EXHIBIT 99.(H)(1)
FUND ACCOUNTING SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this 19th day of October,
2001, by and between Hotchkis and Wiley Funds, a Delaware business trust (the
"Trust") and Firstar Mutual Fund Services, LLC, a Wisconsin limited liability
company ("FMFS").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company,
and is authorized to issue shares of beneficial interest in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, FMFS is, among other things, in the business of providing
mutual fund accounting services to investment companies; and
WHEREAS, the Trust desires to retain FMFS to provide accounting services
to each series of the Trust listed on Exhibit A hereto (as amended from time to
time) (each a "Fund", collectively the "Funds").
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto, intending to be legally bound,
do hereby agree as follows:
1. APPOINTMENT OF FMFS AS FUND ACCOUNTANT
The Trust hereby appoints FMFS as fund accountant of the Trust on the
terms and conditions set forth in this Agreement, and FMFS hereby
accepts such appointment and agrees to perform the services and duties
set forth in this Agreement.
2. SERVICES AND DUTIES OF FMFS
FMFS shall provide the following fund accounting services for the Funds,
including but not limited to:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date+1 basis using
security trade information communicated from the
investment manager.
(2) For each valuation date, obtain prices from a pricing
source approved by the Board of Trustees of the Trust (the
"Board of Trustees" or the "Trustees") and apply those
prices to the portfolio positions. For those securities
where market quotations are not readily available, the
Board of Trustees shall approve, in good faith, the method
for determining the fair value for such securities.
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(3) Identify interest and dividend accrual balances as of each
valuation date and calculate gross earnings on investments
for the accounting period.
(4) Determine gain/loss on security sales and identify them as
short-term or long-term; account for periodic
distributions of gains or losses to shareholders and
maintain undistributed gain or loss balances as of each
valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Trust as to methodology, rate
or dollar amount.
(2) Record payments for Fund expenses upon receipt of written
authorization from the Trust.
(3) Account for Fund expenditures and maintain expense accrual
balances at the level of accounting detail, as agreed upon
by FMFS and the Trust.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for Fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other Fund share
activity as reported by the Fund's transfer agent on a
timely basis.
(2) Apply equalization accounting as directed by the Trust.
(3) Determine net investment income (earnings) for the Fund as
of each valuation date. Account for periodic distributions
of earnings to shareholders and maintain undistributed net
investment income balances as of each valuation date.
(4) Maintain a general ledger and other accounts, books, and
financial records for the Fund in the form as agreed upon.
(5) Determine the net asset value of the Fund according to the
accounting policies and procedures set forth in the Fund's
Prospectus and Statement of Additional Information.
(6) Calculate per share net asset value, per share net
earnings, and other per share amounts reflective of Fund
operations at such time as required by the nature and
characteristics of the Fund.
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(7) Communicate, at an agreed upon time, the per share price
for each valuation date to parties as agreed upon from
time to time.
(8) Prepare monthly reports that document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain accounting records for the investment portfolio
of the Fund to support the tax reporting required for
IRS-defined regulated investment companies.
(2) Maintain tax lot detail for the Fund's investment
portfolio.
(3) Calculate taxable gain/loss on security sales using the
tax lot relief method designated by the Trust.
(4) Provide the necessary financial information to support the
taxable components of income and capital gains
distributions to the Fund's transfer agent to support tax
reporting to the shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the Fund's
accounting records available to the Trust, the Securities
and Exchange Commission (the "SEC"), and the outside
auditors.
(2) Maintain accounting records according to the 1940 Act and
regulations provided thereunder.
F. FMFS will perform the following accounting functions on a daily
basis:
(1) Reconcile cash and investment balances of each Fund with
the Fund's custodian, and provide the Fund's investment
adviser with the beginning cash balance available for
investment purposes.
(2) Transmit or mail a copy of the portfolio valuation to the
Fund's investment adviser.
(3) Review the impact of current day's activity on a per share
basis, and review changes in market value.
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G. In addition, FMFS will:
(1) Prepare monthly security transactions listings.
(2) Supply various Trust, Fund and class statistical data as
requested by the Trust on an ongoing basis.
