Exhibit h(3)
ADMINISTRATION AGREEMENT
Xxxxx Xxxxxx Fund Management LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sir or Madam:
The investment companies listed on Appendix B hereto (individually
"Fund", and collectively, "Funds") each confirm their agreement with Xxxxx
Xxxxxx Fund Management LLC ("SBFM") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in its Prospectus and Statement of Additional Information as from time
to time in effect and in such manner and to such extent as may from time to time
be approved by the Board of Directors of the Fund (the "Board"). Copies of the
Fund's Prospectus and Statement of Additional Information have been submitted to
SBFM. The Fund desires to employ and hereby appoints SBFM to act as its
administrator. SBFM accepts this appointment and agrees to furnish the services
to the Fund for the compensation set forth below. SBFM is hereby authorized to
retain third parties and is hereby authorized to delegate some of or all of its
duties or obligations hereunder to such persons provided that such persons shall
remain under the general supervision of SBFM.
2. Services as Administrator
Subject to the supervision and direction of the Board, SBFM
will: (a) assist in supervising all aspects of the Fund's operations except
those performed by the Fund's investment adviser under its investment advisory
agreement; (b) supply the Fund with office facilities (which may be in SBFM's
own offices), statistical and research data, data processing services, clerical,
accounting and bookkeeping services, including, but not limited to, the
calculation of (i) the net asset value of shares of the Fund, (ii) applicable
contingent deferred sales charges and similar fees and charges and (iii)
distribution fees, internal auditing and legal services, internal executive and
administrative services, and stationary and office supplies; and (c) prepare
Board materials, reports to shareholders of the Fund, tax returns and reports to
and filings with the Securities and Exchange Commission (the "SEC") and state
blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this
Agreement, the Fund will pay SBFM on the first business day of each month a fee
for the previous month at an annual rate as set forth in Appendix C of each
Fund's average daily net assets. The fee for the period from the date the Fund's
initial registration statement is declared effective by the SEC to the end of
the month during which the initial registration statement is declared effective
shall be prorated according to the proportion that such period bears to the full
monthly period. Upon any termination of this Agreement before the end of any
month, the fee for such part of a month shall be prorated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to SBFM, the value of the Fund's net assets shall be
computed at the times and in the manner specified in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect.
4. Expenses
SBFM will bear all expenses in connection with the performance
of its services under this Agreement. The Fund will bear certain other expenses
to be incurred in its operation, including: organizational
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expenses for establishing new investment portfolios, taxes, interest, brokerage
fees and commissions, if any; fees of the members of the Board of the Fund who
are not officers, directors or employees of SBFM or its affiliates; SEC fees and
state blue sky qualification fees; charges of custodians and transfer and
dividend disbursing agents; the Fund's and Board members' proportionate share of
insurance premiums, professional association dues and/or assessments; outside
auditing and legal expenses; costs of maintaining the Fund's existence; costs
attributable to investor services, including, without limitation, telephone and
personnel expenses; payment for portfolio pricing services to a pricing agent,
if any; costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings; and litigation and
any other extraordinary expenses. In addition, the Fund will pay all
distribution fees pursuant to a Distribution Plan adopted under Rule 12b-1 of
the Investment Company Act of 1940, as amended (the "1940 Act").
5. Standard of Care
SBFM shall exercise its best judgment in rendering the
services listed in paragraph 2 above, and SBFM 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 matters to which this Agreement relates, provided that nothing herein
shall be deemed to protect or purport to protect SBFM against liability to the
Fund or to its shareholders to which SBFM would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of SBFM's reckless disregard of its
obligations and duties under this Agreement.
6. Term of Agreement
This Agreement shall continue automatically for successive
annual periods, provided that such continuance is specifically approved at least
annually (a) by the vote of a majority of the Fund's outstanding voting
securities (as defined in the 0000 Xxx) or by the Board of Directors of the Fund
and (b) by the vote, cast in person at a meeting called for the purpose, of a
majority of the Fund's directors who are not parties to this agreement or
"interested persons" (as defined in the 0000 Xxx) of any such party, unless
terminated by the Board or by a "vote of majority of the outstanding voting
securities" of the Fund upon 30 days notice to SBFM.
7. Service to Other Companies or Accounts
The Fund understands that SBFM now acts, will continue to act
and may act in the future as administrator to one or more other investment
companies, and the Fund has no objection to SBFM so acting. In addition, the
Fund understands that the persons employed by SBFM or its affiliates to assist
in the performance of its duties hereunder will not devote their full time to
such service and nothing contained herein shall be deemed to limit or restrict
the right of SBFM or its affiliates to engage in and devote time and attention
to other businesses or to render services of whatever kind or nature.
8. Indemnification
The Fund agrees to indemnify SBFM and its officers, directors,
employees, affiliates, controlling persons, agents (including persons to whom
responsibilities are delegated hereunder) ("indemnitees") against any loss,
claim, expense or cost of any kind (including reasonable attorney's fees)
resulting or arising in connection with this Agreement or from the performance
or failure to perform any act hereunder, provided that no such indemnification
shall be available if the indemnitee violated the standard of care in paragraph
5 above. This indemnification shall be limited by the 1940 Act, and relevant
state law. Each indemnitee shall be entitled to advancement of its expenses in
accordance with the requirements of the 1940 Act and the rules, regulations and
interpretations thereof as in effect from time to time.
9. Limitation of Liability
The Fund and SBFM agree that the obligations of the Fund under
this 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. The
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execution and delivery of this Agreement has been duly authorized by the Fund
and SBFM, and signed by an authorized officer of each, acting as such. Neither
the authorization by the Board members of the Fund, nor the execution and
delivery by the officer of the Fund shall be deemed to have been made by any of
them individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Fund.
10. Amendments
All amendments shall be in writing.
11. This Agreement shall be governed by the laws of the State of
New York, provided that nothing herein shall be construed as being inconsistent
with the 1940 Act.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by singing and returning to us the enclosed copy
hereof.
Very truly yours,
On behalf of each Fund
listed on Appendix B
By:
------------------------
Title:
Accepted:
Xxxxx Xxxxxx Fund Management LLC
By:
-----------------------------------------
Title:
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive accrual-based
recordkeeping and management information. They include maintaining the Fund's
books and records in accordance with the Investment Company Act of 1940, as
amended (the "1940 Act"), net asset value calculation, daily dividend
calculation, tax accounting and portfolio accounting.
The designated Fund accountants interact with the Fund's custodian,
transfer agent and investment adviser daily. As required, the responsibilities
of each Fund accountant may include:
o Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to
the prior day's ending cash balance per fund accounting's cash
availability report;
o Cash Availability - Combine all activity affecting the Fund's
cash account and produce a net cash amount available for
investment;
o Formal Reconciliations - Reconcile system generated reports to
prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
o Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells
to the custodian;
o Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
o Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
o Calculate Net Income, Mil Rate and Yield for Daily
Distribution Funds - Calculate income on purchase and sales,
calculate change in income due to variable rate change,
combine all daily income less expenses to arrive at net
income, calculate mil rate and yields (1 day, 7 day and 30
day);
o Mini-Cycle (except for Money Market Funds) - Review infra day
trial balance and reports, review trial balance N.O.A.;
o Holdings Reconciliation - Reconcile the portfolio holdings per
the system to custodian records;
o Pricing - Determine N.A.V. for Fund using market value of all
securities and currencies (plus N.O.A.), divided by
the shares outstanding, and investigate securities with
significant price changes (over 5%);
o Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
o System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
o Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
o Reporting of Price to NASDAQ - 5:30 P.M. is the final deadline
for Fund prices being reported to the newspaper;
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o Reporting of Price to Transfer Agent - N.A.V.s are reported to
transfer agent upon total completion of above activities.
In addition, Fund accounting personnel: communicate corporate actions
of portfolio holdings to portfolio managers; initiate notification to custodian
procedures on outstanding income receivables; provide information to the Fund's
treasurer for reports to shareholders, SEC, Board members, tax authorities,
statistical and performance reporting companies and the Fund's auditors;
interface with the Fund's auditors; prepare monthly reconciliation packages,
including expense pro forma; prepare amortization schedules for premium and
discount bonds based on the effective yield method; prepare vault reconciliation
reports to indicate securities currently "out-for-transfer;" and calculate daily
expenses based on expense ratios supplied by Fund's treasurer.
Financial Administration. The financial administration services made available
to the Fund fall within three main categories: Financial Reporting; Statistical
Reporting; and Publications. The following is a summary of the services made
available to the Fund by the Financial Administration Division:
Financial Reporting
o Coordinate the preparation and review of the annual,
semi-annual and quarterly portfolio of investments and
financial statements included in the Fund's shareholder
reports.
Statistical Reporting
o Total return reporting;
o SEC 30-day yield reporting and 7-day yield reporting (for
money market finds);
o Prepare dividend summary;
o Prepare quarter-end reports;
o Communicate statistical data to the financial media (Donoghue,
Lipper, Morningstar, et al.)
Publications
o Coordinate the printing and mailing process with outside
printers for annual and semi-annual reports, prospectuses,
statements of additional information, proxy statements and
special letters or supplements;
o Provide graphics and design assistance relating to the
creation of marketing materials and shareholder reports.
Treasury. The following is a summary of the treasury services available to the
Fund:
o Provide a Treasurer and Assistant Treasurer for the Fund;
o Determine expenses properly chargeable to the Fund;
o Authorize payment of bills for expenses of the Fund;
o Establish and monitor the rate of expense accruals;
o Prepare financial materials for review by the Fund's Board
(e.g., Rule 2a7, 10f-3, 17a-7 and 17e-1 reports, repurchase
agreement dealer lists, securities transactions);
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o Recommend dividends to be voted by the Fund's Board;
o Monitor xxxx-to-market comparisons for money market funds;
o Recommend valuation to be used for securities which are not
readily saleable;
o Function as a liaison with the Fund's outside auditors and
arrange for audits;
o Provide accounting, financial and tax support relating to
portfolio management and any contemplated changes in the
Fund's structure or operations;
o Prepare and file forms with the Internal Revenue Service
o Form 8613
o Form 1120-RIC
o Board Members' and Shareholders' 1099s
o Mailings in connection with Section 852 and related
regulations.
Legal and Regulatory Services. The legal and regulatory services made available
to the Fund fall within five main areas: SEC and Public Disclosure Assistance;
Corporate and Secretarial Services; Legal Consultation and Business Planning;
Compliance Services; and Blue Sky Registration or State Regulation. The
following is a summary of the legal and regulatory services available to the
Fund:
SEC and Public Disclosure Assistance
o File annual amendments to the Fund's registration statements,
including updating the prospectus and statement of additional
information where applicable;
o File annual and semi-annual shareholder reports with the
appropriate regulatory agencies;
o Prepare and file proxy statements;
o Review marketing material for SEC and NASD clearance;
o Provide legal assistance for shareholder communications.
Corporate and Secretarial Services
o Provide a Secretary and an Assistant Secretary for the Fund;
o Maintain general corporate calendar;
o Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare
minutes and follow-up matters raised at Board meetings;
o Organize, attend and keep minutes of shareholder meetings;
o Maintain corporate organizational documents and By-Laws of the
Fund.
Legal Consultation and Business Planning
o Provide general legal advice on matters relating to portfolio
management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
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o Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the
Fund, update the Fund's Board and the investment adviser on
those developments and provide related planning assistance
where requested or appropriate;
o Develop or assist in developing guidelines and procedures to
improve overall compliance by the Fund and its various agents;
o Manage Fund litigation matters and assume full responsibility
for the handling of routine Fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing compliance
manuals, conducting seminars for Fund accounting and advisory personnel and
performing on-going testing of the Fund's portfolio to assist the Fund's
investment adviser in complying with prospectus guidelines and limitations, 1940
Act requirements and Internal Revenue Code requirements. The Department may also
act as liaison to the SEC during its routine examinations of the Fund.
State Regulation or Blue Sky Registration
The State Regulation Department operates in a fully automated
environment using blue-sky registration software developed by Price Waterhouse.
In addition to being responsible for the initial and on-going registration of
shares in each state, the Department acts as liaison between the Fund and state
regulators, and monitors and reports on shares sold and remaining registered
shares available for sale.
APPENDIX B
SALOMON BROTHERS SERIES FUNDS INC
All Cap Value Fund
Balanced Fund
Cash Management Fund
High Yield Bond Fund
Institutional Money Market Fund
International Equity Fund
Large Cap Growth Fund
New York Municipal Money Market Fund
Short/Intermediate U.S. Government Fund
Small Cap Growth Fund
Strategic Bond Fund
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
Institutional Emerging Markets Debt Fund
Institutional High Yield Bond Fund
SALOMON BROTHERS VARIABLE SERIES FUNDS INC
Variable All Cap Fund
Variable High Yield Bond Fund
Variable Investors Fund
Variable Large Cap Growth Fund
Variable Small Cap Growth Fund
Variable Strategic Bond Fund
Variable Total Return Fund
APPENDIX C
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FEE
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SALOMON BROTHERS SERIES FUNDS INC
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All Cap Value Fund Good and Valuable Consideration
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Balanced Fund 0.05%
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Cash Management Fund 0.05%
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High Yield Bond Fund 0.05%
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Institutional Money Market Fund 0.05%
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International Equity Fund 0.05%
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Large Cap Growth Fund
First $5 Billion in Assets 0.05%
Next $2.5 Billion 0.025%
Next $2.5 Billion 0.025%
Over $10.0 Billion 0.00%
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New York Municipal Money Market Fund 0.05%
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Short/Intermediate U.S. Government Income Fund 0.05%
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Small Cap Growth Fund 0.05%
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Strategic Bond Fund 0.05%
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SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
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Institutional Emerging Markets Debt Fund 0.05%
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Institutional High Yield Bond Fund 0.05%
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SALOMON BROTHERS VARIABLE SERIES FUNDS INC
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Variable All Cap Fund Good and Valuable Consideration
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Variable High Yield Bond Fund 0.05%
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Variable Investors Fund Good and Valuable Consideration
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Variable Large Cap Growth Fund
First $5 Billion in Assets 0.05%
Next $2.5 Billion 0.025%
Next $2.5 Billion 0.025%
Over $10.0 Billion 0.00%
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Variable Small Cap Growth Fund Good and Valuable Consideration
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Variable Strategic Bond Fund 0.05%
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Variable Total Return Fund Good and Valuable Consideration
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