FRANKLIN INVESTORS SECURITIES TRUST
on behalf of
FRANKLIN CONVERTIBLE SECURITIES FUND
and
FRANKLIN EQUITY INCOME FUND
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made between FRANKLIN INVESTORS
SECURITIES TRUST, a Delaware statutory trust (the "Trust"), on behalf of
FRANKLIN CONVERTIBLE SECURITIES FUND AND FRANKLIN EQUITY INCOME FUND (each, a
"Fund" and collectively, the "Funds") series of the Trust, and FRANKLIN
ADVISERS, INC. (the "Adviser") a California corporation.
WHEREAS, the Trust has been organized and intends to operate as an
investment company registered under the Investment Company Act of 1940, as
amended (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 Statement under the 1940 Act and the Securities
Act of 1933, as amended, 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 the Funds; and,
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, is engaged in the business of
rendering management, investment advisory, counseling and supervisory services
to investment companies and other investment counseling 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:
1. EMPLOYMENT OF THE ADVISER. The Trust hereby employs the Adviser to
manage the investment and reinvestment of each 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 Adviser
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 Adviser 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 or the Trust in any way or otherwise be deemed an agent of the Funds or
the Trust.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY THE ADVISER. The Adviser
undertakes to provide the services hereinafter set forth and to assume the
following obligations:
A. INVESTMENT MANAGEMENT SERVICES.
(a) The Adviser shall manage the Funds' assets subject to and
in accordance with the investment objectives and policies of each Funds and any
directions which the Trust's Board of Trustees may issue from time to time. In
pursuance of the foregoing, the Adviser 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 Funds' investment securities shall be
exercised. The Adviser 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 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 Adviser, 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 Funds, orders for the execution of the Funds'
securities transactions. When placing such orders, the Adviser shall seek to
obtain the best net price and execution for the Funds, but this requirement
shall not be deemed to obligate the Adviser 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
Adviser 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 Adviser 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, as amended) provided by that broker.
Accordingly, the Trust and the Adviser agree that the Adviser
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 Adviser or its affiliates which the
Adviser or its affiliates may lawfully and appropriately use in
their investment management capacities, which relate directly
to securities, actual or potential, of the Funds, or which
place the Adviser 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
Adviser 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 Adviser has determined that the Funds 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
Distributors may be a member. Neither the Adviser 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
Adviser 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 Funds shall enter into an agreement with
the Adviser 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 Adviser shall render regular reports to the Trust, not
more frequently than quarterly, of how much total brokerage
business has been placed by the Adviser, on behalf of each
Fund, with brokers falling into each of the categories referred
to above and the manner in which the allocation has been
accomplished.
(e) The Adviser 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
Adviser's paramount duty to obtain the best net price and
execution for each of the Funds.
(f) Decisions on proxy voting shall be made by the Adviser
unless the Board of Trustees determines otherwise. Pursuant to
its authority, the Adviser shall have the power to vote, either
in person or by proxy, all securities in which each Fund may be
invested from time to time, and shall not be required to seek
or take instructions from each Fund with respect thereto. The
Adviser shall not be expected or required to take any action
other than the rendering of investment-related advice with
respect to lawsuits involving securities presently or formerly
held in each Fund, or the issuers thereof, including actions
involving bankruptcy. Should the Adviser undertake litigation
against an issuer on behalf of each Fund, each Fund agrees to
pay its portion of any applicable legal fees associated with
the action or to forfeit any claim to any assets the Adviser
may recover and, in such case, agrees to hold the Adviser
harmless for excluding the Funds from such action. In the case
of class action suits involving issuers held in the Funds, the
Adviser may include information about the Funds for purposes of
participating in any settlements.
B. PROVISION OF INFORMATION NECESSARY FOR PREPARATION OF
SECURITIES REGISTRATION STATEMENTS, AMENDMENTS AND OTHER MATERIALS. The Adviser,
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 Funds 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.
C. OTHER OBLIGATIONS AND SERVICES. The Adviser 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.
D. DELEGATION OF SERVICES. The Adviser may, at its expense,
select and contract with one or more investment advisers registered under the
Investment Advisers Act of 1940 ("Sub-Advisers") to perform some
or all of the services for the Funds for which it is responsible under this
Agreement. The Adviser will compensate any Sub-Adviser for its services to the
Funds. The Adviser may terminate the services of any Sub-Adviser at any time in
its sole discretion, and shall at such time assume the responsibilities of such
Sub-Adviser unless and until a successor Sub-Adviser is selected and the
requisite approval of the Funds' shareholders is obtained. The Adviser will
continue to have responsibility for all advisory services furnished by any
Sub-Adviser.
