SUB-ADVISORY AGREEMENT
XXXXXXXXX GLOBAL SMALLER COMPANIES FUND
THIS SUB-ADVISORY AGREEMENT made as of 16th November 2005 by
and between XXXXXXXXX INVESTMENT COUNSEL, LLC ("TICL"), a Delaware limited
liability corporation, and FRANKLIN XXXXXXXXX INVESTMENT MANAGEMENT LIMITED,
LONDON, XXXXXX XXXXXX ("FTIML XXXXXX XXXXXX"), a company incorporated in
Switzerland with registered number CH-660-1840005-2 having its registered office
at Xxx xx xx Xxxxxxxxxx 00, XX-Xxxxxx, Xxxxxxxxxxx.
WITNESSETH
WHEREAS, TICL is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and engaged in
the business of supplying investment management services, as an independent
contractor;
WHEREAS, TICL, pursuant to an investment advisory agreement
("Investment Advisory Agreement"), has been retained to render investment
advisory services to Xxxxxxxxx Global Smaller Companies Fund (the "Fund"), an
investment management company registered with the U.S. Securities and Exchange
Commission (the "SEC") pursuant to the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, from time to time, members of the Fund's portfolio
management team will be residing in Geneva, Switzerland during which time they
will be employed by FTIML XXXXXX XXXXXX, and TICL wishes to enter into this
Agreement with FTIML XXXXXX XXXXXX to enable such persons to continue to perform
their responsibilities as members of the Fund's portfolio management team during
their employment with FTIML XXXXXX XXXXXX.
NOW, THEREFORE, in consideration of the covenants and the
mutual promises hereinafter set forth, the parties hereto, intending to be
legally bound hereby, mutually agree as follows:
1. TICL hereby retains FTIML XXXXXX XXXXXX and FTIML XXXXXX
XXXXXX hereby accepts such engagement, to furnish certain investment advisory
services with respect to the assets of the Fund, as more fully set forth herein.
(a) Subject to the overall policies, control, direction
and review of the Fund's Board of Trustees (the "Board") and to the
instructions and supervision of TICL, FTIML XXXXXX XXXXXX agrees
to provide certain investment advisory services with respect to
securities and investments and cash equivalents in the Fund. TICL will
continue to provide all research services in respect of the Fund and
have full responsibility for all investment advisory services provided
to the Fund. TICL acknowledges that the only services that FTIML XXXXXX
XXXXXX will provide under this Agreement are the portfolio management
services of any team members residing in Geneva, Switzerland while such
persons remain employed by FTIML XXXXXX XXXXXX.
(b) Both FTIML XXXXXX XXXXXX and TICL may place all
purchase and sale orders on behalf of the Fund. The placement of these
orders will take place exclusively in Fort Lauderdale and Geneva,
Switzerland.
(c) Unless otherwise instructed by TICL or the Board,
and subject to the provisions of this Agreement and to any guidelines
or limitations specified from time to time by TICL or by the Board,
FTIML XXXXXX XXXXXX shall report daily all transactions effected by
FTIML XXXXXX XXXXXX on behalf of the Fund to TICL and to other entities
as reasonably directed by TICL or the Board.
(d) For the term of this Agreement, TICL shall provide
the Board at least quarterly, in advance of the regular meeting of the
Board, a report of its activities hereunder on behalf of the Fund
and its proposed strategy for the next quarter, all in such form and
detail as requested by the Board. Any team members residing in Geneva,
Switzerland shall also be available to attend such meetings of the
Board as the Board may reasonably request.
(e) In performing its services under this Agreement,
FTIML XXXXXX XXXXXX shall adhere to the Fund's investment objective,
policies and restrictions as contained in the Fund's Prospectus and
Statement of Additional Information, and in the Fund's Declaration of
Trust, and to the investment guidelines most recently established by
TICL and shall comply with the provisions of the 1940 Act and the rules
and regulations of the SEC thereunder in all material respects and with
the provisions of the United States Internal Revenue Code of 1986, as
amended, which are applicable to regulated investment companies.
(f) In carrying out its duties hereunder, FTIML XXXXXX
XXXXXX shall comply with all reasonable instructions of the Fund or
TICL in connection therewith. Such instructions may be given by letter,
telex, telefax or telephone confirmed by telex, by the Board or by
any other person authorized by a resolution of the Board, provided a
certified copy of such resolutions has been supplied to FTIML XXXXXX
XXXXXX.
