FORM OF
SUB-ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of ________, 1999 by and among E*TRADE ASSET
MANAGEMENT, INC., a Delaware corporation ("E*TRADE Asset Management"), E*TRADE
FUNDS, a Delaware business trust (the "Fund"), and PFPC Inc., a Delaware
corporation ("PFPC"), which is an indirect wholly owned subsidiary of PFPC
Worldwide, Inc.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; consisting of
separate investment portfolios; and
WHEREAS, E*TRADE Asset Management is the Administrator to the Fund with
respect to the investment portfolios of the Fund; and
WHEREAS, the E*TRADE Asset Management and the Fund wish to retain PFPC to
render certain administrative services to the Fund with respect to the
investment portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time (each a "Portfolio")
and PFPC is willing to render such services.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and intending to be legally bound hereby the
parties hereto agree as follows:
1. Definitions.
As Used in this Agreement and not previously defined:
(a) "1933 Act" means the Securities Act of 1933, as amended. (b) "1934
Act" means the Securities Exchange Act of 1934, as amended. (c) "1940 Act"
means the Investment Company Act of 1940, as amended.
(d) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Trustees to give
Oral Instructions and Written Instructions on behalf of the Fund
and listed on the Authorized Persons Appendix attached hereto and
made a part hereof or any amendment thereto as may be received by
PFPC. An Authorized Person's scope of authority may be limited
by the Fund by setting forth such limitation in the Authorized
Persons Appendix.
(e) "Change of Control" means a change in ownership or control (not
including transactions between wholly-owned direct or indirect
subsidiaries of a common parent) of 25% or more of the beneficial
ownership of the shares of common stock or shares of beneficial
interest of an entity or its parent(s).
(f) "Oral Instructions" mean oral instructions received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be
an Authorized Person.
(g) "SEC" means the Securities and Exchange Commission. (h) "Securities
Laws" means the 1933 Act, the 1934 Act, the 1940 Act
and the Commodity Exchange Act, as amended..
(i) "Shares" means the shares of beneficial interest of any series or
class of the Fund.
(j) "Written Instructions" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be
delivered by hand, mail, tested telegram, cable, telex, facsimile,
or electronic mail sending device.
2. Appointment. E*TRADE Asset Management hereby appoints PFPC to act as
Sub-Administrator of the Portfolios and provide administration and
accounting services to each of the Portfolios, in accordance with the
terms set forth in this Agreement. PFPC accepts such appointment and
agrees to furnish such services.
3. Delivery of Documents. The Fund has provided or, where applicable, will
provide PFPC with the following: (a) accurate copies of the resolutions of
the Fund's Board of
Trustees, approving the appointment of PFPC or its affiliates to
provide services to each Portfolio and approving this Agreement;
(b) a copy of the Fund's most recent effective registration statement;
(c) a copy of each Portfolio's advisory agreement or agreements;
(d) a copy of the distribution agreement with respect to each class of
Shares representing an interest in a Portfolio;
(e) a copy of any additional administration agreement with respect to a
Portfolio;
(f) a copy of any shareholder servicing agreement made in respect of the
Fund or a Portfolio; and
(g) copies of any and all amendments or supplements to the foregoing.
4. Compliance with Rules and Regulations.
PFPC undertakes to comply with all applicable requirements of the
Securities Laws, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties to be performed
by PFPC hereunder. Except as specifically set forth herein, PFPC assumes
no responsibility for such compliance by the Fund or any Portfolio.
5. Instructions.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person (or
from a person reasonably believed by PFPC to be an Authorized
Person) pursuant to this Agreement. PFPC may assume that any
Oral Instruction or Written Instruction received hereunder is not
in any way inconsistent with the provisions of organizational
documents or this Agreement or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's
shareholders, unless and until PFPC receives Written Instructions
to the contrary.
(c) E*TRADE Asset Management and the Fund agree to forward to PFPC
Written Instructions confirming Oral Instructions (except where
such Oral Instructions are given by PFPC or its affiliates) so
that PFPC receives the Written Instructions by the close of
business on the same day that such Oral Instructions are
received. The fact that such confirming Written Instructions are
not received by PFPC shall in no way invalidate the transactions
or enforceability of the transactions authorized by the Oral
Instructions. Where Oral Instructions or Written Instructions
reasonably appear to have been received from an Authorized
Person, PFPC shall incur no liability to E*TRADE Asset Management
or the Fund in acting upon such Oral Instructions or Written
Instructions provided that PFPC's actions comply with the other
provisions of this Agreement.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any action it should
or should not take, PFPC may request directions or advice, including
Oral Instructions or Written Instructions, from E*TRADE Asset
Management or the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any question of
law pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing
(who may be counsel for E*TRADE Asset Management, the Fund, the
Fund's investment adviser or PFPC, at the option of PFPC).
