SUBADVISORY AGREEMENT
FRANKLIN INVESTORS SECURITIES TRUST
(on behalf of the Xxxxxxxx Xxxx Fund)
THIS SUBADVISORY AGREEMENT made as of the July 16, 1998 by and between
FRANKLIN ADVISERS, INC., a corporation organized and existing under the laws
of the State of California (hereinafter called "FAI"), and XXXXXXXXX
INVESTMENT COUNSEL, INC., a Florida corporation (hereinafter called "TICI").
W I T N E S S E T H
WHEREAS, FAI and TICI are each registered as an investment adviser
under the Investment Advisers Act of 1940 (the "Advisers Act"), and engaged
in the business of supplying investment advice, and investment management
services, as an independent contractor; and
WHEREAS, FAI has been retained to render investment advisory services
to Xxxxxxxx Xxxx Fund (the "Fund"), a series of Franklin Investors Securities
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 (the "1940 Act"); and
WHEREAS, FAI desires to retain TICI to render investment advisory,
research and related services to the Fund pursuant to the terms and
provisions of this Agreement, and TICI is interested in furnishing said
services.
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. FAI hereby retains TICI and TICI 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 FAI, TICI will provide a continuous investment program for
the Fund, including allocation of the Fund's assets among the various
securities markets of the world and, investment research and advice with
respect to securities and investments and cash equivalents in the Fund. So
long as the Board and FAI determine, on no less frequently than an annual
basis, to grant the necessary delegated authority to TICI, and subject to
paragraph (b) below, TICI will determine what securities and other
investments will be purchased, retained or sold by the Fund, and will place
all purchase and sale orders on behalf of the Fund except that orders
regarding U.S. domiciled securities and money market instruments may also be
placed on behalf of the Fund by FAI.
(b) In performing these services, TICI shall adhere to the
Fund's investment objectives, policies and restrictions as contained in its
Prospectus and Statement of Additional Information, and in the Trust's
Declaration of Trust, and to the investment guidelines most recently
established by FAI 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.
(c) Unless otherwise instructed by FAI or the Board, and
subject to the provisions of this Agreement and to any guidelines or
limitations specified from time to time by FAI or by the Board, TICI shall
report daily all transactions effected by TICI on behalf of the Fund to FAI
and to other entities as reasonably directed by FAI or the Board.
(d) TICI 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. TICI shall also make an
investment officer available to attend such meetings of the Board as the
Board may reasonably request.
(e) In carrying out its duties hereunder, TICI shall comply
with all reasonable instructions of the Fund or FAI 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 TICI.
2. In performing the services described above, TICI 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, TICI 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, TICI 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) TICI shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent FAI or the Fund in any
way, or in any way be deemed an agent for FAI or the Fund.
(b) It is understood that the services provided by TICI are not
to be deemed exclusive. FAI acknowledges that TICI may have investment
responsibilities, or render investment advice to, or perform other investment
advisory services, for individuals or entities, including other investment
companies registered pursuant to the 1940 Act, ("Clients") which may invest
in the same type of securities as the Fund. FAI agrees that TICI 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.
4. TICI agrees to use its best efforts in performing the services to
be provided by it pursuant to this Agreement.
5. FAI has furnished or will furnish to TICI as soon as available
copies properly certified or authenticated of each of the following documents:
(a) the Trust's Declaration of Trust, as filed with the
Secretary of State of the Commonwealth of Massachusetts on December 16, 1986,
and any other organizational documents and all amendments thereto or
restatements thereof;
(b) resolutions of the Trust's Board of Trustees authorizing
the appointment of TICI and approving this Agreement;
(c) the Trust's original Notification of Registration on Form
N-8A under the 1940 Act as filed with the SEC and all amendments thereto;
(d) the Trust's current Registration Statement on Form N-1A
under the Securities Act of 1933, as amended and under the 1940 Act as filed
with the SEC, and all amendments thereto, as it relates to the Fund;
(e) the Fund's most recent Prospectus and Statement of
Additional Information; and
(f) the Investment Advisory Agreement between the Fund and FAI.
