Exhibit h.3
FUND ACCOUNTING SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this
23rd day of June, 1998, by and between Badgley Funds,
Inc., a Maryland corporation (hereinafter referred to
as the "Company") and Firstar Trust Company, a
corporation organized under the laws of the State of
Wisconsin (hereinafter referred to as "FTC").
WHEREAS, the Company is an open-end management
investment company registered 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, FTC is in the business of providing,
among other things, mutual fund accounting services to
investment companies; and
WHEREAS, the Company desires to retain FTC to
provide accounting services to the Badgley Growth Fund
(the "Growth Fund"), the Badgley Balanced Fund (the
"Balanced Fund") and each additional series of the
Company listed on Exhibit A attached hereto (each, a
"Fund"), as it may be amended from time to time.
NOW, THEREFORE, in consideration of the mutual
agreements herein made, the Company and FTC agree as
follows:
1. Appointment of Fund Accountant
The Company hereby appoints FTC as Fund Accountant
of the Company on the terms and conditions set forth in
this Agreement, and FTC 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 FTC
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade
date +1 basis using security trade information
communicated from the investment manager.
(2) For each valuation date, obtain prices
from a pricing source approved by the Board of
Directors of the Company and apply those prices to
the portfolio positions. For
those securities
where market quotations are not readily available,
the Board of Directors of the Company shall
approve, in good faith, the method for determining
the fair value for such securities.
(3) Identify interest and dividend accrual
balances as of each valuation date and calculate
gross earnings on investments for the accounting
period.
(4) Determine gain/loss on security sales
and identify them as, short-term or long-term;
account for periodic distributions of gains or
losses to shareholders and maintain undistributed
gain or loss balances as of each valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the
expense accrual amounts as directed by the Company
as to methodology, rate or dollar amount.
(2) Record payments for Fund expenses upon
receipt of written authorization from the Company.
(3) Account for Fund expenditures and
maintain expense accrual balances at the level of
accounting detail, as agreed upon by FTC and the
Company.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for Fund share purchases, sales,
exchanges, transfers, dividend reinvestments, and
other Fund share activity as reported by the
transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the Company.
(3) Determine net investment income
(earnings) for the Fund 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.
(4) Maintain a general ledger and other
accounts, books, and financial records for the
Fund in the form as agreed upon.
(5) Determine the net asset value of the
Fund according to the accounting policies and
procedures set forth in the Fund's Prospectus.
(6) Calculate per share net asset value, per
share net earnings, and other per share amounts
reflective of Fund operations at such time as
required by the nature and characteristics of the
Fund.
(7) Communicate, at an agreed upon time, the
per share price for each valuation date to parties
as agreed upon from time to time.
(8) Prepare monthly reports which document
the adequacy of accounting detail to support month-
end ledger balances.
D. Tax Accounting Services:
(1) Maintain accounting records for the
investment portfolio of the Fund to support the
tax reporting required for IRS-defined regulated
investment companies.
(2) Maintain tax lot detail for the
investment portfolio.
(3) Calculate taxable gain/loss on security
sales using the tax lot relief method designated
by the Company.
(4) Provide the necessary financial
information to support the taxable components of
income and capital gains distributions to the
transfer agent to support tax reporting to the
shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies
and support financial statement preparation by
making the Fund's accounting records available to
the Company, the Securities and Exchange
Commission, and the outside auditors.
(2) Maintain accounting records according to
the 1940 Act and regulations provided thereunder.
3. Pricing of Securities
For each valuation date, obtain prices from a
pricing source selected by FTC but approved by the
Company's Board of Directors and apply those prices to
the portfolio positions of the Fund. For those
securities where market quotations are not readily
available, the Company's Board of Directors shall
approve, in good faith, the method for determining the
fair value for such securities.
If the Company desires to provide a price which
varies from the pricing source, the Company shall
promptly notify and supply FTC with the valuation of
any such security on each valuation date. All pricing
changes made by the Company will be in writing and must
specifically identify the securities to be changed by
CUSIP, name of security, new price or rate to be
applied, and, if applicable, the time period for which
the new price(s) is/are effective.
4. Changes in Accounting Procedures
Any resolution passed by the Board of Directors of
the Company that affects accounting practices and
procedures under this Agreement shall be effective upon
written receipt and acceptance by the FTC.
5. Changes in Equipment, Systems, Service, Etc.
FTC reserves the right to make changes from time
to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules
and equipment, so long as such changes do not adversely
affect the service provided to the Company under this
Agreement.
6. Compensation
FTC 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.
