SUBADVISORY AGREEMENT
FRANKLIN XXXXXXXXX INTERNATIONAL TRUST
(On behalf of the Xxxxxxxxx Foreign Smaller Companies Fund)
This SUBADVISORY AGREEMENT made as of January 1, 2001, (this
"Agreement") by and between XXXXXXXXX INVESTMENT COUNSEL, LLC, a Delaware
limited liability company ("TIC") and XXXXXXXXX ASSET MANAGEMENT LIMITED
("TAML"), a corporation existing under the laws of Singapore.
W I T N E S S E T H
WHEREAS, TIC and TAML are each registered as an investment adviser under
the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and are
engaged in the business of supplying investment management services, each as
an independent contractor;
WHEREAS, TIC, pursuant to a subadvisory agreement with Franklin
Advisers, Inc. ("Advisers"), has been retained to render investment advisory
services to the Templeton Foreign Smaller Companies Fund (the "Fund"), a
series of the Franklin Xxxxxxxxx International Trust (the "Trust"), 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, Senior Vice President of TIC and portfolio
manager for the Fund, will temporarily be residing in Hong Kong during which
time he will be employed by TAML and TIC wishes to enter into this agreement
with TAML to enable Xx. Xxxxxxx to continue to perform his responsibilities
as portfolio manager of the Fund during his employment with TAML.
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. TIC hereby retains TAML, and TAML 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 Trust's Board of Trustees (the "Board") and to the instructions and
supervision of Advisers and TIC, TAML agrees to provide certain investment
advisory services with respect to securities and investments and cash
equivalents in the Fund. TIC acknowledges that the only services that TAML
will provide under this agreement are the portfolio management services of
Xxxxx Xxxxxxx while he remains employed by TAML. Nothing in this agreement
grants to TIC any right to receive any research undertaken by TAML's Emerging
Markets Group.
(b) Both TAML and TIC may place all purchase and sale orders on
behalf of the Fund. The placement of these orders will take place
exclusively in the State of Florida or in Hong Kong.
(c) Unless otherwise instructed by TIC, Advisors or the Board, and
subject to the provisions of this Agreement and to any guidelines or
limitations specified from time to time by TIC or by the Board, TAML shall
report daily all transactions effected by TAML on behalf of the Fund to TIC
and to other entities as reasonably directed by TIC or the Board.
(d) For the term of this Agreement, TIC 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, TAML 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 Trust's Agreement and Declaration of Trust and to the investment
guidelines most recently established by Advisers and TIC 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, TAML shall comply with
all reasonable instructions of the Fund, Advisers or TIC 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 resolution
has been supplied to TAML.
2. In performing the services described above, TAML 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, TAML 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, TAML 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) TIC shall pay to TAML a monthly fee in U.S. dollars based on a
percentage of the Fund's average daily net assets. The advisory fee under
this Agreement shall be payable on the first business day of each month as
compensation for the services to be rendered and obligations assumed by TAML
during the preceding month and shall be reduced by the amount of any advance
payments made by TIC relating to the previous month. This fee shall be
calculated daily at the following annual rates:
0.1667% of the value of the Fund's net assets up to and including $100
million;
0.1333% of the value of the Fund's net assets over $100 million up to and
including $250 million;
0.10% of the value of the Fund's net assets over $250 million up to and
including $500 million;
0.833% of the value of the Fund's net assets over $500 million.
(b) If the subadvisory fee due under the subadvisory agreement
between TIC and the Advisers ("Subadvisory Agreement") is voluntarily reduced
or waived by TIC, the fee due to TAML pursuant to this Agreement shall be
adjusted so that it is in the same proportion to such fee reduced or waived
by TIC as the fee provided in Paragraph 3(a), above, of this Agreement is to
the fee due to TIC provided for in the Subadvisory Agreement.
(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 TAML are not to be
deemed exclusive. TIC acknowledges that TAML 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"). TIC
agrees that TAML 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, TAML may use information furnished by others to
TIC and TAML in providing services to other such Clients
5. TIC 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, TAML 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, Advisers and TIC will
be responsible for all of their respective expenses and liabilities.
7. TAML shall, unless otherwise expressly provided and authorized,
have no authority to act for or represent TIC or the Fund in any way, or in
any way be deemed an agent for TIC or the Fund.
8. TAML 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 TAML 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 be effective on the date of Xxxxx Xxxxxxx'x
employment by TAML and shall continue in effect until Xxxxx Xxxxxxx ceases to
be employed by TAML, for whatever reason.
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 TIC and TAML, and by TIC or TAML 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 TIC 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 TAML, neither TAML nor any of its directors, officers, employees
or affiliates shall be subject to liability to TIC 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 TIC 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 TAML pursuant to authority delegated
as described in Paragraph 1(a), TAML shall indemnify TIC 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 TIC or TAML 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, TAML 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. TAML 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 TAML's engagement under this Agreement or at
the Fund's direction, TAML 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 TAML and relate directly
and exclusively to the performance by TAML of its obligations under this
Agreement; provided, however, that TAML 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 TAML 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 of TAML'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. TIC will furnish to TAML properly certified or authenticated copies
of the resolutions of the board authorizing the appointment of TAML 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:
to TAML: 0 Xxxxxxx Xxxxxxxxx #00-00
Xxxxxx Xxxxx Xxx
Xxxxxxxxx 000000
Facsimile: 000-00-000-0000
to TIC: Xxxxxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: 0-000-000-0000
17. This Agreement shall be interpreted in accordance with and governed
by the laws of the State of Florida.
18. TAML acknowledges that it has received notice of and accepts the
limitations of the Trust's liability as set forth in its Agreement and
Declaration of Trust. TAML agrees that the Trust's obligations hereunder
shall be limited to the assets of the Fund, and that TAML shall not seek
satisfaction of any such obligation from any shareholders of the Fund nor
from any trustee, officer, employee or agent of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers.
XXXXXXXXX ASSET MANAGEMENT LIMITED
By: __________________
Name: Xxxxxxx X. XxXxxxx
Title: Director
XXXXXXXXX INVESTMENT COUNSEL, LLC.
---------------------------------
By: __________________
Name: Xxxx X. Xxxxx
Title: President
FRANKLIN XXXXXXXXX INTERNATIONAL TRUST
On Behalf of Templeton Foreign Smaller Companies Fund
By _____________________
Name: Xxxxxxx X. Xxxxx
Title: Vice President
