FUND ACCOUNTING AGREEMENT
THIS AGREEMENT is made as of this 5th day of October, 2000, by and between
THE SHEPHERD STREET FUNDS, INC. (the "Fund"), a Maryland corporation having its
principal place of business at 480 Shepherd Street, Winston-Salem, North
Carolina 27103, SALEM INVESTMENT COUNSELORS, INC., a North Carolina corporation
("Salem") having its principal place of business at 480 Shepherd Street,
Winston-Salem, North Carolina 27103 and ULTIMUS FUND SOLUTIONS, LLC ("Ultimus"),
a limited liability company organized under the laws of the State of Ohio and
having its principal place of business at 135 Merchant Street, Suite 230,
Cincinnati, Ohio 45246.
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, Salem is an investment advisory firm registered as such with the
Securities and Exchange Commission; and
WHEREAS, the Fund and Salem previously have entered into an "Operating
Services Agreement" dated as of September 30, 1998, authorizing and directing
Salem to provide certain operational and administrative services to the Fund,
and which further authorizes Salem to enter into this Fund Accounting Agreement
(hereafter "Agreement") on behalf of the Fund; and
WHEREAS, Salem desires that Ultimus perform certain fund accounting
services for each series of the Fund, listed on Schedule A attached hereto and
made part of this Agreement, as such Schedule A may be amended from time to time
(individually referred to herein as the "Portfolio" and collectively as the
"Portfolios");
WHEREAS, Ultimus is willing to perform such services on the terms and
conditions set forth in this Agreement; and
WHEREAS, the Fund consents to the appointment of Ultimus to perform the
services set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. RETENTION OF ULTIMUS.
Salem hereby retains Ultimus to act as the fund accountant of the Fund and
to furnish the Fund with the services as set forth below. Ultimus hereby accepts
such employment to perform such duties.
(a) MAINTENANCE OF BOOKS AND RECORDS.
Ultimus shall maintain and keep current the accounts, books, records and
other documents relating to the Fund's financial and portfolio transactions
as may be required by the rules and regulations of the Securities and
Exchange Commission (the "SEC") adopted under Section 31(a) of the 1940
Act. Ultimus shall cause the subject records of the Fund to be maintained
and preserved pursuant to the requirements of the 1940 Act.
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(b) PERFORMANCE OF DAILY ACCOUNTING SERVICES.
In addition to the maintenance of the books and records specified above,
Ultimus shall perform the following accounting services daily for each
Portfolio:
(i) Calculate the net asset value per share utilizing prices
obtained from the sources described in subsection 1(b)(ii)
below;
(ii) Obtain security prices from independent pricing services, or
if such quotes are unavailable, then obtain such prices from
each Portfolio's investment adviser or its designee, as
approved by the Fund's Board of Directors (hereafter
referred to as "Directors");
(iii) Verify and reconcile with the Portfolios' custodian all
daily trade activity;
(iv) Compute, as appropriate, each Portfolio's net income and
capital gains, dividend payables, dividend factors, yields,
and weighted average portfolio maturity;
(v) Review daily the net asset value calculation and dividend
factor (if any) for each Portfolio prior to release to
shareholders, check and confirm the net asset values and
dividend factors for reasonableness and deviations, and
distribute net asset values and yields to NASDAQ;
(vi) Determine unrealized appreciation and depreciation on
securities held by the Portfolios;
(vii) Amortize premiums and accrete discounts on securities
purchased at a price other than face value, if requested by
the Fund;
(viii) Update fund accounting system to reflect rate changes, as
received from a Portfolio's investment adviser, on variable
interest rate instruments;
(ix) Post Portfolio transactions to appropriate categories;
(x) Accrue expenses of each Portfolio according to instructions
received from the Fund's administrator;
(xi) Determine the outstanding receivables and payables for all
(1) security trades, (2) Portfolio share transactions and
(3) income and expense accounts;
(xii) Provide accounting reports in connection with the Fund's
regular annual audit and other audits and examinations by
regulatory agencies; and
(xiii) Provide such periodic reports as the parties shall agree
upon.
(c) SPECIAL REPORTS AND SERVICES.
(i) Ultimus may provide additional special reports upon the
request of the Fund or a Portfolio's investment adviser,
which may result in an additional charge, the amount of
which shall be agreed upon between the parties.
(ii) Ultimus may provide such other similar services with respect
to a Portfolio as may be reasonably requested by the Fund,
which may result in an additional charge, the amount of
which shall be agreed upon between the parties.
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(d) ADDITIONAL ACCOUNTING SERVICES.
