OPERATING SERVICES AGREEMENT
This Agreement is made and entered into as of the __ day of
May, 1998, by and between the CornerCap Group of Funds, a
Massachusetts business trust (the "Fund"), and CornerCap
Investment Counsel, Inc., a Georgia corporation (hereinafter
referred to as "Manager").
WHEREAS, the Fund is a diversified, 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 the CornerCap Growth Fund (the
"Portfolio"); and
WHEREAS, Manager is registered 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 record-keeping 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 Fund 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, to
arrange for other companies to provide the following services to
the Portfolio in the manner and to the extent that such services
are reasonably necessary for the operation of the Portfolio
(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 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 and/or underwriting services;
(6) Independent pricing services;
(7) Preparation of reports describing the
1
operations of the Portfolio, 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;
(8) Sub-accounting and record-keeping 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 September 9, 1992), including
maintenance of shareholder records and shareholder information
concerning the status of their Portfolio accounts by investment
advisers, broker-dealers, financial institutions, and other
organizations on behalf of Manager;
(9) Shareholder and board of director
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; and
(10) Other day-to-day administrative services,
including the costs of designing, printing, and issuing
certificates representing shares of the Portfolio, 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 SERVICES. 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 in
connection with securities transactions to which the Fund or the
Portfolio is a party or in connection with securities owned by
the Fund or the Portfolio;
(2) The interest on indebtedness, if any,
incurred by the Fund or the Portfolio;
(3) The taxes, including franchise, income,
issue, transfer, business license, and other corporate fees
payable by the Fund or the Portfolio 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; and
(5) Any other extraordinary expense of the Fund
or Portfolio.
(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
2
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 an annual fee equal to 0.50% of average net asset
value of the Portfolio, such fee to be computed daily based upon
the net asset value of the Portfolio 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 that Portfolio 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 as Manager
may reasonably require in order to discharge its duties and
obligations hereunder.
3. TERM. This Agreement shall remain in effect until no
later than May , 1999, and from year to year thereafter
provided such continuance is approved at least annually 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
a 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 120 days written
notice to Manager;
(b) The Agreement shall immediately terminate in the
event of its assignment (within the meaning of the Act and the
Rules thereunder); and
(c) Manager may terminate this Agreement without
payment of penalty upon 120 days written notice to the Fund.
3
(4) 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) NOTICES. Any notice under this Agreement shall be
given in writing, addressed and delivered, or mailed post-paid,
to the other party at the principal office of such party.
(C) CHOICE OF LAW. This Agreement shall be construed
in accordance with the laws of the state of Georgia and the
applicable provisions of the Act. To the extent the applicable
law of the state of Georgia 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 executed and
delivered this Agreement on the day and year first above written.
CORNERCAP GROWTH FUND
ATTEST: ____________________ By:______________________
_______________,____________ _________________,_____
CORNERCAP INVESTMENT COUNSEL
ATTEST: _____________________ By:______________________
_______________,_____________ _________________,_____
