SPECIAL SERVICING AGREEMENT
THIS SPECIAL SERVICING AGREEMENT ("Agreement"), made as of this 1st day of
February, 1997, by and among AARP Managed Investment Portfolios Trust
("Managed"), each fund which is listed on Appendix A (as such Appendix may be
amended from time to time) and which evidences its agreement to be bound hereby
by executing a copy of this Agreement (such funds hereinafter called the
"Underlying Funds"), AARP Financial Services Company, Xxxxxxx, Xxxxxxx & Xxxxx,
Inc. ("SSC"), Xxxxxxx Service Corporation ("Xxxxxxx Service"), Xxxxxxx Fund
Accounting Corporation ("SFAC"), Xxxxxxx Trust Company ("STC") and Xxxxxxx
Investor Services, Inc. ("SIS").
W I T N E S S E T H:
WHEREAS, Managed and each of the Underlying Funds are registered as
open-end, diversified or non-diversified management investment companies under
the Investment Company Act of 1940, as amended;
WHEREAS, SSC has entered into a Member Services Agreement with AARP
Financial Services Company for the provision of advice and services to SSC
relating to investment by members of the American Association of Retired Persons
in Managed and the Underlying Funds;
WHEREAS, Managed and the Underlying Funds have each entered into agreements
with Xxxxxxx Service ("Service Agreements") under which Xxxxxxx Service provides
Managed and the Underlying Funds transfer agent services and various participant
account, participant employer record keeping and shareholder services in return
for such compensation as is set forth therein;
WHEREAS, Managed has entered into an agreement with SFAC, and each of the
Underlying Funds has either entered into an agreement, or intends to enter into
an agreement, with SFAC ("Sub-Accounting Agreements") for the provision of
sub-accounting and other services in return for such compensation as is set
forth therein;
WHEREAS, Managed has entered into an agreement with STC, ("Record-Keeping
Agreements") for the provision of record-keeping and other services in
connection with certain retirement and employee benefit plans in return for such
compensation as is set forth therein;
WHEREAS, Managed has entered into an underwriting agreement with SIS
("Underwriting Agreements") for the provision of distribution services in
connection with Managed's shares;
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WHEREAS, Managed has entered into an Investment Management Agreement with
SSC ("IMA") dated February 1, 1997 for the provision of investment management
services. Under the IMA, SSC will be responsible for the payment of various
Managed expenses, pursuant to this agreement.
WHEREAS, Managed has entered into an agreement with State Street Bank and
Trust Company ("State Street"), and each of the Underlying Funds has entered
into an agreement with either State Street or Xxxxx Brothers Xxxxxxxx & Co.
(together referred to as "Custodian Agreements") under which the Custodian is to
furnish Managed and the Underlying Funds various custodial services in return
for such compensation as is set forth in the Custodian Agreements;
WHEREAS, Managed is expected to provide a means by which the Underlying
Funds can eliminate shareholder accounts which are or would be invested directly
in the Underlying Funds;
WHEREAS, such shareholder account reduction can reduce the fees of the
Underlying Funds due Xxxxxxx Service under the Service Agreements and various
other fees and expenses that would otherwise be incurred by the Underlying Funds
(such expenses are further defined below as Variable Expenses, and such
reduction in Variable Expenses is hereinafter referred to as "Savings");
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WHEREAS, Managed will invest its assets exclusively in the Underlying
Funds, except for temporary defensive purposes and cash or cash items necessary
to meet current redemptions; and
WHEREAS, the Board of Trustees of each Underlying Fund has determined that
it is reasonable to expect the aggregate expenses as described below of Managed
to be less than the estimated Savings to each of the Underlying Funds from the
operation of Managed; and such determination by the Board of Trustees is based
on some or all of the following factors, among others as they apply to each
Underlying Fund:
a. The amount of Managed expenses to be absorbed by each Underlying Fund;
b. The amount of assets invested in each Underlying Fund by Managed;
c. The average and median account sizes for the Underlying Funds and
Managed;
d. The rate at which Variable Expenses (i.e., expenses for shareholder
servicing, marketing to increase or maintain account size, account
management, transfer and dividend disbursing agency services, and
prospectuses, shareholder reports, proxies and similar communications)
and Fixed Expenses (i.e., expenses for accounting, custodial, auditing
and legal services, state qualification, filing, and directors fees
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and organization and various miscellaneous expenses) are incurred by
Managed and the Underlying Funds; and
e. The relationship between Variable and Fixed Expenses in the Underlying
Funds and Managed.
