EXHIBIT (h)(1)
FUND ACCOUNTING SERVICE AGREEMENT
BETWEEN
XXXXXX XXXXXX & COMPANY, INC.
AND
XXXXXX XXXXXX SELECT FUND, INC.
This Fund Accounting Service Agreement is made this _____ day of
_____________, 1999 (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") and currently has two distinct series of shares of common stock,
which have been designated Xxxxxx Xxxxxx Intermediate Bond Fund and Xxxxxx
Xxxxxx High Income Fund (each a "Portfolio"); and
WHEREAS, Xxxxxx Xxxxxx is a brokerage firm, and is capable of
providing, among other things, recordkeeping 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 desires to retain Xxxxxx Xxxxxx to provide fund
accounting services for each Portfolio of the Fund;
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 Directors.
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 Directors 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;
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(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.
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(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.
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(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
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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 attached hereto as Exhibit A.
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.
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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 State of Maryland. 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.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
XXXXXX XXXXXX & COMPANY, INC.
By:
----------------------------------
Name:
Title:
XXXXXX XXXXXX SELECT FUND, INC.
By:
-----------------------------------
Name:
Title:
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APPENDIX A
Xxxxxx Xxxxxx Intermediate Bond Fund: Fund Accounting - $1,500 per month,
$18,000 per year
Xxxxxx Xxxxxx High Income Fund: Fund Accounting - $1,500 per month, $18,000 per
year
Fund Accounting Fees include Daily Valuation and Financial Statement Preparation
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