(c) Conflicting Advice. In the event of a conflict between
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directions, advice or Oral Instructions or Written Instructions
PFPC receives from E*TRADE Asset Management or the Fund and the
advice PFPC receives from counsel, PFPC may rely upon and follow
the advice of counsel if such counsel is also counsel to the Fund
or its adviser. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the
part of PFPC which constitutes willful misfeasance, bad faith,
negligence or reckless disregard by PFPC of any duties,
obligations or responsibilities set forth in this Agreement. If
PFPC intends to rely on advice from counsel which conflicts with
Oral or Written Instructions from E*TRADE Asset Management or the
Fund, PFPC shall notify E*TRADE Asset Management or the Fund, as
applicable, in writing prior to such reliance.
(d) Protection of PFPC. PFPC shall be protected in any action it
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takes or does not take in reliance upon directions, advice or
Oral Instructions or Written Instructions it receives from
E*TRADE Asset Management or the Fund or from counsel and which
PFPC believes, in good faith, to be consistent with those
directions, advice and Oral Instructions or Written
Instructions. Nothing in this section shall be construed so as
to impose an obligation upon PFPC (i) to seek such directions,
advice or Oral Instructions or Written Instructions, or (ii) to
act in accordance with such directions, advice or Oral
Instructions or Written Instructions unless, under the terms of
other provisions of this Agreement, the same is a condition of
PFPC's properly taking or not taking such action. Nothing in
this subsection shall excuse PFPC when an action or omission on
the part of PFPC constitutes willful misfeasance, bad faith,
negligence or reckless disregard by PFPC of any duties,
obligations or responsibilities set forth in this Agreement.
7. Records; Visits.
(a) The books and records pertaining to the Fund and the Portfolios
which are in the possession or under the control of PFPC shall be
the property of the Fund. Such books and records shall be
prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. E*TRADE Asset
Management, the Fund and Authorized Persons shall have access to
such books and records at all times during PFPC's normal business
hours. Upon the reasonable request of E*TRADE Asset Management
or the Fund, copies of any such books and records shall be
provided by PFPC to E*TRADE Asset Management or the Fund or to an
Authorized Person.
(b) PFPC shall keep the following records:
(i) all books and records with respect to each Portfolio's
books of account;
(ii) records of each Portfolio's securities transactions; and
(iii) all other books and records as the Fund is required to
maintain with respect to the Portfolios pursuant to Rule 31a-1
of the 1940 Act in connection with the services provided
hereunder for the periods described by Rule 31a-2 under 1940
Act.
8. Confidentiality. PFPC agrees to keep confidential the records of the Fund
and information relating to the Fund and its shareholders, unless the
release of such records or information is otherwise consented to, in
writing, by the Fund. The Fund agrees that such consent shall not be
unreasonably withheld and may not be withheld where PFPC may be exposed to
civil or criminal contempt proceedings or when required to divulge such
information or records to duly constituted authorities.
9. Liaison with Accountants. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide account analyses, fiscal
year summaries, and other audit-related schedules with respect to each
Portfolio. PFPC shall take all reasonable action in the performance of its
duties under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their opinion, as
required by the Fund.
10. Disaster Recovery. PFPC shall enter into and shall maintain in effect
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with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to
the extent appropriate equipment is available. In the event of
equipment failures, PFPC shall, at no additional expense to E*TRADE
Asset Management or the Fund, take reasonable steps to minimize service
interruptions. PFPC shall have no liability with respect to the loss
of data or service interruptions caused by equipment failure, provided
such loss or interruption is not caused by PFPC's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties
or obligations under this Agreement.
11. Year 2000 Readiness Disclosure. PFPC, with respect to services
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provided hereunder, (a) has reviewed its business and operations, (b)
has implemented a program to remediate or replace computer applications
and systems, and (c) has implemented a testing plan to test the
remediation or replacement of computer applications and systems, in
each case, to address on a timely basis the risk that certain computer
applications and systems used by PFPC may be unable to recognize and
perform properly date sensitive functions involving dates prior to,
including and after December 31, 1999, including dates such as February
29, 2000 (the "Year 2000 Challenge"). To the best of PFPC's knowledge
and belief, the reasonably foreseeable consequences of the Year 2000
Challenge will not adversely effect PFPC's ability to perform its
duties and obligations under this Agreement. If requested by E*TRADE
Asset Management, the Fund or the Fund's Board of Trustees, PFPC will
provide written materials describing PFPC's current status and plans
with respect to the Year 2000 Challenge for use in the Fund's
registration statement and/or in materials presented to the Fund's
Board of Trustees.
