AARP Growth Trust
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
September 7, 1998
Xxxxxxx Xxxxxx Investments, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Investment Management Agreement
AARP U.S. Stock Index Fund
Ladies and Gentlemen:
AARP Growth Trust (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees has divided the Trust's shares of
beneficial interest, par value $0.01 per share, (the "Shares") into separate
series, or funds, including AARP U.S. Stock Index Fund (the "Fund"). Series may
be abolished and dissolved, and additional series established, from time to time
by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and for each series that may subsequently be
authorized by the Trustees (unless otherwise provided at the time and subject to
such conditions and amendments to this Agreement as shall be mutually agreed
upon), and to provide certain other services, as more fully set forth below, and
you have indicated that you are willing to act as such investment manager and to
perform such services under the terms and conditions hereinafter set forth.
Accordingly, the Trust on behalf of the Fund agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing
and reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration dated September 13, 1996, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the Fund
selecting you as investment manager and approving the form of this
Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated January 31, 1997 relating to the Fund.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended (the "Code"), relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust or counsel to
you. You shall also make available to the Trust promptly upon request all of a
Fund's investment records and ledgers as are necessary to assist the Trust in
complying with the requirements of the 1940 Act and other applicable laws. To
the extent required by law, you shall furnish to regulatory authorities having
the requisite authority any information or reports in connection with the
services provided pursuant to this Agreement which may be requested in order to
ascertain whether the operations of the Trust are being conducted in a manner
consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management
services specified above in section 2, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for their reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Fund necessary for operating as open-end investment companies
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents,
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custodians, depositories, transfer agents and pricing agents, accountants,
attorneys, printers, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary or desirable to Fund operations;
preparing and making filings with the Securities and Exchange Commission (the
"SEC") and other regulatory and self-regulatory organizations, including, but
not limited to, preliminary and definitive proxy materials, post-effective
amendments to the Registration Statement, semi-annual reports on Form N-SAR and
notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the tabulation of
proxies by the Fund's transfer agent; assisting in the preparation and filing of
the Fund's federal, state and local tax returns; preparing and filing the Fund's
federal excise tax return pursuant to Section 4982 of the Code; providing
assistance with investor and public relations matters; monitoring the valuation
of portfolio securities and the calculation of net asset value; monitoring the
registration of Shares of the Fund under applicable federal and state securities
laws; maintaining or causing to be maintained for the Fund all books, records
and reports and any other information required under the 1940 Act, to the extent
that such books, records and reports and other information are not maintained by
the Fund's custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and other agents as necessary
in connection therewith; establishing and monitoring the Fund's operating
expense budgets; reviewing the Fund's bills; processing the payment of bills
that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Trust as it may reasonably request in the conduct of
the Fund's business, subject to the direction and control of the Trust's Board
of Trustees. Nothing in this Agreement shall be deemed to shift to you or to
diminish the obligations of any agent of a Fund or any other person not a party
to this Agreement which is obligated to provide services to the Fund.
4. In rendering the services required under this Agreement, you may,
subject to the legally required approval of the Trust, its shareholders and
Trustees, cause such services to be provided by a registered investment adviser
or bank (together with Bankers Trust Company, the "Subadvisor") exempt from the
registration requirements under the Investment Advisers Act of 1940, as amended,
(the "Advisers Act") and receive other assistance from such Subadvisor pursuant
to an agreement or agreements and may contract with such other parties as you
deem appropriate to obtain information, advice and management services and other
assistance, provided that such services shall not be deemed to render such party
a registered investment adviser, but any fees, compensation or expenses to be
paid to any such party shall be paid by you, and no obligation shall be incurred
on the Trust's behalf in any respect.
5. You hereby acknowledge that the employment of a Subadvisor or other
service providers hereunder shall not relieve you of any of your obligations
under this Agreement, including your obligations under section 9 of this
Agreement. Further, you acknowledge that for purposes of this Agreement, the
acts of such Subadvisor or other service provider shall be deemed to be acts of
you, the Manager.
6. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 6, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to
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any limitations imposed by law. You shall provide at your expense the portfolio
management services described in section 2 hereof and the administrative
services described in section 3 hereof.
You shall not be required to pay any expenses of a Fund other than those
specifically allocated to you in this section 6. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of a Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 6, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Trustees and officers of the Trust who are directors, officers or
employees of you to the extent that such expenses relate to attendance at
meetings of the Board of Trustees of the Trust or any committees thereof or
advisors thereto held outside of Boston, Massachusetts or New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of a Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in
conformity with Rule 12b-1 under the 1940 Act providing that the Fund (or some
other party) shall assume some or all of such expenses, or (iii) such expenses
are required to be borne by Xxxxxxx pursuant to section 6 of the Investment
Company Services Agreement, dated as of October 8, 1984, among American
Association of Retired Persons, AARP/Xxxxxxx Financial Management Company, and
us. You shall be required to pay such of the foregoing sales expenses as are not
required to be paid by the principal underwriter pursuant to the underwriting
agreement or are not permitted to be paid by the Fund (or some other party)
pursuant to such a plan.
7. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3 and 6 hereof, the Trust
on behalf of the Fund shall pay you on the last day of each month the unpaid
balance of a fee composed of an asset charge in two parts.
