UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
FRANKLIN UNIVERSAL TRUST
(Name of Subject Company)
FRANKLIN UNIVERSAL TRUST
(Name of Person(s) Filing Statement)
Shares of beneficial interest, par value $0.01 per share
(Title of Class of Securities)
355145103
(CUSIP Number of Class of Securities)
ONE FRANKLIN PARKWAY
SAN MATEO CA 94403-1906
(650) 312-2000
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
Craig S. Tyle
One Franklin Parkway
San Mateo, California 94403-1906
(650) 312-2000
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and
Communications on Behalf of the Person(s) Filing Statement)
COPY TO:
Bruce G. Leto
2600 One Commerce Square
Philadelphia, Pennsylvania 19103
Check the box if the filing relates solely to preliminary communications
made before the commencement of a Tender Offer.
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ITEM 1. SUBJECT COMPANY INFORMATION.
The name of the subject company to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (together with the
Exhibits hereto, this "Statement") relates is Franklin Universal Trust, a
Massachusetts business trust. The address of the principal executive offices
of Franklin Universal Trust is One Franklin Parkway, San Mateo, California
94403-1906. The telephone number of the principal executive offices of
Franklin Universal Trust is (650) 312-2000. The title of the subject class of
equity securities to which this Schedule 14D-9 relates is shares of
beneficial interest, par value $0.01 per share ("Shares"). As of January 14,
2008, there were 25,187,893.784 Shares outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
The filing person is the subject company. The Fund's name, business
address and business telephone number are set forth in Item 1 above.
This Statement relates to the tender offer by Bulldog Investors
General Partnership ("Bulldog"), which, according to the Schedule TO filed by
it on February 15, 2008 (the "Bulldog Schedule TO"), is a New York general
partnership, to purchase up to 5,000,000 of the outstanding shares of
beneficial interest, par value $0.01 per share, at a price per share equal to
95% of the net asset value per share determined as of the close of the
regular trading session of the New York Stock Exchange on the Expiration
Date, as defined in the Bulldog Schedule TO, net to the seller in cash
(subject to a $50 processing fee that Bulldog will charge for processing each
Letter of Transmittal, applicable withholding taxes and any brokerage fees
that may apply), without interest upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated February 15, 2008 (the
"Bulldog Offer to Purchase"), and in the related Letter of Transmittal
(which, together with the Bulldog Offer to Purchase, constitute the "Bulldog
Offer"). The tender offer relates to outstanding shares of beneficial
interest, $0.01 par value of Franklin Universal Trust.
According to the Bulldog Schedule TO, the business address of
Bulldog is Park 80 West, Plaza Two, Suite 750, Saddle Brook, New Jersey
07663, and the business telephone number of Bulldog is (201) 556-0092.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Except as stated in the Fund's Investment Management Agreement and
definitive proxy statement filed with the U.S. Securities and Exchange
Commission (the "SEC") on February 5, 2008, which are included as Exhibits
(e)(1) and (e)(2) to this Statement, there are no material agreements,
arrangements, understandings, or any actual or potential conflicts of
interest between the Fund or its affiliates and (1) the Fund, its executive
officers, trustees or affiliates or (2) Bulldog or its executive officers,
directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
a. Solicitation or recommendation. The Board of Trustees ("Board") of
the Fund met to consider and discuss the Bulldog Offer on February 25, 2008.
After careful consideration of the Fund's potential responses, the Board
determined that the Bulldog Offer was not in the best interests of
shareholders and, by unanimous vote, determined to recommend that the Fund's
shareholders reject the Bulldog Offer and not tender their shares to Bulldog.
The following discussion of the information and factors considered by
the Board is not meant to be exhaustive, but includes material information,
factors and analyses considered by the Board in reaching its conclusions and
recommendations. The members of the Board evaluated the various factors
listed below in light of their knowledge of the business, financial
condition, and prospects of the Fund and based upon the advice of independent
legal counsel. In light of the number and variety of factors that the Board
considered, the members of the Board did not find it practicable to assign
relative weights to the foregoing factors. The Board's recommendations were
made after considering the totality of the information and factors involved.
