Territories are more-or-less independent political entities. The Kingdom is not the only territory in the world; several foreign territories exist, all of which are accessible by ocean and river travel. New territories appear on the map at pre-set levels of renown or through exploration with nautical maps.
The Kingdom can interact with foreign territories in a variety of ways, be it friendly trade or ruthless conquest. Engaging in careful diplomacy can be a chore, especially considering friendly relations must be constantly maintained, but grants special benefits to those who are successful.
Once a territory has appeared on the map the Kingdom can form an alliance with it. This normally costs 10 Resource Points, with the exception of Effenmont and Gastrobury, for which an alliance costs 5 RP. Oddly, an alliance does not grants any benefits, other than trade, and does not bestow any responsibilities (e.g. military aid). However, an alliance with a territory allows the Hero Merchants to trade with that specific territory, and also, the allied territory's representatives (such as Diplomats and faction leaders) to visit and reside in the Kingdom's Throne Room. And an alliance is a pre-requisite for the annexation.
Annexing an allied territory grants the Kingdom additional special Benefits, such as higher daily money income, cheaper building construction, etc.
Once a territory is an ally of the Kingdom, a quest involving a pressing issue related to the territory becomes available. Completing this quest, through any of the available approaches, annexes the territory. This makes it a legal part of the Kingdom and grants a unique benefit.
Newly annexed territories start out with a rather friendly relationship with the Kingdom. However, this relationship automatically decays over time or when unfavorable edicts are passed. Negative (red) relationships may lead to a rebellion, which removes the territory's benefits until the situation becomes more amicable. Relationships with annexed territories can be improved by passing edicts favorable to them or by sending the Monarch, Knight, or Spy out to patrol the routes to and from the territories. Different territories' routes can be patrolled through a path in either the Forest or Village, or by taking a ship to patrol sea routes. There is one achievement per territory for obtaining the maximum possible relationship with it.
List of Territories
Advorton's people are thrill-seekers by nature, especially if the thrill involves combat. Many of them become mercenaries, hunters, or soldiers to feed their need for adventure and the highest among them is the Mercenary Lord or Lady.
Aarbyville is an uncivilized and crime-riddled territory. The only thing keeping the region from plunging into total anarchy are its various gangs, especially the Rat Kings and the Queens of Heart, who more or less follow the rulings of the Pirate King or Queen.
Crafthole is an industrious territory that thrives on hard work and determination. It's possible that the area has become somewhat polluted from its industry, as Sims make references to the region having a bad smell. Crafthole is governed by a Sim known as the Smithmaster, though it is a part of the Kingdom from the start of the game.
Effenmont is an island, inaccessible to the Kingdom until a map to it is acquired and an exploration trip is done by a hero. Effenmont is home to the largest population of Elves left in the world, who are ruled by the Elf Lord or Lady. The territory is largely isolationist and cares more about the natural environment than wealth or social status.
Gastrobury is an island, inaccessible to the Kingdom until a map to it is acquired and an exploration trip is done by a hero. Gastrobury is known for its fine foods and agriculture, both of which are celebrated in its famous annual festival 'Gastro-Fest.' A notable part of the island's culture is the Gastronomican, an ancient cookbook passed down through the ages. Gastrobury society revolves around the culinary arts so much that the island is governed by its Master Chef.
Snordwich is an extremely laid-back territory who's citizens are required to have daily naps every afternoon. The Snords' affinity for rest makes it hard for them to relate to more hard-working people, such as the citizens of Crafthole. Snordwich is run by the Snoozemeister.
Ticktop is a highly knowledgeable and cerebral territory of scientists and engineers. Ticktop uses golems for most of their menial labor, allowing its citizens to focus on inventing. It's rumored that the top inventors in the region have developed a time machine, a rumor supported by their leader being referred to as the "Timelord" or "Timelady."
Tredony is a wealthy territory that has been a great hub of trade ever since students of its famous institute realized commerce earned more than industry, many generations ago. Tredony is a part of the Kingdom from the start of the game but is ruled with some degree of independence by the Merchant Prince(ss).
Yacothia is a theocratic city-state. As the birthplace of Jacob and the home of the Proxy, Yacothia is the headquarters of the Jacoban Church and pilgrimages to it are common among the faithful. The city is administered by the High Priest or High Priestess and is guarded by Jacob's Sword, a famous order of paladins.