SUB-ADMINISTRATION AGREEMENT
AGREEMENT made as of February 3, 1999 by and between E*TRADE FUNDS, a
business trust organized under the laws of Delaware (the "Fund"), E*TRADE ASSET
MANAGEMENT, INC. an corporation organized under the laws of Delaware (the
"Administrator"), and INVESTORS BANK & TRUST COMPANY, a Massachusetts trust
company (the "Bank").
WHEREAS, the Fund, a registered investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), consisting of the separate
portfolios, has retained the Administrator to render certain administrative
services to the Fund to with respect to the Portfolios; and
WHEREAS, the Administrator desires to retain the Bank to render certain
administrative services to the Fund with respect to the portfolios designated by
the Administrator (each a "Portfolio") as Sub-Administrator and the Bank is
willing to render such services.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints the Bank to act as
Sub-Administrator of the Fund with respect to the Portfolios on the
terms set forth in this Agreement. The Bank accepts such appointment
and agrees to render the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Fund has furnished the Bank with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the
appointment of the Bank to provide certain administrative
services to the Fund and approving this Agreement;
(b) The Fund's incorporating documents filed with the state of
Delaware on November 4, 1998 and all amendments thereto (the
"Articles");
(c) The Fund's by-laws and all amendments thereto (the "By-Laws");
(d) The Fund's agreements with all service providers which include
any investment advisory agreements, sub-investment advisory
agreements, custody agreements, distribution agreements and
transfer agency agreements (collectively, the "Agreements");
(e) The Fund's most recent Registration Statement on Form N-1A
(the "Registration Statement") under the Securities Act of
1933 and under the 1940 Act and all amendments thereto; and
(f) The Fund's most recent prospectus and statement of additional
information (the "Prospectus"); and
(g) Such other certificates, documents or opinions as may mutually
be deemed necessary or appropriate for the Bank in the proper
performance of its duties hereunder.
The Fund will immediately furnish the Bank with copies of all
amendments of or supplements to the foregoing. Furthermore, the Fund
will notify the Bank as soon as possible of any matter which may
materially affect the performance by the Bank of its services under
this Agreement.
3. Duties of Sub-Administrator. Subject to the supervision and
direction of the Board of Directors of the Fund, the Bank, as
Sub-Administrator, will assist in conducting various aspects of the
Fund's administrative operations and undertakes to perform the
services described in Appendix B hereto. The Bank may, from time to
time, perform additional duties and functions which shall be set
forth in an amendment to such Appendix B executed by both parties.
At such time, the fee schedule included in Appendix C hereto shall
be appropriately amended.
In performing all services under this Agreement, the Bank shall act
in conformity with the Fund's Articles and By-Laws and the 1940 Act,
as the same may be amended from time to time, and the investment
objectives, investment policies and other practices and policies set
forth in the Fund's Registration Statement, as the same may be
amended from time to time. Notwithstanding any item discussed
herein, the Bank has no discretion over the Fund's assets or choice
of investments and cannot be held liable for any dispute relating to
such investments.
4. Duties of the Fund.
(a) The Fund is solely responsible (through its transfer agent
or otherwise) for (i) providing timely and accurate reports
of the daily purchase and redemption of shares of each
portfolio ("Daily Sales Reports") which will enable the
Bank as Sub-Administrator to monitor the total number of
shares sold in each state on a daily basis and (ii)
identifying any exempt transactions ("Exempt Transactions")
which are to be excluded from the Daily Sales Reports.
(b) The Fund agrees to make its legal counsel available to the
Bank for reasonable instruction with respect to any matter of
law arising in connection with the Bank's duties hereunder,
and the Fund further agrees that the Bank shall be entitled to
rely on such instruction without further investigation on the
part of the Bank.
5. Fees and Expenses.
(a) For the services to be rendered and the facilities to be furnished
by the Bank, as provided for in this Agreement, the Administrator
will compensate the Bank in accordance with the fee schedule
attached as Appendix C hereto; provided, however, that the fees with
respect to each Portfolio will be payable only out of the assets of
that Portfolio. Such fees do not include out-of-pocket disbursements
(as delineated on the fee schedule or other expenses with the prior
approval of the Fund's management) of the Bank for which the Bank
shall be entitled to xxxx the Administrator separately and for which
the Administrator shall reimburse the Bank.
(b) The Bank shall not be required to pay any expenses incurred by the
Fund or the Administrator.
6. Limitation of Liability.
(a) The Bank, its directors, officers, employees and agents shall not be
liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of its
obligations and duties under this Agreement, except a loss resulting
from willful misfeasance, bad faith or gross negligence in the
performance of such obligations and duties, or by reason of its
reckless disregard thereof. The Administrator and Fund will
indemnify the Bank, its directors, officers, employees and agents
against and hold it and them harmless from any and all losses,
claims, damages, liabilities or expenses (including legal fees and
expenses) resulting from any claim, demand, action or suit (i)
arising out of the actions or omissions of the Fund, including, but
not limited to, inaccurate Daily Sales Reports and misidentification
of Exempt Transactions; (ii) arising out of the offer or sale of any
securities of the Fund in violation of (x) any requirement under the
federal securities laws or regulations, (y) any requirement under
the securities laws or regulations of any state, or (z) any stop
order or other determination or ruling by any federal or state
agency with respect to the offer or sale of such securities; or
(iii) not resulting from the willful misfeasance, bad faith or gross
negligence of the Bank in the performance of such obligations and
duties or by reason of its reckless disregard thereof.
(b) Notwithstanding anything in this Agreement to the contrary, in no
event shall the Funds be liable to the Bank or any third party, and
the Bank shall indemnify and hold the Funds harmless from and
against any Claims arising as a result of gross negligence, willful
misfeasance or bad faith of the Bank.
(c) The Bank may apply to the Administrator at any time for instructions
and may consult counsel for the Administrator, or its own counsel,
and with accountants and other experts with respect to any matter
arising in connection with its duties hereunder, and the Bank shall
not be liable or accountable for any action reasonably taken or
omitted by it in good faith in accordance with such instruction, or
with the opinion of such counsel, accountants, or other experts. The
Bank shall not be liable for any act or omission taken or not taken
in reliance upon any document, certificate or instrument which it
reasonably believes to be genuine and to be signed or presented by
the proper person or persons. The Bank shall not be held to have
notice of any change of authority of any officers, employees, or
agents of the Fund or Administrator until receipt of written notice
thereof has been received by the Bank from the Fund or
Administrator.
(d) In the event the Bank is unable to perform, or is delayed in
performing, its obligations under the terms of this Agreement
because of acts of God, strikes, legal constraint, government
actions, war, emergency conditions, interruption of electrical power
or other utilities, equipment or transmission failure or damage
reasonably beyond its control or other causes reasonably beyond its
control, the Bank shall not be liable to the Fund for any damages
resulting from such failure to perform, delay in performance, or
otherwise from such causes. The Bank will, however, take all
reasonable steps to minimize service interruption for any period
that such interruption continues beyond the Bank's control.
(e) The Bank represents that the occurrence in or use by the Bank's own
proprietary internal systems (the "Systems") of dates on or after
January 1, 2000 (the "Millennial Dates") will not adversely affect
the performance of the Systems with respect to date dependent data,
computations, output or other functions (including, without
limitation, calculating, computing and sequencing) and that the
Systems will create, store and generate output data related to or
including Millennial Dates without errors or omissions ("Year 2000
Compliance").
(f) The parties to this Agreement acknowledge that the Bank can make no
certification as to the Year 2000 Compliance of third-party systems
utilized by the Bank in its day to day operations or with which the
Systems interact or communicate, from which the Systems receive data
or to which the Systems send data. The parties further acknowledge
that while the Bank has contacted such third-party providers
regarding Year 2000 Compliance and will use reasonable efforts to
monitor the status of such third-party providers' Year 2000
Compliance, failure by such third-party providers to achieve timely
Year 2000 Compliance could adversely affect the Bank's performance
of its obligations hereunder.
(g) Notwithstanding anything to the contrary in this Agreement, in no
event shall the Bank be liable for special, incidental or
consequential damages, even if advised of the possibility of such
damages.
7. Termination of Agreement.
(a) The term of this Agreement shall be an initial term of 2 years
commencing upon the date hereof (the "Initial Term"), unless earlier
terminated as provided herein. After the expiration of the Initial
Term, the term of this Agreement shall automatically renew for
successive one-year terms (each a "Renewal Term") unless notice of
non-renewal is delivered by the non-renewing party to the other
party no later than ninety days prior to the expiration of the
Initial Term or any Renewal Term, as the case may be.
(i) Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term in the event the other party
violates any material provision of this Agreement, provided
that the violating party does not cure such violation within
ninety days of receipt of written notice from the
non-violating party of such violation.
