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EXHIBIT (2)(k)
FUND ACCOUNTING AGREEMENT BETWEEN CN LOAN FUND, INC. AND CITY NATIONAL BANK
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FUND ACCOUNTING AGREEMENT
AGREEMENT made this 12th day of April, 2000, between CN LOAN FUND, INC.
(the "Fund"), a Maryland corporation having its principal place of business at
City National Center, 000 Xxxxx Xxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000,
and CITY NATIONAL BANK ("Fund Accountant"), a national banking association
having its principal place of business at City National Center, 000 Xxxxx
Xxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000.
WHEREAS, the Fund desires that Fund Accountant perform certain fund
accounting services for the Fund, all as now or hereafter may be established
from time to time; and
WHEREAS, Fund Accountant is willing to perform such services on the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein set forth, the parties agree as follows:
1. Services as Fund Accountant.
(a) Maintenance of Books and Records. Fund Accountant
will keep and maintain the following books and
records of the Fund pursuant to Rule 31a-1 under the
Investment Company Act of 1940 (the "Rule"):
(i) Journals containing an itemized daily
record in detail of all purchases and
sales of securities, all receipts and
disbursements of cash and all other debits
and credits, as required by subsection
(b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting
all asset, liability, reserve, capital,
income and expense accounts, including
interest accrued and interest received, as
required by subsection (b)(2)(i) of the
Rule;
(iii) Separate ledger accounts required by
subsection (b)(2)(ii) and (iii) of the
Rule; and
(iv) A monthly trial balance of all ledger
accounts (except shareholder accounts) as
required by subsection (b)(8) of the Rule.
(b) Performance of Daily Accounting Services. In addition
to the maintenance of the books and records specified
above, Fund Accountant shall perform the following
accounting services for the Fund:
(i) Calculate the net asset value per share
utilizing prices obtained from the sources
described in subsection 1(b)(ii) below;
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(ii) Obtain security prices from independent
pricing services, or if such quotes are
unavailable, then obtain such prices from
the Fund's investment adviser or its
designee, as approved by the Fund's Board
of Directors;
(iii) Verify and reconcile with the Fund's
custodian all daily trade activity;
(iv) Compute, as appropriate, the Fund's net
income and capital gains, dividend
payables, dividend factors, 7-day yields,
7-day effective yields, 30-day yields, and
weighted average portfolio maturity;
(v) Review the net asset value calculation and
dividend factor (if any) for the Fund
prior to release to shareholders, check
and confirm the net asset values and
dividend factors for reasonableness and
deviations;
(vi) Determine unrealized appreciation and
depreciation on securities held by the
Fund;
(vii) Amortize premiums and accrete discounts on
securities purchased at a price other than
face value, if requested by the Fund;
(viii) Update fund accounting system to reflect
rate changes, as received from the Fund's
investment adviser, on variable interest
rate instruments;
(ix) Post Fund transactions to appropriate
categories;
(x) Accrue expenses of the Fund according to
instructions received from the Fund's
Investment Adviser;
(xi) Determine the outstanding receivables and
payables for all (1) security trades, (2)
Fund share transactions, and (3) income
and expense accounts;
(xii) Provide accounting reports in connection
with the Fund's regular annual audit and
other audits and examinations by
regulatory agencies; and
(xiii) Provide such periodic reports as the
parties shall agree upon, as set forth in
a separate schedule.
(c) Special Reports and Services.
(i) Fund Accountant may provide additional
special reports upon the request of the
Fund's Investment Adviser, which may
result in an
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additional charge, the amount of which
shall be agreed upon between the parties.
(ii) Fund Accountant may provide such other
similar services with respect to the Fund
as may be reasonably requested by the
Fund, which may result in an additional
charge, the amount of which shall be
agreed upon between the parties.
(d) Additional Accounting Services. Fund Accountant
shall also perform the following additional
accounting services for the Fund:
(i) Provide monthly a download (and hard copy
thereof) of the financial statements
described below, upon request of the Fund.
The download will include the following
items:
Statement of Assets and Liabilities,
Statement of Operations, Statement of
Changes in Net Assets, and Condensed
Financial Information;
(ii) Provide accounting information for the
following:
(A) federal and state income tax returns
and federal excise tax returns; (B)
the Fund's semi-annual reports with
the Securities and Exchange Commission
("SEC") on Form N-SAR;
(B) the Fund's semi-annual reports with
the Securities and Exchange Commission
("SEC") on Form N-SAR;
(C) the Fund's annual, semi-annual and
quarterly (if any) shareholder
reports; (D) registration statements
on Form N-2 and other filings relating
to the registration of shares;
(E) the Investment Adviser's monitoring of
the Fund's status as a regulated
investment company under Subchapter M
of the Internal Revenue Code, as
amended;
(F) annual audit by the Fund's auditors;
and
(G) examinations performed by the SEC.
2. Subcontracting.
Fund Accountant may, at its expense, subcontract with any entity or
person concerning the provision of the services contemplated hereunder;
provided, however, that Fund Accountant shall not be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that Fund Accountant shall be responsible, to the extent
provided in Section 7 hereof, for all acts of such subcontractor as if such
acts were its own.
3. Compensation.
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The Fund shall pay Fund Accountant for the services to be provided
by Fund Accountant under this Agreement in accordance with, and in the manner
set forth in, Schedule A hereto, as such Schedule may be amended from time to
time.
4. Reimbursement of Expenses.
In addition to paying Fund Accountant the fees described in Section
3 hereof, the Fund agrees to reimburse Fund Accountant for its out-of-pocket
expenses in providing services hereunder, including without limitation the
following:
(a) All freight and other delivery and bonding charges
incurred by Fund Accountant in delivering materials to and
from the Fund;
(b) All direct telephone, telephone transmission and telecopy
or other electronic transmission expenses incurred by Fund
Accountant in communication with the Fund, the Fund's
Investment Adviser or custodian, dealers or others as
required for Fund Accountant to perform the services to be
provided hereunder;
(c) The cost of obtaining security market quotes pursuant to
Section l(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other
materials; and
(e) Any expenses Fund Accountant shall incur at the written
direction of an officer of the Fund thereunto duly
authorized.
5. Effective Date.
This Agreement shall become effective with respect to the Fund as of
the date first written above (or, if the Fund is not in existence on that date,
on the date the Fund commences operation) (the "Effective Date").
6. Term.
This Agreement shall continue in effect with respect to the Fund,
unless earlier terminated by either party hereto as provided hereunder, until
April 11, 2002 and thereafter shall be renewed automatically for successive
two-year terms unless written notice not to renew is given by the non-renewing
party to the other party at least 60 days prior to the expiration of the
then-current term; provided, however, that after such termination for so long
as Fund Accountant, with the written consent of the Fund, in fact continues to
perform any one or more of the services contemplated by this Agreement or any
schedule or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Compensation due Fund Accountant and unpaid by the Fund upon
such termination shall be immediately due and payable upon and notwithstanding
such termination. Fund Accountant shall be entitled to collect from the Fund,
in addition to the compensation described under Section 3
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hereof, the amount of all of Fund Accountant's cash disbursements for services
in connection with Fund Accountant's activities in effecting such termination,
including without limitation, the delivery to the Fund and/or its designees of
the Fund's property, records, instruments and documents, or any copies thereof.
Subsequent to such termination, for a reasonable fee, Fund Accountant will
provide the Fund with reasonable access to any Fund documents or records
remaining in its possession.
7. Standard of Care; Reliance on Records and Instructions;
Indemnification.
Fund Accountant shall use its best efforts to insure the accuracy of
all services performed under this Agreement, but shall not be liable to the
Fund for any action taken or omitted by Fund Accountant in the absence of bad
faith, willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties. The Fund agrees to indemnify and hold harmless Fund
Accountant, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to Fund Accountant's actions
taken or nonactions with respect to the performance of services under this
Agreement with respect to the Fund or based, if applicable, upon reasonable
reliance on information, records, instructions or requests with respect to the
Fund given or made to Fund Accountant by a duly authorized representative of
the Fund; provided that this indemnification shall not apply to actions or
omissions of Fund Accountant in cases of its own bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties, and further provided that prior to confessing any claim against it
which may be the subject of this indemnification, Fund Accountant shall give
the Fund written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of Fund Accountant.
8. Record Retention and Confidentiality.
Fund Accountant shall keep and maintain on behalf of the Fund all
books and records which the Fund and Fund Accountant is, or may be, required to
keep and maintain pursuant to any applicable statutes, rules and regulations,
including without limitation Rules 31a-1 and 31a-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"), relating to the maintenance of books
and records in connection with the services to be provided hereunder. Fund
Accountant further agrees that all such books and records shall be the property
of the Fund and to make such books and records available for inspection by the
Fund or by the Securities and Exchange Commission at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Fund and its shareholders; except when requested to divulge
such information by duly-constituted authorities or court process.
9. Uncontrollable Events.
Fund Accountant assumes no responsibility hereunder, and shall not
be liable, for any damage, loss of data, delay or any other loss whatsoever
caused by events beyond its reasonable control.
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10. Reports.
Fund Accountant will furnish to the Fund and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Fund
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by Fund
Accountant, or as subsequently agreed upon by the parties pursuant to an
amendment hereto. The Fund agrees to examine each such report or copy promptly
and will report or cause to be reported any errors or discrepancies therein no
later than three business days from the receipt thereof. In the event that
errors or discrepancies, except such errors and discrepancies as may not
reasonably be expected to be discovered by the recipient within ten days after
conducting a diligent examination, are not so reported within the aforesaid
period of time, a report will for all purposes be accepted by and binding upon
the Fund and any other recipient, and, except as provided in Section 7 hereof,
Fund Accountant shall have no liability for errors or discrepancies therein and
shall have no further responsibility with respect to such report except to
perform reasonable corrections of such errors and discrepancies within a
reasonable time after requested to do so by the Fund.
11. Rights of Ownership.
All computer programs and procedures developed to perform services
required to be provided by Fund Accountant under this Agreement are the
property of Fund Accountant. All records and other data except such computer
programs and procedures are the exclusive property of the Fund and all such
other records and data will be furnished to the Fund in appropriate form as
soon as practicable after termination of this Agreement for any reason.
