SUB-ADVISORY AGREEMENT
TEMPLETON INSTITUTIONAL FUNDS, INC.
Foreign Smaller Companies Series
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 XXXXXX XXXXXX"), a company incorporated in
Switzerland with registered number CH-600-1840005-2 having its registered office
at Xxx xx xx Xxxxxxxxxx 00, XX-Xxxxxx, Xxxxxxxxxxx.
WITNESSETH
WHEREAS, TICL 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 Foreign Smaller Companies Series (the "Fund"), a series of
Templeton Institutional Funds, Inc., 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
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. 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 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, 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
one-half 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 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 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:
The Adelphi Building
0-00 Xxxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Facsimile: 00-000-00000000
(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 Articles of Incorporation. 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.
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
By:/s/XXXXXXX X. XXXXXXX
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Xxxxxxx X. Xxxxxxx
Director
And
By:/s/XXX X XXXXXXX
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Xxx X. Xxxxxxx
Director
XXXXXXXXX INVESTMENT COUNSEL, LLC
By:/s/XXXX X. XXXXX
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Xxxx X. Xxxxx
President
