XXXXXX HIGH QUALITY BOND FUND
(FORMERLY, PUTNAM FEDERAL
INCOME TRUST)
MANAGEMENT CONTRACT
Management Contract dated as of April 2,
1998
between XXXXXX HIGH QUALITY BOND 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 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
the 1940 Act; the term "specifically
approve at least annually" shall be
construed in a manner consistent with the
1940 Act; 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
21, 1988.
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 HIGH
QUALITY
BOND 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 HIGH
QUALITY BOND FUND
/s/ Xxxxxxx
X. Xxxxxx By: --
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Xxxxxxx X.
Xxxxxx
Executive
Vice
President
XXXXXX
INVESTMENT MANAGEMENT, INC.
/s/ Xxxxxx
X. Silver By: -
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Xxxxxx X.
Silver
Senior Managing Directo r
