Exhibit No. 7
CUSTODIAN CONTRACT
Between
PAINEWEBBER CALIFORNIA TAX-EXEMPT INCOME FUND
and
STATE STREET BANK AND TRUST COMPANY
SCS 01/87
WP0585C
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By It.....................1
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian.............................................................2
2.1 Holding Securities....................................................2
2.2 Delivery of Securities................................................2
2.3 Registration of Securities............................................6
2.4 Bank Accounts.........................................................6
2.5 Payments for Shares...................................................7
2.6 Investment and Availability of Federal Funds..........................7
2.7 Collection of Income..................................................7
2.8 Payment of Fund Moneys................................................8
2.9 Liability for Payment in Advance of Receipt of Securities Purchased..10
2.10 Payments for Repurchases or Redemptions of Shares of the Fund.......10
2.11 Appointment of Agents...............................................11
2.12 Deposit of Fund Assets in Securities System.........................11
2.13 Segregated Account..................................................13
2.14 Ownership Certificates for Tax Purposes.............................15
2.15 Proxies.............................................................15
2.16 Communications Relating to Fund Portfolio Securities................15
2.17 Proper Instructions.................................................16
2.18 Actions Permitted Without Express Authority.........................16
2.19 Evidence of Authority...............................................17
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income............................17
4. Records..................................................................18
5. Opinion of Fund's Independent Certified Public Accountants...............19
6. Reports to Fund by Independent Certified Public Accountants..............19
7. Compensation of Custodian................................................19
8. Responsibility of Custodian..............................................19
9. Effective Period, Termination and Amendment..............................20
10. Successor Custodian......................................................21
11. Interpretive and Additional Provisions...................................23
12. Additional Funds.........................................................23
13. Massachusetts Law to Apply...............................................23
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14. Prior Contracts; Assignment..............................................23
15. Headings.................................................................24
16. Notice...................................................................24
17. Limitation of Liability of the Trustees and Shareholders.................24
ii
CUSTODIAN CONTRACT
This Contract between PaineWebber California Tax-Exempt Income Fund, a
Massachusetts business trust organized and existing under the laws of
Massachusetts, having its principal place of business at 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 hereinafter called the "Fund", and State
Street Bank and Trust Company, a Massachusetts corporation, having its principal
place of business at 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx, 00000,
hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares of beneficial interest,
each share representing interests in a portfolio of securities and other assets
of the Fund; and
NOW THEREFOR: in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Declaration of Trust. The Fund agrees to
deliver to the Custodian all securities and cash owned by it, and all payments
of income, payments of principal or capital distributions received by it with
respect to all securities owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest ("Shares") of the Fund as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of the Fund held or received
by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.17), the Custodian shall from time to time employ one or more sub-custodians,
but only in accordance with an
applicable vote by the Trustees of the Fund, and provided that the Custodian
shall have no more or less responsibility or liability to the Fund on account of
any actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of the Fund all non-cash property,
including all securities owned by the Fund, other than securities
which are maintained pursuant to Section 2.12 in a clearing agency
which acts as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury, collectively
referred to herein as "Securities System".
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a
Securities System account of the Custodian only upon receipt of
Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
2
5) To the issuer thereof, or its agent, when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.11 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
3
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by
the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934
("Exchange Act') and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance
4
with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account
deposits in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the Fund's currently effective prospectus and statement of
additional information ("prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption;
and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions, a certified copy of a
resolution of the Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, specifying the securities
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose,
5
and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund
or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment
companies having the same investment adviser as the Fund, or in the
name or nominee name of any agent appointed pursuant to Section 2.11
or in the name or nominee name of any sub-custodian appointed
pursuant to Article 1. All securities accepted by the Custodian on
behalf of the Fund under the terms of this Contract shall be in
"street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft
or order by the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account
of the Fund, other than cash maintained by the Fund in a bank
account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for the
Fund may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company
6
Act of 1940 and that each such bank or trust company and the funds
to be deposited with each such bank or trust company shall be
approved by vote of a majority of the Trustees of the Fund. Such
funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
2.5 Payments for Shares. The Custodian shall receive from the
distributor for the Fund's Shares or from the Transfer Agent of the
Fund and deposit into the Fund's account such payments as are
received for Shares of the Fund issued or sold from time to time by
the Fund. The Custodian will provide timely notification to the Fund
and the Transfer Agent of any receipt by it of payments for Shares
of the Fund.
2.6 Investment and Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall, upon the
receipt of Proper Instructions,
1) invest in such instruments as may be set forth in such
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and
the Fund; and
2) make federal funds available to the Fund as of specified times
agreed upon from time to time by the Fund and the Custodian in
the amount of checks received in payment for Shares of the
Fund which are deposited into the Fund's account.
2.7 Collection of Income. The Custodian shall collect on a timely basis
all income and other payments with respect to registered securities
held hereunder to which
7
the Fund shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if, on
the date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to the Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when due on securities held hereunder. Income due the Fund on
securities loaned pursuant to the provisions of Section 2.2 (10)
shall be the responsibility of the Fund. The Custodian will have no
duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary
to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Fund is properly entitled.
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of the Fund in the
following cases only:
1) Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Fund but
only (a) against the delivery of such securities or evidence
of title to such options, futures contracts or options on
futures contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940,
as amended, to act as a custodian and has been designated by
the Custodian
8
as its agent for this purpose) registered in the name of the
Fund or in the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for transfer; (b) in
the case of a purchase effected through a Securities System,
in accordance with the conditions set forth in Section 2.12
hereof; or (c) in the case of repurchase agreements entered
into between the Fund and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve
Bank with such securities (notwithstanding that the written
agreement to repurchase will be received subsequently) or (ii)
against delivery of the receipt evidencing purchase by the
Fund of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase such
securities from the Fund;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the Fund
as set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
9
5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Trustees or of the Executive Committee of
the Fund signed by an officer of the Fund and certified by its
Secretary or an Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is to be
made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased.
In any and every case where payment for purchase of securities for
the account of the Fund is made by the Custodian in advance of
receipt of the securities purchased in the absence of specific
written instructions from the Fund to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such securities
to the same extent as if the securities had been received by the
Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of the Fund. From
such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of
the Trustees of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered to the
Transfer Agent a request for redemption or repurchase of their
Shares. In
10
connection with the redemption or repurchase of Shares of the Fund,
the Custodian is authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian shall
honor checks drawn on the Custodian by a holder of Shares, which
checks have been furnished by the Fund to the holder of Shares, when
presented to the Custodian in accordance with such procedures and
controls as are mutually agreed upon from time to time between the
Fund and the Custodian.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to
carry out such of the provisions of this Article 2 as the Custodian
may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with
11
applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities system
which shall not include any assets of the Custodian other than
assets held as fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon (i) receipt of advice
from the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of all advices
from the Securities System of transfers of securities for the
account of the Fund shall identify the Fund; be maintained for
the Fund by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or
12
from the account of the Fund in the form of a written advice
or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund.
4) The Custodian shall provide the Fund with any report obtained
b~ the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage
to the Fund resulting from use of the Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent
to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the Fund has
not been made whole for any such loss or damage.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of the
13
Fund, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account be the
Custodian pursuant to Section 2.12 hereof, (i) in accordance with
the provisions of any agreement among the Fund, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or
any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Fund, (ii) for purposes of segregating cash
or government securities in connection with options purchased, sold
or written by the Fund or commodity futures contracts or options
thereon purchased or sold by the Fund, (iii) for the purposes of
compliance by the Fund with the procedures required by Investment
Company Act Release No. 10666, or any subsequent release or releases
of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in
the case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Trustees or of
the Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary, setting forth
the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
14
2.14 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tar purposes in connection with receipt of income or other
payments with respect to securities of the Fund held by it and in
connection with transfers of securities.
2.15 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.16 Communications Relating to Fund Portfolio Securities. The Custodian
shall transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund and
the maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the securities being held
for the Fund. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the securities
those tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer. If the Fund desires to
take action with respect to any tender offer, exchange offer or and
other similar transaction, the
15
Fund shall notify the Custodian at least three business days prior
to the date on which the Custodian is to take such action.
2.17 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or initialled by one or more person
or persons as the Trustees shall have from time to time authorized.
Each such writing shall set forth the specific transaction or type
of transaction involved, including a specific statement of the
purpose for which such action is requested. Oral instructions will
be considered Proper Instructions if the Custodian reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund
shall cause all oral instructions to be confirmed in writing. Upon
receipt of a certlflcate of the Secretary or an Assistant Secretary
as to the authorization by the Trustees of the Fund accompanied by a
detailed description of procedures approved by the Trustees, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Trustees
and the Custodian are satisfied that such procedures afford adequate
safeguards for the Fund's assets.
2.18 Actions Permitted without Express Authority. The Custodian may in
its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in
definitive form;
16
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund except as otherwise directed by the Trustees of
the Fund.
2.19 Evidence of Authority. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or
other instrument or paper believed by it to be genuine and to have
been properly executed by or on behalf of the Fund. The Custodian
may receive and accept a certified copy of a vote of the Trustees of
the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or
of any action by the Trustees pursuant to the Declaration of Trust
as described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written
notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Trustees of the Fund to keep the books of
account of the Fund and/or compute the net asset value per Share of the
outstanding Shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
Share. Unless otherwise directed, the Custodian shall also calculate daily the
net
17
income of the Fund as described in the Fund's currently effective prospectus and
shall advise the Fund and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the Fund to do so,
shall advise the Transfer Agent periodically of the division of such net income
among its various components. The calculations of the net asset value per Share
and the daily income of the Fund shall be made at the time or times described
from time to time in the Fund's currently effective prospectus.
4. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by the Fund and held by the Custodian and shall,
when requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers of such
tabulations.
5. Opinion of Fund's Independent Certified Public Accountants
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the Fund's
independent certified public accountants with respect to its activities
hereunder in connection with the preparation of
18
the Fund's Form N-1A, and Form N-SAR or other annual reports to the Securities
and Exchange Commission and with respect to any other requirements of such
Commission.
6. Reports to Fund by Independent Certified Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent certified public accountants on
the accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian under this Contract; such
reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
8. Responsibility of Custodian.
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties.
The Custodian shall be held to the exercise of reasonable care in carrying out
the provisions of this Contract, but shall be kept indemnified by and shall be
without liability to the Fund for any action taken or omitted by it in
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good faith without negligence. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the option of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any
purposes or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of Fund
assets to the extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
however that the Custodian shall
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not act under Section 2.12 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Trustees of the
Fund has approved the initial use of a particular Securities System and the
receipt of an annual certificate of the Secretary or an Assistant Secretary that
the Trustees has reviewed the use by the Fund of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act of 1940, as
amended; provided further, however, that the Fund shall not amend or terminate
the Contract in contravention of any applicable federal or state regulations, or
any provision of the Declaration of Trust, and further provided, that the Fund
may at anytime by action of its Trustees (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements as
contemplated by this Contract.
10. Successor Custodian
If a successor custodian shall be appointed by the Trustees of the Fund,
the Custodian shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an account of the
successor custodian all of the Fund's securities held in a Securities System.
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If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Trustees of the
Fund, deliver at the office of the Custodian and transfer such securities, funds
and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Trustees shall have been delivered to the
Custodian on or before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank or trust company,
which is a "bank" as defined in the Investment Company Act of 1940, doing
business in Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract and to transfer to an account of
such successor custodian all of the Fund's securities held in any Securities
System. Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Trustees to appoint a successor custodian, the Custodian shall be entitled
to fair compensation for its services during such period as the Custodian
retains possession of such securities, funds and other properties and the
provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
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11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Declaration of Trust of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
12. Additional Funds
In the event that the Fund establishes additional series of beneficial
interest other than the Shares with respect to which it desires to have the
Custodian render services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Fund hereunder.
13. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
14. Prior Contracts; Assignment
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets. This Contract may not be assigned by the Custodian except as
expressly provided for in Section 10 hereof, without the prior written consent
of the Fund.
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15. Headings
The Headings of the Sections of this Contract are inserted for reference
and convenience only, and shall not affect the construction of this Contract.
16. Notice
All notices and communications, including Proper Instructions
(collectively referred to as Notice or Notices in this paragraph), hereunder
shall be in writing or by confirming telegram, cable or telex. Notices shall be
addressed (a) if to the Custodian at its address, 000 Xxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, marked for the attention of the Insurance/Broker-Dealer
Services Division, (b) if to the Fund, at the address of the Fund, or (c) if to
neither of the foregoing, at such other address as shall have been notified to
the sender of any such Notice.
17. Limitation of Liability of the Trustees and Shareholders
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Trustees of the Trust as Trustees
and not individually and that the obligations of this instrument are not binding
upon any of the Trustees, officers or shareholders individually but are binding
only upon the assets and property of the Trust.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed as of the ____ day of ______, 19____.
ATTEST: PAINEWEBBER CALIFORNIA
TAX-FREE INCOME FUND
By:
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ATTEST: STATE STREET BANK AND
TRUST COMPANY
By:
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