ADMINISTRATION AND FUND
ACCOUNTING AGREEMENT
This ADMINISTRATION AND FUND ACCOUNTING AGREEMENT ("Agreement") is
made as of April 30, 1999, by and between SAFECO TAXABLE BOND TRUST ("Trust"), a
Delaware business Trust, and SAFECO ASSET MANAGEMENT COMPANY ("XXX"), a
Washington corporation.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company; and
WHEREAS, the Trust offers for public sale distinct series of shares of
beneficial interest ("Series"), each Series corresponding to a distinct
portfolio; and
WHEREAS, the Trust desires to retain XXX to act as its administrator
and accounting agent, and XXX is willing to act in such capacities;
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions hereinafter set forth, the Trust and XXX hereby agree as follows:
1. APPOINTMENT. The Trust hereby appoints XXX to act as the
administrator and accounting agent for each Series for the period and on the
terms and condition set forth in this Agreement. XXX hereby accepts such
appointment and agrees to render the services set forth for the compensation
herein provided.
2. DEFINITIONS. As used in this Agreement and in addition to the
terms defined elsewhere herein, the following terms shall have the meanings
assigned to them in this Section;
(a) "Authorized Person" means any officer of the Trust and any
other person, whether or not any such person is an officer or employee of the
Trust, duly authorized by the Board of Trustees (the "Board"), the President or
any Vice President of the Trust to give Oral and/or Written Instructions on
behalf of the Trust or any Series.
(b) "Commission" means the Securities and Exchange Commission.
(c) "Custodian" means the custodian or custodians employed by
the Trust to maintain custody of the Series' assets.
(d) "Governing Documents" means the Declaration of Trust,
By-Laws and other applicable charter documents of the Trust, all as they may be
amended from time to time.
(e) "Oral Instructions" means oral instructions actually
received by XXX from an Authorized Person or from a person reasonably believed
by XXX to be an Authorized Person, provided that, any oral instruction shall be
promptly confirmed by written instructions.
(f) "Prospectus" means the current prospectus and statement of
additional information of a Series, taken together.
(g) "Shares" means shares of beneficial interest in of any of
the Series.
(h) "Shareholder" means any owner of Shares.
(i) "Written Instructions" means written instructions delivered
by hand, mail, tested telegram or telex, cable or facsimile sending device
received by XXX and signed by an Authorized Person.
3. COMPLIANCE WITH LAWS, ETC. In performing its responsibilities
hereunder, XXX shall comply with all terms and provisions of the Governing
Documents, the Prospectus and all applicable state and federal laws including,
without limitation, the 1940 Act and the rules and regulations promulgated by
the Commission thereunder.
4. SERVICES. In consideration of the compensation payable hereunder
and subject to the supervision and control of the Trust's Board, XXX shall
provide the following services to the Series:
(a) ACCOUNTING AGENT. As fund accounting agent, XXX shall:
(1) Obtain security market quotes from services approved by
the investment adviser of the Series or, if such quotes are unavailable, then
obtain such prices from the investment adviser of the Series or from such
sources as the investment adviser may direct, and, in either case, calculate the
market value of the Series' investments;
(2) Value the assets of the Series and compute the net
asset value per Share of the Series in the manner specified in the then
currently effective Prospectus;
(3) Calculate the net income of each Series;
(4) Calculate realized gains or losses for each Series from
the sale or disposition of assets, if any;
(5) Maintain the general ledger and other accounts, books
and financial records of the Trust, as required under Section 31(a) of the 1940
Act and the rules promulgated by the Commission thereunder in connection with
the services provided by XXX;
2
(6) Journalize each Series' investment, capital share and
income and expense activities;
(7) Reconcile cash and investment balances of each Series
with the custodian and provide the Series' investment adviser with the beginning
cash balance available for investment purposes;
(8) Maintain individual ledgers for investment securities;
(9) Maintain historical tax lots for investment securities;
(10) Calculate various asset-based expenses (E.G., advisory
and 12b-1 fees);
(11) Receive and act upon notices, Oral and Written
Instructions, certificates, instruments or other communications from a Series'
shareholder servicing and transfer agent;
(12) Assist in the preparation of financial statements
semiannually normally which will include the following items:
(A) schedule of investments;
(B) statement of assets and liabilities;
(C) statement of operations;
(D) statement of changes in net assets; and
(E) notes to financial statements;
(13) Control all Series disbursements;
(14) Transmit the net asset value and other end-of-day fund
information to NASDAQ and business partners, as appropriate; and
(15) As appropriate, compute yields, expense ratios,
portfolio turnover rate, and other portfolio-related calculations.