3. PRICING OF SECURITIES
For each valuation date, FMFS shall obtain prices from a pricing source
selected by FMFS but approved by the Board of Trustees and apply those
prices to the portfolio positions of the Fund. For those securities
where market quotations are not readily available, the Board of Trustees
shall approve, in good faith, the method for determining the fair value
for such securities.
If the Trust desires to provide a price that varies from the pricing
source, the Trust shall promptly notify and supply FMFS with the
valuation of any such security on each valuation date. All pricing
changes made by the Trust will be in writing and must specifically
identify the securities to be changed by CUSIP, name of security, new
price or rate to be applied, and, if applicable, the time period for
which the new price(s) is/are effective.
4. CHANGES IN ACCOUNTING PROCEDURES
Any resolution passed by the Board of Trustees that affects accounting
practices and procedures under this Agreement shall be effective upon
written receipt and acceptance by FMFS.
5. CHANGES IN EQUIPMENT, SYSTEMS, SERVICE, ETC.
FMFS reserves the right to make changes from time to time, as it deems
advisable, relating to its services, systems, programs, rules, operating
schedules and equipment, so long as such changes do not adversely affect
the service provided to the Trust under this Agreement.
6. COMPENSATION
FMFS shall be compensated for providing the services set forth in this
Agreement in accordance with the fee schedule set forth on Exhibit B
hereto (as amended from time to time). The Trust shall pay all fees and
reimbursable expenses within thirty (30) calendar days following receipt
of the billing notice, except for any fee or expense subject to a good
faith dispute. The Trust shall notify FMFS in writing within thirty (30)
calendar days following receipt of each invoice if the Trust is
disputing any amounts in good faith. The Trust shall settle such
disputed amounts within ten (10) calendar days of the day on which the
parties agree to the amount to be paid. With the exception of any fee or
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expense the Trust is disputing in good faith as set forth above, unpaid
invoices shall accrue a finance charge of one and one-half percent
(1 1/2%) per month, after the due date. Notwithstanding anything to the
contrary, amounts owed by the Trust to FMFS shall only be paid by the
investment adviser or out of the assets and property of the particular
Fund involved.
7. INDEMNIFICATION; LIMITATION OF LIABILITY
A. FMFS shall exercise reasonable care in the performance of its
duties under this Agreement. FMFS shall not be liable for any
error of judgment or mistake of law or for any loss suffered by
the Trust in connection with matters to which this Agreement
relates, including losses resulting from mechanical breakdowns or
the failure of communication or power supplies beyond FMFS's
control, except a loss arising out of or relating to FMFS's
refusal or failure to comply with the terms of this Agreement or
from bad faith, negligence, or willful misconduct on its part in
the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement, if FMFS
has exercised reasonable care in the performance of its duties
under this Agreement, the Trust shall indemnify and hold harmless
FMFS from and against any and all claims, demands, losses,
expenses, and liabilities of any and every nature (including
reasonable attorneys' fees) that FMFS may sustain or incur or
that may be asserted against FMFS by any person arising out of
any action taken or omitted to be taken by it in performing the
services hereunder, except for any and all claims, demands,
losses, expenses, and liabilities arising out of or relating to
FMFS's refusal or failure to comply with the terms of this
Agreement or from bad faith, negligence or from willful
misconduct on its part in performance of its duties under this
Agreement, (i) in accordance with the foregoing standards, or
(ii) in reliance upon any written or oral instruction provided to
FMFS by any duly authorized officer of the Trust, such duly
authorized officer to be included in a list of authorized
officers furnished to FMFS and as amended from time to time in
writing by resolution of the Board of Trustees.
FMFS shall indemnify and hold the Trust harmless from and against
any and all claims, demands, losses, expenses, and liabilities of
any and every nature (including reasonable attorneys' fees) that
the Trust may sustain or incur or that may be asserted against
the Trust by any person arising out of any action taken or
omitted to be taken by FMFS as a result of FMFS's refusal or
failure to comply with the terms of this Agreement, its bad
faith, negligence, or willful misconduct.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, FMFS shall
take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond FMFS's
control. FMFS will make every reasonable effort to restore any
lost or damaged data and correct any errors resulting from such a
breakdown at the expense of FMFS. FMFS agrees that it shall, at
all times, have reasonable
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contingency plans with appropriate parties, making reasonable
provision for emergency use of electrical data processing
equipment to the extent appropriate equipment is available.
