FORM OF
SUB-ADMINISTRATION AGREEMENT
AGREEMENT made as of ____________, 1999 by and among E*TRADE ASSET
MANAGEMENT, INC. a corporation organized under the laws of Delaware ("E*TRADE
Asset Management"), E*TRADE Funds (the "Fund"), a business trust organized under
the laws of Delaware, and INVESTORS BANK & TRUST COMPANY, a Massachusetts trust
company (the "Bank").
WHEREAS, the Fund is a registered investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), consisting of the
separate portfolios (each a "Portfolio") listed on Appendix A hereto; and
WHEREAS, E*TRADE Asset Management is the Administrator to the Fund with
respect to the Portfolio; and
WHEREAS, the E*TRADE Asset Management desires to retain the Bank to
render certain administrative services to the Fund with respect to the Portfolio
and the Bank is willing to render such services.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, it is agreed between the parties hereto as follows:
1. Appointment. E*TRADE Asset Management hereby appoints the Bank to
act as Sub-Administrator of the Fund with respect to the Portfolio on the terms
set forth in this Agreement. The Bank accepts such appointment and agrees to
render the services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished the Bank with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the
appointment of the Bank to provide certain administrative services to the Fund
and approving this Agreement;
(b) The Fund's incorporating documents filed with the state of
Delaware on November 4, 1998 and all amendments thereto (the "Articles");
(c) The Fund's by-laws and all amendments thereto (the "By-Laws");
(d) The Fund's agreements with all service providers which include
any investment advisory agreements, custody agreements, distribution agreements
and transfer agency agreements (collectively, the "Agreements");
(e) The Fund's most recent Registration Statement on Form N-1A
(the "Registration Statement") under the Securities Act of 1933 and under the
1940 Act and all amendments thereto; and
(f) The Fund's most recent prospectus and statement of additional
information (the "Prospectus"); and
(g) Such other certificates, documents or opinions as may mutually
be deemed necessary or appropriate for the Bank in the proper performance of its
duties hereunder.
The Fund will immediately furnish the Bank with copies of all
amendments of or supplements to the foregoing. Furthermore, the Fund will notify
the Bank as soon as possible of any matter which may materially affect the
performance by the Bank of its services under this Agreement.
3. Duties of Sub-Administrator. Subject to the supervision and
direction of the Board of Directors of the Fund, the Bank, as Sub-Administrator,
will assist in conducting various aspects of the Fund's administrative
operations and undertakes to perform the services described in Appendix B
hereto. The Bank may, from time to time, perform additional duties and functions
which shall be set forth in an amendment to such Appendix B executed by both
parties. At such time, the fee schedule included in Appendix C hereto shall be
appropriately amended.
In performing all services under this Agreement, the Bank
shall act in conformity with the Fund's Articles and By-Laws and the 1940 Act,
as the same may be amended from time to time, and the investment objectives,
investment policies and other practices and policies set forth in the Fund's
Registration Statement, as the same may be amended from time to time.
Notwithstanding any item discussed herein, the Bank has no discretion over the
Fund's assets or choice of investments and cannot be held liable for any dispute
relating to such investments.
4. Duties of the Fund.
(a) The Fund is solely responsible (through its transfer agent or
otherwise) for (i) providing timely and accurate reports of the daily purchase
and redemption of shares of each portfolio ("Daily Sales Reports") which will
enable the Bank as Sub-Administrator to monitor the total number of shares sold
in each state on a daily basis and (ii) identifying any exempt transactions
("Exempt Transactions") which are to be excluded from the Daily Sales Reports.
(b) The Fund agrees to make its legal counsel available to the Bank
for reasonable instruction with respect to any matter of law arising in
connection with the Bank's duties hereunder, and the Fund further agrees that
the Bank shall be entitled to rely on such instruction without further
investigation on the part of the Bank.
