust
4. Exclusion and Indemnification
5. Successful Defense by Agent
6. Required Approval
7. Advance of Expenses
8. Other Contractual Rights
9. Limitations
10. Insurance
11. Fiduciaries of Corporate Employee Benefit Plan
ARTICLE VII Records and Reports
1. Maintenance and Inspection of Share Register
2. Maintenance and Inspection of By-Laws
3. Maintenance and Inspection of Other Records
4. Inspection by Trustees
5. Financial Statements
ARTICLE VIII General Matters
1. Checks, Drafts, Evidence of Indebtedness
2. Contracts and Instruments; How Executed
3. Certificate of Shares
4. Lost Certificates
5. Representation of Shares of Other Entities
6. Fiscal Year
ARTICLE IX Amendments
1. Amendment by Shareholders
2. Amendment by Trustees
3. Incorporation by Reference into Agreement and Declaration of
Trust of the Trust
BY-LAWS
OF
FRANKLIN CALIFORNIA
250 GROWTH INDEX FUND
A Delaware Business Trust
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The Board of Trustees
shall fix and, from time to time, may change the location of the
principal executive office of the Franklin California 250 Growth
Index Fund (the "Trust") at any place within or outside the State
of Delaware.
Section 2. DELAWARE OFFICE. The Board of Trustees shall
establish a registered office in the State of Delaware and shall
appoint as the Trust's registered agent for service of process in
the State of Delaware an individual resident of the State of
Delaware or a Delaware corporation or a corporation authorized to
transact business in the State of Delaware; in each case the
business office of such registered agent for service of process
shall be identical with the registered Delaware office of the
Trust.
Section 3. OTHER OFFICES. The Board of Trustees may at
any time establish branch or subordinate offices at any place or
places where the Trust intends to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders
shall be held at any place designated by the Board of Trustees.
In the absence of any such designation, shareholders' meetings
shall be held at the principal executive office of the Trust.
Section 2. CALL OF MEETING. A meeting of the
shareholders may be called at any time by the Board of Trustees
or by the Chairman of the Board or by the President.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All
notices of meetings of shareholders shall be sent or otherwise
given in accordance with Section 4 of this Article II not less
than seven (7) nor more than seventy-five (75) days before the
date of the meeting. The notice shall specify (i) the place, date
and hour of the meeting, and (ii) the general nature of the
business to be transacted. The notice of any meeting at which
Trustees are to be elected also shall include the name of any
nominee or nominees whom at the time of the notice are intended
to be presented for election.
If action is proposed to be taken at any meeting for
approval of (i) a contract or transaction in which a Trustee has
a direct or indirect financial interest, (ii) an amendment of the
Agreement and Declaration of Trust of the Trust, (iii) a
reorganization of the Trust, or (iv) a voluntary dissolution of
the Trust, the notice shall also state the general nature of that
proposal.
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF
NOTICE. Notice of any meeting of shareholders shall be given
either personally or by first-class mail or telegraphic or other
written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the
books of the Trust or its transfer agent or given by the
shareholder to the Trust for the purpose of notice. If no such
address appears on the Trust's books or is given, notice shall be
deemed to have been given if sent to that shareholder by first-
class mail or telegraphic or other written communication to the
Trust's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at
the time when delivered personally or deposited in the mail or
sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address
of that shareholder appearing on the books of the Trust is
returned to the Trust by the United States Postal Service marked
to indicate that the Postal Service is unable to deliver the
notice to the shareholder at that address, all future notices or
reports shall be deemed to have been duly given without further
mailing if these shall be available to the shareholder on written
demand of the shareholder at the principal executive office of
the Trust for a period of one year from the date of the giving of
the notice.
An affidavit of the mailing or other means of giving
any notice of any shareholder's meeting shall be executed by the
Secretary, Assistant Secretary or any transfer agent of the Trust
giving the notice and shall be filed and maintained in the minute
book of the Trust.
Section 5. ADJOURNED MEETING; NOTICE. Any shareholder's
meeting, whether or not a quorum is present, may be adjourned
from time to time by the vote of the majority of the shares
represented at that meeting, either in person or by proxy.
When any meeting of shareholders is adjourned to
another time or place, notice need not be given of the adjourned
meeting at which the adjournment is taken, unless a new record
date of the adjourned meeting is fixed or unless the adjournment
is for more than sixty (60) days from the date set for the
original meeting, in which case the Board of Trustees shall set a
new record date. Notice of any such adjourned meeting shall be
given to each shareholder of record entitled to vote at the
adjourned meeting in accordance with the provisions of Sections 3
and 4 of this Article II. At any adjourned meeting, the Trust may
transact any business which might have been transacted at the
original meeting.
Section 6. VOTING. The shareholders entitled to vote at
any meeting of shareholders shall be determined in accordance
with the provisions of the Agreement and Declaration of Trust of
the Trust, as in effect at such time. The shareholders' vote may
be by voice vote or by ballot, provided, however, that any
election for Trustees must be by ballot if demanded by any
shareholder before the voting has begun. On any matter other than
elections of Trustees, any shareholder may vote part of the
shares in favor of the proposal and refrain from voting the
remaining shares or vote them against the proposal, but if the
shareholder fails to specify the number of shares which the
shareholder is voting affirmatively, it will be conclusively
presumed that the shareholder's approving vote is with respect to
the total shares that the shareholder is entitled to vote on such
proposal.
Section 7. WAIVER 0F NOTICE BY CONSENT OF ABSENT
SHAREHOLDERS. The transactions of the meeting of shareholders,
however called and noticed and wherever held, shall be as valid
as though had at a meeting duly held after regular call and
notice if a quorum be present either in person or by proxy and if
either before or after the meeting, each person entitled to vote
who was not present in person or by proxy signs a written waiver
of notice or a consent to a holding of the meeting or an approval
of the minutes. The waiver of notice or consent need not specify
either the business to be transacted or the purpose of any
meeting of shareholders.
Attendance by a person at a meeting shall also
constitute a waiver of notice of that meeting, except when the
person objects at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver
of any right to object to the consideration of matters not
included in the notice of the meeting if that objection is
expressly made at the beginning of the meeting.
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT
WITHOUT A MEETING. Any action which may be taken at any meeting
of shareholders may be taken without a meeting and without prior
notice if a consent in writing setting forth the action so taken
is signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to
authorize or take that action at a meeting at which all shares
entitled to vote on that action were present and voted. All such
consents shall be filed with the Secretary of the Trust and shall
be maintained in the Trust's records. Any shareholder giving a
written consent or the shareholder's proxy holders or a
transferee of the shares or a personal representative of the
shareholder or their respective proxy holders may revoke the
consent by a writing received by the Secretary of the Trust
before written consents of the number of shares required to
authorize the proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote
have not been solicited in writing and if the unanimous written
consent of all such shareholders shall not have been received,
the Secretary shall give prompt notice of the action approved by
the shareholders without a meeting. This notice shall be given in
the manner specified in Section 4 of this Article II. In the case
of approval of (i) contracts or transactions in which a Trustee
has a direct or indirect financial interest, (ii) indemnification
of agents of the Trust, and (iii) a reorganization of the Trust,
the notice shall be given at least ten (10) days before the
consummation of any action authorized by that approval.
Section 9. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING
AND GIVING CONSENTS. For purposes of determining the shareholders
entitled to notice of any meeting or to vote or entitled to give
consent to action without a meeting, the Board of Trustees may
fix in advance a record date which shall not be more than ninety
(90) days nor less than seven (7) days before the date of any
such meeting as provided in the Agreement and Declaration of
Trust of the Trust.
If the Board of Trustees does not so fix a record date:
(a) The record date for determining shareholders
entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on
the business day next preceding the day on which
notice is given or if notice is waived, at the
close of business on the business day next
preceding the day on which the meeting is held.
(b) The record date for determining shareholders
entitled to give consent to action in writing
without a meeting, (i) when no prior action by the
Board of Trustees has been taken, shall be the day
on which the first written consent is given, or
(ii) when prior action of the Board of Trustees
has been taken, shall be at the close of business
on the day on which the Board of Trustees adopt
the resolution relating to that action or the
seventy-fifth day before the date of such other
action, whichever is later.
Section 10. PROXIES. Every person entitled to vote for
Trustees or on any other matter shall have the right to do so
either in person or by one or more agents authorized by a written
proxy signed by the person and filed with the Secretary of the
Trust. A proxy shall be deemed signed if the shareholder's name
is placed on the proxy (whether by manual signature, typewriting,
telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. A validly executed proxy which
does not state that it is irrevocable shall continue in full
force and effect unless(i) revoked by the person executing it
before the vote pursuant to that proxy by a writing delivered to
the Trust stating that the proxy is revoked or by a subsequent
proxy executed by or attendance at the meeting and voting in
person by the person executing that proxy; or (ii) written notice
of the death or incapacity of the maker of that proxy is received
by the Trust before the vote pursuant to that proxy is counted;
provided however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy
unless otherwise provided in the proxy.
Section 11. INSPECTORS OF ELECTION. Before any meeting
of shareholders, the Board of Trustees may appoint any persons
other than nominees for office to act as inspectors of election
at the meeting or its adjournment. If no inspectors of election
are so appointed, the chairman of the meeting may and on the
request of any shareholder or a shareholder's proxy shall,
appoint inspectors of election at the meeting. The number of
inspectors shall be either one (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 or
their proxies present at the meeting shall determine whether one
(1) or three (3) inspectors are to be appointed. If any person
appointed as inspector fails to appear or fails or refuses to
act, the Chairman of the meeting may and on the request of any
shareholder or a shareholder's proxy, shall appoint a person to
fill the vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the
voting power of each, the shares represented at
the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in
any way arising in connection with the right to
vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct
the election or vote with fairness to all
shareholders.
ARTICLE III
TRUSTEES
Section 1. POWERS. Subject to the applicable provisions
of the Agreement and Declaration of Trust of the Trust and these
By-Laws relating to action required to be approved by the
shareholders or by the outstanding shares, the business and
affairs of the Trust shall be managed and all powers shall be
exercised by or under the direction of the Board of Trustees.
Section 2. NUMBER OF TRUSTEES. The exact number of
Trustees within the limits specified in the Agreement and
Declaration of Trust of the Trust shall be fixed from time to
time by a written instrument signed or a resolution approved at a
duly constituted meeting by a majority of the Board of Trustees.
Section 3. VACANCIES. Vacancies in the Board of
Trustees may be filled by a majority of the remaining Trustees,
though less than a quorum, or by a sole remaining Trustee, unless
the Board of Trustees calls a meeting of shareholders for the
purposes of electing Trustees. In the event that at any time less
than a majority of the Trustees holding office at that time were
so elected by the holders of the outstanding voting securities of
the Trust, the Board of Trustees shall forthwith cause to be held
as promptly as possible, and in any event within sixty (60) days,
a meeting of such holders for the purpose of electing Trustees to
fill any existing vacancies in the Board of Trustees, unless such
period is extended by order of the United States Securities and
Exchange Commission.
Notwithstanding the above, whenever and for so long as
the Trust is a participant in or otherwise has in effect a Plan
under which the Trust may be deemed to bear expenses of
distributing its shares as that practice is described in Rule 12b-
1 under the Investment Company Act of 1940, then the selection
and nomination of the Trustees who are not interested persons of
the Trust (as that term is defined in the Investment Company Act
of 1940) shall be, and is, committed to the discretion of such
disinterested Trustees.
Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE.
All meetings of the Board of Trustees may be held at any place
that has been designated from time to time by resolution of the
Board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the Trust. Any
meeting, regular or special, may be held by conference telephone
or similar communication equipment, so long as all Trustees
participating in the meeting can hear one another and all such
Trustees shall be deemed to be present in person at the meeting.
Section 5. REGULAR MEETINGS. Regular meetings of the
Board of Trustees shall be held without call at such time as
shall from time to time be fixed by the Board of Trustees. Such
regular meetings may be held without notice.
Section 6. SPECIAL MEETINGS. Special meetings of the
Board of Trustees for any purpose or purposes may be called at
any time by the Chairman of the Board or the President or any
Vice President or the Secretary or any two (2) Trustees.
Notice of the time and place of special meetings shall
be delivered personally or by telephone to each Trustee or sent
by first-class mail or telegram, charges prepaid, addressed to
each Trustee at that Trustee's address as it is shown on the
records of the Trust. In case the notice is mailed, it shall be
deposited in the United States mail at least seven (7) calendar
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 or by express mail or similar service, it shall
be given at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the Trustee or to a
person at the office of the Trustee who the person giving the
notice has reason to believe will promptly communicate it to the
Trustee. The notice need not specify the purpose of the meeting
or the place if the meeting is to be held at the principal
executive office of the Trust.
Section 7. QUORUM. A majority of the authorized number
of Trustees shall constitute a quorum for the transaction of
business, except to adjourn as provided in Section 10 of this
Article III. Every act or decision done or made by a majority of
the Trustees present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Trustees,
subject to the provisions of the Agreement and Declaration of
Trust of the Trust. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the
withdrawal of Trustees if any action taken is approved by a least
a majority of the required quorum for that meeting.
Section 8. WAIVER OF NOTICE. Notice of any meeting need
not be given to any Trustee who either before or after the
meeting signs a written waiver of notice, a consent to holding
the meeting, or an approval of the minutes. The waiver of notice
or consent need not specify the purpose of the meeting. All such
waivers, consents, and approvals shall be filed with the records
of the Trust or made a part of the minutes of the meeting. Notice
of a meeting shall also be deemed given to any Trustee who
attends the meeting without protesting before or at its
commencement the lack of notice to that Trustee.
Section 9. ADJOURNMENT. A majority of the Trustees
present, whether or not constituting a quorum, may adjourn any
meeting to another time and place.
Section 10. NOTICE OF ADJOURNMENT. Notice of the time
and place of holding an adjourned meeting need not be given
unless the meeting is adjourned for more than forty-eight (48)
hours, in which case notice of the time and place shall be given
before the time of the adjourned meeting in the manner specified
in Section 7 of this Article III to the Trustees who were present
at the time of the adjournment.
Section 11. ACTION WITHOUT A MEETING. Any action
required or permitted to be taken by the Board of Trustees may be
taken without a meeting if a majority of the members of the Board
of Trustees shall individually or collectively consent in writing
to that action. Such action by written consent shall have the
same force and effect as a majority vote of the Board of
Trustees. Such written consent or consents shall be filed with
the minutes of the proceedings of the Board of Trustees.
Section 12. FEES AND COMPENSATION OF TRUSTEES. Trustees
and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be
fixed or determined by resolution of the Board of Trustees. This
Section 12 shall not be construed to preclude any Trustee from
serving the Trust in any other capacity as an officer, agent,
employee, or otherwise and receiving compensation for those
services.
Section 13. DELEGATION OF POWER TO OTHER TRUSTEES. Any
Trustee may, by power of attorney, delegate his power for a
period not exceeding six (6) months at any one time to any other
Trustee or Trustees; provided that in no case shall fewer than
two (2) Trustees personally exercise the powers granted to the
Trustees under this Agreement and Declaration of Trust of the
Trust except as otherwise expressly provided herein or by
resolution of the Board of Trustees. Except where applicable law
may require a Trustee to be present in person, a Trustee
represented by another Trustee pursuant to such power of attorney
shall be deemed to be present for purposes of establishing a
quorum and satisfying the required majority vote.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF TRUSTEES. The Board of
Trustees may by resolution adopted by a majority of the
authorized number of Trustees designate one or more committees,
each consisting of two (2) or more Trustees, to serve at the
pleasure of the Board. The Board may designate one or more
Trustees as alternate members of any committee who may replace
any absent member at any meeting of the committee. Any committee
to the extent provided in the resolution of the Board, shall have
the authority of the Board, except with respect to:
(a) the approval of any action which under applicable law
also requires shareholders' approval or approval of the
outstanding shares, or requires approval by a majority
of the entire Board or certain members of said Board;
(b) the filling of vacancies on the Board of Trustees or in
any committee;
(c) the fixing of compensation of the Trustees for serving
on the Board of Trustees or on any committee;
(d) the amendment or repeal of the Agreement and
Declaration of Trust of the Trust or of the By-Laws or
the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board
of Trustees which by its express terms is not so
amendable or repealable;
(f) a distribution to the shareholders of the Trust, except
at a rate or in a periodic amount or within a
designated range determined by the Board of Trustees;
or
(g) the appointment of any other committees of the Board of
Trustees or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings
and action of committees shall be governed by and held and taken
in accordance with the provisions of Article III of these By-
Laws, with such changes in the context thereof as are necessary
to substitute the committee and its members for the Board of
Trustees and its members, except that the time of regular
meetings of committees may be determined either by resolution of
the Board of Trustees or by resolution of the committee. Special
meetings of committees may also be called by resolution of the
Board of Trustees. Alternate members shall be given notice of
meetings of committees and shall have the right to attend all
meetings of committees. The Board of Trustees may adopt rules for
the government of any committee not inconsistent with the
provisions of these By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the Trust shall be
a President, a Secretary, and a Treasurer. The Trust may also
have, at the discretion of the Board of Trustees, a Chairman of
the Board, one or more Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of
Section 3 of this Article V. Any number of offices may be held by
the same person.
Section 2. ELECTION OF OFFICERS. The officers of the
Trust, except such officers as may appointed in accordance with
the provisions of Section 3 or Section 5 of this Article V, shall
be chosen by the Board of Trustees, and each shall serve at the
pleasure of the Board of Trustees, subject to the rights, if any,
of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Trustees
may appoint and may empower the President to appoint such other
officers as the business of the Trust may require, each of whom
shall hold office for such period, have such authority and
perform such duties as are provided in these By-Laws or as the
Board of Trustees may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject
to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without
cause, by the Board of Trustees at any regular or special meeting
of the Board of Trustees or by the principal executive officer or
by such other officer upon whom such power of removal may be
conferred by the Board of Trustees.
Any officer may resign at any time by giving written
notice to the Trust. Any resignation shall take effect at the
date of the receipt of that notice or at any later time specified
in that notice; and unless otherwise specified in that notice,
the acceptance of the resignation shall not be necessary to make
it effective. Any resignation is without prejudice to the rights,
if any, of the Trust under any contract to which the officer is a
party.
Section 5. VACANCIES IN OFFICES. A vacancy in any
office because of death, resignation, removal, disqualification
or other cause shall be filled in the manner prescribed in these
By-Laws for regular appointment to that office. The President may
make temporary appointments to a vacant office pending action by
the Board of Trustees.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the
Board, if such an Officer is elected, shall if present preside at
meetings of the Board of Trustees, shall be the Chief Executive
Officer of the Trust and shall, subject to the control of the
Board of Trustees, have general supervision, direction and
control of the business and the Officers of the Trust and
exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Trustees or
prescribed by the By-Laws.
Section 7. PRESIDENT. Subject to such supervisory
powers, if any, as may be given by the Board of Trustees to the
Chairman of the Board, if there be such an officer, the President
shall be the chief operating officer of the Trust and shall,
subject to the control of the Board of Trustees and the Chairman,
have general supervision, direction and control of the business
and the officers of the Trust. He shall preside at all meetings
of the shareholders and in the absence of the Chairman of the
Board or if there be none, at all meetings of the Board of
Trustees. He shall have the general powers and duties of
management usually vested in the office of President of a
corporation and shall have such other powers and duties as may be
prescribed by the Board of Trustees or these By-Laws.
Section 8. VICE PRESIDENTS. In the absence or
disability of the President, the Vice Presidents, if any, in
order of their rank as fixed by the Board of Trustees or if not
ranked, the Executive Vice President (who shall be considered
first ranked) and such other Vice Presidents as shall be
designated by the Board of Trustees, shall perform all the duties
of the President and when so acting shall have all powers of and
be subject to all the restrictions upon the President. The Vice
Presidents shall have such other powers and perform such other
duties as from time to time may be prescribed for them
respectively by the Board of Trustees or the President or the
Chairman of the Board or by these By-Laws.
Section 9. SECRETARY. The Secretary shall keep or cause
to be kept at the principal executive office of the Trust or such
other place as the Board of Trustees may direct a book of minutes
of all meetings and actions of Trustees, committees of Trustees
and shareholders with the time and place of holding, whether
regular or special, and if special, how authorized, the notice
given, the names of those present at Trustees' meetings or
committee meetings, the number of shares present or represented
at shareholders' meetings, and the proceedings.
The Secretary shall keep or cause to be kept at the
principal executive office of the Trust or at the office of the
Trust's transfer agent or registrar, a share register or a
duplicate share register showing the names of all shareholders
and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same and
the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give or cause to be given notice of
all meetings of the shareholders and of the Board of Trustees
required to be given by these By-Laws or by applicable law and
shall have such other powers and perform such other duties as may
be prescribed by the Board of Trustees or by these By-Laws.
Section 10. TREASURER. The Treasurer shall be the chief
financial officer and chief accounting officer of the Trust and
shall keep and maintain or cause to be kept and maintained
adequate and correct books and records of accounts of the
properties and business transactions of the Trust, including
accounts of its assets, liabilities, receipts, disbursements,
gains, losses, capital, retained earnings and shares. The books
of account shall at all reasonable times be open to inspection by
any Trustee.
The Treasurer shall deposit all monies and other
valuables in the name and to the credit of the Trust with such
depositaries as may be designated by the Board of Trustees. He
shall disburse the funds of the Trust as may be ordered by the
Board of Trustees, shall render to the President and Trustees,
whenever they request it, an account of all of his transactions
as chief financial officer and of the financial condition of the
Trust and shall have other powers and perform such other duties
as may be prescribed by the Board of Trustees or these By-Laws.
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the
purpose of this Article, "agent" means any person who is or was a
Trustee, officer, employee or other agent of this Trust or is or
was serving at the request of this Trust as a Trustee, director,
officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other
enterprise or was a Trustee, director, officer, employee or agent
of a foreign or domestic corporation which was a predecessor of
another enterprise at the request of such predecessor entity;
"proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or
investigative; and "expenses" includes without limitation
attorney's fees and any expenses of establishing a right to
indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. This Trust
shall indemnify any person who was or is a party or is threatened
to be made a party to any proceeding (other than an action by or
in the right of this Trust) by reason of the fact that such
person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding, if it is
determined that person acted in good faith and reasonably
believed: (a) in the case of conduct in his official capacity as
a Trustee of the Trust, that his conduct was in the Trust's best
interests and (b), in all other cases, that his conduct was at
least not opposed to the Trust's best interests and (c) in the
case of a criminal proceeding, that he had no reasonable cause to
believe the conduct of that person was unlawful. The termination
of any proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be
in the best interests of this Trust or that the person had
reasonable cause to believe that the person's conduct was
unlawful.
Section 3. ACTIONS BY THE TRUST. This Trust shall
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action by or
in the right of this Trust to procure a judgment in its favor by
reason of the fact that that person is or was an agent of this
Trust, against expenses actually and reasonably incurred by that
person in connection with the defense or settlement of that
action if that person acted in good faith, in a manner that
person believed to be in the best interests of this Trust and
with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar
circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION.
Notwithstanding any provision to the contrary contained herein,
there shall be no right to indemnification for any liability
arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in
the conduct of the agent's office with this Trust.
No indemnification shall be made under Sections 2 or 3
of this Article:
(a) In respect of any claim, issue, or matter as to which
that person shall have been adjudged to be liable on
the basis that personal benefit was improperly received
by him, whether or not the benefit resulted from an
action taken in the person's official capacity; or
(b) In respect of any claim, issue or matter as to which
that person shall have been adjudged to be liable in
the performance of that person's duty to this Trust,
unless and only to the extent that the court in which
that action was brought shall determine upon
application that in view of all the circumstances of
the case, that person was not liable by reason of the
disabling conduct set forth in the preceding paragraph
and is fairly and reasonably entitled to indemnity for
the expenses which the court shall determine; or
(c) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court
approval, or of expenses incurred in defending a
threatened or pending action which is settled or
otherwise disposed of without court approval, unless
the required approval set forth in Section 6 of this
Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent
that an agent of this Trust has been successful on the merits in
defense of any proceeding referred to in Sections 2 or 3 of this
Article or in defense of any claim, issue or matter therein,
before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually
and reasonably incurred by the agent in connection therewith,
provided that the Board of Trustees, including a majority who are
disinterested, non-party Trustees, also determines that based
upon a review of the facts, the agent was not liable by reason of
the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in
Section 5 of this Article, any indemnification under this Article
shall be made by this Trust only if authorized in the specific
case on a determination that indemnification of the agent is
proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of
this Article and is not prohibited from indemnification because
of the disabling conduct set forth in Section 4 of this Article,
by:
(a) A majority vote of a quorum consisting of Trustees who
are not parties to the proceeding and are not
interested persons of the Trust (as defined in the
Investment Company Act of 1940); or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in
defending any proceeding may be advanced by this Trust before the
final disposition of the proceeding upon (a) receipt of a written
affirmation by the agent of his good faith belief that he has met
the standard of conduct necessary for indemnification under this
Article and a written undertaking by or on behalf of the agent,
to repay the amount of the advance if it is ultimately determined
that he has not met those requirements, together with at least
one of the following as a condition to the advance: (i) security
for the undertaking; or (ii) the existence of insurance
protecting the Trust against losses arising by reason of any
lawful advances; or (iii) a majority of a quorum consisting of
Trustees who are not parties to the proceeding and are not
interested persons of the Trust, or an independent legal counsel
in a written opinion, shall determine, based on a review of
readily available facts that there is reason to believe that the
agent ultimately will be found entitled to indemnification, and
(b) a determination that the facts then known to those making the
determination would not preclude indemnification under this
Article. Determinations and authorizations of payments under this
Section must be made in the manner specified in Section 6 of this
Article for determining that the indemnification is permissible.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained
in this Article shall affect any right to indemnification to
which persons other than Trustees and officers of this Trust or
any subsidiary hereof may be entitled by contract or otherwise.
Section 9. LIMITATIONS. No indemnification or advance
shall be made under this Article, except as provided in Sections
5 or 6 in any circumstances where it appears:
(a) That it would be inconsistent with a provision of
the Agreement and Declaration of Trust of the
Trust, a resolution of the shareholders, or an
agreement in effect at the time of accrual of the
alleged cause of action asserted in the proceeding
in which the expenses were incurred or other
amounts were paid which prohibits or otherwise
limits indemnification; or
(b) That it would be inconsistent with any condition
expressly imposed by a court in approving a
settlement.
Section 10. INSURANCE. Upon and in the event of a
determination by the Board of Trustees of this Trust to purchase
such insurance, this Trust shall purchase and maintain insurance
on behalf of any agent of this Trust against any liability
asserted against or incurred by the agent in such capacity or
arising out of the agent's status as such, but only to the extent
that this Trust would have the power to indemnify the agent
against that liability under the provisions of this Article and
the Agreement and Declaration of Trust of the Trust.
Section ll. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any Trustee,
investment manager or other fiduciary of an employee benefit plan
in that person's capacity as such, even though that person may
also be an agent of this Trust as defined in Section 1 of this
Article. Nothing contained in this Article shall limit any right
to indemnification to which such a Trustee, investment manager,
or other fiduciary may be entitled by contract or otherwise which
shall be enforceable to the extent permitted by applicable law
other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE
REGISTER. This Trust shall keep at its principal executive office
or at the office of its transfer agent or registrar, if either be
appointed and as determined by resolution of the Board of
Trustees, a record of its shareholders, giving the names and
addresses of all shareholders and the number and series of shares
held by each shareholder.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The
Trust shall keep at its principal executive office the original
or a copy of these By-Laws as amended to date, which shall be
open to inspection by the shareholders at all reasonable times
during office hours.
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS.
The accounting books and records and minutes of proceedings of
the shareholders and the Board of Trustees and any committee or
committees of the Board of Trustees shall be kept at such place
or places designated by the Board of Trustees or in the absence
of such designation, at the principal executive office of the
Trust. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form
or in any other form capable of being converted into written
form. The minutes and accounting books and records shall be open
to inspection upon the written demand of any shareholder or
holder of a voting trust certificate at any reasonable time
during usual business hours for a purpose reasonably related to
the holder's interests as a shareholder or as the holder of a
voting trust certificate. The inspection may be made in person or
by an agent or attorney and shall include the right to copy and
make extracts.
Section 4. INSPECTION BY TRUSTEES. Every Trustee shall
have the absolute right at any reasonable time to inspect all
books, records, and documents of every kind and the physical
properties of the Trust. This inspection by a Trustee may be made
in person or by an agent or attorney and the right of inspection
includes the right to copy and make extracts of documents.
Section 5. FINANCIAL STATEMENTS. A copy of any
financial statements and any income statement of the Trust for
each quarterly period of each fiscal year and accompanying
balance sheet of the Trust as of the end of each such period that
has been prepared by the Trust shall be kept on file in the
principal executive office of the Trust for at least twelve (12)
months and each such statement shall be exhibited at all
reasonable times to any shareholder demanding an examination of
any such statement or a copy shall be mailed to any such
shareholder.
The quarterly income statements and balance sheets
referred to in this section shall be accompanied by the report,
if any, of any independent accountants engaged by the Trust or
the certificate of an authorized officer of the Trust that the
financial statements were prepared without audit from the books
and records of the Trust.
ARTICLE VIII
GENERAL MATTERS
SECTION 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS.
All checks, drafts, or other orders for payment of money, notes
or other evidences of indebtedness issued in the name of or
payable to the Trust shall be signed or endorsed in such manner
and by such person or persons as shall be designated from time to
time in accordance with the resolution of the Board of Trustees.
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The
Board of Trustees, except as otherwise provided in these By-Laws,
may authorize any officer or officers, agent or agents, to enter
into any contract or execute any instrument in the name of and on
behalf of the Trust and this authority may be general or confined
to specific instances; and unless so authorized or ratified by
the Board of Trustees or within the agency power of an officer,
no officer, agent, or employee shall have any power or authority
to bind the Trust by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
Section 3. CERTIFICATES FOR SHARES. A certificate or
certificates for shares of beneficial interest in any series of
the Trust may be issued to a shareholder upon his request when
such shares are fully paid. All certificates shall be signed in
the name of the Trust by the Chairman of the Board or the
President or Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or any Assistant Secretary, certifying
the number of shares and the series of shares owned by the
shareholders. Any or all of the signatures on the certificate may
be facsimile. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed on a
certificate shall have ceased to be that officer, transfer agent,
or registrar before that certificate is issued, it may be issued
by the Trust with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.
Notwithstanding the foregoing, the Trust may adopt and use a
system of issuance, recordation and transfer of its shares by
electronic or other means.
Section 4. LOST CERTIFICATES. Except as provided in
this Section 4, no new certificates for shares shall be issued to
replace an old certificate unless the latter is surrendered to
the Trust and cancelled at the same time. The Board of Trustees
may in case any share certificate or certificate for any other
security is lost, stolen, or destroyed, authorize the issuance of
a replacement certificate on such terms and conditions as the
Board of Trustees may require, including a provision for
indemnification of the Trust secured by a bond or other adequate
security sufficient to protect the Trust against any claim that
may be made against it, including any expense or liability on
account of the alleged loss, theft, or destruction of the
certificate or the issuance of the replacement certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES
HELD BY TRUST. The Chairman of the Board, the President or any
Vice President or any other person authorized by resolution of
the Board of Trustees or by any of the foregoing designated
officers, is authorized to vote or represent on behalf of the
Trust any and all shares of any corporation, partnership, trusts,
or other entities, foreign or domestic, standing in the name of
the Trust. The authority granted may be exercised in person or by
a proxy duly executed by such designated person.
Section 6. FISCAL YEAR. The fiscal year of the Trust
shall be fixed and refixed or changed from time to time by
resolution of the Trustees. The fiscal year of the Trust shall be
the taxable year of each Series of the Trust.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. These By-Laws may
be amended or repealed by the affirmative vote or written consent
of a majority of the outstanding shares entitled to vote, except
as otherwise provided by applicable law or by the Agreement and
Declaration of Trust of the Trust or these By-Laws.
Section 2. AMENDMENT BY TRUSTEES. Subject to the right
of shareholders as provided in Section 1 of this Article to
adopt, amend or repeal By-Laws, and except as otherwise provided
by applicable law or by the Agreement and Declaration of Trust of
the Trust, these By-Laws may be adopted, amended, or repealed by
the Board of Trustees.
SECTION 3. INCORPORATION BY REFERENCE INTO AGREEMENT
AND DECLARATION OF TRUST OF THE TRUST. These By-Laws and any
amendments thereto shall be incorporated by reference to the
Agreement and Declaration of Trust of the Trust.
