THIRD AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
THIRD AMENDED AND RESTATED ADMINISTRATIVE SERVICES AGREEMENT ("Agreement")
effective as of __________, 2001, by and between E*TRADE Funds, a Delaware
business trust ("Trust") on behalf of each series listed on Exhibit A hereto as
amended from time to time (each a "Fund" and collectively, the "Funds"), and
E*TRADE Asset Management, Inc., a Delaware corporation ("Administrator").
WHEREAS, the Trust and the Administrator entered into the Second Amended
and Restated Administrative Services Agreement on May 9, 2000, as amended from
time to time, and each party wishes to amend and restate that agreement herein;
WHEREAS, the Trust, and the Administrator entered into an Administrative
Services Agreement as of March 1, 2001, on behalf of the E*TRADE Asset
Allocation Fund, and both parties agree to terminate that agreement and
incorporate all terms and provisions of that agreement into this Agreement;
WHEREAS, the Trust is a registered open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Administrator is able to act as administrator of the Fund; and
WHEREAS, the Trust wishes to retain the Administrator to render
administrative services with respect to each of the Funds listed on Exhibit A
hereto (as the same may be amended from time to time by the mutual written
consent of the parties), and the Administrator has agreed to act as
administrator for each of the Funds.
NOW, THEREFORE, for good and valuable consideration, the receipt whereof is
hereby acknowledged, and the mutual performance of undertakings herein, it is
agreed by and between the parties hereto as follows:
1. Services to be Provided by the Administrator. (a) Subject to the
control, direction and supervision of the Board of Trustees of the Trust
("Board") and in compliance with the objectives, policies and limitations set
forth in the Trust's Registration Statement, Declaration of Trust and By-Laws;
applicable laws and regulations; and all resolutions and policies implemented by
the Board, the Administrator shall have general responsibility for the oversight
of the Trust's administrative operations and will provide the following
services:
(i) Trust Administration,
(ii) Compliance Services, and
(iii) Trust Accounting.
A detailed description of each of the above services is
contained in Schedules B and C, respectively, to this
Agreement.
(b) The Administrator will also:
(i) provide, without additional cost to the Trust except for
out-of-pocket expenses, office facilities in an appropriate
location with respect to the provision of the services
contemplated herein (which may be in the offices of the
Administrator or a corporate affiliate of the Administrator);
(ii) provide, without additional remuneration from, or other cost
to, the Trust except for out-of-pocket expenses, the services of
individuals to serve as officers of the Trust who will be
designated by the Administrator and elected by the Board subject
to reasonable Board approval;
(iii)provide or otherwise obtain, without additional remuneration
from or other cost to the Trust except for out-of-pocket
expenses, personnel sufficient for provision of the services
contemplated herein;
(iv) furnish, at no additional cost to the Trust except for
out-of-pocket expenses, equipment and other materials, which are
necessary or desirable for provision of the services contemplated
herein; and
(v) keep records, at no additional cost to the Trust except for
out-of-pocket expenses, relating to the services provided
hereunder in such form and manner as the Administrator may deem
appropriate or advisable.
2. Compensation. For the services provided by the Administrator, each of
the Funds shall pay to the Administrator a fee, computed daily and to be paid on
the last business day of each month equal on an annual basis to the amount of
the average daily net assets of such Fund as listed opposite that Fund's name in
Exhibit A, attached hereto.
The term "average daily net assets of the Fund" is defined as the average
of the values placed on the net assets of the Fund as of the close of the New
York Stock Exchange, on each day on which the net asset value of the portfolio
of the Fund is determined consistent with the provisions of Rule 22c-1 under the
1940 Act or, if the Fund lawfully determines the value of the net assets of its
portfolio as of some other time on each business day, as of such time. The value
of the net assets of the Fund shall be determined pursuant to the applicable
provisions of the Fund's then current registration statement under the 1940 Act
and the Securities Act of 1933, as amended, ("Registration Statement"). If,
pursuant to such provisions, the determination of net asset value is suspended
for any particular business day, then for the purposes of this Section 2, the
value of the net assets of the Fund shall be deemed to be the value of such net
assets as last determined in accordance with the Registration Statement. If the
determination of the net asset value of the Fund has been suspended pursuant to
the Registration Statement for a period including a month for which payment
pursuant to this Agreement is due, the Administrator's compensation payable at
the end of such month shall be computed on the basis of the value of the net
assets of the Fund as last determined (whether during or prior to such month).
3. Allocation of Charges and Expenses.
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(a) Except as otherwise specifically provided in this Section 3, the
Administrator shall pay the compensation and expenses of all of its directors,
officers and employees who serve as trustees, officers and executive employees
of the Trust (including the Trust's share of payroll taxes), and the
Administrator shall make available, without expense to each Fund, the service of
its directors, officers and employees who may be duly elected officers of the
Trust, subject to their individual consent to serve and to any limitations
imposed by law.
(b) The Administrator shall not be required to pay pursuant to this
Agreement any expenses of each Fund other than those specifically allocated to
the Administrator in this section 3.
4. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Administrator hereby agrees that all records which it
maintains or causes to be maintained for the Funds are the property of the Funds
and further agrees to surrender promptly to the Funds any of such records upon
the Trust's request. The Administrator further agrees to preserve or cause to be
preserved for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
5. Sub-Contracts. The Administrator may, from time to time, at its own
expense, employ or associate with itself such person or persons as it believes
necessary to assist it in carrying out its obligations under this Agreement.
6. Compliance. The Administrator shall observe and comply with the
Certificate of Trust and organizing documents of the Trust, the applicable
provisions of the Registration Statement, federal securities laws, all lawful
resolutions of the Board and other lawful orders and directions given to it from
time to time by the Board. All activities engaged in by the Administrator
hereunder shall be at all times subject to the control of and review by the
Board.
7. Limitations of Liability.
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(a) Except as may otherwise be required by the 1940 Act or the rules
thereunder or other applicable law, neither the Administrator nor its
shareholders, officers, directors, employees or agents shall be subject to any
liability for, or any damages, expenses or losses incurred in connection with,
any act or omission connected with or arising out of any services rendered under
this Agreement, except by reason of willful misfeasance, bad faith or negligence
in the performance of the Administrator's duties or by reason of reckless
disregard of the Administrator's obligations and duties under this Agreement.
Notwithstanding the foregoing, the Administrator shall not be liable to the
Trust or the Funds for the acts and omissions of any party engaged by the
Administrator to assist it in carrying out its obligations under this Agreement
except to the extent that such party is liable to the Administrator for such
acts and omissions pursuant to the contract under which the Administrator shall
have retained such party. Any person, even though also employed by the
Administrator, who may be or become an employee of and paid by the Trust shall
be deemed, when acting within the scope of his employment by the Trust, to be
acting in such employment solely for the Trust and not as the employee or agent
of the Administrator.
(b) The Administrator shall look only to the assets of a particular Fund
for the performance of the Agreement by the Trust with respect to such Fund, and
neither the Trustees nor any of the Trust's shareholders, officers, employees or
agents, whether past, present or future, shall be personally liable therefor.
8. Non-Exclusivity. Nothing in this Agreement will in any way limit or
restrict the Administrator or any of its officers, directors, employees, agents
or affiliates from providing administrative services or other services to any
other person or entity pursuant to any contract or otherwise; and no such
performance of administrative or other services or taking of any such action or
doing of any such thing, shall be in any manner restricted or otherwise affected
by any aspect of any relationship of the Administrator to the Trust or the Funds
or be deemed to violate or give rise to any duty or obligation of the
Administrator to the Trust, except as otherwise imposed by law.
9. Duration and Termination. This Agreement shall continue in effect with
respect to each Fund until August 31, 2003, if not sooner terminated. This
Agreement shall continue in effect thereafter with respect to each Fund for
successive 12-month periods, unless terminated, provided that each such
continuance is specifically approved at least annually by (a) the vote of a
majority of the entire Board, or by the vote of a majority of the outstanding
voting securities of the Funds (as defined in the 1940 Act), and (b) the vote of
a majority of those Trustees who are not parties to this Agreement or interested
persons (as such term is defined in the 1940 Act). This Agreement may be
terminated at any time without payment of any penalty, by the Trust upon the
vote of a majority of the Board or by a majority of the outstanding voting
securities of the Fund, or by the Administrator, in each case, on sixty (60)
days' written notice to the other party.
10. Reliance on Information. In discharging the functions specified in this
Agreement, the Administrator may, without inquiry, rely and act upon all
notices, information or other communications reasonably believed to have been
supplied to it by any one or more of the Trustees or agents of the Trust.
11. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
12. Miscellaneous.
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a. This Agreement shall be construed in accordance with the laws of the
State of Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, as amended, or rules or orders of the SEC
thereunder.
b. The captions of this Agreement are included for convenience only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect.
c. If any provisions of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
d. The Administrator shall for all purposes herein be deemed to be an
independent contractor and shall have, unless otherwise expressly provided or
authorized, no authority to act for or represent the Trust or the Funds in any
way or otherwise be deemed an agent of the Trust or the Funds.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
E*TRADE FUNDS (on behalf of the series
listed on Exhibit A)
By:
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Name:
Title:
E*TRADE ASSET MANAGEMENT, INC.
By:
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Name:
Title:
EXHIBIT A
to the
THIRD AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
Exhibit A dated as of __________, 2001, to the Third Amended and Restated
Administrative Services Agreement dated as of ___________, 2001, between E*TRADE
Funds and E*TRADE Asset Management, Inc.
Name of Fund Fee
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E*TRADE Asset Allocation Fund 0.15%
E*TRADE Bond Fund 0.15%*
E*TRADE E-Commerce Index Fund*
E*TRADE Financial Sector Index Fund 0.15%
E*TRADE International Index Fund 0.10%
E*TRADE Premier Money Market Fund 0.10%
E*TRADE Xxxxxxx 2000 Index Fund 0.10%
E*TRADE S&P 500 Index Fund 0.10%
E*TRADE Technology Index Fund 0.15%
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* The E*TRADE Bond Index Fund ("Bond Fund") and the E*TRADE E-Commerce
Index Fun ("E-Commerce Fund") will pay ETAM an annual fee of 0.25% and
0.70%, respectively, of each Fund's average daily net assets, computed
daily and to be paid on the last business day of each month, for the
services provided in this Third Amended and Restated Administrative
Services Agreement and for the Administrator to continue to pay all
expenses of the Bond Fund and the E-Commerce Fund except any advisory
or sub-advisory fees, the Administrator's compensation under this
Agreement and any expenses of the each Fund's master portfolio.
Such fee for the Bond Fund will be in effect until the earlier of
either (a) the conversion of the Bond Fund to an actively managed fund,
if such conversion is approved by shareholders of the Bond Fund; or (b)
if conversion of the Bond Fund to an actively managed fund is not
approved, upon the liquidation of the Bond Fund, which is expected to
occur prior to December 31, 2001. After the effective date of such
conversion or liquidation, the Bond Fund will pay the amount in the
table above or will be removed from this Exhibit A, as appropriate.
Such fee for the E-Commerce will be in effect until the earlier of
either (a) the reorganization of the E-Commerce Fund with and into the
E*Trade Technology Index Fund, if such reorganization is approved by
shareholders, or (b) if the reorganization is not approved by
shareholders, upon the liquidation of the E-Commerce Fund. After the
reorganization or liquidation of the E-Commerce Fund, it shall be
removed from this Exhibit A.
EXHIBIT B
to the
THIRD AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
GENERAL DESCRIPTION OF TRUST ADMINISTRATIVE AND COMPLIANCE SERVICES
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I. GENERAL
A. Coordinate and manage the work relationships among all service
providers to the Trust.
B. Perform trust operational management, including development of control
procedures and monitor the performance of all service vendors to the
Trust.
C. Propose and carry out policies, particularly in the area of
operational problem inquiry and resolution, such as, among others,
potential/actual compliance violations, valuation of complex
securities or those trading in problematic markets, and Trust share
valuation errors, as applicable.
II. FINANCIAL AND TAX REPORTING OBLIGATIONS
A. Prepare management reports and Board of Trustees materials, such as,
for example, unaudited financial statements and summaries of dividends
and distributions.
B. Supervise the reporting by any sub-administrator of the Trust's
performance to outside service providers as directed by Trust
management.
C. Assist Trust management in making final determinations of distribution
amounts.
D. The Trust will advise the Administrator 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, and the Administrator
will make appropriate credits to each shareholder's account.
E. Supervise the preparation and filing by the sub-administrator of
theTrust's Form N-SAR with the SEC.
F. Supervise the preparation, coordination and filing with the
appropriate regulatory agencies of the Trust's semi-annual and annual
reports to shareholders The Administrator shall be responsible for
preparing the "President's Letters" or the "Management's discussion of
each Fund's performance" for inclusion in the Trust's annual reports
to shareholders.
G. Supervise the preparation by the Trust's officers of financial
information for the Trust's semi-annual and annual reports, proxy
statements and other communications required or otherwise sent to the
Trust's shareholders and arrange for the dissemination of such reports
and communications.
H. Provide financial information for Trust proxies and prospectuses
including expense table.
I. Supervise the filing of copies of financial reports to shareholders
with the SEC under Rule 30b2-1.
III. PORTFOLIO COMPLIANCE
The Administrator shall provide the following compliance services in conjunction
with the investment adviser's obligations pursuant to its Investment Advisory
Agreement with the Trust and all applicable laws.
A. Mail quarterly requests for "Securities Transaction Reports" to the Trust's
Trustees and officers and "access persons" under the terms of the Trust's
Code of Ethics and regulations promulgated by the U.S. Securities and
Exchange Commission.
B. Prepare, distribute, and utilize in compliance training sessions,
comprehensive compliance materials, including compliance manuals and
checklists, and develop or assist in developing guidelines and procedures
to improve overall compliance by the Trust and its various agents.
IV. REGULATORY AFFAIRS AND CORPORATE GOVERNANCE
A. Prepare, review and file post-effective amendments to the Trust's
registration statement and supplements as needed with respect to the
currently existing Funds only.
B. Prepare and file proxy materials and administer shareholder meetings.
C. Prepare minutes, and follow up on matters related to the Administrator's
responsibilities under this Agreement that are raised at all Board
meetings.
D. In coordination with the investment adviser, make reports and
recommendations to the Board concerning the performance of the investment
adviser and other service providers for the Trust, as the Board may
reasonably request.
E. Supervise the preparation and filing Prepare and file with the SEC of Rule
24f-2 Notices (and all similar state filings, if required by the states).
The Administrator shall not be responsible for preparing any legal opinions
required in connection with Rule 24f-2 Notices.
F. Review and monitor the fidelity bond and errors and omissions insurance
coverage and the submission of any related regulatory filings.
G. Prepare and update documents, such as charter document, by-laws, and
foreign qualification filings.
H. Provide support and counsel with respect to routine regulatory examinations
or investigations of the Trust and work closely with the Trust's legal
counsel in response to any non-routine regulatory matters. Also, coordinate
all communications and data collection with regard to any regulatory
examinations and yearly audits by independent accountants.
I. Maintain general corporate calendar.
J. Assist with preparations for, attend and prepare minutes of shareholder
meetings.
K. When requested, provide consultation on regulatory matters relating to
portfolio management, Trust operations and any potential changes in each
Fund's investment policies, operations or structure.
L. Maintain continuing awareness of significant emerging regulatory and
legislative developments which may affect each Fund, update the Board and
the investment adviser on those developments and provide related planning
assistance where reasonably requested or appropriate.
V. ADMINISTRATION
A. Furnish appropriate officers for the Trust, subject to Board approval.
B. For new Funds, obtain Employer or Taxpayer Identification Number and
CUSIP numbers, as necessary. Estimate organizational costs and
expenses and monitor against actual disbursements.
EXHIBIT C
to the
THIRD AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
DESCRIPTION OF TRUST ACCOUNTING SERVICES
The Administrator shall provide the following accounting services to the Trust:
A. Supervise the maintenance of the books and records for the Trust's assets,
including records of all securities transactions.
B. Supervise the calculation of each Fund's net asset value in accordance with
each Fund's prospectus and, after the Fund meets eligibility requirements,
supervise the transmission to NASDAQ and to such other entities as directed
by the Trust.
C. Supervise the accounting for dividends and interest received and
distributions made by the Trust.
D. Coordination with the Trust's independent auditors with respect to the
annual audit, and as otherwise requested by the Trust.
E. Consult with the Trust's officers, independent public accountants and other
appropriate persons in establishing the accounting policies of the Trust.
F. As mutually agreed upon, the Administrator will provide domestic and/or
international reports.
