INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 31st day of May, 1997, and amended as of April 30,
1998 and May 1, 2001, by and between Active Assets Tax-Free Trust, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter called the "Fund"), and Xxxxxx Xxxxxxx Xxxx Xxxxxx
Advisors Inc., a Delaware corporation (hereinafter called the "Investment
Manager"):
WHEREAS, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, The Investment Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser; and
WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, The Investment Manager desires to be retained to perform services
on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment manager
of the Fund and, subject to the supervision of the Trustees, to supervise the
investment activities of the Fund as hereinafter set forth. Without limiting the
generality of the foregoing, the Investment Manager shall obtain and evaluate
such information and advice relating to the economy, securities markets and
securities as it deems necessary or useful to discharge its duties hereunder;
shall continuously manage the assets of the Fund in a manner consistent with the
investment objectives and policies of the Fund; shall determine the securities
to be purchased, sold or otherwise disposed of by the Fund and the timing of
such purchases, sales and dispositions; and shall take such further action,
including the placing of purchase and sale orders on behalf of the Fund, as the
Investment Manager shall deem necessary or appropriate. The Investment Manager
shall also furnish to or place at the disposal of the Fund such of the
information, evaluations, analyses and opinions formulated or obtained by the
Investment Manager in the discharge of its duties as the Fund may, from time to
time, reasonably request.
2. The Investment Manager shall, at its own expense, maintain such staff and
employ or retain such personnel and consult with such other persons as it shall
from time to time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Investment Manager shall be deemed to
include persons employed or otherwise retained by the Investment Manager to
furnish statistical and other factual data, advice regarding economic factors
and trends, information with respect to technical and scientific developments,
and such other information, advice and assistance as the Investment Manager may
desire. The Investment Manager shall, as agent for the Fund, maintain the Fund's
records and books of account (other than those maintained by the Fund's transfer
agent, registrar, custodian and other agents). All such books and records so
maintained shall be the property of the Fund and, upon request therefor, the
Investment Manager shall surrender to the Fund such of the books and records so
requested.
3. The Fund will, from time to time, furnish or otherwise make available to the
Investment Manager such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the Investment
Manager may reasonably require in order to discharge its duties and obligations
hereunder.
4. The Investment Manager shall bear the cost of rendering the investment
management and supervisory services to be performed by it under this Agreement,
and shall, at its own expense, pay the compensation of the officers and
employees, if any, of the Fund who are also directors, officers or employees of
the
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Investment Manager and provide such office space and equipment and such clerical
and bookkeeping services as the Fund shall reasonably require in the conduct of
its business. The Investment Manager shall also bear the cost of telephone
service, heat, light, power and other utilities provided to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other expenses of the
Fund, including without limitation: the charges and expenses of any registrar,
any custodian or depository appointed by the Fund for the safekeeping of its
cash, portfolio securities and other property, and any stock transfer or
dividend agent or agents appointed by the Fund; brokers' commissions chargeable
to the Fund in connection with portfolio securities transactions to which the
Fund is a party; all taxes, including securities issuance and transfer taxes,
and fees payable by the Fund to Federal, State or other governmental agencies;
the cost and expense of engraving or printing share certificates representing
shares of the Fund; all costs and expenses in connection with the registration
and maintenance of registration of the Fund and its shares with the Securities
and Exchange Commission and various states and other jurisdictions (including
filing fees and legal fees and disbursements of counsel); the cost and expense
of printing (including typesetting) and distributing prospectuses of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing
proxy statements and reports to shareholders; fees and travel expenses of
Trustees or members of any advisory board or committee who are not employees of
the Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Trustees of the Fund who are not interested
persons (as defined in the Act) of the Fund or the Investment Manager, and of
independent auditors in connection with any matter relating to the Fund;
membership dues of the Investment Company Institute; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Trustees) of the Fund which inure to its benefit; extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other charges
and costs of the Fund's operation unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and the expenses
assumed by the Investment Manager, the Fund shall pay to the Investment Manager
monthly compensation determined by applying the following annual rates to the
Fund's daily net assets: 0.50% of the portion of the daily net assets not
exceeding $500 million; 0.425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.375% of the portion of the daily
net assets exceeding $750 million but not exceeding $1 billion; 0.350% of the
portion of the daily net assets exceeding $1 billion but not exceeding
$1.5 billion; 0.325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.30% of the portion of the daily net
assets exceeding $2 billion but not exceeding $2.5 billion; 0.275% of the
portion of the daily net assets exceeding $2.5 billion but not exceeding
$3 billion; 0.250% of the portion of the daily net assets exceeding $3 billion
but not exceeding $15 billion; and 0.249% of the portion of the daily net assets
exceeding $15 billion. Except as hereinafter set forth, compensation under this
Agreement shall be calculated and accrued daily and the amounts of the daily
accruals shall be paid monthly. Such calculations shall be made by applying
1/365ths of the annual rates to the Fund's net assets each day determined as of
the close of business on that day or the last previous business day. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth above. Subject to the provisions of
paragraph 7 hereof, payment of the Investment Manager's compensation for the
preceding month shall be made as promptly as possible after completion of the
computation contemplated by paragraph 7 hereof.
