FUND ADMINISTRATION SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this ___ day of ______, 2002,
by and between Kinetics Mutual Funds, Inc., a Maryland corporation (the
"Corporation") and U.S. Bancorp Fund Services, LLC, a Wisconsin limited
liability company ("USBFS").
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company,
and is authorized to issue shares of common stock in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, USBFS is, among other things, in the business of providing fund
administration services for the benefit of its customers; and
WHEREAS, the Corporation desires to retain USBFS to provide fund
administration services for each series of the Corporation listed on Exhibit A
hereto (as amended from time to time) (each a "Fund", collectively the "Funds").
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto, intending to be legally bound,
do hereby agree as follows:
1. Appointment of USBFS as Administrator
The Corporation hereby appoints USBFS as administrator of the Corporation
on the terms and conditions set forth in this Agreement, and USBFS hereby
accepts such appointment and agrees to perform the services and duties set forth
in this Agreement.
2. Services and Duties of USBFS
USBFS shall provide the following fund administration services for the
Funds, including but not limited to:
A. General Fund Management:
(1) Act as liaison among all Fund service providers.
(2) Supply:
a. Corporate secretarial services.
b. Office facilities (which may be in USBFS's or its
affiliate's own offices).
c. Non-investment-related statistical and research data as
needed.
(3) Coordinate the Corporation's Board of Directors' (the "Board of
Directors" or the "Directors") communication:
a. Establish meeting agendas.
b. Prepare reports for the Board of Directors based on
financial and administrative data.
c. Evaluate independent auditor.
d. Secure and monitor fidelity bond and director and officer
liability coverage, and make the necessary Securities and
Exchange Commission (the "SEC") filings relating thereto.
e. Prepare minutes of meetings of the Board of Directors and
Fund shareholders.
f. Recommend dividend declarations to the Board of Directors,
prepare and distribute to appropriate parties notices
announcing declaration of dividends and other distributions
to shareholders.
g. Provide personnel to serve as officers of the Corporation if
so elected by the Board of Directors, attend Board of
Directors meetings and present materials for Directors'
review at such meetings.
(4) Audits:
a. Prepare appropriate schedules and assist independent
auditors.
b. Provide information to the SEC and facilitate audit process.
c. Provide office facilities.
(5) Assist in overall operations of the Fund.
(6) Pay Fund expenses upon written authorization from the
Corporation.
(7) Monitor arrangements under shareholder services or similar plan.
B. Compliance:
(1) Regulatory Compliance:
a. Monitor compliance with the 1940 Act requirements,
including:
(i) Asset diversification tests.
(ii) Total return and SEC yield calculations.
(iii) Maintenance of books and records under Rule 31a-3.
(iv) Code of Ethics for the disinterested Directors of the
Fund.
b. Monitor Fund's compliance with the policies and investment
limitations of the Corporation as set forth in its current
prospectus (the "Prospectus") and statement of additional
information (the "SAI").
c. Maintain awareness of applicable regulatory and operational
service issues and recommend dispositions.
(2) Blue Sky Compliance:
a. Prepare and file with the appropriate state securities
authorities any and all required compliance filings relating
to the registration of the securities of the Corporation so
as to enable the Corporation to make a continuous offering
of its shares in all states.
b. Monitor status and maintain registrations in each state.
c. Provide information regarding material developments in state
securities regulation.
(3) SEC Registration and Reporting:
a. Assist Corporate counsel in updating the Prospectus and SAI
and in preparing proxy statements and Rule 24f-2 notices.
b. Prepare annual and semiannual reports, Form N-SAR filings
and Rule 24f-2 notices.
c. Coordinate the printing, filing and mailing of publicly
disseminated Prospectuses and reports.
d. File fidelity bond under Rule 17g-1.
e. File shareholder reports under Rule 30b2-1.
f. Monitor sales of each Fund's shares and ensure that such
shares are properly registered with the SEC and the
appropriate state authorities.
g. File Rule 24f-2 notices.
(4) IRS Compliance:
a. Monitor the Corporation's status as a regulated investment
company under Subchapter M, including without limitation,
review of the following:
(i) Asset diversification requirements.
(ii) Qualifying income requirements.
(iii) Distribution requirements.
b. Calculate required distributions (including excise tax
distributions).
C. Financial Reporting:
(1) Provide financial data required by the Fund's Prospectus and SAI.
(2) Prepare financial reports for officers, shareholders, tax
authorities, performance reporting companies, the Board of
Directors, the SEC, and independent auditors.
(3) Supervise the Corporation's custodian and fund accountants in the
maintenance of the Corporation's general ledger and in the
preparation of the Fund's financial statements, including
oversight of expense accruals and payments, of the determination
of net asset value of the Corporation's net assets and of the
Corporation's shares, and of the declaration and payment of
dividends and other distributions to shareholders.
(4) Compute the yield, total return and expense ratio of each class
of each Fund, and each Fund's portfolio turnover rate.
(5) Monitor the expense accruals and notify the Corporation's
management of any proposed adjustments.
(6) Prepare monthly financial statements, which include without
limitation the following items:
a. Schedule of Investments.
b. Statement of Assets and Liabilities.
c. Statement of Operations.
d. Statement of Changes in Net Assets.
e. Cash Statement.
f. Schedule of Capital Gains and Losses.
(7) Prepare quarterly broker security transaction summaries.
D. Tax Reporting:
(1) Prepare and file on a timely basis appropriate federal and state
tax returns including, without limitation, Forms 1120/8610 with
any necessary schedules.
(2) Prepare state income breakdowns where relevant.
(3) File Form 1099 Miscellaneous for payments to Directors and other
service providers. (4) Monitor wash losses. (5) Calculate
eligible dividend income for corporate shareholders.
3. Compensation
USBFS shall be compensated for providing the services set forth in this
Agreement in accordance with the fee schedule set forth on Exhibit A hereto (as
amended from time to time). The Corporation shall pay all fees and reimbursable
expenses within thirty (30) calendar days following receipt of the billing
notice, except for any fee or expense subject to a good faith dispute. The
Corporation shall notify USBFS in writing within thirty (30) calendar days
following receipt of each invoice if the Corporation is disputing any amounts in
good faith. The Corporation shall settle such disputed amounts within ten (10)
calendar days of the day on which the parties agree to the amount to be paid.
With the exception of any fee or expense the Corporation is disputing in good
faith as set forth above, unpaid invoices shall accrue a finance charge of one
and one-half percent (1 1/2%) per month, after the due date. Notwithstanding
anything to the contrary, amounts owed by the Corporation to USBFS shall only be
paid out of the assets and property of the particular Fund involved.
4. Indemnification; Limitation of Liability
A. USBFS shall exercise reasonable care in the performance of its duties
under this Agreement. USBFS shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Corporation
in connection with matters to which this Agreement relates, including
losses resulting from mechanical breakdowns or the failure of
communication or power supplies beyond USBFS's control, except a loss
arising out of or relating to USBFS's refusal or failure to comply
with the terms of this Agreement or from bad faith, negligence, or
willful misconduct on its part in the performance of its duties under
this Agreement. Notwithstanding any other provision of this Agreement,
if USBFS has exercised reasonable care in the performance of its
duties under this Agreement, the Corporation shall indemnify and hold
harmless USBFS from and against any and all claims, demands, losses,
expenses, and liabilities of any and every nature (including
reasonable attorneys' fees) which USBFS may sustain or incur or which
may be asserted against USBFS by any person arising out of any action
taken or omitted to be taken by it in performing the services
hereunder, except for any and all claims, demands, losses, expenses,
and liabilities arising out of or relating to USBFS's refusal or
failure to comply with the terms of this Agreement or from bad faith,
negligence or from willful misconduct on its part in performance of
its duties under this Agreement, (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral instruction
provided to USBFS by any duly authorized officer of the Corporation,
such duly authorized officer to be included in a list of authorized
officers furnished to USBFS and as amended from time to time in
writing by resolution of the Board of Directors.
USBFS shall indemnify and hold the Corporation harmless from and
against any and all claims, demands, losses, expenses, and liabilities
of any and every nature (including reasonable attorneys' fees) that
the Corporation may sustain or incur or that may be asserted against
the Corporation by any person arising out of any action taken or
omitted to be taken by USBFS as a result of USBFS's refusal or failure
to comply with the terms of this Agreement, its bad faith, negligence,
or willful misconduct.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, USBFS shall take
all reasonable steps to minimize service interruptions for any period
that such interruption continues beyond USBFS's control. USBFS will
make every reasonable effort to restore any lost or damaged data and
correct any errors resulting from such a breakdown at the expense of
USBFS. USBFS agrees that it shall, at all times, have reasonable
contingency plans with appropriate parties, making reasonable
provision for emergency use of electrical data processing equipment to
the extent appropriate equipment is available. Representatives of the
Corporation shall be entitled to inspect USBFS's premises and
operating capabilities at any time during regular business hours of
USBFS, upon reasonable notice to USBFS.
Notwithstanding the above, USBFS reserves the right to reprocess
and correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the indemnitor may
be asked to indemnify or hold the indemnitee harmless, the indemnitor
shall be fully and promptly advised of all pertinent facts concerning
the situation in question, and it is further understood that the
indemnitee will use all reasonable care to notify the indemnitor
promptly concerning any situation that presents or appears likely to
present the probability of a claim for indemnification. The indemnitor
shall have the option to defend the indemnitee against any claim that
may be the subject of this indemnification. In the event that the
indemnitor so elects, it will so notify the indemnitee and thereupon
the indemnitor shall take over complete defense of the claim, and the
indemnitee shall in such situation initiate no further legal or other
expenses for which it shall seek indemnification under this section.
The indemnitee shall in no case confess any claim or make any
compromise in any case in which the indemnitor will be asked to
indemnify the indemnitee except with the indemnitor's prior written
consent.
5. Proprietary and Confidential Information
USBFS agrees on behalf of itself and its directors, officers, and employees
to treat confidentially and as proprietary information of the Corporation all
records and other information relative to the Corporation and prior, present, or
potential shareholders of the Corporation (and clients of said shareholders),
and not to use such records and information for any purpose other than the
performance of its responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Corporation, which approval shall
not be unreasonably withheld and may not be withheld where USBFS may be exposed
to civil or criminal contempt proceedings for failure to comply, when requested
to divulge such information by duly constituted authorities, or when so
requested by the Corporation.
Further, USBFS will adhere to the privacy policies adopted by the
Corporation pursuant to Title V of the Xxxxx-Xxxxx-Xxxxxx Act, as may be
modified from time to time (the "Act"). Notwithstanding the foregoing, USBFS
will not share any nonpublic personal information concerning any of the
Corporation's shareholders to any third party unless specifically directed by
the Corporation or allowed under one of the exceptions noted under the Act.
6. Term of Agreement; Amendment
This Agreement shall become effective as of the date first written above
and will continue in effect for a period of one year. Subsequent to the initial
one-year term, this Agreement may be terminated by either party upon giving
ninety (90) days prior written notice to the other party or such shorter period
as is mutually agreed upon by the parties. However, this Agreement may be
amended by mutual written consent of the parties.
7. Records
USBFS shall keep records relating to the services to be performed hereunder
in the form and manner, and for such period, as it may deem advisable and is
agreeable to the Corporation, but not inconsistent with the rules and
regulations of appropriate government authorities, in particular, Section 31 of
the 1940 Act and the rules thereunder. USBFS agrees that all such records
prepared or maintained by USBFS relating to the services to be performed by
USBFS hereunder are the property of the Corporation and will be preserved,
maintained, and made available in accordance with such applicable sections and
rules of the 1940 Act and will be promptly surrendered to the Corporation on and
in accordance with its request.
8. Governing Law
This Agreement shall be construed in accordance with the laws of the State
of Wisconsin, without regard to conflicts of law principles. To the extent that
the applicable laws of the State of Wisconsin, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control, and nothing herein shall be construed in a manner inconsistent with the
1940 Act or any rule or order of the SEC thereunder.
9. Duties in the Event of Termination
In the event that, in connection with termination, a successor to any of
USBFS's duties or responsibilities hereunder is designated by the Corporation by
written notice to USBFS, USBFS will promptly, upon such termination and at the
expense of the Corporation, transfer to such successor all relevant books,
records, correspondence, and other data established or maintained by USBFS under
this Agreement in a form reasonably acceptable to the Corporation (if such form
differs from the form in which USBFS has maintained, the Corporation shall pay
any expenses associated with transferring the data to such form), and will
cooperate in the transfer of such duties and responsibilities, including
provision for assistance from USBFS's personnel in the establishment of books,
records, and other data by such successor.
10. No Agency Relationship
Nothing herein contained shall be deemed to authorize or empower USBFS to
act as agent for the other party to this Agreement, or to conduct business in
the name, or for the account, of the other party to this Agreement.
11. Data Necessary to Perform Services
The Corporation or its agent shall furnish to USBFS the data necessary to
perform the services described herein at such times and in such form as mutually
agreed upon. If USBFS is also acting in another capacity for the Corporation,
nothing herein shall be deemed to relieve USBFS of any of its obligations in
such capacity.
12. Assignment
This Agreement may not be assigned by either party without the prior
written consent of the other party.
13. Notices
Any notice required or permitted to be given by either party to the other
shall be in writing and shall be deemed to have been given on the date delivered
personally or by courier service, or three (3) days after sent by registered or
certified mail, postage prepaid, return receipt requested, or on the date sent
and confirmed received by facsimile transmission to the other party's address
set forth below:
Notice to USBFS shall be sent to:
U.S. Bancorp Fund Services, LLC
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
and notice to the Corporation shall be sent to:
Kinetics Mutual Funds, Inc.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer on one or more counterparts as of the date
first above written.
Kinetics Mutual Funds, Inc. U.S. BANCORP FUND SERVICES, LLC
By: ______________________________ By: ________________________________
Title: __________________________ Title: _____________________________
Administration Services
Annual Fee Schedule
Feeder Funds
Exhibit A
Separate Series of Kinetics Mutual Funds, Inc.
Name of Series
The Internet Fund
The Medical Fund
The Internet Emerging Growth Fund
The New Paradigm Fund
The Small Cap Opportunities Fund
The Kinetics Government Money Market Fund
The Energy Fund
Domestic Equity Funds and Money Market Fund
The Internet Fund, The Medical Fund, The Internet Emerging Growth Fund, The New
Paradigm Fund, The Small Cap Opportunities Fund, The Energy Fund and The
Kinetics Government Money Market Fund shall incur the following fee schedule:
