EXHIBIT 99.(G)
CUSTODIAN AGREEMENT
THIS AGREEMENT, dated as of October 10, 2001, between HOTCHKIS AND
WILEY FUNDS, an open-end management investment company organized under the laws
of the State of Delaware and registered with the Commission under the 1940 Act
(the FUND) on behalf of each of the portfolios listed on the attached Appendix
"A" as the same may be amended from time to time (each a FUND and collectively
the FUNDS), and XXXXX BROTHERS XXXXXXXX & CO., a limited partnership formed
under the laws of the State of New York (BBH&CO. or the CUSTODIAN),
W I T N E S S E T H:
WHEREAS, the Fund wishes to employ BBH&Co. to act as custodian for the
Fund and to provide related services, all as provided herein, and BBH&Co. is
willing to accept such employment, subject to the terms and conditions herein
set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Fund and BBH&Co. hereby agree, as follows:
1. APPOINTMENT OF CUSTODIAN. The Fund hereby appoints BBH&Co. as the Fund's
custodian, and BBH&Co. hereby accepts such appointment. All Investments of the
Fund delivered to the Custodian or its agents or Subcustodians shall be dealt
with as provided in this Agreement. The duties of the Custodian with respect to
the Fund's Investments shall be only as set forth expressly in this Agreement
which duties are generally comprised of safekeeping and various administrative
duties that will be performed in accordance with Instructions and as reasonably
required to effect Instructions.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE FUND. The Fund hereby
represents, warrants and covenants each of the following:
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2.1 This Agreement has been, and at the time of delivery of
each Instruction such Instruction will have been, duly authorized,
executed and delivered by the Fund. This Agreement does not violate any
Applicable Law or conflict with or constitute a default under the
Fund's prospectus or other organic document, agreement, judgment, order
or decree to which the Fund is a party or by which it or its
Investments is bound.
2.2 By providing an Instruction with respect to the first
acquisition of an Investment in a jurisdiction other than the United
States of America, the Fund shall be deemed to have confirmed to the
Custodian that the Fund or its Investment Advisor has (a) assessed and
accepted all material Country or Sovereign Risks and accepted
responsibility for their occurrence, (b) made all determinations
required to be made by the Fund under the 1940 Act, and (iii)
appropriately and adequately disclosed to the Fund's shareholders,
other investors and all persons who have rights in or to such
Investments, all material investment risks, including those relating to
the custody and settlement infrastructure or the servicing of
securities in such jurisdiction.
2.3 The Fund shall safeguard and shall solely be responsible
for the safekeeping of any testkeys, identification codes, passwords,
other security devices or statements of account with which the
Custodian provides it. In furtherance and not limitation of the
foregoing, in the event the Fund utilizes any on-line service offered
by the Custodian, the Fund and the Custodian shall be fully responsible
for the security of each party's connecting terminal, access thereto
and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards in respect thereof.
Additionally, if the Fund uses any on-line or similar communications
service made available by the Custodian, the Fund shall be solely
responsible for ensuring the security of its access to the service and
for the use of the service, and shall only attempt to access the
service and the Custodian's computer systems as directed by the
Custodian. If the Custodian provides any computer software to the Fund
relating to the services described in this Agreement, the Fund will
only use the software for the purposes for which the Custodian provided
the software to the Fund, and will abide by the license agreement
accompanying the software and any other security policies which the
Custodian provides to the Fund.
3. REPRESENTATION AND WARRANTY OF BBH&CO. BBH&Co. hereby represents and warrants
that this Agreement has been duly authorized, executed and delivered by BBH&Co.
and does not and will not violate any Applicable Law or conflict with or
constitute a default under BBH&Co.'s limited partnership agreement or any
agreement, instrument, judgment, order or decree to which BBH&Co. is a party or
by which it is bound. BBH&Co. represents and warrants that in accordance with
Section 17(f) of the 1940 Act, it is a bank as defined in Section 2(a)(5) of the
1940 Act and it has the qualifications prescribed for trustees of unit
investment trusts in Section 26(a)(1) of the 1940 Act.
4. INSTRUCTIONS. Unless otherwise explicitly indicated herein, the Custodian
shall perform its duties pursuant to Instructions. As used herein, the term
INSTRUCTION shall mean a directive initiated by the Fund, acting directly or
through its board of directors, officers or other Authorized Persons, which
directive shall conform to the requirements of this Section 4.
4.1 AUTHORIZED PERSONS. For purposes hereof, an AUTHORIZED PERSON shall be a
person or entity authorized to give Instructions for or on behalf of the Fund by
written notices to the Custodian or otherwise in accordance with
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procedures delivered to and acknowledged by the Custodian, including without
limitation the Fund's Investment Adviser or Foreign Custody Manager. The
Custodian may treat any Authorized Person as having full authority of the Fund
to issue Instructions hereunder unless the notice of authorization contains
explicit limitations as to said authority. The Custodian shall be entitled to
rely upon the authority of Authorized Persons until it receives appropriate
written notice from the Fund to the contrary.
4.2 FORM OF INSTRUCTION. Each Instruction shall be transmitted by such
secured or authenticated electro-mechanical means as the Custodian shall make
available to the Fund from time to time unless the Fund shall elect to transmit
such Instruction in accordance with Subsections 4.2.1 through 4.2.3 of this
Section.
4.2.1 FUND DESIGNATED SECURED-TRANSMISSION METHOD.
Instructions may be transmitted through a secured or tested
electro-mechanical means identified by the Fund or by an Authorized
Person entitled to give Instruction and acknowledged and accepted by
the Custodian; it being understood that such acknowledgment shall
authorize the Custodian to receive and process such means of delivery
but shall not represent a judgment by the Custodian as to the
reasonableness or security of the method determined by the Authorized
Person.
4.2.2 WRITTEN INSTRUCTIONS. Instructions may be transmitted in
a writing that bears the manual signature of Authorized Persons.
4.2.3 OTHER FORMS OF INSTRUCTION. Instructions may also be
transmitted by another means determined by the Fund or Authorized
Persons and acknowledged and accepted by the Custodian (subject to the
same limits as to acknowledgements as is contained in Subsection 4.2.1,
above) including Instructions given orally or by SWIFT, telex or
telefax (whether tested or untested).
When an Instruction is given by means established under Subsections
4.2.1 through 4.2.3, it shall be the responsibility of the Custodian to use
reasonable care to adhere to any security or other procedures established in
writing between the Custodian and the Authorized Person with respect to such
means of Instruction, but such Authorized Person shall be solely responsible for
determining that the particular means chosen is reasonable under the
circumstances. Oral Instructions shall be binding upon the Custodian only if and
when the Custodian takes action with respect thereto. With respect to telefax
instructions, the parties agree and acknowledge that receipt of legible
instructions cannot be assured, that the Custodian cannot verify that authorized
signatures on telefax instructions are original or properly affixed, and that
the Custodian shall not be liable for losses or expenses incurred through
actions taken in reliance on inaccurately stated, illegible or unauthorized
telefax instructions. The provisions of Section 4A of the Uniform Commercial
Code shall apply to Funds Transfers performed in accordance with Instructions.
The Funds Transfer Services Schedule to this Agreement shall comprise a
designation of form of a means of delivering Instructions for purposes of this
Section 4.2.
4.3 COMPLETENESS AND CONTENTS OF INSTRUCTIONS. The Authorized Person
shall be responsible for assuring the adequacy and accuracy of Instructions.
Particularly, upon any acquisition or disposition or other dealing in the Fund's
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Investments and upon any delivery and transfer of any Investment or moneys, the
person initiating such Instruction shall give the Custodian an Instruction with
appropriate detail, including, without limitation:
4.3.1 The transaction date and the date and location of
settlement;
4.3.2 The specification of the type of transaction;
4.3.3 A description of the Investments or moneys in question,
including, as appropriate, quantity, price per unit, amount of money to
be received or delivered and currency information. Where an Instruction
is communicated by electronic means, or otherwise where an Instruction
contains an identifying number such as a CUSIP, SEDOL or ISIN number,
the Custodian shall be entitled to rely on such number as controlling
notwithstanding any inconsistency contained in such Instruction,
particularly with respect to Investment description; and
4.3.4 The name of the broker or similar entity concerned with
execution of the transaction.
If the Custodian shall determine that an Instruction is either unclear
or incomplete, the Custodian may give prompt notice of such determination to the
Fund, and the Fund shall thereupon amend or otherwise reform such Instruction.
In such event, the Custodian shall have no obligation to take any action in
response to the Instruction initially delivered until the redelivery of an
amended or reformed Instruction
4.4 TIMELINESS OF INSTRUCTIONS. In giving an Instruction, the Fund
shall take into consideration delays which may occur due to the involvement of a
Subcustodian or agent, differences in time zones, and other factors particular
to a given market, exchange or issuer. When the Custodian has established
specific timing requirements or deadlines with respect to particular classes of
Instruction, or when an Instruction is received by the Custodian at such a time
that it could not reasonably be expected to have acted on such instruction due
to time zone differences or other factors beyond its reasonable control, the
execution of any Instruction received by the Custodian after such deadline or at
such time (including any modification or revocation of a previous Instruction)
shall be at the risk of the Fund.
5. SAFEKEEPING OF FUND ASSETS. The Custodian shall hold Investments delivered to
it or Subcustodians for the Fund in accordance with the provisions of this
Section. The Custodian shall not be responsible for (a) the safekeeping of
Investments not delivered or that are not caused to be issued to it or its
Subcustodians; or, (b) pre-existing faults or defects in Investments that are
delivered to the Custodian, or its Subcustodians. The Custodian is hereby
authorized to hold with itself or a Subcustodian, and to record in one or more
accounts, all Investments delivered to and accepted by the Custodian, any
Subcustodian or their respective agents pursuant to an Instruction or in
consequence of any
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corporate action. The Custodian shall hold Investments for the account of the
Fund and shall segregate Investments from assets belonging to the Custodian and
shall cause its Subcustodians to segregate Investments from assets belonging to
the Subcustodian in an account held for the Fund or in an account maintained by
the Subcustodian generally for non-proprietary assets of the Custodian.