In addition, individual members of the Board may have given different weight
to different factors.
b. Reasons. The Board carefully considered Bulldog's tender offer and
found that it is not in the best interests of shareholders. The Board's
reasons for its conclusion and recommendation described above included the
following:
The Fund provides real benefits to shareholders as a closed-end fund.
Bulldog has announced that it is making its tender offer to help elect its
slate of trustees, who support measures that include converting the Fund to
an open-end fund. The Fund's Board strongly believes that open-ending is not
in the best interests of the Fund's long-term shareholders. Conversion to an
open-end fund would require the Fund to maintain cash balances to meet
redemptions, thereby potentially reducing the Fund's yield and total return.
In addition, as an open-end fund, the Fund would be unable to use leverage as
it currently does, which could impair the Fund's ability to enhance
investment return. The Board also believes that open-ending the Fund may
result in increased expenses for Fund shareholders--experience has shown that
hedge fund arbitrageurs like Bulldog redeem their shares immediately after a
closed-end fund converts to an open-end fund, thereby reducing the fund
assets and causing the fund's expense ratio to increase.
Bulldog's tender offer is excessively conditional. Bulldog is not
required to consummate its tender offer if shareholders do not elect its
slate of trustee candidates. However, even if Bulldog's candidates are
elected, the other conditions of the Bulldog tender offer are worded so
broadly as to make it uncertain whether the offer would actually be
consummated. For example, if Bulldog determines that there have been certain
changes in the financial markets or any material change with respect to the
financial condition of the Fund, Bulldog could elect not to consummate the
offer. By tying completion of its tender offer to the election of its
trustee candidates - and thus closing the tender offer after the 2008 Annual
Meeting - Bulldog could induce shareholders to elect its slate of trustees,
but rely on a loophole condition to avoid consummating its tender offer.
Bulldog's tender offer gives it a quick profit at shareholder expense.
Bulldog's offer requires shareholders to tender their shares at 95% of the
Fund's NAV. Yet, if the Fund is open-ended as Bulldog essentially proposes,
Bulldog would be able to redeem those same shares at 100% of the Fund's NAV,
giving Bulldog a quick 5% profit (assuming NAV remains constant) that would
have otherwise been available to the tendering shareholders. Bulldog has
also stated that it intends to seek reimbursement of Bulldog's solicitation
expenses, estimated at $100,000, paid out of the Fund's assets.
The terms of Bulldog's tender offer are unfair to shareholders. Bulldog
would assess a $50 processing fee to each shareholder who tenders. This
amount is substantially higher than most closed-end funds typically charge to
tendering shareholders--even when the tenders are conducted at 100% of NAV--and
many closed-end fund tender offers charge no fees at all. For shareholders
who hold shares in multiple names, a separate tender would be required for
each account, and the $50 fee would be charged each time. The $50 processing
fee could significantly reduce the return realized by certain small
shareholders.
Bulldog refuses to disclose its financial resources. While Bulldog
states that its tender offer is not subject to a financing condition, Bulldog
has not provided any information about its ability to complete the tender
offer, other than to state that it would pay the aggregate costs of its
tender offer using its investment capital. No Bulldog financial statements
are included as part of its Schedule TO.
In light of the factors described above, the Board has determined that
the tender offer is not in the best interests of the Fund's shareholders.
Therefore, the Board recommends that shareholders of the Fund reject the
tender offer and not tender their shares to Bulldog.
c. Intent to tender. To the best knowledge of the Fund, none of its
trustees, executive officers, affiliates, or subsidiaries currently intends
to tender Shares held of record or beneficially by such person for purchase
pursuant to the Bulldog Offer.
ITEM 5. PERSON/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED
In addition to solicitation services to be provided by The Altman Group,
Inc. ("Altman"), as described below, recommendations to the shareholders with
respect to the Bulldog Offer may be made by the Fund and its Trustees,
officers and employees (who will receive no compensation therefor in addition
to their regular salaries) and/or regular employees of the Fund's Investment
Manager, administrator, stock transfer agent, or any of their affiliates.