NOW, THEREFORE, in consideration of the promises and mutual covenants made
herein, it is agreed between and among the parties hereto as follows:
1. MANAGED EXPENSES
SFAC will calculate the separate amounts of fees and expenses
allocable to Managed due under the Custodian, Service,
Sub-Accounting, Record-Keeping and Underwriting Agreements
referred to above and agreements or arrangements with
third-parties for record-keeping and other administrative
services, as well as any other amounts due persons as a result of
Managed operations under any other agreement or otherwise
("Expenses"), excluding non-recurring and extraordinary expenses.
Such non-recurring and extraordinary expenses include: the fees
and costs of actions, suits or proceedings, and any penalties,
damages or payments in settlement in connection therewith, for
which the Managed and/or a portfolio or series thereof ("Managed
Portfolio") may be liable directly, or which it may incur as a
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result of its legal obligation to provide indemnification to its
officers, directors and agents; the fees and costs of any
governmental investigation and any fines or penalties in
connection therewith; and any federal, state or local tax, or
related interest, penalties or additions to tax for which Managed
or any Managed Portfolio may be liable. Under unusual
circumstances, the parties may agree to exclude certain other
amounts from Expenses. In addition, SFAC will calculate the
estimated Savings to each Underlying Fund.
2. UNDERLYING FUNDS' PAYMENT OF EXPENSES
Subject to Paragraph 3, each of the Underlying Funds agrees to
pay its pro rata share of the Expenses based on the proportion
which the average daily value of its shares owned by all Managed
Portfolios in the aggregate bears to the average daily value of
all shares of Underlying Funds owned by all Managed Portfolios in
the aggregate, provided that no Underlying Fund will pay such
Expenses in excess of the estimated Savings to it ("Excess
Expense"). The Underlying Funds shall pay such expenses in
accordance with instructions from SFAC.
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3. PAYMENT BY SSC
SSC agrees that, at all times, it will bear any Excess Expense
described in Paragraph 2 and shall pay such Excess Expenses in
accordance with instructions from SFAC.
4. OPINION OF COUNSEL
At any time any of the parties hereto may consult legal counsel
in respect of any matter arising in connection with this
Agreement, and no such party shall be liable for any action taken
or omitted by it in good faith in accordance with such
instructions or with the advice or opinion of such legal counsel.
5. LIABILITIES
No party hereto shall be liable to any other party hereto for any
action taken or thing done by it or its agents or contractors in
carrying out the terms and provisions of this Agreement provided
such party has acted in good faith and without negligence or
willful misconduct and selected its agents and contractors with
reasonable care.
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6. TERM OF AGREEMENT: AMENDMENT; RENEWAL
The term of this Agreement shall begin on February 1, 1997, and
unless sooner terminated as herein provided, the Agreement shall
remain in effect through August 31, 1998. Thereafter, this
Agreement shall continue from year to year if such continuation
is specifically approved at least annually by the Board of
Trustees of each Underlying Fund and Managed, including a
majority of the independent Trustees of each such Fund. In
determining whether to renew this Agreement, the Trustees of the
Underlying Funds may request, and SSC will furnish, such
information relevant to determining the past and expected future
relationship between the Savings and Expenses. The Agreement may
be modified or amended from time to time by mutual written
agreement between the parties hereto. Upon termination hereof,
outstanding obligations hereunder shall survive. This Agreement
may be amended in the future to include as additional parties to
the Agreement other investment companies for which SSC serves as
investment adviser.
7. ASSIGNMENT
This Agreement shall not be assigned or transferred, either
voluntarily or involuntarily, by operation of law or otherwise,
without the prior written consent of SSC, the Underlying Funds
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and Managed. The Agreement shall automatically and immediately
terminate in the event of its assignment without the prior
written consent of such Funds.
8. NOTICE
Any notice under this Agreement shall be in writing, addressed
and delivered or sent by registered or certified mail, postage
prepaid, to the other party at such address as such other party
may designate for the receipt of such notices. Until further
notice to the other parties, it is agreed that for this purpose
the address of all parties to this Agreement is Xxx Xxxxxxxxxxxxx
Xxxxx, Xxxxxx, XX 00000, Attention: Xxxxxx X. XxXxxxxxx.
9. INTERPRETIVE PROVISIONS
In connection with the operation of this Agreement, the parties
may agree from time to time on such provisions interpretive of or
in addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions are to
be signed by all parties and annexed hereto, but no such
provisions shall contravene any applicable Federal or State Law
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or regulation. Also, no existing provision of this Agreement, or
interpretive or additional provision described above, shall be
effective if, as a result, any Managed Portfolio or any
Underlying Fund would lose its status as a regulated investment
company under Subchapter M of the Internal Revenue Code.
10. STATE LAW
This Agreement shall be construed and enforced in accordance with
and governed by the laws of the Commonwealth of Massachusetts.
11. CAPTIONS
The captions in the Agreement are included for convenience of
reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
With respect to a party which is organized as a Massachusetts business
trust, references in this Agreement to the party mean and refer to the Trustees
from time to time serving under its Declaration of Trust on file with the
Secretary of the Commonwealth of Massachusetts, as the same may be amended from
time to time, pursuant to which the party conducts its business. The obligations
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of the party hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the party personally,
but bind only the trust property of the party, as provided in said Declaration
of Trust.
With respect to a party which is organized as either a Massachusetts
business trust or a Maryland corporation, if the party has more than one series,
no series of the party other than the series on whose behalf an obligation shall
have been undertaken shall be responsible for the obligations of the series, and
third parties shall look only to the assets of that series to satisfy those
obligations.
IN WITNESS WHEREOF, the parties have caused the Agreement to be executed as
of the day and year first above written.
AARP Cash Investment Funds
on behalf of
AARP High Quality Money Fund
AARP Growth Trust
on behalf of
AARP Balanced Stock and Bond Fund
AARP Blue Chip Index Fund
AARP Capital Growth Fund
AARP Global Growth Fund
AARP Growth and Income Fund
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AARP International Stock Fund
AARP Small Company Stock Fund
AARP Income Trust
on behalf of
AARP Bond Fund for Income
AARP GNMA and U.S. Treasury Fund
AARP High Quality Bond Fund
AARP Managed Investment Portfolios Trust
on behalf of
AARP Diversified Income Portfolio
AARP Diversified Growth Portfolio
AARP Tax Free Income Trust
on behalf of
AARP High Quality Tax Free Money Fund
AARP Insured Tax Free General Bond Fund
By:__________________________________________
Xxxxxxxx X. Small, President
AARP Financial Services Company
By:__________________________________________
Xxxxxx X. Xxxxx
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Xxxxxxx, Xxxxxxx & Xxxxx, Inc.
By:__________________________________________
Xxxxx X. Xxx, Managing Director
Xxxxxxx Service Corporation
By:__________________________________________
Xxxxx X. Xxx, Vice President
Xxxxxxx Investor Services, Inc.
By:__________________________________________
Xxxxx X. Xxx, President
Xxxxxxx Trust Company
By:__________________________________________
Xxxxxx Xxxxxx, ______________
Xxxxxxx Fund Accounting Corporation
By:__________________________________________
Xxxxx X. Xxx, President
Dated: February 1, 1997
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APPENDIX A
The following Funds are parties to this Agreement, and have so indicated
their intention to be bound by such Agreement by executing the Agreement on the
dates indicated thereon:
AARP Cash Investment Funds
on behalf of
AARP High Quality Money Fund
AARP Growth Trust
on behalf of
AARP Balanced Stock and Bond Fund
AARP Blue Chip Index Fund
AARP Capital Growth Fund
AARP Global Growth Fund
AARP Growth and Income Fund
AARP International Stock Fund
AARP Small Company Stock Fund
AARP Income Trust
on behalf of
AARP Bond Fund for Income
AARP GNMA and U.S. Treasury Fund
AARP High Quality Bond Fund
AARP Managed Investment Portfolios Trust
on behalf of
AARP Diversified Income Portfolio
AARP Diversified Growth Portfolio
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AARP Tax Free Income Trust
on behalf of
AARP High Quality Tax Free Money Fund
AARP Insured Tax Free General Bond Fund
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