5. Fees and Expenses.
(a) For the services to be rendered and the facilities to be
furnished by the Bank, as provided for in this Agreement, E*TRADE Asset
Management will compensate the Bank in accordance with the fee schedule attached
as Appendix C hereto, provided, however, that the fees with respect to each
Portfolio will be payable only out of the assets of that Portfolio. Such fees do
not include out-of-pocket disbursements (as delineated on the fee schedule or
other expenses with the prior approval of E*TRADE Asset Management's management)
of the Bank for which the Bank shall be entitled to xxxx E*TRADE Asset
Management separately and for which E*TRADE Asset Management shall reimburse the
Bank, but only out of the assets of the relevant Portfolio.
(b) The Bank shall not be required to pay any expenses incurred by
the Fund.
6. Limitation of Liability.
(a) The Bank, its directors, officers, employees and agents shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of its obligations and
duties under this Agreement, except a loss resulting from willful misfeasance,
bad faith or gross negligence in the performance of such obligations and duties,
or by reason of its reckless disregard thereof. The Fund will indemnify the
Bank, its directors, officers, employees and agents against and hold it and them
harmless from any and all losses, claims, damages, liabilities or expenses
(including legal fees and expenses) resulting from any claim, demand, action or
suit (i) arising out of the actions or omissions of the Fund, including, but not
limited to, inaccurate Daily Sales Reports and misidentification of Exempt
Transactions; (ii) arising out of the offer or sale of any securities of the
Fund in violation of (x) any requirement under the federal securities laws or
regulations, (y) any requirement under the securities laws or regulations of any
state, or (z) any stop order or other determination or ruling by any federal or
state agency with respect to the offer or sale of such securities; or (iii) not
resulting from the willful misfeasance, bad faith or gross negligence of the
Bank in the performance of such obligations and duties or by reason of its
reckless disregard thereof.
(b) Notwithstanding anything in this Agreement to the contrary, in
no event shall the Funds be liable to the Bank or any third party, and the Bank
shall indemnify and hold the Funds harmless from and against any Claims arising
as a result of gross negligence, willful misfeasance or bad faith of the Bank.
(c) The Bank may apply to the Fund at any time for instructions and
may consult counsel for the Fund, or its own counsel, and with accountants and
other experts with respect to any matter arising in connection with its duties
hereunder, and the Bank shall not be liable or accountable for any action
reasonably taken or omitted by it in good faith in accordance with such
instruction, or with the opinion of such counsel, accountants, or other experts.
The Bank shall not be liable for any act or omission taken or not taken in
reliance upon any document, certificate or instrument which it reasonably
believes to be genuine and to be signed or presented by the proper person or
persons. The Bank shall not be held to have notice of any change of authority of
any officers, employees, or agents of the Fund until receipt of written notice
thereof has been received by the Bank from the Fund.
(d) In the event the Bank is unable to perform, or is delayed in
performing, its obligations under the terms of this Agreement because of acts of
God, strikes, legal constraint, government actions, war, emergency conditions,
interruption of electrical power or other utilities, equipment or transmission
failure or damage reasonably beyond its control or other causes reasonably
beyond its control, the Bank shall not be liable to the Fund for any damages
resulting from such failure to perform, delay in performance, or otherwise from
such causes. The Bank will, however, take all reasonable steps to minimize
service interruption for any period that such interruption continues beyond the
Bank's control.
(e) The Bank certifies that the occurrence in or use by the Bank's
own proprietary internal systems (the "Systems") of dates on or after January 1,
2000 (the "Millennial Dates") will not adversely affect the performance of the
Systems with respect to date dependent data, computations, output or other
functions (including, without limitation, calculating, computing and sequencing)
and that the Systems will create, store and generate output data related to or
including Millennial Dates without errors or omissions ("Year 2000 Compliance").
(i) The parties to this Agreement acknowledge that the Bank can
make no certification as to the Year 2000 Compliance of third-party systems
utilized by the Bank in its day to day operations or with which the Systems
interact or communicate, from which the Systems receive data or to which the
Systems send data. The parties further acknowledge that while the Bank has
contacted such third-party providers regarding Year 2000 Compliance and will use
reasonable efforts to monitor the status of such third-party providers' Year
2000 Compliance, failure by such third-party providers to achieve timely Year
2000 Compliance could adversely affect the Bank's performance of its obligations
hereunder.
(f) Notwithstanding anything to the contrary in this Agreement, in
no event shall the Bank be liable for special, incidental or consequential
damages, even if advised of the possibility of such damages.
7. Termination of Agreement.
(a) The term of this Agreement shall be an initial term of 2 years
commencing upon the date hereof (the "Initial Term"), unless earlier terminated
as provided herein. After the expiration of the Initial Term, the term of this
Agreement shall automatically renew for successive one-year terms (each a
"Renewal Term") unless notice of non-renewal is delivered by the non-renewing
party to the other party no later than ninety days prior to the expiration of
the Initial Term or any Renewal Term, as the case may be.
(i) Either party hereto may terminate this Agreement prior to
the expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the violating party does not
cure such violation within ninety days of receipt of written notice from the
non-violating party of such violation.
(ii) Either party may terminate this Agreement during any
Renewal Term upon ninety days written notice to the other party. Any termination
pursuant to this paragraph 7(a)(ii) shall be effective upon expiration of such
ninety days, provided, however, that the effective date of such termination may
be postponed, at the request of the Fund, to a date not more than one hundred
twenty days after delivery of the written notice in order to give the Fund an
opportunity to make suitable arrangements for a successor sub-administrator.
(b) At any time after the termination of this Agreement, the Fund
may, upon written request, have reasonable access to the records of the Bank
relating to its performance of its duties as Sub-Administrator.
8. Miscellaneous.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to E*TRADE Asset Management or the Bank 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 E*TRADE Asset Management:
E*TRADE Asset Management, Inc.
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
To the Fund:
E*TRADE Funds
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
To the Bank:
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx, X.X. Xxx 0000
Xxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxxx, Client Management
With a copy to: Xxxx X. Xxxxx, General Counsel
(b) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable without the written consent of the
other party.
(c) This Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, without regard to its conflict of laws
provisions.
(d) This Agreement may be executed in any number of counterparts
each of which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
(e) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
9. Confidentiality. All books, records, information and data pertaining
to the business of the other party which are exchanged or received pursuant to
the negotiation or the carrying out of this Agreement shall remain confidential,
and shall not be voluntarily disclosed to any other person, except as may be
required in the performance of duties hereunder or as otherwise required by law.
10. Use of Name. The Fund shall not use the name of the Bank or any of
its affiliates in any prospectus, sales literature or other material relating to
the Fund in a manner not approved by the Bank prior thereto in writing; provided
however, that the approval of the Bank shall not be required for any use of its
name which merely refers in accurate and factual terms to its appointment
hereunder or which is required by the Securities and Exchange Commission or any
state securities authority or any other appropriate regulatory, governmental or
judicial authority; provided further, that in no event shall such approval be
unreasonably withheld or delayed.
11. Year 2000 Compliance. The Bank represents that the occurrence in or
use by the Bank's own proprietary internal systems (the "Systems") of dates on
or after January 1, 2000 (the "Millennial Dates") will not adversely affect the
performance of the Systems with respect to date dependent data, computations,
output or other functions (including, without limitation, calculating, computing
and sequencing) and that the Systems will create, store and generate output data
related to or including Millennial Dates without errors or omissions ("Year 2000
Compliance"). The Bank shall promptly notify the Fund of any lack of Year 2000
Compliance of which it becomes aware that impact the Bank's services hereunder.
