INVESTMENT ADVISORY AGREEMENT
Xxxxxx Target Maturities Trust
Agreement effective this 1st day of June, 1995, between XXXXXX TARGET
MATURITIES TRUST, a registered open-end management investment company organized
as a business trust in the Commonwealth of Massachusetts (the "Trust"), and
XXXXXX MANAGEMENT CORPORATION, a registered investment advisor incorporated in
the State of California (the "Advisor").
Whereas, the Trust is authorized to issue shares of beneficial interest
in one or more series with each such series representing interests in a separate
portfolio of securities and other assets; and
Whereas, the Trust currently offers its shares in six series designated
as the 1995 Portfolio, 2000 Portfolio, 2005 Portfolio, 2010 Portfolio, 2015
Portfolio, and 2020 Portfolio (the "Initial Series"), (such Initial Series
together with all other series subsequently established by the Trust with
respect to which the Trust desires to retain the Advisor to render investment
advisory services hereunder and with respect to which the Advisor is willing to
do so being herein collectively referred to as the "Series"). In the event the
Trust establishes one or more series other than the Initial Series with respect
to which it desires to retain the Advisor to render management and investment
advisory services hereunder, it shall notify the Advisor in writing, whereupon
such series shall become a Series hereunder.
I. DESCRIPTION OF SERVICES TO BE PROVIDED. In consideration for
the compensation hereinafter described, the Advisor agrees to provide the
following services to the Trust and to the Series:
A. Investment Advice and Portfolio Management. The Advisor
shall manage the investment and reinvestment of the Series' assets in accordance
with the investment objectives and policies of the Series as set forth in the
Trust's registration statement with the Securities and Exchange Commission as
amended from time to time and such instructions as the Trust's board of trustees
may issue. Consistent with the foregoing, the Advisor shall make all
determinations as to the investment of the Series' assets and the purchase and
sale of its portfolio securities and take all steps necessary to implement same.
Such determinations and services shall also include determining the manner in
which voting rights, rights to consent to corporate actions and other rights
pertaining to the Series' portfolio securities shall be exercised. In placing
orders for the execution of the Series' portfolio transactions, the Advisor
shall use its best efforts to obtain the best possible price and execution and
shall otherwise place such orders subject to and in accordance with any
directions which the Trust's board of trustees may issue from time to time with
respect thereto. The Advisor shall select brokers and dealers for the execution
of portfolio transactions in accordance with the provisions of Section I.B. of
this agreement.
B. Brokerage. In executing transactions for the Series and
selecting brokers or dealers, the Advisor will use its best efforts to seek the
best price and execution available and shall execute or direct the execution of
all such transactions in a manner both permitted by law and that suits the best
interest of the Series and its shareholders. In assessing the best price and
execution available for any Series transaction, the Advisor will consider all
factors it deems relevant including, but not limited to, breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of any
commission for the specific transaction and on a continuing basis. Consistent
with the obligation to obtain best execution, the Advisor may cause a Series to
pay a broker which provides brokerage and research services to the Advisor a
commission for effecting a securities transaction in excess of the amount
another broker might have charged. Such higher commissions may not be paid
unless the Advisor determines in good faith that the amount paid is reasonable
in relation to the services received in terms of the particular transaction or
the Advisor's overall responsibilities to the Series and any other of the
Advisor's clients.
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On occasions when the Advisor deems the purchase or sale of a security
to be in the best interest of the Series as permitted by applicable law, the
Advisor may aggregate the securities to be sold or purchased with purchases of
sales of other funds in order to obtain the best execution of the order or lower
brokerage commissions, if any. The Advisor may also on occasion purchase or sell
a particular security for one or more clients in different amounts. On either
occasion, and to the extent permitted by applicable law and regulations,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Advisor in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Trust and to such other customers.
