ACCOUNTING SERVICES AGREEMENT
AGREEMENT dated October 1, 1996 (the "Agreement") between Valley Forge
Capital Holdings Total Return fund, Inc. (the "Fund") a corporation operating as
an open-end management investment company, duly organized and existing under the
laws of the State of Maryland, and Commonwealth Fund Accounting, Inc. (the
"Company") a corporation duly organized and existing under the laws of the State
of Virginia.
WITNESSETH THAT:
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. Scope of the Engagement.
(a) The Fund shall promptly turn over to the Company:
(i) originals or copies of any Accounts and Records previously
maintained by or for it or,
(ii) if such records have not been previously created or
maintained, any data required to establish and bring current
such Accounts and Records.
(b) Thereafter, the Fund shall promptly transmit to the Company, and instruct
any other agents for the Fund to promptly transmit to the Company, all
information required for the maintenance of correct and accurate Accounts and
Records for the Fund.
(c) The Fund acknowledges that such Accounts and Records, and information
related thereto, are necessary for the Company to perform its functions under
this Agreement.
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(d) The Fund authorizes the Company to rely on Accounts and Records turned over
to it, and information provided to it, by the Fund or its agents. The Fund
hereby indemnifies 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 such
information, or due to the failure of the Fund to provide any portion of such
Accounts and Records, or to provide any additional information needed by the
Company to knowledgeably perform its functions, within a reasonable time after
requested by the Company.
(e) 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.
(f) The Fund agrees to pay Company on a current and ongoing basis for the
Company's reasonable time and costs required for the correction of any errors or
omissions in the Accounts and Records delivered, or the information provided, to
Company by the Fund. Any such payment shall be in addition to the fees and
charges payable to the Company under this Agreement as set forth in Schedule A
attached hereto (which provides for services normally contemplated to be
rendered under this Agreement), provided that approval of the amount of such
payments shall be obtained in advance by the Company from the Fund if and when
such additional charges would exceed five percent of the usual charges payable
for a period under this Agreement.
Section 2. Identification of Services.
(a) Upon receipt of 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 to between the Fund and the Company, and as may
be required by the Investment Company Act of 1940 (the "Act"):
(1) Cash Receipts Journal
(2) Cash Disbursements Journal
(3) Dividends Paid and Payable Schedule
(4) Purchase and Sales Journals - Portfolio Securities
(5) Subscription and Redemption Journals
(6) Security Ledgers - Transaction Report and Tax Lot Report
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(7) Broker Ledger - Commission Report
(8) Daily Expense Accruals
(9) Daily Interest Accruals
(10) Daily Trial Balance
(11) Portfolio Interest Receivable and Income Journal
(12) Listing of Portfolio Holdings showing cost, market value and
percentage of portfolio comprised of each security.
(b) 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 the time set by the Fund pursuant to Rule 22c-1
under the Act, (presently set at the close of trading on the New York Stock
Exchange), as provided below in accordance with the time frame identified in
Section 7, the Company shall incur no liability, and the Fund shall indemnify
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 calculations and any
subsequent information received from the Fund or any of its designated Agents.
(c) The scope and quality of the services to be provided under this Agreement
are based upon, and specifically incorporate, the assumptions (the "Basic
Assumptions") appended to this Agreement as Schedule B. The Fund agrees that
material deviations from the Basic Assumptions will be made only by mutual
agreement of the Fund and the Company, and deviations from such Basic
Assumptions may affect the ability of the Company to provide the services called
for under this Agreement.
Section 3. Pricing.
(a) The Company shall perform 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.
(b) Portfolio investments for which market quotations are available to the
Company by use of an automated financial service (a "Pricing Service") shall be
valued based on the closing prices of the portfolio investment reported by such
Pricing Service except where the Fund has given or caused to be given specific
Written or Oral Instructions to utilize a different value. Notwithstanding any
information obtained from a Pricing Service, all portfolio securities shall be
given such values as the Fund shall direct by Written or Oral Instructions,
including all restricted securities and other securities requiring valuation not
readily ascertainable solely by the use of such a Pricing Service.
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(c) The Company shall have no responsibility or liability for the accuracy of
prices quoted by any recognized Pricing Service used by it pursuant to the
preceding paragraph; 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 with respect thereto. 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 indemnify 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.