Representatives of the Trust shall be entitled to inspect FMFS's
premises and operating capabilities at any time during regular
business hours of FMFS, upon reasonable notice to FMFS.
Notwithstanding the above, FMFS reserves the right to reprocess
and correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in this
section shall apply, it is understood that if in any case the
indemnitor may be asked to indemnify or hold the indemnitee
harmless, the indemnitor shall be fully and promptly advised of
all pertinent facts concerning the situation in question, and it
is further understood that the indemnitee will use all reasonable
care to notify the indemnitor promptly concerning any situation
that presents or appears likely to present the probability of a
claim for indemnification. The indemnitor shall have the option
to defend the indemnitee against any claim that may be the
subject of this indemnification. In the event that the indemnitor
so elects, it will so notify the indemnitee and thereupon the
indemnitor shall take over complete defense of the claim, and the
indemnitee shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification under this
section. Indemnitee shall in no case confess any claim or make
any compromise in any case in which the indemnitor will be asked
to indemnify the indemnitee except with the indemnitor's prior
written consent.
8. PROPRIETARY AND CONFIDENTIAL INFORMATION
FMFS agrees on behalf of itself and its directors, officers, and
employees to treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and prior,
present, or potential shareholders of the Trust (and clients of said
shareholders), and not to use such records and information for any
purpose other than the performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not
be withheld where FMFS may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the
Trust.
Further, FMFS will adhere to the privacy policies adopted by the Trust
pursuant to Title V of the Xxxxxx-Xxxxx-Xxxxxx Act, as may be modified
from time to time (the "Act"). Notwithstanding the foregoing, FMFS will
not share any nonpublic personal information concerning any of the
Trust's shareholders with any third party unless specifically directed
by the Trust or allowed under one of the exceptions noted under the Act.
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9. TERM OF AGREEMENT; AMENDMENT
This Agreement shall become effective as of the date first written above
and will continue in effect for a period of three years. Subsequent to
the initial two-year term, this Agreement may be terminated by either
party upon giving ninety (90) days prior written notice to the other
party or such shorter period as is mutually agreed upon by the parties.
However, this Agreement may be amended by mutual written consent of the
parties.
10. RECORDS
FMFS shall keep records relating to the services to be performed
hereunder in the form and manner, and for such period, as it may deem
advisable and is agreeable to the Trust, but not inconsistent with the
rules and regulations of appropriate government authorities, in
particular, Section 31 of the 1940 Act and the rules thereunder. FMFS
agrees that all such records prepared or maintained by FMFS relating to
the services to be performed by FMFS hereunder are the property of the
Trust and will be preserved, maintained, and made available in
accordance with such applicable sections and rules of the 1940 Act and
will be promptly surrendered to the Trust on and in accordance with its
request.
11. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the
State of Wisconsin, without regard to conflicts of law principles. To
the extent that the applicable laws of the State of Wisconsin, or any of
the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control, and nothing herein shall be
construed in a manner inconsistent with the 1940 Act or any rule or
order of the SEC thereunder.
12. DUTIES IN THE EVENT OF TERMINATION
In the event that, in connection with termination, a successor to any of
FMFS's duties or responsibilities hereunder is designated by the Trust
by written notice to FMFS, FMFS will promptly, upon such termination and
at the expense of the Trust, transfer to such successor all relevant
books, records, correspondence and other data established or maintained
by FMFS under this Agreement in a form reasonably acceptable to the
Trust (if such form differs from the form in which FMFS has maintained
the same, the Trust shall pay any expenses associated with transferring
the same to such form), and will cooperate in the transfer of such
duties and responsibilities, including provision for assistance from
FMFS's personnel in the establishment of books, records and other data
by such successor.
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13. NO AGENCY RELATIONSHIP
Nothing herein contained shall be deemed to authorize or empower FMFS to
act as agent for the other party to this Agreement, or to conduct
business in the name, or for the account, of the other party to this
Agreement.