(ii) Either party may terminate this Agreement during any Renewal
Term upon ninety days written notice to the other party. Any
termination pursuant to this paragraph 7(a)(ii) shall be
effective upon expiration of such ninety days, provided,
however, that the effective date of such termination may be
postponed, at the request of the Fund, to a date not more than
one hundred twenty days after delivery of the written notice
in order to give the Fund an opportunity to make suitable
arrangements for a successor administrator.
(b) At any time after the termination of this Agreement, the Fund may,
upon written request, have reasonable access to the records of the
Bank relating to its performance of its duties as Sub-Administrator.
8. Miscellaneous.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or the Bank shall be
sufficiently given if addressed to that party and received by it at
its office set forth below or at such other place as it may from
time to time designate in writing.
To the Fund:
E*TRADE Funds Four Embarcadero Road 0000 Xxxx Xxxx Xxxx Xxxx,
XX 00000 Attention:
To the Administrator:
E*TRADE Asset Management, Inc.
Four Embarcadero Road
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention:
To the Bank:
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx, X.X. Xxx 0000
Xxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxxx, Client Management
With a copy to: Xxxx X. Xxxxx, General Counsel
(b) This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable without the
written consent of the other party.
(c) This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, without regard to its conflict of
laws provisions.
(d) This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original and which collectively shall
be deemed to constitute only one instrument.
(e) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
9. Confidentiality. All books, records, information and data pertaining
to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required in the performance of
duties hereunder or as otherwise required by law.
10. Use of Name. The Fund shall not use the name of the Bank or any of
its affiliates in any prospectus, sales literature or other material
relating to the Fund in a manner not approved by the Bank prior
thereto in writing; provided however, that the approval of the Bank
shall not be required for any use of its name which merely refers in
accurate and factual terms to its appointment hereunder or which is
required by the Securities and Exchange Commission or any state
securities authority or any other appropriate regulatory,
governmental or judicial authority; provided further, that in no
event shall such approval be unreasonably withheld or delayed.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed and delivered by their duly authorized officers as of the date
first written above.
E*TRADE FUNDS
By:
Name:
Title:
E*TRADE ASSET MANAGEMENT, INC.
By:
Name:
Title:
INVESTORS BANK & TRUST COMPANY
By:
Name:
Title:
Appendices
Appendix A................................. Portfolios
Appendix B................................. Services
Appendix C................................. Fee Schedule
APPENDIX A
PORTFOLIOS
E*TRADE S&P 500 INDEX FUND
Appendices to Sub-Administration Agreement
Appendix A.................................. Portfolios
Appendix B.................................. Services
Appendix C.................................. Fee Schedule
APPENDIX A
to the
SUB-ADMINISTRATION AGREEMENT
Portfolios
E*TRADE S&P 500 Index Fund
APPENDIX B
E * Trade Group, Inc.
Annual Fee Schedule
For One Equity Fund - 2 Classes
October 28, 1998
==============================================================================
Fund Accounting, Custody and Calculation of N.A.V., Fund Administration,
Financial Statement Preparation.
==============================================================================
A. Fund Accounting, Custody and Calculation of N.A.V., Fund
Administration, Financial Statement Preparation.
The Annual Fee for Fund Accounting, Custody and Calculation of N.A.V., Fund
Administration, Financial Statement Preparation for the one (1) E * Trade
Group, Inc. S&P 500 Equity Fund (including two classes) will be charged
according to the following schedule. The following schedule is exclusive of
transaction costs and out-of-pocket expenses.
Fee Annual
Annual Fee per fund $42,000
For each additional class added beyond the first class there will be an
annual fee of $18,000 for the above services.
==============================================================================
Miscellaneous
==============================================================================
A. Out-of-Pocket
These charges consist of:
- Telephone
- Ad Hoc Reporting
- TA - Non-current Day Inquiry ($1.00 per inquiry)
- Third Party Review
- Forms and Supplies
- Printing/Postage/Delivery
- Systems Development/Reports/Transmissions
- Equipment Rental
- Legal costs associated with substantial alterations of IBT's
standard agreements
B. Balance Credits
We allow use of balance credit against fees (excluding out-of-pocket
charges) for collected fund balances arising out of the custody
relationship. The monthly earnings allowance is equal to 75% of the 90-day
T-xxxx rate.
C. Systems
The details of any systems work required to service this fund will be
determined after a thorough business analysis. All systems work, including
creating customized reports and establishing systems/communications
interfaces with E * Trade, other providers, etc., will be billed on a time
and materials basis.
