EXHIBIT h-1.
ADMINISTRATION AGREEMENT
This Agreement is made as of this 1st day of June, 2003, by and between
Wasatch Funds, Inc. (the "Fund"), and Wasatch Advisors, Inc. (the
"Administrator").
WHEREAS, the Fund is registered as a management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Fund desires the Administrator to provide, and the
Administrator is willing to provide, administrative services to such portfolios
of the Fund as the Fund and the Administrator agree on, pursuant to the terms
and conditions hereinafter set forth; and
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Administrator agree as follows:
Article 1. Retention of the Administrator The Fund hereby retains the
Administrator to act as the administrator with respect to the portfolios listed
on Schedule A (the "Portfolios") and to furnish the Portfolios with the
administrative services for the period and on the terms set forth in this
Agreement. The Administrator accepts such employment to perform the duties set
forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund in any way and shall
not be deemed an agent of the Fund.
Article 2. Administrative Services. The Administrator shall perform,
and subject to the approval of the Board of Directors of the Fund, shall have
the authority to appoint and compensate from its resources one or more
sub-administrators to perform administrative services in connection with the
operation of the Portfolios; provided, however, that the compensation of such
person or persons shall be paid by the Administrator and the Administrator shall
be as fully responsible to the Fund for the acts and omissions of any such
person or persons as it is for its own acts and omissions. The Administrator, on
behalf of the Fund, will investigate, assist in selection of and conduct
relations with custodians, depositories, accountants, legal counsel,
underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and
persons in any other capacity deemed to be necessary or desirable for the
Portfolios' operations. Certain of the administrative services to be performed
by the Administrator are listed on the attached Schedule B.
The Administrator shall provide the Fund with regulatory reporting,
fund accounting and related portfolio accounting services, all necessary office
space, equipment, personnel, compensation and facilities (including facilities
for Shareholders' and Directors' meetings) for handling the affairs of the
Portfolios and such other services as the Administrator shall, from time to
time, determine to be necessary to perform its obligations under this Agreement.
In addition, at the request of the Board of Directors, the Administrator shall
make reports to the Fund's Directors concerning the performance of its
obligations hereunder.
ARTICLE 3. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Fund as well as all Directors of the
Fund who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Fund retained by the Directors of the Fund
to perform services on behalf of the Fund.
(B) The Fund. The Fund assumes and shall pay or cause to be paid
all other expenses of the Fund not otherwise allocated herein, including,
without limitation, organizational costs, taxes, expenses for legal and auditing
services, the expenses of preparing (including typesetting), printing and
mailing reports, prospectuses, statements of additional information, proxy
solicitation material and notices to existing Shareholders, all expenses
incurred in connection with issuing and redeeming Shares, the costs of custodial
services, the cost of initial and ongoing registration of the Shares under
Federal and state securities laws, fees and out-of-pocket expenses of Directors
who are not affiliated persons of the Administrator or any affiliated
corporation of the Administrator, insurance, interest, brokerage costs,
litigation and other extraordinary or nonrecurring expenses, and all fees and
charges of investment advisers to the Fund.
ARTICLE 4. Compensation of the Administrator.
(A) Administration Fee. For the services to be rendered, the
facilities furnished and the expenses assumed by the Administrator pursuant to
this Agreement, the Fund shall pay to the Administrator compensation at an
annual rate as specified in Schedule C. Such compensation shall be calculated
and accrued daily, and paid to the Administrator monthly. The Fund shall also
reimburse the Administrator for reasonable out-of-pocket expenses, including the
travel and lodging expenses incurred by officers and employees of any
sub-administrator appointed by the Administrator in connection with attendance
at Board meetings, which are paid by the Administrator to the sub-administrator.
If this Agreement becomes effective subsequent to the first day of a
month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
(B) Survival of Compensation Rates. All rights of compensation
under this Agreement for services performed as of the termination date shall
survive the termination of this Agreement.
ARTICLE 5. Limitation of Liability of the Administrator. As used in
this Article 5, the term "Administrator" shall include directors, officers,
employees and other corporate agents of the Administrator as well as that
corporation itself. The Administrator shall not be liable for any
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error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in carrying out its duties hereunder,
except a loss resulting from willful misfeasance, bad faith or negligence in the
performance of its duties, or by reason of reckless disregard of its obligations
and duties hereunder, except as may otherwise be provided under provisions of
applicable law which cannot be waived or modified hereby. In any event, the
Administrator's cumulative liability for each calendar year (a "Liability
Period") with respect to the Fund under this Agreement, regardless of the form
of action or legal theory, shall be limited to the total annual compensation
earned by the Administrator with respect to the Fund and fees payable hereunder
during the preceding Compensation Period, as defined herein, for any liability
or loss suffered by the Fund including, but not limited to, any liability
relating to qualification of the Fund as a regulated investment company or any
liability relating to the Fund's compliance with any federal or state tax or
securities statute, regulation or ruling during such Liability Period.
"Compensation Period" shall mean the calendar year ending immediately prior to
each Liability Period in which the event(s) giving rise to the Administrator's
liability for that period have occurred. Notwithstanding the foregoing, the
Compensation Period for purposes of calculating the annual cumulative liability
of the Administrator for the Liability Period commencing on the date of this
Agreement and terminating on December 31, 2003 shall be the date of this
Agreement through December 31, 2003 on an annualized basis, and the Compensation
Period for the Liability Period commencing January 1, 2004 and terminating on
December 31, 2004 shall be January 1, 2004 through December 31, 2004.
The Administrator shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its control, including
without limitation, work stoppage, power or other mechanical failure, computer
virus, natural disaster, governmental action or communication disruption.
So long as the Administrator acts without willful misfeasance, bad
faith or negligence, or reckless disregard of its obligations and duties
hereunder, the Fund assumes full responsibility and shall indemnify the
Administrator and hold it harmless from and against any and all actions, suits
and claims, whether groundless or otherwise, and from and against any and all
losses, damages, costs, charges, reasonable counsel fees and disbursements,
payments, expenses and liabilities (including reasonable investigation expenses)
arising directly or indirectly out of said administration relationship to the
Fund rendered to the Fund hereunder. The indemnity and defense provisions set
forth herein shall indefinitely survive the termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Fund may be asked to indemnify or hold the
Administrator harmless, the Fund shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Fund promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Fund, but failure to do so in good faith shall not affect the rights
hereunder.
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The Fund shall be entitled to participate at its own expense or, if it
so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Fund elects to assume the defense of
any such claim, the defense shall be conducted by counsel chosen by the Fund and
satisfactory to the Administrator, whose approval shall not be unreasonably
withheld. In the event that the Fund elects to assume the defense of any suit
and retain counsel, the Administrator shall bear the fees and expenses of any
additional counsel retained by it. If the Fund does not elect to assume the
defense of a suit, it will reimburse the Administrator for the reasonable fees
and expenses of any counsel retained by the Administrator.
The Administrator may apply to the Fund at any time for instructions
and may consult counsel for the Fund or its own counsel and with accountants and
other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. Nor shall the Administrator be held to have
notice of any change of authority of any officers, employee or agent of the Fund
until receipt of written notice thereof from the Fund.
ARTICLE 6. Activities of the Administrator. The services of the
Administrator rendered to the Fund are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that Directors, officers, employees
and Shareholders of the Fund are or may be or become interested in the
Administrator, as directors, officers, employees and shareholders or otherwise
and that directors, officers, employees and shareholders of the Administrator
and its counsel are or may be or become similarly interested in the Fund, and
that the Administrator may be or become interested in the Fund as a Shareholder
or otherwise.
ARTICLE 7. Term and Termination of this Agreement. This Agreement shall
become effective on the date of its execution and shall remain in full force and
effect unless either party terminates this Agreement upon at least sixty (60)
days prior written notice to the other party. Such termination can be effected
with or without cause and without the payment of any penalty. Termination of
this Agreement with respect to a Portfolio shall in no way affect the continued
validity of this Agreement with respect to any other Portfolio. Upon termination
of this Agreement, the Fund shall pay to the Administrator such compensation and
any reimbursable expenses as may be due under the terms hereof as of the date of
such termination, including reasonable out-of-pocket expenses associated with
such termination.
This Agreement shall not be assignable by either party without the
written consent of the other party.
ARTICLE 8. Amendments. This Agreement may be modified or amended from
time to time by the mutual written agreement of the parties if such amendment,
including any change to the delegation of administrative services contained in
Schedule B, is specifically approved (i) by the vote of a majority of the
Directors of the Fund, and (ii) by the vote of a majority of the
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Directors of the Fund who are not parties to this Agreement or interested
persons of any such party.
ARTICLE 9. Certain Records. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Fund shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Fund and will be made available
to or surrendered promptly to the Fund on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Fund and follow the Fund's
instructions as to permitting or refusing such inspection; provided that the
Administrator may 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, unless
(in cases involving potential exposure only to civil liability) the Fund has
agreed to indemnify the Administrator against such liability.
ARTICLE 10. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission (the "SEC").
ARTICLE 11. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party giving
notice: if to the Fund, at c/o Venice X. Xxxxxxx, Secretary/Treasurer, Wasatch
Funds, Inc., 000 Xxxxxx Xxxx Xxxxxx Xxxxx 000, Xxxx Xxxx Xxxx, XX 00000 and to
its legal counsel at, Xxxxxxx X. Xxxxxx, Esq., Xxxxxx & Whitney LLP, 00 Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx, XX 00000-0000; and if to the
Administrator at c/o Xxxxxx Xxxxxx, [title], Wasatch Advisors, Inc., 000 Xxxxxx
Xxxx Xxxxxx Xxxxx 000, Xxxx Xxxx Xxxx, XX 00000.
ARTICLE 12. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Utah and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of Utah, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
ARTICLE 13. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
WASATCH FUNDS, INC.
By: /s/ Venice Xxxxxxx
------------------
Name: Venice Xxxxxxx
Title: Secretary/Treasurer
WASATCH ADVISORS, INC.
By: /s/ Xxxx Xxxxxx
------------------
Name: Xxxx Xxxxxx
Title: President, Wasatch Advisors
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SCHEDULE A TO THE
ADMINISTRATION AGREEMENT
DATED AS OF JUNE 1, 2003
BETWEEN
WASATCH FUNDS, INC.
AND
WASATCH ADVISORS, INC.
NAMES OF FUNDS
Wasatch Core Growth Fund
Wasatch Global Science & Technology Fund
Wasatch International Growth Fund
Wasatch Micro Cap Growth Fund
Wasatch Small Cap Value Fund
Wasatch Ultra Growth Fund
Wasatch Micro Cap Value Fund
Wasatch-Xxxxxxxxxx U.S. Treasury Fund
A-1
SCHEDULE B TO THE
ADMINISTRATION AGREEMENT
DATED AS OF JUNE 1, 2003
BETWEEN
WASATCH FUNDS, INC.
AND
WASATCH ADVISORS, INC.
ADMINISTRATIVE SERVICES
Listed below are certain activities to be performed by the
Administrator pursuant to the Agreement. The Administrator has appointed,
pursuant to Article 2 of the Agreement, State Street Bank and Trust Company (the
"Sub-Administrator") to perform certain of the administrative services listed
below.
