INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
X. XXXX PRICE STATE TAX-FREE INCOME TRUST
AND
X. XXXX PRICE ASSOCIATES, INC.
INVESTMENT MANAGEMENT AGREEMENT, made as of the 7th day of February, 2001,
by and between X. XXXX PRICE STATE TAX-FREE INCOME TRUST, a Massachusetts
business trust (the "Trust"), and X. XXXX PRICE ASSOCIATES, INC., a corporation
organized and existing under the laws of the State of Maryland (hereinafter
called the "Manager").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered as such under the federal Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
("Shares") in the Maryland Tax-Free Money Fund (the "Fund"), a separate series
of the Trust whose Shares represent interests in a separate portfolio of
securities and other assets ("Fund Shares"); and
WHEREAS, the Manager is engaged principally in the business of rendering
investment supervisory services and is registered as an investment adviser under
the federal Investment Advisers Act of 1940, as amended; and
WHEREAS, the Fund desires the Manager to render investment supervisory
services to the Fund in the manner and on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
1. DUTIES AND RESPONSIBILITIES OF MANAGER.
A.
INVESTMENT ADVISORY SERVICES. The Manager shall act as investment manager and
shall supervise and direct the investments of the Fund in accordance with the
Fund's investment objective, program and restrictions as provided in the Trust's
prospectus, on behalf of the Fund, as amended from time to time, and such other
limitations as the Trust may impose by notice in writing to the Manager. The
Manager shall obtain and evaluate such information relating to the economy,
PAGE 24
industries, businesses, securities markets and securities as it may deem
necessary or useful in the discharge of its obligations hereunder and shall
formulate and implement a continuing program for the management of the assets
and resources of the Fund in a manner consistent with its investment objective.
In furtherance of this duty, the Manager, as agent and attorney-in-fact with
respect to the Trust, is authorized, in its discretion and without prior
consultation with the Trust, to:
(i)
buy, sell, exchange, convert, lend, and otherwise trade in any stocks, bonds,
and other securities or assets; and
(ii)
place orders and negotiate the commissions (if any) for the execution of
transactions in securities with or through such brokers, dealers, underwriters
or issuers as the Manager may select.
B.
FINANCIAL, ACCOUNTING, AND ADMINISTRATIVE SERVICES. The Manager shall maintain
the existence and records of the Trust; maintain the registrations and
qualifications of Fund Shares under federal and state law; monitor the
financial, accounting, and administrative functions of the Fund; maintain
liaison with the various agents employed for the benefit of the Fund by the
Trust (including the Trust's transfer agent, custodian, independent accountants
and legal counsel) and assist in the coordination of their activities on behalf
of the Fund.
C.
REPORTS TO FUND. The Manager shall furnish to or place at the disposal of the
Trust or Fund, as appropriate, such information, reports, evaluations, analyses
and opinions as they may, at any time or from time to time, reasonably request
or as the Manager may deem helpful.
D.
REPORTS AND OTHER COMMUNICATIONS TO SHAREHOLDERS. The Manager shall assist in
developing all general shareholder communications, including regular shareholder
reports.
E.
FUND PERSONNEL. The Manager agrees to permit individuals who are officers or
employees of the Manager to serve (if duly elected or appointed) as officers,
trustees, members of any committee of trustees, members of any advisory board,
or members of any other committee of the Trust, without remuneration or other
cost to the Fund or the Trust.
F.
PERSONNEL, OFFICE SPACE, AND FACILITIES OF MANAGER. The Manager at its own
expense shall furnish or provide and pay the cost of such office space, office
equipment, office personnel, and office services as the Manager requires in the
performance of its investment advisory and other obligations under this
Agreement.
2. ALLOCATION OF EXPENSES.
A. EXPENSES PAID BY MANAGER.
(1)
SALARIES AND FEES OF OFFICERS. The Manager shall pay all salaries, expenses, and
fees of the officers and trustees of the Trust who are affiliated with the
Manager.
(2)
ASSUMPTION OF EXPENSES BY MANAGER. The payment or assumption by the Manager of
any expense of the Trust or Fund, as appropriate, that the Manager is not
required by
PAGE 25
this Agreement to pay or assume shall not obligate the Manager to pay or assume
the same or any similar expense on any subsequent occasion.