D. Other
Assumptions:
The fee schedule assumes that there will be two (2) classes of shares.
The above fees will be charged against the funds' custodian checking account
five business days after the invoice is mailed to the fund.
This annual fee schedule is valid for 30 days and assumes the execution of
IBT's standard contractual agreements for a minimum term of three (3) years.
All charges will be billed monthly. The fee schedule will be effective upon
start-up of the fund.
Agreed:
---------------------------------
E * Trade Group, Inc.
WIRE INSTRUCTIONS FOR E*TRADE S&P 500 INDEX FUND:
INVESTORS BANK & TRUST COMPANY
BOSTON, MASSACHUSETTS
ABA # 000000000
ACCOUNT # 5819-1000
ACCOUNT: BGI CAP STOCK
REFERENCE: E*TRADE FUND - 10755
Appendix C Investors Bank & Trust Summary of
Administration Functions 1/99 E *
Trade Group, Inc.
Suggested Fund
Function Investors Bank & Trust E * Trade Auditor or Counsel
--------------------------------- ----------------------------- ------------------------ -----------------------
---------------------------------
MANAGEMENT REPORTING
& TREASURY ADMINISTRATION
---------------------------------
C - Review agenda,
Prepare agenda and board Prepare agenda and board material and
materials for quarterly board resolutions and board and committee
meetings. assemble board meeting minutes.
materials for Ensure BOD material
quarterly board contains all required
meetings. Prepare information that the
supporting information BOD must review
and materials when and/or approve to
necessary. Attend perform their duties
Frequency: Quarterly board and committee as directors.
meetings and prepare
minutes.
Monitor portfolio compliance in Perform tests of certain Continuously monitor A/C - Provide
accordance with the current specific portfolio activity portfolio activity and consultation as
Prospectus and SAI. designed from provisions of Fund operations in needed on compliance
the Fund's Prospectus and conjunction with 1940 issues.
SAI at the Master level Act, Prospectus, SAI
only. Follow-up on and any other
potential violations. applicable laws and
Frequency: Daily regulations. Monitor
testing results and
approve resolution of
compliance issues.
Provide compliance summary Provide a report of Review report. A/C - Provide
package. compliance testing results. consultation as
needed.
Frequency: Monthly
A - Provide
Perform asset diversification Perform asset Continuously monitor consultation as
testing to establish diversification tests at portfolio activity in needed in
qualification as a RIC. each tax quarter end. conjunction with IRS establishing
Follow-up on issues. requirements. Review positions to be taken
test results and take in tax treatment of
any necessary action. particular issues.
Frequency: Quarterly Approve tax positions Review quarter end
taken. tests on a current
basis.
Perform qualifying income Perform qualifying income Continuously monitor A- Consult as needed
testing to establish testing (on book basis portfolio activity in on tax accounting
qualification as a RIC. income, unless material conjunction with IRS positions to be
differences are requirements. Review taken. Review in
anticipated) on quarterly test results and take conjunction with
basis and as may otherwise any necessary action. year-end audit.
Frequency: Quarterly be necessary. Follow-up Approve tax positions
on issues. taken.
Prepare the Fund's annual Prepare preliminary expense Provide asset level
expense budget. Establish budget. Notify fund projections. Approve
daily accruals. accounting of new accrual expense budget.
rates.
Frequency: Annually
Monitor the Fund's expense Monitor actual expenses Provide asset level C/A - Provide
budget. updating budgets/ expense projections consultation as
Review the Fund's multi-class accruals. Review expense quarterly. Provide requested.
expense differentials. differentials among classes vendor information as
to ensure consistency with necessary. Review
Rule 18f-3 or the Fund's expense analysis and
exemptive application and approve budget
Frequency: Quarterly the Fund's private letter revisions.
ruling or published ruling.
Receive and coordinate payment Propose allocations of Approve invoices and
of fund expenses. invoice among Funds and allocations of
obtain authorized approval payments. Send
Frequency: As often as to process payment. invoices to IBT in a
necessary timely manner.
Calculate periodic dividend Calculate amounts available Establish and maintain C - Review dividend
rates to be declared in for distribution. dividend and resolutions in
accordance with management Coordinate review by distribution conjunction with
guidelines. management and/or policies. Approve Board approval.
auditors. Notify custody distribution rates per
and transfer agent of share and aggregate A - Review and concur
authorized dividend rates amounts. Obtain Board with proposed
in accordance with Board approval when required. distributions
Frequency: Annually approved policy. Report
dividends to Board as
required.
