SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 10th day of September, 1999 (the "Effective
Date") between THIRD AVENUE VARIABLE SERIES TRUST (the "Fund"), a Delaware
business trust having its principal place of business at 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 and FIRST DATA INVESTOR SERVICES GROUP, INC. ("Investor
Services Group"), a Massachusetts corporation with principal offices at 0000
Xxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxxxxx 00000.
WITNESSETH
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WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities or other assets.
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Schedule A, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint
Investor Services Group as its fund accounting agent, transfer agent, dividend
disbursing agent and agent in connection with certain other activities and
Investor Services Group desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 DEFINITIONS.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended
from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund; or (ii) any person, whether or not such
person is an officer or employee of the Fund, duly authorized to give
Oral Instructions or Written Instructions on behalf of the Fund as
indicated in writing to Investor Services Group from time to time.
(c) "Board Members" shall mean the Directors or Trustees of the
governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or Board
of Trustees of the Fund, as the case may be.
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(e) "Commencement Date" shall mean the date on which Investor
Services Group commences providing services to the Fund pursuant to
this Agreement.
(f) "Commission" shall mean the Securities and Exchange Commission.
(g) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.
(h) "1934 Act" shall mean the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder, all as amended from
time to time.
(i) "1940 Act" shall mean the Investment Company Act of 1940 and
the rules and regulations promulgated thereunder, all as amended from
time to time.
(j) "Oral Instructions" shall mean instructions, other than Written
Instructions, actually received by Investor Services Group from a
person reasonably believed by Investor Services Group to be an
Authorized Person;
(k) "Portfolio" shall mean each separate series of shares offered
by the Fund representing interests in a separate portfolio of
securities and other assets;
(l) "Prospectus" shall mean the most recently dated Fund Prospectus
and Statement of Additional Information, including any supplements
thereto if any, which has become effective under the Securities Act of
1933 and the 1940 Act.
(m) "Shares" refers collectively to such shares of capital stock or
beneficial interest, as the case may be, or class thereof, of each
respective Portfolio of the Fund as may be issued from time to time.
(n) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(o) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group to be
an Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually executed originals and
authorized electronic transmissions, including telefacsimile of a
manually executed original or other process.
Article 2 APPOINTMENT OF INVESTOR SERVICES GROUP.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
Investor Services Group as its transfer agent and dividend disbursing agent for
Shares of each respective Portfolio of the Fund and as fund accounting agent,
and shareholder servicing agent for the Fund, and
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Investor Services Group hereby accepts such appointments and agrees to perform
the duties hereinafter set forth. This Agreement shall be effective as of the
Effective Date.
Article 3 DUTIES OF INVESTOR SERVICES GROUP.
3.1 Investor Services Group shall be responsible for:
(a) Administering and/or performing the customary services of
a transfer agent; acting as service agent in connection with dividend
and distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with the
Custodian) of Shares of each Portfolio, as more fully described in the
written schedule of Duties of Investor Services Group annexed hereto as
Schedule B and incorporated herein, and in accordance with the terms of
the Prospectus of the Fund on behalf of the applicable Portfolio,
applicable law and the procedures established from time to time between
Investor Services Group and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant
to Rule 17Ad-10(e) of the 1934 Act a record of the total number of
Shares of each Portfolio which are authorized, based upon data provided
to it by the Fund, and issued and outstanding. Investor Services Group
shall provide the Fund on a regular basis with the total number of
Shares of each Portfolio which are authorized and issued and
outstanding and, except as provided herein, shall have no obligation,
when recording the issuance of Shares, to monitor the issuance of such
Shares.
(c) Investor Services Group shall be responsible for the
following: performing the customary services of a fund accounting agent
for the Fund, as more fully described in the written schedule of Duties
of Investor Services Group annexed hereto as Schedule B and
incorporated herein, and subject to the supervision and direction of
the Board of Directors of the Fund.
(d) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group shall be under no duty or obligation
to inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares; (ii) the legality of the redemption of
any Shares; (iii) the legality of the declaration of any dividend by
the Board of Directors, or the legality of the issuance of any Shares
in payment of any dividend; or (iv) the legality of any
recapitalization or readjustment of the Shares.
3.2 In addition, the Fund shall (i) identify to Investor Services Group
in writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. Except to the extent that Investor Services Group shall
provide Blue Sky administration services to the Fund, the responsibility of
Investor Services Group for the Fund's blue sky State registration status is
solely limited to the initial establishment of transactions subject to blue sky
compliance by the Fund.
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3.3 In performing its duties under this Agreement, Investor Services
Group: (a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the Fund
and will conform to and comply with the requirements of the 1940 Act and all
other applicable federal or state laws and regulations; and (b) will consult
with legal counsel to the Fund, as necessary and appropriate. Furthermore,
Investor Services Group shall not have or be required to have any authority to
supervise the investment or reinvestment of the securities or other properties
which comprise the assets of the Fund or any of its Portfolios and shall not
provide any investment advisory services to the Fund or any of its Portfolios.
3.4 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and Investor Services Group.
Article 4 RECORDKEEPING AND OTHER INFORMATION.
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule B
in accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and will be surrendered
promptly to the Fund on and in accordance with the Fund's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, Investor Services Group will notify the Fund of
such request and secure Written Instructions as to the handling of such request.
Investor Services Group reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to comply with such request.
Article 5 FUND INSTRUCTIONS.
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions reasonably believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. Investor Services Group will also have no liability when
processing Share certificates which it reasonably believes to bear the proper
manual or facsimile signatures of the officers of the Fund and the proper
countersignature of Investor Services Group.
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5.2 At any time, Investor Services Group may request Written
Instructions from the Fund and may seek advice from legal counsel for the Fund,
or its own legal counsel, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for Investor Services
Group. Written Instructions requested by Investor Services Group will be
provided by the Fund within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions shall be followed
within one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect Investor Services Group's
right to rely on Oral Instructions.
Article 6 COMPENSATION.
6.1 The Fund on behalf of each of the Portfolios will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees and other charges set forth in the written Fee Schedule
annexed hereto as Schedule C and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the Fund
on behalf of each of the Portfolios agrees to pay, and will be billed separately
for, out-of-pocket expenses actually incurred by Investor Services Group in the
performance of its duties hereunder. Out-of-pocket expenses shall include, but
shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule D and incorporated herein.
Schedule D may be modified by written agreement between the parties. Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket expenses
reasonably incurred by Investor Services Group in the performance of its
obligations hereunder.
6.3 The Fund on behalf of each of the Portfolios hereby authorizes
Investor Services Group to collect its fees, other charges and related
out-of-pocket expenses by debiting the Fund's or Portfolio's custody account for
invoices which are rendered for the services performed for the applicable
function. Invoices for the services performed will be sent to the Fund after
such debiting with an indication that payment has been made. The Fund shall have
the right in good faith to dispute any invoice amount in which case the Fund
shall do the following within thirty (30) days of the postmark date: (a)
identify for Investor Services Group the undisputed amount of the invoice; and
(b) provide Investor Services Group with a detailed written description of the
disputed amount and the basis for the Fund's dispute with such amount. The Fund
and Investor Services Group shall cooperate in resolving disputed invoice
amounts. Upon resolution of such dispute, Investor Services Group agrees to
promptly refund such amounts determined to be due.
6.4 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule C, a revised Fee Schedule executed and dated by
the parties hereto.
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6.5 Investor Services Group will from time to time employ or associate
with itself such person or persons as Investor Services Group may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Investor Services Group and the Fund. The compensation of such person or persons
shall be paid by Investor Services Group and no obligation shall be incurred on
behalf of the Fund in such respect.
6.6 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Fund: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing stock certificates, prospectuses, reports and
notices; interest on borrowed money; brokerage commissions; stock exchange
listing fees; taxes and fees payable to Federal, state and other governmental
agencies; fees of Board Members of the Fund who are not affiliated with Investor
Services Group; outside auditing expenses; outside legal expenses; Blue Sky
registration or filing fees; or other expenses not specified in this Section 6.7
which may be properly payable by the Fund.
Article 7 [RESERVED]
Article 8 INVESTOR SERVICES GROUP SYSTEM.
8.1 Investor Services Group shall retain title to and ownership of any
and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by Investor Services
Group in connection with the services provided by Investor Services Group to the
Fund herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Fund a limited license
to the Investor Services Group System for the sole and limited purpose of having
Investor Services Group provide the services contemplated hereunder and nothing
contained in this Agreement shall be construed or interpreted otherwise and such
license shall immediately terminate with the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System for either account inquiry or to
transmit transaction information, including but not limited to maintenance,
exchanges, purchases and redemptions, such direct access capability shall be
limited to direct entry to the Investor Services Group System by means of
on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of information to the
Investor Services Group System is strictly prohibited without the prior written
consent of Investor Services Group.
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Article 9 REPRESENTATIONS AND WARRANTIES.
9.1 Investor Services Group represents and warrants to the Fund that:
(a) it is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Massachusetts;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory
agency as a transfer agent and such registration will remain in effect
for the duration of this Agreement; and
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
(a) it is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Declaration of
Trust, By-Laws and applicable laws have been taken to authorize it to
enter into this Agreement; and
(d) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with
the terms of the Fund's Articles of Incorporation and its Prospectus
with respect to each Portfolio, such Shares shall be validly issued,
fully paid and non-assessable.
Article 10 INDEMNIFICATION.
10.1 Investor Services Group shall not be responsible for and the Fund
on behalf of each Portfolio shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
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(a) any actions of Investor Services Group required to be
taken pursuant to this Agreement unless such Claim resulted from a
negligent act or omission to act or bad faith by Investor Services
Group in the performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or
reasonable use of information, data, records and documents (including
but not limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) received by Investor Services Group from the Fund, or
any authorized third party acting on behalf of the Fund, including but
not limited to the prior transfer agent for the Fund, except FPS
Services, Inc., in the performance of Investor Services Group's duties
and obligations hereunder;
(c) the reliance on, or the implementation of, any Written or
Oral Instructions or any other instructions or requests of the Fund on
behalf of the applicable Portfolio;
(d) the offer or sales of shares in violation of any
requirement under the securities laws or regulations of any state that
such shares be registered in such state or in violation of any stop
order or other determination or ruling by any state with respect to the
offer or sale of such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of
this Agreement, or any Claim which arises out of the Fund's negligence
or misconduct or the breach of any representation or warranty of the
Fund made herein.
10.2 Investor Services Group shall indemnify and hold the Fund harmless
from and against any and all claims, costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and liabilities of any sort
or kind which may be asserted against the Fund or for which the Fund may be held
to be liable in connection with this Agreement (a "Claim"), provided that such
Claim resulted from a negligent act or omission to act, bad faith, willful
misfeasance or reckless disregard by Investor Services Group in the performance
of its duties hereunder.
10.3 In any case in which one party (the "Indemnifying Party") may be
asked to indemnify or hold the other party (the "Indemnified Party") harmless,
the Indemnified Party will notify the Indemnifying Party promptly after
identifying any situation which it believes presents or appears likely to
present a claim for indemnification against the Indemnified Party although the
failure to do so shall not prevent recovery by the Indemnified Party and shall
keep the Indemnifying Party advised with respect to all developments concerning
such situation. The Indemnifying Party shall have the option to defend the
Indemnified Party against any Claim which may be the subject of this
indemnification, and, in the event that the Indemnifying Party so elects, such
defense shall be conducted by counsel chosen by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party, and thereupon the Indemnifying
Party shall take over complete defense of the Claim and the Indemnified Party
shall sustain no further legal or other expenses in respect of such Claim. The
Indemnified Party will not confess any Claim or make any compromise in any case
in which the Indemnifying Party will be asked to provide
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indemnification, except with the Indemnifying Party's prior written consent. The
obligations of the parties hereto under this Article 10 shall survive the
termination of this Agreement.
10.4 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Indemnified Party becomes aware of the
event for which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 STANDARD OF CARE.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Neither party may assert any cause of action against the other
party under this Agreement that accrued more than three (3) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
11.3 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 CONSEQUENTIAL DAMAGES.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL EITHER PARTY, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES.
As used in the preceding paragraph "incidental, indirect or
consequential damages" means damages which do not flow directly from the act of
the party or which arise from the intervention of special circumstances not
ordinarily predictable, and does NOT include direct damages which arise
naturally or ordinarily from a breach of contract.
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Article 13 TERM AND TERMINATION.
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of three (3) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms") each,
unless the Fund or Investor Services Group provides written notice to the other
of its intent not to renew. Such notice must be received not less than ninety
(90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term. The Fund shall
have the right to terminate this Agreement prior to the expiration of the
Initial Term or then current Renewal Term upon sixty (60) days written notice to
Investor Services Group if the Fund's Board of Trustees finds in the exercise of
its fiduciary duty that Investor Services Group is materially unable to perform
its duties and obligations under this Agreement.
13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor service provider will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If the material failure is one for which the
Non-Defaulting Party has previously given the Defaulting Party notice as
provided in the previous sentence, the Agreement may be terminated by the
Non-Defaulting Party upon thirty (30) days written notice without giving the
Defaulting Party a second opportunity to cure such material failure. If Investor
Services Group is the Non-Defaulting Party, its termination of this Agreement
shall not constitute a waiver of any other rights or remedies of Investor
Services Group with respect to services performed prior to such termination of
rights of Investor Services Group to be reimbursed for out-of-pocket expenses.
In all cases, termination by the Non-Defaulting Party shall not constitute a
waiver by the Non-Defaulting Party of any other rights it might have under this
Agreement or otherwise against the Defaulting Party.
13.5 Notwithstanding anything contained in this Agreement to the
contrary and except as provided in Section 13.4, should the Fund desire to move
any of the services provided by Investor Services Group hereunder to a successor
service provider prior to the expiration of the then current Initial or Renewal
Term, or should the Fund or any of its affiliates take any action which would
result in Investor Services Group ceasing to provide transfer agency or fund
accounting services to the Fund prior to the expiration of the Initial or any
Renewal Term, Investor Services Group shall make a good faith effort and use all
commercially reasonable efforts to facilitate the conversion on such prior date,
however, there can be no guarantee that Investor Services Group will be able to
facilitate a conversion of services on such prior date. In connection with the
foregoing, should services be converted to a successor service provider or
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should the Fund or any of its affiliates take any action which would result in
Investor Services Group ceasing to provide transfer agency or fund accounting
services to the Fund prior to the expiration of the Initial or any Renewal Term,
the payment of fees to Investor Services Group as set forth herein shall be
accelerated to a date prior to the conversion or termination of services and
calculated as if the services had remained with Investor Services Group until
the expiration of the then current Initial or Renewal Term and calculated at the
asset and/or Shareholder account levels, as the case may be, on the date notice
of termination was given to Investor Services Group.
Article 14 ADDITIONAL PORTFOLIOS
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have Investor Services Group render services as service provider
under the terms hereof, the Fund shall so notify Investor Services Group in
writing, and if Investor Services Group agrees in writing to provide such
services, Exhibit 1 shall be amended to include such additional Portfolios. If
after good faith negotiations, the parties are unable to agree upon the
conditions upon which Investor Services Group will service the new Portfolio,
either party shall have the right to terminate this Agreement upon sixty (60)
days written notice to the other party.
Article 15 CONFIDENTIALITY.
15.1 The parties agree that the Proprietary Information (defined below)
(collectively "Confidential Information") are confidential information of the
parties and their respective licensors. The Fund and Investor Services Group
shall exercise at least the same degree of care, but not less than reasonable
care, to safeguard the confidentiality of the Confidential Information of the
other as it would exercise to protect its own confidential information of a
similar nature. The Fund and Investor Services Group shall not duplicate, sell
or disclose to others the Confidential Information of the other, in whole or in
part, without the prior written permission of the other party. The Fund and
Investor Services Group may, however, disclose Confidential Information to their
respective parent corporation, their respective affiliates, their subsidiaries
and affiliated companies and employees, provided that each shall use reasonable
efforts to ensure that the Confidential Information is not duplicated or
disclosed in breach of this Agreement. The Fund and Investor Services Group may
also disclose the Confidential Information to independent contractors, auditors,
and professional advisors, provided they first agree in writing to be bound by
the confidentiality obligations substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, portfolio holdings, and internal performance
results
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relating to the past, present or future business activities of the
Fund or Investor Services Group, their respective subsidiaries and
affiliated companies and the customers, clients and suppliers of any
of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or
Investor Services Group a competitive advantage over its competitors;
and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this
Agreement or subsequently came into the public domain through no fault
of such party; or
(b) Was lawfully received by the party from a third party free
of any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to
receipt thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or
administrative proceeding after all reasonable legal remedies for
maintaining such information in confidence have been exhausted
including, but not limited to, giving the other party as much advance
notice of the possibility of such disclosure as practical so the other
party may attempt to stop such disclosure or obtain a protective order
concerning such disclosure; or
(e) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
Article 16 FORCE MAJEURE; EXCUSED NON-PERFORMANCE.
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by
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(i) fire, flood, elements of nature or other acts of God; (ii) any outbreak or
escalation of hostilities, war, riots or civil disorders in any country, (iii)
any act or omission of the other party or any governmental authority; (iv) any
labor disputes (provided that the employees' demands are not reasonable and
within the party's power to satisfy); or (v) nonperformance by a third party or
any similar cause beyond the reasonable control of such party, including without
limitation, failures or fluctuations in telecommunications or other equipment.
In addition, no party shall be liable for any default or delay in the
performance of its obligations under this Agreement if and to the extent that
such default or delay is caused, directly or indirectly, by the actions or
inactions of the other party. In any such event, the non-performing party shall
be excused from any further performance and observance of the obligations so
affected only for as long as such circumstances prevail and such party continues
to use commercially reasonable efforts to recommence performance or observance
as soon as practicable.
Article 17 ASSIGNMENT AND SUBCONTRACTING.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Investor Services Group may, in its sole discretion, assign all its right, title
and interest in this Agreement to an affiliate, parent or subsidiary. Investor
Services Group may, in its sole discretion, engage subcontractors to perform any
of the obligations contained in this Agreement to be performed by Investor
Services Group but shall no be relieved of its obligations and responsibilities
hereunder by reason of any such engagement.
Article 18 ARBITRATION.
18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by the
American Arbitration Association in New York, New York in accordance with its
applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
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Article 19 NOTICE.
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
Third Avenue Variable Series Trust
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxxxxx, General Counsel
To Investor Services Group:
First Data Investor Services Group, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: President
with a copy to Investor Services Group's General Counsel
Article 20 GOVERNING LAW/VENUE.
The laws of the State of New York, excluding the laws on conflicts of
laws, shall govern the interpretation, validity, and enforcement of this
agreement.
Article 21 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 CAPTIONS.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 PUBLICITY.
Neither Investor Services Group nor the Fund shall release or publish
news releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated by it without the prior
review and written approval of the other party; provided, however, that either
party may make such disclosures as are required by legal,
-14-
accounting or regulatory requirements after making reasonable efforts in the
circumstances to consult in advance with the other party.
Article 24 RELATIONSHIP OF PARTIES/NON-SOLICITATION.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
neither Party shall recruit, solicit, employ or engage, for itself or others,
the other Party's employees.
Article 25 ENTIRE AGREEMENT; SEVERABILITY.
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
Article 26 MISCELLANEOUS.
The Fund and Investor Services Group agree that the obligations of the
Fund under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Fund individually, but are binding only upon the assets and
property of the Fund, as provided in the Articles of Incorporation. The
execution and delivery of this Agreement have been authorized by the Board
Members of the Fund, and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Board Members nor such execution
and delivery by such officer shall be deemed to have been made by any of them or
any shareholder of the Fund individually or to impose any liability on any of
them or any shareholder of the Fund personally, but shall bind only the assets
and property of the Fund as provided in the Articles of
-15-
Incorporation and all persons dealing with any Portfolio of the Fund must look
solely to the trust property belonging to such Portfolio for the enforcement of
any claims against the Fund.
-16-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
THIRD AVENUE VARIABLE SERIES TRUST
By:
-----------------------------
Title:
-----------------------------
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
-----------------------------
Title:
-----------------------------
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SCHEDULE A
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LIST OF PORTFOLIOS
Third Avenue Value Portfolio
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SCHEDULE B
----------
DUTIES OF INVESTOR SERVICES GROUP
1. SERVICES RELATED TO PORTFOLIO VALUATION AND MUTUAL FUND ACCOUNTING
All financial data provided to, processed and reported by Investor Services
Group under this Agreement shall be in United States dollars. Investor Services
Group's obligation to convert, equate or deal in foreign currencies or values
extends only to the accurate transposition of information received from the
various pricing and information services.
A. Daily Accounting Services
1. Calculate Net Asset Value ("NAV") and Public Offering Price Per Share
("POP"):
o Update the daily market value of all assets held by the Fund
using Investor Services Group's standard agents for pricing U.S.
equity and bond securities as approved by the Board of Trustees.
The U.S. equity pricing services are currently Reuters, Inc.,
Xxxxxx Data Corporation, X.X. Xxxxx Co., Inc. and Interactive
Data Corporation ("IDC"). Xxxxxx Data Corporation, Dow Xxxxx
Markets (formerly Telerate Systems, Inc.), X.X. Xxxxx Co., Inc.,
Municipal Market Data and IDC are also used for bond and money
market prices/yields. Bloomberg is available and used for price
research.
o Enter limited number (less than 15) of manual prices supplied by
the Fund and/or broker.
o Prepare NAV proof sheets. Review components of change in NAV for
reasonableness.
o Review variance reporting on-line and in hard copy for price
changes in individual securities using variance levels
established by the Fund. Verify U.S. dollar security prices
exceeding variance levels by notifying the Fund and pricing
sources of noted variances.
o Review for ex-dividend items indicated by pricing sources; trace
to Fund's general ledger for agreement.
o Communicate pricing information (NAV) to the Fund, Investor
Services Group and electronically to NASDAQ.
2. Determine and Report Cash Availability to the Fund by approximately
9:30 a.m. Eastern Time:
o Receive daily cash and transaction statements from the Custodian
by 8:30 a.m. Eastern time.
o Receive previous day shareholder activity reports from the
Transfer Agent by 8:30 a.m. Eastern time.
o Fax hard copy cash availability calculations with all details to
the Fund.
o Supply the Fund with 3-day cash projection report.
o Prepare daily bank cash reconciliations. Notify the Custodians
and the Fund of any reconciling items.
3. Reconcile and Record All Expense Accruals:
o Accrue expenses based on budget supplied by the Fund either as
percentage of net assets or specific dollar amounts.
o If applicable, monitor expense limitations established by the
Fund.
o If applicable, accrue daily amortization of organizational
expense.
o If applicable, complete daily accrual of 12b-1 expenses.
4. Verify and Record All Daily Income Accruals for Debt Issues:
o Review and verify all system generated Interest and Amortization
reports.
o Establish unique security codes for bond issues to permit
segregated trial balance income reporting.
5. Monitor Securities Held for Cash Dividends, Corporate Actions and
Capital Changes such as splits, mergers, spin-offs, etc. and process
appropriately.
o Monitor electronically received information from pricing vendors
for all domestic securities.
o Review current daily security trades for dividend activity.
o Monitor collection and postings of corporate actions, dividends
and interest.
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6. Enter All Security Trades on Accounting System based on written
instructions from the Fund's Advisor.
o Review system verification of trade and interest calculations.
o Verify settlement through statements supplied by the Custodian.
o Maintain security ledger transaction reporting.
o Maintain tax lot holdings.
o Determine realized gains or losses on security trades.
o Provide broker commission reporting.
7. Enter All Fund Share Transactions on Accounting System:
o Process activity identified on reports supplied by Investor
Services Group.
o Verify settlement through statements supplied by the Custodians.
o Reconcile to Investor Services Group's report balances.
8. Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance
(listing all asset, liability, equity, income and expense accounts).
o Post manual entries to the general ledger.
o Post Custodian activity.
o Post security transactions.
o Post and verify system generated activity, i.e. income and
expense accruals.
9. Review and Reconcile with Custodians' Statements:
o Verify all posted interest, dividends, expenses and shareholder
and security payments/receipts, etc. (Discrepancies will be
reported to the Custodians).
o Post all cash settlement activity to the trial balance.
o Reconcile to ending cash balance accounts.
o Clear subsidiary reports with settled amounts.
o Track status of past due items and failed trades as reported by
the Custodians.
10. Submission of Daily Accounting Reports to the Fund: (Additional
reports readily available)
o Fund Trial Balance.
o Portfolio Valuation (listing inclusive of holdings, costs, market
values, unrealized appreciation/depreciation and percentage of
portfolio comprised of each security).
o NAV Calculation Report
o Cash Availability
o 3-Day Cash Projection Report.
B. Monthly Accounting Services
1. Full Financial Statement Preparation (automated Statements of Assets
and Liabilities, of Operations and of Changes in Net Assets) and
submission to the Fund by 10th business day.
2. Submission of Monthly Automated Accounting Reports to the Fund (by 10th
business day):
o Security Purchase/Sales Journal.
o Interest and Maturity Report.
o Brokers Ledger (Commission Report).
o Security Ledger Transaction Report with Realized Gains/Losses.
o Security Ledger Tax Lot Holdings Report.
o Additional reports available upon request.
3. Submit Reconciliation of Accounting Asset Listing to Custodian Asset
Listing:
o Report any security balance discrepancies to the Custodian/the
Fund.
4. Provide Monthly Analysis and Reconciliation of Additional Trial Balance
Accounts, such as:
-20-
o Security cost and realized gains/losses.
o Interest/dividend receivable and income.
o Payable/receivable for securities purchased and sold.
o Payable/receivable for fund shares; issued and redeemed.
o Expense payments and accruals analysis.
5. If appropriate, Prepare and Submit to the Fund (additional fees may
apply):
o Income by state reporting.
o Standard Industry Code Valuation Report.
o Alternative Minimum Tax Income segregation schedule.
o SEC yield reporting (non-money market funds).
C. Annual (and Semi-Annual) Accounting Services
1. Annually assist and supply Fund's auditors with schedules supporting
securities and shareholder transactions, income and expense accruals,
etc. for each Portfolio during the year in accordance with standard
audit assistance requirements.
2. Provide N-SAR Reporting (Accounting Questions) on a Semi-Annual Basis:
If applicable, answer the following items:
2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62,
63, 64B, 71, 72, 73, 74, 75 and 76
D. Accounts and Records
On each day the New York Stock Exchange is open for regular trading and
subject to the proper receipt (via Oral or Written Instructions) by
Investor Services Group of all information required to fulfill its duties
under this Agreement, Investor Services Group will maintain and keep
current the following Accounts and Records and any other records required
to be kept pursuant to Rule 31a-1 of the 1940 Act relating to the business
of the Portfolios in such form as may be mutually agreed upon between the
Fund and Investor Services Group:
(1) Net Asset Value Calculation Reports;
(2) Cash Receipts Report;
(3) Cash Disbursements Report;
(4) Dividends Paid and Payable Schedule;
(5) Purchase and Sales Journals - Portfolio Securities;
(6) Subscription and Redemption Reports;
(7) Security Ledgers - Transaction Report and Tax Lot Holdings
Report;
(8) Broker Ledger - Commission Report;
(9) Daily Expense Accruals;
(10) Daily Interest Accruals;
(11) Daily Trial Balance;
(12) Portfolio Interest Receivable and Income Reports;
(13) Portfolio Dividend Receivable and Income Reports;
(14) Listing of Portfolio Holdings - showing cost, market value
and percentage of portfolio comprised of each security; and
(15) Average Daily Net assets provided on monthly basis.
2. SERVICES RELATED TO SHAREHOLDERS AND SHARE TRANSACTIONS
A. Shareholder File
1. Establish new accounts and enter demographic data into shareholder base.
Includes in-house processing and National Securities Clearing
Corporation ("NSCC") - Fund/SERV and/or Networking transmissions.
-21-
2. Create Customer Information File ("CIF") to link accounts within the
Fund and across Portfolios within the Fund. Facilitates account
maintenance, lead tracking, quality control, household mailings and
combined statements.
3. 100% quality control of new account information including verification
of initial investment.
4. Maintain account and customer file records based on shareholder request
and routine quality review.
5. Maintain tax ID certification and Non Resident Alien ("NRA") records
for each account, including backup withholding.
6. Provide written confirmation of address changes.
7. Produce shareholder statements for daily activity, dividends,
on-request, interested party and periodic mailings.
8. Establish and maintain dealer file by Fund, including dealer, branch,
representative number and name, and provide this information to the
Fund.
9. Automated processing of dividends and capital gains with daily,
monthly, quarterly or annual distributions. Payment options include
reinvestment, directed payment to another fund, cash via mail, Fed wire
or ACH.
10. Image all applications, account documents, data changes,
correspondence, monetary transactions and other pertinent shareholder
documents.
B. Shareholder Services
1. Provide quality service through a dedicated group of highly trained
NASD licensed customer service personnel, including phone, research and
correspondence representatives.
2. Answer shareholder calls in timely fashion: provide routine account
information, transactions details including direct and wire purchases,
redemptions, exchanges, systematic withdrawals, pre-authorized drafts,
Fund/SERV and wire order trades, problem solving and process telephone
transactions.
3. Silent monitoring of telephone representative calls by the phone
supervisor during live conversations to ensure exceptional customer
service.
4. Record and maintain tape recordings of all shareholder calls for a six
month period.
5. Phone supervisor produces daily management reports of shareholder calls
which include tracking volume, call length, average wait time and
abandoned call rates to ensure quality service, and provided to the
Fund weekly.
6. Phone representatives will be trained through in-house training
programs on the techniques of providing exceptional customer service.
7. Customer inquiries received by letter or telephone will be researched
by a correspondence team. These inquiries include such items as account
/ customer file information, complete historical account information,
stop payments on checks, transaction details and lost certificates.
8. Provide written correspondence in response to shareholder inquiries and
requests. Whenever possible, unclear shareholder instructional letters
are handled by a phone call to the shareholder from Investor Services
Group's phone representatives to avoid delay in processing of the
request.
-22-
C. Investment Processing
1. Initial investment.
2. Subsequent investments processed through lock box.
3. Pre-authorized investments ("PAD") through ACH system.
4. Government allotments through ACH system.
5. Wire order and NSCC - Fund/SERV trades.
6. Prepare and process daily bank deposit of shareholder investments.
D. Redemption Processing
1. Process mail redemption requests.
2. Process telephone redemption transactions.
3. Establish Systematic Withdrawal file and process automated
transactions on monthly basis.
4. Provide wire order and NSCC - Fund/SERV trade processing.
5. Distribute redemption proceeds to shareholder by check, wire or ACH
processing.
E. Exchange and Transfer Processing
1. Process legal transfers.
2. Process ACATS transfers.
3. Issue and cancel certificates.
4. Replace certificates through surety bonds (separate charge to
shareholder).
5. Process exchange transactions (letter and/or telephone requests).
F. CASH MANAGEMENT SERVICES. (a) Investor Services Group shall
establish demand deposit accounts (DDA's) with a cash management provider to
facilitate the receipt of purchase payments and the processing of other
Shareholder-related transactions. Investor Services Group shall retain any
excess balance credits earned with respect to the amounts in such DDA's
("Balance Credits") after such Balance Credits are first used to offset any
banking service fees charged in connection with banking services provided on
behalf of the Fund. Balance Credits will be calculated and applied toward the
Fund's banking service charges regardless of the withdrawal of DDA balances
described in Section (b) below.
(b) DDA balances which cannot be forwarded on the day of receipt may be
withdrawn on a daily basis and invested in U.S. Treasury and Federal Agency
obligations, money market mutual funds, repurchase agreements, money market
preferred securities (rated A or better), commercial paper (rated A1 or P1),
corporate notes/bonds (rated A or better) and/or Eurodollar time deposits
(issued by banks rated A or better). Investor Services Group bears the risk of
loss on any such investment and shall retain any earnings generated thereby.
Other similarly rated investment vehicles may be used, provided however,
Investor Services Group shall first notify the Fund of any such change.
-23-
(c) Investor Services Group may facilitate the payment of distributions from
the Fund which are made by check ("Distributions") through the "IPS Official
Check" program. "IPS Official Check" is a product and service provided by
Investor Services Group's affiliate, Integrated Payment Systems ("IPS"). IPS is
licensed and regulated as an "issuer of payment instruments". In the event the
IPS Official Check program is utilized, funds used to cover such Distributions
shall be forwarded to and held by IPS. IPS may invest such funds while awaiting
presentment of items for payment. In return the services provided by IPS, IPS
imposes a per item charge which is identified in the Schedule of Out-of-Pocket
Expenses attached hereto and shall retain, and share with Investor Services
Group, the benefit of the revenue generated from its investment practices.
G. LOST SHAREHOLDERS. Investor Services Group shall perform such services as are
required in order to comply with Rules 17a-24 and 17Ad-17 of the 34 Act (the
Lost Shareholder Rules"), including, but not limited to those set forth below.
Investor Services Group may, in its sole discretion, use the services of a third
party to perform the some or all such services.
o documentation of electronic search policies and procedures;
o execution of required searches;
o creation and mailing of confirmation letters;
o taking receipt of returned verification forms;
o providing confirmed address corrections in batch via electronic
media;
o tracking results and maintaining data sufficient to comply with the
Lost Shareholder Rules; and
o preparation and submission of data required under the Lost
Shareholder Rules.
H. Settlement and Control
1. Daily review of processed shareholder transactions to assure input was
processed correctly. Accurate trade activity figures passed to Investor
Services Group.
2. Preparation of daily cash movement sheets to be passed to Investor
Services Group and the Custodian Bank for use in determining the Fund's
daily cash availability.
3. Prepare a daily share reconcilement which balances the shares on the
Transfer Agent system to those on the books of the Fund.
4. Resolve any outstanding share or cash issues that are not cleared by
trade date + 2.
5. Process shareholder adjustments to also include the proper notification
of any booking entries needed, as well as any necessary cash movement.
6. Settlement and review of the Fund's declared dividends and capital gains
will include the following:
a. Review of record date report for accuracy of shares.
b. Prepare dividend settlement report after dividend is posted.
c. Verify the posting date shares, the rate used and the NAV price of
reinvest date to ensure dividend was posted properly.
d. Distribute copies to Investor Services Group.
e. Prepare the checks prior to being mailed.
f. Send any dividends via wire, if requested.
g. Prepare cash movement sheets for the cash portion of the dividend payout
on payable date.
7. Placement of stop payments on dividend and liquidation checks as well as
the issuance of their replacements.
8. Maintain inventory control for stock certificates and dividend check
form.
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9. Aggregate tax filings for all Investor Services Group clients. Monthly
deposits are made to the IRS for all taxes withheld from shareholder
disbursements, distributions and foreign account distributions.
Correspond with the IRS concerning any of the above issues.
10. Timely settlement and cash movement for all NSCC - Fund/SERV activity.
I. Year-End Processing
1. Maintain shareholder records in accordance with IRS notices for
under-reporting and invalid tax IDs. This includes initiating 31% backup
withholding and notifying shareholders of their tax status and the
corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertificated accounts. Update
account tax status to reflect backup withholding or certificated status
depending on responses.
3. Conduct periodic W-8 solicitation of all non-resident alien shareholder
accounts. Update account tax status with updated shareholder information
and treaty rates for NRA tax.
4. Review IRS Revenue Procedures for changes in transaction and distribution
reporting and specifications for the production of forms to ensure
compliance.
5. Coordinate year-end activity with client. Activities include producing
year-end statements, scheduling record dates for year-end dividends and
capital gains, production of combined statements and printing of inserts
to be mailed with tax forms.
6. Distribute dividend letter to Portfolios to sign off on all distributions
paid year-to-date. Dates and rates must be authorized so that they can be
used for reporting to the IRS.
7. Coordinate the ordering of forms and envelopes from vendors in
preparation of tax reporting. Compare forms with IRS requirements to
ensure accuracy. Upon receipt of forms and envelopes, allocate space for
storage.
