Exhibit 23H(1)
OPERATING SERVICES AGREEMENT
AVALON FUNDS, INC.
THIS AGREEMENT is made and entered into as of the 1st day of December,
2000, by and between Avalon Funds, Inc., a Maryland corporation (the "Fund"),
and Avalon Trust Company, a New Mexico state chartered trust company
(hereinafter referred to as "Manager").
WHEREAS, the Fund is an open-end management investment company, registered
under the Investment Company Act of 1940, as amended (the "Act"), and authorized
to issue shares representing interests in an indefinite number of series (each a
"Portfolio"); and
WHEREAS, Manager is authorized to act as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of asset management
and the provision of certain other administrative and recordkeeping services in
connection therewith; and
WHEREAS, the Fund wishes to engage Manager, to provide, or arrange for the
provision of, certain operational services which are necessary for the
day-to-day operations of the Portfolios set forth in Exhibit A attached to this
Agreement, as such Exhibit A may be amended from time to time by agreement of
the parties, in the manner and on the terms and conditions hereinafter set
forth, and Manager wishes to accept such engagement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and Manager agree as follows:
1. OBLIGATIONS OF MANAGER
(a) Services. The Fund hereby retains Manager to provide, or, upon receipt
of written approval of the Fund arrange for other companies to provide, the
following services to the Portfolio(s) in the manner and to the extent that
such services are reasonably necessary for the operation of the
Portfolio(s) (collectively, the "Services"):
(1) accounting services and functions, including costs and expenses of any
independent public accountants;
(2) non-litigation related legal and compliance services, including the
expenses of maintaining registration and qualification of the Fund and
the Portfolio(s) under federal, state and any other applicable laws
and regulations;
(3) dividend disbursing agent, dividend reinvestment agent, transfer
agent, and registrar services and functions (including answering
inquiries related to shareholder Portfolio accounts);
(4) custodian and depository services and functions;
(5) distribution, marketing, and/or underwriting services;
(6) independent pricing services;
(7) preparation of reports describing the operations of the Portfolio(s),
including the costs of providing such reports to broker-dealers,
financial institutions and other organizations which render services
and assistance in connection with the distribution of shares of the
Portfolio(s);
(8) sub-accounting and recordkeeping services and functions (other than
those books and records required to be maintained by Manager under the
Investment Advisory Agreement between the Fund and Manager dated
December 1, 2000), including maintenance of shareholder records and
shareholder information concerning the status of their Portfolio(s)
accounts by investment advisors, broker-dealers, financial
institutions, and other organizations on behalf of Manager;
(9) shareholder and board of directors communication services, including
the costs of preparing, printing and distributing notices of
shareholders' meetings, proxy statements, prospectuses, statements of
additional information, Portfolio reports, and other communications to
the Fund's Portfolio shareholders, as well as all expenses of
shareholders' and board of directors' meetings, including the
compensation and reimbursable expenses of the directors of the Fund;
(10) other day-to-day administrative services, including the costs of
designing, printing, and issuing certificates representing shares of
the Portfolio(s), and premiums for the fidelity bond maintained by the
Fund pursuant to Section 17(g) of the Act and rules promulgated
thereunder (except for such premiums as may be allocated to third
parties, as insureds thereunder).
(b) Exclusions from Service. Notwithstanding the provisions of Paragraph
1(a) above, the Services shall not include and Manager will not be
responsible for any of the following:
(1) all brokers' commissions, issue and transfer taxes, and other costs
chargeable to the Fund or the Portfolio(s) in connection with
securities transactions to which the Fund or the Portfolio(s) is a
party or in connection with securities owned by the Fund or the
Portfolio(s);
(2) the interest on indebtedness, if any, incurred by the Fund or the
Portfolio(s);
(3) the taxes, including franchise, income, issue, transfer, business
license, and other corporate fees payable by the Fund or the
Portfolio(s) to federal, state, county, city, or other governmental
agents;
(4) the expenses, including fees and disbursements of counsel, in
connection with litigation by or against the Fund or the Portfolio(s);
and
(5) any other extraordinary expense of the Fund or Portfolio(s).