Calculate total return Provide total return Review total return
information on Funds as defined calculations. information.
in the current Prospectus and
SAI.
Frequency: Monthly
Prepare responses to major Prepare, coordinate as Identify the services
industry questionnaires. necessary, and submit to which the Funds
responses to the report. Provide
Frequency: As often as appropriate agency. information as
necessary requested.
Prepare disinterested Summarize amounts paid to Provide social
director/trustee Form 1099-Misc. directors/trustees during security numbers and
the calendar year. Prepare current mailing
and mail Form 1099-Misc. address for trustees.
Frequency: Annually Review and approve
information provided
for Form 1099-Misc.
---------------------------------
FINANCIAL REPORTING
---------------------------------
Prepare financial information Prepare selected
for presentation to Fund portfolio and
Management and Board of financial information
Directors. for inclusion in board
material.
Frequency: Quarterly
Coordinate the annual audit and Coordinate the creation of Provide past F/S and A - Perform audit and
semi-annual preparation and templates reflecting other information issue opinion on
printing of financial client-selected required to create annual financial
statements and notes with standardized appearance and templates, including statements.
management, fund accounting and text of financial report style and
the fund auditors. statements and footnotes. graphics. Approve
Draft and manage production format and text as
cycle. Coordinate with IBT standard. Approve A/C - Review reports.
fund accounting the production cycle and
electronic receipt of assist in managing to
portfolio and general the cycle. Coordinate
ledger information. Assist review and approval by
in resolution of accounting portfolio managers of
issues. Using templates, portfolio listings to
draft financial statements, be included in
coordinate auditor and financial statements.
management review, and Prepare appropriate
clear comments. Coordinate management letter and
printing of reports and coordinate production
XXXXX conversion with of Management
outside printer and filing Discussion and
with the SEC via XXXXX. Analysis. Review and
approve entire
report. Make
appropriate
representations in
conjunction with audit.
Frequency:
Annually/semi-annually
-----------------------------
TAX
-----------------------------
Prepare income tax Calculate investment Provide transaction A - Provide
provisions. company taxable income, information as consultation as needed
net tax exempt interest, requested. Identify in establishing
net capital gain and Passive Foreign positions to be taken
spillback dividend Investment Companies in tax treatment of
requirements. Identify (PFICs). Approve particular issues.
book-tax accounting tax accounting Perform review in
differences. Track positions to be conjunction with the
required information taken. Approve year-end audit.
relating to accounting provisions.
differences.
Frequency: Annually
Calculate excise tax Calculate required Provide transaction A - Provide
distributions distributions to avoid information as consultation as needed
imposition of excise tax. requested. Identify in establishing
Passive Foreign positions to be taken
- Calculate capital Investment Companies in tax treatment of
gain net income (PFICs). Approve particular issues.
and foreign currency tax accounting Review and concur with
gain/loss through positions to be proposed distributions
October 31. taken. Review and per share.
approve all income
- Calculate ordinary and distribution
income and calculations,
distributions through including projected
a specified cut off income and dividend
date . shares. Approve
distribution rates
- Project ordinary per share and
income from cut off aggregate amounts.
date to December 31. Obtain Board
approval when
- Ascertain dividend required.
shares.
Identify book-tax accounting differences. Track
required information relating to accounting
differences. Coordinate review by management and
fund auditors. Notify custody and transfer agent
of authorized dividend rates in accordance with
Board approved policy. Report dividends to Board
as required.
Frequency: Annually
Prepare tax returns Prepare excise and RIC tax Review and sign tax A - Review and sign tax
returns for Feeder. return. return as preparer.
Frequency: Annually
Prepare Form 1099 Obtain yearly distribution Review and approve
information. Calculate information provided
1099 reclasses and for Form 1099.
Frequency: Annually coordinate with transfer
agent.
Prepare other year-end Obtain yearly income Review and approve
tax-related disclosures distribution information provided.
information. Calculate
disclosures
(i.e., dividend received
Frequency: Annually deductions,
foreign tax credits,
tax-exempt
income, income by
jurisdiction) and
coordinate with transfer
agent.
Review and Approval
The attached Summary of Administration Functions has been reviewed and
represents the services currently being provided.
--------------------------------- ------------------------
Signature of Account Manager Date
---------------------------------- ------------------------
Signature of Authorized Date
Client Representative