12. Return of Records.
Fund Accountant may at its option at any time, and shall promptly
upon the Fund's demand, turn over to the Fund and cease to retain Fund
Accountant's files, records and documents created and maintained by Fund
Accountant pursuant to this Agreement which are no longer needed by Fund
Accountant in the performance of its services or for its legal protection. If
not so turned over to the Fund, such documents and records will be retained by
Fund Accountant for six years from the year of creation. At the end of such
six-year period, such records and documents will be turned over to the Fund
unless the Fund authorizes in writing the destruction of such records and
documents.
13. Representations of the Fund.
The Fund certifies to Fund Accountant that: (1) as of the close of
business on the Effective Date, each Fund that is in existence as of the
Effective Date has authorized 23,000,000 shares, and (2) this Agreement has
been duly authorized by the Fund and, when executed and delivered by the Fund,
will constitute a legal, valid and binding obligation of the Fund, enforceable
against the Fund in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
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14. Representations of Fund Accountant.
Fund Accountant represents and warrants that: (1) the various
procedures and systems which Fund Accountant has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other
cause the records, and other data of the Fund and Fund Accountant's records,
data, equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
hereunder, and (2) this Agreement has been duly authorized by Fund Accountant
and, when executed and delivered by Fund Accountant, will constitute a legal,
valid and binding obligation of Fund Accountant, enforceable against Fund
Accountant in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
15. Insurance.
Fund Accountant shall notify the Fund should any of its insurance
coverage be canceled or reduced. Such notification shall include the date of
change and the reasons therefor. Fund Accountant shall notify the Fund of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify
the Fund from time to time as may be appropriate of the total outstanding
claims made by Fund Accountant under its insurance coverage.
16. Information to be Furnished by the Fund.
The Fund has furnished to Fund Accountant the following:
(a) Copies of the Articles of Incorporation of the
Fund and of any amendments thereto, certified by
the proper official of the state in which such
document has been filed.
(b) Copies of the following documents:
(i) The Fund's Bylaws and any amendments
thereto; and
(ii) Certified copies of resolutions of
the Board of Directors covering the
approval of this Agreement,
authorization of a specified officer
of the Fund to execute and deliver
this Agreement and authorization for
specified officers of the Fund to
instruct Fund Accountant thereunder.
(c) A list of all the officers of the Fund, together
with specimen signatures of those officers who
are authorized to instruct Fund Accountant in
all matters.
(d) Two copies of the Private Offering Memorandum
("Memorandum") for the Fund.
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17. Information Furnished by Fund Accountant.
(a) Fund Accountant has furnished to the Fund the
following:
(i) Fund Accountant's Charter; and
(ii) Fund Accountant's Bylaws and any
amendments thereto.
18. Amendments to Documents.
The Fund shall furnish Fund Accountant written copies of any
amendments to, or changes in, any of the items referred to in Section 17 hereof
forthwith upon such amendments or changes becoming effective. In addition, the
Fund agrees that no amendments will be made to the Memorandum of the Fund which
might have the effect of changing the procedures employed by Fund Accountant in
providing the services agreed to hereunder or which amendment might affect the
duties of Fund Accountant hereunder unless the Fund first obtains Fund
Accountant's approval of such amendments or changes.
19. Compliance with Law.
Except for the obligations of Fund Accountant set forth in Section 8
hereof, the Fund assumes full responsibility for the preparation, contents and
distribution of the Memorandum of the Fund as to compliance with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the 1940 Act and any other laws, rules and regulations of governmental
authorities having jurisdiction. Fund Accountant shall have no obligation to
take cognizance of any laws relating to the sale of the Fund's shares. The Fund
represents and warrants that no shares of the Fund will be offered until the
Fund's registration statement under the 1940 Act has become effective.
20. Notices.
Any notice provided hereunder shall be sufficiently given when sent
by registered or certified mail to the party required to be served with such
notice, at the following address: City National Center, 000 Xxxxx Xxxxxxx
Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, or at such other address as such party
may from time to time specify in writing to the other party pursuant to this
Section.
21. Headings.
Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
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00. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to the Fund by either of the parties hereto except by
the specific written consent of the other party.
23. Governing Law.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed all as of the day and year first above written.
CN LOAN FUND, INC.
By: /s/ Xxxx X. Xxxx
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Xxxx X. Xxxx
Assistant CFO
CITY NATIONAL BANK
By: /s/ Xxxx X. Xxxx
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Xxxx X. Xxxx
Executive Vice President
Dated: April 12, 2000
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FORM OF SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
CN LOAN FUND, INC.
AND
CITY NATIONAL BANK
FEES
City National Bank shall be entitled to receive a fee from the Fund
in the amount of $10,000 per month plus City National Bank's reasonable
out-of-pocket expenses incurred in the performance of its services as provided
in Section 4 of the Fund Accounting Agreement to which this Schedule A is
attached.
CN LOAN FUND, INC. CITY NATIONAL BANK
By: /s/ Xxxx X. Xxxx By: /s/ Xxxx X. Xxxx
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