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, Secretary of Franklin Strategic
Series, a business trust organized under the laws of the State of
Delaware, do hereby certify that the following resolution was
adopted by a majority of the trustees present at a meeting held
at the offices of the trust at 777 Mariners Island Boulevard, San
Mateo, California, on April 19, 1994:
WHEREAS, the Board of Trustees has determined that it is
advisable and in the best interests of the shareholders of
the Trust to revise the Trust's By-Laws to specifically
provide for the use of proxies which are communicated by an
electronic, telephonic, computerized or telecommunications
method;
NOW THEREFORE, BE IT RESOLVED, that Section 10 of Article II
is hereby resolved to read as follows:
"Section 10. PROXIES. Every person entitled to vote for
Trustees or on any other matter shall have the right to
do so either in person or by one or more agents. Except
as otherwise provided in the Agreement and Declaration
of Trust or these By-Laws, matters relating to the
giving, voting or validity of proxies will be governed
by the Delaware General Corporation Law relating to
proxies, and Delaware judicial interpretations
thereunder, as if the Trust were a Delaware corporation
and Shareholders of the Trust were shareholders of a
Delaware corporation."
IN WITNESS WHEREOF, I have subscribed my name this 27th day of
October, 1994.
/s/Deborah R. Gatzek
Deborah R. Gatzek
Secretary
FRANKLIN STRATEGIC SERIES
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN STRATEGIC
SERIES, a Delaware business trust, hereinafter called the
"Trust", and FRANKLIN ADVISERS, INC., a California corporation,
hereinafter called the "Manager."
WHEREAS, the Trust has been organized and intends to operate
as an investment company registered under the Investment Company
Act of 1940 (the "Act") for the purpose of investing and
reinvesting its assets in securities, as set forth in its
Agreement and Declaration of Trust, its By-Laws and its
Registration Statements under the Act and the Securities Act of
1933, all as heretofore and hereafter amended and supplemented;
and the Trust desires to avail itself of the services,
information, advice, assistance and facilities of an investment
manager and to have an investment manager perform various
management, statistical, research, investment advisory and other
services for Franklin Emerging Growth Fund and Franklin Global
Health Care Fund (the "Funds") and any separate series of the
Trust hereinafter organized; and
WHEREAS, the Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, is engaged in the
business of rendering management, investment advisory,
counselling and supervisory services to investment companies and
other investment counselling clients, and desires to provide
these services to the Funds.
NOW THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is mutually agreed as follows:
l. Employment of the Manager. The Trust hereby employs the
Manager to manage the investment and reinvestment of the Funds'
assets and to administer the Funds' affairs, subject to the
direction of the Board of Trustees and the officers of the Fund,
for the period and on the terms hereinafter set forth. The
Manager hereby accepts such employment and agrees during such
period to render the services and to assume the obligations
herein set forth for the compensation herein provided. The
Manager shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority to
act for or represent the Funds in any way or otherwise be deemed
an agent of the Funds.
2. Obligations of and Services to be Provided by the
Manager. The Manager undertakes to provide the services
hereinafter set forth and to assume the following obligations:
A. Administrative Services. The Manager shall
furnish to the Funds adequate (i) office space, which may be
space within the offices of the Manager or in such other place as
may be agreed upon from time to time, and (ii) office
furnishings, facilities and equipment as may be reasonably
required for managing the affairs and conducting the business of
the Funds, including conducting correspondence and other
communications with the shareholders of the Funds, maintaining
all internal bookkeeping, accounting and auditing services and
records in connection with the Funds' investment and business
activities. The Manager shall employ or provide and compensate
the executive, secretarial and clerical personnel necessary to
provide such services. The Manager shall also compensate all
officers and employees of the Trust who are officers or employees
of the Manager or its affiliates.
B. Investment Management Services.
(a) The Manager shall manage the Funds' assets
subject to and in accordance with the investment objectives and
policies of the Funds and any directions which the Trust's Board
of Trustees may issue from time to time. In pursuance of the
foregoing, the Manager shall make all determinations with respect
to the investment of the Funds' assets and the purchase and sale
of its investment securities, and shall take such steps as may be
necessary to implement the same. Such determinations and
services shall include determining the manner in which any voting
rights, rights to consent to corporate action and any other
rights pertaining to the Funds' investment securities shall be
exercised. The Manager shall render regular reports to the
Trust, at regular meetings of its Board of Trustees and at such
other times as may be reasonably requested by the Trust's Board
of Trustees, of (i) the decisions which it has made with respect
to the investment of the Funds' assets and the purchase and sale
of its investment securities, (ii) the reasons for such decisions
and (iii) the extent to which those decisions have been
implemented.
(b) The Manager, subject to and in accordance
with any directions which the Trust's Board of Trustees may issue
from time to time, shall place orders for the execution of the
Funds' securities transactions. When placing such orders, the
Manager shall seek to obtain the best net price and execution for
the Funds, 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
Funds and the Manager in accordance with the standards set forth
below. Moreover, to the extent that it continues to be lawful to
do so and so long as the Board of Trustees determines that the
Funds 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
Trust and the Manager agree that the Manager shall select brokers
for the execution of the Funds' transactions from among:
(i) Those brokers and dealers who provide
quotations and other services to the Funds, specifically
including the quotations necessary to determine the Funds' net
assets, in such amount of total brokerage as may reasonably be
required in light of such services; and
(ii) Those brokers and dealers who supply
research, statistical and other data to the Manager or its
affiliates which the Manager or its affiliates may lawfully and
appropriately use in their investment advisory capacities, which
relate directly to securities, actual or potential, of the Funds,
or which place the Manager in a better position to make decisions
in connection with the management of the Funds' assets and
securities, whether or not such data may also be useful to the
Manager and its affiliates in managing other portfolios or
advising other clients, in such amount of total brokerage as may
reasonably be required. Provided that the Funds' officers are
satisfied that the best execution is obtained, the sale of shares
of the Funds may also be considered as a factor in the selection
of broker-dealers to execute the Funds' portfolio transactions.
(c) When the Manager has determined that the
Funds 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 Distributors 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. 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 Trust
shall enter into an agreement with the Manager and/or
Distributors to reimburse them for all such expenses connected
with attempting to collect such fees, including legal fees and
expenses and that portion of the compensation due to their
employees which is attributable to the time involved in
attempting to collect such fees.
(d) The Manager shall render regular reports to
the Trust, not more frequently than quarterly, of how much total
brokerage business has been placed by the Manager with brokers
falling into each of the categories referred to above and the
manner in which the allocation has been accomplished.
(e) The Manager agrees that no investment
decision will be made or influenced by a desire to provide
brokerage for allocation in accordance with the foregoing, and
that the right to make such allocation of brokerage shall not
interfere with the Manager's paramount duty to obtain the best
net price and execution for the Funds.
C. Provision of Information Necessary for Preparation
of Securities Registration Statements, Amendments and Other
Materials. The Manager, its officers and employees will make
available and provide accounting and statistical information
required by the Funds in the preparation of registration
statements, reports and other documents required by Federal and
state securities laws and with such information as the Funda 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 Funds' shares.
D. Other Obligations and Services. The Manager shall
make its officers and employees available to the Board of
Trustees and officers of the Trust for consultation and
discussions regarding the administration and management of the
Funds and its investment activities.
3. Expenses of the Funds. It is understood that the Funds
will pay all of its own expenses other than those expressly
assumed by the Manager herein, which expenses payable by the
Funds shall include:
A. Fees and expenses paid to the Manager as provided
herein;
B. Expenses of all audits by independent public
accountants;
C. Expenses of transfer agent, registrar, custodian,
dividend disbursing agent and shareholder record-keeping
services, including the expenses of issue, repurchase or
redemption of their shares;
D. Expenses of obtaining quotations for calculating
the value of the Funds' Net assets;
E. Salaries and other compensations of executive
officers of the Trust who are not officers, directors,
stockholders or employees of the Manager or its affiliates;
F. Taxes levied against the Funds;
G. Brokerage fees and commissions in connection with
the purchase and sale of securities for the Funds;
H. Costs, including the interest expense, of
borrowing money;
I. Costs incident to meetings of the Board of
Trustees and shareholders of the Funds, reports to the Funds'
shareholders, the filing of reports with regulatory bodies and
the maintenance of the Funds' legal existence;
J. Legal fees, including the legal fees related to
the registration and continued qualification of the Funds' shares
for sale;
K. Costs of printing stock certificates representing
shares of the Funds.
L. Trustees' fees and expenses to trustees who are
not directors, officers, employees or stockholders of the Manager
or any of its affiliates;
M. Costs and expense of registering and maintaining
the registration of the Funds and their shares under Federal and
any applicable state laws; including the printing and mailing of
prospectuses to its shareholders;
N. Trade association dues; and
O. The Funds' pro rata portion of fidelity bond,
errors and omissions, and trustees and officer liability
insurance premiums.
4. Compensation of the Manager. The Funds shall pay a
monthly fee in cash to the Manager computed and accrued daily and
paid monthly at an annual rate based upon a percentage of the
value of each Fund's net assets, calculated as set forth below,
as compensation for the services rendered and obligations assumed
by the Manager during the preceding month, on the first business
day of the month in each year. 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 Funds relating to the previous month.
A. For purposes of calculating such fee, the value of
the net assets of the Funds shall be the average daily net assets
during the month for which the payment is being made, determined
in the same manner as the Funds use to compute the value of their
net assets in connection with the determination of the daily net
asset value of their shares, all as set forth more fully in each
Fund's current prospectus. The annual rate of the management fee
payable shall be as follows:
.625 of 1% of the value of average daily net assets up
to and including $100 million; and
.50 of 1% of the value of average daily net assets over
$100 million, up to and including $250 million; and
.45 of 1% of the value of average daily net assets over
$250 million up to and including $10 billion; and
.44 of 1% of the value of average daily net assets over
$10 billion up to and including $12.5 billion; and
.42 of 1% of the value of average daily net assets over
$12.5 billion up to and including $15 billion; and
.40 of 1% of the value of average daily net assets over
$15 billion.
B. The management fee payable by the Funds shall be
reduced or eliminated to the extent that Distributors has
actually received cash payments of tender offer solicitation fees
less certain costs and expenses incurred in connection therewith
as set forth in paragraph 2.B.(c) of this Agreement. The Manager
may, from time to time, voluntarily reduce or waive any
management fee due to it hereunder.
C. 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 Funds hereunder are not to be deemed exclusive, and the
Manager and any of its affiliates shall be free to render similar
services to others. Subject to and in accordance with the
Agreement and Declaration of Trust and By-Laws of the Trust and
Section 10(a)
of the Act, it is understood that trustees, officers, agents and
shareholders of the Funds are or may be interested in the Manager
or its affiliates as directors, officers, agents or stockholders;
that directors, officers, agents or stockholders of the Manager
or its affiliates are or may be interested in the Trust as
trustees, officers, agents, shareholders or otherwise; that the
Manager or its affiliates may be interested in the Funds as
shareholders or otherwise; and that the effect of any such
interests shall be governed by said Agreement and Declaration of
Trust, By-Laws and the Act.
6. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Manager, the Manager shall not be
subject to liability to the Funds or to any shareholder 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 Funds for any and all costs, expenses, and
counsel and trustees' fees reasonably incurred by the Fund sin
the preparation, printing and distribution of proxy statements,
amendments to its Registration Statement, holdings of meetings of
its shareholders or trustees, the conduct of factual
investigations, any legal or administrative proceedings
(including any applications for exemptions or determinations by
the Securities and Exchange Commission) which the Funds incur as
the result of action or inaction of the Manager or any of its
affiliates or any of their officers, directors, employees or
stockholders where the action or inaction necessitating such
expenditures (i) is directly or indirectly related to any
transactions or proposed transaction in the stock or control of
the Manager or its affiliates (or litigation related to any
pending or proposed or future transaction in such shares or
control) which shall have been undertaken without the prior,
express approval of the Fund's Board of Trustees; or, (ii) is
within the control of the Manager or any of its affiliates or any
of their officers, directors, employees or stockholders. The
Manager shall not be obligated pursuant to the provisions of this
Subparagraph 6(B), to reimburse the Funds for any expenditures
related to the institution of an administrative proceeding or
civil litigation by the Funds or a shareholder seeking to recover
all or a portion of the proceeds derived by any stockholder of
the Manager or any of its affiliates from the sale of his shares
of the Manager, or similar matters. So long as this Agreement is
in effect, the Manager shall pay to the Funds the amount due for
expenses subject to this Subparagraph 6(B) within 30 days after a
bill or statement has been received by the Manager therefor.
This provision shall not be deemed to be a waiver of any claim
the Funds may have or may assert against the Manager or others
for costs, expenses or damages heretofore incurred by the Funds
or for costs, expenses or damages the Funds may hereafter incur
which are not reimbursable to it hereunder.
C. No provision of this Agreement shall be construed
to protect any trustee or officer of the Fund, or director or
officer of the Manager, from liability in violation of Sections
17(h) and (i) of the Act.
7. Renewal and Termination.
A. This Agreement shall become effective on the date
written below and shall continue in effect for two (2) years. The
Agreement is renewable annually thereafter for successive periods
not to exceed one (l) year (i) by a vote of a majority of the
outstanding voting securities of the Funds or by a vote of the
Board of Trustees of the Fund, and (ii) by a vote of a majority
of the Trustees of the Funds who are not parties to the Agreement
(other than as Trustees of the Fund), cast in person at a meeting
called for the purpose of voting on the Agreement.
B. This Agreement:
(i) may at any time be terminated without the
payment of any penalty either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting
securities of the Funds seeking to terminate the Agreement, on 60
days' written notice to the Manager;
(ii) shall immediately terminate with respect to
the Funds in the event of its assignment; and
(iii) may be terminated by the Manager on 60 days'
written notice to the Fund.
C. As used in this Paragraph the terms "assignment,"
"interested person" and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth for any such
terms in the Act.
D. Any notice under this Agreement shall be given in
writing addressed and delivered, or mailed post-paid, to the
other party at any office of such party.
8. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and effective on the 24th day of February, 1992.
FRANKLIN STRATEGIC SERIES
By: /s/ Charles B. Johnson
FRANKLIN ADVISERS, INC.
By: Rupert H. Johnson, Jr.
Mc-FD1.ADM
FRANKLIN MIDCAP GROWTH FUND
Franklin Strategic Series
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT is made between FRANKLIN
MIDCAP GROWTH FUND (the "Fund"), a series of Franklin Strategic
Series, a Massachusetts business trust and FRANKLIN ADVISERS,
INC., a California Corporation, hereinafter called the
"Administrator."
WHEREAS, the Fund has been organized and operates as a
series of 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 the Trust's Agreement
and Declaration of Trust, 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;
WHEREAS, the Fund, desires to avail itself of the
services, assistance and facilities of an administrator and to
have an administrator perform various administrative and other
services for it; and,
WHEREAS, the Administrator is engaged in the business of
rendering administrative services to investment companies, 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 Administrator. The Fund hereby
employs the Administrator to administer its affairs, subject to
the direction of the Board of Trustees and the officers of the
Fund, for the period and on the terms hereinafter set forth. The
Administrator 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
Administrator 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
Administrator. The Administrator undertakes to provide the
services hereinafter set forth and to assume the following
obligations:
A. Office Space, Furnishings, Facilities,Equipment,
and Personnel.
The Administrator shall furnish to the Fund adequate
(i) office space, which may be space within the offices
of the Administrator or in such other place as may be
agreed upon from time to time, and (ii) office
furnishings, facilities and equipment as may be
reasonably required for managing the affairs and
conducting the business of the Fund, including
complying with the 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,
auditing services and records in connection with the
Fund's investment and business activities, and
computing its net asset value. The Administrator shall
employ or provide and compensate the executive,
secretarial and clerical personnel necessary to provide
such services. The Administrator shall also compensate
all officers and employees of the Fund who are officers
or employees of the Administrator.
B. Provision of Information Necessary for
Preparation of Securities Registration Statements,
Amendments and Other Materials.
The Administrator, its officers and
employees will make available and provide
accounting and statistical information required by
the Fund or its Underwriter in the preparation of
registration statements, reports and other
documents required by Federal and state securities
laws and with such information as the Fund or its
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.
C. Other Obligations and Services.
The Administrator shall make available its
officers and employees to the Board of Trustees
and officers of the Fund for consultation and
discussions regarding the administration of the
Fund and its activities.
3. Expenses of the Fund. It is understood that the
Fund will pay all of its own expenses other than those expressly
assumed by the Administrator herein, which expenses payable by
the Fund shall include:
A. Fees to the Administrator 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, if any, 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, trustees, stockholders
or employees of the Administrator;
F. Taxes levied against the Fund
or the Fund;
G. Costs, including the interest
expense, of borrowing money;
H. Costs incident to meetings of
the Board of Trustees, reports to the Fund to
its shareholders, the filing of reports with
regulatory bodies and the maintenance of the
Fund's legal existence;
I. Legal fees, including the
legal fees related to the registration and
continued qualification of the Fund's shares
for sale;
J. Costs of printing share
certificates representing shares of the Fund;
K. Trustees' fees and expenses to
trustees who are not directors, officers,
employees or stockholders of the
Administrator or any of its affiliates;
L. Trade association dues; and
M. Its pro rata portion of the
fidelity bond insurance premium and trustees
and officers errors and omissions insurance
premium.
4. Compensation of the Administrator. The Fund shall
pay a monthly administration fee in cash to the Administrator
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 Administrator during the preceding
month. The initial administration 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
average daily net assets during the month for
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 daily net asset value of its
shares, all as set forth more fully in the Fund's
current prospectus. The Fund shall pay an annual
administration fee equal to 15/100 of 1% of the
value of the Fund's net assets.
B. If this Agreement is terminated prior to
the end of any month, the monthly administration
fee for the Fund 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 Administrator. The services of the
Administrator to the Fund hereunder are not to be deemed
exclusive, and the Administrator and any of its affiliates shall
be free to render similar services to others. Subject to and in
accordance with the Agreement and Declaration of the Fund and By-
Laws of the Fund and to Section 10(a) of the Investment Company
Act of 1940, it is understood that Trustees, officers, agents and
shareholders of the Fund are or may be interested in the
Administrator or its affiliates as trustees, directors, officers,
agents or stockholders, and that directors, officers, agents or
stockholders of the Administrator or its affiliates are or may be
interested in the Fund as Trustees, officers, agents,
shareholders or otherwise, and that the Administrator or its
affiliates may be interested in the Fund as shareholders or
otherwise; and that the effect of any such interests shall be
governed by said Agreement and Declaration of Fund, the By-Laws
and the Investment Company Act of 1940.
6. Liabilities of the Administrator.
A. In the absence of willful
misfeasance, bad faith, gross negligence, or
reckless disregard of obligation or duties
hereunder on the part of the Administrator,
the Administrator shall not be subject to
liability to the Fund or the Fund or to any
shareholder of the Fund for any act or
omission in the course of, or connected with,
rendering services hereunder.
B. Notwithstanding the foregoing,
the Administrator agrees to reimburse the
Fund for any and all costs, expenses, and
counsel and trustees' fees reasonably
incurred by the Fund in the preparation,
printing and distribution of proxy
statements, amendments to its Registration
Statement, holdings of meetings of its
shareholders or Trustees, the conduct of
factual investigations, any legal or
administrative proceedings (including any
applications for exemptions or determinations
by the Securities and Exchange Commission)
which the Fund incurs as the result of action
or inaction of the Administrator 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
Administrator or its affiliates (or
litigation related to any pending or proposed
or future transaction in such shares or
control); or, (ii) is within the control of
the Administrator or any of its affiliates or
any of their officers, trustees, employees or
shareholders. The Administrator 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 shareholder
seeking to recover all or a portion of the
proceeds derived by any shareholder of the
Administrator or any of its affiliates from
the sale of his shares of the Administrator,
or similar matters. So long as this
Agreement is in effect, the Administrator
shall pay to the Fund the amount due for
expenses subject to Subsection 6(B) of this
Agreement within 30 days after a bill or
statement has been received by the
Administrator therefor. This provision shall
not be deemed to be a waiver of any claim the
Fund may have or may assert against the
Administrator or others for costs, expenses
or damages heretofore incurred by the Fund or
for costs, expenses or damages the Fund may
hereafter incur which are not reimbursable to
it hereunder.
C. No provision of this Agreement shall be construed
to protect any Trustee or officer of the Fund, or
director or officer of the Administrator, from liability
in violation of Sections 17(h) and (i) of the Investment
Company Act of 1940.
7. Duration and Termination.
A. This Agreement shall become effective on
the date written below and shall continue in
effect until terminated by the Fund or the
Administrator on 60 days written notice to the
other.
B. Any notice under this Agreement shall be
given in writing, addressed and delivered, or
mailed post-paid, to the other party at any
office of such party.
8. Severability. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement shall not be
affected thereby.
9. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
California.
10. Limitation of Liability. The Administrator
acknowledges that it has received notice of and accepts the
limitations of the Fund's liability as set forth in its Agreement
and Declaration of Fund. The Administrator agrees that the
Fund's obligations hereunder shall be limited to the assets of
the Fund, and that the Administrator shall not seek satisfaction
of any such obligation from any shareholders of the Fund nor from
any trustee, officer, employee or agent of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and effective on the 12th day of April,
1993.
FRANKLIN MIDCAP GROWTH FUND
Franklin Strategic Series
By /s/ Deborah R. Gatzek
Deborah R. Gatzek
Title: Vice President
FRANKLIN ADVISERS, INC.
By Rupert H. Johnson, Jr.
Rupert H. Johnson, Jr.
Title: President
FISCO MIDCAP GROWTH FUND
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN STRATEGIC
SERIES, a Delaware business trust ("Trust"), on behalf of the
FISCO MIDCAP GROWTH FUND (the "Fund"), and FRANKLIN INSTITUTIONAL
SERVICES CORPORATION, a California corporation (the "Manager").
WHEREAS, the Trust has been organized and intends to operate
as an investment company registered under the Investment Company
Act of 1940 (the "1940 Act") for the purpose of investing and
reinvesting its assets in securities, as set forth in its
Agreement and Declaration of Trust, its By-Laws and its
Registration Statements under the 1940 Act and the Securities Act
of 1933, all as heretofore and hereafter amended and
supplemented.
WHEREAS, the Trust desires to avail itself of the services,
information, advice, assistance and facilities of an investment
manager and to have an investment manager perform various
management, statistical, research, investment advisory and other
services; and,
WHEREAS, the Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, is engaged in the
business of rendering management, investment advisory,
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 mutually agreed as follows:
l. Employment of the Manager. The Trust hereby employs the
Manager to manage the investment and reinvestment of the Fund's
assets and to administer its affairs, subject to the direction of
the Board of Trustees and the officers of the Trust, 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 or the Trust in any way or otherwise be deemed an agent
of the Fund or the Trust.
2. Obligations of and Services to be Provided by the
Manager. The Manager undertakes to provide the services
hereinafter set forth and to assume the following obligations:
A. Administrative Services. The Manager shall
furnish to the Fund adequate (i) office space, which may be space
within the offices of the Manager or in such other place as may
be agreed upon from time to time, (ii) office furnishings,
facilities and equipment as may be reasonably required for
managing the affairs and conducting the business of the Fund,
including conducting correspondence and other communications with
the shareholders of the Fund, maintaining all internal
bookkeeping, accounting and auditing services and records in
connection with the Fund's investment and business activities.
The Manager shall employ or provide and compensate the executive,
secretarial and clerical personnel necessary to provide such
services. The Manager shall also compensate all officers and
employees of the Trust who are officers or employees of the
Manager or its affiliates.
B. Investment Management Services.
(a) The Manager shall manage the Fund's assets
subject to and in accordance with the investment objectives and
policies of the Fund and any directions which the Trust's Board
of Trustees may issue from time to time. In pursuance of the
foregoing, the Manager shall make all determinations with respect
to the investment of the Fund's assets and the purchase and sale
of its investment securities, and shall take such steps as may be
necessary to implement the same. Such determinations and
services shall include determining the manner in which any voting
rights, rights to consent to corporate action and any other
rights pertaining to the Fund's investment securities shall be
exercised. The Manager shall render or cause to be rendered
regular reports to the Trust, at regular meetings of its Board of
Trustees and at such other times as may be reasonably requested
by the Trust's Board of Trustees, of (i) the decisions made with
respect to the investment of the Fund's assets and the purchase
and sale of its investment securities, (ii) the reasons for such
decisions and (iii) the extent to which those decisions have been
implemented.
(b) The Manager, subject to and in accordance
with any directions which the Trust's Board of Trustees may issue
from time to time, shall place, in the name of the Fund, orders
for the execution of the Fund's securities transactions. When
placing such orders the Manager shall seek to obtain the best net
price and execution for the Fund, but this requirement shall not
be deemed to obligate the Manager to place any order solely on
the basis of obtaining the lowest commission rate if the other
standards set forth in this section have been satisfied. The
parties recognize that there are likely to be many cases in which
different brokers or dealers are equally able to provide such
best price and execution and that, in selecting among such
brokers and dealers with respect to particular trades, it is
desirable to choose those brokers or dealers who furnish
research, statistical, quotations and other information to the
Fund and the Manager in accord with the standards set forth
below. Moreover, to the extent that it continues to be lawful to
do so and so long as the Board of Trustees determines that the
Fund will benefit, directly or indirectly, by doing so, the
Manager may place orders with a broker who charges a commission
for that transaction which is in excess of the amount of
commission that another broker would have charged for effecting
that transaction, provided that the excess commission is
reasonable in relation to the value of "brokerage and research
services" (as defined in Section 28(e) (3) of the Securities
Exchange Act of 1934) provided by that broker.
Accordingly, the Trust and the Manager agree that the Manager
shall select brokers for the execution of the Fund's transactions
from among:
(i) Those brokers and dealers who
provide quotations and other services to
the Fund, specifically including the
quotations necessary to determine the
Fund's net assets, in such amount of total
brokerage as may reasonably be required in
light of such services; and
(ii) Those brokers and dealers
who supply research, statistical and other
data to the Manager or its affiliates which
the Manager or its affiliates may lawfully
and appropriately use in their investment
advisory capacities, which relate directly
to securities, actual or potential, of the
Fund, or which place the Manager in a
better position to make decisions in
connection with the management of the
Fund's assets and securities, whether or
not such data may also be useful to the
Manager and its affiliates in managing
other portfolios or advising other clients,
in such amount of total brokerage as may
reasonably be required. Provided that the
Trust's officers are satisfied that the
best execution is obtained, the sale of
shares of the Fund may also be considered
as a factor in the selection of broker-
dealers to execute the Fund's portfolio
transactions.
(c) It is acknowledged that the Manager may
contract with one or more firms to undertake some or all of the
manager's investment management services as set forth herein
pursuant to an agreement which is subject to substantially the
same provisions as contained in paragraphs 6, 7 and 10 herein.
(d) When the Manager has determined that the
Fund should tender securities pursuant to a "tender offer
solicitation," Franklin/Templeton 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 Distributors 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. 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 Trust, on behalf of the Fund, shall enter into
an agreement with the Manager and/or Distributors to reimburse
them for all such expenses connected with attempting to collect
such fees, including legal fees and expenses and that portion of
the compensation due to their employees which is attributable to
the time involved in attempting to collect such fees.
(e) The Manager shall render regular reports to
the Trust, not more frequently than quarterly, of how much total
brokerage business has been placed by the Manager, on behalf of
the Fund, with brokers falling into each of the categories
referred to above and the manner in which the allocation has been
accomplished.
(f) The Manager agrees that no investment
decision will be made or influenced by a desire to provide
brokerage for allocation in accordance with the foregoing, and
that the right to make such allocation of brokerage shall not
interfere with the Manager's paramount duty to obtain the best
net price and execution for the Fund.
C. Provision of Information Necessary for Preparation
of Securities Registration Statements, Amendments and Other
Materials. The Manager, its officers and employees will make
available and provide accounting and statistical information
required by the Fund in the preparation of registration statements,
reports and other documents required by federal and state securities
laws and with such information as the Fund may reasonably request
for use in the preparation of such documents or of other materials
necessary or helpful for the underwriting and distribution of the
Fund's shares.
D. Other Obligations and Services. The Manager shall
make its officers and employees available to the Board of Trustees
and officers of the Trust for consultation and discussions regarding
the administration and management of the Fund and its investment
activities.
3. Expenses of the Fund. It is understood that the Fund will
pay all of its own expenses other than those expressly assumed by
the Manager herein, which expenses payable by the Fund shall
include:
A. Fees and expenses paid to the Manager as provided
herein;
B. Expenses of all audits by independent public
accountants;
C. Expenses of transfer agent, registrar, custodian,
dividend disbursing agent and shareholder record-keeping services,
including the expenses of issue, repurchase or redemption of their
shares;
D. Expenses of obtaining quotations for calculating the
value of the Fund's net assets;
E. Salaries and other compensations of executive
officers of the Trust who are not officers, directors, stockholders
or employees of the Manager or its affiliates;
F. Taxes levied against the Fund;
G. Brokerage fees and commissions in connection with
the purchase and sale of securities for the Fund;
H. Costs, including the interest expense, of borrowing
money;
I. Costs incident to meetings of the Board of
Trustees and shareholders of the Fund, reports to the Fund's
shareholders, the filing of reports with regulatory bodies and
the maintenance of the Fund's and the Trust's legal existence;
J. Legal fees, including the legal fees related to
the registration and continued qualification of the Fund's shares
for sale;
K. Trustees' fees and expenses to trustees who are
not directors, officers, employees or stockholders of the Manager
or any of its affiliates;
L. Costs and expense of registering and maintaining
the registration of the Fund and its shares under federal and any
applicable state laws; including the printing and mailing of
prospectuses to their shareholders;
M. Trade association dues; and
N. The Fund's pro rata portion of fidelity bond,
errors and omissions, and trustees and officer liability
insurance premiums.
4. Compensation of the Manager. The Fund shall pay a
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, as compensation for the services rendered and
obligations assumed by the Manager, during the preceding month,
on the first business day of the month in each year. 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 average daily net
assets of the Fund during each month, 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 its
shares, all as set forth more fully in the Fund's current
prospectus and statement of additional information. The annual
rate of the management fee payable by the Fund shall be .65% of
the Fund's average daily net assets.
B. The management fee payable by the Fund shall be
reduced or eliminated to the extent that Distributors has
actually received cash payments of tender offer solicitation fees
less certain costs and expenses incurred in connection therewith
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. The Manager may, from
time to time, voluntarily reduce or waive any management fee due
to it hereunder.
C. If this Agreement is terminated prior to the end
of any month, the accrued management fee shall be paid to 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 the
Manager and any of its affiliates shall be free to render similar
services to others. Subject to and in accordance with the
Agreement and Declaration of Trust and By-Laws of the Trust and
Section 10(a) of the 1940 Act, it is understood that trustees,
officers, agents and shareholders of the Fund are or may be
interested in the Manager or its affiliates as directors,
officers, agents or stockholders; that directors, officers,
agents or stockholders of the Manager or its affiliates are or
may be interested in the Fund as trustees, officers, agents,
shareholders or otherwise; that the Manager or its affiliates may
be interested in the Fund as shareholders or otherwise; and that
the effect of any such interests shall be governed by said
Agreement and Declaration of Trust, By-Laws and the 1940 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 Trust or 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 trustees' fees reasonably incurred by the Fund in the
preparation, printing and distribution of proxy statements,
amendments to its Registration Statement, holdings of meetings of
its shareholders or trustees, the conduct of factual
investigations, any legal or administrative proceedings
(including any applications for exemptions or determinations by
the Securities and Exchange Commission) which the Fund incurs as
the result of action or inaction of the Manager or any of its
affiliates or any of their officers, directors, employees or
stockholders where the action or inaction necessitating such
expenditures (i) is directly or indirectly related to any
transaction or proposed transaction in the stock or control of
the Manager or its affiliates (or litigation related to any
pending or proposed or future transaction in such shares or
control) which shall have been undertaken without the prior,
express approval of the Trust's Board of Trustees; or, (ii) is
within the control of the Manager or any of its affiliates or any
of their officers, directors, employees or stockholders. The
Manager shall not be obligated pursuant to the provisions of this
Subparagraph 6(B), to reimburse the Fund for any expenditures
related to the institution of an administrative proceeding or
civil litigation by the Fund or a shareholder seeking to recover
all or a portion of the proceeds derived by any stockholder of
the Manager or any of its affiliates from the sale of his shares
of the Manager, or similar matters. So long as this Agreement is
in effect, the Manager shall pay to the Fund the amount due for
expenses subject to this Subparagraph 6(B) within 30 days after a
bill or statement has been received by the Manager therefor.
This provision shall not be deemed to be a waiver of any claim
the Fund may have or may assert against the Manager or others for
costs, expenses or damages heretofore incurred by the Fund or for
costs, expenses or damages the Fund may hereafter incur which are
not reimbursable to it hereunder.
C. No provision of this Agreement shall be construed
to protect any trustee or officer of the Trust, or director or
officer of the Manager, from liability in violation of Sections
17(h) and (i) of the 1940 Act.
7. Renewal and Termination.
A. This Agreement shall become effective on the date
written below and shall continue in effect for two (2) years
thereafter, unless sooner terminated as hereinafter provided and
shall continue in effect thereafter for periods not exceeding one
(1) year so long as such continuation is approved at least
annually (i) by a vote of a majority of the outstanding voting
securities of the Fund or by a vote of the Board of Trustees of
the Trust, and (ii) by a vote of a majority of the Trustees of
the Trust who are not parties to the Agreement or interested
persons of any parties to the Agreement (other than as Trustees
of the Trust), cast in person at a meeting called for the purpose
of voting on the Agreement.
