INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 1st day of October,
1995, between FRANKLIN VALUEMARK FUNDS, a business trust
organized under the laws of the Commonwealth of
Massachusetts (the "Trust"), on behalf of the Xxxxxxxxx
Developing Markets Equity Fund series (the "Fund"), and
XXXXXXXXX INVESTMENT MANAGEMENT (SINGAPORE) PTE., LTD., a
company organized under the laws of Singapore (the
"Investment Manager").
In consideration of the mutual agreements
herein made, the Trust and the Investment Manager understand
and agree as follows:
(1) The Investment Manager agrees, during the
life of this Agreement, to furnish the Fund with investment
research and advice and continuously to furnish the Fund
with an investment program for the assets of the Fund
consistent with the provisions of the Declaration of Trust
of the Fund and the investment policies adopted and declared
by the Fund's Board of Trustees. It is understood that all
acts of the Investment Manager in performing this Agreement
are performed by it outside the United States.
(2) The Investment Manager agrees, during the life
of this Agreement, to be responsible for:
(a) providing office space, telephone, office
equipment and supplies for the Fund;
(b) paying compensation of the Trust's
officers for services rendered as such;
(c) authorizing expenditures and approving
bills for payment on behalf of the Fund;
(d) supervising preparation of annual and
semiannual reports to Shareholders, notices
of dividends, capital gains distributions and
tax credits, and attending to routine
correspondence and other communications with
individual Shareholders;
(e) daily pricing of the Fund's investment
portfolio and preparing and supervising
publication of daily quotations of the prices
of the Fund's Shares, earnings reports and
other financial data;
(f) monitoring relationships with
organizations serving the Fund, including
custodians, transfer agents and printers;
(g) providing trading desk facilities for the
Fund;
(h) supervising compliance by the Fund with
recordkeeping requirements under the
Investment Company Act of 1940 (the "1940
Act") and the rules and regulations
thereunder, with state regulatory
requirements, maintenance of books and
records for the Fund (other than those
maintained by the custodian and transfer
agent), preparing and filing of tax reports
other than the Fund's income tax returns;
(i) monitoring the qualifications of tax
deferred retirement plans for the Fund; and
(j) providing executive, clerical and
secretarial personnel needed to carry out the
above responsibilities.
(3) The Investment Manager shall be
responsible for selecting members of securities exchanges,
brokers and dealers (such members, brokers and dealers being
hereinafter referred to as "brokers") for the execution of
the Fund's portfolio transactions consistent with the Fund's
brokerage policy and, when applicable, the negotiation of
commissions in connection therewith.
All decisions and placements shall be made in
accordance with the following principles:
(A) Purchase and sale orders will
usually be placed with brokers which are
selected by the Investment Manager as able to
achieve "best execution" of such orders.
"Best execution" shall mean prompt and
reliable execution at the most favorable
securities price, taking into account the
other provisions hereinafter set forth. The
determination of what may constitute best
execution and price in the execution of a
securities transaction by a broker involves a
number of considerations, including, without
limitation, the overall direct net economic
result to the Fund (involving both price paid
or received and any commissions and other
costs paid), the efficiency with which the
transaction is executed, the ability to
effect the transaction at all where a large
block is involved, availability of the broker
to stand ready to execute possibly difficult
transactions in the future, and the financial
strength and stability of the broker. Such
considerations are judgmental and are weighed
by the Investment Manager in determining the
overall reasonableness of brokerage
commissions.
(B) In selecting brokers for portfolio
transactions, the Investment Manager shall
take into account its past experience as to
brokers qualified to achieve "best
execution", including brokers who specialize
in any foreign securities held by the Fund.
