INVESTMENT MANAGEMENT AGREEMENT
Cash Equivalent Fund
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
December 31, 1997
Xxxxxxx Xxxxxx Investments, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Investment Management Agreement
Money Market Portfolio
Government Securities Portfolio
Ladies and Gentlemen:
CASH EQUIVALENT FUND (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 is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized the Money Market Portfolio and the Government
Securities Portfolio (each a "Fund" and collectively, the "Funds"). 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 Funds, has selected you to act as the investment
manager of the Funds 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. In the event the Trust establishes one or more additional
series with respect to which it desires to retain you to render the services
described hereunder, it shall notify you in writing. If you are willing to
render such services, you shall notify the Trust in writing, whereupon such
series shall become a fund hereunder. Accordingly, the Trust on behalf of the
Funds agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of each 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 each 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
Funds:
(1) The Declaration, as amended to date.
(2) By-Laws of the Trust as in effect on the date hereof (the "By- Laws").
(3) Resolutions of the Trustees of the Trust and the shareholders of each
Fund selecting you as investment manager and approving the form of
this Agreement.
(4) Establishment and Designation of Series of Shares of Beneficial
Interest relating to the Funds, as applicable.
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 Funds, you
shall provide continuing investment management of the assets of the Funds 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
each Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Funds 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
Funds 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. You shall
also make available to the Trust promptly upon request all of the Funds'
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 each 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
each 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 each 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 Funds such office space and facilities in the United States as the Funds may
require for its 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 Funds necessary for operating as an open end investment company 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, 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 Funds' transfer agent; assisting in the preparation
and filing of each Fund's federal, state and local tax returns; preparing and
filing each 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 each Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Funds 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 Funds' custodian or other agents of the
Funds; assisting in establishing the accounting policies of the Funds; assisting
in the resolution of accounting issues that may arise with respect to the Funds'
operations and consulting with the Funds' independent accountants, legal counsel
and the Funds' other agents as necessary in connection therewith; establishing
and monitoring each Fund's operating expense budgets; reviewing
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each Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Funds in determining the amount of dividends
and distributions available to be paid by each 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 Funds' 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 the Funds or any other person not a party to this Agreement which is
obligated to provide services to the Funds.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including each Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Funds, 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 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 the Funds other than those
specifically allocated to you in this section 4. 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 the Funds' Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of each Fund: organization expenses of each
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 Funds' 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 Funds in connection with membership in investment company trade
organizations; fees and expenses of the Funds' accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, 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 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by each Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of each Fund for sale; interest charges, bond premiums and other
insurance expense; freight, insurance and other charges in connection with the
shipment of each 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 Funds; expenses of printing and distributing reports, notices
and dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of each Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
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 a 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 a Fund shall have adopted a plan in conformity with Rule
12b-1 under the 1940 Act providing that a Fund (or some other party) shall
assume some or all of such expenses. 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 a Fund (or some other party) pursuant to such a plan.
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5. 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 4 hereof, the Trust
on behalf of the Funds shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .22 of
1 percent of the combined average daily net assets as defined below of the Funds
for such month; provided that, for any calendar month during which the average
of such values exceeds $500,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $500,000,000 shall be 1/12 of
.20 of 1 percent of such portion; provided that, for any calendar month during
which the average of such values exceeds $1 billion, the fee payable for that
month based on the portion of the average of such values in excess of $1 billion
shall be 1/12 of .175 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $2 billion, the
fee payable for that month based on the portion of the average of such values in
excess of $2 billion shall be 1/12 of .16 of 1 percent of such portion; and
provided that, for any calendar month during which the average of such values
exceeds $3 billion, the fee payable for that month based on the portion of the
average of such values in excess of $3 billion shall be 1/12 of .15 of 1 percent
of such portion; over (b) the greater of (i) the amount by which the Funds'
aggregate expenses exceed .90 of 1% of the Funds' combined average daily net
assets up to $500 million, .80 of 1% of the next $500 million, .75 of 1% of the
next $1 billion and .70 of 1% of combined average daily net assets over $2
billion or (ii) any compensation waived by you from time to time (as more fully
described below). You shall be entitled to receive during any month such interim
payments of your fee hereunder as you shall request, provided that no such
payment shall exceed 75 percent of the amount of your fee then accrued on the
books of the Funds and unpaid.
The "average daily net assets" of a Fund shall mean the average of the values
placed on a Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of a Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of such Fund as last determined shall be deemed to be the value of its
net assets as of 4:00 p.m. (New York time), or as of such other time as the
value of the net assets of the Fund's portfolio may be lawfully determined on
that day. If a Fund determines the value of the net assets 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 5.
You agree that your gross compensation for any fiscal year shall not be greater
than an amount which, when added to other expenses of the Funds, shall cause the
aggregate expenses of the Funds to exceed on an annual basis .90 of 1% of the
Funds' combined average daily net assets up to $500 million, .80 of 1% of the
next $500 million, .75 of 1% of the next $1 billion and .70 of 1% of combined
average daily net assets over $2 billion. Except to the extent that such amount
has been reflected in reduced payments to you, you shall refund to the Funds the
amount of any payment received in excess of the limitation pursuant to this
section 5 as promptly as practicable after the end of such fiscal year, provided
that you shall not be required to pay the Funds an amount greater than the fee
paid to you in respect of such year pursuant to this Agreement. As used in this
section 5, "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.
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 the Funds' expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Funds, 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 each Fund's account with
brokers
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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 such
Fund.
Your services to the Funds 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. Whenever a Fund and one or
more other accounts or investment companies advised by you have available funds
for investment, investments suitable and appropriate for each shall be allocated
in accordance with procedures believed by you to be equitable to each entity.
Similarly, opportunities to sell securities shall be allocated in a manner
believed by you to be equitable. The Funds recognize that in some cases this
procedure may adversely affect the size of the position that may be acquired or
disposed of for the Funds.
7. 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, the Funds
or their 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.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until December 1, 1998, and continue in force from year to year thereafter
with respect to each Fund, but only so long as such continuance is specifically
approved for each Fund 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 by the vote of
a majority of the outstanding voting securities of such Fund. 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 such 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.
This Agreement may be terminated with respect to a Fund at any time without the
payment of any penalty by the Board of Trustees or by vote of a majority of the
outstanding voting securities of such Fund in the event that it shall have been
established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. 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 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.
10. 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 "Cash Equivalent
Fund" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of a Fund, or Trustee,
officer, employee or agent of the Trust, shall be subject to claims against or
obligations of the Trust or of a Fund to any extent whatsoever, but that the
Trust estate only shall be liable.
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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 each Fund pursuant to this Agreement shall be limited in all cases
to each Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of a 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 each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. 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 Funds.
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,
CASH EQUIVALENT FUND, on behalf of
Money Market Portfolio
Government Securities Portfolio
By:/s/Xxxx X. Xxxx
------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
XXXXXXX XXXXXX INVESTMENTS, INC.
By:/s/Xxxx X. Xxxxxxxx
----------------------
President
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