B.EXPENSES PAID BY FUND. The Trust or Fund, as appropriate, shall bear all
expenses of its organization, operations, and business not specifically assumed
or agreed to be paid by the Manager as provided in this Agreement. In
particular, but without limiting the generality of the foregoing, the Trust or
Fund, as appropriate, shall pay:
(1)CUSTODY AND ACCOUNTING SERVICES. All expenses of the transfer, receipt,
safekeeping, servicing and accounting for the cash, securities, and other
property of the Trust, for the benefit of the Fund, including all charges of
depositories, custodians, and other agents, if any;
(2)
SHAREHOLDER SERVICING. All expenses of maintaining and servicing shareholder
accounts, including all charges for transfer, shareholder recordkeeping,
dividend disbursing, redemption, and other agents for the benefit of the Fund,
if any;
(3)SHAREHOLDER COMMUNICATIONS. All expenses of preparing, setting in type,
printing, and distributing reports and other communications to shareholders;
(4)SHAREHOLDER MEETINGS. All expenses incidental to holding meetings of
shareholders, including the printing of notices and proxy material, and proxy
solicitation therefor;
(5)
PROSPECTUSES. All expenses of preparing, setting in type, and printing of annual
or more frequent revisions of the prospectus and of mailing them to
shareholders;
(6)PRICING. All expenses of computing the Fund's net asset value per share,
including the cost of any equipment or services used for obtaining price
quotations;
(7)COMMUNICATION EQUIPMENT. All charges for equipment or services used for
communication between the Manager or the Trust or Fund and the custodian,
transfer agent or any other agent selected by the Trust;
(8)
LEGAL AND ACCOUNTING FEES AND EXPENSES. All charges for services and expenses of
the Trust's legal counsel and independent auditors for the benefit of the Fund;
(9)
TRUSTEES' FEES AND EXPENSES. All compensation of trustees, other than those
affiliated with the Manager, and all expenses incurred in connection with their
service;
(10)
FEDERAL REGISTRATION FEES. All fees and expenses of registering and maintaining
the registration of the Trust under the Act and the registration of Fund Shares
under the Securities Act of 1933, as amended (the "'33 Act"), including all fees
and expenses incurred in connection with the preparation, setting in type,
printing, and filing of any registration statement and prospectus under the '33
Act or the Act, and any amendments or supplements that may be made from time to
time;
(11)
STATE REGISTRATION FEES. All fees and expenses of qualifying and maintaining
qualification of the Trust or Fund, as appropriate, and of Fund Shares for sale
under securities laws
PAGE 26
of various states or jurisdictions, and of registration and qualification of the
Trust or Fund, as appropriate, under all other laws applicable to the Trust or
Fund, as appropriate, or its business activities (including registering the
Trust as a broker-dealer, or any officer of the Trust or any person as agent or
salesman of the Trust in any state);
(12)
ISSUE AND REDEMPTION OF FUND SHARES. All expenses incurred in connection with
the issue, redemption, and transfer of Fund Shares, including the expense of
confirming all Fund Share transactions;
(13)
BONDING AND INSURANCE. All expenses of bond, liability, and other insurance
coverage required by law or deemed advisable by the board of trustees;
(14)
BROKERAGE COMMISSIONS. All brokers' commissions and other charges incident to
the purchase, sale, or lending of the Fund's portfolio securities;
(15)
TAXES. All taxes or governmental fees payable by or with respect of the Trust or
Fund, as appropriate, to federal, state, or other governmental agencies,
domestic or foreign, including stamp or other transfer taxes;
(16)TRADE ASSOCIATION FEES. All fees, dues, and other expenses incurred in
connection with the Trust's or Fund's, as appropriate, membership in any trade
association or other investment organization; and
(17)
NONRECURRING AND EXTRAORDINARY EXPENSES. Such nonrecurring expenses as may
arise, including the costs of actions, suits, or proceedings to which the Trust
or Fund, as appropriate, is a party and the expenses the Trust or Fund, as
appropriate, may incur as a result of its legal obligation to provide
indemnification to its officers, trustees, and agents.
3.
MANAGEMENT FEE. The Fund shall pay the Manager a fee ("Fee") which will consist
of two components: a Group Management Fee ("Group Fee"), and an Individual Fund
Fee ("Fund Fee"). The Fee shall be paid monthly to the Manager on the first
business day of the next succeeding calendar month and shall be calculated as
follows:
A.
