[FORM OF]
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the ____ day of _____________, between
TEMPLETON INSTITUTIONAL FUNDS, INC. (hereinafter referred to as the "Trust"), on
behalf of Foreign Smaller Companies Series (the "Fund"), and Xxxxxxxxx
Investment Counsel, LLC (hereinafter referred to as the "Investment Manager").
In consideration of the mutual agreements herein made, the
Trust on behalf of the Fund and the Investment Manager understand and agree as
follows:
(1) The Investment Manager agrees, during the life of
this Agreement, to manage the investment and reinvestment of the Fund's assets
consistent with the provisions of the Trust Instrument of the Trust and the
investment policies adopted and declared by the Trust's Board of Trustees. In
pursuance of the foregoing, the Investment Manager shall make all determinations
with respect to the investment of the Fund's assets and the purchase and sale of
its investment securities, and shall take such steps as may be necessary to
implement those determinations. Such determinations and services shall include
determining the manner in which any voting rights, rights to consent to
corporate action and any other rights pertaining to the Fund's investment
securities shall be exercised, subject to guidelines adopted by the Board of
Trustees.
(2) The Investment Manager is not required to furnish
any personnel, overhead items or facilities for the Fund, including trading desk
facilities or daily pricing of the Fund's portfolio.
(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 Trust's
brokerage policies 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 security 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 effected, 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 Trust'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 paid 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 Trust'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 that are
provided for the Investment Manager are useful to the
Investment Manager in performing its advisory services under
this 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 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 the Fund's 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 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 Trust'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 the Trust's shares.
(4) The Fund agrees to pay to the Investment Manager a monthly
fee in dollars at an annual rate of 0.75% of the daily net assets of the Fund
during the month preceding each payment. The Investment Manager may waive all or
a portion of its fees provided for hereunder and such waiver shall be treated as
a reduction in purchase price of its services. The Investment Manager shall be
contractually bound hereunder by the terms of any publicly announced waiver of
its fee, or any limitation of the Fund's expenses, as if such waiver or
limitation were fully set forth herein.
Notwithstanding the foregoing, if the total expenses of the
Fund (including the fee to the Investment Manager) in any fiscal year of the
Trust 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 Trust's fiscal year if accrued expenses thereafter fall below the limit.
(5) This Agreement is made this [DATE] and shall
continue in effect until [DATE]. 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 Investment Company Act of 1940
(the "1940 Act")) 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.
(6) 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).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the 1940 Act).
(8) 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 "Templeton" or any name misleadingly implying a continuing relationship
between the Fund and the Investment Manager or any of its affiliates.
(9) 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 Trust 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 Trust 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.
(10) 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 Trust's Board of Trustees, to be
impartial and fair.
(11) This Agreement shall be construed in accordance
with the laws of the State of Delaware, provided that nothing herein shall be
construed as being inconsistent with applicable Federal and state securities
laws and any rules, regulations and orders thereunder.
(12) 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.
(13) Nothing herein shall be construed as constituting the
Investment Manager an agent of the Trust.
(14) 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 duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON INSTITUTIONAL FUNDS, INC
By:_______________________________
INVESTMENT MANAGER
By:_________________________________
