INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
Agreement dated December 11, 1996, between KEYSTONE TAX FREE FUND, a
Massachusetts business trust organized under a Declaration of Trust dated June
20, 1985 (the "Fund"), and KEYSTONE INVESTMENT MANAGEMENT COMPANY, a Delaware
corporation (the "Company").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE COMPANY TO THE FUND.
The Company will provide investment management and other services to the
Fund as specified below.
A. In providing investment management services to the Fund, the Company
will determine from time to time what securities shall be acquired, held or
disposed of and what portion of the assets of the Fund shall be held
uninvested. Should the Board of Trustees of the Fund at any time, however,
notify the Company in writing of any portfolio transaction to be made or not
to be made or any investment policy to be followed by the Fund, the Company
shall be obliged to follow such direction or such investment policies for the
period, if any, specified in such notice or until the Company has received
written notice that such investment policy is no longer to be followed. The
Company shall take, on behalf of the Fund, all actions which it deems
necessary to implement the investment policies of the Fund, and in particular
shall place all orders for the purchase, sale or loan of portfolio securities
for the Fund's account with brokers or dealers or others selected by it, and
to that end the Company is authorized to give instructions to the custodian of
the Fund's assets as to deliveries of securities and payments of cash for the
account of the Fund. In the placement of such orders and the selection of
brokers or dealers, the Company shall conform to the Fund's policies
concerning such matters as may be from time to time determined by the Board of
Trustees of the Fund or set forth in the Fund's most recent prospectus under
the Securities Act of 1933. In the performance of these duties, the Company
will use its best efforts to safeguard and promote the welfare of the Fund.
However, nothing in this agreement shall be construed to constitute the
Company as an agent of the Fund.
B. The Company, at its own expense, shall furnish to the Fund office space
in the offices of the Company or in such other place as may be agreed upon
from time to time, and all necessary office facilities, equipment and
personnel for managing the affairs of the Fund, and shall arrange, if desired
by the Fund, for members of the Company's organization to serve without
salaries from the Fund as officers and agents of the Fund.
C. At the request of the Board of Trustees of the Fund, the Company at its
own expense will provide or cause to be provided to the Fund the following
management and operating services, facilities and personnel (a) the officers
of the Fund and each Trustee of the Fund who is an affiliated person of the
Company or any investment adviser retained by the Company as contemplated in
Section 4; (b) determination from time to time of the value of the net assets
of the Fund, the keeping of its books and records and the safekeeping of its
cash, securities and other property; (c) auditors and accountants; (d)
transfer agents, dividend disbursing agents and registrars, including checks,
stationery and other supplies for the performance of such functions; (e)
insurance and membership in trade associations; (f) share certificates
representing shares of the Fund; (g) registration and maintenance of
registrations of the Fund and of its shares with various states and with the
Securities and Exchange Commission, including the preparation and printing of
prospectuses for filing with said Commission; (h) for shareholders' and
Trustees' meetings and the preparation, printing and mailing of reports and
other material to shareholders; (i) legal counsel in connection with the
Fund's existence, organization and financial structure and relations with its
shareholders, in connection with any of the foregoing items or otherwise, and
in connection with other legal matters with respect to which the Fund may
require and desire advice of legal counsel; and (j) all other services and
facilities, the expenses of which are not hereinafter specifically assumed by
the Fund, for the management of the investment and reinvestment of the assets
of the Fund, the offering and sale of the shares of the Fund and the
administration of the affairs of the Fund. The expense, charges, dues, fees
and other costs to be borne by the Company in providing or causing to be
provided to the Fund the services, facilities and personnel described in
clauses (b) through (i) are hereinafter referred to as the "Reimbursable
Expenses of the Company".
The additional management and operating services, facilities and personnel
required by clauses (b) through (i), of the immediately preceding paragraph
and the performance of the same shall be paid for solely by the Company, but
shall be at all times subject to the directions, instructions and requests of
the Board of Trustees of the Fund, including, without limitation, directions
as to the identity of the person or organization providing or performing the
same, the manner of performance and the rates of fees and charges of such
persons or organizations.