(a) The asset charge for each calendar day of each year shall be equal
to the total of 1/365th (1/366th in each leap year) of the amount computed in
accordance with paragraphs (b) and (c) below.
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The computation shall be made for each such day on the basis of net assets as of
the close of business of the full business day one (1) business day prior to the
day for which the computation is being made. In the case of the suspension of
the computation of net asset value, the asset charge for each day during such
suspension shall be computed as of the close of business on the last full
business day on which the net assets were computed. As used herein, "net assets"
as of the close of a full business day shall include all transactions in shares
of the Fund recorded on the books of the Fund for that day.
(b) The base fee rate part of the fee shall be based on the average
daily net assets of all funds within the AARP Investment Program from Xxxxxxx
(the "Program"), including any new fund which may be organized in the future.
The base fee rate will be the percent of Program net assets as set forth in the
following table.
Base Fee Rate
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Program Assets Annual Rate at Each
(Billions) Asset Level
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First $2 0.35%
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Next $2 0.33%
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Next $2 0.30%
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Next $2 0.28
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Next $3 0.26%
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Next $3 0.25%
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Over $14 0.24%
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The portion of the base fee rate which the Fund shall bear will be the same
percentage of the base fee rate as its net assets are to the total net assets of
all the Program funds.
(c) The fund fee rate part of the fee shall be 0.00 percent per annum
of the net assets of the Fund.
The value of net assets of the Trust or any Fund shall be determined
pursuant to the applicable provisions of the Declaration, By-Laws and
Registration Statement of the Trust. If, pursuant to such provisions, the
determination of net asset value for any Fund is suspended for any particular
business day, then for the purposes of this paragraph 5, the value of the net
assets of that series of the Trust as last determined shall be deemed to be the
value of the net assets as of the close of the New York Stock Exchange, or as of
such other time as the value of the net assets of the portfolio of that Fund may
lawfully be determined, on that day. If the determination of the net asset value
of the shares of any Fund of the Trust has been suspended pursuant to the
Declaration, By-Laws or Registration Statement of the Trust for a period
including such month, your compensation payable at the end of such month shall
be computed on the basis of the value of the net assets of the Trust as last
determined (whether during or prior to such month). If a Fund determines the net
asset value of its portfolio more than once on any day, then the last such
determination thereof on that day shall be deemed to be the sole determination
thereof on that day for the purposes of this section 7.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of a Fund's expenses, as if such waiver or
limitation were fully set forth herein.
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8. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of a Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of a Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Trust and the Fund pursuant to this Agreement are not
to be deemed to be exclusive and it is understood that you may render investment
advice, management and services to others. In acting under this Agreement, you
shall be an independent contractor and not an agent of the Trust or a Fund.
Whenever a Fund and one or more other accounts or investment companies advised
by the Manager have available funds for investment, investments suitable and
appropriate for each shall be allocated in accordance with procedures believed
by the Manager to be equitable to each entity. Similarly, opportunities to sell
securities shall be allocated in a manner believed by the Manager to be
equitable. The Fund recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund.
9. Limitation of Liability of Manager. As an inducement to your undertaking
to render services pursuant to this Agreement, the Trust agrees that you shall
not be liable under this Agreement for any error of judgment or mistake of law
or for any loss suffered by a Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, a Fund or
its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
Any person, even though also employed by you, who may be or become an employee
of and paid by a Fund shall be deemed, when acting within the scope of his or
her employment by the Fund, to be acting in such employment solely for the Fund
and not as your employee or agent.
10. Duration and Termination of This Agreement. This Agreement shall remain
in force until August 31, 1999, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or, with respect to the Fund, by the vote of a
majority of the outstanding voting securities of such Fund of the Trust. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder and any applicable SEC
exemptive order therefrom.
This Agreement may be terminated with respect to a Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Trust's Board of Trustees on 60 days'
written notice to you, or by you on 60 days' written notice to the Trust. This
Agreement shall terminate automatically in the event of its assignment.
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom
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enforcement of the change, waiver, discharge or termination is sought, and no
amendment of this Agreement shall be effective until approved in a manner
consistent with the 1940 Act and rules and regulations thereunder and any
applicable SEC exemptive order therefrom.
12. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of The Commonwealth of Massachusetts, provides that the name "AARP Growth Trust"
refers to the Trustees under the Declaration collectively as Trustees and not as
individuals or personally, and that no shareholder of any Fund of the Trust, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of any Fund of the Trust to any extent
whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as
set forth in the Declaration and you agree that the obligations assumed by the
Trust on behalf of the Fund pursuant to this Agreement shall be limited in all
cases to the applicable Fund and its assets, and you shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the Fund or
any other series of the Trust, or from any Trustee, officer, employee or agent
of the Trust. You understand that the rights and obligations of the Fund, or
series, under the Declaration are separate and distinct from those of any and
all other series.
13. Miscellaneous. The captions in this 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. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause a
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
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If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
AARP GROWTH TRUST, on behalf of
AARP U.S. Stock Index Fund
By: ______________________________
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
XXXXXXX XXXXXX INVESTMENTS, INC.
By: ______________________________
Managing Director
