INTERIM SUB-ADVISORY AGREEMENT
XXXXXXXXX GLOBAL SMALLER COMPANIES FUND
THIS SUB-ADVISORY AGREEMENT made as of 18th day of September, 2007, by and
between FRANKLIN XXXXXXXXX INVESTMENTS CORP. ("FTIC"), an Ontario, Canada
corporation, and XXXXXXXXX INVESTMENT COUNSEL, LLC ("TICL"), a Delaware limited
liability company
WITNESSETH
WHEREAS, FTIC 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, FTIC, 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 employed by TICL, and FTIC wishes to enter into this Agreement with TICL
to enable such persons to perform their responsibilities as members of the
Fund's portfolio management team.
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. FTIC hereby retains TICL and TICL 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 FTIC, TICL agrees to provide certain investment advisory
services with respect to securities and investments and cash equivalents in
the Fund. FTIC 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.
(b) Both TICL and FTIC may place all purchase and sale orders on
behalf of the Fund.
(c) Unless otherwise instructed by FTIC or the Board, and subject to
the provisions of this Agreement and to any guidelines or limitations
specified from time to time by FTIC or by the Board, TICL shall report
daily all transactions effected by TICL on behalf of the Fund to FTIC and
to other entities as reasonably directed by FTIC or the Board.
(d) For the term of this Agreement, FTIC 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 shall be available to attend such meetings of the
Board as the Board may reasonably request.
(e) In performing its services under this Agreement, TICL 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 FTIC 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, TICL shall comply with all
reasonable instructions of the Fund or FTIC 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 TICL.
2. In performing the services described above, TICL 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, TICL 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, TICL 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) FTIC shall pay to TICL a fee equal to 45% of the advisory fee paid
to FTIC 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 TICL 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 FTIC relating to the previous month.
(b) FTIC and TICL shall share pro rata in any voluntary reduction or
waiver by FTIC of the management fee due under the Investment Advisory
Agreement between FTIC 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 TICL are not to be deemed
exclusive. FTIC acknowledges that TICL 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"). FTIC agrees that TICL 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, TICL may
use information furnished by others to FTIC and TICL in providing services to
other such Clients.
5. FTIC 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, TICL 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 FTIC will be responsible for all of their
respective expenses and liabilities.
7. TICL shall, unless otherwise expressly provided and authorized, have no
authority to act for or represent FTIC or the Fund in any way, or in any way be
deemed an agent for FTIC or the Fund.
8. TICL 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 TICL
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 for 150 days following that date. If not sooner
terminated, this Agreement shall continue in effect until the shareholders of
the Fund approve a Subadvisory Agreement between FTIC and TICL at a meeting
called for the purpose of voting on such Subadvisory Agreement.
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 FTIC and TICL, and by FTIC or TICL 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 FTIC 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
TICL, neither TICL nor any of its directors, officers, employees or affiliates
shall be subject to liability to FTIC 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 FTIC 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 TICL pursuant to authority delegated as described in
Paragraph 1(a), TICL shall indemnify FTIC 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 FTIC or TICL 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,
TICL 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. TICL 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 TICL's engagement under this Agreement or at the
Fund's direction, TICL 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 TICL and relate directly and
exclusively to the performance by TICL of its obligations under this Agreement;
provided, however, that TICL 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 TICL 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 TICL'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. FTIC will furnish to TICL properly certified or authenticated copies of
the resolutions of the Board authorizing the appointment of TICL 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 TICL:
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: 000-000-0000
(ii) to FTIC:
000 Xxxx Xx Xxxx ,00xx Xxxxx
Xxxxxxx, Xxxxxxx, Xxxxxx
Facsimile: 000-000-0000
17. This Agreement shall be interpreted in accordance with and governed by
the laws of the State of Florida.
18. TICL 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. TICL agrees that the Fund's obligations hereunder shall be
limited to the assets of the Fund, and that TICL 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 INVESTMENTS CORP.
By: /s/XXXXXX X. XXXX
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/s/XXXX XXXXXXXXXXXXX
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XXXXXXXXX INVESTMENT COUNSEL, LLC
By:/s/XXXX X. XXXXX
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