SUB-ADMINISTRATION AGREEMENT
SUB-ADMINISTRATION AGREEMENT made this 26th day of February, 1998 between
Waterhouse Securities, Inc. ("Waterhouse"), a Delaware corporation, and Funds
Distributor, Inc. ("FDI"), a Massachusetts corporation.
WHEREAS, Waterhouse provides certain administrative services for certain
open-end management investment companies registered under the Investment Company
Act of 1940, as amended ("the 1940 Act") (the "Company"), and to certain
portfolios of the Company (each a "Portfolio", collectively, the "Portfolios")
as listed on Schedule A, as such Schedule shall be automatically amended from
time to time, subject to Board of Director approval;
WHEREAS, Waterhouse serves as administrator for the Company pursuant to an
Administration Agreement dated as of February 26, 1998, as amended from time to
time;
WHEREAS, Waterhouse desires to retain FDI to assist it in performing
administrative services with respect to the shares of the common stock (the
Shares) of the Company and FDI is willing to perform such services on the terms
and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual agreements herein contained, the
parties agree as follows:
1. Services Provided by FDI. FDI will assist Waterhouse by providing
services to the Portfolios of the Company, as listed in Exhibit A.
2. Services Provided by Waterhouse. In furtherance of the
responsibilities under this Agreement Waterhouse will:
(a) cause the Company's service providers to furnish any and all
information and assist FDI in taking any other actions that may be reasonably
necessary in connection with FDI providing those services listed in Exhibit A;
(b) cause the Company's blue sky administrator to monitor sales
of the Shares to assure compliance with applicable state securities
and Blue Sky laws;
(c) cause the Company's transfer agent to give necessary information for
the preparation of quarterly reports in a form satisfactory to FDI regarding
Rule 12b-1 fees, front-end sales loads, back-end sales loads, if applicable, and
other data regarding sales and sales loads as required by the 1940 Act or as
requested by the Board of Directors of the Company;
(d) cause the Company's transfer agent to provide FDI with all necessary
historical information so that FDI can calculate the maximum sales charges
payable by the Company pursuant to the Conduct Rules of the National Association
of Securities Dealers, Inc. ("NASD") and the actual sales charges paid by the
Company, if applicable;
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cause the Company's transfer agent to provide FDI with all of the necessary
information so that FDI can calculate the maximum sales charges payable by the
Company pursuant to the Conduct Rules of the NASD and the actual sales charges
paid by the Company, if applicable; and cause the Companys transfer agent to
provide such information in a form satisfactory to FDI no less often than
monthly for every Company and on a daily basis for any Company where FDI
determines that the remaining limit is approaching zero, if applicable; and
(e) provide FDI with copies of, or access to, any documents that FDI may
reasonably request and will notify FDI as soon as possible of any matter
materially affecting FDIs performance of its services under this Agreement.
3. Compensation; Reimbursement of Expenses. For the services rendered by FDI
hereunder, FDI shall receive a fee from Waterhouse as agreed by Waterhouse and
FDI from time to time as set forth in Schedule B attached hereto. This fee will
be payable in equal monthly installments on the second business day of each
month.
4. Effective Date and Term. This Agreement shall become effective with respect
to a Company as of the date first written above (or, if a particular Company is
not in existence on that date, on the date Funds Distributor, Inc. becomes
sub-administrator to the Company; Schedule A to this Agreement shall be deemed
amended to include such Company from and after such date).
