INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of the , 1997 between TEMPLETON
INSTITUTIONAL FUNDS, INC. (hereinafter referred to as the "Company") on behalf
of Emerging Fixed Income Markets Series (hereinafter referred to as the "Fund"),
and XXXXXXXXX INVESTMENT COUNSEL, INC., through its TEMPLETON GLOBAL BOND
MANAGERS division (hereinafter referred to as the "Investment Manager").
In consideration of the mutual agreements herein made, the
Company 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 Fund's
Agreement and Articles of Incorporation and the investment policies adopted and
declared by the Fund's Board of Directors. 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.
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
the guidelines adopted by the Board of Directors.
(2) The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Company, 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 herein-
after 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 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 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 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 the Fund's shares.
(4) The Company agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of % of the Fund's average daily net
assets, payable at the end of each calendar month. 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
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) This Agreement shall continue in effect until , 199 and
shall continue in effect until , 199 . 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 Company's Board of Directors 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 Company's Board of Directors 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 Company is approved by vote of a majority of the Company's Board of
Directors 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.
(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 Company's Board of Directors, to be
impartial and fair.
(11) This Agreement shall be construed in accordance with the laws
of the State of Maryland, 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 Company or of the Fund.
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:________________________________
XXXXXXXXX INVESTMENT COUNSEL, INC.
By:_________________________________