GROUP FEE. The monthly Group Fee ("Monthly Group Fee") shall be the sum of the
daily Group Fee accruals ("Daily Group Fee Accruals") for each month. The Daily
Group Fee Accrual for any particular day will be computed by multiplying the
Price Funds' group fee accrual as determined below ("Daily Price Funds' Group
Fee Accrual") by the ratio of the Fund's net assets for that day to the sum of
the aggregate net assets of the Price Funds for that day. The Daily Price Funds'
Group Fee Accrual for any particular day shall be calculated by multiplying the
fraction of one (1) over the number of calendar days in the year by the
annualized Daily Price Funds' Group Fee Accrual for that day as determined in
accordance with the following schedule:
Price Funds Annual Group
Base Fee Rate for Each Level of Assets
________________________________________
0.480% First $1 billion
PAGE 27
0.450% Next $1 billion
0.420% Next $1 billion
0.390% Next $1 billion
0.370% Next $1 billion
0.360% Next $2 billion
0.350% Next $2 billion
0.340% Next $5 billion
0.330% Next $10 billion
0.320% Next $10 billion
0.310% Next $16 billion
0.305% Next $30 billion
0.300% Next $40 billion
0.295% Thereafter
The Price Funds shall include all the mutual funds distributed by X. Xxxx Price
Investment Services, Inc., excluding institutional or private label mutual
funds. For the purpose of calculating the Daily Price Funds' Group Fee Accrual
for any particular day, the net assets of each Price Fund shall be determined in
accordance with the Fund's prospectus as of the close of business on the
previous business day on which the Fund was open for business.
B.
FUND FEE. The monthly Fund Fee ("Monthly Fund Fee") shall be the sum of the
daily Fund Fee accruals ("Daily Fund Fee Accruals") for each month. The Daily
Fund Fee Accrual for any particular day will be computed by multiplying the
fraction of one (1) over the number of calendar days in the year by the Fund Fee
Rate of 0.10% and multiplying this product by the net assets of the Fund for
that day, as determined in accordance with the Fund's prospectus as of the close
of business on the previous business day on which the Fund was open for
business.
C.
EXPENSE LIMITATION. As part of the consideration for the Fund entering into this
Agreement, the Manager hereby agrees to limit the aggregate expenses of every
character incurred by the Fund, including but not limited to Fees of the Manager
computed as hereinabove set forth, but excluding interest, taxes, brokerage, and
other expenditures which are capitalized in accordance with generally accepted
accounting principles and extraordinary expenses, ("Manager Limitation"). Under
the Manager Limitation, the Manager agrees that through February 28, 2003, such
expenses shall not exceed 0.55% of the average daily net assets of the Fund
("0.55% Expense Limitation"). To determine the Manager's liability for the
Fund's expenses over the 0.55% Expense Limitation, the amount of allowable year
to date expenses shall be computed daily by pro rating the 0.55% Expense
Limitation based on the number of days elapsed within the fiscal year of the
Fund, or limitation period, if shorter ("Pro Rated Limitation"). The Pro Rated
Limitation shall be compared to the expenses of the Fund recorded through the
prior day in order to produce the allowable expenses to be recorded for the
current day ("Allowable Expenses"). If the Fund's Management Fee and other
expenses for the current day exceed the Allowable Expenses, the Management Fee
for the current day shall be reduced by such excess ("Unaccrued Fees"). In the
event the excess exceeds the amount due as the Management Fee, the Manager shall
be responsible to the Fund for the additional excess ("Other Expenses Exceeding
Limit"). If at any time up through and including February 28, 2003, the Fund's
Management Fee and other expenses for the current day are less than the
Allowable Expenses, the differential shall be due to the Manager as payment of
cumulative Unaccrued Fees (if any) or as payment for cumulative Other Expenses
PAGE 28
Exceeding Limit (if any). If cumulative Unaccrued Fees or cumulative Other
Expenses Exceeding Limit remain at February 28, 2003, these amounts shall be
paid to the Manager in the future provided that: (1) no such payment shall be
made to the Manager after February 28, 2005; and (2) such payment shall only be
made to the extent that it does not result in the Fund's aggregate expenses
exceeding an expense limit of 0.55% of average daily net assets. The Manager may
voluntarily agree to an additional expense limitation (any such additional
expense limitation hereinafter referred to as an "Additional Expense
Limitation"), at the same or a different level and for the same or a different
period of time beyond February 28, 2003 (any such additional period being
hereinafter referred to an as "Additional Period") provided, however, that: (1)
the calculations and methods of payment shall be as described above; (2) no
payment for cumulative Unaccrued Fees or cumulative Other Expenses Exceeding
Limit shall be made to the Manager more than two years after the end of an
Additional Period; and (3) payment for cumulative Unaccrued Fees or cumulative
Other Expenses Exceeding Limit after the expiration of the Additional Period
shall only be made to the extent it does not result in the Fund's aggregate
expenses exceeding the Additional Expense Limitation to which the unpaid amounts
relate.
