Exhibit 10.18

 

ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT

 

AGREEMENT is made as of the 25th day of August, 2004, by and between Ivy
Funds, Inc. (the “Company”), a Maryland Corporation, and Waddell & Reed Services
Company (“WRSCO”), a Missouri corporation,

 

WITNESSETH:

 

WHEREAS, the Company wishes to appoint WRSCO to be its Accounting Services Agent
and to perform certain administrative services with respect to each of its
series listed in Appendix A (each, a “Fund”) upon and subject to the terms and
provisions of this Agreement;

 

NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties agree as follows:

 

A.        Appointment of WRSCO as Accounting Services Agent and Administrator
for the Company; Acceptance.

 

(1)  The Company hereby appoints WRSCO to act as Accounting Services Agent and
Administrator for the Funds upon and subject to the terms and provisions of this
Agreement.

 

(2)  WRSCO hereby accepts the appointment as Accounting Services Agent and
Administrator for the Funds and agrees to act as such, upon and subject to the
terms and provisions of this Agreement.

 

B.         Duties of WRSCO.

 

WRSCO shall perform such duties as set forth in this Paragraph B as agent for
and on behalf of the Company.

 

(1)  WRSCO shall at its expense provide bookkeeping and accounting services and
assistance, including, in particular, the following services as are required by
the Funds:

 

a)            maintaining the registration or qualification of the Funds and
their shares under state “Blue Sky” or securities laws and regulations, provided
that the Funds shall pay all related filing fees and registration or
qualification fees;

b)           record the current days’ trading activity and such other proper
bookkeeping entries as are necessary for determining that day’s net asset value
for the Funds, including pricing daily the value of the shares of the Funds;

c)            assisting the Funds and third party solicitors (if any) in
connection with soliciting and gathering shareholder proxies;

d)           preparing the Funds’ U.S. Federal, state and local income tax
returns, provided that the Funds shall pay all charges for services and expenses
of the Funds’ independent auditors in reviewing such returns;

e)            preparing the financial information for the Funds’ prospectuses,
statements of additional information and periodic reports to shareholders,
provided that the Funds shall pay all charges for services and expenses of the
Funds’ independent auditors;

 

 

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f)               preparing Form N-SAR, Form N-CSR, Form N-PX and Form N-Q, or
such other forms as the Securities and Exchange Commission (the “SEC”) from time
to time may prescribe under the Investment Company Act of 1940, as amended (the
“1940 Act”);

g)            in coordination with the Funds’ legal counsel, preparing and
filing with the SEC of the Funds’ registration statement (including prospectuses
and statements of additional information), and any amendments or supplements
that may be made from time to time, and preparing and filing with the SEC of
notices and proxy materials for meetings of shareholders, provided that the
Funds shall pay all charges for services and expenses of the Funds’ outside
legal counsel;

h)            assisting in the printing of the Funds’ prospectuses, periodic
reports to shareholders and proxy materials;

i)                rendering statements or copies of records for the Funds from
time to time as requested by the Company (see Appendix B);

j)               facilitating audits of accounts by the Company’s independent
auditors or by any other auditors employed or engaged by the Company or by any
regulatory body with jurisdiction over the Company;

k)           computing each Fund’s net asset value per share, and, if
applicable, its public offering price, total returns and yields, and notifying
the Company and such other persons as the Company may reasonably request of the
net asset value per share, the public offering price and/or the total return
yield; and

l)                providing executive, clerical and secretarial personnel
competent to carry out the above responsibilities.

 

(2)  WRSCO shall maintain and keep current the accounts, books, records, and
other documents relating to the Funds’ financial and portfolio transactions as
may be required by rules and regulations of the SEC adopted under Sections
31(a) of the 1940 Act.

 

(3)  WRSCO shall cause the subject records of the Funds to be maintained and
preserved pursuant to the requirements under the 1940 Act.