5.1 USE OF SECURITIES DEPOSITORIES. The Custodian may deposit and
maintain Investments in any Securities Depository, either directly or through
one or more Subcustodians appointed by the Custodian. Investments held in a
Securities Depository shall be held (a) subject to the agreement, rules,
statement of terms and conditions or other document or conditions effective
between the Securities Depository and the Custodian or the Subcustodian, as the
case may be, and (b) in an account for the Fund or in bulk segregation in an
account maintained for the non-proprietary assets of the entity holding such
Investments in the Depository. If market practice or the rules and regulations
of the Securities Depository prevent the Custodian, the Subcustodian or (any
agent of either) from holding its client assets in such a separate account, the
Custodian, the Subcustodian or other agent shall as appropriate segregate such
Investments for benefit of the Fund or for benefit of clients of the Custodian
generally on its own books.
5.2 CERTIFICATED ASSETS. Investments which are certificated may be held
in registered or bearer form: (a) in the Custodian's vault; (b) in the vault of
a Subcustodian or agent of the Custodian or a Subcustodian; or (c) in an account
maintained by the Custodian, Subcustodian or agent at a Securities Depository;
all in accordance with customary market practice in the jurisdiction in which
any Investments are held.
5.3 REGISTERED ASSETS. Investments which are registered may be
registered in the name of the Custodian, a Subcustodian, or in the name of the
Fund or a nominee for any of the foregoing, and may be held in any manner set
forth in paragraph 5.2 above with or without any identification of fiduciary
capacity in such registration.
5.4 BOOK ENTRY ASSETS. Investments which are represented by book-entry
may be so held in an account maintained by the Book-entry Agent on behalf of the
Custodian, a Subcustodian or another agent of the Custodian, or a Securities
Depository.
5.5 REPLACEMENT OF LOST INVESTMENTS. In the event of a loss of
Investments for which the Custodian is responsible under the terms of this
Agreement, the Custodian shall replace such Investment, or in the event that
such replacement cannot be effected, the Custodian shall pay to the Fund the
fair market value of such Investment based on the last available price as of the
close of business in the relevant market on the date that a claim was first made
to the Custodian with respect to such loss, or, if less, such other amount as
shall be agreed by the parties as the date for
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settlement.
6. ADMINISTRATIVE DUTIES OF THE CUSTODIAN. The Custodian shall perform the
following administrative duties with respect to Investments of the Fund.
6.1 PURCHASE OF INVESTMENTS. Pursuant to Instruction, Investments
purchased for the account of the Fund shall be paid for (a) against delivery
thereof to the Custodian or a Subcustodian, as the case may be, either directly
or through a Clearing Corporation or a Securities Depository (in accordance with
the rules of such Securities Depository or such Clearing Corporation), or (b)
otherwise in accordance with an Instruction, Applicable Law, generally accepted
trade practices, or the terms of the instrument representing such
6.2 SALE OF INVESTMENTS. Pursuant to Instruction, Investments sold for
the account of the Fund shall be delivered (a) against payment therefor in cash,
by check or by bank wire transfer, (b) by credit to the account of the Custodian
or the applicable Subcustodian, as the case may be, with a Clearing Corporation
or a Securities Depository (in accordance with the rules of such Securities
Depository or such Clearing Corporation), or (c) otherwise in accordance with an
Instruction, Applicable Law, generally accepted trade practices, or the terms of
the instrument representing such Investment.
6.3 DELIVERY AND RECEIPT IN CONNECTION WITH BORROWINGS OF THE FUND OR
OTHER COLLATERAL AND MARGIN REQUIREMENTS. Pursuant to Instruction, the Custodian
may deliver or receive Investments or cash of the Fund in connection with
borrowings or loans by the Fund and other collateral and margin requirements.
6.4 FUTURES AND OPTIONS. If, pursuant to an Instruction, the Custodian
shall become a party to an agreement with the Fund and a futures commission
merchant regarding margin (TRI-PARTY AGREEMENT), the Custodian shall (a) receive
and retain, to the extent the same are provided to the Custodian, confirmations
or other documents evidencing the purchase or sale by the Fund of
exchange-traded futures contracts and commodity options, (b) when required by
such Tri-Party Agreement, deposit and maintain in an account opened pursuant to
such Agreement (MARGIN ACCOUNT), segregated either physically or by book-entry
in a Securities Depository for the benefit of any futures commission merchant,
such Investments as the Fund shall have designated as initial, maintenance or
variation "margin" deposits or other collateral intended to secure the Fund's
performance of its obligations under the terms of any exchange-traded futures
contracts and commodity options; and (c) thereafter pay, release or transfer
Investments into or out of the margin account in accordance with the provisions
of such Agreement. Alternatively, the Custodian may deliver Investments, in
accordance with an Instruction, to a futures commission merchant for purposes of
margin requirements in accordance
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with Rule 17f-6. The Custodian shall in no event be responsible for the acts and
omissions of any futures commission merchant to whom Investments are delivered
pursuant to this Section; for the sufficiency of Investments held in any Margin
Account; or, for the performance of any terms of any exchange-traded futures
contracts and commodity options.
6.5 CONTRACTUAL OBLIGATIONS AND SIMILAR INVESTMENTS. From time to time,
the Fund's Investments may include Investments that are not ownership interests
as may be represented by certificate (whether registered or bearer), by entry in
a Securities Depository or by book entry agent, registrar or similar agent for
recording ownership interests in the relevant Investment. If the Fund shall at
any time acquire such Investments, including without limitation deposit
obligations, loan participations, repurchase agreements and derivative
arrangements, the Custodian shall (a) receive and retain, to the extent the same
are provided to the Custodian, confirmations or other documents evidencing the
arrangement; and (b) perform on the Fund's account in accordance with the terms
of the applicable arrangement, but only to the extent directed to do so by
Instruction. The Custodian shall have no responsibility for agreements running
to the Fund as to which it is not a party other than to retain, to the extent
the same are provided to the Custodian, documents or copies of documents
evidencing the arrangement and, in accordance with Instruction, to include such
arrangements in reports made to the Fund.
6.6 EXCHANGE OF SECURITIES. Unless otherwise directed by Instruction,
the Custodian shall: (a) exchange securities held for the account of the Fund
for other securities in connection with any reorganization, recapitalization,
conversion, split-up, change of par value of shares or similar event, and (b)
deposit any such securities in accordance with the terms of any reorganization
or protective plan.
6.7 SURRENDER OF SECURITIES. Unless otherwise directed by Instruction,
the Custodian may surrender securities: (a) in temporary form for definitive
securities; (b) for transfer into the name of an entity allowable under Section
5.3; and (c) for a different number of certificates or instruments representing
the same number of shares or the same principal amount of indebtedness.
6.8 RIGHTS, WARRANTS, ETC. Pursuant to Instruction, the Custodian shall
(a) deliver warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to any agent of such issuer or trustee, for purposes of
exercising such rights or selling such securities, and (b) deposit securities in
response to any invitation for the tender thereof.
6.9 MANDATORY CORPORATE ACTIONS. Unless otherwise directed by
Instruction, the Custodian shall: (a) comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions or similar rights of
securities ownership affecting securities held on the Fund's account and
promptly notify the Fund of such action; and (b) collect all stock dividends,
rights and other items of like nature with respect to such securities.
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6.10 INCOME COLLECTION. Unless otherwise directed by Instruction, the
Custodian shall collect any amount due and payable to the Fund with respect to
Investments and promptly credit the amount collected to a Principal or Agency
Account; provided, however, that the Custodian shall not be responsible for: (a)
the collection of amounts due and payable with respect to Investments that are
in default; or (b) the collection of cash or share entitlements with respect to
Investments that are not registered in the name of the Custodian or its
Subcustodians. The Custodian is hereby authorized to endorse and deliver any
instrument required to be so endorsed and delivered to effect collection of any
amount due and payable to the Fund with respect to Investments.
6.11 OWNERSHIP CERTIFICATES AND DISCLOSURE OF THE FUND'S INTEREST. The
Custodian is hereby authorized to execute on behalf of the Fund ownership
certificates, affidavits or other disclosure required under Applicable Law or
established market practice in connection with the receipt of income, capital
gains or other payments by the Fund with respect to Investments, or in
connection with the sale, purchase or ownership of Investments.
With respect to securities issued in the United States of America, the
Custodian [ ] may [ ] may not release the identity of the Fund to an
issuer which requests such information pursuant to the Shareholder
Communications Act of 1985 for the specific purpose of direct
communications between such issuer and the Fund. IF NO BOX IS CHECKED,
THE CUSTODIAN SHALL RELEASE SUCH INFORMATION UNTIL IT RECEIVES CONTRARY
INSTRUCTIONS FROM THE FUND. With respect to securities issued outside
of the United States of America, information shall be released in
accordance with law or custom of the particular country in which such
security is located.
6.12 PROXY MATERIALS. The Custodian shall deliver, or cause to be
delivered, to the Fund proxy forms, notices of meeting, and any other notices or
announcements materially affecting or relating to Investments received by the
Custodian or any nominee.
6.13 TAXES. The Custodian shall, where applicable, assist the Fund in
the reclamation of taxes withheld on dividends and interest payments received by
the Fund. In the performance of its duties with respect to tax withholding and
reclamation, the Custodian shall be entitled to rely on the advice of counsel
and upon information and advice regarding the Fund's tax status that is received
from or on behalf of the Fund without duty of separate inquiry.
6.14 OTHER DEALINGS. The Custodian shall otherwise act as directed by
Instruction, including without limitation effecting the free payments of moneys
or the free delivery of securities, provided that such Instruction shall
indicate the purpose of such payment or delivery and that the Custodian shall
record the party to whom such payment or delivery is made.
The Custodian shall attend to all nondiscretionary details in
connection with the sale or purchase or other administration of Investments,
except as otherwise directed by an Instruction, and may make payments to itself
or
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others for minor expenses of administering Investments under this Agreement;
provided that the Fund shall have the right to request an accounting with
respect to such expenses.
In fulfilling the duties set forth in Sections 6.6 through 6.10 above,
the Custodian shall promptly provide to the Fund all material information
pertaining to a corporate action which the Custodian actually receives; provided
that the Custodian shall not be responsible for the completeness or accuracy of
such information. Any advance credit of cash or shares expected to be received
as a result of any corporate action shall be subject to actual collection and
may, when the Custodian deems collection unlikely, be reversed by the Custodian.
The Custodian may at any time or times in its discretion appoint (and
may at any time remove) agents (other than Subcustodians) to carry out some or
all of the administrative provisions of this Agreement (AGENTS), provided,
however, that the appointment of such agent shall not relieve the Custodian of
its administrative obligations under this Agreement.