B. This Agreement:
(i) may at any time be terminated without the
payment of any penalty either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting
securities of the Fund, on 60 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 60
days' written notice to the Fund.
C. As used in this Paragraph the terms "assignment,"
"interested person" and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth for any such
terms in the 1940 Act.
D. Any notice under this Agreement shall be given in
writing addressed and delivered, or mailed post-paid, to the
other party at any office of such party.
8. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and effective on the 17th day of August, 1993.
FRANKLIN STRATEGIC SERIES on behalf of the
FISCO MIDCAP GROWTH FUND
By:/s/ Rupert H. Johnson, Jr.
FRANKLIN INSTITUTIONAL SERVICES
CORPORATION
By: /s/ Charles E. Johnson
FRANKLIN STRATEGIC INCOME FUND
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN STRATEGIC
SERIES, a Delaware business trust ("Trust"), on behalf of the
FRANKLIN STRATEGIC INCOME FUND (the "Fund"), and FRANKLIN
ADVISERS, INC., a California corporation (the "Manager").
WHEREAS, the Trust has been organized and intends to operate
as an investment company registered under the Investment Company
Act of 1940 (the "1940 Act") for the purpose of investing and
reinvesting its assets in securities, as set forth in its
Agreement and Declaration of Trust, its By-Laws and its
Registration Statements under the 1940 Act and the Securities Act
of 1933, all as heretofore and hereafter amended and
supplemented.
WHEREAS, the Trust desires to avail itself of the services,
information, advice, assistance and facilities of an investment
manager and to have an investment manager perform various
management, statistical, research, investment advisory and other
services; and,
WHEREAS, the Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, is engaged in the
business of rendering management, investment advisory,
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 mutually agreed as follows:
l. Employment of the Manager. The Trust hereby employs the
Manager to manage the investment and reinvestment of the Fund's
assets and to administer its affairs, subject to the direction of
the Board of Trustees and the officers of the Trust, 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 or the Trust in any way or otherwise be deemed an agent
of the Fund or the Trust.
2. Obligations of and Services to be Provided by the
Manager. The Manager undertakes to provide the services
hereinafter set forth and to assume the following obligations:
A. Administrative Services. The Manager shall
furnish to the Fund adequate (i) office space, which may be space
within the offices of the Manager or in such other place as may
be agreed upon from time to time, (ii) office furnishings,
facilities and equipment as may be reasonably required for
managing the affairs and conducting the business of the Fund,
including conducting correspondence and other communications with
the shareholders of the Fund, maintaining all internal
bookkeeping, accounting and auditing services and records in
connection with the Fund's investment and business activities.
The Manager shall employ or provide and compensate the executive,
secretarial and clerical personnel necessary to provide such
services. The Manager shall also compensate all officers and
employees of the Trust who are officers or employees of the
Manager or its affiliates.
B. Investment Management Services.
(a) The Manager shall manage the Fund's assets
subject to and in accordance with the investment objectives and
policies of the Fund and any directions which the Trust's Board
of Trustees may issue from time to time. In pursuance of the
foregoing, the Manager shall make all determinations with respect
to the investment of the Fund's assets and the purchase and sale
of its investment securities, and shall take such steps as may be
necessary to implement the same. Such determinations and
services shall include determining the manner in which any voting
rights, rights to consent to corporate action and any other
rights pertaining to the Fund's investment securities shall be
exercised. The Manager shall render or cause to be rendered
regular reports to the Trust, at regular meetings of its Board of
Trustees and at such other times as may be reasonably requested
by the Trust's Board of Trustees, of (i) the decisions made with
respect to the investment of the Fund's assets and the purchase
and sale of its investment securities, (ii) the reasons for such
decisions and (iii) the extent to which those decisions have been
implemented.
(b) The Manager, subject to and in accordance
with any directions which the Trust's Board of Trustees may issue
from time to time, shall place, in the name of the Fund, orders
for the execution of the Fund's securities transactions. When
placing such orders the Manager shall seek to obtain the best net
price and execution for the Fund, but this requirement shall not
be deemed to obligate the Manager to place any order solely on
the basis of obtaining the lowest commission rate if the other
standards set forth in this section have been satisfied. The
parties recognize that there are likely to be many cases in which
different brokers or dealers are equally able to provide such
best price and execution and that, in selecting among such
brokers and dealers with respect to particular trades, it is
desirable to choose those brokers or dealers who furnish
research, statistical, quotations and other information to the
Fund and the Manager in accord with the standards set forth
below. Moreover, to the extent that it continues to be lawful to
do so and so long as the Board of Trustees determines that the
Fund will benefit, directly or indirectly, by doing so, the
Manager may place orders with a broker who charges a commission
for that transaction which is in excess of the amount of
commission that another broker would have charged for effecting
that transaction, provided that the excess commission is
reasonable in relation to the value of "brokerage and research
services" (as defined in Section 28(e) (3) of the Securities
Exchange Act of 1934) provided by that broker.
Accordingly, the Trust and the Manager agree that the Manager
shall select brokers for the execution of the Fund's transactions
from among:
(i) Those brokers and dealers who provide
quotations and other services to the Fund, specifically
including the quotations necessary to determine the Fund's
net assets, in such amount of total brokerage as may
reasonably be required in light of such services; and
(ii) Those brokers and dealers who supply
research, statistical and other data to the Manager or its
affiliates which the Manager or its affiliates may lawfully
and appropriately use in their investment advisory
capacities, which relate directly to securities, actual or
potential, of the Fund, or which place the Manager in a
better position to make decisions in connection with the
management of the Fund's assets and securities, whether or
not such data may also be useful to the Manager and its
affiliates in managing other portfolios or advising other
clients, in such amount of total brokerage as may reasonably
be required. Provided that the Trust's officers are
satisfied that the best execution is obtained, the sale of
shares of the Fund may also be considered as a factor in the
selection of broker-dealers to execute the Fund's portfolio
transactions.
(c) It is acknowledged that the Manager may
contract with one or more firms to undertake some or all of the
manager's investment management services as set forth herein
pursuant to an agreement which is subject to substantially the
same provisions as contained in paragraphs 6, 7 and 10 herein.
(d) When the Manager has determined that the Fund
should tender securities pursuant to a "tender offer
solicitation," Franklin/Templeton 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 Distributors 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. 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 Trust, on behalf of the Fund, shall enter into
an agreement with the Manager and/or Distributors to reimburse
them for all such expenses connected with attempting to collect
such fees, including legal fees and expenses and that portion of
the compensation due to their employees which is attributable to
the time involved in attempting to collect such fees.
(e) The Manager shall render regular reports to
the Trust, not more frequently than quarterly, of how much total
brokerage business has been placed by the Manager, on behalf of
the Fund, with brokers falling into each of the categories
referred to above and the manner in which the allocation has been
accomplished.
(f) The Manager agrees that no investment
decision will be made or influenced by a desire to provide
brokerage for allocation in accordance with the foregoing, and
that the right to make such allocation of brokerage shall not
interfere with the Manager's paramount duty to obtain the best
net price and execution for the Fund.
C. Provision of Information Necessary for Preparation
of Securities Registration Statements, Amendments and Other
Materials. The Manager, its officers and employees will make
available and provide accounting and statistical information
required by the Fund in the preparation of registration
statements, reports and other documents required by federal and
state securities laws and with such information as the Fund may
reasonably request for use in the preparation of such documents
or of other materials necessary or helpful for the underwriting
and distribution of the Fund's shares.
D. Other Obligations and Services. The Manager shall
make its officers and employees available to the Board of
Trustees and officers of the Trust for consultation and
discussions regarding the administration and management of the
Fund and its investment activities.
3. Expenses of the Fund. It is understood that the Fund
will pay all of its own expenses other than those expressly
assumed by the Manager herein, which expenses payable by the Fund
shall include:
A. Fees and expenses paid to the Manager as provided
herein;
B. Expenses of all audits by independent public
accountants;
C. Expenses of transfer agent, registrar, custodian,
dividend disbursing agent and shareholder record-keeping
services, including the expenses of issue, repurchase or
redemption of their shares;
D. Expenses of obtaining quotations for calculating
the value of the Fund's net assets;
E. Salaries and other compensations of executive
officers of the Trust who are not officers, directors,
stockholders or employees of the Manager or its affiliates;
F. Taxes levied against the Fund;
G. Brokerage fees and commissions in connection with
the purchase and sale of securities for the Fund;
H. Costs, including the interest expense, of
borrowing money;
I. Costs incident to meetings of the Board of
Trustees and shareholders of the Fund, reports to the Fund's
shareholders, the filing of reports with regulatory bodies and
the maintenance of the Fund's and the Trust's legal existence;
J. Legal fees, including the legal fees related to
the registration and continued qualification of the Fund's shares
for sale;
K. Trustees' fees and expenses to trustees who are
not directors, officers, employees or stockholders of the Manager
or any of its affiliates;
L. Costs and expense of registering and maintaining
the registration of the Fund and its shares under federal and any
applicable state laws; including the printing and mailing of
prospectuses to their shareholders;
M. Trade association dues; and
N. The Fund's pro rata portion of fidelity bond,
errors and omissions, and trustees and officer liability
insurance premiums.
4. Compensation of the Manager. The Fund shall pay a
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, as compensation for the services rendered and
obligations assumed by the Manager, during the preceding month,
on the first business day of the month in each year. 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 average daily net assets
of the Fund during each month, 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 its
shares, all as set forth more fully in the Fund's current
prospectus and statement of additional information. The annual
rate of the management fee payable by the Fund shall be as
follows:
.625 of 1% of the value of net assets up to and
including $100,000,000; and
.50 of 1% of the value of net assets over
$100,000,00 and not over $250,000,000; and
.45 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 Distributors 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. The Manager may, from
time to time, voluntarily reduce or waive any management fee due
to it hereunder.
C. If this Agreement is terminated prior to the end
of any month, the accrued management fee shall be paid to 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 the
Manager and any of its affiliates shall be free to render similar
services to others. Subject to and in accordance with the
Agreement and Declaration of Trust and By-Laws of the Trust and
Section 10(a) of the 1940 Act, it is understood that trustees,
officers, agents and shareholders of the Fund are or may be
interested in the Manager or its affiliates as directors,
officers, agents or stockholders; that directors, officers,
agents or stockholders of the Manager or its affiliates are or
may be interested in the Fund as trustees, officers, agents,
shareholders or otherwise; that the Manager or its affiliates may
be interested in the Fund as shareholders or otherwise; and that
the effect of any such interests shall be governed by said
Agreement and Declaration of Trust, By-Laws and the 1940 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 Trust or 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 trustees' fees reasonably incurred by the Fund in the
preparation, printing and distribution of proxy statements,
amendments to its Registration Statement, holdings of meetings of
its shareholders or trustees, the conduct of factual
investigations, any legal or administrative proceedings
(including any applications for exemptions or determinations by
the Securities and Exchange Commission) which the Fund incurs as
the result of action or inaction of the Manager or any of its
affiliates or any of their officers, directors, employees or
stockholders where the action or inaction necessitating such
expenditures (i) is directly or indirectly related to any
transaction or proposed transaction in the stock or control of
the Manager or its affiliates (or litigation related to any
pending or proposed or future transaction in such shares or
control) which shall have been undertaken without the prior,
express approval of the Trust's Board of Trustees; or, (ii) is
within the control of the Manager or any of its affiliates or any
of their officers, directors, employees or stockholders. The
Manager shall not be obligated pursuant to the provisions of this
Subparagraph 6(B), to reimburse the Fund for any expenditures
related to the institution of an administrative proceeding or
civil litigation by the Fund or a shareholder seeking to recover
all or a portion of the proceeds derived by any stockholder of
the Manager or any of its affiliates from the sale of his shares
of the Manager, or similar matters. So long as this Agreement is
in effect, the Manager shall pay to the Fund the amount due for
expenses subject to this Subparagraph 6(B) within 30 days after a
bill or statement has been received by the Manager therefor.
This provision shall not be deemed to be a waiver of any claim
the Fund may have or may assert against the Manager or others for
costs, expenses or damages heretofore incurred by the Fund or for
costs, expenses or damages the Fund may hereafter incur which are
not reimbursable to it hereunder.
C. No provision of this Agreement shall be construed
to protect any trustee or officer of the Trust, or director or
officer of the Manager, from liability in violation of Sections
17(h) and (i) of the 1940 Act.
7. Renewal and Termination.
A. This Agreement shall become effective on the date
written below and shall continue in effect for two (2) years
thereafter, unless sooner terminated as hereinafter provided and
shall continue in effect thereafter for periods not exceeding one
(1) year so long as such continuation is approved at least
annually (i) by a vote of a majority of the outstanding voting
securities of the Fund or by a vote of the Board of Trustees of
the Trust, and (ii) by a vote of a majority of the Trustees of
the Trust who are not parties to the Agreement or interested
persons of any parties to the Agreement (other than as Trustees
of the Trust), cast in person at a meeting called for the purpose
of voting on the Agreement.
B. This Agreement:
(i) may at any time be terminated without the
payment of any penalty either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting
securities of the Fund, on 60 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 60
days' written notice to the Fund.
C. As used in this Paragraph the terms
"assignment," "interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth
for any such terms in the 1940 Act.
D. Any notice under this Agreement shall be
given in writing addressed and delivered, or mailed post-paid, to
the other party at any office of such party.
8. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and effective on the 24th day of May, 1994.
FRANKLIN STRATEGIC SERIES on behalf of the
FRANKLIN STRATEGIC INCOME FUND
By: /s/ Harmon E. Burns
Title Vice President
FRANKLIN ADVISERS, INC.
By: Charles B. Johnson
Title
SUBADVISORY AGREEMENT
FRANKLIN STRATEGIC SERIES
(on behalf of the Franklin Strategic Income Fund)
THIS SUBADVISORY AGREEMENT made as of the 24th day of May
1994, by and between FRANKLIN ADVISERS, INC., a corporation
organized and existing under the laws of the State of California
(hereinafter called "FAI"), and TEMPLETON INVESTMENT COUNSEL,
INC., a Florida corporation (hereinafter called "TICI").
W I T N E S S E T H
WHEREAS, FAI is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act"), and is
engaged in the business of supplying investment advice, and
investment management services, as an independent contractor; and
WHEREAS, FAI has been retained to render investment
management services to Franklin Strategic Series Fund (the
"Fund"), a series of Franklin Strategic Series (the "Trust"), an
investment management company registered with the U.S. Securities
and Exchange Commission (the "SEC") pursuant to the Investment
Company Act of 1940 (the "1940 Act"); and
WHEREAS, FAI desires to retain TICI to render investment
advisory, research and related services to the Fund pursuant to
the terms and provisions of this Agreement, and TICI is
interested in furnishing said services.
NOW, THEREFORE, in consideration of the covenants and the
mutual promises hereinafter set forth, the parties hereto,
intending to be legally bound hereby, mutually agree as follows:
1. FAI hereby retains TICI and TICI hereby accepts such
engagement, to furnish certain investment advisory services with
respect to the assets of the Fund, as more fully set forth
herein.
(a) Subject to the overall policies, control,
direction and review of the Trust's Board of Trustees (the
"Board") and to the instructions and supervision of FAI, TICI
will provide a continuous investment program for the Fund,
including allocation of the Fund's assets among the various
securities markets of the world and, investment research and
advice with respect to securities and investments and cash
equivalents in the Fund. So long as the Board and FAI determine,
on no less frequently than an annual basis, to grant the
necessary delegated authority to TICI, and subject to paragraph
(b) below, TICI will determine what securities and other
investments will be purchased, retained or sold by the Fund, and
will place all purchase and sale orders on behalf of the Fund
except that orders regarding U.S. domiciled securities and money
market instruments may also be placed on behalf of the Fund by
FAI.
(b) In performing these services, TICI shall adhere to
the Fund's investment objectives, policies and restrictions as
contained in its Prospectus and Statement of Additional
Information, and in the Trust's Declaration of Trust, and to the
investment guidelines most recently established by FAI and shall
comply with the provisions of the 1940 Act and the rules and
regulations of the SEC thereunder in all material respects and
with the provisions of the United States Internal Revenue Code of
1986, as amended, which are applicable to regulated investment
companies.
(c) Unless otherwise instructed by FAI or the Board,
and subject to the provisions of this Agreement and to any
guidelines or limitations specified from time to time by FAI or
by the Board, TICI shall report daily all transactions effected
by TICI on behalf of the Fund to FAI and to other entities as
reasonably directed by FAI or the Board.
(d) TICI shall provide the Board at least quarterly,
in advance of the regular meetings of the Board, a report of its
activities hereunder on behalf of the Fund and its proposed
strategy for the next quarter, all in such form and detail as
requested by the Board. TICI shall also make an investment
officer available to attend such meetings of the Board as the
Board may reasonably request.
(e) In carrying out its duties hereunder, TICI shall
comply with all reasonable instructions of the Fund or FAI in
connection therewith. Such instructions may be given by letter,
telex, telefax or telephone confirmed by telex, by the Board or
by any other person authorized by a resolution of the Board,
provided a certified copy of such resolution has been supplied to
TICI.
2. In performing the services described above, TICI shall
use its best efforts to obtain for the Fund the most favorable
price and execution available. Subject to prior authorization of
appropriate policies and procedures by the Board, TICI may, to
the extent authorized by law and in accordance with the terms of
the Fund's Prospectus and Statement of Additional Information,
cause the Fund to pay a broker who provides brokerage and
research services an amount of commission for effecting a
portfolio investment transaction in excess of the amount of
commission another broker would have charged for effecting that
transaction, in recognition of the brokerage and research
services provided by the broker. To the extent authorized by
applicable law, TICI shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or
otherwise solely by reason of such action.
3. (a) TICI shall, unless otherwise expressly provided
and authorized, have no authority to act for or represent FAI or
the Fund in any way, or in any way be deemed an agent for FAI or
the Fund.
(b) It is understood that the services provided by
TICI are not to be deemed exclusive. FAI acknowledges that TICI
may have investment responsibilities, or render investment advice
to, or perform other investment advisory services, for
individuals or entities, including other investment companies
registered pursuant to the 1940 Act, ("Clients") which may invest
in the same type of securities as the Fund. FAI agrees that TICI
may give advice or exercise investment responsibility and take
such other action with respect to such Clients which may differ
from advice given or the timing or nature of action taken with
respect to the Fund.
4. TICI agrees to use its best efforts in performing the
services to be provided by it pursuant to this Agreement.
5. FAI has furnished or will furnish to TICI as soon as
available copies properly certified or authenticated of each of
the following documents:
(a) the Trust's Declaration of Trust, as filed with
the Secretary of State of the State of Delaware on March 22,
1991, and any other organizational documents and all amendments
thereto or restatements thereof;
(b) resolutions of the Trust's Board of Trustees
authorizing the appointment of TICI and approving this Agreement;
(c) the Trust's original Notification of Registration
on Form N-8A under the 1940 Act as filed with the SEC and all
amendments thereto;
(d) the Trust's current Registration Statement on Form
N-1A under the Securities Act of 1933, as amended and under the
1940 Act as filed with the SEC, and all amendments thereto, as it
relates to the Fund;
(e) the Fund's most recent Prospectus and Statement of
Additional Information; and
(f) the Investment Management Agreement between the
Fund and FAI.
FAI will furnish TICI with copies of all amendments of or
supplements to the foregoing documents.
6. TICI will treat confidentially and as proprietary
information of the Fund all records and other information
relative to the Fund and prior, present or potential
shareholders, and will not use such records and information for
any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval
in writing by the Fund, which approval shall not be unreasonably
withheld and may not be withheld where TICI may be exposed to
civil or criminal contempt proceedings for failure to comply when
requested to divulge such information by duly constituted
authorities, or when so requested by the Fund.
7. FAI shall pay a monthly fee in cash to TICI 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 TICI during the preceding month. The advisory 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 FAI relating to the previous month.
(a) For purposes of calculating such fee, the value of
the net assets of the Fund shall be the average daily net assets
of the Fund during each month, 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 its
shares, all as set forth more fully in the Fund's current
Prospectus. The rate of the monthly fee payable to TICI shall be
based upon the following annual rates:
.3125 of 1% of the value of net assets up to and
including $100,000,000; and
.25 of 1% of the value of net assets over
$100,000,00 and not over $250,000,000; and
.225 of 1% of the value of net assets in excess of
$250,000,000.
(b) FAI and TICI shall share equally in any voluntary
reduction or waiver by FAI of the management fee due FAI under
the Management Agreement between FAI and the Fund.
(c) If this Agreement is terminated prior to the end
of any month, the monthly 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 month during which the Agreement is in
effect bears to the total number of calendar days in the month,
and shall be payable within 10 days after the date of
termination.
8. Nothing herein contained shall be deemed to relieve or
deprive the Board of its responsibility for and control of the
conduct of the affairs of the Fund.
9. (a) In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of its obligations or
duties hereunder on the part of TICI, neither TICI nor any of its
directors, officers, employees or affiliates shall be subject to
liability to FAI or the Fund or to any shareholder of the Fund
for any error of judgment or mistake of law or any other 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 paragraph 9(a), to the extent that
FAI is found by a court of competent jurisdiction, or the SEC or
any other regulatory agency to be liable to the Fund or any
shareholder (a "liability"), for any acts undertaken by TICI
pursuant to authority delegated as described in Paragraph 1(a),
TICI shall indemnify and save FAI and each of its affiliates,
officers, directors and employees (each a "Franklin Indemnified
Party") harmless from, against, for and in respect of all losses,
damages, costs and expenses incurred by a Franklin Indemnified
Party with respect to such liability, together with all legal and
other expenses reasonably incurred by any such Franklin
Indemnified Party, in connection with such liability.
(c) No provision of this Agreement shall be construed
to protect any director or officer of FAI or TICI, from liability
in violation of Sections 17(h) or (i), respectively, of the 1940
Act.
10. During the term of this Agreement, TICI will pay all
expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including
brokerage commissions, if any) purchased for the Fund. The Fund
and FAI will be responsible for all of their respective expenses
and liabilities.
11. This Agreement shall be effective as of January 1, 1993
and shall continue in effect for two years. It is renewable
annually thereafter for successive periods not to exceed one year
each (i) by a vote of the Board or by the vote of a majority of
the outstanding voting securities of the Fund, and (ii) by the
vote of a majority of the Trustees of the Trust who are not
parties to this Agreement or interested persons thereof, cast in
person at a meeting called for the purpose of voting on such
approval.
12. This Agreement may be terminated at any time, without
payment of any penalty, by the Board or by vote of a majority of
the outstanding voting securities of the Fund, upon sixty (60)
days' written notice to FAI and TICI, and by FAI or TICI upon
sixty (60) days' written notice to the other party.
13. This Agreement shall terminate automatically in the
event of any transfer or assignment thereof, as defined in the
1940 Act, and in the event of any act or event that terminates
the Management Agreement between FAI and the Fund.
14. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, TICI hereby agrees that all records which it
maintains for the Fund are the property of the Fund and further
agrees to surrender promptly to the Fund, or to any third party
at the Fund's direction, any of such records upon the Fund's
request. TICI further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required
to be maintained by Rule 31a-1 under the 1940 Act.
15. This Agreement may not be materially amended,
transferred, assigned, sold or in any manner hypothecated or
pledged without the affirmative vote or written consent of the
holders of a majority of the outstanding voting securities of the
Fund and may not be amended without the written consent of FAI
and TICI.
16. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule, or otherwise,
the remainder of this Agreement shall not be affected thereby.
17. The terms "majority of the outstanding voting
securities" of the Fund and "interested persons" shall have the
meanings as set forth in the 1940 Act.
18. This Agreement shall be interpreted in accordance with
and governed by the laws of the State of California of the United
States of America.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and attested by their duly
authorized officers.
FRANKLIN ADVISERS, INC.
By: /s/ Charles B. Johnson
Title Chairman of the Board
TEMPLETON INVESTMENT COUNSEL, INC.
By: /s/ Donald Reed
Title President
Franklin Strategic Income Fund hereby acknowledges and agrees to
the provisions of paragraphs 9(a) and 10 of this Agreement.
FRANKLIN STRATEGIC SERIES on behalf of
FRANKLIN STRATEGIC INCOME FUND
By: /s/ Harmon E. Burns
Title Vice President
FRANKLIN CALIFORNIA GROWTH FUND
AMENDED AND RESTATED MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN STRATEGIC
SERIES, a Delaware business trust (the "Trust"), on behalf of
FRANKLIN CALIFORNIA GROWTH FUND (the "Fund"), a series of the
Trust, and FRANKLIN ADVISERS, INC., a California corporation,
hereinafter called the "Manager."
WHEREAS, the Trust has been organized and intends to operate
as an investment company registered under the Investment Company
Act of 1940 (the "Act") for the purpose of investing and
reinvesting its assets in securities, as set forth in its
Agreement and Declaration of Trust, its By-Laws and its
Registration Statements under the Act and the Securities Act of
1933, all as heretofore and hereafter amended and supplemented;
and the Trust desires to avail itself of the services,
information, advice, assistance and facilities of an investment
manager and to have an investment manager perform various
management, statistical, research, investment advisory and other
services; and,
WHEREAS, the Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, is engaged in the
business of rendering management, investment advisory,
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 mutually agreed as follows:
l. Employment of the Manager. The Trust hereby employs the
Manager to manage the investment and reinvestment of the Fund's
assets and to administer its affairs, subject to the direction of
the Board of Trustees and the officers of the Trust, for the
period and on the terms hereinafter set forth. The Manager
hereby accepts such employment and agrees during such period to
render the services and to assume the obligations herein set
forth for the compensation herein provided. The Manager shall
for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether
herein or otherwise), have no authority to act for or represent
the Fund in any way or otherwise be deemed an agent of the Fund.
2. Obligations of and Services to be Provided by the
Manager. The Manager undertakes to provide the services
hereinafter set forth and to assume the following obligations:
A. Administrative Services. The Manager shall
furnish to the Fund adequate (i) office space, which may be space
within the offices of the Manager or in such other place as may
be agreed upon from time to time, and (ii) office furnishings,
facilities and equipment as may be reasonably required for
managing the affairs and conducting the business of the Fund,
including conducting correspondence and other communications with
the shareholders of the Fund, maintaining all internal
bookkeeping, accounting and auditing services and records in
connection with the Fund's investment and business activities.
The Manager shall employ or provide and compensate the executive,
secretarial and clerical personnel necessary to provide such
services. The Manager shall also compensate all officers and
employees of the Trust who are officers or employees of the
Manager or its affiliates.
B. Investment Management Services.
(a) The Manager shall manage the Fund's assets
subject to and in accordance with the investment objectives and
policies of the Fund and any directions which the Trust's Board
of Trustees may issue from time to time. In pursuance of the
foregoing, the Manager shall make all determinations with respect
to the investment of the Fund's assets and the purchase and sale
of its investment securities, and shall take such steps as may be
necessary to implement the same. Such determinations and
services shall include determining the manner in which any voting
rights, rights to consent to corporate action and any other
rights pertaining to the Fund's investment securities shall be
exercised. The Manager shall render regular reports to the
Trust, at regular meetings of its Board of Trustees and at such
other times as may be reasonably requested by the Trust's Board
of Trustees, of (i) the decisions which it has made with respect
to the investment of the Fund's assets and the purchase and sale
of its investment securities, (ii) the reasons for such decisions
and (iii) the extent to which those decisions have been
implemented.
(b) The Manager, subject to and in accordance
with any directions which the Trust's Board of Trustees may issue
from time to time, shall place orders for the execution of the
Fund's securities transactions. When placing such orders, the
Manager shall seek to obtain the best net price and execution for
the Fund, but this requirement shall not be deemed to obligate
the Manager to place any order solely on the basis of obtaining
the lowest commission rate if the other standards set forth in
this section have been satisfied. The parties recognize that
there are likely to be many cases in which different brokers are
equally able to provide such best price and execution and that,
in selecting among such brokers with respect to particular
trades, it is desirable to choose those brokers who furnish
research, statistical, quotations and other information to the
Fund and the Manager in accordance with the standards set forth
below. Moreover, to the extent that it continues to be lawful to
do so and so long as the Board of Trustees determines that the
Fund will benefit, directly or indirectly, by doing so, the
Manager may place orders with a broker who charges a commission
for that transaction which is in excess of the amount of
commission that another broker would have charged for effecting
that transaction, provided that the excess commission is
reasonable in relation to the value of "brokerage and research
services" (as defined in Section 28(e) (3) of the Securities
Exchange Act of 1934) provided by that broker. Accordingly, the
Trust and the Manager agree that the Manager shall select brokers
for the execution of the Fund's transactions from among:
(i) Those brokers and dealers who provide
quotations and other services to the Fund, specifically including
the quotations necessary to determine the Fund's net assets, in
such amount of total brokerage as may reasonably be required in
light of such services; and
(ii) Those brokers and dealers who supply
research, statistical and other data to the Manager or its
affiliates which the Manager or its affiliates may lawfully and
appropriately use in their investment advisory capacities, which
relate directly to securities, actual or potential, of the Fund,
or which place the Manager in a better position to make decisions
in connection with the management of the Fund's assets and
securities, whether or not such data may also be useful to the
Manager and its affiliates in managing other portfolios or
advising other clients, in such amount of total brokerage as may
reasonably be required. Provided that the Trust'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 Distributors 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. 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 Trust
shall enter into an agreement with the Manager and/or
Distributors to reimburse them for all such expenses connected
with attempting to collect such fees, including legal fees and
expenses and that portion of the compensation due to their
employees which is attributable to the time involved in
attempting to collect such fees.
(d) The Manager shall render regular reports to
the Trust, not more frequently than quarterly, of how much total
brokerage business has been placed by the Manager with brokers
falling into each of the categories referred to above and the
manner in which the allocation has been accomplished.
(e) The Manager agrees that no investment
decision will be made or influenced by a desire to provide
brokerage for allocation in accordance with the foregoing, and
that the right to make such allocation of brokerage shall not
interfere with the Manager's paramount duty to obtain the best
net price and execution for the Fund.
C. Provision of Information Necessary for Preparation
of Securities Registration Statements, Amendments and Other
Materials. The Manager, its officers and employees will make
available and provide accounting and statistical information
required by the Fund in the preparation of registration
statements, reports and other documents required by Federal and
state securities laws and with such information as the Fund may
reasonably request for use in the preparation of such documents
or of other materials necessary or helpful for the underwriting
and distribution of the Fund's shares.
D. Other Obligations and Services. The Manager shall
make its officers and employees available to the Board of
Trustees and officers of the Trust for consultation and
discussions regarding the administration and management of the
Fund and its investment activities.
3. Expenses of the Fund. It is understood that the Fund
will pay all of its own expenses other than those expressly
assumed by the Manager herein, which expenses payable by the Fund
shall include:
A. Fees and expenses paid to the Manager as provided
herein;
B. Expenses of all audits by independent public
accountants;
C. Expenses of transfer agent, registrar, custodian,
dividend disbursing agent and shareholder record-keeping
services, including the expenses of issue, repurchase or
redemption of their shares;
D. Expenses of obtaining quotations for calculating
the value of the Fund's Net assets;
E. Salaries and other compensations of executive
officers of the Trust who are not officers, directors,
stockholders or employees of the Manager or its affiliates;
F. Taxes levied against the Fund;
G. Brokerage fees and commissions in connection with
the purchase and sale of securities for the Fund;
H. Costs, including the interest expense, of
borrowing money;
I. Costs incident to meetings of the Board of
Trustees and shareholders of the Fund, reports to the Fund's
shareholders, the filing of reports with regulatory bodies and
the maintenance of the Fund's legal existence;
J. Legal fees, including the legal fees related to
the registration and continued qualification of the Fund's shares
for sale;
K. Costs of printing stock certificates representing
shares of the Fund.
L. Trustees' fees and expenses to trustees who are
not directors, officers, employees or stockholders of the Manager
or any of its affiliates;
M. Costs and expense of registering and maintaining
the registration of the Fund and their shares under Federal and
any applicable state laws; including the printing and mailing of
prospectuses to its shareholders;
N. Trade association dues; and
O. The Fund's pro rata portion of fidelity bond,
errors and omissions, and trustees and officer liability
insurance premiums.
4. Compensation of the Manager. The Fund shall pay a
monthly fee in cash to the Manager computed and accrued daily and
paid monthly at an annual rate based upon a percentage of the
value of each Fund's net assets, calculated as set forth below,
as compensation for the services rendered and obligations assumed
by the Manager during the preceding month, on the first business
day of the month in each year. 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 average daily net assets
during the month for which the payment is being made, determined
in the same manner as the Fund uses to compute the value of their
net assets in connection with the determination of the daily net
asset value of their shares, all as set forth more fully in each
Fund's current prospectus. The annual rate of the management fee
payable shall be as follows:
.625 of 1% of the value of average daily net assets up
to and including $100 million; and
.50 of 1% of the value of average daily net assets over
$100 million, up to and including $250 million; and
.45 of 1% of the value of average daily net assets over
$250 million up to and including $10 billion; and
.44 of 1% of the value of average daily net assets over
$10 billion up to and including $12.5 billion; and
.42 of 1% of the value of average daily net assets over
$12.5 billion up to and including $15 billion; and
.40 of 1% of the value of average daily net assets over
$15 billion.
