FRANKLIN BALANCE SHEET INVESTMENT FUND
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN BALANCE SHEET INVESTMENT
FUND, a Massachusetts Business Trust, hereinafter called the "Fund", and
FRANKLIN ADVISERS, INC., a California corporation, hereinafter called the
"Manager."
WHEREAS, the Fund 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 Fund 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 the Fund and
any separate series of the Fund of the Fund hereafter 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 Fund.
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is mutually agreed as follows:
1. Employment of the Manager. The Fund hereby employs the Manager to
manage the investment and reinvestment of the Fund's assets and to administer
its affairs, subject to the direction of the Board of 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
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 or Contract
Holders investing in 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
Fund 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 Fund'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
their 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 Fund, at regular
meetings of its Board of Trustees and at such other times as may be reasonably
requested by the Fund'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 their 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 Fund'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 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 Fund 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.
(c) When the Manager has determined that the Fund should
tender securities pursuant to a "tender offer solicitation," the Manager shall
designate Franklin Distributors, Inc. ("Distributors") as the "tendering dealer"
so long as it is legally permissible for the Manager to do so, and 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.
Distributors shall not 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 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.
(d) The Manager shall render regular reports to the Fund, not
more frequently than quarterly, of how much total brokerage business has been
placed by the Manager with brokers falling into each of the 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
offering 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
Fund for consultation and discussions regarding the administration and
management of the Fund and their 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
Fund 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 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. 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 their shares under Federal and any applicable state
laws; including the printing and mailing of prospectuses to its 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 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, payable monthly at the request of the
Manager.
A. For purposes of calculating such fee, the value of the net assets
of the Fund shall be determined in the same manner as that 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 rate of the management
fee payable by the Fund shall be calculated daily at the following annual rates:
.625 of 1% of the value of net assets up to and including
$100,000,000;
.50 of 1% of the value of net assets over
$100,000,000 up to and including $250,000,000; and
.45 of 1% of the value of net assets over $250,000,000 up to
and including $10,000,000,000; and
.44 of 1% of the value of net assets over
$10,000,000,000 up to and including
$12,500,000,000; and
.42 of 1% of the value of net assets over
$12,500,000,000 up to and including
$15,000,000,000; and
.40 of 1% of the value of net assets over $15,000,000,000.
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 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. To the extent that the gross operating costs and expenses of the
Fund (excluding any interest, taxes, brokerage commissions, amortization of
organization expense, expenses under the Distribution Plan, and, with the prior
written approval of any state securities commission requiring same, any
extraordinary expenses, such as litigation), exceed the most stringent expense
limitation requirements of the states in which shares of the Fund are qualified
for sale, the Manager shall reduce its fees by the amount of such excess.
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 Fund
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 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 Act.
6. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the part
of the Manager, the Manager shall not be subject to liability to the Fund or to
any shareholder of the Trust 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 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 Fund for any expenditures related to the institution of an
administrative proceeding or civil litigation by the Fund or a shareholder or
policyholder investing in the Fund 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 xxxx 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 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 (1) 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 Fund, and (ii) by a vote of a majority of the
Trustees of the Fund 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 Fund 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.
10. Limitation of Liability. The Manager acknowledges that it has
received notice of and accepts the limitations of the Fund's liability as set
forth in Article VIII of its Agreement and Declaration of Trust. The Manager
agrees that the Fund's obligations hereunder shall be limited to the assets of
the Fund, and that the Manager 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 2nd day of April 1990.
FRANKLIN BALANCE SHEET INVESTMENT FUND
/s/ Xxxxxx X. Xxxxx
By: Xxxxxx X. Xxxxx
Vice President
FRANKLIN ADVISERS, INC.
/s/ Xxxxxx X. Xxxxxxx, Xx.
By: Xxxxxx X. Xxxxxxx, Xx.
President
