FRANKLIN NEW YORK TAX-FREE TRUST
on behalf of
FRANKLIN NEW YORK LIMITED-TERM TAX-FREE INCOME FUND
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT made between FRANKLIN NEW YORK TAX-FREE TRUST
a Massachusetts business trust (the "Trust"), on behalf of FRANKLIN NEW YORK
LIMITED-TERM TAX-FREE INCOME FUND (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 Fund; 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:
1. 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
inves tment 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 t o 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.
(f) Decisions on proxy voting shall be made by the Adviser unless the Board of
Trustees determines otherwise. Pursuant to its authority, Adviser shall have
the power to vote, either in person or by proxy, all securities in which the
Fund may be invested from time to time, and shall not be required to seek or
take instructions from the Fund with respect thereto. 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 Fund, or the issuers thereof, including
actions involving bankruptcy. Should Adviser undertake litigation against an
issuer on behalf of the Fund, the Fund agrees to pay its portion of any
applicable legal fees associated with the action or to forfeit any claim to any
assets Adviser may recover and, in such case, agrees to hold Adviser harmless
for excluding the Fund from such action. In the case of class action suits
involving issuers held in the Fund, Adviser may include information about the
Fund for purposes of participating in any settlements.
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.
D. 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
Fund for which it is responsible under this Agreement. The Adviser will
compensate any Sub-Adviser for its services to the Fund. 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
Fund's shareholders is obtained. The Adviser will continue to have
responsibility for all advisory services furnished by any Sub-Adviser.
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 the 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;
N. The Fund's pro rata portion of fidelity bond, errors and omissions, and
trustees and officer liability insurance premiums; and
O. The Fund's portion of the cost of any proxy voting service used on its
behalf.
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 management fee payable by
the Fund shall be calculated daily at the following annual rates:
o 0.500 of 1% of the value of average daily net assets of the Fund up to and
including $100 million; and
o 0.450 of 1% of the value of average daily net assets over $100 million up to
and including $250 million; and
o 0.425 of 1% of the value of average daily net assets over $250 million up to
and including $500 million; and
o 0.400 of 1% of the value of average daily net assets over $500 million.
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 full 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 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 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
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
each 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.
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 September 2003.
FRANKLIN NEW YORK TAX-FREE TRUST on behalf of
FRANKLIN NEW YORK LIMITED-TERM TAX-FREE INCOME FUND
By: /S/ XXXXXX X. XXXXXXX
Xxxxxx X. Xxxxxxx
Vice President & Secretary
FRANKLIN ADVISERS, INC.
By: /S/ XXXXXX X. XXXXXXXX
Xxxxxx X. Xxxxxxxx
President
