26234 Federal Register / Vol. 61, No. 102 / Friday, May 24, 1996 / Notices

[FR Doc. 96–13052 Filed 5–23–96; 8:45 am]

BILLING CODE 3110–01–M
Federal Register / Vol. 61, No. 102 / Friday, May 24, 1996 / Notices 26235

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

21964; 812–9860]

Franklin Templeton Fund Manager, et

al.; Notice of Application

May 20, 1996.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under the Investment. Company

Act of 1940 (the ‘‘Act’’).

APPLICANTS: Franklin Templeton Fund

Manager (‘‘FTFM’’); Franklin Gold

Fund; Franklin Premier Return Fund;

Franklin Equity Fund; AGE High

Income Fund, Inc.; Franklin Custodian

Funds, Inc.; Franklin Money Fund;

Franklin California Tax-Free Income

Fund, Inc.; Franklin Federal Money

Fund; Franklin Tax-Exempt Money

Fund; Franklin New York Tax-Free

Income Fund, Inc.; Franklin Federal

Tax-Free Income Fund; Franklin TaxFree Trust; Franklin California Tax-Free

Trust; Franklin New York Tax-Free

Trust; Franklin Investors Securities

Trust; Institutional Fiduciary Trust;

Franklin Value Investors Trust; Franklin

Tax-Advantaged International Bond

Fund; Franklin Tax-Advantaged High

Yield Securities Fund; Franklin TaxAdvantaged U.S. Government Securities

Fund; Franklin Strategic Mortgage

Portfolio; Franklin Municipal Securities

Trust; Franklin Managed Trust; Franklin

Strategic Series; Adjustable Rate

Securities Portfolios; The Money Market

Portfolios; Midcap Growth Portfolio;

The Portfolios Trust; Franklin

International Trust; Franklin Real Estate

Securities Trust; Franklin Templeton

Money Fund Trust; Franklin Valuemark

Funds; Franklin Government Securities

Trust; Franklin Templeton Global Trust

(collectively, the ‘‘Franklin Funds’’);

Franklin Templeton Japan Fund;

Templeton Variable Products Series

Fund; Templeton Growth Fund, Inc.;

Templeton Funds, Inc.; Templeton

Smaller Companies Growth Fund, Inc.;

Templeton Income Trust; Templeton

Real Estate Securities Fund; Templeton

Global Investment Trust; Templeton

Global Opportunities Trust; Templeton

American Trust, Inc.; Templeton

Institutional Funds, Inc.; Templeton

Developing Markets Trust (collectively,

the ‘‘Templeton Funds’’) (the Franklin

Funds and the Templeton Funds are

collectively referred to as the ‘‘Franklin

Templeton Group of Funds’’); any future

open-end investment companies for

which Franklin Advisers, Inc. (or any

entities controlling, controlled by or

under common control with Franklin

Advisers, Inc.), Franklin Institutional

Services Corporation (or any entities

controlling, controlled by or under

common control with Franklin

Institutional Services Corporation),

Templeton, Galbraith & Hansberger Ltd.

(or any entities controlling, controlled

by or under common control with

Templeton, Galbraith & Hansberger

Ltd.), Templeton Investment Counsel,

Inc. (or any entities controlling,

controlled by or under common control

with Templeton Investment Counsel,

Inc.), or Templeton Investment

Management (Singapore) Pte. Ltd. (or

any entities controlling, controlled by or

under common control with Templeton

Investment Management (Singapore)

Pte. Ltd.) acts as investment adviser or

for which Franklin/Templeton

Distributors, Inc. (or any entities

controlling, controlled by or under

common control with Franklin/

Templeton Distributors, Inc.) acts as

principal underwriter (the Franklin

Funds, the Templeton Funds and such

future funds are collectively referred to

herein as the ‘‘Funds’’ which reference,

unless hereinafter designated otherwise,

is intended to include series of shares

with different investment portfolios

offered by such investment companies);

and Franklin Advisers, Inc. (‘‘FAI’’),

Franklin Institutional Services

Corporation (‘‘FISCO’’), Templeton,

Galbraith & Hansberger Ltd., Templeton

Investment Counsel, Inc., Templeton

Investment Management (Singapore)

Pte. Ltd. (collectively, ‘‘Templeton

Advisers’’) (FAI, FISCO and the

Templeton Advisers are collectively

referred to as the ‘‘Advisers’’ and each

is individually referred to as an

‘‘Adviser’’) and Franklin/Templeton

Distributors, Inc. (‘‘FTDI’’ or

‘‘Distributor’’).

RELEVANT ACT SECTIONS: Order requested

under section 6(c) of the Act from

section 12(d)(1) of the Act, and under

sections 6(c) and 17(b) of the Act from

section 17(a) of the Act.

