PUTNAM AMERICAN GOVERNMENT INCOME FUND
MANAGEMENT CONTRACT
Management Contract dated as of March 5, 1998
between XXXXXX AMERICAN GOVERNMENT INCOME FUND, a
Massachusetts business trust (the "Fund"), and XXXXXX
INVESTMENT MANAGEMENT, INC., a Massachusetts
corporation (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) The Manager, at its expense, will furnish
continuously an investment program for the Fund, will
determine what investments
shall be purchased, held, sold or exchanged by the
Fund and what portion,
if any, of the assets of the Fund shall be held
uninvested and shall,
on behalf of the Fund, make changes in the Fund's
investments. Subject always to the control of the
Trustees of the Fund and except
for the functions carried out by the officers and
personnel referred to in Section 1(d), the Manager
will also manage, supervise and conduct the other
affairs and business of the Fund and matters
incidental thereto. In the
performance of its duties, the Manager will comply
with the provisions of the Agreement and Declaration
of Trust and By-laws of the Fund and its stated
investment objectives, policies and restrictions, and
will use its best
efforts to safeguard and promote the welfare of the
Fund and to comply with other policies which the
Trustees may from time to time determine and shall
exercise the same care and diligence expected of the
Trustees.
(b) The Manager, at its expense, except as such
expense is paid by the Fund as provided in Section
1(d), will furnish (1) all necessary investment
and management facilities, including salaries of
personnel, required for it to execute its duties
faithfully; (2) suitable office space for the
Fund; and (3) administrative facilities,
including bookkeeping, clerical personnel and
equipment necessary for the efficient conduct of
the affairs of the Fund, including determination of
the Fund's net asset value, but excluding
shareholder accounting services. Except as
otherwise provided in Section 1(d), the Manager will
pay the compensation, if any, of the officers of the
Fund.
(c) The Manager, at its expense, shall place
all orders for the purchase and sale of portfolio
investments for the Fund's account with brokers or
dealers selected by the Manager. In the selection
of such brokers or dealers and the placing of
such orders, the Manager shall use its best efforts
to obtain for the Fund the most favorable price and
execution available, except to the extent it may
be permitted to pay higher brokerage
commissions for brokerage and research services
as described below. In using its best efforts to
obtain for the Fund the most favorable price and
execution available, the Manager, bearing in mind
the Fund's best interests at all times, shall
consider all factors it deems relevant, including
by way of illustration, price, the size of the
transaction, the nature of the market for the
security, the amount of the commission, the timing
of the transaction taking into account market
prices and trends, the reputation, experience and
financial stability of the broker or dealer
involved and the quality of service rendered by the
broker or dealer in other transactions. Subject to
such policies as the Trustees of the Fund may
determine, the Manager shall not be deemed to
have acted unlawfully or to have breached any duty
created by this Contract or otherwise solely by
reason of its having caused the Fund to pay a
broker or dealer that provides brokerage and
research services to the Manager an amount of
commission for effecting a portfolio investment
transaction in excess of the amount of commission
another broker or dealer would have charged for
effecting that transaction, if the Manager
determines in good faith that such amount of
commission was reasonable in relation to the value
of the brokerage and research services provided by
such broker or dealer, viewed in terms of either
that particular transaction or the Manager's
overall responsibilities with respect to the Fund and
to other clients of the Manager as to which the
Manager exercises investment discretion. The
Manager agrees that in connection with purchases or
sales of portfolio investments for the Fund's
account, neither the Manager nor any officer,
director, employee or agent of the Manager shall act
as a principal or receive any commission other than
as provided in Section 3.
(d) The Fund will pay or reimburse the
Manager for the compensation in whole or in part of
such officers of the Fund and persons assisting them
as may be determined from time to time by the
Trustees of the Fund. The Fund will also pay or
reimburse the Manager for all or part of the cost of
suitable office space, utilities, support services
and equipment attributable to such officers and
persons, as may be determined in each case by the
Trustees of the Fund. The Fund will pay the fees, if
any, of the Trustees of the Fund.
(e) The Manager shall not be obligated to pay
any expenses of or for the Fund not expressly
assumed by the Manager pursuant to this Section 1
other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the
shareholders, Trustees, officers and employees of
the Fund may be a shareholder, director, officer
or employee of, or be otherwise interested in, the
Manager, and in any person controlled by or under
common control with the Manager, and that the
Manager and any person controlled by or under
common control with the Manager may have an
interest in the Fund. It is also understood that the
Manager and any person controlled by or under
common control with the Manager have and may have
advisory, management, service or other contracts
with other organizations and persons, and may
have other interests and business.
3. COMPENSATION TO BE PAID BY THE FUND TO THE
MANAGER.
The Fund will pay to the Manager as
compensation for the Manager's services rendered,
for the facilities furnished and for the expenses
borne by the Manager pursuant to paragraphs (a),
(b), (c) and (e) of Section 1, a fee, computed and
paid quarterly at the following annual rates:
(a) 0.65% of the first $500 million of
average net asset
value of the Fund;
(b) 0.55% of the next $500 million of such
average net
asset value;
(c) 0.50% of the next $500 million of such
average net
asset value;
(d) 0.45% of the next $5 billion of such
average net asset
value;
(e) 0.425% of the next $5 billion of such
average net asset value;
(f) 0.405% of the next $5 billion of such
average net asset value;
(g) 0.39% of the next $5 billion of such
average net asset value; and
(h) 0.38% of any amount thereafter.
