DRAFT
XXXXXXXX XXXXXXXXX FUND ALLOCATOR SERIES
on behalf of its series
Franklin Xxxxxxxxx 2015 Retirement Target Fund
Xxxxxxxx Xxxxxxxxx 2025 Retirement Target Fund
Franklin Xxxxxxxxx 2035 Retirement Target Fund
Franklin Xxxxxxxxx 2045 Retirement Target Fund
INVESTMENT ADVISORY and ASSET ALLOCATION AGREEMENT
This INVESTMENT ADVISORY and ASSET ALLOCATION AGREEMENT ("Agreement") made
between XXXXXXXX XXXXXXXXX FUND ALLOCATOR SERIES, a Delaware business trust (the
"Trust"), on behalf of each of its series named above (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 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 Funds; and,
WHEREAS, the investment policies of each Fund contemplate that the Fund
seek to achieve its investment objectives through investment of the Fund's
assets in a number of asset classes and, consequently, each Fund will require
the provision of asset allocation services, as well as traditional investment
advisory services; and
WHEREAS, each Fund currently intends to invest its assets primarily in one
or more available investment companies in the Franklin Xxxxxxxxx Group of Funds,
although each Fund is also permitted to and may invest some or all of its assets
directly in non-investment company securities; and
WHEREAS, the parties hereto have agreed to the respective fees for asset
allocation and investment advisory services as described below; and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, is engaged in the business of rendering asset
allocation, 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:
l. EMPLOYMENT OF THE ADVISER. The Trust hereby employs the Adviser to
provide asset allocation services to the Funds, to manage the investment and
reinvestment of the Funds' assets in investment company and non-investment
company securities and to administer certain aspects of their 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. ASSET ALLOCATION SERVICES. The Adviser shall, subject to and in
accordance with the investment objectives and policies of each Fund and any
directions which the Trust's Board may issue from time to time, (i) manage the
allocation of each Fund's assets as between different asset classes, which may
include but are not be limited to domestic equity, international, fixed income,
gold and cash; and (ii) consistent with those allocation decisions, select the
amount, if any, to be invested by each Fund in either the Franklin Xxxxxxxxx
Funds available for purchase by such Funds to it or such other securities as are
consistent with each Fund's investment objectives and policies.
B. INVESTMENT ADVISORY SERVICES. 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 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.
C. This subsection 2.C applies only to any assets of the Funds which
are not invested in investment company securities.
(a) The Adviser, subject to and in accordance with any
directions which the Board may issue from time to time, shall place, in the name
of each Fund, orders for the execution of each Fund's securities transactions.
When placing such orders, the Adviser shall seek to obtain the best net price
and execution for each 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 one or more 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
determines that the affected 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) provided by that broker.
Accordingly, the Trust and the Adviser agree that the Adviser
shall select brokers for the execution of each 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.
(b) When the Adviser has determined that a 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 affected 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.
(c) 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 each Fund, with brokers falling into each of
the categories referred to above and the manner in which the allocation has been
accomplished.
(d) 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.
D. This subsection 2.D applies to any assets of the Funds which are
invested in investment company securities. Orders for the purchase or sale of
investment company securities shall be placed directly with Franklin/Xxxxxxxxx
Distributors, Inc.
E. The Adviser shall render or cause to be rendered regular reports
to the Trust, at regular meetings of its Board and at such other times as may be
reasonably requested by the Board, of (i) decisions made with respect to the
allocation of each Fund's assets; (ii) to the extent each Fund's assets are
invested in investment companies in the Franklin Xxxxxxxxx Group of Funds,
decisions made with respect to purchases and sales of such funds within the
specific asset classes; (iii) to the extent that any portion of a Fund's assets
is invested directly in non-investment company securities, decisions made with
respect to purchase and sale of non-investment company securities; (iv) the
reasons for such decisions; and (v) the extent to which those decisions have
been implemented.
F. The Adviser shall be responsible for determining the manner in
which any voting rights, rights to consent to corporate action and any other
rights pertaining to each Fund's investment company and non-investment company
securities shall be exercised.
G. 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 each 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.
H. OTHER OBLIGATIONS AND SERVICES. The Adviser shall make its
officers and employees available to the Board and officers of the Trust for
consultation and discussions regarding the administration and management of each
Fund and its investment activities.
3. EXPENSES OF THE FUND. 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 Fund shall include, without limitation:
X. Xxxx and expenses paid to the Adviser as provided herein;
B. Expenses of fund administration, including without limitation fees
paid pursuant to the Fund's contract with Franklin Xxxxxxxxx Services, LLC or
fees paid to any other entity which provides similar services to the Fund in the
future;
C. Expenses of all audits by independent public accountants;
D. 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;
E. Expenses of obtaining quotations for calculating the value of the
Fund's net assets;
X. Xxxxxxxx and other compensations of executive officers of the
Trust who are not officers, directors, stockholders or employees of the Adviser
or its affiliates;
G. Taxes levied against the Fund;
X. Xxxxxxxxx fees and commissions in connection with the purchase and
sale of securities for the Fund;
I. Costs, including the interest expense, of borrowing money;
X. Xxxxx incident to meetings of the Board 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 the Trust's legal existence;
K. Legal fees, including the legal fees related to the registration
and continued qualification of the Fund's shares for sale;
L. Board members' fees and expenses to Board members who are not
directors, officers, employees or stockholders of the Adviser or any of its
affiliates;
M. 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;
N. Trade association dues; and
O. The Fund's pro rata portion of fidelity bond, errors and
omissions, and trustees and officer liability insurance premiums.
P. The Fund's portion of the cost of any proxy voting service used on
its behalf.
4. COMPENSATION OF THE ADVISER. The Adviser shall receive no fee for any
services under this Agreement, except for the Asset Allocation Services
described in subsection 2.A., above. Each Fund shall pay an asset allocation 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 asset allocation
services rendered 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 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 asset
allocation fee payable by the Fund shall be calculated daily at the following
annual rates:
0.25% of the Fund's average daily net assets
B. The fee payable by a 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 a 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 asset allocation fee shall be paid to the date of termination.
5. ACTIVITIES OF THE ADVISER. The services of the Adviser to each Fund
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 or Articles of
Incorporation of the Trust, the By-Laws of the Trust, and Section 10(a) of the
1940 Act, it is understood that Board members, 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 Board members, officers, agents, shareholders or otherwise; that the
Adviser or its affiliates may be interested in each Fund as shareholders or
otherwise; and that the effect of any such interests shall be governed by said
Agreement and Declaration of Trust or Articles of Incorporation, 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
any Fund or to any shareholder of any 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 any 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 Board; 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 30 days after a bill 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
Board member 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 each Fund or by a vote of the Board, and (ii) by a vote of a majority of the
Board members who are not parties to the Agreement (other than as Board
members), 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 as to a Fund without the
payment of any penalty either by vote of the Board 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 as to a Fund with respect to
the Fund in the event of its assignment; and
(iii)may be terminated as to a Fund 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.
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 ___ day of ______________.
XXXXXXXX XXXXXXXXX FUND ALLOCATOR SERIES on behalf of Xxxxxxxx Xxxxxxxxx 2015
Retirement Target Fund Xxxxxxxx Xxxxxxxxx 2025 Retirement Target Fund Franklin
Xxxxxxxxx 2035 Retirement Target Fund Franklin Xxxxxxxxx 2045 Retirement Target
Fund
By:___________________________
Title: _______________________
XXXXXXXX ADVISERS, INC.
By:
__________________________
Title: _______________________