(C) The Investment Manager is
authorized to allocate brokerage business to
brokers who have provided brokerage and
research services, as such services are
defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act") for the
Fund and/or other accounts, if any, for which
the Investment Manager exercises investment
discretion (as defined in Section 3(a)(35) of
the 0000 Xxx) and, as to transactions for
which fixed minimum commission rates are not
applicable, to cause the Fund to pay a
commission for effecting a securities
transaction in excess of the amount another
broker would have charged for effecting that
transaction, if the Investment Manager
determines in good faith that such amount of
commission is reasonable in relation to the
value of the brokerage and research services
provided by such broker, viewed in terms of
either that particular transaction or the
Investment Manager's overall responsibilities
with respect to the Fund and the other
accounts, if any, as to which it exercises
investment discretion. In reaching such
determination, the Investment Manager will
not be required to place or attempt to place
a specific dollar value on the research or
execution services of a broker or on the
portion of any commission reflecting either
of said services. In demonstrating that such
determinations were made in good faith, the
Investment Manager shall be prepared to show
that all commissions were allocated and paid
for purposes contemplated by the Fund's
brokerage policy; that the research services
provide lawful and appropriate assistance to
the Investment Manager in the performance of
its investment decision-making
responsibilities, and that the commissions
were within a reasonable range. Whether
commissions were within a reasonable range
shall be based on any available information
as to the level of commission known to be
charged by other brokers on comparable
transactions, but there shall be taken into
account the Fund's policies that (i)
obtaining a low commission is deemed
secondary to obtaining a favorable securities
price, since it is recognized that usually it
is more beneficial to the Fund to obtain a
favorable price than to pay the lowest
commission; and (ii) the quality,
comprehensiveness, and frequency of research
studies which are provided for the Investment
Manager are useful to the Investment Manager
in performing its advisory services under its
Agreement. Research services provided by
brokers to the Investment Manager are
considered to be in addition to, and not in
lieu of, services required to be performed by
the Investment Manager under this Agreement.
Research furnished by brokers through which
the Fund effects securities transactions may
be used by the Investment Manager for any of
its accounts, and not all such research may
be used by the Investment Manager for the
Fund. When execution of portfolio
transactions is allocated to brokers trading
on exchanges with fixed brokerage commission
rates, account may be taken of various
services provided by the broker.
(D) Purchases and sales of portfolio
securities within the United States other
than on a securities exchange shall be
executed with primary market makers acting as
principal, except where, in the judgment of
the Investment Manager, better prices and
execution may be obtained on a commission
basis or from other sources.
(E) Sales of Fund Shares (which shall
be deemed to include also Shares of other
registered investment companies which have
either the same adviser or an investment
adviser affiliated with the Fund's Investment
Manager) by a broker are one factor among
others to be taken into account in deciding
to allocate portfolio transactions (including
agency transactions, principal transactions,
purchases in underwritings or tenders in
response to tender offers) for the account of
the Fund to that broker; provided that the
broker shall furnish "best execution," as
defined in subparagraph A above, and that
such allocation shall be within the scope of
the Fund's policies as stated above; provided
further, that in every allocation made to a
broker in which the sale of Fund Shares is
taken into account, there shall be no
increase in the amount of the commissions or
other compensation paid to such broker beyond
a reasonable commission or other compensation
determined, as set forth in subparagraph C
above, on the basis of best execution alone
or best execution plus research services,
without taking account of or placing any
value upon such sale of Fund's Shares.
(4) The Fund agrees to pay to the Investment
Manager as compensation for such services a monthly fee
equal on an annual basis to 1.25% of the average daily net
assets of the Fund during the month preceding each payment.
Notwithstanding the foregoing, if the total
expenses of the Fund (including the fee to the Investment
Manager) in any fiscal year of the Fund exceed any expense
limitation imposed by applicable State law, the Investment
Manager shall reimburse the Fund for such excess in the
manner and to the extent required by applicable State law.
The term "total expenses," as used in this paragraph, does
not include interest, taxes, litigation expenses,
distribution expenses, brokerage commissions or other costs
of acquiring or disposing of any of the Fund's portfolio
securities or any costs or expenses incurred or arising
other than in the ordinary and necessary course of the
Fund's business. When the accrued amount of such expenses
exceeds this limit, the monthly payment of the Investment
Manager's fee will be reduced by the amount of such excess,
subject to adjustment month by month during the balance of
the Fund's fiscal year if accrued expenses thereafter fall
below the limit.
5. The provisions set forth in this paragraph 5
(hereinafter referred to as the "Plan") have been adopted
pursuant to Rule 12b-1 under the Act by the Trust, having
been approved by a majority of the Trust's Board of
Trustees, including a majority of the Trustees who are not
interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plan
(the "non-interested Trustees"), cast in person at a meeting
called for the purpose of voting on such Plan. The Board of
Trustees concluded that the rate of compensation to be paid
to the Manager by the Fund was fair and not excessive, but
that due solely to the uncertainty that may exist from time
to time with respect to whether payments made by the Fund to
the Manager or to other firms may nevertheless be deemed to
constitute distribution expenses, it was determined that
adoption of the Plan would be prudent and in the best
interests of the Fund and its shareholders or policyholders
having an interest in the Fund. The Trustees' approval
included a determination that in the exercise of their
reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders or policyholders
investing in the Fund.
