Exhibit 1
PUTNAM AMERICAN GOVERNMENT INCOME FUND
Form of
MANAGEMENT CONTRACT
Management Contract dated as of March , 1998 between PUTNAM
AMERICAN GOVERNMENT INCOME FUND, a Massachusetts business trust
(the "Fund"), and XXXXXX INVESTMENT MANAGEMENT, INC., a
Massachusetts corporation (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously
an
investment program for the Fund, will determine what investments
shall be purchased, held, sold or exchanged by the Fund and what
portion, if any, of the assets of the Fund shall be held
uninvested
and shall, on behalf of the Fund, make changes in the Fund's
investments. Subject always to the control of the Trustees of
the
Fund and except for the functions carried out by the officers and
personnel referred to in Section 1(d), the Manager will also
manage, supervise and conduct the other affairs and business of
the
Fund and matters incidental thereto. In the performance of its
duties, the Manager will comply with the provisions of the
Agreement and Declaration of Trust and By-laws of the Fund and
its
stated investment objectives, policies and restrictions, and will
use its best efforts to safeguard and promote the welfare of the
Fund and to comply with other policies which the Trustees may
from
time to time determine and shall exercise the same care and
diligence expected of the Trustees.
(b) The Manager, at its expense, except as such expense is
paid by the Fund as provided in Section 1(d), will furnish (1)
all
necessary investment and management facilities, including
salaries
of personnel, required for it to execute its duties faithfully;
(2)
suitable office space for the Fund; and (3) administrative
facilities, including bookkeeping, clerical personnel and
equipment
necessary for the efficient conduct of the affairs of the Fund,
including determination of the Fund's net asset value, but
excluding shareholder accounting services. Except as otherwise
provided in Section 1(d), the Manager will pay the compensation,
if
any, of the officers of the Fund.
(c) The Manager, at its expense, shall place all orders for
the purchase and sale of portfolio investments for the Fund's
account with brokers or dealers selected by the Manager. In the
selection of such brokers or dealers and the placing of such
orders, the Manager shall use its best efforts to obtain for the
Fund the most favorable price and execution available, except to
the extent it may be permitted to pay higher brokerage
commissions
for brokerage and research services as described below. In using
its best efforts to obtain for the Fund the most favorable price
and execution available, the Manager, bearing in mind the Fund's
best interests at all times, shall consider all factors it deems
relevant, including by way of illustration, price, the size of
the
transaction, the nature of the market for the security, the
amount
of the commission, the timing of the transaction taking into
account market prices and trends, the reputation, experience and
financial stability of the broker or dealer involved and the
quality of service rendered by the broker or dealer in other
transactions. Subject to such policies as the Trustees of the
Fund
may determine, the Manager shall not be deemed to have acted
unlawfully or to have breached any duty created by this Contract
or
otherwise solely by reason of its having caused the Fund to pay a
broker or dealer that provides brokerage and research services to
the Manager an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction, if the Manager determines in good faith that such
amount of commission was reasonable in relation to the value of
the
brokerage and research services provided by such broker or
dealer,
viewed in terms of either that particular transaction or the
Manager's overall responsibilities with respect to the Fund and
to
other clients of the Manager as to which the Manager exercises
investment discretion. The Manager agrees that in connection
with
purchases or sales of portfolio investments for the Fund's
account,
neither the Manager nor any officer, director, employee or agent
of
the Manager shall act as a principal or receive any commission
other than as provided in Section 3.
(d) The Fund will pay or reimburse the Manager for the
compensation in whole or in part of such officers of the Fund and
persons assisting them as may be determined from time to time by
the Trustees of the Fund. The Fund will also pay or reimburse
the
Manager for all or part of the cost of suitable office space,
utilities, support services and equipment attributable to such
officers and persons, as may be determined in each case by the
Trustees of the Fund. The Fund will pay the fees, if any, of the
Trustees of the Fund.
(e) The Manager shall not be obligated to pay any expenses
of
or for the Fund not expressly assumed by the Manager pursuant to
this Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees,
officers and employees of the Fund may be a shareholder,
director,
officer or employee of, or be otherwise interested in, the
Manager,
and in any person controlled by or under common control with the
Manager, and that the Manager and any person controlled by or
under
common control with the Manager may have an interest in the Fund.