The parties to this Agreement acknowledge that the Bank can make no
certification as to the Year 2000 Compliance of third-party systems utilized by
the Bank in its day to day operations or with which the Systems interact or
communicate, from which the Systems receive data or to which the Systems send
data. The parties further acknowledge that while the Bank has contacted such
third-party providers regarding Year 2000 Compliance and will use reasonable
efforts to monitor the status of such third-party providers' Year 2000
Compliance, failure by such third-party providers to achieve timely Year 2000
Compliance could adversely affect the Bank's performance of its obligations
hereunder.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
E*TRADE ASSET MANAGEMENT, INC.
By:__________________________________
Name:
Title:
E*TRADE FUNDS
By:__________________________________
Name:
Title:
INVESTORS BANK & TRUST COMPANY
By:__________________________________
Name:
Title:
Appendices
Appendix A..................................... Portfolios
Appendix B..................................... Services
Appendix C..................................... Fee Schedule
APPENDIX A
to the
SUB-ADMINISTRATION AGREEMENT
Portfolios
E*TRADE S&P 500 Index Fund
Appendix B
E * Trade Group, Inc.
Annual Fee Schedule
For One Equity Fund - 2 Classes
October 28, 1998
================================================================================
Fund Accounting, Custody and Calculation of N.A.V., Fund Administration,
Financial Statement Preparation.
================================================================================
A. Fund Accounting, Custody and Calculation of N.A.V. , Fund Administration,
Financial Statement Preparation.
The Annual Fee for Fund Accounting, Custody and Calculation of N.A.V., Fund
Administration, Financial Statement Preparation for the one (1) E * Trade
Group, Inc. S&P 500 Equity Fund (including two classes) will be charged
according to the following schedule. The following schedule is exclusive of
transaction costs and out-of-pocket expenses.
Annual Fee
Annual Fee per fund $42,000
For each additional class added beyond the first class there will be an
annual fee of $18,000 for the above services.
================================================================================
Miscellaneous
================================================================================
A. Out-of-Pocket
These charges consist of:
- Telephone
- Ad Hoc Reporting
- TA - Non-current Day Inquiry ($1.00 per inquiry)
- Third Party Review
- Forms and Supplies
- Printing/Postage/Delivery
- Systems Development/Reports/Transmissions
- Equipment Rental
- Legal costs associated with substantial alterations of IBT's standard
agreements
B. Balance Credits
We allow use of balance credit against fees (excluding out-of-pocket
charges) for collected fund balances arising out of the custody
relationship. The monthly earnings allowance is equal to 75% of the 90-day
T-xxxx rate.
C. Systems
The details of any systems work required to service this fund will be
determined after a thorough business analysis. All systems work, including
creating customized reports and establishing systems/communications
interfaces with E * Trade, other providers, etc., will be billed on a time
and materials basis.
D. Other
Assumptions:
The fee schedule assumes that there will be two (2) classes of shares.
The above fees will be charged against the funds' custodian checking account
five business days after the invoice is mailed to the fund.
This annual fee schedule is valid for 30 days and assumes the execution of
IBT's standard contractual agreements for a minimum term of three (3) years.
All charges will be billed monthly. The fee schedule will be effective upon
start-up of the fund.
Agreed:
_________________________________
E * Trade Group, Inc.
WIRE INSTRUCTIONS FOR E*TRADE S&P 500 INDEX FUND:
INVESTORS BANK & TRUST COMPANY
BOSTON, MASSACHUSETTS
ABA # 000000000
ACCOUNT # 5819-1000
ACCOUNT: BGI CAP STOCK
REFERENCE: E*TRADE FUND - 10755
Appendix C Investors Bank & Trust Summary of Administration Functions 1/99
E * Trade Group, Inc.