SUMMARY OF APPLICATION: The requested

order would permit series of the

Franklin Templeton Fund Manager,

which will be registered as an open-end

management investment company, to

invest substantially all of their assets in

a combination of Franklin Funds and

Templeton Funds.

FILING DATES: The application was filed

on November 29, 1995, and amended on

March 25, 1996.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicants with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

June 14, 1996, and should be

accompanied by proof of service on

applicants, in the form of an affidavit,

or, for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Applicants, c/o Deborah R. Gatzek,

Senior Vice President-Legal, Franklin

Resources, Inc., 777 Mariners Island

Boulevard, San Mateo, CA 94404.

FOR FURTHER INFORMATION CONTACT:

Christine Y. Greenless, Senior Counsel,

at (202) 942–0581, or Alison E. Baur,

Branch Chief, at (202) 942–0564

(Division of Investment Management,

Office of Investment Company

Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee from the SEC’s

Public Reference Branch.

Applicants’ Representations

1. FTFM is a newly formed Delaware

Business Trust that will be registered

under the Act as an open-end

management investment company.

FTFM intends to offer shares in three

open-end series, designated as Series I,

II and III (the ‘‘Asset Allocation Series’’

or ‘‘Series’’). Each Series intends to

invest substantially all of its assets in a

combination of Franklin Funds and

Templeton Funds, each of which is an

open-end management investment

company, or series thereof (the

‘‘Underlying Funds’’). While the Asset

Allocation Series currently intends to

invest in the Funds listed herein, the

Series may also invest in any Fund in

the Franklin Templeton Group of Funds

currently existing or to be organized in

the future.

2. The Asset Allocation Series will be

designed for investors who wish to

achieve their investment objectives of

long-term total return in excess of the

inflation rate by investing in one mutual

fund that provides for professional asset

allocation of investments among various

Franklin Funds and Templeton Funds.

Such asset allocation and, consequently,

the percentage investment in the

Underlying Funds, will be related to the

investor’s specific long-term investment

goals.

3. Series I will be targeted to investors

with shorter time horizons, including
26236 Federal Register / Vol. 61, No. 102 / Friday, May 24, 1996 / Notices

those in or approaching retirement.

Series II will be targeted to investors

with medium-term horizons, including

employees in mid-career. Series III will

be targeted to investors with long-term

horizons, including employees in their

early career years. The Series would be

marketed to both tax-exempt (i.e., 401(k)

Plans and IRAs) and taxable accounts as

a vehicle for meeting specified

investment planning goals, including, in

particular, retirement funding.

4. The Underlying Funds are

currently offered in a classes structure,

either with Class I and Class II shares,

or with a single class of shares subject

to a pricing structure resembling that of

Class I. With the exception of certain

Templeton Funds which offer shares

with a maximum front-end sales charge

of 5.75%, most Class I shares, or shares

of Funds offering only one class of

shares, carry a maximum front-end sales

charge of 4.50% for equity Funds and

4.25% for fixed income funds. The

majority of Class I shares, or shares of

funds offering only one class of shares,

are offered with a Rule 12b–1 fee of a

maximum of 0.25% for equity funds,

0.15% for taxable fixed income funds

and 0.10% for tax-free fixed income

funds, and a limited contingent deferred

sales charge (‘‘CDSC’’) for certain large

purchases.

5. Class II shares carry a 1.00% frontend sales charge, a servicing fee of

0.15% for fixed income funds and

0.25% for equity funds and an assetbased sales charge of 0.50% for fixed

income funds and 0.75% for equity

funds. In addition, Class II shares carry

a CDSC of 1.00% if shares are redeemed

within the first eighteen months after

purchase.

6. Applicant proposes that the Asset

Allocation Series will invest in a third

class of shares to be created for each

Underlying Fund that currently offers

two classes of shares (and a second class

to be created for each Underlying Fund

that currently offers only one class of

shares) (collectively referred to herein as

‘‘Class III shares’’). Such Class III shares

would be sold to and redeemed by the

Asset Allocation Series at net asset

value without the imposition of any

front-end or deferred sales charge, or

redemption fee. In addition, Class III

shares would not be subject to

distribution fees under a rule 12b–1

plan.

7. It is proposed that the Asset

Allocation Series would be created with

a classes structure which mirrors the

classes structure for the equity

Underlying Funds; namely, each Asset

Allocation Series would offer Class I

and Class II shares, largely as described

above. Class I shares of the Asset

Allocation Series would be subject to

rule 12b–1 distribution fees with a

maximum charge of 0.25%. Class II

shares of the Asset Allocation Series

would be subject to rule 12b–1 plan fees

with a servicing fee of 0.25% and an

asset-based sales charge of 0.75%.

8. The Asset Allocation Series will

bear all of their own expenses and,

indirectly, their proportionate share of

the expenses of each Underlying Fund.

Generally, it is expected that the total

expenses of the Asset Allocation Series,

both direct and indirect, expressed as a

percentage of net assets, will be slightly

higher than what a shareholder would

pay if he or she invested directly in the

same mix of Underlying Funds, but

within the range of total expenses

incurred by equity funds in the Franklin

Templeton Group of Funds.

9. FAI intends to provide advisory

services, which include asset allocation

advice, to the Asset Allocation Series,

and will also provide the Series with

administrative services. While the

general investment advisory and

administrative services will be

furnished without charge, it is

anticipated that FAI will charge an asset

allocation fee of no more than 0.25% of

average daily net assets of each Asset

Allocation Series. Such fee will be for

services that are in addition to, rather

than duplicative of, advisory services

being provided to the Underlying

Funds. If FAI determines to charge an

advisory fee for other advisory services,

it will do so only in conformity with the

requirements of the conditions to the

requested order.

10. Franklin Templeton Investor

Services, Inc. (‘‘FTISTI’’) will serve as

the shareholder servicing and transfer

agent of the Asset Allocation Series.

Bank of New York (‘‘BONY’’) likely will

serve as the custodian for the Asset

Allocation Series. FTISI currently

provides such shareholder servicing and

transfer agency services to the

Underlying Funds.

Applicants’ Legal Analysis

A. Section 12(d)(1)

1. Section 12(d)(1)(A) provides that no

registered investment company may

acquire securities of another investment

company if such securities represent

more than 3% of the acquired

company’s outstanding voting stock,

more than 5% of the acquiring

company’s total assets, or if such

securities, together with the securities of

any other acquired investment

companies, represent more than 10% of

the acquiring company’s total assets.

Section 12(d)(1)(B) provides that no

registered open-end investment

company may sell its securities to

another investment company if the sale

will cause the acquiring company to

own more than 3% of the acquired

company’s voting stock, or if the sale

will cause more than 10% of the

acquired company’s voting stock to be

owned by investment companies.

2. Section 6(c) provides that the SEC

may exempt persons or transactions if,

and to the extent that, such exemption

is necessary or appropriate in the public

interest and consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the Act. Applicants

request an order under section 6(c)

exempting them from section 12(d)(1) to

permit the Asset Allocation Series to

invest in the Underlying Funds in

excess of the percentage limitations of

that section.

3. Section 12(d)(1) was intended to

mitigate or eliminate actual or potential

abuses which might arise when one

investment company acquires shares of

another investment company. These

abuses include the acquiring fund

imposing undue influence over the

management of the acquired funds

through the threat of large-scale

redemptions, the acquisition by the

acquiring company of voting control of

the acquired company, the layering of

sales charges, advisory fees, and

administrative costs, and the creation of

a complex pyramidal structure which

may be confusing to investors.

Applicants believe that none of these

potential or actual abuses are present in

their proposed fund of funds structure.

4. FAI would charge only a small

asset allocation fee to the Asset

Allocation Series. Such fee would be of

services that are in addition to and not

duplicative of the investment advisory

services that are being furnished to the

Underlying Funds. Thus, while

shareholders of the Asset Allocation

Series would pay indirectly their

proportional share of the advisory fees

paid by the Underlying Funds,

applicants believe that there would be

no duplication or layering of fees.

5. While the Asset Allocation Series

will carry a front-end and deferred load

structure, the Class III shares of the

Underlying Funds selling to the Asset

Allocation Series will not have any sales

charges, front-end or deferred or

redemption fee. Investors in the Asset

Allocation Series, therefore, will not be

subject to a ‘‘sales load on a sales load.’’

6. Applicants’ proposal does not

contemplate any duplicative

distribution expenses. The Class III

shares of the Underlying Funds that will

sell their shares to the Asset Allocation

Series will not carry Rule 12b–1
Federal Register / Vol. 61, No. 102 / Friday, May 24, 1996 / Notices 26237

1Section 17(b) applies to specific proposed

transactions, rather than an ongoing series of future

transactions. See Keystone Custodian Funds, 21

S.E.C. 295, 298–99 (1945). Section 6(c) frequently

is used to grant relief from section 17(a) to permit

an ongoing series of future transactions.

distribution fees. The Asset Allocation

Series’ Class I shares and Class II shares

will be subject to Rule 12b–1 fees, in

accordance with the normal equity fund

Rule 12b–1 fees for funds in the

Franklin Templeton Group of Funds.

Thus, at all times, there will be no

duplication of distribution fees paid by

shareholders of FTFM.

7. Applicants assert that redemption

threats and a concomitant risk of lost

advisory fees are not a problem in the

context of a fund of funds structure in

which all of the funds are members of

the same fund family. FTFM would be

part of the same fund complex as the

Underlying Funds and will only acquire

shares of the Underlying Funds.

