ACCOUNTING SERVICES AGREEMENT
This Agreement, dated as of the _____ day of ________________, 1997
made by and between Metropolitan West Funds (the "Trust"), a business trust
operating as an open end management investment company registered under the
Investment Company Act of 1940, as amended (the "Act"), duly organized and
existing under the laws of the State of Delaware and FPS Services, Inc. ("FPS"),
a corporation duly organized and existing under the laws of the State of
Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue
separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto, and which Schedule "C" may be amended from time to time by mutual
agreement of the Trust and FPS; and
WHEREAS, the Trust desires to appoint FPS as 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 Trust (the "Accounts
and Records") and to perform certain other functions in connection with such
Accounts and Records pursuant to the terms and conditions set forth in this
Agreement; and
WHEREAS, FPS is willing to serve in such capacity and perform such
functions pursuant to the terms and conditions set forth in this Agreement; and
WHEREAS, the Trust will provide all necessary information concerning
the Series to FPS so that FPS may appropriately execute its responsibilities
hereunder;
1
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
Section 1. Appointment. The Trust hereby appoints FPS as Accounting
Services Agent and FPS hereby accepts such appointment. The Trust also agrees to
appoint FPS as Accounting Services Agent for any additional Series which, from
time to time, may be added to the Trust.
Section 2. Definitions. For purposes of this Agreement:
Oral Instructions shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to FPS in person or
by telephone, telegram, telecopy, or other mechanical or documentary means
lacking an original signature, by a person or persons reasonably identified to
FPS to be a person or persons authorized by a resolution of the Board of
Trustees of the Trust, to give such Oral Instructions on behalf of the Trust.
Written Instructions shall mean an authorization, instruction,
approval, item or set of data or information of any kind transmitted to FPS in
original writing containing an original signature or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to FPS to be the signature of a person authorized by a resolution of
the Board of Trustees of the Trust to give written instructions on behalf of the
Trust.
2
The Trust shall file with FPS a certified copy of each resolution of
its Board of Trustees authorizing execution of Written Instructions or the
transmittal of Oral Instructions as provided above.
Section 3. To the extent FPS receives the necessary information from
the Trust or its agents by Written or Oral Instructions, FPS shall maintain and
keep current the following Accounts and Records and any other records required
to be kept pursuant to Rule 3 la-1 of the Act relating to the business of the
Trust in such form as may be mutually agreed upon between the Trust and FPS:
(a) Net Asset Value Calculation reports
(b) Cash Receipts Journal
(c) Cash Disbursements Journal
(d) Dividends Paid and Payable Schedule
(e) Purchase and Sales Journals - Portfolio Securities
(f) Subscription and Redemption Journals
(g) Security Ledgers - Transaction Report and Tax Lot Holdings Report
(h) Broker Ledger - Commission Report
(i) Daily Expense Accruals
(j) Daily Interest Accruals
(k) Daily Trial Balance
(l) Portfolio Interest Receivable and Income Journal
(m) Portfolio Dividend Receivable and Income Register
3
(n) Listing of Portfolio Holdings - showing cost, market value and
percentage of portfolio comprised of each security.
(o) Average Daily Net assets provided on monthly basis.
The necessary information to perform the above functions and the
calculation of the net asset value of the Trust as provided below, is to be
furnished by Written or Oral Instructions to FPS each day (in accordance with
the time frame identified below) prior to the close of regular trading on the
New York Stock Exchange.
Section 4. FPS shall perform the ministerial calculations necessary to
calculate the net asset value for each Series on each day that the New York
Stock Exchange is open for business, in accordance with; (i) the current
Prospectus and Statement of Additional Information for the Trust, and (ii)
procedures with respect thereto approved by the Board of Trustees of the Trust
and supplied in writing to FPS. Portfolio items for which market quotations are
available by FPS's use of an automated financial information service (the
"Service") shall be based on the closing prices of such Service except where the
Trust has given or caused to be given specific Written or Oral Instructions to
utilize a different value subject to the appropriate provisions in the Trust's
Prospectus and Statement of Additional Information then in effect. All of the
portfolio securities shall be given such values as the Trust provides by Written
or Oral Instructions including all restricted securities and other securities
requiring valuation not readily ascertainable solely by such Service subject to
the appropriate provisions in the Trust's Prospectus and Statement of Additional
Information then in effect. FPS shall have no responsibility or liability for;
(i) the accuracy of prices quoted by
4
such Service; (ii) the accuracy of the information supplied by the Trust, or
(iii) any loss, liability, damage, or cost arising out of any inaccuracy of such
data. FPS shall have no responsibility or duty to include information or
valuations to be provided by the Trust in any computation unless and until it is
timely supplied to FPS in usable form. FPS shall record corporate action
information as received from the custodian of the Trust's assets (the
"Custodian"), the Service or the Trust. FPS shall have no duty to gather or
record corporate action information not supplied by these sources.