 

(4)  In pricing daily the value of shares of the Funds, WRSCO may make
arrangements with, and obtain the value of portfolio securities from, pricing
services or quotation services that are compensated by the Funds directly or
indirectly through the placement of portfolio transactions with broker-dealers
who provide such valuation or quotation services to WRSCO.

 

(5)  WRSCO shall maintain duplicate copies, or information from which copies of
the records necessary to the preparation of the Funds’ financial statements and
valuations of its assets may be reconstructed.  Such duplicate copies or
information shall be maintained at a location other than where WRSCO performs
its normal duties hereunder so that in the event the records established and
maintained pursuant to the foregoing provisions of this Section B are damaged or
destroyed, WRSCO shall be able to provide the services and assistance specified
in this Section B.

 

(6)  WRSCO will compute each Fund’s net asset value in a manner consistent with
the specific provisions of the Funds’ prospectuses.  In general, such
computation will be made by dividing the value of a Fund’s portfolio securities,
cash and any other assets, less its

 

 

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liabilities, by the number of shares of the Fund outstanding, adjusted to the
nearest cent.  Such computation will be made as of the close of regular trading
on the New York Stock Exchange (normally 4:00 p.m., Eastern time) on each day
that the New York Stock Exchange is open for trading.  If applicable, WRSCO will
also compute the public offering price by dividing the net asset value per share
by the appropriate factor as provided by the Fund; the total return; and the
yield.

 

Each Fund’s liabilities are allocated between its classes.  The total of such
liabilities allocated to a class plus that class’ distribution fee and any other
expenses specially allocated to that class are then deducted from the class’
proportionate interest in the Fund’s assets, and the resulting amount for each
class is divided by the number of shares of that class outstanding to produce
the “net asset value” per share.

 

(7)   In the event any of WRSCO’s facilities or equipment necessary for the
performance of its duties hereunder is damaged, destroyed or rendered inoperable
by reason of fire, vandalism, riot, natural disaster or otherwise, WRSCO will
use its best efforts to restore all services hereunder to the Funds and will not
seek from the Funds additional compensation to repair or replace damaged or
destroyed facilities or equipment.  WRSCO shall also make and maintain
arrangements for emergency use of alternative facilities for use in the event of
the aforesaid destruction of or damage to its facilities.

 

C.        Compensation of WRSCO.

 

Each Fund agrees to pay to WRSCO for its services under this Agreement, an
amount payable on the first day of the month as shown on the following table
pertinent to the average daily net assets of the Fund during the prior month:

 

Fund’s Average Daily Net Assets for the Month

 

Monthly Fee

 

 

 

$    0 - $  10 million

 

$         0

$  10 - $  25 million

 

$     958

$  25 - $  50 million

 

$  1,925

$  50 - $100 million

 

$  2,958

$100 - $200 million

 

$  4,033

$200 - $350 million

 

$  5,267

$350 - $550 million

 

$  6,875

$550 - $750 million

 

$  8,025

$750 - $  1.0 billion

 

$10,133

$1.0 billion and over

 

$12,375

 

In addition, for each class of shares in excess of one, the Fund pays WRSCO a
monthly per-class fee equal to 2.5% of the monthly base fee.

 

Each Fund also pays monthly a fee paid at the annual rate of 0.01% or one basis
point for the first $1 billion of net assets with no fee charged for net assets
in excess of $1 billion.  This fee may be voluntarily waived until Fund assets
are at least $10 million.

 

 

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D.        Right of the Company to Inspect; Ownership of Records.

 

The Company will have the right under this Agreement to perform on-site
inspection of records and accounts, and audits directly pertaining to the Funds’
accounting and portfolio records maintained by WRSCO hereunder at WRSCO’s
facilities.  WRSCO will cooperate with the Company’s independent auditors or
representatives of appropriate regulatory agencies and furnish all reasonably
requested records and data.  WRSCO acknowledges that these records are the
property of the Company, and that it will surrender to the Company all such
records promptly on request.

 

E.         Standard of Care; Indemnification.

 

WRSCO will at all times exercise reasonable care and good faith in performing
its duties hereunder.  WRSCO shall incur no liability to the Company or the Fund
in connection with its performance of services hereunder, except to the extent
that is does not comply with the foregoing standards.  WRSCO will make every
reasonable effort and take all reasonably available measures to assure the
adequacy of its personnel, facilities and equipment as well as the accurate
performance of all services to be performed by it hereunder within, at a
minimum, the time requirements of any applicable statutes, rules or regulations
made in the Company’s current registration statement as filed with the SEC.

 

WRSCO shall not be responsible for, and the Company agrees to indemnify WRSCO
for, any losses, damages or expenses (including reasonable counsel fees and
expenses) (i) resulting from any claim, demand, action or suit not resulting
from WRSCO’s failure to exercise good faith or reasonable care and arising out
of or in connection with WRSCO’s duties on behalf of the Funds hereunder;
(ii) for any delay, error or omission by reason of circumstances beyond its
control, including acts of civil or military authority, national emergencies,
labor difficulties (except with respect to WRSCO’s employees), fire, mechanical
breakdown beyond its control, flood catastrophe, acts of God, insurrection, war,
riots or failure beyond its control of transportation, communication or power
supply; or (iii) for any action taken or omitted to be taken by WRSCO in good
faith in reliance on the accuracy of any information provided to it by the
Company or its directors or in reliance on any advice of counsel who may be
internally employed counsel or outside counsel for the Company or advice of any
independent accountant or expert employed by the Company with respect to the
preparation and filing of any document with a governmental agency or authority.

 

In order for the rights to indemnification to apply, it is understood that if in
any case the Company may be asked to indemnify or hold WRSCO harmless, the
Company shall be advised of all pertinent facts concerning the situation in
question, and it is further understood that WRSCO will use reasonable care to
identify and notify the Company promptly concerning any situation which presents
or appears likely to present a claim for indemnification against the Company. 
The Company shall have the option to defend WRSCO against any claim which may be
the subject of this indemnification and, in the event that the Company so
elects, it will so notify WRSCO, and thereupon the Company shall take over
complete defense of the claim, and WRSCO shall sustain no further legal or other
expenses in such situation for which WRSCO shall seek indemnification under this
paragraph.  WRSCO will in no case confess any claim or make any compromise in
any case in which the Company will be asked to indemnify WRSCO except with the
Company’s prior written consent.

 

 

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F.         Term of the Agreement; Taking Effect; Amendments.

 

This Agreement shall become effective at the start of business on the date
hereof and shall continue, unless terminated as hereinafter provided, for a
period of one (1) year and from year-to-year thereafter, provided that such
continuance shall be specifically approved as provided below.

 

This Agreement shall go into effect, or may be continued, or may be amended, or
a new agreement covering the same topics between the Company and WRSCO may be
entered into only if the terms of this Agreement, such continuance, the terms of
such amendment or the terms of such new agreement have been approved by the
Board of Directors of the Company, including the vote of a majority of the
directors who are not “interested persons,” as defined in the 1940 Act, of
either party to this Agreement, the agreement to be continued, amendment or new
agreement, cast in person at a meeting called for the purpose of voting on such
approval.  Such a vote is hereinafter referred to as a “disinterested director
vote.”

 

Any disinterested director’s vote shall, in favor of continuance, amendment or
execution of a new agreement, include a determination that:  (i) the Agreement,
amendment, new agreement or continuance in question is in the best interests of
the Company and its shareholders; (ii) the services to be performed under the
Agreement, the Agreement as amended, new agreement or agreement to be continued,
are services required for the operation of the Fund; (iii) WRSCO can provide
services, the nature and quality of which are at least equal to those provided
by others offering the same or similar services; and (iv) the fees for such
services are fair and reasonable in the light of the usual and customary charges
made by others for services of the same nature and quality.