It is also understood that the Manager and any person controlled
by
or under common control with the Manager have and may have
advisory, management, service or other contracts with other
organizations and persons, and may have other interests and
business.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
The Fund will pay to the Manager as compensation for the
Manager's services rendered, for the facilities furnished and for
the expenses borne by the Manager pursuant to paragraphs (a),
(b),
(c) and (e) of Section 1, a fee, computed and paid quarterly at
the
following annual rates:
(a) 0.65% of the first $500 million of average net asset
value of the Fund;
(b) 0.55% of the next $500 million of such average net asset
value;
(c) 0.50% of the next $500 million of such average net asset
value;
(d) 0.45% of the next $5 billion of such average net asset
value;
(e) 0.425% of the next $5 billion of such average net asset
value;
(f) 0.405% of the next $5 billion of such average net asset
value;
(g) 0.39% of the next $5 billion of such average net asset
value; and
(h) 0.38% of any amount thereafter.
Such average net asset value shall be determined by taking an
average of all of the determinations of such net asset value
during
such quarter at the close of business on each business day during
such quarter while this Contract is in effect. Such fees shall be
payable for each fiscal quarter within 30 days after the close of
such quarter and shall commence accruing as of the date of the
initial issuance of shares of the Fund to the public.
The fees payable by the Fund to the Manager pursuant to this
Section 3 shall be reduced by any commissions, fees, brokerage or
similar payments received by the Manager or any affiliated person
of the Manager in connection with the purchase and sale of
portfolio investments of the Fund, less any direct expenses
approved by the Trustees incurred by the Manager or any
affiliated
person of the Manager in connection with obtaining such payments.
In the event that expenses of the Fund for any fiscal year
should exceed the expense limitation on investment company
expenses
imposed by any statute or regulatory authority of any
jurisdiction
in which shares of the Fund are qualified for offer or sale, the
compensation due the Manager for such fiscal year shall be
reduced
by the amount of excess by a reduction or refund thereof. In the
event that the expenses of the Fund exceed any expense limitation
which the Manager may, by written notice to the Fund, voluntarily
declare to be effective subject to such terms and conditions as
the
Manager may prescribe in such notice, the compensation due the
Manager shall be reduced, and, if necessary, the Manager shall
assume expenses of the Fund to the extent required by the terms
and
conditions of such expense limitation.
If the Manager shall serve for less than the whole of a
quarter, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS
CONTRACT.
This Contract shall automatically terminate, without the
payment of any penalty, in the event of its assignment; and this
Contract shall not be amended unless such amendment be approved
at a meeting by the affirmative vote of a majority of the
outstanding shares of the Fund, and by the vote, cast in person
at a meeting called for the purpose of voting on such approval,
of a majority of the Trustees of the Fund who are not interested
persons of the Fund or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and
shall remain in full force and effect continuously thereafter
(unless terminated automatically as set forth in Section 4) until
terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' nor less than thirty days'
written notice delivered or mailed by registered mail, postage
prepaid, to the other party, or
(b) If (i) the Trustees of the Fund or the shareholders by
the affirmative vote of a majority of the outstanding shares of
the Fund, and (ii) a majority of the Trustees of the Fund who are
not interested persons of the Fund or of the Manager, by vote
cast in person at a meeting called for the purpose of voting on
such approval, do not specifically approve at least annually the
continuance of this Contract, then this Contract shall
automatically terminate at the close of business on the second
anniversary of its execution or upon the expiration of one year
from the effective date of the last such continuance, whichever
is later.
Action by the Fund under (a) above may be taken either (i) by
vote of a majority of its Trustees, or (ii) by the affirmative
vote of a majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 will
be without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a
majority of the outstanding shares of the Fund" means the
affirmative vote, at a duly called and held meeting of
shareholders of the Fund, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50%
of the outstanding shares of the Fund entitled to vote at such
meeting are present in person or by proxy, or (b) of the holders
of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated
person", "control", "interested person" and "assignment" shall
have their respective meanings defined in the Investment Company
Act of 1940 and the Rules and Regulations thereunder (the "1940
Act"), subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a
manner consistent with the 1940 Act and the Rules and Regulations
thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and
the Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be
subject to any liability to the Fund or to any shareholder of the
Fund, for any act or omission in the course of, or connected
with, rendering services hereunder.
8. TERMINATION OF PRIOR CONTRACT.
This Contract shall become effective as of its date, and
supersedes the Management Contract dated December 8, 1989.
9. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND
SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Fund
is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Fund as Trustees and
not individually and that the obligations of or arising out of
this instrument are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon
the assets and property of the Fund.
IN WITNESS WHEREOF, XXXXXX AMERICAN GOVERNMENT INCOME FUND
and XXXXXX INVESTMENT MANAGEMENT, INC. have each caused this
instrument to be signed in duplicate in its behalf by its
President or a Vice President thereunto duly authorized, all as
of the day and year first above written.
XXXXXX AMERICAN GOVERNMENT
INCOME FUND
By ------------------------------
Executive Vice President
XXXXXX INVESTMENT MANAGEMENT, INC.
By ------------------------------
President