Because the investment advisers to the

Underlying Funds, as well as the Asset

Allocation Series, would be affiliated, a

redemption by an Asset Allocation

Series from one Underlying Fund would

simply lead to the placing of the

proceeds into another Underlying Fund.

8. In addition to not containing the

actual and potential abuses which led to

the enactment of section 12(d)(1),

applicants believe that the structure of

the Asset Allocation Series would

provide a number of benefits to its

shareholders, including: (a) expense

ratios only slightly higher than the

weighted average of the expense ratios

which an investor would pay were he or

she to invest the same amount in a

combination of Underlying Funds; (b)

immediate and broad diversification

resulting from the Asset Allocation

Series’ shareholders access to the

existing investment portfolios of the

Underlying Funds; and (c) efficient

trading practices resulting from the

Underlying Funds’ ability to engage in

block trading, which would enable them

to acquire securities at more favorable

prices than would smaller transactions.

B. Section 17(a)

1. Section 17(a) makes it unlawful for

an affiliated person of a registered

investment company, or an affiliated

person of such person, to sell securities

to, or purchase securities from, the

company. The Asset Allocation Series

and the Underlying Funds may be

considered affiliated persons because

they share common officers and/or

directors/trustees. An Underlying

Fund’s issuance of its shares to the

Asset Allocation Series may be

considered a sale prohibited by section

17(a).

2. Section 17(b) provides that the SEC

shall exempt a proposed transaction

from section 17(a) if evidence

establishes that: (a) the terms of the

proposed transaction are reasonable and

fair and do not involve overreaching; (b)

the proposed transaction is consistent

with the policies of the registered

investment company involved; and (c)

the proposed transaction is consistent

with the general provisions of the Act.

Applicants believe that the proposed

transactions meet the standards of

sections 6(c) and 17(b).1

Applicants’ Conditions

Applicants agree that the order

granting the requested relief shall be

subject to the following conditions:

1. FTFM and each Underlying Fund

will be part of the same ‘‘group of

investment companies,’’ as defined in

rule 11a–3 under the Act.

2. No Underlying Fund shall acquire

securities of any other investment

company in excess of the limits

contained in section 12(d)(1)(A) of the

Act.

3. A majority of the trustees of FTFM

will not be ‘‘interested persons,’’ as

defined in section 2(a)(19) of the Act.

4. Before approving any advisory

contract under section 15 of the Act, the

Board of Trustees of FTFM, including a

majority of the trustees who are not

‘‘interested persons,’’ as defined in

section 2(a)(19), shall find that advisory

fees charged under such contract are

based on services provided that are in

addition to, rather than duplicative of,

services provided pursuant to any

Underlying Fund’s advisory contact.

Such finding, and the basis upon which

the finding was made, will be recorded

fully in the minute books of FTFM.

5. Any sales charges or service fees

charged with respect to securities of the

Asset Allocation Series, when

aggregated with any sales charges or

service fees paid by the Asset Allocation

Series with respect to shares of the

Underlying Funds, shall not exceed the

limits set forth in Article III, section 26,

of the Rules of Fair Practice of the

National Association of Securities

Dealers, Inc.

6. Applicants agree to provide the

following information, in electronic

format, to the Chief Financial Analyst of

the SEC’s Division of Investment

Management: monthly average total

assets for each FTFM portfolio and each

of its Underlying Funds; monthly

purchases and redemptions (other than

by exchange) for each FTFM portfolio

and each of its Underlying Funds;

monthly exchanges into and out of each

FTFM portfolio and each of its

Underlying Funds; month-end

allocations of each FTFM portfolio’s

assets among its Underlying Funds;

annual expense ratios for each FTFM

portfolio and each of its Underlying

Funds; and a description of any vote

taken by the shareholders of any

Underlying Funds, including a

statement of the percentage of votes cast

for and against the proposal by FTFM

and by the other shareholders of the

Underlying Funds. Such information

will be provided as soon as reasonably

practicable following each fiscal yearend of FTFM (unless the Chief Financial

Analyst shall notify applicants in

writing that such information need no

longer be submitted).

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–13142 Filed 5–23–96; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21965; 812–10094]

National Equity Trust; Notice of

Application

May 20, 1996.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: National Equity Trust.

RELEVANT ACT SECTIONS: Order requested

under section 6(c) of the Act for an

exemption from section 12(d)(3) of the

Act.

SUMMARY OF APPLICATION: Applicant

requests an order on behalf of itself and

subsequently established series (the

‘‘Series’’) to permit each Series to invest

up to 10% of its total assets in securities

of an issuer that derives more than 15%

of its gross revenues in its most recent

fiscal year from securities related

activities.

FILING DATE: The application was filed

on April 22, 1996.

HEARING OR NOTIFICATION OF HEARING; An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

June 14, 1996, and should be

accompanied by proof of service on

applicant, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature