EXHIBIT 24(b) 9(d)
Investment Company Services Agreement
This Agreement, dated as of the 31st day of December, 1997, made by and
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between The ▇▇▇▇▇▇▇▇ Funds, Inc., (the "Company"), a corporation operating as an
open-end, management investment company registered under the Investment Company
Act of 1940, as amended (the "Act"), duly organized and existing under the laws
of the State of Maryland and FPS Services, Inc. ("FPS"), a corporation duly
organized under the laws of the State of Delaware (collectively, the "Parties").
Witnesseth That:
Whereas, the Company is authorized by its Articles of Incorporation to
issue separate series of shares representing interests in separate investment
portfolios which are identified on Schedule "C" attached hereto and which
Schedule "C" may be amended from time to time by mutual agreement of the
Parties; and
Whereas, the Parties desire to enter into an agreement whereby FPS will
provide the services to the Company as specified herein and set forth in
particular in Schedule "A" which is attached hereto and made a part hereof.
Now Therefore, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
General Provisions
Section 1. Appointment. The Company hereby appoints FPS as servicing
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agent and FPS hereby accepts such appointment. In order that FPS may perform its
duties under the terms of this Agreement, the Board of Directors of the Company
shall direct the officers, investment adviser, legal counsel, independent
accountants and custodian of the Company to cooperate fully with FPS and, upon
request of FPS, to provide such information, documents and advice relating to
the Company which FPS requires to execute its responsibilities hereunder. In
connection with its duties, FPS shall be entitled to rely, and will be held
harmless by the Company when acting in reasonable reliance, upon any
instruction, advice or document relating to the Company as provided to FPS by
any of the aforementioned persons on behalf of the Company. All fees charged by
any such persons acting on behalf of the Company will be deemed an expense of
the Company.
Any services performed by FPS under this Agreement will conform to the
requirements of:
(a) the provisions of the Act and the Securities Act of 1933, as amended, and
any rules or regulations in force thereunder;
(b) any other applicable provision of state and federal law;
(c) the provisions of the Articles of Incorporation and the By-Laws as amended
from time to time and delivered to FPS;
(d) any policies and determinations of the Board of Directors of the Company
which are communicated to FPS; and
(e) the policies of the Company as reflected in the Company's registration
statement as filed with the U.S. Securities and Exchange Commission.
Nothing in this Agreement will prevent FPS or any officer thereof from
providing the same or comparable services for or with any other person, firm or
corporation. While the services supplied to the Company may be different than
those supplied to other persons, firms or corporations, FPS will provide the
Company equitable treatment in supplying services. The Company recognizes that
it will not receive preferential treatment from FPS as compared with the
treatment provided to other FPS clients.
Section 2. Duties and Obligations of FPS.
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Subject to the provisions of this Agreement, FPS will provide to the
Company the specific services as set forth in Schedule "A" attached hereto.
Section 3. Definitions. For purposes of this Agreement:
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"Certificate" will mean any notice, instruction, or other instrument in
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writing, authorized or required by this Agreement. To be effective, such
Certificate shall be given to and received by the custodian and shall be signed
on behalf of the Company by any two of its designated officers, and the term
Certificate shall also include instructions communicated to the custodian by
FPS.
"Custodian" will refer to that agent which provides safekeeping of the
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assets of the Company.
"Instructions" will mean communications containing instructions transmitted
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by electronic or telecommunications media including, but not limited to,
Industry Standardization for Institutional Trade Communications, computer-to-
computer interface, dedicated transmission line, facsimile transmission (which
may be signed by an officer or unsigned) and tested telex.
"Oral Instruction" will mean an authorization, instruction, approval, item
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or set of data, or information of any kind transmitted to FPS in person or by
telephone, telegram, telecopy or other mechanical or documentary means lacking
original signature, by a person or persons reasonably identified to FPS to be a
person or persons so authorized by a resolution of the Board of Directors of the
Company to give Oral Instructions to FPS on behalf of the Company.
"Shareholders" will mean the registered owners of the shares of the Company
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in accordance with the share registry records maintained by FPS for the Company.
"Shares" will mean the issued and outstanding shares of the Company.
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"Signature Guarantee" will mean the guarantee of signatures by an "eligible
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guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Eligible guarantor institutions
include banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
Broker-dealers guaranteeing signatures must be members of a clearing corporation
or maintain net capital of at least $100,000. Signature guarantees will be
accepted from any eligible guarantor institution which participates in a
signature guarantee program.
"Written Instruction" will mean an authorization, instruction, approval,
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item or set of data or information of any kind transmitted to FPS in an original
writing containing an original signature or a copy of such document transmitted
by telecopy including transmission of such signature reasonably identified to
FPS to be the signature of a person or persons so authorized by a resolution of
the Board of Directors of the Company, or so identified by the Company to give
Written Instructions to FPS on behalf of the Company.
Concerning Oral and Written Instructions For all purposes under this
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Agreement, FPS is authorized to act upon receipt of the first of any
Written or Oral Instruction it receives from the Company or its agents. In
cases where the first instruction is an Oral Instruction that is not in the
form of a document or written record, a confirmatory Written Instruction or
Oral Instruction in the form of a document or written record shall be
delivered. In cases where FPS receives an Instruction, whether Written or
Oral, to enter a portfolio transaction onto the Company's records, the
Company shall cause the broker/dealer executing such transaction to send a
written confirmation to the Custodian.
FPS shall be entitled to rely on the first Instruction received. For any
act or omission undertaken by FPS in compliance therewith, it shall be free
of liability and fully indemnified and held harmless by the Company,
provided however, that in the event a Written or Oral Instruction received
by FPS is countermanded by a subsequent Written or Oral Instruction
received prior to acting upon such countermanded Instruction, FPS shall act
upon such subsequent Written or Oral Instruction. The sole obligation of
FPS with respect to any follow-up or confirmatory Written Instruction or
Oral Instruction in documentary or written form shall be to make reasonable
efforts to detect any such discrepancy between the original Instruction and
such confirmation and to report such discrepancy to
the Company. The Company shall be responsible and bear the expense of its
taking any action, including any reprocessing, necessary to correct any
discrepancy or error. To the extent such action requires FPS to act, the
Company shall give FPS specific Written Instruction as to the action
required.
The Company will file with FPS a certified copy of each resolution of the
Company's Board of Directors authorizing execution of Written Instructions or
the transmittal of Oral Instructions as provided above.
Section 4. Indemnification.
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(a) FPS, its directors, officers, employees, shareholders, and agents will
be liable for any loss suffered by the Company resulting from the willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
FPS in the performance of its obligations and duties under this Agreement.
(b) Any director, officer, employee, shareholder or agent of FPS, who may
be or become an officer, director, employee or agent of the Company, will be
deemed, when rendering services to the Company, or acting on any business of the
Company (other than services or business in connection with FPS' duties
hereunder), to be rendering such services to or acting solely for the Company
and not as a director, officer, employee, shareholder or agent of, or under the
control or direction of FPS even though such person may be receiving
compensation from FPS.
(c) The Company agrees to indemnify and hold FPS harmless, together with
its directors, officers, employees, shareholders and agents from and against any
and all claims, demands, expenses and liabilities (whether with or without basis
in fact or law) of any and every nature which FPS may sustain or incur or which
may be asserted against FPS by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by FPS except claims,
demands, expenses and liabilities arising from willful misfeasance, bad faith,
gross negligence or reckless disregard on the part of FPS in the performance of
its obligations and duties under this Agreement; or
(ii) any action taken or omitted to be taken by FPS in reliance upon
any Certificate, instrument, order or stock certificate or other document
reasonably believed by FPS to be genuine and signed, countersigned or executed
by any duly authorized person, upon the Oral Instructions or Written
Instructions of an authorized person of the Company, or upon the written opinion
of legal counsel for the Company or FPS; or
(iii) the offer or sale of shares of the Company to any person,
natural or otherwise, which is in violation of any state or federal law.
If a claim is made against FPS as to which FPS may seek indemnity under
this Section, FPS will notify the Company promptly after receipt of any written
assertion of such claim threatening to institute an action or proceeding with
respect thereto and will notify the Company promptly of any action commenced
against FPS within ten (10) days after FPS has been served with a summons or
other legal process. Failure to notify the Company will not, however, relieve
the Company from any liability which it may have on account of the indemnity
under this Section so long as the Company has not been prejudiced in any
material respect by such failure.
The Company and FPS will cooperate in the control of the defense of any
action, suit or proceeding in which FPS is involved and for which indemnity is
being provided by the Company to FPS. The Company may negotiate the settlement
of any action, suit or proceeding subject to FPS' approval, which will not be
unreasonably withheld. FPS reserves the right, but not the obligation, to
participate in the defense or settlement of a claim, action or proceeding with
its own counsel. Costs or expenses incurred by FPS in connection with, or as a
result of such participation, will be borne solely by the Company if:
(i) FPS has received an opinion of counsel from counsel to the
Company stating that the use of counsel to the Company by FPS would present an
impermissible conflict of interest;
(ii) the defendants in, or targets of, any such action or proceeding
include both FPS and the Company, and legal counsel to FPS has reasonably
concluded that there are legal defenses available to it which are different from
or additional to those available to the Company or which may be adverse to or
inconsistent with defenses available to the Company (in which case the Company
will not have the right to direct the defense of such action on behalf of FPS);
or
(iii) the Company authorize FPS to employ separate counsel at the
expense of the Company.
(d) The terms of this Section will survive the termination of this
Agreement.
Section 5. Representations and Warranties.
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(a) FPS represents and warrants that:
(i) it is a corporation duly organized and existing and in good
standing under the laws of Delaware;
(ii) it is empowered under applicable laws and by its Certificate of
Incorporation and By-Laws to enter into and perform this Agreement;
(iii) all requisite corporate proceedings have been taken to
authorize FPS to enter into and perform this Agreement;
(iv) it has and will continue to have access to the facilities,
personnel and equipment required to fully perform its duties and obligations
hereunder;
(v) no legal or administrative proceeding have been instituted or
threatened which would impair FPS' ability to perform its duties and obligations
under this Agreement;
(vi) its entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or obligation of FPS
or any law or regulation applicable to it;
(vii) it is registered as a transfer agent under Section 17A(c)(2) of
the Exchange Act;
(viii) this Agreement has been duly authorized by FPS and, when
executed and delivered, will constitute valid, legal and binding obligation of
FPS, enforceable in accordance with its terms.
(b) The Company represents and warrants that:
(i) it is a corporation duly organized and existing and in good
standing under the laws of the State of Maryland;
(ii) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the
Company to enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted or
threatened which would impair the Company's ability to perform its duties and
obligations under this Agreement;
(v) the Company's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligations of the Company, or any law or regulation applicable to either;
(vi) this Agreement has been duly authorized by the Company and,
when executed and delivered, will constitute valid, legal and binding obligation
of the Company, enforceable in accordance with its terms.
(c) Record Keeping and Other Information
FPS will create and maintain all records required of it pursuant to its
duties hereunder and as set forth in Schedule "A" in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the Act. All such records will be the property of the Company and will
be available during regular business hours for inspection, copying and use by
the Company. Where applicable, such records will be maintained by FPS for the
periods and in the places required by Rule 31a-2 under the Act. Upon termination
of this Agreement, FPS will deliver all such records to the Company or such
person as the Company may designate.
In case of any request or demand for the inspection of the Share records of
the Company, FPS shall notify the Company and secure instructions as to
permitting or refusing such inspection. FPS may, however, exhibit such records
to any person in any case where it is advised by its counsel that it may be held
liable for failure to do so.
Section 6. Compensation. The Company agrees to pay FPS compensation for
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its services, and to reimburse it for expenses at the rates, times, manner and
amounts as set forth in Schedule "B" attached hereto and incorporated herein by
reference and as will be set forth in any amendments to such Schedule "B" agreed
upon in writing by the Parties. Upon receipt of an invoice therefor, FPS is
authorized to collect such fees by debiting the Company's custody account. In
addition, the Company agrees to reimburse FPS for any out-of-pocket expenses
paid by FPS on behalf of the Company within ten (10) calendar days of the
Company's receipt of an invoice therefor.
For the purpose of determining fees payable to FPS, the value of the
Company's net assets will be computed at the times and in the manner specified
in the Company's Prospectus and Statement of Additional Information then in
effect.
During the term of this Agreement, should the Company seek services or
functions in addition to those outlined below or in Schedule "A" attached
hereto, a written amendment to this Agreement specifying the additional services
and corresponding compensation will be executed by the Parties.
In the event that the Company is more than sixty (60) days delinquent in
its payments of monthly ▇▇▇▇▇▇▇▇ in connection with this Agreement (with the
exception of specific amounts which may be contested in good faith by the
Company), this Agreement may be terminated upon thirty (30) days' written notice
to the Company by FPS. The Company must notify FPS in writing of any contested
amounts within thirty (30) days of receipt of a billing for such amounts.
Disputed amounts are not due and payable while they are being disputed.
Section 7. Days of Operation. Nothing contained in this Agreement is
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intended to or will require FPS, in any capacity hereunder, to perform any
functions or duties on any holiday, day of special observance or any other day
on which the New York Stock Exchange ("NYSE") is closed. Functions or duties
normally scheduled to be performed on such days will be performed on and as of
the next succeeding business day on which the NYSE is open. Notwithstanding the
foregoing, FPS will compute the net asset value of the Company on each day
required pursuant to Rule 22c-1 promulgated under the Act.
Section 8. Acts of God, etc. FPS will not be liable or responsible for
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delays or errors caused by acts of God or by reason of circumstances beyond its
control including, acts of civil or military authority, national emergencies,
labor difficulties, mechanical breakdown, insurrection, war, riots, or failure
or unavailability of transportation, communication or power supply, fire, flood
or other catastrophe.
In the event of equipment failures beyond FPS' control, FPS will, at no
additional expense to the Company, take reasonable steps to minimize service
interruptions but will have no liability with respect thereto. The foregoing
obligation will not extend to computer terminals located outside of premises
maintained by FPS. FPS has entered into and maintains in effect agreements
making reasonable provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
Section 9. Inspection and Ownership of Records. In the event of a request
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or demand for the inspection of the records of the Company, FPS will use its
best efforts to notify the Company and to secure instructions as to permitting
or refusing such inspection. FPS may, however, make such records available for
inspection to any person in any case where it is advised in writing by its
counsel that it may be held liable for failure to do so after notice to the
Company.
FPS recognizes that the records it maintains for the Company are the
property of the Company and will be surrendered to the Company upon written
notice to FPS as outlined under Section 10(c) below. The Company is responsible
for the payment in advance of any fees owed to FPS. FPS agrees to maintain the
records and all other information of the Company in a confidential manner and
will not use such information for any purpose other than the performance of FPS'
duties under this Agreement.
Section 10. Duration and Termination.
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(a) The initial term of this Agreement will commence on the date
hereinabove first written (the "Effective Date") and will continue thereafter
subject to termination by either Party as set forth in subsection (c) below,
until February 28, 1999.
(b) The fee schedules set forth in Schedule "B" attached hereto will be
fixed until February 28, 1999, except as noted, commencing on the Effective Date
of this Agreement.
(c) After the initial term of this Agreement, a Party may give written
notice to the other (the day on which the notice is received by the Party
against which the notice is made shall be the "Notice Date") of a date on which
this Agreement shall be terminated ("Termination Date"). The Termination Date
shall be set on a day not less than one hundred eighty (180) days after the
Notice Date. The period of time between the Notice Date and the Termination Date
is hereby identified as the "Notice Period". Any time up to, but not later than
fifteen (15) days prior to the Termination Date, the Company will pay to FPS
such compensation as may be due as of the Termination Date and will likewise
reimburse FPS for any out-of-pocket expenses and disbursements reasonably
incurred or expected to by incurred by FPS up to and including the Termination
Date.
(d) In connection with the termination of this Agreement, if a successor
to any of FPS' duties or responsibilities under this Agreement is designated by
the Company by written notice to FPS, FPS will promptly, on the Termination Date
and upon receipt by FPS of any payments owed to it as set forth in Section
10.(c) above, transfer to the successor, at the Company's expense, all records
which belong to the Company and will provide appropriate, reasonable and
professional cooperation in transferring such records to the named successor.
(e) Should the Company desire to move any of the services outlined in this
Agreement to a successor service provider prior to the Termination Date, FPS
shall make a good faith effort to facilitate the conversion on such prior date,
however, there can be no guarantee that FPS will be able to facilitate a
conversion of services prior to the end of the Notice Period. Should services be
converted to a successor service provider prior to the end of the Notice Period,
or if the Company is liquidated or its assets merged or purchased or the like
with another entity, payment of fees to FPS shall be accelerated to a date prior
to the conversion or termination of services and calculated as if the services
had remained at FPS until the expiration of the Notice Period and shall be
calculated at the asset levels on the Notice Date.
(f) Notwithstanding the foregoing, this Agreement may be terminated at any
time by either Party in the event of a material breach by the other Party
involving gross negligence, willful misfeasance, bad faith or a reckless
disregard of its obligations and duties under this Agreement provided that such
breach shall have remained unremedied for sixty (60) days or more after receipt
of written specification thereof.
Section 11. Rights of Ownership. All computer programs and procedures
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developed to perform services required to be provided by FPS under this
Agreement are the property of FPS. All records and other data except such
computer programs and procedures are the exclusive property of the Company and
all such other records and data will be furnished to the Company in appropriate
form as soon as practicable after termination of this Agreement for any reason.
Section 12. Amendments to Documents. The Company will furnish FPS written
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copies of any amendments to, or changes in, the Company Instrument, By-Laws,
Prospectus or Statement of Additional Information in a reasonable time prior to
such amendments or changes becoming effective. In addition, the Company agrees
that no amendments will be made to the Prospectus or Statement of Additional
Information of the Company which might have the effect of changing the
procedures employed by FPS in providing the services agreed to hereunder or
which amendment might affect the duties of FPS hereunder unless the Company
first obtains FPS' approval of such amendments or changes.
Section 13. Confidentiality. Both Parties hereto agree that any non-
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public information obtained hereunder concerning the other Party is confidential
and may not be disclosed to any other person without the consent of the other
Party, except as may be required by applicable law or at the request of the U.S.
Securities and Exchange Commission or other governmental agency. FPS agrees that
it will not use any non-public information for any purpose other than
performance of its duties or obligations hereunder. The obligations of the
Parties under this Section will survive the termination of this Agreement. The
Parties further agree that a breach of this Section would irreparably damage the
other Party and accordingly agree that each of them is entitled, without bond or
other security, to an injunction or injunctions to prevent breaches of this
provision.
Section 14. Notices. Except as otherwise provided in this Agreement, any
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notice or other communication required by or permitted to be given in connection
with this Agreement will be in writing and will be delivered in person or sent
by first class mail, postage prepaid or by prepaid overnight delivery service to
the respective parties as follows:
If to the Company: If to FPS:
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The ▇▇▇▇▇▇▇▇ Funds, Inc. FPS Services, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ King of ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman President
Section 15. Amendment. No provision of this Agreement may be amended or
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modified in any manner except by a written agreement properly authorized and
executed by the Parties. This Agreement may be amended from time to time by
supplemental agreement executed by the Parties and the compensation stated in
Schedule "B" attached hereto may be adjusted accordingly as mutually agreed
upon.
Section 16. Authorization. The Parties represent and warrant to each
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other that the execution and delivery of this Agreement by the undersigned
officer of each Party has been duly and validly authorized; and when duly
executed, this Agreement will constitute a valid and legally binding enforceable
obligation of each Party.
Section 17. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which when so executed will be deemed to be an original,
but such counterparts will together constitute but one and the same instrument.
Section 18. Assignment. This Agreement will extend to and be binding upon
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the Parties hereto and their respective successors and assigns; provided,
however, that this Agreement will not be assignable by the Company without the
written consent of FPS or by FPS without the written consent of the Company
which consent shall be authorized or approved by a resolution by its respective
Boards of Directors.
Section 19. Governing Law. This Agreement will be governed by the laws of
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the State of Pennsylvania and the exclusive venue of any action arising under
this Agreement will be ▇▇▇▇▇▇▇▇▇▇ County, Commonwealth of Pennsylvania.
Section 20. Severability. If any part, term or provision of this
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Agreement is held by any court to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions will be considered
severable and not be affected and the rights and obligations of the parties will
be construed and enforced as if the Agreement did not contain the particular
part, term or provision held to be illegal or invalid, provided that the basic
agreement is not thereby materially impaired.
In Witness Whereof, the Parties hereto have caused this Agreement
consisting of twelve (12) typewritten pages, together with Schedules "▇," "▇"
and "C" to be signed by their duly authorized officers as of the day and year
first above written.
The ▇▇▇▇▇▇▇▇ Funds, Inc. FPS Services, Inc.
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By:______________________________ By:______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Schedule "A"
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Services to be provided by FPS Services, Inc.
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FPS Services, Inc., (FPS) will (i) provide its own office space, facilities,
equipment and personnel for the performance of its duties under this Agreement;
and (ii) take all actions it deems necessary to properly execute its
responsibilities hereunder.
1. SERVICES RELATED TO ADMINISTRATIVE SERVICES
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I. Regulatory Compliance
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A. Compliance - Federal Investment Company Act of 1940
1. Review, report and renew
a. investment advisory contracts
b. fidelity bond
c. underwriting contracts
d. distribution (12b-1) plans
e. administration contracts
f. accounting contracts
g. custody administration contracts
h. transfer agent and shareholder services
2. Filings
a. N-SAR (semi-annual report)
b. N-1A (prospectus), post-effective amendments and supplements
("stickers")
c. 24f-2 indefinite registration of shares
d. filing fidelity bond under 17g-1
e. filing shareholder reports under 30b2-1
3. Annual up-dates of biographical information and questionnaires for
Directors/Trustees and Officers
II. Corporate Business and Shareholder/Public Information
A. Directors/Trustees/Management
1. Preparation of meetings
a. agendas - all necessary items of compliance
b. arrange and conduct meetings
c. prepare minutes of meetings
d. keep attendance records
e. maintain corporate records/minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
C. Maintain Corporate Calendars and Files
D. Release Corporate Information
1. To shareholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
c. changes to prospectus
d. letters from management
e. funds' performance
4. Respond to:
a. financial press
b. miscellaneous shareholders inquiries
c. industry questionnaires
E. Communications to Shareholders
1. Coordinate printing and distribution of annual, semi-annual
reports, and prospectus
III. Financial and Management Reporting
A. Income and Expenses
1. Monitoring of expense accruals, budgets, expense payments and
expense caps
2. Approve and coordinate payment of expenses
3. Establish Funds' operating expense checking account and perform
monthly reconciliation of checking account
4. Calculation of advisory fee, 12b-1 fee and reimbursements to
fund, (if applicable)
5. Authorize the recording and amortization of organizational costs
and pre-paid expenses (supplied by advisor), for start-up funds
and reorganizations
6. Calculation of average net assets
7. Expense ratios calculated
B. Distributions to Shareholders
1. Calculations of dividends and capital gain distributions (in
conjunction with the fund and their auditors)
a. compliance with income tax provisions
b. compliance with excise tax provisions
c. compliance with Investment Company Act of 1940
2. Book/Tax identification and adjustments at required distribution
periods (in conjunction with the funds' auditors)
C. Financial Reporting
1. Liaison between fund management, independent auditors and
printers for semi-annual and annual shareholder reports
2. Preparation of semi-annual and annual reports to shareholders
3. Preparation of semi-annual and annual NSAR's (Financial Data)
4. Preparation of Financial Statements for required SEC Post
Effective filings (if applicable)
5. Preparation of required performance graph (annually) (based on
advisor supplied indices)
D. Subchapter M Compliance (monthly)
1. Asset diversification and gross income tests
E. Other Financial Analyses
1. Upon request from fund management, other budgeting and analyses
can be constructed to meet the fund's specific needs (additional
fees may apply)
2. Sales information, portfolio turnover (monthly)
3. Work closely with independent auditors on tax reporting schedules
we prepare on return of capital presentation, excise tax
calculation
4. Performance (total return) calculation (monthly)
5. 1099 Miscellaneous - prepared and filed for Directors/Trustees
(annual)
6. Analysis of interest derived from various Government obligations
(annual) (if interest income was distributed in a calendar year)
7. Analysis of interest derived, by state, for Municipal Bond Funds
8. Review and characterize 1099-Dividend Forms
9. Prepare and coordinate with printer the printing and mailing of
1099-Dividend Insert Cards
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification entries to ensure proper
update
2. Perform various reviews to ensure accuracy of Accounting (the
monthly expense analysis) and Custody (review of daily bank
statements to ensure accurate expense money movement for expense
payments)
3. Review accruals, budgets and expenditures (where applicable)
G. Preparation and distribution of monthly operational reports to
management by 10th business day
1. Management Statistics (Recap)
a. portfolio summary
b. book gains/losses/per share
c. net income, book income/per share
d. capital stock activity
e. distributions
2. Performance Analysis (faxed to Fund 1/st/ workday of month)
a. total return
b. monthly, quarterly, year to date, average annual
3. Expense Analysis
a. schedule
b. summary of due to/from advisor
c. expenses paid
d. expense cap
e. accrual monitoring
f. advisory fee
4. Portfolio Turnover
a. market value
b. cost of purchases
c. net proceeds of sales
d. average market value
5. Asset Diversification and Gross Income Tests
▇. ▇▇▇▇▇ assets
b. non-qualifying assets
▇. ▇▇▇▇▇ income test
6. Activity Summary
a. shares sold, redeemed and reinvested
b. change in investment
H. Provide rating agencies statistical data as requested
(monthly/quarterly)
I. Standard schedules for Board Package (Quarterly)
1. Activity Summary (III-G-7 from above)
2. Expense analysis
3. Other schedules can be provided (additional fees may apply)
IV. Blue Sky Administration
A. Sales Data
1. Receive daily sales figures through SUNGARD interface with Price
Waterhouse Blue 2 System.
2. Receive daily sales figures broken down by state from ▇▇▇▇▇▇▇
▇▇▇▇▇▇ or other mutual fund marketplaces (if applicable).
3. Produce daily warning report for sales in excess of pre-
determined percentage.
4. Analysis of all sales data to determine trends within any state.
B. Filings
1. Produce and mail the following required filings:
a. Initial Filings - produce all required forms including
notification of SEC Effectiveness.
b. Renewals - produce all renewal documents and mail to states,
includes follow-up to ensure all is in order to continue
selling in states.
c. Sales Reports - produce all relevant sales reports for the
states and complete necessary documents to properly file
sales reports with states.
d. Prospectus Filings - file all copies of Definitive SAI &
Prospectuses with the states which require notification.
e. Post-Effective Amendment Filing - file all Post-Effective
Amendments with the states which require notification, as
well as, any other required documents.
2. On demand additional states - complete filing for any states that
you would like to add. This includes all of the items in 1(a).
3. Amendments to current permits - file in a timely manner any
amendment to registered share amounts.
4. Update and file hard copy of all data pertaining to individual
permits.
C. Consulting and Analysis - We will supply you with the most current fee
structure for each state and help you decide what course of action to
take in each state to minimize the amount of money spent on Blue Sky
Registration.
2. SERVICES RELATED TO SHAREHOLDERS AND SHARE TRANSACTIONS
------------------------------------------------------------
A. Shareholder File
1. Establish new accounts and enter demographic data into shareholder
base. Includes in-house processing and National Securities Clearing
Corporation (NSCC) -Fund/SERV and/or Networking transmissions.
2. Create Customer Information File (CIF) to link accounts within the
Fund and across funds within the Fund Group. Facilitates account
maintenance, lead tracking, quality control, household mailings and
combined statements.
3. 100% quality control of new account information including verification
of initial investment.
4. Maintain account and customer file records based on shareholder
request and routine quality review.
5. Maintain tax ID certification and Non Resident Agent (NRA) records for
each account, including backup withholding.
6. Provide written confirmation of address changes.
7. Produce shareholder statements for daily activity, dividends, on-
request, interested party and periodic mailings.
8. Automated processing of dividends and capital gains with daily,
monthly, quarterly or annual distributions. Payment options include
reinvestment, directed payment to another fund, cash via mail, Fed
wire or ACH.
9. Image all applications, account documents, data changes,
correspondence, monetary transactions and other pertinent shareholder
documents.
B. Shareholder Services
1. Provide quality service through a staff of highly trained NASD
licensed customer service personnel, including phone, research and
correspondence representatives.
2. Answer shareholder calls: provide routine account information,
transaction details including direct and wire purchases, redemptions,
exchanges, systematic withdrawals, pre-authorized drafts, Fund/SERV
and wire order trades, problem solving and process telephone
transactions.
3. Silent monitoring of telephone representative calls by the phone
supervisor during live conversations to ensure exceptional customer
service.
4. Record and maintain tape recordings of all shareholder calls for a six
month period.
5. Phone Supervisor produces daily management reports of shareholder
calls which include tracking volume, call length, average wait time
and abandoned call rates to ensure quality service.
6. Phone representatives are thoroughly trained through in-house training
programs on the techniques of providing Exceptional Customer Service.
7. Customer inquiries received by letter or telephone are researched by a
correspondence team. These inquires include such items as
account/customer file information, complete historical account
information, stop payments on checks, transaction details and lost
certificates.
8. Provide written correspondence in response to shareholder inquiries
and request through the ▇▇▇▇▇ Letter Writer system. Whenever possible,
unclear shareholder instructional letters are handled by a phone call
to the shareholder from our phone representatives to avoid delay in
processing of the request.
C. Investment Processing
1. Initial investment (checks or Fed wires)
2. Subsequent investments processed through lock box
3. Pre-authorized investments (PAD) through ACH system
4. Government allotments through ACH system
5. Wire order and NSCC - Fund/SERV trades
6. Prepare and process daily bank deposit of shareholder investments
D. Redemption Processing
1. Process mail redemption requests
2. Process telephone redemption transactions
3. Establish Systematic Withdrawal file and process automated
transactions on monthly basis
4. Provide wire order and NSCC - Fund/SERV trade processing
5. Distribute redemption proceeds to shareholder by check, wire or ACH
processing
E. Exchange & Transfer Processing
1. Process legal transfers
2. Process ACATS transfers
3. Issue and cancel certificates
4. Replace certificates through surety bonds (separate charge to
shareholder)
5. Process exchange transactions (letter and/or telephone requests)
F. Retirement Plan Services
1. Fund sponsored IRAs offered using Semper Trust Company as custodian.
Services include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify ▇▇▇ holders of 70 1/2 requirements
g. Calculate Required Minimum Distributions (RMD)
h. Maintain beneficiary information file
i. Solicit birth date information
2. Fund sponsored SEP-▇▇▇ plans offered using Semper Trust Company as
custodian. Services include those listed under IRAs and:
a. Identification of employer contributions
3. Fund sponsored Qualified plans offered:
a. Plan document available
b. Omnibus/master account processing only
c. Produce annual statements
d. Process contributions
e. Process distributions
f. Process rollover and Transfer of Assets transactions
G. Settlement & Control
1. Daily review of processed shareholder transactions to assure input was
processed correctly. Accurate trade activity figures passed to the
Fund's Accounting Agent.
2. Preparation of daily cash movement sheets to be passed to the Fund's
Accounting Agent and Custodian Bank for use in determining the Fund's
daily cash availability.
3. Prepare a daily share reconcilement which balances the shares on the
Transfer Agent system to those on the books of the Fund.
4. Resolve any outstanding share or cash issues that are not cleared by
trade date + 2.
5. Process shareholder adjustments to also include the proper
notification of any booking entries needed, as well as any necessary
cash movement.
6. Settlement and review of the Fund's declared dividends and capital
gains will include the following:
a. Review of record date report for accuracy of shares
b. Prepare dividend settlement report after dividend is posted
c. Verify the posting date shares, the rate used and the NAV price
of reinvest date to ensure dividend was posted properly
d. Distribute copies to the Fund's Accounting Agent
e. Prepare the checks prior to being mailed
f. Send any dividends via wire, if requested
g. Prepare cash movement sheets for the cash portion of the dividend
payout on payable date
7. Placement of stop payments on dividend and liquidation checks as well
as the issuance of their replacements.
8. Maintain inventory control for stock certificates and dividend check
form.
9. Aggregate tax filings for all FPS clients. Monthly deposits are made
to the IRS for all taxes withheld from shareholder disbursements,
distributions and foreign account distributions. Correspond with the
IRS concerning any of the above issues.
10. Timely settlement and cash movement for all NSCC - Fund/SERV activity.
H. Year-End Processing
1. Maintain shareholder records in accordance with IRS notices for under-
reporting and invalid tax IDs. This includes initiating 31% backup
withholding and notifying shareholders of their tax status and the
corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertified accounts. Update
account tax status to reflect backup withholding or certified status
depending upon responses.
3. Conduct periodic W-8 solicitation of all non-resident alien
shareholder accounts. Update account tax status with updated
shareholder information and treaty rates for NRA tax.
4. Review IRS Revenue Procedures for changes in transaction and
distribution reporting and specifications for the production of forms
to ensure compliance.
5. Coordinate year-end activity with client. Activities include producing
year-end statements, scheduling record dates for year-end dividends
and capital gains, production of combined statements and printing of
inserts to be mailed with tax forms.
6. Distribute Dividend Letter to funds for them to sign off on all
distributions paid year-to-date. Dates and rates must be authorized so
that they can be used for reporting to the IRS.
7. Coordinate the ordering of forms and envelopes from vendors in
preparation of tax reporting. Compare forms with IRS requirements to
ensure accuracy. Upon receipt of forms and envelopes, allocate space
for storage.
8. Prepare form flashes for the microfiche vendor. Test and oversee the
production of fiche for year-end statements and tax forms.
9. Match and settle tax reporting totals to fund records and on-line data
from INVESTAR.
10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year-end
valuations. Quality assure forms before mailing to shareholders.
11. Monitor IRS deadlines and special events such as crossover dividends
and prior year ▇▇▇ contributions.
12. Prepare magnetic tapes and appropriate forms for the filing of all
reportable activity to the IRS.
I. Client Services
1. An Account Manager is assigned to each relationship and is the liaison
between the Fund and the Transfer Agency staff. Responsibilities
include scheduling of events, system enhancement implementation,
special promotion/event implementation and follow-up and constant fund
interaction on daily operational issues.
Specifically:
a. Scheduling of dividends, proxies, report mailings and special
mailings
b. Coordinating with the Fund the shipment of materials for
scheduled mailings
c. Acting as liaison between the Fund and support services for
preparation of proofs and eventual printing of statement forms,
certificates, proxy cards, envelopes, etc.
d. Handling all notification to the client regarding proxy
tabulation through the meeting - coordinate scheduling of
materials, including voted cards, tabulation letters and
shareholder list to be available for the meeting
e. Ordering special reports, tapes and/or discs for special systems
requests received
f. Implementing new operational procedures, i.e., check writing
feature, load discounts, minimum waivers, sweeps, telephone
options, PAD promotions, etc.
g. Coordinating with systems, services and operations, special
events, i.e., mergers, new fund start ups, small account
liquidations, combined statements, household mailings, additional
mail files
h. Preparing standard operating procedures and review prospectuses -
coordinate implementation of suggested changes with the Fund
i. Acting as liaison between the Fund and the Transfer Agency staff
regarding all service and operational issues
2. Blue Sky Processing
a. Maintain file with additions, deletions, changes and updates at
the Fund's direction
J. Other Related Services (not included in this Agreement)
1. Systematic linkage of shareholder accounts with exact matches on SSN
and address for the purpose of consolidated account history reporting.
Periodic production of laser printed combined statements.
2. Production of household mailing labels which enable the Fund to do
special mailings to each address in the Fund Group rather than each
account.
3. Produce shareholder lists, labels and ad hoc reports to Fund
management as requested.
DAILY REPORTS
-------------
REPORT NUMBER REPORT DESCRIPTION
------------- ------------------
-- Daily Activity Register
024 Tax Reporting Proof
051 Cash Receipts and Disbursement Proof
053 Daily Share Proof
091 Daily Gain/Loss Report
104 Maintenance Register
044 Transfer/Certificate Register
056 Blue Sky Warning Report
MONTHLY REPORTS
---------------
REPORT DESCRIPTION
------------------
Blue Sky
Certificate Listing
State Sales and Redemption
Monthly Statistical Report
Account Demographic Analysis
MTD Sales - Demographics by Account Group
Account Analysis by Type
3. SERVICES RELATED TO PORTFOLIO VALUATION AND MUTUAL FUND ACCOUNTING
-----------------------------------------------------------------------
All financial data provided to, processed and reported by FPS under this
Agreement shall be in United States dollars. FPS' obligation to convert, equate
or deal in foreign currencies or values extends only to the accurate
transposition of information received from the various pricing and information
services.
A. Daily Accounting Services
1. Calculate Net Asset Value ("NAV") Per Share:
. Update the daily market value of securities held by the Fund using
FPS's standard agents for pricing U.S. equity and bond securities. The
U.S. equity pricing services are Reuters, Inc., ▇▇▇▇▇▇ Data
Corporation, ▇.▇. ▇▇▇▇▇ Co., Inc. and Interactive Data Corporation
(IDC). ▇▇▇▇▇▇ Data, Dow ▇▇▇▇▇ Markets (formerly Telerate Systems,
Inc.), ▇.▇. ▇▇▇▇▇ Co., Inc., Municipal Market Data and IDC are also
used for bond and money market prices/yields. Bloomberg is available
and used for price research.
. Enter limited number of manual prices supplied by The ▇▇▇▇▇▇▇▇ Funds,
Inc. and/or broker.
. Prepare NAV proof sheet. Review components of change in NAV for
reasonableness.
. Review variance reporting on-line and in hard copy for price changes
in individual securities using variance levels established by The
▇▇▇▇▇▇▇▇ Funds, Inc. Verify U.S.
dollar security prices exceeding variance levels by notifying The
▇▇▇▇▇▇▇▇ Funds, Inc. and pricing sources of noted variances.
. Review for ex-dividend items indicated by pricing sources; trace to
Fund's general ledger for agreement.
. Communicate pricing information (NAV) to The ▇▇▇▇▇▇▇▇ Funds, Inc.,
Fund's transfer agent ("Transfer Agent") and electronically to NASDAQ.
2. Determine and Report Cash Availability to The ▇▇▇▇▇▇▇▇ Funds, Inc. by
approximately 9:30 a.m. Eastern Time:
. Receive daily cash and transaction statements from the agent
responsible for the safekeeping of the Fund's assets (the "Custodian")
by 8:30 a.m. Eastern time.
. Receive previous day shareholder activity reports from the Transfer
Agent by 8:30 a.m. Eastern time.
. Fax hard copy Cash Availability calculations with all details to The
▇▇▇▇▇▇▇▇ Funds, Inc.
. Supply The ▇▇▇▇▇▇▇▇ Funds, Inc. with 3-day cash projection report.
. Prepare daily bank cash reconciliations. Notify the Custodian and The
▇▇▇▇▇▇▇▇ Funds, Inc. of any reconciling items.
3. Reconcile and Record All Daily Expense Accruals:
. Accrue expenses based on budget supplied by The ▇▇▇▇▇▇▇▇ Funds, Inc.
either as percentage of net assets or specific dollar amounts.
. If applicable, monitor expense limitations established by The ▇▇▇▇▇▇▇▇
Funds, Inc.
. If applicable, accrue daily amortization of organizational expense.
. If applicable, complete daily accrual of 12b-1 expenses.
4. Verify and Record All Daily Income Accruals for Debt Issues:
. Review and verify all system generated Interest and Amortization
reports.
. Establish unique security codes for bond issues to permit segregated
trial balance income reporting.
5. Monitor Securities Held for Cash Dividends, corporate actions and capital
changes such as splits, mergers, spinoffs, etc. and process appropriately.
. Monitor electronically received information from ▇▇▇▇▇▇ Data
Corporation for all domestic securities.
. Review current daily security trades for dividend activity.
. Monitor collection and postings of corporate actions, dividends and
interest.
6. Enter All Security Trades on Investment Accounting System (IAS) based on
written instructions from the Fund's Advisor.
. Review system verification of trade and interest calculations.
. Verify settlement through statements supplied by the Custodian.
. Maintain security ledger transaction reporting.
. Maintain tax lot holdings.
. Determine realized gains or losses on security trades.
. Provide broker commission reporting.
7. Enter All Fund Share Transactions on IAS:
. Process activity identified on reports supplied by the Transfer Agent.
. Verify settlement through statements supplied by the Custodian.
. Reconcile to FPS's Transfer Agent report balances.
8. Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance (listing
all asset, liability, equity, income and expense accounts).
. Post manual entries to the general ledger.
. Post Custodian activity.
. Post security transactions.
. Post and verify system generated activity, i.e. income and expense
accruals.
. Prepare general ledger net cash proof used in NAV calculation.
9. Review and Reconcile with Custodian Statements:
. Verify all posted interest, dividends, expenses and shareholder and
security payments/receipts, etc. (Discrepancies will be reported to
the Custodian).
. Post all cash settlement activity to the trial balance.
. Reconcile to ending cash balance accounts.
. Clear IAS subsidiary reports with settled amounts.
. Track status of past due items and failed trades as reported by the
Custodian.
10. Submission of Daily Accounting Reports to The ▇▇▇▇▇▇▇▇ Funds, Inc.:
(Additional reports readily available)
. Trial Balance.
. Portfolio Valuation (listing inclusive of holdings, costs, market
values, unrealized appreciation/depreciation and percentage of
portfolio comprised of each security).
. NAV Calculation Report.
. Cash Availability
. 3-Day Cash Projection Report.
B. Monthly Accounting Services
1. Full Financial Statement Preparation (automated Statements of Assets and
Liabilities, of Operations and of Changes in Net Assets) and submission to
The ▇▇▇▇▇▇▇▇ Funds, Inc. by 10th business day.
2. Submission of Monthly Automated IAS Reports to The ▇▇▇▇▇▇▇▇ Funds, Inc.:
. Security Purchase/Sales Journal.
. Interest and Maturity Report.
. Brokers Ledger (Commission Report).
. Security Ledger Transaction Report with Realized Gains/Losses.
. Security Ledger Tax Lot Holdings Report.
. Additional reports available upon request.
3. Reconcile Accounting Asset Listing to Custodian Asset Listing:
. Report any security balance discrepancies to the Custodian/The ▇▇▇▇▇▇▇▇
Funds, Inc.
4. Provide Monthly Analysis and Reconciliation of Additional Trial Balance
Accounts,
such as:
. Security cost and realized gains/losses.
. Interest/dividend receivable and income.
. Payable/receivable for securities purchased and sold.
. Payable/receivable for fund shares; issued and redeemed.
. Expense payments and accruals analysis.
5. If Appropriate, Prepare and Submit to The ▇▇▇▇▇▇▇▇ Funds, Inc. (additional
fees may apply):
. Income by state reporting
. Standard Industry Code Valuation Report.
. Alternative Minimum Tax Income segregation schedule
. SEC yield reporting (non-money market funds with domestic and ADR
securities only).
C. Annual (and Semi-Annual) Accounting Services
1. Annually assist and supply Fund's auditors with schedules supporting
securities and shareholder transactions, income and expense accruals, etc.
during the year in accordance with standard audit assistance requirements.
2. Provide N-SAR Reporting (Accounting Questions) on a Semi-Annual Basis:
If applicable, answer the following items: 2, 12B, 20, 21, 22, 23, 28, 30A,
31, 32, 35, 36, 37, 43, 53, 55, 62, 63, 64B, 71, 72, 73, 74, 75 and 76
D. Accounts and Records
On each day the NYSE is open for regular trading and subject to the proper
receipt (via Oral or Written Instructions) by FPS of all information
required to fulfill its duties under this Agreement, FPS will maintain and
keep current the following Accounts and Records and any other records
required to be kept pursuant to Rule 31a-1 of the Act relating to the
business of the Series in such form as may be mutually agreed upon between
the Trust and FPS:
(1) Net Asset Value Calculation Reports;
(2) Cash Receipts Report;
(3) Cash Disbursements Report;
(4) Dividends Paid and Payable Schedule;
(5) Purchase and Sales Journals - Portfolio Securities;
(6) Subscription and Redemption Reports;
(7) Security Ledgers - Transaction Report and Tax Lot Holdings Report;
(8) Broker Ledger - Commission Report;
(9) Daily Expense Accruals;
(10) Daily Interest Accruals;
(11) Daily Trial Balance;
(12) Portfolio Interest Receivable and Income Reports;
(13) Portfolio Dividend Receivable and Income Reports;
(14) Listing of Portfolio Holdings - showing cost, market value and
percentage of portfolio comprised of each security; and
(15) Average Daily Net assets provided on monthly basis.
E. Protocol concerning accuracy of Pricing Portfolio Securities
FPS shall perform the ministerial calculations necessary to calculate the
net asset value each day that the New York Stock Exchange is open for
business, in accordance with; (i) the current Prospectus and Statement of
Additional Information for each Series, and (ii) procedures with respect
thereto approved by the Board of Trustees of the Trust and supplied in
writing to FPS. Portfolio items for which market quotations are available
by FPS' use of an automated financial information service (the "Service")
shall be based on the closing prices of such Service except where a Series
or the Advisor has given or caused to be given specific Written or Oral
Instructions to utilize a different value subject to the appropriate
provisions in each Series' Prospectus and Statement of Additional
Information then in effect. All of the portfolio securities shall be given
such values as the applicable Series or the Advisor provides by Written or
Oral Instructions including all restricted securities and other securities
requiring valuation not readily ascertainable solely by such Service
subject to the appropriate provisions in the Series' Prospectus and
Statement of Additional Information then in effect.
FPS will have no responsibility or liability for (i) the accuracy of prices
quoted by such Service; (ii) the accuracy of the information supplied by
the a Series; or (iii) any loss, liability, damage, or cost arising out of
any inaccuracy of such data. FPS will have no responsibility or duty to
include information or valuations to be provided by a Series in any
computation unless and until it is timely supplied to FPS in usable form.
FPS will record corporate action information as received from the
Custodians, the Service or a Series. FPS will not have any duty to gather
or record corporate action information not supplied by these sources.
FPS will assume no liability for price changes caused by the Advisor or any
subadvisor, Custodian, suppliers of security prices, corporate action and
dividend information, or any party other than FPS itself.
F. Protocol regarding Receipt of Instructions
For all purposes under this Agreement, FPS is authorized to act upon
receipt of the first of any Written or Oral Instruction it receives from
the Trust on behalf of a Series or its agents on behalf of the Trust. In
cases where the first instruction is an Oral Instruction that is not in the
form of a document or written record, a confirmatory Written Instruction or
Oral Instruction in the form of a document or written record will be
delivered, and in cases where FPS receives an Instruction, whether Written
or Oral, to enter a portfolio transaction on the records, the Trust will
cause the broker/dealer to send a written confirmation to the Custodian.
FPS will be entitled to rely on the first Oral or Written Instruction
received and any act or omission undertaken in compliance therewith will be
free of liability and fully indemnified and held harmless by the applicable
Series, provided, however, that in the event a Written or Oral Instruction
received by FPS is countermanded by a subsequent Written or Oral
Instruction received by FPS prior to acting upon such countermanded
Instruction, FPS will act upon such subsequent Written or Oral Instruction.
The sole obligation of FPS with respect to any follow-up or confirmatory
Written Instruction or Oral Instruction in documentary or written form will
be to make reasonable efforts to detect any such discrepancy between the
original Instruction and such confirmation and to report such discrepancy
to the applicable Series. The Series will be responsible, at the Series'
expense, for taking any action, including any reprocessing, necessary to
correct any discrepancy or error. To the extent such action requires FPS to
act, the Trust will give FPS specific Written Instruction as to the action
required.
G. Accounting Services Basic Assumptions for the Funds
The Accounting Fees as set forth in Schedule "B" are based on the following
assumptions. To the extent these assumptions are inaccurate or requirements
change, fee revisions may be necessary.
1. The Funds portfolio asset composition will be domestic equity, debt and
money market issues. Trading activity is expected to be moderate, with an
annual turnover rate not to exceed 100%.
2. Each Fund has a tax year-end which coincides with its fiscal year-end. No
additional accounting requirements are necessary to identify or maintain
book-tax differences. FPS does not provide security tax accounting which
differs from its book accounting under this fee schedule.
3. Each Fund agrees to the use of FPS' standard current pricing services for
domestic equity, debt and ADR securities.
It is assumed that FPS will work closely with each Fund to ensure the
accuracy of the Funds' NAV and to obtain the most satisfactory pricing
sources and specific methodologies. Each Fund will establish security
variance procedures to minimize NAV miscalculations.
4. To the extent a Fund requires a limited number of daily security prices
from specific brokers (as opposed to pricing information received
electronically), these manual prices will be obtained by the Funds' Advisor
and faxed to FPS by 4:00 p.m. Eastern time for inclusion in the NAV
calculations. The Advisor will supply FPS with the appropriate pricing
contacts for these manual quotes.
5. FPS will supply weekly Portfolio Valuation Reports to each Funds' Advisor
identifying current security positions, original/amortized cost, security
market values and changes in unrealized appreciation/depreciation. It will
be the responsibility of the Advisor to review these reports and to
promptly notify FPS of any possible problems, trade discrepancies,
incorrect security prices or corporate action/capital change information
that could result in a misstated NAV.
6. Each Fund does not currently expect to invest in Open-end Regulated
Investment Company's (RIC's), Swaps, Futures, ▇▇▇▇▇▇, Derivatives or
foreign (non-U.S. dollar denominated) securities and currency. To the
extent these investment strategies should change, additional fees may apply
after the appropriate procedural discussions have taken place between FPS
and Fund management. (Two weeks advance notice is required should the Funds
commence trading in these investments.)
7. Each Fund will supply FPS with income information such as accrual methods,
interest payment frequency details, coupon payment dates, floating rate
reset dates, and complete security descriptions with issue types and
cusip/Sedol numbers for all debt issues. The Funds' Advisor shall supply
the yield to maturity, related cash flow schedules and principal repayment
factors for any mortgage/asset-backed securities held in the Fund not
available on Bloomberg.
Any income accrual adjustments (to the extent necessary) based upon initial
estimates will be completed by FPS when actual principal/income payments
are collected by the Custodian and reported to FPS.
8. FPS will use the ICI/NAREIT Tracking System along with Bloomberg to obtain
receipt of complete and accurate information on REITs for entry into the
FPS Investment Accounting System (IAS). The Advisor will also
supply/support FPS in timely receipt of dividend information and return of
capital characterization for the REITs held in each Fund, if not available
from the ICI or Bloomberg systems.
To the extent applicable, FPS will maintain on a daily basis U.S. dollar-
denominated qualified covered call options and index options reporting on
the daily Trial Balance and value the respective options and underlying
positions. This Agreement does not provide for tax classifications if they
are required.
9. Each Fund is responsible for the establishment and monitoring of any
segregated accounts pertaining to any line of credit for temporary
administrative purposes, and/or leveraging/hedging the portfolio. FPS will
reflect appropriate trial balance account entries for interest expense
accrual charges on the daily trial balance adjusting as necessary at month-
end.
10. If a Fund commences participation in security lending or short sales within
its portfolio securities, additional fees apply as identified in the Fee
Schedule. Should a Fund require these additional services, procedural
discussions must take place between FPS and the Funds' Advisor to clarify
responsibilities. (Two weeks advance notice to FPS is required should a
Fund desire to participate in the above.)
11. The following specific deadlines will be met and complete information will
be supplied by each Fund in order to minimize any settlement problems, NAV
miscalculations or income accrual adjustments.
Each Fund will direct its Advisor to provide Trade Authorization Forms to
FPS with the appropriate officer's signature on all security trades placed
by the Fund no later than 12:30 p.m. Eastern time on settlement/value date
for short term money market securities issues (assuming that trade date
equals settlement date); and by 11:00 a.m. Eastern time on trade date plus
one for non-money market securities. Receipt by FPS of trade information
within these identified deadlines may be made via telex, fax or on-line
system access. The Advisor will supply FPS with the trade details in
accordance with the above stated deadlines.
The Advisor will provide all information required by FPS, including
cusip/Sedol numbers and/or ticker symbols for all trades on the Trade
Authorization, telex or on-line support. FPS will not be responsible for
NAV changes or distribution rate adjustments that result from incomplete
trade information.
12. To the extent a Fund utilizes purchases in-kind (U.S. dollar denominated
securities only) as a method for shareholder subscriptions, FPS will
provide the Fund with procedures to properly handle and process such
transactions. Should a Fund prefer procedures other than those provided by
FPS, additional fees may apply. Discussions shall take place at least two
weeks in advance between FPS and the Fund to clarify the appropriate in-
kind operational procedures to be followed.
13. The Parties will establish mutually agreed upon amortization procedures and
accretion requirements for debt issues held by the Fund prior to
commencement of operations/conversion. Adjustments for financial statements
regarding any issues with original issue discount (OID) are not included
under this Agreement. Each Fund will direct its independent auditors to
complete the necessary OID adjustments for financial statements and/or tax
reporting.
14. The Accounting fees assume FPS will provide Custody Administration and/or
Transfer Agency Services.
4. SERVICES RELATED TO CUSTODY ADMINISTRATION
---------------------------------------------
. Assign a Custody Administrator to accept, control and process The ▇▇▇▇▇▇▇▇
Funds, Inc.'s daily portfolio transactions through direct computer link
with the Custodian.
. Match and review DTC eligible ID's and trade information with The ▇▇▇▇▇▇▇▇
Funds, Inc.'s instructions for accuracy and coordinating with the Custodian
and The ▇▇▇▇▇▇▇▇ Funds, Inc.'s Accounting agent for recording and
affirmation processing with the depository.
. Systematically settle all depository eligible issues. Transactions
requiring physical delivery will be settled through the Custodian's New
York office.
. Assist The ▇▇▇▇▇▇▇▇ Funds, Inc. in placing cash management trades through
Custodian, such as commercial paper, CD's and repurchase agreements.
. Provide The ▇▇▇▇▇▇▇▇ Funds, Inc.'s Fund Accounting agent and Investment
Advisor with daily custodian statements reflecting all prior day cash
activity on behalf of each portfolio by 8:30 a.m. Eastern time. Complete
descriptions of any posting, inclusive of Sedol/cusip numbers,
interest/dividend payment date, capital stock details, expense
authorizations, beginning/ending cash balances, etc., will be provided by
the Custodian's reports or system.
. Provide monthly activity statements combining both cash changes and
security trades, and a full portfolio listing.
. Communicate to The ▇▇▇▇▇▇▇▇ Funds, Inc. and The ▇▇▇▇▇▇▇▇ Funds, Inc.'s Fund
Accounting agent on any corporate actions, capital changes and interest
rate changes supported by appropriate supplemental reports received from
the Custodian. Follow-up will be made with the Custodian to ensure all
necessary actions and/or paperwork is completed.
. Work with Fund Accounting and the Custodian on monthly asset
reconciliations.
. Coordinate and resolve unsettled dividends, interest, paydowns and capital
changes. Assist in resolution of failed transactions and any settlement
problems.
. Arrange for securities lending, lines of credit and/or letters of credit
through the Custodian.
. Provide automated mortgage-backed processing through the Custodian.
. Provide broker interface ensuring trade settlement with fail trade follow-
up.
. Provide The ▇▇▇▇▇▇▇▇ Funds, Inc.'s auditors with trade documentation to
help expedite the fund's audit.
SCHEDULE "B"
============
Fee Schedule
For
The ▇▇▇▇▇▇▇▇ Funds, Inc.
(Except as noted below, fees are quoted from effective date through February 28,
1999)
I. Fees Related to Fund Administration (1/12th payable monthly)
▇▇▇▇▇▇▇▇ Small-Cap Yield Fund - $30,000 per year
▇▇▇▇▇▇▇▇ Special Value Fund - $10,000 per year
II. Fees Related to Shareholder Servicing (1/12th payable monthly)
A. $13.00 per account per year per portfolio
$1.00 per account redemption fee
B. IRA's, 403(b) Plans, Defined Contribution/Benefit Plans:
Annual Maintenance Fee - $12.00 per account per year
(Normally charged to participants)
C. FUND/SERV Processing (If Applicable)
$50.00 Per month/per fund monthly maintenance fee
D. Networking Processing (If Applicable)
$75.00 Per month/per fund monthly maintenance fee
III. Fees Related to Fund Accounting and Portfolio Valuation
A. Annual Fee Schedule for ▇▇▇▇▇▇▇▇ Small-Cap Yield Fund: U.S. Dollar
Denominated Securities only (1/12th payable monthly)
$20,000 Annual Fee (which fee will be for a term of 5 months from the
Effective Date, and thereafter will be subject to renegotiation).
B. Annual Fee Schedule for ▇▇▇▇▇▇▇▇ Special Value Fund effective January
1, 1998:
U.S. Dollar Denominated Securities only (1/12th payable monthly)
$25,000 Minimum to $ 20 Million of Average Net Assets
.0003 On Next $ 30 Million of Average Net Assets
.0002 On Next $ 50 Million of Average Net Assets
.0001 Over $100 Million of Average Net Assets
C. Annual Fee Schedule for ▇▇▇▇▇▇▇▇ Special Value Fund Upon Commencement
of Short Sales per Complex Domestic Portfolio: (1/12th payable monthly)
$30,000 Minimum to $ 20 Million of Average Net Assets
.0003 On Next $ 30 Million of Average Net Assets
.0002 On Next $ 50 Million of Average Net Assets
.0001 Over $100 Million of Average Net Assets
D. Pricing Services Quotation Fee
Specific costs will be identified based upon options selected by the
client and will be billed monthly.
FPS does not currently pass along charges for U.S. equity prices
supplied by ▇▇▇▇▇▇ Data. Should the Fund invest in security types other
than domestic equities supplied by ▇▇▇▇▇▇, the following fees would
apply.
======================================================================================================
▇▇▇▇▇▇ DATA INTERACTIVE DATA ▇.▇. ▇▇▇▇▇ CO.,
SECURITY TYPES CORP.* CORP.* INC.*
------------------------------------------------------------------------------------------------------
Government Bonds $ .50 $ .50 $ .25 (a)
------------------------------------------------------------------------------------------------------
Mortgage-Backed (evaluated, seasoned, closing) .50 .50 .25 (a)
------------------------------------------------------------------------------------------------------
Corporate Bonds (short and long term) .50 .50 .25 (a)
------------------------------------------------------------------------------------------------------
U.S. Municipal Bonds (short and long term) .55 .80 .50 (b)
------------------------------------------------------------------------------------------------------
CMO's/ARM's/ABS 1.00 .80 1.00 (a)
------------------------------------------------------------------------------------------------------
Convertible Bonds .50 .50 1.00 (a)
------------------------------------------------------------------------------------------------------
High Yield Bonds .50 .50 1.00 (a)
------------------------------------------------------------------------------------------------------
Mortgage-Backed Factors (per Issue per Month) 1.00 n/a n/a
------------------------------------------------------------------------------------------------------
U.S. EQUITIES (D) .15 n/a
------------------------------------------------------------------------------------------------------
U.S. Options n/a .15 n/a
------------------------------------------------------------------------------------------------------
Domestic Dividends & Capital Changes
(per Issue per Month) (d) 3.50 n/a
------------------------------------------------------------------------------------------------------
Foreign Securities .50 .50 n/a
------------------------------------------------------------------------------------------------------
Foreign Securities Dividends & Capital Changes
(per Issue per Month) 2.00 4.00 n/a
------------------------------------------------------------------------------------------------------
Set-up Fees n/a n/a (e) .25 (c)
------------------------------------------------------------------------------------------------------
All Added Items n/a n/a .25 (c)
======================================================================================================
* Based on current Vendor costs, subject to change. Costs are quoted
based on individual security CUSIP/identifiers and are per issue per
day.
(a) $35.00 per day minimum
(b) $25.00 per day minimum
(c) $ 1.00, if no cusip
(D) AT NO ADDITIONAL COST TO FPS CLIENTS
(e) Interactive Data also charges monthly transmission costs and disk
storage charges.
A) FUTURES AND CURRENCY FORWARD CONTRACTS $2.00 per Issue per Day
B) DOW ▇▇▇▇▇ MARKETS (FORMERLY TELERATE SYSTEMS, INC.)* (if applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by the
client and will be billed monthly.
C) REUTERS, INC.*
*Based on current vendor costs, subject to change.
FPS does not currently pass along charges for domestic security prices
supplied by Reuters, Inc.
D) MUNICIPAL MARKET DATA* (if applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by the
client and will be billed monthly.
E. SEC Yield Calculation: (if applicable)
Provide up to 12 reports per year to reflect the yield calculations for
non-money market Funds required by the SEC, $1,000 per year per Fund. For
multiple class Funds, $1,000 per year per class. Daily SEC yield reporting
is available at $3,000 per year per Fund (US dollar denominated securities
only).
IV. Fees Related to Custody Administration of Fund Assets Using Bank of New
York
A. Domestic Securities and ADRS Per Portfolio : (1/12th payable monthly)
U.S. Dollar Denominated Securities only
.00065 On First $ 10 Million of Average Net Assets
.00035 On the Next $ 20 Million of Average Net Assets
.00025 On the Next $ 20 Million of Average Net Assets
.000175 On the Next $ 50 Million of Average Net Assets
.00015 Over $100 Million of Average Net Assets
B. Custody Domestic Securities Transactions Charge: (billed monthly)
Book Entry DTC, Federal Book Entry $14.00
Physical Securities $24.50
A transaction includes buys, sells, maturities or free security
movements.
C. When Issued, Securities Lending, Index Futures, etc.: Should any
investment vehicle require a separate segregated custody account, a
fee of $125 per account per month will apply. THIS FEE IS WAIVED FOR
BOTH FUNDS.
D. Custody Miscellaneous Fees
Administrative fees incurred in certain local markets will be passed
onto the customer with a detailed description of the fees. Fees
include income collection, corporate action handling, overdraft
charges, funds transfer, special local taxes, stamp duties,
registration fees, messenger and courier services and other out-of-
pocket expenses.
V. Out-of-Pocket Expenses
The Funds will reimburse FPS Services, Inc. monthly for all reasonable out-of-
pocket expenses, including telephone, postage, ▇▇▇▇▇ filings, Fund/SERV and
Networking expenses, shareholder statements, incoming wire charges,
telecommunications, special reports, record retention, special transportation
costs, copying and sending materials to auditors and/or regulatory agencies as
incurred and approved.
VI. Additional Services
To the extent the Funds commence using investment techniques such as Security
Lending, Swaps, Leveraging, Short Sales, Derivatives, Precious Metals, or
foreign (non-U.S.D.) securities and currency, additional fees will apply.
Activities of a non-recurring nature such as shareholder in-kinds, fund
consolidations, mergers or reorganizations will be subject to negotiation. To
the extent that the Funds should decide to issue multiple/separate classes of
shares, additional fees will apply. Any additional/enhanced services,
programming requests, or reports will be quoted upon request.
SCHEDULE "C"
============
Identification of Account
-------------------------
Below are listed the separate accounts of The ▇▇▇▇▇▇▇▇ Funds, Inc. to which
services under this Agreement are to be performed as of the Execution Date of
this Agreement.
▇▇▇▇▇▇▇▇ Small-Cap Yield Fund
▇▇▇▇▇▇▇▇ Special Value Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.