C. Reports and Information. The Advisor shall render regular
reports to the Trust at quarterly meetings of the board of trustees and at such
other times as may reasonably be requested by the Trust's board of (i) the
decisions it has made with respect to the Series' assets and the purchase and
sale of its portfolio securities, (ii) the reasons for such decisions and
related actions and, (iii) the extent to which those decisions have been
implemented. In addition, the Advisor will provide the Trust with such
accounting and statistical data as it requires for the preparation of
registration statements, reports and other documents required by federal and
state securities, tax and other applicable laws and regulations and such
additional documents and information as the Trust may reasonably request for the
management of its affairs.
D. Promotion and Distribution. The Advisor shall promote the
sale and distribution of the Series' shares to the general public in such a
manner and at such times and places as the Advisor shall, in the exercise of
reasonable discretion, determine; and otherwise as the Advisor and the Trust's
board of trustees may from time to time agree.
II. COMPENSATION FOR SERVICES.
(a) Amount of Compensation. As compensation for the services
rendered and duties assumed by the Advisor, the Trust, on behalf of the Series,
shall, within ten (10) days after the last day of each calendar month, pay the
Advisor an advisory fee equal to the amount determined using the following
formula: (A) a Trust Fee plus an Individual Fund Fee (if any), minus (B) the
amount by which the Series' Expenses exceed the Expense Guarantee Rate as
defined below, minus (C) any further amount by which the Advisor publicly
announces it will reduce the Series' Expenses, plus (D) the amount of any
recoupment as described below.
The Advisor's compensation shall be computed and accrued daily.
Upon termination of this agreement before the end of any calendar
month, the fee for the period from the end of the calendar month preceding the
month of termination to the date of termination shall be prorated according to
the proportion which the number of calendar days in the month prior to the date
of termination bears to the number of calendar days in the month of termination,
and shall be payable within ten (10) days after the date of termination. For
this purpose, the value of the Series' net assets shall be computed by the same
method at the end of each business day as the Series uses to compute the value
of its net assets in connection with the determination of the net asset value of
Series shares, all as more fully set forth in the Series' prospectus. To the
extent that Expenses of the Series in excess of the Series' Expense Guarantee
Rate exceed the total of the Trust Fee and Individual Fund Fee (if any), plus
any recoupment due, the Advisor will reimburse the Series for such excess.
(b) Determination of Trust Fee. The Trust Fee for each Series
shall be equal to that Series' pro-rata share of the value of the aggregated
average daily net assets of the Trust, determined for each calendar day,
pursuant to the following schedule of annualized rates:
0.35% of the first $750 million;
0.25% of the next $750 million;
0.24% of the next $1 billion;
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0.23% of the next $1 billion;
0.22% of the next $1 billion;
0.21% of the next $1 billion;
0.20% of the next $1 billion;
and 0.19% of the net assets over $6.5 billion.
(c) Limitation of Fund Expenses.
1. The Expense Guarantee Rate for each Series is set
forth on Schedule A, attached hereto, as such
schedule may be amended from time to time by the
Trust's board of trustees.
2. The term "Expenses" as used in Section II of this
agreement shall mean:
A. The Trust Fee plus the Individual Fund Fee (if any).
B. Compensation for administrative and
transfer agent services as specified in
Section I.B and II.B of The Administrative
Services Agreement, as such agreement may be
amended from time to time by the Trust's
board of trustees or shareholders (the
"Administrative Services Agreement").
C. Direct expenses as specified in Section III.B of the
Administrative Services Agreement.
D. Extraordinary Expenses, as specified in Section
III.C of the Administrative Services Agreement, are
excluded from the definition of Expenses as set forth
herein.
3. The Advisor will be legally bound by any public
announcement that it will reduce, in accordance with
the terms of its announcement, the Series' Expenses
below the Expense Guarantee Rate.
(d) Recoupment. The Advisor may recover amounts (representing
Expenses in excess of the Expense Guarantee Rate) which reduced the Advisor's
compensation or that it reimbursed to a Series during the preceding 11 months
if, and to the extent that, for any given month, the Series' expense ratio (net
of reimbursements) was lower than the Expense Guarantee Rate in effect at the
time, but not during any period, during which the Advisor has agreed, pursuant
to paragraph (c)3 above, to limit the Series' Expenses to an amount less than
the Expense Guarantee Rate.