B. The management fee payable by the Fund shall be
reduced or eliminated to the extent that Distributors has
actually received cash payments of tender offer solicitation fees
less certain costs and expenses incurred in connection therewith
as set forth in paragraph 2.B.(c) of this Agreement. The Manager
may, from time to time, voluntarily reduce or waive any
management fee due to it hereunder.
C. If this Agreement is terminated prior to the end
of any month, the accrued management fee shall be paid to 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 the
Manager and any of its affiliates shall be free to render similar
services to others. Subject to and in accordance with the
Agreement and Declaration of Trust and By-Laws of the Trust and
Section 10(a) of the Act, it is understood that trustees,
officers, agents and shareholders of the Fund are or may be
interested in the Manager or its affiliates as directors,
officers, agents or stockholders; that directors, officers,
agents or stockholders of the Manager or its affiliates are or
may be interested in the Trust as trustees, officers, agents,
shareholders or otherwise; that the Manager or its affiliates may
be interested in the Fund as shareholders or otherwise; and that
the effect of any such interests shall be governed by said
Agreement and Declaration of Trust, By-Laws and the Act.
6. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Manager, the Manager shall not be
subject to liability to the Fund or to any shareholder for any
act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security by the Fund.
B. Notwithstanding the foregoing, the Manager agrees
to reimburse the Fund for any and all costs, expenses, and
counsel and trustees' fees reasonably incurred by the Fund in the
preparation, printing and distribution of proxy statements,
amendments to its Registration Statement, holdings of meetings of
its shareholders or the Trust's trustees, the conduct of factual
investigations, any legal or administrative proceedings
(including any applications for exemptions or determinations by
the Securities and Exchange Commission) which the Fund incurs as
the result of action or inaction of the Manager or any of its
affiliates or any of their officers, directors, employees or
stockholders where the action or inaction necessitating such
expenditures (i) is directly or indirectly related to any
transactions or proposed transaction in the stock or control of
the Manager or its affiliates (or litigation related to any
pending or proposed or future transaction in such shares or
control) which shall have been undertaken without the prior,
express approval of the Trust's Board of Trustees; or, (ii) is
within the control of the Manager or any of its affiliates or any
of their officers, directors, employees or stockholders. The
Manager shall not be obligated pursuant to the provisions of this
Subparagraph 6(B), to reimburse the Fund for any expenditures
related to the institution of an administrative proceeding or
civil litigation by the Fund or a shareholder seeking to recover
all or a portion of the proceeds derived by any stockholder of
the Manager or any of its affiliates from the sale of his shares
of the Manager, or similar matters. So long as this Agreement is
in effect, the Manager shall pay to the Fund the amount due for
expenses subject to this Subparagraph 6(B) within 30 days after a
bill or statement has been received by the Manager therefor.
This provision shall not be deemed to be a waiver of any claim
the Fund may have or may assert against the Manager or others for
costs, expenses or damages heretofore incurred by the Fund or for
costs, expenses or damages the Fund may hereafter incur which are
not reimbursable to it hereunder.
C. No provision of this Agreement shall be construed
to protect any trustee or officer of the Trust, or director or
officer of the Manager, from liability in violation of Sections
17(h) and (i) of the Act.
7. Renewal and Termination.
A. This Agreement shall become effective on the date
written below and shall continue in effect for two (2) years. The
Agreement is renewable annually thereafter for successive periods
not to exceed one (l) year (i) by a vote of a majority of the
outstanding voting securities of the Fund or by a vote of the
Board of Trustees of the Trust, and (ii) by a vote of a majority
of the Trustees of the Trust who are not parties to the Agreement
(other than as Trustees of the Trust), cast in person at a
meeting called for the purpose of voting on the Agreement.
B. This Agreement:
(i) may at any time be terminated without the
payment of any penalty either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting
securities of the Fund seeking to terminate the Agreement, on 60
days' written notice to the Manager;
(ii) shall immediately terminate with respect to
the Fund in the event of its assignment; and
(iii) may be terminated by the Manager on 60 days'
written notice to the Fund.
C. As used in this Paragraph the terms "assignment,"
"interested person" and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth for any such
terms in the Act.
D. Any notice under this Agreement shall be given in
writing addressed and delivered, or mailed post-paid, to the
other party at any office of such party.
8. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and effective on the 12th day of July, 1993.
.
FRANKLIN STRATEGIC SERIES on behalf of
FRANKLIN CALIFORNIA GROWTH FUND
By: /s/ Charles B. Johnson
FRANKLIN ADVISERS, INC.
By: /s/ Rupert H. Johnson, Jr.
FRANKLIN STRATEGIC SERIES
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
For All Series Except Strategic Income Series
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 except that
this Agreement shall not apply to the Fund's Strategic Income
Series, and the terms "Fund" and "Shares" shall exclude any and
all classes of shares of the Strategic Income Series for purposes
of this Agreement.
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 STRATEGIC SERIES
By:_______________________________
Accepted:
Franklin/Templeton Distributors, Inc.
By:__________________________________
DATED: ______________
FRANKLIN STRATEGIC SERIES
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
For Strategic Income Series Only
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 of our Strategic Income Series (the "Shares")
to authorized persons in accordance with applicable Federal and
State securities laws. The Shares may be made available in 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
the 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 retains the right to make direct sales of
the 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 the 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 class of Shares and its shareholders
only, transactions involving the reorganization of the Fund or
the Strategic Income Series, and transactions involving the
merger or combination of the Fund or the 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 class of 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 class of 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
the 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 the 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 the 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 the 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 the Shares.
10. Furnishing of Information. We will furnish to you such
information with respect to each 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 Strategic Income Series,
for successive periods not to exceed one year (i) by a vote of
(a) a majority of the outstanding voting securities of such
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 the Strategic Income 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 such 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 such 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 STRATEGIC SERIES
By:_______________________________
Accepted:
Franklin/Templeton Distributors, Inc.
By:__________________________________
DATED: ______________
CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and entered
into as of August 20, 1991, by and between Franklin California
250 Growth Fund, a Delaware business trust (the "Fund"), and Bank
of America National Trust and Savings Association, a banking
association organized under the laws of the United States (the
"Custodian").
RECITALS
A. The Fund is an investment company registered under
the Investment Company Act that invests and reinvests in Domestic
Securities and Foreign Securities.
B. The Fund and the Custodian desire to provide for
the retention of the Custodian as the custodian of the assets of
the Fund and any separate series of the Fund hereinafter
organized, on the terms and subject to the provisions set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS
For purposes of this Agreement, the following terms
shall have the respective meanings specified below:
"Agreement" shall mean this Custody Agreement.
"Board of Trustees" shall mean the Board of Trustees of
the 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.
"Custodian" shall mean Bank of America National Trust and
Savings Association.
"Domestic Securities" shall have the meaning provided in
Subsection 2.1 hereof.
"Executive Committee" shall mean the executive committee
of the Board of Trustees.
"Foreign Custodian" shall have the meaning provided in
Section 4.1 hereof.
"Foreign Securities" shall have the meaning provided in
Section 2.1 hereof.
"Foreign Securities Depository" shall have the meaning
provided in Section 4.1 hereof.
"Fund" shall mean the Franklin California 250 Growth
Fund and any separate series of the Fund hereinafter organized.
"Guidelines" shall have the meaning provided in
Subsection 3.5(a) hereof.
"Investment Company Act" shall mean the Investment
Company Act of 1940, as amended.
"Securities" shall have the meaning provided in Section
2.1 hereof.
"Securities System" shall have the meaning provided in
Section 3.1 hereof.
"Securities System Account" shall have the meaning
provided in Subsection 3.8(a) hereof.
"Shares" shall mean shares of beneficial interest of the
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 the 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 Trustees 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 Trustees 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 Investment Company 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; provided, however, that in the case of
Foreign Securities, Proper Instructions are provided to
the Custodian by the Fund prior to the contractual
settlement date in accordance with, and within the time
period specified in the "Global Custody Guidelines for
the Franklin California 250 Growth Fund" (the
"Guidelines") which may be adopted for this use of this
Fund, as may be amended by the Custodian from time to
time in its sole discretion. The Custodian shall have
no liability of any kind to any person, including the
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; provided, however, that in the case of Foreign
Securities, Proper Instructions are provided to the
Custodian by the Fund prior to the contractual
settlement date in accordance with, and within the time
period specified in, the Guidelines. The Custodian
shall have no liability of any kind to any person,
including the 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 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 Trustees with
respect to the Shares.
3.7 Appointment of Subcustodians. The Custodian may,
upon receipt of Proper Instructions, appoint another bank or
trust company, which is itself qualified under the Investment
Company Act to act as a custodian (a "Subcustodian"), as the
agent of the Custodian to carry out such of the duties of the
Custodian hereunder as the Custodian may from time to time
direct; provided, however, that the appointment of any
Subcustodian shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
3.8 Deposit of Securities in Securities Systems. The
Custodian may deposit and/or maintain Domestic Securities owned
by the 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 Trustees or of the Executive Committee certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes
to be proper corporate purposes.
3.10 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection
with receipt of income or other payments with respect to domestic
securities of the 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. The Custodian shall supply
to the Fund the daily, weekly and monthly reports described in
the Guidelines as well as any other reports which the Custodian
and the Fund may agree 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 Trustees or the Executive Committee
has approved in advance the use of each such Foreign Custodian
and Foreign Securities Depository and the contract between the
Custodian and each Foreign Custodian and that such approval is
set forth in Proper Instructions and a certified copy of a
resolution of the Board of Trustees or of the Executive Committee
certified by the Secretary or an Assistant Secretary of the 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 Investment Company 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. 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 U.S. $200 million or that its shareholders' equity
has declined below U.S. $200 million (in each case computed in
accordance with generally accepted United States accounting
principles), 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 U.S. $100 million or that its shareholders' equity
has declined below U.S. $100 million (in each case computed in
accordance with generally accepted United States accounting
principles).
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. 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 cancelled or superseded.
If the Custodian requires test arrangements, authentication
methods or other security devices to be used with respect to
Proper Instructions, any Proper Instructions given by the 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 trustees 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.
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
Trustees or Executive Committee as conclusive evidence (a) of the
authority of any person to act in accordance with such resolution
or (b) of any determination or of any action by the Board of
Trustees or Executive Committee as described in such resolution,
and such resolution may be considered as in full force and effect
until receipt by the Custodian of written notice by an Authorized
Person to the contrary.
Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary
information in its possession (to the extent permissible under
applicable law) to the entity or entities appointed by the Board
of Trustees to keep the books of account of the 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
Investment Company 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 Trustees and may rely on the genuineness of any such
documents which it may in good faith believe to be validly
executed. The Custodian shall not be liable for any loss
resulting from, or caused by, the direction of the 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 Agreement and Declaration of Trust. 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 Trustee, 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 Trustees, a
certified copy of which shall accompany such notice of
termination, and provided further, that such resolution shall
specify the names of the persons to whom the Custodian shall
deliver the assets of the 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
Trustees 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 Trustees 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 California 250 Growth Fund
c/o Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Fund Manager
if to the Custodian:
Bank of America NT&SA
International Securities Services
25 Cannon Street
London EC4P HN
England
Attention: Manager
14.5 Headings. The underlined headings contained
herein are for convenience of reference only, shall not be deemed
to be a part of this Agreement and shall not be referred to in
connection with the interpretation hereof.
14.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and both
of which, when taken together, shall constitute one agreement.
14.7 Governing Law. This Agreement shall be
construed in accordance with, and governed in all respects by,
the laws of the State of California (without giving effect to
principles of conflict of laws).
14.8 Force Majeure. Subject to the provisions of
Section 11 hereof regarding the Custodian's general standard of
care, no failure, delay or default in performance of any
obligation hereunder shall constitute an event of default or a
breach of this agreement, or give rise to any liability
whatsoever on the part of one party hereto to the other, to the
extent that such failure to perform, delay or default arises out
of a cause beyond the control and without negligence of the party
otherwise chargeable with failure, delay or default; including,
but not limited to: action or inaction of governmental, civil or
military authority; fire; strike; lockout or other labor dispute;
flood; war; riot; theft; earthquake; natural disaster; breakdown
of public or common carrier communications facilities; computer
malfunction; or act, negligence or default of the other party.
This paragraph shall in no way limit the right of either party to
this Agreement to make any claim against third parties for any
damages suffered due to such causes.
14.9 Successors and Assigns. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns, if any.
14.10 Waiver. No failure on the part of any person to
exercise any power, right, privilege or remedy hereunder, and no
delay on the part of any person in the exercise of any power,
right, privilege or remedy hereunder, shall operate as a waiver
thereof; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further
exercise thereof or of any other power, right, privilege or
remedy.
14.11 Amendments. This Agreement may not be amended,
modified, altered or supplemented other than by means of an
agreement or instrument executed on behalf of each of the parties
hereto.
14.12 Severability. In the event that any provision
of this Agreement, or the application of any such provision to
any person or set of circumstances, shall be determined to be
invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such
provision to persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent
permitted by law.
14.13 Parties in Interest. None of the provisions of
this Agreement is intended to provide any rights or remedies to
any person other than the 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 agreements and understandings between the parties hereto
relating to the subject matter hereof.
14.15 Variations of Pronouns. Whenever required by
the context hereof, the singular number shall include the
plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall
include the masculine and feminine genders.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first
above written.
"Custodian": BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ John B. Housen
Its
"Fund" FRANKLIN CALIFORNIA 250 GROWTH
FUND
By /s/ Charles B. Johnson
Its President
CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and
entered into as of February 14, 1992, by and between Franklin
Strategic Series, a Delaware business trust (the "Trust"), and
Bank of America National Trust and Savings Association, a banking
association organized under the laws of the United States (the
"Custodian").
RECITALS
A. The Trust is an investment company registered under
the Investment Company Act of 1940, as amended (the "Investment
Company Act") that invests and reinvests, on behalf of its
series, in Domestic Securities and Foreign Securities.
B. The Custodian is, and has represented to the Trust
that it is, a "bank" as that term is defined in Section 2(a)(5)
of the Investment Company 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 Trust and the Custodian desire to provide for
the retention of the Custodian as the custodian of the assets of
one of the Trust's current series, Franklin Small Cap Growth
Fund, on the terms and subject to the provisions set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS
For purposes of this Agreement, the following terms
shall have the respective meanings specified below:
"Agreement" shall mean this Custody Agreement.
"Board of Trustees" shall mean the Board of Trustees of
the Trust.
"Business Day" with respect to any Domestic Security
means any day, other than a Saturday or Sunday, that is not a day
on which banking institutions are authorized or required by law
to be closed in the city of New York and, with respect to Foreign
Securities, a London Business Day. "London Business Day" shall
mean any day on which dealings and deposits in U.S. dollars are
transacted in the London interbank market.
"Custodian" shall mean Bank of America National Trust and
Savings Association.
"Domestic Securities" shall have the meaning provided in
Subsection 2.1 hereof.
"Executive Committee" shall mean the executive committee
of the Board of Trustees.
"Foreign Custodian" shall have the meaning provided in
Section 4.1 hereof.
"Foreign Securities" shall have the meaning provided in
Section 2.1 hereof.
"Foreign Securities Depository" shall have the meaning
provided in Section 4.1 hereof.
"Investment Company Act" shall mean the Investment
Company Act of 1940, as amended.
"Securities" shall have the meaning provided in Section
2.1 hereof.
"Securities System" shall have the meaning provided in
Section 3.1 hereof.
"Securities System Account" shall have the meaning
provided in Subsection 3.8(a) hereof.
"Shares" shall mean shares of beneficial interest of the
Trust.
"Subcustodian" shall have the meaning provided in
Subsection 3.7 hereof, but shall not include any Foreign
Custodian.
"Transfer Agent" shall mean the duly appointed and
acting transfer agent for the Trust.
"Trust" shall mean the Franklin Strategic Series on
behalf of the Franklin Small Cap Growth Fund.
"Writing" shall mean a communication in writing, a
communication by telex, the Custodian's Global Custody
Instruction SystemTM, facsimile transmission, bank wire or other
teleprocess or electronic instruction system acceptable to the
Custodian.
Section 2. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS
2.1 Appointment of Custodian. The Trust hereby
appoints and designates the Custodian as a custodian of the
assets of the Trust including cash, securities the Trust desires
to be held within the United States ("Domestic Securities") and
securities it desires to be held outside the United States
("Foreign Securities"). Domestic Securities and Foreign
Securities are sometimes referred to herein, collectively, as
"Securities." The Custodian hereby accepts such appointment and
designation and agrees that it shall maintain custody of the
assets of the Trust delivered to it hereunder in the manner
provided for herein.
2.2 Delivery of Assets. The Trust agrees to deliver to
the Custodian Securities and cash owned by the Trust, payments of
income, principal or capital distributions received by the Trust
with respect to Securities owned by the Trust from time to time,
and the consideration received by it for such Shares or other
securities of the Trust as may be issued and sold from time to
time. The Custodian shall have no responsibility whatsoever for
any property or assets of the Trust held or received by the Trust
and not delivered to the Custodian pursuant to and in accordance
with the terms hereof. All Securities accepted by the Custodian
on behalf of the Trust under the terms of this Agreement shall be
in "street name" or other good delivery form as determined by the
Custodian.
2.3 Subcustodians. Upon receipt of Proper Instructions
and a certified copy of a resolution of the Board of Trustees or
of the Executive Committee certified by the Secretary or an
Assistant Secretary of the Trust, the Custodian may from time to
time appoint one or more Subcustodians or Foreign Custodians to
hold assets of the Trust in accordance with the provisions of
this Agreement.
2.4 No Duty to Manage. The Custodian, a Subcustodian
or a Foreign Custodian shall not have any duty or responsibility
to manage or recommend investments of the assets of the Trust
held by them or to initiate any purchase, sale or other
investment transaction in the absence of Proper Instructions or
except as otherwise specifically provided herein.
Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO
ASSETS OF THE TRUST HELD BY THE CUSTODIAN
3.1 Holding Securities. The Custodian shall hold and
physically segregate from any property owned by the Custodian,
for the account of the Trust, all non-cash property delivered by
the Trust to the Custodian hereunder other than Securities which,
pursuant to Subsection 3.8 hereof, are held through a registered
clearing agency, a registered securities depository, the Federal
Reserve's book-entry securities system (referred to herein,
individually, as a "Securities System"), or held by a
Subcustodian, Foreign Custodian or in a Foreign Securities
Depository.
3.2 Delivery of Securities. Except as otherwise
provided in Subsection 3.5 hereof, the Custodian, upon receipt of
Proper Instructions, shall release and deliver Securities owned
by the Trust and held by the Custodian in the following cases or
as otherwise directed in Proper Instructions:
(a) except as otherwise provided herein,
upon sale of such Securities for the account of the
Trust and receipt by the Custodian, a Subcustodian or a
Foreign Custodian of payment therefor;
(b) upon the receipt of payment by the
Custodian, a Subcustodian or a Foreign Custodian in
connection with any repurchase agreement related to
such Securities entered into by the Trust;
(c) in the case of a sale effected through a
Securities System, in accordance with the provisions of
Subsection 3.8 hereof;
(d) to a tender agent or other authorized
agent in connection with (i) a tender or other similar
offer for Securities owned by the Trust, or (ii) a
tender offer or repurchase by the Trust of its own
Shares;
(e) to the issuer thereof or its agent when
such Securities are called, redeemed, retired or
otherwise become payable; provided, that in any such
case, the cash or other consideration is to be
delivered to the Custodian, a Subcustodian or a Foreign
Custodian;
(f) to the issuer thereof, or its agent, for
transfer into the name or nominee name of the Trust,
the name or nominee name of the Custodian, the name or
nominee name of any Subcustodian or Foreign Custodian;
or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new Securities are to be
delivered to the Custodian, a Subcustodian or Foreign
Custodian;
(g) to the broker selling the same for
examination in accordance with the "street delivery"
custom;
(h) for exchange or conversion pursuant to
any plan of merger, consolidation, recapitalization, or
reorganization of the issuer of such Securities, or
pursuant to a conversion of such Securities; provided
that, in any such case, the new Securities and cash, if
any, are to be delivered to the Custodian or a
Subcustodian;
(i) in the case of warrants, rights or
similar securities, the surrender thereof in connection
with the exercise of such warrants, rights or similar
Securities or the surrender of interim receipts or
temporary Securities for definitive Securities;
provided that, in any such case, the new Securities and
cash, if any, are to be delivered to the Custodian, a
subcustodian or a Foreign Custodian;
(j) for delivery in connection with any
loans of Securities made by the Trust, but only against
receipt by the Custodian, a Subcustodian or a Foreign
Custodian of adequate collateral as determined by the
Trust (and identified in Proper Instructions
communicated to the Custodian), which may be in the
form of cash or obligations issued by the United
States government, its agencies or instrumentalities,
except that in connection with any loans for which
collateral is to be credited to the account of the
Custodian, a Subcustodian or a Foreign Custodian in the
Federal Reserve's book-entry securities system, the
Custodian will not be held liable or responsible for
the delivery of Securities owned by the Trust prior to
the receipt of such collateral;
(k) for delivery as security in connection
with any borrowings by the Trust requiring a pledge of
assets by the Trust, but only against receipt by the
Custodian, a Subcustodian or a Foreign Custodian of
amounts borrowed;
(l) for delivery in accordance with the
provisions of any agreement among the Trust, the
Custodian, a Subcustodian or a Foreign Custodian and a
broker-dealer relating to compliance with the rules of
registered clearing corporations and of any registered
national securities exchange, or of any similar
organization or organizations, regarding escrow or
other arrangements in connection with transactions by
the Trust;
(m) for delivery in accordance with the
provisions of any agreement among the Trust, the
Custodian, a Subcustodian or a Foreign Custodian and a
futures commission merchant, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any contract market, or any similar
organization or organizations, regarding account
deposits in connection with transactions by the Trust;
(n) upon the receipt of instructions from
the Transfer Agent for delivery to the Transfer Agent
or to the holders of Shares in connection with
distributions in kind in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(o) for any other proper purpose, but only
upon receipt of Proper Instructions, and a certified
copy of a resolution of the Trustees or of the
Executive Committee certified by the Secretary or an
Assistant Secretary of the Trust, specifying the
securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such
purpose to be a proper purpose, and naming the person
or persons to whom delivery of such securities shall be
made.
3.3 Registration of Securities. Securities held by the
Custodian, a Subcustodian or a Foreign Custodian (other than
bearer Securities) shall be registered in the name or nominee
name of the Trust, in the name or nominee name of the Custodian
or in the name or nominee name of any Subcustodian or Foreign
Custodian. The Trust agrees to hold the Custodian, any such
nominee, Subcustodian or Foreign Custodian harmless from any
liability as a holder of record of such Securities.
3.4 Bank Accounts. The Custodian shall open and
maintain a separate bank account or accounts for the Trust,
subject only to draft or order by the Custodian acting pursuant
to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by
it hereunder from or for the account of the Trust, other than
cash maintained by the Trust in a bank account established and
used in accordance with Rule 17f-3 under the Investment Company
Act. Funds held by the Custodian for the Trust may be deposited
by it to its credit as Custodian in the banking departments of
the Custodian, a Subcustodian or a Foreign Custodian. It is
understood and agreed by the Custodian and the Trust that the
rate of interest, if any, payable on such funds (including
foreign currency deposits) that are deposited with the Custodian
may not be a market rate of interest and that the rate of
interest payable by the Custodian to the Trust shall be agreed
upon by the Custodian and the Trust from time to time. Such
funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
3.5 Collection of Income; Trade Settlement; Crediting
of Accounts. The Custodian shall collect income payable with
respect to Securities owned by the Trust, settle Securities
trades for the account of the Trust and credit and debit the
Trust's account with the Custodian in connection therewith as
follows:
(a) Upon receipt of Proper Instructions, the
Custodian shall effect the purchase of a Security by
charging the account of the Trust on the contractual
settlement date. The Custodian shall have no liability
of any kind to any person, including the Trust, if the
Custodian effects payment on behalf of the Trust as
provided for herein or in Proper Instructions, and the
seller or selling broker fails to deliver the
Securities purchased.
(b) Upon receipt of Proper Instructions, the
Custodian shall effect the sale of a Security by
delivering a certificate or other indicia of ownership,
and shall credit the account of the Trust with the
proceeds of such sale on the contractual settlement
date. The Custodian shall have no liability of any
kind to any person, including the Trust, if the
Custodian delivers such a certificate(s) or other
indicia of ownership as provided for herein or in
Proper Instructions, and the purchaser or purchasing
broker fails to effect payment to the Trust within a
reasonable time period, as determined by the Custodian
in its sole discretion. In such event, the Custodian
shall be entitled to reimbursement of the amount so
credited to the account of the Trust in connection with
such sale.
(c) The Trust is responsible for ensuring
that the Custodian receives timely and accurate Proper
Instructions to enable the Custodian to effect
settlement of any purchase or sale. If the Custodian
does not receive such instructions within the required
time period, the Custodian shall have no liability of
any kind to any person, including the Trust, for
failing to effect settlement on the contractual
settlement date. However, the Custodian shall use its
best reasonable efforts to effect settlement as soon as
possible after receipt of Proper Instructions.
(d) The Custodian shall credit the account
of the Trust with interest income payable on interest
bearing Securities on payable date. Interest income on
cash balances will be credited monthly to the account
of the Trust on the first Business Day (on which the
Custodian is open for business) following the end of
each month. Dividends and other amounts payable with
respect to Domestic Securities and Foreign Securities
shall be credited to the account of the Trust when
received by the Custodian. The Custodian shall not be
required to commence suit or collection proceedings or
resort to any extraordinary means to collect such
income and other amounts payable with respect to
Securities owned by the Trust. The collection of
income due the Trust on Domestic Securities loaned
pursuant to the provisions of Subsection 3.2(j) shall
be the responsibility of the Trust. The Custodian will
have no duty or responsibility in connection therewith,
other than to provide the Trust with such information
or data as may be necessary to assist the Trust in
arranging for the timely delivery to the Custodian of
the income to which the Trust is entitled. The
Custodian shall have no liability to any person,
including the Trust, if the Custodian credits the
account of the Trust with such income or other amounts
payable with respect to Securities owned by the Trust
(other than Securities loaned by the Trust pursuant to
Subsection 3.2(j) hereof) and the Custodian
subsequently is unable to collect such income or other
amounts from the payors thereof within a reasonable
time period, as determined by the Custodian in its sole
discretion. In such event, the Custodian shall be
entitled to reimbursement of the amount so credited to
the account of the Trust.
3.6 Payment of Trust Monies. Upon receipt of Proper
Instructions the Custodian shall pay out monies of the Trust in
the following cases or as otherwise directed in Proper
Instructions:
(a) upon the purchase of Securities, futures
contracts or options on futures contracts for the
account of the Trust but only, except as otherwise
provided herein, (i) against the delivery of such
securities, or evidence of title to futures contracts
or options on futures contracts, to the Custodian or a
Subcustodian registered pursuant to Subsection 3.3
hereof or in proper form for transfer; (ii) in the case
of a purchase effected through a Securities System, in
accordance with the conditions set forth in Subsection
3.8 hereof; or (iii) in the case of repurchase
agreements entered into between the Trust and the
Custodian, another bank or a broker-dealer (A) against
delivery of the Securities either in certificated form
to the Custodian or a Subcustodian or through an entry
crediting the Custodian's account at the appropriate
Federal Reserve Bank with such Securities or (B)
against delivery of the confirmation evidencing
purchase by the Trust of Securities owned by the
Custodian or such broker-dealer or other bank along
with written evidence of the agreement by the Custodian
or such broker-dealer or other bank to repurchase such
Securities from the Trust;
(b) in connection with conversion, exchange
or surrender of Securities owned by the Trust as set
forth in Subsection 3.2 hereof;
(c) for the redemption or repurchase of
Shares issued by the Trust;
(d) for the payment of any expense or
liability incurred by the Trust, including but not
limited to the following payments for the account of
the Trust: custodian fees, interest, taxes, management,
accounting, transfer agent and legal fees and operating
expenses of the Trust whether or not such expenses are
to be in whole or part capitalized or treated as
deferred expenses; and
(e) for the payment of any dividends or
distributions declared by the Board of Trustees with
respect to the Shares.
3.7 Appointment of Subcustodians. The Custodian may,
upon receipt of Proper Instructions, appoint another bank or
trust company, which is itself qualified under the Investment
Company Act to act as a custodian (a "Subcustodian"), as the
agent of the Custodian to carry out such of the duties of the
Custodian hereunder as 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 Trust in a Securities System in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following
provisions:
(a) the Custodian may hold Domestic
Securities of the Trust in the Depository Trust Company
or the Federal Reserve's book entry system or, upon
receipt of Proper Instructions, in another Securities
System provided that such securities are held in an
account of the Custodian in the Securities System
("Securities System Account") which shall not include
any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
(b) the records of the Custodian with
respect to Domestic Securities of the Trust which are
maintained in a Securities System shall identify by
book-entry those Domestic Securities belonging to the
Trust;
(c) the Custodian shall pay for Domestic
Securities purchased for the account of the Trust upon
(i) receipt of advice from the Securities System that
such securities have been transferred to the Securities
System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of the Trust. The Custodian
shall transfer Domestic Securities sold for the account
of the Trust upon (A) receipt of advice from the
Securities System that payment for such securities has
been transferred to the Securities System Account, and
(B) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the
account of the Trust. Copies of all advices from the
Securities System of transfers of Domestic Securities
for the account of the Trust shall be maintained for
the Trust by the Custodian and be provided to the Trust
at its request. Upon request, the Custodian shall
furnish the Trust confirmation of each transfer to or
from the account of the Trust in the form of a written
advice or notice; and
(d) upon request, the Custodian shall
provide the Trust with any report obtained by the
Custodian on the Securities System's accounting system,
internal accounting control and procedures for
safeguarding domestic securities deposited in the
Securities System.
3.9 Segregated Account. The Custodian shall upon
receipt of Proper Instructions establish and maintain a
segregated account or accounts for and on behalf of the Trust,
into which account or accounts may be transferred cash and/or
Securities, including Securities maintained in an account by the
Custodian pursuant to Section 3.8 hereof, (i) in accordance with
the provisions of any agreement among the Trust, the Custodian
and a broker-dealer or futures commission merchant, relating to
compliance with the rules of registered clearing corporations and
of any national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Trust, (ii)
for purposes of segregating cash or securities in connection with
options purchased, sold or written by the Trust or commodity
futures contracts or options thereon purchased or sold by the
Trust and (iii) for other proper corporate purposes, but only, in
the case of this clause (iii), upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes
to be proper corporate purposes.
3.10 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection
with receipt of income or other payments with respect to domestic
securities of the Trust held by it and in connection with
transfers of such securities.
3.11 Proxies. The Custodian shall, with respect to
the Securities held hereunder, promptly deliver to the Trust all
proxies, all proxy soliciting materials and all notices relating
to such Securities. If the Securities are registered otherwise
than in the name of the Trust or a nominee of the Trust, the
Custodian shall use its best reasonable efforts, consistent with
applicable law, to cause all proxies to be promptly executed by
the registered holder of such Securities in accordance with
Proper Instructions.
3.12 Communications Relating to Trust Portfolio
Securities. The Custodian shall transmit promptly to the Trust
all written information (including, without limitation, pendency
of calls and maturities of Securities and expirations of rights
in connection therewith and notices of exercise of put and call
options written by the Trust and the maturity of futures
contracts purchased or sold by the Trust) received by the
Custodian from issuers of Securities being held for the Trust.
With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Trust all written information received
by the Custodian from issuers of the Securities whose tender or
exchange is sought and from the party (or its agents) making the
tender or exchange offer. If the Trust desires to take action
with respect to any tender offer, exchange offer or any other
similar transaction, the Trust shall notify the Custodian at
least three Business Days prior to the date of which the
Custodian is to take such action.
3.13 Reports by Custodian. Custodian shall each
business day furnish the Trust 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 Trust 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 TRUST HELD OUTSIDE
THE UNITED STATES
4.1 Custody outside the United States. The Trust
authorizes the Custodian to hold Foreign Securities and cash in
custody accounts which have been established by the Custodian
with (i) its foreign branches, (ii) foreign banking institutions,
foreign branches of United States banks and subsidiaries of
United States banks or bank holding companies (each a "Foreign
Custodian") and (iii) Foreign Securities depositories or clearing
agencies (each a "Foreign Securities Depository"); provided,
however, that the Board of Trustees or the Executive Committee
has approved in advance the use of each such Foreign Custodian
and Foreign Securities Depository and the contract between the
Custodian and each Foreign Custodian and that such approval is
set forth in Proper Instructions and a certified copy of a
resolution of the Board of Trustees or of the Executive Committee
certified by the Secretary or an Assistant Secretary of the
Trust. Unless expressly provided to the contrary in this Section
4, custody of Foreign Securities and assets held outside the
United States by the Custodian, a Foreign Custodian or through a
Foreign Securities Depository shall be governed by Section 3
hereof.
