Page 1
FUND ADMINISTRATION SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of
September, 2000, by and between The Hennessy Funds, Inc., a Maryland business
company (the "Company") and Firstar Mutual Fund Services, LLC, a Wisconsin
limited liability company ("FMFS").
WHEREAS, the Company is a registered investment company under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Company is authorized to create separate series, each with
its own separate investment portfolio;
WHEREAS, FMFS is in the business of providing, among other things,
mutual fund administration services to investment companies; and
WHEREAS, the Company desires to retain FMFS to provide mutual fund
administration services to each of the portfolios of the Company, (each a
"Fund") and each additional series of the Company listed on Exhibit A attached
hereto, as Exhibit A may be amended from time to time.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and FMFS agree as follows:
1. Appointment of Administrator
The Company hereby appoints FMFS as Administrator of the Company on the
terms and conditions set forth in this Agreement, and FMFS hereby accepts
such appointment and agrees to perform the services and duties set forth in
this Agreement in consideration of the compensation provided for herein.
2. Duties and Responsibilities of FMFS
A. General Fund Management
1. Act as liaison among all Fund service providers
2. Supply:
a. Corporate secretarial services
b. Office facilities (which may be in FMFS's or its affiliate's
own offices)
c. Non-investment-related statistical and research data as
needed
3. Coordinate board communication:
<PAGE>
Page 2
a. Establish meeting agendas
b. Prepare board reports based on financial and administrative
data
c. Evaluate independent auditors
d. Secure and monitor fidelity bond and director and officer
liability coverage, and make the necessary Securities and
Exchange Commission ("SEC") filings relating thereto
e. Prepare minutes of meetings of the board and shareholders
f. Recommend dividend declarations to the Board, prepare and
distribute to appropriate parties notices announcing
declaration of dividends and other distributions to
shareholders g. Provide personnel to serve as officers of
the Company if so elected by the Board and attend Board
meetings to present materials for Board review
4. Audits
a. Prepare appropriate schedules and assist independent
auditors
b. Provide information to the SEC and facilitate audit process
c. Provide office facilities
5. Assist in overall operations of the Fund
6. Pay Fund expenses upon written authorization from the Company
7. Monitor arrangements under shareholder services or similar plan
B. Compliance
1. Regulatory Compliance
a. Monitor compliance with 1940 Act requirements, including:
1) Asset diversification tests
2) Total return and SEC yield calculations
3) Maintenance of books and records under Rule 31a-3
4) Code of Ethics for the disinterested Directors of the
Fund
b. Monitor Fund's compliance with the policies and investment
limitations of the Company as set forth in its Prospectus
and Statement of Additional Information
c. Maintain awareness of applicable regulatory and operational
service issues and recommend dispositions
2. Blue Sky Compliance
a. Prepare and file with the appropriate state securities
authorities any and all required compliance filings relating
to the registration of the securities of
<PAGE>
Page 3
the Company so as to enable the Company to make a continuous
offering of its shares in all states
b. Monitor status and maintain registrations in each state
c. Provide information regarding material developments in state
securities regulation
3. SEC Registration and Reporting
a. Assist Company counsel in updating Prospectus and Statement
of Additional Information and in preparing proxy statements
and Rule 24f-2 notices
b. Prepare annual and semiannual reports, Form N-SAR filings
and Rule 24f-2 notices
c. Coordinate the printing, filing and mailing of publicly
disseminated Prospectuses and reports
d. File fidelity bond under Rule 17g-1
e. File shareholder reports under Rule 30b2-1
f. Monitor sales of each Fund's shares and ensure that such
shares are properly registered with the SEC and the
appropriate state authorities
g. File Rule 24f-2 notices
4. IRS Compliance
a. Monitor Company's status as a regulated investment company
under Subchapter M, including without limitation, review of
the following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
b. Calculate required distributions (including excise tax
distributions)
C. Financial Reporting
1. Provide financial data required by the Fund's Prospectus and
Statement of Additional Information
2. Prepare financial reports for officers, shareholders, tax
authorities, performance reporting companies, the board, the SEC,
and independent auditors