Suggested Fund
Function Investors Bank & Trust E * Trade Auditor or Counsel
---------------------------------
Management Reporting
& Treasury Administration
---------------------------------
Prepare agenda and board Prepare agenda and C - Review agenda,
materials for quarterly board resolutions and board material and
meetings. assemble board board and committee
materials for meeting minutes.
quarterly board Ensure BOD material
meetings. Prepare contains all required
supporting information information that the
and materials when BOD must review
necessary. Attend and/or approve to
Frequency: Quarterly board and committee perform their duties
meetings and prepare as directors.
minutes.
Monitor portfolio compliance in Perform tests of certain Continuously monitor A/C - Provide
accordance with the current specific portfolio activity portfolio activity and consultation as
Prospectus and SAI. designed from provisions of Fund operations in needed on compliance
the Fund's Prospectus and conjunction with 1940 issues.
SAI at the Master level Act, Prospectus, SAI
only. Follow-up on and any other
potential violations. applicable laws and
Frequency: Daily regulations. Monitor
testing results and
approve resolution of
compliance issues.
Provide compliance summary Provide a report of Review report. A/C - Provide
package. compliance testing results. consultation as
needed.
Frequency: Monthly
Perform asset diversification Perform asset Continuously monitor A - Provide
testing to establish diversification tests at portfolio activity in consultation as
qualification as a RIC. each tax quarter end. conjunction with IRS needed in
Follow-up on issues. requirements. Review establishing
test results and take positions to be taken
any necessary action. in tax treatment of
Frequency: Quarterly Approve tax positions particular issues.
taken. Review quarter end
tests on a current
basis.
---------------------------------
Management Reporting
& Treasury Administration
(CONT.)
---------------------------------
Perform qualifying income Perform qualifying income Continuously monitor A- Consult as needed
testing to establish testing (on book basis portfolio activity in on tax accounting
qualification as a RIC. income, unless material conjunction with IRS positions to be
differences are requirements. Review taken. Review in
anticipated) on quarterly test results and take conjunction with
basis and as may otherwise any necessary action. year-end audit.
Frequency: Quarterly be necessary. Follow-up Approve tax positions
on issues. taken.
Prepare the Fund's annual Prepare preliminary expense Provide asset level
expense budget. Establish budget. Notify fund projections. Approve
daily accruals. accounting of new accrual expense budget.
rates.
Frequency: Annually
Monitor the Fund's expense Monitor actual expenses Provide asset level C/A - Provide
budget. updating budgets/ expense projections consultation as
Review the Fund's multi-class accruals. Review expense quarterly. Provide requested.
expense differentials. differentials among classes vendor information as
to ensure consistency with necessary. Review
Rule 18f-3 or the Fund's expense analysis and
exemptive application and approve budget
Frequency: Quarterly the Fund's private letter revisions.
ruling or published ruling.
Receive and coordinate payment Propose allocations of Approve invoices and
of fund expenses. invoice among Funds and allocations of
obtain authorized approval payments. Send
Frequency: As often as to process payment. invoices to IBT in a
necessary timely manner.
---------------------------------
Management Reporting
& Treasury Administration
(CONT.)
---------------------------------
Calculate periodic dividend Calculate amounts available Establish and maintain C - Review dividend
rates to be declared in for distribution. dividend and resolutions in
accordance with management Coordinate review by distribution conjunction with
guidelines. management and/or policies. Approve Board approval.
auditors. Notify custody distribution rates per
and transfer agent of share and aggregate A - Review and concur
authorized dividend rates amounts. Obtain Board with proposed
in accordance with Board approval when required. distributions
Frequency: Annually approved policy. Report
dividends to Board as
required.
Calculate total return Provide total return Review total return
information on Funds as defined calculations. information.
in the current Prospectus and
SAI.
Frequency: Monthly
Prepare responses to major Prepare, coordinate as Identify the services
industry questionnaires. necessary, and submit to which the Funds
responses to the report. Provide
Frequency: As often as appropriate agency. information as
necessary requested.
Prepare disinterested Summarize amounts paid to Provide social
director/trustee Form 1099-Misc. directors/trustees during security numbers and
the calendar year. Prepare current mailing
and mail Form 1099-Misc. address for trustees.