FPS will assume no liability for price changes caused by the investment
adviser(s), the Custodian, suppliers of security prices and corporate action and
dividend information, or any party other than FPS itself.
Section 5. For all purposes under this Agreement, FPS is authorized to
act upon receipt of the first of any Written or Oral Instruction it receives
from the Trust or its agents on behalf of the Trust. 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 FPS
receives an Instruction whether Written or Oral, to enter a portfolio
transaction on the records, the Trust shall cause the broker/dealer executing
such transaction to send a written confirmation to the Custodian. FPS shall be
entitled to rely on the first Instruction received, and for any act or omission
undertaken in compliance therewith shall be free of liability and fully
indemnified and held harmless by the Trust, provided however, that in the event
a Written or Oral Instruction received by FPS is countermanded by a timely
received
5
subsequent Written or Oral Instruction prior to acting upon such countermanded
Instruction, FPS shall act upon such subsequent Written or Oral Instruction. The
sole obligation of FPS with respect to any follow-up or confirmatory Written
Instruction, Oral Instruction in documentary or written form, 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 Trust.
The Trust shall be responsible, at the Trust's expense, for taking any action,
including any reprocessing, necessary to correct any discrepancy or error. To
the extent such action requires FPS to act, the Trust shall give FPS specific
Written Instruction as to the action required.
Section 6. The Trust shall cause the Custodian to forward to FPS a
daily statement of cash and portfolio transactions. At the end of each month,
the Trust shall cause the Custodian to forward to FPS a monthly statement of
portfolio positions, which will be reconciled with the Trust's Accounts and
Records maintained by FPS. FPS will report any discrepancies to the Custodian,
and report any unreconciled items to the Trust.
Section 7. FPS shall promptly supply daily and periodic reports to the
Trust as requested by the Trust and agreed upon by FPS.
Section 8. The Trust shall provide and shall require each of its agents
(including the Custodian) to provide FPS as of the close of each business day,
or on such other schedule as the Trust determines is necessary, with Written or
Oral Instructions (to be delivered to FPS by 11:00 a.m., Eastern time, the next
following business day) containing all data and information necessary for FPS to
maintain the Trust's Accounts and Records and FPS may conclusively
6
assume that the information it receives by Written or Oral Instructions is
complete and accurate.
Section 9. The Accounts and Records, in the agreed-upon format,
maintained by FPS shall be the property of the Trust and shall be made available
to the Trust promptly upon request and shall be maintained for the periods
prescribed in Rules 3 1 a- I and 31 a-2 under the Act. FPS shall assist the
Trust's independent auditors, or upon approval of the Trust, or upon demand, any
regulatory body, in any requested review of the Trust's Accounts and Records but
shall be reimbursed for all expenses and employee time invested in any such
review outside of routine and normal periodic review and audits. Upon receipt
from the Trust of the necessary information, FPS shall supply the necessary data
for the Trust or an independent auditor's completion of any necessary tax
returns, questionnaires, periodic reports to Shareholders and such other reports
and information requests as the Trust and FPS shall agree upon from time to
time.
Section 10. In case of any request or demand for the inspection of the
records of the Trust, FPS shall use its best efforts to notify the Trust and to
secure instructions as to permitting or refusing such inspection. FPS may
however, exhibit such records to any person in any case where it is advised in
writing by its counsel that it may be held liable for failure to do so.
Section 11. FPS and the Trust may from time to time adopt such
procedures as agreed upon in writing, and FPS may conclusively assume that any
procedure approved by the Trust or directed by the Trust, does not conflict with
or violate any requirements of the Trust's
7
Prospectus, Statement of Additional Information, Trust Instrument or any rule or
regulation of any regulatory body or governmental agency. The Trust shall be
responsible for notifying FPS of any changes in regulations or rules which might
necessitate changes in FPS's procedures, and for working out with FPS such
changes.
Section 12. Limitation of Liability
(a) FPS, its directors, officers, employees, shareholders and agents
shall only be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the performance of this Agreement that
result from willful misfeasance, bad faith, negligence or reckless disregard on
the part of FPS in the performance of its obligations and duties under this
Agreement.
(b) Any person, even though a director, officer, employee, shareholder
or agent of FPS, who may be or become an officer, director, employee or agent of
the Trust, shall be deemed when rendering services to such entity or acting on
any business of such entity (other than services or business in connection with
FPS's duties under the Agreement), to be rendering such services to or acting
solely for the Trust and not as a director, officer, employee, shareholder or
agent of, or under the control or direction of FPS even though such person may
receive compensation from FPS.