III. EXPENSES.Except as hereinafter provided, the Advisor shall pay
all of its expenses incurred in the performance of this agreement, including but
not limited to salaries and other compensation of its officers and employees and
all other costs of providing such advice, portfolio management and information
and reports to the Trust and the Series as are required hereunder, and all
expenses associated with any activity primarily intended to result in the sale
of Series' shares, such as advertising, printing and mailing of prospectuses to
other than current shareholders, printing and mailing of sales literature and
compensation of sales personnel.
IV. ACTIVITIES OF THE ADVISOR. The services of the Advisor to the
Series hereunder are not to be deemed exclusive, and the Advisor shall be free
to render similar services to others. Subject to and in accordance with the
Declaration of Trust and the Bylaws of the Trust and to Section 10(a) of the
Investment Company Act of 1940, it is understood that trustees, officers, agents
and shareholders of the Trust are or may be interested in the Advisor as
directors, officers or shareholders of the Advisor, that directors, officers,
agents or shareholders of the Advisor are or may be interested in the Trust as
trustees, officers, shareholders or otherwise, that the Advisor is or may be
interested in the
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Trust as a shareholder or otherwise, and that the effect of any such interest
shall be governed by the Trust's Declaration of Trust, its Bylaws and the
Investment Company Act of 1940.
V. LIABILITY OF THE ADVISOR. In the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of its obligations and duties
hereunder, the Advisor shall not be subject to liability to the Series or to any
shareholder of the Series for any act or omission in the course of, or connected
with, rendering advice or services hereunder or for any losses that may be
sustained in the purchase, retention or sale of any security. No provision of
this agreement shall be construed to protect any trustee or officer of the Trust
or any director or officer of the Advisor from liability in violation of
Sections 17(h) and (i) of the Investment Company Act of 1940.
VI. LIMITATION OF TRUST'S LIABILITY. The Advisor acknowledges that it
has received notice of and accepts the limitations of the Trust's liability set
forth in its Declaration of Trust. The Advisor agrees that the Trust's
obligations hereunder shall be limited to the Series and to its assets and that
the Advisor shall not seek satisfaction of any such obligation from the
shareholders of the Series nor from any trustee, officer, employee or agent of
the Trust.
VII. RENEWAL, TERMINATION AND AMENDMENT. The term of this agreement
shall be from the date first written above, and shall continue in effect, unless
sooner terminated as provided herein, for two years from such date, and shall
continue in effect with respect to a Series from year to year thereafter only so
long as such continuance is specifically approved at least annually by the vote
of either a majority of the outstanding voting securities of that Series or a
majority of the Trust's trustees, and the vote of a majority of the Trust's
trustees who are neither parties to the agreement nor interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval. "Approved at least annually" shall mean approval occurring, with
respect to the first continuance of the agreement, during the 90 days prior to
and including the date of its termination in the absence of such approval, and
with respect to any subsequent continuance, during the 90 days prior to and
including the first anniversary of the date upon which the most recent previous
annual continuance of this agreement became effective. This agreement may be
terminated at any time without payment of any penalty, by the board of trustees
of the Trust, or with respect to a Series, by a vote of the majority of the
outstanding voting securities of such Series, upon 60 days' written notice to
the Advisor, and by the Advisor upon 60 days' written notice to the Trust. This
agreement shall terminate automatically in the event of its assignment. The
terms "assignment" and "vote of a majority of the outstanding voting securities"
shall have the meanings set forth for such terms in the Investment Company Act
of 1940 and Rule 18f-2 thereunder.
VIII. SEVERABILITY.If any provision of this agreement shall be held or
made invalid by a court decision, statute, rule or similar authority, the
remainder of this agreement shall not be affected thereby.
IX. APPLICABLE LAW. This agreement shall be construed in accordance
with the laws of the State of California.
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In witness whereof, the parties hereto have caused this instrument to
be executed by their officers designated below on the day and year first written
above.
