FRANKLIN HIGH INCOME TRUST
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN HIGH INCOME TRUST, a
Delaware business trust (the "Trust"), on behalf of AGE HIGH INCOME FUND (the
"Fund"), a series of the Trust, and FRANKLIN ADVISERS, INC., a California
corporation, (the "Manager").
WHEREAS, the Trust has been organized and operates 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
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 for its various management, statistical,
research, investment advisory and other services for the Fund; and,
WHEREAS, the Manager is registered as an investment adviser under the
Investment Adviser's Act of 1940, is engaged in the business of rendering
management, investment advisory, counselling and supervisory services to
investment companies and other investment counselling clients, and desires to
provide these services to the Fund.
NOW THEREFORE, in consideration of the terms and conditions hereinafter set
forth, it is agreed as follows:
1. EMPLOYMENT OF THE MANAGER. The 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 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. OFFICE SPACE, FURNISHINGS, FACILITIES, EQUIPMENT, AND PERSONNEL.
The Manager shall furnish to the Fund adequate (i) office space, which may be
space within the offices of the Manager or in such other place as may be agreed
upon from time to time, (ii) office furnishings, facilities and equipment as may
be reasonably required for managing the corporate affairs and conducting the
business of the Fund, including complying with the corporate and securities
reporting requirements of the United States and the various states in which the
Fund does business, conducting correspondence and other communications with the
shareholders of the Fund, maintaining all internal bookkeeping, accounting and
auditing services and records in connection with the Fund's investment and
business activities, and computing net asset value. The Manager shall employ or
provide and compensate the executive, secretarial and clerical personnel
necessary to provide such services. The Manager shall also compensate all
officers and employees of the Trust who are officers or employees of the
Manager.
B. INVESTMENT MANAGEMENT SERVICES
(a) The Manager shall manage the Fund's assets subject to and
portfolio 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 portfolio securities, and shall take such steps as may be
necessary to implement the same. Such determinations and services shall also
include determining the manner in which voting rights, rights to consent to
corporate action and any other rights pertaining to the Fund's portfolio
securities shall be exercised. The Manager shall render regular reports to the
Trust, at regular meetings of the 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 portfolio securities, (ii) the reasons for such
decisions and (iii) the extent to which those decisions have been implemented.
(b) The Manager, subject to and in accordance with any directions
which the 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 portfolio
transactions. When placing such orders the Manager shall seek to obtain the best
net price and execution for the Fund, but this requirement shall not be deemed
to obligate the Manager to place any order solely on the basis of obtaining the
lowest commission rate if the other standards set forth in this section have
been satisfied. The parties recognize that there are likely to be many cases in
which different brokers are equally able to provide such best price and
execution and that, in selecting among such brokers with respect to particular
trades, it is desirable to choose those brokers who furnish research,
statistical quotations and other information to the Fund and the Manager in
accord with the standards set forth below. Moreover, to the extent that it
continues to be lawful to do so and so long as the Board determines that the
Fund will benefit, directly or indirectly, by doing so, the Manager may place
orders with a broker who charges a commission for that transaction which is in
excess of the amount of commission that another broker would have charged for
effecting that transaction, provided that the excess commission is reasonable in
relation to the value of "brokerage and research services" (as defined in
Section 28(e)(3) of the Securities Exchange Act of 1934) provided by that
broker.
Accordingly, the Trust and the Manager agree that the Manager
shall select brokers for the execution of the Fund's portfolio transactions from
among:
(i) Those brokers and dealers who provide quotations and other
services to the Fund, specifically including the quotations
necessary to determine the Fund's net assets, in such amount of
total brokerage as may reasonably be required in light of such
services;
(ii) Those brokers and dealers who supply research, statistical
and other data to the Manager or its affiliates which relate
directly to portfolio securities, actual or potential, of the
Fund or which place the Manager in a better position to make
decisions in connection with the management of the Fund's assets
and portfolio, whether or not such data may also be useful to the
Manager and its affiliates in managing other portfolios or
advising other clients, in such amount of total brokerage as may
reasonably be required. Provided that the 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/Xxxxxxxxx
Distributors, Inc. ("Distributors") shall be designated as the "tendering
dealer" so long as it is legally permitted to act in such capacity under the
Federal securities laws and rules thereunder and the rules of any securities
exchange or association of which it may be a member. Neither the Manager nor
Distributors shall be obligated to make any additional commitments of capital,
expense or personnel beyond that already committed (other than normal periodic
fees or payments necessary to maintain its corporate existence and membership in
the National Association of Securities Dealers, Inc.) as of the date of this
Agreement and this Agreement shall not obligate the Manager or Distributors (i)
to act pursuant to the foregoing requirement under any circumstances in which
they might reasonably believe that liability might be imposed upon them as a
result of so acting, or (ii) to institute legal or other proceedings to collect
fees which may be considered to be due from others to it as a result of such a
tender, unless the Trust on behalf of the Fund shall enter into an agreement
with the Manager to reimburse them for all expenses connected with attempting to
collect such fees including legal fees and expenses and that portion of the
compensation due to their employees which is attributable to the time involved
in attempting to collect such fees.
(d) The Manager shall render regular reports to the 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 foregoing categories
and the manner in which the allocation has been accomplished.
(e) The Manager agrees that no investment decision will be made
or influenced by a desire to provide brokerage for allocation in accordance with
the foregoing, and that the right to make such allocation of brokerage shall not
interfere with the Manager's paramount duty to obtain the best net price and
execution for the Fund.
C. PROVISIONS OF INFORMATION NECESSARY FOR PREPARATION OF SECURITIES
REGISTRATION STATEMENTS, AMENDMENTS AND OTHER MATERIALS. The Manager, its
officers and employees will make available and provide accounting and
statistical information required by the Underwriter in the preparation of
registration statements, reports and other documents required by Federal and
state securities laws and with such information as the Underwriter may
reasonably request for use in the preparation of such documents or of other
materials necessary or helpful for the underwriting and distribution of the
Fund's shares.
D. OTHER OBLIGATIONS AND SERVICES. The Manager shall make available
its officers and employees to the Board of Trustees and officers of the Trust
for consultation and discussions regarding the administrative management of the
Fund and its investment activities.
3. EXPENSES OF THE FUND. It is understood that the Fund will pay all its
expenses other than those expressly assumed by the Manager herein, which
expenses payable by the Fund shall include:
A. Fees to the Manager as provided herein;
B. Expenses of all audits by independent public accountants;
C. Expenses of transfer agent, registrar, custodian, dividend
disbursing agent and shareholder record-keeping services;
D. Expenses of obtaining quotations for calculating the value of the
Fund's net assets;
E. Salaries and other compensation of any of its executive officers
who are not officers, trustees, stockholders or employees of the Manager;
F. Taxes levied against the Fund;
G. Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Fund;
H. Costs, including the interest expense, of borrowing money;
I. Costs incident to meetings of the Board of Trustees and
shareholders of the Fund, reports to the Funds 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. 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; and
M. Its pro rata portion of the fidelity bond insurance premium.
4. COMPENSATION OF THE MANAGER. The Fund shall pay a monthly management fee
in cash to the Manager based upon a percentage of the value of the Fund's net
assets, calculated as set forth below, on the first business day of each month
in each year as compensation for the services rendered and obligations assumed
by the Manager during the preceding month. The initial management fee under this
Agreement shall be payable on the first business day of the first month
following the effective date of this Agreement, and shall be reduced by the
amount of any advance payments made by the Fund relating to the previous month.
A. For purposes of calculating such fee, the value of the net assets
of the Fund shall be the net assets computed as of the close of business on the
last business day of the month preceding the month in which the payment is being
made, determined in the same manner as the Fund uses to compute the value of its
net assets in connection with the determination of the net asset value of its
shares, all as set forth more fully in the Fund's current prospectus. The rate
of the monthly management fee shall be as follows:
5/96 of 1% of the value of net assets up to and including
$100,000,000; and
1/24 of 1% of the value of net assets over $100,000,000 and not
over $250,000,000; and
9/240 of 1% of the value of net assets in excess of $250,000,000.