D. The Fund assumes and shall pay (1) brokers' commissions (which may be
higher than other brokers would charge if paid to a broker which provides
brokerage and research services to the Company or any investment adviser
retained by the Company as contemplated by Section 4 or any affiliate of
either, for use in rendering investment management, advisory or similar
services to the Fund or other clients of the Company, of such investment
adviser or of any affiliate of either); (2) issue and transfer taxes
chargeable to the Fund in connection with securities transactions to which the
Fund is a party; (3) its interest charges and all taxes and fees (not
hereinabove specifically required to be borne by the Company) payable by the
Fund to federal, state or other governmental agencies and (4) the compensation
of each Trustee of the Fund who is not an affiliated person of the Company or
any investment adviser retained by the Company as contemplated by Section 4.
E. The Company may delegate its obligation to provide all of the services
required hereunder to the Fund to an investment adviser as contemplated by
Section 4.
F. The services of the Company to the Fund hereunder are not to be deemed
exclusive, and the Company shall be free to render similar services to others
or to have any other business or management interests.
2. COMPENSATION TO BE PAID BY THE FUND TO THE COMPANY.
As compensation for the services, facilities and personnel which the
Company is to provide or cause to be provided pursuant to Section 1, the Fund
shall pay to the Company at the end of each calendar month (i) an amount
calculated as set forth below:
ANNUAL AGGREGATE NET ASSET VALUE
MANAGEMENT OF THE SHARES
FEE INCOME OF THE FUND
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2.0% of
Gross Dividend and
Interest Income
Plus
0.50% of the first $100,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of the next $100,000,000, plus
0.35% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $500,000,000;
and (ii) an amount equal to the amount of the Reimbursable Expenses of the
Company accrued during such calendar month.
Any other provision of this agreement to the contrary notwithstanding, the
total monthly compensation payable to the Company shall not exceed (i) the
largest amount which would not cause the Fund's expenses to exceed the lowest
applicable expense limitation imposed as of the beginning of the fiscal year
by any statute or any regulatory authority of any jurisdiction in which shares
of the Fund are qualified for offer and sale as such limitation is set forth
in the most recent notice furnished by the Company to the Fund not later than
the first day of the fiscal year or (ii) such lower percentage limit as the
Company may by written notice to the Fund declare to be effective for such
period of time as shall be stated in the notice. For purposes of clause (i) of
this paragraph, there shall be excluded from the "Fund's expenses" any amount
borne directly or indirectly by the Fund which is permitted to be excluded
from the computation of such limitation by such statute or regulatory
authority. If the Company shall serve under this agreement for less than the
whole of any calendar month, the foregoing compensation will be prorated. The
Company shall submit to the Fund detailed statements of all Reimbursable
Expenses of the Company promptly after the end of each such calendar month.
The Fund and its agents, accountants and employees shall have the right at
reasonable times during normal business hours to inspect the books and records
of the Company pertaining to such Reimbursable Expenses of the Company.
3. PUBLIC ACCOUNTANT'S REPORT.
The Fund's books and accounts shall be audited at least once each year by
a reputable, independent public accountant or organization of public
accountants who shall render a report to the Fund.
4. SUBADVISER.
The Company may enter into an agreement to retain at its own expense a
firm or firms ("SubAdviser") to provide the Fund all of the services to be
provided by the Company hereunder if such agreement is approved as required
by law. Such agreement may delegate to such SubAdviser all of the Company's
rights, obligations and duties hereunder.
5. INTERESTED AND AFFILIATED PERSONS.
Subject to and in accordance with the Declaration of Trust of the Fund,
the Articles of Incorporation of the Company and the governing documents of
any SubAdviser, it is understood that Trustees, officers, agents and
shareholders of the Fund or any Adviser are or may be interested in the
Company (or any successor thereof) as Directors and officers of the Company or
its affiliates, as stockholders of Keystone Investments, Inc. or otherwise;
that Directors, officers and agents of the Company and its affiliates or
stockholders of Keystone Investments, Inc. are or may be interested in the
Fund or any Adviser as Trustees, Directors, officers, shareholders or
otherwise; that the Company (or any such successor) is or may be interested in
the Fund or any SubAdviser as shareholder, or otherwise, and that the effect
of any such adverse interests shall be governed by said Declaration of Trust
of the Fund, Articles of Incorporation of the Company and governing documents
of any SubAdviser.
