ADMINISTRATION AGREEMENT
Agreement dated as of December 29, 1997 between XXXXXX XXXXXXX
STRATEGIC ADVISER FUND, INC., a Maryland corporation (the "Fund") and XXXXXX
XXXXXXX ASSET MANAGEMENT INC., a Delaware corporation ("MSAM").
WHEREAS, the Fund has filed a Registration Statement on Form N-1A to
register as an investment company under the Investment Company Act of 1940 (the
"1940 Act") and to offer shares of three portfolios (the Aggressive Portfolio,
the Conservative Portfolio, and the Moderate Portfolio) under the Securities Act
of 1933, and such additional portfolios as may be mutually agreed by the Fund
and MSAM; and
WHEREAS, the Fund desires to retain MSAM to render certain management,
administrative, transfer agency, dividend disbursing and other services to the
Fund, and MSAM is willing to render such services;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Fund hereby appoints MSAM to act as administrator to the Fund for
the period and on the terms set forth in this Agreement. In connection
therewith, MSAM accepts such appointment and agrees to render the services and
provide, at its own expense, the office space, furnishings and equipment and the
personnel required by it to perform the services on the terms and for the
compensation herein provided. The parties hereto agree that MSAM may render and
provide the services described herein directly or through the services of third
parties. In connection with such appointment, the Fund will deliver to MSAM
copies of each of the following documents and will deliver to it all future
amendments and supplements, if any:
A. Certified copies of the Articles of Incorporation of the Fund as
presently in effect and as amended from time to time;
B. A certified copy of the Fund's By-Laws as presently in effect as
amended from time to time;
C. A copy of the resolution of the Fund's Board of Directors
authorizing this Agreement;
D. Specimens of all forms of outstanding and new stock certificates
in the forms approved from time to time by the Board of Directors of the Fund
with a certificate of the Secretary of the Fund as to such approval;
1
E. The Fund's registration statement on Form N-1A as filed with, and
declared effective by, the U.S. Securities and Exchange Commission, and all
amendments thereto;
F. Each resolution of the Board of Directors of the Fund authorizing
the original issue of its shares.
G. Certified copies of the resolutions of the Fund's Board of
Directors authorizing: (1) certain persons to give instructions to the Fund's
Custodian pursuant to the Corporate Custody Agreement and (2) certain persons to
sign checks and pay expenses on behalf of the Fund.
H. A copy of the Investment Advisory Agreement dated October 1, 1988
between the Fund and Xxxxxx Xxxxxxx Asset Management, Inc.
I. A copy of the Corporate Custody Agreement dated October 1, 1988
between the Fund and The Xxxxxx Guaranty Trust Company of New York.
J. Such other certificates, documents or opinions which MSAM may, in
its reasonable discretion, deem necessary or appropriate in the proper
performance of its duties.
2. REPRESENTATION AND WARRANTIES OF MSAM
MSAM represents and warrants to the Fund that:
A. It is a corporation, duly organized and existing in good standing
under the laws of Delaware.
B. It is duly qualified to carry on its business in the State of New
York.
C. It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform the services contemplated in
this Agreement.
D. All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
E. It has and will continue to have and maintain, directly or
through third parties, the necessary facilities, equipment and personnel to
perform its duties and obligations under this Agreement.
2
3. AUTHORIZED SHARES
The Fund certifies to MSAM that as of the close of business on the
date of this Agreement, the Fund is authorized to issue 3 billion shares of
common stock ("shares"), $.001 par value, and that the Board of Directors has
the power to classify or reclassify unissued shares of stock, from time to time,
into one or more classes ("Portfolios") of shares, and that it would initially
offer shares of three Portfolios (the Aggressive Portfolio, the Conservative
Portfolio and the Moderate Portfolio).
4. SERVICES PROVIDED BY MSAM
MSAM shall discharge, directly or through third parties, the following
responsibilities subject to the control of the Fund's Board of Directors, and in
compliance with the objectives, policies and limitations set forth in the
Fund's registration statement, By-Laws and applicable laws and regulations.
A. GENERAL ADMINISTRATION. Under the direction of the Fund's Board
of Directors, MSAM shall manage, administer, and conduct all of the general
business activities of the Fund other than those which have been contracted to
third parties by the Fund. MSAM shall, directly or through third parties,
provide the personnel and facilities necessary to perform such general business
activities under the supervision of the Fund's Board of Directors and Executive
Officers.
