ADMINISTRATION AGREEMENT
This Agreement, dated as of the day of , 1997, made by and between
Metropolitan West Funds, (the "Trust") a business trust operating an open-end,
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"), duly organized and existing under the laws of the
State of Delaware and FPS Services, -Inc. ("FPS"), a corporation duly organized
and existing under the laws of the State of Delaware (collectively, the
"Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue
separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto, and which Schedule "C" may be amended from time to time by mutual
agreement of the Trust and FPS; and
WHEREAS, the Parties desire to enter into an agreement whereby FPS will
provide certain administration services to the Trust on the terms and conditions
set forth in this Agreement; and
WHEREAS, FPS is willing to serve in such capacity and perform such
administrative services under the terms and conditions set forth below; and
WHEREAS, the Trust will provide all necessary information to FPS
concerning the Series so that FPS may appropriately execute its responsibilities
hereunder;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
Section 1. Appointment The Trust hereby appoints FPS as administrator
and FPS hereby-accepts such appointment. The Trust further agrees to appoint FPS
as administrator to any additional Series which, from time to time, may be added
to the Trust.
Section 2. Duties and Obligations of FPS
(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Board of Trustees of the Trust, FPS shall
provide to each of the Series all administrative services set forth in Schedule
"A" attached hereto, which Schedule is incorporated by reference in its entirety
into this Agreement. In addition to the obligations set forth in Schedule "A",
FPS shall (i) provide its own office space, facilities, equipment and personnel
for the performance of its duties under this Agreement; and (ii) take all
actions it deems necessary to properly execute the administrative
responsibilities of the Trust.
(b) So that FPS may perform its duties under the terms of this
Agreement, the Board of Trustees of the Trust shall direct the officers,
investment advisor, distributor, legal counsel, independent accountants and
custodian of the Trust to cooperate fully with FPS and to provide such
information, documents and advice relating to the Trust as is within the
possession or knowledge of such persons provided that no such person need
provide any information to FPS if to do so would, in the reasoned opinion of
counsel to the Trust, result in the loss of any privilege or confidential
treatment with respect to such information. In connection with its duties, FPS
shall be entitled to rely, and shall be held harmless by the Trust when acting
in reasonable reliance upon the instruction, advice or any documents provided by
the Trust to FPS by any of the aforementioned persons. All fees charged by any
such persons shall be deemed an expense of the Trust.
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(c) Any activities performed by FPS under this Agreement shall conform
to the requirements of:
(1) the provisions of the Act and the Securities Act of 1933, as
amended, and of any rules or regulations in force thereunder;
(2) any other applicable provision of state and federal law;
(3) the provisions of the Trust Instrument of the Trust, as
amended from time to time;
(4) any policies and determinations of the Board of Trustees of
the Trust; and
(5) the fundamental policies of the Trust as reflected in its
registration statement filed pursuant to the Act.
FPS acknowledges that all records that it maintains for the Trust are
the property of the Trust and will be surrendered promptly to the Trust upon
written request. FPS will preserve, for the periods prescribed under Rule 3 la-2
under the Act, all such records required to be maintained under Rule 00 x- 0 xx
xxx Xxx.
(x) Nothing in this Agreement shall prevent FPS or any officer thereof
from acting as administrator for any other person, firm or corporation. While
the administrative services supplied to the Trust may be different than those
supplied to other persons, firms or corporations, FPS shall provide the Trust
equitable treatment in supplying services. The Trust recognizes that it will not
receive preferential treatment from FPS as compared with the treatment provided
to other FPS clients. FPS agrees to maintain the records and all other
information of the Trust in a confidential manner and shall not use such
information for any purpose other than the performance of FPS's duties under
this Agreement.
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Section 3. Allocation of Expenses All costs and expenses of the Trust
shall be paid by the Trust including, but not limited to:
a) fees paid to an investment advisor (the ("Advisor");
b) interest and taxes;
c) brokerage fees and commissions;
d) insurance premiums;
e) compensation and expenses of its Trustees who are not
affiliated persons of the Advisor;
f) legal, accounting and audit expenses;
g) custodian and transfer agent, or shareholder servicing agent,
fees and expenses;
h) fees and expenses incident to the registration of the shares
of the Trust under Federal or state securities laws;
i) expenses related to preparing, setting in type, printing and
mailing prospectuses, statements of additional information,
reports and notices and proxy material to shareholders of the
Trust;
j) all expenses incidental to holding meetings of shareholders
and Trustees of the Trust;
k) such extraordinary expenses as may arise, including
litigation, affecting the Trust and the legal obligations
which the Trust may have regarding indemnification of its
officers and directors; and
l) fees and out-of-pocket expenses paid on behalf of the Trust by
FPS.
Section 4. Compensation of FPS The Trust agrees to pay FPS compensation
for its services and to reimburse it for expenses, at the rates and amounts as
set forth in Schedule "B" attached hereto, and as shall be set forth in any
amendments to such Schedule "B" approved by the Trust and FPS. The Trust agrees
and understands that FPS's compensation be comprised of two components and
payable on a monthly basis as follows:
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(a) an asset based fee calculated on the Trust's total assets subject
to a minimum fee calculated on the number of series and classes within each
series, which the Trust hereby authorizes FPS to collect by debiting the Trust's
custody account for invoices which are rendered for the services performed for
the applicable function. The invoices for the services performed will be sent to
the Trust after such debiting with the indication that payment has been made;
and
(b) reimbursement of any out-of-pocket expenses paid by FPS on behalf
of the Trust. which out-of-pocket expenses will be billed to the Trust within
the first ten calendar days of the month following the month in which such
out-of-pocket expenses were incurred. The Trust agrees to reimburse FPS for such
expenses within ten calendar days of receipt of such xxxx.
For the purpose of determining fees payable to FPS, the value of the
Trust's net assets shall be computed at the times and in the manner specified in
the Trust's Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both FPS and the Trust.
Section 5. Duration
(a) The term of this Agreement shall be for a period of two (2) years,
commencing on the date which the Trust's registration statement is declared
effective by the U.S. Securities and Exchange Commission ("Effective Date") and
shall continue thereafter on a year to year term subject to termination by
either Party set forth in (c) below.
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(b) The fee schedule set forth in Schedule "B" attached shall be fixed
for two (2) years commencing on the Effective Date of this Agreement and shall
continue thereafter subject to review and adjustment as determined by the
Parties.
(c) After the initial term of this Agreement, the Trust or FPS may give
written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice, which date shall
not be less than one hundred eighty ( 180) days after the date of receipt of
such notice. Upon the effective termination date, the Trust shall pay to FPS
such compensation as may be due as of the date of termination and shall likewise
reimburse FPS for any out-of-pocket expenses and disbursements reasonably
incurred by FPS to such date.
(d) If a successor to any of FPS's duties or responsibilities under
this Agreement is designated by the Trust by written notice to FPS in connection
with the termination of this Agreement, FPS shall promptly, upon such
termination and at the expense of the Trust, transfer all records which are the
property of the Trust and shall cooperate in the transfer of such records and
its duties and responsibilities under the Agreement.
Section 6. Amendment No provision of this Agreement may be amended or
modified, in any manner except by a written agreement properly authorized and
executed by FPS and the Trust.
Section 7. Applicable Law This Agreement shall be governed by the laws
of the State of California and the exclusive venue of any action arising under
this Agreement shall be Xxxxxxxxxx County, Commonwealth of Pennsylvania.
Section 8. Authority of Signatories The Parties represent and warrant
to each other that the execution and delivery of this Agreement by the
undersigned officer of each Party has been
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duly and validly authorized; and, when duly executed, this Agreement will
constitute a valid and legally binding enforceable obligation of each Party. The
obligations under this Agreement shall be binding upon the assets and property
of the Trust and shall not be binding upon any officer or shareholder of the
Series individually.
Section 9. Limitation of Liability
(a) FPS, its directors, officers, employees, shareholders and agents
shall only be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the performance of this Agreement that
result from willful misfeasance, bad faith, negligence or reckless disregard on
the part of FPS in the performance of its obligations and duties under this
Agreement.
(b) Any person, even though a director, officer, employee, shareholder
or agent of FPS, who may be or become an officer, director, employee or agent of
the Trust, shall be deemed when rendering services to such entity or acting on
any business of such entity (other than services or business in connection with
FPS's duties under the Agreement), to be rendering such services to or acting
solely for the Trust and not as a director, officer, employee, shareholder or
agent of, or under the control or direction of FPS even though such person may
receive compensation from FPS.
(c) Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless FPS, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which FPS may sustain or incur or which may be asserted against FPS by
any person by reason of, or as a result of (i) any action taken or omitted to be
taken by FPS in good
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faith, (ii) any action taken or omitted to be taken by FPS in good faith in
reliance upon any certificate, instrument, order or stock certificate or other
document reasonably believed by FPS to be genuine and signed, countersigned or
executed by any duly authorized person, upon the oral or written instruction of
an authorized person of the Trust or upon the opinion of legal counsel to the
Trust; or (iii) any action taken in good faith or omitted to be taken by FPS in
connection with its appointment in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. Indemnification under this subparagraph
shall not apply, however, to actions or omissions of FPS or its directors,
officers, employees, shareholders or agents in cases of its or their willful
misfeasance, bad faith, negligence or reckless disregard of its or their duties
hereunder.
If a claim is made against FPS as to which FPS may seek indemnity under
this Section, FPS shall notify the Trust promptly after any written assertion of
such claim threatening to institute an action or proceeding with respect thereto
and shall notify the Trust promptly of any action commenced against FPS within
ten (10) days after FPS shall have been served with a summons or other legal
process, giving information as to the nature and basis of the claim. Failure to
notify the Trust shall not, however, relieve the Trust from any liability which
it may have on account of the indemnity under this Section 9(c) if the Trust has
not been prejudiced in any material respect by such failure.
The Trust and FPS shall cooperate in the control of the defense of any
action, suit or proceeding in which FPS's involved and for which indemnity is
being provided by the Trust to FPS. The Trust may negotiate the settlement of
any action, suit or proceeding subject to FPS's approval, which shall not be
unreasonably withheld. FPS shall have the right, but not the
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obligation, to participate in the defense or settlement of a claim or action,
with its own counsel, but any costs or expenses incurred by FPS in connection
with, or as a result of, such participation will be borne solely by FPS.
FPS shall have the right to participate in the defense of an action or
proceeding and to retain its own counsel, and the reasonable fees and expenses
of such counsel shall be borne by the Trust (which shall pay such fees, costs
and expenses at least quarterly) if:
(i) FPS has received an opinion of counsel stating that the use of
counsel chosen by the Trust to represent FPS would present such counsel with a
conflict of interest;
(ii) the defendants in, or targets of, any such action or
proceeding include both FPS and the Trust, and legal counsel to FPS shall have
reasonably concluded that there are legal defenses available to it which are
different from or additional to those available to the Trust or which may be
adverse to or inconsistent with defenses available to the Trust (in which case
the Trust shall not have the right to direct the defense of such action on
behalf of FPS); or
(iii) the Trust shall authorize FPS to employ separate counsel at
the expense of the Trust. Notwithstanding anything to the contrary herein, it is
understood that the Trust shall not, in connection with any action, suit or
proceeding or related action, suit or proceeding, be liable under this Agreement
for the fees and expenses of more than one firm.
(d) The terms of this Section 9 shall survive the termination of this
Agreement.
Section 10. Notices Except as otherwise provided in this Agreement, any
notice or other communication required by or permitted to be given in connection
with this Agreement shall be in writing, and shall be delivered in person or
sent by first class mail or by overnight delivery, postage prepaid to the
respective parties as follows:
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If to Metropolitan West Funds: If to FPS:
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Metropolitan West Funds FPS Services, Inc.
00000 Xxxxxxxx Xxxx., Xxxxx 0000 3200 Horizon Drive, X.X. Xxx 00000
Xxx Xxxxxxx, XX 00000 King of Prussia, PA 19406-0903
Attention: Xxxxx X. Dubchansky Attention: Xxxxxxx X. Xxxxx
Chief Executive Officer and Trustee President
Section 11. If any part, term or provision of this Agreement is held by
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid, provided that the basic agreement is not thereby
substantially impaired.
Section 12. This Agreement shall extend to and shall be binding upon
the Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Trust without the written consent
of FPS or by FPS without the written consent of the Trust, authorized or
approved by a resolution of their respective Boards of Directors or Trustees.
Section 13. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 14. This Agreement shall be governed by the laws of the State
of California and the exclusive venue of any action arising under this Agreement
shall be Xxxxxxxxxx County, Commonwealth of Pennsylvania.
Section 15. Section Headings Section and paragraph headings are for
convenience only and shall not be construed as part of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of eight typewritten pages, together with Schedules "A", "B" and "C,"
to be signed by their duly authorized officers as of the day and year first
above written.
Metropolitan West Funds FPS Services. Inc.
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By: Xxxxx X. Dubchansky By: Xxxxxxx X. Xxxxx
Chief Executive Officer and Trustee President
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SCHEDULE "A"
FUND ADMINISTRATION SERVICES
FOR
METROPOLITAN WEST FUNDS
I. Regulatory Compliance
A. Federal Compliance - Investment Company Act of 1940
1. Review, report and renew
a. investment advisory contracts
b. fidelity bond
c. underwriting contracts
d. distribution (12b-1) plans
e. administration contracts
f. accounting contracts
g. custody administration contracts
h. transfer agent and shareholder services
2. Filings
a. N-SAR (semi-annual report)
b. N-1A (prospectus), post-effective amendments
and supplements ("stickers")
c. 24f-2 indefinite registration of shares
d. filing fidelity bond under 17g-1
e. filing shareholder reports under 30(b)2-1
3. Annual up-dates of biographical information and
questionnaires for Directors/Trustees and Officers
II. Corporate Business and Shareholder/Public Information
A. Directors/Trustees/Management
1. Preparation of meetings
a. agendas - all necessary items of compliance
b. arrange and conduct meetings
c. prepare minutes of meetings
d. keep attendance records
e. maintain corporate records/ minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
C. Maintain Corporate Calendars and Files
D. Release Corporate Information
1. To shareholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
c. changes to prospectus
d. letters from management
e. Funds' performance
4. Respond to:
a. financial press
b. miscellaneous shareholders inquiries
c. industry questionnaires
E. Communications to Shareholders
1. Coordinate printing and distribution of annual,
semi-annual reports, and prospectus
III. Financial and Management Reporting
A. Income and Expenses
1. Monitoring of expense accruals, expense payments and
expense caps
2. Approve and coordinate payment of expenses
3. Establish Funds' operating expense checking account
and perform monthly reconciliation of checking account.
4. Calculation of advisory fee, 12b-1 fee and
reimbursements to Fund (if applicable)
5. Authorize the recording and amortization of
organizational costs and pre-paid expenses (supplied by
advisor), for start-up funds and reorganizations
6. Calculation of average net assets
7. Expense ratios calculated
B. Distributions to Shareholders
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1. Calculations of dividends and capital gain
distributions (in conjunction with the Fund and their
auditors)
a. compliance with income tax provisions
b. compliance with excise tax provisions
c. compliance with Investment Company Act of
1940
2. Book/Tax identification and adjustments at required
distribution periods (in conjunction with the Funds
and their auditors)
C. Financial Reporting
1. Liaison between Fund management, independent auditors
and printers for semi-annual and annual shareholder
reports
2. Prepare of semi-annual and annual reports to
shareholders
3. Preparation of semi-annual and annual N-SAR's
(Financial Data)
4. Preparation of Financial Statements for required
SEC Post-Effective filings (if applicable)
5. Preparation of required performance graph (annually)
(based on advisor supplied indices)
D. Subchapter M Compliance (monthly)
1. Asset diversification test
2. Short/short test
E. Other Financial Analyses
1. Upon request from Fund management, other budgeting and
analyses can be constructed to meet the Fund's
specific needs (additional fees may apply)
2. Sales information, portfolio turnover (monthly)
3. Work closely with independent auditors on return of
capital presentation, excise tax calculation
4. Performance (total return) calculation (monthly)
5. 1099 Miscellaneous - prepared and filed for Directors/
Trustees (annual)
6. Analysis of interest derived from various Government
obligations (annual) (if interest income was
distributed in a calendar year)
7. Analysis of interest derived by state (for municipal
bond funds)
8. Review and characterize 1099- Dividend Forms
9. Prepare and coordinate with printer and FPS Account
Management with printing and mailing of 1099 Dividend
Insert cards
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification entries to ensure
proper update
2. Perform various reviews to ensure accuracy of
Accounting (the monthly expense analysis), and Custody
(review of daily bank statements to ensure accurate
expense movements for expense payments)
3. Review accruals and expenditures (where applicable)
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G. Preparation and distribution of monthly operational reports to
management by 10th Business Day
1. Management Statistics (Recap)
a. portfolio summary
b. book gains/losses/per share
c. net income, book income/per share
d. capital stock activity
e. distributions
2. Performance Analysis
a. total return
b. monthly, quarterly, year to date, average
annual returns
3. Expense Analysis
a. schedule
b. summary of due to/from advisor
c. expenses paid
d. expense cap
e. accrual monitoring
f. advisory fee
4. Short-Short Analysis
a. short-short income
x. xxxxx income (components)
5. Portfolio Turnover
a. market value
b. cost of purchases
c. net proceeds of sales
d. average market value
6. Asset Diversification Test
x. xxxxx assets
b. non-qualifying assets
7. Activity Summary
a. shares sold, redeemed and reinvested
b. change in investment
H. Provide rating agencies statistical data as requested
(monthly/quarterly)
I. Standard schedules for Board Package (Quarterly)
1. Activity Summary (III-G-7 from above)
2. Expense analysis
3. Other schedules can be provided (additional fees
may apply)
IV. Blue Sky Administration
A. Sales Data
1. Receive daily sales figures through SUNGARD interface
with Price Waterhouse Blue 2 System.
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2. Receive daily sales figures broken down by state from
Xxxxxxx Xxxxxx (if applicable).
3. Produce daily warning report for sales in excess of
pre-determined percentage.
4. Analysis of all sales data to determine trends within
certain states.
B. Filings
1. Produce and mail the following required filings:
a. Initial Filings - produce all required forms
and follow-up on any comments, including
notification of SEC Effectiveness.
b. Renewals - produce all renewal documents and
mail to states, includes follow-up to ensure
all is in order to continue selling in
states.
c. Sales Reports - produce all relevant sales
reports for the states and complete necessary
documents to properly file sales reports with
states.
d. Annual Report Filings - file copies of all
annual reports with states.
e. Prospectus Filings - file all copies of
Definitive SAI & Prospectuses with the
states.
f. Post-Effective Amendment Filing - file all
Post-Effective Amendments with the states, as
well as, any other required documents.
2. On demand additional states - complete filing for any
states that you would like to add. This includes all
of the items in 1 (A).
3. Amendments to current permits - file in a timely
manner any amendment to registered share amounts.
4. Update and file hard copy of all data pertaining to
individual permits.
C. Consulting and Analysis - We will supply you with the most
current fee structure for each state and help you decide what
course of action to take in each state to minimize the amount
of money spent on Blue Sky Registration.
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SCHEDULE "B"
ADMINISTRATION SERVICES FEE SCHEDULE
FOR
METROPOLITAN WEST FUNDS
This Fee Schedule is fixed for a period of two (2) years from the
Effective Date as that term is defined in the Agreement.
I. Corporate/Financial Administration
Subject to a minimum annual fee of $55,000 for the initial Series'
first class of shares and $12,000 for each additional separate series
or class thereof, the Trust agrees to pay FPS each month an asset based
fee calculated at the annual rate of:
.0015 On the First $ 50 Million of the Average Net Assets of the Trust;
.0010 On the Next $ 50 Million of the Average Net Assets of the Trust;
and .0005 Over $100 Million of the Average Net Assets of the Trust
II. Blue Sky Administration
$150 per permit/per state/per year*
* Pursuant to our letter dated March 6, 1997, fees for Blue Sky
Administration have been waived.
III. Out-of-Pocket Expenses
The Funds will reimburse FPS Services, Inc. monthly for all reasonable
out-of-pocket expenses, including telephone, postage, overdraft
charges, XXXXX filings, Fund/SERV and Networking expenses,
telecommunications, special reports, record retention, special
transportation costs, copying and sending materials to auditors and/or
regulatory agencies, as incurred and approved.*
* FPS will provide the Funds with a $1,000 per quarter credit for
out-of-pocket expenses.
SCHEDULE "C"
Identification of Series
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
"Metropolitan West Funds"
1. Metropolitan West Total Return Bond Fund
2. Metropolitan West Low Duration Bond Fund
3. Metropolitan West Short Term Investment Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