8. Prepare form flashes for the microfiche vendor. Test and oversee the
production of fiche for year-end statements and tax forms.
9. Match and settle tax reporting totals to Fund records and on-line data
from Transfer Agency System.
10. Produce Forms 1099R, 1099B, 1099Div, 5498, 1042S and year-end valuations.
Quality assure forms before mailing to shareholders.
11. Monitor IRS deadlines and special events such as crossover dividends and
prior year XXX contributions.
12. Prepare magnetic tapes and appropriate forms for the filing of all
reportable activity to the IRS.
J. Client Services
1. An Account Manager is assigned to each relationship and is the liaison
between the Fund and Investor Service Group. Responsibilities include
scheduling of events, system enhancement implementation, special
promotion / event implementation and follow-up and constant Fund
interaction on daily operational issues. Specifically:
a. Scheduling of dividends, proxies, report mailings and special mailings.
b. Coordinating with the Fund the shipment of materials for scheduled
mailings.
c. Acting as liaison between the Fund and support services for preparation
of proofs and eventual printing of statement forms, certificates, proxy
cards, envelopes etc.
-25-
d. Handling all notification to the Fund regarding proxy tabulation through
the meeting - coordinate scheduling of materials, including votes cards,
tabulation letters and shareholder list to be available for the meeting.
e. Ordering special reports, tapes and/or discs for special systems requests
received.
f. Implementing new operational procedures, i.e., check writing feature,
load discounts, minimum waivers, sweeps, telephone options, PAD
promotions etc.
g. Coordinating with systems, services and operations, special events, i.e.,
mergers, new fund start-ups, small account liquidations, combined
statements, household mailings, additional mail files.
h. Preparing standard operating procedures and review prospectuses -
coordinate implementation of suggested changes with the Fund. i. Acting
as liaison between the Fund and Investor Services Group regarding all
service and operational issues.
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SCHEDULE C
----------
FEE SCHEDULE
FUND ACCOUNTING (PER DOMESTIC PORTFOLIO)
$25,000 minimum to $20 million of average net assets, plus
.0003 on the next $30 million of average net assets
.0002 on the next $50 million of average net assets
.0001 over $100 million of average net assets
TRANSFER AGENCY
$2,000 per month based on daily activity in an omnibus account. Assumes
no printing of account statements
FUND/SERV Processing (not applicable)
Networking Processing (not applicable)
Lost Shareholder Search/Reporting: $2.75 per account search*
* The per account search fee shall be waived until June 2000
so long as the Fund retains Xxxxx Tracers, Inc. ("KTI") to
provide the Fund with KTI's "In-Depth Research Program"
services.
MISCELLANEOUS CHARGES
The Fund shall be charged for the following products and services as applicable:
o Ad hoc reports
o Ad hoc SQL time
o COLD Storage
o Digital Recording
o Banking Services, including incoming and outgoing wire charges
o Microfiche/microfilm production
o Magnetic media tapes and freight
o Manual Pricing
o Materials for Rule 15c-3 Presentations
o Pre-Printed Stock, including business forms, certificates, envelopes,
checks and stationary
FEE ADJUSTMENTS
After the one year anniversary of the effective date of this Agreement, Investor
Services Group may adjust the fees described in the above sections once per
calendar year, upon thirty (30) days
-27-
prior written notice in an amount not to exceed the cumulative percentage
increase in the Consumer Price Index for All Urban Consumers (CPI-U) U.S. City
Average, All items (unadjusted) - (1982-84=100), published by the U.S.
Department of Labor since the last such adjustment in the Client's monthly fees
(or the Effective Date absent a prior such adjustment).
PROGRAMMING COSTS (TO THE EXTENT REQUESTED BY THE FUND)
The following programming rates are subject to an annual 5% increase after the
one year anniversary of the effective date of this Agreement.
(a) Dedicated Team: Programmer: $100,000 per annum
BSA: $ 85,000 per annum
Tester: $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team): $ 150.00 per/hr per
programmer
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SCHEDULE D
----------
OUT-OF-POCKET EXPENSES
The Fund shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
o Postage - direct pass through to the Fund
o Telephone and telecommunication costs requested by the Fund,
including all lease, maintenance and line costs
o Proxy solicitations, mailings and tabulations
o Shipping, Certified and Overnight mail and insurance
o Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
requested by the Fund
o Duplicating services
o Distribution and Redemption Check Issuance
o Courier services
o Federal Reserve charges for check clearance
o Overtime, as approved by the Fund
o Temporary staff, as approved by the Fund
o Travel and entertainment, as approved by the Fund
o Record retention, retrieval and destruction costs, including, but
not limited to exit fees charged by third party record keeping
vendors
o Third party audit reviews
o Pricing services (or services used to determine Fund NAV)
o Vendor set-up charges for Blue Sky
o Blue Sky filing or registration fees
o XXXXX filing fees
o Vendor pricing comparison
o Such other expenses as are agreed to by Investor Services Group and
the Fund
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with Investor Services Group. In addition,
the Fund will promptly reimburse Investor Services Group for any other
unscheduled expenses incurred by Investor Services Group whenever the Fund and
Investor Services Group mutually agree that such expenses are not otherwise
properly borne by Investor Services Group as part of its duties and obligations
under the Agreement.
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