B. The management fee payable by the Fund shall be reduced or
eliminated to the extent that 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 waive all or a portion of its fees provided for
hereunder and such waiver shall be treated as a reduction in purchase price of
its services. The Manager shall be contractually bound hereunder by the terms of
any publicly announced waiver of its fee, or any limitation of the Fund's
expenses, as if such waiver or limitation were full set forth herein.
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 month during which the
Agreement is in effect bears to the number of calendar days in the month, and
shall be payable within 10 days after the date of termination.
5. ACTIVITIES OF THE MANAGER. The services of the Manager to the Fund
hereunder are not to be deemed exclusive, and 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 to Section 10(a) of the Investment Company Act of 1940, it is understood
that trustees, officers, agents and stockholders of the Trust are or may be
interested in the Manager or its affiliates as trustees, officers, agents or
stockholders, and that trustees, officers, agents or stockholders of the Manager
or its affiliates are or may be interested in the Trust as trustees, officers,
agents, stockholders or otherwise, that the Manager or its affiliates may be
interested in the Fund as stockholders or otherwise; and that the effect of any
such interests shall be governed by said 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
Trust for any and all costs, expenses, and counsel and trustees' fees reasonably
incurred by the Trust 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 Trust incurs
as the result of action or inaction of the Manager or any of its affiliates or
any of their officers, trustees, employees or shareholders where the action or
inaction necessitating such expenditures (i) is directly or indirectly related
to any transactions or proposed transaction in the shares or control of the
Manager or its affiliates (or litigation related to any pending or proposed or
future transaction in such shares or control) which shall have been undertaken
without the prior, express approval of the Trust's Board of Trustees; or, (ii)
is within the control of the Manager or any of its affiliates or any of their
officers, trustees, employees or shareholders. The Manager shall not be
obligated pursuant to the provisions of this Subsection 6(B), to reimburse the
Trust for any expenditures related to the institution of an administrative
proceeding or civil litigation by the Trust or a shareholder seeking to recover
all or a portion of the proceeds derived by any shareholder of the Manager or
any of its affiliates from the sale of his shares of the Manager, or similar
matters. So long as this Agreement is in effect the Manager shall pay to the
Trust the amount due for expenses subject to this Subsection 6(B) Agreement
within 30 days after a xxxx or statement has been received by the Manager
therefore. This provision shall not be deemed to be a waiver of any claim the
Trust may have or may assert against the Manager or others for costs, expenses
or damages heretofore incurred by the Trust or for costs, expenses or damages
the Trust may hereafter incur which are not reimbursable to it hereunder.
C. No provision of this Agreement shall be construed to protect any
director or officer of the Trust, or the Manager, from liability in violation of
Sections 17(h) and (i) of the Investment Company Act of 1940.
7. RENEWAL AND TERMINATION.
A. This Agreement shall become effective on the date written below and
shall continue in effect for two years. The Agreement is renewable annually
thereafter for successive periods not to exceed one year (i) by a vote of a
majority of the outstanding voting securities of the Fund or by a vote of the
Board of 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 30 days' written
notice to the Manager;
(ii) shall immediately terminate in the event of its assignment;
and
(iii) may be terminated by the Manager on 30 days' written notice
to the Fund.
C. As used in this Section the terms "assignment," "interested person"
and "vote of a majority of the outstanding voting securities" shall have the
meanings set forth for any such terms in the Investment Company Act of 1940, as
amended.
D. Any notice under this Agreement shall be given in writing addressed
and delivered, or mailed post-paid, to the other party at any office of such
party.
8. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
the 13th day of September, 1996.
FRANKLIN HIGH INCOME TRUST
By /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Vice President & Secretary
FRANKLIN ADVISERS, INC.
By /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Executive Vice President