2. In performing the services described above, FTIML XXXXXX
XXXXXX shall use its best efforts to obtain for the Fund the most favorable
price and execution available. Subject to prior authorization of appropriate
policies and procedures by the Board, FTIML XXXXXX XXXXXX may, to the extent
authorized by law and in accordance with the terms of the Fund's Prospectus and
Statement of Additional Information, cause the Fund to pay a broker who provides
brokerage and research services an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker would have charged for effecting that transaction, in recognition of the
brokerage and research services provided by the broker. To the extent authorized
by applicable law, FTIML XXXXXX XXXXXX shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of such action.
3. (a) TICL shall pay to FTIML XXXXXX XXXXXX a fee equal to
45% of the advisory fee paid to TICL by the Fund, which fee shall be
payable in U.S. dollars on the first business day of each month as
compensation for the services to be rendered and obligations assumed by
FTIML XXXXXX XXXXXX during the preceding month. The advisory fee under
this Agreement shall be payable on the first business day of the first
month following the effective day of this Agreement and shall be
reduced by the amount of any advance payments made by TICL relating to
the previous month.
(b) TICL and FTIML XXXXXX XXXXXX shall share pro rata in
any voluntary reduction or waiver by TICL of the management fee due
under the Investment Advisory Agreement between TICL and the Fund.
(c) If this Agreement is terminated prior to the end of
any month, the monthly 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 total
number of calendar days in the month, and shall be payable within 10
days after the date of termination.
4. It is understood that the services provided by FTIML XXXXXX
XXXXXX are not to be deemed exclusive. TICL acknowledges that FTIML XXXXXX
XXXXXX may have investment responsibilities, render investment advice to, or
perform other investment advisory services to other investment companies and
clients, which may invest in the same type of securities as the Fund
(collectively, "Clients"). TICL agrees that FTIML XXXXXX XXXXXX may give advice
or exercise investment responsibility and take such other action with respect to
such Clients which may differ from advice given or the timing or nature of
action taken with respect to the Fund. In providing services, FTIML XXXXXX
XXXXXX may use information furnished by others to TICL and FTIML XXXXXX XXXXXX
in providing services to other such Clients.
5. TICL agrees to use its best efforts in performing the
services to be provided by it pursuant to this Agreement.
6. During the term of this Agreement, FTIML XXXXXX XXXXXX will
pay all expenses incurred by it in connection with the services to be
provided by it under this Agreement other than the cost of securities
(including brokerage commissions, if any) purchased for the Fund. The
Fund and TICL will be responsible for all of their respective expenses
and liabilities.
7. FTIML XXXXXX XXXXXX shall, unless otherwise expressly
provided and authorized, have no authority to act for or represent TICL
or the Fund in any way, or in any way be deemed an agent for TICL or
the Fund.
8. FTIML XXXXXX XXXXXX will treat confidentially and as
proprietary information of the Fund all records and other information
relative to the Fund and prior, present or potential shareholders, and
will not use such records and information for any purpose other than
performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld
where FTIML XXXXXX XXXXXX may be exposed to civil or criminal contempt
proceedings for failure to comply when requested to divulge such
information by duly constituted authorities, or when so requested by
the Fund.
9. This Agreement shall become effective as of the date first
written above and shall continue in effect until May 31, 2007. If not
sooner terminated, this Agreement shall continue in effect for
successive periods of 12 months each thereafter, PROVIDED that each
such continuance shall be specifically approved annually by the vote of
a majority of the Fund's Board of Trustees who are not parties to this
Agreement or "interested persons" (as defined in the 0000 Xxx) of any
such party, cast in person at a meeting called for the purpose of
voting on such approval, and either the vote of (a) a majority of the
outstanding voting securities of the Fund, as defined in the 1940 Act,
or (b) a majority of the Fund's Board of Trustees as a whole.
10. (a) Notwithstanding the foregoing, this Agreement may be
terminated at any time, without the payment of any penalty, by the
Board upon written notice to TICL and FTIML XXXXXX XXXXXX, and by TICL
or FTIML XXXXXX XXXXXX upon not less than sixty (60) days' written
notice to the other party.
(b) This Agreement shall terminate automatically in the
event of any transfer or assignment thereof, as defined in the 1940
Act, and in the event of any act or event that terminates the
Investment Advisory Agreement between TICL and the Fund.
