Exhibit (h)(3)
FUND ACCOUNTING SERVICE AGREEMENT
BETWEEN
XXXXXX XXXXXX & COMPANY, INC.
AND
XXXXXX XXXXXX SELECT FUND, INC.
This Fund Accounting Service Agreement is made this 1st day of July, 2005
(the "Agreement"), between Xxxxxx Xxxxxx Select Fund, Inc., a Maryland
corporation (the "Fund"), and Xxxxxx Xxxxxx & Company, Inc. ("Xxxxxx Xxxxxx"), a
brokerage firm.
WHEREAS, the Fund is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
with distinct series of shares of common stock (each a "Portfolio" and
collectively the "Portfolios"); and
WHEREAS, Xxxxxx Xxxxxx is a brokerage firm, and is capable of providing,
among other things, record keeping and fund accounting services in accordance
with the 1940 Act, and the Securities Exchange Act of 1934 (the "1934 Act"), and
the current prospectus of the Fund as filed with the Securities and Exchange
Commission under the Securities Act of 1933 (the "1933 Act"); and
WHEREAS, the Fund wishes to retain Xxxxxx Xxxxxx to provide fund accounting
services for its investment portfolios listed on Exhibit A attached hereto and
made a part hereof, as such Exhibit A may be amended from time to time, and
Xxxxxx Xxxxxx wishes to furnish such services;
NOW, THEREFORE, Xxxxxx Xxxxxx and the Fund in consideration of the mutual
agreements contained herein agree as follows:
1. SERVICES. Xxxxxx Xxxxxx agrees to provide all mutual fund accounting
services to the Fund on behalf of each Portfolio required to conduct the
business of the Fund or otherwise required under the 1940 Act, except such
services as are normally performed by the investment adviser, the Fund's
independent accountant, and the officers of the Fund. Such services shall
include, without limitation, the following:
A. Portfolio Accounting Services:
------------------------------
(1) Maintain each Portfolio's records on a trade date basis using
security trade information communicated on a timely basis from
the Fund's investment adviser.
(2) Update each Portfolio's records, including share or face
positions, with the effect of capital changes and corporate
action announcements as known. Obtain information as to these
announcements by performing the following:
(a) Subscribe to announcement information services that Xxxxxx
Xxxxxx deems sufficient to remain current with industry
standards. Xxxxxx Xxxxxx will regularly review and update
such subscriptions and notify its fund customers of the
changes in the information services it is using. Xxxxxx
Xxxxxx will subscribe to additional information services
that are requested in writing by the Fund, with information
from that service used specifically and solely for the
Fund's portfolio accounting and with the expense of that
service charged directly to the Fund.
(b) Receive information regarding such announcements from the
Fund's investment adviser.
(3) For each security identified by the Fund on behalf of each
Portfolio for pricing, obtain a price for each valuation date
from a pricing source approved by the Fund's Board of Trustees.
Apply the price to the security's portfolio position to determine
its market value as of valuation day. In the event that a price
for a given security identified for pricing is not available from
the normal pricing sources for a given valuation date, obtain a
price from alternative source or sources identified by the Fund's
investment adviser.
(4) For each security not identified for pricing, determine its
market value as of each valuation date using a method identified
by the Fund from among the following:
(a) Market value equals book value;
(b) Market value equals face value;
(c) Market value equals book value less any amortization balance
or plus any accretion balance (amortized cost method);
(d) Another method approved by the Fund's Board of Trustees or
its Valuation Committee.
(5) Identify interest and dividend accrual balances as of each
valuation date and identify gross earnings on investments for
each accounting period. Determine these amounts using:
(a) The security characteristics communicated from the Fund's
investment adviser at the time of purchase;
(b) Corrections to security characteristics subsequently
provided in writing by the Fund's investment adviser or
subsequently identified by the Fund's custodian as a result
of collection activity and approved in writing by the Fund's
investment adviser;
(c) Published corporate action announcements available to the
public;
(d) For variable and floating rate notes, rate information from
sources identified and approved by the Fund's investment
adviser.
(6) Determine accretion and amortization balances on each valuation
date for securities which are purchased at a premium or discount
(original issue and secondary market) and which are identified in
the Fund's accounting policy established by the Fund as requiring
that accounting treatment. Determine these amounts using purchase
price and security characteristics communicated from the Fund's
investment adviser at the time of purchase or using corrections
to the information subsequently provided in writing by the Fund's
investment adviser. For those securities identified for this
accounting treatment, include the daily amortization or accretion
amount as a component of gross earnings on investments.
(7) For original issue discount (OID) debt instruments to which the
Internal Revenue Service OID rules apply, calculate adjusted
issue price as of each valuation date. For OID bonds also
calculate the ratable position of the original issue discount for
the accounting period and include that amount as part of gross
income on investments for that period. Coordinate the accounting
for original issue discount with the accounting for market
premium or discount (Section 5 above) for those OID debit
instruments purchased on the secondary market at a price other
than OID adjusted issue price. Perform this calculation using the
following information communicated from the Fund's investment
adviser at the time of purchase.
(a) Whether the debt security is one to which the Internal
Revenue Service OID rules apply;
(b) the original issue date;
(c) the original issue price;
(d) the redemption value;
(e) the maturity date;
(f) payment dates, if on irregular intervals or payment start
date and payment cycle, if on regular intervals; and
(g) the original issue yield to maturity.
(8) Determine gain/loss on security sales and identify them as to
short or long term status under the Internal Revenue Code, using
the tax lot relief policy elected by the Fund or recognizing
sales from lots that may be specifically identified by the Fund's
investment adviser at the time trade details are communicated.
Account for periodic distributions of gain to shareholders and
maintain undistributed gain or loss balances as of each valuation
date.
(9) Provide the portfolio-based reports requested in writing by the
Fund or the Fund's investment adviser in a format as agreed to
from time to time. Issue requested reports to the recipient and
with the frequency identified in the request.
(10) Compare portfolio information in the Fund accounting system with
corresponding information in the Fund's custody records. Report
to the Fund any outstanding receivables of each Portfolio aged
more than 30 days beyond contractual payment date.
B. Expense Accrual and Payment Services:
-------------------------------------
(1) For each valuation date, calculate the expense accrual amounts as
directed by each Portfolio as to methodology, rate, or dollar
amount.
(2) Upon receipt of written authorization from the Fund's
Administrator, initiate payment of each Portfolio's expenses by
the Fund's custodian.
(3) Account for each Portfolio's expenditures and maintain expense
accrual balances at the level of accounting detail specified by
the Fund.
(4) Provide accounting information to the Fund's Administrator or
designated expense control agent from the Fund's accounting
records as to actual expense activity versus expense accrual
amounts for specified time periods.
(5) Maintain accounting control over payment checks issued and
outstanding.
C. Fund Valuation and Financial Reporting Services:
------------------------------------------------
(1) Account for share purchases, sales, exchanges, transfers,
dividend reinvestment, and other share activity as reported on a
timely basis by the Fund's transfer agent.
(2) Determine net investment income (earnings) as of each valuation
date. Account for periodic distributions of earnings to
shareholders and maintain undistributed net investment income
balances as of each valuation date.
(3) Maintain a general ledger in the form defined by the Fund and as
of each valuation date produce the set of financial statements in
the format agreed to from time to time. Issue the statements to
the recipients identified in writing by the Fund on behalf of
each Portfolio and with the specified frequency.
(4) For each day the Fund is open as defined in the Fund's
prospectus, determine net asset value according to the accounting
policies and procedures set forth in the Fund's prospectus.
(5) Calculate per share net asset value, per share net earnings, and
other per share amounts reflective of Fund and Portfolio
operation at such time as required by the nature and
characteristics of the Fund and each Portfolio. Perform the
calculations using the number of shares outstanding reported by
the Fund's transfer agent to be applicable at the time of
calculation.
(6) Communicate per share price for each valuation date to
newspapers, the Fund's transfer agent, the Fund's investment
adviser, and other parties as specified by the Fund's
Administrator.
(7) Prepare a monthly proof package of reports in the format agreed
to from time to time which documents the adequacy of accounting
detail to support month-end ledger balances and reports.
Distribute this package to the recipients identified in writing
by the Fund behalf of each Portfolio.
D. Tax Accounting Services:
------------------------
(1) Maintain tax accounting records for each Portfolio, for expense
activity and for shareholder distribution activity sufficient to
support federal and state tax reporting required for IRS-defined
regulated investment companies.
(2) Maintain tax lot detail for each Portfolio.
(3) Calculate taxable gain/loss on security sales using the tax lot
relief method defined by the Fund and recognizing sales from lots
that are specifically identified.
(4) Calculate and report the taxable components of income and capital
gains distributions to the Fund's transfer agent to support tax
reporting to the shareholders.
(5) Prepare all Federal and State tax returns.
E. Compliance Control Services:
----------------------------
(1) Make the Fund's accounting records and the requested
portfolio-based reporting identified above available to the
investment adviser upon request in a timely fashion so as to
support their compliance-monitoring review. Provide the
compliance reporting in the format requested by the Fund. Issue
the requested reports to the recipients and with the frequency
identified in this request.
(2) Make the Fund's accounting records and the requested
portfolio-based and compliance reporting identified above
available upon request in a timely fashion, to the Fund's
financial accountant, so as to support the Fund's compliance with
all applicable regulatory filings including N-1A filings, N-SAR
filing and any applicable IRS filings, and preparation of the
Fund's financial statements.
(3) Make the Fund's accounting records identified above available
upon request to Securities and Exchange Commission
representatives, to the Fund's auditors and to designated Fund
agents for their review as to the propriety of the Fund's
accounting records and the Fund's operations.
(4) Maintain at Xxxxxx Xxxxxx'x expense, and preserve at the Fund's
expense in accordance with the 1940 Act and the rules thereunder,
all such accounting records, which shall at all times be the
property of the Fund.
2. COMPENSATION. Xxxxxx Xxxxxx shall be compensated for providing the
above-referenced services for each Portfolio of the Fund in accordance with the
Fee Schedule listed on Exhibit B, attached hereto and made a part hereof, as
such Exhibit B may be amended from time to time.
3. RESPONSIBILITY OF XXXXXX XXXXXX & Company, Inc. Xxxxxx Xxxxxx shall be
held to the exercise of reasonable care in carrying out the provisions of this
Agreement, but shall be indemnified by and shall be without liability to the
Fund for any action taken or omitted by it in good faith without negligence or
willful misconduct. Xxxxxx Xxxxxx shall be entitled to rely on and may act upon
the reasonable advice of the Fund's auditors or of counsel (who may be counsel
of the Fund) on all matters, and shall not be liable for any action reasonably
taken or omitted pursuant to such advice.
In addition, Xxxxxx Xxxxxx shall not be liable for any loss of data or any
delay in its performance under this Agreement to the extent such loss or delay
is due to causes beyond its control, including but not limited to: acts of God,
interruption in, loss of or malfunction in power, significant computer hardware
or systems software or telephone communication service; acts of civil or
military authority; sabotage; war or civil commotion; fire; explosion; or strike
beyond delivery of minimum critical services. Xxxxxx Xxxxxx shall use its best
efforts to minimize any such loss or delay by all practical means and to replace
any lost data promptly. Xxxxxx Xxxxxx agrees not to discriminate against the
Fund in favor of any other customer of Xxxxxx Xxxxxx in making computer time and
its personnel available to input and process the transactions hereunder when a
loss or delay occurs.
4. AMENDMENTS. Xxxxxx Xxxxxx and the Fund shall regularly consult with each
other regarding Xxxxxx Xxxxxx'x performance of its obligations hereunder. Any
change in the Fund's registration statements under the Securities Act of 1933,
as amended, or the 1940 Act or in the forms relating to any plan, program or
service offered by the current prospectus of the Fund which would require a
change in Xxxxxx Xxxxxx'x obligations hereunder shall be subject to Xxxxxx
Xxxxxx'x approval, which shall not be unreasonably withheld. Neither this
Agreement nor any provisions hereof may be changed, waived, discharged, or
terminated orally, but only by written instrument which shall make specific
reference to this Agreement and which shall be signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
5. TERM OF AGREEMENT. This Agreement shall become effective as of its
execution. Thereafter, the Agreement will be renewed automatically on an annual
basis; provided, however, that this Agreement may be terminated at any time by
either party upon at least sixty days' prior written notice to the other party
and provided further that this Agreement may be terminated immediately at any
time for cause either by the Fund or Xxxxxx Xxxxxx. Any such termination shall
not affect the rights and obligations of the parties under paragraph 3 hereof.
In the event that the Fund designates a successor to any of Xxxxxx Xxxxxx'x
obligations hereunder, Xxxxxx Xxxxxx shall, at the expense and direction of the
Fund, transfer to such successor all relevant books, records and other data of
the Fund established or maintained by Xxxxxx Xxxxxx hereunder and shall
cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Xxxxxx Xxxxxx'x cognizant personnel in the
establishment of books, records and other data by such successor. Historical
records will be transferred in accordance with all then current laws and
industry regulations.
6. MISCELLANEOUS. Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof. This
Agreement shall be construed and enforced in accordance with and governed by the
laws of the Commonwealth of Massachusetts. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
7. MATTERS RELATING TO THE FUND AS A MASSACHUSETTS BUSINESS TRUST. It is
expressly agreed that the obligations of the Fund hereunder shall not be binding
upon any of the Trustees, shareholders, nominees, officers, agents or employees
of the Fund personally, but shall bind only the trust property of the Fund. The
execution and delivery of this Agreement have been authorized by the Board, and
this Agreement has been signed and delivered by an authorized officer of the
Fund, acting as such, and neither such authorization by the Board nor such
execution and delivery by such officer 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 trust property of the Fund as provided in the Fund's
Declaration of Trust.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
XXXXXX XXXXXX & COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Assistant Treasurer and Assistant
Secretary
XXXXXX XXXXXX SELECT FUND, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary and Assistant Treasurer
EXHIBIT A
---------
THIS EXHIBIT A, dated as of July 1, 2005, is Exhibit A to that certain Fund
Accounting Service Agreement between Xxxxxx Xxxxxx & Company, Inc. and Xxxxxx
Xxxxxx Select Fund, Inc.
PORTFOLIOS
----------
Regions Xxxxxx Xxxxxx Select LEADER Short Term Bond Fund
Regions Xxxxxx Xxxxxx Select Intermediate Bond Fund
Regions Xxxxxx Xxxxxx Select High Income Fund
EXHIBIT B
---------
THIS EXHIBIT B, dated as of July 1, 2005, is Exhibit B to that certain Fund
Accounting Service Agreement between Xxxxxx Xxxxxx & Company, Inc. and Xxxxxx
Xxxxxx Select Fund, Inc.
ANNUALIZED % OF AVERAGE
PORTFOLIO DAILY NET ASSETS
--------------------------------------------------------------------------------
Regions Xxxxxx Xxxxxx Select LEADER Short Term Bond Fund 0.030%
Regions Xxxxxx Xxxxxx Select Intermediate Bond Fund 0.030%
Regions Xxxxxx Xxxxxx Select High Income Fund 0.030%
Fund Accounting Fees include Daily Valuation and Financial Statement
Preparation.
