SUBADVISORY AGREEMENT
TEMPLETON INSTITUTIONAL FUNDS, INC.
(on behalf of Franklin ▇▇▇▇▇▇▇▇▇ Non-U.S. Core Equity Series)
THIS SUBADVISORY AGREEMENT made as of the 24th day of February, 2004 by
and between FRANKLIN ▇▇▇▇▇▇▇▇▇ ALTERNATIVE STRATEGIES, INC., a Delaware limited
liability company (hereinafter called "FTAS") and ▇▇▇▇▇▇▇▇▇ INVESTMENT COUNSEL,
LLC, a Delaware limited liability company (hereinafter called "TIC, LLC").
W I T N E S S E T H
WHEREAS, FTAS and TIC, LLC 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, FTAS has been retained to render investment advisory services
to the Franklin ▇▇▇▇▇▇▇▇▇ Non-U.S. Core Equity Series (the "Fund"), a series of
Templeton Institutional Funds, Inc. (the "Company"), 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, FTAS desires to retain TIC, LLC to render investment advisory,
research and related services to the Fund pursuant to the terms and provisions
of this Agreement, and TIC, LLC 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. FTAS hereby retains TIC, LLC and TIC, LLC 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 Company's Board of Directors (the "Board") and to the instructions
and supervision of FTAS, TIC, LLC will provide a continuous investment program
for the Fund with respect to that portion of the Fund's assets designated by
FTAS, 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 FTAS determine, on no less frequently than an annual basis, to grant
the necessary delegated authority to TIC, LLC, and subject to paragraph (b)
below, TIC, LLC will, with respect to the portion of the Fund's assets over
which it has been given responsibility, 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.
(b) In performing these services, TIC, LLC shall adhere to the
Fund's investment objectives, policies and restrictions as contained in its
Prospectus and Statement of Additional Information, and in the Company's
Articles of Incorporation, and to the investment guidelines most recently
established by FTAS 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 FTAS or the Board, and
subject to the provisions of this Agreement and to any guidelines or limitations
specified from time to time by FTAS or by the Board, TIC, LLC shall report daily
all transactions effected by TIC, LLC on behalf of the Fund to FTAS and to other
entities as reasonably directed by FTAS or the Board.
(d) TIC, LLC 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. TIC, LLC 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, TIC, LLC shall
comply with all reasonable instructions of the Fund or FTAS 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 TIC, LLC.
2. In performing the services described above, TIC, LLC 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, TIC, LLC 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, TIC, LLC 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) TIC, LLC shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent FTAS or the Fund in any
way, or in any way be deemed an agent for FTAS or the Fund.
(b) It is understood that the services provided by TIC, LLC
are not to be deemed exclusive. FTAS acknowledges that TIC, LLC 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. FTAS agrees that TIC, LLC 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. TIC, LLC agrees to use its best efforts in performing the services
to be provided by it pursuant to this Agreement.
5. FTAS has furnished or will furnish to TIC, LLC as soon as available
copies properly certified or authenticated of each of the following documents:
(a) the Company's Articles of Incorporation, as filed with the
Secretary of State of the State of Maryland on July 6, 1990, and any other
organizational documents and all amendments thereto or restatements thereof;
(b) resolutions of the Company's Board of Directors
authorizing the appointment of TIC, LLC and approving this Agreement;
(c) the Company's original Notification of Registration on
Form N-8A under the 1940 Act as filed with the SEC and all amendments thereto;
(d) the Company'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
FTAS.
FTAS will furnish TIC, LLC with copies of all amendments of or supplements to
the foregoing documents.
6. TIC, LLC 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 TIC, LLC 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) FTAS shall pay a monthly fee in cash to TIC, LLC of one-half
(1/2) of the investment advisory fee paid to FTAS 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 TIC, LLC 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
FTAS relating to the previous month.
(b) FTAS and TIC, LLC shall share equally in any voluntary
reduction or waiver by FTAS of the management fee due FTAS under the Investment
Advisory Agreement between FTAS 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 TIC, LLC, neither TIC, LLC nor any of its directors, officers, employees
or affiliates shall be subject to liability to FTAS 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 FTAS 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 TIC, LLC pursuant to authority delegated as described in Paragraph
1(a), TIC, LLC shall indemnify and save FTAS and each of its affiliates,
officers, directors and employees (each an "Indemnified Party") harmless from,
against, for and in respect of all losses, damages, costs and expenses incurred
by an Indemnified Party with respect to such liability, together with all legal
and other expenses reasonably incurred by any such Indemnified Party, in
connection with such liability.
(c) No provision of this Agreement shall be construed to
protect any director or officer of FTAS or TIC, LLC, from liability in violation
of Sections 17(h) or (i), respectively, of the ▇▇▇▇ ▇▇▇.
10. During the term of this Agreement, TIC, LLC 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 FTAS 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 Directors of the Company 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 FTAS and TIC,
LLC, and by FTAS or TIC, LLC 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 FTAS
and the Fund.
14. In compliance with the requirements of Rule 31a-3 under the 1940
Act, TIC, LLC 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. TIC, LLC 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
FTAS and TIC, LLC.
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 Florida of the United States of America.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers.
FRANKLIN ▇▇▇▇▇▇▇▇▇ ALTERNATIVE STRATEGIES, INC.
By:/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇▇▇▇ INVESTMENT COUNSEL, LLC
By:/s/▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
Franklin ▇▇▇▇▇▇▇▇▇ Non-U.S. Core Equity Fund hereby acknowledges and agrees to
the provisions of paragraphs 9(a) and 10 of this Agreement.
Templeton Institutional Funds, Inc. on behalf of
Franklin ▇▇▇▇▇▇▇▇▇ Non-U.S. Core Equity Series
By:/s/▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President and Assistant Secretary