FRANKLIN FLOATING RATE TRUST
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT made between FRANKLIN FLOATING RATE
TRUST, a Delaware business trust (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 (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 Statements under the 1940 Act and the Securities
Act of 1933, 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 Trust; 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 Trust.
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is mutually agreed as follows:
l. 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 or 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. INVESTMENT MANAGEMENT SERVICES.
(a) The Manager shall manage the Trust's assets
subject to and in accordance with the 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 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 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 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 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. Provided
that the Trust's officers are satisfied that the best
execution is obtained, the sale of shares of the Trust
may also be considered as a factor in the selection of
broker-dealers to execute the Trust's portfolio
transactions.
(c) When the Manager has determined that the Trust
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 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. 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 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, not more frequently than quarterly, of how much total brokerage
business has been placed by the Manager, on behalf of the Trust, 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.
B. 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 for use in the preparation of such documents or of
other materials necessary or helpful for the underwriting and distribution of
the Trust's shares.
C. 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:
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 its shares;
D. Expenses of obtaining quotations for calculating the
value of the Trust's net assets;
E. Salaries and other compensations 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 the 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 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 mailing of prospectuses to its
shareholders;
M. Trade association dues; and
N. The Trust's pro rata portion of fidelity bond, errors and
omissions, and trustees and officer liability insurance premiums.
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 managed assets, calculated as set forth below, as compensation for
the services rendered and obligations assumed by the Manager, 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 the Trust shall be determined in the same manner as that Trust
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 prospectus and statement of additional
information. To determine the Trust's managed assets, the Trust's net assets
shall be added to the value of any senior securities outstanding, including
but not limited to the value of any borrowings, debt securities or preferred
stock offering, provided that the amount of such borrowing or the proceeds of
such offering have been used to purchase portfolio securities for the Trust.
The rate of the management fee payable by the Trust shall be calculated daily
at the following annual rates:
0.80% of the average daily managed assets of the Trust
B. The management fee payable by the Trust 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 Trust as set forth in
the laws, regulations and administrative interpretations of those states in
which the Trust'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 Trust'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, the accrued management fee shall be paid to the date of termination.
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 1940 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 1940 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 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
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 a waiver of any claim the Trust may have or may assert against
the Manager 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
Manager, 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 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 Trust who are not 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 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 with respect to the
Trust 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 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.
E. Unless otherwise agreed by the Manager, upon
termination of this Agreement, the Trust shall cease to use the "Franklin"
name and logo.
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 16th day of September, 1997.
FRANKLIN FLOATING RATE TRUST
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
