FORM OF FUND ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT initially made as of _______________, 1998,
in Denver, Colorado, by and between Founders Funds, Inc., a
Maryland corporation (the "Fund"), and Founders Asset
Management LLC, a Delaware limited liability company
(hereinafter referred to as "Founders").
WHEREAS, the Fund is engaged in business as an open-end
management investment company, is registered as such under
the Investment Company Act of 1940, as amended (the "Act"),
and is authorized to issue shares representing interests in
the separate portfolios of investments listed on Appendix 1
to this Agreement, which Appendix 1 is incorporated into
this Agreement by this reference (the "Portfolios"); and
WHEREAS, Founders is registered as an investment
adviser under the Investment Advisers Act of 1940, and
engages in the business of acting as investment adviser and
providing certain other administrative, shareholder
servicing, accounting, and record keeping services to the
Fund; and
WHEREAS, the Fund desires to retain Founders to render
certain additional administrative, accounting, and
recordkeeping services (the "Services") in the manner and on
the terms and conditions hereinafter set forth; and
WHEREAS, Founders desires to be retained to perform
such services on said terms and conditions;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants hereinafter contained, the Fund and
Founders agree as follows:
1. SERVICES. The Fund hereby retains Founders to provide
the following Services to the Portfolios:
A. ACCOUNTING SERVICES.
(1) Prepare and maintain, according to generally
accepted accounting principles, general ledgers and
financial statements of the Fund and the Portfolios,
including the following:
(a) DAILY PREPARATION AND MAINTENANCE:
(i) Detailed transaction ledgers listing all
transactions affecting the Fund;
(ii) Trial balance listing by account the
beginning balance, all debits and credits, and the
ending balance;
(iii) Balance sheet, income statement and
a portfolio listing summarizing net assets, net
income, capitalization, and realized and
unrealized gains and losses.
(b) MONTHLY PREPARATION AND MAINTENANCE:
Statements of assets and liabilities,
operations and changes in net assets, statements
of gains and losses and statements of sales and
redemptions.
(c) SEMI-ANNUAL PREPARATION AND MAINTENANCE:
The same ledgers as are prepared monthly,
plus per share statements, appreciation/
depreciation statements, and fund share activity
statements.
(2) Obtain such data from the Fund's transfer agent,
custodian, and investment adviser as is necessary to
calculate the net asset value of each Portfolio in the
manner, and at such times and frequencies, as is required by
the Act and by the Fund's prospectus and statement of
additional information.
B. CONTROL AND COMPLIANCE.
(1) Audit certain data and transactions of the
Fund's custodian, transfer agent and investment adviser by
engaging in the following:
(a) DAILY AUDIT/RECONCILIATION PROCEDURES:
(i) Reconciliation of the custodian's trust
account activity including cash movement, cash
balances, settlement of security purchases and
sales, and settlement of Fund share purchases and
sales;
(ii) Reconciliation of the transfer agent's
activity in regard to Fund share movements and "as
of" transactions;
(iii) Monitoring of the investment
adviser's trading activity, including compliance
and brokerage allocations.
(b) MONTHLY AUDIT/RECONCILIATION PROCEDURES:
(i) Audit of the custodian's holding of Fund
assets and assets in transit, audit of the
custodian's fees charged to the Fund, and audit of
credits for the Fund's compensating balances;
(ii) Audit of the transfer agent's activity
concerning dividend and redemption payouts and of
the transfer agent's fees charged to the Fund;
(iii) Audit of the investment adviser's
fees charged to the Funds, including servicing and
accounting fees.
(c) MONITOR COMPLIANCE WITH THE ACT:
(i) Daily monitoring of the investment adviser's
trading activity, including compliance and
brokerage allocation and commissions;
(ii) Periodic monitoring of disclosures and record
keeping.
C. REPORTING AND ANALYSIS.
(1) Provide regulatory (Securities and Exchange
Commission), shareholder and other miscellaneous
reporting and, in particular, prepare and maintain the
following required books, records, and other documents:
(a) journals containing daily itemized
records of all Portfolio securities purchases and
sales, receipts and deliveries of securities,
receipts and disbursements of cash, and all other
debits and credits, in the form required by Rule
31a-1(b)(1) under the Act;
(b) general and auxiliary ledgers reflecting
all asset, liability, reserve, capital, income and
expense accounts, in the form required by Rules
31a-1(b)(1)(i) - (iii) under the Act;
(c) a securities record or ledger reflecting
separately for each portfolio security as of trade
date all "long" and "short" positions, if any,
carried by the Portfolios for the accounts of the
Portfolios, and showing the location of all
securities long and the off-setting positions of
all securities short, in the form required by Rule
31a-1(b)(3) under the Act;
(d) a record of all Portfolio purchases or
sales, in the form required by Rule 31a-1(b)(6)
under the Act;
(e) a record of all puts, calls, spreads,
straddles and other options, if any, in which the
Portfolios have any direct or indirect interest or
which the Portfolios have granted or guaranteed,
in the form required by Rule 31a-1(b)(7) under the
Act;
(f) a record of the proof of money balances
in all ledger accounts maintained pursuant to this
Agreement, in the form required by Rule 31a-
1(b)(8) under the Act;
(g) price make-up sheets and such records as
are necessary to reflect the determination of the
Portfolios' net asset values;
(h) Regulatory: semi-annual and annual Form
N-SARs and quarterly Form 13-Fs.
(i) Shareholder: semi-annual and annual
statements of assets and liabilities, operations,
changes in net assets, per share data,
appreciation/depreciation, and share activity; and
(j) Media: weekly, monthly, quarterly, semi-
annual and annual statistical data of the Funds,
to be provided to newsletters and other investment
industry publications such as ICI, Xxxxxxx, Lipper
and the NASD.
The foregoing books and records shall be maintained and
preserved by Founders in accordance with and for the time
periods specified by applicable rules and regulations,
including Rule 31a-2 under the Act. All such books and
records shall be the property of the Fund and, upon request
therefor, Founders shall surrender to the Fund such of the
books and records so requested.
2. STAFF MAINTENANCE. Founders shall, at its own expense,
maintain such staff and employ or retain such personnel and
consult with such other persons as it shall from time to
time determine to be necessary or useful to the performance
of its obligations under this Agreement. Without limiting
the generality of the foregoing, such staff and personnel
may include officers of Founders and persons employed or
otherwise retained by Founders to provide or assist in
providing services to the Fund other than those Services to
be provided pursuant to this Agreement.
3. FACILITIES. Founders shall, at its own expense,
provide such office space, facilities and equipment
(including, but not limited to, computer equipment,
communication lines, and supplies) and such clerical help
and other services as shall be necessary to provide the
Services to the Portfolios. In addition, Founders may
arrange on behalf of the Fund to obtain pricing information
regarding the Portfolios' investment securities from such
company or companies as are approved by a majority of the
Fund's board of directors. The Fund shall be financially
responsible to such company or companies for the reasonable
cost of providing such pricing information.
4. FUND INFORMATION. The Fund will, from time to time,
furnish or otherwise make available to Founders such
information relating to the business and affairs of the
Portfolios as Founders may reasonably require in order to
discharge its duties and obligations hereunder.
5. FEES. For the services rendered and facilities
furnished by Founders under this Agreement, the Fund shall
pay to Founders a fee computed on a daily basis and paid on
a monthly basis. The fee shall be computed at the annual
rate of 0.06% of the daily net assets of the Fund from $0 to
$500 million and at the annual rate of 0.02% of the daily
net assets of the Fund in excess of $500 million. Founders
shall also be reimbursed for all out-of-pocket expenses
incurred by it in performing its services pursuant to the
Agreement. For purposes of each daily calculation of this
fee, the most recently calculated net asset value of the
Fund, as determined by a valuation made in accordance with
the Fund's procedure for calculating Portfolio net asset
value as described in the Fund's prospectus and/or statement
of additional information, shall be used. During any period
when the determination of the Fund's net asset value is
suspended by the directors of the Fund, the net asset value
of the Fund as of the last business day prior to such
suspension shall, for the purpose of this Paragraph 5, be
deemed to be the net asset value at the close of each
succeeding business day until it is again determined.
6. ACCESS TO FOUNDERS' RECORDS. Founders will permit
representatives of the Fund, including the Fund's
independent auditors, to have reasonable access to the
personnel and records of Founders in order to enable such
representatives to monitor the quality of services being
provided and the level of fees due Founders pursuant to this
Agreement. In addition, Founders shall promptly deliver to
the board of directors of the Fund such information as may
reasonably be requested from time to time to permit the
board of directors to make an informed determination
regarding continuation of this Agreement and the payments
contemplated to be made hereunder.
7. LIABILITY. Founders shall not be liable to the Fund
for any action taken or omitted to be taken by Founders or
its employees, agents or contractors in carrying out the
provisions of this Agreement if such action was taken or
omitted in good faith and without gross negligence or
willful misconduct on the part of Founders or its employees,
agents or contractors.
8. INDEMNIFICATION BY THE FUND. The Fund shall indemnify
Founders and hold it harmless from and against any and all
losses, damages, and expenses, including reasonable
attorneys' fees and expenses, incurred by Founders which
result from: (i) any claim, action, suit or proceeding in
connection with Founders' entry into or performance of this
Agreement; (ii) any action taken or omission to act
committed by Founders in the performance of its obligations
hereunder; or (iii) any action of Founders upon instructions
reasonably believed in good faith by it to have been
executed by a duly authorized officer or representative of
the Fund; PROVIDED, HOWEVER, that Founders shall not be
entitled to such indemnification in respect of actions or
omissions constituting gross negligence or willful
misconduct on the part of Founders or its employees, agents
or contractors. Before confessing any claim against it
which may be subject to indemnification by the Fund
hereunder, Founders shall give the Fund reasonable
opportunity to defend against such claim in its own name or
in the name of Founders.
9. INDEMNIFICATION BY FOUNDERS. Founders shall indemnify
the Fund and hold it harmless from and against any and all
losses, damages and expenses, including reasonable
attorneys' fees and expenses, incurred by the Fund which
result from: (i) Founders' lack of good faith in performing
its obligations hereunder; or (ii) the gross negligence or
willful misconduct of Founders or its employees, agents or
contractors in connection herewith. The Fund shall not be
entitled to such indemnification in respect of actions or
omissions constituting gross negligence or willful
misconduct on the part of the Fund or its employees, agents
or contractors other than Founders, unless such gross
negligence or willful misconduct results from or is
accompanied by gross negligence or willful misconduct on the
part of Founders, any affiliated person of Founders, or any
affiliated person of an affiliated person of Founders.
Before confessing any claim against it which may be subject
to indemnification hereunder, the Fund shall give Founders
reasonable opportunity to defend against such claim in its
own name or in the name of the Fund.
10. EFFECT OF AGREEMENT. Nothing herein contained shall be
deemed to require the Fund to take any action contrary to
its Articles of Incorporation or its By-Laws or any
applicable law, regulation or order to which it is subject
or by which it is bound, or to relieve or deprive the
directors of the Fund and the Fund of their overall
responsibility for and control of the conduct of the
business and affairs of the Fund.
11. TERM AND TERMINATION. This Agreement shall remain in
effect until May 31, 1998 and from year to year thereafter
provided such continuance is approved at least annually by
the vote of a majority of the directors of the Fund who are
not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party, which vote must be
cast in person at a meeting called for the purpose of voting
on such approval; provided, however, that (a) the Fund may,
at any time and without the payment of any penalty,
terminate this Agreement upon ninety days written notice to
Founders; (b) the Agreement shall immediately terminate in
the event of its assignment (within the meaning of the Act
and the Rules thereunder) unless the board of directors of
the Fund approves such assignment; and (c) Founders may
terminate this Agreement without payment of penalty on
ninety days written notice to the Fund. Any notice under
this Agreement shall be given in writing, addressed and
delivered, or mailed post-paid, to the other party at the
principal office of such party.
12. APPLICATION OF LAW. This Agreement shall be construed
in accordance with the laws of the State of Colorado and the
applicable provisions of the Act. To the extent the
applicable law of the State of Colorado or any of the
provisions herein conflict with the applicable provisions of
the Act, the latter shall control.
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement on the day and year first above
written.
FOUNDERS FUNDS, INC.
By:__________________________
_______________, President
FOUNDERS ASSET MANAGEMENT LLC
By:__________________________
_______________, President
APPENDIX 1
TO
FUND ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT
Founders Discovery Fund
Founders Frontier Fund
Founders Passport Fund
Founders International Equity Fund
Founders Special Fund
Founders Worldwide Growth Fund
Founders Growth Fund
Founders Blue Chip Fund
Founders Balanced Fund
Founders Government Securities Fund
Founders Money Market Fund
