Exhibit (h)(1)
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
KINETICS MUTUAL FUNDS, INC.
AND
KINETICS ASSET MANAGEMENT, INC.
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TABLE OF CONTENTS
1. Duties of the Administrator........................................-1-
2. Compensation of the Administrator..................................-5-
3. Indemnification....................................................-5-
4. Reports............................................................-6-
5. Delegation of Certain Duties to Sub-Administrator..................-7-
6. Activities of the Administrator....................................-7-
7. Confidentiality....................................................-7-
8. Duration and Termination of the Agreement..........................-7-
9. Assignment.........................................................-7-
10. Governing Law......................................................-8-
11. Amendments to this Agreement.......................................-8-
12. Merger of Agreement................................................-8-
13. Notices............................................................-8-
14. Regarding the Administrator........................................-8-
SCHEDULE A..................................................................A-1
(a) Administrative Service Fee
(b) Expenses
(c) Special Reports
(i)
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated as of September 1, 1999 by and between
KINETICS MUTUAL FUNDS, INC., a Maryland corporation, having an office and place
of business at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on behalf of its
series, THE MEDICAL FUND (the "Fund"), and KINETICS ASSET MANAGEMENT, INC., a
New York corporation, having its place of business at 000 Xxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (the "Administrator").
BACKGROUND
WHEREAS, the Company is an open-end management investment
company registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Administrator is a corporation experienced in
providing administrative services to mutual funds and possesses facilities
sufficient to provide such services; and
WHEREAS, the Company, on behalf of the Fund, desires to avail
itself of the experience, assistance and facilities of the Administrator and to
have the Administrator perform for the Fund certain services appropriate to the
operations of the Fund and the Administrator is willing to furnish such services
in accordance with the terms hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
TERMS
Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints the Administrator to act as the
Fund's administrator for the Fund's authorized and issued shares of its common
stock, ("Shares").
1. DUTIES OF THE ADMINISTRATOR.
The Administrator agrees that it will provide all
administrative services necessary and customary to administer a mutual fund,
and will provide the Fund with the necessary office space, communication and
data processing facilities and personnel to perform such services for the Fund,
including:
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A. GENERAL FUND MANAGEMENT.
(1) Act as liaison among all Fund service providers.
(2) Coordinate board communication by:
(a) establishing all meeting agendas;
(b) preparing and presenting board
reports and collateral materials;
(c) supervising preparation of board
minutes; and
(d) evaluating independent auditors and
Fund counsel for board review and
approval.
(3) Coordinate all operations of the Fund.
B. AUDITS.
(1) Provide central coordination of interactions with SEC
and other regulatory agencies.
(2) Provide office facilities to assist audit process.
C. SEC REGISTRATION.
(1) Update prospectus, statement of additional information
and proxies as required.
(2) Coordinate updates with Fund Counsel.
(3) Coordinate printing and distribution of required
prospectus updates and proxies.
D. TREASURY SERVICES.
(1) Provide staff to act as officers and signatories to the
Fund to authorize official documents.
(2) Review and approve all Fund expense items.
(3) Maintain overall expense accrual targets for fiscal
reporting periods and coordinate with Fund Accountant.
E. DUTIES OF SUB-ADMINISTRATOR - FIRSTAR MUTUAL FUND
SERVICES LLC ("FMFS").
(1) Financial Reporting.
(a) Prepare Annual and Semi-Annual Reports.
(b) Prepare Financial Highlights and Expense
Summary for prospectus updates.
(c) Prepare Rule 24f-2 Notice.
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(d) Prepare financial reports and schedules
for the Fund's independent auditors.
(e) Prepare financials as required by the
Administrator for inclusion in bond
reports.
(f) Supervise maintenance of the Fund's
general ledger and the preparation
of financial statements, expense
accruals and payments, net asset
value determination and the
declaration and payment of dividends
and other distributions to
shareholders.
F. TAX REPORTING.
(1) Prepare and file on a timely basis federal and state
tax returns, including forms 1120/8610 with any
necessary schedules.
(2) Prepare state income breakdowns where relevant.
(3) File 1099 Miscellaneous for payments to directors and
other service promotions.
(4) Monitor wash sales in portfolio.
(5) Calculate eligible dividend income for corporate
shareholders.
G. PORTFOLIO REGULATORY COMPLIANCE.
(1) Monthly, quarterly and intra-month spot checks as
needed to monitor compliance with Investment Company
Act of 1940 requirements.
(a) Asset diversification tests.
(b) Total return and SEC yield calculations.
(c) Maintenance of books and records under
Rule 31a-3.
(d) Code of ethics.
(2) Periodically monitor Fund's compliance with the
policies and investment limitations of the Fund as set
forth in its prospectus and statement of additional
information.
(3) Monthly, quarterly and intra-month spot checks as
needed to monitor the Fund's status under IRS
Subchapter M through review of the following:
(a) Asset diversification requirements.
(b) Qualifying income requirements.
(c) Distribution requirements.
(4) Calculate required distributions (including excise tax
distributions).
(5) Blue Sky Filings.
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(a) Prepare and file with appropriate
state securities authorities initial
and subsequent filings to enable the
Funds to make a continuous offering
of its shares.
(b) Monitor status and maintain
registrations in each state.
1.1 ESTABLISHMENT OF PROCEDURE. Procedures applicable to
certain of these services may be established from time to time by agreement
between the Fund and the Administrator.
1.2 INDEPENDENT CONTRACTOR. The Administrator shall, for all
purposes herein, be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
2. COMPENSATION OF THE ADMINISTRATOR.
In consideration of the services to be performed by the
Administrator as set forth herein for the Fund, the Administrator shall be
entitled to receive and the Fund agrees to pay the Administrator the fees and
reimburse those of out-of-pocket expenses set forth on the fee schedule attached
hereto as Schedule A.
3. INDEMNIFICATION.
The Administrator shall not be responsible for, and the Fund
shall indemnify and hold the Administrator harmless from and against, any and
all losses, damages, costs, charges, reasonable counsel fees, payments, expenses
and liability arising out of or attributable to:
(a) All actions of the Administrator required to be
taken or taken pursuant to this Agreement, provided that such actions are taken
in good faith and without negligence or willful misconduct or violation of
applicable law.
(b) The Fund's refusal or failure to comply with the
terms of this Agreement, or which arise out of the Fund's lack of good faith,
negligence or willful misconduct or violation of applicable law.
(c) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations or 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
federal agency or any state with respect to the offer or sale of such Shares in
such state, except if such sale is conducted with the knowledge of the
Administrator or against the written advice of the Administrator.
3.1 RELIANCE UPON AUTHORITY. At any time the Administrator may
apply to any officer of the Fund for instructions, and may consult with the
Fund's legal counsel with respect to any matter arising in connection with the
services to be performed by the Administrator under this Agreement, and the
Administrator shall not be liable and shall be indemnified by the Fund for any
action taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel except if the Administrator knew or should have known
that such conduct was illegal or improper. The Administrator shall be protected
and indemnified in acting upon any paper or document furnished by or on behalf
of the Fund or its Advisor, reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction, information,
data, records or documents provided the Administrator by machine readable input,
telex, CRT data entry or other similar means authorized by the Fund, and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund.
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3.2 FORCE MAJEURE, ETC. In the event either party is unable to
perform its obligations under the terms of this Agreement because of acts of
God, strikes, equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party shall not be
liable for damages to the other for any damages resulting from such failure to
perform or otherwise from such causes.
3.3 CONSEQUENTIAL DAMAGES. Neither party to this Agreement
shall be liable to the other party for consequential damages under any provision
of this Agreement or for any act or failure to act hereunder.
3.4 LIABILITY OF ADMINISTRATOR. The Administrator shall
indemnify and hold the Fund harmless from and against, any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liability arising out of or attributable to the Administrator's negligence or
willful misconduct or violation of applicable law.
3.5 CLAIMS. In order that the indemnification provisions
contained in this Article shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion, and
shall keep the other party advised with respect to all developments concerning
such claim. The party who may be required to indemnify shall have the option to
participate with the party seeking indemnification the defense of such claim.
The party seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent. The party seeking
indemnification shall notify the other party in a reasonable period of time
after reviewing any claim. A copy of the claim shall accompany such notice. The
other party shall have the right to choose counsel to defend against such claim
after consultation with the party seeking indemnification.
4.REPORTS.
The Administrator shall provide to the Board of Directors of
the Fund, on a quarterly basis, a report, in such a form as the Administrator
and the Fund shall from time to time agree, representing that, to its knowledge,
the Fund was in compliance with all requirements of applicable federal and state
law, including without limitation, the rules and regulations of the Securities
and Exchange Commission and the Internal Revenue Service, or specifying any
instances in which the Fund was not so in compliance. Whenever, in the course of
performing its duties under this Agreement, the Administrator determines, on the
basis of information supplied to the Administrator by the Fund, that a violation
of applicable law has occurred, or that, to its knowledge, a possible violation
of applicable law may have occurred or, with the passage of time, could occur,
the Administrator shall promptly notify the Fund and its counsel of such
violation.
5. DELEGATION OF CERTAIN DUTIES TO SUB-ADMINISTRATOR.
It is understood and agreed by the parties that the
Administrator shall be entitled to delegate certain duties
of the Administrator as set forth under Section 1 hereof, including but not
limited, to financial reporting, tax reporting, portfolio compliance with the
Investment Company Act of 1940, and "blue sky" filing obligations to Firstar
Mutual Funds Services LLC, as sub-administrator, whose compensation shall be the
sole responsibility of the Administrator.
6. ACTIVITIES OF THE ADMINISTRATOR.
The Administrator shall be free to render similar services
to others so long as its services hereunder are not impaired thereby.
7. CONFIDENTIALITY.
The Administrator agrees that it will, on behalf of itself
and its officers and employees, treat all transactions contemplated by this
Agreement, and all other information germane thereto, as Confidential
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Information and such Confidential Information shall not be disclosed to any
person except as may be authorized by the Fund.
8. DURATION AND TERMINATION OF THE AGREEMENT.
This Agreement shall become effective as of the date hereof
and, unless sooner terminated as provided herein, shall continue automatically
in effect for successive annual periods. This Agreement may be terminated by
either party upon ninety (90) days prior written notice to the other party or
such shorter period as is mutually agreed upon by the parties.
Upon termination of this Agreement, the Administrator shall
deliver all documentation and other property belonging to the Fund, if any,
including, but not limited to, all Shareholder records, books stock ledgers,
instruments and other documents(including computer or other electronically
stored information) made or accumulated in the performance of its duties
hereunder (which Administrator acknowledges are the property of the Fund), along
with a certified locator document clearly indicating the complete contents
therein, to such successor as may be specified in a notice of termination or
other instruction.
9. ASSIGNMENT.
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 by the Fund without the prior
written consent of the Administrator, or by the Administrator without the prior
written consent of the Fund.
10. GOVERNING LAW.
The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect and the applicable provisions of the 1940 Act. To the extent that the
applicable law of the State of New York or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.
11. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties hereto only
if such amendment is in writing and signed by both parties.
12. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
13. NOTICES.
All notices and other communications hereunder shall be in
writing, shall be deemed to have been given when delivered in person or by
certified mail, return receipt requested, or by telecopier and shall be given to
the following addresses (or such other addresses as to which notice is given):
TO THE FUND: Kinetics Mutual Funds, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax No. (000) 000-0000
Attn: Xx. Xxxxxx X. Xxxxxx
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TO THE ADMINISTRATOR: Kinetics Asset Management, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax No.(000) 000-0000
Attn.: Xx. Xxx X. Xxxxxxxxxx
14. REGARDING THE ADMINISTRATOR.
The Administrator warrants and represents that it is duly
authorized and permitted to act as transfer agent and dividend disbursing agent
under all applicable laws and that it will immediately notify the Fund of any
revocation of such authority or permission or of the commencement of any
proceeding or other action which may lead to such revocation.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first set forth above.
KINETICS MUTUAL FUNDS, INC., KINETICS ASSET MANAGEMENT, INC.
on behalf of its series, The Medical Fund
By:____________________________________ By:_________________________________
, President , President
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SCHEDULE A
(a) ADMINISTRATIVE SERVICE FEE.
For the services rendered by the Administrator in its capacity as
administrator, as specified in Paragraph 1, "Duties of the Administrator", the
Fund shall pay the Administrator within ten (10) days after receipt of an
invoice from the Administrator at the beginning of each month 1/12th of .15% per
annum of the Fund's average net assets of the Fund:
(b) EXPENSES.
The Fund shall reimburse the Administrator for any direct out-of-pocket
expenses, incurred by the Administrator in connection with the performance of
its duties hereunder to include: costs for printing, and filing with the SEC via
XXXXX when applicable, fund documents (i.e. shareholder transaction confirmation
statements, periodic shareholder transaction statements, redemption/dividend
checks, envelopes, financial statements, forms 1099 and 5498, proxy statements,
fund prospectus, initial 800-line installation cost and monthly recurring
invoice from AT&T for incoming calls, postage, costs incurred by a mail
fulfillment house* utilized for mailing the following (periodic shareholder
account statements, semi-annual and annual financial statements, proxy
statement, Fund prospectus), pro rata portion (not to exceed $300) of annual
SAS-70 audit letter, and any authorized courier charges.
The Administrator shall provide the Fund with a monthly invoice of such
expenses and the Fund shall reimburse the Administrator within fifteen (15) days
after receipt thereof.
* Fund management reserves the right to approve the selection of the
fulfillment house utilized or to utilize their internal facilities to
do the mailing.
(c) SPECIAL REPORTS.
All reports and /or analyses requested by the Fund, its auditors, legal
counsel, portfolio manager, or any regulatory agency having jurisdiction over
the Fund, that are not in the normal course of fund administrative activities as
specified in Section 1 of this Agreement shall be subject to an additional
charge, agreed upon in advance, based upon the following rates:
Labor:
Senior staff - $150.00/hr.
Junior staff - $ 75.00/hr.
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