FRANKLIN PRINCIPAL MATURITY TRUST
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made between FRANKLIN PRINCIPAL
MATURITY TRUST, a Massachusetts Business Trust, hereinafter called the "Trust",
and FRANKLIN ADVISERS, INC., a California corporation, hereinafter called the
"Manager."
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 "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 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 various management,
statistical, research, investment advisory and other services for it; 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 investment counselling clients, and desires to
provide these services to the Trust.
NOW THEREFORE, in consideration of the terms and conditions hereinafter set
forth, it is mutually agreed as follows:
1. EMPLOYMENT OF THE MANAGER. The Trust hereby employs the Manager to
manage the investment and reinvestment of the Trust'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 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. ADMINISTRATIVE SERVICES. The Manager shall furnish to the Trust
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 Trust,
including conducting correspondence and other communications with the
shareholders of the Trust, maintaining all internal bookkeeping, accounting
and auditing services and records in connection with the Trust'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 Trust who are officers or employees of the Manager or its affiliates.
B. INVESTMENT MANAGEMENT SERVICES.
(a) The Manager shall manage the Trust's assets subject to and in
accordance with the respective investment objectives and policies of
the Trust 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
Trust'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 Trust's investment securities shall
be exercised. The Manager shall render 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 which it has made with respect to the investment of
the Trust's 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 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 Trust, orders for the execution of the
Trust's securities transactions. When placing such orders the Manager
shall seek to obtain the best net price and execution for the Trust,
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 Trust 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 Trust 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 Trust's transactions from among:
(i) Those brokers and dealers who provide quotations
and other services to the Trust, specifically including the
quotations necessary to determine the Trust'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 Trust, or which place the Manager in a better position
to make decisions in connection with the management of the
Trust'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 Trust 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 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 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 Trust, on a
quarterly basis unless more frequent reports are mutually agreed upon
by the Trust and the Manager, 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
Trust.
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 Trust in the preparation of
registration statements, reports and other documents required by federal
and state securities laws and with such information as the Trust may
reasonably request.
D. OTHER OBLIGATIONS AND SERVICES. The Manager 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 Trust and its investment activities.
3. EXPENSES OF THE TRUST. It is understood that the Trust will pay all of
its own expenses other than those expressly assumed by the Manager herein, which
expenses payable by the Trust shall include without limitation:
A. Fees to the Manager as provided herein;
B. Expenses of all audits and other services by independent public
accountants;
C. Expenses of its transfer agent, registrar, custodian, dividend
disbursing agent and shareholder record-keeping services, including the
expenses of issue, repurchase or redemption of or tender for its shares,
and the cost of certificates;
D. Expenses of obtaining quotations for calculating the Trust's net
asset value;
E. Salaries and other compensation of executive officers of the Trust
who are not officers, directors, stockholders or employees of the Manager
or its affiliates;
F. Taxes levied against the Trust;
G. Brokerage fees and commissions in connection with the purchase and
sale of securities for the Trust;
H. Costs, including the interest expense, of borrowing money;
I. Costs incident to meetings of Board of Trustees and shareholders of
the Trust, reports to the Trust'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 any continued qualification of the Trust'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 Trust and its shares under federal and any applicable state laws;
including the printing and distributing of prospectuses, proxy statements
and reports to its shareholders;
M. Trade association dues;
N. Its pro rata portion of fidelity bond and liability insurance
premiums;
O. Expenses of obtaining and maintaining stock exchange listings of
the Trust's shares; and
P. Expenses incurred in connection with the Trust's Dividend
Reinvestment Plan.
4. COMPENSATION OF THE MANAGER. The Trust shall pay a management fee in
cash to the Manager based upon a percentage of the value of the Trust's weekly
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 weekly net
assets of the Trust shall mean the average weekly value of the total assets
of the Trust, minus the sum of accrued liabilities (other than the
principal amount of any non-temporary borrowings). The value of the Trust's
portfolio securities shall be determined in the same manner as the Trust
otherwise 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 Registration Statement on Form N-2.
B. The management fee payable by the Trust shall be calculated weekly
and payable monthly from the date of the initial public offering of the
Shares of the Trust through May 31, 1993 at an annual rate of 0.75 of 1% of
the Trust's average weekly net assets. The annual rate shall be reduced to
0.60% of the Trust's average weekly net assets from June 1, 1993 through
May 31, 1997 and to 0.45% of the Trust's average weekly net assets from
June 1, 1997 through the termination of the Trust.
C. The management fee will be accrued weekly by the Trust and paid to
the Manager on the first business day of the succeeding month. The initial
monthly management fee shall be payable on the first business day of the
first month following the effective date of this Agreement. The 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. If this
Agreement is terminated prior to the end of any month, the fee to the
Manager shall be payable within ten (10) days after the date of
termination.
D. The Management fee 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 reduce the compensation or reimbursement of expenses due to it pursuant
to this Agreement. Any such reduction shall be applicable only with respect
to the items or time periods specified by the Manager and shall not
constitute an agreement to reduce any future compensation or reimbursement
due to the Manager hereunder.
5. ACTIVITIES OF THE MANAGER. The services of the Manager to the Trust
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 Section 10(a) of the Act, it is understood that trustees, officers, agents
and shareholders of the Trust 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 Trust as trustees, officers, agents, shareholders or
otherwise; that the Manager or its affiliates may be interested in the Trust 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 Trust 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 any of the
Trust.
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,
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 Trust'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 Trust for any expenditures related to
the institution of an administrative proceeding or civil litigation by the
Trust or a shareholder of the Trust 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 Trust
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 waiver of any claim the Trust may
have or may assert against the Manager of 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 Manager,
from liability in violation of Sections 17(h) and (i) of the Act.
7. EFFECTIVE DATE, RENEWAL AND TERMINATION.
A. This Agreement shall become effective on the date as set forth
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 year so long as such continuation
is approved at least annually by (i) the Board of Trustees of the Trust or
by the vote of a majority of the outstanding voting securities of the
Trust, and (ii) the vote of a majority of the Trustees of the Trust who are
not parties to this Agreement or interested persons thereof, cast in person
at a meeting called for the purpose of voting on such approval.
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 Trust,
on 60 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 60 days' written notice
to the Trust.
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 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 Trust,
and that the Manager shall not seek satisfaction of any such obligation from any
shareholders of the Trust nor from any trustee, officer, employee or agent of
the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the 19th day of January, 1989.
FRANKLIN PRINCIPAL MATURITY TRUST
By: /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Vice President
FRANKLIN ADVISERS, INC.
By: /s/ R. Xxxxxx Xxxxxxxxx
R. Xxxxxx Xxxxxxxxx
Vice President