The Fund has contracted with Altman to assist with solicitation of
proxies. In the course of that solicitation, Altman may receive questions
regarding the Bulldog Offer. The Fund anticipates that the cost of retaining
Altman will be up to approximately $140,000, plus reimbursement of reasonable
out-of-pocket expenses (which amount is included in the estimate of total
expenses below). The Fund has also agreed to indemnify Altman against
certain liabilities and expenses, including liabilities under the federal
securities laws. Altman anticipates that approximately 20 of its employees or
other persons will be involved in soliciting shareholders of the Fund.
Altman's address is 60 East 42nd Street, Suite 405, New York, New York 10165.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
Pursuant to the Fund's share repurchase program, the Fund has made the
following purchases of its shares within the past 60 days:
FUT TRADES NAME COUPON PRICE FACE SETTLEMENSETTLE
DATE
1/2/2008 buy FUT common 6.9000 5,200 (35,932) 1/7/2008
1/3/2008 buy FUT common 6.9199 7,000 (48,509) 1/8/2008
1/4/2008 buy FUT common 6.8810 7,000 (48,237) 1/9/2008
1/7/2008 buy FUT common 6.8805 3,700 (25,494) 1/10/2008
1/8/2008 buy FUT common 6.9252 6,200 (42,998) 1/11/2008
1/9/2008 buy FUT common 6.9208 6,200 (42,970) 1/14/2008
1/10/2008 buy FUT common 6.9267 3,600 (24,972) 1/15/2008
1/11/2008 buy FUT common 6.9266 6,200 (43,006) 1/16/2008
1/22/2008 buy FUT common 6.1573 6,000 (37,003) 1/25/2008
1/23/2008 buy FUT common 6.4750 6,000 (38,910) 1/28/2008
1/24/2008 buy FUT common 6.6195 4,200 (27,843) 1/29/2008
1/25/2008 buy FUT common 6.6850 6,000 (40,170) 1/30/2008
1/28/2008 buy FUT common 6.6635 7,900 (52,720) 1/31/2008
1/29/2008 buy FUT common 6.7162 7,900 (53,136) 2/1/2008
1/30/2008 buy FUT common 6.7427 7,900 (53,346) 2/4/2008
1/31/2008 buy FUT common 6.6947 7,900 (52,967) 2/5/2008
2/1/2008 buy FUT common 6.7500 2,200 (14,872) 2/6/2008
Other than the foregoing, during the past 60 days, the Fund is not aware
of any other transactions with respect to the Shares that have been effected
by the Fund or, to the Fund's knowledge, by any of its executive officers,
trustees, affiliates or subsidiaries.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
The Fund and its Board have not undertaken and are not engaged in any
negotiation with Bulldog in response to the Bulldog Offer. However, the
Board continually considers all strategic alternatives available to the Fund
and the Fund reserves the right to develop and evaluate other alternatives to
the Bulldog Offer.
ITEM 8. ADDITIONAL INFORMATION
The Statement is not an offer to sell, nor a solicitation of an
offer to buy, shares of any fund. On February 27, 2008, the Fund issued a
press release (the "Press Release") containing the statement relating to the
proposed Bulldog Offer, which is attached as Exhibit (a)(1). The materials
have also been filed with the SEC and can be found on the SEC's website
(http://www.sec.gov).
ITEM 9. EXHIBITS
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EXHIBIT NO. DESCRIPTION
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(a)(1) Press Release issued by the Fund on February 27, 2008.
Filed herewith.
(e)(1) Investment Management Agreement, dated September 23,
1988, between the Fund and Franklin Advisers, Inc.
Filed herewith.
(e)(2) Definitive proxy statement of the Fund, filed with the
Securities and Exchange Commission on Schedule 14A on
February 5, 2008. Incorporated by reference.
(g)(1) Definitive additional proxy materials of the Fund, filed
with the Securities and Exchange Commission on Schedule
14A on February 5, 2008. Incorporated by reference.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
FRANKLIN UNIVERSAL TRUST
By:/s/ KAREN L. SKIDMORE
Name: Karen L. Skidmore
Title: Secretary
Dated: February 27, 2008
Exhibit (a)(1)
[Franklin Templeton Investments Letterhead]
FROM: Franklin Templeton Investments
Media: (650) 525-7458
Shareholders/Financial Advisors: (800) 336-5159
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FOR IMMEDIATE RELEASE
BOARD OF TRUSTEES OF FRANKLIN UNIVERSAL TRUST
RECOMMENDS THAT SHAREHOLDERS REJECT BULLDOG'S TENDER OFFER
San Mateo, CA, February 27, 2008 - The Board of Trustees of Franklin
Universal Trust (the "Fund") [NYSE:FT] unanimously recommends that the Fund's
shareholders reject the conditional tender offer by Bulldog Investors General
Partnership ("Bulldog") announced on February 15, 2008 to purchase shares of
the Fund.