This Agreement shall become effective as of the date hereof and will continue
for an initial two-year term and will continue thereafter so long as such
continuance is specifically approved at least annually (i) by the Company's
Board or (ii) by a vote of a majority (as defined in the 0000 Xxx) of the Shares
of the Company or the relevant Portfolio, as the case may be, provided that in
either event its continuance also is approved by a majority of the Board members
who are not interested persons (as defined in the 0000 Xxx) of any party to this
Agreement and who have no direct or indirect financial interest in this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable with respect to any Portfolio or
any Company, without penalty, on not less than sixty days notice, by the
Company's Board of Directors, by vote of a majority (as defined in the 0000 Xxx)
of the outstanding voting securities of such Company, or by you. This Agreement
shall terminate automatically in the event of its assignment (as defined in the
1940 Act). This Agreement may be terminated by either party, on not less than 60
days written notice, upon any material breach of this Agreement by the other
party. If FDI ceases to be the Sub-Administrator of any Company before the fifth
anniversary of the date the Company began its investment activities, Waterhouse
shall reimburse FDI an amount equal to the number resulting from multiplying the
Company's total unamortized organizational expenses by a fraction, the numerator
of which is equal to the number of initial shares redeemed by FDI or its
affiliate and the denominator of which is equal to the number of initial shares
still outstanding as of the date of such redemption, as long as the
administrative position of the staff of the Securities and Exchange Commission
requires FDI to reimburse the Company such amount. (Initial shares shall mean
the shares purchased by FDI or an affiliate to provide the initial seed capital
to a Company pursuant to Section 14 of the 1940 Act.)
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5. Standard of Care and Indemnification.
(a) Waterhouse will indemnify and hold harmless FDI, its officers, employees and
agents and any persons who control FDI (together FDI and its employees) and hold
each of them harmless from any losses, claims, damages or liabilities, or
actions in respect thereof, to which FDI and its employees may become subject,
including amounts paid in settlement with the prior written consent of
Waterhouse, insofar as such losses, claims, damages or liabilities, or actions
in respect thereof, arise out of or result from the failure of Waterhouse to
comply with the terms of this Agreement;
(b) FDI will indemnify and hold harmless Waterhouse, its officers, employees and
agents and any persons who control Waterhouse (together Waterhouse and its
employees) and hold each of them harmless from any losses, claims, damages or
liabilities, or actions in respect thereof, to which Waterhouse and its
employees may become subject, including amounts paid in settlement with the
prior written consent of FDI, insofar as such losses, claims, damages or
liabilities, or actions in respect thereof, arise out of or result from the
failure of FDI to comply with the terms of this Agreement;
Waterhouse will reimburse FDI and its employees for reasonable legal or other
expenses reasonably incurred by FDI and its employees in connection with
investigating or defending against any such loss, claim, damage, liability or
action. Waterhouse shall not be liable to FDI for any action taken or omitted by
FDI in bad faith, with willful misfeasance or gross negligence, or with reckless
disregard by FDI of its obligations and duties hereunder. The indemnities in
this Section shall, upon the same terms and conditions, extend to and inure to
the benefit of each of the employees of FDI that serve as officers or directors
of the Company and to each of the directors and officers of FDI and any person
controlling FDI within the meaning of Section 15 of the Securities Act of 1933
("1933 Act") or Section 20 of the Securities Exchange Act of 1934 ("1934 Act").
FDI will reimburse Waterhouse for reasonable legal or other expenses reasonably
incurred by Waterhouse in connection with investigating or defending against any
such loss, claim, damage, liability or action. FDI shall not be liable to
Waterhouse for any action taken or omitted by Waterhouse in bad faith, with
willful misfeasance or gross negligence, or with reckless disregard by
Waterhouse of its obligations and duties hereunder. The indemnities in this
Section shall, upon the same terms and conditions, extend to and inure to the
benefit of each of the directors and officers of Waterhouse and any person
controlling Waterhouse within the meaning of Section 15 for the 1933 Act or
Section 20 of the 1934 Act.
(c) (i) Promptly after an indemnified party (or, if such indemnified party is
not a natural person, a responsible officer of such indemnified party) receives
notice or otherwise becomes aware of the commencement of any action or other
assertion of any losses, claims, damages or liabilities by any third party, such
indemnified party shall, if a claim in respect thereof is to be made pursuant to
this Section 5, notify the indemnitor of the same in writing (such notice, a
"claim notice"); but the omission so to notify the indemnitor will not relieve
the indemnitor from any liability that it may have to such indemnified party
otherwise than under this Section 5. In the event that the indemnified party
notifies the indemnitor in writing of its waiver of any right to indemnification
pursuant to this Section 5 in respect of
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any losses, claims, damages or liabilities or portion thereof, the
provisions of clause (ii) of this Section 5(c) shall not apply.
(ii) Promptly following receipt of a claim notice, the indemnitor, upon request
of the indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnitor may designate in contesting such losses, claims, damages or
liabilities and shall pay the reasonable fees and disbursements of such counsel
related to such contest. In any such contest, any indemnified party shall have
the right to retain its own counsel, but the reasonable fees and expenses of
such counsel shall be at the expense of such indemnified party unless (A) the
indemnitor and the indemnified party shall have mutually agreed to the retention
of such counsel or (B) the named parties to any such contest (including any
impleaded parties) include both the indemnitor and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that the
indemnitor shall not, in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the reasonable fees and expenses of more
than one firm for all such indemnified parties. The indemnitor may, at its
option, at any time upon written notice to the indemnified party, assume the
responsibility for contesting any losses, claims, damages or liabilities and may
designate counsel satisfactory to the indemnitor in connection therewith
provided that the counsel so designated would have no actual or potential
conflict of interest in connection with such representation. Unless it shall
assume the responsibility for contesting any losses, claims, damages or
liabilities, the indemnitor shall not be liable for any settlement or compromise
of such losses, claims, damages or liabilities or portion thereof which
settlement or compromise is effected without its written consent, but if settled
or compromised with such consent or if there be a final judgment for the
plaintiff asserting such losses, claims or liabilities, the indemnitor agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement, compromise or judgment. If the indemnitor assumes
responsibility for contesting any losses, claims, damages or liabilities, it
shall be entitled to settle or compromise such losses, claims, damages or
liabilities or portion thereof with the consent of the indemnified party or, if
such settlement or compromise provides for release of the indemnified party in
connection with all matters relating to such losses, claims, damages or
liabilities, or, with respect to the settlement or compromise of a portion of
such losses, claims, damages or liabilities, all matters relating to such
portion of such losses, claims, damages or liabilities, that have been asserted
against the indemnified party by the other parties to such settlement or
compromise, without the consent of the indemnified party. In the event that any
expense paid by the indemnitor pursuant to this Section 6(c) is subsequently
determined to not be required to be borne by the indemnitor, the indemnified
party that received such payment shall promptly refund the amount so paid to the
indemnitor. If the indemnitor assumes responsibility for contesting any losses,
claims, damages or liabilities, the indemnitor shall keep the indemnified party
apprised, on a current basis, of matters concerning such contest, including
without limitation (i) providing the indemnified party with reasonable notice of
and opportunity to be present in person and/or by counsel at proceedings or
discussions of settlement or compromise; (ii) providing the indemnified party
with copies of and opportunity to comment on filings, papers or settlement
agreements proposed to be filed or served by or on behalf of the indemnitor; and
(iii) providing the indemnified party with
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copies of filings, papers and proposed settlement agreements received by
the indemnitor from or on behalf of persons asserting such losses, claims,
damages or liabilities.
(d) The obligation to indemnify and provide contribution pursuant to this
Section 6 shall survive the termination of this Agreement.
7. Record Retention and Confidentiality. FDI shall keep and maintain on behalf
of the Company all books and records which the Company and FDI are, or may be,
required to keep and maintain in connection with the services to be provided
hereunder pursuant to any applicable statutes, rules and regulations, including
without limitation Rules 31a-1 and 31a-2 under the 1940 Act. FDI further agrees
that all such books and records shall be the property of the Company and to make
such books and records available for inspection by the Company, by Waterhouse,
or by the Securities and Exchange Commission at reasonable times and otherwise
to keep confidential all books and records and other information relative to the
Company and its shareholders; except when requested to divulge such information
by duly-constituted authorities or court process.
8. Rights of Ownership. All computer programs and procedures
developed to perform the services to be provided by FDI under this
Agreement are the property of FDI.
9. Return of Records. FDI may at its option at any time, and shall promptly upon
the demand of Waterhouse and/or the Company, turn over to Waterhouse and/or the
Company and cease to retain FDIs files, records and documents created and
maintained by FDI pursuant to this Agreement so long as FDI shall be able to
retain photocopies of such documents to the extent needed by FDI in the
performance of its services or for its legal protection. If not so turned over
to Waterhouse and/or the Company, such documents and records will be retained by
FDI for six years from the end of the fiscal year of the Company for which they
were created. At the end of such six-year period, such records and documents
will be turned over to Waterhouse and/or the Company unless the Company
authorizes in writing the destruction of such records and documents.
10. Representations of Waterhouse. Waterhouse represents and warrants to FDI
that this Agreement has been duly authorized by Waterhouse and, when executed
and delivered by Waterhouse, will constitute a legal, valid and binding
obligation of Waterhouse, enforceable against Waterhouse in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the rights and remedies of creditors and
secured parties.
11. Representations of FDI. FDI represents and warrants that this Agreement has
been duly authorized by FDI and, when executed and delivered by FDI, will
constitute a legal, valid and binding obligation of FDI, enforceable against FDI
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and secured parties.
12. Notices. All notices or other communications hereunder to either party shall
be in writing and shall be deemed sufficient if mailed to Waterhouse at the
following address: Waterhouse Securities, Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention: President;
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and to FDI at the following address: 00 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxx,
XX 00000, Attention: President with a copy to General Counsel or at such other
address as such party may designate by written notice to the other, or in either
case if sent by telex, telecopier, telegram or similar means of same day
delivery (with a confirming copy by mail as provided herein).
13. Headings. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this
Agreement.
14. Assignment. This Agreement and the rights and duties hereunder
shall not be assignable by either of the parties hereto except by the
specific written consent of the other party.
15. Governing Law. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed all as of the day and year first above written.
WATERHOUSE SECURITIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Title: Senior Vice President
----------------------------
FUNDS DISTRIBUTOR, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------
Title: Exec. Vice President
----------------------------
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Dated: February 26, 1998
SCHEDULE A
TO THE AGREEMENT
BETWEEN
WATERHOUSE SECURITIES, INC.
AND
FUNDS DISTRIBUTOR, INC.
NAME OF COMPANY
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
Xxxxxxx Cabot Money Market Portfolio
Xxxxxxx Cabot U.S. Government Portfolio
Xxxxxxx Cabot Municipal Portfolio
WATERHOUSE SECURITIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Title: Senior Vice President
----------------------------
FUNDS DISTRIBUTOR, INC.
By: Xxxxxxx X. Xxxxxx
----------------------------
Title: Exec. Vice President
----------------------------
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Dated: February 26, 1998
SCHEDULE B
TO THE AGREEMENT
BETWEEN
WATERHOUSE SECURITIES, INC.
AND
FUNDS DISTRIBUTOR, INC.
FDI's annual fee charged to and payable by Waterhouse as defined below is its
share of an annual complex-wide charge. The annual complex-wide charge is:
(a) an annual fee of $250,000 for all Covered Entities for Routine
Administrative Services, as defined in Exhibit A, payable in equal monthly
installments on the second business day of each month; and
(b) for Extraordinary Administrative Services, as defined in Exhibit A, for
any Covered Entity:
(i) a flat fee to be negotiated after the scope of the project has been
accurately and completely defined; or
(ii) a fee for a particular project based on a blended hourly rate of
$75.00 per person. Only personnel with an Assistant Vice President title or
higher with FDI would xxxx on an hourly basis.
Except as previously set forth, compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
monthly in arrears. If this Agreement becomes effective subsequent to the first
day of a month or shall terminate before the last day of a month, compensation
for that part of the month this Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fees as set forth above. In
addition, Waterhouse agrees to reimburse FDI for FDIs reasonable out-of-pocket
expenses as mutually agreed to by the parties from time to time.
A Covered Entity is any series of Waterhouse Investors Family of Funds,
Inc. and National Investors Cash Management Fund, Inc. and each other
future mutual fund (or series thereof) for which FDI provides
administrative services.
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EXHIBIT A
Administrative Services
Funds Distributor will provide the following administrative services:
Corporate and Secretarial Services
* Provide Secretary and the necessary complement of Assistant
Secretaries for the fund. These services will be provided consistent with the
procedures listed in Exhibit B.
* Maintain general corporate calendar. Track all legal and
compliance requirements through annual cycles.
* Four quarterly board meetings per year:
* Prepare agenda and background materials for legal
approval
* Make presentations
* Monitor annual approval requirements
* Prepare extensive background material for
annual review of advisory fees
* Prepare minutes
* Follow-up on matters raised at meetings
* Maintain Articles of Incorporation and By-Laws of the Corporation
* Prepare organizational board meeting materials
* Draft contracts, assisting in negotiation and planning, as
appropriate. For example negotiate, draft and keep current the
following contracts: (i) investment advisory and sub-advisory
contracts; (ii) Distribution Agreement; (iii) Bank Agreements;
(iv) Broker Dealer Agreements; (v) Transfer Agency Agreement;
(vi) Custody Agreement; (vii) Administration Agreement and Sub-
Administration Agreement; (viii) 12b-1 Plans and related
agreements; (ix) Shareholder Servicing Plans and Related
Agreements; (x) XXX Custodian Agreements; (xi) Bi-Party
Repurchase Agreements; (xii) Tri-Party Repurchase Agreements;
(xiii) Futures Account Agreement and Procedural Safekeeping
Agreement; (xiv) loan agreements; and (xv) various other
agreements and amendments.
SEC and Public Disclosure Assistance
* Prepare and file one annual amendment to the Companys
registration statement, including updating prospectuses and SAIs.
9
* Coordinate/monitor, with assistance from the fund administrator
and fund accountant and any other relevant fund service
providers, XXXXX (Electronic Data Gathering Analysis and
Retrieval System) on-line filings related to post-effective
amendments, N-SARs, 24f-2, annual and semi-annual shareholders
reports.
* Review annual and semi-annual Shareholder Reports.
* Provide legal assistance for shareholder communications.
* Shareholder Meetings
* Draft Proxies
* Organize, attend and keep minutes
* Work with the Transfer Agent on Solicitations and Vote
Tabulation
* Provide legal presence at meetings
* Draft Proxy/Solicitation Documents on Form N-14 (Fund Mergers).
* Monitor and participate in the preparation of documents for
Exemptive Orders (e.g., Joint Repurchase Account), Revenue
Rulings (e.g., Multi-Class) and other state specific regulator
orders (e.g., Florida Request for Technical Assistance).
* Filing advertising and sales literature with the appropriate
regulatory entities and providing all compliance review of
such materials.
Legal Consulting and Planning
* Provide general legal advice on matters relating to portfolio
management, fund operations, mutual fund sales, development of
advertising materials, changing or improving prospectus
disclosure, and any potential changes in the funds investment
policies, operations, or structure.
* Maintain a continuing awareness of significant emerging
regulatory and legislative developments which may affect the
fund, update the advisor on those developments, and provide
related planning assistance.
* Develop or assist in developing guidelines and procedures to
improve overall compliance by the fund and its various agents.
* Provide advice with regard to fund litigation matters, routine
fund examinations and investigations by regulatory agencies.
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* Provide advice regarding long term planning for the Company
including the creation of new funds or portfolios, corporate
structural changes, mergers, acquisitions, and other asset
gathering plans including new distribution methods.