3. EXPENSES OF THE FUND. It is understood that each Fund will pay all of
its own expenses other than those expressly assumed by the Adviser herein, which
expenses payable by the Funds shall include:
A. Fees and expenses paid to the Adviser 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 its shares;
D. Expenses of obtaining quotations for calculating the value of
each 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 Adviser
or its affiliates;
F. Taxes levied against the Funds;
G. Brokerage fees and commissions in connection with the
purchase and sale of securities for each Fund;
H. Costs, including the interest expense, of borrowing money;
I. Costs incident to meetings of the Board of Trustees and
shareholders of each Fund, reports to each Fund's shareholders, the filing of
reports with regulatory bodies and the maintenance of each Fund's and the
Trust's legal existence;
J. Legal fees, including the legal fees related to the
registration and continued qualification of each Fund's shares for sale;
K. Trustees' fees and expenses to trustees who are not
directors, officers, employees or stockholders of the Adviser or any of its
affiliates;
L. Costs and expense of registering and maintaining the
registration of the Funds and its shares under federal and any applicable state
laws; including the printing and mailing of prospectuses to its shareholders;
M. Trade association dues;
N. The Funds' pro rata portion of fidelity bond, errors and
omissions, and trustees and officer liability insurance premiums; and
O. The Funds' portion of the cost of any proxy voting service
used on its behalf.
4. COMPENSATION OF THE ADVISER. Each Fund shall pay a management fee in
cash to the Adviser based upon a percentage of the value of the respective
Fund's net assets, calculated as set forth below, as compensation for the
services rendered and obligations assumed by the Adviser, during the preceding
month, on the first business day of the month in each year.
A. For purposes of calculating such fee, the value of the net
assets of each Fund shall be determined in the same manner as that 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 Trust's
current prospectus and statement of additional information. The rate of the
management fee payable by each Fund shall be calculated at the following annual
rates:
0.625% of the value of net assets up to and
including $100 million;
0.500% of the value of net assets over $100
million and not over $250 million;
0.450% of the value of net assets over $250
million and not over $7.5 billion;
0.440% of the value of net assets over $7.5
billion and not over $10 billion;
0.430% of the value of net assets over $10 billion
and not over
$12.5 billion;
0.420% of the value of net assets over $12.5
billion and not over $15 billion;
0.400% of the value of net assets over $15
billion and not over $17.5 billion;
0.380% of the value of net assets over $17.5
billion and not over $20 billion;
0.360% of the value of net assets over $20
billion and not over $35 billion;
0.355% of the value of net assets over $35
billion and not over $50 billion; and
0.350% of the value of net assets in excess
of $50 billion.
B. The management fee payable by a 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 Adviser 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 Adviser shall be contractually bound hereunder by the terms of
any publicly announced waiver of its fee, or any limitation of a Fund's
expenses, as if such waiver or limitation were fully set forth herein.
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 ADVISER. The services of the Adviser to the Funds
hereunder are not to be deemed exclusive, and the Adviser 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 Trust are or may be interested in the Adviser or
its affiliates as directors, officers, agents or stockholders; that directors,
officers, agents or stockholders of the Adviser or its affiliates are or may be
interested in the Trust as trustees, officers, agents, shareholders or
otherwise; that the Adviser 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 1940 Act.
6. LIABILITIES OF THE ADVISER.
A. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the part
of the Adviser, the Adviser shall not be subject to liability to the Trust or
the Funds or to any shareholder of the Funds 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
Funds.
B. Notwithstanding the foregoing, the Adviser 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
Adviser 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 Adviser 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 Adviser or any of its
affiliates or any of their officers, directors, employees or stockholders. The
Adviser shall not be obligated pursuant to the provisions of this Subparagraph
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 stockholder
of the Adviser or any of its affiliates from the sale of his shares of the
Adviser, or similar matters. So long as this Agreement is in effect, the Adviser
shall pay to the Trust the amount due for expenses subject to this Subparagraph
6.B. within thirty (30) days after a xxxx or statement has been received by the
Adviser therefore. This provision shall not be deemed to be a waiver of any
claim the Trust may have or may assert against the Adviser 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 trustee or officer of the Trust, or director or officer of the Adviser, 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 such 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) or "interested persons" of any
such party, 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 with respect to any of the
Funds 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 sixty (60) days' written notice
to the Adviser;
(ii) shall immediately terminate with respect to the Funds in
the event of its assignment; and
(iii) may be terminated by the Adviser on sixty (60) days'
written notice to the applicable 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 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 1st day of March 2008.
FRANKLIN INVESTORS SECURITIES TRUST on behalf of
FRANKLIN CONVERTIBLE SECURITIES FUND and
FRANKLIN EQUITY INCOME FUND
By: _____________________________
Xxxxx X. Xxxxxxxx
Title: Vice President & Secretary
FRANKLIN ADVISERS, INC.
By: ______________________________
Xxxxxx X. Xxxxxxxx
Title: President & Chief Investment Officer
