FRANKLIN FLOATING RATE MASTER TRUST
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT made between FRANKLIN FLOATING RATE
MASTER TRUST, a Delaware business trust (the "Trust"), on behalf of FRANKLIN
FLOATING RATE MASTER SERIES (the "Fund"), a series of the Trust, 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 (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, 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 adviser and to have an investment
adviser perform various management, statistical, research, investment
advisory and other services for the Trust; and,
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, is engaged in the business of rendering
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 mutually agreed as follows:
l. EMPLOYMENT OF THE ADVISER. The Trust hereby employs the Adviser 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 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 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 ADVISER. The
Adviser undertakes to provide the services hereinafter set forth and to
assume the following obligations:
A. INVESTMENT ADVISORY SERVICES.
(a) The Adviser shall manage the Fund's assets 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 Adviser shall make all
determinations with respect to the investment of the 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 Fund's
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 the 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 Fund, orders for the execution of the Fund's
securities transactions. When placing such orders, the Adviser shall seek to
obtain the best net price and execution for the Fund, 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 Fund 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 Fund 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) provided by that
broker.
Accordingly, the Trust and the Adviser agree that the Adviser
shall select brokers for the execution of the Fund's 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; 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 advisory capacities,
which relate directly to securities, actual or potential, of
the Fund, or which place the Adviser in a better position to
make decisions in connection with the management of the
Fund's 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. 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 Adviser 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 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 Fund 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 Fund, 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 the Fund.
B. 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 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 underwriting
and distribution of the Fund's shares.
C. 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
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 Adviser herein, which
expenses payable by the Fund 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
the 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 Fund;
G. Brokerage fees and commissions in connection with the purchase
and sale of securities for the Fund;
H. Costs, including the interest expense, of borrowing
money;
I. Costs incident to meetings of the Board of Trustees and
shareholders of the Fund, reports to the Fund's shareholders, the filing of
reports with regulatory bodies and the maintenance of the Fund's and 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. 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 the 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; and
N. The Fund's pro rata portion of fidelity bond, errors and
omissions, and trustees and officer liability insurance premiums.
4. COMPENSATION OF THE ADVISER. The Fund shall pay an advisory fee in
cash to the Adviser based upon a percentage of the value of the 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 the Fund shall be determined in the same manner as that 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 advisory fee payable by the Fund shall be calculated daily at the
following annual rates:
0.80% of the average daily net assets of the Fund
B. The advisory 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 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 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, the accrued advisory fee shall be paid to the date of termination.
5. ACTIVITIES OF THE ADVISER. The services of the Adviser to the
Trust 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 Fund 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 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 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 therefor. 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 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 (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 Fund on sixty (60)
days' written notice to the Adviser;
(ii) shall immediately terminate with respect to the Fund in
the event of its assignment; and
(iii) may be terminated by the Adviser on sixty (60) days'
written notice to the 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 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 Adviser, 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 24th day of March, 2000.
FRANKLIN FLOATING RATE MASTER TRUST on behalf of
FRANKLIN FLOATING RATE MASTER SERIES
By: /s/ XXXXX X. XXXX
Xxxxx X. Xxxx
Title: Vice President &
Assistant Secretary
FRANKLIN ADVISERS, INC.
By: /s/ H.E. XXXXX
Xxxxxx X. Xxxxx
Title: Executive Vice President