* Maintain effective communications with fund counsel, counsel to
the non-interested board members and to the funds local counsel.
* Create and implement timing and responsibility system for
outside legal counsel when necessary to implement major projects
and the legal management of such projects.
* Monitor activities and billing practices of outside counsel
performing services for the fund or in connection with related
fund activities.
Compliance
* Review of all testing that is done by fund accountant to assist
the advisor in complying with fund prospectus guidelines and
limitations, 1940 Act requirements, and Internal Revenue Code
requirements.
* Review of monthly testing and compliance report created by fund
accountant including:
* Tax compliance testing for gross income, short three,
diversification, and single issuer,
* 5% diversification testing for tax and 1940 Act
compliance based on current market value and
acquisition cost testing, if required,
* Income available for distribution report, which includes
capital gains and interest income,
* Net investment income calculated on per-share basis each
month, and
* Prospectus and 1940 Act compliance testing-tests are
tailored to each individual funds prospectus and tests
against the type and amount of securities held.
* Jointly create Compliance Manuals and workshops for advisory
personnel with the fund accountant.
* Consultation and advice for resolution of compliance questions
along with the investment advisor, the fund administrator, the
fund counsel and the fund accountant.
* Be actively involved with the management of SEC and other
regulatory examinations.
* Review with the investment advisor and fund administrator
summary reports created by the fund accountant of all compliance
issues to assure immediate compliance adjustments.
* Assist portfolio managers with compliance matters including
reviewing the Compliance Manual on a regular basis and
attending compliance meetings with the portfolio managers.
* Assist in developing guidelines and procedures to improve
overall compliance by the fund and its various agents.
* Maintain legal liaison with and provide legal advice and counsel
to fund regarding its relationships, contractual or otherwise,
with the various fund agents, such as the adviser, custodian,
transfer agents, and auditors with respect to their activities
on behalf of the fund.
* Advice regarding all fund distribution arrangements for
compliance with applicable banking and broker-dealer
regulations.
* Provide other fund officers as requested (e.g. President and
Vice President).
* Maintaining the funds code of ethics.
Treasury Services
* Providing the Companys Treasurer and the appropriate complement
of Assistant Treasurers to assume certain specified
responsibilities (these functions will be based upon the day to
day work completed by knowledgeable staff assembled by
Waterhouse including the fund accountant).
* Determining properly chargeable expenses and authorizing payment
of bills for each fund.
* Monitoring and recommending changes to expense accrual rates.
* Coordinate/monitor, with assistance from the investment adviser,
the fund accountant and any other relevant fund service
provider, all required financial materials for review by the
board (for example, items required by SEC Rule 2a-7, 10f-3,
17a-7, and 17e-1 reports, repurchase agreements, dealer lists,
securities transactions).
* Recommending dividends to be voted by the board
* Reviewing and monitoring xxxx-to-market comparisons for money
market funds that are generated by the fund accountant.
* Reviewing, signing off and filing all fund tax returns after
such returns have been prepared and signed by the funds
independent auditors.
* Assisting (along with the fund accountant) the funds advisor in
valuing securities which are not readily salable.
* Function as a liaison with the funds custodian, fund accountant,
outside auditors and regulators, including managing the
planning and conducting of audits and examinations.
12
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EXHIBIT B
SIGNATURE/OVERSIGHT PROCEDURES
RULE 24e(2)/24f(2) SHARE REGISTRATION
Documents pertaining to filing of fund share registration statements pursuant to
Rule 24e(2) or 24f(2) will be prepared by the fund accountant. The fund
accountant will provide FDI with certain financial information contained in such
filing. After the filing documents have been prepared and reviewed by
Waterhouse, the following will occur:
* Filing documents, accompanied by a completed signature request form (see
copy attached), will be forwarded to appropriate fund officer for
signature.*
* Financial statements providing the basis for the financial information
contained in the filing documents will be provided in "blueprint" form to
Funds Distributor by the fund accountant.
* Documents will be reviewed by Funds Distributor utilizing the financial
statements.
* Completed signature request form will be reviewed by Funds Distributor
for proper authorization.
* Any questions that may arise during review will be directed to Waterhouse
or the fund accountant as appropriate.
* If not in order, Funds Distributor will contact the appropriate entities
or persons with an explanation and, if necessary, documents will be
returned to Waterhouse and/or the fund accountant, as appropriate, with
explanation.
* If in order, documents will be signed by fund officer and returned to the
Waterhouse Legal Department by the request date specified in the
completed signature request form.
* To the extent that Funds Distributor must provide an opinion letter to
which another Company service provider is the source of knowledge, that
service provider must provide Fund Distributor with an opinion letter
supporting the date that it provides Funds Distributor.
*Contact Persons:
2
SIGNATURE/OVERSIGHT PROCEDURES
FORM N-SAR SEMI-ANNUAL REPORT
Semi-annual report on form N-SAR will be prepared for filing by the fund
accountant. The fund accountant will provide Waterhouse and Funds Distributor
with certain financial information required on Form N-SAR. After form has been
completed, the following will occur:
* Form N-SAR, accompanied by completed signature request form (see copy
attached), will be forwarded to Funds Distributor for fund officer
signature.*
* Form will be reviewed by Funds Distributor and Waterhouse.
* Completed Signature Request form will be reviewed for proper
authorization.
* Any questions that may arise during review will be directed to Waterhouse
or the fund accountant appropriate.
* If not in order, Funds Distributor will contact the appropriate entities
or persons with an explanation and, if necessary, form will be returned
to Waterhouse and/or the fund accountant, as appropriate, with
explanation.
* If in order, form will be signed by fund officer and returned to
Waterhouse by the request date specified in the completed signature
request form.
*Contact Person:
3
SIGNATURE/OVERSIGHT PROCEDURES
TAX RETURNS
All tax and information returns will be prepared and reviewed by the fund's
auditor. When returns are completed and reviewed, the following will occur:
* Tax and information returns, signed by independent auditors and
accompanied by a completed signature request form (see copy attached),
will be forwarded to Funds Distributor for fund officer signature.*
* All returns will be reviewed by Funds Distributor and Waterhouse.
* Completed signature request form will be reviewed for proper
authorization.
* Any questions that arise during review will be directed to the funds
auditor.
* If not in order, returns will be returned to the funds auditor with
explanation.
* If in order, returns will be signed by fund officer and returned to the
fund auditor.
*Contact Persons:
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SIGNATURE/OVERSIGHT PROCEDURES
SEC EXAMINATION/INQUIRIES
When the Securities and Exchange Commission conducts a periodic examination of
the Company or makes written inquiries for specific information, the following
will occur:
* Waterhouse* will promptly inform Funds Distributor* of such examination
or written inquiry.
* Waterhouse will inform Funds Distributor of the specific nature of the
information requested for examination or by inquiry.
* Funds Distributor will be actively involved with any SEC examinations.
* Waterhouse will submit to Funds Distributor the response to SEC-written
inquiries.
* Waterhouse will forward to Funds Distributor and each fund officer a copy
of the comment letter received from the SEC upon completion of
examination.
* Waterhouse will forward to Funds Distributor and each officer a copy of
the response to the comment letter.
*Contact Person:
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SIGNATURE/OVERSIGHT PROCEDURES
AUDIT REPRESENTATION LETTER
The process of examining financial statements of the Company by independent
auditors includes the receipt of a letter from the Company in which various
representations are made. This letter will be prepared by the independent
auditors. Upon completion of this letter, the following will occur:
* Letter will be reviewed and signed by Waterhouse authorized signatory.
* Letter will be sent to Funds Distributor for review and fund officer
signature.*
* Letter will be reviewed by Fund Distributor.