4.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of its
foreign branches, Foreign Custodians and Foreign Securities
Depositories to: (i) "foreign securities", as defined in
paragraph (c) (1) of Rule 17f-5 under the Investment Company Act,
and (ii) cash and cash equivalents in such amounts as the
Custodian or the Trust may determine to be reasonably necessary
to effect the Trust's Foreign Securities transactions.
4.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Custodian and the
Trust, assets of the Trust shall be maintained in Foreign
Securities Depositories only through arrangements implemented by
the Custodian or Foreign Custodians pursuant to the terms hereof.
4.4 Segregation of Securities. The Custodian shall
identify on its books and records as belonging to the Trust, the
Foreign Securities of the Trust held by each Foreign Custodian.
4.5 Agreements with Foreign Custodians. Each
agreement with a Foreign Custodian shall provide generally that:
(a) the Trust's assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the
Foreign Custodian or its creditors, except a claim of payment for
their safe custody or administration; (b) beneficial ownership
for the Trust's assets will be freely transferable without the
payment of money or value other than for custody or
administration; (c) adequate records will be maintained
identifying the assets as belonging to the Trust; (d) the
independent public accountants for the Trust, will be given
access to the records of the Foreign Custodian relating to the
assets of the Trust or confirmation of the contents of those
records; (e) the disposition of assets of the Trust held by the
Foreign Custodian will be subject only to the instructions of the
Custodian or its agents; (f) the Foreign Custodian shall
indemnify and hold harmless the Custodian and the Trust from and
against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the Foreign Custodian's
performance of its obligations under such agreement; (g) to the
extent practicable, the Trust's assets will be adequately insured
in the event of loss; and (h) the Custodian will receive periodic
reports with respect to the safekeeping of the Trust's assets,
including notification of any transfer to or from the Trust's
account.
4.6 Access of Independent Accountants of the Trust.
Upon request of the Trust, the Custodian will use its best
reasonable efforts to arrange for the independent accountants of
the Trust to be afforded access to the books and records of any
Foreign Custodian insofar as such books and records relate to the
custody by any such Foreign Custodian of assets of the Trust.
4.7 Transactions in Foreign Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall instruct the
appropriate Foreign Custodian to transfer, exchange or deliver
Foreign Securities owned by the Trust, but, except to the extent
explicitly provided herein, only in any of the cases specified in
Subsection 3.2. Upon receipt of Proper Instructions, the
Custodian shall pay out or instruct the appropriate Foreign
Custodian to pay out monies of the Trust in any of the cases
specified in Subsection 3.6. Notwithstanding anything herein to
the contrary, settlement and payment for Foreign Securities
received for the account of the Trust and delivery of Foreign
Securities maintained for the account of the Trust may be
effected in accordance with the customary or established
securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering securities to
the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation
of receiving later payment for such securities from such
purchaser or dealer. Foreign Securities maintained in the
custody of a Foreign Custodian may be maintained in the name of
such entity or its nominee name to the same extent as set forth
in Section 3.3 of this Agreement and the Trust agrees to hold any
Foreign Custodian and its nominee harmless from any liability as
a holder of record of such securities.
4.8 Liability of Foreign Custodian. Each agreement
between the Custodian and a Foreign Custodian shall require the
Foreign Custodian to exercise reasonable care in the performance
of its duties and to indemnify and hold harmless the Custodian
and the Trust from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the
Foreign Custodian's performance of such obligations. At the
election of the Trust, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claims against a
Foreign Custodian as a consequence of any such loss, damage,
cost, expense, liability or claim if and to the extent that the
Trust has not been made whole for any such loss, damage, cost,
expense, liability or claim.
4.9 Monitoring Responsibilities.
(a) The Custodian will promptly inform the
Trust in the event that the Custodian learns of a
material adverse change in the financial condition of a
Foreign Custodian or is notified by (i) a foreign
banking institution employed as a Foreign Custodian
that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200
million or that its shareholders' equity has declined
below $200 million (in each case computed in accordance
with generally accepted United States accounting
principles), and denominated in U.S. dollars, or (ii) a
subsidiary of a United States bank or bank holding
company acting as a Foreign Custodian that there
appears to be a substantial likelihood that its
shareholders' equity will decline below $100 million or
that its shareholders' equity has declined below $100
million (in each case computed in accordance with
generally accepted United States accounting
principles), and denominated in U.S. dollars.
(b) The custodian will furnish such
information as may be reasonably necessary to assist
the Trust's Board of Trustees in its annual review and
approval of the continuance of all contracts or
arrangements with Foreign Subcustodians.
Section 5. PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper
Instructions" means instructions of the Trust received by the
Custodian via telephone or in Writing which the Custodian
believes in good faith to have been given by Authorized Persons
(as defined below) or which are transmitted with proper testing
or authentication pursuant to terms and conditions which the
Custodian may specify. Any Proper Instructions delivered to the
Custodian by telephone shall promptly thereafter be confirmed in
Writing by an Authorized Person, but the Trust will hold the
Custodian harmless for its failure to send such confirmation in
writing, the failure of such confirmation to conform to the
telephone instructions received or the Custodian's failure to
produce such confirmation at any subsequent time. Unless
otherwise expressly provided, all Proper Instructions shall
continue in full force and effect until cancelled or superseded.
If the Custodian requires test arrangements, authentication
methods or other security devices to be used with respect to
Proper Instructions, any Proper Instructions given by the Trust
thereafter shall be given and processed in accordance with such
terms and conditions for the use of such arrangements, methods or
devices as the Custodian may put into effect and modify from time
to time. The Trust shall safeguard any test keys, identification
codes or other security devices which the Custodian shall make
available to it. The Custodian may electronically record any
Proper Instructions given by telephone, and any other telephone
discussions, with respect to its activities hereunder. As used
in this Agreement, the term "Authorized Persons" means such
officers or such agents of the Trust as have been designated by a
resolution of the Board of trustees or of the Executive
Committee, a certified copy of which has been provided to the
Custodian, to act on behalf of the Trust under this Agreement.
Each of such persons shall continue to be an Authorized Person
until such time as the Custodian receives Proper Instructions
that any such officer or agent is no longer an Authorized Person.
Section 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express
authority from the Trust:
(a) make payments to itself or others for
minor expenses of handling Securities or other similar
items relating to its duties under this Agreement,
provided that all such payments shall be accounted for
to the Trust;
(b) endorse for collection, in the name of
the Trust, checks, drafts and other negotiable
instruments; and
(c) in general, attend to all non-
discretionary details in connection with the sale,
exchange, substitution, purchase, transfer and other
dealings with the Securities and property of the Trust
except as otherwise provided in Proper Instructions.
Section 7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any
instructions (conveyed by telephone or in Writing), notice,
request, consent, certificate or other instrument or paper
believed by it to be genuine and to have been properly given or
executed by or on behalf of the Trust. The Custodian may receive
and accept a certified copy of a resolution of the Board of
Trustees or Executive Committee as conclusive evidence (a) of the
authority of any person to act in accordance with such resolution
or (b) of any determination or of any action by the Board of
Trustees or Executive Committee as described in such resolution,
and such resolution may be considered as in full force and effect
until receipt by the Custodian of written notice by an Authorized
Person to the contrary.
Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary
information in its possession (to the extent permissible under
applicable law) to the entity or entities appointed by the Board
of Trustees to keep the books of account of the Trust and/or
compute the net asset value per Share of the outstanding Shares
of the Trust.
Section 9. RECORDS
The Custodian shall create and maintain all records
relating to its activities under this Agreement which are
required with respect to such activities under Section 31 of the
Investment Company Act and Rules 31a-1 and 31a-2 thereunder. All
such records shall be the property of the Trust and shall at all
times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents
of the Trust and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Trust's
request, supply the Trust with a tabulation of Securities owned
by the Trust and held by the Custodian and shall, when requested
to do so by the Trust and for such compensation as shall be
agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
Section 10. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Trust and the
Custodian.
Section 11. RESPONSIBILITY OF CUSTODIAN
The Custodian shall be responsible for the performance
of only such duties as are set forth herein or contained in
Proper Instructions and shall use reasonable care in carrying out
such duties. The Custodian shall be liable to the Trust for any
loss which shall occur as the result of the failure of a Foreign
Custodian or a Foreign Securities Depository engaged by such
Foreign Custodian or the Custodian to exercise reasonable care
with respect to the safekeeping of securities and other assets of
the Trust to the same extent that the Custodian would be liable
to the Trust if the Custodian itself were holding such securities
and other assets. In the event of any loss to the Trust by
reason of the failure of the Custodian, a Foreign Custodian or a
Foreign Securities Depository engaged by such Foreign Custodian
or the Custodian to utilize reasonable care, the Custodian shall
be liable to the Trust to the extent of the Trust's damages, to
be determined based on the market value of the property which is
the subject of the loss at the date of discovery of such loss and
without reference to any special conditions or circumstances.
The Custodian shall be held to the exercise of reasonable care in
carrying out this Agreement. The Trust agrees to indemnify and
hold harmless the Custodian and its nominees from all taxes,
charges, expenses, assessments, claims and liabilities (including
legal fees and expenses) incurred by any of them in connection
with the performance of this Agreement, except such as may arise
from any negligent action, negligent failure to act or willful
misconduct on the part of the indemnified entity or any Foreign
Custodian or Foreign Securities Depository. The Custodian shall
be entitled to rely, and may act, on advice of counsel (who may
be counsel for the Trust) on all matters and shall be without
liability for any action reasonably taken or omitted pursuant to
such advice. The Custodian need not maintain any insurance for
the benefit of the Trust.
All collections of funds or other property paid or
distributed in respect of Securities held by the Custodian,
agent, Subcustodian or Foreign Custodian hereunder shall be made
at the risk of the Trust. The Custodian shall have no liability
for any loss occasioned by delay in the actual receipt of notice
by the Custodian, agent, Subcustodian or by a Foreign Custodian
of any payment, redemption or other transaction regarding
securities in respect of which the Custodian has agreed to take
action as provided in Section 3 hereof. The Custodian shall not
be liable for any action taken in good faith upon Proper
Instructions or upon any certified copy of any resolution of the
Board of Trustees and may rely on the genuineness of any such
documents which it may in good faith believe to be validly
executed. The Custodian shall not be liable for any loss
resulting from, or caused by, the direction of the Trust to
maintain custody of any Securities or cash in a foreign country
including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, civil
disturbance, acts of war or terrorism, insurrection, revolution,
nuclear fusion, fission or radiation or other similar occurrences
or events beyond the control of the Custodian. Finally, the
Custodian shall not be liable for any taxes, including interest
and penalties with respect thereto, that may be levied or
assessed upon or in respect of any assets of the Trust held by
the Custodian.
Section 12. LIMITED LIABILITY OF THE TRUST
The Custodian acknowledges that it has received notice
of and accepts the limitations of the Trust's liability as set
forth in its Agreement and Declaration of Trust. The Custodian
agrees that the Trust's obligation hereunder shall be limited to
the assets of the Trust, and that the Custodian shall not seek
satisfaction of any such obligation from the shareholders of the
Trust nor from any Trustee, officer, employee, or agent of the
Trust.
Section 13. EFFECTIVE PERIOD; TERMINATION
This Agreement shall become effective as of the date of
its execution and shall continue in full force and effect until
terminated as hereinafter provided. This Agreement may be
terminated by the Trust or the Custodian by 60 days notice in
Writing to the other provided that any termination by the Trust
shall be authorized by a resolution of the Board of Trustees, a
certified copy of which shall accompany such notice of
termination, and provided further, that such resolution shall
specify the names of the persons to whom the Custodian shall
deliver the assets of the Trust held by it. If notice of
termination is given by the Custodian, the Trust shall, within 60
days following the giving of such notice, deliver to the
Custodian a certified copy of a resolution of the Board of
Trustees specifying the names of the persons to whom the
Custodian shall deliver assets of the Trust held by it. In
either case the Custodian will deliver such assets to the persons
so specified, after deducting therefrom any amounts which the
Custodian determines to be owed to it hereunder (including all
costs and expenses of delivery or transfer of Trust assets to the
persons so specified). If within 60 days following the giving of
a notice of termination by the Custodian, the Custodian does not
receive from the Trust a certified copy of a resolution of the
Board of Trustees specifying the names of the persons to whom the
Custodian shall deliver the assets of the Trust held by it, the
Custodian, at its election, may deliver such assets to a bank or
trust company doing business in the State of California to be
held and disposed of pursuant to the provisions of this Agreement
or may continue to hold such assets until a certified copy of one
or more resolutions as aforesaid is delivered to the Custodian.
The obligations of the parties hereto regarding the use of
reasonable care, indemnities and payment of fees and expenses
shall survive the termination of this Agreement.
Section 14. MISCELLANEOUS
14.1 Relationship. Nothing contained in this Agreement
shall (i) create any fiduciary, joint venture or partnership
relationship between the Custodian and the Trust or (ii) be
construed as or constitute a prohibition against the provision by
the Custodian or any of its affiliates to the Trust of investment
banking, securities dealing or brokerages services or any other
banking or financial services.
14.2 Further Assurances. Each party hereto shall
furnish to the other party hereto such instruments and other
documents as such other party may reasonably request for the
purpose of carrying out or evidencing the transactions
contemplated by this Agreement.
14.3 Attorneys' Fees. If any lawsuit or other action
or proceeding relating to this Agreement is brought by a party
hereto against the other party hereto, the prevailing party shall
be entitled to recover reasonable attorneys' fees, costs and
disbursements (including allocated costs and disbursements of in-
house counsel), in addition to any other relief to which the
prevailing party may be entitled.
14.4 Notices. Except as otherwise specified herein,
each notice or other communication hereunder shall be in Writing
and shall be delivered to the intended recipient at the following
address (or at such other address as the intended recipient shall
have specified in a written notice given to the other parties
hereto):
if to the Trust:
Franklin Strategic Series
c/o Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Trust Manager
if to the Custodian:
Bank of America NT&SA
1455 Market Street
16th Floor, Dept. 5014
San Francisco, CA 94104
Attention: Manager
14.5 Headings. The underlined headings contained
herein are for convenience of reference only, shall not be deemed
to be a part of this Agreement and shall not be referred to in
connection with the interpretation hereof.
14.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and both
of which, when taken together, shall constitute one agreement.
14.7 Governing Law. This Agreement shall be
construed in accordance with, and governed in all respects by,
the laws of the State of California (without giving effect to
principles of conflict of laws).
14.8 Force Majeure. Subject to the provisions of
Section 11 hereof regarding the Custodian's general standard of
care, no failure, delay or default in performance of any
obligation hereunder shall constitute an event of default or a
breach of this agreement, or give rise to any liability
whatsoever on the part of one party hereto to the other, to the
extent that such failure to perform, delay or default arises out
of a cause beyond the control and without negligence of the party
otherwise chargeable with failure, delay or default; including,
but not limited to: action or inaction of governmental, civil or
military authority; fire; strike; lockout or other labor dispute;
flood; war; riot; theft; earthquake; natural disaster; breakdown
of public or common carrier communications facilities; computer
malfunction; or act, negligence or default of the other party.
This paragraph shall in no way limit the right of either party to
this Agreement to make any claim against third parties for any
damages suffered due to such causes.
14.9 Successors and Assigns. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns, if any.
14.10 Waiver. No failure on the part of any person to
exercise any power, right, privilege or remedy hereunder, and no
delay on the part of any person in the exercise of any power,
right, privilege or remedy hereunder, shall operate as a waiver
thereof; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further
exercise thereof or of any other power, right, privilege or
remedy.
14.11 Amendments. This Agreement may not be amended,
modified, altered or supplemented other than by means of an
agreement or instrument executed on behalf of each of the parties
hereto.
14.12 Severability. In the event that any provision
of this Agreement, or the application of any such provision to
any person or set of circumstances, shall be determined to be
invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such
provision to persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent
permitted by law.
14.13 Parties in Interest. None of the provisions of
this Agreement is intended to provide any rights or remedies to
any person other than the Trust and the Custodian and their
respective successors and assigns, if any.
14.14 Entire Agreement. This Agreement sets forth the
entire understanding of the parties hereto and supersedes all
prior agreements and understandings between the parties hereto
relating to the subject matter hereof.
14.15 Variations of Pronouns. Whenever required by
the context hereof, the singular number shall include the
plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above
written.
"Custodian": BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ John B. Housen
Its Vice President
"Trust": FRANKLIN STRATEGIC SERIES
By Harmon E. Burns
Its Vice President
CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and
entered into as of February 14, 1992, by and between Franklin
Strategic Series, a Delaware business trust (the "Trust"), and
Bank of America National Trust and Savings Association, a banking
association organized under the laws of the United States (the
"Custodian").
RECITALS
A. The Trust is an investment company registered under
the Investment Company Act of 1940, as amended (the "Investment
Company Act") that invests and reinvests, on behalf of its
series, in Domestic Securities and Foreign Securities.
B. The Custodian is, and has represented to the Trust
that it is, a "bank" as that term is defined in Section 2(a)(5)
of the Investment Company 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 Trust and the Custodian desire to provide for
the retention of the Custodian as the custodian of the assets of
one of the Trust's current series, Franklin Global Health Care
Fund, on the terms and subject to the provisions set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS
For purposes of this Agreement, the following terms
shall have the respective meanings specified below:
"Agreement" shall mean this Custody Agreement.
"Board of Trustees" shall mean the Board of Trustees of
the Trust.
"Business Day" with respect to any Domestic Security
means any day, other than a Saturday or Sunday, that is not a day
on which banking institutions are authorized or required by law
to be closed in the city of New York and, with respect to Foreign
Securities, a London Business Day. "London Business Day" shall
mean any day on which dealings and deposits in U.S. dollars are
transacted in the London interbank market.
"Custodian" shall mean Bank of America National Trust and
Savings Association.
"Domestic Securities" shall have the meaning provided in
Subsection 2.1 hereof.
"Executive Committee" shall mean the executive committee
of the Board of Trustees.
"Foreign Custodian" shall have the meaning provided in
Section 4.1 hereof.
"Foreign Securities" shall have the meaning provided in
Section 2.1 hereof.
"Foreign Securities Depository" shall have the meaning
provided in Section 4.1 hereof.
"Investment Company Act" shall mean the Investment
Company Act of 1940, as amended.
"Securities" shall have the meaning provided in Section
2.1 hereof.
"Securities System" shall have the meaning provided in
Section 3.1 hereof.
"Securities System Account" shall have the meaning
provided in Subsection 3.8(a) hereof.
"Shares" shall mean shares of beneficial interest of the
Trust.
"Subcustodian" shall have the meaning provided in
Subsection 3.7 hereof, but shall not include any Foreign
Custodian.
"Transfer Agent" shall mean the duly appointed and
acting transfer agent for the Trust.
"Trust" shall mean the Franklin Strategic Series on
behalf of Franklin Global Health Care Fund.
"Writing" shall mean a communication in writing, a
communication by telex, the Custodian's Global Custody
Instruction SystemTM, facsimile transmission, bank wire or other
teleprocess or electronic instruction system acceptable to the
Custodian.
Section 2. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS
2.1 Appointment of Custodian. The Trust hereby
appoints and designates the Custodian as a custodian of the
assets of the Trust including cash, securities the Trust desires
to be held within the United States ("Domestic Securities") and
securities it desires to be held outside the United States
("Foreign Securities"). Domestic Securities and Foreign
Securities are sometimes referred to herein, collectively, as
"Securities." The Custodian hereby accepts such appointment and
designation and agrees that it shall maintain custody of the
assets of the Trust delivered to it hereunder in the manner
provided for herein.
2.2 Delivery of Assets. The Trust agrees to deliver to
the Custodian Securities and cash owned by the Trust, payments of
income, principal or capital distributions received by the Trust
with respect to Securities owned by the Trust from time to time,
and the consideration received by it for such Shares or other
securities of the Trust as may be issued and sold from time to
time. The Custodian shall have no responsibility whatsoever for
any property or assets of the Trust held or received by the Trust
and not delivered to the Custodian pursuant to and in accordance
with the terms hereof. All Securities accepted by the Custodian
on behalf of the Trust under the terms of this Agreement shall be
in "street name" or other good delivery form as determined by the
Custodian.
2.3 Subcustodians. Upon receipt of Proper Instructions
and a certified copy of a resolution of the Board of Trustees or
of the Executive Committee certified by the Secretary or an
Assistant Secretary of the Trust, the Custodian may from time to
time appoint one or more Subcustodians or Foreign Custodians to
hold assets of the Trust in accordance with the provisions of
this Agreement.
2.4 No Duty to Manage. The Custodian, a Subcustodian
or a Foreign Custodian shall not have any duty or responsibility
to manage or recommend investments of the assets of the Trust
held by them or to initiate any purchase, sale or other
investment transaction in the absence of Proper Instructions or
except as otherwise specifically provided herein.
Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO
ASSETS OF THE TRUST HELD BY THE CUSTODIAN
3.1 Holding Securities. The Custodian shall hold and
physically segregate from any property owned by the Custodian,
for the account of the Trust, all non-cash property delivered by
the Trust to the Custodian hereunder other than Securities which,
pursuant to Subsection 3.8 hereof, are held through a registered
clearing agency, a registered securities depository, the Federal
Reserve's book-entry securities system (referred to herein,
individually, as a "Securities System"), or held by a
Subcustodian, Foreign Custodian or in a Foreign Securities
Depository.
3.2 Delivery of Securities. Except as otherwise
provided in Subsection 3.5 hereof, the Custodian, upon receipt of
Proper Instructions, shall release and deliver Securities owned
by the Trust and held by the Custodian in the following cases or
as otherwise directed in Proper Instructions:
(a) except as otherwise provided herein,
upon sale of such Securities for the account of the
Trust and receipt by the Custodian, a Subcustodian or a
Foreign Custodian of payment therefor;
(b) upon the receipt of payment by the
Custodian, a Subcustodian or a Foreign Custodian in
connection with any repurchase agreement related to
such Securities entered into by the Trust;
(c) in the case of a sale effected through a
Securities System, in accordance with the provisions of
Subsection 3.8 hereof;
(d) to a tender agent or other authorized
agent in connection with (i) a tender or other similar
offer for Securities owned by the Trust, or (ii) a
tender offer or repurchase by the Trust of its own
Shares;
(e) to the issuer thereof or its agent when
such Securities are called, redeemed, retired or
otherwise become payable; provided, that in any such
case, the cash or other consideration is to be
delivered to the Custodian, a Subcustodian or a Foreign
Custodian;
(f) to the issuer thereof, or its agent, for
transfer into the name or nominee name of the Trust,
the name or nominee name of the Custodian, the name or
nominee name of any Subcustodian or Foreign Custodian;
or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new Securities are to be
delivered to the Custodian, a Subcustodian or Foreign
Custodian;
(g) to the broker selling the same for
examination in accordance with the "street delivery"
custom;
(h) for exchange or conversion pursuant to
any plan of merger, consolidation, recapitalization, or
reorganization of the issuer of such Securities, or
pursuant to a conversion of such Securities; provided
that, in any such case, the new Securities and cash, if
any, are to be delivered to the Custodian or a
Subcustodian;
(i) in the case of warrants, rights or
similar securities, the surrender thereof in connection
with the exercise of such warrants, rights or similar
Securities or the surrender of interim receipts or
temporary Securities for definitive Securities;
provided that, in any such case, the new Securities and
cash, if any, are to be delivered to the Custodian, a
subcustodian or a Foreign Custodian;
(j) for delivery in connection with any
loans of Securities made by the Trust, but only against
receipt by the Custodian, a Subcustodian or a Foreign
Custodian of adequate collateral as determined by the
Trust (and identified in Proper Instructions
communicated to the Custodian), which may be in the
form of cash or obligations issued by the United
States government, its agencies or instrumentalities,
except that in connection with any loans for which
collateral is to be credited to the account of the
Custodian, a Subcustodian or a Foreign Custodian in the
Federal Reserve's book-entry securities system, the
Custodian will not be held liable or responsible for
the delivery of Securities owned by the Trust prior to
the receipt of such collateral;
(k) for delivery as security in connection
with any borrowings by the Trust requiring a pledge of
assets by the Trust, but only against receipt by the
Custodian, a Subcustodian or a Foreign Custodian of
amounts borrowed;
(l) for delivery in accordance with the
provisions of any agreement among the Trust, the
Custodian, a Subcustodian or a Foreign Custodian and a
broker-dealer relating to compliance with the rules of
registered clearing corporations and of any registered
national securities exchange, or of any similar
organization or organizations, regarding escrow or
other arrangements in connection with transactions by
the Trust;
(m) for delivery in accordance with the
provisions of any agreement among the Trust, the
Custodian, a Subcustodian or a Foreign Custodian and a
futures commission merchant, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any contract market, or any similar
organization or organizations, regarding account
deposits in connection with transactions by the Trust;
(n) upon the receipt of instructions from
the Transfer Agent for delivery to the Transfer Agent
or to the holders of Shares in connection with
distributions in kind in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(o) for any other proper purpose, but only
upon receipt of Proper Instructions, and a certified
copy of a resolution of the Trustees or of the
Executive Committee certified by the Secretary or an
Assistant Secretary of the Trust, specifying the
securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such
purpose to be a proper purpose, and naming the person
or persons to whom delivery of such securities shall be
made.
3.3 Registration of Securities. Securities held by the
Custodian, a Subcustodian or a Foreign Custodian (other than
bearer Securities) shall be registered in the name or nominee
name of the Trust, in the name or nominee name of the Custodian
or in the name or nominee name of any Subcustodian or Foreign
Custodian. The Trust agrees to hold the Custodian, any such
nominee, Subcustodian or Foreign Custodian harmless from any
liability as a holder of record of such Securities.
3.4 Bank Accounts. The Custodian shall open and
maintain a separate bank account or accounts for the Trust,
subject only to draft or order by the Custodian acting pursuant
to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by
it hereunder from or for the account of the Trust, other than
cash maintained by the Trust in a bank account established and
used in accordance with Rule 17f-3 under the Investment Company
Act. Funds held by the Custodian for the Trust may be deposited
by it to its credit as Custodian in the banking departments of
the Custodian, a Subcustodian or a Foreign Custodian. It is
understood and agreed by the Custodian and the Trust that the
rate of interest, if any, payable on such funds (including
foreign currency deposits) that are deposited with the Custodian
may not be a market rate of interest and that the rate of
interest payable by the Custodian to the Trust shall be agreed
upon by the Custodian and the Trust from time to time. Such
funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
3.5 Collection of Income; Trade Settlement; Crediting
of Accounts. The Custodian shall collect income payable with
respect to Securities owned by the Trust, settle Securities
trades for the account of the Trust and credit and debit the
Trust's account with the Custodian in connection therewith as
follows:
(a) Upon receipt of Proper Instructions, the
Custodian shall effect the purchase of a Security by
charging the account of the Trust on the contractual
settlement date. The Custodian shall have no liability
of any kind to any person, including the Trust, if the
Custodian effects payment on behalf of the Trust as
provided for herein or in Proper Instructions, and the
seller or selling broker fails to deliver the
Securities purchased.
(b) Upon receipt of Proper Instructions, the
Custodian shall effect the sale of a Security by
delivering a certificate or other indicia of ownership,
and shall credit the account of the Trust with the
proceeds of such sale on the contractual settlement
date. The Custodian shall have no liability of any
kind to any person, including the Trust, if the
Custodian delivers such a certificate(s) or other
indicia of ownership as provided for herein or in
Proper Instructions, and the purchaser or purchasing
broker fails to effect payment to the Trust within a
reasonable time period, as determined by the Custodian
in its sole discretion. In such event, the Custodian
shall be entitled to reimbursement of the amount so
credited to the account of the Trust in connection with
such sale.
(c) The Trust is responsible for ensuring
that the Custodian receives timely and accurate Proper
Instructions to enable the Custodian to effect
settlement of any purchase or sale. If the Custodian
does not receive such instructions within the required
time period, the Custodian shall have no liability of
any kind to any person, including the Trust, for
failing to effect settlement on the contractual
settlement date. However, the Custodian shall use its
best reasonable efforts to effect settlement as soon as
possible after receipt of Proper Instructions.
(d) The Custodian shall credit the account
of the Trust with interest income payable on interest
bearing Securities on payable date. Interest income on
cash balances will be credited monthly to the account
of the Trust on the first Business Day (on which the
Custodian is open for business) following the end of
each month. Dividends and other amounts payable with
respect to Domestic Securities and Foreign Securities
shall be credited to the account of the Trust when
received by the Custodian. The Custodian shall not be
required to commence suit or collection proceedings or
resort to any extraordinary means to collect such
income and other amounts payable with respect to
Securities owned by the Trust. The collection of
income due the Trust on Domestic Securities loaned
pursuant to the provisions of Subsection 3.2(j) shall
be the responsibility of the Trust. The Custodian will
have no duty or responsibility in connection therewith,
other than to provide the Trust with such information
or data as may be necessary to assist the Trust in
arranging for the timely delivery to the Custodian of
the income to which the Trust is entitled. The
Custodian shall have no liability to any person,
including the Trust, if the Custodian credits the
account of the Trust with such income or other amounts
payable with respect to Securities owned by the Trust
(other than Securities loaned by the Trust pursuant to
Subsection 3.2(j) hereof) and the Custodian
subsequently is unable to collect such income or other
amounts from the payors thereof within a reasonable
time period, as determined by the Custodian in its sole
discretion. In such event, the Custodian shall be
entitled to reimbursement of the amount so credited to
the account of the Trust.
3.6 Payment of Trust Monies. Upon receipt of Proper
Instructions the Custodian shall pay out monies of the Trust in
the following cases or as otherwise directed in Proper
Instructions:
(a) upon the purchase of Securities, futures
contracts or options on futures contracts for the
account of the Trust but only, except as otherwise
provided herein, (i) against the delivery of such
securities, or evidence of title to futures contracts
or options on futures contracts, to the Custodian or a
Subcustodian registered pursuant to Subsection 3.3
hereof or in proper form for transfer; (ii) in the case
of a purchase effected through a Securities System, in
accordance with the conditions set forth in Subsection
3.8 hereof; or (iii) in the case of repurchase
agreements entered into between the Trust and the
Custodian, another bank or a broker-dealer (A) against
delivery of the Securities either in certificated form
to the Custodian or a Subcustodian or through an entry
crediting the Custodian's account at the appropriate
Federal Reserve Bank with such Securities or (B)
against delivery of the confirmation evidencing
purchase by the Trust of Securities owned by the
Custodian or such broker-dealer or other bank along
with written evidence of the agreement by the Custodian
or such broker-dealer or other bank to repurchase such
Securities from the Trust;
(b) in connection with conversion, exchange
or surrender of Securities owned by the Trust as set
forth in Subsection 3.2 hereof;
(c) for the redemption or repurchase of
Shares issued by the Trust;
(d) for the payment of any expense or
liability incurred by the Trust, including but not
limited to the following payments for the account of
the Trust: custodian fees, interest, taxes, management,
accounting, transfer agent and legal fees and operating
expenses of the Trust whether or not such expenses are
to be in whole or part capitalized or treated as
deferred expenses; and
(e) for the payment of any dividends or
distributions declared by the Board of Trustees with
respect to the Shares.
3.7 Appointment of Subcustodians. The Custodian may,
upon receipt of Proper Instructions, appoint another bank or
trust company, which is itself qualified under the Investment
Company Act to act as a custodian (a "Subcustodian"), as the
agent of the Custodian to carry out such of the duties of the
Custodian hereunder as 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 Trust in a Securities System in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following
provisions:
(a) the Custodian may hold Domestic
Securities of the Trust in the Depository Trust Company
or the Federal Reserve's book entry system or, upon
receipt of Proper Instructions, in another Securities
System provided that such securities are held in an
account of the Custodian in the Securities System
("Securities System Account") which shall not include
any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
(b) the records of the Custodian with
respect to Domestic Securities of the Trust which are
maintained in a Securities System shall identify by
book-entry those Domestic Securities belonging to the
Trust;
(c) the Custodian shall pay for Domestic
Securities purchased for the account of the Trust upon
(i) receipt of advice from the Securities System that
such securities have been transferred to the Securities
System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of the Trust. The Custodian
shall transfer Domestic Securities sold for the account
of the Trust upon (A) receipt of advice from the
Securities System that payment for such securities has
been transferred to the Securities System Account, and
(B) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the
account of the Trust. Copies of all advices from the
Securities System of transfers of Domestic Securities
for the account of the Trust shall be maintained for
the Trust by the Custodian and be provided to the Trust
at its request. Upon request, the Custodian shall
furnish the Trust confirmation of each transfer to or
from the account of the Trust in the form of a written
advice or notice; and
(d) upon request, the Custodian shall
provide the Trust with any report obtained by the
Custodian on the Securities System's accounting system,
internal accounting control and procedures for
safeguarding domestic securities deposited in the
Securities System.
