INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of the ___th day of ________, 1996, between
XXXXXXXXX VARIABLE PRODUCTS SERIES FUND, a Massachusetts business trust
(hereinafter referred to as the "Trust"), on behalf of Xxxxxxxxx Developing
Markets Fund, a series of the Trust (hereinafter referred to as the "Fund"), and
XXXXXXXXX ASSET MANAGEMENT Ltd. (hereinafter referred to as 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 manage the investment and reinvestment of the Fund's assets consistent with
the provisions of the Declaration of Trust 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 all such steps as may be necessary to
implement those determinations. 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 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 Fund'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 Trust 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 Fund's shares. (4) The Fund
agrees to pay to the Investment Manager a monthly fee in dollars at an
annual rate of 1.25% of
the Fund's average daily net assets, payable at the end of each calendar month.
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 shall become effective on __________, 1996 and shall
continue in effect until _________, 1997. 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 Trust'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 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 on the Investment Manager's part or by reason of
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 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 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.
(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 VARIABLE PRODUCTS SERIES
FUND
By:_______________________________
Xxxx X. Xxx
Vice President
XXXXXXXXX ASSET MANAGEMENT Ltd.
By:_________________________________
