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EXHIBIT 99.h-1
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
THIS AGREEMENT is made as of this 31st day of October, 1999, by and
between Choice Funds, a Delaware business trust (the "Trust"), and
Sunstone Financial Group, Inc., a Wisconsin corporation (the "Administrator").
WHEREAS, the Trust is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act") and is authorized to
issue shares of beneficial interest (the "Shares") in separate series with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Trust and the Administrator desire to enter into an
agreement pursuant to which the Administrator shall provide administration and
fund accounting services to such investment portfolios of the Trust as are
listed on Schedule A hereto and any additional investment portfolios the Trust
and Administrator may agree upon and include on Schedule A as such Schedule may
be amended from time to time (such investment portfolios and any additional
investment portfolios are individually referred to as a "Fund" and collectively,
the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Appointment
The Trust hereby appoints the Administrator as administrator and fund
accountant of the Funds for the period and on the terms set forth in this
Agreement. The Administrator accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Services as Administrator
(a) In performing its duties, the Administrator will act under the
direction and control of the Trust's Board of Trustees and in accordance with
the Trust's Agreement and Declaration of Trust, By-Laws, Registration Statement
and in compliance with the requirements of the 1940 Act and all other applicable
federal or state laws and will consult with legal counsel to the Trust as
necessary and appropriate. The expense of legal counsel will be the
responsibility of the Trust. The duties of the Administrator shall be confined
to those expressly set forth herein, and no implied duties are assumed by or may
be asserted against the Administrator hereunder In conformance with the
foregoing and utilizing information provided by the Trust and its agents, the
Administrator will:
(1) provide office space, facilities, equipment and personnel to
carry out its services hereunder;
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(2) compile data for and prepare with respect to the Funds timely
Notices to the Securities and Exchange Commission (the "Commission") required
pursuant to Rule 24f-2 under the 1940 Act and Semi-Annual Reports on Form N-SAR;
(3) assist in the preparation for execution by the Trust and file
for all Funds and the Trust all federal income and excise tax returns and state
income tax returns (and such other required tax filings as may be agreed to by
the parties) other than those required to be made by the Trust's custodian or
transfer agent, subject to review and approval of the Trust and the Trust's
independent accountants;
(4) prepare the financial statements (including footnotes to
financial statements) for the Annual and Semi-Annual Reports required pursuant
to Section 30(d) under the 1940 Act;
(5) assist the Trust's legal counsel in the preparation of the
Registration Statement for the Trust (on Form N-1A or any replacement therefor)
and any pre- or post-effective amendments thereto, and file the same;
(6) determine and periodically monitor each Fund's income and
expense accruals and cause all appropriate expenses to be paid from Trust assets
on proper authorization from the Trust;
(7) calculate daily net asset values and income factors of each
Fund;
(8) maintain all general ledger accounts and related subledgers;
(9) perform security valuations;
(10) assist in the acquisition of the Trust's fidelity bond
required by the Act, monitor the amount of the bond and make the necessary
Commission filings related thereto;
(11) from time to time as the Administrator deems appropriate,
check each Fund's compliance with the policies and limitations of each Fund
relating to the portfolio investments as set forth in the Prospectus and
Statement of Additional Information and monitor each Fund's status as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (but these functions shall not relieve the Trust's investment
adviser and sub-advisers, if any, of their primary day-to-day responsibility for
assuring such compliance);
(12) maintain, and/or coordinate with the other service providers
the maintenance of, the accounts, books and other documents required pursuant to
Rule 31a-1(a) and (b) under the 1940 Act for periods proscribed by Rule 31a-2
under the 1940 Act during the term of this Agreement;
(13) prepare and/or file securities registration compliance
filings with appropriate state authorities so as to enable each Fund to make a
continuous offering of its shares in the states identified by the Trust in a
written instruction to the Administrator, with the advice of the Trust's legal
counsel;
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(14) develop with legal counsel and secretary of the Trust an
agenda for each board meeting and, if requested by the Trustees, attend all
regular and special board meetings and prepare and distribute minutes of such
meetings;
(15) prepare Form 1099s for Trustees and other Trust vendors;
(16) calculate dividend and capital gains distributions subject to
review and approval by the Trust and its independent accountants; and
(17) generally assist in the Trust's administrative operations as
mutually agreed to by the parties.
(b) The Trustees of the Trust shall cause the officers, investment
adviser, legal counsel, independent accountants, transfer agent and custodian
for the Funds to cooperate with the Administrator and to provide the
Administrator, upon request, with such information, documents and advice
relating to the Funds and the Trust as is within the possession or knowledge of
such persons, in order to enable the Administrator to perform its duties
hereunder. In connection with its duties hereunder, the Administrator shall be
entitled to rely, and shall be held harmless by the Trust when acting in
reliance, upon the instruction, advice, information or any documents relating to
the Funds provided to the Administrator by an officer or representative of the
Funds or by any of the aforementioned persons. The Administrator shall be
entitled to rely on any document which it reasonably believes to be genuine and
to have been signed or presented by the proper party. Fees charged by such
persons shall be an expense of the Trust. The Administrator shall not be held to
have notice of any change of authority of any officer, agent, representative or
employee of the Trust until receipt of written notice thereof from the Trust.
(c) In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Administrator hereby agrees that all records which it maintains for the
Trust are the property of the Trust and further agrees to surrender promptly to
the Trust any of such records upon the Trust's request. Subject to the terms of
Section 6, the Administrator further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records described in (a) above
which are maintained by the Administrator for the Trust.
(d) It is understood that in determining security valuations, the
Administrator employs one or more pricing services to determine valuations of
portfolio securities for purposes of calculating net asset values of the Funds.
The Administrator shall identify to the Trust and the Board of Trustees any such
pricing service utilized on behalf of the Trust. The Administrator is authorized
to rely on the prices provided by such service(s) or by the Funds' investment
adviser or other authorized representative of the Funds, and shall not be liable
for losses to the Trust or its securityholders as a result of its reliance on
the valuations provided by the approved pricing service(s) or the
representative.
(e) The Trust's Board of Trustees and the Funds' investment adviser have
and retain primary responsibility for all compliance matters relating to the
Funds, including, but not limited to, compliance with the Investment Company Act
of 1940, as amended, the Internal Revenue Code of 1986, as amended, and the
policies and limitations of each Fund relating to the portfolio investments as
set forth
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in the Prospectus and Statement of Additional Information. Sunstone's
monitoring and other functions hereunder shall not relieve the Board and the
investment adviser of their primary day-to-day responsibility for assuring such
compliance.
3. Fees; Delegation; Expenses
(a) In consideration of the services rendered pursuant to this Agreement,
the Trust will pay the Administrator a fee, computed daily and payable monthly,
plus out-of-pocket expenses, each as provided in Schedule B hereto. The Trust
shall also pay the Administrator for organizational start-up services provided
on behalf of the Funds as specified in Schedule B.
(b) For the purpose of determining fees payable to the Administrator, net
asset value shall be computed in accordance with the Trust's Prospectuses and
resolutions of the Trust's Board of Trustees. The fee for the period from the
day of the month this Agreement is entered into until the end of that month
shall be pro-rated according to the proportion which such period bears to the
full monthly period. Upon any termination of this Agreement before the end of
any month, the fee for such part of a month shall be pro-rated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. Should the Trust be
liquidated, merged with or acquired by another fund or investment company, any
accrued fees shall be immediately payable. Such fee as is attributable to each
Fund shall be a separate charge to each Fund and shall be the several (and not
joint or joint and several) obligation of each such Fund.
