Exhibit 99.DXX
SUB-ADVISORY AGREEMENT
FRANKLIN XXXXXXXXX VARIABLE INSURANCE PRODUCTS TRUST
Xxxxxxxxx Foreign Securities Fund
THIS SUB-ADVISORY AGREEMENT made as of November 16, 2005 by and
between XXXXXXXXX INVESTMENT COUNSEL, LLC ("TICL"), a Delaware limited liability
corporation, and the Geneva, Switzerland branch office of FRANKLIN XXXXXXXXX
INVESTMENT MANAGEMENT LIMITED ("FTIML"), a corporation existing under the laws
of the United Kingdom.
WITNESSETH
WHEREAS, TICL and FTIML are each registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
engaged in the business of supplying investment management services, as an
independent contractor;
WHEREAS, TICL, pursuant to an investment advisory agreement
("Investment Advisory Agreement"), has been retained to render investment
advisory services to Templeton Foreign Securities Fund (the "Fund"), a series of
Franklin Xxxxxxxxx Variable Insurance Products Trust, an investment management
company registered with the U.S. Securities and Exchange Commission (the "SEC")
pursuant to the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, from time to time, a member of the Fund's portfolio
management team will be residing in Geneva, Switzerland during which time he
will be employed by FTIML, and TICL wishes to enter into this Agreement with
FTIML to enable such person to continue to perform his responsibilities as a
member of the Fund's portfolio management team during his employment with FTIML.
NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto, intending to be legally
bound hereby, mutually agree as follows:
1. TICL hereby retains FTIML and FTIML hereby accepts such engagement,
to furnish certain investment advisory services with respect to the assets of
the Fund, as more fully set forth herein.
(a) Subject to the overall policies, control, direction and
review of the Fund's Board of Trustees (the "Board") and to the instructions and
supervision of TICL, FTIML agrees to provide certain investment advisory
services with respect to securities and investments and cash equivalents in the
Fund. TICL will continue to provide all research services in respect of the Fund
and have full responsibility for all investment advisory services provided to
the Fund. TICL acknowledge that the only services that FTIML will provide under
this Agreement are the portfolio management services of the team member residing
in Geneva, Switzerland while such person remains employed by FTIML.
1
(b) Both FTIML and TICL may place all purchase and sale orders on
behalf of the Fund. The placement of these orders will take place exclusively in
Fort Lauderdale and Geneva, Switzerland.
(c) Unless otherwise instructed by TICL or the Board, and subject
to the provisions of this Agreement and to any guidelines or limitations
specified from time to time by TICL or by the Board, FTIML shall report daily
all transactions effected by FTIML on behalf of the Fund to TICL and to other
entities as reasonably directed by TICL or the Board.
(d) For the term of this Agreement, TICL shall provide the Board
at least quarterly, in advance of the regular meetings of the Board, a report of
its activities hereunder on behalf of the Fund and its proposed strategy for the
next quarter, all in such form and detail as requested by the Board. The team
member residing in Geneva, Switzerland shall also be available to attend such
meetings of the Board as the Board may reasonably request.
(e) In performing its services under this Agreement, FTIML shall
adhere to the Fund's investment objective, policies and restrictions as
contained in the Fund's Prospectus and Statement of Additional Information, and
in the Fund's Agreement and Declaration of Trust, and to the investment
guidelines most recently established by TICL and shall comply with the
provisions of the 1940 Act and the rules and regulations of the SEC thereunder
in all material respects and with the provisions of the United States Internal
Revenue Code of 1986, as amended, which are applicable to regulated investment
companies.
(f) In carrying out its duties hereunder, FTIML shall comply with
all reasonable instructions of the Fund or TICL in connection therewith. Such
instructions may be given by letter, telex, telefax or telephone confirmed by
telex, by the Board or by any other person authorized by a resolution of the
Board, provided a certified copy of such resolutions has been supplied to FTIML.
2. In performing the services described above, FTIML shall use its
best efforts to obtain for the Fund the most favorable price and execution
available. Subject to prior authorization of appropriate policies and procedures
by the Board, FTIML may, to the extent authorized by law and in accordance with
the terms of the Fund's Prospectus and Statement of Additional Information,
cause the Fund to pay a broker who provides brokerage and research services an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker would have charged for effecting that
transaction, in recognition of the brokerage and research services provided by
the broker. To the extent authorized by applicable law, FTIML shall not be
deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of such action.
3. (a) TICL shall pay to FTIML a fee equal to 5% of the advisory fee
paid to TICL by the Fund, which fee shall be payable in U.S. dollars on the
first business day of each month as compensation for the services to be rendered
and obligations assumed by FTIML during the preceding month. The advisory fee
under this Agreement shall be payable on the first business day of the first
month following the effective day of this Agreement and shall be reduced by the
amount of any advance payments made by TICL relating to the previous month.
2
(b) TICL and FTIML shall share equally in any voluntary reduction
or waiver by TICL of the management fee due under the Investment Advisory
agreement between TICL and the Fund.
(c) If this Agreement is terminated prior to the end of any
month, the monthly fee shall be prorated for the portion of any month in which
this Agreement is in effect which is not a complete month according to the
proportion which the number of calendar days in the month during which the
Agreement is in effect bears to the total number of calendar days in the month,
and shall be payable within 10 days after the date of termination.
4. It is understood that the services provided by FTIML are not to be
deemed exclusive. TICL acknowledge that FTIML may have investment
responsibilities, render investment advice to, or perform other investment
advisory services to other investment companies and clients, which may invest in
the same type of securities as the Fund (collectively, "Clients"). TICL agree
that FTIML may give advice or exercise investment responsibility and take such
other action with respect to such Clients which may differ from advice given or
the timing or nature of action taken with respect to the Fund. In providing
services, FTIML may use information furnished by others to TICL and FTIML in
providing services to other such Clients.
