FRANKLIN TAX-FREE TRUST
on behalf of
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN TAX-FREE TRUST, a
Massachusetts business trust, hereinafter called the "Trust" on behalf of the
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND, hereinafter called the "Fund", a
series of Franklin Tax-Free Trust, and FRANKLIN ADVISERS, INC., a California
Corporation, hereinafter called the "Manager."
WHEREAS, the Trust has been organized and operates 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; 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 Fund; and,
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisor's 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 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 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 Trust and 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 affairs and conducting the
business of the Trust and the Fund, including complying with the securities
reporting requirements of the United States and the various states in which the
Trust 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 assets of the Fund 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 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 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 the Manager or
its affiliates may lawfully and appropriately use in their investment advisory
capacities, 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 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/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 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. 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 Underwriter of 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 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 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 Trust or 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
Trust to its 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.
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 Trust 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 such Fund uses to compute the value of
its net assets in connection with the determination of the net asset value of
such Fund's shares, all as set forth more fully in such Fund's current
prospectus. The rate of the monthly management fee payable by the Fund shall be
as follows:
5/96 of 1% of the value of its net assets up to and including
$100,000,000; and
1/24 of 1% of the value of its net assets over $100,000,000
up to and including $250,000,000; and
9/240 of 1% of the value of its 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 fully set forth herein.
C. If this Agreement is terminated prior to the end of any month for the
Fund, the monthly management fee for such 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, agents and shareholders of the Trust 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, 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, 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 of 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
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 incur
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) 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
Fund for any expenditures related to the institution of an administrative
proceeding or civil litigation by the Trust or the Fund's shareholders 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 this Subsection 6(B) 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 the Fund 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 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 anytime be terminated with respect to the Fund 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 seeking
to terminate the Agreement, on 30 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 with respect to the
Fund 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.
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
Article VIII of 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
shareholder 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 1st day of October, 1998.
FRANKLIN TAX-FREE TRUST on behalf of
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
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
TERMINATION OF AGREEMENT
Franklin Tax-Free Trust and Franklin Investment Advisory Services, Inc., hereby
agree that the Management Agreement between them dated October 1, 1996 is
terminated with respect to the Franklin Connecticut Tax-Free Income Fund,
effective as of the date of the Management Agreement above.
FRANKLIN TAX-FREE TRUST
By /S/ XXXXXX X. XXXXX
Xxxxxx X. Xxxxx
Vice President
FRANKLIN INVESTMENT ADVISORY SERVICES, INC.
By /S/ XXXXXXX X. XXXXXX
Xxxxxxx X. Xxxxxx
Vice President &
Assistant Secretary
