FORM OF
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT, dated as of the ___ day of ____________, 1996 made by and
between CornerCap Balanced Fund (the "Fund") a corporation operating as an
open-end management investment company, duly organized and existing under the
laws of the State of Massachusetts, and Fortune Fund Administration, Inc. (the
"Company") a corporation duly organized and existing under the laws of the State
of Georgia.
WITNESSETH THAT:
WHEREAS, the Fund consists of a Fund, at present namely Cornerstone Growth
Fund, Inc. WHEREAS, the Fund desires to appoint the Company as its Accounting
Services Agent to maintain and keep current the books, accounts, records,
journals or other records of original entry relating to the business of the Fund
as set forth in Section 2 of this Agreement (the "Accounts and Records") and to
perform certain other functions in connection with such accounts and records;
and
WHEREAS, the Company is willing to perform such functions upon the terms
and conditions set forth below; and
WHEREAS, the Fund will cause to be provided certain information to the
Company as set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
agree as follows:
Section 1. The Fund shall promptly turn over to the Company such of the
Accounts and Records previously maintained by or for it as are necessary for the
Company to perform its functions under this Agreement. The Fund authorizes the
Company to rely on such Accounts and Records turned over to it and hereby
indemnities and holds the Company, its successors and assigns harmless of and
from any and all expenses, damages, claims, suits, liabilities, actions, demands
and losses whatsoever arising out of or in connection with any error, omission,
inaccuracy or other deficiency of such Accounts and Records or in the failure of
the Fund to provide any portion of such or to provide any additional information
needed by the Company to knowledgeably perform its functions, within a
reasonable time after requested by the Company.
The Company shall make reasonable efforts to isolate and correct any
inaccuracies, omissions, discrepancies, or other deficiencies in the Accounts
and Records delivered to the Company, to the extent such matters are disclosed
to the Company or are discovered by it and are relevant to its performance of
its functions under this Agreement. The Fund shall provide the Company with
such assistance as it may reasonably request in connection with its efforts to
correct such matters. The Fund agrees to pay to Company on a current and
ongoing basis for its reasonable time and costs expended on the correction of
such matters, said payment to be in addition to the fees and charges agreed to
for the normal services rendered under this Agreement, provided the amount of
such payments is approved in advance by the Fund.
Section 2. To the extent it receives the necessary information from the
Fund or its agents by Written or Oral Instructions, the Company shall maintain
and keep current the following Accounts and Records relating to the business of
the Fund, in such form as may be mutually agreed
2
to between the Fund and the Company, and as may be required by the Investment
Company Act of 1940:
(a) Cash Receipts Journal
(b) Cash Disbursements Journal
(c) Dividends Paid and Payable Schedule
(d) Purchase and Sales Journals - Portfolio securities
(e) Subscription and Redemption Journals
(f) Security Ledgers - Transaction Report and Tax Lot Holdings Report
(g) Broker Ledger - Commission Report
(h) Daily Expense Accruals
(i) Daily Interest Accruals
(j) Daily Trial Balance
(k) Portfolio Interest Receivable and Income Journal
(l) Listing of Portfolio Holdings showing cost, market value and
percentage of portfolio comprised of each security.
Unless necessary information to perform the above functions is furnished by
Written or Oral Instructions to the Company to enable the daily calculation of
the Fund's net asset value at 4:15 PM Eastern time (the close of trading on the
New York Stock Exchange), as provided below in accordance with the rime frame
identified in Section 7, the Company shall incur no liability, and the Fund
shall indemnity and hold harmless the Company from and against any liability
arising from any failure to provide complete information or from any discrepancy
between the information received
3
by the Company and used in such calculations and any subsequent information
receivedfrom the Fund or any of its designated Agents.
