EXHIBIT (h)(6)
ADMINISTRATION AGREEMENT
THIS AGREEMENT dated as of September 8, 2004 by and between Security
Capital Real Estate Mutual Funds Incorporated ("Company"), a Maryland
corporation, having its principal place of business at 00 Xxxxx Xx Xxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000, on behalf of its single current series, Security
Capital U.S. Real Estate Shares ("Fund"), and One Group Administrative Services,
Inc. ("Administrator"), a Delaware corporation having its principal place of
business at 0000 Xxxxxxx Xxxxxxx, Xxxxxxxx, Xxxx 00000 ("Agreement"). THIS
AGREEMENT SHALL BE EFFECTIVE JANUARY 22, 2005.
WHEREAS, the Company is an open-end, management investment company
registered with the Securities and Exchange Commission ("Commission") under the
Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Company desires to retain the Administrator to furnish
management and administrative services to the Company on behalf of the Fund; and
WHEREAS, on September 8, 2004, the Board of Directors of the Company
approved the reorganization and redomiciliaton of the Fund into a series of the
One Group Real Estate Fund, a newly formed series of One Group Mutual Funds
("Trust"), subject to the approval of the Fund's shareholders at a meeting to be
held on or about January 20, 2005 ("Reorganization"), and
WHEREAS, the Reorganization, if approved by shareholders, is expected to
be completed on or about February 18, 2005, at which time the Fund will become a
party to the Administration Agreement among the Administrator, the Trust and One
Group Investment Trust.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein set forth, the parties agree as follows:
ARTICLE 1. Retention of the Administrator. The Company hereby retains
the Administrator to act as the administrator of the Fund and to furnish the
Fund with the management and administrative services as set forth in Article 2
below. The Administrator hereby accepts such employment to perform the duties
set forth below. The Administrator shall, for all purposes herein, be deemed to
be an independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Company in any
way and shall not be deemed an agent of the Company.
ARTICLE 2. Management and Administrative Services. Subject to the
direction and control of the Board of Directors of the Company ("Board"), the
Administrator shall perform or supervise the performance by others of
administrative services in connection with the operations of the Fund.
Without limiting the generality of the foregoing, the Administrator
shall:
a. Provide all necessary office facilities (which may be in the
offices of the Administrator or an affiliate), equipment, and
personnel for handling the affairs of the Fund;
b. Subject to supervision by counsel to the Company, prepare
amendments to, file, and maintain the Company's governing
documents, including the Articles of Incorporation, the Bylaws,
and minutes of meetings of shareholders;
c. Provide individuals reasonably acceptable to the Company's Board
to serve as officers of the Company, who will be responsible for
the management of certain of the Company's affairs as determined
by the Company's Board;
d. Prepare agenda and compile board materials for all Board
meetings and review, file, and maintain minutes of meetings of
Board;
e. Provide appropriate personnel and prepare appropriate materials
for Board meetings;
f. Subject to supervision by counsel to the Company, prepare,
review and file the Company's Registration Statement (on Form
N-1A, Form N-14 or any replacements therefor), periodic
supplements to the Registration Statement, proxy materials and
other filings with the Commission;
g. Subject to supervision by counsel to the Company, prepare and
file, or supervise the preparation and filing of, Form N-CSR and
Form N-Q and provide any sub-certifications which may reasonably
be requested by the Company's Principal Executive Officer or
Principal Financial Officer in connection with the required
certification of those filings and coordinate receipt of similar
sub-certifications from other service providers that provide
information to be included in such filings;
h. Prepare and file, or supervise the preparation and filing of,
all necessary Blue Sky filings;
i. Prepare and file, or supervise the preparation and filing of,
annual Form N-PX;
j. Arrange for and coordinate the layout and printing of
prospectuses, statements of additional information, semi-annual
and annual reports to shareholders, and proxy materials;
k. Prepare, with the assistance of the Fund's investment adviser,
and sub-adviser, as applicable, communications to shareholders;
l. Coordinate the mailing of prospectuses, notices, proxy
statements, proxies, semi-annual and annual reports to
shareholders, and other reports to shareholders of the Fund, and
supervise and facilitate the proxy solicitation process for all
shareholder meetings, including the tabulation of shareholder
votes;
m. Prepare for and conduct shareholder meetings, if necessary;
n. Assist with the design, development, and operation of Fund,
including new classes, investment objectives, policies and
structure;
o. Prepare semi-annual and annual financial statements;
2
p. Prepare and file periodic reports to shareholders and the
Commission on Form N-SAR or any replacement forms therefor;
q. Prepare and file Notices to the Commission required pursuant to
Rule 24f-2 of the 1940 Act;
r. Compile data for, assist the Company or its designee in the
preparation of, and file, all of the Fund's federal and state
tax returns and required tax filings other than those required
to be made by the Company's custodian and transfer agent;
s. Prepare and distribute year-end shareholder tax information
letters and Forms 1099-MISC for fees for the Board members and
vendor payments;
t. Identify and track book-tax differences;
u. Prepare quarterly tax compliance checklist for use by the Fund's
investment adviser;
v. Calculate declaration of income/capital gain distributions in
compliance with income/excise tax distribution requirements and
ensure that such distributions are not "preferential" under the
Internal Revenue Code;
w. Review reports produced by, and the operations and performance
of, the various organizations providing services to the Company
or the Fund, including, without limitation, the Fund's
investment adviser, custodian, sub-adviser, fund accountant,
shareholder servicing agent, transfer agent, outside legal
counsel, independent public accountants, and other entities
providing services to the Company, and at the request of the
Board, report to the Board on the performance of such
organizations;
x. Prepare, negotiate, and administer contracts on behalf of the
Company with, among others, the Fund's investment adviser,
custodian, fund accountant, shareholder servicing agent, and
transfer agent and oversee expense disbursement and any service
provider conversions;
y. Calculate contractual Company and Fund expenses and control all
disbursements for the Fund, and as appropriate compute the
Fund's yields, total return, expense. ratios, portfolio turnover
rate and, if required, portfolio average dollar weighted
maturity;
z. Prepare annual Company expense budget and monthly accrual
analyses, perform various expense savings analysis and expense
benchmarking analysis;
aa. Prepare expense authorizations and review or prepare for
management review all invoices for Company and Fund expenses;
bb. Calculate performance data of the Fund for dissemination to
information service providers covering the investment company
industry;
cc. Review marketing material to verify that the Fund information is
accurate;
dd. Prepare and file proofs of claims in connection with Class
Action notices;
3
ee. Monitor compliance of the Fund with the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder, so
as to enable the Fund to maintain its status as a "regulated
investment company;"
ff. Monitor compliance by the Company and the Fund with all
applicable federal securities and other regulatory requirements
(other than state securities registration and filing
requirements);
gg. Monitor the Fund's compliance with its registration statement;
hh. Obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Fund in
accordance with the requirements of Rules 17g-1 and 17d-1(7)
under the 1940 Act as such bonds and policies are approved by
the Company's Board;
ii. Provide information and assistance with inspections by the
Commission;
jj. Coordinate annual audit activities, including providing
information and assistance with respect to audits conducted by
the Company's independent auditors;
kk. Assist management with the administration of any deferred
compensation plan for the Board;
ll. Design, implement and maintain a disaster recovery program for
the Company's records;
mm. Consider the Company's compliance program (as approved by the
Board in accordance with Rule 38a-1 under the 0000 Xxx) and
assist the Company's Chief Compliance Officer with issues
regarding the Company's compliance program as reasonably
requested;
nn. Administer the implementation and required distribution of the
Privacy Policy of the Company as required under Regulation S-P;
and
oo. Perform all administrative services and functions of the Company
and the Fund to the extent administrative services and functions
are not provided to the Company or the Fund pursuant to the
Company's or the Fund's investment advisory agreement, custodian
agreement, fund accounting agreement, shareholder servicing
agreement, and transfer agent agreement.
The Administrator shall perform such other administrative services for
the Company that are mutually agreed upon by the parties from time to time.
ARTICLE 3. Additional Services; Delegation. The Administrator may
provide additional reports and services upon the request of the Fund's
investment adviser, which may result in an additional charge, the amount of
which shall be agreed upon between the parties. The Administrator may delegate
some or all of its responsibilities under this Agreement, as provided in
Article 9.
4
ARTICLE 4. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Company as well as all the Board of the
Company who are officers or employees of the Administrator or any affiliated
company of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Company retained by the Board of the Company
to perform services on behalf of the Company.
(B) The Company. The Company assumes and shall pay or cause to be
paid all other expenses of the Company not otherwise allocated herein,
including, without limitation, organization costs, taxes, fees and expenses for
legal and auditing services, fees and expenses of pricing services, transfer
agency fees and expenses, the expenses of preparing (including typesetting),
printing and mailing reports, prospectuses, statements of additional
information, proxy solicitation material and notices to existing shareholders,
all expenses incurred in connection with issuing and redeeming shares, the cost
of custodial services, the cost of initial and ongoing registration of the
shares under Federal and state securities laws, fees and out-of-pocket expenses
of Board members who are not officers or employees of the Administrator, the
Distributor, or the Investment Adviser to the Company or any affiliated company
of the Administrator, the Distributor, or the Investment Adviser, insurance,
interest, brokerage costs, litigation and other extraordinary or nonrecurring
expenses, and all fees and charges of investment advisers to the Company.
ARTICLE 5. Compensation of the Administrator.
(A) Administration Fee. In consideration of the services rendered,
the facilities furnished and the expenses assumed by the Administrator pursuant
to this Agreement, the Company shall pay the Administrator compensation at an
annual rate of the Fund's average daily net assets as follows: twenty
one-hundredths of one percent (.20%) of amounts included in that portion of the
aggregate daily net assets of (1) all series of One Group Mutual Funds other
than the One Group Institutional Money Market Funds and the One Group Investor
Funds and (2) the Fund (together referred as the "Multiple Class Funds") equal
to or less than $1,500,000,000; eighteen one-hundredths of one percent (.18%) of
amounts included in the portion of the aggregate daily net assets of all
Multiple Class Funds between $1,500,000,000 and $2,000,000,000; and sixteen
one-hundredths of one percent (.16%) of amounts included in that portion of the
aggregate daily net assets of all Multiple Class Funds in excess of
$2,000,000,000. The fees pertaining to each Multiple Class Fund shall be
computed daily in amounts strictly proportionate to the amount of the Multiple
Class Fund's average daily net assets as a percentage of the aggregate daily net
assets of all Multiple Class Funds. Such compensation shall be calculated and
accrued daily, and paid to the Administrator on the first business day of each
month, or at such time(s) as the Administrator shall request and the parties
hereto shall agree. The Company shall also reimburse the Administrator for its
reasonable out-of-pocket expenses, including the travel and lodging expenses
incurred by officers and employees of the Administrator in connection with
attendance at Board meetings. If this Agreement terminates before the last day
of a month, the Administrator's compensation for that part of the month in which
this Agreement is in effect shall be prorated according to the proportion which
such period bears to the full monthly period and shall be payable upon the date
of termination of this Agreement.
For the purpose of determining fees payable to the Administrator, the
value of net assets of the Fund shall be computed in the manner described in the
Company's Articles of Incorporation or in the prospectus or statement of
additional information for the computation of the Company's net assets in
connection with the determination of the net asset value of the Company's
shares.
(B) Survival of Compensation Rights. All rights of compensation
under this Agreement for services performed as of the termination date shall
survive the termination of this Agreement.
5
ARTICLE 6. Limitation of Liability of the Administrator. The duties of
the Administrator shall be confined to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance, bad
faith or negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable law which cannot be waived or modified
hereby. Any person, even though also an employee, or agent of the Administrator,
who may be or become an officer, Board member, employee or agent of the Company
or the Fund shall be deemed, when rendering services to the Company or the Fund,
or acting on any business of that party, to be rendering such services to or
acting solely for that party and not as a partner, employee, or agent or one
under the control or direction of the Administrator even though paid by it.
So long as the Administrator acts in good faith and with due diligence
and without negligence, the Company assumes full responsibility and shall
indemnify the Administrator, its employees, agents, directors, officers and
nominees and hold them harmless from and against any and all actions, suits and
claims, whether groundless or otherwise, and from and against any and all
losses, damages, costs, charges, reasonable counsel fees and disbursements,
payments, expenses and liabilities (including reasonable investigation expenses)
arising directly or indirectly out of the Administrator's actions taken or
non-actions with respect to the performance of services hereunder. The indemnity
and defense provisions set forth herein shall indefinitely survive the
termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Company may be asked to indemnify or hold the
Administrator harmless, the Company shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Company promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Company, but failure to do so in good faith shall not affect the rights
hereunder.
The Company shall be entitled to participate at its own expense or, if
it so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Company elects to assume the defense
of any such claim, the defense shall be conducted by counsel chosen by the
Company and satisfactory to the Administrator, whose approval shall not be
unreasonably withheld. In the event that the Company elects to assume the
defense of any suit and retain counsel, the Administrator shall bear the fees
and expenses of any additional counsel retained by it. If the Company does not
elect to assume the defense of a suit, it will reimburse the Administrator for
the reasonable fees and expenses of any counsel retained by the Administrator.
The Administrator may apply to the Company at any time for instructions
and may consult counsel for the Company or its own counsel and with accountants
and other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
6
The Administrator shall be protected in acting upon any document which
it reasonably believes to be genuine and to have been signed or presented by the
proper person or persons. The Administrator will not be held to have notice of
any change of authority of any officers, employees or agents of the Company
until receipt of written notice thereof from the Company.
ARTICLE 7. Activities of the Administrator. The services of the
Administrator rendered to the Company are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that directors, officers, employees
and shareholders of the Company are or may be or become interested in the
Administrator, as officers, employees or otherwise and that partners, officers
and employees of the Administrator and its counsel are or may be or become
similarly interested in the Company, and that the Administrator may be or become
interested in the Company as an owner of Company shares or otherwise.
ARTICLE 8. Term. This Agreement shall become effective as of January 22,
2005 and shall continue until the Closing Date of the Reorganization and or such
later date as mutually agreed to by the parties thereto.
Notwithstanding the foregoing, this Agreement may be terminated at any
time by mutual agreement of the parties hereto or for "cause." For purposes of
this Agreement, "cause" shall mean (a) willful misfeasance, bad faith, gross
negligence or reckless disregard of the party to be terminated; (b) a final,
unappealable 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; (c) financial difficulties on the part of the
party to be terminated which is 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 in effect, or any applicable law of any jurisdiction relating to
the liquidation or reorganization of debtors or the modification or alteration
of the rights of creditors; or (d) any circumstance which substantially impairs
the performance of the obligations and duties, as contemplated herein.
If, for any reason other than "cause" as defined above, the
Administrator is replaced as administrator or if a third party is added to
perform all or a part of the services provided by Administrator under this
Agreement, then the Company shall make a one time cash payment, as liquidated
damages, to the Administrator equal to the balance due the Administrator for the
remainder of the term of this Agreement, assuming for purposes of calculation of
the payment that the asset level of the Company on the date Administrator is
replaced, or a third party is added, will remain constant for the balance of the
contract term.