7. CASH ACCOUNTS, DEPOSITS AND MONEY MOVEMENTS. Subject to the terms and
conditions set forth in this Section 7, the Fund hereby authorizes the Custodian
to open and maintain, with itself or with Subcustodians, cash accounts in United
States Dollars, in such other currencies as are the currencies of the countries
in which the Fund maintains Investments or in such other currencies as the Fund
shall from time to time request by Instruction.
7.1 TYPES OF CASH ACCOUNTS. Cash accounts opened on the books of the
Custodian (PRINCIPAL ACCOUNTS) shall be opened in the name of the Fund. Such
accounts collectively shall be a deposit obligation of the Custodian and shall
be subject to the terms of this Section 7 and the general liability provisions
contained in Section 9. Cash accounts opened on the books of a Subcustodian may
be opened in the name of the Fund or the Custodian or in the name of the
Custodian for its customers generally (AGENCY ACCOUNTS). Such deposits shall be
obligations of the Subcustodian and shall be treated as an Investment of the
Fund. Accordingly, the Custodian shall be responsible for exercising reasonable
care in the administration of such accounts but shall not be liable for their
repayment in the event such Subcustodian, by reason of its bankruptcy,
insolvency or otherwise, fails to make repayment.
7.2 PAYMENTS AND CREDITS WITH RESPECT TO THE CASH ACCOUNTS. The
Custodian shall make payments from or deposits to any of said accounts in the
course of carrying out its administrative duties, including but not limited to
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income collection with respect to the Fund's Investments, and otherwise in
accordance with Instructions. The Custodian and its Subcustodians shall be
required to credit amounts to the cash accounts only when moneys are actually
received in cleared funds in accordance with banking practice in the country and
currency of deposit. Any credit made to any Principal or Agency Account before
actual receipt of cleared funds shall be provisional and may be reversed by the
Custodian in the event such payment is not actually collected. Unless otherwise
specifically agreed in writing by the Custodian or any Subcustodian, all
deposits shall be payable only at the branch of the Custodian or Subcustodian
where the deposit is made or carried.
7.3 CURRENCY AND RELATED RISKS. The Fund bears risks of holding or
transacting in any currency. The Custodian shall not be liable for any loss or
damage arising from the applicability of any law or regulation now or hereafter
in effect, or from the occurrence of any event, which may delay or affect the
transferability, convertibility or availability of any currency in the country
(a) in which such Principal or Agency Accounts are maintained or (b) in which
such currency is issued, and in no event shall the Custodian be obligated to
make payment of a deposit denominated in a currency during the period during
which its transferability, convertibility or availability has been affected by
any such law, regulation or event. Without limiting the generality of the
foregoing, neither the Custodian nor any Subcustodian shall be required to repay
any deposit made at a foreign branch of either the Custodian or Subcustodian if
such branch cannot repay the deposit due to a cause for which the Custodian
would not be responsible in accordance with the terms of Section 9 of this
Agreement unless the Custodian or such Subcustodian expressly agrees in writing
to repay the deposit under such circumstances. All currency transactions in any
account opened pursuant to this Agreement are subject to exchange control
regulations of the United States and of the country where such currency is the
lawful currency or where the account is maintained. Any taxes, costs, charges or
fees imposed on the convertibility of a currency held by the Fund shall be for
the account of the Fund.
7.4 FOREIGN EXCHANGE TRANSACTIONS. The Custodian shall, subject to the
terms of this Section, settle foreign exchange transactions (including
contracts, futures, options and options on futures) on behalf and for the
account of the Fund with such currency brokers or banking institutions,
including Subcustodians, as the Fund may direct pursuant to Instructions. The
Custodian may act as principal in any foreign exchange transaction with the Fund
in accordance with Section 7.4.2 of this Agreement. The obligations of the
Custodian in respect of all foreign exchange transactions (whether or not the
Custodian shall act as principal in such transaction) shall be contingent on the
free, unencumbered transferability of the currency transacted on the actual
settlement date of the transaction.
7.4.1 THIRD PARTY FOREIGN EXCHANGE TRANSACTIONS. The Custodian
shall process foreign
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exchange transactions (including without limitation contracts, futures,
options, and options on futures), where any third party acts as
principal counterparty to the Fund on the same basis it performs duties
as agent for the Fund with respect to any other of the Fund's
Investments. Accordingly the Custodian shall only be responsible for
delivering or receiving currency on behalf of the Fund in respect of
such contracts pursuant to Instructions. The Custodian shall not be
responsible for the failure of any counterparty (including any
Subcustodian) in such agency transaction to perform its obligations
thereunder. The Custodian (a) shall transmit cash and Instructions to
and from the currency broker or banking institution with which a foreign
exchange contract or option has been executed pursuant hereto, (b) may
make free outgoing payments of cash in the form of Dollars or foreign
currency without receiving confirmation of a foreign exchange contract
or option or confirmation that the countervalue currency completing the
foreign exchange contract has been delivered or received or that the
option has been delivered or received, and (c) shall hold all
confirmations, certificates and other documents and agreements received
by the Custodian and evidencing or relating to such foreign exchange
transactions in safekeeping. The Fund accepts full responsibility for
its use of third-party foreign exchange dealers and for execution of
said foreign exchange contracts and options and understands that the
Fund shall be responsible for any and all costs and interest charges
which may be incurred by the Fund or the Custodian as a result of the
failure or delay of third parties to deliver foreign exchange.
7.4.2 FOREIGN EXCHANGE WITH THE CUSTODIAN AS PRINCIPAL. The
Custodian may undertake foreign exchange transactions with the Fund as
principal as the Custodian and the Fund may agree from time to time. In
such event, the foreign exchange transaction will be performed in
accordance with the particular agreement of the parties, or in the event
a principal foreign exchange transaction is initiated by Instruction in
the absence of specific agreement, such transaction will be performed in
accordance with the usual commercial terms of the Custodian.
7.5 DELAYS. If no event of Force Majeure shall have occurred and be
continuing and in the event that a delay shall have been caused by the
negligence or willful misconduct of the Custodian in carrying out an Instruction
to credit or transfer cash, the Custodian shall be liable to the Fund: (a) with
respect to Principal Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Custodian on overnight
deposits at the time the delay occurs for the period from the day when the
transfer should have been effected until the day it is in fact effected; and,
(b) with respect to Agency Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Subcustodian on overnight
deposits at the time the delay occurs for the period from the day when the
transfer should have been effected until the day it is in fact effected. The
Custodian shall not be liable for delays in carrying out such Instructions to
transfer cash which are not due to the Custodian's own negligence or willful
misconduct.
7.6 ADVANCES. If, for any reason in the conduct of its safekeeping
duties pursuant to Section 5 hereof or its administration of the Fund's assets
pursuant to Section 6 hereof, the Custodian or any Subcustodian advances monies
to facilitate settlement or otherwise for benefit of the Fund (whether or not
any Principal or Agency Account shall be overdrawn either during, or at the end
of, any Business Day), the Fund hereby does:
7.6.1 acknowledge that the Fund shall have no right or title to
any Investments purchased
11
with such Advance save a right to receive such Investments upon: (a) the
debit of the Principal or Agency Account; or, (b) if such debit would
produce an overdraft in such account, other reimbursement of the
associated Advance;
7.6.2 grant to the Custodian a security interest in the Fund's
Investments, as security for such Advance, in an amount not to exceed
the amount of the Advance together with any fees, charges and other
reasonable costs associated therewith; and,
7.6.3 agree that the Custodian may secure the resulting Advance
by perfecting a security interest in all Investments under Applicable
Law in an amount not to exceed the amount of the Advance.
Neither the Custodian nor any Subcustodian shall be obligated to
advance monies to the Fund, and in the event that such Advance occurs, any
transaction giving rise to an Advance shall be for the account and risk of the
Fund and shall not be deemed to be a transaction undertaken by the Custodian for
its own account and risk. If such Advance shall have been made by a Subcustodian
or any other person, the Custodian may assign the security interest and any
other rights granted to the Custodian hereunder to such Subcustodian or other
person. If the Fund shall fail to repay when due the principal balance of an
Advance and accrued and unpaid interest thereon, the Custodian or its assignee,
as the case may be, shall be entitled to utilize the available cash balance in
any Agency or Principal Account and to dispose of any Investments to the extent
necessary to recover payment of all principal of, and interest on, such Advance
in full. The Custodian may assign any rights it has hereunder to a Subcustodian
or third party. Any security interest in Investments taken hereunder shall be
treated as financial assets credited to securities accounts under Articles 8 and
9 of the Uniform Commercial Code (1997). Accordingly, the Custodian shall have
the rights and benefits of a secured creditor that is a securities intermediary
under such Articles 8 and 9.
7.7 INTEGRATED ACCOUNT. For purposes hereof, deposits maintained in all
Principal Accounts (whether or not denominated in Dollars) shall collectively
constitute a single and indivisible current account with respect to the Fund's
obligations to the Custodian, or its assignee, and balances in such Principal
Accounts shall be available for satisfaction of the Fund's obligations under
this Section 7. The Custodian shall further have a right of offset against the
balances in any Agency Account maintained hereunder to the extent that the
aggregate of all Principal Accounts is overdrawn.
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8. SUBCUSTODIANS AND SECURITIES DEPOSITORIES. Subject to the provisions
hereinafter set forth in this Section 8, the Fund hereby authorizes the
Custodian to utilize Securities Depositories to act on behalf of the Fund and to
appoint from time to time and to utilize Subcustodians. With respect to
securities and funds held by a Subcustodian, either directly or indirectly
(including by a Securities Depository or Clearing Corporation), notwithstanding
any provisions of this Agreement to the contrary, payment for securities
purchased and delivery of securities sold may be made prior to receipt of
securities or payment, respectively, and securities or payment may be received
in a form, in accordance with (a) governmental regulations, (b) rules of
Securities Depositories and clearing agencies, (c) generally accepted trade
practice in the applicable local market, (d) the terms and characteristics of
the particular Investment, or (e) the terms of Instructions.
8.1 DOMESTIC SUBCUSTODIANS AND SECURITIES DEPOSITORIES. The Custodian
may deposit and/or maintain, either directly or through one or more agents
appointed by the Custodian, Investments of the Fund in any Securities Depository
in the United States, including The Depository Trust Company, provided such
Depository meets applicable requirements of the Federal Reserve Bank or of the
Securities and Exchange Commission. The Custodian may, at any time and from time
to time, appoint any bank as defined in Section 2(a)(5) of the 1940 Act meeting
the requirements of a custodian under Section 17(f) of the 1940 Act and the
rules and regulations thereunder, to act on behalf of the Fund as a Subcustodian
for purposes of holding Investments of the Fund in the United States.
