Exhibit (h)(2)
MUTUAL FUND SERVICES AGREEMENT
THIS AGREEMENT is made as of this 18th day of May, 2005, by and between
FAIRHOLME FUNDS, INC. (the "Fund"), a Maryland corporation having its principal
place of business at 00 XXX Xxxxxxx, Xxxxx Xxxxx, Xxx Xxxxxx 00000, and CITCO
MUTUAL FUND SERVICES, INC. ("CMFS"), a corporation organized under the laws of
the State of Delaware and having its principal place of business at 00 Xxxxxxx
Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxxxx 00000.
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Fund is authorized by its Charter and By-laws to issue
separate series of shares of its common stock representing separate investment
portfolios (each series individually referred to herein as a "Portfolio" and
collectively as the "Portfolios") and to further divide such Portfolios into
separate share classes;
WHEREAS, the Fund has authorized the issuance of shares of common stock in
the Portfolios, and share classes thereof, listed on Schedule A to this
Agreement, attached hereto and made part of this Agreement, as such Schedule A
may be amended in writing from time to time by CMFS and the Fund;
WHEREAS, the Fund desires that CMFS perform certain transfer agency,
accounting, and administrative services for each Portfolio listed on Schedule A,
and such Portfolios as may be added to Schedule A from time to time in
accordance with the foregoing recital;
WHEREAS, the Fund has taken all necessary action to appoint CMFS and all
necessary approvals have been obtained; and
WHEREAS, CMFS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. RETENTION OF CMFS.
The Fund hereby retains CMFS to provide transfer agency, fund accounting
and fund administration services to each Portfolio as set forth in Schedules B,
C and D to this Agreement, attached hereto and made part of this Agreement, as
such schedules may be amended in writing from time to time by CMFS and the Fund.
CMFS hereby accepts such appointment to perform such services in accordance with
the terms of this Agreement and subject to the supervision of the Fund's sponsor
(i.e., investment adviser) and the Fund's Board of Directors. CMFS shall not be
responsible for services that are not explicitly set forth in this Agreement.
Nonetheless, CMFS agrees to negotiate in good faith with the Fund regarding the
provision of any services not set forth herein but desired by the Fund.
2. SUBCONTRACTING.
CMFS may, at its expense, subcontract with any entity or person concerning
the provision of the services contemplated hereunder; provided, however, that
CMFS shall not be relieved of any of its obligations under this Agreement by the
appointment of such subcontractor and provided further, that CMFS shall be
responsible, to the extent provided in Section 7 hereof, for all acts of such
subcontractor as if such acts were its own.
3. COMPENSATION.
The Fund shall pay for the services to be provided by CMFS under this
Agreement in accordance with, and in the manner set forth in, Schedule E
attached hereto, as such Schedule E may be amended from time to time in writing
by the parties.
If this Agreement becomes effective subsequent to the first day of a month
or terminates before the last day of a month, CMFS' compensation for that part
of the month in which the Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees as set forth above. Payment of CMFS'
fees for the preceding month shall be made within ten (10) days of the end of
such month. CMFS shall have the right to assess a late fee up to one-half of one
(1) percent of the fee due in the event the Fund fails to pay any fee due
hereunder in accordance with the terms hereof. The Fund shall pay the foregoing
fees despite the existence of any dispute between the parties. In the event a
court of competent jurisdiction determines that CMFS is not entitled to such
fee, CMFS shall promptly reimburse the Fund the amount of such fee.
4. REIMBURSEMENT OF EXPENSES.
In addition to paying CMFS the fees described in Schedule E attached
hereto, the Fund agrees to reimburse CMFS for its reasonable out-of-pocket
expenses in providing services hereunder, including without limitation the
following:
(a) All freight, delivery and bonding charges incurred by CMFS in
delivering materials to and from the Fund;
(b) All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by CMFS or an affiliate of
CMFS in communications with the Fund, an adviser or sub-adviser to the
Fund, the Fund's custodian, counsel, auditors, dealers or others as
required for CMFS to perform the services to be provided hereunder;
(c) The costs of obtaining security market quotes for the holdings of each
Portfolio (the cost of obtaining prices for securities held in each
Portfolio will be borne by the Portfolio);
(d) All expenses incurred in connection with any custom programming,
statements or systems modifications required to provide any reports or
services requested by the Fund;
(e) Any and all costs associated with the preparation, mailing or delivery
of statements, confirms, offering documents, proxy statements or any
other documents, including, but not limited to, the costs of
preparation, photocopying, supplies, typesetting, printing, postage,
any fees charged by Automatic Data Processing, Inc. or other
processors with respect to such mailings and any related record
storage;
(f) Any expenses incurred by CMFS to reprint account applications or other
documents identifying CMFS (along with its address and telephone
number) as the Fund's transfer agent;
(g) Any expenses CMFS shall incur at the written direction of an officer
of the Fund's investment adviser or officer of the Fund;
(h) Any additional expenses reasonably incurred by CMFS in the performance
of its duties and obligations under this Agreement and approved in
advance by the Fund;
(i) Any expenses incurred by CMFS in connection with shareholder meetings
and proxy solicitations;
(j) Any fees and expenses associated with Blue Sky filings, SEC
registration fees, Xxxxx Filings (if applicable), electronic support
of Board materials, escheatment, applicable Imaging fees, portfolio
data software, VRU services, Citrix links, internet architecture and
access fees, Web Access for Fund shareholders, DST FanMail or other
similar reporting services, esuite of features (E-signature), third
party platforms, bank service charges, associated fees of NSCC
trading, other industry standard transfer agency expenses which shall
be pre-approved;
(k) Fidelity bond insurance premiums of the Fund;
(l) The costs resulting from greater than 150 portfolio trades per month,
per Portfolio (exclusive of daily cash investments). Portfolios
engaging in more than 150 trades per month shall not be charged for
excess trades so long as the total number of monthly portfolio trades
executed by all the Portfolios does not exceed the aggregate monthly
portfolio trades allowed under this paragraph (e.g., 8 Portfolios X
150 monthly trades = 1200 aggregate monthly allowable trades).
Portfolios executing more than 150 portfolio trades per month and that
cause the Fund to exceed its aggregate monthly allowable trades will
be charged $5 per trade for each trade in excess of 150.
(m) Any expenses associated with the implementation and enforcement of
Customer Identification Procedures as required by regulations or rules
adopted pursuant to the USA PATRIOT Act, and any new law, rule or
regulation issued relating to the Fund's Anti - Money Laundering
Program (as defined in Schedule D) which require the commitment of
CMFS resources or that are adopted subsequent to the Effective Date
and which expenses are directly related to the Fund's operations.
5. EFFECTIVE DATE.
This Agreement shall become effective with respect to the Fund's Portfolios
as of the date first written above or, if the Fund is converting from a prior
service provider, upon completion of the conversion of the records and services
from the Fund's former service provider to CMFS (the "Effective Date"). The Fund
will provide CMFS with reasonable notice, as mutually agreed upon in writing, of
such conversion to allow for an orderly conversion from the former service
provider to CMFS.
If a particular Portfolio is not in existence on the date of this Agreement
or upon completion of the conversion from the former service provider, the
Effective Date of this Agreement (including the fee schedule hereto) with
respect to such Portfolio shall be the date CMFS is provided with written notice
of the Portfolio's commencement of operations in accordance with the terms of
this Agreement. To assure that CMFS can provide the services hereunder as of the
Portfolio's commencement of operations, the Fund shall give CMFS at least 45
days advance written notice of the inception of such new Portfolio. CMFS also
needs 45 days advance written notice of changes to share class structure (e.g.,
additions or changes of sales loads).
CMFS shall have a right of first refusal to provide transfer agency,
accounting and administration services to any new Portfolio established by the
Fund. CMFS reserves the right to decline to provide such services to any new
Portfolio established by the Fund.
6. TERM OF THIS AGREEMENT.
The term of this Agreement shall continue in effect, unless earlier
terminated by any party hereto as provided hereunder, for a period of two (2)
years. Thereafter, unless otherwise terminated as provided herein, this
Agreement shall be renewed automatically for additional periods of one year.
This Agreement may be terminated without penalty: (i) by the Fund or CMFS
upon ninety (90) days' written notice; or (ii) by the Fund or CMFS for any
uncured "cause" (as defined below) upon the provision of sixty (60) days'
advance written notice by the party alleging cause.
For purposes of this Agreement, "cause" shall mean:
(i) a material breach of this Agreement that has not been remedied within
thirty (30) days following written notice of such breach from the
non-breaching party;
(ii) an act or omission of a party to this Agreement involving gross
negligence, willful malfeasance or intentional wrongdoing;
(iii) a series of negligent acts, omissions or breaches of this Agreement
which, in the aggregate, constitute in the reasonable judgment of the
Fund, a serious, unremedied and ongoing failure to perform
satisfactorily CMFS' obligations hereunder;
(iv) a final, non-appealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of
criminal or unethical behavior in the conduct of its business; or
(v) financial difficulties on the part of the party to be terminated which
are evidenced by the authorization or commencement of, or involvement
by way of pleading, answer, consent or acquiescence in, a voluntary or
involuntary case under Title 11 of the United States Code, as from
time to time is in effect, or any applicable law other than said Title
11, of any jurisdiction relating to the liquidation or reorganization
of debtors or the modification or alteration of the rights of
creditors.
In the event the Fund notifies CMFS of any foregoing cause in accordance
with the notice requirements of this provision, CMFS shall be given forty-five
(45) days to remedy such cause for termination. Upon remedying such cause, the
notice of termination provided by the Fund shall no longer have the effect of
terminating the Agreement. Finding "cause" shall not be determinative of any
liability under this Agreement, which is governed by Paragraph 7 hereof.
Notwithstanding the foregoing, in the event this Agreement is terminated
and for any reason CMFS, with the written consent of the Fund, in fact continues
to perform any one or more of the services contemplated by this Agreement or any
schedule or exhibit hereto, the then pertinent provisions of this Agreement,
including without limitation the provisions dealing with indemnification, shall
continue in full force and effect. Compensation due CMFS and unpaid by the Fund
upon such termination shall be immediately due and payable upon and
notwithstanding such termination. CMFS shall be entitled to collect from the
Fund, in addition to the compensation described in Schedule E, the amount of all
of CMFS' expenses in connection with CMFS' activities in effecting such
termination, including without limitation, the delivery to the Fund and/or its
designees of the Fund's property, records, instruments and documents. In the
event this Agreement is terminated, CMFS will continue to provide services to
the Fund during the transition period to a successor service provider and will
cooperate with the successor service provider to assist in as orderly, efficient
and cost effective conversion as is reasonably possible.
7. STANDARD OF CARE AND LIABILITY.
The duties of CMFS shall be confined to those expressly set forth herein,
and no implied duties are assumed by or may be asserted against CMFS hereunder.
CMFS shall be liable for any damages arising directly out of CMFS' failure to
perform its duties under this Agreement to the extent such damages arise
directly out of CMFS' willful misfeasance, bad faith, gross negligence in the
performance of its duties, or reckless disregard of it obligations and duties
hereunder. (As used in this paragraph 7, the term "CMFS" shall include
directors, officers, employees and other agents of CMFS as well as CMFS itself).
Without limiting the generality of the foregoing or any other provision of
this Agreement, CMFS shall not be liable for the validity or invalidity or
authority or lack thereof of any instruction, notice or other instrument that
CMFS reasonably believes to be genuine and to have been signed or presented by a
duly authorized representative of the Fund. CMFS shall not be liable for any
pricing error caused by the failure of the Fund's investment adviser or
sub-adviser to provide a trade ticket or for incorrect information included in
any trade ticket provided.
CMFS may at any time seek instructions from the Fund and may consult with
counsel for the Fund or its own counsel, and with accountants and other experts
with respect to any matter arising in connection with CMFS' duties hereunder,
and CMFS 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 reasonable
opinion of such counsel, accountants or other experts qualified to render such
opinion. To the extent CMFS consults with such consultants pursuant to this
provision, such expense shall be an expense of the Fund.
In the event the Fund is converting from a prior service provider, CMFS
shall be entitled to rely upon the Fund's books and records provided to CMFS by
the prior service provider and shall have no duty to investigate whether such
books and records are complete or accurate. CMFS shall not be subject to
liability hereunder, to the extent CMFS cannot perform any of its services
hereunder as a result of a failure of the Fund's former service provider.
8. INDEMNIFICATION.
The Fund agrees to indemnify and hold harmless CMFS from and against any
and all actions, suits, claims, losses, damages, costs, charges, reasonable
counsel fees and disbursements, payments, expenses and liabilities (including
reasonable investigation expenses) (collectively, "Losses") to which CMFS may
become liable arising directly or indirectly out of (i) any action or omission
to act which CMFS takes at any request or on the direction of or in reliance on
the reasonable advice of the Fund, the Fund's counsel or the Fund's investment
adviser, (ii) upon any instruction, notice or other instrument that CMFS
reasonably believes to be genuine and to have been signed or presented by a duly
authorized representative of the Fund, its investment adviser or other duly
authorized agent, (iii) any action or omission of CMFS that CMFS on its own
initiative, in good faith and without negligence on the part of CMFS and
otherwise in accordance with the standard of care set forth in Paragraph 7
above, takes or does not take in connection with the performance of its duties
or obligations hereunder, (iv) any inaccuracy or omission in any prospectus,
registration statement, annual or other periodic report or proxy statement of
the Fund or any advertising, marketing, shareholder communication, or
promotional material generated by the Fund or its investment adviser or
sub-adviser, or (v) any breach by the Fund of any representation, warranty or
agreement contained in this Agreement. CMFS shall not be indemnified against or
held harmless from any Losses arising directly or indirectly out of CMFS' own
willful misfeasance, bad faith, negligence in the performance of its duties, or
reckless disregard of its obligations and duties hereunder. (As used in this
paragraph 8, the term "CMFS" shall include directors, officers, employees and
other agents of CMFS as well as CMFS itself).
CMFS agrees to indemnify and hold harmless the Fund from and against any
and all Losses to which the Fund may become liable arising directly out of (i)
CMFS' own willful misfeasance, bad faith, gross negligence in the performance of
its duties, or reckless disregard of its obligations and duties as set forth in
this Agreement, or (ii) any breach by CMFS of any representation, warranty or
agreement contained in this Agreement. (As used in this paragraph 8, the term
"Fund" shall include Directors, officers, employees and other agents of the Fund
as well as the Fund itself.)
If a claim is made against any party to this Agreement as to which that
party may seek indemnity under this paragraph 8 from the other party, the party
seeking indemnification shall notify the other party within ten (10) days after
receipt of any written assertion of such claim threatening to institute an
action or proceeding or service of summons or other legal process. Failure to
notify a party of a claim for indemnification will relieve the party from whom
indemnification is sought from any liability which it may have on account of the
indemnity provisions set forth under this paragraph 8 unless the party seeking
indemnification can demonstrate to the reasonable satisfaction of the other
party that such party has not been prejudiced in any material respect by such
failure to so notify.
The parties to this Agreement will cooperate in the control of the defense
of any action, suit or proceeding in which a party is involved and for which
indemnity is being provided by the other party. Any party from whom
indemnification is sought may negotiate the settlement of any action, suit or
proceeding subject to the other party's approval, which approval will not be
unreasonably withheld. The party seeking indemnification 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 a party
to whom indemnification is being provided in connection with, or as a result of
such participation, will be borne solely by the indemnified party unless:
o the party seeking indemnification has received an opinion of counsel
from counsel to either party stating that the use of common counsel
would present an impermissible conflict of interest;
o the defendants in, or targets of, any such action or proceeding
include both CMFS and the Fund, and legal counsel to either party has
reasonably concluded that there are legal defenses available to a
party which are different from or additional to those available to the
other party or which may be adverse to or inconsistent with defenses
available to a party; or
o the party from whom indemnification is sought authorizes the other
party to employ separate counsel at the expense of the indemnifying
party.
o The terms of this paragraph 8 will survive the termination of this
Agreement.
9. RECORD RETENTION AND CONFIDENTIALITY.
CMFS shall keep and maintain on behalf of the Fund all books and records
which the Fund or CMFS is, or may be, required to keep and maintain pursuant to
any applicable statutes, rules and regulations, including without limitation
Rules 31a-1 and 31a-2 under the 1940 Act, relating to the maintenance of books
and records in connection with the services to be provided hereunder. CMFS
further agrees that all such books and records maintained by CMFS in connection
with the services hereunder shall be the property of the Fund and to make such
books and records available for inspection by the Fund or by the SEC at
reasonable times and otherwise to keep confidential all books and records and
other information relative to the Fund and its shareholders; except when
requested to divulge such information by duly-constituted authorities or court
process. In case of any requests or demands for the inspection of the records of
the Fund maintained by CMFS, CMFS will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such inspection. CMFS
shall abide by the Fund's instructions for granting or denying the inspection;
provided, however, that CMFS may grant the inspection without instructions if
CMFS is advised by counsel to CMFS that failure to do so would be a breach of
any applicable law, regulation, or request of a regulatory authority or order of
a court, or would result in liability to CMFS.
CMFS acknowledges that the Fund's non-public information, including but not
limited to portfolio holdings information ("Non-public Information") is the
confidential property of the Fund. CMFS agrees that during the term of this
Agreement, it shall maintain policies reasonably designed to prohibit the
dissemination or use of the Fund's Non-public Information by CMFS or its
employees, affiliates, subsidiaries, parent, officers, directors, advisors and
contractors ("Representatives"), except as provided in this Agreement. In any
event, CMFS and its Representatives shall not engage in securities transactions
based on Non-public Information or knowledge of the Fund's trading position or
plans.
Dissemination of Non-public Information may occur only: (i) in connection
with the provision of services to the Fund (including for data processing,
statistical and risk analysis purposes); (ii) at the direction of the Fund
pursuant to instructions as provided in this Agreement; or (iii) as requested or
required in any regulatory proceeding, investigation, audit, examination,
subpoena, civil investigative demand or other similar process, or required by
operation of law or regulation. Any disclosure by CMFS pursuant to (iii), above,
shall be preceded to the extent reasonably practicable by reasonable notice to
the Fund; provided, however, no such notice is required where the disclosure is
made to any internal or external auditor of CMFS or any authorized services
provider or to any examiner or regulator of CMFS or any authorized services
provider. Upon written request, CMFS agrees to promptly return or destroy, as
directed, any Non-public Information; provided, however, CMFS shall be entitled
to keep one copy of any Non-public Information as required to satisfy any
regulatory or other legal obligation applicable to CMFS, which retained
information shall continue to be subject to the terms of this Section without
regard to any termination of the Agreement.
10. FORCE MAJEURE.
CMFS assumes no responsibility hereunder, and shall not be liable, for any
damage, loss of data, delay or any other loss whatsoever caused by acts of civil
or military authority, national emergencies, fire, flood, catastrophe, acts of
God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
11. RIGHTS OF OWNERSHIP; RETURN OF RECORDS.
Except for computer software, programs and procedures, whether or not
customized for the Fund or one of its Portfolios, developed to perform services
required to be provided by CMFS under this Agreement, all books and records
maintained by CMFS in connection with its services under this Agreement are the
exclusive property of the Fund and all such records and data will be furnished
to the Fund in appropriate form as soon as practicable after termination of this
Agreement for any reason. CMFS may at its option at any time, and shall promptly
upon the Fund's demand, deliver to the Fund, at the Fund's expense, and cease to
retain, books and records created and maintained by CMFS pursuant to this
Agreement which are no longer needed by CMFS in the performance of its services
or for its legal protection. CMFS shall be entitled to maintain a copy of the
Fund's books and records to the extent necessary for CMFS to fulfill its
regulatory obligations. If such books and records are not delivered in
accordance with this paragraph, CMFS will maintain such books and records in
accordance with applicable record keeping requirements from the date such books
and records were created. At the end of such retention period, such books and
records will be delivered to the Fund at the Fund's expense unless the Fund
instructs CMFS in writing to destroy such books and records. Any such
destruction will be at the Fund's expense. If destruction of books and records
is instructed by the Fund, CMFS shall provide reasonable proof of such
destruction to the Fund. Any such destruction authorization shall be evidenced
by a certified resolution of the Fund's Board of Directors. The Fund shall
indemnify and hold harmless CMFS in accordance with Paragraph 8 of this
Agreement for any loss, claim or expense (including, but not limited to,
reasonable attorneys' fees) in connection with CMFS' compliance with an
instruction to destroy any books and records pursuant to this paragraph.
12. REPRESENTATIONS OF THE FUND.
The Fund certifies to CMFS that: (1) as of the close of business on the
Effective Date, each Portfolio that is in existence as of the Effective Date has
authorized the issuance of an indefinite number of shares and has elected to
register an indefinite number of shares in accordance with Rule 24f-2 under the
1940 Act; (2) this Agreement has been duly authorized by the Fund and, when
executed and delivered by the Fund, will constitute a legal, valid and binding
obligation of the Fund, enforceable against the Fund in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the rights and remedies of creditors and
secured parties; (3) if necessary, any shareholder approval of this Agreement
has been obtained; and (4) that it will promptly disclose any material
regulatory, civil or criminal investigation or proceeding during the term of
this Agreement, including any such investigation or proceeding in existence as
of the Effective Date.
13. REPRESENTATIONS OF CMFS.
CMFS represents and warrants that: (1) it has adopted and implemented
procedures intended to safeguard from loss or damage the books and records CMFS
maintains on behalf of the Fund pursuant to the terms of this Agreement; (2)
this Agreement has been duly authorized by CMFS and, when executed and delivered
by CMFS, will constitute a legal, valid and binding obligation of CMFS,
enforceable against CMFS in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties; (3) it is
duly registered with the appropriate regulatory agency as a transfer agent and
such registration will remain in full force and effect for the duration of this
Agreement; and (4) that it will promptly disclose any material regulatory, civil
or criminal investigation or proceeding during the term of this Agreement,
including any such investigation or proceeding in existence as of the Effective
Date.
14. INSURANCE.
CMFS shall furnish the Fund with a copy of, and any related information
with respect to, CMFS' errors and omissions insurance policy. Such policy and
information shall include the identity of its insurance carrier(s), coverage
levels and deductible amounts. CMFS shall notify the Fund within ten (10) days
should any of its insurance coverage be canceled or reduced. Such notification
shall include the date of change and the reasons therefore. Any failure on the
part of CMFS to notify the Fund of changes to CMFS' insurance coverage as set
forth in this paragraph 14 shall constitute a material breach of this Agreement,
and the Fund shall be entitled to terminate this Agreement immediately in the
event of such a breach.
15. INFORMATION TO BE FURNISHED BY THE FUND.
The Fund has furnished to CMFS, or will furnish prior to the Effective
Date, the following:
(a) Copies of the following documents:
1. Copies of the Fund's current Charter and of any amendments
thereto, certified by the proper official of the state in
which such document has been filed.
2. The Fund's current By-laws and any amendments thereto; and
3. Copies of resolutions of the Directors covering the approval
of this Agreement, authorization of a specified officer of
the Fund to execute and deliver this Agreement and
authorization for specified officers of the Fund to provide
instructions to CMFS.
(b) A list of all the officers of the Fund, together with specimen
signatures of those officers who are authorized to instruct CMFS
in all matters.
(c) Copies of the current Prospectus and Statement of Additional
Information ("SAI") for each Portfolio.
(d) A copy of relevant procedures adopted by the Fund with respect to
each Portfolio that are necessary for CMFS to perform its
services hereunder, including a list of all issuers the Portfolio
is restricted from purchasing.
(e) A list of all affiliated persons (as such term is defined in the
0000 Xxx) of the Fund that are broker-dealers.
(f) The identity of the Fund's auditors along with contact
information.
(g) The expense budget for each Portfolio for the current fiscal
year.
(h) A list of contact persons (primary, backup and secondary backup)
of the Fund's investment adviser and, if applicable, sub-adviser
who can be reached until 6:30 p.m. ET with respect to valuation
and compliance matters.
The Fund shall promptly provide CMFS with written notice of any updates of or
changes to any of the foregoing documents or information, including an updated
written copy of such document or information. Until CMFS receives such updated
information or document, CMFS shall have no obligation to implement or rely upon
such updated information or document.
16. RULE 38a-1 POLICIES AND PROCEDURES
CMFS has provided the Fund with its written compliance policies and
procedures as required by Rule 38a-1 ("Rule 38a-1 Policies and Procedures") for
the approval by the Directors of the Fund. With respect to the services CMFS
provides to the Fund hereunder, CMFS' Rule 38a-1 Policies and Procedures shall
be reasonably designed to prevent violations by CMFS of the federal securities
laws as defined in Rule 38a-1, and which include the Securities Act of 1933, the
Securities and Exchange Act of 1934, the Xxxxxxxx-Xxxxx Act of 2002, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, Title V of
the Xxxxx-Xxxxx-Xxxxxx Act (relating to privacy regulation), any SEC rules
adopted under any of these statutes, the Bank Secrecy Act as it applies to
registered investment company operations (anti-money laundering), and any rules
adopted thereunder by the SEC or the Department of the Treasury ("Federal
Securities Laws").
CMFS will promptly provide the Fund's Chief Compliance Officer with any
material changes that have been made to CMFS' Rule 38a-1 Policies and
Procedures.
CMFS agrees to cooperate with the Fund in the annual review of CMFS' Rule
38a-1 Policies and Procedures conducted by the Fund's Chief Compliance Officer
to determine the adequacy of CMFS' Rule 38a-1 Policies and Procedures and the
effectiveness of their implementation (the "Annual Review"). CMFS also agrees to
cooperate with the Fund in any interim reviews of CMFS' Rule 38a-1 Policies and
Procedures to determine their adequacy and the effectiveness of their
implementation in response to significant compliance events, changes in business
arrangements, and/or regulatory developments ("Interim Review"). Such
cooperation includes, without limitation, furnishing such certifications,
subcertifications, and documentation within the scope of CMFS' functions and
responsibilities as the Fund's Chief Compliance Officer shall reasonably request
from time to time and implementing changes to CMFS' Rule 38a-1 Policies and
Procedures satisfactory to both the Fund's Chief Compliance Officer and CMFS.
CMFS will provide the Fund with ongoing, direct, and prompt access to CMFS'
compliance personnel and shall cooperate with the Fund's Chief Compliance
Officer in order to provide assistance to the Fund in carrying out its
obligations under Rule 38a-1.
CMFS will promptly notify the Fund in the event that a Material Compliance
Matter, as defined under Rule 38a-1, occurs with respect to CMFS' Rule 38a-1
Policies and Procedures and will cooperate with the Fund in providing the Fund
with periodic and special reports in the event any Material Compliance Matter
occurs. A "Material Compliance Matter" has the same meaning as the term defined
in Rule 38a-1, and includes any compliance matters that involve: (1) a violation
of the Federal Securities Laws by CMFS (or its officer, directors, employees, or
agents); (2) a violation of CMFS' Rule 38a-1 Policies and Procedures; or (3) a
weakness in the design or implementation of CMFS' Rule 38a-1 Policies and
Procedures.
CMFS (and anyone acting under the direction of CMFS) will refrain from,
directly or indirectly, taking any action to coerce, manipulate, mislead, or
fraudulently influence the Fund's Chief Compliance Officer in the performance of
her or his responsibilities under Rule 38a-1.
17. AMENDMENTS TO AGREEMENT.
This Agreement, or any term thereof, may be changed or waived only by
written amendment signed by the party against whom enforcement of such change or
waiver is sought.
For special cases, the parties hereto may amend such procedures set forth
herein as may be appropriate or practical under the circumstances, and CMFS may
conclusively assume that any special procedure which has been approved by the
Fund does not conflict with or violate any requirements of any rule, regulation
or requirement of any regulatory body of the Fund's then current prospectuses.
18. COMPLIANCE WITH LAW.
Except for the obligations of CMFS specifically set forth herein, the Fund
assumes full responsibility for the preparation, substance and distribution of
each prospectus and SAI of the Fund as well as compliance with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the 1940 Act and any other laws, rules and regulations of governmental
authorities having jurisdiction. The Fund represents and warrants that no shares
of the Fund will be offered to the public until the Fund's registration
statement under the Securities Act and the 1940 Act has been declared or becomes
effective and currently is effective in accordance with the Securities Act and
the 1940 Act.
19. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such
notice, at the following address: if to CMFS, at 83 General Xxxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxx, Xxxxxxxxxxxx 00000, Attn: President with a copy to the
attention of General Counsel and if to the Fund, at 00 Xxxx X. Xxxxxxx Xxxxxxx,
Xxxxx Xxxxx, Xxx Xxxxxx 00000 Attn: Xxxxx X. Xxxxxxx; or at such other address
as such party may from time to time specify in writing to the other party
pursuant to this paragraph.
20. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be assignable
by any party hereto except as permitted under Section 2 or except by the
specific written consent of the other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
21. GOVERNING LAW.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania and the applicable provisions of the 1940 Act. To
the extent that the applicable laws of the Commonwealth of Pennsylvania, or any
of the provisions herein, conflict with the applicable provisions of the 1940
Act, the provisions of the 1940 Act shall control.
22. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
CITCO MUTUAL FUND SERVICES, INC. FAIRHOLME FUNDS, INC.
By:/s/ Xxxx X. Xxxxx By:/s/ Xxxxx X. Xxxxxxxxx
------------------------------- -----------------------------
Xxxx X. Xxxxx Name: Xxxxx X. Xxxxxxxxx
President Title: President
SCHEDULE A
TO THE
MUTUAL FUND SERVICES AGREEMENT
BETWEEN
FAIRHOLME FUNDS, INC.
AND
CITCO MUTUAL FUND SERVICES, INC.
================================================================================
Dated May 18, 2005
PORTFOLIOS Sole Class
---------- ----------
The Xxxxxxxxx Xxxx X
SCHEDULE B
TO THE
MUTUAL FUND SERVICES AGREEMENT
BETWEEN FAIRHOLME FUNDS, INC. (the "Fund")
AND
CITCO MUTUAL FUND SERVICES, INC.
Dated May 18, 2005
Accounting Services to be Provided By Citco Mutual Fund Services, Inc. for
the Portfolios of the Fund as Set Forth on Schedule A
--------------------------------------------------------------------------
(a) Maintenance of Accounting Books and Records.
With respect to the services provided by CMFS under this Agreement,
CMFS shall maintain and keep current the accounts, books, records and
other documents relating to the Fund's financial and portfolio
transactions as and for the periods that may be required by the rules
and regulations of the Securities and Exchange Commission (the "SEC")
adopted under Section 31(a) of the 1940 Act. CMFS shall cause the
subject records of the Fund to be maintained and preserved pursuant to
the requirements of the 1940 Act.
(b) Daily Accounting Services.
CMFS shall perform the following accounting services with the
frequency provided in the prospectus for each Portfolio:
(i) Calculate the net asset value per share utilizing prices
obtained from the sources described in subsection 1(b)(ii)
below;
(ii) Obtain security prices from independent pricing services, or
if such quotes are unavailable, then obtain such prices from
each Portfolio's investment adviser or its designee as
approved by the Fund's Board of Directors (hereafter
referred to as "Directors");
(iii) Verify and reconcile with the Portfolios' custodian all
daily trade activity on settlement date;
(iv) Compute, as appropriate, and in consultation with the Fund's
auditors and tax advisers, each Portfolio's net income and
capital gains, dividend payables, dividend factors, yields,
and weighted average portfolio maturity, provided however
that CMFS shall not be responsible for tax compliance;
(v) Distribute net asset values and yields to NASDAQ or such
other exchange or reporting entity as is approved by the
Directors;
(vi) Determine unrealized appreciation and depreciation on
securities held by the Portfolios;
(vii) Amortize premiums and accrete discounts on securities
purchased at a price other than face value, if requested by
the Fund;
(viii) Update accounting system to reflect rate changes, as
received from a Portfolio's investment adviser or designee,
on variable interest rate instruments;
(ix) Post Portfolio transactions to appropriate categories;
(x) Accrue expenses and monitor the established expense budgets
of each Portfolio according to instructions received from
the Fund's treasurer or other authorized representative
(including officers of the Fund's investment adviser) and
make such adjustments over such periods as CMFS deems
necessary to reflect over-accruals or under-accruals of
estimated expenses or income;
(xi) Determine the outstanding receivables and payables for all
(1) security trades, (2) portfolio share transactions and
(3) income and expense accounts in accordance with the
budgets provided by the Fund or its investment adviser;
(xii) Provide accounting reports in connection with the Fund's
regular annual audit and other routine audits and
examinations by regulatory agencies.
(c) Additional Periodic Accounting Services.
CMFS shall also perform the following accounting services for each
Portfolio in accordance with such deadlines as the parties mutually
agree upon:
(i) Provide information periodically (as may reasonably be
requested by the Fund or a Portfolio's investment adviser or
sub-adviser(s)) and as required to complete the following
financial statements for each Portfolio: (1) Statement of
Assets and Liabilities; (2) Statement of Operations; (3)
Statement of Changes in Net Assets; (4) Security Purchases
and Sales Journals; and (5) Portfolio Holdings Reports.
(ii) Provide accounting information for the following:
(1) federal and state income tax returns and federal excise
tax returns, which will be prepared by the Fund's
auditor or tax advisers;
(2) the Fund's semi-annual reports on Form N-SAR;
(3) the Fund's annual, semi-annual and quarterly (if any)
shareholder reports;
(4) registration statements on Form N-1A and other filings
relating to the registration of shares;
(5) CMFS' monitoring of the Fund's portfolio composition
with respect to its status as a regulated investment
company under Subchapter M of the Internal Revenue
Code, as amended;
(6) annual audit by the Fund's auditors; and
(7) routine examinations performed by the SEC.
(iii) Produce no less frequently than quarterly such compliance
reports as may be agreed upon by the parties relating to the
services provided by CMFS under this Agreement for the
Fund's investment adviser and the Board of Directors and
provide information to the Fund's investment adviser and
other appropriate persons with respect to questions of Fund
compliance.
(d) Additional Reports and Services.
(i) Upon reasonable notice and as mutually agreed upon, CMFS may
provide additional reports upon the request of the Fund or
its investment adviser, or sub-adviser(s), which may result
in additional charges, the amount of which shall be agreed
upon between the parties prior to the provision of such
report.
(ii) Upon reasonable notice and as mutually agreed upon, CMFS may
provide such other similar services with respect to a
Portfolio, which may result in an additional charge, the
amount of which shall be agreed upon between the parties
prior to the provision of such service.
SCHEDULE C
TO THE
MUTUAL FUND SERVICES AGREEMENT
BETWEEN FAIRHOLME FUNDS, INC. (the "Fund")
AND
CITCO MUTUAL FUND SERVICES, INC.
Dated May 18, 2005
Administrative Services to be Provided By Citco Mutual Fund Services, Inc. for
the Portfolios of the Fund as Set Forth on Schedule A
------------------------------------------------------------------------------
CMFS shall assure that it maintains the necessary office space, equipment,
personnel and facilities for handling the affairs of the Fund as they relate to
the services provided under this Agreement (including the schedules to this
Agreement). Further, CMFS shall:
(a) record expenses and administer all disbursements with respect to each
Portfolio, and, as appropriate, compute the Portfolios' respective
yields, total returns, expense ratios and portfolio turnover rates;
(b) prepare such reports, notices and other documents (including reports
regarding the sale and redemption of shares of the Fund) as may be
necessary or desirable to make notice filings relating to the Fund's
shares with federal and state securities authorities to enable the
Fund to make a continuous offering of its shares; provided that CMFS
shall not be required to provide an opinion regarding the valid
issuance of the shares if such an opinion of counsel is required;
(c) coordinate the mailing of prospectuses, prospectus supplements, proxy
statements, and other reports to Fund shareholders as the Fund may
request upon reasonable notice;
(d) arrange for a location at which to hold shareholders meetings and for
the tabulation of shareholder votes for such meetings;
(e) coordinate the filing of the Fund's fidelity bond in accordance with
the requirements of the 1940 Act;
(f) on a post-trade basis, perform a secondary check of portfolio holdings
to assist the Fund in ensuring portfolio adherence with the
requirements and limitations set forth by the Investment Company Act
of 1940, the Fund's prospectus and SAI, and other applicable
regulatory requirements.
a. in this regard, the Fund shall promptly provide CMFS with updated
copies of such documents (including, but not limited to,
restricted issuer or country lists) as they may be amended from
time to time;
b. as CMFS' compliance monitoring is on a post-trade basis, the
portfolio managers and their employers must monitor compliance
with prospectus, 1940 Act, and other regulatory or investment
limitations on a primary, pre-trade basis;
c. in order for CMFS to adequately fulfill its undertaking pursuant
to this provision of the Agreement, the portfolio manager(s) will
need to promptly provide CMFS with information on a periodic
basis, as may be requested by CMFS from time to time;
d. except as otherwise provided in this Agreement, CMFS' undertaking
in this provision shall not include the following types of
monitoring-related activities: (i) calculating the amount
necessary to cover senior securities as defined under the 1940
Act and the SEC Staff's interpretation thereof; (ii) selecting
liquid assets to cover senior securities; (iii) ensuring that the
cash management instructions provided by the portfolio manager(s)
is consistent with applicable regulatory requirements; (iv)
issuing cash management instructions on behalf of portfolio
manager(s); (v) compliance with any applicable repurchase
agreement procedures; (vi) compliance with Rules 17a-7, 17e-1 and
10f-3 of the 1940 Act; or (vii) compliance with the Fund's market
timing policies and procedures.
(g) coordinate the compilation and mailing of materials for quarterly and
special meetings of the Directors (in this regard, the Fund shall
provide CMFS with notice of regular meetings at least six (6) weeks
before such meeting and as soon as practicable before any special
meeting of the Directors);
(h) cooperate with, and take all reasonable actions in the performance of
its duties under this Agreement to ensure that all necessary
information is made available to the Fund's independent public
accountants in connection with the preparation of any audit or report
requested by the Fund, including the provision of a conference room at
CMFS' location if necessary (in this regard, the Fund's independent
auditors shall provide CMFS with reasonable notice of any such audit
so that CMFS will be able to promptly respond to such information
requests without undue disruption of its business); and
(i) prepare and file with the SEC periodic financial reports on form
N-SAR, N-CSR, N-Q and filings required pursuant to Rules 17g-1 and
24f-2 under the 1940 Act. File Form N-PX containing the information
provided by the Fund or its advisers. CMFS will not file Form 13F or
Schedule 13G. Coordinate and assist the Fund with such other filings
as may be required by law or regulation as the parties may agree.
Additional Administrative Services. Upon reasonable notice and as mutually
agreed upon, CMFS may provide additional administrative services upon the
request of the Fund or its investment adviser or sub-adviser, which may result
in additional charges, the amount of which shall be agreed upon between the
parties prior to the provision of such report.
SCHEDULE D
TO THE
MUTUAL FUND SERVICES AGREEMENT
BETWEEN FAIRHOLME FUNDS, INC. (the "Fund")
AND
CITCO MUTUAL FUND SERVICES, INC.
Dated May 18, 2005
Transfer Agency Services to be Provided By Citco Mutual Fund Services, Inc. for
the Portfolios of the Fund as Set Forth on Schedule A
-------------------------------------------------------------------------------
(a) Services. CMFS will perform the following services:
(i) provide the services of a transfer agent, dividend disbursing agent
and, as relevant, agent in connection with accumulation, open-account
or similar plans (including without limitation any periodic investment
plan or periodic withdrawal program) that are customary for open-end
management investment companies including: (A) maintaining all
shareholder accounts, (B) preparing shareholder meeting lists, (C)
mailing proxies to shareholders, (D) mailing shareholder reports and
prospectuses to current shareholders, (E) withholding taxes on U.S.
resident and non-resident alien accounts, (F) preparing and filing
U.S. Treasury Department Forms 1099 and other appropriate forms
required by federal authorities with respect to distributions for
shareholders, (G) preparing and mailing confirmation forms and
statements of account to shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
shareholder accounts, (H) preparing and mailing activity statements
for shareholders, and (I) providing shareholder account information;
(ii) receive for acceptance orders for the purchase of Shares and promptly
deliver payment and appropriate documentation therefor to the
custodian of the applicable Portfolio (the "Custodian");
(iii) pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate shareholder account;
(iv) receive for acceptance redemption requests and deliver the appropriate
documentation therefor to the Custodian;
(v) monitor redemption requests for application of a Portfolio's
redemption fee, if applicable, as set forth in the Portfolio's
prospectus;
(vi) as and when it receives monies paid to it by the Custodian with
respect to any redemption, pay the redemption proceeds, less any
applicable redemption fee, as required by the prospectus pursuant to
which the redeemed Shares were offered and as instructed by the
redeeming shareholders;
(vii) effect transfers of Shares upon receipt of appropriate instructions
from shareholders;
(viii) prepare and transmit to shareholders (or credit the appropriate
shareholder accounts) payments for all distributions declared by the
Fund with respect to Shares;
(ix) if applicable, issue share certificates and replacement share
certificates for those share certificates alleged to have been lost,
stolen, or destroyed upon receipt by CMFS of indemnification
satisfactory to CMFS and protecting CMFS and the Fund and, at the
option of CMFS, issue replacement certificates in place of mutilated
share certificates upon presentation thereof without requiring
indemnification;
(x) receive from shareholders or debit shareholder accounts for sales
commissions, including contingent deferred, deferred and other sales
charges, and service fees (i.e., wire redemption charges) and prepare
and transmit payments to underwriters, selected dealers and others for
commissions and service fees received;
(xi) track shareholder accounts by financial intermediary source and
otherwise as requested by the Fund and provide periodic reporting to
the Fund or other agent;
(xii) maintain records of account for and provide reports and statements to
the Fund and shareholders as to the foregoing;
(xiii) record the issuance of Shares of the Fund and maintain pursuant to
Rule 17Ad-10(e) under the Securities Exchange Act of 1934, as amended
(the "1934 Act") a record of the total number of Shares of the Fund,
each Portfolio and each class thereof, that are authorized, based upon
data provided to it by the Fund, and are issued and outstanding and
provide the Fund on a regular basis a report of the total number of
Shares that are authorized and the total number of Shares that are
issued and outstanding;
(xiv) provide a system which will enable the Fund to calculate the total
number of Shares of each Portfolio and class thereof sold in each
State;
(xv) in accordance with the Fund's obligations under all applicable
anti-money laundering laws, regulations, rules and government guidance
and the Bank Secrecy Act ("BSA"), as amended by the USA PATRIOT ACT of
2001, together with its implementing regulations, and related
governmental and self-regulatory organization rules and regulations
(collectively, the "Anti-Money Laundering Laws"), maintain an
anti-money laundering program reasonably designed to ensure that the
Fund is in material compliance with the Anti-Money Laundering Laws
with respect to the services provided by CMFS to the Fund under this
Agreement (the "Anti-Money Laundering Program"). (CMFS agrees to
notify the Fund of any change to the Anti-Money Laundering Program
that may materially impact the Fund's anti-money laundering program.
It is contemplated that the Anti-Money Laundering Program as well as
the Fund's anti-money laundering program will be amended from time to
time, as additional regulations are adopted and/or regulatory guidance
is provided relating to the Fund's or CMFS' anti-money laundering
responsibilities);
(xvi) in order to assist the Fund in complying with its policies and
procedures related to market timing activity, provide the Fund with
access to a daily report on any potential market timing activity
(based on criteria provided to CMFS by the Fund) and, upon written
instructions from the Fund, take such action as the Fund so instructs
against any shareholder determined by the Fund to be engaged in market
timing activity; and
(xvii) respond as appropriate to all inquiries and communications from
shareholders relating to shareholder accounts, provide the Fund with
notification of any complaints relating to shareholder accounts and
assist the Fund in resolving any complaints relating to shareholder
accounts.
(b) Other Services. CMFS shall provide the following additional services on
behalf of the Fund and such other services agreed to in writing by the Fund and
CMFS:
(i) monitor and make appropriate filings with respect to the escheatment
laws of the various states and territories of the United States; and
(ii) receive and tabulate proxy votes/oversee the activities of proxy
solicitation firms and coordinate the tabulation of proxy and
shareholder meeting votes.
(c) Blue Sky Matters. The Fund or other agent (i) shall identify to CMFS in
writing those transactions and assets to be treated as exempt from reporting for
each state and territory of the United States and for each foreign jurisdiction
(collectively "States") and (ii) shall monitor the sales activity with respect
to shareholders domiciled or resident in each State. The responsibility of CMFS
for the Fund's State registration status is solely limited to the reporting of
transactions to the Fund, and CMFS shall have no obligation, when recording the
issuance of Shares, to monitor the issuance of such Shares or to take cognizance
of any laws relating to the issue or sale of such Shares, which functions shall
be the sole responsibility of the Fund or its administrator or other agent.
(d) Safekeeping. CMFS shall establish and maintain facilities and procedures
reasonably acceptable to the Fund for the safekeeping, control, preparation and
use of share certificates (if applicable), check forms, and facsimile signature
imprinting devices. CMFS shall establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of all records maintained by
CMFS pursuant to this Agreement.
(e) Cooperation With Accountants. CMFS shall cooperate with each Portfolio's
independent registered public accounting firm and shall take reasonable action
to make all necessary information available to the firm for the performance of
its duties.
(f) Inspection Of Records By Others For Purposes Of The Fund's Anti-Money
Laundering Program. CMFS agrees to allow appropriate federal examiners to obtain
and inspect information and records maintained by CMFS under this Agreement
relating to the Fund's anti-money laundering program and to inspect CMFS for
purposes of the Fund's anti-money laundering program.
(g) Suspicious Activities. The Fund agrees to notify CMFS promptly about any
known suspicious activities related to open accounts. CMFS agrees to notify the
Fund promptly about any detected suspicious activities pursuant to the
Anti-Money Laundering Program.
(h) Issuance of Shares. CMFS shall make original issues of Shares of each
Portfolio and class thereof in accordance with the Fund's then-current
prospectus only upon receipt of (i) instructions requesting the issuance, (ii) a
certified copy of a resolution of the Board authorizing the issuance, (iii)
necessary funds for the payment of any original issue tax applicable to such
Shares, and (iv) an opinion of the Fund's counsel as to the legality and
validity of the issuance, which opinion may provide that it is contingent upon
the filing by the Fund of an appropriate notice with the SEC, as required by
Section 24 of the 1940 Act or the rules thereunder. If the opinion described in
(iv) above is contingent upon a filing under Section 24 of the 1940 Act, the
Fund shall indemnify CMFS for any liability arising from the failure of the Fund
to comply with that section or the rules thereunder.
(i) Transfer of Shares. Transfers of Shares of each Portfolio and class thereof
shall be registered on the shareholder records maintained by CMFS. In
registering transfers of Shares, CMFS may rely upon the Uniform Commercial Code
as in effect in the State of Pennsylvania or any other statutes that, in the
opinion of CMFS' counsel, protect CMFS and the Fund from liability arising from
(i) not requiring complete documentation, (ii) registering a transfer without an
adverse claim inquiry, (iii) delaying registration for purposes of such inquiry
or (iv) refusing registration whenever an adverse claim requires such refusal.
As transfer agent, CMFS will be responsible for delivery to the transferor and
transferee of such documentation as is required by the Uniform Commercial Code.
CMFS shall perform such other services for the Fund that are mutually
agreed upon by the parties from time to time either at such fee as mutually
agreed upon by the parties; provided, however that the Fund or CMFS may retain
third parties to perform such other services in accordance with paragraph 2 of
this Agreement. Such services may include, without limitation, mailing
shareholder reports and mailing notices of shareholders' meetings, proxies and
proxy statements, for which the Fund promptly will reimburse CMFS' for its
out-of-pocket expenses.
Additional Transfer Agency Services. Upon reasonable notice and as mutually
agreed upon, CMFS may provide additional administrative services upon the
request of the Fund or its investment adviser or sub-adviser, which may result
in additional charges, the amount of which shall be agreed upon between the
parties prior to the provision of such report.
SCHEDULE E
TO THE
MUTUAL FUND SERVICES AGREEMENT
BETWEEN FAIRHOLME FUNDS, INC. (the "Fund")
AND
CITCO MUTUAL FUND SERVICES, INC.
Dated May 18, 2005
FEE SCHEDULE
FOR ADMINISTRATION SERVICES
Citco Mutual Fund Services, Inc. (CMFS) will provide all of the services
described in Schedules B-D of this Agreement for the following fees: CMFS will
provide all of the services described in Schedule B-D herein for the greater of
$100,000 per year or fees based on the table below:
--------------------------------------------------------------------------------
Average Daily Net Assets Annualized Fees
--------------------------------------------------------------------------------
On the first $300 million in Assets 0.11%
--------------------------------------------------------------------------------
On Assets greater than $300 million
but less than $600 million 0.08%
--------------------------------------------------------------------------------
On all Assets greater than $600 0.06%
million.
--------------------------------------------------------------------------------
CHANGE OF TERMS:
This schedule is based upon current regulatory requirements and the Fund's
current requirements as set forth in its registration statement, organizational
documents, policies and procedures. Any material change to business or makeup of
the Fund, the investment objectives or to the minimum investment amount may
constitute a material change to this Agreement. If such a change occurs, the
parties agree to negotiate in good faith to modify the foregoing fee schedule in
accordance with the additional requirements resulting from such material
change(s).
22146.0003 #564952v3