(c) Books and Records. All books and records prepared and maintained by
Manager for the Fund under this Agreement shall be the property of the Fund
and, upon request therefor, Manager shall surrender to the Fund such of the
books and records so requested.
(d) Staff and Facilities. Manager assumes and shall pay for maintaining the
staff, personnel, space, equipment and facilities necessary to perform its
obligations under this Agreement.
2. OBLIGATIONS OF THE FUND
(a) Fee. The Fund will pay to Manager on the last day of each month a fee
at an annual rate equal to 1.00% of average net asset of each Portfolio subject
to this Agreement, such fee to be computed daily based upon the net asset value
of the Portfolio(s) as determined by a valuation made in accordance with the
Fund's procedure for calculating Portfolio net asset value as described in the
Fund's Prospectus and/or Statement of Additional Information. During any period
when the determination of a Portfolio's net asset value is suspended by the
directors of the Fund, the net asset value of a share of the Portfolio(s) as of
the last business day prior to such suspension shall, for the purpose of this
Paragraph 2(a), be deemed to be the net asset value at the close of each
succeeding business day until it is again determined.
(b) Information. The Fund will, from time to time, furnish or otherwise
make available to Manager such information relating to the business and affairs
of the Portfolio(s) as Manager may reasonably require in order to discharge its
duties and obligations hereunder.
3. TERM. This Agreement shall remain in effect until December 1, 2002, and from
year to year thereafter provided such continuance is approved at least annually
by (1) the vote of a majority of the Board of Directors of the Fund or (2) a
vote of a "majority" (as that term is defined in the Investment Company Act of
1940) of the Fund's outstanding securities; provided, however, that;
(a) at any time and without the payment of any penalty, the Fund may
terminate this Agreement upon 90 days written notice to Manager;
(b) this Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder); and
(c) at any time and without the payment of any penalty, Manager may
terminate this Agreement upon 90 days written notice to the Fund.
4. NOTICES. Except as otherwise provided in this Agreement, any notice or other
communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by first
class mail, postage prepaid or by prepaid overnight delivery service to the
respective parties as follows:
If to the Fund: If to the Adviser:
--------------- ------------------
Avalon Funds, Inc. Avalon Trust Company
000 Xxxxxxx Xxxxxx, Xxxxx 000 000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xx, Xxx Xxxxxx 87501-2052 Xxxxx Xx, Xxx Xxxxxx 00000-0000
Xxxxx Xxxxx Xxxxxx Xxxxx X. Xxxxxxx
President Executive Vice President
5. MISCELLANEOUS
(a) Performance Review. Manager will permit representatives of the Fund,
including the Fund's independent auditors, to have reasonable access to the
personnel and records of Manager in order to enable such representatives to
monitor the quality of services being provided and the level of fees due
Manager pursuant to this Agreement. In addition, Manager shall promptly
deliver to the Board of Directors of the Fund such information as may
reasonably be requested from time to time to permit the Board of Directors
to make an informed determination regarding continuation of this Agreement
and the payments contemplated to be made hereunder.
(b) Choice of Law. This Agreement shall be construed in accordance with the
laws of the State of Maryland and the applicable provisions of the Act. To
the extent the applicable law of the State of Maryland or any of the
provisions herein conflict with the applicable provisions of the Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
AVALON FUNDS, INC. AVALON TRUST COMPANY
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By: Xxxxx Xxxxxx By: Xxxxx X. Xxxxxxx
Its: President Its: Executive Vice President
ATTEST: ATTEST:
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By: Xxxxx X. Xxxxxxx, Esq. By: __________________________
Secretary Secretary
EXHIBIT A
PORTFOLIOS SUBJECT TO
OPERATING SERVICES AGREEMENT
BETWEEN AVALON FUNDS, INC. AND
AVALON TRUST COMPANY DATED
DECEMBER 1, 2000
THE EDUCATION FUND
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