14. DATA NECESSARY TO PERFORM SERVICES
The Trust or its agent, which may be FMFS in another capacity, shall
furnish to FMFS the data necessary to perform the services described
herein at such times and in such form as mutually agreed upon. If FMFS
is also acting in another capacity for the Trust, nothing herein shall
be deemed to relieve FMFS of any of its obligations in such capacity.
15. NOTIFICATION OF ERROR
The Trust will notify FMFS of any discrepancy between FMFS and the
Trust, including, but not limited to, failing to account for a security
position in the Fund's portfolio, by the later of: within three (3)
business days after receipt of any reports rendered by FMFS to the
Trust; within three (3) business days after discovery of any error or
omission not covered in the balancing or control procedure, or within
three (3) business days of receiving notice from any shareholder.
16. ASSIGNMENT
This Agreement may not be assigned by either party without the prior
written consent of the other party.
17. NOTICES
Any notice required or permitted to be given by either party to the
other shall be in writing and shall be deemed to have been given on the
date delivered personally or by courier service, or three (3) days after
sent by registered or certified mail, postage prepaid, return receipt
requested, or on the date sent and confirmed received by facsimile
transmission to the other party's address set forth below:
Notice to FMFS shall be sent to:
Firstar Mutual Fund Services, LLC
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
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and notice to the Trust shall be sent to:
Hotchkis and Wiley Funds
000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by a duly authorized officer on one or more counterparts as of
the date first above written.
HOTCHKIS AND WILEY FUNDS FIRSTAR MUTUAL FUND SERVICES, LLC
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxx Xxxxxxx
------------------------------- -------------------------------
Xxxxx X. Xxxxxx Xxx Xxxxxxx
Title: President Title: President
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EXHIBIT A
TO THE
FUND ACCOUNTING SERVICING AGREEMENT
FUND NAMES
Separate Series of Hotchkis and Wiley Funds
Name of Series Date Added
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Hotchkis and Wiley Large Cap Value Fund October , 2001
Hotchkis and Wiley Mid-Cap Value Fund October , 2001
Hotchkis and Wiley Cap Value Fund October , 2001
Hotchkis and Wiley Equity Fund For Insurance Companies October , 2001
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DOMESTIC EQUITY FUNDS Multiple Classes -- Each class is an additional
25% of the charge of the initial class.
$30,000 for the first $100 million
1.25 basis point on the next $200 million Master/Feeder Funds -- Each master and feeder
.75 basis point on the balance is charged according to the schedule.
EQUITY FUND FOR INSURANCE COMPANIES Multiple Manager Funds -- Quoted separately.
$15,000 for the first $80 million Extraordinary services - quoted separately
2 basis point on the next $220 million
1 basis point on the balance Conversion Estimate -- one month's fee
DOMESTIC BALANCED FUNDS NOTE - All schedules subject to change
depending upon the use of derivatives -
$33,000 for the first $100 million options, futures, short sales, etc.
1.5 basis points on the next $200 million
1 basis point on the balance All fees are billed monthly plus out-of-pocket
expenses, including pricing
DOMESTIC FIXED INCOME FUNDS service:
FUNDS OF FUNDS $.15 Domestic and Canadian Equities
$.15 Options
SHORT OR DERIVATIVE FUNDS $.50 Corp/Gov/Agency Bonds
$.80 CMO's
INTERNATIONAL EQUITY FUNDS $.50 International Equities and Bonds
$.80 Municipal Bonds
TAX-EXEMPT MONEY MARKET FUNDS $.80 Money Market Instruments
$125 Per fund per month - Mutual Funds
$39,000 for the first $100 million
2 basis points on the next $200 million Factor Services (BondBuyer)
1 basis point on the balance
Per CMO - $1.50/month
TAXABLE MONEY MARKET FUNDS Per Mortgage Backed - $0.25/month
Minimum - $300/month
$39,000 for the first $100 million
1 basis point on the next $200 million
1/2 basis point on the balance
INTERNATIONAL INCOME FUNDS
$42,000 for the first $100 million
3 basis points on the next $200 million
1.5 basis points on the balance
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