3.9 Segregated Account. The Custodian shall upon
receipt of Proper Instructions establish and maintain a
segregated account or accounts for and on behalf of the Trust,
into which account or accounts may be transferred cash and/or
Securities, including Securities maintained in an account by the
Custodian pursuant to Section 3.8 hereof, (i) in accordance with
the provisions of any agreement among the Trust, the Custodian
and a broker-dealer or futures commission merchant, relating to
compliance with the rules of registered clearing corporations and
of any national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Trust, (ii)
for purposes of segregating cash or securities in connection with
options purchased, sold or written by the Trust or commodity
futures contracts or options thereon purchased or sold by the
Trust and (iii) for other proper corporate purposes, but only, in
the case of this clause (iii), upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes
to be proper corporate purposes.
3.10 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection
with receipt of income or other payments with respect to domestic
securities of the Trust held by it and in connection with
transfers of such securities.
3.11 Proxies. The Custodian shall, with respect to
the Securities held hereunder, promptly deliver to the Trust all
proxies, all proxy soliciting materials and all notices relating
to such Securities. If the Securities are registered otherwise
than in the name of the Trust or a nominee of the Trust, the
Custodian shall use its best reasonable efforts, consistent with
applicable law, to cause all proxies to be promptly executed by
the registered holder of such Securities in accordance with
Proper Instructions.
3.12 Communications Relating to Trust Portfolio
Securities. The Custodian shall transmit promptly to the Trust
all written information (including, without limitation, pendency
of calls and maturities of Securities and expirations of rights
in connection therewith and notices of exercise of put and call
options written by the Trust and the maturity of futures
contracts purchased or sold by the Trust) received by the
Custodian from issuers of Securities being held for the Trust.
With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Trust all written information received
by the Custodian from issuers of the Securities whose tender or
exchange is sought and from the party (or its agents) making the
tender or exchange offer. If the Trust desires to take action
with respect to any tender offer, exchange offer or any other
similar transaction, the Trust shall notify the Custodian at
least three Business Days prior to the date of which the
Custodian is to take such action.
3.13 Reports by Custodian. Custodian shall each
business day furnish the Trust 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 Trust 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 TRUST HELD OUTSIDE
THE UNITED STATES
4.1 Custody outside the United States. The Trust
authorizes the Custodian to hold Foreign Securities and cash in
custody accounts which have been established by the Custodian
with (i) its foreign branches, (ii) foreign banking institutions,
foreign branches of United States banks and subsidiaries of
United States banks or bank holding companies (each a "Foreign
Custodian") and (iii) Foreign Securities depositories or clearing
agencies (each a "Foreign Securities Depository"); provided,
however, that the Board of Trustees or the Executive Committee
has approved in advance the use of each such Foreign Custodian
and Foreign Securities Depository and the contract between the
Custodian and each Foreign Custodian and that such approval is
set forth in Proper Instructions and a certified copy of a
resolution of the Board of Trustees or of the Executive Committee
certified by the Secretary or an Assistant Secretary of the
Trust. Unless expressly provided to the contrary in this Section
4, custody of Foreign Securities and assets held outside the
United States by the Custodian, a Foreign Custodian or through a
Foreign Securities Depository shall be governed by Section 3
hereof.
4.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of its
foreign branches, Foreign Custodians and Foreign Securities
Depositories to: (i) "foreign securities", as defined in
paragraph (c) (1) of Rule 17f-5 under the Investment Company Act,
and (ii) cash and cash equivalents in such amounts as the
Custodian or the Trust may determine to be reasonably necessary
to effect the Trust's Foreign Securities transactions.
4.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Custodian and the
Trust, assets of the Trust shall be maintained in Foreign
Securities Depositories only through arrangements implemented by
the Custodian or Foreign Custodians pursuant to the terms hereof.
4.4 Segregation of Securities. The Custodian shall
identify on its books and records as belonging to the Trust, the
Foreign Securities of the Trust held by each Foreign Custodian.
4.5 Agreements with Foreign Custodians. Each
agreement with a Foreign Custodian shall provide generally that:
(a) the Trust's assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the
Foreign Custodian or its creditors, except a claim of payment for
their safe custody or administration; (b) beneficial ownership
for the Trust's assets will be freely transferable without the
payment of money or value other than for custody or
administration; (c) adequate records will be maintained
identifying the assets as belonging to the Trust; (d) the
independent public accountants for the Trust, will be given
access to the records of the Foreign Custodian relating to the
assets of the Trust or confirmation of the contents of those
records; (e) the disposition of assets of the Trust held by the
Foreign Custodian will be subject only to the instructions of the
Custodian or its agents; (f) the Foreign Custodian shall
indemnify and hold harmless the Custodian and the Trust from and
against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the Foreign Custodian's
performance of its obligations under such agreement; (g) to the
extent practicable, the Trust's assets will be adequately insured
in the event of loss; and (h) the Custodian will receive periodic
reports with respect to the safekeeping of the Trust's assets,
including notification of any transfer to or from the Trust's
account.
4.6 Access of Independent Accountants of the Trust.
Upon request of the Trust, the Custodian will use its best
reasonable efforts to arrange for the independent accountants of
the Trust to be afforded access to the books and records of any
Foreign Custodian insofar as such books and records relate to the
custody by any such Foreign Custodian of assets of the Trust.
4.7 Transactions in Foreign Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall instruct the
appropriate Foreign Custodian to transfer, exchange or deliver
Foreign Securities owned by the Trust, but, except to the extent
explicitly provided herein, only in any of the cases specified in
Subsection 3.2. Upon receipt of Proper Instructions, the
Custodian shall pay out or instruct the appropriate Foreign
Custodian to pay out monies of the Trust in any of the cases
specified in Subsection 3.6. Notwithstanding anything herein to
the contrary, settlement and payment for Foreign Securities
received for the account of the Trust and delivery of Foreign
Securities maintained for the account of the Trust may be
effected in accordance with the customary or established
securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering securities to
the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation
of receiving later payment for such securities from such
purchaser or dealer. Foreign Securities maintained in the
custody of a Foreign Custodian may be maintained in the name of
such entity or its nominee name to the same extent as set forth
in Section 3.3 of this Agreement and the Trust agrees to hold any
Foreign Custodian and its nominee harmless from any liability as
a holder of record of such securities.
4.8 Liability of Foreign Custodian. Each agreement
between the Custodian and a Foreign Custodian shall require the
Foreign Custodian to exercise reasonable care in the performance
of its duties and to indemnify and hold harmless the Custodian
and the Trust from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the
Foreign Custodian's performance of such obligations. At the
election of the Trust, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claims against a
Foreign Custodian as a consequence of any such loss, damage,
cost, expense, liability or claim if and to the extent that the
Trust has not been made whole for any such loss, damage, cost,
expense, liability or claim.
4.9 Monitoring Responsibilities.
(a) The Custodian will promptly inform the
Trust in the event that the Custodian learns of a
material adverse change in the financial condition of a
Foreign Custodian or is notified by (i) a foreign
banking institution employed as a Foreign Custodian
that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200
million or that its shareholders' equity has declined
below $200 million (in each case computed in accordance
with generally accepted United States accounting
principles), and denominated in U.S. dollars, or (ii) a
subsidiary of a United States bank or bank holding
company acting as a Foreign Custodian that there
appears to be a substantial likelihood that its
shareholders' equity will decline below $100 million or
that its shareholders' equity has declined below $100
million (in each case computed in accordance with
generally accepted United States accounting
principles), and denominated in U.S. dollars.
(b) The custodian will furnish such
information as may be reasonably necessary to assist
the Trust's Board of Trustees in its annual review and
approval of the continuance of all contracts or
arrangements with Foreign Subcustodians.
Section 5. PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper
Instructions" means instructions of the Trust received by the
Custodian via telephone or in Writing which the Custodian
believes in good faith to have been given by Authorized Persons
(as defined below) or which are transmitted with proper testing
or authentication pursuant to terms and conditions which the
Custodian may specify. Any Proper Instructions delivered to the
Custodian by telephone shall promptly thereafter be confirmed in
Writing by an Authorized Person, but the Trust will hold the
Custodian harmless for its failure to send such confirmation in
writing, the failure of such confirmation to conform to the
telephone instructions received or the Custodian's failure to
produce such confirmation at any subsequent time. Unless
otherwise expressly provided, all Proper Instructions shall
continue in full force and effect until cancelled or superseded.
If the Custodian requires test arrangements, authentication
methods or other security devices to be used with respect to
Proper Instructions, any Proper Instructions given by the Trust
thereafter shall be given and processed in accordance with such
terms and conditions for the use of such arrangements, methods or
devices as the Custodian may put into effect and modify from time
to time. The Trust shall safeguard any test keys, identification
codes or other security devices which the Custodian shall make
available to it. The Custodian may electronically record any
Proper Instructions given by telephone, and any other telephone
discussions, with respect to its activities hereunder. As used
in this Agreement, the term "Authorized Persons" means such
officers or such agents of the Trust as have been designated by a
resolution of the Board of trustees or of the Executive
Committee, a certified copy of which has been provided to the
Custodian, to act on behalf of the Trust under this Agreement.
Each of such persons shall continue to be an Authorized Person
until such time as the Custodian receives Proper Instructions
that any such officer or agent is no longer an Authorized Person.
Section 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express
authority from the Trust:
(a) make payments to itself or others for
minor expenses of handling Securities or other similar
items relating to its duties under this Agreement,
provided that all such payments shall be accounted for
to the Trust;
(b) endorse for collection, in the name of
the Trust, checks, drafts and other negotiable
instruments; and
(c) in general, attend to all non-
discretionary details in connection with the sale,
exchange, substitution, purchase, transfer and other
dealings with the Securities and property of the Trust
except as otherwise provided in Proper Instructions.
Section 7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any
instructions (conveyed by telephone or in Writing), notice,
request, consent, certificate or other instrument or paper
believed by it to be genuine and to have been properly given or
executed by or on behalf of the Trust. The Custodian may receive
and accept a certified copy of a resolution of the Board of
Trustees or Executive Committee as conclusive evidence (a) of the
authority of any person to act in accordance with such resolution
or (b) of any determination or of any action by the Board of
Trustees or Executive Committee as described in such resolution,
and such resolution may be considered as in full force and effect
until receipt by the Custodian of written notice by an Authorized
Person to the contrary.
Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary
information in its possession (to the extent permissible under
applicable law) to the entity or entities appointed by the Board
of Trustees to keep the books of account of the Trust and/or
compute the net asset value per Share of the outstanding Shares
of the Trust.
Section 9. RECORDS
The Custodian shall create and maintain all records
relating to its activities under this Agreement which are
required with respect to such activities under Section 31 of the
Investment Company Act and Rules 31a-1 and 31a-2 thereunder. All
such records shall be the property of the Trust and shall at all
times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents
of the Trust and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Trust's
request, supply the Trust with a tabulation of Securities owned
by the Trust and held by the Custodian and shall, when requested
to do so by the Trust and for such compensation as shall be
agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
Section 10. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Trust and the
Custodian.
Section 11. RESPONSIBILITY OF CUSTODIAN
The Custodian shall be responsible for the performance
of only such duties as are set forth herein or contained in
Proper Instructions and shall use reasonable care in carrying out
such duties. The Custodian shall be liable to the Trust for any
loss which shall occur as the result of the failure of a Foreign
Custodian or a Foreign Securities Depository engaged by such
Foreign Custodian or the Custodian to exercise reasonable care
with respect to the safekeeping of securities and other assets of
the Trust to the same extent that the Custodian would be liable
to the Trust if the Custodian itself were holding such securities
and other assets. In the event of any loss to the Trust by
reason of the failure of the Custodian, a Foreign Custodian or a
Foreign Securities Depository engaged by such Foreign Custodian
or the Custodian to utilize reasonable care, the Custodian shall
be liable to the Trust to the extent of the Trust's damages, to
be determined based on the market value of the property which is
the subject of the loss at the date of discovery of such loss and
without reference to any special conditions or circumstances.
The Custodian shall be held to the exercise of reasonable care in
carrying out this Agreement. The Trust agrees to indemnify and
hold harmless the Custodian and its nominees from all taxes,
charges, expenses, assessments, claims and liabilities (including
legal fees and expenses) incurred by any of them in connection
with the performance of this Agreement, except such as may arise
from any negligent action, negligent failure to act or willful
misconduct on the part of the indemnified entity or any Foreign
Custodian or Foreign Securities Depository. The Custodian shall
be entitled to rely, and may act, on advice of counsel (who may
be counsel for the Trust) on all matters and shall be without
liability for any action reasonably taken or omitted pursuant to
such advice. The Custodian need not maintain any insurance for
the benefit of the Trust.
All collections of funds or other property paid or
distributed in respect of Securities held by the Custodian,
agent, Subcustodian or Foreign Custodian hereunder shall be made
at the risk of the Trust. The Custodian shall have no liability
for any loss occasioned by delay in the actual receipt of notice
by the Custodian, agent, Subcustodian or by a Foreign Custodian
of any payment, redemption or other transaction regarding
securities in respect of which the Custodian has agreed to take
action as provided in Section 3 hereof. The Custodian shall not
be liable for any action taken in good faith upon Proper
Instructions or upon any certified copy of any resolution of the
Board of Trustees and may rely on the genuineness of any such
documents which it may in good faith believe to be validly
executed. The Custodian shall not be liable for any loss
resulting from, or caused by, the direction of the Trust to
maintain custody of any Securities or cash in a foreign country
including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, civil
disturbance, acts of war or terrorism, insurrection, revolution,
nuclear fusion, fission or radiation or other similar occurrences
or events beyond the control of the Custodian. Finally, the
Custodian shall not be liable for any taxes, including interest
and penalties with respect thereto, that may be levied or
assessed upon or in respect of any assets of the Trust held by
the Custodian.
Section 12. LIMITED LIABILITY OF THE TRUST
The Custodian acknowledges that it has received notice
of and accepts the limitations of the Trust's liability as set
forth in its Agreement and Declaration of Trust. The Custodian
agrees that the Trust's obligation hereunder shall be limited to
the assets of the Trust, and that the Custodian shall not seek
satisfaction of any such obligation from the shareholders of the
Trust nor from any Trustee, officer, employee, or agent of the
Trust.
Section 13. EFFECTIVE PERIOD; TERMINATION
This Agreement shall become effective as of the date of
its execution and shall continue in full force and effect until
terminated as hereinafter provided. This Agreement may be
terminated by the Trust or the Custodian by 60 days notice in
Writing to the other provided that any termination by the Trust
shall be authorized by a resolution of the Board of Trustees, a
certified copy of which shall accompany such notice of
termination, and provided further, that such resolution shall
specify the names of the persons to whom the Custodian shall
deliver the assets of the Trust held by it. If notice of
termination is given by the Custodian, the Trust shall, within 60
days following the giving of such notice, deliver to the
Custodian a certified copy of a resolution of the Board of
Trustees specifying the names of the persons to whom the
Custodian shall deliver assets of the Trust held by it. In
either case the Custodian will deliver such assets to the persons
so specified, after deducting therefrom any amounts which the
Custodian determines to be owed to it hereunder (including all
costs and expenses of delivery or transfer of Trust assets to the
persons so specified). If within 60 days following the giving of
a notice of termination by the Custodian, the Custodian does not
receive from the Trust a certified copy of a resolution of the
Board of Trustees specifying the names of the persons to whom the
Custodian shall deliver the assets of the Trust held by it, the
Custodian, at its election, may deliver such assets to a bank or
trust company doing business in the State of California to be
held and disposed of pursuant to the provisions of this Agreement
or may continue to hold such assets until a certified copy of one
or more resolutions as aforesaid is delivered to the Custodian.
The obligations of the parties hereto regarding the use of
reasonable care, indemnities and payment of fees and expenses
shall survive the termination of this Agreement.
Section 14. MISCELLANEOUS
14.1 Relationship. Nothing contained in this Agreement
shall (i) create any fiduciary, joint venture or partnership
relationship between the Custodian and the Trust or (ii) be
construed as or constitute a prohibition against the provision by
the Custodian or any of its affiliates to the Trust of investment
banking, securities dealing or brokerages services or any other
banking or financial services.
14.2 Further Assurances. Each party hereto shall
furnish to the other party hereto such instruments and other
documents as such other party may reasonably request for the
purpose of carrying out or evidencing the transactions
contemplated by this Agreement.
14.3 Attorneys' Fees. If any lawsuit or other action
or proceeding relating to this Agreement is brought by a party
hereto against the other party hereto, the prevailing party shall
be entitled to recover reasonable attorneys' fees, costs and
disbursements (including allocated costs and disbursements of in-
house counsel), in addition to any other relief to which the
prevailing party may be entitled.
14.4 Notices. Except as otherwise specified herein,
each notice or other communication hereunder shall be in Writing
and shall be delivered to the intended recipient at the following
address (or at such other address as the intended recipient shall
have specified in a written notice given to the other parties
hereto):
if to the Trust:
Franklin Strategic Series
c/o Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Trust Manager
if to the Custodian:
Bank of America NT&SA
1455 Market Street
16th Floor, Dept. 5014
San Francisco, CA 94104
Attention: Manager
14.5 Headings. The underlined headings contained
herein are for convenience of reference only, shall not be deemed
to be a part of this Agreement and shall not be referred to in
connection with the interpretation hereof.
14.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and both
of which, when taken together, shall constitute one agreement.
14.7 Governing Law. This Agreement shall be
construed in accordance with, and governed in all respects by,
the laws of the State of California (without giving effect to
principles of conflict of laws).
14.8 Force Majeure. Subject to the provisions of
Section 11 hereof regarding the Custodian's general standard of
care, no failure, delay or default in performance of any
obligation hereunder shall constitute an event of default or a
breach of this agreement, or give rise to any liability
whatsoever on the part of one party hereto to the other, to the
extent that such failure to perform, delay or default arises out
of a cause beyond the control and without negligence of the party
otherwise chargeable with failure, delay or default; including,
but not limited to: action or inaction of governmental, civil or
military authority; fire; strike; lockout or other labor dispute;
flood; war; riot; theft; earthquake; natural disaster; breakdown
of public or common carrier communications facilities; computer
malfunction; or act, negligence or default of the other party.
This paragraph shall in no way limit the right of either party to
this Agreement to make any claim against third parties for any
damages suffered due to such causes.
14.9 Successors and Assigns. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns, if any.
14.10 Waiver. No failure on the part of any person to
exercise any power, right, privilege or remedy hereunder, and no
delay on the part of any person in the exercise of any power,
right, privilege or remedy hereunder, shall operate as a waiver
thereof; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further
exercise thereof or of any other power, right, privilege or
remedy.
14.11 Amendments. This Agreement may not be amended,
modified, altered or supplemented other than by means of an
agreement or instrument executed on behalf of each of the parties
hereto.
14.12 Severability. In the event that any provision
of this Agreement, or the application of any such provision to
any person or set of circumstances, shall be determined to be
invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such
provision to persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent
permitted by law.
14.13 Parties in Interest. None of the provisions of
this Agreement is intended to provide any rights or remedies to
any person other than the Trust and the Custodian and their
respective successors and assigns, if any.
14.14 Entire Agreement. This Agreement sets forth the
entire understanding of the parties hereto and supersedes all
prior agreements and understandings between the parties hereto
relating to the subject matter hereof.
14.15 Variations of Pronouns. Whenever required by
the context hereof, the singular number shall include the
plural, and vice versa; the masculine gender shall include the
feminine and
neuter genders; and the neuter gender shall include the masculine
and feminine genders.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above
written.
"Custodian": BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ John B. Housen
Its Vice President
"Trust": FRANKLIN STRATEGIC SERIES
By /s/ Harmon E. Burns
Its Vice President
CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and
entered into as of July 2, 1992, by and between Franklin
Strategic Series, a Delaware business trust (the "Trust"), and
Bank of America National Trust and Savings Association, a banking
association organized under the laws of the United States (the
"Custodian").
RECITALS
A. The Trust is an investment company registered under
the Investment Company Act of 1940, as amended (the "Investment
Company Act") that invests and reinvests, on behalf of its
series, in Domestic Securities and Foreign Securities.
B. The Custodian is, and has represented to the Trust
that it is, a "bank" as that term is defined in Section 2(a)(5)
of the Investment Company 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 Trust and the Custodian desire to provide for
the retention of the Custodian as the custodian of the assets of
one of the Trust's current series, Franklin Global Utilities
Fund, on the terms and subject to the provisions set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS
For purposes of this Agreement, the following terms
shall have the respective meanings specified below:
"Agreement" shall mean this Custody Agreement.
"Board of Trustees" shall mean the Board of Trustees of
the Trust.
"Business Day" with respect to any Domestic Security
means any day, other than a Saturday or Sunday, that is not a day
on which banking institutions are authorized or required by law
to be closed in the city of New York and, with respect to Foreign
Securities, a London Business Day. "London Business Day" shall
mean any day on which dealings and deposits in U.S. dollars are
transacted in the London interbank market.
"Custodian" shall mean Bank of America National Trust and
Savings Association.
"Domestic Securities" shall have the meaning provided in
Subsection 2.1 hereof.
"Executive Committee" shall mean the executive committee
of the Board of Trustees.
"Foreign Custodian" shall have the meaning provided in
Section 4.1 hereof.
"Foreign Securities" shall have the meaning provided in
Section 2.1 hereof.
"Foreign Securities Depository" shall have the meaning
provided in Section 4.1 hereof.
"Investment Company Act" shall mean the Investment
Company Act of 1940, as amended.
"Securities" shall have the meaning provided in Section
2.1 hereof.
"Securities System" shall have the meaning provided in
Section 3.1 hereof.
"Securities System Account" shall have the meaning
provided in Subsection 3.8(a) hereof.
"Shares" shall mean shares of beneficial interest of the
Trust.
"Subcustodian" shall have the meaning provided in
Subsection 3.7 hereof, but shall not include any Foreign
Custodian.
"Transfer Agent" shall mean the duly appointed and
acting transfer agent for the Trust.
"Trust" shall mean the Franklin Strategic Series on
behalf of the Franklin Global Utilities Fund.
"Writing" shall mean a communication in writing, a
communication by telex, the Custodian's Global Custody
Instruction SystemTM, facsimile transmission, bank wire or other
teleprocess or electronic instruction system acceptable to the
Custodian.
Section 2. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS
2.1 Appointment of Custodian. The Trust hereby
appoints and designates the Custodian as a custodian of the
assets of the Trust including cash, securities the Trust desires
to be held within the United States ("Domestic Securities") and
securities it desires to be held outside the United States
("Foreign Securities"). Domestic Securities and Foreign
Securities are sometimes referred to herein, collectively, as
"Securities." The Custodian hereby accepts such appointment and
designation and agrees that it shall maintain custody of the
assets of the Trust delivered to it hereunder in the manner
provided for herein.
2.2 Delivery of Assets. The Trust agrees to deliver to
the Custodian Securities and cash owned by the Trust, payments of
income, principal or capital distributions received by the Trust
with respect to Securities owned by the Trust from time to time,
and the consideration received by it for such Shares or other
securities of the Trust as may be issued and sold from time to
time. The Custodian shall have no responsibility whatsoever for
any property or assets of the Trust held or received by the Trust
and not delivered to the Custodian pursuant to and in accordance
with the terms hereof. All Securities accepted by the Custodian
on behalf of the Trust under the terms of this Agreement shall be
in "street name" or other good delivery form as determined by the
Custodian.
2.3 Subcustodians. Upon receipt of Proper Instructions
and a certified copy of a resolution of the Board of Trustees or
of the Executive Committee certified by the Secretary or an
Assistant Secretary of the Trust, the Custodian may from time to
time appoint one or more Subcustodians or Foreign Custodians to
hold assets of the Trust in accordance with the provisions of
this Agreement.
2.4 No Duty to Manage. The Custodian, a Subcustodian
or a Foreign Custodian shall not have any duty or responsibility
to manage or recommend investments of the assets of the Trust
held by them or to initiate any purchase, sale or other
investment transaction in the absence of Proper Instructions or
except as otherwise specifically provided herein.
Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO
ASSETS OF THE TRUST HELD BY THE CUSTODIAN
3.1 Holding Securities. The Custodian shall hold and
physically segregate from any property owned by the Custodian,
for the account of the Trust, all non-cash property delivered by
the Trust to the Custodian hereunder other than Securities which,
pursuant to Subsection 3.8 hereof, are held through a registered
clearing agency, a registered securities depository, the Federal
Reserve's book-entry securities system (referred to herein,
individually, as a "Securities System"), or held by a
Subcustodian, Foreign Custodian or in a Foreign Securities
Depository.
3.2 Delivery of Securities. Except as otherwise
provided in Subsection 3.5 hereof, the Custodian, upon receipt of
Proper Instructions, shall release and deliver Securities owned
by the Trust and held by the Custodian in the following cases or
as otherwise directed in Proper Instructions:
(a) except as otherwise provided herein,
upon sale of such Securities for the account of the
Trust and receipt by the Custodian, a Subcustodian or a
Foreign Custodian of payment therefor;
(b) upon the receipt of payment by the
Custodian, a Subcustodian or a Foreign Custodian in
connection with any repurchase agreement related to
such Securities entered into by the Trust;
(c) in the case of a sale effected through a
Securities System, in accordance with the provisions of
Subsection 3.8 hereof;
(d) to a tender agent or other authorized
agent in connection with (i) a tender or other similar
offer for Securities owned by the Trust, or (ii) a
tender offer or repurchase by the Trust of its own
Shares;
(e) to the issuer thereof or its agent when
such Securities are called, redeemed, retired or
otherwise become payable; provided, that in any such
case, the cash or other consideration is to be
delivered to the Custodian, a Subcustodian or a Foreign
Custodian;
(f) to the issuer thereof, or its agent, for
transfer into the name or nominee name of the Trust,
the name or nominee name of the Custodian, the name or
nominee name of any Subcustodian or Foreign Custodian;
or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new Securities are to be
delivered to the Custodian, a Subcustodian or Foreign
Custodian;
(g) to the broker selling the same for
examination in accordance with the "street delivery"
custom;
(h) for exchange or conversion pursuant to
any plan of merger, consolidation, recapitalization, or
reorganization of the issuer of such Securities, or
pursuant to a conversion of such Securities; provided
that, in any such case, the new Securities and cash, if
any, are to be delivered to the Custodian or a
Subcustodian;
(i) in the case of warrants, rights or
similar securities, the surrender thereof in connection
with the exercise of such warrants, rights or similar
Securities or the surrender of interim receipts or
temporary Securities for definitive Securities;
provided that, in any such case, the new Securities and
cash, if any, are to be delivered to the Custodian, a
subcustodian or a Foreign Custodian;
(j) for delivery in connection with any
loans of Securities made by the Trust, but only against
receipt by the Custodian, a Subcustodian or a Foreign
Custodian of adequate collateral as determined by the
Trust (and identified in Proper Instructions
communicated to the Custodian), which may be in the
form of cash or obligations issued by the United
States government, its agencies or instrumentalities,
except that in connection with any loans for which
collateral is to be credited to the account of the
Custodian, a Subcustodian or a Foreign Custodian in the
Federal Reserve's book-entry securities system, the
Custodian will not be held liable or responsible for
the delivery of Securities owned by the Trust prior to
the receipt of such collateral;
(k) for delivery as security in connection
with any borrowings by the Trust requiring a pledge of
assets by the Trust, but only against receipt by the
Custodian, a Subcustodian or a Foreign Custodian of
amounts borrowed;
(l) for delivery in accordance with the
provisions of any agreement among the Trust, the
Custodian, a Subcustodian or a Foreign Custodian and a
broker-dealer relating to compliance with the rules of
registered clearing corporations and of any registered
national securities exchange, or of any similar
organization or organizations, regarding escrow or
other arrangements in connection with transactions by
the Trust;
(m) for delivery in accordance with the
provisions of any agreement among the Trust, the
Custodian, a Subcustodian or a Foreign Custodian and a
futures commission merchant, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any contract market, or any similar
organization or organizations, regarding account
deposits in connection with transactions by the Trust;
(n) upon the receipt of instructions from
the Transfer Agent for delivery to the Transfer Agent
or to the holders of Shares in connection with
distributions in kind in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(o) for any other proper purpose, but only
upon receipt of Proper Instructions, and a certified
copy of a resolution of the Trustees or of the
Executive Committee certified by the Secretary or an
Assistant Secretary of the Trust, specifying the
securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such
purpose to be a proper purpose, and naming the person
or persons to whom delivery of such securities shall be
made.
3.3 Registration of Securities. Securities held by the
Custodian, a Subcustodian or a Foreign Custodian (other than
bearer Securities) shall be registered in the name or nominee
name of the Trust, in the name or nominee name of the Custodian
or in the name or nominee name of any Subcustodian or Foreign
Custodian. The Trust agrees to hold the Custodian, any such
nominee, Subcustodian or Foreign Custodian harmless from any
liability as a holder of record of such Securities.
3.4 Bank Accounts. The Custodian shall open and
maintain a separate bank account or accounts for the Trust,
subject only to draft or order by the Custodian acting pursuant
to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by
it hereunder from or for the account of the Trust, other than
cash maintained by the Trust in a bank account established and
used in accordance with Rule 17f-3 under the Investment Company
Act. Funds held by the Custodian for the Trust may be deposited
by it to its credit as Custodian in the banking departments of
the Custodian, a Subcustodian or a Foreign Custodian. It is
understood and agreed by the Custodian and the Trust that the
rate of interest, if any, payable on such funds (including
foreign currency deposits) that are deposited with the Custodian
may not be a market rate of interest and that the rate of
interest payable by the Custodian to the Trust shall be agreed
upon by the Custodian and the Trust from time to time. Such
funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
3.5 Collection of Income; Trade Settlement; Crediting
of Accounts. The Custodian shall collect income payable with
respect to Securities owned by the Trust, settle Securities
trades for the account of the Trust and credit and debit the
Trust's account with the Custodian in connection therewith as
follows:
(a) Upon receipt of Proper Instructions, the
Custodian shall effect the purchase of a Security by
charging the account of the Trust on the contractual
settlement date. The Custodian shall have no liability
of any kind to any person, including the Trust, if the
Custodian effects payment on behalf of the Trust as
provided for herein or in Proper Instructions, and the
seller or selling broker fails to deliver the
Securities purchased.
(b) Upon receipt of Proper Instructions, the
Custodian shall effect the sale of a Security by
delivering a certificate or other indicia of ownership,
and shall credit the account of the Trust with the
proceeds of such sale on the contractual settlement
date. The Custodian shall have no liability of any
kind to any person, including the Trust, if the
Custodian delivers such a certificate(s) or other
indicia of ownership as provided for herein or in
Proper Instructions, and the purchaser or purchasing
broker fails to effect payment to the Trust within a
reasonable time period, as determined by the Custodian
in its sole discretion. In such event, the Custodian
shall be entitled to reimbursement of the amount so
credited to the account of the Trust in connection with
such sale.
(c) The Trust is responsible for ensuring
that the Custodian receives timely and accurate Proper
Instructions to enable the Custodian to effect
settlement of any purchase or sale. If the Custodian
does not receive such instructions within the required
time period, the Custodian shall have no liability of
any kind to any person, including the Trust, for
failing to effect settlement on the contractual
settlement date. However, the Custodian shall use its
best reasonable efforts to effect settlement as soon as
possible after receipt of Proper Instructions.
(d) The Custodian shall credit the account
of the Trust with interest income payable on interest
bearing Securities on payable date. Interest income on
cash balances will be credited monthly to the account
of the Trust on the first Business Day (on which the
Custodian is open for business) following the end of
each month. Dividends and other amounts payable with
respect to Domestic Securities and Foreign Securities
shall be credited to the account of the Trust when
received by the Custodian. The Custodian shall not be
required to commence suit or collection proceedings or
resort to any extraordinary means to collect such
income and other amounts payable with respect to
Securities owned by the Trust. The collection of
income due the Trust on Domestic Securities loaned
pursuant to the provisions of Subsection 3.2(j) shall
be the responsibility of the Trust. The Custodian will
have no duty or responsibility in connection therewith,
other than to provide the Trust with such information
or data as may be necessary to assist the Trust in
arranging for the timely delivery to the Custodian of
the income to which the Trust is entitled. The
Custodian shall have no liability to any person,
including the Trust, if the Custodian credits the
account of the Trust with such income or other amounts
payable with respect to Securities owned by the Trust
(other than Securities loaned by the Trust pursuant to
Subsection 3.2(j) hereof) and the Custodian
subsequently is unable to collect such income or other
amounts from the payors thereof within a reasonable
time period, as determined by the Custodian in its sole
discretion. In such event, the Custodian shall be
entitled to reimbursement of the amount so credited to
the account of the Trust.