Section 3. The Company shall perform the ministerial calculations
necessary to calculate the Fund's net asset value daily, in accordance with the
Fund's current prospectus and utilizing the information described in this
Section. Portfolio items for which market quotations are available by the
Company's use of an automated financial information service ("Service") shall be
based on the closing prices of such Service except where the Fund has given or
caused to be given Specific Written or Oral Instructions to utilize a different
value. All of the portfolio securities shall be given such values as the Fund
provides by Written or Oral Instructions including all restricted securities and
other securities requiring valuation not readily ascertainable solely by such
Service. The Company shall have no responsibility or liability for the accuracy
of prices quoted by such Service; for the accuracy of the information supplied
by the Fund; or for any loss, liability, damage, or cost arising out of any
inaccuracy of such data, unless the Company is itself negligent. The Company
shall have no responsibility or duty to include information or valuations to be
provided by the Fund in any computation unless and until it is timely supplied
to the Company in usable form. Unless the necessary information to calculate
the net asset value daily is furnished by Written or Oral Instructions from the
Fund, the Company shall incur no liability, and the Fund shall indemnity and
hold harmless the Company from and against any liability arising from any
failure to provide complete information or from any discrepancy between the
information received by the Company and used in such calculation and any
subsequent information received from the Fund or any of its designated agents,
provided the Company notifies the Fund promptly of its need for additional
information with which to calculate net asset value.
4
Section 4. For all purposes under this Agreement, the Company is
authorized to act upon receipt of the first of any Written or Oral Instruction
it receives from the Fund or its agents on behalf of the Fund. In cases where
the first instruction is an Oral Instruction that is not in the form of a
document or written record, a confirmatory Written Instruction or Oral
Instruction in the form of a document or written record shall be delivered, and
in cases where the Company receives an Instruction, whether Written or Oral, to
enter a portfolio transaction on the records, the Fund shall cause the
Broker-Dealer to send a written confirmation to the Company. The Company shall
be entitled to rely on the first Instruction received, and for any act or
omission undertaken in compliance therewith shall be free of liability and fully
indemnified and held harmless by the Fund, provided however, that in the event a
Written or Oral Instruction received by the Company is countermanded by a timely
later Written or Oral Instruction received by the Company prior to acing upon
such countermanded Instruction, the Company shall act upon such later Written or
Oral Instruction. The sole obligation of the Company with respect to any
follow-up or confirmatory Written Instruction, Oral Instruction in documentary
or written form, or Broker-Dealer written confirmation shall be to make
reasonable efforts to detect any such discrepancy between the original
Instruction and such confirmation and to report such discrepancy to the Fund.
The Fund shall be responsible, at the Fund's expense, for taking any action,
including any reprocessing, necessary to correct any discrepancy or error, and
to the extent such action requires the Company to act the Fund shall give the
Company specific Written Instruction as to the action required.
Section 5. At the end of each month, the Fund shall cause the
Custodian to forward to the Company a monthly statement of cash and portfolio
transactions, which will be reconciled with
5
the Company's Accounts and Records maintained for the Fund. The Company will
report any discrepancies to the Custodian, and report any unreconciled items to
the Fund.
Section 6. The Company shall promptly supply daily and periodic reports
to the Fund as requested by the Fund and agreed upon by the Company.
Section 7. The Fund shall and shall require each of its agents
(including without limitation its Transfer Agent and its Custodian) to provide
the Company as of the close of each Business Day, or on such other schedule as
the Fund determines is necessary, with Written or OraI Instructions (to be
delivered to the Company by 10:00 AM the next following business day) containing
all data and information necessary for the Company to maintain the Fund's
Accounts and Records and the Company may conclusively assume that the
information it receives by Written or Oral Instructions is complete and
accurate. The Fund is responsible to provide or cause to be provided to the
Company reports of share purchases, redemptions, and total shares outstanding on
the next business day after each net asset valuation.
Section 8. The Accounts and Records, in the agreed upon format,
maintained by the Company shall be the property of the Fund, and shall be made
available to the Fund promptly upon request and shall be maintained for the
periods prescribed in Rule 31(a)-2 under the Investment Company Act of 1940, as
amended. The Company shall assist the Fund's independent auditors, or upon
approval of the Fund, or upon demand, any regulatory body, in any requested
review of the Fund's Accounts and Records, and shall be reimbursed for all
expenses and employee time invested in any such review of the Fund's Accounts
and Records outside of routine and normal periodic reviews and audits. Upon
receipt from the Fund, or its agents, of the necessary information, the Company
shall supply the necessary data for the Fund or accountant's completion of any
necessary
6
tax returns, questionnaires, periodic reports to shareholders and such other
reports and information requests as the Fund and the Company shall agree upon
from time to time.
