Exhibit 5
Xxxxxxx GNMA Fund
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
November 14, 1990
Xxxxxxx Xxxxxxx & Xxxxx, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Investment Management Agreement
Dear Sirs:
Xxxxxxx GNMA Fund (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company.
The Trust has selected you to act as the sole investment manager of the
Trust and to provide certain other services, as more fully set forth below, and
you have indicated that you are willing to act as such investment manager and to
perform such services under the terms and conditions hereinafter set forth.
Accordingly, the Trust agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing
and reinvesting the assets of the Trust in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the SAI") included in the Trust's Registration Statement on Form N-1A, as
amended from time to time, (the "Registration Statement") filed by the Trust
under the Investment Company Act of 1940, as amended, (the "1940 Act") and the
Securities Act of 1933, as amended. Copies of the documents referred to in the
preceding sentence have been furnished to you by the Trust. The Trust has also
furnished you with copies property certified or authenticated of each of the
following additional documents related to the Trust:
(a) Declaration of Trust of the Trust dated November 3, 1987 as amended
to date (the "Declaration").
(b) By-Laws of the Trust as in effect on the date hereof (the
"By-Laws").
(c) Resolutions of the Trustees and the shareholders of the Trust
selecting you as investment manager and approving the form of this
Agreement.
The Trust will furnish you from time to time with copies, property
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Name Of Trust. The Trust may use any name derived from the name
"Xxxxxxx, Xxxxxxx & Xxxxx", if the Trust elects to do so, only for so long as
this Agreement, any other investment management agreement between you and the
Trust or any extension, renewal or amendment hereof or thereof remains in
effect, including any similar agreement with any organization which shall have
succeeded to your business as investment manager. At such time as such an
agreement shall no longer be in effect, the Trust shall (to the extent the Trust
has the legal power to cause it to be done) cease to use such a name or any
other name indicating that it is managed by or otherwise connected with you or
any organization which shall have so succeeded to your business.
3. Portfolio Management Services. As manager of the assets of the Trust,
you shall provide continuing investment management of the assets of the Trust in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Trust so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Trust shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Trust in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Trust or counsel to
you. You shall also make available to the Trust promptly upon request all of the
Trust's investment records and ledgers as are necessary to assist the Trust to
comply with the requirements of the 1940 Act and other applicable laws. To the
extent required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in
connection with the services provided pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Trust are being
conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Trust and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Trust policies
as expressed in the Registration Statement. You shall determine what portion of
the Trust's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Trust and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
4. Administrative Services. In addition to the portfolio management
services specified above in Section 3, you shall furnish at your expense for the
use of the Trust such office space and facilities in the United States as the
Trust may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Trust necessary for operating as an open-end investment company
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Trust shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, custodians, depositories, transfer and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Trust
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Trust's transfer agent; assisting in the
preparation and filing of the Trust's federal, state and local tax returns;
preparing and filing the Trust's federal excise tax return pursuant to Section
4982 of the Code; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities, the calculation of
net asset value and the calculation and payment of distributions to Trust
shareholders; monitoring the registration of the Trust's shares of beneficial
interest, par value $.01 per share, ("shares") under applicable federal and
state securities laws; maintaining or causing to be maintained for the Trust all
books, records and reports and any other information required under the 1940
Act, to the extent that such books, records and reports and other information
are not maintained by the Trust's custodian or other agents of the Trust;
assisting in establishing the accounting policies of the Trust; assisting in the
resolution of accounting issues that may arise with respect to the Trust's
operations and consulting with the Trust's independent accountants, legal
counsel and the Trust's other agents as necessary in connection therewith;
establishing and monitoring the Trust's operating expense budgets; reviewing the
Trust's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Trust in determining the amount of dividends
and distributions available to be paid by the Trust to its shareholders,
preparing and arranging for the printing of dividend notices to shareholders,
and providing the transfer and dividend paying agent and the custodian with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Trust's business, subject to the direction and
control of the Trust's Board of Trustees. Nothing in this Agreement shall be
deemed to shift to you or to diminish the obligations of any agent of the Trust
or any other person not a party to this Agreement which is obligated to provide
services to the Trust.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Trust's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Trust, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 3 hereof and the administrative services described in section 4 hereof.
