ADMINISTRATION AGREEMENT
MUNICIPAL HIGH INCOME FUND INC.
June 1, 1994
Xxxxx, Xxxxxx Advisers, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Municipal High Income Fund Inc. (the "Fund"), a corporation organized
under the laws of the State of Maryland, confirms its agreement with Xxxxx,
Xxxxxx Advisers, Inc. ("SBA") 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 Articles of Incorporation dated March 4, 1988, as amended
from time to time (the "Articles"), 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, Statement of
Additional Information and Articles have been or will be submitted to SBA.
Greenwich Street Advisors Division of Mutual Management Corp. ("Greenwich
Street Advisors") serves as the Fund's investment adviser and the Fund desires
to employ and hereby appoints SBA to act as its administrator. SBA accepts
this appointment and agrees to furnish the services to the Fund for the
compensation set forth below. SBA is hereby authorized to retain third
parties and is hereby authorized to delegate some or all of its duties and
obligations hereunder to such persons provided that such persons shall remain
under the general supervision of SBA.
2. Services as Administrator
Subject to the supervision and direction of the Board, SBA 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 SBA'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 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 SBA on the first business day of each month a fee for the
previous month at an annual rate of .20 of 1.00% of the 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 SBA, 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
SBA 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: 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 Xxxxx Xxxxxx Shearson Inc. or its
affiliates or any person who is an affiliate of any person to whom duties may
be delegated hereunder; 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;
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 of the officers or
Board and any 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. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment advisory
agreement (s), but excluding distribution fees, interest, taxes, brokerage
and, if permitted by state securities commissions, extraordinary expenses)
exceed the expense limitations of any state having jurisdiction over the Fund,
SBA will reimburse the Fund for that excess expense to the extent required by
state law in the same proportion as its respective fees bear to the combined
fees for investment advice and administration. The expense reimbursement
obligation of SBA will be limited to the amount of its fees hereunder. Such
expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis.
6. Standard of Care
SBA shall exercise its best judgment in rendering the services
listed in paragraph 2 above, and SBA 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 SBA against liability to the
Fund or to its shareholders to which SBA 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 SBA's reckless disregard of its
obligations and duties under this Agreement.
7. Term of Agreement
This Agreement shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually
by the Board.
8. Service to Other Companies or Accounts
The Fund understands that SBA 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 SBA so acting. In addition, the
Fund understands that the persons employed by SBA 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 SBA or its affiliates to engage in and devote time and attention
to other businesses or to render services of whatever kind or nature.
9. Indemnification
The Fund agrees to indemnify SBA 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 6 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.
10. Limitation of Liability
The Fund, SBA and Boston Advisors 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, as provided in the Articles and Bylaws. The
execution and delivery of this Agreement has been duly authorized by the Fund,
SBA and Boston
Advisors, 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 as provided in the
Articles and Bylaws.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed
copy hereof.
Very truly yours,
Municipal High Income Fund Inc.
By: ______________________
Name: Xxxxx X. XxXxxxxx
Title: Chairman of the Board
Accepted:
Xxxxx, Xxxxxx Advisers, Inc.
By: ______________________
Name: Xxxxxxxxx X. Xxxxx
Title: Secretary
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive accrual-based
recordkeeping and management information. They include maintaining a 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:
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;
Cash Availability - Combine all activity affecting the Fund's cash
account and produce a net cash amount available for investment;
Formal Reconciliations - Reconcile system generated reports to
prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to
the custodian;
Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
Reconcile and Calculate N.O.A. (net other assets) - Compile all
activity affecting asset and liability accounts other than
investment account;
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);
Mini-Cycle (except for Money Market Funds) - Review intra day
trial balance and reports, review trial balance N.O.A.;
Holdings Reconciliation - Reconcile the portfolio holdings per the
system to custodian records;
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%);
Money Market Fund Pricing - Monitor valuation for compliance with
Rule 2a-7;
System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
Net Asset Value Reconciliation - Identify the impact of current
day's Fund activity on a per share basis;
Reporting of Price to NASDAQ - 5:30 P.M. is the final deadline for
Fund prices being reported to the newspaper;
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
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
Total return reporting;
SEC 30-day yield reporting and 7-day yield reporting (for
money market funds);
Prepare dividend summary;
Prepare quarter-end reports;
Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.)
Publications
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;
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:
Provide a Treasurer and Assistant Treasurer for the Fund;
Determine expenses properly chargeable to the Fund;
Authorize payment of bills for expenses of the Fund;
Establish and monitor the rate of expense accruals;
Prepare financial materials for review by the Fund's Board
(e.g., Rule 2a-7, 10f-3, 17a-7 and 17e-1 reports, repurchase
agreement dealer lists, securities transactions);
Recommend dividends to be voted by the Fund's Board;
Monitor xxxx-to-market comparisons for money market funds;
Recommend valuation to be used for securities which are not
readily saleable;
Function as a liaison with the Fund's outside auditors and
arrange for audits;
Provide accounting, financial and tax support relating to
portfolio management and any contemplated changes in the
Fund's structure or operations;
Prepare and file forms with the Internal Revenue Service
* Form 8613
* Form 1120-RIC
* Board Members' and Shareholders' 1099s
* 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 four main areas: SEC and Public Disclosure
Assistance; Corporate and Secretarial Services; Compliance Services; and Blue
Sky Registration. The following is a summary of the legal and regulatory
services available to the Fund:
SEC and Public Disclosure Assistance
File annual amendments to the Fund's registration
statements, including updating the prospectus and statement
of additional information where applicable;
File annual and semi-annual shareholder reports with the
appropriate regulatory agencies;
Prepare and file proxy statements;
Review marketing material for SEC and NASD clearance;
Provide legal assistance for shareholder communications.
Corporate and Secretarial Services
Provide a Secretary and an Assistant Secretary for the Fund;
Maintain general corporate calendar;
Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare
minutes and follow-up matters raised at Board meetings;
Organize, attend and keep minutes of shareholder meetings;
Maintain Master Trust Agreement and By-Laws of the Fund.
Legal Consultation and Business Planning
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;
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;
Develop or assist in developing guidelines and procedures to
improve overall compliance by the Fund and its various
agents;
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
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.
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