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 MANAGEMENT and ASSET ALLOCATION AGREEMENT
This INVESTMENT MANAGEMENT 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 MANAGEMENT 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 1st day of August 2006.
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: /s/ XXXXX X. XXXXXXXX
Xxxxx X. Xxxxxxxx
Title: Vice President & Secretary
XXXXXXXX ADVISERS, INC.
By: /s/ XXXXX X. XXXX
Xxxxx X. Xxxx
Title: Senior Vice President &
Chief Financial Officer
