Exhibit 77Q1(e)
Xxxxxx U.S. Government Securities Fund
Form N-SAR for the period ended 04/30/98
File No. 811-2719
INVESTMENT MANAGEMENT AGREEMENT
Xxxxxx U.S. Government Securities 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
Xxxxxx U.S. Government Securities Fund
Ladies and Gentlemen:
XXXXXX U.S. GOVERNMENT SECURITIES 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
Xxxxxx
U.S. Government Securities 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
investment manager of the Fund 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, 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 relating to the Fund, 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 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. You shall also
make
available to the Trust promptly upon request all of the
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.
2
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
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 Fund 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 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
3
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 the Fund's 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 the Fund or any
other
person not a party to this Agreement which is obligated
to
provide services to the Fund.
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 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 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
Fund 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 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
4
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 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; 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
the 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. 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.
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 Fund 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 .45
of 1
percent of the average daily net assets as defined below
of the
Fund for such month; provided that, for any calendar
month during
which the average of such values exceeds $250,000,000,
the fee
payable for that month based on the portion of the
average of
such values in excess of $250,000,000 shall be 1/12 of
.43 of 1
percent of such portion; provided that, for any calendar
month
during which the average of such values exceeds
$1,000,000,000,
5
the fee payable for that month based on the portion of
the
average of such values in excess of $1,000,000,000 shall
be 1/12
of .41 of 1 percent of such portion; provided that, for
any
calendar month during which the average of such values
exceeds
$2,500,000,000, the fee payable for that month based on
the
portion of the average of such values in excess of
$2,500,000,000
shall be 1/12 of .40 of 1 percent of such portion;
provided
that, for any calendar month during which the average of
such
values exceeds $5,000,000,000, the fee payable for that
month
based on the portion of the average of such values in
excess of
$5,000,000,000 shall be 1/12 of .38 of 1 percent of such
portion;
provided that, for any calendar month during which the
average of
such values exceeds $7,500,000,000, the fee payable for
that
month based on the portion of the average of such values
in
excess of $7,500,000,000 shall be 1/12 of .36 of 1
percent of
such portion; provided that, for any calendar month
during which
the average of such values exceeds $10,000,000,000, the
fee
payable for that month based on the portion of the
average of
such values in excess of $10,000,000,000 shall be 1/12
of .34 of
1 percent of such portion; and provided that, for any
calendar
month during which the average of such values exceeds
$12,500,000,000, the fee payable for that month based on
the
portion of the average of such values in excess of
$12,500,000,000 shall be 1/12 of .32 of 1 percent of
such
portion; over 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 Fund and unpaid.
The "average daily net assets" of the Fund shall mean
the average
of the values placed on the 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 the 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 the 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 the
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.
6
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 Fund, shall cause the aggregate expenses of the
Fund to
equal 1% of average daily net assets. Except to the
extent that
such amount has been reflected in reduced payments to
you, you
shall refund to the Fund 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 Fund 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 Fund's 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 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 the 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 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. Whenever the
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
7
a manner believed by you 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.
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 the 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 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.
8. Duration and Termination of This Agreement. This
Agreement
shall remain in force until March 1, 1998, 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
by the
vote of a majority of the outstanding voting securities
of the
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 the
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.
This Agreement may be terminated with respect to the
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
the 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
8
until approved in a manner consistent with the 1940 Act
and rules
and regulations thereunder and any applicable SEC
exemptive order
therefrom.
20. 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 "Xxxxxx U.S. Government
Securities Fund"
refers to the Trustees under the Declaration
collectively as
Trustees and not as individuals or personally, and that
no
shareholder of the Fund, or Trustee, officer, employee
or agent
of the Trust, shall be subject to claims against or
obligations
of the Trust or of the Fund 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
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 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 the 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.
9
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,
XXXXXX U.S. GOVERNMENT SECURITIES FUND
on behalf
of Xxxxxx U.S. Government Securities
Fund
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
-----------------------------
Vice President
LKW|W:\FUNDS\NSAR.EXH\KGSF\KGSF-498.77Q|060398
10