Ultimus shall also perform the following additional accounting
services for each Portfolio:
(i) Provide monthly (or as frequently as may reasonably be
requested by the Fund or a Portfolio's investment adviser) a
set of financial statements for each Portfolio as described
below, upon request of the Fund:
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Security Purchases and Sales Journals
Portfolio Holdings Reports
(ii) Provide accounting information for the following:
(A) federal and state income tax returns and federal excise
tax returns;
(B) the Fund's semi-annual reports with the SEC on Form
N-SAR;
(C) the Fund's annual, semi-annual and quarterly (if any)
shareholder reports;
(D) registration statements on Form N-1A and other filings
relating to the registration of shares;
(E) Ultimus' monitoring of the Fund's status as a regulated
investment company under Subchapter M of the Internal
Revenue Code, as amended;
(F) annual audit by the Fund's auditors; and
(G) examinations performed by the SEC.
2. SUBCONTRACTING.
Ultimus may, at its expense and, upon written notice to Salem and the Fund,
subcontract with any entity or person concerning the provision of the services
contemplated hereunder; provided, however, that Ultimus shall not be relieved of
any of its obligations under this Agreement by the appointment of such
subcontractor and provided further, that Ultimus shall be responsible, to the
extent provided in Section 7 hereof, for all acts of such subcontractor as if
such acts were its own.
3. COMPENSATION.
Salem shall pay for the services to be provided by Ultimus under this
Agreement in accordance with, and in the manner set forth in, Schedule B
attached hereto, as such Schedule may be amended from time to time.
If this Agreement becomes effective subsequent to the first day of a month
or terminates before the last day of a month, Ultimus' compensation for that
part of the month in which the Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fees as set forth above. Payment
of Ultimus' compensation for the preceding month shall be made promptly.
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4. REIMBURSEMENT OF EXPENSES.
In addition to paying Ultimus the fees described in Schedule B attached
hereto, Salem agrees to reimburse Ultimus for its reasonable out-of-pocket
expenses in providing services hereunder, including without limitation the
following:
(a) All freight and other delivery and bonding charges incurred by Ultimus
in delivering materials to and from the Fund or Salem;
(b) All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by Ultimus in communication
with the Fund, Salem, the Fund's custodian, dealers or others as
required for Ultimus to perform the services to be provided hereunder;
(c) The cost of obtaining security market quotes;
(d) All expenses incurred in connection with any custom programming or
systems modifications required to provide any special reports or
services requested by the Fund or Salem;
(e) Any expenses Ultimus shall incur at the written direction of an
officer of the Fund or Salem thereunto duly authorized other than an
employee or other affiliated person of Ultimus who may otherwise be
named as an authorized representative of the Fund for certain
purposes; and
(f) Any additional expenses reasonably incurred by Ultimus in the
performance of its duties and obligations under this Agreement.
5. EFFECTIVE DATE.
This Agreement shall become effective with respect to a Portfolio as of the
date first written above (or, if a particular Portfolio is not in existence on
that date, on the date such Portfolio commences operation) (the "Effective
Date").
6. TERM OF THIS AGREEMENT.
The term of this Agreement shall continue in effect, unless earlier
terminated by any party hereto as provided hereunder, for a period of two years
(the "Initial Term"). Thereafter, unless otherwise terminated as provided
herein, this Agreement shall be renewed automatically for successive one-year
periods.
This Agreement may be terminated without penalty: (i) by provision of sixty
(60) days' written notice; (ii) by mutual agreement of the parties; or (iii) for
"cause" (as defined herein) upon the provision of sixty (60) days' advance
written notice by the party alleging cause.
For purposes of this Agreement, "cause" shall mean: (i) a material breach
of this Agreement that has not been remedied within thirty (30) days following
written notice of such breach from the non-breaching party, (ii) a series of
negligent acts or omissions or breaches of this Agreement which, in the
aggregate, constitute in the reasonable judgment of the Fund or Salem, a serious
failure to perform satisfactorily Ultimus' obligations hereunder; (iii) a final,
unappealable judicial, regulatory or administrative ruling or order in which the
party to be
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terminated has been found guilty of criminal or unethical behavior in the
conduct of its business; or (iv) financial difficulties on the part of the party
to be terminated which are evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent or acquiescence in, a voluntary
or involuntary case under Title 11 of the United States Code, as from time to
time is in effect, or any applicable law, other than said Title 11, of any
jurisdiction relating to the liquidation or reorganization of debtors or the
modification or alteration of the rights of creditors.