D.
PRORATION OF FEE. If this Agreement becomes effective or terminates before the
end of any month, the Fee for the period from the effective date to the end of
such month or from the beginning of such month to the date of termination, as
the case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
4.
BROKERAGE. Subject to the approval of the board of trustees, the Manager, in
carrying out its duties under Paragraph 1.A., may cause the Trust, with respect
to the Fund, to pay a broker-dealer which furnishes brokerage or research
services [as such services are defined under Section 28(e) of the Securities
Exchange Act of l934, as amended (the "'34 Act")], a higher commission than that
which might be charged by another broker-dealer which does not furnish brokerage
or research services or which furnishes brokerage or research services deemed to
be of lesser value, if such commission is deemed reasonable in relation to the
brokerage and research services provided by the broker-dealer, viewed in terms
of either that particular transaction or the overall responsibilities of the
Manager with respect to the accounts as to which it exercises investment
discretion (as such term is defined under Section 3(a)(35) of the '34 Act).
5.
MANAGER'S USE OF THE SERVICES OF OTHERS. The Manager may (at its cost except as
contemplated by Paragraph 4 of this Agreement) employ, retain or otherwise avail
itself of the services or facilities of other persons or organizations for the
purpose of providing the Manager or the Trust or Fund, as appropriate, with such
statistical and other factual information, such advice regarding economic
factors and trends, such advice as to occasional transactions in specific
securities or such other information, advice or assistance as the Manager may
deem necessary, appropriate or convenient for the discharge of its obligations
hereunder or otherwise helpful to the Trust or Fund, as appropriate, or in the
discharge of Manager's overall responsibilities with respect to the other
accounts which it serves as investment manager.
6.
OWNERSHIP OF RECORDS. All records required to be maintained and preserved by the
Trust or Fund pursuant to the provisions of rules or regulations of the
Securities and Exchange Commission under Section 31(a) of the Act and maintained
and preserved by the Manager on
PAGE 29
behalf of the Trust or Fund, as appropriate, are the property of the Trust or
Fund, as appropriate, and will be surrendered by the Manager promptly on request
by the Trust or Fund, as appropriate.
7.REPORTS TO MANAGER. The Trust or Fund, as appropriate, shall furnish or
otherwise make available to the Manager such prospectuses, financial statements,
proxy statements, reports, and other information relating to the business and
affairs of the Trust or Fund, as appropriate, as the Manager may, at any time or
from time to time, reasonably require in order to discharge its obligations
under this Agreement.
8.
SERVICES TO OTHER CLIENTS. Nothing herein contained shall limit the freedom of
the Manager or any affiliated person of the Manager to render investment
supervisory and corporate administrative services to other investment companies,
to act as investment manager or investment counselor to other persons, firms or
corporations, or to engage in other business activities; but so long as this
Agreement or any extension, renewal or amendment hereof shall remain in effect
or until the Manager shall otherwise consent, the Manager shall be the only
investment manager to the Fund.
9.
LIMITATION OF LIABILITY OF MANAGER. Neither the Manager nor any of its officers,
directors, or employees, nor any person performing executive, administrative,
trading, or other functions for the Trust or Fund (at the direction or request
of the Manager) or the Manager in connection with the Manager's discharge of its
obligations undertaken or reasonably assumed with respect to this Agreement,
shall be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust or Fund in connection with the matters to which this
Agreement relates, except for loss resulting from willful misfeasance, bad
faith, or gross negligence in the performance of its or his duties on behalf of
the Trust or Fund or from reckless disregard by the Manager or any such person
of the duties of the Manager under this Agreement.
10.
