INTERIM INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 18th day of September, 2007, between XXXXXXXXX
GLOBAL SMALLER COMPANIES FUND, a statutory trust organized under the laws of the
State of Delaware (hereinafter referred to as the "Fund"), and FRANKLIN
XXXXXXXXX INVESTMENTS CORP. (hereinafter referred to as the "Investment
Manager").
In consideration of the mutual agreements herein made, the Fund and the
Investment Manager understand and agree as follows:
(1) The Investment Manager agrees, during the life of this Agreement, to
manage the investment and reinvestment of the Fund's assets consistent with the
provisions of the Fund's Agreement and Declaration of Trust and the investment
policies adopted and declared by the Fund's Board of Trustees. In pursuance of
the foregoing, the Investment 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 all such steps as may be necessary to
implement those determinations.
(2) The Investment Manager is not required to furnish any personnel,
overhead items or facilities for the Fund, including trading desk facilities or
daily pricing of the Fund's portfolio.
(3) The Investment Manager shall be responsible for selecting members of
securities exchanges, brokers and dealers (such members, brokers and dealers
being hereinafter referred to as "brokers") for the execution of the Fund's
portfolio transactions consistent with the Fund's brokerage policy and, when
applicable, the negotiation of commissions in connection therewith.
All decisions and placements shall be made in accordance with the following
principles:
(A) Purchase and sale orders will usually be placed with
brokers which are selected by the Investment Manager as able to achieve
"best execution" of such orders. "Best execution" shall mean prompt and
reliable execution at the most favorable securities price, taking into
account the other provisions hereinafter set forth. The determination
of what may constitute best execution and price in the execution of a
securities transaction by a broker involves a number of considerations,
including, without limitation, the overall direct net economic result
to the Fund (involving both price paid or received and any commissions
and other costs paid), the efficiency with which the transaction is
executed, the ability to effect the transaction at all where a large
block is involved, availability of the broker to stand ready to execute
possibly difficult transactions in the future, and the financial
strength and stability of the broker. Such considerations are
judgmental and are weighed by the Investment Manager in determining the
overall reasonableness of brokerage commissions.
(B) In selecting brokers for portfolio transactions, the
Investment Manager shall take into account its past experience as to
brokers qualified to achieve "best execution," including brokers who
specialize in any foreign securities held by the Fund.
(C) The Investment Manager is authorized to allocate brokerage
business to brokers who have provided brokerage and research services,
as such services are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act") for the Fund and/or other
accounts, if any, for which the Investment Manager exercises investment
discretion (as defined in Section 3(a)(35) of the 0000 Xxx) and, as to
transactions for which fixed minimum commission rates are not
applicable, to cause the Fund to pay a commission for effecting a
securities transaction in excess of the amount another broker would
have charged for effecting that transaction, if the Investment Manager
determines in good faith that such amount of commission is reasonable
in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of either that particular
transaction or the Investment Manager's overall responsibilities with
respect to the Fund and the other accounts, if any, as to which it
exercises investment discretion. In reaching such determination, the
Investment Manager will not be required to place or attempt to place a
specific dollar value on the research or execution services of a broker
or on the portion of any commission reflecting either of said services.
In demonstrating that such determinations were made in good faith, the
Investment Manager shall be prepared to show that all commissions were
allocated and paid for purposes contemplated by the Fund's brokerage
policy; that the research services provide lawful and appropriate
assistance to the Investment Manager in the performance of its
investment decision-making responsibilities, and that the commissions
were within a reasonable range. Whether commissions were within a
reasonable range shall be based on any available information as to the
level of commission known to be charged by other brokers on comparable
transactions, but there shall be taken into account the Fund's policies
that (i) obtaining a low commission is deemed secondary to obtaining a
favorable securities price, since it is recognized that usually it is
more beneficial to the Fund to obtain a favorable price than to pay the
lowest commission; and (ii) the quality, comprehensiveness, and
frequency of research studies which are provided for the Investment
Manager are useful to the Investment Manager in performing its advisory
services under its Agreement. Research services provided by brokers to
the Investment Manager are considered to be in addition to, and not in
lieu of, services required to be performed by the Investment Manager
under this Agreement. Research furnished by brokers through which the
Fund effects securities transactions may be used by the Investment
Manager for any of its accounts, and not all such research may be used
by the Investment Manager for the Fund. When execution of portfolio
transactions is allocated to brokers trading on exchanges with fixed
brokerage commission rates, account may be taken of various services
provided by the broker.
(D) Purchases and sales of portfolio securities within the
United States other than on a securities exchange shall be executed
with primary market makers acting as principal, except where, in the
judgment of the Investment Manager, better prices and execution may be
obtained on a commission basis or from other sources.
(4) The Fund agrees to pay to the Investment Manager a monthly fee in
dollars, at the annual rate of the Fund's daily net assets, as listed below,
payable at the end of each calendar month:
0.75%, up to and including $1 billion
0.73% over $1 billion, up to and including $5 billion
0.71% over $5 billion, up to and including $10 billion
0.69% over $10 billion, up to and including $15 billion
0.67% over $15 billion, up to and including $20 billion
0.65% over $20 billion
Notwithstanding the foregoing, if the total expenses of the Fund (including
the fee to the Investment Manager) in any fiscal year of the Fund exceed any
expense limitation imposed by applicable State law, the Investment Manager shall
reimburse the Fund for such excess in the manner and to the extent required by
applicable State law. The term "total expenses," as used in this paragraph, does
not include interest, taxes, litigation expenses, distribution expenses,
brokerage commissions or other costs of acquiring or disposing of any of the
Fund's portfolio securities or any costs or expenses incurred or arising other
than in the ordinary and necessary course of the Fund's business. When the
accrued amount of such expenses exceeds this limit, the monthly payment of the
Investment Manager's fee will be reduced by the amount of such excess, subject
to adjustment month by month during the balance of the Fund's fiscal year if
accrued expenses thereafter fall below the limit.
(5) This Agreement shall become effective as of the date first written
above and shall continue in effect for 150 days following that date. If not
sooner terminated, this Agreement shall continue in effect until the
shareholders of the Fund approve an Investment Management Agreement between the
Fund and the Investment Manager at a meeting called for the purpose of voting on
such Investment Management Agreement.
(6) Notwithstanding the foregoing, this Agreement may be terminated by
either party at any time, without the payment of any penalty, on sixty (60)
days' written notice to the other party, provided that termination by the Fund
is approved by vote of a majority of the Fund's Board of Trustees in office at
the time or by vote of a majority of the outstanding voting securities of the
Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and immediately in the
event of its assignment (as defined in the 1940 Act).
(8) In the event this Agreement is terminated and the Investment Manager no
longer acts as Investment Manager to the Fund, the Investment Manager reserves
the right to withdraw from the Fund the use of the name "Xxxxxxxxx" or any name
misleadingly implying a continuing relationship between the Fund and the
Investment Manager or any of its affiliates.
(9) Except as may otherwise be provided by the 1940 Act, neither the
Investment Manager nor its officers, directors, employees or agents shall be
subject to any liability for any error of judgment, mistake of law, or any loss
arising out of any investment or other act or omission in the performance by the
Investment Manager of its duties under the Agreement or for any loss or damage
resulting from the imposition by any government of exchange control restrictions
which might affect the liquidity of the Fund's assets, or from acts or omissions
of custodians, or securities depositories, or from any war or political act of
any foreign government to which such assets might be exposed, or for failure, on
the part of the custodian or otherwise, timely to collect payments, except for
any liability, loss or damage resulting from willful misfeasance, bad faith or
gross negligence on the Investment Manager's part or by reason of reckless
disregard of the Investment Manager's duties under this Agreement. It is hereby
understood and acknowledged by the Fund that the value of the investments made
for the Fund may increase as well as decrease and are not guaranteed by the
Investment Manager. It is further understood and acknowledged by the Fund that
investment decisions made on behalf of the Fund by the Investment Manager are
subject to a variety of factors which may affect the values and income generated
by the Fund's portfolio securities, including general economic conditions,
market factors and currency exchange rates, and that investment decisions made
by the Investment Manager will not always be profitable or prove to have been
correct.
(10) It is understood that the services of the Investment Manager are not
deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Manager, or any affiliate thereof, from providing similar services to
other investment companies and other clients, including clients which may invest
in the same types of securities as the Fund, or, in providing such services,
from using information furnished by others. When the Investment Manager
determines to buy or sell the same security for the Fund that the Investment
Manager or one or more of its affiliates has selected for clients of the
Investment Manager or its affiliates, the orders for all such security
transactions shall be placed for execution by methods determined by the
Investment Manager, with approval by the Fund's Board of Trustees, to be
impartial and fair.
(11) This Agreement shall be construed in accordance with the laws of the
State of Delaware, provided that nothing herein shall be construed as being
inconsistent with applicable Federal and state securities laws and any rules,
regulations and orders thereunder.
(12) 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 and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting the Investment
Manager an agent of the Fund.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers and their respective corporate seals
to be hereunto duly affixed and attested.
XXXXXXXXX GLOBAL SMALLER COMPANIES FUND
By:/s/XXXXX X. XXXX
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FRANKLIN XXXXXXXXX INVESTMENTS CORP.
By: /s/XXXXXX X. XXXX
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/s/XXXX XXXXXXXXXXXXX
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