Notwithstanding the foregoing, after such termination for so long as
Ultimus, with the written consent of the Fund, in fact continues to perform any
one or more of the services contemplated by this Agreement or any schedule or
exhibit hereto, the provisions of this Agreement, including without limitation
the provisions dealing with indemnification, shall continue in full force and
effect. Compensation due Ultimus and unpaid by Salem upon such termination shall
be immediately due and payable upon and notwithstanding such termination.
Ultimus shall be entitled to collect from Salem, in addition to the compensation
described in Schedule B, the amount of all of Ultimus' cash disbursements for
services in connection with Ultimus' activities in effecting such termination,
including without limitation, the delivery to the Fund and/or its designees of
the Fund's property, records, instruments and documents.
7. STANDARD OF CARE.
The duties of Ultimus shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against Ultimus
hereunder. Ultimus shall be obligated to exercise care and diligence in the
performance of its duties hereunder and to act in good faith in performing the
services provided for under this Agreement. Ultimus shall be liable for any
damages arising directly or indirectly out of Ultimus' failure to perform its
duties under this Agreement to the extent such damages arise directly or
indirectly out of Ultimus' willful misfeasance, bad faith, negligence in the
performance of its duties, or reckless disregard of it obligations and duties
hereunder. (As used in this Article 7, the term "Ultimus" shall include
directors, officers, employees and other agents of Ultimus as well as Ultimus
itself.)
Without limiting the generality of the foregoing or any other provision of
this Agreement, (i) Ultimus shall not be liable for losses beyond its reasonable
control, provided that Ultimus has acted in accordance with the standard of care
set forth above; and (ii) Ultimus shall not be liable for the validity or
invalidity or authority or lack thereof of any instruction, notice or other
instrument that Ultimus reasonably believes to be genuine and to have been
signed or presented by a duly authorized representative of the Fund or Salem
(other than an employee or other affiliated persons of Ultimus who may otherwise
be named as an authorized representative of the Fund for certain purposes).
Ultimus may apply to the Fund at any time for instructions and may consult
with counsel for the Fund or its own counsel and with accountants and other
experts with respect to any matter arising in connection with Ultimus' duties
hereunder, and Ultimus shall not be liable or accountable for any action taken
or omitted by it in good faith in accordance with such instruction or with the
reasonable opinion of such counsel, accountants or other experts qualified to
render such opinion.
8. INDEMNIFICATION.
The Fund agrees to indemnify and hold harmless Ultimus from and against any
and all actions, suits, claims, losses, damages, costs, charges, reasonable
counsel fees and disbursements,
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payments, expenses and liabilities (including reasonable investigation expenses)
(collectively, "Losses") arising directly or indirectly out of any action or
omission to act which Ultimus takes (i) at any request or on the direction of or
in reliance on the reasonable advice of the Fund, (ii) upon any instruction,
notice or other instrument that Ultimus reasonably believes to be genuine and to
have been signed or presented by a duly authorized representative of the Fund
(other than an employee or other affiliated person of Ultimus who may otherwise
be named as an authorized representative of the Fund for certain purposes) or
(iii) on its own initiative, in good faith and in accordance with the standard
of care set forth herein, in connection with the performance of its duties or
obligations hereunder; provided, however that the Fund shall have no obligation
to indemnify or reimburse Ultimus under this Article 8 to the extent that
Ultimus is entitled to reimbursement or indemnification for such Losses under
any liability insurance policy described in this Agreement or otherwise.
Salem agrees to indemnify and hold harmless Ultimus from and against any
and all actions, suits, claims, losses, damages, costs, charges, reasonable
counsel fees and disbursements, payments, expenses and liabilities (including
reasonable investigation expenses) (collectively, "Losses") arising directly or
indirectly out of any action or omission to act which Ultimus takes (i) at any
request or on the direction of or in reliance on the reasonable advice of Salem,
(ii) upon any instruction, notice or other instrument that Ultimus reasonably
believes to be genuine and to have been signed or presented by a duly authorized
representative of Salem or (iii) on its own initiative, in good faith and in
accordance with the standard of care set forth herein, in connection with the
performance of its duties or obligations hereunder; provided, however that Salem
shall have no obligation to indemnify or reimburse Ultimus under this Article 8
to the extent that Ultimus is entitled to reimbursement or indemnification for
such Losses under any liability insurance policy described in this Agreement or
otherwise.
Ultimus shall not be indemnified against or held harmless from any Losses
arising directly or indirectly out of Ultimus' own willful misfeasance, bad
faith, negligence in the performance of its duties, or reckless disregard of its
obligations and duties hereunder. (As used in this Article 8, the term "Ultimus"
shall include directors, officers, employees and other agents of Ultimus as well
as Ultimus itself.)
