FRANKLIN VALUE INVESTORS TRUST
on behalf of
FRANKLIN BALANCE SHEET INVESTMENT FUND
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN VALUE INVESTORS TRUST,
formerly known as Franklin Balance Sheet Investment Fund, a Massachusetts
Business Trust, on behalf of its series FRANKLIN BALANCE SHEET INVESTMENT
FUND, hereinafter called the "Fund", and FRANKLIN ADVISORY SERVICES, LLC, a
Delaware limited liability company, 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, counseling and supervisory services to
investment companies and other investment counseling 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 Delaware.
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 1st day of April, 1999.
FRANKLIN VALUE INVESTORS TRUST
By:/s/X.X. XXXXXX
Xxxxxxx X. Xxxxxx
Vice President &
Secretary
FRANKLIN ADVISORY SERVICES, LLC
By:/s/XXXXXX X. XXXXXXX
Xxxxxx X. Xxxxxxx
Secretary