Section 4. Reliance Upon Instructions.
(a) For all purposes under this Agreement, the Company is authorized to act upon
receipt of the first of any Written or Oral Instructions it receives from the
Fund or authorized agents 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.
(b) The Company shall be entitled to rely on the first Instruction received by
it, 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 acting 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
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to the extent such action requires the Company to act the Fund shall give the
Company to act the Fund shall give the Company specific Written Instruction as
to the action required.
Section 5. Reconciliation with Fund's Custodian.
At the end of each month, the Fund shall cause its Custodian Bank to
forward to the Company a monthly statement of cash and portfolio transactions,
which will be reconciled with the Company's Accounts and Records maintained for
the Fund. The Company will report any discrepancies to the Custodian, and shall
report any unreconciled items to the Fund.
Section 6. Reports to Fund.
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. Information from Fund.
(a) The Fund, directly or by instructions to its agents (including without
limitations its Transfer Agent and its Custodian), shall provide to the Company
as of the close of each Business Day (or on such other schedule as the Fund
determines is necessary), confirmed by Written or Oral Instructions delivered to
the Company by 10:00 a.m. on the next business day) all data and information
necessary for the Company to maintain the Fund's Accounts and Records.
(b) The Company may conclusively assume that information it receives by Written
or Oral Instructions pursuant to the preceding paragraph is complete and
accurate. It is agreed that the information provided by the Fund or its agents
shall include reports of share purchases, redemptions or repurchases, and total
shares outstanding at the end of each business day after the determination of
the net asset value.
Section 8. Ownership of and Access to Fund Records.
(a) It is agreed that the Accounts and Records maintained by the Company for the
Fund are the property of the Fund, and shall be made available to the Fund
promptly upon request and shall be for the periods prescribed in Rule 31(a)-2
under the Act.
(b) The Company shall assist the Fund's independent auditors or, upon lawful
demand, any authorized regulatory body, in any authorized inspection or review
of the Fund's Accounts and Records.
(c) If the Company receives any request or order of a court or regulatory body
of competent jurisdiction, seeking access to the books and records of the Fund
in the possession of the Company, the
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Company shall seek to notify the Fund of such request or order to the extent it
may lawfully do so. The Company shall not be required to oppose or defend
against any such request or order. In connection with any such request or order
the Company may consult with counsel (whether its counsel or counsel for the
Fund) regarding same, and shall be reimbursed by the Fund for any costs incurred
thereby.
(d) The Company shall be reimbursed for all expenses and employee time required
to assist with any 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 data to the
Fund's accountants to allow them to complete any necessary 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. Procedures and Compliance.
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 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
such changes with the Company.
Section 10. Indemnification.
(a) The Company, its directors, officers, employees, shareholders and agents
shall not be liable for any error or judgement 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 malfeasance, bad faith, or gross negligence
on the part of the Company, or gross neglect by 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.
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(c) Notwithstanding any other provision of this Agreement, the Fund shall
indemnify 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.
(e) In connection with any legal proceeding giving rise to a request for
indemnification by the Company pursuant to this provision, 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 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 for such purpose.
(f) The Fund shall not settle any claim without the Company's express written
consent, which consent shall not be unreasonably withheld. The Company shall not
settle any claim without the Fund's express written consent, which consent shall
not be unreasonably withheld.
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Section 11. Foreign currencies.
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. Compensation of the Company.
The Fund agrees to pay the 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 from time to time. The Fund hereby instructs its Custodian Bank to debit
the Fund's custody account for invoices which are rendered by the Company for
the services performed for the Accounting agent function and to make payment on
such invoices in accordance with normal practices. Invoices for services
supplied or costs incurred by the Company will be sent to the Fund on or about
the first business day of each month, and payment thereon shall be made within
ten (10) days thereafter. The Fund agrees that the compensation payable
hereunder is predicated on the Basic Assumptions, and agrees that any
incremental work required to be provided by the Company due to deviation from
the Basic Assumptions by the Fund or its agents shall be payable to, or on
behalf of, the Company by the Fund.
Section 13. Holidays.
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, 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-1 promulgated under
the Act.
Section 14. Counterparts.
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.
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Section 15.Definitions.
For purposes of this Agreement, the terms Oral Instructions and Written
Instructions shall mean:
(a) Oral Instructions: The term Oral Instructions 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 an original 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.
(b) 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 bearing an original signature of an authorized
person, or a copy of such document transmitted by telecopy including
transmission of such a signature believed in good faith by the Company to be the
signature of a person authorized by a resolution of the Board of Directors of
the Fund to given Written Instructions on behalf of the Fund.
(c) 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.Termination.
(a) Either Party hereto may give written notice to the other party (the
"Termination Notice") of the termination of this Agreement. Such Termination
Notice shall state a date upon which the termination is effective (the
"Termination Date"), which shall be not less than sixty (60) days after the date
of the giving of the notice unless otherwise agreed by the parties hereto in
writing.
(b) Prior to the Termination Date, the Company shall provide to the Fund an
estimate of any anticipated fees, charges or expenses additional to the normal
fees, charges and expenses which would be payable under this Agreement for the
period from that time until the Termination Date, and the Company may require a
deposit on account of such estimate to be paid by the Fund.
(c) Upon the 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 which are then in the Company's possession.
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Section 17.Notice.
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:
Valley Forge Capital Holdings Total Return Fund, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xx 00000
Attn: Xxxxx X. Xxx
If to the Company:
Commonwealth Fund Accounting, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attention: J. Xxxxxxx Xxxxxx
Section 18. Amendments to be in Writing.
This Agreement may be amended from time to time by a writing executed
by the Fund and the Company. The compensation stated in Schedule A attached
hereto may be adjusted from time to time by the execution of a new schedule
signed by both of the parties.
Section 19. Controlling law.
This Agreement shall be governed by the laws of the Commonwealth of
Virginia.
Section 20. Entire Agreement.
This Agreement 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. Separability of Provisions.
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.
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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.
Valley Forge Capital Holdings
Total Return Fund, Inc.
Attest By:__________________________
NAME Xxxxxxxx X. Xxxx
TITLE President
----------------------
Xxxxx X. Xxx
Attest COMMONWEALTH FUND ACCOUNTING, INC.
By:____________________________
J. Xxxxxxx Xxxxxx
President
----------------------
A-1
SCHEDULE A
COMMONWEALTH FUND ACCOUNTING, INC.
ACCOUNTING SERVICES FEES
1. Domestic and ADR Securities Annual Basic Fee per portfolio
(1/12 payable monthly)
$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
.0002 on Next $75 Million of Average Net Assets
Should total assets exceed $100 Million/Fund the fee schedule
will be renegotiated.
2. Should the Fund's security trading activity exceed an average
of 100 trades per month per portfolio, an additional fee of
$2.50 will be charged per trade.
3. As a special waiver that the Company has agreed to hold the
Annual Basic Fee to $15,000 Minimum regardless of the size of
the Average Net Assets for the initial six months of
operation.
B-1
SCHEDULE B
ACCOUNTING SERVICES AGREEMENT
COMMONWEALTH FUND ACCOUNTING, INC.
BASIC ASSUMPTIONS
1. The Fund will complete all necessary prospectus and compliance reports, as
well as monitoring 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., by 11:00
a.m. EST on trade date plus one)
3. The Transfer Agent is 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 p.m. EST
5. The Fund's security trading activity will remain on average less than 100
trades per month, per portfolio.
6. The Company can, upon request, supply daily Portfolio Valuation Reports to
the Fund's investment advisor identifying current security positions,
original/amortized cost, security market values and changes in unrealized
appreciation and/or depreciation.
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.
7. 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 11:00 a.m. Trade Authorization Forms,
with the appropriate officer signature, should be faxed to the Company on
all security trades placed by the Fund as soon as available but no later
trade date for money market instruments, and trade plus one for non-money
market securities.
B-2
There is no assurance that security trades called in after the above stated
deadline can be included in that day's work.
8. Should the Fund participate in Security Lending additional fees may apply.
9. Fund management will monitor the expense accrual procedures for accuracy
and adequacy based on outstanding liabilities monthly, and promptly
communicate to the Company any adjustment needed.