9. RECORD RETENTION AND CONFIDENTIALITY.
Ultimus shall keep and maintain on behalf of the Fund all books and records
which the Fund and Ultimus is, or may be, required to keep and maintain pursuant
to any applicable statutes, rules and regulations, including without limitation
Rules 31a-1 and 31a-2 under the 1940 Act, relating to the maintenance of books
and records in connection with the services to be provided hereunder. Ultimus
further agrees that all such books and records shall be the property of the Fund
and to make such books and records available for inspection by the Fund or by
the SEC at reasonable times and otherwise to keep confidential all books and
records and other information relative to the Fund and its shareholders; except
when requested to divulge such information by duly-constituted authorities or
court process.
10. FORCE MAJEURE.
Ultimus assumes no responsibility hereunder, and shall not be liable, for
any damage, loss of data, delay or any other loss whatsoever caused by events
beyond its reasonable control, including acts of civil or military authority,
national emergencies, fire, flood, catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply.
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11. RIGHTS OF OWNERSHIP; RETURN OF RECORDS.
All records and other data except computer programs and procedures
developed to perform services required to be provided by Ultimus are the
exclusive property of the Fund and all such records and data will be furnished
to the Fund in appropriate form as soon as practicable after termination of this
Agreement for any reason. Ultimus may at its option at any time, and shall
promptly upon the Fund's demand, turn over to the Fund and cease to retain
Ultimus' files, records and documents created and maintained by Ultimus pursuant
to this Agreement which are no longer needed by Ultimus in the performance of
its services or for its legal protection. If not so turned over to the Fund,
such documents and records will be retained by Ultimus for six years from the
year of creation. At the end of such six-year period, such records and documents
will be turned over to the Fund unless the Fund authorizes in writing the
destruction of such records and documents.
12. REPRESENTATIONS OF THE FUND.
The Fund certifies to Ultimus that: (1) as of the close of business on the
Effective Date, each Portfolio that is in existence as of the Effective Date has
authorized an indefinite number of shares, and (2) this Agreement has been duly
authorized by the Fund and, when executed and delivered by the Fund, will
constitute a legal, valid and binding obligation of the Fund, enforceable
against the Fund in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
13. REPRESENTATIONS OF SALEM
Salem certifies to Ultimus that: (1) Salem is authorized under its
Operating Services Agreement with the Fund to enter into this Agreement; (2)
this Agreement has been duly authorized by Salem and, when executed and
delivered by Salem, will constitute a legal, valid and binding obligation of
Salem, enforceable against Salem in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
14. REPRESENTATIONS OF ULTIMUS.
Ultimus represents and warrants that: (1) the various procedures and
systems which Ultimus has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause the records, and other
data of the Fund and Ultimus' records, data, equipment facilities and other
property used in the performance of its obligations hereunder are adequate and
that it will make such changes therein from time to time as are required for the
secure performance of its obligations hereunder, (2) this Agreement has been
duly authorized by Ultimus and, when executed and delivered by Ultimus, will
constitute a legal, valid and binding obligation of Ultimus, enforceable against
Ultimus in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties, (3) it is duly registered
with the appropriate regulatory agency as a transfer agent and such registration
will remain in full force and effect for the duration of this Agreement, and (4)
it has and will continue to have access to the necessary facilities, equipment
and personnel to perform its duties and obligations under this Agreement.
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15. INSURANCE.
Ultimus shall furnish the Fund with pertinent information concerning the
professional liability insurance coverage that it maintains. Such information
shall include the identity of the insurance carrier(s), coverage levels and
deductible amounts. Ultimus shall notify the Fund should any of its insurance
coverage be canceled or reduced. Such notification shall include the date of
change and the reasons therefor. Ultimus shall notify the Fund of any material
claims against it with respect to services performed under this Agreement,
whether or not they may be covered by insurance, and shall notify the Fund from
time to time as may be appropriate of the total outstanding claims made by
Ultimus under its insurance coverage.
16. INFORMATION TO BE FURNISHED BY THE FUND.
The Fund has furnished to Ultimus the following:
(a) Copies of the Fund's Articles of Incorporation and of any amendments
thereto, certified by the proper official of the state in which such
document has been filed.
(b) Copies of the following documents:
(1) The Fund's Bylaws and any amendments thereto; and
(2) Certified copies of resolutions of the Directors covering the
approval of this Agreement, authorization of a specified officer
of the Fund to execute and deliver this Agreement and
authorization for specified officers of the Fund to instruct
Ultimus thereunder.