11. (a) In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of its obligations or duties
hereunder on the part of FTIML XXXXXX XXXXXX, neither FTIML XXXXXX
XXXXXX nor any of its directors, officers, employees or affiliates
shall be subject to liability to TICL or the Fund or to any shareholder
of the Fund for any error of judgement or mistake of law or any other
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 paragraph 11(a), to the extent that
TICL is found by a court of competent jurisdiction, or the SEC or
any other regulatory agency, to be liable to the Fund or any
shareholder (a "liability") for any acts undertaken by FTIML XXXXXX
XXXXXX pursuant to authority delegated as described in Paragraph 1(a),
FTIML XXXXXX XXXXXX shall indemnify TICL and each of its affiliates,
officers, directors and employees (each a "Franklin Indemnified Party")
harmless from, against, for and in respect of all losses, damages,
costs and expenses incurred by a Franklin Indemnified Party with
respect to such liability, together with all legal and other expenses
reasonably incurred by any such Franklin Indemnified Party, in
connection with such liability.
(c) No provision of this Agreement shall be construed to
protect any director or officer of TICL or FTIML XXXXXX XXXXXX from
liability in violation of Sections 17(h) or (i), respectively, of the
0000 Xxx.
12. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, FTIML XXXXXX XXXXXX hereby agrees that all records which it
maintains for the Fund are the property of the Fund and further agrees to
surrender promptly to the Fund, or to any third party at the Fund's direction,
any of such records upon the Fund's request. FTIML XXXXXX XXXXXX further agrees
to preserve for periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act.
13. Upon termination of FTIML XXXXXX XXXXXX'x engagement under
this Agreement or at the Fund's direction, FTIML XXXXXX XXXXXX shall forthwith
deliver to the Fund, or to any third party at the Fund's direction, all records,
documents and books of accounts which are in the possession or control of FTIML
XXXXXX XXXXXX and relate directly and exclusively to the performance by FTIML
XXXXXX XXXXXX of its obligations under this Agreement; provided, however, that
FTIML XXXXXX XXXXXX shall be permitted to keep such records or copies thereof
for such periods of time as are necessary to comply with applicable laws, in
which case FTIML XXXXXX XXXXXX shall provide the Fund or a designated third
party with copies of such retained documents unless providing such copies would
contravene such rules, regulations and laws.
Termination of this Agreement or FTIML XXXXXX XXXXXX'x
engagement hereunder shall be without prejudice to the rights and liabilities
created hereunder prior to such termination.
14. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, in whole or in part,
the other provisions hereof shall remain in full force and effect. Invalid
provisions shall, in accordance with the intent and purpose of this Agreement,
be replaced by such valid provisions which in their economic effect come as
closely as legally possible to such invalid provisions.
15. TICL will furnish to FTIML XXXXXX XXXXXX properly
certified or authenticated copies of the resolutions of the Board authorizing
the appointment of FTIML XXXXXX XXXXXX and approving this Agreement as soon as
such copies are available.
16. Any notice or other communication required to be given
pursuant to this Agreement shall be in writing and given by personal delivery or
by facsimile transmission and shall be effective upon receipt. Notices and
communications shall be given:
(i) to FTIML XXXXXX XXXXXX:
Xxx xx xx Xxxxxxxxxx 00
XX-Xxxxxx
Xxxxxxxxxxx
Facsimile: xx00 00 000 0000
(ii) to TICL:
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: 000-000-0000
17. This Agreement shall be interpreted in accordance with and
governed by the laws of the State of Florida.
18. FTIML XXXXXX XXXXXX acknowledges that it has received
notice of and accepts the limitations of the Fund's liability as set forth in
its Agreement and Declaration of Trust. FTIML XXXXXX XXXXXX agrees that the
Fund's obligations hereunder shall be limited to the assets of the Fund, and
that FTIML XXXXXX XXXXXX 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.
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PAGE
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
FRANKLIN XXXXXXXXX INVESTMENT
MANAGEMENT LIMITED,LONDON,
XXXXXX XXXXXX
By:/s/XXXXXXX X. XXXXXXX
---------------------------
Xxxxxxx X. Xxxxxxx
Director
And
By:/s/XXX X. XXXXXXX
---------------------------
Xxx X. Xxxxxxx
Director
XXXXXXXXX INVESTMENT COUNSEL,
LLC
By:/s/XXXX X. XXXXX
---------------------------
Xxxx X. Xxxxx
President
