XXXXXX CALIFORNIA TAX EXEMPT INCOME FUND
MANAGEMENT CONTRACT
Management Contract dated as of July 1, 1999 between XXXXXX CALIFORNIA TAX
EXEMPT 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 (i) the compensation of
the Vice Chairman of the Fund and of persons assisting him in this office,
as determined from time to time by the Trustees of the Fund, (ii) the
compensation in whole or in part of such other officers of the Fund and
persons assisting them as may be determined from time to time by the
Trustees of the Fund, and (iii) the cost of suitable office space,
utilities, support services and equipment of the Vice Chairman and persons
assisting him and, as determined from time to time by the Trustees of the
Fund, all or a part of such cost attributable to the other officers and
persons assisting them whose compensation is paid in whole or in part by
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 lesser of (i) an annual rate of 0.50% of
the average net asset value of the Fund or (ii) the following annual rates:
(a) 0.60% of the first $500 million of the average net asset value of the
Fund;
(b) 0.50% of the next $500 million of such average net asset value;
(c) 0.45% of the next $500 million of such average net asset value;
(d) 0.40% of the next $5 billion of such average net asset value;
(e) 0.375% of the next $5 billion of such average net asset value;
(f) 0.355% of the next $5 billion of such average net asset value;
(g) 0.34% of the next $5 billion of such average net asset value; and
(h) 0.33% of any excess 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 fee shall be payable for each fiscal quarter
within 30 days after the close of such quarter.
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, 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 Investment Company Act of 1940 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 January 20, 1997.
9. LIMITATION OF LIABILITY OF THE TRUSTEES 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 or shareholders individually but are binding only upon the
assets and property of the Fund.
IN WITNESS WHEREOF, XXXXXX CALIFORNIA TAX EXEMPT 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 CALIFORNIA TAX EXEMPT INCOME FUND
/s/ Xxxxxxx X. Xxxxxx
By: --------------------------------
Xxxxxxx X. Xxxxxx
Executive Vice President
XXXXXX INVESTMENT MANAGEMENT, INC.
/s/ Xxxxxx X. Silver
By: --------------------------------
Xxxxxx X. Silver
Senior Managing Director
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