(c) The Administrator will bear all expenses in connection with the
performance of its services under this Agreement except as otherwise provided
herein. Other costs and expenses to be incurred in the operation of the Funds,
including, but not limited to: taxes; interest; brokerage fees and commissions,
if any; salaries, fees and expenses of officers and Trustees; Commission fees
and state Blue Sky fees; advisory fees; charges of custodians, transfer agents,
dividend disbursing and accounting services agents; security pricing services;
insurance premiums; outside auditing and legal expenses; costs of organization
and maintenance of corporate existence; typesetting, printing, proofing and
mailing of prospectuses, statements of additional information, supplements,
notices and proxy materials for regulatory purposes and for distribution to
current shareholders; typesetting, printing, proofing and mailing and other
costs of shareholder reports; expenses in connection with the electronic
transmission of documents and information including electronic filings with the
Commission and the states: expenses incidental to holding meetings of the Fund's
shareholders and Trustees; and any extraordinary expenses; will be borne by the
Funds or their investment adviser, as appropriate. Expenses incurred for
distribution of shares, including the typesetting, printing, proofing and
mailing of prospectuses for persons who are not shareholders of the Trust, will
be borne by the investment adviser, except for such expenses permitted to be
paid by the Trust under a distribution agreement and/or plan adopted in
accordance with applicable laws. The Administrator shall not be required to pay
any Blue Sky registration or filing fees unless and until it has received the
amount of such fees from the Trust
4. PROPRIETARY AND CONFIDENTIAL INFORMATION
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The Administrator agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records relative
to the Trust and/or Funds and prior, present or future shareholders of the
Trust, and not to use such records and information for any purpose other than
performance of its responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Trust, which approval shall not
be unreasonably withheld and may not be withheld where the Administrator may be
exposed to civil or criminal proceedings for failure to comply, when requested
to divulge such information by duly constituted authorities, when subject to
governmental or regulatory audit or investigation, or when so requested by the
Trust. Records and information which have become known to the public through no
wrongful act of the Administrator or any of its employees, agents or
representatives shall not be subject to this paragraph.
5. LIMITATION OF LIABILITY
(a) The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Funds in connection with the
matters to which this Agreement relates, except for a loss resulting from the
Administrator's willful misfeasance, bad faith or gross negligence in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Furthermore, the Administrator shall not be
liable for any action taken or omitted to be taken in good faith in accordance
with written or oral instructions received by the Administrator from an officer
or representative of the Trust.
(b) The Administrator shall indemnify and hold the Trust, its Trustees or
its duly authorized officers harmless from and against any and all claims,
demands, losses, expenses and liability (whether with or without basis in fact
or law) of any nature (including reasonable attorney's fees which may be
asserted against any or all of them by any person arising out of any action
taken or omitted to be taken by the Administrator as a result of the
Administrator's refusal or failure to comply with the terms of this Agreement,
its willful misfeasance, bad faith, negligence or willful misconduct, and will
cooperate in the transfer of the Administrators duties and responsibilities. The
Trust on behalf of the Funds agrees to indemnify and hold harmless the
Administrator, its officers, directors, employees, agents and nominees from and
against any and all claims, demands, losses, expenses and liability (whether
with or without basis in fact or law) of any nature (including reasonable
attorney's fees which may be asserted against any or all of them by any person
arising out of the Administrator's actions taken or nonactions with respect to
the performance of services under this Agreement or based, if applicable, upon
good faith reliance on information, records, instructions (oral or written) or
requests given or made to the Administrator by the Trust, its officers,
directors, agents or representatives; provided that this indemnification shall
not apply to actions or omissions of the Administrator in cases of its own
willful misfeasance, bad faith, negligence or willful misconduct. The indemnity
and defense provisions provided hereunder shall indefinitely survive the
termination of this Agreement
(c) The Administrator assumes no responsibility hereunder, and shall not
be liable, for any damage, loss of data, errors, delay or any other loss
whatsoever caused by events beyond its reasonable control. The Administrator
will, however, take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond its control. At the request
of the Trust, the
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Administrator will provide to the Trust a copy of the Administrator's current
disaster recovery plan, or, at the discretion of the Administrator, a summary
thereof.