3.6 Payment of Trust Monies. Upon receipt of Proper
Instructions the Custodian shall pay out monies of the Trust in
the following cases or as otherwise directed in Proper
Instructions:
(a) upon the purchase of Securities, futures
contracts or options on futures contracts for the
account of the Trust but only, except as otherwise
provided herein, (i) against the delivery of such
securities, or evidence of title to futures contracts
or options on futures contracts, to the Custodian or a
Subcustodian registered pursuant to Subsection 3.3
hereof or in proper form for transfer; (ii) in the case
of a purchase effected through a Securities System, in
accordance with the conditions set forth in Subsection
3.8 hereof; or (iii) in the case of repurchase
agreements entered into between the Trust and the
Custodian, another bank or a broker-dealer (A) against
delivery of the Securities either in certificated form
to the Custodian or a Subcustodian or through an entry
crediting the Custodian's account at the appropriate
Federal Reserve Bank with such Securities or (B)
against delivery of the confirmation evidencing
purchase by the Trust of Securities owned by the
Custodian or such broker-dealer or other bank along
with written evidence of the agreement by the Custodian
or such broker-dealer or other bank to repurchase such
Securities from the Trust;
(b) in connection with conversion, exchange
or surrender of Securities owned by the Trust as set
forth in Subsection 3.2 hereof;
(c) for the redemption or repurchase of
Shares issued by the Trust;
(d) for the payment of any expense or
liability incurred by the Trust, including but not
limited to the following payments for the account of
the Trust: custodian fees, interest, taxes, management,
accounting, transfer agent and legal fees and operating
expenses of the Trust whether or not such expenses are
to be in whole or part capitalized or treated as
deferred expenses; and
(e) for the payment of any dividends or
distributions declared by the Board of Trustees with
respect to the Shares.
3.7 Appointment of Subcustodians. The Custodian may,
upon receipt of Proper Instructions, appoint another bank or
trust company, which is itself qualified under the Investment
Company Act to act as a custodian (a "Subcustodian"), as the
agent of the Custodian to carry out such of the duties of the
Custodian hereunder as 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 Trust in a Securities System in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following
provisions:
(a) the Custodian may hold Domestic
Securities of the Trust in the Depository Trust Company
or the Federal Reserve's book entry system or, upon
receipt of Proper Instructions, in another Securities
System provided that such securities are held in an
account of the Custodian in the Securities System
("Securities System Account") which shall not include
any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
(b) the records of the Custodian with
respect to Domestic Securities of the Trust which are
maintained in a Securities System shall identify by
book-entry those Domestic Securities belonging to the
Trust;
(c) the Custodian shall pay for Domestic
Securities purchased for the account of the Trust upon
(i) receipt of advice from the Securities System that
such securities have been transferred to the Securities
System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of the Trust. The Custodian
shall transfer Domestic Securities sold for the account
of the Trust upon (A) receipt of advice from the
Securities System that payment for such securities has
been transferred to the Securities System Account, and
(B) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the
account of the Trust. Copies of all advices from the
Securities System of transfers of Domestic Securities
for the account of the Trust shall be maintained for
the Trust by the Custodian and be provided to the Trust
at its request. Upon request, the Custodian shall
furnish the Trust confirmation of each transfer to or
from the account of the Trust in the form of a written
advice or notice; and
(d) upon request, the Custodian shall
provide the Trust with any report obtained by the
Custodian on the Securities System's accounting system,
internal accounting control and procedures for
safeguarding domestic securities deposited in the
Securities System.
3.9 Segregated Account. The Custodian shall upon
receipt of Proper Instructions establish and maintain a
segregated account or accounts for and on behalf of the Trust,
into which account or accounts may be transferred cash and/or
Securities, including Securities maintained in an account by the
Custodian pursuant to Section 3.8 hereof, (i) in accordance with
the provisions of any agreement among the Trust, the Custodian
and a broker-dealer or futures commission merchant, relating to
compliance with the rules of registered clearing corporations and
of any national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Trust, (ii)
for purposes of segregating cash or securities in connection with
options purchased, sold or written by the Trust or commodity
futures contracts or options thereon purchased or sold by the
Trust and (iii) for other proper corporate purposes, but only, in
the case of this clause (iii), upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes
to be proper corporate purposes.
3.10 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection
with receipt of income or other payments with respect to domestic
securities of the Trust held by it and in connection with
transfers of such securities.
3.11 Proxies. The Custodian shall, with respect to
the Securities held hereunder, promptly deliver to the Trust all
proxies, all proxy soliciting materials and all notices relating
to such Securities. If the Securities are registered otherwise
than in the name of the Trust or a nominee of the Trust, the
Custodian shall use its best reasonable efforts, consistent with
applicable law, to cause all proxies to be promptly executed by
the registered holder of such Securities in accordance with
Proper Instructions.
3.12 Communications Relating to Trust Portfolio
Securities. The Custodian shall transmit promptly to the Trust
all written information (including, without limitation, pendency
of calls and maturities of Securities and expirations of rights
in connection therewith and notices of exercise of put and call
options written by the Trust and the maturity of futures
contracts purchased or sold by the Trust) received by the
Custodian from issuers of Securities being held for the Trust.
With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Trust all written information received
by the Custodian from issuers of the Securities whose tender or
exchange is sought and from the party (or its agents) making the
tender or exchange offer. If the Trust desires to take action
with respect to any tender offer, exchange offer or any other
similar transaction, the Trust shall notify the Custodian at
least three Business Days prior to the date of which the
Custodian is to take such action.
3.13 Reports by Custodian. Custodian shall each
business day furnish the Trust 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 Trust 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 TRUST HELD OUTSIDE
THE UNITED STATES
4.1 Custody outside the United States. The Trust
authorizes the Custodian to hold Foreign Securities and cash in
custody accounts which have been established by the Custodian
with (i) its foreign branches, (ii) foreign banking institutions,
foreign branches of United States banks and subsidiaries of
United States banks or bank holding companies (each a "Foreign
Custodian") and (iii) Foreign Securities depositories or clearing
agencies (each a "Foreign Securities Depository"); provided,
however, that the Board of Trustees or the Executive Committee
has approved in advance the use of each such Foreign Custodian
and Foreign Securities Depository and the contract between the
Custodian and each Foreign Custodian and that such approval is
set forth in Proper Instructions and a certified copy of a
resolution of the Board of Trustees or of the Executive Committee
certified by the Secretary or an Assistant Secretary of the
Trust. Unless expressly provided to the contrary in this Section
4, custody of Foreign Securities and assets held outside the
United States by the Custodian, a Foreign Custodian or through a
Foreign Securities Depository shall be governed by Section 3
hereof.
4.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of its
foreign branches, Foreign Custodians and Foreign Securities
Depositories to: (i) "foreign securities", as defined in
paragraph (c) (1) of Rule 17f-5 under the Investment Company Act,
and (ii) cash and cash equivalents in such amounts as the
Custodian or the Trust may determine to be reasonably necessary
to effect the Trust's Foreign Securities transactions.
4.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Custodian and the
Trust, assets of the Trust shall be maintained in Foreign
Securities Depositories only through arrangements implemented by
the Custodian or Foreign Custodians pursuant to the terms hereof.
4.4 Segregation of Securities. The Custodian shall
identify on its books and records as belonging to the Trust, the
Foreign Securities of the Trust held by each Foreign Custodian.
4.5 Agreements with Foreign Custodians. Each
agreement with a Foreign Custodian shall provide generally that:
(a) the Trust's assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the
Foreign Custodian or its creditors, except a claim of payment for
their safe custody or administration; (b) beneficial ownership
for the Trust's assets will be freely transferable without the
payment of money or value other than for custody or
administration; (c) adequate records will be maintained
identifying the assets as belonging to the Trust; (d) the
independent public accountants for the Trust, will be given
access to the records of the Foreign Custodian relating to the
assets of the Trust or confirmation of the contents of those
records; (e) the disposition of assets of the Trust held by the
Foreign Custodian will be subject only to the instructions of the
Custodian or its agents; (f) the Foreign Custodian shall
indemnify and hold harmless the Custodian and the Trust from and
against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the Foreign Custodian's
performance of its obligations under such agreement; (g) to the
extent practicable, the Trust's assets will be adequately insured
in the event of loss; and (h) the Custodian will receive periodic
reports with respect to the safekeeping of the Trust's assets,
including notification of any transfer to or from the Trust's
account.
4.6 Access of Independent Accountants of the Trust.
Upon request of the Trust, the Custodian will use its best
reasonable efforts to arrange for the independent accountants of
the Trust to be afforded access to the books and records of any
Foreign Custodian insofar as such books and records relate to the
custody by any such Foreign Custodian of assets of the Trust.
4.7 Transactions in Foreign Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall instruct the
appropriate Foreign Custodian to transfer, exchange or deliver
Foreign Securities owned by the Trust, but, except to the extent
explicitly provided herein, only in any of the cases specified in
Subsection 3.2. Upon receipt of Proper Instructions, the
Custodian shall pay out or instruct the appropriate Foreign
Custodian to pay out monies of the Trust in any of the cases
specified in Subsection 3.6. Notwithstanding anything herein to
the contrary, settlement and payment for Foreign Securities
received for the account of the Trust and delivery of Foreign
Securities maintained for the account of the Trust may be
effected in accordance with the customary or established
securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering securities to
the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation
of receiving later payment for such securities from such
purchaser or dealer. Foreign Securities maintained in the
custody of a Foreign Custodian may be maintained in the name of
such entity or its nominee name to the same extent as set forth
in Section 3.3 of this Agreement and the Trust agrees to hold any
Foreign Custodian and its nominee harmless from any liability as
a holder of record of such securities.
4.8 Liability of Foreign Custodian. Each agreement
between the Custodian and a Foreign Custodian shall require the
Foreign Custodian to exercise reasonable care in the performance
of its duties and to indemnify and hold harmless the Custodian
and the Trust from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the
Foreign Custodian's performance of such obligations. At the
election of the Trust, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claims against a
Foreign Custodian as a consequence of any such loss, damage,
cost, expense, liability or claim if and to the extent that the
Trust has not been made whole for any such loss, damage, cost,
expense, liability or claim.
4.9 Monitoring Responsibilities.
(a) The Custodian will promptly inform the
Trust in the event that the Custodian learns of a
material adverse change in the financial condition of a
Foreign Custodian or is notified by (i) a foreign
banking institution employed as a Foreign Custodian
that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200
million or that its shareholders' equity has declined
below $200 million (in each case computed in accordance
with generally accepted United States accounting
principles), and denominated in U.S. dollars, or (ii) a
subsidiary of a United States bank or bank holding
company acting as a Foreign Custodian that there
appears to be a substantial likelihood that its
shareholders' equity will decline below $100 million or
that its shareholders' equity has declined below $100
million (in each case computed in accordance with
generally accepted United States accounting
principles), and denominated in U.S. dollars.
(b) The custodian will furnish such
information as may be reasonably necessary to assist
the Trust's Board of Trustees in its annual review and
approval of the continuance of all contracts or
arrangements with Foreign Subcustodians.
Section 5. PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper
Instructions" means instructions of the Trust received by the
Custodian via telephone or in Writing which the Custodian
believes in good faith to have been given by Authorized Persons
(as defined below) or which are transmitted with proper testing
or authentication pursuant to terms and conditions which the
Custodian may specify. Any Proper Instructions delivered to the
Custodian by telephone shall promptly thereafter be confirmed in
Writing by an Authorized Person, but the Trust will hold the
Custodian harmless for its failure to send such confirmation in
writing, the failure of such confirmation to conform to the
telephone instructions received or the Custodian's failure to
produce such confirmation at any subsequent time. Unless
otherwise expressly provided, all Proper Instructions shall
continue in full force and effect until cancelled or superseded.
If the Custodian requires test arrangements, authentication
methods or other security devices to be used with respect to
Proper Instructions, any Proper Instructions given by the Trust
thereafter shall be given and processed in accordance with such
terms and conditions for the use of such arrangements, methods or
devices as the Custodian may put into effect and modify from time
to time. The Trust shall safeguard any test keys, identification
codes or other security devices which the Custodian shall make
available to it. The Custodian may electronically record any
Proper Instructions given by telephone, and any other telephone
discussions, with respect to its activities hereunder. As used
in this Agreement, the term "Authorized Persons" means such
officers or such agents of the Trust as have been designated by a
resolution of the Board of trustees or of the Executive
Committee, a certified copy of which has been provided to the
Custodian, to act on behalf of the Trust under this Agreement.
Each of such persons shall continue to be an Authorized Person
until such time as the Custodian receives Proper Instructions
that any such officer or agent is no longer an Authorized Person.
Section 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express
authority from the Trust:
(a) make payments to itself or others for
minor expenses of handling Securities or other similar
items relating to its duties under this Agreement,
provided that all such payments shall be accounted for
to the Trust;
(b) endorse for collection, in the name of
the Trust, checks, drafts and other negotiable
instruments; and
(c) in general, attend to all non-
discretionary details in connection with the sale,
exchange, substitution, purchase, transfer and other
dealings with the Securities and property of the Trust
except as otherwise provided in Proper Instructions.
Section 7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any
instructions (conveyed by telephone or in Writing), notice,
request, consent, certificate or other instrument or paper
believed by it to be genuine and to have been properly given or
executed by or on behalf of the Trust. The Custodian may receive
and accept a certified copy of a resolution of the Board of
Trustees or Executive Committee as conclusive evidence (a) of the
authority of any person to act in accordance with such resolution
or (b) of any determination or of any action by the Board of
Trustees or Executive Committee as described in such resolution,
and such resolution may be considered as in full force and effect
until receipt by the Custodian of written notice by an Authorized
Person to the contrary.
Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary
information in its possession (to the extent permissible under
applicable law) to the entity or entities appointed by the Board
of Trustees to keep the books of account of the Trust and/or
compute the net asset value per Share of the outstanding Shares
of the Trust.
Section 9. RECORDS
The Custodian shall create and maintain all records
relating to its activities under this Agreement which are
required with respect to such activities under Section 31 of the
Investment Company Act and Rules 31a-1 and 31a-2 thereunder. All
such records shall be the property of the Trust and shall at all
times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents
of the Trust and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Trust's
request, supply the Trust with a tabulation of Securities owned
by the Trust and held by the Custodian and shall, when requested
to do so by the Trust and for such compensation as shall be
agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
Section 10. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Trust and the
Custodian.
Section 11. RESPONSIBILITY OF CUSTODIAN
The Custodian shall be responsible for the performance
of only such duties as are set forth herein or contained in
Proper Instructions and shall use reasonable care in carrying out
such duties. The Custodian shall be liable to the Trust for any
loss which shall occur as the result of the failure of a Foreign
Custodian or a Foreign Securities Depository engaged by such
Foreign Custodian or the Custodian to exercise reasonable care
with respect to the safekeeping of securities and other assets of
the Trust to the same extent that the Custodian would be liable
to the Trust if the Custodian itself were holding such securities
and other assets. In the event of any loss to the Trust by
reason of the failure of the Custodian, a Foreign Custodian or a
Foreign Securities Depository engaged by such Foreign Custodian
or the Custodian to utilize reasonable care, the Custodian shall
be liable to the Trust to the extent of the Trust's damages, to
be determined based on the market value of the property which is
the subject of the loss at the date of discovery of such loss and
without reference to any special conditions or circumstances.
The Custodian shall be held to the exercise of reasonable care in
carrying out this Agreement. The Trust agrees to indemnify and
hold harmless the Custodian and its nominees from all taxes,
charges, expenses, assessments, claims and liabilities (including
legal fees and expenses) incurred by any of them in connection
with the performance of this Agreement, except such as may arise
from any negligent action, negligent failure to act or willful
misconduct on the part of the indemnified entity or any Foreign
Custodian or Foreign Securities Depository. The Custodian shall
be entitled to rely, and may act, on advice of counsel (who may
be counsel for the Trust) on all matters and shall be without
liability for any action reasonably taken or omitted pursuant to
such advice. The Custodian need not maintain any insurance for
the benefit of the Trust.
All collections of funds or other property paid or
distributed in respect of Securities held by the Custodian,
agent, Subcustodian or Foreign Custodian hereunder shall be made
at the risk of the Trust. The Custodian shall have no liability
for any loss occasioned by delay in the actual receipt of notice
by the Custodian, agent, Subcustodian or by a Foreign Custodian
of any payment, redemption or other transaction regarding
securities in respect of which the Custodian has agreed to take
action as provided in Section 3 hereof. The Custodian shall not
be liable for any action taken in good faith upon Proper
Instructions or upon any certified copy of any resolution of the
Board of Trustees and may rely on the genuineness of any such
documents which it may in good faith believe to be validly
executed. The Custodian shall not be liable for any loss
resulting from, or caused by, the direction of the Trust to
maintain custody of any Securities or cash in a foreign country
including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, civil
disturbance, acts of war or terrorism, insurrection, revolution,
nuclear fusion, fission or radiation or other similar occurrences
or events beyond the control of the Custodian. Finally, the
Custodian shall not be liable for any taxes, including interest
and penalties with respect thereto, that may be levied or
assessed upon or in respect of any assets of the Trust held by
the Custodian.
Section 12. LIMITED LIABILITY OF THE TRUST
The Custodian acknowledges that it has received notice
of and accepts the limitations of the Trust's liability as set
forth in its Agreement and Declaration of Trust. The Custodian
agrees that the Trust's obligation hereunder shall be limited to
the assets of the Trust, and that the Custodian shall not seek
satisfaction of any such obligation from the shareholders of the
Trust nor from any Trustee, officer, employee, or agent of the
Trust.
Section 13. EFFECTIVE PERIOD; TERMINATION
This Agreement shall become effective as of the date of
its execution and shall continue in full force and effect until
terminated as hereinafter provided. This Agreement may be
terminated by the Trust or the Custodian by 60 days notice in
Writing to the other provided that any termination by the Trust
shall be authorized by a resolution of the Board of Trustees, a
certified copy of which shall accompany such notice of
termination, and provided further, that such resolution shall
specify the names of the persons to whom the Custodian shall
deliver the assets of the Trust held by it. If notice of
termination is given by the Custodian, the Trust shall, within 60
days following the giving of such notice, deliver to the
Custodian a certified copy of a resolution of the Board of
Trustees specifying the names of the persons to whom the
Custodian shall deliver assets of the Trust held by it. In
either case the Custodian will deliver such assets to the persons
so specified, after deducting therefrom any amounts which the
Custodian determines to be owed to it hereunder (including all
costs and expenses of delivery or transfer of Trust assets to the
persons so specified). If within 60 days following the giving of
a notice of termination by the Custodian, the Custodian does not
receive from the Trust a certified copy of a resolution of the
Board of Trustees specifying the names of the persons to whom the
Custodian shall deliver the assets of the Trust held by it, the
Custodian, at its election, may deliver such assets to a bank or
trust company doing business in the State of California to be
held and disposed of pursuant to the provisions of this Agreement
or may continue to hold such assets until a certified copy of one
or more resolutions as aforesaid is delivered to the Custodian.
The obligations of the parties hereto regarding the use of
reasonable care, indemnities and payment of fees and expenses
shall survive the termination of this Agreement.
Section 14. MISCELLANEOUS
14.1 Relationship. Nothing contained in this Agreement
shall (i) create any fiduciary, joint venture or partnership
relationship between the Custodian and the Trust or (ii) be
construed as or constitute a prohibition against the provision by
the Custodian or any of its affiliates to the Trust of investment
banking, securities dealing or brokerages services or any other
banking or financial services.
14.2 Further Assurances. Each party hereto shall
furnish to the other party hereto such instruments and other
documents as such other party may reasonably request for the
purpose of carrying out or evidencing the transactions
contemplated by this Agreement.
14.3 Attorneys' Fees. If any lawsuit or other action
or proceeding relating to this Agreement is brought by a party
hereto against the other party hereto, the prevailing party shall
be entitled to recover reasonable attorneys' fees, costs and
disbursements (including allocated costs and disbursements of in-
house counsel), in addition to any other relief to which the
prevailing party may be entitled.
14.4 Notices. Except as otherwise specified herein,
each notice or other communication hereunder shall be in Writing
and shall be delivered to the intended recipient at the following
address (or at such other address as the intended recipient shall
have specified in a written notice given to the other parties
hereto):
if to the Trust:
Franklin Strategic Series
c/o Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Trust Manager
if to the Custodian:
Bank of America NT&SA
1455 Market Street
16th Floor, Dept. 5014
San Francisco, CA 94104
Attention: Manager
14.5 Headings. The underlined headings contained
herein are for convenience of reference only, shall not be deemed
to be a part of this Agreement and shall not be referred to in
connection with the interpretation hereof.
14.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and both
of which, when taken together, shall constitute one agreement.
14.7 Governing Law. This Agreement shall be
construed in accordance with, and governed in all respects by,
the laws of the State of California (without giving effect to
principles of conflict of laws).
14.8 Force Majeure. Subject to the provisions of
Section 11 hereof regarding the Custodian's general standard of
care, no failure, delay or default in performance of any
obligation hereunder shall constitute an event of default or a
breach of this agreement, or give rise to any liability
whatsoever on the part of one party hereto to the other, to the
extent that such failure to perform, delay or default arises out
of a cause beyond the control and without negligence of the party
otherwise chargeable with failure, delay or default; including,
but not limited to: action or inaction of governmental, civil or
military authority; fire; strike; lockout or other labor dispute;
flood; war; riot; theft; earthquake; natural disaster; breakdown
of public or common carrier communications facilities; computer
malfunction; or act, negligence or default of the other party.
This paragraph shall in no way limit the right of either party to
this Agreement to make any claim against third parties for any
damages suffered due to such causes.
14.9 Successors and Assigns. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns, if any.
14.10 Waiver. No failure on the part of any person to
exercise any power, right, privilege or remedy hereunder, and no
delay on the part of any person in the exercise of any power,
right, privilege or remedy hereunder, shall operate as a waiver
thereof; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further
exercise thereof or of any other power, right, privilege or
remedy.
14.11 Amendments. This Agreement may not be amended,
modified, altered or supplemented other than by means of an
agreement or instrument executed on behalf of each of the parties
hereto.
14.12 Severability. In the event that any provision
of this Agreement, or the application of any such provision to
any person or set of circumstances, shall be determined to be
invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such
provision to persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent
permitted by law.
14.13 Parties in Interest. None of the provisions of
this Agreement is intended to provide any rights or remedies to
any person other than the Trust and the Custodian and their
respective successors and assigns, if any.
14.14 Entire Agreement. This Agreement sets forth the
entire understanding of the parties hereto and supersedes all
prior agreements and understandings between the parties hereto
relating to the subject matter hereof.
14.15 Variations of Pronouns. Whenever required by
the context hereof, the singular number shall include the
plural, and vice versa; the masculine gender shall include the
feminine and
neuter genders; and the neuter gender shall include the masculine
and feminine genders.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above
written.
"Custodian": BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ John B. Housen
Its Vice President
"Trust": FRANKLIN STRATEGIC SERIES
By /s/ Harmon E. Burns
Its Vice President
CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and
entered into as of _______________, 1994, by and between FRANKLIN
STRATEGIC SERIES, a Delaware business trust (the "Trust"), and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a banking
association organized under the laws of the United States (the
"Custodian").
RECITALS
A. The Trust is an investment company registered under
the Investment Company Act of 1940, as amended (the "Investment
Company Act") that invests and reinvests, on behalf of its
series, in Domestic Securities and Foreign Securities.
B. The Custodian is, and has represented to the Trust
that the Custodian is, a "bank" as that term is defined in
Section 2(a)(5) of the Investment Company Act of 1940, as amended
and is eligible to receive and maintain custody of investment
company assets pursuant to Section 17(f) and Rule 17f-2
thereunder.
C. The Trust and the Custodian desire to provide for
the retention of the Custodian as a custodian of the assets of
the Trust and such subsequent series as the parties hereto may
determine from time-to-time, on the terms and subject to the
provisions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS
For purposes of this Agreement, the following terms
shall have the respective meanings specified below:
"Agreement" shall mean this Custody Agreement.
"Board of Trustees" shall mean the Board of Trustees of
the Trust.
"Business Day" with respect to any Domestic Security
means any day, other than a Saturday or Sunday, that is not a day
on which banking institutions are authorized or required by law
to be closed in The City of New York and, with respect to Foreign
Securities, a London Business Day. "London Business Day" shall
mean any day on which dealings and deposits in U.S. dollars are
transacted in the London interbank market.
"Custodian" shall mean Bank of America National Trust
and Savings Association.
"Domestic Securities" shall have the meaning provided in
Subsection 2.1 hereof.
"Executive Committee" shall mean the executive committee
of the Board of Trustees.
"Foreign Custodian" shall have the meaning provided in
Section 4.1 hereof.
"Foreign Securities" shall have the meaning provided in
Section 2.1 hereof.
"Foreign Securities Depository" shall have the meaning
provided in Section 4.1 hereof.
"Investment Company Act" shall mean the Investment
Company Act of 1940, as amended.
"Securities" shall have the meaning provided in Section
2.1 hereof.
"Securities System" shall have the meaning provided in
Section 3.1 hereof.
"Securities System Account" shall have the meaning
provided in Subsection 3.8(a) hereof.
"Shares" shall mean shares of beneficial interest of the
Trust.
"Subcustodian" shall have the meaning provided in
Subsection 3.7 hereof, but shall not include any Foreign
Custodian.
"Transfer Agent" shall mean the duly appointed and
acting transfer agent for the Trust.
"Trust" shall mean the Franklin Strategic Series and any
separate series of the Trust hereinafter organized.
"Writing" shall mean a communication in writing, a
communication by telex, the Custodian's Global Custody
Instruction SystemTM, facsimile transmission, bank wire or other
teleprocess or electronic instruction system acceptable to the
Custodian.
Section 2. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS
2.1 Appointment of Custodian. The Trust hereby
appoints and designates the Custodian as a custodian of the
assets of the Trust including cash, securities the Trust desires
to be held within the United States ("Domestic Securities") and
securities it desires to be held outside the United States
("Foreign Securities"). Domestic Securities and Foreign
Securities are sometimes referred to herein, collectively, as
"Securities." The Custodian hereby accepts such appointment and
designation and agrees that it shall maintain custody of the
assets of the Trust delivered to it hereunder in the manner
provided for herein.
2.2 Delivery of Assets. The Trust agrees to deliver
to the Custodian Securities and cash owned by the Trust, payments
of income, principal or capital distributions received by the
Trust with respect to Securities owned by the Trust from time to
time, and the consideration received by it for such Shares or
other securities of the Trust as may be issued and sold from time
to time. The Custodian shall have no responsibility whatsoever
for any property or assets of the Trust held or received by the
Trust and not delivered to the Custodian pursuant to and in
accordance with the terms hereof. All Securities accepted by the
Custodian on behalf of the Trust under the terms of this
Agreement shall be in "street name" or other good delivery form
as determined by the Custodian.
2.3 Subcustodians. Upon receipt of Proper
Instructions and a certified copy of a resolution of the Board of
Trustees or of the Executive Committee certified by the Secretary
or an Assistant Secretary of the Trust, the Custodian may from
time to time appoint one or more Subcustodians or Foreign
Custodians to hold assets of the Trust in accordance with the
provisions of this Agreement.
2.4 No Duty to Manage. The Custodian, a Subcustodian
or a Foreign Custodian shall not have any duty or responsibility
to manage or recommend investments of the assets of the Trust
held by them or to initiate any purchase, sale or other
investment transaction in the absence of Proper Instructions or
except as otherwise specifically provided herein.
Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS OF
THE TRUST HELD BY THE CUSTODIAN
3.1 Holding Securities. The Custodian shall hold and
physically segregate from any property owned by the Custodian,
for the account of the Trust, all non-cash property delivered by
the Trust to the Custodian hereunder other than Securities which,
pursuant to Subsection 3.8 hereof, are held through a registered
clearing agency, a registered securities depository, the Federal
Reserve's book-entry securities system (referred to herein,
individually, as a "Securities System"), or held by a
Subcustodian, Foreign Custodian or in a Foreign Securities
Depository.
3.2 Delivery of Securities. Except as otherwise
provided in Subsection 3.5 hereof, the Custodian, upon receipt of
Proper Instructions, shall release and deliver Securities owned
by the Trust and held by the Custodian in the following cases or
as otherwise directed in Proper Instructions:
(a) except as otherwise provided herein,
upon sale of such Securities for the account of the
Trust and receipt by the Custodian, a Subcustodian or a
Foreign Custodian of payment therefor;
(b) upon the receipt of payment by the
Custodian, a Subcustodian or a Foreign Custodian in
connection with any repurchase agreement related to
such Securities entered into by the Trust;
(c) in the case of a sale effected through a
Securities System, in accordance with the provisions of
Subsection 3.8 hereof;
(d) to a tender agent or other authorized
agent in connection with (i) a tender or other similar
offer for Securities owned by the Trust, or (ii) a
tender offer or repurchase by the Trust of its own
Shares;
(e) to the issuer thereof or its agent when
such Securities are called, redeemed, retired or
otherwise become payable; provided, that in any such
case, the cash or other consideration is to be
delivered to the Custodian, a Subcustodian or a Foreign
Custodian;
(f) to the issuer thereof, or its agent, for
transfer into the name or nominee name of the Trust,
the name or nominee name of the Custodian, the name or
nominee name of any Subcustodian or Foreign Custodian;
or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new Securities are to be
delivered to the Custodian, a Subcustodian or Foreign
Custodian;
(g) to the broker selling the same for
examination in accordance with the "street delivery"
custom;
(h) for exchange or conversion pursuant to
any plan of merger, consolidation, recapitalization, or
reorganization of the issuer of such Securities, or
pursuant to a conversion of such Securities; provided
that, in any such case, the new Securities and cash, if
any, are to be delivered to the Custodian or a
Subcustodian;
(i) in the case of warrants, rights or
similar securities, the surrender thereof in connection
with the exercise of such warrants, rights or similar
Securities or the surrender of interim receipts or
temporary Securities for definitive Securities;
provided that, in any such case, the new Securities and
cash, if any, are to be delivered to the Custodian, a
subcustodian or a Foreign Custodian;
(j) for delivery in connection with any
loans of Securities made by the Trust, but only against
receipt by the Custodian, a Subcustodian or a Foreign
Custodian of adequate collateral as determined by the
Trust (and identified in Proper Instructions
communicated to the Custodian), which may be in the
form of cash or obligations issued by the United
States government, its agencies or instrumentalities,
except that in connection with any loans for which
collateral is to be credited to the account of the
Custodian, a Subcustodian or a Foreign Custodian in the
Federal Reserve's book-entry securities system, the
Custodian will not be held liable or responsible for
the delivery of Securities owned by the Trust prior to
the receipt of such collateral;
(k) for delivery as security in connection
with any borrowings by the Trust requiring a pledge of
assets by the Trust, but only against receipt by the
Custodian, a Subcustodian or a Foreign Custodian of
amounts borrowed;
(l) for delivery in accordance with the
provisions of any agreement among the Trust, the
Custodian, a Subcustodian or a Foreign Custodian and a
broker-dealer relating to compliance with the rules of
registered clearing corporations and of any registered
national securities exchange, or of any similar
organization or organizations, regarding escrow or
other arrangements in connection with transactions by
the Trust;
(m) for delivery in accordance with the
provisions of any agreement among the Trust, the
Custodian, a Subcustodian or a Foreign Custodian and a
futures commission merchant, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any contract market, or any similar
organization or organizations, regarding account
deposits in connection with transactions by the Trust;
(n) upon the receipt of instructions from
the Transfer Agent for delivery to the Transfer Agent
or to the holders of Shares in connection with
distributions in kind in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(o) for any other proper purpose, but only
upon receipt of Proper Instructions, and a certified
copy of a resolution of the Trustees or of the
Executive Committee certified by the Secretary or an
Assistant Secretary of the Trust, specifying the
securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such
purpose to be a proper purpose, and naming the person
or persons to whom delivery of such securities shall be
made.
3.3 Registration of Securities. Securities held by
the Custodian, a Subcustodian or a Foreign Custodian (other than
bearer Securities) shall be registered in the name or nominee
name of the Trust, in the name or nominee name of the Custodian
or in the name or nominee name of any Subcustodian or Foreign
Custodian. The Trust agrees to hold the Custodian, any such
nominee, Subcustodian or Foreign Custodian harmless from any
liability as a holder of record of such Securities.
3.4 Bank Accounts. The Custodian shall open and
maintain a separate bank account or accounts for the Trust,
subject only to draft or order by the Custodian acting pursuant
to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by
it hereunder from or for the account of the Trust, other than
cash maintained by the Trust in a bank account established and
used in accordance with Rule 17f-3 under the Investment Company
Act. Funds held by the Custodian for the Trust may be deposited
by it to its credit as Custodian in the banking departments of
the Custodian, a Subcustodian or a Foreign Custodian. It is
understood and agreed by the Custodian and the Trust that the
rate of interest, if any, payable on such funds (including
foreign currency deposits) that are deposited with the Custodian
may not be a market rate of interest and that the rate of
interest payable by the Custodian to the Trust shall be agreed
upon by the Custodian and the Trust from time to time. Such
funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
3.5 Collection of Income; Trade Settlement; Crediting
of Accounts. The Custodian shall collect income payable with
respect to Securities owned by the Trust, settle Securities
trades for the account of the Trust and credit and debit the
Trust's account with the Custodian in connection therewith as
follows:
(a) Upon receipt of Proper Instructions, the
Custodian shall effect the purchase of a Security by
charging the account of the Trust on the contractual
settlement date. The Custodian shall have no liability
of any kind to any person, including the Trust, if the
Custodian effects payment on behalf of the Trust as
provided for herein or in Proper Instructions, and the
seller or selling broker fails to deliver the
Securities purchased.