7. Performance of Service; Limitation of Liability
A. FTC shall exercise reasonable care in
the performance of its duties under this
Agreement. FTC 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
FTC's control, except a loss resulting from FTC'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 under this Agreement.
Notwithstanding any other provision of this
Agreement, the Company shall indemnify and hold
harmless FTC 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 FTC may sustain or incur or
which may be asserted against FTC by any person
arising out of any action taken or omitted to be
taken by it in performing the services hereunder
(i) in accordance with the foregoing standards, or
(ii) in reliance upon any written or oral
instruction provided to FTC by any duly authorized
officer of the Company, such duly authorized
officer to be included in a list of authorized
officers furnished to FTC and as amended from time
to time in writing by resolution of the Board of
Directors of the Company.
FTC 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 FTC as a result of FTC'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, FTC shall take all reasonable steps
to minimize service interruptions for any period
that such interruption continues beyond FTC's
control. FTC 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 FTC. FTC 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 FTC's premises and
operating capabilities at any time during regular
business hours of FTC, upon reasonable notice to
FTC.
Regardless of the above, FTC 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 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. 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.
8. No Agency Relationship
Nothing herein contained shall be deemed to
authorize or empower FTC to act as agent for the other
party to this Agreement, or to conduct business in the
name of, or for the account of the other party to this
Agreement.
9. Records
FTC 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. FTC agrees that all such records prepared
or maintained by FTC relating to the services to be
performed by FTC 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.
10. Data Necessary to Perform Services
The Company or its agent, which may be FTC, shall
furnish to FTC the data necessary to perform the
services described herein at such times and in such
form as mutually agreed upon. If FTC is also acting as
the transfer agent for the Company, nothing herein
shall be deemed to relieve FTC of any of its
obligations under the Transfer Agent Servicing
Agreement.
11. Notification of Error
The Company will notify FTC of any balancing or
control error caused by FTC within three (3) business
days after receipt of any reports rendered by FTC to
the Company, or within three (3) business days after
discovery of any error or omission not covered in the
balancing or control procedure, or within three (3)
business days of receiving notice from any shareholder.
12. Proprietary and Confidential Information
FTC 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 FTC 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.
13. Term of Agreement
This Agreement shall become effective as of the
date hereof and, unless sooner terminated as provided
herein, shall continue automatically in effect for
successive annual periods. This 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 replaced or modified by
a subsequent agreement between the parties.
14. 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 FTC
shall be sent to:
Firstar Trust Company
Attn.: Mutual Fund Services
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
and notice to the Company shall be sent to:
Badgley Funds, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Corporate Secretary
15. Duties in the Event of Termination
In the event that in connection with termination,
a successor to any of FTC's duties or responsibilities
hereunder is designated by the Company by written
notice to FTC, FTC 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 FTC under
this Agreement in a form reasonably acceptable to the
Company (if such form differs from the form in which
FTC has maintained the same, the Company shall pay any
expenses associated with transferring the same to such
form), and will cooperate in the transfer of such
duties and responsibilities, including provision for
assistance from FTC's personnel in the establishment of
books, records and other data by such successor.
16. Governing Law
This Agreement shall be construed 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.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer in one or more counterparts as of the day and
year first written above.
BADGLEY FUNDS, INC. FIRSTAR TRUST COMPANY
By: /s/ Xxxx X. Xxxxx III By: /s/ Xxxxxx Xxxxxxxxx
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Attest: /s/ Xxxx X. Xxxxxx Attest: /s/ Xxxxxxxxx X. Xxxxxxxx
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Fund Accounting Services
Annual Fee Schedule
Exhibit A
Separate Series of Badgley Funds, Inc.
Name of Series Date Added
Badgley Growth Fund June 23, 1998
Badgley Balanced Fund June 23, 1998
Domestic Equity Funds
$22,000 for the first $40 million
1/100 of 1% (1 basis point) on the next $200 million
.5/100 of 1% (.5 basis point) on average net assets exceeding
$240 million
Domestic Balanced Funds
$23,500 for the first $40 million
1.5/100 of 1% (1.5 basis points) on the next $200 million
1/100 of 1% (1.0 basis point) on average net assets exceeding
$240 million
Plus out-of-pocket expenses, including pricing service:
Domestic and Canadian Equities $.15
Options $.15
Corp/Gov/Agency Bonds $.50
CMO's $.80
International Equities and Bonds $.50
Municipal Bonds $.80
Money Market Instruments $.80
If out-of-pocket expenses exceed $5,000 in any month,
such expenses must be pre-approved by the Company.
Fees and out-of-pocket expenses are billed to the Fund monthly.
