SUB-ADVISORY AGREEMENT
XXXXXXXXX GLOBAL SMALLER COMPANIES FUND, INC.
THIS ADVISORY AGREEMENT made as of October 8, 2001 by and between
XXXXXXXXX INVESTMENT COUNSEL, LLC. ("TICL"), a Delaware limited liability
corporation and FRANKLIN XXXXXXXXX INVESTMENTS (ASIA) LIMITED ("FTIL"), a
corporation existing under the laws of Hong Kong.
WITNESSETH
WHEREAS, TICL and FTIL are each 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, Inc. (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, Xxxxx Xxxxxxx, a member of the Fund's portfolio management
team, will be residing in Hong Kong during which time he will be employed by
FTIL, and TICL wishes to enter into this agreement with FTIL to enable Xx.
Xxxxxxx to continue to perform his responsibilities as a member of the Fund's
portfolio management team during his employment with FTIL.
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 FTIL and FTIL 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 Directors (the "Board") and to the instructions and
supervision of TICL, FTIL agrees to provide certain investment advisory services
with respect to securities and investments and cash equivalents in the Fund.
TICL will continue to have full responsibility for all investment advisory
services provided to the Fund. TICL acknowledges that the only services that
FTIL will provide under this agreement are the portfolio management services of
Xxxxx Xxxxxxx while he remains employed by FTIL.
(b) Both FTIL 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 or Hong Kong.
(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, FTIL shall report daily all
transactions effected by FTIL 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 meetings 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. Xxxxx
Xxxxxxx 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, FTIL 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
Articles of Incorporation, 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, FTIL 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 FTIL.
2. In performing the services described above, FTIL 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, FTIL 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, FTIL 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 FTIL a fee equal to .25% of the advisory fee paid
to TICL by the Fund, which fee shall be payable in the U.S. dollars on the first
business day of each month as compensation for the services to be rendered and
obligations assumed by FTIL 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 FTIL shall share equally 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 FTIL are not to be deemed
exclusive. TICL acknowledges that FTIL 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 FTIL 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, FTIL may
use information furnished by others to TICL and FTIL 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, FTIL 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. FTIL 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. FTIL 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 FTIL
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 on the date that Xxxxx Xxxxxxx
becomes employed by FTIL and shall continue in effect until Xxxxx Xxxxxxx ceases
to be employed by FTIL for whatever reason or until May 31, 2002. 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
Directors 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 Directors 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 not less than
sixty (60) days' written notice to TICL and FTIL, and by TICL or FTIL 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
FTIL, neither FTIL 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 FTIL pursuant to authority delegated as described in Paragraph
1(a), FTIL 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 FTIL 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,
FTIL 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. FTIL 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 FTIL's engagement under this Agreement or at the
Fund's direction, FTIL 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 FTIL and relate directly and
exclusively to the performance by FTIL of its obligations under this Agreement;
provided, however, that FTIL 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 FTIL 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 FTIL's 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 FTIL properly certified or authenticated copies of
the resolutions of the Board authorizing the appointment of FTIL 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 FTIL:
Xxxx 0000, Xxxx Xx Xxxxxx
0-0 Xxxxxxx Xxxx
XxxXxxx, Xxxx Xxxx
Facsimile: 011-852-2829-0694
(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. FTIL acknowledges that is has received notice of and accepts the
limitations of the Fund's liability as set forth in its Articles of
Incorporation. FTIL agrees that the Fund's obligations hereunder shall be
limited to the assets of the Fund, and that FTIL 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
duly executed by their duly authorized officers and their respective corporate
seals to be hereunto duly affixed and attested.
FRANKLIN XXXXXXXXX INVESTMENT (ASIA) LIMITED
By: /s/XXXXXXXX X. XXXXXXX
----------------------------
XXXXXXXXX INVESTMENT COUNSEL, LLC
By: /s/XXXXXX X. ROSSOLET
--------------------------