3. Supervise the Company's custodian and accountants in the
maintenance of the Company's general ledger and in the
preparation of the Fund's financial statements, including
oversight of expense accruals and payments, of the determination
of net asset value of the Company's net assets and of the
Company's shares, and of the declaration and payment of dividends
and other distributions to shareholders
<PAGE>
Page 4
4. Compute the yield, total return and expense ratio of each class
of each Portfolio, and each Portfolio's portfolio turnover rate
5. Monitor the expense accruals and notify Company management of any
proposed adjustments
6. Prepare monthly financial statements, which will include without
limitation the following items:
a. Schedule of Investments
b. Statement of Assets and Liabilities
c. Statement of Operations
d. Statement of Changes in Net Assets
e. Cash Statement
f. Schedule of Capital Gains and Losses
7. Prepare quarterly broker security transaction summaries
D. Tax Reporting
1. Prepare and file on a timely basis appropriate federal and state
tax returns including, without limitation, Forms 1120/8610 with
any necessary schedules
2. Prepare state income breakdowns where relevant
3. File Form 1099 Miscellaneous for payments to directors and other
service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate shareholders
3. Compensation
FMFS shall be compensated for providing the services set forth in this
Agreement in accordance with the Fee Schedule attached hereto as Exhibit A
and as mutually agreed upon and amended from time to time. The Company
agrees to pay all fees and reimbursable expenses within ten (10) business
days following the receipt of the billing notice.
4. Performance of Service; Limitation of Liability
A. FMFS shall exercise reasonable care in the performance of its duties
under this Agreement. FMFS shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Company in connection with
matters to which this Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication or power supplies
beyond FMFS's control, except a loss arising out of or relating to FMFS's
refusal or failure to comply with the terms of this Agreement or from bad
faith, negligence, or willful misconduct on its part in the performance of
its duties
<PAGE>
Page 5
under this Agreement. Notwithstanding any other provision of this
Agreement, if FMFS has exercised reasonable care in the performance of its
duties under this Agreement, the Company shall indemnify and hold harmless
FMFS from and against any and all claims, demands, losses, expenses, and
liabilities (whether with or without basis in fact or law) of any and every
nature (including reasonable attorneys' fees) which FMFS may sustain or
incur or which may be asserted against FMFS by any person arising out of
any action taken or omitted to be taken by it in performing the services
hereunder, except for any and all claims, demands, losses, expenses, and
liabilities arising out of or relating to FMFS's refusal or failure to
comply with the terms of this Agreement or from bad faith, negligence or
from willful misconduct on its part in performance of its duties under this
Agreement, (i) in accordance with the foregoing standards, or (ii) in
reliance upon any written or oral instruction provided to FMFS by any duly
authorized officer of the Company, such duly authorized officer to be
included in a list of authorized officers furnished to FMFS and as amended
from time to time in writing by resolution of the Board of Directors of the
Company.
FMFS shall indemnify and hold the Company harmless from and against
any and all claims, demands, losses, expenses, and liabilities (whether
with or without basis in fact or law) of any and every nature (including
reasonable attorneys' fees) which the Company may sustain or incur or which
may be asserted against the Company by any person arising out of any action
taken or omitted to be taken by FMFS as a result of FMFS's refusal or
failure to comply with the terms of this Agreement, its bad faith,
negligence, or willful misconduct.
In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, FMFS shall take all reasonable steps to
minimize service interruptions for any period that such interruption
continues beyond FMFS's control. FMFS will make every reasonable effort to
restore any lost or damaged data and correct any errors resulting from such
a breakdown at the expense of FMFS. FMFS agrees that it shall, at all
times, have reasonable contingency plans with appropriate parties, making
reasonable provision for emergency use of electrical data processing
equipment to the extent appropriate equipment is available. Representatives
of the Company shall be entitled to inspect FMFS's premises and operating
capabilities at any time during regular business hours of FMFS, upon
reasonable notice to FMFS.
Regardless of the above, FMFS reserves the right to reprocess and
correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the indemnitor may be
asked to indemnify or hold the indemnitee harmless, the indemnitor shall be
fully and promptly advised of all pertinent facts concerning the situation
in question, and it is further understood that the indemnitee will use all
reasonable care to notify the indemnitor promptly concerning any situation
which presents or appears likely to present the probability of a claim for
indemnification. The indemnitor shall have the option to defend the
indemnitee against any claim which
<PAGE>
Page 6
may be the subject of this indemnification. In the event that the
indemnitor so elects, it will so notify the indemnitee and thereupon the
indemnitor shall take over complete defense of the claim, and the
indemnitee shall in such situation initiate no further legal or other
expenses for which it shall seek indemnification under this section. The
indemnitee shall in no case confess any claim or make any compromise in any
case in which the indemnitor will be asked to indemnify the indemnitee
except with the indemnitor's prior written consent.
5. Proprietary and Confidential Information
FMFS agrees on behalf of itself and its directors, officers, and employees
to treat confidentially and as proprietary information of the Company all
records and other information relative to the Company and prior, present,
or potential shareholders of the Company (and clients of said
shareholders), and not to use such records and information for any purpose
other than the performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Company,
which approval shall not be unreasonably withheld and may not be withheld
where FMFS may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company.
6. Term of Agreement
This Agreement shall become effective as of the date hereof and, unless
sooner terminated as provided herein, shall continue subject to Board
approval in effect for successive annual periods. The Agreement may be
terminated by either party upon giving ninety (90) days prior written
notice to the other party or such shorter period as is mutually agreed upon
by the parties. However, this Agreement may be amended by mutual written
consent of the parties.
7. Records
FMFS shall keep records relating to the services to be performed hereunder,
in the form and manner, and for such period as it may deem advisable and is
agreeable to the Company but not inconsistent with the rules and
regulations of appropriate government authorities, in particular, Section
31 of the 1940 Act and the rules thereunder. FMFS agrees that all such
records prepared or maintained by FMFS relating to the services to be
performed by FMFS hereunder are the property of the Company and will be
preserved, maintained, and made available in accordance with such section
and rules of the 1940 Act and will be promptly surrendered to the Company
on and in accordance with its request.
<PAGE>
Page 7
8. Governing Law
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the State of Wisconsin. However,
nothing herein shall be construed in a manner inconsistent with the 1940
Act or any rule or regulation promulgated by the SEC thereunder.
9. Duties in the Event of Termination
In the event that, in connection with termination, a successor to any of
FMFS's duties or responsibilities hereunder is designated by the Company by
written notice to FMFS, FMFS will promptly, upon such termination and at
the expense of the Company, transfer to such successor all relevant books,
records, correspondence, and other data established or maintained by FMFS
under this Agreement in a form reasonably acceptable to the Company (if
such form differs from the form in which FMFS has maintained, the Company
shall pay any expenses associated with transferring the data to such form),
and will cooperate in the transfer of such duties and responsibilities,
including provision for assistance from FMFS's personnel in the
establishment of books, records, and other data by such successor.
10. No Agency Relationship
Nothing herein contained shall be deemed to authorize or empower FMFS to
act as agent for the other party to this Agreement, or to conduct business
in the name, or for the account, of the other party to this Agreement.
11. Data Necessary to Perform Services
The Company or its agent, which may be FMFS, shall furnish to FMFS the data
necessary to perform the services described herein at times and in such
form as mutually agreed upon. If FMFS is also acting in another capacity
for the Company, nothing herein shall be deemed to relieve FMFS of any of
its obligations in such capacity.
12. Notices
Notices of any kind to be given by either party to the other party shall be
in writing and shall be duly given if mailed or delivered as follows:
Notice to FMFS shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
<PAGE>
Page 8
and notice to the Company shall be sent to:
The Hennessy Funds, Inc.
The Courtyard Square
750 Grant Avenue, Suite 100
Novato, CA 94945
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by a duly authorized officer or one or more counterparts as of the day and year
first written above.
THE HENNESSY FUNDS, INC. FIRSTAR MUTUAL FUND SERVICES, LLC
By:_____________________________ By:________________________________
Title:__________________________ Title:_____________________________
