Exhibit 10.3
FRANKLIN VALUE INVESTORS TRUST
on behalf of
FRANKLIN BALANCE SHEET INVESTMENT FUND
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN VALUE INVESTORS
TRUST, formerly known as Franklin Balance Sheet Investment Fund, a
Massachusetts Business Trust, on behalf of its series FRANKLIN BALANCE
SHEET INVESTMENT FUND, hereinafter called the "Fund", and FRANKLIN
ADVISORY SERVICES, INC., a Delaware 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 and Declaration of Trust, its
By-Laws and its Registration Statements under the Act and the
Securities Act of 1933, all as heretofore and hereafter 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 any separate series of the Fund of the Fund hereafter
organized; 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, 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 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 of the Board of
Trustees and the officers 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, and (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 or
Contract Holders investing in 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 investment objectives and policies of the
Fund and any directions which the Fund's Board of Trustees may issue
from time to time. In pursuance 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 their 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 Board of Trustees and at such other times as
may be reasonably requested by the Fund's Board of Trustees, of (i) the
decisions which it has made with respect to the investment of the
Fund's assets and the purchase and sale of their 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 Board of Trustees may issue from time to
time, shall place, 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
Board of Trustees determines 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; and
(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 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 offering
of the Fund's shares.
D. Other Obligations and Services. The Manager shall
make its officers and employees available to the Board of Trustees and
officers of the Fund for consultation and discussions regarding the
administration and management of the Fund and their 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
Manager herein, which expenses payable by the Fund shall include:
A. Fees and expenses paid 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 record-keeping services,
including the expenses of issue, repurchase or redemption of their
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 Fund who are not officers, directors, stockholders or employees
of the Manager 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 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 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 Manager or any of
its affiliates;
L. Costs and expense of registering and maintaining the
registration of the Fund and their 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 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
monthly 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 that
the 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:
.625 of 1% of the value of net assets up to and
including $100,000,000;
.50 of 1% of the value of net assets over
$100,000,000 up to and including $250,000,000; and
.45 of 1% of the value of net assets over
$250,000,000 up to and including $10,000,000,000; and
.44 of 1% of the value of net assets over
$10,000,000,000 up to and including $12,500,000,000;
and
.42 of 1% of the value of net assets over
$12,500,000,000 up to and including $15,000,000,000;
and
.40 of 1% of the value of net assets over
$15,000,000,000.
B. The Management 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 as set forth in paragraph
2.B.(c) of this Agreement. The Manager may, from time to time,
voluntarily reduce or waive any management fee due to it hereunder.
C. To the extent that the gross operating costs and
expenses of the Fund (excluding any interest, taxes, brokerage
commissions, amortization of organization expense, expenses under the
Distribution Plan, and, with the prior written approval of any state
securities commission requiring same, any extraordinary expenses, such
as litigation), exceed the most stringent expense limitation
requirements of the states in which shares of the Fund are qualified
for sale, the Manager shall reduce its fees by the amount of such
excess.
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 and
Declaration of Trust and By-Laws of the Fund and Section 10(a) of the
Act, it is understood that trustees, 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 trustees, officers, agents,
shareholders or otherwise; that the Manager 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 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 the Manager, the Manager shall not be subject
to liability to the Fund or to any shareholder of the Trust 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 and
trustees' 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
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
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 Board of Trustees;
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 or policyholder investing in 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 bill or statement has been received by the Manager therefor. This
provision shall not be deemed to be a 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 trustee 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 two (2) years. 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 Board of Trustees of
the Fund, and (ii) by a vote of a majority of the Trustees of the Fund
who are not parties to the Agreement (other than as Trustees 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 Board of Trustees of the Fund or
by vote of a majority of the outstanding voting securities of the Fund
seeking to terminate the Agreement, on 60 days' written notice to the
Manager;
(ii) shall immediately terminate with respect to the
Fund 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 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 Delaware.
10. Limitation of Liability. The Manager acknowledges that it has
received notice of and accepts the limitations of the Fund's liability
as set forth in Article VIII of its Agreement and Declaration of Trust.
The Manager agrees that the Fund's obligations hereunder shall be
limited to the assets of the Fund, and that the Manager shall not seek
satisfaction of any such obligation from any shareholders of the Fund
nor from any trustee, officer, employee or agent of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and effective on the 1st day of July, 1996.
FRANKLIN VALUE INVESTORS TRUST
By:__________________________
William J. Lippman
President
FRANKLIN ADVISORY SERVICES, INC.
By:___________________________
Harmon E. Burns
Executive Vice President
Termination of Agreement
Franklin Value Investors Trust, formerly known as Franklin Balance
Sheet Investment Fund, and Franklin Advisers, Inc., hereby agree that
the Management Agreement between them dated as of April 2, 1990, is
terminated effective as of the date of the Management Agreement above.
FRANKLIN VALUE INVESTORS TRUST
formerly known as Franklin Balance Sheet Investment Fund
By:_________________________
William J. Lippman
Title: President
FRANKLIN ADVISERS, INC.
By:__________________________
Harmon E. Burns
Title: Executive Vice President