(c) Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless FPS, 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 FPS may sustain or incur or which
8
may be asserted against FPS by any person by reason of, or as a result of (i)
any action taken or omitted to be taken by FPS in good faith, (ii) any action
taken or omitted to be taken by FPS in good faith in reliance upon any
certificate, instrument, order or stock certificate or other document reasonably
believed by FPS to be genuine and signed, countersigned or executed by any duly
authorized person, upon the oral or written instruction of an authorized person
of the Trust or upon the opinion of legal counsel to the Trust; or (iii) any
action taken in good faith or omitted to be taken by FPS in connection with its
appointment in reliance upon any law, act, regulation or interpretation of the
same even though the same may thereafter have been altered, changed, amended or
repealed. Indemnification under this subparagraph shall not apply, however, to
actions or omissions of FPS or its directors, officers, employees, shareholders
or agents in cases of its or their willful misfeasance, bad faith, negligence or
reckless disregard of its or their duties hereunder.
If a claim is made against FPS as to which FPS may seek indemnity under
this Section, FPS shall notify the Trust promptly after any written assertion of
such claim threatening to institute an action or proceeding with respect thereto
and shall notify the Trust promptly of any action commenced against FPS within
ten (10) days after FPS shall have been served with a summons or other legal
process, giving information as to the nature and basis of the claim. Failure to
notify the Trust shall not, however, relieve the Trust from any liability which
it may have on account of the indemnity under this Section 12(c) if the Trust
has not been prejudiced in any material respect by such failure.
9
The Trust and FPS shall cooperate in the control of the defense of any
action, suit or ~ proceeding in which FPS is involved and for which indemnity is
being provided by the Trust to FPS. The Trust may negotiate the settlement of
any action, suit or proceeding subject to FPS's approval, which shall not be
unreasonably withheld. FPS shall have the right, but not the obligation, to
participate in the defense or settlement of a claim or action, with its own
counsel, but any costs or expenses incurred by FPS in connection with, or as a
result of, such participation will be borne solely by FPS.
FPS shall have the right to participate in the defense of an action or
proceeding and to retain its own counsel, and the reasonable fees and expenses
of such counsel shall be borne by the Trust (which shall pay such fees, costs
and expenses at least quarterly) if:
(i) FPS has received an opinion of counsel stating that the use of
counsel chosen by the Trust to represent FPS would present such counsel with a
conflict of interest;
(ii) the defendants in, or targets of, any such action or
proceeding include both FPS and the Trust, and legal counsel to FPS shall have
reasonably concluded that there are legal defenses available to it which are
different from or additional to those available to the Trust or which may be
adverse to or inconsistent with defenses available to the Trust (in which case
the Trust shall not have the right to direct the defense of such action on
behalf of FPS); or
(iii) the Trust shall authorize FPS to employ separate counsel at
the expense of the Trust. Notwithstanding anything to the contrary herein, it is
understood that the Trust
10
shall not, in connection with any action, suit or proceeding or related action,
suit or proceeding, be liable under this Agreement for the fees and expenses of
more than one firm.
(d) The terms of this Section 12 shall survive the termination of this
Agreement.
Section 13. All financial data provided to, processed by, and reported
by FPS under this Agreement shall be stated in United States dollars. FPS's
obligation to convert, equate or deal in foreign currencies or values extends
only to the accurate transposition of information received from the various
pricing and informational services into FPS's Investment Accounting System.
Section 14. The Trust agrees to pay FPS compensation for its services
and to reimburse it for expenses, at the rates and amounts as set forth in
Schedule "B" attached hereto, and as shall be set forth in any amendments to
such Schedule "B" approved by the Trust and FPS. The Trust agrees and
understands that FPS's compensation be comprised of two components and payable
on a monthly basis as follows:
(i) an asset based fee calculated on the Trust's total assets.
subject to a minimum fee, which the Trust hereby authorizes FPS to collect by
debiting the Trust's custody account for invoices which are rendered for the
services performed for the applicable function. The invoices for the services
performed will be sent to the Trust after such debiting with the indication that
payment has been made. And,
(ii) reimbursement of any reasonable out-of-pocket expenses paid
by FPS on behalf of the Trust, which out-of-pocket expenses will be billed to
the Trust within the first ten calendar days of the month following the month in
which such out-of-pocket expenses
11
were incurred. The Trust agrees to reimburse FPS for such expenses within ten
calendar days of receipt of such xxxx.
For the purpose of determining fees payable to FPS, the value of the
Series' net assets shall be computed at the times and in the manner specified in
the Series' Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both FPS and the Trust.
Section 15. Nothing contained in this Agreement is intended to or shall
require FPS, in any capacity hereunder, to perform any functions or duties on
any holiday, day of special observance or any other day on which the New York
Stock Exchange is closed. Functions or duties normally scheduled to be performed
on such days shall be performed on, and as of, the next succeeding business day
on which the New York Stock Exchange is open. Notwithstanding the foregoing, FPS
shall compute the net asset value of each Series on each day required pursuant
to (i) Rule 22c- 1 promulgated under the Investment Company Act of 1940, as
amended, and (ii) the Trust's Prospectus and Statement of Additional Information
then in effect.
Section 16.
(a) The term of this Agreement shall be for a period of two (2) years,
commencing on the date which the Trust's registration statement is declared
effective by the U.S. Securities
12
and Exchange Commission ("Effective Date") and shall continue thereafter on a
year to year term subject to termination by either Party as set forth in (c)
below.
(b) The fee schedule set forth in Schedule "B" attached shall be fixed
for (2) years commencing on the Effective Date of this Agreement and shall
continue thereafter subject to its review, adjustment or termination as set
forth in section (c) below.
(c) After the initial term of this Agreement, the Trust or FPS may give
written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice, which date shall
not be less than one hundred eighty (180) days after the date of receipt of such
notice. Upon the effective termination date, the Trust shall pay to FPS such
compensation as may be due as of the date of termination and shall likewise
reimburse FPS for any out-of-pocket expenses and disbursements reasonably
incurred by FPS to such date.
(d) If a successor to any of FPS's duties or responsibilities under
this Agreement is designated by the Trust by written notice to FPS in connection
with the termination of this Agreement, FPS shall promptly, upon such
termination and at the expense of the Trust, transfer all accounts and required
records which belong to the Trust and shall cooperate in the transfer of such
records, and its duties and responsibilities under the Agreement.
Section 17. Except as otherwise provided in this Agreement, 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:
13
If to the Trust: If to FPS:
--------------- ---------
Metropolitan West Funds FPS Services, Inc.
00000 Xxxxxxxx Xxxx., Xxxxx 0000 3200 Horizon Drive, X.X. Xxx 00000
Xxx Xxxxxxx, XX 00000 King of Prussia, PA 19406-0903
Attention: Xxxxx X. Dubchansky Attention: Xxxxxxx X. Xxxxx,
Chief Executive Officer and Trustee President
Section 18. This Agreement may be amended from time to time by
supplemental agreement executed by the Trust and FPS and the compensation stated
in Schedule "B" attached hereto may be adjusted accordingly as mutually agreed
upon.
Section 19. The Parties represent and warrant to each other that the
execution and delivery of this Agreement by the undersigned officer of each
Party has been duly and validly authorized; and, when duly executed, this
Agreement will constitute a valid and legally binding enforceable obligation of
each Party.
Section 20. 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.
Section 21. This Agreement shall extend to and shall be binding upon
the parties hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Trust without the
written consent of FPS or by FPS without the written consent of the Trust,
authorized or approved by a resolution of its respective Boards of Directors and
Trustees.
14
Section 22. This Agreement shall be governed by the laws of the State
of Califonia and the exclusive venue of any action arising under this Agreement
shall be Xxxxxxxxxx County, Commonwealth of Pennsylvania.
Section 23. No provision of this Agreement may be amended or modified,
in any manner except by a written agreement properly authorized and executed by
FPS and the Trust.
Section 24. If any part, term or provision of this Agreement is held by
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of eleven typewritten pages, together with Schedules "A", "B" and
"C", to be signed by their duly authorized of ficers as of the day and year
first above written.
Metropolitan West fund FPS Services, Inc.
---------------------- ------------------
_______________________________________ _________________________________
By: Xxxxx X. Dubchansky, By: Xxxxxxx X.Xxxxx, President
Chief Executive Officer and Trustee
15
SCHEDULE "A"
FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES
TO BE PERFORMED ON BEHALF OF
METROPOLITAN WEST FUNDS
Daily Accounting Services
1) Calculate Net Asset Value ("NAV"):
o Update the daily market value of securities held by
the Fund using FPS's standard agents for pricing U.S.
equity and bond securities. The U.S. equity pricing
services are Reuters, Inc. Xxxxxx Data Corporation,
X.X. Xxxxx Co., Inc. and Interactive Data Corporation
(IDC). Xxxxxx Data, Telerate Systems, Inc., X.X.
Xxxxx Co., Inc. and IDC are used for bond and money
market prices/yields. Bloomberg is available and used
for price research.
o Enter limited number of manual prices supplied by
Metropolitan West Asset Management and/or broker.
o Prepare NAV proof sheet. Review components of change
in NAV for reasonableness.
o Review variance reporting on-line and in hard copy
for price changes in individual securities using
variance levels established by Metropolitan West
Asset Management. Verify US dollar security prices
exceeding variance levels by notifying Metropolitan
West Asset Management and pricing sources of noted
variances.
o Review for ax-dividend items indicated by pricing
sources; trace to Fund's general ledger for
agreement.
o Communicate required pricing information (NAY) to
Metropolitan West Asset Management, Transfer Agent
and, electronically, to NASDAQ.