1. The Sub-Administrator shall perform the following
administrative services:
a. Oversee the determination and publication of the
Fund's net asset value in accordance with the Fund's
policy as adopted from time to time by the Board;
b. Oversee the maintenance by the Fund's custodian of
certain books and records of the Fund as required
under Rule 31a-1(b) of the 1940 Act;
c. Prepare the Fund's federal, state and local income
tax returns for review by the Fund's independent
accountants and filing by the Fund's treasurer;
d. Review calculation of, and if appropriate, recommend
changes to, Fund expense accruals. Submit for
approval by officers of the Fund and arrange for
payment of the Fund's expenses;
e. Prepare for review and approval by officers of the
Fund financial information for the Fund's semi-annual
and annual reports, proxy statements and other
communications required or otherwise to be sent to
Fund shareholders;
f. Prepare for review by an officer of the Fund the
Fund's periodic financial reports required to be
filed with the Securities and Exchange Commission
("SEC") on Forms N-SAR and N-CSR, and financial
information required by Form N-1A and such other
reports, forms or filings as may be mutually agreed
upon;
g. Prepare reports relating to the business and affairs
of the Fund as may be mutually agreed upon and not
otherwise prepared by the Fund's investment adviser,
Administrator, custodian, legal counsel or
independent accountants;
B-1
h. Coordinate the audit of the Fund's financial
statements by the Fund's independent accountants, and
make such reports and recommendations to the Board
concerning the performance of the independent
accountants as the Board may reasonably request;
i. Make such reports and recommendations to the Board
concerning the performance and fees of the Fund's
custodian and transfer and dividend disbursing agent
("Transfer Agent") as the Board may reasonably
request or deems appropriate;
j. Oversee and review calculations of fees paid to the
Fund's investment adviser, Administrator, custodian
and Transfer Agent;
k. Consult with the Fund's officers, Administrator,
independent accountants, legal counsel, custodian and
Transfer Agent in establishing the accounting
policies of the Fund;
l. Refer to the Fund's officers or Transfer Agent,
shareholder inquiries relating to the Fund. Respond
to inquiries from the Fund's officers or Transfer
Agent regarding shareholder inquiries relating to the
Fund;
m. Provide periodic testing of portfolios to assist the
Fund's investment adviser in complying with Internal
Revenue Code mandatory qualification requirements,
the requirements of the 1940 Act and Fund prospectus
limitations as may be mutually agreed upon;
n. Maintain general corporate calendar;
o. Maintain copies of the Fund's charter and by-laws;
p. File annual and semi-annual shareholder reports with
the appropriate regulatory agencies; review text of
"President's letters" to shareholders and
"Management's Discussion of Fund Performance" (which
shall also be subject to review by the Fund's legal
counsel);
q. Provide consultation on regulatory matters relating
to portfolio management, Fund operations and any
potential changes in the Fund's investment policies,
operations or structure; act as liaison to legal
counsel to the Fund and, where applicable, to legal
counsel to the Fund's independent Board members
(responsibility for this item is shared with the
Administrator; see item 2(c) below);
r. Maintain continuing awareness of significant emerging
regulatory and legislative developments which may
affect the Fund, update the Administrator, the Board
and the investment adviser on those developments and
provide related planning assistance where requested
or appropriate (responsibility for this item is
shared with the Administrator; see item 2(d) below);
B-2
s. Develop or assist in developing guidelines and
procedures to improve overall compliance by the Fund
and its various agents (responsibility for this item
is shared with the Administrator; see item 2(e)
below);
t. Counsel and assist the Fund in the handling of
routine regulatory examinations and work closely with
the Fund's legal counsel in response to any
non-routine regulatory matters;
u. Prepare and disseminate vendor survey information;
v. Prepare and furnish performance information
(including total return information and yield
information), including such information on an
after-tax basis, calculated in accordance with
applicable U.S. securities laws and regulations as
may be reasonably requested by the Administrator;
w. Prepare for filing with the SEC amendments to the
Fund's registration statement, including updating the
Prospectus and Statement of Additional Information,
where applicable (subject to review and comment by
the Fund's legal counsel) (Sub-Administrator is
primarily responsible for the SAI);
x. Prepare for filing with the SEC proxy statements;
provide consultation on proxy solicitation matters
(subject to review and comment by the Fund's legal
counsel);
y. Prepare agenda and background materials for Board
meetings, make presentations where appropriate,
attend Board meetings, prepare minutes and follow-up
on matters raised at Board meetings (subject to
review and comment by the Fund's legal counsel);
attend shareholder meetings and prepare minutes;
z. Prepare and file with the SEC Rule 24f-2 notices
(subject to review and comment by the Fund's legal
counsel); and
aa. Perform Blue Sky services (subject to review and
comment by the Fund's legal counsel) pursuant to the
specific instructions of the Administrator and as
detailed in Schedule C of the Sub-Administration
Agreement dated June 1, 2003 between Administrator
and Sub-Administrator including (i) filing of Fund's
Initial Notice Filings, as directed by the
Administrator; (ii) filing of Fund's renewals and
amendments as required; (iii) filing of amendments to
the Fund's registration statement where required;
(iv) filing Fund sales reports where required; (v)
payment at the expense of the Administrator of all
Fund Notice Filing fees; (vi) filing the Prospectuses
and Statements of Additional Information and any
amendments or supplements thereto where required;
(vii) filing of annual reports and proxy statements
where required; and (viii) the performance of such
additional services as the Sub-Administrator and the
Administrator may agree upon in writing.
