Exhibit d(x)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of January 1, 2001, between Franklin Xxxxxxxxx
Variable Insurance Products Trust, a Massachusetts business trust (the "Trust"),
on behalf of the Xxxxxxxxx International Smaller Companies Fund (the "Fund"), a
separate series of the Trust, and Xxxxxxxxx Investment Counsel, LLC ("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 shall manage the investment and
reinvestment of the Fund's assets consistent with the provisions of the Trust
Instrument of the Trust and the Fund's 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 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
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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 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 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 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
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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 Franklin Xxxxxxxxx Variable Insurance Products
Trust contracts, or of 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 Fund's policies
as stated above; provided further, that in every allocation made to a broker in
which the broker's sale of Franklin Valuemark contracts or of mutual 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
Franklin Xxxxxxxxx Variable Insurance Products Trust contracts or mutual fund
shares.
(4) The Trust agrees to pay to the Investment Manager a monthly fee
in dollars based on a percentage of the Fund's average daily net assets, payable
at the end of each calendar month. This fee shall be calculated daily at the
following annual rates:
0.85 % of the value of the Fund's net assets up to and including
$200 million;
0.765 % of the value of the Fund's net assets over $200 million
up to and including $1.3 billion;
0.68 % of the value of the Fund's net assets over $1.3 billion.
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.
The 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 Manager shall be
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contractually bond 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 full set forth herein.
(5) This Agreement shall become effective on January 1, 2001, and
shall continue in effect until April 30, 2002. 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.
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(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 of the United States of America, 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 or of the Fund.
(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.
FRANKLIN XXXXXXXXX VARIABLE INSURANCE PRODUCTS TRUST on behalf of
XXXXXXXXX INTERNATIONAL SMALLER COMPANIES FUND
By: /s/ Xxxxxx X. Xxxxxxx
Secretary
XXXXXXXXX INVESTMENT COUNSEL, LLC
By: /s/ Xxxxxx X. Xxxxxxxx
Executive Vice President
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