12. Compensation. As compensation for services rendered by PFPC during the
term of this Agreement, E*TRADE Asset Management, will pay to PFPC a fee
or fees as may be agreed to in writing by E*TRADE Asset Management and
PFPC.
13. Indemnification. E*TRADE Asset Management and the Fund, on behalf of
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each Portfolio, agrees to indemnify and hold harmless PFPC and its
affiliates from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under
the Securities Laws and any state or foreign securities and blue sky
laws, and amendments thereto), including, without limitation,
attorneys' fees and disbursements arising directly or indirectly from
any action or omission to act which PFPC takes (i) at the request or on
the direction of or in reliance on the advice of E*TRADE Asset
Management or the Fund or (ii) upon Oral Instructions or Written
Instructions. Neither PFPC, nor any of its affiliates, shall be
indemnified against any liability (or any expenses incident to such
liability) arising out of PFPC's or its affiliates' own willful
misfeasance, bad faith, negligence or reckless disregard of its duties
and obligations under this Agreement. Any amounts payable by E*TRADE
Asset Management hereunder shall be satisfied only against the relevant
Portfolio's assets and not against the assets of any other investment
portfolio of the Fund.
14. Responsibility of PFPC.
(a) PFPC shall be under no duty to take any action on behalf of
E*TRADE Asset Management or the Fund or any Portfolio except as
specifically set forth herein or as may be specifically agreed to
by PFPC in writing. PFPC shall be obligated to exercise care and
diligence in the performance of its duties hereunder and to act
in good faith in performing services provided for under this
Agreement. PFPC shall be liable for any damages arising out of
PFPC's failure to perform its duties under this Agreement to the
extent such damages arise out of PFPC's willful misfeasance, bad
faith, negligence or reckless disregard of such duties or a
breach of this Agreement.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC shall not be liable for
losses beyond its control, provided that PFPC has acted in
accordance with the standard of care set forth above; and (ii)
PFPC shall not be liable for (A) the validity or invalidity or
authority or lack thereof of any Oral Instruction or Written
Instruction, notice or other instrument which conforms to the
applicable requirements of this Agreement, and which PFPC
reasonably believes to be genuine; or (B) subject to Section 10,
delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or
military authority, national emergencies, labor difficulties,
fire, flood, catastrophe, acts of God, insurrection, war, riots
or failure of the mails, transportation, communication or power
supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC nor its affiliates shall be liable to E*TRADE Asset
Management or the Fund or to any Portfolio for any consequential,
special or indirect losses or damages which E*TRADE Asset
Management, the Fund or any Portfolio may incur or suffer by or
as a consequence of PFPC's or any affiliates' performance of the
services provided hereunder, whether or not the likelihood of
such losses or damages was known by PFPC or its affiliates.
15. Description of Accounting Services on a Continuous Basis. PFPC will
perform the following accounting services with respect to
each Portfolio:
(i) Journalize investment, capital share and income and expense
activities;
(ii) Verify investment buy/sell trade tickets when received from the
investment adviser for a Portfolio (the "Adviser") and transmit
trades to the Fund's custodian (the "Custodian") for proper
settlement;
(iii) Maintain individual ledgers for investment securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of the Fund with the
Custodian, and provide the Adviser with the beginning cash balance
available for investment purposes;
(vi) Update the cash availability throughout the day as required by the
Adviser;
(vii) Post to and prepare the Statement of Assets and Liabilities and the
Statement of Operations;
(viii)Calculate various contractual expenses (e.g., advisory and custody
fees);
(ix) Monitor the expense accruals and notify an officer of the Fund of
any proposed adjustments;
(x) Control all disbursements and authorize such disbursements upon
Written Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine net income;
(xiii)Obtain security market quotes from independent pricing services
approved by the Adviser, or if such quotes are unavailable, then
obtain such prices from the Adviser, and in either case calculate
the market value of each Portfolio's Investments;
(xiv) Transmit or mail a copy of the daily portfolio valuation to the
Adviser;
(xv) Compute net asset value;
(xvi) As appropriate or at the request of the Fund, compute yields, total
return, expense ratios, portfolio turnover rate, and, if required,
portfolio average dollar-weighted maturity; and
(xvii)Prepare a monthly financial statement, which will include the
following items:
Schedule of Investments Statement of Assets and
Liabilities Statement of Operations Statement of Changes
in Net Assets Cash Statement Schedule of Capital Gains
and Losses.