You shall not be required to pay any expenses of the Trust other than
those specifically allocated to you in this section 5. In particular, but
without limiting the generality of the foregoing, you shall not be responsible,
except to the extent of the reasonable compensation of such of the Trust's
Trustees and officers as are directors, officers or employees of you whose
services may be involved, for the following expenses of the Trust: organization
expenses of the Trust (including out-of-pocket expenses, but not including your
overhead
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or employee costs); fees payable to you and to any other Trust advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Trust's custodian
or other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Trust in connection with membership in investment company trade
organizations; fees and expenses of the Trust's custodians, subcustodians,
transfer agents, dividend disbursing agents and registrars; payment for
portfolio pricing or valuation services to pricing agents, accountants, bankers
and other specialists, if any; expenses of preparing share certificates and,
except as provided below in this section 5, other expenses in connection with
the issuance, offering, distribution, sale, redemption or repurchase of
securities issued by the Trust; expenses relating to investor and public
relations; expenses and fees of registering or qualifying Shares of the Trust
for sale; interest charges, bond premiums and other insurance expense; freight,
insurance and other charges in connection with the shipment of the Trust's
portfolio securities; the compensation and all expenses (specifically including
travel expenses relating to Trust business) of Trustees, officers and employees
of the Trust who are not affiliated persons of you; brokerage commissions or
other costs of acquiring or disposing of any portfolio securities of the Trust;
expenses of printing and distributing reports, notices and dividends to
shareholders; expenses of printing and mailing Prospectuses and SAI of the
Trust and supplements thereto; costs of stationery; any litigation expenses;
indemnification of Trustees and officers of the Trust; costs of shareholders'
and other meetings; and travel expenses (or an appropriate portion thereof) of
Trustees and officers of the Trust who are directors, officers or employees of
you to the extent that such expenses relate to attendance at meetings of the
Board of Trustees of the Trust or any committees thereof or advisors thereto
held outside of Boston, Massachusetts or New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Trust if and to the
extent that (i) such expenses are required to be borne by a principal
underwriter which acts as the distributor of the Trust's Shares pursuant to an
underwriting agreement which provides that the underwriter shall assume some or
all of such expenses, or (ii) the Trust shall have adopted a plan in conformity
with Rule 12b-1 under the 1940 Act providing that the Trust (or some other
party) shall assumed some or all of such expenses. You shall be required to pay
such of the foregoing sales expenses as are not required to be paid by the
principal underwriter pursuant to the underwriting agreement or are not
permitted to be paid by the Trust (or some other party) pursuant to such a plan.
6. Management Fee. For all services to be rendered, payments to be made
and costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Trust shall pay you on the last day of each month the unpaid balance of a fee
equal to the excess of (a) 1/12 of .65 of 1% of the average daily net assets as
defined below of the Trust for such month; provided that, for any calendar month
during which the average of such values exceeds $200,000,000, the fee payable
for that month based on the portion of the average of such values in excess of
$200,000,000 shall be 1/12 of .60 of 1% of such portion; and provided that, for
any calendar month during which the average of such values exceeds $500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $500,000,000 shall be 1/12 of .55 of 1% of such portion over
(b) the greater of (i) the amount by which the Trust's expenses exceed the
lowest applicable expense limitation (as more fully described below) or (ii) any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75% of the amount of your fee then accrued on the books of the Trust and unpaid.
The "average daily net assets" of the Trust shall mean the average of the
values placed on the Trust's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Trust is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Trust lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Trust shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 6, the value of the net
assets of the Trust as last determined shall be deemed to be the value of its
net assets as of 4:00 p.m. (New York time), or as of such other time as the
value of the net assets of the Trust's portfolio may be lawfully determined on
that day. If the Trust determines the value of the net assets of its portfolio
more than once on any day, then the last such determination thereof on that day
shall be deemed to be the sole determination thereof on that day for the
purposes of this section 6.