8.2 FOREIGN SUBCUSTODIANS AND SECURITIES DEPOSITORIES. Unless
instructed otherwise by the Fund, the Custodian may deposit and/or maintain
non-U.S. Investments of the Fund in any non-U.S. Securities Depository provided
such Securities Depository meets the requirements of an "eligible securities
depository" under Rule 17f-7 promulgated under the 1940 Act, or any successor
rule or regulation ("Rule 17f-7") or which by order of the Securities and
Exchange Commission is exempted therefrom. Prior to the time that securities are
placed with such depository, but subject to the provisions of Section 8.2.4
below, the Custodian shall have prepared an assessment of the custody risks
associated with maintaining assets with the Securities Depository and shall have
established a system to monitor such risks on a continuing basis in accordance
with subsection 8.2.3 of this Section. Additionally, the Custodian may, at any
time and from time to time, appoint (a) any bank, trust company or other entity
meeting the requirements of an "eligible foreign custodian" under Rule 17f-5 or
which by order of the Securities and Exchange Commission is exempted
13
therefrom, or (b) any bank as defined in Section 2(a)(5) of the 1940 Act meeting
the requirements of a custodian under Section 17(f) of the 1940 Act and the
rules and regulations thereunder, to act on behalf of the Fund as a Subcustodian
for purposes of holding Investments of the Fund outside the United States. Such
appointment of foreign Subcustodians shall be subject to approval of the Fund in
accordance with Subsections 8.2.1 and 8.2.2 hereof, and use of non-U.S.
Securities Depositories shall be subject to the terms of Subsections 8.2.3 and
8.2.4 hereof. An Instruction to open an account in a given country shall
comprise authorization of the Custodian to hold assets in such country in
accordance with the terms of this Agreement. The Custodian shall not be required
to make independent inquiry as to the authorization of the Fund to invest in
such country.
8.2.1 BOARD APPROVAL OF FOREIGN SUBCUSTODIANS. Unless and except
to the extent that the Board has delegated to and the Custodian has
accepted delegation of review of certain matters concerning the
appointment of Subcustodians pursuant to Subsection 8.2.2, the Custodian
shall, prior to the appointment of any Subcustodian for purposes of
holding Investments of the Fund outside the United States, obtain
written confirmation of the approval of the Board of Trustees or
Directors of the Fund with respect to (a) the identity of a
Subcustodian, and (b) the Subcustodian agreement which shall govern such
appointment, such approval to be signed by an Authorized Person.
8.2.2 DELEGATION OF BOARD REVIEW OF SUBCUSTODIANS. From time to
time, the Custodian may agree to perform certain reviews of
Subcustodians and of Subcustodian Contracts as delegate of the Fund's
Board. In such event, the Custodian's duties and obligations with
respect to this delegated review will be performed in accordance with
the terms of the attached 17f-5 Delegation Schedule to this Agreement.
8.2.3 MONITORING AND RISK ASSESSMENT OF SECURITIES DEPOSITORIES.
Prior to the placement of any assets of the Fund with a non-U.S.
Securities Depository, the Custodian: (a) shall provide to the Fund or
its authorized representative an assessment of the custody risks
associated with maintaining assets within such Securities Depository;
and (b) shall have established a system to monitor the custody risks
associated with maintaining assets with such Securities Depository on a
continuing basis and to promptly notify the Fund or its Investment
Adviser of any material changes in such risk. In performing its duties
under this subsection, the Custodian shall use reasonable care and may
rely on such reasonable sources of information as may be available
including but not limited to: (i) published ratings; (ii) information
supplied by a Subcustodian that is a participant in such Securities
Depository; (iii) industry surveys or publications; (iv) information
supplied by the depository itself, by its auditors (internal or
external) or by the relevant Foreign Financial Regulatory Authority. It
is acknowledged that information procured through some or all of these
sources may not be independently verifiable by the Custodian and that
direct access to Securities Depositories is limited under most
circumstances. Accordingly, the Custodian shall not be responsible for
errors or omissions in its duties hereunder provided that it has
performed its monitoring and assessment duties with reasonable care. The
risk assessment shall be provided to the Fund or its Investment Advisor
by such means as the Custodian shall reasonably establish. Advices of
material change in such assessment may be provided by the Custodian in
the manner established as customary between the Fund and the Custodian
for transmission of material market information.
8.3 RESPONSIBILITY FOR SUBCUSTODIANS. Except as provided in the last
sentence of this Section 8.3, the Custodian shall be liable to the Fund for any
loss or damage to the Fund caused by or resulting from the acts or omissions of
any Subcustodian to the extent that such acts or omissions would be deemed to be
negligence, gross
14
negligence or willful misconduct in accordance with the terms of the relevant
subcustodian agreement under the laws, circumstances and practices prevailing in
the place where the act or omission occurred. The liability of the Custodian in
respect of the countries and subcustodians so designated by the Custodian, from
time to time, on the Global Custody Network Listing, shall be subject to the
additional condition that the Custodian actually recovers such loss or damage
from the Subcustodian.
8.4 NEW COUNTRIES. The Fund shall be responsible for informing the
Custodian sufficiently in advance of a proposed investment which is to be held
in a country in which no Subcustodian is authorized to act in order that the
Custodian shall, if it deems appropriate to do so, have sufficient time to
establish a subcustodial arrangement in accordance herewith. In the event,
however, the Custodian is unable to establish such arrangements prior to the
time such investment is to be acquired, the Custodian is authorized to designate
at its discretion a local safekeeping agent, and the use of such local
safekeeping agent shall be at the sole risk of the Fund, and accordingly the
Custodian shall be responsible to the Fund for the actions of such agent if and
only to the extent the Custodian shall have recovered from such agent for any
damages caused the Fund by such agent.
9. RESPONSIBILITY OF THE CUSTODIAN. In performing its duties and obligations
hereunder, the Custodian shall use reasonable care under the facts and
circumstances prevailing in the market where performance is effected. Subject to
the specific provisions of this Section, the Custodian shall be liable for any
direct damage incurred by the Fund in consequence of the Custodian's negligence,
bad faith or willful misconduct. In no event shall the Custodian be liable
hereunder for any special, indirect, punitive or consequential damages arising
out of, pursuant to or in connection with this Agreement even if the Custodian
has been advised of the possibility of such damages. It is agreed that the
Custodian shall have no duty to assess the risks inherent in the Fund's
Investments or to provide investment advice with respect to such Investments and
that the Fund as principal shall bear any risks attendant to particular
Investments such as failure of counterparty or issuer.
9.1 LIMITATIONS OF PERFORMANCE. The Custodian shall not be responsible
under this Agreement for any failure to perform its duties, and shall not liable
hereunder for any loss or damage in association with such failure to perform,
for or in consequence of the following causes:
15
9.1.1 FORCE MAJEURE. FORCE MAJEURE shall mean any circumstance
or event which is beyond the reasonable control of the Custodian, a
Subcustodian or any agent of the Custodian or a Subcustodian and which
adversely affects the performance by the Custodian of its obligations
hereunder, by the Subcustodian of its obligations under its Subcustody
Agreement or by any other agent of the Custodian or the Subcustodian,
including any event caused by, arising out of or involving (a) an act of
God, (b) accident, fire, water damage or explosion, (c) any computer,
system or other equipment failure or malfunction caused by any computer
virus or the malfunction or failure of any communications medium, (d)
any interruption of the power supply or other utility service, (e) any
strike or other work stoppage, whether partial or total, (f) any delay
or disruption resulting from or reflecting the occurrence of any
Sovereign Risk, (g) any disruption of, or suspension of trading in, the
securities, commodities or foreign exchange markets, whether or not
resulting from or reflecting the occurrence of any Sovereign Risk, (h)
any encumbrance on the transferability of a currency or a currency
position on the actual settlement date of a foreign exchange
transaction, whether or not resulting from or reflecting the occurrence
of any Sovereign Risk, or (i) any other cause similarly beyond the
reasonable control of the Custodian.
9.1.2 COUNTRY RISK. COUNTRY RISK shall mean, with respect to the
acquisition, ownership, settlement or custody of Investments in a
jurisdiction, all risks relating to, or arising in consequence of,
systemic and markets factors affecting the acquisition, payment for or
ownership of Investments including (a) the prevalence of crime and
corruption, (b) the inaccuracy or unreliability of business and
financial information, (c) the instability or volatility of banking and
financial systems, or the absence or inadequacy of an infrastructure to
support such systems, (d) custody and settlement infrastructure of the
market in which such Investments are transacted and held, (e) the acts,
omissions and operation of any Securities Depository, (f) the risk of
the bankruptcy or insolvency of banking agents, counterparties to cash
and securities transactions, registrars or transfer agents, and (g) the
existence of market conditions which prevent the orderly execution or
settlement of transactions or which affect the value of assets.
9.1.3 SOVEREIGN RISK. SOVEREIGN RISK shall mean, in respect of
any jurisdiction, including the United States of America, where
Investments is acquired or held hereunder or under a Subcustody
Agreement, (a) any act of war, terrorism, riot, insurrection or civil
commotion, (b) the imposition of any investment, repatriation or
exchange control restrictions by any Governmental Authority, (c) the
confiscation, expropriation or nationalization of any Investments by any
Governmental Authority, whether de facto or de jure, (d) any devaluation
or revaluation of the currency, (e) the imposition of taxes, levies or
other charges affecting Investments, (f) any change in the Applicable
Law, or (g) any other economic or political risk incurred or
experienced.
9.2. LIMITATIONS ON LIABILITY. The Custodian shall not be liable for any
loss, claim, damage or other liability arising from the following causes:
9.2.1 FAILURE OF THIRD PARTIES. The failure of any third party
including: (a) any issuer of Investments or book-entry or other agent of
and issuer; (b) any counterparty with respect to any Investment,
including any issuer of exchange-traded or other futures, option,
derivative or commodities contract; (c) failure of an Investment
Advisor, Foreign Custody Manager or other agent of the Fund; or (d)
failure of other third parties similarly beyond the control or choice of
the Custodian.
9.2.2 INFORMATION SOURCES. The Custodian may rely upon
information received from issuers of Investments or agents of such
issuers, information received from Subcustodians and from other
commercially reasonable sources such as commercial data bases and the
like, but shall not be responsible for specific inaccuracies in such
information, provided that the Custodian has relied upon such
information in good faith, or for the failure of any commercially
reasonable information provider.