7. In the event the operating expenses of the Fund, including amounts payable to
the Investment Manager pursuant to paragraph 6 hereof, for any fiscal year
ending on a date on which this Agreement is in effect, exceed the expense
limitations applicable to the Fund imposed by state securities laws or
regulations thereunder, as such limitations may be raised or lowered from time
to time, the Investment Manager shall reduce its management fee to the extent of
such excess and, if required, pursuant to any such laws or regulations, will
reimburse the Fund for annual operating expenses in excess of any expense
limitation that
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may be applicable; provided, however, there shall be excluded from such expenses
the amount of any interest, taxes, brokerage commissions and extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto) paid or payable by the
Fund. Such reduction, if any, shall be computed and accrued daily, shall be
settled on a monthly basis, and shall be based upon the expense limitation
applicable to the Fund as at the end of the last business day of the month.
Should two or more such expense limitations be applicable as at the end of the
last business day of the month, that expense limitation which results in the
largest reduction in the Investment Manager's fee shall be applicable.
For purposes of this provision, should any applicable expense limitation be
based upon the gross income of the Fund, such gross income shall include, but
not be limited to, interest on debt of fixed income securities in the Fund's
portfolio accrued to and including the last day of the Fund's fiscal year, and
dividends declared but not paid on any equity securities in the Fund's
portfolio, the record dates for which fall on or prior to the last day of such
fiscal year, but shall not include gains from the sales of securities.
8. The Investment Manager will use its best efforts in the supervision and
management of the investment activities of the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Investment Manager shall not be liable to the Fund or
any of its investors for any error of judgment or mistake of law or for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors.
9. Nothing contained in this Agreement shall prevent the Investment Manager or
any affiliated person of the Investment Manager from acting as investment
adviser or manager for any other person, firm or corporation and shall not in
any way bind or restrict the Investment Manager or any such affiliated person
from buying, selling or trading any securities or commodities for their own
accounts or for the account of others for whom they may be acting. Nothing in
this Agreement shall limit or restrict the right of any director, officer or
employee of the Investment Manager to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of any
other business whether of a similar or dissimilar nature.
10. This Agreement shall remain in effect until April 30, 2002 and from year to
year thereafter provided such continuance is approved at least annually by the
vote of holders of a majority (as defined in the Act) of the outstanding voting
securities of the Fund or by the Board of Trustees of the Fund; provided that in
either event such continuance is also approved annually by the vote of a
majority of the Trustees of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party, which vote must
be cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that (a) the Fund may, at any time and without the
payment of any penalty, terminate this Agreement upon thirty days' written
notice to the Investment Manager, either by majority vote of the Board of
Trustees of the Fund or by the vote of a majority of the outstanding voting
securities of the Fund; (b) this Agreement shall immediately terminate in the
event of its assignment (within the meaning of the Act) unless such automatic
termination shall be prevented by an exemptive order of the Securities and
Exchange Commission; and (c) the Investment Manager may terminate this Agreement
without payment of penalty on thirty days' written notice to the Fund. Any
notice under this Agreement shall be given in writing, addressed and delivered,
or mailed post-paid, to the other party at the principal office of such party.
11. This Agreement may be amended by the parties without the vote or consent of
shareholders of the Fund to supply any omission, to cure, correct or supplement
any ambiguous, defective or inconsistent provision hereof, or if they deem it
necessary to conform this Agreement to the requirements of applicable federal
laws or regulations, but neither the Fund nor the Investment Manager shall be
liable for failing to do so.
12. This Agreement shall be construed in accordance with the law of the State of
New York and the applicable provisions of the Act. To the extent the applicable
law of the State of New York, or any of the provisions herein, conflicts with
the applicable provisions of the Act, the latter shall control.
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13. The Declaration of Trust establishing Active Assets Tax-Free Trust, dated
March 27, 1981, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name Active Assets Tax-Free Trust refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of Active
Assets Tax-Free Trust shall be held to any personal liability, nor shall resort
be had to their private property for the satisfaction of any obligation or claim
or otherwise, in connection with the affairs of said Active Assets Tax-Free
Trust, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on May 1, 2001 on the day and year first above written in
New York, New York.
ACTIVE ASSETS TAX-FREE TRUST
By: /s/ XXXXX XXXX
......................................
Xxxxx Xxxx
Attest:
/s/ XXXX XXXX
......................................
Xxxx Xxxx
XXXXXX XXXXXXX XXXX XXXXXX ADVISORS
INC.
By: /s/ XXXXXXXX X. XXXXX
......................................
Xxxxxxxx X. Xxxxx
Attest:
/s/ XXXXXXX X. XXXXXXX
......................................
Xxxxxxx X. Xxxxxxx
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