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EXIBIT 99.B5(a)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 4th day of January, 1996, by and between XXXXXX
DIVERSIFIED INCOME FUND, a Massachusetts business trust (the "Fund"), and XXXXXX
FINANCIAL SERVICES, INC., a Delaware corporation (the "Adviser").
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, the shares of beneficial interest
("Shares") of which are registered under the Securities Act of 1933;
WHEREAS, the Fund is authorized to issue Shares in separate series or
portfolios with each representing the interests in a separate portfolio of
securities and other assets;
WHEREAS, the Fund currently offers or intends to offer Shares in one
portfolio, the Initial Portfolio, together with any other Fund portfolios which
may be established later and served by the Adviser hereunder, being herein
referred to collectively as the "Portfolios" and individually referred to as a
"Portfolio"; and
WHEREAS, the Fund desires at this time to retain the Adviser to render
investment advisory and management services to the Initial Portfolio, and the
Adviser is willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby employs the Adviser to act as the investment adviser for the
Initial Portfolio and other Portfolios hereunder and to manage the investment
and reinvestment of the assets of each such Portfolio in accordance with the
applicable investment objectives and policies and limitations, and to administer
the affairs of each such Portfolio to the extent requested by and subject to the
supervision of the Board of Trustees of the Fund for the period and upon the
terms herein set forth, and to place orders for the purchase or sale of
portfolio securities for the Fund's account with brokers or dealers selected by
it; and, in connection therewith, the Adviser is authorized as the agent of the
Fund to give instructions to the Custodian of the Fund as to the deliveries of
securities and payments of cash for the account of the Fund. In connection with
the selection of such brokers or dealers and the placing of such orders, the
Adviser is directed to seek for the Fund best execution of orders. Subject to
such policies as the Board of Trustees of the Fund determines, the
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Adviser shall not be deemed to have acted unlawfully or to have breached any
duty, created by this Agreement or otherwise, solely by reason of its having
caused the Fund to pay a broker or dealer an amount of commission for effecting
a securities transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Adviser
determined 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
Adviser's overall responsibilities with respect to the clients of the Adviser as
to which the Adviser exercises investment discretion. The Fund recognizes that
all research services and research that the Adviser receives or generates are
available for all clients, and that the Fund and other clients may benefit
thereby. The investment of funds shall be subject to all applicable restrictions
of the Agreement and Declaration of Trust and By-Laws of the Fund as may from
time to time be in force.
The Adviser accepts such employment and agrees during such period to render
such services, to furnish office facilities and equipment and clerical,
bookkeeping and administrative services for the Fund, to permit any of its
officers or employees to serve without compensation as trustees or officers of
the Fund if elected to such positions and to assume the obligations herein set
forth for the compensation herein provided. The Adviser shall for all purposes
herein provided be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund. It is
understood and agreed that the Adviser, by separate agreements with the Fund,
may also serve the Fund in other capacities.
2. In the event that the Fund establishes one or more portfolios other than the
Initial Portfolio with respect to which it desires to retain the Adviser to
render investment advisory and management services hereunder, it shall notify
the Adviser in writing. If the Adviser is willing to render such services, it
shall notify the Fund in writing whereupon such portfolio or portfolios shall
become a Portfolio or Portfolios hereunder.
3. For the services and facilities described in Section 1, the Fund will pay to
the Adviser at the end of each calendar month, an investment management fee for
each Portfolio computed by applying the following annual rates to the applicable
average daily net assets of the Portfolio:
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Applicable Average
Daily Net Assets
(Thousands) Annual Rate
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$0 - $ 250,000 .58 of 1%
$ 250,000 - $ 1,000,000 .55 of 1%
$ 1,000,000 - $ 2,500,000 .53 of 1%
$ 2,500,000 - $ 5,000,000 .51 of 1%
$ 5,000,000 - $ 7,500,000 .48 of 1%
$ 7,500,000 - $10,000,000 .46 of 1%
$10,000,000 - $12,500,000 .44 of 1%
Over $12,500,000 .42 of 1%
The fee as computed above shall be computed separately for, and charged as
an expense of, each Portfolio based upon the average daily net assets of such
Portfolio. For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during the month and year, respectively.
4. The services of the Adviser to the Fund under this Agreement are not to be
deemed exclusive, and the Adviser shall be free to render similar services or
other services to others so long as its services hereunder are not impaired
thereby.
5. In addition to the fee of the Adviser, the Fund shall assume and pay any
expenses for services rendered by a custodian for the safekeeping of the Fund's
securities or other property, for keeping its books of account, for any other
charges of the custodian, and for calculating the net asset value of the Fund as
provided in the prospectus of the Fund. The Adviser shall not be required to pay
and the Fund shall assume and pay the charges and expenses of its operations,
including compensation of the trustees (other than those affiliated with the
Adviser), charges and expenses of independent auditors, of legal counsel, of any
transfer or dividend disbursing agent, and of any registrar of the Fund, costs
of acquiring and disposing of portfolio securities, interest, if any, on
obligations incurred by the Fund, costs of share certificates and of reports,
membership dues in the Investment Company Institute or any similar organization,
costs of reports and notices to shareholders, other like miscellaneous expenses
and all taxes and fees payable to federal, state or other governmental agencies
on account of the registration of securities issued by the Fund, filing of trust
documents or otherwise. The Fund shall not pay or incur any obligation for any
expenses for which the Fund intends to seek reimbursement from the Adviser as
herein provided without first
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obtaining the written approval of the Adviser. The Adviser shall arrange, if
desired by the Fund, for officers or employees of the Adviser to serve, without
compensation from the Fund, as trustees, officers or agents of the Fund if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law.