Section 9. The Company and the Fund may from time to time adopt such
procedures as they agree upon in writing, and the Company may conclusively
assume that any procedure approved by the Fund or directed by the Fund, does not
conflict with or violate any requirements of its Prospectus, Articles of
Incorporation, By-Laws, or any rule or regulation of any regulatory body or
governmental agency. The Fund shall be responsible for notifying the Company of
any changes in regulations or rules which might necessitate changes in the
Company's procedures, and for working out with the Company such changes.
Section 10.
(a) the Company, its directors, officers, employees, shareholders and
agents shall not be liable for any error or judgment or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
Agreement, except losses resulting from willful misfeasance, bad faith or gross
negligence on the part of the Company in the performance of its obligations and
duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of the Company, who may be or become an officer, trustee,
employee or agent of the Fund, shall be deemed, when rendering services to the
Fund or acting on any business of the Fund (other than services or business in
connection with the Company's duties hereunder), to be rendering such services
to or acting solely for the Fund and not as a director, officer, employee,
shareholder or agent of, or one under the control or direction of the Company
even though paid by it.
7
(c) Notwithstanding any other provision of this Agreement, the Fund
shall indemnity and hold harmless the Company, its directors, officers,
employees, shareholders and agents from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact or law) of any
and every nature which the Company may sustain or incur or which may be asserted
against the Company by any person by reason of, or as a result of: (i) any
action taken or omitted to be taken by the Company in good faith hereunder; (ii)
in reliance upon any certificate, instrument, order or stock certificate or
other document reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized person of the Fund or upon
the opinion of legal counsel for the Fund or its own counsel; or (iii) any
action taken or omitted to be taken by the Company in connection with its
appointment in good faith in reliance upon any law, fact, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of the Company or its
directors, officers, employees, shareholders or agents in cases of its or their
own negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
(d) The Company shall give written notice to the Fund within ten (10)
business days of receipt by the Company of a written assertion or claim of any
threatened or pending legal proceeding which may be subject to this
indemnification. However, the failure to notify the Fund of such written
assertion or claim shall not operate in any manner whatsoever to relieve the
Fund of any liability arising from this Section or otherwise.
8
(e) For any legal proceeding giving rise to this indemnification, the
Fund shall be entitled to defend or prosecute any claim in the name of the
Company at its own expense and through counsel of its own choosing if it gives
written notice to the Company within ten (10) business days of receiving notice
of such claim. Notwithstanding the foregoing, the Company may participate in
the litigation at its own expense through counsel of its own choosing. If the
Fund does choose to defend or prosecute such claim, then the parties shall
cooperate in the defense or prosecution thereof and shall furnish such records
and other information as are reasonably necessary.
(f) The Fund shall not settle any claim without the Company's express
written consent which shall not be unreasonably withheld. The Company shall not
settle any claim without the Fund's express written consent which shall not be
unreasonably withheld.
Section 11. All financial data provided to, processed by, and reported
by the Company under this Agreement shall be stated in United States dollars or
currency. The Company shall have no obligation to convert to, equate, or deal
in foreign currencies or values, and expressly assumes no liability for any
currency conversion or equation computations relating to the affairs of the
Fund.
Section 12. The Fund agrees to pay Company compensation for its services
and to reimburse it for expenses, as set forth in Schedule A attached hereto, or
as shall be set forth in amendments to such Schedule approved by the Fund and
Company. The Fund authorizes the Company to debit the Fund's custody account
for invoices which are rendered for the services performed for the Accounting
agent function. The invoices for the service will be sent to the Fund after the
debiting with the indication that payment has been made.
9
Section 13. Nothing contained in this Agreement is intended to or shall
require the Company, in any capacity hereunder, to perform any functions or
duties on any holiday, day of special observance or any other day on which the
Custodian or the New York Stock Exchange is closed. Functions or duties
normally scheduled to be performed on such days shall be performed on, and as
of, the next succeeding business day on which both the New York Stock Exchange
and the Custodian are open. Not withstanding the foregoing, the Company shall
compute the net asset value of the Fund on each day required pursuant to Rule
22c-I promulgated under the Investment Act of 1940.
Section 14. This Agreement may be executed in two or more counterparts,
each of which, when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 15. For purposes of this Agreement, the terms Oral Instructions
and Written Instructions shall mean:
Oral Instructions: The term Oral Instruction shall mean an authorization,
instruction, approval, item or set of data, or information of any kind
transmitted to the Company in person or by telephone, telegram, telecopy or
other mechanical or documentary means lacking a signature, by a person or
persons believed in good faith by the Company to be a person or persons
authorized by a resolution of the Board of Directors of the Fund, to give Oral
Instructions on behalf of the Fund.
Written Instructions: The term Written Instruction shall mean an
authorization, instruction, approval, item or set of data or information of any
kind transmitted to the Company in original writing containing original
signatures or a copy of such document transmitted by telecopy including
transmission of such signature believed in good faith by the Company to be the
signature of a
10
person authorized by a resolution of the Board of Directors of the Fund to given
Written instructions on behalf of the Fund.
The Fund shall file with the Company a certified copy of each resolution of
its Board of Directors authorizing execution of Written Instructions Or the
transmittal of Oral Instructions as provided above.
Section 16. The Fund or the Company may give written notice to the other
of the termination of this Agreement, such termination to take effect at the
time specified in the notice not less than 60 days after the giving of the
notice. Upon the effective termination date, subject to payment to the Company
by the Fund of all amounts due to the Company as of said date, the Company shall
make available to the Fund or its designated recordkeeping successor, all of the
records of the Fund maintained under this Agreement then in the Company's
possession.
Section 17. Any notice or other communication required by or permitted
to be given in connection with this Agreement shall be in writing, and shall be
delivered in person or sent by first class mail, postage prepaid to the
respective parties as follows:
If to the Fund:
Cornerstone Growth Fund, Inc.
000 Xxxxxxxxxx, Xxxxx 000
0000 Xxxxxxxxx Xxxxxxx, XX
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
If to the Company:
Fortune Fund Administration, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx X. Xxxxxxx
11
Section 18. This Agreement may be amended from time to time by
supplemental agreement executed by the Fund and the Company and the compensation
stated in Schedule A attached hereto may be adjusted accordingly as mutually
agreed upon.
Section 19. This Agreement shall be governed by the laws of the
Commonwealth of Virginia.
Section 20. This contract sets forth the entire understanding of the
parties with respect to the provisions contemplated hereby, and supersedes any
and all prior agreements, arrangements and understandings relating to such
services.
Section 21. 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 without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 22. The Company expressly agrees that, notwithstanding anything
to the contrary herein, or in law, that it will look solely to the assets of the
Fund for any obligations of the Fund hereunder and nothing herein shall be
construe to create any personal liability of any Trustee or any shareholder of
the Fund. The Fund expressly acknowledges that the declaration of trust
establishing the CornerCap Balanced Fund, dated as of November 23, 1992 (as
amended) a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name CornerCap Balanced Fund refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of the
CornerCap Balanced
12
Fund shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise,
in connection with the affairs of said CornerCap Balanced Fund, but the property
of the CornerCap Balanced Fund only shall be liable.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized officers and their corporate seals hereunto duly affixed
and attested, as of the day and year first above written.
CORNERCAP BALANCED FUND
By:
--------------------------------
Attest
Name:
------------------------------
Title:
- ------------------------------- ------------------------------
FORTUNE FUND ADMINISTRATION, INC.
By:
--------------------------------
Attest
Name:
------------------------------
Title:
- ------------------------------- ------------------------------
13
FORTUNE FUND ADMINISTRATION
Fund Accounting
Schedule of Fees
1. DOMESTIC AND ADR SECURITIES ANNUAL BASIC FEE
$12,000 minimum up to $5 million average net assets.
$18,000 minimum up to $10 million average net assets.
$24,000 minimum up to $25 million average net assets.
.00002 on nest $75 million of average net assets
Should total assets exceed $100 million per fund, the fee schedule
will be renegotiated.
2. Should the Fund's security trading activity exceen an average
of 100 trades per month per portfolio, an additional fee of
$2.50 will be charged per trade.
SCHEDULE A
ACCOUNTING SERVICES UNIT (ASU)
- - Commonwealth Fund Accounting, Inc. offers the CornerCap Balanced Fund a
comprehensive level of service.
- - Basic Assumptions:
1. The Fund's Administrator will complete all necessary prospectus and
compliance reports, as well as monitoring of the various limitations and
restrictions.
2. Daily Transfer Agent information will be supplied to the Company in the
required format, and within the necessary time constraints (i.e., trade
date plus one by I 1:00 AM EST).
3. The Transfer Agent will remain responsible for reconciliation of Fund share
balances between the Transfer Agent reports and the Accounting share
reports.
4. The Company will supply the Transfer Agent with daily NAV's for each
portfolio by 6:00 PM Eastern time (via fax).
5. The Funds' security trading activity is presently very low, and will remain
on average less than 30 trades per month, per portfolio.
6. To the extent the Fund requires daily security prices from specific brokers
for domestic and foreign securities, these manual prices will be obtained
by the Funds' investment advisor and faxed to the Company by 4:00 PM
Eastern time for inclusion in the NAV calculations. In our experience, we
believe the Funds' investment advisors have better success obtaining
accurate and timely quotes from their brokers on a more consistent basis
than Commonwealth Fund Accounting, Inc. would.
1
SCHEDULE A
It is our understanding that the Fund will supply the Company with all non-
U.S. dollar denominated prices inclusive of local price, daily foreign
exchange rate and U.S. dollar price.
To the extent the Fund owns unlisted ADR's not available on Bloomberg, we
will assume receipt of these daily prices in the above stated manner.
7. The Funds' custodian and investment advisor will supply Company with all
required foreign dividend and corporate action information. For all
portfolios, we suggest documentation of clear cut security variance
procedures to minimize NAV miscalculations.
8. All foreign currency and time deposits will be held within the custodian
and sub-custodian network. To the extent tax accounting requirements for
the foreign securities differ from the "book" requirements, they will be
identified by the Fund or the Fund's independent accountant.
The Funds do not expect to invest in foreign debt instruments, forward
currency xxxxxx, currency trading except for security settlement purposes,
or options and futures. To the extent this should change, additional fees
will apply.
9. The Company will supply timely daily Portfolio Valuation Reports (via fax)
to the Fund's investment advisor identifying current security positions,
original/amortized cost, security market values and changes in unrealized
appreciation/depreciation.
2
SCHEDULE A
It will be the responsibility of the Fund's investment advisor to review
these reports upon receipt and to promptly notify the Company of any
possible problems", incorrect security prices or capital change information
that could result in an incorrect Fund NAV.
10. Specific deadlines and complete information will be identified for all
security trades in order to minimize any settlement problems or NAV errors.
Details of non-money market trades will be called or faxed to the Company
on trade date plus one, no later than I 1:00 AM Eastern time.
Trade Authorization Forms, with the appropriate officer signature, should
be faxed to the Company on all security trades placed by the Fund no later
than trade date for money market instruments, and trade date plus one for
non-money market securities.
There is no assurance that security trades called in after the above stated
deadline can be included in that day's work.
Money market trades will be coordinated directly through the Custody Unit
by the Fund's investment advisor.
Commonwealth Fund Accounting, Inc. will supply the investment advisor with
recommended trade ticket documents to minimize receipt of incomplete
information. (i.e., cusip numbers for all domestic trades and sedol numbers
for all foreign trades would be supplied by the investment advisor.) We
would find it difficult to be responsible for NAV changes that resulted
from incomplete information about a trade.
3
SCHEDULE A
11. The Fund does not currently participate in Security Lending. To the extent
it does so in the future, additional fees may apply.
12. Fund management will monitor the expense accrual procedures for adequacy
based on outstanding liabilities monthly, and promptly communicate to the
Company any adjustments needed.
13. Nothing in Schedule A will supersede or modify anything in the basic
Agreement, as the foregoing assumptions relate only to the fees charged or
to be charged by the Company to the Fund.
4
