SUB-ADVISORY AGREEMENT
----------------------
FRANKLIN XXXXXXXXX INTERNATIONAL TRUST on behalf of the
XXXXXXXXX PACIFIC GROWTH FUND
THIS SUBADVISORY AGREEMENT made as of October 9, 2001, by and
between FRANKLIN ADVISERS, INC. ("Advisers"), a corporation organized and
existing under the laws of the State of California, and FRANKLIN XXXXXXXXX
INVESTMENTS (ASIA) LIMITED ("FTIL"), a corporation existing under the laws of
Hong Kong.
W I T N E S S E T H
WHEREAS, Advisers is registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act"), and is engaged in the
business of supplying investment advice and investment management services
as an independent contractor; and
WHEREAS, Advisers has been retained to render investment
management services to Templeton Pacific Growth Fund (the "Fund"), a series of
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 (the "1940 Act"); and
WHEREAS, Advisers desires to retain FTIL to render investment
advisory, research and related services to the Fund pursuant to the terms and
provisions of this Agreement, and FTIL 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. Advisers 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 Trust's Board of Trustees (the "Board") and to the instructions
and supervision of Advisers, FTIL 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 Advisers determine, on no less frequently than an annual basis, to
grant the necessary delegated authority to FTIL, and subject to paragraph (b)
below, FTIL 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 Advisers.
(b) In performing these services, FTIL 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 Agreement
and Declaration of Trust, and to the investment guidelines most recently
established by Advisers 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 Advisers or the Board, and
subject to the provisions of this Agreement and to any guidelines or limitations
specified from time to time by Advisers or by the Board, FTIL shall report daily
all transactions effected by FTIL on behalf of the Fund to Advisers and to other
entities as reasonably directed by Advisers or the Board.
(d) FTIL 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. FTIL 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, FTIL shall comply with
all reasonable instructions of the Fund or Advisers 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 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) FTIL shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent Advisers or the Fund in
any way, or in any way be deemed an agent for Advisers or the Fund.
(b) It is understood that the services provided by FTIL
are not to be deemed exclusive. Advisers acknowledges that FTIL 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, which may invest in
the same type of securities as the Fund (collectively, "Clients"). Advisers
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.
4. FTIL agrees to use its best efforts in performing the
services to be provided by it pursuant to this Agreement.
5. Advisers has furnished or will furnish to FTIL as soon as
available copies properly certified or authenticated of each of the following
documents:
(a) the Trust's Agreement and Declaration of Trust, as
filed with the Secretary of State of the State of Delaware on March 22, 1991,
and any other organizational documents and all amendments thereto or
restatements thereof;
(b) resolutions of the Board authorizing the appointment
of FTIL 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 Management Agreement between the Fund
and Advisers. Advisers will furnish FTIL with copies of all amendments of or
supplements to the foregoing documents.
6. 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.
7. Advisers shall pay a monthly fee in cash to FTIL based upon
a percentage of the value of the Fund's net assets, calculated as set forth
below, on the first business day of each month in each year as compensation for
the services 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 date of this Agreement,
and shall be reduced by the amount of any advance payments made by Advisers
relating to the previous month.
(a) For purposes of calculating such fee, the value of the
net assets of the Fund shall be the average daily net assets of the Fund during
each month, determined in the same manner as the Fund uses to compute the value
of its net assets in connection with the determination of the net asset value of
its shares, all as set forth more fully in the Fund's current Prospectus. The
rate of the monthly fee payable to FTIL shall be based upon the following annual
rates:
.50% of the value of its average daily net assets up to and
including $100,000,000;
.40% of the value of its average daily net assets over
$100,000,000 up to and including $250,000,000;
.30% of the value of its average daily net assets over
$250,000,000 up to and including $500,000,000; and
.25% of the value of its average daily net assets over
$500,000,000.
(b) Advisers and FTIL shall share equally in
any voluntary reduction or waiver by Advisers of the management fee due Advisers
under the Management Agreement between Advisers 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 FTIL, neither FTIL nor any of its directors, officers,
employees or affiliates shall be subject to liability to Advisers 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
Advisers 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 and save Advisers 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 Advisers or FTIL from liability in violation
of Sections 17(h) or (i), respectively, of the 0000 Xxx.
10. During the term of this Agreement, FTIL 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 Advisers will be responsible for all of
their respective expenses and liabilities.
11. This Agreement shall become effective on the date that Xxxxx
Xxxxxxx and Xxxxxx Xxxxxx become employed by FTIL and shall continue in effect
until either Xx. Xxxxxxx or Xx. Xxxxxx ceases to be employed by FTIL for
whatever reason or until May 31, 2002. If not terminated sooner, 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 Trust'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
Trust's Board of Trustees as a whole.
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 Advisers
and FTIL, and by Advisers or FTIL 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 Management Agreement between Advisers
and the Fund.
14. 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 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
Advisers and FTIL.
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers.
FRANKLIN XXXXXXXXX INVESTMENTS (ASIA)
LIMITED
By:/s/Xxx X. Xxxxxxx
Director
FRANKLIN ADVISERS, INC.
By:/s/Xxxxxxx X. Xxxxxxx
President