LIMITATION OF LIABILITY OF TRUST. The term "X. Xxxx Price State Tax-Free Income
Trust" means and refers to the trustees from time to time serving under the
Master Trust Agreement (Declaration of Trust) of the Trust dated June 13, 1986,
as the same may subsequently thereto have been, or subsequently hereto be,
amended. It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust, as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement have been authorized by the trustees
and shareholders of the Trust and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such trustees and shareholders
nor such execution and delivery by such officer shall be deemed to have been
made by any of them but shall bind only the trust property of the Trust as
provided in its Declaration of Trust.
11.
USE OF MANAGER'S NAME. The Trust or Fund may use the name "X. Xxxx Price State
Tax-Free Income Trust" or any other name derived from the name "X. Xxxx Price"
only for so long as this Agreement or any extension, renewal or amendment hereof
remains in effect, including any similar agreement with any organization which
shall have succeeded to the business of the Manager as investment manager. At
such time as this Agreement or any extension, renewal or amendment hereof, or
such other similar agreement shall no longer be in effect, the Trust or Fund
will (by corporate action, if necessary) cease to use any name derived from the
name "X. Xxxx Price," any name similar thereto or any other name indicating that
it is advised by or
PAGE 30
otherwise connected with the Manager, or with any organization which shall have
succeeded to the Manager's business as investment manager.
12.
TERM OF AGREEMENT. The term of this Agreement shall begin on the date first
above written, and unless sooner terminated as hereinafter provided, this
Agreement shall remain in effect through April 30, 2002. Thereafter, this
Agreement shall continue in effect from year to year, with respect to the Fund,
subject to the termination provisions and all other terms and conditions hereof,
so long as: (a) such continuation shall be specifically approved at least
annually by the board of trustees of the Trust, or by vote of a majority of the
outstanding voting securities of the Fund, and, concurrently with such approval
by the board of trustees or prior to such approval by the holders of the
outstanding voting securities of the Fund, as the case may be, 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 Trust, with respect to the Fund, who are not
parties to this Agreement or interested persons of any such party; and (b) the
Manager shall not have notified the Trust, in writing, at least 60 days prior to
April 30, 2002 or prior to April 30th of any year thereafter, that it does not
desire such continuation. The Manager shall furnish to the Trust, promptly upon
its request, such information as may reasonably be necessary to evaluate the
terms of this Agreement or any extension, renewal or amendment hereof.
13.
AMENDMENT AND ASSIGNMENT OF AGREEMENT. This Agreement may not be amended or
assigned without the affirmative vote of a majority of the outstanding voting
securities of the Fund, and this Agreement shall automatically and immediately
terminate in the event of its assignment.
14.
TERMINATION OF AGREEMENT. This Agreement may be terminated by either party
hereto, without the payment of any penalty, upon 60 days' prior notice in
writing to the other party; provided, that in the case of termination by the
Trust, with respect to the Fund, such action shall have been authorized by
resolution of a majority of the trustees who are not parties to this Agreement
or interested persons of any such party, or by vote of a majority of the
outstanding voting securities of the Fund.
15. MISCELLANEOUS.
A.CAPTIONS. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
B.
INTERPRETATION. Nothing herein contained shall be deemed to require the Trust to
take any action contrary to its Master Trust Agreement or By-Laws, or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the board of trustees of the Trust
of its responsibility for and control of the conduct of the affairs of the Fund.
C.
DEFINITIONS. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the Act shall be resolved by reference to such term or provision of the Act
and to interpretations thereof, if any, by the United States courts or, in the
absence of any controlling decision of any such court, by
PAGE 31
rules, regulations or orders of the Securities and Exchange Commission validly
issued pursuant to the Act. Specifically, the terms "vote of a majority of the
outstanding voting securities," "interested person," "assignment," and
"affiliated person," as used in Paragraphs 2, 8, 11, 12, and 13 hereof, shall
have the meanings assigned to them by Section 2(a) of the Act. In addition,
where the effect of a requirement of the Act reflected in any provision of this
Agreement is relaxed by a rule, regulation or order of the Securities and
Exchange Commission, whether of special or of general application, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
Attest: X. XXXX PRICE STATE TAX-FREE INCOME TRUST
________________________ By: ______________________
Xxxxxxxx X. Xxxxxxx, President
Attest: X. XXXX PRICE ASSOCIATES, INC.
______________________ By: _______________________
Xxxxxxx X. Xxx Xxxx,
Secretary