(b) ADMINISTRATOR. As administrator, XXX shall:
(1) Prepare monthly security transaction listings;
(2) Supply various normal and customary Series statistical
data as requested on an ongoing basis;
3
(3) Prepare and file the Series' Federal and state tax
returns;
(4) Prepare and file the Series' Semi-Annual Reports with
the Commission on Form N-SAR;
(5) Prepare and arrange for filing with the Commission the
Series' annual and semi-annual shareholder reports;
(6) Prepare and arrange for filing, if necessary, reports
with the securities commissions of the various states;
(7) Prepare and arrange for filing Post-Effective
Amendments to the Trust's Registration Statement on Form N-1A and other filings
relating to the registration of Shares;
(8) Monitor sales of the Shares and assure that the Series
has properly registered such Shares with the Commission and made any necessary
filings with state authorities;
(9) Monitor the Series' compliance with the investment
restrictions and limitations imposed by the 1940 Act, and applicable regulations
thereunder, the fundamental and non-fundamental investment policies and
limitations set forth in the Prospectus, and the investment restrictions and
limitations necessary for each Series to qualify as a regulated investment
company under Sub-Chapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), or any successor statute;
(10) Review sales literature and file such with regulatory
authorities, as appropriate;
(11) Coordinate contractual relationships and communications
between the Series and its contractual service providers;
(12) Prepare and monitor an expense budget for each Series,
including setting and revising accruals for each category of expenses;
(13) Determine the amount of dividends and other
distributions payable to Shareholders as necessary to maintain the qualification
as a regulated investment company of each Series of the Trust under the Code;
and in accordance with policies set by the Board of Trustees;
(14) Prepare and distribute to appropriate parties notices
announcing the declaration of dividends and other distributions to Shareholders;
4
(15) Prepare financial and other material for periodic
meetings with the Board;
(16) Prepare, file, and maintain the Series' Governing
Documents and any amendments thereto, as appropriate, (which have already been
prepared and filed), and minutes of meetings of their Boards, Committees, and
Shareholders;
(17) Provide personnel to serve as officers of the Trust if
so elected by the Board;
(18) Provide in-house legal counsel and internal audit
services to the Trust; and
(19) Assist with the design, development, and operation of
the Trust and each Series.
5. COMPENSATION.
(a) For accounting services furnished by XXX, each existing Series
shall pay XXX an annual fee computed on the basis of the average net asset value
of the Series as ascertained each business day and paid monthly in accordance
with the rate schedule set forth on Schedule A.
(b) For administrative services furnished by XXX, each existing
Series shall pay XXX an annual fee computed on the basis of the average net
asset value of the Series as ascertained each business day and paid monthly in
accordance with the rate schedule set forth on Schedule B.
6. RELIANCE BY XXX ON INSTRUCTIONS. Unless otherwise provided in this
Agreement, XXX shall act only upon Oral or Written Instructions. XXX shall be
entitled to rely upon any such Instructions actually received by it under this
Agreement. The Trust agrees that XXX shall incur no liability to the Trust or
any of the Series in acting upon Oral or Written Instructions given to XXX
hereunder, provided that such Instructions reasonably appear to have been
received from an Authorized Person.
7. COOPERATION WITH AGENTS OF THE TRUST. XXX shall cooperate with the
Trust's agents and employees, including, without limitation, its independent
accountants, and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that all necessary information is
made available to such agents to the extent necessary in the performance of
their duties to the Trust.
8. CONFIDENTIALITY. XXX, on behalf of itself and its employees,
agrees to treat confidentially all records and other information relating to the
Trust and the Series except when requested to divulge such information by duly
constituted authorities, provided that notification
5
and prior approval is obtained from the Trust, which approval shall not be
unreasonably withheld and may not be withheld if XXX, in its judgment, may be
subject to civil or criminal contempt proceedings for failure to comply.