The Board has carefully considered Bulldog's tender offer and found that it
is not in the best interests of shareholders. The Board's reasons for its
conclusion included the following:
o THE FUND PROVIDES REAL BENEFITS TO SHAREHOLDERS AS A CLOSED-END FUND.
---------------------------------------------------------------------
Bulldog has announced that it is making its tender offer to help elect
its slate of trustees, who support measures that include converting the
Fund to an open-end fund. The Fund's Board strongly believes that
open-ending is not in the best interests of the Fund's long-term
shareholders. Conversion to an open-end fund would require the Fund to
maintain cash balances to meet redemptions, thereby potentially reducing
the Fund's yield and total return. In addition, as an open-end fund,
the Fund would be unable to use leverage as it currently does, which
could impair the Fund's ability to enhance investment return. The Board
also believes that open-ending the Fund may result in increased expenses
for Fund shareholders--experience has shown that hedge fund arbitrageurs
like Bulldog redeem their shares immediately after a closed-end fund
converts to an open-end fund, thereby reducing the fund assets and
causing the fund's expense ratio to increase.
o BULLDOG'S TENDER OFFER IS EXCESSIVELY CONDITIONAL. Bulldog is not
--------------------------------------------------
required to consummate its tender offer if shareholders do not elect its
slate of trustee candidates. However, even if Bulldog's candidates are
elected, the other conditions of the Bulldog tender offer are worded so
broadly as to make it uncertain whether the offer would actually be
consummated. For example, if Bulldog determines that there have been
certain changes in the financial markets or any material change with
respect to the financial condition of the Fund, Bulldog could elect not
to consummate the offer. By tying completion of its tender offer to the
election of its trustee candidates--and thus closing the tender offer
after the 2008 Annual Meeting--Bulldog could induce shareholders to elect
its slate of trustees, but rely on a loophole condition to avoid
consummating its tender offer.
o BULLDOG'S TENDER OFFER GIVES IT A QUICK PROFIT AT SHAREHOLDER EXPENSE.
----------------------------------------------------------------------
Bulldog's offer requires shareholders to tender their shares at 95% of
the Fund's NAV. Yet, if the Fund is open-ended as Bulldog essentially
proposes, Bulldog would be able to redeem those same shares at 100% of
the Fund's NAV, giving Bulldog a quick 5% profit (assuming NAV remains
constant) that would have otherwise been available to the tendering
shareholders. Bulldog has also stated that it intends to seek
reimbursement of Bulldog's solicitation expenses, estimated at $100,000,
paid out of the Fund's assets.
o THE TERMS OF BULLDOG'S TENDER OFFER ARE UNFAIR TO SHAREHOLDERS. Bulldog
---------------------------------------------------------------
would assess a $50 processing fee to each shareholder who tenders. This
amount is substantially higher than most closed-end funds typically
charge to tendering shareholders--even when the tenders are conducted at
100% of NAV--and many closed-end fund tender offers charge no fees at
all. For shareholders who hold shares in multiple names, a separate
tender would be required for each account, and the $50 fee would be
charged each time. The $50 processing fee could significantly reduce
the return realized by certain small shareholders.
o BULLDOG REFUSES TO DISCLOSE ITS FINANCIAL RESOURCES. While Bulldog
states that its tender offer is not subject to a financing condition,
Bulldog has not provided any information about its ability to complete
the tender offer, other than to state that it would pay the aggregate
costs of its tender offer using its investment capital. No Bulldog
financial statements are included as part of its Schedule TO.
In light of the factors described above, the Board has determined that the
tender offer is not in the best interests of the Fund's shareholders.
Therefore, the Board recommends that shareholders of the Fund reject the
tender offer and not tender their shares to Bulldog.
In connection with the tender offer, the Fund has filed a
Solicitation/Recommendation Statement on Schedule 14D-9 with the Securities
and Exchange Commission (the "SEC"). Investors and security holders are
strongly advised to read the Solicitation/Recommendation Statement because it
contains important information about the Bulldog Offer. Free copies of the
Solicitation/Recommendation Statement are available at
www.franklintempleton.com and on the SEC's website at www.sec.gov.
Franklin Universal Trust is a closed-end investment company managed by
Franklin Advisers, Inc. Franklin Advisers, Inc. is a wholly owned subsidiary
of Franklin Resources, Inc. [NYSE:BEN], a global investment management
organization operating as Franklin Templeton Investments.
* * * * *
The foregoing is not an offer to sell, nor a solicitation of an offer to buy,
shares of any fund, nor is it a solicitation of any proxy.
# # #
Exhibit (e)(1)
FRANKLIN UNIVERSAL TRUST
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made between FRANKLIN
UNIVERSAL TRUST, a Massachusetts Business Trust, hereinafter
called the "Trust", and FRANKLIN ADVISERS, INC., a California
corporation, hereinafter called the "Manager."
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 "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 Act and the Securities Act of
1933, all as heretofore 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 it; 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 Trust.
NOW THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is mutually agreed as follows:
1. EMPLOYMENT OF THE MANAGER. The Trust hereby employs the
Manager to manage the investment and reinvestment of the Trust'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 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 Trust in any way or otherwise be deemed an agent of the Trust.
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
Trust 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 Trust, including conducting
correspondence and other communications with the shareholders of
the Trust, maintaining all internal bookkeeping, accounting and
auditing services and records in connection with the Trust'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 Trust who are
officers or employees of the Manager or its affiliates.
B. INVESTMENT MANAGEMENT SERVICES.
(a) The Manager shall manage the Trust's assets subject to and
in accordance with the respective investment objectives and
policies of the Trust and any directions which the Trust'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 Trust'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 Trust's investment securities shall be
exercised. The Manager shall render 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 which it has made with respect
to the investment of the Trust'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 Trust's Board of Trustees may issue from
time to time, shall place, in the name of the Trust, orders for
the execution of the Trust's securities transactions. When
placing such orders the Manager shall seek to obtain the best net
price and execution for the Trust, 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 Trust 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 Trust 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
Trust and the Manager agree that the Manager shall select brokers
for the execution of the Trust's transactions from among:
(i) Those brokers and dealers who provide quotations and other
services to the Trust, specifically including
the quotations necessary to determine the
Trust'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 Trust, or which place
the Manager in a better position to make
decisions in connection with the management
of the Trust'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 Trust 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 Trust
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 Trust, on a
quarterly basis unless more frequent reports are mutually agreed
upon by the Trust and the Manager, 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
Trust.
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 Trust in the preparation of registration
statements, reports and other documents required by federal and
state securities laws and with such information as the Trust may
reasonably request.
D. OTHER OBLIGATIONS AND SERVICES. The Manager 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 Trust and its investment
activities.
3. EXPENSES OF THE TRUST. It is understood that the Trust will
pay all of its own expenses other than those expressly assumed by
the Manager herein, which expenses payable by the Trust shall
include without limitation:
A. Fees to the Manager as provided herein;
B. Expenses of all audits by independent public accountants;
C. Expenses of its transfer agent, registrar, custodian,
dividend disbursing agent and shareholder record-keeping
services, including the expenses of issue, repurchase or
redemption of or tender for its shares and senior notes, the cost
of certificates, and the cost and expenses of the trustee under
an indenture for any debt issued by the Trust;
D. Expenses of obtaining quotations for calculating the Trust's
net asset value and its compliance with the terms of any
indenture with respect to its senior notes;
E. Salaries and other compensation of executive officers of the
Trust who are not officers, directors, stockholders or employees
of the Manager or its affiliates;
F. Taxes levied against the Trust;
G. Brokerage fees and commissions in connection with the
purchase and sale of securities for the Trust;
H. Costs, including the interest expense, of borrowing money;
I. Costs incident to meetings of Board of Trustees and
shareholders of the Trust, reports to the Trust's shareholders,
the filing of reports with regulatory bodies and the maintenance
of the Trust's legal existence;
J. Legal fees, including the legal fees related to the
registration and any continued qualification of the Trust'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 Trust and its shares under federal and any
applicable state laws; including the printing and distributing of
prospectuses, proxy statements and reports to its shareholders;
M. Trade association dues;
N. Its pro rata portion of fidelity bond and liability
insurance premiums;
O. Expenses of obtaining and maintaining stock exchange
listings of the Trust's shares and such ratings as the Board of
Trustees may deem desirable; and
P. Expenses incurred in connection with the Trust's Dividend
Reinvestment Plan.
