EXHIBIT (h).2
FORM OF
FUND ADMINISTRATION SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this __________, 1999, by
and between Investment Advisers, Inc., a corporation organized under the laws of
the State of Delaware (hereinafter referred to as "IAI") and Firstar Mutual Fund
Services, LLC, a corporation organized under the laws of the State of Wisconsin
(hereinafter referred to as "FMFS"). WHEREAS, IAI is a registered investment
adviser under the Investment Advisers Act of 1940, as amended, and serves as the
investment manager of open-end investment management companies (the "IAI Mutual
Funds") registered under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, the IAI Mutual Funds are authorized to create separate series,
each with its own separate investment portfolio (each a "Fund");
WHEREAS, FMFS is in the business of providing, among other things,
mutual fund administration services to investment companies; and
WHEREAS, IAI desires to retain FMFS to provide mutual fund
administration services to the Funds listed on Exhibit A attached hereto, as it
may be amended from time to time.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
IAI and FMFS agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
IAI hereby appoints FMFS as Administrator of the IAI Mutual Funds on
the terms and conditions set forth in this Agreement, and FMFS hereby
accepts such appointment and agrees to perform the services and duties
set forth in this Agreement in consideration of the compensation
provided for herein.
2. DUTIES AND RESPONSIBILITIES OF FMFS
A. General Fund Management
1. Act as liaison among all Fund service providers
2. Supply:
a. Corporate secretarial services
b. Office facilities (which may be in FMFS's or its
affiliate's own offices)
c. Non-investment-related statistical and research data
as needed
3. Coordinate board communication by:
a. Establish meeting agendas
b. Preparing board reports based on financial and
administrative data
c. Evaluating independent auditor
d. Securing and monitoring fidelity bond and director
and officer liability coverage, and making the
necessary SEC filings relating thereto
e. Preparing minutes of meetings of the board and
shareholders
f. Recommend dividend declarations to the Board, prepare
and distribute to appropriate parties' notices
announcing declaration of dividends and other
distributions to shareholders
g. Provide personnel to serve as officers of the IAI
Mutual Funds if so elected by the Board and attend
Board meetings to present materials for Board review
h. Prepare expenses and director fee analysis for annual
approval
4. Audits
a. Prepare appropriate schedules and assist independent
auditors
b. Provide information to SEC and facilitate audit
process
c. Provide office facilities
5. Assist in overall operations of the Fund
6. Pay Fund expenses upon written authorization from the IAI
Mutual Funds
7. Monitor arrangements under shareholder services or similar
plan
8. Complete and return Fund survey information
B. Compliance
1. Regulatory Compliance
a. Monitor compliance with 1940 Act requirements,
including:
1) Asset diversification tests
2) Total return and SEC yield calculations
3) Maintenance of books and records under Rule
31a-3
4) Code of Ethics for the disinterested
Directors of the Fund
b. Monitor Fund's compliance with the policies and
investment limitations of the Fund as set forth in
its Prospectus and Statement of Additional
Information
c. Maintain awareness of applicable regulatory and
operational service issues and recommend dispositions
2. Blue Sky Compliance
a. Prepare and file with the appropriate state
securities authorities any and all required
compliance filings relating to the registration of
the securities of the Fund so as to enable the Fund
to make a continuous offering of its shares in all
states
b. Monitor status and maintain registrations in each
state
c. Provide information regarding material developments
in state securities regulation
3. SEC Registration and Reporting
a. Assist Fund counsel in updating Prospectus and
Statement of Additional Information and in preparing
proxy statements and Rule 24f-2 notices
b. Prepare annual and semiannual reports, Form N-SAR
filings and Rule 24f-2 notices
c. Coordinate the printing, filing and mailing of
publicly disseminated Prospectuses and reports
d. File fidelity bond under Rule 17g-1
e. File shareholder reports under Rule 30b2-1
f. Monitor sales of each Fund's shares and ensure that
such shares are properly registered with the SEC and
the appropriate state authorities
g. File Rule 24f-2 notices, Form N-SAR, Form N30-d
4. IRS Compliance
a. Monitor status as a regulated investment company
under Subchapter M, including without limitation,
review of the following:
1) Asset diversification requirements,
including variable annuity testing
2) Qualifying income requirements
3) Distribution requirements
b. Calculate required distributions (including excise
tax distributions)
C. Financial Reporting
1. Provide financial data required by Fund's Prospectus and
Statement of Additional Information;
2. Prepare financial reports for officers, shareholders, tax
authorities, performance reporting companies, the board, the
SEC, and independent auditors;
3. Supervise the Funds' Custodian and Accountants in the
maintenance of the general ledger and in the preparation of
the Funds' financial statements, including oversight of
expense accruals and payments, of the determination of net
asset
value of each Fund's net assets and of each Fund's shares, and
of the declaration and payment of dividends and other
distributions to shareholders;
4. Compute the yield, total return and expense ratio of each
class of each Fund, and each Fund's portfolio turnover rate;
and
5. Monitor the expense accruals and notify IAI of any proposed
adjustments.
6. Prepare monthly financial statements, which will include
without limitation the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses
7. Prepare quarterly broker security transaction summaries.
D. Tax Reporting
1. Prepare and file on a timely basis appropriate federal and
state tax returns including, without limitation, Forms
1120/8613 with any necessary schedules
2. Prepare state income breakdowns where relevant
3. File Form 1099 Miscellaneous for payments to directors and
other service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate shareholders
6. Calculate federal obligation interest
E. Perform such other tasks as routinely performed by IAI prior to the
effective date of this Agreement consistent with the intent of both
parties that FMFS is assuming all responsibilities previously exercised
by IAI in connection with the services generally described herein.
3. COMPENSATION
FMFS shall be compensated for providing the services set forth in this Agreement
in accordance with the Fee Schedule attached hereto as Exhibit A and as mutually
agreed upon and amended from time to time. IAI agrees to pay all fees and
reimbursable expenses within ten (10) business days following the receipt of the
billing notice.
4. PERFORMANCE OF SERVICE; LIMITATION OF LIABILITY
A. FMFS shall exercise reasonable care in the performance of its duties
under this Agreement. FMFS shall not be liable for any error of
judgment or mistake of law or for any loss suffered by a Fund in
connection with matters to which this Agreement relates, including
losses resulting from mechanical breakdowns or the failure of
communication
or power supplies beyond FMFS's control, except for such an error,
mistake or loss arising out of or relating to FMFS's refusal or failure
to comply with the terms of this Agreement or from bad faith,
negligence, or willful misconduct on its part in the performance of its
duties under this Agreement.
Notwithstanding any other provision of this Agreement (other than
Section 3 above), if FMFS has exercised reasonable care in the
performance of its duties under this Agreement, IAI shall indemnify and
hold harmless FMFS from and against any and all claims, demands,
losses, expenses, and liabilities (whether with or without basis in
fact or law) of any and every nature (including reasonable attorneys'
fees) which FMFS may sustain or incur or which may be asserted against
FMFS by any person arising out of any action taken or omitted to be
taken by it in performing the services hereunder (i) in accordance with
the foregoing standards, or (ii) in reliance upon any written or oral
instruction provided to FMFS by any duly authorized officer of the Fund
or IAI, such duly authorized officer to be included in a list of
authorized officers furnished to FMFS. This indemnification and hold
harmless obligation shall not extend to any and all claims, demands,
losses, expenses, and liabilities arising out of or relating to FMFS's
refusal or failure to comply with the terms of this Agreement or from
bad faith, negligence or from willful misconduct on its part in
performance of its duties under this Agreement.
FMFS shall indemnify and hold IAI harmless from and against any and all
claims, demands, losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature (including
reasonable attorneys' fees) which the IAI may sustain or incur or which
may be asserted against IAI by any person arising out of any action
taken or omitted to be taken by FMFS as a result of FMFS"s refusal or
failure to comply with the terms of this Agreement, its bad faith,
negligence, or willful misconduct.
