FRANKLIN TAX-ADVANTAGED U.S. GOVERNMENT SECURITIES FUND
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN TAX-ADVANTAGED U.S.
GOVERNMENT SECURITIES FUND, a California limited partnership, hereinafter called
the "Fund", and FRANKLIN ADVISERS, INC., a California corporation, hereinafter
called the "Manager."
WHEREAS, the Fund has been organized and intends to operate as an
investment company registered under the Investment Company Act of 1940 (the
"Act") for the purpose of investing and reinvesting its assets in securities as
set forth in its Agreement of Limited Partnership, its Operating Procedures, and
its Registration Statement under the Act and the Securities Act of 1933, all as
may be amended and supplemented; and the Fund 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 Fund; 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, counselling and supervisory services to
investment companies and other investment counselling 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 Manager. The Fund hereby employs the Manager to
manage the investment and reinvestment of the Fund's assets and to administer
its affairs, subject to the direction and control of the Managing General
Partners of the Fund, 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
Fund in any way or otherwise be deemed an agent of the Fund.
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. Administrative Services. The Manager shall furnish to the Fund
adequate (i) office space, which may be space within the offices of the Manager
or in such other place as may be agreed upon from time to time, (ii) office
furnishings, facilities and equipment as may be reasonably required for managing
the affairs and conducting the business of the Fund, including conducting
correspondence and other communications with the shareholders of the Fund,
maintaining all internal bookkeeping, accounting and auditing services and
records in connection with the Fund's investment and business activities. The
Manager shall employ or provide and compensate the executive, secretarial and
clerical personnel necessary to provide such services. The Manager shall also
compensate all officers and employees of the Fund who are officers or employees
of the Manager or its affiliates.
B. Investment Management Services.
(a) The Manager shall manage the Fund's assets subject to and
in accordance with the respective investment objectives and policies of the Fund
and any directions which the Fund's Managing General Partners may issue from
time to time. In respect of the foregoing, the Manager 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 Manager shall render regular reports to the
Fund, at regular meetings of its Managing General Partners and at such other
times as may be reasonably requested by the Fund's Managing General Partners, of
(i) the decisions which it has 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 Manager, subject to and in accordance with any
directions which the Fund's Managing General Partners 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 Manager shall seek
to obtain the best net price and execution for the Fund, 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 Fund and the
Manager in accord with the standards set forth below. Moreover, to the extent
that it continues to be lawful to do so and so long as the Managing General
Partners determine that the Fund 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 Fund and the Manager agree that
the Manager 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;
(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 Fund, or which
place the Manager 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 Manager and its affiliates in managing
other portfolios or advising other clients, in such
amount of total brokerage as may reasonably be required.
(c) When the Manager has determined that the Fund should
tender securities pursuant to a "tender offer solicitation," the Manager shall
designate Franklin Distributors, Inc. ("Distributors") as the "tendering dealer"
so long as it is legally permissible for the Manager to do so, and 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.
Distributors shall not 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 Fund 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 Fund, not
more frequently than quarterly, of how much total brokerage business has been
placed by the Manager 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 Fund
C. 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 Fund in the preparation of registration
statements, reports and other documents required by Federal, state and foreign
securities laws and tax 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 offering of the Fund's shares.
D. Other Obligations and Services. The Manager shall make its
officers and employees available to the Managing General Partners and officers
of the Fund for consultation and discussions regarding the administration and
management of the Fund and its investment activities.
3. Expenses of the Funds. It is understood that the Fund will pay all of
its own expenses other than those expressly assumed by the Manager herein, which
expenses payable by the Fund shall include:
A. Fees 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 recordkeeping services, including the expenses
of issue, repurchase or redemption of shares;
D. Expenses of obtaining quotations for calculating the value of the
Fund's net assets;
E. Salaries and other compensations of officers of the Fund who are
not officers, directors, stockholders or employees of the Manager or its
affiliates;
F. Taxes levied against the Fund (to the extent such obligations are
not the obligations of the Fund's shareholders);
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 Managing General Partners 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 legal
existence;
J. Legal fees, including the legal fees related to the registration
and continued qualification of the Fund's shares for sale:
K. Fees and expenses of the Managing General Partners 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 Fund and its shares under the applicable Federal, state and foreign
securities 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 insurance premiums.
4. Compensation of the Manager. The Fund shall pay a management fee in
cash to the Manager 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 Manager, payable at the request of the Manager.
A. For purposes of calculating such fee, the value of the net assets
of the Fund shall be determined in the same manner as the Fund uses the 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.
B. The rate of the management fee payable by the Fund shall be as
follows, based on the value of the Fund's net assets as of the close of business
on the last business day of each month:
5/96 of 1% of the value of the Fund's net assets up to and
including $100,000,000;
1/24 of 1% of the value of the Fund's net assets over
$100,000,000 up to and including $250,000,000; and
9/240 of 1% of the value of the
Fund's net assets in excess of
$250,000,000.
C. The management fee payable by the Fund shall be reduced or
eliminated (i) to the extent that Distributors have actually received cash
payments of tender offer solicitation fees less certain costs and expenses
incurred in connection therewith as set forth in paragraph 2(B)(c) of this
Agreement, or (ii) to the extent required by applicable state law or regulation
in any state where shares of the Fund are qualified for sale.
5. Activities of the Manager. The services of the Manager to the Fund
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 of Limited Partnership and Operating Procedures of
the Fund and Section 10(a) of the Act, it is understood that Managing General
Partners, officers, agents and shareholders of the Fund 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 Fund as Managing General Partners,
officers, agents, shareholders or otherwise; that the Manager or its affiliates
may be interested in the Fund as Non-Managing General Partners, shareholders, or
otherwise; and that the effect of any such interests shall be governed by said
Agreement of Limited Partnership, Operating Procedures and the 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 Manager, the Manager shall not be subject to liability to 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 Manager agrees to reimburse
the Fund for any and all costs, expenses, and counsel fees reasonably incurred
by the Fund in the preparation, printing and distribution of proxy statements,
amendments to its Registration Statement, holdings of meetings of its
shareholders or Managing General Partners, the conduct of factual
investigations, any legal or administrative proceedings (including any
applications for rulings, exemptions or determinations by the Internal Revenue
Service or the Securities and Exchange Commission) which the Fund 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 Fund's Managing General Partners; 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
Fund for any expenditures related to the institution of an administrative
proceeding or civil litigation by the Fund or a shareholder of the Fund 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 Fund 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 waiver of any claim the Fund may have
or may assert against the Manager or others for costs, expenses or damages
heretofore incurred by the Fund or for costs, expenses or damages the Fund may
hereafter incur which are not reimbursable to it hereunder
C. No provision of this Agreement shall be construed to protect any
Managing General Partner or officer of the Fund, or director or officer of the
Manager, from liability in violation of Sections 17(h) and (i) of the Act.
7. Renewal and Termination.
A. This Agreement shall become effective on the date written below
and shall continue in effect for a period of two (2) years unless sooner
terminated as provided below. The Agreement is renewable annually thereafter for
successive periods not to exceed one (1) year (i) by a vote of a majority of the
outstanding voting securities of the Fund or by a vote of the Managing General
partners of the Fund, and (ii) by a vote of a majority of the Managing General
Partners of the Fund who are not parties to the Agreement (other than as
Managing General Partners of the Fund), 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 Managing General Partners of the Fund or by vote
of a majority of the outstanding voting securities of the Fund, on 60 days'
written notice to the Manager;
(ii) shall immediately terminate in the event of its
assignment; and
(iii) may be terminated by the Manager on 60 days' written
notice to the Fund.
C. As used in this Paragraph and other Paragraphs of this Agreement
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 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.
10. Limitation of Liability. The Fund's obligations hereunder shall be
limited to the Fund and the assets of the Fund and no party shall seek
satisfaction of any such obligation from any limited partner, officer, employee
or agent of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 4th day of May, 1987.
FRANKLIN TAX-ADVANTAGED
U.S. GOVERNMENT SECURITIES FUND
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
XXXXXXXX ADVISERS, INC.
/s/ Xxxxxx X. Xxxxxxx, Xx.
Xxxxxx X. Xxxxxxx, Xx.