XXXXXX TARGET MATURITIES TRUST
By /s/Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx
President
XXXXXX MANAGEMENT CORPORATION
By /s/Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
President
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EXPENSE GUARANTEE RATES
SCHEDULE A
Expense Guarantee Rates and Effective Dates
Approved by Board of Directors/Trustees April 3, 1995
=======================================================================================================
Proposed '95) BOARD EFFECTIVE
FUND EXPENSE GUARANTEE APPROVAL DATES
RATE DATE
=======================================================================================================
Capital Preservation Fund .54% 4/3/95 6/1/95 to
5/31/96
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Capital Preservation Fund II .75% 4/3/95 6/1/95 to
5/31/96
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Xxxxxx California Tax-Free and Municipal Funds
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Municipal High-Yield Fund .62% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------
Municipal Money Market Fund .58% " "
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Tax-Free Insured Fund .62% " "
-------------------------------------------------------------------------------------------------------
Tax-Free Intermediate Fund .62% " "
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Tax-Free Long-Term Fund .62% " "
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Tax-Free Money Market Fund .54% " "
-------------------------------------------------------------------------------------------------------
Tax-Free Short-Term Fund .62% " "
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Xxxxxx Equity Funds
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Xxxxxx Equity Growth Fund .75% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------
Xxxxxx Gold Equities Index Fund .75% " "
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Xxxxxx Income & Growth Fund .75% " "
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Xxxxxx Utilities Income Fund .75% " "
-------------------------------------------------------------------------------------------------------
Xxxxxx Global Natural Resources Index Fund .75% " "
-------------------------------------------------------------------------------------------------------
Xxxxxx Government Income Trust
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Xxxxxx GNMA Income Fund .65% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------
Xxxxxx Treasury Note Fund .65% " "
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Xxxxxx Government Agency Fund .50% " "
-------------------------------------------------------------------------------------------------------
Xxxxxx Adjustable Rate Government Securities Fund .65% " "
-------------------------------------------------------------------------------------------------------
Xxxxxx Short-Term Treasury and Agency Fund .65% " "
-------------------------------------------------------------------------------------------------------
Benham Long-Term Treasury and Agency Fund .65% " "
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=======================================================================================================
Proposed '95) BOARD EFFECTIVE
FUND EXPENSE GUARANTEE APPROVAL DATES
RATE DATE
=======================================================================================================
Xxxxxx International Funds
-------------------------------------------------------------------------------------------------------
Xxxxxx European Government Bond Fund .90% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------
Xxxxxx Investment Trust
-------------------------------------------------------------------------------------------------------
Xxxxxx Prime Money Market Fund .50% 4/3/95 6/1/95 to
5/31/98
-------------------------------------------------------------------------------------------------------
Xxxxxx Manager Funds
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Xxxxxx Capital Manager Fund 1.00% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------
Xxxxxx Municipal Trust
-------------------------------------------------------------------------------------------------------
Xxxxxx National Tax-Free Money Market Fund .64% 4/3/95 6/1/94 to
5/31/96
-------------------------------------------------------------------------------------------------------
Xxxxxx National Tax-Free Intermediate-Term Fund .69% " "
-------------------------------------------------------------------------------------------------------
Xxxxxx National Tax-Free Long-Term Fund .69% " "
-------------------------------------------------------------------------------------------------------
Xxxxxx Florida Municipal Money Market Fund .65% " "
-------------------------------------------------------------------------------------------------------
Xxxxxx Florida Municipal Intermediate-Term Fund .69% " "
-------------------------------------------------------------------------------------------------------
Xxxxxx Arizona Municipal Intermediate-Term Fund .69% " "
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Xxxxxx Target Maturities Trust
-------------------------------------------------------------------------------------------------------
1995 Portfolio .70% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------
2000 Portfolio .70% " "
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2005 Portfolio .70% " "
-------------------------------------------------------------------------------------------------------
2010 Portfolio .70% " "
-------------------------------------------------------------------------------------------------------
2015 Portfolio .70% " "
-------------------------------------------------------------------------------------------------------
2020 Portfolio .70% " "
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