(c) A list of all the officers of the Fund, together with specimen
signatures of those officers who are authorized to instruct Ultimus in
all matters.
(d) Copies of the Prospectus and Statement of Additional Information for
each Portfolio.
17. AMENDMENTS TO AGREEMENT.
This Agreement, or any term thereof, may be changed or waived only by
written amendment signed by the party against whom enforcement of such change or
waiver is sought.
For special cases, the parties hereto may amend such procedures set forth
herein as may be appropriate or practical under the circumstances, and Ultimus
may conclusively assume that any special procedure which has been approved by
the Fund does not conflict with or violate any requirements of its Articles of
Incorporation or then current prospectuses, or any rule, regulation or
requirement of any regulatory body.
18. COMPLIANCE WITH LAW.
Except for the obligations of Ultimus otherwise set forth herein, the Fund
assumes full responsibility for the preparation, contents and distribution of
each prospectus of the Fund as to compliance with all applicable requirements of
the Securities Act of 1933, as amended (the "Securities Act"), the 1940 Act and
any other laws, rules and regulations of governmental authorities having
jurisdiction. The Fund represents and warrants that no shares of the Fund will
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be offered to the public until the Fund's registration statement under the
Securities Act and the 1940 Act has been declared or becomes effective.
19. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such
notice, at the following address: if to the Fund or Salem, at 480 Shepherd
Street, Winston-Salem, North Carolina 27103, Attn: Mr. Jeffrey Howard; and if to
Ultimus, at 135 Merchant Street, Suite 230, Cincinnati, Ohio 45246, Attn: Robert
G. Dorsey; or at such other address as such party may from time to time specify
in writing to the other party pursuant to this Section.
20. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be assignable
by any of the parties hereto except by the specific written consent of the other
parties. This Agreement shall be binding upon, and shall inure to the benefit
of, the parties hereto and their respective successors and permitted assigns.
21. GOVERNING LAW.
This Agreement shall be construed in accordance with the laws of the State
of Ohio and the applicable provisions of the 1940 Act. To the extent that the
applicable laws of the State of Ohio, or any of the provisions herein, conflict
with the applicable provisions of the 1940 Act, the latter shall control.
22. MULTIPLE ORIGINALS.
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
SALEM INVESTMENT
THE SHEPHERD STREET FUNDS, INC. COUNSELORS, INC.
By: /s/ David B. Rea By: /s/ David B. Rea
-------------------------------- --------------------------------
Title: President Title: President
ULTIMUS FUND SOLUTIONS, LLC
By: /s/ Robert G. Dorsey
--------------------------------
Title: President
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SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT BETWEEN
THE SHEPHERD STREET FUNDS, INC.
SALEM INVESTMENT COUNSELORS, INC.
AND
ULTIMUS FUND SOLUTIONS, LLC
DATED SEPTEMBER 30, 2000
FUND PORTFOLIOS
---------------
THE SHEPHERD STREET EQUITY FUND
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SCHEDULE B
TO THE FUND ACCOUNTING AGREEMENT BETWEEN
THE SHEPHERD STREET FUNDS, INC.
SALEM INVESTMENT COUNSELORS, INC.
AND
ULTIMUS FUND SOLUTIONS, LLC
DATED SEPTEMBER 30, 2000
FEES AND EXPENSES
-----------------
FEES:
Ultimus shall be entitled to receive a fee from Salem on the first business
day following the end of each month, or at such time(s) as Ultimus shall request
and the parties hereto shall agree, a fee computed with respect to each
Portfolio as follows:
Base fee per year = $30,000, ($2,500 per month), plus
Asset based fee of:
------------------------------------------------------------
AVERAGE DAILY NET ASSETS ASSET BASED FEE
------------------------------------------------------------
$25 to $500 million .010%
------------------------------------------------------------
In excess of $500 million .005%
------------------------------------------------------------
The above base fee assumes one class of shares. For a Portfolio that offers
more than one class of shares, the base fee is $36,000.
The foregoing fees include 100 portfolio trades per month (exclusive of
daily cash investments). For Portfolios with more than 100 trades in a month,
Ultimus will charge $5.00 for each trade in excess of 100.
The foregoing fees will be discounted with respect to The Shepherd Street
Equity Fund by 20% until the earlier of (i) the expiration of the Initial Term
as defined in Article 6 or (ii) such Portfolio's net assets reach $20 million.
OUT-OF-POCKET EXPENSES:
The fees set forth above shall be in addition to the payment of
out-of-pocket expenses, as provided for in Section 4 of this Agreement.
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