16. Description of Administration Services on a Continuous Basis. PFPC will
perform the following administration services with respect to
each Portfolio:
(i) Prepare quarterly broker security transactions summaries;
(ii) Prepare monthly security transaction listings;
(iii) Supply various normal and customary Portfolio and Fund statistical
data as requested on an ongoing basis;
(iv) Prepare for execution and file the Fund's Federal and state tax
returns;
(v) Prepare and file the Fund's Semi-Annual Reports with the SEC on Form
N-SAR;
(vi) Prepare and file with the SEC the Fund's annual, semi-annual, and
quarterly shareholder reports;
(vii) Assist in the preparation of registration statements and other
filings relating to the registration of Shares;
(viii)Monitor each Portfolio's status as a regulated investment company
under Sub-chapter M of the Internal Revenue Code of 1986, as
amended; and
(ix) Coordinate contractual relationships and communications between the
Fund and its contractual service providers.
17. Duration and Termination. This Agreement shall continue until terminated
by E*TRADE Asset Management or the Fund or by PFPC on sixty (60) days'
prior written notice to the other parties.
18. Change of Control. Notwithstanding any other provision of this Agreement,
in the event of an agreement to enter into a transaction that would result
in a Change of Control of the Fund's adviser or sponsor, the Fund's
ability to terminate the Agreement will be suspended from the time of such
agreement until ninety-days after the Change of Control.
19. Notices. All notices and other communications, including Written
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Instructions, shall be in writing or by confirming telegram, cable,
telex, facsimile or electronic mail sending device. If notice is sent
by confirming telegram, cable, telex or facsimile sending device, it
shall be deemed to have been given immediately. If notice is sent by
first-class mail, it shall be deemed to have been given three days
after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered. Notices shall be
addressed (a) if to PFPC, at 000 Xxxxxxxx Xxxxxxx, Xxxxxxxxxx, Xxxxxxxx
00000, Attention: President, or electronic mail: _________@xxxx.xxx;
(b) if to E*TRADE Asset Management, at 0000 Xxxxxxxx Xxxxx, Xxxxx Xxxx,
XX 00000, Attention: , or electronic mail:
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________@xxxxxx.xxx; (c) if to the Fund, at 0000 Xxxxxxxx Xxxxx, Xxxxx
Xxxx, XX 00000, Attention: , or electronic mail:
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________@xxxxxx.xxx; or (d) if to neither of the foregoing, at such
other address as shall have been provided by like notice to the sender
of any such notice or other communication by the other party.
20. Amendments. This Agreement, or any term thereof, may be changed or waived
only by written amendment, signed by the party against whom enforcement of
such change or waiver is sought.
21. Delegation; Assignment. PFPC may delegate its duties hereunder to any
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majority-owned direct or indirect subsidiary of PFPC or another wholly
owned subsidiary of PFPC Worldwide Inc., provided that (i) PFPC gives
E*TRADE Asset Management and the Fund 30 days prior written notice of
such assignment or delegation, (ii) the delegate agrees to comply with
this Agreement and the relevant provisions of the Securities Laws, and
(iii) PFPC and such delegate promptly provide such information as
E*TRADE Asset Management or the Fund may reasonably request, and
respond to such questions as E*TRADE Asset Management or the Fund may
reasonably ask, relative to the delegation (including, without
limitation, the capabilities of the delegate).
22. Counterparts. This Agreement may be executed in two or more counter-parts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
23. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
24. Miscellaneous.
(a) This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents
their agreement, if any, with respect to delegated duties and
Oral Instructions. The captions in 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. Notwithstanding any provision hereof, the
services of PFPC are not, nor shall they be, construed as
constituting legal advice or the provision of legal services for
or on behalf of E*TRADE Asset Management, the Fund or any other
person.
(b) This Agreement shall be deemed to be a contract made in Delaware and
governed by Delaware law, without regard to principles of conflicts
of law.
(c) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
(d) The facsimile signature of any party to this Agreement shall
constitute the valid and binding execution hereof by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By:
Title:
E*TRADE FUNDS
By:
Title:
E*TRADE ASSET MANAGEMENT, INC.
By:
Title:
EXHIBIT A
THIS EXHIBIT A, dated as of _________, 1999 is Exhibit A to that
Sub-Administration and Accounting Services Agreement dated as of ________, 1999
between PFPC Inc. and E*Trade Funds.
PORTFOLIOS
E*TRADE Technology Index Fund
AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