B. No additional payments are to be made by
the Fund as a result of the Plan other than the
payments the Fund are otherwise obligated to make
(i) to the Manager pursuant to paragraph 4 of this
Agreement, (ii) to their Transfer and Dividend
Paying Agents or Custodian, pursuant to their
respective Agreements as in effect at any time, and
(iii) in payment of any expenses by the Fund in the
ordinary course of their respective businesses that
may be deemed primarily intended to result in the
sale of shares issued by such Fund. However, to the
extent any of such other payments by the Fund, to or
by the Manager, or to the Fund' Agents, are
nevertheless deemed to be payments for the financing
of any activity primarily intended to result in the
sale of shares issued by the Fund within the context
of Rule 12b-1 under the Act, then such payments
shall be deemed to have been made pursuant to the
Plan as set forth herein. The costs and activities,
the payment of which are intended to be within the
scope of the Plan, shall include, but not
necessarily be limited to, the following:
(a) the costs of the preparation, printing
and mailing of all required reports and notices
to shareholders or policyholders investing in
the Fund;
(b) the costs of the preparation, printing
and mailing of all prospectuses and
statements of additional information;
(c) the costs of preparation, printing and
mailing of any proxy statements and proxies;
(d) all legal and accounting fees relating to
the preparation of any such reports,
prospectuses, proxies and proxy statements;
(e) all fees and expenses relating to the
qualification of the Fund and/or its shares
under the securities or "Blue Sky" laws of
any jurisdiction;
(f) all fees under the Securities Act of 1933
and the Act, including fees in connection
with any application for exemption relating
to or directed toward the sale of the Fund's
shares;
(g) all fees and assessments of the
Investment Company Institute or any successor
organization, irrespective of whether some of
its activities are designed to provide sales
assistance;
(h) all costs of the preparation and mailing
of confirmations of shares sold or redeemed,
and reports of share balances;
(i) all costs of responding to telephone
or mail inquiries of investors or
prospective investors; and
(j) payments to dealers, financial
institutions, advisers, or other firms, any
one of whom may receive monies in respect of
the Fund's shares held in accounts for
policyholders for whom such firm is the
dealer of record or holder of record, or with
whom such firm has a servicing relationship.
Servicing may include, among other things:
(i) answering client inquiries regarding the
Fund; (ii) assisting clients in changing
account designations and addresses; (iii)
performing sub-accounting; (iv) establishing
and maintaining shareholder or policyholder
accounts and. records; (v) processing
purchase and redemption transactions; (vi)
providing periodic statements showing a
client's account balance and integrating such
statements with those of other transactions
and balances in the client's other accounts
serviced by such firm; (vii) arranging for
bank wires; and (viii) such other services as
the Fund may request, to the extent such are
permitted by applicable statute, rule or
regulation.
C. The terms and provisions of the Plan are as follows:
(a) The Manager shall report to the
Board of Trustees of the Trust at
least quarterly on payments for any of
the activities in subparagraph B of
this paragraph 8, and shall furnish
the Board of Trustees of the Trust
with such other information as the
Board may reasonably request in
connection with such payments in order
to enable the Board to make an
informed determination of whether the
Plan should be continued.
(b) The Plan shall continue in effect
for a period of more than one year
from the date written below only so
long as such continuance is
specifically approved at least
annually (from the date below) by the
Trust's Board of Trustees, including
the non-interested Trustees, cast in
person at a meeting called for the
purpose of voting on the Plan.
(c) The Plan may be terminated with
respect to the Fund at any time by
vote of a majority of non-interested
Trustees or by vote of a majority of
the Fund's outstanding voting
securities on not more than sixty (60)
days' written notice to any other
party to the Plan, and the Plan shall
terminate automatically in the event
of any act that constitutes an
assignment of this Management
Agreement.
(d) The Plan may not be amended to
increase materially the amount deemed
to be spent for distribution without
approval by a majority of the Fund's
outstanding shares (as defined by the
Act and all material amendments to the
Plan shall be approved by the
non-interested Trustees cast in person
at a meeting called for the purpose of
voting on such amendment.
(e) So long as the Plan is in effect,
the selection and nomination of the
Trust's non-interested Trustees shall
be committed to the discretion of such
non-interested Trustees.
(f) Any termination of the Plan shall
not terminate this Management
Agreement or affect the validity of
any of the provisions of this
Agreement other than this paragraph 8.
(6) This Agreement shall become effective on
the date written above and shall continue in effect for one
(1) year thereafter. 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 Trust'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 Trust's Board of Trustees
as a whole.
(7) Notwithstanding the foregoing, this
Agreement may be terminated by either party at any time,
without the payment of any penalty, on sixty (60) days'
written notice to the other party, provided that termination
by the Trust is approved by vote of a majority of the
Trust's Board of Trustees in office at the time or by vote
of a majority of the outstanding voting securities of the
Fund (as defined by the 1940 Act).
(8) This Agreement will terminate
automatically and immediately in the event of its assignment
(as defined in the 1940 Act).
(9) In the event this Agreement is terminated
and the Investment Manager no longer acts as Investment
Manager to the Fund, the Investment Manager reserves the
right to withdraw from the Fund the use of the name
"Xxxxxxxxx" or any name misleadingly implying a continuing
relationship between the Fund and the Investment Manager or
any of its affiliates.
(10) Except as may otherwise be provided by
the 1940 Act, neither the Investment Manager nor its
officers, directors, employees or agents shall be subject to
any liability for any error of judgment, mistake of law, or
any loss arising out of any investment or other act or
omission in the performance by the Investment Manager of its
duties under the Agreement or for any loss or damage
resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the
Fund's assets, or from acts or omissions of custodians, or
securities depositories, or from any war or political act of
any foreign government to which such assets might be
exposed, or for failure, on the part of the custodian or
otherwise, timely to collect payments, except for any
liability, loss or damage resulting from willful
misfeasance, bad faith or gross negligence on the Investment
Manager's part or by reason of reckless disregard of the
Investment Manager's duties under this Agreement. It is
hereby understood and acknowledged by the Fund that the
value of the investments made for the Fund may increase as
well as decrease and are not guaranteed by the Investment
Manager. It is further understood and acknowledged by the
Fund that investment decisions made on behalf of the Fund by
the Investment Manager are subject to a variety of factors
which may affect the values and income generated by the
Fund's portfolio securities, including general economic
conditions, market factors and currency exchange rates, and
that investment decisions made by the Investment Manager
will not always be profitable or prove to have been correct.
(11) It is understood that the services of the
Investment Manager are not deemed to be exclusive, and
nothing in this Agreement shall prevent the Investment
Manager, or any affiliate thereof, from providing similar
services to other investment companies and other clients,
including clients which may invest in the same types of
securities as the Fund, or, in providing such services, from
using information furnished by others. When the Investment
Manager determines to buy or sell the same security for the
Fund that the Investment Manager or one or more of its
affiliates has selected for clients of the Investment
Manager or its affiliates, the orders for all such security
transactions shall be placed for execution by methods
determined by the Investment Manager, with approval by the
Fund's Board of Trustees, to be impartial and fair.
(12) This Agreement shall be construed in
accordance with the laws of the Commonwealth of
Massachusetts, provided that nothing herein shall be
construed as being inconsistent with applicable Federal and
state securities laws and any rules, regulations and orders
thereunder.
(13) 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 and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(14)Nothing herein shall be construed as
constituting the Investment Manager an agent of the Fund.
(15) It is understood and expressly
stipulated that neither the holders of Shares of the Fund
nor any Trustee, officer, agent or employee of the Trust
shall be personally liable hereunder, nor shall any resort
be had to other private property for the satisfaction of any
claim or obligation hereunder, but the Trust only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by their duly
authorized officers.
FRANKLIN VALUEMARK FUNDS
By: /s/ Xxxxxxx X. Xxxxxx
Title: Vice President and Secretary
XXXXXXXXX INVESTMENT
MANAGEMENT (SINGAPORE) PTE., LTD.
By: /s/ Illegible
Title: Director
TERMINATION OF AGREEMENT
Franklin Valuemark Funds and Xxxxxxxxx Investment Management
(Hong Kong) Limited hereby agree that the Investment
Management Agreement between them dated as of March 15,
1994, regarding the Xxxxxxxxx Developing Markets Equity
Fund, is terminated effective as of the date of the
Investment Management Agreement above.
FRANKLIN VALUEMARK FUNDS
By: /s/ Xxxxxxx X. Xxxxxx
Title: Vice President and Secretary
XXXXXXXXX INVESTMENT
MANAGEMENT (HONG KONG) LTD.
By: /s/ Illegible
Title: Director
