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<PAGE> PAGE 2
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SIGNATURE DIOMEDES LOO-TAM
TITLE TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MIDCAP GROWTH PORTFOLIO APRIL 30, 1996 ANNUAL REPORT AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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</TABLE>
NAME OF REGISTRANT:
MidCap Growth Portfolio
File No. 811-7638
EXHIBIT ITEM No. 77C:
Submission of matters to a vote of security holders.
MIDCAP GROWTH PORTFOLIO
ACTION BY UNANIMOUS CONSENT OF SHAREHOLDERS
Pursuant to the provisions of Article V, Section 4 of the
Agreement and Declaration of Trust of MidCap Growth Portfolio
(the "Trust"), the undersigned, being the sole shareholders of
the Trust, hereby approve the following resolution with the same
force and effect as if the resolution had been approved at a
meeting held in person:
RESOLVED: That the investment management agreement to
be entered into between the Trust and
Franklin Advisers, Inc. be, and it hereby is,
approved for the Trust.
Executed by the undersigned as of the 1st day
of January, 1996.
FRANKLIN INSTITUTIONAL SERVICES
CORPORATION
By: /s/ Charles E. Johnson
Name: Charles E. Johnson
Title: President
FRANKLIN STRATEGIC SERIES, on
behalf of Franklin MidCap Growth Fund
By: /s/ Rupert H. Johnson, Jr.
Name: Rupert H. Johnson,
Jr.
Title: President
NAME OF REGISTRANT:
MidCap Growth Portfolio
File No. 811-7638
EXHIBIT ITEM No. 77Q(1)(e):
Copies of any new or amended investment advisory contract of registrant.
MIDCAP GROWTH PORTFOLIO
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is made between MIDCAP GROWTH PORTFOLIO, a
Delaware business trust ( the "Trust"), and TEMPLETON QUANTITATIVE ADVISORS,
INC., a Delaware corporation (the "Manager").
WHEREAS, the Trust has been organized and intends to operate as an
investment company registered under the Investment Company Act of 1940 (the
"1940 Act") for the purpose of investing and reinvesting its assets in
securities, as set forth in its Agreement and Declaration of Trust, its By-Laws
and its Registration Statements under the 1940 Act and the Securities Act of
1933, all as heretofore and hereafter amended and supplemented.
WHEREAS, 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; 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 agreed as follows:
l. 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. INVESTMENT MANAGEMENT SERVICES.
(a) The Manager shall manage the Trust's assets subject to and in
accordance with the 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 or cause to be rendered regular
reports to the Trust, at regular meetings of its Board of Trustees and
at such other times as may be reasonably requested by the Trust's
Board of Trustees, of (i) the decisions made with respect to the
investment of the 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 or dealers are equally able to
provide such best price and execution and that, in selecting among
such brokers and dealers with respect to particular trades, it is
desirable to choose those brokers or dealers 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) It is acknowledged that the Manager may contract with one or
more firms to undertake some or all of the manager's investment
management services as set forth herein pursuant to an agreement which
is subject to substantially the same provisions as contained in
paragraphs 6, 7 and 10 herein.
(d) When the Manager has determined that the Trust should tender
securities pursuant to a "tender offer solicitation,"
Franklin/Templeton 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 Manager
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 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.
(e) The Manager shall render regular reports to the Trust, not
more frequently than quarterly, of how much total brokerage business
has been placed by the Manager, on behalf of the Trust, with brokers
falling into each of the categories referred to above and the manner
in which the allocation has been accomplished.
(f) 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.
B. 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 for use in the
preparation of such documents or of other materials necessary or
helpful for the underwriting and distribution of the Trust's shares.
C. 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 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:
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 shares;
D. Expenses of obtaining quotations for calculating the value of the
Trust's net assets;
E. Salaries and other compensations 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 the 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 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 mailing of prospectuses to their shareholders;
M. Trade association dues; and
N. The Trust's pro rata portion of fidelity bond, errors and
omissions, and trustees and officer liability insurance premiums.
4. COMPENSATION OF THE MANAGER. The Trust shall pay a monthly management
fee in cash to the Manager based upon a percentage of the value of the
Trust's net assets, calculated as set forth below, on the first business
day of each month in each year as compensation for the services rendered
and obligations assumed by the Manager during the preceding month. The
initial management fee under this Agreement shall be payable on the first
business day of the first month following the effective date of this
Agreement, and shall be reduced by the amount of any advance payments made
by the Trust relating to the previous month.
A. For purposes of calculating such fee, the value of the net assets
of the Trust shall be the average daily net assets during the month for
which the payment is being made, determined in the same manner as the Trust
uses to compute the value of its net assets in connection with the
determination of the daily net asset value of its shares, all as set forth
more fully in the Trust's current prospectus. The annual rate of the
management fee payable by the Trust shall be .50% of the Trust's average
daily net assets.
B. The management fee payable by the Trust 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 Trust as set forth in
the laws, regulations and administrative interpretations of those states in
which the Trust's shares are registered. The Manager may, from time to
time, voluntarily reduce or waive any management fee due to it hereunder.
C. If this Agreement is terminated prior to the end of any month, the
monthly management fee for the Trust 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
fiscal quarter during which the Agreement is in effect bears to the number
of calendar days in the month, and shall be payable within 10 days after
the date of termination.
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 1940 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 1940 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 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 transaction 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 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 the stockholder's 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 a 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 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. 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 Trust
or by a vote of the Board of Trustees of the Trust, and (ii) by a vote of a
majority of the Trustees of the Trust who are not parties to the Agreement
or interested persons of any parties to the Agreement (other than as
Trustees of the Trust), cast in person at a meeting called for the purpose
of voting on the Agreement.
B. This Agreement:
(i) may at any time be terminated without the payment of any
penalty either by vote of the Board of Trustees of the Trust or by
vote of a majority of the outstanding voting securities of the Trust
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 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 16th day of August, 1994.
MIDCAP GROWTH PORTFOLIO
By: /s/ Harmon E. Burns
Title Vice President
TEMPLETON QUANTITATIVE ADVISORS, INC.
By: /s/ Robert E. Butman
Title President