16
9.2.3 RELIANCE ON INSTRUCTION. Action by the Custodian or the
Subcustodian in accordance with an Instruction, even when such action
conflicts with, or is contrary to any provision of, the Fund's
declaration of trust, certificate of incorporation or by-laws,
Applicable Law, or actions by the trustees, directors or shareholders of
the Fund.
9.2.4 RESTRICTED SECURITIES. The limitations inherent in the
rights, transferability or similar investment characteristics of a given
Investment of the Fund.
10. INDEMNIFICATION. The Fund hereby indemnifies the Custodian and its partners,
employees, officers and directors, and agrees to hold each of them harmless from
and against all claims and liabilities, including counsel fees and taxes,
incurred or assessed against any of them in connection with the performance of
this Agreement and any Instruction. Subject to Section 9 hereof, the Custodian
agrees to indemnify the Fund and agrees to hold it harmless from and against all
claims and liabilities, including counsel fees and taxes, incurred or assessed
against it in connection with the performance of this Agreement and any
Instruction, except such as may result from the Fund's negligence, bad faith or
willful misconduct. If any person indemnified under the first sentence hereof
gives written notice of claim to the Custodian, the Custodian shall promptly
give written notice to the Fund. Not more than thirty days following the date of
such notice, unless the Custodian shall be liable under Section 8 hereof in
respect of such claim, the Fund will pay the amount of such claim or reimburse
the Custodian for any payment made by the Custodian in respect thereof.
11. REPORTS AND RECORDS. The Custodian shall:
11.1 create and maintain records relating to the performance of
its obligations under this Agreement;
11.2 make available to the Fund, its auditors, agents and
employees, during regular business hours of the Custodian, upon
reasonable request and during normal business hours of the Custodian,
all records maintained by the Custodian pursuant to paragraph 11.1
above, subject, however, to all reasonable security requirements of the
Custodian then applicable to the records of its custody customers
generally; and
11.3 make available to the Fund all Electronic Reports; it being
understood that the Custodian shall not be liable hereunder for the
inaccuracy or incompleteness thereof or for errors in any information
included therein.
The Fund shall examine all records, howsoever produced or transmitted,
promptly upon receipt thereof and
17
notify the Custodian promptly of any discrepancy or error therein. Unless the
Fund delivers written notice of any such discrepancy or error within a
reasonable time after its receipt thereof, such records shall be deemed to be
true and accurate. It is understood that the Custodian now obtains and will in
the future obtain information on the value of assets from outside sources which
may be utilized in certain reports made available to the Fund. The Custodian
deems such sources to be reliable but it is acknowledged and agreed that the
Custodian does not verify nor represent nor warrant as to the accuracy or
completeness of such information and accordingly shall be without liability in
selecting and using such sources and furnishing such information.
12. MISCELLANEOUS.
12.1 PROXIES, ETC. The Fund will promptly execute and deliver, upon
request, such proxies, powers of attorney or other instruments as may be
necessary or desirable for the Custodian to provide, or to cause any
Subcustodian to provide, custody services.
12.2 ENTIRE AGREEMENT. Except as specifically provided herein, this
Agreement constitutes the entire agreement between the Fund and the Custodian
with respect to the subject matter hereof. Accordingly, this Agreement
supersedes any custody agreement or other oral or written agreements heretofore
in effect between the Fund and the Custodian with respect to the custody of the
Fund's Investments.
12.3 WAIVER AND AMENDMENT. No provision of this Agreement may be
waived, amended or modified, and no addendum to this Agreement shall be or
become effective, or be waived, amended or modified, except by an instrument in
writing executed by the party against which enforcement of such waiver,
amendment or modification is sought; provided, however, that an Instruction
shall, whether or not such Instruction shall constitute a waiver, amendment or
modification for purposes hereof, shall be deemed to have been accepted by the
Custodian when it commences actions pursuant thereto or in accordance therewith.
12.4 GOVERNING LAW AND JURISDICTION. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH, AND BE GOVERNED BY THE LAWS OF, THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW OF SUCH STATE. THE PARTIES HERETO
IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK AND THE
18
FEDERAL COURTS LOCATED IN NEW YORK CITY IN THE BOROUGH OF MANHATTAN.
12.5 NOTICES. Notices and other writings contemplated by this Agreement,
other than Instructions, shall be delivered (a) by hand, (b) by first class
registered or certified mail, postage prepaid, return receipt requested, (c) by
a nationally recognized overnight courier, or (d) by facsimile transmission,
provided that any notice or other writing sent by facsimile transmission shall
also be mailed, postage prepaid, to the party to whom such notice is addressed.
All such notices shall be addressed, as follows:
If to the Fund:
Hotchkis and Wiley Funds
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxx
President
Telephone -- 000-000-0000
Facsimile -- 000-000-0000
If to the Custodian:
Xxxxx Brothers Xxxxxxxx & Co.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Manager, Securities Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000,
or such other address as the Fund or the Custodian may have designated
in writing to the other.
12.6 HEADINGS. Paragraph headings included herein are for convenience of
reference only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
12.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
the Fund and the Custodian.
12.8 CONFIDENTIALITY. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering or obtaining services pursuant
to this Agreement and, except as may be required in carrying out this Agreement,
shall not be disclosed to any third party without the prior consent of such
providing party. The foregoing shall not be applicable to any information that
is publicly available when provided or thereafter becomes publicly
19
available other than through a breach of this Agreement, or that is required to
be disclosed by or to any bank examiner of the Custodian or any Subcustodian,
any Regulatory Authority, any auditor of the parties hereto, or by judicial or
administrative process or otherwise by Applicable Law.
12.9 COUNSEL. In fulfilling its duties hereunder, the Custodian shall
be entitled to receive and act upon the advice of (i) counsel regularly retained
by the Custodian in respect of such matters, (ii) counsel for the Fund or (iii)
such counsel as the Fund and the Custodian may agree upon, with respect to all
matters, and the Custodian shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
12.10 CONFLICT. Nothing contained in this Agreement shall prevent the
Custodian and its associates from (i) dealing as a principal or an intermediary
in the sale, purchase or loan of the Fund's Investments to, or from the
Custodian or its associates; (ii) acting as a custodian, a subcustodian, a
trustee, an agent, securities dealer, an investment manager or in any other
capacity for any other client whose interests may be adverse to the interest of
the Fund; or (iii) buying, holding, lending, and dealing in any way in any
assets for the benefit of its own account, or for the account of any other
client whose interests may be adverse to the Fund notwithstanding that the same
or similar assets may be held or dealt in by, or for the account of the Fund by
the Custodian. The Fund hereby voluntarily consents to, and waives any potential
conflict of interest between the Custodian and/or its associates and the Fund,
and agrees that:
(a) the Custodian's and/or its associates' engagement in any
such transaction shall not disqualify the Custodian from
continuing to perform as the custodian of the Fund under
this Agreement;
(b) the Custodian and/or its associates shall not be under
any duty to disclose any information in connection with
any such transaction to the Fund; and
(c) the Custodian and/or its associates shall not be liable
to account to the Fund for any profits or benefits made
or derived by or in connection with any such
transaction.
13. DEFINITIONS. The following defined terms will have the respective meanings
set forth below.
13.1 ADVANCE(s) shall mean any extension of credit by or through the
Custodian or by or through any Subcustodian and shall include amounts paid to
third parties for account of the Fund or in discharge of any expense, tax or
other item payable by the Fund.
13.2 AGENCY ACCOUNT(s) shall mean any deposit account opened on the
books of a Subcustodian or other banking institution in accordance with Section
7.1.
13.3 AGENT(s) shall have the meaning set forth in the last sentence of
Section 6.
20
13.4 APPLICABLE LAW shall mean with respect to each jurisdiction, all
(a) laws, statutes, treaties, regulations, guidelines (or their equivalents);
(b) orders, interpretations licenses and permits; and (c) judgments, decrees,
injunctions writs, orders and similar actions by a court of competent
jurisdiction; compliance with which is required or customarily observed in such
jurisdiction.
13.5 AUTHORIZED PERSON(s) shall mean any person or entity authorized to
give Instructions on behalf of the Fund in accordance with Section 4.1.
13.6 BOOK-ENTRY AGENT(s) shall mean an entity acting as agent for the
issuer of Investments for purposes of recording ownership or similar entitlement
to Investments, including without limitation a transfer agent or registrar.
13.7 CLEARING CORPORATION shall mean any entity or system established
for purposes of providing securities settlement and movement and associated
functions for a given market.
13.8 DELEGATION SCHEDULE shall mean any separate schedule entered into
between the Custodian and the Fund or its authorized representative with respect
to certain matters concerning the appointment and administration of
Subcustodians delegated to the Custodian pursuant to Rule 17f-5.
13.9 FOREIGN CUSTODY MANAGER shall mean the Fund's foreign custody
manager appointed pursuant to Rule 17f-5 of the 1940 Act.
13.10 FOREIGN FINANCIAL REGULATORY AUTHORITY shall have the meaning
given by Section 2(a)(50) of the 0000 Xxx.
13.11 FUNDS TRANSFER SERVICES SCHEDULE shall mean any separate schedule
entered into between the Custodian and the Fund or its authorized representative
with respect to certain matters concerning the processing of payment orders from
Principal Accounts of the Fund.
13.12 GLOBAL CUSTODY NETWORK LISTING shall mean the Countries and
Subcustodians approved for Investments in non-U.S. Markets.
13.13 INSTRUCTION(s) shall have the meaning assigned in Section 4.
13.14 INVESTMENT ADVISOR shall mean any person or entity who is an
Authorized Person to give Instructions with respect to the investment and
reinvestment of the Fund's Investments.
13.15 INVESTMENT(s) shall mean any investment asset of the Fund,
including without limitation securities, bonds, notes, and debentures as well as
receivables, derivatives, contractual rights or entitlements and other
intangible assets.
13.16 MARGIN ACCOUNT shall have the meaning set forth in Section 6.4
hereof.
21
13.17 PRINCIPAL ACCOUNT(S) shall mean deposit accounts of the Fund
carried on the books of BBH&Co. as principal in accordance with Section 7.
13.18 SAFEKEEPING ACCOUNT shall mean an account established on the books
of the Custodian or any Subcustodian for purposes of segregating the interests
of the Fund (or clients of the Custodian or Subcustodian) from the assets of the
Custodian or any Subcustodian.