You agree that your gross compensation for any fiscal year shall not be
greater than an amount which, when added to the other expenses of the Trust,
shall cause the aggregate expenses of the Trust to equal the maximum expenses
under the lowest applicable expense limitation established pursuant to the
statutes or regulations of any jurisdiction in which the Shares of the Trust may
be qualified for offer and sale. Except to the extent that such amount has been
reflected in reduced payments to you, you shall refund to the Trust the
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amount of any payment received in excess of the limitation pursuant to this
section 6 as promptly as practicable after the end of such fiscal year, provided
that you shall not be required to pay the Trust an amount greater than the fee
paid to you in respect of such year pursuant to this Agreement. As used in this
section 6, "expenses" shall mean those expenses included in the applicable
expense limitation having the broadest specifications thereof, and "expense
limitation" means a limit on the maximum annual expenses which may be incurred
by an investment company determined (i) by multiplying a fixed percentage by the
average, or by multiplying more than one such percentage by different specified
amounts of the average, of the values Of an investment company's net assets for
a fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year. The words "lowest applicable
expense limitation" shall be construed to result in the largest reduction of
your compensation for any fiscal year of the Trust; provided, however, that
nothing in this Agreement shall limit your fees if not required by an applicable
statute or regulation referred to above in this section 6.
You may waive all or a portion of your fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of your services.
You shall be contractually bound hereunder by the terms of any publicly
announced waiver of your fee, or any limitation of the Trust's expenses, as if
such waiver or limitation were fully set forth herein.
7. Avoidance of inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Trust, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Trust's account with
brokers or dealers selected by you in accordance with Trust policies as
expressed in the Registration Statement. If any occasion should arise in which
you give any advice to clients of yours concerning the Shares of the Trust, you
shall act solely as investment counsel for such clients and not in any way on
behalf of the Trust.
Your services to the Trust pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Trust.
8. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees that
you shall not be liable under this Agreement for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
matters to which this Agreement relates, provided that nothing in this Agreement
shall be deemed to protect or purport to protect you against any liability to
the Trust, or its shareholders to which you would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder. Any person, even though also employed by you, who may be or become an
employee of and paid by the Trust shall be deemed, when acting within the scope
of his or her employment by, the Trust, to be acting in such employment solely
for the Trust and not as your employee or agent.
9. Duration and Termination of this Agreement. This Agreement shall remain
in force until September 30, 1992 and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval and (b) by
the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Trust. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder.
This Agreement may be terminated with respect to the Trust at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Trust or by the Trust's Board of Trustees on 60 days'
written notice to you, or by you on 60 days' written notice to the Trust. This
Agreement shall terminate automatically in the event of its assignment.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by the vote of a majority of the outstanding voting
securities of the Trust and by the Trust's Board of Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval.
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11. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Xxxxxxx GNMA
Trust" refers to the Trustees under the Declaration collectively as trustees and
not as individuals or personally, and that no shareholder, Trustee, officer,
employee or agent of the Trust, shall be subject to claims against or
obligations of the Trust to any extent whatsoever, but that the Trust estate
only shall be liable.
You are hereby expressly put on notice of the limitation of liability as
set forth in the Declaration and you agree that the obligations assumed by the
Trust on behalf of the Trust pursuant to this Agreement shall be limited in all
cases to the Trust and its assets, and you shall not seek satisfaction of any
such obligation from the shareholders or any shareholder of the Trust or any
other series of the Trust, or from any Trustee, officer, employee or agent of
the Trust. You understand that the rights and obligations of each series, under
the Declaration are separate and distinct from those of any and all other
series.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall not apply to the management of assets allocated to
any series of the Trust's shares hereafter established by the Trust's Board of
Trustees.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"affiliated person," "assignment" and "majority of the outstanding voting
securities"), as from time to time amended, shall be applied, subject, however,
to such exemptions as may be granted by the SEC by any rule, regulation or
order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Trust to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly.
XXXXXXX GNMA FUND
By /s/ Xxxxxx Xxxxxx
------------------------------------
President
The foregoing Agreement is hereby accepted as of the date thereof.
XXXXXXX, XXXXXXX & XXXXX, INC.
By /s/ Xxxxx X. Xxx
------------------------------------
Managing Director
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