FAI will furnish TICI with copies of all amendments of or supplements to the
foregoing documents.
6. TICI 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 TICI 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.
7. (a) FAI shall pay a monthly fee in cash to TICI of 25% of the
investment advisory fee paid to FAI by the Fund, which fee shall be payable
on the first business day of each month in each year as compensation for the
services rendered and obligations assumed by TICI 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 date of this
Agreement, and shall be reduced by the amount of any advance payments made by
FAI relating to the previous month.
(b) FAI and TICI shall share equally in any voluntary reduction
or waiver by FAI of the management fee due FAI under the Investment Advisory
Agreement between FAI 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.
8. Nothing herein contained shall be deemed to relieve or deprive
the Board of its responsibility for and control of the conduct of the affairs
of the Fund.
9. (a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations or duties hereunder on
the part of TICI, neither TICI nor any of its directors, officers, employees
or affiliates shall be subject to liability to FAI or the Fund or to any
shareholder of the Fund for any error of judgment 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 9(a), to the extent that FAI 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 TICI pursuant to authority delegated
as described in Paragraph 1(a), TICI shall indemnify and save FAI 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 FAI or TICI, from liability in violation
of Sections 17(h) or (i), respectively, of the 0000 Xxx.
10. During the term of this Agreement, TICI will pay all expenses
incurred by it in connection with its activities under this Agreement other
than the cost of securities (including brokerage commissions, if any)
purchased for the Fund. The Fund and FAI will be responsible for all of
their respective expenses and liabilities.
11. This Agreement shall be effective as of the date given above, and
shall continue in effect for two years. It is renewable annually thereafter
for successive periods not to exceed one year each (i) by a vote of the Board
or by the vote of a majority of the outstanding voting securities of the
Fund, and (ii) by the vote of a majority of the Trustees of the Trust who are
not parties to this Agreement or interested persons thereof, cast in person
at a meeting called for the purpose of voting on such approval.
12. This Agreement may be terminated at any time, without payment of
any penalty, by the Board or by vote of a majority of the outstanding voting
securities of the Fund, upon sixty (60) days' written notice to FAI and TICI,
and by FAI or TICI upon sixty (60) days' written notice to the other party.
13. 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
FAI and the Fund.
14. In compliance with the requirements of Rule 31a-3 under the 1940
Act, TICI 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. TICI further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
15. This Agreement may not be materially amended, transferred,
assigned, sold or in any manner hypothecated or pledged without the
affirmative vote or written consent of the holders of a majority of the
outstanding voting securities of the Fund and may not be amended without the
written consent of FAI and TICI.
16. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule, or otherwise, the remainder of this
Agreement shall not be affected thereby.
17. The terms "majority of the outstanding voting securities" of the
Fund and "interested persons" shall have the meanings as set forth in the
1940 Act.
18. This Agreement shall be interpreted in accordance with and
governed by the laws of the State of California of the United States of
America.
19. TICI 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. TICI agrees that the Trust's obligations hereunder
shall be limited to the assets of the Fund, and that TICI 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 and attested by their duly authorized officers.
FRANKLIN ADVISERS, INC.
By: /s/ Xxxxxx X. Xxxxx
------------------------
Xxxxxx X. Xxxxx
Executive Vice President
XXXXXXXXX INVESTMENT COUNSEL, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------
Xxxxxxx X. Xxxxxx
Vice President
Xxxxxxxx Xxxx Fund hereby acknowledges and agrees to the provisions of
paragraphs 9(a) and 10 of this Agreement.
FRANKLIN INVESTORS SECURITIES TRUST on behalf of
XXXXXXXX XXXX FUND
By: /s/ Xxxxxxx X. Xxxxxx
------------------------
Xxxxxxx X. Xxxxxx
Vice President & Secretary
