SUBADVISORY AGREEMENT
FRANKLIN CUSTODIAN FUNDS
(on behalf of the FRANKLIN GROWTH FUND)
THIS SUBADVISORY AGREEMENT made as of the November 1,
2008 by and between FRANKLIN ADVISERS, INC., a corporation
organized and existing under the laws of the State of
California (hereinafter called "FAV"), and FRANKLIN
INVESTMENT ADVISORY SERVICES, LLC, a Delaware limited
liability company (hereinafter called "FIAS, LLC").
W I T N E S S E T H
WHEREAS, FAV and FIAS, LLC 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 advice, and investment
management services, as an independent contractor; and
WHEREAS, FAV has been retained to render investment
advisory services to FRANKLIN GROWTH FUND (the "Fund"), a
series of FRANKLIN CUSTODIAN FUNDS (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, as amended (the "1940
Act"); and
WHEREAS, FAV desires to retain FIAS, LLC to render
investment advisory, research and related services to the
Fund pursuant to the terms and provisions of this Agreement,
and FIAS, 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. FAV hereby retains FIAS, LLC and FIAS, 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 Trust's Board of Trustees (the
"Board") and to the instructions and supervision of FAV,
FIAS, LLC 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 FAV determine, on no less frequently than an
annual basis, to grant the necessary delegated authority to
FIAS, LLC, and subject to paragraph (b) below, FIAS, LLC
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 FAV.
(b) In performing these services, FIAS, 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 Trust's Declaration of
Trust, and to the investment guidelines most recently
established by FAV 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 FAV or the
Board, and subject to the provisions of this Agreement and
to any guidelines or limitations specified from time to time
by FAV or by the Board, FIAS, LLC shall report daily all
transactions effected by FIAS, LLC on behalf of the Fund to
FAV and to other entities as reasonably directed by FAV or
the Board.
(d) FIAS, 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. FIAS, 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, FIAS,
LLC shall comply with all reasonable instructions of the
Fund or FAV 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 FIAS, LLC.
2. In performing the services described above, FIAS,
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, FIAS, 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,
FIAS, 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) FIAS, LLC shall, unless otherwise expressly
provided and authorized, have no authority to act for or
represent FAV or the Fund in any way, or in any way be
deemed an agent for FAV or the Fund.
(b) It is understood that the services provided
by FIAS, LLC are not to be deemed exclusive. FAV
acknowledges that FIAS, 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. FAV agrees that
FIAS, 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. FIAS, LLC agrees to use its best efforts in
performing the services to be provided by it pursuant to
this Agreement.
5. FAV has furnished or will furnish to FIAS, LLC 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 state of Delaware on
October 18, 2006, 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 FIAS, LLC 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 Management Agreement between
the Fund and FAV.
FAV will furnish FIAS, LLC with copies of all amendments of
or supplements to the foregoing documents.
6. FIAS, 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 FIAS,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) FAV shall pay a monthly fee in cash to FIAS,
LLC of 70% of the fees FAV receives for providing investment
management services to 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 FIAS, 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 FAV relating to
the previous month.
(b) FAV and FIAS, LLC shall share equally in any
voluntary reduction or waiver by FAV of the management fee
due FAV under the Investment Management Agreement between
FAV 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 FIAS, LLC,
neither FIAS, LLC nor any of its directors, officers,
employees or affiliates shall be subject to liability to FAV
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 FAV 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 FIAS, LLC pursuant to authority delegated as
described in Paragraph 1(a), FIAS, LLC shall indemnify and
save FAV 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 FAV or FIAS,
LLC, from liability in violation of Sections 17(h) or (i),
respectively, of the 1940 Act.
10. During the term of this Agreement, FIAS, 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 FAV 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 FAV and FIAS, LLC,
and by FAV or FIAS, 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 management Agreement between FAV
and the Fund.
14. In compliance with the requirements of Rule 31a-3
under the 1940 Act, FIAS, 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. FIAS, 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 FAV and FIAS, 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 California of
the United States of America.
19. FIAS, LLC 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. FIAS,
LLC agrees that the Trust's obligations hereunder shall be
limited to the assets of the Fund, and that FIAS, LLC 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/ EDWARD B. JAMIESON
Edward B. Jamieson
Title: President & Chief Investment Officer
FRANKLIN INVESTMENT ADVISORY SERVICES, LLC
By: /s/ JOHN M. LUSK
John M. Lusk
Title: President
FRANKLIN GROWTH FUND hereby acknowledges and agrees to the
provisions of paragraphs 9(a) and 10 of this Agreement.
FRANKLIN CUSTODIAN FUNDS on behalf of
FRANKLIN GROWTH FUND
By: /s/ KAREN L. SKIDMORE
Karen L. Skidmore
Title: Vice President & Secretary