B. ACCOUNTING. MSAM shall, directly or through third parties,
provide the following accounting services to the Fund:
1) Maintenance of the books and records and accounting controls for
the Fund's assets, including records of all securities transactions;
2) Daily calculation of the net asset value for each of the Fund's
Portfolios;
3) Accounting for dividends and interest received and distributions
made by each of the Fund's Portfolios;
4) Preparation and filing of the Fund's U.S. tax returns and annual
and semi-annual reports on Form N-SAR:
5) The production of transaction data, financial reports and such
other periodic and special reports as the Board of Directors of the
Fund may reasonably request;
6) The preparation of financial statements for the annual and
semi-annual reports and other shareholder communications;
3
7) Liaison with the Fund's independent auditors;
8) Monitoring and administration of arrangements with the Fund's
custodian and depository banks; and
9) Maintenance of (but not the payment for) the Fidelity Bond
required to be maintained under the 1940 Act and preparation of the
filings required in connection therewith.
C. TRANSFER AGENT. The Fund hereby directs MSAM to be responsible
for the appointment of Transfer Agent for the Fund and MSAM agrees to act in
such capacity. In connection with such appointment, the transfer agent shall:
1) Maintain records showing for each Fund shareholder the following:
a) Name, address and tax identifying number (if applicable);
b) Number of shares of the Portfolio of the Fund held;
c) Historical information including dividends paid and date and
price of all transactions including individual purchases and
redemptions; and
d) Any dividend reinvestment order, application, dividend
address and correspondence relating to the current maintenance of
the account;
2) Record the issuance of shares of common stock of each Portfolio of
the Fund and shall notify the Fund in case any proposed issue of
shares by the fund shall result in an over-issue as identified by
Section 8-104(2) of the Uniform Commercial Code and in case any issue
would result in such an over-issue, shall refuse to countersign and
issue, and/or credit, said shares. Except as specifically agreed in
writing, MSAM and any transfer agent appointed by MSAM shall have no
obligation when countersigning and issuing and/or crediting shares, to
take cognizance of any other laws relating to the issue and sale of
such shares except insofar as policies and procedures of the Stock
Transfer Association recognize such laws.
3) Process all orders for the purchase of each Portfolio of the Fund
in accordance with the Fund's current registration statement. Upon
receipt of any check or other payment for purchase of shares of the
Fund from an investor, the transfer agent will (i) stamp the order
with the date of receipt, (ii) determine the amounts thereof due the
Fund, and notify the Fund of such determination and deposit, such
notification to be given on a daily basis of the total amounts
determined and deposited to said account during such day. The
transfer agent shall then credit the
4
share account of the investor with the number of shares to be
purchased according to the price of the Portfolio's shares in effect
for purchases made on the date such payment is received as set forth
in the Fund's current prospectus and shall promptly mail a
confirmation of said purchase to the investor, all subject to any
instructions which the fund may give to MSAM or the transfer agent
with respect to the timing or manner of acceptance of orders for
shares relating to payments so received by it.
4) Receive and stamp with the date of receipt all requests for
redemptions of shares, and shall process said redemptions requests as
follows:
a) If such redemption request complies with the applicable
standards approved by the Fund, MSAM or the transfer agent shall
on each business day notify the Fund of the total number of
shares presented and covered by such requests received by MSAM or
the transfer agent on such day;
b) On or prior to the seventh calendar day succeeding any such
request for redemption, MSAM or the transfer agent shall notify
the Custodian, subject to instructions from the Fund, to transfer
monies to such account as designated by MSAM or the transfer
agent for such payment to the redeeming shareholder of the
applicable redemption or repurchase price.
c) If any such request for redemption does not comply with
applicable standards, MSAM or the transfer agent shall promptly
notify the investor of such fact, together with the reason
therefore, and shall effect such redemption at the Portfolio's
price next determined after receipt of documents complying with
said standards or, at such other time as the Fund shall so
direct;
5) Acknowledge all correspondence from shareholders relating to their
share accounts and undertake such other shareholder correspondence as
may from time to time be mutually agreed upon;
6) Process redemptions, exchanges and transfers of Fund shares upon
telephone instructions from qualified shareholders in accordance with
the procedures set forth in the Fund's current prospectus. MSAM and
any transfer agent appointed by MSAM shall be permitted to act upon
the instruction of any person by telephone to redeem, exchange and/or
transfer Fund shares from any account for which such services have
been authorized. In accordance with Section 7 herein, the Fund hereby
agrees to indemnify and hold MSAM and any transfer agent appointed by
MSAM harmless against all losses, costs or expenses, including
attorney fees, suffered or incurred by MSAM and any transfer agent
appointed by MSAM directly or indirectly as a result of (i) taping the
telephone conversation of
5
any shareholder, or (ii) relying on the telephone instructions of any
person acting on behalf of a shareholder account for which telephone
services have been authorized.
D. RECORDING OF TRANSFER. A transfer agent duly appointed by MSAM
is authorized to transfer on the records of the Fund maintained by it issued
shares held in non-certificate form, upon the surrender to it of documents
evidencing ownership in proper form for transfer, and upon cancellation thereof
to countersign and issue new documents of ownership for a like amount of stock
and to deliver the same pursuant to the transfer instructions.
E. RETURNED CHECKS. In the event that any check or other order for
the payment of money is returned unpaid for any reason, MSAM or a third party
appointed by MSAM will take such steps, including redepositing said check for
collection or returning said check to the investor, as MSAM or a third party
appointed by MSAM may, at its discretion, deem appropriate, or as the Fund may
instruct.
F. DIVIDEND TAX REPORTING AND WITHHOLDING. MSAM or a third party
appointed by MSAM will prepare, file with the Internal Revenue Service and mail
to shareholders such returns for reporting payment of dividends and
distributions as are required by applicable laws to be so filed and/or mailed
and MSAM or a third party appointed by MSAM shall withhold such sums as are
required to be withheld under applicable Federal income tax laws, rules and
regulations.
G. PROXIES. MSAM or a third party appointed by MSAM shall mail
proxy statements, proxy cards and other materials supplied to it by the Fund and
shall receive, examine and tabulate returned proxies. MSAM or a third party
appointed by MSAM shall make interim reports of the status of such tabulation to
the Fund upon request, and shall certify the final results of the tabulation.
H. DIVIDENDS DISBURSING. MSAM or a third party appointed by MSAM
shall act as Dividend Disbursing Agent for the Fund and each of its Portfolios,
and, as such shall prepare and mail checks or credit income and capital gain
payments to shareholders. The Fund shall advise MSAM or a third party appointed
by MSAM of the declaration of any dividend or distribution and the record and
payable date thereof at least five (5) days prior to the record date. MSAM or a
third party appointed by MSAM shall, on or before the payment date of any such
dividend or distribution, notify the Fund's Custodian of the estimated amount
required to pay any portion of said dividend or distribution which is payable in
cash, and on or before the payment date of such distribution, the Fund shall
instruct its Custodian to make available to MSAM or a third party appointed by
MSAM sufficient funds for the cash amount to be paid out. If a shareholder is
entitled to receive additional shares by virtue of any such distribution or
dividend, appropriate credits will be made to this account. A shareholder will
receive a confirmation from MSAM or a third party appointed by MSAM indicating
the number of shares credited to his account as a result of the reinvested
dividend or distribution.
6
I. OTHER INFORMATION. MSAM shall, directly or through third
parties, furnish for the Fund such other information as is required by law,
including but not limited to shareholder lists, and such statistical information
as may be reasonably requested by the Fund.
5. SERVICES TO BE OBTAINED INDEPENDENTLY BY THE FUND
The following shall be provided at no expense to MSAM hereunder:
A. Organizational expenses;
B. Services of an independent accountant;
C. Services of outside legal counsel (including such counsel's
review of the Fund's registration statement, proxy materials and other reports
and materials prepared by MSAM, directly or through third parties under this
Agreement);
D. Any services contracted for by the Fund directly from parties
other than MSAM;
E. Trading operations and brokerage fees, commissions and transfer
taxes in connection with the purchase and sale of securities for its investment
portfolio;
F. Taxes, insurance premiums and other fees and expenses applicable
to its operation;
G. Investment advisory services;
H. Costs incidental to any meetings of shareholders including, but
not limited to, legal and accounting fees, proxy filing fees and the
preparation, printing and mailing of any proxy materials;
I. Costs incidental to Directors' meetings, including fees and
expenses of Directors;
J. The salary and expenses of any officer or employee of the Fund;
K. Custodian and depository banks, and all services related thereto;
L. Costs incidental to the preparation, printing and distribution of
its registration statement and any amendments thereto, and shareholder reports;
M. All registration fees and filing fees required under the
securities laws of the United States and state regulatory authorities;
7
N. Fidelity bond and Director's and Officers' liability insurance.
6. PRICES, CHARGES AND INSTRUCTIONS
A. The Fund will pay to MSAM, as compensation for the services
provided and the expenses assumed pursuant to this Agreement, as agreed to in a
written fee schedule approved by the parties hereto (see Schedule A). In
addition, MSAM, or third parties providing such services for the benefit of the
Fund through arrangements with MSAM, shall be reimbursed for the cost of any and
all forms, including blank checks and proxies, used by it in communicating with
shareholders of the Fund, or especially prepared for use in connection with its
obligations hereunder, as well as the cost of postage, telephone, telex and
telecopy used in communicating with shareholders of the Fund and microfilm used
each year to record the previous year's transactions in shareholder accounts and
computer tapes used for permanent storage of records, permanent storage costs
for hard copy Fund records and cost of insertion of materials in mailing
envelopes by outside firms. Prior to ordering any forms in such supply as it
estimates will be adequate for more than two years' use, MSAM or any third party
appointed by MSAM shall obtain the written consent of the Fund. All forms for
which MSAM or any third party appointed by MSAM has received reimbursement from
the Fund shall be and remain the property of the Fund until used.
B. At any time MSAM, and third parties providing such services for
the benefit of the Fund through arrangements with MSAM may apply to any officer
of the fund or officer of the Fund's investment adviser for instructions, and
may consult with legal counsel for the Fund, or its own outside legal counsel,
at the expense of the Fund, with respect to any matter arising in connection
with the services to be performed by MSAM or any third party appointed by MSAM
under this Agreement and MSAM and such third parties shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in good
faith in reliance upon such instructions. In carrying out its duties hereunder,
MSAM and such third parties shall be protected and indemnified in acting upon
any paper or document believed by it to be genuine and to have been signed by
the proper person or persons and shall not be held to have notice of any change
or authority of any person, until receipt of written notice thereof from the
Fund.
7. LIMITATION OF LIABILITY AND INDEMNIFICATION.
A. MSAM shall be responsible hereunder for the performance of only
such duties as are set forth or contemplated herein or contained in instructions
given to it which are not contrary to this Agreement. MSAM shall have no
liability for any loss or damage resulting from the performance or non-
performance of its duties hereunder unless solely caused by or resulting from
the gross negligence or willful misconduct of MSAM, its officers and employees.
B. The fund shall indemnify and hold MSAM, and third parties
providing services for the benefit of the Fund through arrangements with MSAM,
harmless from all loss, cost, damage and expense, including reasonable expenses
for counsel, incurred by any such
8
person resulting from any claim, demand, action or omission by it in the
performance of its duties hereunder or under such arrangements with MSAM, or as
a result of acting upon any instructions reasonably believed by any such person
to have been executed by a duly authorized officer of the fund or of the Fund's
investment advisers, provided that this indemnification shall not apply to
actions or omission of MSAM, its officers, employees or agents in cases of its
or their own gross negligence or willful misconduct.
C. The Fund will be entitled to participate at its own expense in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any liability subject to the indemnification provided above, but, if the
Fund elects to assume the defense, such defense shall be conducted by counsel
chosen by the Fund. In the event the Fund elects to assume the defense of any
such suit and retain such counsel, MSAM or any of its affiliated persons or any
third parties providing services for the benefit of the Fund through
arrangements with MSAM, named as defendant or defendants in the suit, may retain
additional counsel but shall bear the fees and expenses of such counsel unless
at such time the Fund specifically authorizes in writing the retaining of such
counsel at the Fund's expense.
D. No provisions of this Agreement shall be deemed to protect MSAM
or any of its directors, officers and/or employees, against liability to the
Fund or its shareholders to which it might otherwise be subject by reason of any
fraud, willful misfeasance or gross negligence in the performance of its duties
or the reckless disregard of its obligations under this Agreement.
8. CONFIDENTIALITY
MSAM agrees that, except as otherwise required by law or as necessary in
accordance with this Agreement, MSAM will keep confidential all records and
information in its possession relating to the Fund or its shareholders or
shareholder accounts and will not disclose the same to any person except at the
request or with the written consent of the Fund.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS
The Fund assumes full responsibility hereunder for complying with all
applicable requirements of the Securities Act of 1933, the Investment Company
Act of 1940 and the Securities Exchange Act of 1934, all as amended, and any
laws, rules and regulations of governmental authorities having jurisdiction,
except to the extent that MSAM specifically assumes any such obligations under
the terms of this Agreement.
MSAM shall, directly or through third parties, maintain and preserve
for the periods prescribed, such records relating to the services to be
performed by MSAM under this Agreement as are required pursuant to the
Investment Company Act of 1940 and the Securities Exchange Act of 1934. All
such records shall at all times remain the respective properties of the Fund,
shall be readily accessible during normal business hours to each, and shall be
promptly
9
surrendered upon the termination of this Agreement or otherwise on written
request. Records shall be surrendered in usable machine readable form.
10. STATUS OF MSAM
The services of MSAM to the Fund are not to be deemed exclusive, and
MSAM shall be free to render similar services to others. MSAM shall be deemed
to be an independent contractor hereunder and shall, unless otherwise expressly
provided herein or authorized by the Fund from time to time, have no authority
to act or represent the Fund in any way or otherwise be deemed an agent of the
Fund with respect to this Agreement.
11. PRINTED MATTER CONCERNING THE FUND OR MSAM
Neither the fund nor MSAM shall, with respect to this Agreement,
publish and circulate any printed matter which contains any reference to the
other party without its prior written approval, excepting such printed matter as
refers in accurate terms to MSAM's appointment under this Agreement and except
as required by applicable laws.
12. TERM, AMENDMENT AND TERMINATION
This Agreement may be modified or amended from time to time by mutual
agreement between the parties hereto. The Agreement shall remain in effect for
a period of one year from the date the Fund's registration statement on file
with the U.S. Securities and Exchange Commission becomes effective and shall
automatically continue in effect thereafter unless terminated by either party at
the end of such period or thereafter on one 60 days' prior written notice. Upon
termination of the Agreement, the fund shall pay to MSAM such compensation as
may be due under the terms hereof as the of the date of such termination. If,
during the initial one year period, either of the parties hereto shall be in
default in the performance of any its duties and obligations hereunder (the
defaulting party), the other party hereto may give written notice to the
defaulting party and if such default shall not have been remedied within 30 days
after such written notice is given, then the party giving such notice may
terminate this Agreement by 90 days' written notice of such termination to the
defaulting party, but such termination shall not affect any rights or
obligations of either party arising from or relating to such default under the
terms hereof.
13. NOTICES
Any notice or other communication authorized or required by this
Agreement to be given to any party mentioned herein shall be sufficiently given
if addressed to such party and mailed postage prepaid or delivered to its
principal office.
14. NON-ASSIGNABILITY
10
This Agreement shall not be assigned by any of the parties hereto
without the prior consent in writing of the other party.
15. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of
the Fund and MSAM, and their respective successors.
16. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
17. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the day and year first above written.
ATTEST: XXXXXX XXXXXXX STRATEGIC
ADVISER FUND, INC.
/s/ Xxxxxxxx Xxxxx By: /s/ Xxxxxxx X. Xxxxx
-------------------- --------------------
ATTEST: XXXXXX XXXXXXX ASSET
MANAGEMENT INC.
/s/ Xxxxxxxx Xxxxx By: /s/ Xxxxxxx X. Xxxxx
-------------------- --------------------
11
SCHEDULE A
TO
ADMINISTRATION AGREEMENT DATED AS OF DECEMBER 29, 1997
XXXXXX XXXXXXX STRATEGIC ADVISER FUND, INC.
and
XXXXXX XXXXXXX ASSET MANAGEMENT INC.
PORTFOLIOS
1. Strategic Adviser Aggressive Portfolio
2. Strategic Adviser Conservative Portfolio
3. Strategic Adviser Moderate Portfolio
12
SCHEDULE B
TO
ADMINISTRATION AGREEMENT DATED AS OF DECEMBER 29, 1997
XXXXXX XXXXXXX STRATEGIC ADVISER FUND, INC.
and
XXXXXX XXXXXXX ASSET MANAGEMENT INC.
FEE SCHEDULE
For the services provided and the expenses assumed pursuant to the attached
Administration Agreement, the Xxxxxx Xxxxxxx Strategic Adviser Fund, Inc. shall
pay to Xxxxxx Xxxxxxx Asset Management Inc. an annual fee, in monthly
installments, of .25% of the average daily net assets of each Portfolio of the
Fund listed on Schedule A.