* To the extent that Funds Distributor must provide an audit representation
letter to which another Company service provider is the source of
knowledge (i.e. the fund auditor), that service provider must provide
Funds Distributor with an opinion letter supporting the audit
representation letter or any other data that it provides Funds
Distributor.
* If not in order, letter will be returned to Waterhouse or the fund
auditor with explanation.
* If in order, letter will be signed by fund officer and returned to
independent auditors.
*Contact Persons:
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SIGNATURE/OVERSIGHT PROCEDURES
VALUATION OF MUTUAL FUND PORTFOLIO SECURITIES
In connection with the valuation of mutual fund portfolio securities, it is
sometimes necessary to convene a meeting of the Company's Portfolio Securities
Pricing Committee to place a value on a portfolio security for the purpose of
calculating NAV per share.
* Funds Distributor and a find officer will be present at meeting, either
in person or by conference call.
* Meeting minutes or memo of Pricing Committee decisions will be sent to
Funds Distributor.
In addition, because of the complexities or large universe of various portfolio
securities (i.e., GNMA and Tax-Exempt Securities), an independent pricing
service is utilized to price such securities.
* Waterhouse will inform Funds Distributor of any change of independent
pricing service.
In connection with money market funds, it is necessary to monitor any deviation
of a fund's net asset value per share calculated using market values from the
fund's net asset value per share calculated using amortized cost prices.
* Waterhouse or the fund accountant will send Funds Distributor,* on a
daily basis, a schedule that indicates each money market fund's net asset
value per share calculated at amortized cost and market value.
* Waterhouse or the fund accountant will send Fund Distributor,* on a
monthly basis, a schedule for each fund, indicating the fund's total net
assets, dividend per share and net asset value per share calculated at
amortized cost and market value.
* Waterhouse will notify Funds Distributor* when Waterhouse intends to
apprise a fund's Board of Directors of information concerning the fund's
net asset value per share.
7
SIGNATURE/OVERSIGHT PROCEDURES
CHANGE IN NET ASSET VALUE PER SHARE
If a funds net asset value per share changes after the day of calculation and
shareholder account processing, the following will occur:
* Waterhouse or the fund accountant will send Funds Distributor* a schedule that
will indicate the fund and change in net asset value per share.
* Waterhouse or the fund accountant will document the change in net asset value
per share and forward the documentation to Funds Distributor* accompanied by
completed signature request form (see copy attached).
* Contact Persons:
8
CHANGE IN NET ASSET VALUE PER SHARE
SIGNATURE REQUEST FORM
TO: ____________________________________________________________________________
FROM: __________________________________________________________________________
Tel. #: ___________________________ Fax # __________________________
Date: __________________________________________________________________________
RIC/Company Name:_______________________________________________________________
Restated NAV Per Share:_________________________________________________________
Documentation of Change in NAV:_________________________________________________
Waterhouse Approval:
Signature: Date:
---------------------------------- ---------------
Name:
Title:
Funds Distributor Approval:
Signature: Date:
---------------------------------- ---------------
Company Officer
Waterhouse Authorized Signatories Fund Distributor Contact Persons
---------------------------------- --------------------------------
9
SIGNATURE/OVERSIGHT PROCEDURES
RECLAIM OF TAXES
WITHHELD FORM DIVIDENDS ON FOREIGN SECURITIES
Forms necessary to reclaim taxes withheld from dividends paid on foreign
securities are coordinated by the fund's auditor. When these forms require the
signature of a fund officer, the following will occur:
* Completed forms, accompanied by completed signature request form (see copy
attached), will be forwarded to Funds Distributor for fund officer
signature.*
* Funds Distributor will review the form
* Funds Distributor will review the completed form for proper authorization.
* Any questions that arise during review will be directed to the fund's
auditor.
* If not in order, form will be returned to the fund's auditor with
explanation.
* If in order, form will be signed by fund officer and returned to the fund's
auditor.
* Contact Persons:
