INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of [DATE] between TEMPLETON VARIABLE
PRODUCTS SERIES FUND, a Massachusetts business trust (hereinafter referred to as
the "Trust"), on behalf of its series ▇▇▇▇▇▇▇▇▇ INTERNATIONAL FUND ("Fund"), and
▇▇▇▇▇▇▇▇▇ INVESTMENT COUNSEL, INC., a Florida corporation ("Investment
Manager").
WHEREAS, the Trust has been organized and intends to operate
as an investment company registered under the Investment Company Act of 1940
(the "1940 Act") for the purpose of investing and reinvesting its assets in
securities, as set forth in its Agreement and Declaration of Trust, its By-Laws
and its Registration Statements under the 1940 Act and the Securities Act of
1933, all as heretofore and hereafter amended and supplemented; and the Trust,
on behalf of the Fund, desires to avail itself of the services of the Investment
Manager; and,
WHEREAS, the Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, is engaged in the business of
rendering investment management services and desires to provide these services
to the Fund.
THEREFORE, 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's
Agreement and Declaration of Trust and the Fund's investment policies as 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 Trust, 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 ▇▇▇▇ ▇▇▇) 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 Trust agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of 0.75% of the first $200,000,000 of
the Fund's average daily net assets, reduced for such assets over $200,000,000
to 0.675%, and further reduced for such assets in excess of $1,300,000,000 to
0.60%, payable at the end of each calendar month.
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 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.
(5) This Agreement shall become effective on [DATE] and shall
continue in effect until [DATE]. 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 the 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 Trust and the Fund
the use of the names "Franklin," "▇▇▇▇▇▇▇▇▇" or any name misleadingly implying a
continuing relationship between the Trust or 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.
(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 Florida, 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.
(14) It is understood and expressly stipulated that neither
the holders of shares of the Trust 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.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
By:___________________
▇▇▇▇▇▇▇▇▇ INVESTMENT COUNSEL, INC.
By:___________________
