SUBADVISORY AGREEMENT
FRANKLIN TAX-ADVANTAGED INTERNATIONAL BOND FUND
THIS SUBADVISORY AGREEMENT made as of the 28th day of June, 1994, 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 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, FAI has been retained to render investment management services to
Franklin Tax-Advantaged International Bond 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 (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 Fund's Managing General Partners 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 Managing General
Partners 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 Fund's Agreement of Limited
Partnership, 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 Managing General
Partners, and subject to the provisions of this Agreement and to any guidelines
or limitations specified from time to time by FAI or by the Managing General
Partners, 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
Managing General Partners.
(d) TICI shall provide the Managing General Partners at least
quarterly, in advance of the regular meetings of the Managing General Partners,
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
Managing General Partners. TICI shall also make an investment officer available
to attend such meetings of the Managing General Partners as the Managing General
Partners 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 Managing General Partners or by any other person authorized by a
resolution of the Managing General Partners, 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
Managing General Partners, 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 Fund's Agreement of Limited Partnership, as filed with the
Secretary of State of the State of California, and any other organizational
documents and all amendments thereto or restatements thereof;
(b) resolutions of the Fund's Managing General Partners
authorizing the appointment of TICI and approving this Agreement;
(c) the Fund's original Notification of Registration on Form N-8A
under the 1940 Act as filed with the SEC and all amendments thereto;
(d) the Fund'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 Management 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. FAI shall pay a monthly fee in cash to TICI based upon a percentage of
the value of the Fund's net assets, calculated as set forth below as
compensation for the services rendered and obligations assumed by TICI during
the preceding month.
(a) For purposes of calculating such fee, the value of the net
assets of the Fund shall be 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 and Statement of Additional Information. The rate of the monthly fee
payable by FAI shall be as follows, based on the value of the Fund's net assets
as of the close of business on the last business day of each month:
1/2 of 5/96 of 1% of the value of the Fund's net assets up to and
including $100,000,000;
1/2 of 1/24 of 1% of the value of the Fund's net assets over
$100,000,000 up to and including $250,000,000; and
1/2 of 9/240 of 1% of the value of the Fund's net assets in
excess of $250,000,000.
(b) FAI and TICI shall share equally in any voluntary reduction or
waiver by FAI of the management fee due FAI under the Management 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
Managing General Partners 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 June 28, 1994, 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 Managing
General Partners 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 Managing
General Partners of the Fund 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 Managing General Partners 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 Management 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 Fund's liability as set forth in its Agreement of Limited
Partnership. TICI agrees that the Limited Partnership'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 managing general partner, officer, employee or agent of the Fund.
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. XXXXXXX
Title: President
XXXXXXXXX INVESTMENT COUNSEL, INC.
By /S/XXXXXX XXXXXXXX
Title: Executive Vice President
Franklin Tax-Advantaged International Bond Fund hereby acknowledges and agrees
to the provisions of paragraphs 9(a) and 10 of this Agreement.
FRANKLIN TAX-ADVANTAGED INTERNATIONAL BOND FUND
By /S/XXXXXXX X. XXXXXXX
Title: Chairman of the Board