5. FTIML agrees to use its best efforts in performing the services to
be provided by it pursuant to this Agreement.
6. During the term of this Agreement, FTIML will pay all expenses
incurred by it in connection with the services to be provided by it under this
Agreement other than the cost of securities (including brokerage commissions, if
any) purchased for the Fund. The Fund and TICL will be responsible for all of
their respective expenses and liabilities.
7. FTIML shall, unless otherwise expressly provided and authorized,
have no authority to act for or represent TICL or the Fund in any way, or in any
way be deemed an agent for TICL or the Fund.
8. FTIML will treat confidentially and as proprietary information of
the Fund all records and other information relative to the Fund and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Fund, which approval shall not be unreasonably withheld and may not be withheld
where FTIML may be exposed to civil or criminal contempt proceedings for failure
to comply when requested to divulge such information by duly constituted
authorities, or when so requested by the Fund.
9. This Agreement shall become effective as of the date first written
above and shall continue in effect until October 17, 2007. 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 Fund's Board of
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 0000 Xxx) of any such party, cast in person at a meeting called
for the purpose of voting on such
3
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
Fund's Board of Trustees as a whole.
10. (a) Notwithstanding the foregoing, this Agreement may be
terminated at any time, without the payment of any penalty, by the Board upon
written notice to TICL and FTIML, and by TICL or FTIML upon not less than sixty
(60) days' written notice to the other party.
(b) This Agreement shall terminate automatically in the event of
any transfer or assignment thereof, as defined in the 1940 Act, and in the event
of any act or event that terminates the Investment Advisory Agreement between
TICL and the Fund.
11. (a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations or duties hereunder on the
part of FTIML, neither FTIML nor any of its directors, officers, employees or
affiliates shall be subject to liability to TICL or the Fund or to any
shareholder of the Fund for any error of judgement or mistake of law or any
other act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security by the Fund.
(b) Notwithstanding paragraph 11(a), to the extent that TICL is
found by a court of competent jurisdiction, or the SEC or any other regulatory
agency, to be liable to the Fund or any shareholder (a "liability") for any acts
undertaken by FTIML pursuant to authority delegated as described in Paragraph
1(a), FTIML shall indemnify TICL and each of their respective affiliates,
officers, directors and employees (each a "Franklin Indemnified Party") harmless
from, against, for and in respect of all losses, damages, costs and expenses
incurred by a Franklin Indemnified Party with respect to such liability,
together with all legal and other expenses reasonably incurred by any such
Franklin Indemnified Party, in connection with such liability.
(c) No provision of this Agreement shall be construed to protect
any director or officer of TICL or FTIML from liability in violation of Sections
17(h) or (i), respectively, of the 0000 Xxx.
12. In compliance with the requirements of Rule 31a-3 under the 1940
Act, FTIML hereby agrees that all records which it maintains for the Fund are
the property of the Fund and further agrees to surrender promptly to the Fund,
or to any third party at the Fund's direction, any of such records upon the
Fund's request. FTIML further agrees to preserve for periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under the 1940 Act.
13. Upon termination of FTIML's engagement under this Agreement or at
the Fund's direction, FTIML shall forthwith deliver to the Fund, or to any third
party at the Fund's direction, all records, documents and books of accounts
which are in the possession or control of FTIML and relate directly and
exclusively to the performance by FTIML of its obligations under this Agreement;
provided, however, that FTIML shall be permitted to keep such records or copies
thereof for such periods of time as are necessary to comply with applicable
laws, in which
4
case FTIML shall provide the Fund or a designated third party
with copies of such retained documents unless providing such copies would
contravene such rules, regulations and laws.
Termination of this Agreement or FTIML's engagement hereunder
shall be without prejudice to the rights and liabilities created hereunder prior
to such termination.
14. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, in whole or in part, the other
provisions hereof shall remain in full force and effect. Invalid provisions
shall, in accordance with the intent and purpose of this Agreement, be replaced
by such valid provisions which in their economic effect come as closely as
legally possible to such invalid provisions.
15. TICL will furnish to FTIML properly certified or authenticated
copies of the resolutions of the Board authorizing the appointment of FTIML and
approving this Agreement as soon as such copies are available.
16. Any notice or other communication required to be given pursuant to
this Agreement shall be in writing and given by personal delivery or by
facsimile transmission and shall be effective upon receipt. Notices and
communications shall be given:
(i) to FTIML:
The Adelphi Building
0-00 Xxxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Facsimile: 00-000-00000000
(ii) to TICL:
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: 000-000-0000
17. This Agreement shall be interpreted in accordance with and
governed by the laws of the State of Florida.
18. FTIML acknowledges that it has received notice of and accepts the
limitations of the Fund's liability as set forth in its Agreement and
Declaration of Trust. FTIML agrees that the Fund's obligations hereunder shall
be limited to the assets of the Fund, and that FTIML shall not seek satisfaction
of any such obligation from any shareholders of the Fund nor from any trustee,
officer, employee or agent of the Fund.
5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested by their duly authorized officers.
FRANKLIN XXXXXXXXX INVESTMENT MANAGEMENT
LIMITED
By:
------------------------------------
Xxxxxxx X. Xxxxxxx
Director
XXXXXXXXX INVESTMENT COUNSEL, LLC
By:
------------------------------------
Xxxxxxx X. Xxxxxxxx
Vice President & Controller
6