B-3
2. The Administrator shall perform the following administrative
services:
a. Arrange for printing and dissemination of the Fund's
semi-annual and annual reports, proxy statements and
other communications required or otherwise to be sent
to Fund shareholders;
b. Review and provide assistance on shareholder
communications;
c. Provide consultation on regulatory matters relating
to portfolio management, Fund operations and any
potential changes in the Fund's investment policies,
operations or structure; act as liaison to legal
counsel to the Fund and, where applicable, to legal
counsel to the Fund's independent Board members
(responsibility for this item is shared with the
Sub-Administrator; see item 1(q) above);
d. Maintain continuing awareness of significant emerging
regulatory and legislative developments which may
affect the Fund, update the Administrator, the Board
and the investment adviser on those developments and
provide related planning assistance where requested
or appropriate (responsibility for this item is
shared with the Sub-Administrator; see item 1(r)
above);
e. Develop or assist in developing guidelines and
procedures to improve overall compliance by the Fund
and its various agents (responsibility for this item
is shared with the Sub-Administrator; see item 1(s)
above);
f. Counsel and assist the Fund in the handling of
routine regulatory examinations and work closely with
the Fund's legal counsel in response to any
non-routine regulatory matters (responsibility for
this item is shared with the Sub-Administrator; see
Item 1(t) above);
g. Prepare for filing with the SEC amendments to the
Fund's registration statement, including updating the
Prospectus and Statement of Additional Information,
where applicable (subject to review and comment by
the Fund's legal counsel) (responsibility for this
item is shared with the Sub-Administrator -
Administrator is primarily responsible for the
prospectus and Sub-Administrator is primarily
responsible for the SAI; see item 1(w) above);
h. Prepare for filing with the SEC proxy statements;
primarily responsible for proxy solicitation matters
(subject to review and comment by the Fund's legal
counsel);
i. Assist Sub-Administrator to refer to the Fund's
officers or Transfer Agent, shareholder inquiries
relating to the Fund and assist Sub-Administrator to
respond to inquiries from the Fund's officers or
Transfer Agent regarding shareholder inquiries
relating to the Fund (see item 1(l) listed above);
B-4
j. Assist Sub-Administrator to provide periodic testing
of portfolios to assist the Fund's investment adviser
in complying with Internal Revenue Code mandatory
qualification requirements, the requirements of the
1940 Act and Fund prospectus limitations as may be
mutually agreed upon (see item 1(m) listed above);
k. Assist Sub-Administrator to prepare agenda and
background materials for Board meetings, make
presentations where appropriate; attend Board
meetings; prepare minutes and follow-up on matters
raised at Board meetings; attend shareholder meetings
and prepare minutes (subject to review and comment by
the Fund's legal counsel) (see item 1(y) above); and
l. Supervise and coordinate the work done by the
Sub-Administrator and other Fund service providers,
and provide, or arrange for the provision of,
necessary Fund services not provided by other Fund
service providers.
B-5
