ADJUSTABLE RATE SECURITIES PORTFOLIOS
ADJUSTABLE RATE SECURITIES PORTFOLIO
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between ADJUSTABLE RATE
SECURITIES PORTFOLIOS, a Delaware business trust, (the "Trust"),
on behalf of the ADJUSTABLE RATE SECURITIES PORTFOLIO (the
"Fund"), a separate series of the Trust, and FRANKLIN ADVISERS,
INC., a California corporation (the "Manager").
WHEREAS, the Trust has been organized and intends to operate
as an investment company registered under the Investment Company
Act of 1940 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 Investment Company Act of 1940 and the Securities Act
of 1933, all as heretofore amended and supplemented;
WHEREAS, the Fund, as a separate series of 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; 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 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 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 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 or the Trust 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, and (ii) office furnishings,
facilities and equipment as may be reasonably required
for managing the affairs and conducting the business of
the Fund, including complying with the 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, auditing services and records
in connection with the Fund's investment and business
activities and computing its 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 assets of the Fund
subject to and in accordance with its investment
objective and policies 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 assets of the Fund and the purchase and sale of its
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 assets of
the Fund and the purchase and sale of its 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
or dealers are equally able to provide such best price
and execution and that, in selecting among such brokers
and dealers with respect to particular trades, it is
desirable to choose those brokers or dealers who
furnish research, statistical quotations and other
information to the Fund and the Manager 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 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 and dealers 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 the Manager or its
affiliates may lawfully and appropriately use in
their investment advisory capacities, which relate
directly to portfolio securities, actual or Fund
or which place the Manager in a better position to
make decisions in connection with the management
of the Fund's assets and portfolios, 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 shares of the Fund
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 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 Distributors 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 Trust, on
behalf of the Fund, shall enter into an agreement
with the Manager and/or Distributors 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, on behalf of the Fund, 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. 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 available its officers and employees to the
Board of Trustees and officers of the Trust for
consultation and discussions regarding the
administration and management of the Fund and its
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 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, reports to the Fund's shareholders, the
filing of reports with regulatory bodies and the
maintenance of 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 share 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;
M. Trade association dues; and
N. Its pro rata portion of the fidelity bond
insurance premium and trustees and officers errors
and omissions 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
asset 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 average
daily net assets during the month for 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 daily net asset value of its
shares, all as set forth more fully in the Fund's
current prospectus. The annual rate of the
management fee payable by the Fund shall be as
follows:
40/1OO of 1% of the value of its net assets up to
and including $5,000,000,000;
35/100 of 1% of the value of its net assets in
excess of $5,000,000,000 up to and including
$10,000,000,000;
33/100 of 1% of the value of its net assets in
excess of $10,000,000,000 up to and including
$15,000,000,000;
30/100 of 1% of the value of its net assets in
excess of $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, 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, from time to time,
voluntarily reduce or waive any management fee due
to it hereunder.
C. If this Agreement is terminated prior to the end
of any month, the monthly management fee for the
Fund 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 fiscal quarter 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, and agents of the Trust and
shareholders of the Fund are or may be interested in the Manager
or its affiliates as trustees, directors, officers, agents or
stockholders, and that directors, officers, agents or
stockholders of the Manager or its affiliates are or may be
interested in the Trust as Trustees, officers or agents or 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, the By-Laws and the Investment Company Act
of 1940.
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 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 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 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); 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 Fund 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 Fund the amount due for expenses subject to
Subsection 6(B) of this Agreement 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 Trust, or
director or officer of 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
(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 Trust 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 Fund who are not parties to the Agreement or
interested persons of any 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 Trust or by vote of a majority
of the outstanding voting securities of the Fund
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 at any time be terminated by the Manager
on 60 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.
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
Trust's liability as set forth in its Agreement and Declaration
of Trust. The Manager agrees that the Trust'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 Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and effective on the 5th day of
November, 1991.
ADJUSTABLE RATE SECURITIES PORTFOLIOS
on behalf of ADJUSTABLE RATE
SECURITIES PORTFOLIO
By: /s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
President
FRANKLIN ADVISERS, INC.
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
Xxxxxx X. Xxxxxxx, Xx.
President