Regardless of the above, FMFS reserves the right to reprocess and
correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the indemnitor may be
asked to indemnify or hold the indemnitee harmless, the indemnitor
shall be fully and promptly advised of all pertinent facts concerning
the situation in question, and it is further understood that the
indemnitee will use all reasonable care to notify the indemnitor
promptly concerning any situation which presents or appears likely to
present the probability of a claim for indemnification. The indemnitor
shall have the option to defend the indemnitee against any claim, which
may be the subject of this indemnification. In the event that the
indemnitor so elects, it will so notify the indemnitee and thereupon
the indemnitor shall take over complete defense of the claim, and the
indemnitee shall in such situation initiate no further legal or other
expenses for which it shall seek indemnification under this section.
The indemnitee shall in no case confess any claim or make any
compromise in any case in which the indemnitor will be asked to
indemnify the indemnitee except with the indemnitor's prior written
consent.
5. PROPRIETARY AND CONFIDENTIAL INFORMATION
FMFS agrees on behalf of itself and its directors, officers, and employees to
treat confidentially and as proprietary information of the IAI Mutual Funds, all
records and other information relative to the IAI Mutual Funds and prior,
present, or potential shareholders of the IAI Mutual Funds (and clients of said
shareholders), and not to use such records and information for any purpose other
than the performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the IAI Mutual Funds, which
approval shall not be unreasonably withheld and may not be withheld where FMFS
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by the IAI Mutual Funds.
6. DATA NECESSARY TO PERFORM SERVICES
Each Fund or its agent, which may be FMFS, shall furnish to FMFS the data
necessary to perform the services described herein at times and in such form as
mutually agreed upon if FMFS is also acting in another capacity for a Fund,
nothing herein shall be deemed to relieve FMFS of any of its obligations in such
capacity.
7. TERM OF AGREEMENT
This Agreement shall become effective as of the date hereof and, unless sooner
terminated as provided herein, shall continue subject to Board approval in
effect for successive annual periods. The Agreement may be terminated by either
party upon giving sixty (60) days prior written notice to the other party or
such shorter period as is mutually agreed upon by the parties. However, this
Agreement may be amended by mutual written consent of the parties. If the IAI
Mutual Funds terminate their agreements with IAI pursuant to which IAI has
retained FMFS under this Agreement, such termination shall also serve to
terminate FMFS.
8. NOTICES
Notices of any kind to be given by either party to the other party shall be in
writing and shall be duly given if mailed or delivered as follows: Notice to
FMFS shall be sent to:
Firstar Mutual Fund Services, LLC
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
and notice to IAI shall be sent to:
IAI Mutual Funds
Director of Fund Administration
000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000
9. NO AGENCY RELATIONSHIP
Nothing herein contained shall be deemed to authorize or empower FMFS to act as
agent for the other party to this Agreement, or to conduct business in the name
of, or for the account of the other party to this Agreement.
10. DUTIES IN THE EVENT OF TERMINATION
In the event that, in connection with termination, a successor to any of FMFS's
duties or responsibilities hereunder is designated by IAI by written notice to
FMFS, FMFS will promptly, upon such termination and at the expense of IAI,
transfer to such successor all relevant books, records, correspondence, and
other data established or maintained by FMFS under this Agreement in a form
reasonably acceptable to IAI (if such form differs from the form in which FMFS
has maintained, IAI shall pay any expenses associated with transferring the data
to such form), and will cooperate in the transfer of such duties and
responsibilities, including provision for assistance from FMFS's personnel in
the establishment of books, records, and other data by such successor.
11. GOVERNING LAW
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with the laws of the State of Wisconsin. However, nothing
herein shall be construed in a manner inconsistent with the 1940 Act or any rule
or regulation promulgated by the Securities and Exchange Commission thereunder.
12. RECORDS
FMFS shall keep records relating to the services to be performed hereunder, in
the form and manner as it may deem advisable. To the extent required by Section
31 of the 1940 Act, and the rules thereunder, FMFS agrees that all such records
prepared or maintained by FMFS relating to the services to be performed by FMFS
hereunder are the property of a Fund and will be preserved, maintained and made
available in accordance with such section and rules and will be surrendered to a
Fund on and in accordance with its request. Such records shall also be made
available for review by the U.S. Securities and Exchange Commission.