4. COMPENSATION OF THE MANAGER. The Trust shall pay a
management fee in cash to the Manager based upon a percentage of
the value of the Trust's weekly 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
weekly net assets of the Trust shall mean the average weekly
value of the total assets of the Trust, minus the sum of accrued
liabilities (other than the principal amount of the senior notes
issued by the Trust). The value of the Trust's portfolio
securities shall be determined in the same manner as the Trust
otherwise 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 Trust's current
Registration Statement on Form N-2. The management fee payable
by the Trust shall be calculated weekly and payable monthly at an
annual rate of 0.75 of 1% of the Trust's average weekly net
assets.
B. The management fee will be accrued weekly by the Trust and
paid to the Manager on the first business day of the succeeding
month. The initial monthly management fee shall be payable on
the first business day of the first month following the effective
date of this Agreement. The management fee shall be prorated for
the portion of any month in which this Agreement is in effect
which is not a complete month according to the proportion which
the number of calendar days in the month during which the
Agreement is in effect bears to the number of calendar days in
the month. If this Agreement is terminated prior to the end of
any month, the fee to the Manager shall be payable within ten
(10) days after the date of termination.
C. The Management fee 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 reduce the
compensation or reimbursement of expenses due to it pursuant to
this Agreement. Any such reduction shall be applicable only with
respect to the items or time periods specified by the Manager and
shall not constitute an agreement to reduce any future
compensation or reimbursement due to the Manager hereunder.
5. ACTIVITIES OF THE MANAGER. The services of the Manager to
the Trust 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 Trust and
Section 10(a) of the Act, it is understood that trustees,
officers, agents and shareholders of the Trust 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 Trust as trustees, officers, agents,
shareholders or otherwise; that the Manager or its affiliates may
be interested in the Trust 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 Trust 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 any
of the Trust.
B. Notwithstanding the foregoing, the Manager 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 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 Trust'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 Trust for any expenditures
related to the institution of an administrative proceeding or
civil litigation by the Trust or a shareholder of the Trust
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
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 Manager therefor. This provision shall not be deemed to
be waiver of any claim the Trust may have or may assert against
the Manager 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 Manager, from liability in violation of Sections 17(h) and
(i) of the Act.
7. EFFECTIVE DATE, RENEWAL AND TERMINATION.
A. This Agreement shall become effective on the date as set
forth 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
year so long as such continuation is approved at least annually
by (i) the Board of Trustees of the Trust or by the vote of a
majority of the outstanding voting securities of the Trust, and
(ii) the vote of a majority of the Trustees of the Trust who are
not parties to this Agreement or interested persons thereof, in
each case cast in person at a meeting called for the purpose of
voting on such approval.
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
Trust seeking to terminate the Agreement, 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 Trust.
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 California.
10. LIMITATION OF LIABILITY. The Manager acknowledges that it
has received notice of and accepts the limitations of the Trust's
liability as set forth in Article VIII of its Agreement and
Declaration of Trust. The Manager agrees that the Trust's
obligations hereunder shall be limited to the assets of the
Trust, and that the Manager shall not seek satisfaction of any
such obligation from any shareholders of the Trust nor from any
trustee, officer, employee or agent of the Trust.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the 23rd day of September, 1988.
FRANKLIN UNIVERSAL TRUST
By: /S/ HARMON BURNS,
VICE PRESIDENT
FRANKLIN ADVISERS, INC.
By: /S/ RUPERT H. JOHNSON,
PRESIDENT