ARTICLE 9. Assignment. This Agreement shall not be assigned by either
party without the written consent of the other party; provided, however, that
the Administrator may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder. The
Administrator shall not, however, be relieved of any of its obligations under
this Agreement by the appointment of such subcontractor and provided further,
that the Administrator shall be responsible, to the extent provided in Article 6
hereof, for all acts of such subcontractor as if such acts were its own. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
7
ARTICLE 10. Amendments. This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the vote of a
majority of the Board members and (ii) by the vote of a majority of the Board
members who are not parties to this Agreement or interested persons of any such
party.
For special cases, the parties hereto may amend such procedures set
forth herein as may be appropriate or practical under the circumstances, and the
Administrator may conclusively assume that any special procedure which has been
approved by the Company does not conflict with or violate any requirements of
its Articles of Incorporation or then-current prospectuses, or any rule,
regulation or requirement of any regulatory body.
ARTICLE 11. Certain Records. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Company shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Company and will be made
available to or surrendered promptly to the Company on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Company and follow the
Company's instructions as to permitting or refusing such inspection; provided
that the Administrator may exhibit such records to any person in any case where
it is advised by its counsel that it may be held liable for failure to do so.
ARTICLE 12. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Commission.
ARTICLE 13. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if delivered to the other
party at the following address: 0000 Xxxxxxx Xxxxxxx, Xxxxxxxx, Xxxx 00000, or
at such other address as a party may from time to time specify in writing to the
other party pursuant to this Section.
ARTICLE 14. Governing Law; Limitation of Liability of the Board and
Shareholders. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Delaware.
ARTICLE 15. Use of Confidential Information. Notwithstanding anything in
this Agreement to the contrary:
The Administrator will keep confidential and will not use or disclose to
any other party (including, but not limited to, affiliates of the Administrator)
any Customer Information (as defined below), except as authorized in writing by
the Company or as appropriate in connection with performing this Agreement and
subject to any conditions set forth elsewhere in the Agreement.
The Administrator will maintain appropriate physical, electronic and
procedural safeguards to store, dispose of (if applicable) and secure Customer
Information to protect it from unauthorized access, use, disclosure, alteration,
loss and destruction. The safeguards used by the Administrator to protect
Customer Information will be no less than those used by the Administrator to
protect its own
8
confidential information. In addition, the Administrator will comply with any
other security safeguards required by this Agreement.
The Administrator will control access to Customer Information and,
except as required by law or as otherwise may be specifically permitted by this
Agreement, permit access only to individuals who need access in connection with
performing this Agreement and will cause such individuals to maintain the
confidentiality of Customer Information.
Except as necessary to conform to any record retention requirements
imposed by this Agreement, the Company will, upon termination of this Agreement
or the Company's earlier request, return to the Company all Customer Information
or destroy it, as specified by the Company. The Administrator will provide to
the Company a destruction certificate if so required.
As between the Company and the Administrator, Customer Information and
all applicable intellectual property rights embodied in the Customer Information
shall remain the property of the Company.
The Administrator acknowledges that it has received and reviewed a copy
of the Company's privacy policy applicable to Customer Information and it agrees
that it will not act in a manner that is inconsistent with such policy.
Without limiting the foregoing, the Administrator shall not directly or
through an affiliate, disclose any Customer Information, including account
numbers, access numbers, or access codes for an account for use in
telemarketing, direct mail marketing, or marketing through electronic mail,
except as permitted by this Agreement, the Privacy Policy of the Company's, and
as permitted in Section 248.12 of Regulation S-P.
The term "Customer Information" as used in this Article means
information, in any form, provided to the Administrator by on or behalf of the
Company that uniquely identifies in any way a current, former or prospective
Company customer. Customer Information includes, but is not limited to, copies
of such information or materials derived from such information.
ARTICLE 16. Counterparts. This Agreement may be executed by the parties
on any number of counterparts, and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW]
9
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
SECURITY CAPITAL REAL ESTATE MUTUAL
FUNDS INCORPORATED
By:
-----------------------------
Title:
---------------------
ONE GROUP ADMINISTRATIVE SERVICES, INC.
By:
-----------------------------
Title:
---------------------
10