If expenses borne by the Fund for those Portfolios which the Adviser
manages in any fiscal year (including the Adviser's fee, but excluding interest,
taxes, fees incurred in acquiring and disposing of portfolio securities,
distribution services fees, extraordinary expenses and any other expenses
excludable under state securities law limitations) exceed any applicable
limitation arising under state securities laws, the Adviser will reduce its fee
or reimburse the Fund for any excess to the extent required by such state
securities laws. If for any month the expenses of the Fund properly chargeable
to the income account shall exceed 1/12 of the percentage of average net assets
allowable as expenses, the payment to the Adviser for that month shall be
reduced and if necessary the Adviser shall make a refund payment to the Fund so
that the total net expense will not exceed such percentage. As of the end of the
Fund's fiscal year, however, the foregoing computations and payments shall be
readjusted so that the aggregate compensation payable to the Adviser for the
year is equal to the percentage calculated in accordance with Section 3 hereof
of the average net asset value as determined as described herein throughout the
fiscal year, diminished to the extent necessary so that the total of the
aforementioned expense items of the Fund shall not exceed the expense
limitation. The aggregate of repayments, if any, by the Adviser to the Fund for
the year shall be the amount necessary to limit the said net expense to said
percentage in accordance with the foregoing.
The net asset value for each Portfolio shall be calculated in accordance
with the provisions of the Fund's prospectus or as the trustees may determine in
accordance with the provisions of the Investment Company Act of 1940. On each
day when net asset value is not calculated, the net asset value of a Portfolio
shall be deemed to be the net asset value of such Portfolio as of the close of
business on the last day on which such calculation was made for the purpose of
the foregoing computations.
6. Subject to applicable statutes and regulations, it is understood that
trustees, officers or agents of the Fund are or may be interested in the Adviser
as officers, directors, agents, shareholders or otherwise, and that the
officers, directors, shareholders and agents of the Adviser may be interested in
the Fund otherwise than as a trustee, officer or agent.
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7. The Adviser shall not be liable for any error of judgment or of law or for
any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Adviser in the performance of its
obligations and duties or by reason of its reckless disregard of its obligations
and duties under this Agreement.
8. This Agreement shall become effective with respect to the Initial Portfolio
on the date hereof and shall remain in full force until March 1, 1996, unless
sooner terminated as hereinafter provided. This Agreement shall continue in
force from year to year thereafter with respect to each Portfolio, but only as
long as such continuance is specifically approved for each Portfolio at least
annually in the manner required by the Investment Company Act of 1940 and the
rules and regulations thereunder; provided, however, that if the continuation of
this Agreement is not approved for a Portfolio, the Adviser may continue to
serve in such capacity for such Portfolio in the manner and to the extent
permitted by the Investment Company Act of 1940 and the rules and regulations
thereunder.
This Agreement shall automatically terminate in the event of its assignment
and may be terminated at any time without the payment of any penalty by the Fund
or by the Adviser on sixty (60) days written notice to the other party. The Fund
may effect termination with respect to any Portfolio by action of the Board of
Trustees or by vote of a majority of the outstanding voting securities of such
Portfolio.
This Agreement may be terminated with respect to any Portfolio 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 such Portfolio in the event
that it shall have been established by a court of competent jurisdiction that
the Adviser or any officer or director of the Adviser has taken any action which
results in a breach of the covenants of the Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act of
1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation described in Section
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9. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
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10. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
11. All parties hereto are expressly put on notice of the Fund's Agreement and
Declaration of Trust and all amendments thereto, all of which are on file with
the Secretary of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This Agreement has been
executed by and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of the Fund hereunder
are not binding upon any of the trustees, officers, or shareholders of the Fund
individually but are binding upon only the assets and property of the Fund. With
respect to any claim by the Adviser for recovery of that portion of the
investment management fee (or any other liability of the Fund arising hereunder)
allocated to a particular Portfolio, whether in accordance with the express
terms hereof or otherwise, the Adviser shall have recourse solely against the
assets of that Portfolio to satisfy such claim and shall have no recourse
against the assets of any other Portfolio for such purpose.
12. This Agreement shall be construed in accordance with applicable federal law
and (except as to Section 11 hereof which shall be construed in accordance with
the laws of The Commonwealth of Massachusetts) the laws of the State of
Illinois.
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13. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed as of the day and year first above written.
XXXXXX DIVERSIFIED INCOME FUND
By: /s/ Xxxx X. Xxxxxx
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Title: Vice President
ATTEST:
/s/ Xxxxxx X. Xxxxxxx
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Title: Secretary
XXXXXX FINANCIAL SERVICES, INC.
By: /s/ Xxxxxxx Xxxxxxx
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Title: Senior Vice President
ATTEST:
/s/ Xxxxx X. Xxxxxxxxxxx
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Title: Assistant Secretary
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