6. TERMINATION AND AMENDMENT.
This agreement shall continue in effect until December 10, 1998, after
which it will terminate unless its continuance after said date is specifically
approved at least annually by the vote of a majority of the Trustees of the
Fund who are not interested persons of the Fund or interested persons of the
Company (as defined in the Investment Company Act of 1940) cast in person at a
meeting called for the purpose of voting on such approval; provided, however,
that (1) this agreement may at any time be terminated without the payment of
any penalty either by the vote of the Board of Trustees of the Fund or by the
vote of a majority of the outstanding voting securities of the Fund, on 60
days' written notice to the Company, (2) this agreement shall immediately
terminate in the event of its assignment (within the meaning of the Investment
Company Act of 1940), and (3) this agreement may be terminated by the Company
on 90 days' written notice to the Fund. The aforesaid requirement that
continuance of this agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the Investment Company Act of
1940 and the Rules and Regulations thereunder. Any notice under this agreement
shall be given in writing, addressed and delivered, or mailed postpaid, to the
other party at any office of such party.
This agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by the vote of a majority of the outstanding voting securities of the
Fund and by the vote of a majority of the Trustees of the Fund who are not
interested persons of the Fund or interested persons of the Company (as
defined in the Investment Company Act of 1940) cast in person at a meeting
called for the purpose of voting on such approval.
7. LIABILITY OF THE COMPANY.
In the absence of willful misfeasance, bad faith or gross negligence on
the part of the Company, or of reckless disregard of its obligations and
duties hereunder, the Company shall not be subject to liability for any act or
omission in the course of, or connected with, rendering services hereunder.
The Fund agrees to indemnify and hold the Company harmless from all taxes,
charges, expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the Securities Act of 1933, the
Securities Exchange Act of 1934, the Investment Company Act of 1940, and any
state and foreign securities and blue sky laws, as amended from time to time)
and expenses, including (without limitation) attorneys' fees and
disbursements, arising directly or indirectly from any action or thing which
the Company takes or does or omits to take or do hereunder provided that the
Company shall not be indemnified against any liability to the Fund or to its
shareholders (or any expenses incident to such liability) arising out of a
breach of fiduciary duty with respect to the receipt of compensation for
services, willful misfeasance, bad faith, or gross negligence on the part of
the Company in the performance of its duties, or from reckless disregard by it
of its obligations and duties under this agreement.
8. DEFINITIONS.
For the purpose of this agreement the words: (1) "vote of a majority of
the outstanding voting securities of the Fund" mean the affirmative vote, at a
duly 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 or more than 50% of the outstanding
shares of the Fund are present in person or by proxy and entitled to vote at
such meeting, or (b) of the holders of more than 50% of the outstanding shares
of the Fund, whichever is less, and (2) the words "brokerage and research
services" shall have the meaning given in the Securities Exchange Act of 1934
and the Rules and Regulations thereunder.
A copy of the Declaration of Trust of the Fund is on file with the
Secretary 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 this instrument are not
binding upon the Trustees or holders of Shares of the Fund individually but
are binding only upon the assets and property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto authorized at Boston,
Massachusetts, on the day and year first above written.
KEYSTONE TAX FREE FUND
By: /s/ Xxxxxx X. Xxxxxxx
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Name: XXXXXX X. XXXXXXX
Title: Chairman of the Board
KEYSTONE INVESTMENT MANAGEMENT
COMPANY
By: /s/ Xxxxxxxx X. Van Antwerp
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Name: XXXXXXXX X. VAN ANTWERP
Title: Senior Vice President
