Exhibit 5(a)
AARP INCOME TRUST
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
January 2, 1987
AARP/Xxxxxxx Financial Management Company
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Investment Management and Advisory Agreement
Dear Sirs:
AARP Income Trust (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. The Trust's
Declaration of Trust provides that the Trust's Trustees may, from time to time,
determine that the shares of beneficial interests of the Trust ("Shares") shall
be issued in separate series of the Trust ("Series"). There are currently two
Series. The Trust has selected you to act as investment adviser, for each of the
current two Series of the Trust 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 mutually be agreed
upon), and to provide certain other services, as more fully set forth below, and
you are willing to act as such investment manager and adviser and to perform
such services under the terms and conditions hereinafter set forth.
1. Delivery of Trust Documents. The Trust has furnished you with copies
properly certified or authenticated of each of the following:
(a) Declaration of Trust, dated June 8, 1984, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof.
(c) Resolutions of the Trustees selecting you as investment adviser
and approving the form of this Agreement.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements to the foregoing, if any.
2. Advisory Services. You will regularly provide, or cause to be provided
pursuant to the Subadvisory Agreement and other agreements referred to in
paragraph 9 hereof, each Series of the Trust with investment research, advice
and supervision and will furnish continuously an investment program for each
Series consistent with the investment objectives and policies of that Series.
You will determine what securities shall be purchased for each Series, what
securities shall be held or sold by each Series, and what portion of the assets
of each Series shall be held uninvested, subject always to the provisions of the
Trust's Declaration of Trust and By-Laws and of the Investment Company Act of
1940, as amended, and to the investment objectives, policies and restrictions of
the Trust and the Series, as each of the same shall be from time to time in
effect, and subject, further, to such policies and instructions as the Trustees
may from time to time establish. You shall advise and assist the officers of the
Trust in taking such steps as are necessary or appropriate to carry out the
decisions of the Trustees and the appropriate committees of the Trustees
regarding the conduct of the business of the Trust and each Series.
3. Allocation of Charges and Expenses. You will pay the compensation and
expenses of all officers and executive employees of the Trust and will make
available or cause to be made available, without expense to the Trust, the
services of such of your partners, directors, officers and employees, or of the
partners, directors, officers and employees of your partners, as may duly be
elected officers, directors or trustees of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You will pay
the Trust's office rent and will provide, or cause to be provided, investment
advisory, research and statistical facilities and all clerical services relating
to research, statistical and investment work. You will not be required to pay
any expenses of the Trust other than those specifically allocated to you in this
paragraph 3. In particular, but without limiting the generality of the
foregoing, you will not be required to pay: organization expenses of the Trust;
clerical salaries; fees and expenses incurred by the Trust in connection with
membership in investment company organizations; brokers' commissions; payment
for portfolio pricing services to a pricing agent, if any; legal, auditing or
accounting expenses; taxes or governmental fees; the fees and expenses of the
transfer agent of the Trust; the cost of preparing share certificates or any
other expenses, including clerical and administrative expenses of issue, sale,
underwriting, distribution, redemption or repurchase of Shares issued by the
Trust; the expenses of and fees for registering or qualifying Shares of the
Trust for sale under federal or state
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securities law; the fees and expenses of directors or Trustees of the Trust who
are not affiliated with you; the cost of preparing and distributing reports and
notices to shareholders; or the fees or disbursements of custodians of the
Trust's assets, including expenses incurred in the performance of any
obligations enumerated by the Declaration of Trust or By-Laws of the Trust
insofar as they govern agreements with any such custodian. You shall not be
required to pay expenses of activities which are primarily intended to result in
sales of Shares of the Trust 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 Trust's Shares pursuant to an underwriting agreement which provides that the
underwriter shall assume some of all of such expenses, (ii) the Trust shall have
adopted a plan in conformity with Rule 12b-l under the Investment Company Act of
1940, as amended, providing that the Trust (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 4 of the Investment Company Services Agreement,
dated as of October 9, 1984, among Xxxxxxx, American Association of Retired
Persons and the Manager. You shall be required to pay such expenses as are
excluded by the preceding sentence.
4. Compensation of the Adviser. For all services to be rendered and
payments made as provided in paragraphs 2 and 3 hereof, the Trust will pay you
on the last day of each month a fee equal to the sum of 45/1200 of 1% on the
first $2 billion, 44/1200 of 1% on the next $1 billion and 43/1200 of 1% on the
balance of average daily net assets (as defined below) of the Series of the
Trust known as "AARP GNMA and U.S. Treasury Fund" and 49/1200 of 1% of the value
of the average daily net assets of the Series of the Trust known as "AARP
General Bond Fund." The "average daily net assets" of the Trust or any Series
are defined as the average of the values placed on the net assets as of the
close of the New York Stock Exchange, on each day on which the net asset value
of the portfolio of the Trust or a series thereof is determined consistent with
the provisions of Rule 22c-l under the Investment Company Act of 1940 or, if the
Trust lawfully determines the value of the net assets of its portfolio as of
some other time on each business day, as of such time. The value of net assets
of the Trust or any Series shall be determined pursuant to the applicable
provisions of the Declaration of Trust and By-Laws of the Trust. If, pursuant to
such provisions, the determination of net asset value for any Series is
suspended for any particular business day, then for the purposes of this
paragraph 4, 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 Series may lawfully be determined, on that day.
If the determination of the net asset value of the Shares of any Series of the
Trust has been suspended pursuant to the Declaration of Trust or By-Laws 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). You agree that
your compensation for any fiscal year shall be reduced by the amount, if any, by
which the expenses of the Trust for such fiscal year exceed the lowest
applicable expense limitation established pursuant to the statutes or
regulations of any jurisdiction in which the Shares of the Trust may be
qualified for offer and sale. You shall refund to the Trust or Series, as
applicable, the amount of any reduction of your compensation pursuant to this
paragraph 4 as promptly as
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practicable after the end of such fiscal year, provided that you will not be
required to pay the Trust or Series an amount greater than the fee paid to you
in respect of such year pursuant to this Agreement. As used in this paragraph 4,
"expenses" shall mean those expenses included in the applicable expense
limitation having the broadest specifications thereof, and "expense limitation"
means a limit on the maximum annual expenses which may be incurred by an
investment company determined (i) by multiplying a fixed percentage by the
average, or by multiplying more than one such percentage by different specified
amounts of the average, of the values of an investment company's net assets for
a fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year. The words "lowest applicable
expense limitation" shall be construed to result in the largest reduction of
your compensation for any fiscal year of the Trust. Nothing in this paragraph 4
shall be construed to require you to reduce your compensation unless such
reduction would be required by the statutes and regulations of any jurisdiction
in which Shares of the Trust are qualified for sale without the application of
this paragraph 4.
5. Avoidance of Inconsistent Position. In connection with purchases or
sales of portfolio securities for the account of the Trust, neither you nor any
of your partners, directors, officers or employees will 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 for the Trust's
account with brokers or dealers selected by you. In the selection of such
brokers or dealers and the placing of such orders, you are directed at all times
to seek for the Trust the most favorable execution and net price available. If
any occasion should arise in which you give any advice to clients of yours
concerning the Shares of the Trust, you will act solely as investment counsel
for such clients and not in any way on behalf of the Trust. Your services to the
Trust pursuant to this Agreement are not to be deemed to be exclusive and it is
understood that you may render investment advice, management and other services
to others.
6. Limitation of Liability of Adviser. You shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from reckless disregard by you of your
obligations and duties under this Agreement. Any person, even though also
employed by you, who may be or become an employee of and paid by the Trust shall
be deemed, when acting within the scope of his employment by the Trust, to be
acting in such employment solely for the Trust and not as your employee or
agent.
7. Duration and Termination of this Agreement. This Agreement shall become
effective as of the date hereof and shall remain in force until August 31, 1987
and with respect to each Series, from year to year thereafter, but only so long
as such continuance is specifically approved at least annually by the vote of a
majority of the trustees who are not interested persons of you or of the Trust,
cast in person at a meeting called for the purpose of voting on such approval
and by a vote of the Trustees, or, with respect to each Series, by vote of a
majority of the outstanding voting securities of such Series of the Trust. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in
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a manner consistent with the Investment Company Act of 1940 and the rules and
regulations thereunder. This Agreement may, on 60 days' written notice, be
terminated at any time without the payment of any penalty, by the Trustees, by
vote of a majority of the outstanding voting securities of the Trust (or Series,
with respect only to that Series), or by you. This Agreement shall automatically
terminate in the event of its assignment, provided that an assignment to a
corporate successor to all or substantially all of your business or to a
wholly-owned subsidiary of such corporate successor which does not result in a
change of actual control or management of your business shall not be deemed to
be an assignment for the purposes of this Agreement. In interpreting the
provisions of this Agreement, the definitions contained in Section 2(a) of the
Investment Company Act of 1940 (particularly the definitions of "interested
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 Securities and Exchange Commission by any
rule, regulation or order.
8. Amendment of this Agreement. No provisions of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of his Agreement shall be
effective with respect to any Series until approved by the Trustees, including a
majority of the odirectors or Trustees who are not interested persons of you or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval and by vote of the holders of a majority of the outstanding voting
securities of such Series of the Trust.
9. Subadvisory Agreement, etc. In rendering the services required under
this Agreement, you may, subject to the legally required approval of the Trust,
its shareholders and Trustees or directors, cause such services to be provided
by a registered investment adviser and receive other assistance from such
investment adviser pursuant to an agreement or agreements, and may contract with
such other parties as you may deem appropriate to obtain information, advice and
management services and other assistance, 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.
10. Termination of Prior Agreement. The Investment Management and Advisory
Agreement between AARP Income Trust, a Massachusetts business trust, and you
dated December 16, 1985 is terminated as of the opening of business on the date
hereof.
11. Miscellaneous. It is understood and expressly stipulated that neither
the shareholders of the Trust nor the Trustees shall be personally liable
hereunder. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit 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. This Agreement shall be construed in accordance with and governed by
the laws of New York.
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If you are in agreement with the foregoing, please sign 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.
Yours very truly,
AARP INCOME TRUST
By /s/ [Illegible]
---------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
AARP/XXXXXXX FINANCIAL
MANAGEMENT COMPANY
By: XXXXXXX, XXXXXXX & XXXXX
A General Partner
By /s/ [Illegible]
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Title: Managing Director
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