Exhibit d(iv)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated as of the 1st day of January, 2001, between FRANKLIN
XXXXXXXXX VARIABLE INSURANCE PRODUCTS TRUST, a Massachusetts business trust (the
"Trust"), on behalf of Xxxxxxxxx International Securities Fund, a series of the
Trust (the "Fund"), and XXXXXXXXX INVESTMENT COUNSEL, LLC, a Delaware limited
liability company (the "Adviser").
In consideration of the mutual agreements herein made, the Trust and the
Adviser understand and agree as follows:
(1) The Adviser 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
Adviser 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 Adviser in performing this Agreement are
performed by it outside the United States.
(2) The Adviser 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 Adviser 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 Adviser 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 Adviser in
determining the overall reasonableness of brokerage commissions.
B. In selecting brokers for portfolio transactions, the Adviser 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.
1
C. The Adviser 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 Adviser 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 Adviser 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 Adviser'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 Adviser 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
Adviser 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 Adviser 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
Adviser are useful to the Adviser in performing its advisory services under this
Agreement. Research services provided by brokers to the Adviser are considered
to be in addition to, and not in lieu of, services required to be performed by
the Adviser under this Agreement. Research furnished by brokers through which
the Fund effects securities transactions may be used by the Adviser for any of
its accounts, and not all research may be used by the Adviser 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 Adviser, 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 Adviser) 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
2
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) In addition to the investment management services provided pursuant to
paragraph (1) above, the Adviser agrees, during the life of this Agreement, to
furnish or provide for the Fund, at the Adviser's expenses, such administrative
services as are required to facilitate investment in the shares of the Fund by
an insurance company, on behalf of one or more of its separate accounts,
pursuant to a fund participation agreement among the Fund, Franklin Xxxxxxxxx
Distributors, Inc. and such insurance company. Such services may include, but
are not limited to, the following: maintaining books and records required by
applicable state or federal laws; assisting in processing purchase and
redemption transactions; transmitting to the Fund periodic reports necessary to
enable the Fund to comply with applicable laws; processing Fund distributions;
answering questions and handling correspondence from contractowners about their
accounts; providing information about the Fund; acting as sole shareholder of
record and nominee for shareholders; and similar administrative, recordkeeping,
and contractowner services.
(5) The Fund agrees to pay to the Adviser 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:
0.75% of the value of the Fund's net assets up to an including
$200 million;
0.675% of the value of the Fund's net assets over $200 million
up to and including $1.3 billion;
0.60% of the value of the Fund's net assets over $1.3 billion.
The Adviser may waive in advance all or a portion of its fee provided for
hereunder and such waiver will be treated as a reduction in purchase price of
its services. The Adviser 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 Adviser) in any fiscal year of the Trust exceed any expense
limitation imposed by applicable State law, the Adviser 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 Adviser'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.
(6) This Agreement shall become effective on January 1, 2001 and shall
continue in effect until April 30, 2003. 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
3
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.
(7) 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).
(8) This Agreement will terminate automatically and immediately in the
event of its assignment (as defined in the 1940 Act).
(9) In the event this Agreement is terminated and the Adviser no longer
acts as Adviser to the Fund, the Adviser 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 Adviser or any of its
affiliates.
(10) Except as may otherwise be provided by the 1940 Act, neither the
Adviser 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 Adviser 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
Adviser's part or by reason of disregard of the Adviser'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 Adviser. It is further understood and acknowledged by the
Trust that investment decisions made on behalf of the Fund by the Adviser 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 Adviser will not always be profitable or prove to have been correct.
(11) It is understood that the services of Adviser are not deemed to be
exclusive, and nothing in this Agreement shall prevent the Adviser, 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 Adviser determines to buy or sell the same
security for the Fund that the Adviser or one or more of its affiliates has
selected for clients of the Adviser or its affiliates, the orders for all such
security transactions shall be placed for execution by methods determined by the
Adviser, with approval by the Trust's Board of Trustees, to be impartial and
fair.
4
(12) This Agreement shall be construed in accordance with the laws of the
State of Delaware, provided that nothing herein shall be construed as being
inconsistent with applicable Federal and state securities laws and any rules,
regulations and orders thereunder.
(13) 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.
(14) Nothing herein shall be construed as constituting the Adviser an
agent of the Trust.
(15) 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 SECURITIES FUND
By /s/ Xxxxxx X. Xxxxxxx
Secretary
XXXXXXXXX INVESTMENT COUNSEL, LLC
By /s/ Xxxxxx X. Xxxxxxxx
Executive Vice President
5
