1
EX-99.B5(a).
INVESTMENT MANAGEMENT AGREEMENT
Xxxxxx High Yield Series
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
December 31, 1997
Xxxxxxx Xxxxxx Investments, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Investment Management Agreement
Xxxxxx High Yield Fund
Ladies and Gentlemen:
XXXXXX HIGH YIELD SERIES (the "Trust") has been established as a
Massachusetts business trust to engage in the business of an investment
company. Pursuant to the Trust's Declaration of Trust, as amended from
time-to-time (the "Declaration"), the Board of Trustees is authorized to issue
the Trust's shares of beneficial interest (the "Shares"), in separate series,
or funds. The Board of Trustees has authorized Xxxxxx High Yield Fund (the
"Fund"). Series may be abolished and dissolved, and additional series
established, from time to time by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the
investment manager of the Fund 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 on behalf of the Fund
agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of
investing and reinvesting the assets of the Fund 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") relating to the Fund 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 properly certified or authenticated of each of the following additional
documents related to the Trust and the Fund:
2
The Declaration, as amended to date.
(a) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(b) Resolutions of the Trustees of the Trust and the shareholders of
the Fund selecting you as investment manager and approving the form of this
Agreement.
(c) Establishment and Designation of Series of Shares of Beneficial
Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified
or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
1. Portfolio Management Services. As manager of the assets of the Fund,
you shall provide continuing investment management of the assets of the
Fund 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 Fund so that it will qualify as a regulated investment company
under Subchapter M of the Code and regulations issued thereunder. The Fund
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 Fund in accordance with the requirements set forth in this section
2, you shall be entitled to receive and act upon advice of counsel to the
Trust. You shall also make available to the Trust promptly upon request all of
the Fund's investment records and ledgers as are necessary to assist the Trust
in complying 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 Fund and place orders
with broker-dealers,
2
3
foreign currency dealers, futures commission merchants or others
pursuant to your determinations and all in accordance with Fund policies as
expressed in the Registration Statement. You shall determine what portion of
the Fund 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 Fund 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.
2. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund 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 Fund 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 Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer agents
and pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund 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 Fund's transfer agent; assisting in
the preparation and filing of the Fund's federal, state and local tax returns;
preparing and filing the Fund'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 and the calculation
of net asset value; monitoring the registration of Shares of the Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for the Fund 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 Fund's custodian or
other agents of the Fund; assisting in establishing the accounting policies of
the Fund; assisting in the resolution of accounting issues that may arise with
respect to the Fund's operations and consulting with the Fund's independent
accountants, legal counsel
3
4
and the Fund's other agents as necessary in connection therewith;
establishing and monitoring the Fund's operating expense budgets; reviewing the
Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Fund in determining the amount of dividends
and distributions available to be paid by the Fund to its shareholders,
preparing and arranging for the printing of dividend notices to shareholders,
and providing the transfer and dividend paying agent, the custodian, and the
accounting agent 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 Fund'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 Fund or any other person not a party to this
Agreement which is obligated to provide services to the Fund.
3. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 4, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, 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 2 hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. 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 Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund'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 Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services
4
5
to pricing agents, accountants, bankers and other specialists, if any; expenses
of preparing share certificates and, except as provided below in this section
4, other expenses in connection with the issuance, offering, distribution,
sale, redemption or repurchase of securities issued by the Fund; expenses
relating to investor and public relations; expenses and fees of registering or
qualifying Shares of the Fund for sale; interest charges, bond premiums and
other insurance expense; freight, insurance and other charges in connection
with the shipment of the Fund'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 Fund; expenses of printing and distributing
reports, notices and dividends to shareholders; expenses of printing and
mailing Prospectuses and SAIs of the Fund and supplements thereto; costs of
stationery; any litigation expenses; indemnification of Trustees and officers
of the Trust; and costs of shareholders and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund 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 Fund's Shares pursuant to an underwriting agreement
which provides that the underwriter shall assume some or all of such expenses,
or (ii) the Trust on behalf of the Fund shall have adopted a plan in conformity
with Rule 12b-1 under the 1940 Act providing that the Fund (or some other
party) shall assume 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 Fund (or some other party) pursuant to such a plan.
4. Management Fee. For all services to be rendered, payments to be made
and costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the
Trust on behalf of the Fund shall pay you in United States Dollars on the last
day of each month the unpaid balance of a fee equal to the excess of (a) 1/12
of .58 of 1 percent of the average daily net assets as defined below of the
Fund for such month; provided that, for any calendar month during which the
average of such values exceeds $250,000,000 the fee payable for that month
based on the portion of the average of such values in excess of $250,000,000
shall be 1/12 of .55 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $1,000,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $1,000,000,000 shall be 1/12 of .53 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds
5
6
$2,500,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12 of .51 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $5,000,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $5,000,000,000
shall be 1/12 of .48 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $7,500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $7,500,000,000 shall be 1/12 of .46 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds 10,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $10,000,000,000 shall be
1/12 of .44 of 1 percent of such portion; and provided that, for any calendar
month during which the average of such values exceeds 12,500,000,000, the fee
payable for that month based on the portion of the average of such values in
excess of $12,500,000,000 shall be 1/12 of .42 of 1 percent of such portion;
over (b) 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 percent of the amount of your fee then accrued on
the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund 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 Fund 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 5, the value of the net
assets of the Fund 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 Fund's portfolio may be lawfully determined on
that day. If the Fund 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 5.
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
6
7
fee, or any limitation of the Fund's expenses, as if such waiver or limitation
were fully set forth herein.
5. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other
investments for the account of the Fund, 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
Fund's account with brokers or dealers selected by you in accordance with Fund
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 Fund, you shall act solely as investment counsel for such clients and not
in any way on behalf of the Fund.
Your services to the Fund 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. Whenever the Fund and
one or more other accounts or investment companies advised by you have
available funds for investment, investments suitable and appropriate for each
shall be allocated in accordance with procedures believed by you to be
equitable to each entity. Similarly, opportunities to sell securities shall be
allocated in a manner believed by you to be equitable. The Fund recognizes
that in some cases this procedure may adversely affect the size of the position
that may be acquired or disposed of for the Fund.
6. 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 Fund 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, the Fund 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.
7. Duration and Termination of This Agreement. This Agreement shall
remain in force until March 1, 1998, 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
7
8
vote of a majority of the outstanding voting securities of the Fund. 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 and any applicable SEC
exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the
outstanding voting securities of the Fund 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.
This Agreement may be terminated with respect to the Fund at any time
without the payment of any penalty by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Fund in the event that it
shall have been established by a court of competent jurisdiction that you or
any of your officers or directors has taken any action which results in a
breach of your covenants set forth herein.
8. 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 in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
9. 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 "Xxxxxx
High Yield Series" refers to the Trustees under the Declaration collectively as
Trustees and not as individuals or personally, and that no shareholder of the
Fund, or Trustee, officer, employee or agent of the Trust, shall be subject to
claims against or obligations of the Trust or of the Fund 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 Fund pursuant to this Agreement shall be limited in all
cases to the Fund and its assets, and you shall not seek satisfaction of any
such obligation from the shareholders or any shareholder of the Fund 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 Fund, or
series, under the Declaration are separate and distinct from those of any and
all other series.
8
9
10. 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.
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 Fund 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 on behalf of the Fund.
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,
XXXXXX HIGH YIELD SERIES,
on behalf of Xxxxxx High Yield Fund
By: /s/ Xxxx X. Xxxx
---------------------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
XXXXXXX XXXXXX INVESTMENTS, INC.
By: /s/ Xxxx X. Xxxxxxxx
---------------------------------
Vice President
9
