8-K: Advent Fund Consolidates Key Services with BNY Mellon

Advent Convertible and Income Fund has entered into new agreements with The Bank of New York Mellon for fund administration, accounting, and custody services, replacing prior arrangements.

Summary

• Advent Convertible and Income Fund (NYSE: AVK) entered into a new Fund Administration and Accounting Agreement with The Bank of New York Mellon (BNY) effective December 15, 2025.
• The Fund also entered into new Custody Agreement and Foreign Custody Manager Agreement with BNY, amending and replacing prior agreements with BNY dated May 2, 2003.
• In conjunction with these new agreements, the Fund terminated its existing administration and accounting agreement with MUFG Investor Services (US) LLC (MUFG).
• The Fund also terminated its prior custody and foreign custody manager agreements with BNY.
• BNY will perform administrative functions, bookkeeping, accounting, and pricing functions for the Fund.
• BNY will serve as the Fund's custodian, holding securities and cash, and provide foreign custody manager services.
• Fees for BNY's services are accrued daily and paid monthly, based on the average daily net assets of the Fund, subject to a minimum fee per year, plus certain charges for securities transactions.
• The Fund will reimburse BNY for certain out-of-pocket expenses.
• No termination or other fees are payable by the Fund in connection with the termination of the prior agreements, other than ordinary course payments through the effective date of termination.

Sentiment

Score: 7

Explanation: The filing describes a routine operational change to consolidate and update fund administration, accounting, and custody services with a reputable provider, BNY Mellon. While not directly impacting financial performance, it suggests a move towards operational efficiency and updated compliance frameworks. No immediate negative financial implications are apparent, and the transition appears smooth with no termination fees.

Positives

• Consolidation of critical fund services (administration, accounting, custody) with a single, major financial institution, BNY Mellon, potentially streamlining operations and improving efficiency.
• The new agreements update and replace prior arrangements, ensuring the Fund's service framework is current and compliant with evolving regulatory standards.
• No significant termination fees were incurred for ending the previous agreements, indicating a smooth transition.

Negatives

• Fees for BNY's services are based on average daily net assets, meaning higher fund assets will result in higher service costs.
• The Fund is responsible for reimbursing BNY for certain out-of-pocket expenses, which could add to operational costs.

Risks

• BNY is not liable for losses caused by circumstances beyond its reasonable control, such as natural disasters, strikes, or system failures.
• BNY is not responsible for the accuracy or completeness of third-party data (e.g., Market Data) and will not be liable for losses resulting from inaccurate or incomplete data.
• BNY does not provide tax advice; the Fund is solely responsible for understanding and complying with its Tax Obligations.
• The Foreign Custody Manager's determination of appropriateness does not include evaluation of 'Country Risks' (e.g., financial infrastructure, nationalization, currency controls) associated with foreign investments.
• BNY's liability is limited to direct damages caused by its failure to meet the 'Standard of Care' and excludes indirect, incidental, consequential, exemplary, punitive, or special losses.
• BNY's total maximum aggregate liability under the Fund Administration and Accounting Agreement is capped at the fees paid for services over the preceding twelve months.
• The Fund assumes full responsibility for all risks associated with BNY's delivery of securities or cash in accordance with customary settlement practices, which may not be simultaneous.
• BNY is not obligated to advance its own funds if an instruction would result in an overdraft in an account.
• The Fund is responsible for identifying securities requiring U.S. tax treatment that differs from U.S. generally accepted accounting principles; BNY only processes identified securities.

Future Outlook

The new agreements are expected to provide comprehensive administrative, accounting, and custody services, ensuring the Fund's continued operational efficiency and compliance with regulatory requirements. BNY will continue to monitor custody risks for foreign assets and advise the Fund of any material changes.

Management Comments

• Robert White, Chief Financial Officer, signed the Form 8-K, indicating management's approval and authorization of these new agreements.

Industry Context

This announcement reflects a common industry practice among investment funds to periodically review and update their service provider relationships. Consolidating fund administration, accounting, and custody services with a single, large, and reputable provider like BNY Mellon can lead to enhanced operational synergies, improved data integration, and potentially more robust compliance frameworks, aligning with broader trends towards efficiency and risk management in the financial sector. BNY Mellon is a leading global provider in these service areas.

Comparison to Industry Standards

• BNY Mellon is a top-tier global custodian and fund administrator, comparable to industry leaders such as State Street, JP Morgan, and Northern Trust, offering a comprehensive suite of services.
• The 'Standard of Care' defined in the agreements (prudent professional administrator/custodian) is a widely accepted benchmark in service agreements for registered investment companies.
• The requirement for BNY to provide annual SOC 1 and, upon request, SOC 2 reports is an industry standard for demonstrating internal controls over financial reporting and information security.
• The liability limitations, including the exclusion of indirect/consequential damages and the cap on direct damages, are standard clauses found in similar service agreements within the financial services industry.
• The detailed provisions for foreign custody management, including adherence to Rule 17f-5 and Rule 17f-7 under the 1940 Act, reflect standard regulatory compliance practices for funds investing in international markets.

Corporate Governance

Stakeholder Impact

• Shareholders: Potential for improved operational efficiency and regulatory compliance, indirectly benefiting shareholders through better fund management and risk mitigation. No direct financial impact is immediately visible.
• Customers (Fund Investors): Enhanced security and regulatory compliance for their investments due to updated and consolidated service agreements with a major financial institution.
• Suppliers (Service Providers): MUFG Investor Services (US) LLC loses its administration and accounting contract. The Bank of New York Mellon gains expanded and updated contracts for administration, accounting, and custody services.

Next Steps

• BNY will commence or continue providing fund administration, accounting, and custody services to the Fund under the new agreements.
• The Fund will continue to provide BNY with necessary instructions, explanations, information, and documentation for service performance.
• BNY will provide annual SOC 1 and, upon request, SOC 2 reports to the Fund.
• BNY, as Foreign Custody Manager, will monitor custody risks for foreign assets and advise the Fund of any material changes.

Key Dates

Recommendation

The filing details a standard operational update where the fund is consolidating and renewing its administration, accounting, and custody services with a well-established industry provider, BNY Mellon. This move is generally seen as a positive for operational efficiency and regulatory compliance, but it does not present new information that would fundamentally alter the investment thesis or warrant a change in current holdings. The financial terms are standard for such services, and no significant positive or negative financial surprises are indicated.

Keywords

Fund Administration, Custody Services, Accounting Services, SEC Filing, 8-K, BNY Mellon, Advent Convertible and Income Fund, AVK, Corporate Governance, Investment Company Act