INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of the 21st day of February, 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 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 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 0.70% 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 become effective on the date first written and shall
continue in effect until April 30, 1998. 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:/s/XXXX X. XXX
-------------------------------
Xxxx X. Xxx
Vice President
XXXXXXXXX INVESTMENT COUNSEL, INC.
By:/s/XXXXXXX X XXXXXXX
-----------------------------
Xxxxxxx X. XxXxxxx
Executive Vice President