2) Complete Daily Dividend Requirements:
o Calculate net investment income available for
distribution daily.
o Calculate daily distribution rate based on
outstanding settled shares.
o Supply Transfer Agent and Metropolitan West Asset
Management with distribution rates.
3) Determine and Report Cash Availability to Fund by
Approximately 9. 30 AM Eastern Time:
16
o Receive daily cash and transaction statements from
the Custodian by 8:30 AM Eastern time.
o Receive previous day shareholder activity reports
from the Transfer Agent by 8:30 AM Eastern time.
o Fax hard copy Cash Availability calculations with all
details to Metropolitan West Asset Management.
o Supply Metropolitan West Asset Management with 3-day
cash projection report.
o Prepare and complete daily bank cash reconciliations
including documentation of any reconciling items and
notify the custodian and Metropolitan West Asset
Management.
4) Reconcile and Record All Daily Expense Accruals
o Accrue expenses based on budget supplied by
Metropolitan West Asset Management either as
percentage of net assets or specific dollar amounts.
o If applicable, monitor expense limitations
established by Metropolitan West Asset Management.
o If applicable, accrue daily amortization of
Organizational expense.
o If applicable, complete daily accrual of 1 2b-1
expenses.
5) Verify and Record All Daily Income Accruals for Debt Issues:
o Review and verify all system generated Interest and
Amortization reports.
o Establish unique security codes for bond issues to
permit segregated Trial Balance income reporting.
6) Monitor Domestic Securities Held for Cash Dividends. corporate
actions and capital changes such as splits. mergers.
spin-offs. etc. and process appropriately.
o Monitor electronically received information from
Xxxxxx Data for all domestic securities.
o Review current daily security trades for dividend
activity.
o Interface with Custodian to monitor timely collection
and postings of corporate actions, dividends and
interest.
7) Enter All Security Trades on Investment Accounting System
(IAS) based on written instructions from the Fund's advisor.
o Review system verification of trade and interest
calculations.
o Verify settlement through statements supplied by the
Custodian.
o Maintain security ledger transaction reporting.
o Maintain tax lot holdings.
17
o Determine realized gains or losses on security
trades.
o Provide complete broker commission reporting.
8) Enter All Fund Share Transactions on IAS:
o Process activity identified on reports supplied by
the Transfer Agent.
o Verify settlement through statements supplied by the
Custodian.
o Reconcile to the FPS Services' Transfer Agent report
balances.
9) Prepare and Reconcile/Prove Accuracy of the Daily Trial
Balance (listing all asset, liability, equity, income and
expense accounts)
o Post manual entries to the general ledger.
o Post custodian bank activity.
o Post shareholder and security transactions.
o Post and verify system generated activity, i.e.
income and expense accruals.
o Prepare general ledger net cash proof used in NAV
calculation.
10) Review and Reconcile with Custodian Statements:
o Verify all posted interest, dividends, expenses, and
shareholder and security payments/receipts, etc.
(Discrepancies will be reported to and resolved by
the Custodian.)
o Post all cash settlement activity to the Trial
Balance.
o Reconcile to ending cash balance accounts.
o Clear IAS subsidiary reports with settled amounts.
o Track status of past due items and failed trades
handled by the Custodian.
11) Submission of Daily Accounting Reports to Metropolitan West
Asset Management. (Additional reports readily available.)
o Trial Balance.
o Portfolio Valuation (listing inclusive of holdings,
costs, market values, unrealized
appreciation/depreciation and percentage of portfolio
comprised of each security).
o NAV Calculation Report with Daily Distribution Rates.
o Cash Availability and 3-day Cash Projection Report.
Monthly Accounting Services
1) Full Financial Statement Preparation (automated Statements of
Assets and Liabilities, of Operations and of Changes in Net
Assets) and submission to Metropolitan West Asset Management
by 1 0th business day.
18
2) Submission o f Monthly Automated IAS Reports to Metropolitan
West Asset Management.
o Security Purchase/Sales Journal
o Interest and Maturity Report
o Brokers Ledger (Commission Report)
o Security Ledger Transaction Report with Realized
Gains/Losses
o Security Ledger Tax Lot Holdings Report
o Additional reports available upon request
3) Reconcile Accounting Asset Listing to Custodian Asset Listing:
o Report any security balance discrepancies to the
Custodian/Metropolitan West Asset Management.