Such average net asset value shall be determined by
taking an average of all of the determinations of
such net asset value during such quarter at the
close of business on each business day during such
quarter while this Contract is in effect. Such fees
shall be payable for each fiscal quarter within 30
days after the close of such quarter and shall
commence accruing as of the date of the initial
issuance of shares of the Fund to the public.
The fees payable by the Fund to the Manager
pursuant to this Section 3 shall be reduced by any
commissions, fees, brokerage or similar payments
received by the Manager or any affiliated person of
the Manager in connection with the purchase and
sale of portfolio investments of the Fund, less
any direct expenses approved by the Trustees
incurred by the Manager or any affiliated
person of the Manager in connection with obtaining
such payments.
In the event that expenses of the Fund for any
fiscal year should exceed the expense limitation
on investment company expenses imposed by any
statute or regulatory authority of any jurisdiction
in which shares of the Fund are qualified for offer
or sale, the compensation due the Manager for such
fiscal year shall be reduced by the amount of excess
by a reduction or refund thereof. In the event that
the expenses of the Fund exceed any expense
limitation which the Manager may, by written notice
to the Fund, voluntarily declare to be effective
subject to such terms and conditions as the Manager
may prescribe in such notice, the compensation due
the Manager shall be reduced, and, if necessary,
the Manager shall assume expenses of the Fund to
the extent required by the terms and conditions
of such expense limitation.
If the Manager shall serve for less than the
whole of a quarter, the foregoing compensation
shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT;
AMENDMENTS OF THIS
CONTRACT.
This Contract shall automatically terminate,
without the payment of any penalty, in the event of
its assignment; and this Contract shall not be
amended unless such amendment be approved at a
meeting by the affirmative vote of a majority of
the outstanding shares of the Fund, and by the vote,
cast in person at a meeting called for the
purpose of voting on such approval, of a majority of
the Trustees of the Fund who are not interested
persons of the Fund or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS
CONTRACT.
This Contract shall become effective upon its
execution, and shall remain in full force and
effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until
terminated as follows:
(a) Either party hereto may at any time
terminate this Contract by not more than sixty days'
nor less than thirty days' written notice delivered
or mailed by registered mail, postage
prepaid, to the other party, or
(b) If (i) the Trustees of the Fund or the
shareholders by the affirmative vote of a majority
of the outstanding shares of the Fund, and (ii) a
majority of the Trustees of the Fund who are not
interested persons of the Fund or of the Manager,
by vote cast in person at a meeting called for the
purpose of voting on such approval, do not
specifically approve at least annually the
continuance of this Contract, then this Contract
shall automatically terminate at the close of
business on the second anniversary of its execution
or upon the expiration of one year from the
effective date of the last such continuance,
whichever is later.
Action by the Fund under (a) above may be taken
either (i) by vote of a majority of its Trustees, or
(ii) by the affirmative vote of a majority of the
outstanding shares of the Fund.
Termination of this Contract pursuant to this
Section 5 will be without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the
"affirmative vote of a majority of the
outstanding shares of the Fund" means the
affirmative vote, at a duly called and held
meeting of
shareholders of the Fund, (a) of the holders of 67%
or more of the shares of the Fund present (in
person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at
such meeting are present in person or by proxy, or
(b) of the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at
such meeting, whichever is less.
For the purposes of this Contract, the terms
"affiliated person", "control", "interested person"
and "assignment" shall have their respective
meanings defined in the Investment Company Act of
1940 and the Rules and Regulations thereunder (the
"1940 Act"), subject, however, to such exemptions as
may be granted by the Securities and Exchange
Commission under said Act; the term "specifically
approve at least annually" shall be construed in a
manner consistent with the 1940 Act and the Rules and
Regulations thereunder; and the term "brokerage and
research services" shall have the meaning given in
the Securities Exchange Act of 1934 and the Rules and
Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad
faith or gross negligence on the part of the
Manager, or reckless disregard of its obligations
and duties hereunder, the Manager shall not be
subject to any liability to the Fund or to any
shareholder of the Fund, for any act or omission
in the course of, or connected with, rendering
services hereunder.
8. TERMINATION OF PRIOR CONTRACT.
This Contract shall become effective as of its
date, and supersedes the Management Contract dated
December 8, 1989.
9. LIMITATION OF LIABILITY OF THE TRUSTEES,
OFFICERS, AND
SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust
of the Fund is on file with the Secretary of State
of the Commonwealth of Massachusetts, and notice is
hereby given that this instrument is
executed on behalf of the Trustees of the Fund as
Trustees and not individually and that the
obligations of or arising out of this instrument
are not binding upon any of the Trustees,
officers or shareholders individually but are
binding only upon the assets and property of the
Fund.
IN WITNESS WHEREOF, XXXXXX AMERICAN GOVERNMENT
INCOME FUND and XXXXXX INVESTMENT MANAGEMENT, INC.
have each caused this instrument to be signed
in duplicate in its behalf by its President or a
Vice President thereunto duly authorized, all as of
the day and year first above written.
XXXXXX AMERICAN GOVERNMENT
INCOME FUND
/s/ Xxxxxxx Xxxxxx
By -----------------------
-------
Xxxxxxx X. Xxxxxx
Executive Vice
President
XXXXXX INVESTMENT
MANAGEMENT, INC.
/s/ Xxxxxx Silver
By ------------------
------------
Xxxxxx X. Silver
Senior Managing
Director
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