13.19 SECURITIES DEPOSITORY shall mean a central or book entry system or
agency established under Applicable Law for purposes of recording the ownership
and/or entitlement to investment securities for a given market that, if a
foreign Securities Depository, meets the definitional requirements of Rule 17f-7
under the 1940 Act.
13.20 SUBCUSTODIAN(S) shall mean each foreign bank appointed by the
Custodian pursuant to Section 8, but shall not include Securities Depositories.
13.21 TRI-PARTY AGREEMENT shall have the meaning set forth in Section
6.4 hereof.
13.22 1940 ACT shall mean the Investment Company Act of 1940.
14. COMPENSATION. The Fund agrees to pay to the Custodian (a) a fee in an amount
set forth in the fee letter between the Fund and the Custodian in effect on the
date hereof or as amended from time to time, and (b) all out-of-pocket expenses
incurred by the Custodian, including the fees and expenses of all Subcustodians,
and payable from time to time. Amounts payable by the Fund under and pursuant to
this Section 14 shall be payable by wire transfer to the Custodian at BBH&Co. in
New York, New York.
15. TERMINATION. This Agreement may be terminated by either party in accordance
with the provisions of this Section. The provisions of this Agreement and any
other rights or obligations incurred or accrued by any party hereto prior to
termination of this Agreement shall survive any termination of this Agreement.
15.1 NOTICE AND EFFECT. This Agreement may be terminated by either party
by written notice effective no sooner than seventy-five (75) consecutive
calendar days following the date that notice to such effect shall be delivered
to other party at its address set forth in paragraph 12.5 hereof.
22
15.2 SUCCESSOR CUSTODIAN. In the event of the appointment of a successor
custodian, it is agreed that the Investments of the fund held by the Custodian
or any Subcustodian shall be delivered to the successor custodian in accordance
with reasonable Instructions. The Custodian agrees to cooperate with the Fund in
the execution of documents and performance of other actions necessary or
desirable in order to facilitate the succession of the new custodian. If no
successor custodian shall be appointed, the Custodian shall in like manner
transfer the Fund's Investments in accordance with Instructions.
15.3 DELAYED SUCCESSION. If no Instruction has been given as of the
effective date of termination, Custodian may at any time on or after such
termination date and upon ten (10) consecutive calendar days written notice to
the Fund either (a) deliver the Investments of the Fund held hereunder to the
Fund at the address designated for receipt of notices hereunder; or (b) deliver
any investments held hereunder to a bank or trust company having a
capitalization of $2,000,000 USD equivalent and operating under the Applicable
law of the jurisdiction where such Investments are located, such delivery to be
at the risk of the Fund. In the event that Investments or moneys of the Fund
remain in the custody of the Custodian or its Subcustodians after the date of
termination owing to the failure of the Fund to issue Instructions with respect
to their disposition or owing to the fact that such disposition could not be
accomplished in accordance with such Instructions despite diligent efforts of
the Custodian, the Custodian shall be entitled to compensation for its services
with respect to such Investments and moneys during such period as the Custodian
or its Subcustodians retain possession of such items and the provisions of this
Agreement shall remain in full force and effect until disposition in accordance
with this Section is accomplished.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed as of the date first above written.
XXXXX BROTHERS XXXXXXXX & CO. HOTCHKIS AND WILEY FUNDS
By: /s/ Xxxx Xxxxxxxxx By: /s/ Xxxxx X. Xxxxxx
-------------------------------- --------------------------------
Name: Xxxx Xxxxxxxxx Name: Xxxxx X. Xxxxxx
Title: Managing Director Title: President
Date: 11 October 2001 Date: 10-16-01
23
FUNDS TRANSFER SERVICES SCHEDULE TO CUSTODIAN AGREEMENT
1. Execution of Payment Orders. Xxxxx Brothers Xxxxxxxx & Co. (the CUSTODIAN) is
hereby instructed by Hotchkis and Wiley Funds (the COMPANY) to execute each
payment order, whether denominated in United States dollars or other applicable
currencies, received by the Custodian in the Company's name as sender and
authorized and confirmed by an Authorized Person as defined in a Custodian
Agreement dated as of October 10, 2001 by and between the Custodian and the
Company, as amended or restated from time thereafter (the AGREEMENT), provided
that the Company has sufficient available funds on deposit in a Principal
Account as defined in the Agreement and provided that the order (i) is received
by the Custodian in the manner specified in this Funds Transfer Services
Schedule or any amendment hereafter; (ii) complies with any written instructions
and restrictions of the Company as set forth in this Funds Transfer Services
Schedule or any amendment hereafter; (iii) is authorized by the Company or is
verified by the Custodian in compliance with a security procedure set forth in
Paragraph 2 below for verifying the authenticity of a funds transfer
communication sent to the Custodian in the name of the Company or for the
detection of errors set forth in any such communication; and (iv) contains
sufficient data to enable the Custodian to process such transfer.
2. Security Procedure. The Company hereby elects to use the procedure selected
below as its security procedure (the SECURITY PROCEDURE). The Security Procedure
will be used by the Custodian to verify the authenticity of a payment order or a
communication amending or canceling a payment order. The Custodian will act on
instructions received provided the instruction is authenticated by the Security
Procedure. The Company agrees and acknowledges in connection with (i) the size,
type and frequency of payment orders normally issued or expected to be issued by
the Company to the Custodian, (ii) all of the security procedures offered to the
Company by the Custodian, and (iii) the usual security procedures used by
customers and receiving banks similarly situated, that authentication through
the Security Procedure shall be deemed commercially reasonable for the
authentication of all payment orders submitted to the Custodian. The Company
hereby elects (PLEASE CHOOSE ONE) the following Security Procedure as described
below:
[ ] BIDS and BIDS Worldview Payment Products. BIDS and BIDS
Worldview Payment Products, are on-line payment order
authorization facilities with built-in authentication
procedures. The Custodian and the Company shall each be
responsible for maintaining the confidentiality of passwords or
other codes to be used by them in connection with BIDS. The
Custodian will act on instructions received through BIDS without
duty of further confirmation unless the Company notifies the
Custodian that its password is not secure.
[ ] SWIFT. The Custodian and the Company shall comply with SWIFT's
authentication procedures. The Custodian will act on
instructions received via SWIFT provided the instruction is
authenticated by the SWIFT system.
[ ] Tested Telex. The Custodian will accept payment orders sent by
tested telex, provided the test key matches the algorithmic key
the Custodian and Company have agreed to use.
[ ] Computer Transmission. The Custodian is able to accept
transmissions sent from the Company's computer facilities to the
Custodian's computer facilities provided such transmissions are
encrypted and digitally certified or are otherwise authenticated
in a reasonable manner based on available technology. Such
procedures shall be established in an operating protocol between
the Custodian and the Company.
[X] Telefax Instructions. A payment order transmitted to the
Custodian by telefax transmission shall transmitted by the
Company to a telephone number specified from time to time by the
Custodian for such purposes. If it detects no discrepancies, the
Custodian will then either:
1. If the telefax requests a repetitive payment
order, the Custodian may call the Company at its
last known telephone number, request to speak to
the Company or Authorized Person, and confirm
the authorization and the details of the payment
order (a CALLBACK); or
2. If the telefax requests a non-repetitive order,
the Custodian will perform a Callback.
All faxes must be accompanied by a fax cover sheet which
indicates the sender's name, company name, telephone number, fax
number, number of pages, and number of transactions or
instructions attached.
24
[ ] Telephonic. A telephonic payment order shall be called into the
Custodian at the telephone number designated from time to time
by the Custodian for that purpose. The caller shall identify
herself/himself as an Authorized Person. The Custodian shall
obtain the payment order data from the caller. The Custodian
shall then:
1. If a telephonic repetitive payment order, the
Custodian may perform a Callback; or
2. If a telephonic non-repetitive payment order,
the Custodian will perform a Callback.
In the event the Company chooses a procedure which is not a Security Procedure
as described above, the Company agrees to be bound by any payment order (whether
or not authorized) issued in its name and accepted by the Custodian in
compliance with the procedure selected by the Company.
3. Rejection of Payment Orders. The Custodian shall give the Company timely
notice of the Custodian's rejection of a payment order. Such notice may be given
in writing or orally by telephone, each of which is hereby deemed commercially
reasonable. In the event the Custodian fails to execute a properly executable
payment order and fails to give the Company notice of the Custodian's
non-execution, the Custodian shall be liable only for the Company's actual
damages and only to the extent that such damages are recoverable under UCC 4A
(as defined in Paragraph 7 below). Notwithstanding anything in this Funds
Transfer Services Schedule and the Agreement to the contrary, the Custodian
shall in no event be liable for any consequential or special damages under this
Funds Transfer Services Schedule, whether or not such damages relate to services
covered by UCC 4A, even if the Custodian has been advised of the possibility of
such damages. Whenever compensation in the form of interest is payable by the
Custodian to the Company pursuant to this Funds Transfer Services Schedule, such
compensation will be payable in accordance with UCC 4A.
4. Cancellation of Payment Orders. The Company may cancel a payment order but
the Custodian shall have no liability for the Custodian's failure to act on a
cancellation instruction unless the Custodian has received such cancellation
instruction at a time and in a manner affording the Custodian reasonable
opportunity to act prior to the Custodian's execution of the order. Any
cancellation shall be sent and confirmed in the manner set forth in Paragraph 2
above.
5. Responsibility for the Detection of Errors and Unauthorized Payment Orders.
Except as may be provided, the Custodian is not responsible for detecting any
Company error contained in any payment order sent by the Company to the
Custodian. In the event that the Company's payment order to the Custodian either
(i) identifies the beneficiary by both a name and an identifying or bank account
number and the name and number identify different persons or entities, or (ii)
identifies any bank by both a name and an identifying number and the number
identifies a person or entity different from the bank identified by name,
execution of the payment order, payment to the beneficiary, cancellation of the
payment order or actions taken by any bank in respect of such payment order may
be made solely on the basis of the number. The Custodian shall not be liable for
interest on the amount of any payment order that was not authorized or was
erroneously executed unless the Company so notifies the Custodian within thirty
(30) business days following the Company's receipt of notice that such payment
order had been processed. If a payment order in the name of the Company and
accepted by the Custodian was not authorized by the Company, the liability of
the parties will be governed by the applicable provisions of UCC 4A.
