FRANKLIN CALIFORNIA TAX-FREE TRUST
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made between FRANKLIN
CALIFORNIA TAX-FREE TRUST, a Delaware statutory trust (the
"Trust"), on behalf of THE SERIES LISTED ON ATTACHMENT A (each a
"Fund", and collectively, the "Funds"), and FRANKLIN ADVISERS,
INC., a California corporation (the "Adviser").
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 the
Funds' 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. ADMINISTRATIVE SERVICES. The Adviser shall
furnish to each Fund adequate (i) office space, which may be
space within the offices of the Adviser 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 corporate affairs and conducting the business of
each Fund, including complying with the corporate and 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 each Fund,
maintaining all internal bookkeeping, accounting and auditing
services and records in connection with the Funds' investment and
business activities, and computing net asset value. The Adviser
shall employ or provide and compensate the executive, secretarial
and clerical personnel necessary to provide such services. The
Adviser shall also compensate all officers and employees of the
Trust who are officers or employees of the Adviser or its
affiliates.
B. INVESTMENT MANAGEMENT SERVICES.
(a) The Adviser shall manage each Fund's assets
subject to and in accordance with the investment objectives and
policies of each Fund 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 each 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 each Fund'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 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 any
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 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
the Funds, 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 Fund.
(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 the
Funds may be invested from time to time, and shall not be
required to seek or take instructions from the Funds 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 the Funds, or the issuers thereof, including
actions involving bankruptcy. Should the Adviser undertake
litigation against an issuer on behalf of the Funds, 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.
C. 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.
D. 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.
E. 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 FUNDS. 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 the Funds, reports to the Funds'
shareholders, the filing of reports with regulatory bodies and
the maintenance of the Funds' 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 each Fund 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 such 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 each
Fund shall be as follows:
For the Franklin California Insured Tax-Free Income Fund and
Franklin California Intermediate-Term Tax-Free Income Fund, the
Trust agrees to pay to the Adviser a fee equal to a monthly rate
of:
5/96 of 1% (0.625% annually) of the value of net
assets up to and including $100 million; and
1/24 of 1% (0.500% annually) of the value of net
assets over $100 million up to and including $250
million; and
9/240 of 1% (0.450% annually) of the value of net
assets over $250 million; up to and including $10
billion; and
11/300 of 1% (0.440% annually) of the value of net
assets over $10 billion up to and including $12.5
billion; and
7/200 of 1% (0.420% annually) of the value of net
assets over $12.5 billion up to and including $15
billion; and
1/30 of 1% (0.400% annually) of the value of net
assets over $15 billion up to and including $17.5
billion
19/600 of 1% (0.380% annually) of the value of net
assets over $17.5 billion up to and including $20
billion; and
3/100 of 1% (0.360% annually) of the value of net
assets in excess of $20 billion.
For the Franklin California Tax-Exempt Money Fund, the Trust
agrees to pay to the Adviser a fee equal to the daily rate of:
1/584 of 1% (0.625% annually) of the value of net
assets up to and including $100 million; and
1/730 of 1% (0.500% annually) of the value of net
assets over $100 million up to and including $250
million; and
9/7,300 of 1% (0.450% annually) of the value of
net assets over $250 million; up to and including
$10 billion; and
11/9,125 of 1% (0.440% annually) of the value of
net assets over $10 billion up to and including
$12.5 billion; and
21/18,250 of 1% (0.420% annually) of the value of
net assets over $12.5 billion up to and including
$15 billion; and
2/1,825 of 1% (0.400% annually) of the value of
net assets over $15 billion up to and including
$17.5 billion
19/18,250 of 1% (0.380% annually) of the value of
net assets over $17.5 billion up to and including
$20 billion; and
9/9,125 of 1% (0.360% annually) of the value of
net assets in excess of $20 billion.
B. The management fee payable by each 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 Funds as set forth in the
laws, regulations and administrative interpretations of those
states in which the Funds' 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 the Funds' 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 the Funds 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 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 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 November 2007.
FRANKLIN CALIFORNIA TAX-FREE TRUST
on behalf of Funds listed on Attachment A
By: /s/ XXXXX X. XXXXXXXX
Xxxxx X. Xxxxxxxx
Title: Vice President & Secretary
FRANKLIN ADVISERS, INC.
By: /s/ XXXXXX X. XXXXXXXX
Xxxxxx X. Xxxxxxxx
Title: President & Chief Investment Officer
ATTACHMENT A
Franklin California Insured Tax-Free Income Fund
Franklin California Intermediate-Term Tax-Free Income
Fund
Franklin California Tax-Exempt Money Fund