(b) Upon receipt of Proper Instructions, the
Custodian shall effect the sale of a Security by
delivering a certificate or other indicia of ownership,
and shall credit the account of the Trust with the
proceeds of such sale on the contractual settlement
date. The Custodian shall have no liability of any
kind to any person, including the Trust, if the
Custodian delivers such a certificate(s) or other
indicia of ownership as provided for herein or in
Proper Instructions, and the purchaser or purchasing
broker fails to effect payment to the Trust within a
reasonable time period, as determined by the Custodian
in its sole discretion. In such event, the Custodian
shall be entitled to reimbursement of the amount so
credited to the account of the Trust in connection with
such sale.
(c) The Trust is responsible for ensuring
that the Custodian receives timely and accurate Proper
Instructions to enable the Custodian to effect
settlement of any purchase or sale. If the Custodian
does not receive such instructions within the required
time period, the Custodian shall have no liability of
any kind to any person, including the Trust, for
failing to effect settlement on the contractual
settlement date. However, the Custodian shall use its
best reasonable efforts to effect settlement as soon as
possible after receipt of Proper Instructions.
(d) The Custodian shall credit the account
of the Trust with interest income payable on interest
bearing Securities on payable date. Interest income on
cash balances will be credited monthly to the account
of the Trust on the first Business Day (on which the
Custodian is open for business) following the end of
each month. Dividends and other amounts payable with
respect to Domestic Securities and Foreign Securities
shall be credited to the account of the Trust when
received by the Custodian. The Custodian shall not be
required to commence suit or collection proceedings or
resort to any extraordinary means to collect such
income and other amounts payable with respect to
Securities owned by the Trust. The collection of
income due the Trust on Domestic Securities loaned
pursuant to the provisions of Subsection 3.2(j) shall
be the responsibility of the Trust. The Custodian will
have no duty or responsibility in connection therewith,
other than to provide the Trust with such information
or data as may be necessary to assist the Trust in
arranging for the timely delivery to the Custodian of
the income to which the Trust is entitled. The
Custodian shall have no liability to any person,
including the Trust, if the Custodian credits the
account of the Trust with such income or other amounts
payable with respect to Securities owned by the Trust
(other than Securities loaned by the Trust pursuant to
Subsection 3.2(j) hereof) and the Custodian
subsequently is unable to collect such income or other
amounts from the payors thereof within a reasonable
time period, as determined by the Custodian in its sole
discretion. In such event, the Custodian shall be
entitled to reimbursement of the amount so credited to
the account of the Trust.
3.6 Payment of Trust Monies. Upon receipt of Proper
Instructions the Custodian shall pay out monies of the Trust in
the following cases or as otherwise directed in Proper
Instructions:
(a) upon the purchase of Securities, futures
contracts or options on futures contracts for the
account of the Trust but only, except as otherwise
provided herein, (i) against the delivery of such
securities, or evidence of title to futures contracts
or options on futures contracts, to the Custodian or a
Subcustodian registered pursuant to Subsection 3.3
hereof or in proper form for transfer; (ii) in the case
of a purchase effected through a Securities System, in
accordance with the conditions set forth in Subsection
3.8 hereof; or (iii) in the case of repurchase
agreements entered into between the Trust and the
Custodian, another bank or a broker-dealer (A) against
delivery of the Securities either in certificated form
to the Custodian or a Subcustodian or through an entry
crediting the Custodian's account at the appropriate
Federal Reserve Bank with such Securities or (B)
against delivery of the confirmation evidencing
purchase by the Trust of Securities owned by the
Custodian or such broker-dealer or other bank along
with written evidence of the agreement by the Custodian
or such broker-dealer or other bank to repurchase such
Securities from the Trust;
(b) in connection with conversion, exchange
or surrender of Securities owned by the Trust as set
forth in Subsection 3.2 hereof;
(c) for the redemption or repurchase of
Shares issued by the Trust;
(d) for the payment of any expense or
liability incurred by the Trust, including but not
limited to the following payments for the account of
the Trust: custodian fees, interest, taxes, management,
accounting, transfer agent and legal fees and operating
expenses of the Trust whether or not such expenses are
to be in whole or part capitalized or treated as
deferred expenses; and
(e) for the payment of any dividends or
distributions declared by the Board of Trustees with
respect to the Shares.
3.7 Appointment of Subcustodians. The Custodian may,
upon receipt of Proper Instructions, appoint another bank or
trust company, which is itself qualified under the Investment
Company Act to act as a custodian (a "Subcustodian"), as the
agent of the Custodian to carry out such of the duties of the
Custodian hereunder as 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 Trust in a Securities System in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following
provisions:
(a) the Custodian may hold Domestic
Securities of the Trust in the Depository Trust Company
or the Federal Reserve's book entry system or, upon
receipt of Proper Instructions, in another Securities
System provided that such securities are held in an
account of the Custodian in the Securities System
("Securities System Account") which shall not include
any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
(b) the records of the Custodian with
respect to Domestic Securities of the Trust which are
maintained in a Securities System shall identify by
book-entry those Domestic Securities belonging to the
Trust;
(c) the Custodian shall pay for Domestic
Securities purchased for the account of the Trust upon
(i) receipt of advice from the Securities System that
such securities have been transferred to the Securities
System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of the Trust. The Custodian
shall transfer Domestic Securities sold for the account
of the Trust upon (A) receipt of advice from the
Securities System that payment for such securities has
been transferred to the Securities System Account, and
(B) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the
account of the Trust. Copies of all advices from the
Securities System of transfers of Domestic Securities
for the account of the Trust shall be maintained for
the Trust by the Custodian and be provided to the Trust
at its request. Upon request, the Custodian shall
furnish the Trust confirmation of each transfer to or
from the account of the Trust in the form of a written
advice or notice; and
(d) upon request, the Custodian shall
provide the Trust with any report obtained by the
Custodian on the Securities System's accounting system,
internal accounting control and procedures for
safeguarding domestic securities deposited in the
Securities System.
3.9 Segregated Account. The Custodian shall upon
receipt of Proper Instructions establish and maintain a
segregated account or accounts for and on behalf of the Trust,
into which account or accounts may be transferred cash and/or
Securities, including Securities maintained in an account by the
Custodian pursuant to Section 3.8 hereof, (i) in accordance with
the provisions of any agreement among the Trust, the Custodian
and a broker-dealer or futures commission merchant, relating to
compliance with the rules of registered clearing corporations and
of any national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Trust, (ii)
for purposes of segregating cash or securities in connection with
options purchased, sold or written by the Trust or commodity
futures contracts or options thereon purchased or sold by the
Trust and (iii) for other proper corporate purposes, but only, in
the case of this clause (iii), upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes
to be proper corporate purposes.
3.10 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection
with receipt of income or other payments with respect to domestic
securities of the Trust held by it and in connection with
transfers of such securities.
3.11 Proxies. The Custodian shall, with respect to
the Securities held hereunder, promptly deliver to the Trust all
proxies, all proxy soliciting materials and all notices relating
to such Securities. If the Securities are registered otherwise
than in the name of the Trust or a nominee of the Trust, the
Custodian shall use its best reasonable efforts, consistent with
applicable law, to cause all proxies to be promptly executed by
the registered holder of such Securities in accordance with
Proper Instructions.
3.12 Communications Relating to Trust Portfolio
Securities. The Custodian shall transmit promptly to the Trust
all written information (including, without limitation, pendency
of calls and maturities of Securities and expirations of rights
in connection therewith and notices of exercise of put and call
options written by the Trust and the maturity of futures
contracts purchased or sold by the Trust) received by the
Custodian from issuers of Securities being held for the Trust.
With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Trust all written information received
by the Custodian from issuers of the Securities whose tender or
exchange is sought and from the party (or its agents) making the
tender or exchange offer. If the Trust desires to take action
with respect to any tender offer, exchange offer or any other
similar transaction, the Trust shall notify the Custodian at
least three Business Days prior to the date of which the
Custodian is to take such action.
3.13 Reports by Custodian. Custodian shall each
business day furnish the Trust 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 Trust 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 TRUST HELD OUTSIDE THE UNITED STATES
4.1 Custody Outside the United States. The Trust
authorizes the Custodian to hold Foreign Securities and cash in
custody accounts which have been established by the Custodian
with (i) its foreign branches, (ii) foreign banking institutions,
foreign branches of United States banks and subsidiaries of
United States banks or bank holding companies (each a "Foreign
Custodian") and (iii) Foreign Securities depositories or clearing
agencies (each a "Foreign Securities Depository"); provided,
however, that the Board of Trustees or the Executive Committee
has approved in advance the use of each such Foreign Custodian
and Foreign Securities Depository and the contract between the
Custodian and each Foreign Custodian and that such approval is
set forth in Proper Instructions and a certified copy of a
resolution of the Board of Trustees or of the Executive Committee
certified by the Secretary or an Assistant Secretary of the
Trust. Unless expressly provided to the contrary in this Section
4, custody of Foreign Securities and assets held outside the
United States by the Custodian, a Foreign Custodian or through a
Foreign Securities Depository shall be governed by Section 3
hereof.
4.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of its
foreign branches, Foreign Custodians and Foreign Securities
Depositories to: (i) "foreign securities", as defined in
paragraph (c) (1) of Rule 17f-5 under the Investment Company Act,
and (ii) cash and cash equivalents in such amounts as the
Custodian or the Trust may determine to be reasonably necessary
to effect the Trust's Foreign Securities transactions.
4.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Custodian and the
Trust, assets of the Trust shall be maintained in Foreign
Securities Depositories only through arrangements implemented by
the Custodian or Foreign Custodians pursuant to the terms hereof.
4.4 Segregation of Securities. The Custodian shall
identify on its books and records as belonging to the Trust, the
Foreign Securities of the Trust held by each Foreign Custodian.
4.5 Agreements with Foreign Custodians. Each
agreement with a Foreign Custodian shall provide generally that:
(a) the Trust's assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the
Foreign Custodian or its creditors, except a claim of payment for
their safe custody or administration; (b) beneficial ownership
for the Trust's assets will be freely transferable without the
payment of money or value other than for custody or
administration; (c) adequate records will be maintained
identifying the assets as belonging to the Trust; (d) the
independent public accountants for the Trust, will be given
access to the records of the Foreign Custodian relating to the
assets of the Trust or confirmation of the contents of those
records; (e) the disposition of assets of the Trust held by the
Foreign Custodian will be subject only to the instructions of the
Custodian or its agents; (f) the Foreign Custodian shall
indemnify and hold harmless the Custodian and the Trust from and
against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the Foreign Custodian's
performance of its obligations under such agreement; (g) to the
extent practicable, the Trust's assets will be adequately insured
in the event of loss; and (h) the Custodian will receive periodic
reports with respect to the safekeeping of the Trust's assets,
including notification of any transfer to or from the Trust's
account.
4.6 Access of Independent Accountants of the Trust.
Upon request of the Trust, the Custodian will use its best
reasonable efforts to arrange for the independent accountants of
the Trust to be afforded access to the books and records of any
Foreign Custodian insofar as such books and records relate to the
custody by any such Foreign Custodian of assets of the Trust.
4.7 Transactions in Foreign Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall instruct the
appropriate Foreign Custodian to transfer, exchange or deliver
Foreign Securities owned by the Trust, but, except to the extent
explicitly provided herein, only in any of the cases specified in
Subsection 3.2. Upon receipt of Proper Instructions, the
Custodian shall pay out or instruct the appropriate Foreign
Custodian to pay out monies of the Trust in any of the cases
specified in Subsection 3.6. Notwithstanding anything herein to
the contrary, settlement and payment for Foreign Securities
received for the account of the Trust and delivery of Foreign
Securities maintained for the account of the Trust may be
effected in accordance with the customary or established
securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering securities to
the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation
of receiving later payment for such securities from such
purchaser or dealer. Foreign Securities maintained in the
custody of a Foreign Custodian may be maintained in the name of
such entity or its nominee name to the same extent as set forth
in Section 3.3 of this Agreement and the Trust agrees to hold any
Foreign Custodian and its nominee harmless from any liability as
a holder of record of such securities.
4.8 Liability of Foreign Custodian. Each agreement
between the Custodian and a Foreign Custodian shall require the
Foreign Custodian to exercise reasonable care in the performance
of its duties and to indemnify and hold harmless the Custodian
and the Trust from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the
Foreign Custodian's performance of such obligations. At the
election of the Trust, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claims against a
Foreign Custodian as a consequence of any such loss, damage,
cost, expense, liability or claim if and to the extent that the
Trust has not been made whole for any such loss, damage, cost,
expense, liability or claim.
4.9 Monitoring Responsibilities.
(a) The Custodian will promptly inform the
Trust in the event that the Custodian learns of a
material adverse change in the financial condition of a
Foreign Custodian or is notified by (i) a foreign
banking institution employed as a Foreign Custodian
that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200
million or that its shareholders' equity has declined
below $200 million (in each case computed in accordance
with generally accepted United States accounting
principles), and denominated in U.S. dollars, or (ii) a
subsidiary of a United States bank or bank holding
company acting as a Foreign Custodian that there
appears to be a substantial likelihood that its
shareholders' equity will decline below $100 million or
that its shareholders' equity has declined below $100
million (in each case computed in accordance with
generally accepted United States accounting
principles), and denominated in U.S. dollars.
(b) The custodian will furnish such
information as may be reasonably necessary to assist
the Trust's Board of Trustees in its annual review and
approval of the continuance of all contracts or
arrangements with Foreign Subcustodians.
Section 5. PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper
Instructions" means instructions of the Trust received by the
Custodian via telephone or in Writing which the Custodian
believes in good faith to have been given by Authorized Persons
(as defined below) or which are transmitted with proper testing
or authentication pursuant to terms and conditions which the
Custodian may specify. Any Proper Instructions delivered to the
Custodian by telephone shall promptly thereafter be confirmed in
Writing by an Authorized Person, but the Trust will hold the
Custodian harmless for its failure to send such confirmation in
writing, the failure of such confirmation to conform to the
telephone instructions received or the Custodian's failure to
produce such confirmation at any subsequent time. Unless
otherwise expressly provided, all Proper Instructions shall
continue in full force and effect until cancelled or superseded.
If the Custodian requires test arrangements, authentication
methods or other security devices to be used with respect to
Proper Instructions, any Proper Instructions given by the Trust
thereafter shall be given and processed in accordance with such
terms and conditions for the use of such arrangements, methods or
devices as the Custodian may put into effect and modify from time
to time. The Trust shall safeguard any test keys, identification
codes or other security devices which the Custodian shall make
available to it. The Custodian may electronically record any
Proper Instructions given by telephone, and any other telephone
discussions, with respect to its activities hereunder. As used
in this Agreement, the term "Authorized Persons" means such
officers or such agents of the Trust as have been designated by a
resolution of the Board of trustees or of the Executive
Committee, a certified copy of which has been provided to the
Custodian, to act on behalf of the Trust under this Agreement.
Each of such persons shall continue to be an Authorized Person
until such time as the Custodian receives Proper Instructions
that any such officer or agent is no longer an Authorized Person.
Section 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express
authority from the Trust:
(a) make payments to itself or others for
minor expenses of handling Securities or other similar
items relating to its duties under this Agreement,
provided that all such payments shall be accounted for
to the Trust;
(b) endorse for collection, in the name of
the Trust, checks, drafts and other negotiable
instruments; and
(c) in general, attend to all non-
discretionary details in connection with the sale,
exchange, substitution, purchase, transfer and other
dealings with the Securities and property of the Trust
except as otherwise provided in Proper Instructions.
Section 7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any
instructions (conveyed by telephone or in Writing), notice,
request, consent, certificate or other instrument or paper
believed by it to be genuine and to have been properly given or
executed by or on behalf of the Trust. The Custodian may receive
and accept a certified copy of a resolution of the Board of
Trustees or Executive Committee as conclusive evidence (a) of the
authority of any person to act in accordance with such resolution
or (b) of any determination or of any action by the Board of
Trustees or Executive Committee as described in such resolution,
and such resolution may be considered as in full force and effect
until receipt by the Custodian of written notice by an Authorized
Person to the contrary.
Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary
information in its possession (to the extent permissible under
applicable law) to the entity or entities appointed by the Board
of Trustees to keep the books of account of the Trust and/or
compute the net asset value per Share of the outstanding Shares
of the Trust.
Section 9. RECORDS
The Custodian shall create and maintain all records
relating to its activities under this Agreement which are
required with respect to such activities under Section 31 of the
Investment Company Act and Rules 31a-1 and 31a-2 thereunder. All
such records shall be the property of the Trust and shall at all
times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents
of the Trust and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Trust's
request, supply the Trust with a tabulation of Securities owned
by the Trust and held by the Custodian and shall, when requested
to do so by the Trust and for such compensation as shall be
agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
Section 10. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Trust and the
Custodian.
Section 11. RESPONSIBILITY OF CUSTODIAN
The Custodian shall be responsible for the performance
of only such duties as are set forth herein or contained in
Proper Instructions and shall use reasonable care in carrying out
such duties. The Custodian shall be liable to the Trust for any
loss which shall occur as the result of the failure of a Foreign
Custodian or a Foreign Securities Depository engaged by such
Foreign Custodian or the Custodian to exercise reasonable care
with respect to the safekeeping of securities and other assets of
the Trust to the same extent that the Custodian would be liable
to the Trust if the Custodian itself were holding such securities
and other assets. In the event of any loss to the Trust by
reason of the failure of the Custodian, a Foreign Custodian or a
Foreign Securities Depository engaged by such Foreign Custodian
or the Custodian to utilize reasonable care, the Custodian shall
be liable to the Trust to the extent of the Trust's damages, to
be determined based on the market value of the property which is
the subject of the loss at the date of discovery of such loss and
without reference to any special conditions or circumstances.
The Custodian shall be held to the exercise of reasonable care in
carrying out this Agreement. The Trust agrees to indemnify and
hold harmless the Custodian and its nominees from all taxes,
charges, expenses, assessments, claims and liabilities (including
legal fees and expenses) incurred by any of them in connection
with the performance of this Agreement, except such as may arise
from any negligent action, negligent failure to act or willful
misconduct on the part of the indemnified entity or any Foreign
Custodian or Foreign Securities Depository. The Custodian shall
be entitled to rely, and may act, on advice of counsel (who may
be counsel for the Trust) on all matters and shall be without
liability for any action reasonably taken or omitted pursuant to
such advice. The Custodian need not maintain any insurance for
the benefit of the Trust.
All collections of funds or other property paid or
distributed in respect of Securities held by the Custodian,
agent, Subcustodian or Foreign Custodian hereunder shall be made
at the risk of the Trust. The Custodian shall have no liability
for any loss occasioned by delay in the actual receipt of notice
by the Custodian, agent, Subcustodian or by a Foreign Custodian
of any payment, redemption or other transaction regarding
securities in respect of which the Custodian has agreed to take
action as provided in Section 3 hereof. The Custodian shall not
be liable for any action taken in good faith upon Proper
Instructions or upon any certified copy of any resolution of the
Board of Trustees and may rely on the genuineness of any such
documents which it may in good faith believe to be validly
executed. The Custodian shall not be liable for any loss
resulting from, or caused by, the direction of the Trust to
maintain custody of any Securities or cash in a foreign country
including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, civil
disturbance, acts of war or terrorism, insurrection, revolution,
nuclear fusion, fission or radiation or other similar occurrences
or events beyond the control of the Custodian. Finally, the
Custodian shall not be liable for any taxes, including interest
and penalties with respect thereto, that may be levied or
assessed upon or in respect of any assets of the Trust held by
the Custodian.
Section 12. LIMITED LIABILITY OF THE TRUST
The Custodian acknowledges that it has received notice
of and accepts the limitations of the Trust's liability as set
forth in its Agreement and Declaration of Trust. The Custodian
agrees that the Trust's obligation hereunder shall be limited to
the assets of the Trust, and that the Custodian shall not seek
satisfaction of any such obligation from the shareholders of the
Trust nor from any Trustee, officer, employee, or agent of the
Trust.
Section 13. EFFECTIVE PERIOD; TERMINATION
This Agreement shall become effective as of the date of
its execution and shall continue in full force and effect until
terminated as hereinafter provided. This Agreement may be
terminated by the Trust or the Custodian by 60 days notice in
Writing to the other provided that any termination by the Trust
shall be authorized by a resolution of the Board of Trustees, a
certified copy of which shall accompany such notice of
termination, and provided further, that such resolution shall
specify the names of the persons to whom the Custodian shall
deliver the assets of the Trust held by it. If notice of
termination is given by the Custodian, the Trust shall, within 60
days following the giving of such notice, deliver to the
Custodian a certified copy of a resolution of the Board of
Trustees specifying the names of the persons to whom the
Custodian shall deliver assets of the Trust held by it. In
either case the Custodian will deliver such assets to the persons
so specified, after deducting therefrom any amounts which the
Custodian determines to be owed to it hereunder (including all
costs and expenses of delivery or transfer of Trust assets to the
persons so specified). If within 60 days following the giving of
a notice of termination by the Custodian, the Custodian does not
receive from the Trust a certified copy of a resolution of the
Board of Trustees specifying the names of the persons to whom the
Custodian shall deliver the assets of the Trust held by it, the
Custodian, at its election, may deliver such assets to a bank or
trust company doing business in the State of California to be
held and disposed of pursuant to the provisions of this Agreement
or may continue to hold such assets until a certified copy of one
or more resolutions as aforesaid is delivered to the Custodian.
The obligations of the parties hereto regarding the use of
reasonable care, indemnities and payment of fees and expenses
shall survive the termination of this Agreement.
Section 14. MISCELLANEOUS
14.1 Relationship. Nothing contained in this
Agreement shall (i) create any fiduciary, joint venture or
partnership relationship between the Custodian and the Trust or
(ii) be construed as or constitute a prohibition against the
provision by the Custodian or any of its affiliates to the Trust
of investment banking, securities dealing or brokerages services
or any other banking or financial services.
14.2 Further Assurances. Each party hereto shall
furnish to the other party hereto such instruments and other
documents as such other party may reasonably request for the
purpose of carrying out or evidencing the transactions
contemplated by this Agreement.
14.3 Attorneys' Fees. If any lawsuit or other action
or proceeding relating to this Agreement is brought by a party
hereto against the other party hereto, the prevailing party shall
be entitled to recover reasonable attorneys' fees, costs and
disbursements (including allocated costs and disbursements of in-
house counsel), in addition to any other relief to which the
prevailing party may be entitled.
14.4 Notices. Except as otherwise specified herein,
each notice or other communication hereunder shall be in Writing
and shall be delivered to the intended recipient at the following
address (or at such other address as the intended recipient shall
have specified in a written notice given to the other parties
hereto):
if to the Trust:
Franklin Strategic Series
c/o Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Trust Manager
if to the Custodian:
Bank of America NT&SA
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 both
of which, when taken together, shall constitute one agreement.
14.7 Governing Law. This Agreement shall be
construed in accordance with, and governed in all respects by,
the laws of the State of California (without giving effect to
principles of conflict of laws).
14.8 Force Majeure. Subject to the provisions of
Section 11 hereof regarding the Custodian's general standard of
care, no failure, delay or default in performance of any
obligation hereunder shall constitute an event of default or a
breach of this agreement, or give rise to any liability
whatsoever on the part of one party hereto to the other, to the
extent that such failure to perform, delay or default arises out
of a cause beyond the control and without negligence of the party
otherwise chargeable with failure, delay or default; including,
but not limited to: action or inaction of governmental, civil or
military authority; fire; strike; lockout or other labor dispute;
flood; war; riot; theft; earthquake; natural disaster; breakdown
of public or common carrier communications facilities; computer
malfunction; or act, negligence or default of the other party.
This paragraph shall in no way limit the right of either party to
this Agreement to make any claim against third parties for any
damages suffered due to such causes.
14.9 Successors and Assigns. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns, if any.
14.10 Waiver. No failure on the part of any person to
exercise any power, right, privilege or remedy hereunder, and no
delay on the part of any person in the exercise of any power,
right, privilege or remedy hereunder, shall operate as a waiver
thereof; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further
exercise thereof or of any other power, right, privilege or
remedy.
14.11 Amendments. This Agreement may not be amended,
modified, altered or supplemented other than by means of an
agreement or instrument executed on behalf of each of the parties
hereto.
14.12 Severability. In the event that any provision
of this Agreement, or the application of any such provision to
any person or set of circumstances, shall be determined to be
invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such
provision to persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent
permitted by law.
14.13 Parties in Interest. None of the provisions of
this Agreement is intended to provide any rights or remedies to
any person other than the Trust and the Custodian and their
respective successors and assigns, if any.
14.14 Entire Agreement. This Agreement sets forth the
entire understanding of the parties hereto and supersedes all
prior agreements and understandings between the parties hereto
relating to the subject matter hereof.
14.15 Variations of Pronouns. Whenever required by
the context hereof, the singular number shall include the
plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above
written.
"Custodian": BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By _____________________________
Its_____________________________
"Trust": FRANKLIN STRATEGIC SERIES
By______________________________
Its_____________________________
CONSENT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Franklin Strategic Series:
We consent to the incorporation by reference in Post-
Effective Amendment No. 13 to the Registration Statement of
Franklin Strategic Series on Form N-1A (File No. 33-39088)
of our report dated March 18, 1995 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 April 30, 1994, which is
incorporated by reference in the Registration Statement.
/s/ COOPERS & LYBRAND L.L.P.
San Francisco, California
April 14, 1995
Franklin California 250 Growth Fund
777 Mariners Island Blvd.
San Mateo, California 94404
Gentlemen:
The undersigned hereby subscribes for the purchase of 200,000.00
shares of beneficial interest (the "Shares") of the Franklin
California 250 Growth Fund (the "Fund"), at $10.00 per share for
a total investment of $2,000,000.00 In connection with said
subscription, the undersigned hereby represents that:
1. There is no present reason to anticipate any change in
circumstances or any other occasion or event which would cause
the undersigned to sell or redeem the Shares shortly after the
purchase thereof.
2. There are no agreements or arrangements between the
undersigned and the Fund, or any of its officers, trustees,
employees or the investment manager of the Fund, or any
affiliated persons thereof with respect to the resale, future
distribution or redemption of the Shares.
3. The sale of the Shares will only be made by redemption
to the Fund and not be a transfer to any third party.
4. The undersigned is aware that in issuing and selling
these Shares, the Fund is relying upon the aforementioned
representations.
5. The undersigned is fully aware that the organization
expenses of the Fund, including the costs and expenses of
registration of the Shares, are being charged to the operation of
the Fund over a period of five years, and that in the event the
undersigned redeems any portion of these Shares prior to the end
of said amortization period, the undersigned will reimburse the
Fund for the pro rata share of the unamortized organization
expenses (by a reduction of the redemption proceeds) in the same
proportion as the number of Shares being redeemed bears to the
total number of remaining initial Shares acquired by the
undersigned hereunder.
FRANKLIN RESOURCES, INC.
By: /s/ Harmon E. Burns
Harmon E. Burns,
Executive Vice President
Dated: August 20, 1991
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 STRATEGIC SERIES
Preamble to Amended and Restated Distribution Plan
The following Amended and Restated Distribution Plan (the
"Plan") has been adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Act") by Franklin Strategic
Series (the "Trust") for the use of four series entitled Franklin
California Growth Fund, Franklin Small Cap Growth Fund, Franklin
Global Health Care Fund and Franklin Global Utilities Fund (may
be collectively or separately hereinafter referred to as the
"Funds" or a "Fund"). The Plan has been approved by a majority
vote of the Board of Trustees of the Trust (the "Board of
Trustees"), including a majority of the trustees who are not
interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plan (the
"non-interested trustees"), cast in person at a meeting called
for the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees considered the
schedule and nature of payments and terms of the Management
Agreements between the Trust on behalf of the Funds and Franklin
Advisers, Inc. (the "Manager") and the terms of the Underwriting
Agreement between the Trust and Franklin/Templeton Distributors,
Inc. ("Distributors"). The Board of Trustees concluded that the
compensation of the Manager, under the Management Agreements was
fair and not excessive; however, the Board of Trustees also
recognized that uncertainty may exist from time to time with
respect to whether payments to be made by the Funds to the
Manager or to Distributors or others or by the Manager or
Distributors to others may be deemed to constitute distribution
expenses. Accordingly, the Board of Trustees determined that the
Plan should provide for such payments and that adoption of the
Plan would be prudent and in the best interests of each 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 each Fund and its shareholders.
AMENDED AND RESTATED DISTRIBUTION PLAN
1. The Funds shall reimburse Distributors or others for
all expenses incurred by Distributors or others in the promotion
and distribution of the shares of the Funds, including, but not
limited to, the printing of prospectuses and reports used for
sales purposes, expenses of preparation and distribution of sales
literature and related expenses, advertisements, and other
distribution-related expenses, including a prorated portion of
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 trustees, including the non-interested trustees.
2. The maximum amount which may be reimbursed by the Funds
to Distributors or others pursuant to Paragraph 1 herein shall be
0.25% per annum of the average daily net assets of each Fund.
Said reimbursement shall be made quarterly by each Fund to
Distributors or others.
3. In addition to the payments which the Funds are
authorized to make pursuant to paragraphs 1 and 2 hereof, to the
extent that the Funds, the Manager, Distributors or other parties
on behalf of a Fund, the Manager or Distributors make payments
that are deemed to be payments for the financing of any activity
primarily intended to result in the sale of shares issued by a
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 Trustees,
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 Trustees with such other information as the
Board of Trustees may reasonably request in connection with the
payments made under the Plan in order to enable the Board of
Trustees to make an informed determination of whether the Plan
should be continued.
5. The Plan 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 Trustees,
including the non-interested trustees, 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 a Fund
with respect to such Fund, or by vote of a majority of the non-
interested trustees, on not more than sixty (60) days' written
notice, or by Distributors on not more that sixty (60) days'
written notice and shall terminate automatically in the event of
any act that constitutes an assignment of the Management
Agreements between the Trust, on behalf of the Funds, and the
Manager or the Underwriting Agreement between the Trust and
Distributors.
7. The Plan, and any agreements entered into pursuant to
this Plan, may not be amended to increase materially the amount
to be spent by a Fund for distribution pursuant to Paragraph 2
hereof without approval by majority vote of a Fund's outstanding
voting securities with respect to such Fund.
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 trustees, cast in person at a meeting
called for the purpose of voting on any such amendment.
9. So long as the Plan is in effect, the selection and
nomination of the Trust's non-interested trustees shall be
committed to the discretion of such non-interested trustees.
10. This Plan shall take effect on the 1st day of July,
1993.
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Trust, on behalf of the Funds, and
Distributors as evidenced by their execution hereof.
FRANKLIN STRATEGIC SERIES on behalf of
Franklin California Growth Fund,
Franklin Small Cap Growth Fund, Franklin Global
Health Care Fund and Franklin Global Utilities Fund
By: /s/ Charles B. Johnson
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By: /s/ Rupert H. Johnson, Jr.
FRANKLIN STRATEGIC SERIES
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 Strategic Series (the "Trust")
for the use of Franklin Strategic Income Fund (the "Fund"), which
Plan shall take effect on the 24th day of May, 1994 (the
"Effective Date of the Plan"). The Plan has been approved by a
majority of the Board of Trustees of the Trust (the "Board of
Trustees"), including a majority of the trustees who are not
interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plan (the
"non-interested trustees"), cast in person at a meeting called
for the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees considered the
schedule and nature of payments and terms of the Management
Agreement between the Trust on behalf of the Fund and Franklin
Advisers, Inc. ("Advisers") and the terms of the Underwriting
Agreement between the Trust on behalf of the Fund and
Franklin/Templeton Distributors, Inc. ("Distributors"). The Board
of Trustees 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 Trustees 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 Trustees
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 Trust on behalf of the Fund,
Distributors or its affiliates, which form of agreement has been
approved from time to time by the trustees, including the non-
interested trustees.
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 Trustees, 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 Trustees with such other information as the
Board of Trustees may reasonably request in connection with the
payments made under the Plan in order to enable the Board of
Trustees to make an informed determination of whether the Plan
should be continued.
5. The Plan 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 Trustees,
including the non-interested trustees, 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 trustees, 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 Trust on
behalf of 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 trustees cast in person at a meeting called
for the purpose of voting on any such amendment.
9. So long as the Plan is in effect, the selection and
nomination of the Trust's non-interested trustees shall be
committed to the discretion of such non-interested trustees.
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Trust and Distributors as evidenced
by their execution hereof.
FRANKLIN STRATEGIC SERIES
on behalf of Franklin Strategic Income Fund
By:/s/ Harmon E. Burns
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:/s/ Charles B. Johnson
CLASS II DISTRIBUTION PLAN
I. Investment Company: FRANKLIN STRATEGIC SERIES
II. Fund and Class: FRANKLIN GLOBAL UTILITIES 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 non-
interested Board members cast in person at a meeting called for
the purpose of voting on any such amendment.
9. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested Board members shall be
committed to the discretion of such non-interested Board members.
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Investment Company and Distributors
as evidenced by their execution hereof.
Date: __________________, 1995
Investment Company
By:________________________________
Franklin/Templeton Distributors, Inc.
By:_____________________________________
