FORM OF
SUB-ADVISORY AGREEMENT
FRANKLIN XXXXXXXXX INTERNATIONAL TRUST
Templeton Global Long-Short Fund
THIS SUB-ADVISORY AGREEMENT made as of _________________, 2005
by and between XXXXXXXXX GLOBAL ADVISORS LIMITED ("TGAL"), a Delaware limited
liability corporation, and FRANKLIN XXXXXXXXX INVESTMENT MANAGEMENT LIMITED
("FTIML"), a corporation existing under the laws of the United Kingdom.
WITNESSETH
WHEREAS, TGAL and FTIML are each 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, Franklin Advisers, Inc. ("FAI"), pursuant to an
investment advisory agreement ("Investment Advisory Agreement"), has been
retained to render investment advisory services to Templeton Foreign Smaller
Companies Fund (the "Fund"), a series of Franklin Xxxxxxxxx International 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, FAI has entered into a sub-advisory agreement with
TGAL pursuant to which TGAL performs certain investment advisory services for
the Fund; and
WHEREAS, from time to time, members of the Fund's portfolio
management team will be residing in London during which time they will be
employed by FTIML, and TGAL wishes to enter into this Agreement with FTIML to
enable such persons to continue to perform their responsibilities as members of
the Fund's portfolio management team during their employment with FTIML.
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. TGAL hereby retains FTIML and FTIML 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 FAI and TGAL, FTIML agrees to
provide certain investment advisory services with respect to securities
and investments and cash equivalents in the Fund. FAI and TGAL will
continue to provide all research services in respect of the Fund and
FAI have full responsibility for all investment advisory services
provided to the Fund. FAI and TGAL acknowledge that the only services
that FTIML will provide under this Agreement are the portfolio
management services of any team members residing in Geneva, Switzerland
while such persons remain employed by FTIML.
(b) Both FTIML and TGAL may place all purchase
and sale orders on behalf of the Fund. The placement of these orders
will take place exclusively in Fort Lauderdale and Geneva, Switzerland.
(c) Unless otherwise instructed by FAI, TGAL
or the Board, and subject to the provisions of this Agreement and to
any guidelines or limitations specified from time to time by FAI, TGAL
or by the Board, FTIML shall report daily all transactions effected by
FTIML on behalf of the Fund to TGAL and to other entities as reasonably
directed by FAI, TGAL or the Board.
(d) For the term of this Agreement, TGAL 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 residing in
Geneva, Switzerland 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, FTIML 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 Agreement and
Declaration of Trust, and to the investment guidelines most recently
established by FAI and TGAL 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,
FTIML shall comply with all reasonable instructions of the Fund, FAI or
TGAL 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 FTIML.
2. In performing the services described above, FTIML
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, FTIML 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, FTIML 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) TGAL shall pay to FTIML a fee equal to
ninety percent (90%) of the advisory fee paid to TGAL by FAI, 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 FTIML 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 TGAL relating to
the previous month.
(b) TGAL and FTIML shall share equally in any
voluntary reduction or waiver by TGAL of the sub-advisory fee due under
the sub-advisory agreement between TGAL and FAI.
(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
FTIML are not to be deemed exclusive. FAI and TGAL acknowledge that FTIML 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").
FAI and TGAL agree that FTIML 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, FTIML may use information furnished by others
to FAI, TGAL and FTIML in providing services to other such Clients.
5. TGAL 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, FTIML 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, FAI and TGAL will be
responsible for all of their respective expenses and liabilities.
7. FTIML shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent TGAL, FAI or the Fund in
any way, or in any way be deemed an agent for TGAL or the Fund.
8. FTIML 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 FTIML 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 until ___________, 2007. If not
sooner terminated, 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 Fund'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 Fund's Board of Trustees as a whole.
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 TGAL and FTIML, and by FAI, TGAL or FTIML
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 FAI and the Fund
or the sub-advisory agreement between FAI and TGAL.
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 FTIML, neither FTIML nor any of its
directors, officers, employees or affiliates shall be subject to
liability to FAI, TGAL 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 FAI or TGAL 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 FTIML
pursuant to authority delegated as described in Paragraph 1(a), FTIML
shall indemnify FAI and/or TGAL and each of their respective
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 TGAL or FTIML 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, FTIML 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. FTIML 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 FTIML's engagement under this
Agreement or at the Fund's direction, FTIML 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 FTIML and relate directly
and exclusively to the performance by FTIML of its obligations under this
Agreement; provided, however, that FTIML 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 FTIML 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 FTIML'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. TGAL will furnish to FTIML properly certified or
authenticated copies of the resolutions of the Board authorizing the appointment
of FTIML 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 FTIML:
The Adelphi Building
0-00 Xxxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Facsimile: 00-000-00000000
(ii) to TGAL:
Box N-7759
Nassau, Bahamas
Facsimile: 000-000-0000
17. This Agreement shall be interpreted in accordance
with and governed by the laws of the State of California.
18. FTIML 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. FTIML agrees that the Fund's obligations
hereunder shall be limited to the assets of the Fund, and that FTIML 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 INVESTMENT
MANAGEMENT LIMITED
By:
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Director
XXXXXXXXX GLOBAL ADVISORS LIMITED
By:
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Xxxxxxx X. Xxxxxxx
President
ACKNOWLEDGED AND ACCEPTED: FRANKLIN ADVISERS, INC.
By:
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Xxxxxxxxxxx X. Xxxxxxxx
Vice President