THIRD AMENDED AND RESTATED
ADMINISTRATIVE, FUND ACCOUNTING
AND TRANSFER AGENCY SERVICES AGREEMENT
THIRD AMENDED AND RESTATED ADMINISTRATIVE, FUND ACCOUNTINGAND TRANSFER AGENCY
SERVICES AGREEMENT dated as of May 31, 2002, as amended August 8, 2002, January
31, 2005, and April 30, 2005 between Diamond Hill Funds (the "Trust"), an Ohio
business trust, and Diamond Hill Capital Management, Inc. ("DHCM"), an Ohio
corporation.
WHEREAS, the Trust has been organized to operate as an open-end management
investment company registered under the Investment Company Act of 1940 (the
"Act"); and
WHEREAS, the Trust has engaged DHCM to act as investment adviser to one or
more of the Trust's several series, as they are duly authorized and offered, a
complete list of which is set forth on Schedule A attached hereto, as it may be
amended from time to time (individually a "Fund" and collectively the "Funds");
and
WHEREAS, the Trust wishes to retain DHCM to perform certain
administrative, fund accounting and transfer agency services as hereinafter
described on behalf of the Funds; provided, however, that DHCM is authorized at
its own expense to contract with other service providers to perform any or all
of the administrative, fund accounting and transfer agency services hereinafter
described; and
WHEREAS, DHCM wishes to provide, or arrange for the provision of, such
services to the Trust under the conditions set forth below;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained in this Agreement, the Trust and DHCM agree as follows:
1. Employment. The Trust, being duly authorized, hereby employs DHCM to
perform the services described in this Agreement. DHCM shall perform such
services upon the terms and conditions hereinafter set forth. Any services
undertaken by DHCM pursuant to this Agreement, as well as any other activities
undertaken by DHCM on behalf of the Trust pursuant hereto, shall at all times be
subject to any directives of the Board of Trustees of the Trust.
2. Trust Administration. DHCM shall give the Trust the benefit of its best
judgment, efforts and facilities in rendering its administrative services. DHCM
shall at all times conform to: (i) all applicable provisions of the Act and any
rules and regulations adopted thereunder, (ii) the provisions of the
Registration Statement of the Trust under the Securities Act of 1933 and the Act
as amended from time to time, (iii) the provisions of the Amended and Restated
Agreement and Declaration of Trust and the By-Laws of the Trust, as each shall
be amended from time to time and (iv) any other applicable provisions of state
and federal law.
Subject to the direction and control of the Trust, DHCM shall supervise
the Fund's business affairs not otherwise supervised by other agents of the
Trust. To the extent not otherwise the primary responsibility of, or provided
by, other parties under agreement with the Trust, DHCM shall supply (i)
non-investment related statistical and research data, (ii) internal regulatory
compliance services, and (iii) executive and administrative services. DHCM shall
supervise the preparation of (i) tax returns, (ii) reports to shareholders of
the Fund, (iii) reports to and filings with the Securities and Exchange
Commission, state securities commissions and Blue Sky authorities including
preliminary and definitive proxy materials and post-effective amendments to the
Fund's registration statement, and (iv) necessary materials for meetings of the
Trust's Board of Trustees. DHCM shall provide personnel to serve as officers of
the Trust if so elected by the Board of Trustees. Executive and administrative
services include, but are not limited to, the coordination of all third parties
furnishing services to the Fund, review of the books and records of the Trust
maintained by such third parties, and the review and submission to the officers
of the Trust for their approval, of invoices or other requests for payment of
Trust expenses; and such other action with respect to the Trust as may be
necessary in the opinion of DHCM to perform its duties hereunder.
3. Fund Accounting. DHCM shall maintain and keep current the general
ledger for each of the Funds of the Trust, recording all income and expenses,
capital share activity and security transactions of the Trust. DHCM shall
calculate the net asset value of each of the Funds of the Trust and the per
share net asset value of each of the Funds of the Trust, in accordance with the
Trust's current prospectus and statement of additional information, once daily
as of the time selected by the Trust's Board of Trustees. DHCM shall prepare and
maintain a daily valuation of all securities and other assets of the Trust in
accordance with instructions from a designated officer of the Trust and in the
manner set forth in the Trust's current prospectus and statement of additional
information. In valuing securities of the Trust, DHCM may contract with, and
rely upon market quotations provided by, outside services.
DHCM shall also perform all such fund accounting services and duties as
are customary and necessary in the industry, including but not limited to: DHCM
shall process each request received from the Trust or its authorized agents for
payment of the Trust's expenses. Upon receipt of written instructions signed by
an officer or other authorized agent of the Trust, DHCM shall prepare checks in
the appropriate amounts which shall be signed by an authorized officer of DHCM
and mailed to the appropriate party.
4. Transfer Agency. DHCM shall record the issuance of shares of the Trust
and maintain pursuant to applicable rules of the SEC a record of the total
number of shares of the Trust which are authorized, issued and outstanding,
based upon data provided to it by the Trust. DHCM shall also provide the Trust
on a regular basis or upon reasonable request the total number of shares which
are authorized, issued and outstanding, but shall have no obligation when
recording the issuance of the Trust's shares, except as otherwise set forth
herein, to monitor the issuance of such shares or to take cognizance of any laws
relating to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust. DHCM shall not handle physical shares. Upon receipt
of a proper request for transfer and upon surrender to DHCM of certificates, if
any, in proper form for transfer, DHCM shall approve such transfer and shall
take all necessary steps to effectuate the transfer as indicated in the transfer
request. Upon approval of the transfer, DHCM shall notify the Trust in writing
of each such transaction and shall make appropriate entries on the shareholder
records maintained by DHCM.
DHCM shall also perform all such transfer agency services and duties as
are customary and necessary in the industry, including but not limited to:
accounting for and processing checks received for purchase of shares of the
various series; processing purchase orders for shares of the various series;
processing returned checks; processing dividends and distributions as and when
made by the Trust; accounting for unclaimed dividends and unclaimed redemption
proceeds; processing redemptions and exchanges; processing automatic withdrawal
orders pursuant to the provisions of withdrawal plans duly executed by
shareholders; processing wire-order purchases; withholding such sums as are
required to be withheld under applicable federal and state income tax laws,
rules and regulations; create and maintain all records required by applicable
laws, rules and regulations, including but not limited to records required by
Section 31(a) of the Act and the rules thereunder; maintain records for each
shareholder account and receive and answer all shareholder and dealer inquiries
relating to account status, share purchases, redemptions and exchanges and other
investment plans available to Trust shareholders.
5. Allocation of Charges and Expenses. DHCM will pay all operating
expenses of the Fund not specifically assumed by the Fund, including without
limitation the compensation and expenses of any employees of the Fund and of any
other persons rendering any services to the Fund; clerical and shareholder
service staff salaries; office space and other office expenses; fees and
expenses incurred by the Fund in connection with membership in investment
company organizations; legal, auditing and accounting expenses; expenses of
registering shares under federal and state securities laws, including expenses
incurred by the Fund in connection with the organization and initial
registration of shares of the Fund; insurance expenses; fees and expenses of the
custodian, transfer agent, dividend disbursing agent, shareholder service agent,
plan agent, administrator (excluding fees and expenses payable to DHCM under
this Agreement), accounting and pricing services agent and principal underwriter
of the Fund; expenses, including clerical expenses, of issue, sale, redemption
or repurchase of shares of the Fund; the cost of preparing and distributing
reports and notices to shareholders, the cost of printing or preparing
prospectuses and statements of additional information for delivery to the Fund's
current shareholders; the cost of printing or preparing stock certificates or
any other documents, statements or reports to shareholders; expenses of
shareholders' meetings and proxy solicitations; and all other operating expenses
not specifically assumed by the Fund.
The Fund will pay all brokerage fees and commissions, taxes, borrowing
costs (such as (a) interest and (b) dividend expenses on securities sold short),
fees and expenses of trustees of the Trust who are not interested persons of the
Trust, as defined in the Act, and such extraordinary or non-recurring expenses
as may arise, including litigation to which the Fund may be a party and
indemnification of the Trust's trustees and officers with respect thereto. The
Fund will also pay the fees paid pursuant to its Management Agreement between
DHCM and the Trust, and all expenses which it is authorized to pay pursuant to
Rule 12b-1 under the 1940 Act. DHCM may obtain reimbursement from the Fund, at
such time or times as DHCM may determine in its sole discretion, for any of the
expenses advanced by DHCM, which the Fund is obligated to pay, and such
reimbursement shall not be considered to be part of DHCM's compensation pursuant
to this Agreement.
6. Record Keeping and Other Information. DHCM shall create and maintain
all necessary records in accordance with all applicable laws, rules and
regulations, including but not limited to records required by Section 31(a) of
the Act and the rules thereunder, as the same may be amended from time to time,
pertaining to the various functions performed by it and not otherwise created
and maintained by another party pursuant to contract with the Trust. Where
applicable, such records shall be maintained by DHCM for the periods and in the
places required by Rule 31a-2 under the Act.
7. Audit, Inspection and Visitation. DHCM shall make available to the
Trust during regular business hours all records and other data created and
maintained pursuant to the foregoing provisions of this Agreement for reasonable
audit and inspection by the Trust or any regulatory agency having authority over
the Trust.
8. Compensation. For the performance of DHCM's obligations under this
Agreement, each Fund listed on Schedule A shall pay DHCM, on the first business
day following the end of each month, a fee at an annual rate of 0.40% of the
average daily net assets of the Class A and C shares of each Fund, and at an
annual rate of 0.20% of the average daily net assets of the Class I shares of
each Fund.
The average value of the daily net assets of the different classes of
shares of each Fund shall be determined pursuant to the applicable provisions of
the Amended and Restated Agreement and Declaration of Trust of the Trust or a
resolution of the Board, if required. If, pursuant to such provisions, the
determination of net asset value of a Fund is suspended for any particular
business day, then for the purposes of this paragraph, the value of the net
assets of a Fund as last determined shall be deemed to be the value of the net
assets as of the close of the business day, or as of such other time as the
value of a Fund's net assets may lawfully be determined, on that day. If the
determination of the net asset value of a Fund has been suspended for a period
including such month, DHCM's compensation payable at the end of such month shall
be computed on the basis of the value of the net assets of that Fund as last
determined (whether during or prior to such month).
9. Limitation of Liability. DHCM may rely on information reasonably
believed by it to be accurate and reliable. Except as may otherwise be required
by the Act or the rules thereunder, neither DHCM nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof
(collectively, the "DHCM Employees") shall be subject to any liability for, or
any damages, expenses or losses incurred by the Trust in connection with, any
error of judgment, mistake of law, any act or omission in connection with or
arising out of any services rendered under or payments made pursuant to this
Agreement or any other matter to which this Agreement relates, except by reason
of willful misfeasance, bad faith or gross negligence on the part of any such
persons in the performance of the duties of DHCM under this Agreement or by
reason of reckless disregard by any of such persons of the obligations and
duties of DHCM under this Agreement. Any person, even though also a director,
officer, employee, shareholder or agent of DHCM, who may be or become an
officer, trustee, employee or agent of the Trust, shall be deemed, when
rendering services to the Trust or acting on any business of the Trust (other
than services or business in connection with DHCM's duties hereunder), to be
rendering such services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent, or one under the control or direction
of DHCM, even though paid by it.
10. Indemnification of DHCM. Subject to and except as otherwise provided
in the Securities Act of 1933, as amended, and the Act, the Trust shall
indemnify DHCM and each DHCM Employee (hereinafter collectively referred to as a
"Covered Person") against all liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such person may be or
may have been threatened, while serving as the administrator for the Trust or as
a DHCM Employee, or, thereafter, by reason of being or having been the
administrator for the Trust or a DHCM Employee, including but not limited to
liabilities arising due to any misrepresentation or misstatement in the Trust's
prospectus, other regulatory filings, and amendments thereto, or in other
documents originating from the Trust. In no case shall a Covered Person be
indemnified against any liability to which such Covered Person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties of such Covered Person.
11. Services for Others. Nothing in this Agreement shall prevent DHCM or
any affiliated person of DHCM from providing services for any other person, firm
or corporation, including other investment companies; provided, however, that
DHCM expressly represents that it will undertake no activities which, in its
judgment, will adversely affect the performance of its obligations to the Trust
under this Agreement.
12. Compliance with the Act. The parties hereto acknowledge and agree that
nothing contained herein shall be construed to require DHCM to perform any
services for any series of the Trust which services could cause DHCM to be
deemed an "investment adviser" of the Fund within the meaning of Section
2(a)(20) of the Act or to supersede or contravene the Prospectus or Statement of
Additional Information of any series of the Trust or any provisions of the Act
and the rules thereunder.
13. Renewal and Termination. This Agreement shall become effective on the
date first above written and shall remain in force until May 31, 2003, and from
year to year thereafter, but only so long as such continuance is specifically
approved at least annually by the vote of a majority of the Trustees who are not
interested persons of the Trust or DHCM, cast in person at a meeting called for
the purpose of voting on such approval and by a vote of the Board of Trustees or
of a majority of the Fund's outstanding voting securities. This Agreement may be
terminated without the payment of any penalty by either party upon sixty (60)
days' written notice to the other party. Upon the termination of this Agreement,
the Trust shall pay DHCM such compensation as may be payable for the period
prior to the effective date of such termination.
14. The Trust. The term "Diamond Hill Funds" means and refers to the
Trustees from time to time serving under the Trust's Agreement and Declaration
of Trust as the same may subsequently thereto have been, or subsequently hereto
may be, amended. It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agent or employees of the Trust, personally, but bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.
15. Miscellaneous. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
Diamond Hill Funds
By: /s/ Xxxxx X. Xxxxx
--------------------------
Xxxxx X. Xxxxx
Its: President
Diamond Hill Capital Management, Inc.
By: /s/ X.X. Xxxxxx
--------------------------
X.X. Xxxxxx
Its: President
Schedule A
April 30, 2005
Diamond Hill Small Cap Fund
Diamond Hill Large Cap Fund
Diamond Hill Focus Long-Short Fund
Diamond Hill Bank & Financial Fund
Diamond Hill Short Term Fixed Income Fund
Diamond Hill Strategic Income Fund