4) Provide Monthly Analysis and Reconciliation of Additional
Trial Balance Accounts such as:
o Security cost and realized gains/losses
o Interest/dividend receivable and income
o Payable/receivable for securities purchased and sold
o Payable/receivable for fund shares; issued and
redeemed
o Expense payments and accruals analysis
5) If Appropriate Prepare and Submit to Metropolitan West Asset
Management (additional fees may apply)
o SEC yield reporting (non-money market funds with
domestic and ADR securities only).
o Income by state reporting.
o Standard Industry Code Valuation Report.
o Alternative Minimum Tax Income segregation schedule.
Annual (and Semi-Annual) Accounting Services
1) Assist and supply auditors with schedules supporting
securities and share holder transactions, income and expense
accruals, etc. during the year in accordance with standard
audit assistance requirements.
2) Provide NSAR Reporting (Accounting Questions): If applicable,
answer the following items: 2,2B,20,21,22,23,28,30A,31,32,35,
36,37,43,53,55,62,63,64B,71,72,73,74,75 and 76
19
ACCOUNTING SERVICES BASIC ASSUMPTIONS
FOR
METROPOLITAN WEST ASSET MANAGEMENT
The Accounting Fees as set forth in Schedule "B" are based on the
following assumptions..
To
the extent these assumptions are inaccurate or requirements change,
fee revisions may be necessary.
Basic Assumptions:
1) Sub-Chapter "M" compliance reporting shall be maintained by
FPS Services as FundAdministrator.
2) It is assumed that the Low Duration Bond and Short Term
Investment portfolio assetcomposition will be primarily fixed
income securities. The Total Return portfolio would have a 60%
equity and 40% bond security mix. Trading activity is expected
to be approximately 100 trades per month per portfolio.
3) The Funds have a tax year-end which coincides with its fiscal
year-end. No additional accounting requirements are necessary
to identify or maintain book-tax differences. This proposal
does not include providing security tax accounting which
differs from its book accounting.
4) The Funds foresee no difficulty in using FPS's standard
current pricing services for US equity, bond and AD
securities. We currently use Reuters, Xxxxxx Data or
Interactive Data Corporation (ID) for U.S. equities and listed
ADR's. Xxxxxx Data Corporation, X.X.Xxxxx Co., Inc., Telerate
Systems, Inc. and IDC are used for bonds and money market
issues. Bloomberg is also available for price research and
backup.
It is assumed that ASU will work closely with the Metropolitan
West Asset Management to ensure the accuracy of the Funds' NAV
and to obtain the most satisfactory pricing sources and
specific methodologies prior to the actual start-up date. We
would propose that the Funds establish clear cut security
variance procedures to minimize NAV miscalculations.
5) To the extent the Funds require daily security prices (limited
in number) from specific brokers for U.S. securities, these
manual prices will be obtained by the Funds' Investment
Advisor and faxed to ASU by
20
approximately 4:00 PM Eastern time for inclusion in the NAV
calculations. Metropolitan West Asset Management will supply
ASU with the appropriate pricing contacts for these manual
quotes.
6) ASU will supply daily Portfolio Valuation Reports to the
Funds' Investment Advisor or manager identifying current
security positions, original/amortized cost, security market
values and changes in unrealized appreciation/depreciation.
It will be the responsibility of the Funds' Investment Advisor
to review these reports and to promptly notify ASU of any
possible problems, trade discrepancies. incorrect security
prices and corporate action/capital change information that
could result in a misstated Fund NAV.
7) The Funds do not expect to invest in Open-end Regulated
Investment Company's (RIC's), Futures, Swaps, Xxxxxx,
Derivatives or Foreign (non-US dollar denominated) Securities
and Currency. To the extent these investment strategies should
change, additional fees will apply after the appropriate
procedural discussions have taken place between ASU and Fund
management. (Two weeks advance notice is required should the
Fund commence trading in these investments.)
8) It is assumed for all debt issues that the Investment Advisor
will supply ASU with critical income information such as
accrual methods, interest payment frequency details, coupon
payment dates, floating rate reset dates, and complete
security descriptions with issue types and CUSIP numbers. If
applicable, for proper income accrual accounting, ASU will
look to the Funds' Investment Advisor to supply the yield to
maturity and related cash flow schedules for any
mortgage/asset-backed securities held in the Fund.
9) With respect to Mortgage/Asset-Backed securities including
GNMA's, FHLMC's, FNMA's, CMO's, ARM's, the Fund shall direct
the Custodian, or a Metropolitan West Asset Management
supplied source, to provide ASU with current principal
repayment factors on a timely basis in accordance with the
appropriate securities' schedule. Income accrual adjustments
(to the extent necessary) based upon initial estimates will be
completed by ASU when actual principal/income payments are
collected by the Custodian and reported to ASU.
10) To the extent applicable, ASU will maintain on a daily basis
US dollar denominated qualified covered call options and index
options reporting on the daily Trial Balance and value the
respective options and underlying positions.