13. FURTHER REPRESENTATIONS AND WARRANTIES OF FMFS
A. FMFS represents and warrants to IAI that the computer software,
computer firmware, computer hardware (whether general or special
purpose) and other similar related items of automated, computerized
and/or software systems that are owned or licensed by FMFS and will be
utilized by FMFS or its agents in connection with the provision of
services described in this Agreement are "Year 2000 Compliant" (as
defined below). As used in this Section 15 of this Agreement, the term
"Year 2000 Compliant" shall mean the ability of the relevant system to
provide all of the following functions:
(1) Process date information before, during and after January 1, 2000,
including but not limited to accepting date specific input data,
providing date specific output data, and performing calculations on
dates or portions of dates;
(2) Function accurately and without interruption or malfunction before,
during and after January 1, 2000, without any change in operations
associated with the advent of the new millennium and assuming no other
defects, bugs, viruses or other problems unrelated to Year 2000
compliance issues which disrupt functionality;
(3) Respond to two-digit, year-date input in a way that resolves the
ambiguity as to century and in a disclosed, defined and predetermined
manner; and
(4) Store and provide output data of date specific information in ways
that are unambiguous as to century.
The parties recognize and acknowledge that this representation
and warranty was a significant inducement for IAI to enter into this
Agreement.
B. FMFS represents and warrants that it satisfies all rules and
requirements under the 1940 Act for the purpose of providing the
services set forth in this Agreement.
C. To the extent FMFS make changes relating to its services, systems,
programs, rules, operating schedules and equipment, it represents and
warrants that any such changes will not adversely affect the services
provided to a Fund under this Agreement. FMFS will provide IAI at least
90 days' prior written notice of any such material changes.
D. In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, FMFS shall take all reasonable steps
to minimize service interruptions for any period that such interruption
continues beyond FMFS's control. FMFS will restore any lost or damaged
data and correct any errors resulting from such a breakdown at the
expense of FMFS. FMFS agrees that it shall, at all times, have
reasonable contingency plans with appropriate parties, making
reasonable provision for emergency use of systems needed to perform
services under this Agreement. FMFS shall provide IAI with copies of
such contingencies plans and any changes thereto. Representatives of
IAI shall be entitled to inspect FMFS's premises and operating
capabilities at any time during regular business hours of FMFS, upon
reasonable notice to FMFS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer or one or more counterparts as of the day
and year first written above.
INVESTMENT ADVISERS, INC. FIRSTAR MUTUAL FUND SERVICES, LLC
By:__________________________________ By:____________________________________
Attest:______________________________ Attest:________________________________
EXHIBIT A
Name of Fund Effective Date
------------ --------------
IAI INVESTMENT FUNDS I, INC.
IAI Bond Fund April 26, 1999
IAI Institutional Bond Fund April 26, 1999
IAI INVESTMENT FUNDS II, INC.
IAI Growth Fund April 26, 1999
IAI INVESTMENT FUNDS III, INC.
IAI International Fund April 26, 1999
IAI INVESTMENT FUNDS IV, INC.
IAI Regional Fund April 26, 1999
IAI INVESTMENT FUNDS VI, INC.
IAI Emerging Growth Fund April 26, 1999
IAI Midcap Growth Fund April 26, 1999
IAI Balanced Fund April 26, 1999
IAI Money Market Fund April 26, 1999
IAI Capital Appreciation Fund April 26, 1999
IAI INVESTMENT FUNDS VII, INC.
IAI Growth & Income Fund April 26, 1999
IAI INVESTMENT FUNDS VIII, INC.
IAI Value Fund April 26, 1999
IAI RETIREMENT FUNDS, INC.
IAI Regional Portfolio April 26, 1999
IAI Reserve Portfolio April 26, 1999
IAI Balanced Portfolio April 26, 1999
Annual fee based upon fund group assets:
7 basis points on the first $500 million
6 basis points on the next $500 million
4 basis points on the balance
Subject to a minimum annual fee of $25,000 per fund, in aggregate for the fund
group.
Extraordinary services quoted separately.
Plus out-of-pocket expense reimbursements, including but not limited to:
Postage
Programming
Stationery
Proxies
Retention of records
Special reports
Federal and state regulatory filing fees
Certain insurance premiums
Expenses from board of Directors meetings
Auditing and legal expenses
Fees and out-of-pocket expense reimbursements are billed to IAI monthly