6. Laws and Regulations. The rights and obligations of the Custodian and the
Company with respect to any payment order executed pursuant to this Funds
Transfer Services Schedule will be governed by any applicable laws, regulations,
circulars and funds transfer system rules, the laws and regulations of the
United States of America and of other relevant countries including exchange
control regulations and limitations on dealings or other sanctions, and
including without limitation those sanctions imposed under the law of the United
States of America by the Office of Foreign Assets Control. Any taxes, fines,
costs, charges or fees imposed by relevant authorities on such transactions
shall be for the account of the Company.
7. Miscellaneous. All accounts opened by the Company or its authorized agents at
the Custodian subsequent to the date hereof shall be governed by this Funds
Transfer Schedule. All terms used in this Funds Transfer Services Schedule shall
have the meaning set forth in Article 4A of the Uniform Commercial Code as
currently in effect in the State of New York (UCC 4A) unless otherwise set forth
herein. The terms and conditions of this Funds Transfer Services Schedule are in
addition to, and do not modify or otherwise affect, the terms and conditions of
the Agreement and any other agreement or arrangement between the parties hereto.
25
8. Indemnification. The Custodian does not recommend the sending of instructions
by telefax or telephonic means as provided in Paragraph 2. BY ELECTING TO SEND
INSTRUCTIONS BY TELEFAX OR TELEPHONIC MEANS, THE COMPANY AGREES TO INDEMNIFY THE
CUSTODIAN AND ITS PARTNERS, OFFICERS AND EMPLOYEES FOR ALL LOSSES THEREFROM.
----------
OPTIONAL: The Custodian will perform a Callback if instructions
are sent by telefax or telephonic means as provided in Paragraph 2. THE
COMPANY MAY, AT ITS OWN RISK AND BY HEREBY AGREEING TO INDEMNIFY THE
CUSTODIAN AND ITS PARTNERS, OFFICERS AND EMPLOYEES FOR ALL LOSSES
THEREFROM, ELECT TO WAIVE A CALLBACK BY THE CUSTODIAN BY INITIALLING
HERE: __________
----------
Accepted and agreed:
XXXXX BROTHERS XXXXXXXX & CO. HOTCHKIS AND WILEY FUNDS
By: /s/ Xxxx Xxxxxxxxx By: /s/ Xxxxx X. Xxxxxx
------------------------------- -------------------------------
Name: Xxxx Xxxxxxxxx Name: Xxxxx X. Xxxxxx
Title: Managing Director Title: President
Date: 11 October 2001 Date: October 16, 2001
26
17f-5 DELEGATION SCHEDULE
By its execution of this Delegation Schedule dated as of October 10,
2001, HOTCHKIS AND WILEY FUNDS, a management investment company registered with
the Securities and Exchange Commission (the COMMISSION) under the Investment
Company Act of 1940, as amended, (the 1940 ACT), on behalf of each of the
portfolios listed on the Appendix "A" of the Custodian Agreement (each a FUND
and collectively the FUNDS), acting through its Board of Directors/Trustees or
its duly appointed representative, hereby appoints XXXXX BROTHERS XXXXXXXX &
CO., a New York limited partnership with an office in Boston, Massachusetts (the
DELEGATE) as its delegate to perform certain functions with respect to the
custody of Fund's Assets outside the United States.
1. Maintenance of Fund's Assets Abroad. The Fund, acting through its Board or
its duly authorized representative, hereby instructs Delegate pursuant to the
terms of the Custodian Agreement dated as of the date hereof executed by and
between the Fund and the Delegate (the CUSTODIAN AGREEMENT) to place and
maintain the Fund's Assets in countries outside the United States in accordance
with Instructions received from the Fund's Investment Advisor. Such instruction
shall represent an Instruction under the terms of the Custodian Agreement. The
Fund acknowledges that (a) the Delegate shall perform services hereunder only
with respect to the countries where it accepts delegation as Foreign Custody
Manager as indicated on your Global Custody Network Listing; (b) depending on
conditions in the particular country, advance notice may be required before the
Delegate shall be able to perform its duties hereunder in or with respect to
such country (such advance notice to be reasonable in light of the specific
facts and circumstances attendant to performance of duties in such country); and
(c) nothing in this Delegation Schedule shall require the Delegate to provide
delegated or custodial services in any country, and there may from time to time
be countries as to which the Delegate determines it will not provide delegation
services.
2. Delegation. Pursuant to the provisions of Rule 17f-5 under the 1940 Act, the
Board hereby delegates to the Delegate, and the Delegate hereby accepts such
delegation and agrees to perform,
1
only those duties set forth in this Delegation Schedule concerning the
safekeeping of the Fund's Assets in each of the countries as to which it acts as
the Board's delegate. The Delegate is hereby authorized to take such actions on
behalf of or in the name of the Fund as are reasonably required to discharge its
duties under this Delegation Schedule, including, without limitation, to cause
the Fund's Assets to be placed with a particular Eligible Foreign Custodian in
accordance herewith. The Fund confirms to the Delegate that the Fund or its
investment adviser has considered the Sovereign Risk and prevailing Country Risk
(as defined in Sections 9.1.3 and 9.1.2, respectively, of the Custodian
Agreement) as part of its continuing investment decision process, including such
factors as may be reasonably related to the systemic risk of maintaining the
Fund's Assets in a particular country, including, but not limited to, financial
infrastructure, prevailing custody and settlement systems and practices
(including the use of any Securities Depository in the context of information
provided by the Custodian in the performance of its duties as required under
Rule 17f-7 and the terms of the Custodian Agreement governing such duties), and
the laws relating to the safekeeping and recovery of the Fund's Assets held in
custody pursuant to the terms of the Custodian Agreement.
3. Selection of Eligible Foreign Custodian and Contract Administration. The
Delegate shall perform the following duties with respect to the selection of
Eligible Foreign Custodians and administration of certain contracts governing
the Fund's foreign custodial arrangements:
(a) Selection of Eligible Foreign Custodian. The Delegate shall
place and maintain the Fund's Assets with an Eligible Foreign Custodian;
provided that the Delegate shall have determined that the Fund's Assets will be
subject to reasonable care based on the standards applicable to custodians in
the relevant market after considering all factors relevant to the safekeeping of
such assets including without limitation:
(i) The Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical
protections available for certificated securities (if applicable), the
controls and procedures for dealing with any Securities Depository, the
method of keeping custodial records, and the security and data protection
practices;
(ii) Whether the Eligible Foreign Custodian has the requisite
financial strength to provide reasonable care for the Fund's Assets;
(iii) The Eligible Foreign Custodian's general reputation and
standing; and
(iv) Whether the Fund will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such as by
virtue of the existence of any offices of such
2
Eligible Foreign Custodian in the United States or such Eligible Foreign
Custodian's appointment of an agent for service of process in the United
States or consent to jurisdiction in the United States.
The Delegate shall be required to make the foregoing determination to the best
of its knowledge and belief based only on information reasonably available to
it.
(b) Contract Administration. The Delegate shall cause that the
foreign custody arrangements with an Eligible Foreign Custodian shall be
governed by a written contract that the Delegate has determined will provide
reasonable care for Fund assets based on the standards applicable to custodians
in the relevant market. Each such contract shall, except as set forth in the
last paragraph of this subsection (b), include provisions that provide:
(i) For indemnification or insurance arrangements (or any
combination of the foregoing) such that the Fund will be adequately
protected against the risk of loss of assets held in accordance with such
contract;
(ii) That the Fund's Assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the
Eligible Foreign Custodian or its creditors except a claim of payment for
their safe custody or administration or, in the case of cash deposits,
liens or rights in favor of creditors of such Custodian arising under
bankruptcy, insolvency or similar laws;
(iii) That beneficial ownership of the Fund's Assets will be
freely transferable without the payment of money or value other than for
safe custody or administration;
(iv) That adequate records will be maintained identifying the
Fund's Assets as belonging to the Fund or as being held by a third party
for the benefit of the Fund;
(v) That the Fund's independent public accountants will be given
access to those records described in (iv) above or confirmation of the
contents of such records; and
(vi) That the Delegate will receive sufficient and timely periodic
reports with respect to the safekeeping of the Fund's Assets, including,
but not limited to, notification of any transfer to or from the Fund's
account or a third party account containing the Fund's Assets.
Such contract may contain, in lieu of any or all of the provisions
specified in this Section 3(b), such other provisions that the Delegate
determines will provide, in their entirety, the same or a greater level
of care and protection for the Fund's Assets as the specified provisions,
in their
3
entirety.
(c) Limitation to Delegated Selection. Notwithstanding anything in this
Delegation Schedule to the contrary, the duties under this Section 3 shall apply
only to Eligible Foreign Custodians selected by the Delegate and shall not apply
to Securities Depositories or to any Eligible Foreign Custodian that the
Delegate is directed to use pursuant to Section 7 of this Delegation Schedule.
4. Monitoring. The Delegate shall establish a system to monitor at reasonable
intervals (but at least annually) the appropriateness of maintaining the Fund's
Assets with each Eligible Foreign Custodian that has been selected by the
Delegate pursuant to Section 3 of this Delegation Schedule. The Delegate shall
monitor the continuing appropriateness of placement of the Fund's Assets in
accordance with the criteria established under Section 3(a) of this Delegation
Schedule. The Delegate shall monitor the continuing appropriateness of the
contract governing the Fund's arrangements in accordance with the criteria
established under Section 3(b) of this Delegation Schedule.
5. Reporting. At least annually and more frequently as mutually agreed between
the parties, the Delegate shall provide to the Board written reports specifying
placement of the Fund's Assets with each Eligible Foreign Custodian selected by
the Delegate pursuant to Section 3 of this Delegation Schedule and shall
promptly report as to any material changes to such foreign custody arrangements.
Delegate will prepare such a report with respect to any Eligible Foreign
Custodian that the Delegate has been instructed to use pursuant to Section 7 of
this Delegation Schedule only to the extent specifically agreed with respect to
the particular situation.
6. Withdrawal of Fund's Assets. If the Delegate determines that an arrangement
with a specific Eligible Foreign Custodian selected by the Delegate under
Section 3 of this Delegation Schedule no longer meets the requirements of said
Section, Delegate shall withdraw the Fund's Assets from the non-complying
arrangement as soon as reasonably practicable; provided, however, that if in the
reasonable judgment of the Delegate, such withdrawal would require liquidation
of any of the Fund's Assets or would materially impair the liquidity, value or
other investment characteristics of the Fund's Assets, it shall be the duty of
the Delegate to provide information regarding the particular circumstances and
to act only in accordance with Instructions of the Fund or its Investment
Advisor with respect to such liquidation or other withdrawal.
4
7. Direction as to Eligible Foreign Custodian. Notwithstanding this Delegation
Schedule, the Fund, acting through its Board, its Investment Advisor or its
other authorized representative, may direct the Delegate to place and maintain
the Fund's Assets with a particular Eligible Foreign Custodian, including
without limitation with respect to investment in countries as to which the
Custodian will not provide delegation services. In such event, the Delegate
shall be entitled to rely on any such instruction as an Instruction under the
terms of the Custodian Agreement and shall have no duties under this Delegation
Schedule with respect to such arrangement save those that it may undertake
specifically in writing with respect to each particular instance.
8. Standard of Care. In carrying out its duties under this Delegation Schedule,
the Delegate agrees to exercise reasonable care, prudence and diligence such as
a person having responsibility for safekeeping the Fund's Assets would exercise.
9. Representations. The Delegate hereby represents and warrants that it is a
U.S. Bank and that this Delegation Schedule has been duly authorized, executed
and delivered by the Delegate and is a legal, valid and binding agreement of the
Delegate.
The Fund hereby represents and warrants that its Board of Trustees
has determined that it is reasonable to rely on the Delegate to perform the
delegated responsibilities provided for herein and that this Delegation Schedule
has been duly authorized, executed and delivered by the Fund and is a legal,
valid and binding agreement of the Fund.
10. Effectiveness; termination. This Delegation Schedule shall be effective as
of the date on which this Delegation Schedule shall have been accepted by the
Delegate, as indicated by the date set forth below the Delegate's signature.
This Delegation Schedule may be terminated at any time, without penalty, by
written notice from the terminating party to the non-terminating party. Such
termination shall be effective on the 30th calendar day following the date on
which the non-terminating party shall receive the foregoing notice. The
foregoing to the contrary notwithstanding, this Delegation Schedule shall be
deemed to have been terminated concurrently with the termination of the
Custodian Agreement.
11. Notices. Notices and other communications under this Delegation Schedule are
to be made in accordance with the arrangements designated for such purpose under
the Custodian Agreement unless otherwise indicated in a writing referencing this
Delegation Schedule and executed by both parties.
5
12. Definitions. Capitalized terms in this Delegation Schedule have the
following meanings:
a. Eligible Foreign Custodian - shall have the meaning set forth
in Rule 17f-5(a)(1) and shall also include a U.S. Bank.
b. Fund's Assets - shall mean any of the Fund's investments
(including foreign currencies) for which the primary market is
outside the United States, and such cash and cash equivalents as
are reasonably necessary to effect the Fund's transactions in such
investments.
c. Instructions - shall have the meaning set forth in the
Custodian Agreement.
d. Securities Depository - shall have the meaning set forth in
Rule 17f-7.
e. Sovereign Risk - shall have the meaning set forth in Section
9.1.3 of the Custodian Agreement.
f. U.S. Bank - shall mean a bank which qualifies to serve as a
custodian of assets of investment companies under Section 17(f) of
the Act.
13. Governing Law and Jurisdiction. THIS DELEGATION SCHEDULE SHALL BE CONSTRUED
IN ACCORDANCE WITH, AND BE GOVERNED BY THE LAWS OF, THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW OF SUCH STATE. THE PARTIES HERETO
IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK AND THE FEDERAL COURTS LOCATED IN NEW YORK CITY IN THE BOROUGH OF
MANHATTAN.
14. Fees. Delegate shall perform its functions under this Delegation Schedule
for the compensation determined under the Custodian Agreement.
15. Integration. This Delegation Schedule sets forth all of the Delegate's
duties with respect to the selection and monitoring of Eligible Foreign
Custodians, the administration of contracts with Eligible Foreign Custodians,
the withdrawal of assets from Eligible Foreign Custodians and the issuance of
reports
6
in connection with such duties. The terms of the Custodian Agreement shall apply
generally as to matters not expressly covered in this Delegation Schedule,
including dealings with the Eligible Foreign Custodians in the course of
discharge of the Delegate's obligations under the Custodian Agreement.
7
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed as of the date first above written.
XXXXX BROTHERS XXXXXXXX & CO. HOTCHKIS AND WILEY FUNDS
By: /s/ Xxxx Xxxxxxxxx By: /s/ Xxxxx X. Xxxxxx
------------------------------- -------------------------------
Name: Xxxx Xxxxxxxxx Name: Xxxxx X. Xxxxxx
Title: Managing Director Title: President
8
APPENDIX "A"
TO
CUSTODIAN AGREEMENT
BETWEEN
HOTCHKIS AND WILEY FUNDS
and
XXXXX BROTHERS XXXXXXXX & CO.
Dated as of October 10, 2001
The following is a list of Funds for which the Custodian shall serve under a
Custodian Agreement dated as of October 10, 2001 (the "Agreement"):
Hotchkis and Wiley Large Cap Value Fund
Hotchkis and Wiley Mid-Cap Value Fund
Hotchkis and Wiley Small Cap Value Fund
Hotchkis and Wiley Equity Fund for Insurance Companies
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to be
executed in its name and on behalf of each such Fund.
HOTCHKIS AND WILEY FUNDS XXXXX BROTHERS XXXXXXXX & CO.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxx Xxxxxxxxx
------------------------------- -------------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxx Xxxxxxxxx
Title: President Title: Managing Director
9
GLOBAL CUSTODY FEE SCHEDULE
BETWEEN
XXXXX BROTHERS XXXXXXXX & CO.
AND
HOTCHKIS AND WILEY CAPITAL MANAGEMENT LLC
AND
EACH OF THE U.S. DOMICILED HOTCHKIS AND WILEY FUNDS LISTED ON APPENDIX "A".
SEPTEMBER 2001
GLOBAL CUSTODY - payable monthly on value of assets per portfolio:
Domestic:
--------
Asset Charge Transaction Charge
------------ ------------------
United States .5 First $400 Million $5
.4 Next $1.6 Billion
.3 Over $2 Billion
Foreign:
--------
Asset Charge Transaction Charge
------------ ------------------
Argentina 25 basis points $90
Australia 6 basis points $25
Austria 5 basis points $75
Bahrain 55 basis points $175
Bangladesh 40 basis points $100
Belgium 8 basis points $60
Botswana 40 basis points $100
Brazil 35 basis points - includes Local Admin. $50
Canada 3 basis points $25
Chile 30 basis points $70
30 basis points - Local Admin.
China 25 basis points $90
Colombia 35 basis points $100
35 basis points - Local Admin.
Croatia 60 basis points $100
Czech Rep. 40 basis points $60
Denmark 6 basis points $40
Ecuador 50 basis points $100
Egypt 45 basis points $120
Estonia 40 basis points $150
Euroclear 3 basis points $25
Finland 8 basis points $40
France 4 basis points $40
Germany 3 basis points $25
Ghana 50 basis points $150
Greece 40 basis points $100 on premise
Asset Charge Transaction Charge
------------ ------------------
Hong Kong 6 basis points $40
Hungary 40 basis points $100
India 35 basis points $100
Indonesia 15 basis points $75
Ireland 7 basis points $25
Israel 35 basis points $50
Italy 6 basis points $60
Japan 35 basis points $20
Jordan 40 basis points $100
Kenya 50 basis points $150
Korea 20 basis points $50
Latvia 40 basis points $75
Lebanon 45 basis points $90
Lithuania 45 basis points $50
Malaysia 10 basis points $50
Mauritius 45 basis points $115
Mexico 12 basis points $50
Morocco 40 basis points $100
Netherlands 6 basis points $30
New Zealand 7 basis points $40
Norway 8 basis points $40
Oman 55 basis points $175
Pakistan 40 basis points $100
Xxxx 00 basis points $100
Philippines 18 basis points $75
Poland 40 basis points $100
Portugal 18 basis points $40
Russia 65 basis points $175
Singapore 8 basis points $40
Xxxxxx Xxxxxxxx 00 basis points $125
Slovenia 50 basis points $110
South Africa 10 basis points $30
Spain 7 basis points $40
Sri Lanka 30 basis points $70
Swaziland 50 basis points $65
Sweden 6 basis points $40
Switzerland 5 basis points $40
Taiwan 20 basis points $75
Thailand 12 basis points $45
Turkey 35 basis points $100
United Kingdom 3 basis points $20
Uruguay 45 basis points $65
Venezuela 40 basis points $100
Zambia 50 basis points $70
Zimbabwe 40 basis points $100
Other Transactions:
-------------------
Wires and Transfers $4 (automated)
$10 (non-automated)
Third Party Foreign Exchange (Spot Only) $10
Third Party Derivatives (Currency and Security) $15
Forwards, Futures, Options, Swaps, etc.
Non-Automated Trade Instructions(1) $15
On-Line Transaction Repair(2) $15
BBH&CO. OUT-OF-POCKET EXPENSES
There will be no BBH&Co. out-of-pocket expenses passed on to the fund
unless agreed upon in advance.
SUBCUSTODIAN OUT-OF-POCKET EXPENSES
Subcustodian out-of-pocket expenses in the form of dividend and interest
collection, tax reclaim filings, taxes, registration, transfer, stamp duty,
handling, withdrawal, and proxy fees will be passed through to the fund. The
cost of transporting securities within or between markets is for the account of
the fund.
RUSSIA: Expenses include, but are not limited to, travel expenses, registration
fees for shares, transportation, and insurance costs, and will be charged as
incurred. Estimated costs may be provided prior to investment.
Any countries not shown on the current fee schedule will be negotiated
at the time of investment.
/s/ Xxxxxxx X. XxXxxxxx /s/ Xxxxx X. Xxxxxx
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Xxxxx Brothers Xxxxxxxx & Co. Hotchkis and Wiley Capital Management LLC
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(1) A non-automated instruction charge will be assesed on a per instruction
basis for all instructions which are not provided to BBH in properly formatted
SWIFT or ISITC form.
(2) An on-line transaction repair charge will be assessed on a per instruction
basis for all instructions which require manual intervention to process.
APPENDIX "A"
Hotchkis and Wiley Large Cap Value Fund
Hotchkis and Wiley Small Cap Value Fund
Hotchkis and Wiley Mid-Cap Value Fund
Hotchkis and Wiley Equity Fund for Insurance Companies
