EXHIBIT C
INVESTMENT ADVISORY AGREEMENT
AVALON FUNDS, INC.
As Amended on
July 30, 2001
This Agreement is made and entered into as of the 1st 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 ("Adviser").
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, Adviser 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 desires to retain Adviser to render certain investment
management services to 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 Adviser wishes to accept such engagement;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. OBLIGATIONS OF INVESTMENT ADVISER
(A) SERVICES. Adviser agrees to perform the following services (the "Services")
for the Fund:
(1) manage the investment and reinvestment of each Portfolio's assets;
(2) continuously review, supervise, and administer the investment program
of the Portfolio(s);
(3) determine, in its discretion, the securities to be purchased, retained
or sold (and implement those decisions);
(4) provide the Fund with records concerning Adviser's activities which
the Fund is required to maintain; and
(5) render regular reports to the Fund's officers and directors concerning
Adviser's discharge of the foregoing responsibilities.
Adviser shall discharge the foregoing responsibilities subject to the
general supervision and control of the officers and the directors of the Fund
and in compliance with such policies as the directors may from time to time
establish, and in compliance with the objectives, policies, and limitations of
the Portfolio(s) set forth in the Fund's prospectus and statement of additional
information, as amended from time to time, and with all applicable laws and
regulations. All Services to be furnished by Adviser under this Agreement may be
furnished through the medium of any directors, officers or employees of Adviser
or through such other parties as Adviser may determine from time to time.
Adviser agrees, at its own expense or at the expense of one or more of its
affiliates, to render the Services and to provide the office space, furnishings,
equipment and personnel as may be reasonably required in the judgment of the
Board of Directors of the Fund to perform the Services on the terms and for the
compensation provided herein. Adviser shall authorize and permit any of its
officers, directors and employees, who may be elected as directors or officers
of the Fund, to serve in the capacities in which they are elected.
Except to the extent expressly assumed by Adviser herein and except to the
extent required by law to be paid by Adviser, the Fund shall pay all costs and
expenses in connection with its operation and organization.
(B) BOOKS AND RECORDS. All books and records prepared and maintained by
Adviser for the Fund under this Agreement shall be the property of the Fund and,
upon request therefor, Adviser shall surrender to the Fund such of the books and
records so requested.
2. PORTFOLIO TRANSACTIONS. Adviser is authorized to select the brokers or
dealers that will execute the purchases and sales of portfolio securities for
the Portfolio(s) and is directed to use its best efforts to obtain the best net
results as described in the Fund's prospectus from time to time. Adviser may, in
its discretion, purchase and sell portfolio securities from and to brokers and
dealers who provide the Portfolio(s) with research, analysis, advice and similar
services, and Adviser may pay to these brokers and dealers, in return for
research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, provided that Adviser determines in good faith that
such commission is reasonable in terms either of that particular transaction or
of the overall responsibility of Adviser to the Fund and its other clients and
that the total commission paid by the Fund will be reasonable in relation to the
benefits to the Portfolio over the long-term. Adviser will promptly communicate
to the officers and the directors of the Fund such information relating to
portfolio transactions as they may reasonably request.
3. COMPENSATION OF ADVISER. The Fund will pay to Adviser on the last day of each
month a fee at an annual rate equal to the percentage of the daily average net
asset value of each Portfolio subject to this Agreement as set forth on Exhibit
B to this Agreement, as such Exhibit B may be amended from time to time by
agreement of the parties, such fees to be computed daily based upon the net
asset value of the Portfolio(s) as determined by a valuation made in accordance
with the each Portfolio's procedures for calculating Portfolio net asset value
as described in the Portfolio'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 as of the last business day prior to such suspension shall, for
the purpose of this Paragraph 3, be deemed to be net asset value at the close of
each succeeding business day until it is again determined.
4. STATUS OF INVESTMENT ADVISER. The services of Adviser to the Fund are not to
be deemed exclusive, and Adviser shall be free to render similar services to
others so long as its services to the Fund are not impaired thereby. Adviser
shall be deemed to be an independent contractor and shall, unless otherwise
expressly provided or authorized, have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund. Nothing in this
Agreement shall limit or restrict the right of any director, officer or employee
of Adviser, who may also be a director, officer, or employee of the Fund, to
engage in any other business or to devote his or her time and attention in part
to the management or other aspects of any other business, whether of a similar
nature or a dissimilar nature.
5. PERMISSIBLE INTERESTS. Directors, agents, and stockholders of the Fund are or
may be interested in Adviser (or any successor thereof) as directors, partners,
officers, or stockholders, or otherwise, and directors, partners, officers,
agents, and stockholders of Adviser are or may be interested in the Fund as
directors, stockholders or otherwise; and Adviser (or any successor) is or may
be interested in the Fund as a stockholder or otherwise.
6. LIABILITY OF INVESTMENT ADVISER. Adviser assumes no responsibility under this
Agreement other than to render the services called for hereunder in good faith.
Adviser shall not be liable for any error of judgment or for any loss suffered
by the Fund or Portfolio(s) in connection with the matters to which this
Agreement relates, except a loss resulting from a breach of fiduciary duty with
respect to receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in Section
36(b)(3) of the Investment Company Act of 1940 or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of, or
from reckless disregard by it of its obligations and duties under, this
Agreement.
7. 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 that in either event the
continuance is also approved by the vote of a majority of the directors of the
Fund who are not parties to this Agreement or "interested persons" (as defined
in the Act) of any such party, which vote must be cast in person at meeting
called for the purpose of voting on such approval; provided, however, that;
(a) the Fund may, at any time and without the payment of any penalty,
terminate this Agreement upon 60 days written notice to Adviser;
(b) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder);
and
(c) Adviser may terminate this Agreement without payment of penalty on 60
days written notice to the Fund; and
(d) the terms of paragraph 6 of this Agreement shall survive the
termination of this Agreement.
8. 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 Xxxxxx Xxxxx X. Xxxxxxx
President Executive Vice President
9. AMENDMENTS. No provision of this Agreement may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
vote of the holders of a majority of the Fund's outstanding voting securities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and the year first written above.
AVALON FUNDS, INC. AVALON TRUST COMPANY
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By: Xxxxx Xxxxxx By: Xxxxx X. Xxxxxxx
President Executive Vice President
ATTEST: ATTEST:
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By: ___________________________ ______________________________
Its: Secretary Its: Secretary
[Corporate Seal] [Corporate Seal]
Exhibit A
Portfolios Subject to
Investment Advisory Agreement
Between Avalon Funds, Inc. and
Avalon Trust Company dated
December 1, 2000
And
Amended July 30, 2001
The Education Fund
The Water Fund
Exhibit B
Pricing Schedule for
Portfolios Subject to
Investment Advisory Agreement
Between Avalon Funds, Inc. and
Avalon Trust Company dated
December 1, 2000
And
Amended July 30, 2001
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Name of Portfolio Annual Fee
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The Education Fund
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The Water Fund 1.00%
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