21
This proposal does not provide for tax classifications if they
are required. (If the Funds commence investment in domestic
options or designated xxxxxx, two weeks advance notice is
required to clarify operational procedures between ASU and the
Investment Advisor.)
11) To the extent that the Funds should establish a Line of Credit
in segregated accounts with the Custodian for temporary
administrative purposes, and/or leveraging hedging the
portfolio, it is not the responsibility under this proposal
for ASU to complete the appropriate paperwork/monitoring for
segregation of assets and adequacy of collateral. The Funds
shall direct the Investment Advisor to execute such
responsibilities. ASU will, however, reflect appropriate Trial
Balance account entries and interest expense accrual charges
on the daily Trial Balance adjusting as necessary at
month-end.
12) If the Funds commence participation in Security Lending,
Leveraging, or Short Sales within their portfolio securities,
additional fees will apply. (Two weeks advance notice to ASU
is required should the Funds desire to participate in the
above.)
13) The Funds shall direct the Investment Advisor or FPS Services
as Administrator to supply ASU with portfolio specific expense
accrual procedures and monitor the expense accrual balances
for adequacy based on outstanding liabilities monthly. The
Administrator will promptly communicate to ASU any adjustments
needed.
14) Specific deadlines shall be met and complete information shall
be supplied by the Funds in order to minimize any settlement
problems, NAV miscalculations or income accrual adjustments.
The Funds shall direct the Investment Advisor to provide to
ASU Trade Authorization Forms, with the appropriate officer's
signature on all security trades placed by the Fund no later
than 12:30 PM Eastern time on settlement/value date for short
term money market securities issues (assuming that trade date
equals settlement date); and by 11:00 AM Eastern time on trade
date plus one for non-money market securities. Receipt by ASU
of trade information within these identified deadlines may be
via telex, fax, or online system access. The Investment
Advisor will communicate all trade information directly to the
FPS Custody Administrator. The Advisor and/or FPS's Custody
Administrator will supply ASU with the trade details in
accordance with the above stated deadlines.
The Funds shall direct the Investment Advisor to include all
information required by ASU; including CUSIP numbers and/or
ticker symbols for all US
22
dollar denominated -trades on the Trade Authorization, telex
or on-line support. ASU will supply the Investment Advisor
with recommended trade ticket documents to minimize receipt of
incomplete information. ASU will not be responsible for NAV
changes that result from incomplete trade information.
15) To the extent the Funds utilize Purchases In-Kind (U.S. dollar
denominated securities only) as a method for shareholder
subscriptions, ASU will provide the Funds with procedures to
properly handle and process securities in-kind. Should the
Fund prefer procedures other than those provided by ASU,
additional fees may apply. Discussions should take place at
least two weeks in advance between ASU and the Fund to clarify
the appropriate In-Kind operational procedures to be followed.
16) It is assumed that the Funds' Investment Advisor or FPS
Services as Administrator will complete the applicable
performance and rate of return calculations as required by the
SEC for the Funds.
17) We would establish mutually agreed upon amortization
procedures and accretion requirements for debt issues held by
the Fund prior to commencement of operations. Adjustments for
financial statements regarding any issues with Original Issue
Discount (OID) are not included under this agreement. The Fund
shall direct its independent auditors to complete the
necessary OID adjustments for financial statements and/or tax
reporting.
18) The Funds are not currently expected to issue separate classes
of shares. To the extent they do so, additional fees will be
negotiated.
19) The fees reflected assume FPS Services will supply Transfer
Agency and Custody Administration Services for the Funds.
SCHEDULE "B"
FUND ACCOUNTING AND PORTFOLIO VALUATION Services FEE SCHEDULE
FOR
METROPOLITAN WEST FUNDS
This Fee Schedule is fixed for a period of two (2) years from the
Effective Date as that term is defined in the Agreement.
23
The Accounting Fees as set forth below are stated and offered subject to the
"Basic Assumptions" as set forth in Schedule "A. "
To the extent that those assumptions are
inaccurate or requirements change, fee revisions may be necessary.
I. ANNUAL FEE SCHEDULE Per Domestic Portfolio: U.S. Dollar Denominated
Securities only (1/12th payable monthly):
$25,000 Minimum to $ 20 Million of Average Net Assets
.0003 On Next $ 30 Million of Average Net Assets
.0002 On Next $ 50 Million of Average Net Assets
.0001 Over $100 Million of Average Net Assets
II PRICING SERVICES QUOTATION FEE: Specific costs will be identified based
upon options selected by Metropolitan West Asset Management and will be
billed monthly.
FPS does not currently pass along the charges for the U.S. equity
prices supplied by Xxxxxx Data. Should the Fund invest in security
types other than domestic equities supplied by Xxxxxx, the following
fees would apply.
24
------------------------------------------------ ---------------------- ---------------------- ----------------------
Security Types Xxxxxx Data Interactive Data X.X. Xxxxx Co., Inc.*
Corp.* Corp.*
------------------------------------------------ ---------------------- ---------------------- ----------------------
Government Bonds $ .50 $ .50 $ .25 (a)
------------------------------------------------ ---------------------- ---------------------- ----------------------
Mortgage-Backed (evaluated, seasoned, closing) .50 .50 .25 (a)
------------------------------------------------ ---------------------- ---------------------- ----------------------
Corporate Bonds (short and long term) .50 .50 .25 (a)
------------------------------------------------ ---------------------- ---------------------- ----------------------
U.S. Municipal Bonds (short and long term) .55 .80 .50 (b)
------------------------------------------------ ---------------------- ---------------------- ----------------------
CMO's/ARM's/ABS 1.00 .80 1.00 (a)
------------------------------------------------ ---------------------- ---------------------- ----------------------
Convertible Bonds .50 .50 1.00 (a)
------------------------------------------------ ---------------------- ---------------------- ----------------------
High Yield Bonds .50 .50 1.00 (a)
------------------------------------------------ ---------------------- ---------------------- ----------------------
Mortgage-Backed Factors (per Issue per Month 1.00 n/a n/a
------------------------------------------------ ---------------------- ---------------------- ----------------------
U.S. Equities (d) .15 n/a
------------------------------------------------ ---------------------- ---------------------- ----------------------
U.S. Options n/a .15 n/a
------------------------------------------------ ---------------------- ---------------------- ----------------------
Domestic Dividends & Capital Changes (per (d) 3.50 n/a
Issue per Month)
------------------------------------------------ ---------------------- ---------------------- ----------------------
Foreign Securities .50 .50 n/a
------------------------------------------------ ---------------------- ---------------------- ----------------------
Foreign Securities Dividends & Capital Changes 2.00 4.00 n/a
(per Issue per Month)
------------------------------------------------ ---------------------- ---------------------- ----------------------
Set-up Fees n/a n/a (e) .25 (c)
------------------------------------------------ ---------------------- ---------------------- ----------------------
All Added Items n/a n/a .25 (c)
------------------------------------------------ ---------------------- ---------------------- ----------------------
* Based on current Vendor costs, subject to change. Costs are quoted based on
individual security CUSIP/identifiers and are per issue per day.
(a) $35.00 per day minimum (b) $25.00 per day minimum
(a) $35.00 per day minimum
(b) $25.00 per day minimum
(c) $ 1.00, if no CUSIP
(d) At no additional cost to FPS clients
(e) Interactive Data also charges monthly transmission costs and disk storage
charges.
25
A) Futures and Currency Forward Contracts $2.00 per Issue per Day
B) TelerateSystems, Inc.* (if applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by
Metropolitan We' Asset Management and will be billed monthly.
C) Reuters, Inc.*
*Based on current vendor costs, subject to change.
FPS does not currently pass along the charges for the domestic security
prices supplied by Reuters, Inc.
D) Municipal Market Data*
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by
Metropolitan West Asset Management and will be billed monthly.
III. SEC YIELD CALCULATION: (if applicable) Provide up to 12 reports per
year to reflect the yield calculations for non-money xxxx funds
required by the SEC, $1,000 per year per Fund. Daily SEC yield
reporting is available at $3,000 per year per Fund (US dollar
denominated securities only).
IV. OUT-OF-POCKET EXPENSES The Funds will reimburse FPS Services, Inc.
monthly for all reasonable out-of-pocket expenses, including telephone,
postage, overdraft charges, XXXXX filings, Fund/SERV and Networking
expenses, telecommunications, special reports, record retention,
special transportation costs, copying and sending materials to auditors
and/or regulatory agencies, as incurred and approved.
V. ADDITIONAL SERVICES To the extent the Funds commence using investment
techniques such as Futures, Security Lending, Swaps, Leveraging, Short
Sales, Derivatives, Precious Metals, or foreign trading (non U.S.
dollar denominated securities and currency), additional fees will
apply. Activities of a non-recurring nature such as shareholder
inkinds, fund consolidations, mergers or reorganizations will be
subject to negotiation. To the extent that the Funds should decide to
issue multiple/separate classes of shares, additional fees will apply.
Any additional/enhanced services, programming requests, or reports will
be quoted upon request.
26
SCHEDULE C
Identification of Series
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of the Agreement:
"Metropolitan West Funds"
1. Metropolitan West Total Return Bond Fund
2. Metropolitan West Low Duration Bond Fund
3. Metropolitan West Short Term Investment Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
27