9. STANDARD OF CARE. In the performance of its responsibilities
hereunder, XXX shall exercise care and diligence in the performance of its
duties and act in good faith to ensure the accuracy and completeness of all
services under this Agreement. In performing services hereunder, XXX:
(a) shall be under no duty to take any action on behalf of the
Trust or the Series except as specifically set forth herein or as may be
specifically agreed to by XXX in writing, and in computing the net asset value
per Share of a Series, XXX may rely upon any information furnished to it
including, without limitation, information (1) as to the accrual of liabilities
of a Series and as to liabilities of a Series not appearing on the books of
account kept by XXX, (2) as to the existence, status and proper treatment of
reserves, if any, authorized by a Series, (3) as to the sources of quotations to
be used in computing net asset value, (4) as to the fair value to be assigned to
any securities or other property for which price quotations are not readily
available and (5) as to the sources of information with respect to "corporate
actions" affecting portfolio securities of a Series (information as to
"corporate actions" shall include information as to dividends, distributions,
interest payments, prepayments, stock splits, stock dividends, rights offerings,
conversions, exchanges, recapitalizations, mergers, redemptions, calls, maturity
dates and similar actions, including ex-dividend and record dates and the
amounts and terms thereof);
(b) shall be responsible and liable for all losses, damages and
costs (including reasonable attorneys' fees) incurred by the Trust or any Series
which is due to or caused by SAM's negligence in the performance of its duties
under this Agreement or for SAM's negligent failure to perform such duties as
are specifically assumed by XXX in this Agreement, provided that, to the extent
that duties, obligations and responsibilities are not expressly set forth in
this Agreement, XXX shall not be liable for any act or omission that does not
constitute willful misfeasance, bad faith or negligence on the part of XXX or
reckless disregard by XXX of such duties, obligations and responsibilities; and
(c) without limiting the generality of the foregoing, XXX shall
not, in connection with SAM's duties under this Agreement, be under any duty or
obligation to inquire into and shall not he liable for or in respect of:
(1) the validity or invalidity or authority or lack of
authority of any Oral or Written Instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement, if any, and that XXX
reasonably believes to be genuine; and
(2) delays or errors or loss of data occurring by reason of
circumstances beyond SAM's control including, without limitation, acts of civil
or military authorities, national emergencies, labor difficulties, fire,
mechanical breakdown, denial of
6
access, earthquake, flood or catastrophe, acts of God, insurrection, war, riots,
or failure of the mails, transportation, communication or power supply.
Notwithstanding any other provisions of this Agreement, the following provisions
shall apply with respect to SAM's computation of a Series' net asset value: XXX
shall be held to the exercise of reasonable care in computing and determining
net asset value as provided in Section 4(a), above, but shall not be held
accountable or liable for any losses, damages or expenses of a Series or any
Shareholder or former Shareholder may incur arising from or based upon errors or
delays in the determination of such net asset value unless such error or delay
was due to SAM's negligence or willful misfeasance. The parties hereto
acknowledge, however, that XXX causing an error or delay in the determination of
net asset value may indicate, but does not in and of itself, constitute
negligence or willful misfeasance. SAM's liability for any such negligence or
willful misfeasance which results in an error in determination of such net asset
value shall be limited to the direct out-of-pocket loss a Series and/or any
Shareholder or former Shareholder shall actually incur.
Without limiting the generality of the foregoing, XXX shall not be
held accountable or liable to a Series, a Shareholder or former Shareholder or
any other person for any delays or losses, damages or expenses any of them may
suffer or incur resulting from (1) SAM's failure to receive timely and suitable
notification concerning quotations, corporate actions or similar matters
relating to or affecting portfolio securities of a Series or (2) any errors in
the computation of a net asset value based upon or arising out of quotations or
information as to corporate actions if received by XXX from a source that XXX
was authorized to rely upon. Nevertheless, XXX will use its best judgment in
determining whether to verify through another source any information that it has
received as to quotations or corporate actions if XXX has reason to believe that
any such information is incorrect.
10. RECEIPT OF ADVICE. If XXX is in doubt as to any action to be
taken or omitted by it, XXX may request, and shall be entitled to rely upon,
directions and advice from the Trust, including Oral or Written Instructions
where appropriate, or from counsel of its own choosing (who may also be counsel
for the Trust or any Series), with respect to any question of law. In case of
conflict between directions, advice or Oral and Written Instructions received by
XXX pursuant to this Section, XXX shall be entitled to rely on and follow the
advice received from counsel, as described above. XXX shall be protected in
taking or omitting to any action in reliance on any directions, advice or Oral
or Written Instructions received pursuant to this Section that XXX in good faith
believes to be consistent with such directions, advice or Oral or Written
Instructions, as the case may be. Notwithstanding the foregoing, nothing in this
Section shall be construed as imposing on XXX any obligation to seek such
directions, advice or Oral or Written Instructions, or to act in accordance with
them when received, unless the same is a condition to SAM's properly taking or
omitting to take such action under the terms of this Agreement.
11. INDEMNIFICATION OF XXX. The Trust agrees to indemnify and hold
harmless XXX and its officers, directors, employees, nominees and
subcontractors, if any, from all taxes, charges, expenses, assessments, claims
and liabilities, including, without limitation, liabilities
7
arising under the 1940 Act, the Securities Act of 1933, an amended, the
Securities Exchange Act of 1934, as amended, the Commodities Exchange Act and
any state or foreign securities or Blue Sky laws, and expenses, including,
without limitation, reasonable attorneys' fees and disbursements, arising
directly or indirectly from any action or thing that XXX takes or omits to take
or do;
(a) at the request or on the direction of or in reliance upon
the advice of the Trust;
(b) upon Oral or Written Instructions; or
(c) in the performance by XXX of its responsibilities under this
Agreement;
provided that, XXX shall not be indemnified against any liability to the Trust
or the Series, or any expenses incident hereto, arising out of SAM's own willful
misfeasance, bad faith or negligence or reckless disregard of its duties in
connection with the performance of its duties and obligations specifically
described in this Agreement.
12. INDEMNIFICATION OF THE TRUST. XXX agrees to indemnity and hold
harmless the Trust and its officers, trustees and employees, from all taxes,
charges, expenses, assessments, claims and liabilities, including, without
limitation, liabilities arising under the 1940 Act, the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended, the Commodities Act
and any state or foreign securities, Blue Sky laws, and expenses, including,
without limitation, reasonable attorneys' fees and disbursements, arising
directly or indirectly from any action or omission of XXX that does not meet the
standard of care to which XXX is subject under Section 9, above.
13. LIMITATION OF LIABILITY. XXX is hereby expressly put on notice of
(i) the limitation of Shareholder, officer and trustee liability as set forth in
the Governing Documents of the Trust and (ii) of the provisions in the Governing
Documents permitting the establishment of separate Series and limiting the
liability of each Series to obligations of that Series. XXX hereby agrees that
obligations assumed by the Trust pursuant to this Agreement are in all cases
assumed on behalf of a particular Series and each such obligation shall be
limited in all cases to that Series and its assets. XXX agrees that it shall not
seek satisfaction of any such obligation from the Shareholders or any individual
Shareholder of the Trust nor from the officers or trustees or any individual
officer or trustee of the Trust.
14. TERMINATION. This Agreement is terminable with respect to any
Series or in its entirety without penalty by the Trust's Board of Trustees, by
vote of a majority of the outstanding voting securities of each affected Series
(as defined in the 1940 Act), or by XXX, on not less than 60 days' notice to the
other party and will be terminated upon the mutual written consent of XXX and
the Trust. This Agreement shall terminate automatically in the event of its
assignment.
8
15. NOTICES. All notices and other communications hereunder,
including Written Instructions, shall be in writing or by confirming telegram,
cable, telex or facsimile sending device. Notices with respect to a party shall
be directed to such address as may from time to time, be designated by that
party to the other.
16. FURTHER ACTIONS. The Trust and XXX agree to perform such further
acts and to execute such further documents as may be necessary or appropriate to
effect the purposes of this Agreement.
17. AMENDMENTS. This Agreement, or any part thereof, may be amended
only by an instrument in writing signed by the Trust and XXX.
18. ENTIRE AGREEMENT/ENFORCEMENT OF RIGHTS. This Agreement embodies
the entire agreement between XXX and the Trust with respect to the services to
be provided by XXX to the Trust and each Series and supersedes any prior written
or oral agreement between those parties with respect to its subject matter. In
the event that either party should be required to take legal action in order to
enforce its rights under this Agreement, the prevailing party in any such action
or proceeding shall be entitled to recover from the other party costs and
reasonable attorneys fees.
19. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in counterparts, each of which taken together shall
constitute one and the same instrument. XXX understands that the rights and
obligations of each Series under the Governing Documents are separate and
distinct from those of any and all other Series.
20. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Washington and, to the extent it
involves any United States statute, in accordance with the laws of the United
States.
IN WITNESS WHEREOF, the Trust and XXX have caused this Agreement to be
executed by their officers designated below as of this day, month and year first
above written.
ATTEST: SAFECO TAXABLE BOND TRUST
------------------------------ ---------------------------------------------
Xxxx X. Xxxxxx Xxxxx X. Xxxx
Assistant Secretary President
ATTEST: SAFECO ASSET MANAGEMENT COMPANY
------------------------------ ---------------------------------------------
Xxxx X. Xxxxxx Xxxxxxx X. Xxxxx
Assistant Secretary President
9
SCHEDULE A
ACCOUNTING SERVICES FEES
Each Series shall pay XXX a fee, computed daily and paid monthly, at the
annual rate of 0.04% of the Series' average daily net assets up to the first
$200,000,000 and 0.01% of its assets thereafter.
SCHEDULE B
ADMINISTRATIVE SERVICES FEES
Each Series shall pay XXX a fee, computed daily and paid monthly, at the
annual rate of 0.05% of the Series' average daily net assets up to the first
$200,000,000 and 0.01% of its assets thereafter.