6. TERM
(a) This Agreement shall become effective with respect to each Fund
listed on Schedule A hereof as of the date hereof and, with respect to each Fund
not in existence on that date, on the date an amendment to Schedule A to this
Agreement relating to that Fund is executed. This Agreement shall continue in
effect with respect to each Fund until _______ __, 199_ (the "Initial Term").
Thereafter, if not terminated as provided herein, this Agreement shall continue
automatically in effect as to each Fund for successive annual periods provided
that the continuance of the Agreement is approved by the Trustees of the Trust.
(b) This Agreement may be terminated with respect to any one or more
particular Funds without penalty after the Initial Term (i) upon mutual consent
of the parties, or (ii) by either party upon not less than sixty (60) days'
written notice to the other party (which notice may be waived by the party
entitled to the notice). The terms of this Agreement shall not be waived,
altered, modified, amended or supplemented in any manner whatsoever except by a
written instrument signed by the Administrator and the Trust.
(c) Notwithstanding anything herein to the contrary, upon the termination
of this Agreement or the liquidation of a Fund or the Trust, the Administrator
shall deliver all data and the records and any other records or data established
or maintained by the Administrator under this Agreement and will cooperate in
the transfer of the Administrator's duties and responsibilities of the Fund(s)
and/or Trust as the case may be to the Trust or person(s) designated by the
Trust as successor to the Administrator and thereafter the Trust or its designee
shall be solely responsible for preserving the records for the periods required
by all applicable laws, rules and regulations. In the absence of such
designation by the Trust, upon the date specified in the notice of termination
of this Agreement and delivery of the records maintained hereunder, the
Administrator shall be relieved of all duties and responsibilities pursuant to
this Agreement. In addition, in the event of termination of this Agreement, or
the proposed liquidation or merger of the Trust or a Fund(s), and the Trust
requests the Administrator to provide services in connection therewith, the
Administrator shall provide such services and be entitled to such compensation
as the parties may mutually agree.
7. NON-EXCLUSIVITY
The services of the Administrator rendered to the Trust are not deemed to
be exclusive. The Administrator may render such services and any other services
to others, including other investment companies. The Trust recognizes that from
time to time directors, officers and employees of the Administrator may serve as
trustees, directors, officers and employees of other entities (including other
investment companies), that such other entities may include the name of the
Administrator as part of their name and that the Administrator or its affiliates
may enter into investment advisory or other agreements with such other entities.
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8. GOVERNING LAW; INVALIDITY
This Agreement shall be governed by and construed in accordance with the
laws of the State of Wisconsin. To the extent that the applicable laws of the
State of Wisconsin, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control, and nothing
herein shall be construed in a manner inconsistent with the 1940 Act or any rule
or order of the Commission thereunder. Any provision of this Agreement which may
be determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability and shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9. NOTICES
Any notice required or permitted to be given by either party to the other
shall be in writing and shall be deemed to have been given when sent by
registered or certified mail, postage prepaid, return receipt requested, as
follows: Notice to the Administrator shall be sent to Sunstone Financial Group,
Inc., 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, XX, 00000, Attention:
Xxxxxx X. Xxxxxxx, and notice to the Trust shall be sent to Choice Funds, x/x
Xxxxxxxx Xxxxx Xxxxxxx & Xxxxx, XXX, Xxxxxxxxx: Xxxxxxx Xxxxxx, Esquire.
10. TRUST LIMITATIONS
This Agreement is executed by the Trust with respect to each of the Funds
and the obligations hereunder are not binding upon any of the trustees, officers
or shareholders of the Trust individually but are binding only upon the Fund to
which such obligations pertain and the assets and property of such Fund. All
obligations of the Trust under this Agreement shall apply only on a Fund-by-Fund
basis, and the assets of one Fund shall not be liable for the obligations of
another Fund. The Fund's Declaration of Trust is on file with the Secretary of
State of Delaware.
11. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement of the parties hereto.
12. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original agreement but such counterparts shall
together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the day and year first above
written.
CHOICE FUNDS
(the "Trust")
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By:____________________________________________
President
SUNSTONE FINANCIAL GROUP, INC.
("Administrator")
By:____________________________________________
President
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SCHEDULE A
TO
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
TRUST PORTFOLIOS
Choice Focus Fund
Choice Balanced Fund
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SCHEDULE B
TO
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
FEE SCHEDULE
ASSET BASED FEES
------------------------- -------------------------------------- ----------------------------- ----------------------
NAME OF FUND AVERAGE NET ASSETS BASIS POINTS* MINIMUM
------------ ------------------ ------------- ANNUAL FEE*
-----------
------------------------- -------------------------------------- ----------------------------- ----------------------
Focus Fund Up to $50 Million 15.0 basis points $70,000
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$50 Million to $100 Million 7.5 basis points
------------------------- -------------------------------------- ----------------------------- ----------------------
$100 Million to $250 Million 5.0 basis points
------------------------- -------------------------------------- ----------------------------- ----------------------
$250 Million to $500 Million 3.0 basis points
------------------------- -------------------------------------- ----------------------------- ----------------------
Over $500 Million 2.0 basis points
------------------------- -------------------------------------- ----------------------------- ----------------------
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Balanced Fund Up to $50 Million 15.0 basis points $70,000
------------------------- -------------------------------------- ----------------------------- ----------------------
$50 Million to $100 Million 7.5 basis points
------------------------- -------------------------------------- ----------------------------- ----------------------
$100 Million to $250 Million 5.0 basis points
------------------------- -------------------------------------- ----------------------------- ----------------------
$250 Million to $500 Million 3.0 basis points
------------------------- -------------------------------------- ----------------------------- ----------------------
Over $500 Million 2.0 basis points
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*The parties agree that in the event that the Balanced Fund has not commenced
operations by June 30, 2000, then beginning on July 1, 2000, the following
revised fee schedule shall apply to the Focus Fund:
------------------------- -------------------------------------- ----------------------------- ----------------------
NAME OF FUND AVERAGE NET ASSETS BASIS POINTS MINIMUM
------------ ------------------ ------------ ANNUAL FEE
----------
------------------------- -------------------------------------- ----------------------------- ----------------------
Focus Fund Up to $50 Million 18.0 basis points $75,000
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$50 Million to $100 Million 10.0 basis points
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$100 Million to $250 Million 7.0 basis points
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$250 Million to $500 Million 5.0 basis points
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Over $500 Million 3.0 basis points
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The minimum annual fee is subject to an annual escalation of five percent (5%),
which escalation shall be effective commencing one year from the effective date
of each Fund and the corresponding date each year thereafter. No amendment of
this Schedule B shall be required with each escalation. The foregoing fee
schedules assume a single class of shares for each Fund.
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Additional fees shall apply when adding any additional Fund(s) and/or classes
including compensation for the Administrator's services in connection with the
organization of the new Fund(s) or classes. The Administrator shall provide such
services and be entitled to such compensation as the parties may mutually agree
in writing.
OUT-OF-POCKET AND OTHER RELATED EXPENSES
The Trust shall also pay/reimburse the Administrator's out-of-pocket and other
related expenses. Out-of-pocket expenses include, but are not limited to,
travel, lodging and meals in connection with travel in connection with Board
meetings and otherwise on behalf of the Trust, programming and related expenses
(previously incurred or to be incurred by Administrator) in connection with
providing electronic transmission of data between the Administrator and the
Funds' other service providers, brokers, dealers and depositories, fees and
expenses of pricing services, fees of research services including Lexis/Nexis,
Morningstar and Lipper, NASDAQ and other service interface fees, XXXXX related
fees, long distance telephone charges, and photocopying, faxes, postage and
overnight delivery expenses.
ORGANIZATIONAL AND START-UP EXPENSES
The Trust agrees to reimburse the Administrator the sum of $20,000 for providing
organizational and start-up expenses.
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