Frequency: Annually Review and approve
information provided
for Form 1099-Misc.
---------------------------------
FINANCIAL REPORTING
---------------------------------
Prepare financial information Prepare selected
for presentation to Fund portfolio and
Management and Board of financial information
Directors. for inclusion in board
material.
Frequency: Quarterly
Coordinate the annual audit and Coordinate the creation of Provide past F/S and A - Perform audit and
semi-annual preparation and templates reflecting other information issue opinion on
printing of financial client-selected required to create annual financial
statements and notes with standardized appearance and templates, including statements.
management, fund accounting and text of financial report style and
the fund auditors. statements and footnotes. graphics. Approve A/C - Review reports.
Draft and manage production format and text as
cycle. Coordinate with IBT standard. Approve
fund accounting the production cycle and
electronic receipt of assist in managing to
portfolio and general the cycle. Coordinate
ledger information. Assist review and approval by
in resolution of accounting portfolio managers of
issues. Using templates, portfolio listings to
draft financial statements, be included in
coordinate auditor and financial statements.
management review, and Prepare appropriate
Frequency: clear comments. Coordinate management letter and
Annually/semi-annually printing of reports and coordinate production
XXXXX conversion with of Management
outside printer and filing Discussion and
with the SEC via XXXXX. Analysis. Review and
approve entire
report. Make
appropriate
representations in
conjunction with audit.
---------------------------------
TAX
---------------------------------
Prepare income tax provisions. Calculate investment Provide transaction A - Provide
company taxable income, net information as consultation as
tax exempt interest, net requested. Identify needed in
capital gain and spillback Passive Foreign establishing
dividend requirements. Investment Companies positions to be taken
Identify book-tax (PFICs). Approve tax in tax treatment of
accounting differences. accounting positions particular issues.
Frequency: Annually Track required information to be taken. Approve Perform review in
relating to accounting provisions. conjunction with the
differences. year-end audit.
Calculate excise tax Calculate required Provide transaction A - Provide
distributions distributions to avoid information as consultation as
imposition of excise tax. requested. Identify needed in
- Calculate capital gain Passive Foreign establishing
net income and Investment Companies positions to be taken
foreign currency (PFICs). Approve tax in tax treatment of
gain/loss through accounting positions particular issues.
October 31. to be taken. Review Review and concur
- Calculate ordinary and approve all income with proposed
income and and distribution distributions per
distributions through a calculations, share.
specified cut off date . including projected
- Project ordinary income and dividend
income from cut off shares. Approve
date to December 31. distribution rates per
- Ascertain dividend share and aggregate
shares. amounts. Obtain Board
Identify book-tax approval when required.
accounting differences.
Track required information
Frequency: Annually relating to accounting
differences. Coordinate
review by management and
fund auditors. Notify
custody and transfer agent
of authorized dividend
rates in accordance with
Board approved policy.
Report dividends to Board
as required.
---------------------------------
TAX (CONT.)
---------------------------------
Prepare tax returns Prepare excise and RIC tax Review and sign tax A - Review and sign
returns for Feeder. return. tax return as
Frequency: Annually preparer.
Prepare Form 1099 Obtain yearly distribution Review and approve
information. Calculate information provided
1099 reclasses and for Form 1099.
Frequency: Annually coordinate with transfer
agent.
Prepare other year-end Obtain yearly income Review and approve
tax-related disclosures distribution information provided.
information. Calculate
disclosures
(i.e., dividend received
Frequency: Annually deductions,
foreign tax credits,
tax-exempt
income, income by
jurisdiction) and
coordinate with transfer
agent.
Review and Approval
The attached Summary of Administration Functions has been reviewed and
represents the services currently being provided.
___________________________________________________________
Signature of Account Manager Date
___________________________________________________________
Signature of Authorized Client Representative Date