 

Nothing herein contained shall prevent any disinterested director vote from
being conditioned on the favorable vote of the holders of a majority (as defined
in or under the 1940 Act) of the outstanding shares of the Funds.

 

G.        Termination.

 

(1)  This Agreement may be terminated by WRSCO at any time without penalty upon
giving the Company at least one hundred twenty (120) days’ written notice (which
notice may be waived by the Fund) and may be terminated by the Company at any
time without penalty upon giving WRSCO at least sixty (60) days’ written notice
(which notice may be waived by WRSCO), provided that such termination by the
Company shall be directed or approved by the vote of a majority of the Board of
Directors of the Company in office at the time or by the vote of the holders of
a majority (as defined in or under the 1940 Act) of the outstanding shares of
the Funds.

 

(2)  On termination, WRSCO will deliver to the Company or its designee all
files, documents and records of the Company used, kept or maintained by WRSCO in
the performance of its services hereunder, including such of the Company’s
records in machine readable form as may be maintained by WRSCO, as well as such
summary and/or control data relating thereto used by or available to WRSCO.

 

(3)  In addition, on such termination or in preparation therefore at the request
of the Company and at the Company’s expense, WRSCO shall provide, to the extent
that its

 

 

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capabilities then permit, such documentation, personnel and equipment as may be
reasonably necessary in order for a new agent or the Company to fully assume and
commence to perform the agency functions described in this Agreement with a
minimum disruption to the Funds’ activities.

 

(4)  This Agreement shall automatically terminate in the event of its
assignment, the term “assignment” for this purpose having the meaning defined in
Section 2(a)(4) of the Act and the rules and regulations thereunder of the SEC.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date and year first above written.

 

 

 

IVY FUNDS, INC.

 

 

 

 

 

 

By:

/s/Henry J. Herrmann

 

 

 

 Henry J. Herrmann, President

 

 

 

 

 

ATTEST:

 

 

 

 

 

By:

/s/Kristen A. Richards

 

 

 Kristen A. Richards, Secretary

 

 

 

 

 

WADDELL & REED SERVICES COMPANY

 

By:

/s/Michael D. Strohm

 

 

 

 Michael D. Strohm, President

 

 

 

 

 

ATTEST:

 

 

 

 

 

By:

/s/Daniel C. Schulte

 

 

 Daniel C. Schulte, Secretary

 

 

 

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ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT

 

IVY FUNDS, INC.

 

Appendix A

 

 

Ivy Asset Strategy Fund

Ivy Capital Appreciation Fund

Ivy Core Equity Fund

Ivy Energy Fund

Ivy High Income Fund

Ivy Large Cap Growth Fund

Ivy Limited-Term Bond Fund

Ivy Mid Cap Growth Fund

Ivy Money Market Fund

Ivy Municipal Bond Fund

Ivy Municipal High Income Fund

Ivy Science and Technology Fund

Ivy Small Cap Growth Fund

Ivy Tax-Managed Equity Fund

 

 

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Appendix B

 

Standard Reports and Availability

 

The following reports will be provided to the Fund on a regular basis with
availability as indicated:

 

A.        Daily

 

1.         Printed Trial Balance

2.         Net Asset Value Worksheet

3.         Cash Forecast

4.         Yield Computation, if applicable

 

B.         Weekly - Tax Lot Ledgers

 

C.        Monthly

 

1.         Tax Lot Ledgers as of month-end

2.         Working Appraisal as on month-end

3.         Purchase and Sale Journal for the month

4.         Summary of Gains and Losses on Securities for the month

5.         Dividend Ledger for the month (Receivable as of month-end and earned)

6.         Interest Income Analysis for the month (receivable as of month-end
and earned)

7.         Trial Balance as of month-end

8.         Net Asset Value Worksheet as of month-end

9.         Open Trades (payable and receivable for unsettled securities
transactions)

 

D.        Annually

 

1.         Purchase and Sale Journal for the year

2.         Summary of Gains and Losses on Securities for the year

3.         Broker Allocation Report for the year

 

 

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