IBT draft 8/28/96
Form Agreement
Full Custody/Foreign Securities
(Yield Calculation)
Company Form (Series)
CUSTODIAN AGREEMENT
BETWEEN
Xxxxxxx, Xxxxxxx Funds, Inc.
and
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
Page
1. Bank Appointed Custodian 1
2. Definitions 1
2.1 Authorized Person 1
2.2 Board 1
2.3 Security 1
2.4 Portfolio Security 1
2.5 Officers' Certificate 1
2.6 Book-Entry System 2
2.7 Depository 2
2.8 Proper Instructions 2
3. Separate Accounts 2
4. Certification as to Authorized Persons 2
5. Custody of Cash 3
5.1 Purchase of Securities 3
5.2 Redemptions 3
5.3 Distributions and Expenses of Fund 3
5.4 Payment in Respect of Securities 3
5.5 Repayment of Loans 3
5.6 Repayment of Cash 3
5.7 Foreign Exchange Transactions 4
5.8 Other Authorized Payments 4
5.9 Termination 4
6. Securities 4
6.1 Segregation and Registration 4
6.2 Voting and Proxies 5
6.3 Corporate Action 5
6.4 Book-Entry System 6
6.5 Use of a Depository 6
6.6 Use of Book-Entry System for Commercial Paper 7
6.7 Use of Immobilization Programs 8
6.8 Eurodollar CDs 8
6.9 Options and Futures Transactions 8
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter 8
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges 9
6.10 Segregated Account 9
6.11 Interest Bearing Call or Time Deposits 10
6.12 Transfer of Securities 10
7. Redemptions 12
8. Merger, Dissolution, etc. of Fund 12
9. Actions of Bank Without Prior Authorization 12
10. Collection and Defaults 13
11. Maintenance of Records and Accounting Services 13
12. Fund Evaluation and Yield Calculation 13
12.1 Fund Evaluation 13
12.2 Yield Calculation 14
13. Additional Services 15
14. Duties of the Bank 15
14.1 Performance of Duties and
Standard of Care 15
14.2 Agents and Subcustodians with Respect to Property
of the Fund Held in the United States 15
14.3 Duties of the Bank with Respect to Property
Held Outside of the United States 16
14.4 Insurance 18
14.5 Fees and Expenses of Bank 18
14.6 Advances by Bank 18
15. Limitation of Liability 19
16. Termination 20
17. Confidentiality 21
18. Notices 21
19. Amendments 21
20. Parties 21
21. Governing Law 22
22. Counterparts 22
23. Entire Agreement 22
APPENDICES
Appendix A Fee Schedule
Appendix B Wire Transfer Agreement
Appendix C Additional Services
Appendix D Select Foreign Sub-Custodians
Appendix E Reports
CUSTODIAN AGREEMENT
AGREEMENT made as of this first day of October, 1996, between Xxxxxxx,
Loevner Funds, Inc. a company organized under the laws of [ ] (the
"Fund") and INVESTORS BANK & TRUST COMPANY (the "Bank").
The Fund, an open-end management investment company, desires to place
and maintain all of its portfolio securities and cash in the custody of the
Bank. The Bank has at least the minimum qualifications required by Section
17(f)(1) of the Investment Company Act of 1940 (the "1940 Act") to act as
custodian of the portfolio securities and cash of the Fund, and has indicated
its willingness to so act, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth. For the services rendered pursuant to this
Agreement the Fund agrees to pay to the Bank the fees set forth on Appendix A
hereto.
2. Definitions. Whenever used herein, the terms listed below will have
the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on
behalf of the Fund by appropriate resolution of its Board, and set forth in a
certificate as required by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors or the Board of
Trustees of the Fund, as the case may be.
2.3 Security. The term security as used herein will have the same
meaning assigned to such term in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest or participation
in any profit sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share, investment
contract, voting-trust certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas, or other mineral rights, any put,
call, straddle, option, or privilege on any security, certificate of deposit,
or group or index of securities (including any interest therein or based on
the value thereof), or any put, call, straddle, option, or privilege entered
into on a national securities exchange relating to a foreign currency, or, in
general, any interest or instrument commonly known as a "security", or any
certificate of interest or participation in, temporary or interim certificate
for, receipt for, guarantee of, or warrant or right to subscribe to, or
option contract to purchase or sell any of the foregoing, and futures,
forward contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will mean any security
owned by the Fund.
2.5 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank,
its successor or successors and its nominee or nominees.
2.7 Depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934
("Exchange Act"), its successor or successors and its nominee or nominees.
The term "Depository" shall further mean and include any other person
authorized to act as a depository under the 1940 Act, its successor or
successors and its nominee or nominees, specifically identified in a
certified copy of a resolution of the Board.
2.8 Proper Instructions. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized
Person, such instructions to be given in such form and manner as the Bank and
the Fund shall agree upon from time to time, and (ii) instructions (which may
be continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions
if the Bank reasonably believes them to have been given by an Authorized
Person. The Fund shall cause all oral instructions to be promptly confirmed
in writing. The Bank shall act upon and comply with any subsequent Proper
Instruction which modifies a prior instruction and the sole obligation of the
Bank with respect to any follow-up or confirmatory instruction shall be to
make reasonable efforts to detect any discrepancy between the original
instruction and such confirmation and to report such discrepancy to the Fund.
The Fund shall be responsible, at the Fund's expense, for taking any action,
including any reprocessing, necessary to correct any such discrepancy or
error, and to the extent such action requires the Bank to act, the Fund shall
give the Bank specific Proper Instructions as to the action required. Upon
receipt by the Bank of an Officers' Certificate as to the authorization by
the Board accompanied by a detailed description of procedures approved by the
Fund, Proper Instructions may include communication effected directly between
electro-mechanical or electronic devices provided that the Board and the Bank
agree in writing that such procedures afford adequate safeguards for the
Fund's assets.
3. Separate Accounts. If the Fund has more than one series or
portfolio, the Bank will segregate the assets of each series or portfolio to
which this Agreement relates into a separate account for each such series or
portfolio containing the assets of such series or portfolio (and all
investment earnings thereon). Unless the context otherwise requires, any
reference in this Agreement to any actions to be taken by the Fund shall be
deemed to refer to the Fund acting on behalf of one or more of its series,
any reference in this Agreement to any assets of the Fund, including, without
limitation, any portfolio securities and cash and earnings thereon, shall be
deemed to refer only to assets of the applicable series, any duty or
obligation of the Bank hereunder to the Fund shall be deemed to refer to
duties and obligations with respect to such individual series and any
obligation or liability of the Fund hereunder shall be binding only with
respect to such individual series, and shall be discharged only out of the
assets of such series.
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank,
of (i) the names and signatures of the Authorized Persons and (ii) the names
of the members of the Board, it being understood that upon the occurrence of
any change in the information set forth in the most recent certification on
file (including without limitation any person named in the most recent
certification who is no longer an Authorized Person as designated therein),
the Secretary or Assistant Secretary of the Fund will sign a new or amended
certification setting forth the change and the new, additional or omitted
names or signatures. The Bank will be entitled to rely and act upon any
Officers' Certificate given to it by the Fund which has been signed by
Authorized Persons named in the most recent certification received by the
Bank.
5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the
name of the Bank, as Custodian of the Fund, and will deposit to the account
of the Fund all of the cash of the Fund, except for cash held by a
subcustodian appointed pursuant to Sections 14.2 or 14.3 hereof, including
borrowed funds, delivered to the Bank, subject only to draft or order by the
Bank acting pursuant to the terms of this Agreement. Pursuant to the Bank's
internal policies regarding the management of cash accounts, the Bank may
segregate certain portions of the cash of the Fund into a separate savings
deposit account upon which the Bank reserves the right to require seven (7)
days notice prior to withdrawal of cash from such an account. Upon receipt
by the Bank of Proper Instructions (which may be continuing instructions) or
in the case of payments for redemptions and repurchases of outstanding shares
of common stock of the Fund, notification from the Fund's transfer agent as
provided in Section 7, requesting such payment, designating the payee or the
account or accounts to which the Bank will release funds for deposit, and
stating that it is for a purpose permitted under the terms of this Section 5,
specifying the applicable subsection, the Bank will make payments of cash
held for the accounts of the Fund, insofar as funds are available for that
purpose, only as permitted in subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for
the Fund, against contemporaneous receipt of such securities by the Bank or
against delivery of such securities to the Bank in accordance with generally
accepted settlement practices and customs in the jurisdiction or market in
which the transaction occurs registered in the name of the Fund or in the
name of, or properly endorsed and in form for transfer to, the Bank, or a
nominee of the Bank, or receipt for the account of the Bank pursuant to the
provisions of Section 6 below, each such payment to be made at the purchase
price shown on a broker's confirmation (or transaction report in the case of
Book Entry Paper (as that term is defined in Section 6.6 hereof)) of purchase
of the securities received by the Bank before such payment is made, as
confirmed in the Proper Instructions received by the Bank before such payment
is made.
5.2 Redemptions. In such amount as may be necessary for the
repurchase or redemption of common shares of the Fund offered for repurchase
or redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the
account of the Fund of dividends or other distributions to shareholders as
may from time to time be declared by the Board, interest, taxes, management
or supervisory fees, distribution fees, fees of the Bank for its services
hereunder and reimbursement of the expenses and liabilities of the Bank as
provided hereunder, fees of any transfer agent, fees for legal, accounting,
and auditing services, or other operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in connection
with the conversion, exchange or surrender of Portfolio Securities or
securities subscribed to by the Fund held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Fund,
but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or hypothecated therefor and upon surrender of
documents evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Fund for
the purpose of collateralizing the obligation to return to the Fund
certificates borrowed from the Fund representing Portfolio Securities, but
only upon redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions.
(a) For payments in connection with foreign exchange contracts
or options to purchase and sell foreign currencies for spot and future
delivery (collectively, "Foreign Exchange Agreements")which may be entered
into by the Bank on behalf of the Fund upon the receipt of Proper
Instructions, such Proper Instructions to specify the currency broker or
banking institution (which may be the Bank, or any other subcustodian or
agent hereunder, acting as principal) with which the contract or option is
made, and the Bank shall have no duty with respect to the selection of such
currency brokers or banking institutions with which the Fund deals or for
their failure to comply with the terms of any contract or option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Fund agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign
Exchange Agreement, in and to any property at any time held by the Bank for
the Fund's benefit or in which the Fund has an interest and which is then in
the Bank's possession or control (or in the possession or control of any
third party acting on the Bank's behalf). The Fund authorizes the Bank, in
the Bank's sole discretion, at any time to charge any such payment due under
any Foreign Exchange Agreement against any balance of account standing to the
credit of the Fund on the Bank's books.
5.8 Other Authorized Payments. For other authorized transactions
of the Fund, or other obligations of the Fund incurred for proper Fund
purposes; provided that before making any such payment the Bank will also
receive a certified copy of a resolution of the Board signed by an Authorized
Person (other than the Person certifying such resolution) and certified by
its Secretary or Assistant Secretary, naming the person or persons to whom
such payment is to be made, and either describing the transaction for which
payment is to be made and declaring it to be an authorized transaction of the
Fund, or specifying the amount of the obligation for which payment is to be
made, setting forth the purpose for which such obligation was incurred and
declaring such purpose to be a proper corporate purpose.
5.9 Termination: Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 16 of this Agreement.
In connection with transfers or orders made by the Bank pursuant to
this Section 5, and otherwise under this Agreement, the Fund and the Bank
shall enter into a Wire Transfer Agreement substantially in the form attached
as Appendix B hereto.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided
herein, and except for securities to be delivered to any subcustodian
appointed pursuant to Sections 14.2 or 14.3 hereof, the Bank as custodian
will receive and hold pursuant to the provisions hereof, in a separate
account or accounts and physically segregated at all times from those of
other persons, any and all Portfolio Securities which may now or hereafter be
delivered to it by or for the account of the Fund. All such Portfolio
Securities will be held or disposed of by the Bank for, and subject at all
times to, the instructions of the Fund pursuant to the terms of this
Agreement. Subject to the specific provisions herein relating to Portfolio
Securities that are not physically held by the Bank, the Bank will register
all Portfolio Securities (unless otherwise directed by Proper Instructions or
an Officers' Certificate), in the name of a registered nominee of the Bank as
defined in the Internal Revenue Code and any Regulations of the Treasury
Department issued thereunder, and will execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or
to register in the name of its registered nominee, any Portfolio Securities
which may from time to time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the
Bank will vote any of the Portfolio Securities held hereunder, except in
accordance with Proper Instructions or an Officers' Certificate. The Bank
will execute and deliver, or cause to be executed and delivered, to the Fund
all notices, proxies and proxy soliciting materials delivered to the Bank
with respect to such Securities, such proxies to be executed by the
registered holder of such Securities (if registered otherwise than in the
name of the Fund), but without indicating the manner in which such proxies
are to be voted.
6.3 Corporate Action. If at any time the Bank is notified that
an issuer of any Portfolio Security has taken or intends to take a corporate
action (a "Corporate Action") that affects the rights, privileges, powers,
preferences, qualifications or ownership of a Portfolio Security, including
without limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or
stock dividend, which Corporate Action requires an affirmative response or
action on the part of the holder of such Portfolio Security (a "Response"),
the Bank shall notify the Fund promptly of the Corporate Action, the Response
required in connection with the Corporate Action and the Bank's deadline for
receipt from the Fund of Proper Instructions regarding the Response (the
"Response Deadline"). The Bank shall forward to the Fund via telecopier
and/or overnight courier all notices, information statements or other
materials relating to the Corporate Action within twenty-four (24) hours of
receipt of such materials by the Bank.
(a) The Bank shall act upon a required Response only after
receipt by the Bank of Proper Instructions from the Fund no later than 5:00
p.m. on the date specified as the Response Deadline and only if the Bank (or
its agent or subcustodian hereunder) has actual possession of all necessary
Securities, consents and other materials no later than 5:00 p.m. on the date
specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a required Response
if Proper Instructions relating to such Response and all necessary
Securities, consents and other materials are not received by and in the
possession of the Bank no later than 5:00 p.m. on the date specified as the
Response Deadline. Notwithstanding, the Bank may, in its sole discretion,
use its best efforts to act upon a Response for which Proper Instructions
and/or necessary Securities, consents or other materials are received by the
Bank after 5:00 p.m. on the date specified as the Response Deadline, it being
acknowledged and agreed by the parties that any undertaking by the Bank to
use its best efforts in such circumstances shall in no way create any duty
upon the Bank to complete such Response prior to its expiration.
(c) In the event that the Fund notifies the Bank of a Corporate
Action requiring a Response and the Bank has received no other notice of such
Corporate Action, the Response Deadline shall be 48 hours prior to the
Response expiration time set by the depository processing such Corporate
Action.
(d) Section 14.3(g) of this Agreement shall govern any Corporate Action
involving Foreign Portfolio Securities held by a Selected Foreign Sub-Custodian.
6.4 Book-Entry System. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits
of Fund assets in the Book-Entry System, and (ii) for any subsequent changes
to such arrangements following such approval, the Board has reviewed and
approved the arrangement and has not delivered an Officer's Certificate to
the Bank indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect
to the Fund's participation in the Book-Entry System through the Bank (or any
such agent) will identify by book entry the Portfolio Securities which are
included with other securities deposited in the Account and shall at all
times during the regular business hours of the Bank (or such agent) be open
for inspection by duly authorized officers, employees or agents of the Fund.
Where securities are transferred to the Fund's account, the Bank shall also,
by book entry or otherwise, identify as belonging to the Fund a quantity of
securities in a fungible bulk of securities (i) registered in the name of the
Bank or its nominee, or (ii) shown on the Bank's account on the books of the
Federal Reserve Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Fund or shall pay cash collateral against the return
of Portfolio Securities loaned by the Fund upon (i) receipt of advice from
the Book-Entry System that such Securities have been transferred to the
Account, and (ii) the making of an entry on the records of the Bank (or its
agent) to reflect such payment and transfer for the account of the Fund. The
Bank (or its agent) shall transfer securities sold or loaned for the account
of the Fund upon
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial cash collateral against
the delivery of securities loaned by the Fund has been transferred to the
Account; and
(ii) the making of an entry on the records of the Bank (or
its agent) to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Book-Entry System of transfers of securities
for the account of the Fund shall identify the Fund, be maintained for the
Fund by the Bank and shall be provided to the Fund at its request. The Bank
shall send the Fund a confirmation, as defined by Rule 17f-4 of the 1940 Act,
of any transfers to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the Book-Entry System;
6.5 Use of a Depository. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits
in DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and
remit to the Bank on behalf of the Fund all income and other payments thereon
and to take all steps necessary and proper in connection with the collection
thereof;
(b) Registration of Portfolio Securities may be made in the
name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the
account of the Fund and the Fund shall pay cash collateral against the return
of Portfolio Securities loaned by the Fund only upon delivery of the
Securities to or for the account of the Fund; and upon any sale of Portfolio
Securities, delivery of the Securities will be made only against payment
therefor or, in the event Portfolio Securities are loaned, delivery of
Securities will be made only against receipt of the initial cash collateral
to or for the account of the Fund; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any
certificated Portfolio Security deposited with it in the event such Security
is lost, destroyed, wrongfully taken or otherwise not available to be
returned to the Bank upon its request;
(ii) Proxy materials received by a Depository with respect
to Portfolio Securities deposited with such Depository are forwarded
immediately to the Bank for prompt transmittal to the Fund;
(iii) Such Depository promptly forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank
such records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule 31(a)
thereunder; and
(v) Such Depository delivers to the Bank all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Fund may reasonably request
in order to verify the Portfolio Securities held by such Depository.
6.6 Use of Book-Entry System for Commercial Paper. Provided (i)
the Bank has received a certified copy of a resolution of the Board
specifically approving participation in a system maintained by the Bank for
the holding of commercial paper in book-entry form ("Book-Entry Paper") and
(ii) for each year following such approval the Board has received and
approved the arrangements, upon receipt of Proper Instructions and upon
receipt of confirmation from an Issuer (as defined below) that the Fund has
purchased such Issuer's Book-Entry Paper, the Bank shall issue and hold in
book-entry form, on behalf of the Fund, commercial paper issued by issuers
with whom the Bank has entered into a book-entry agreement (the "Issuers").
In maintaining procedures for Book-Entry Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the
Fund in an account of the Bank that includes only assets held by it for
customers;
(b) The records of the Bank with respect to the Fund's purchase
of Book-Entry Paper through the Bank will identify, by book-entry, commercial
paper belonging to the Fund which is included in the Book-Entry System and
shall at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the
Issuer that such sale of Book-Entry Paper has been effected, and (ii) the
making of an entry on the records of the Bank to reflect such payment and
transfer for the account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation upon
the maturity thereof upon contemporaneous (i) receipt of advice that payment
for such Book-Entry Paper has been transferred to the Fund, and (ii) the
making of an entry on the records of the Bank to reflect such payment for the
account of the Fund; and
(e) The Bank will send to the Fund such reports on its system
of internal accounting control with respect to the Book-Entry Paper as the
Fund may reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated
by a bank which meets the requirements of Section 26(a)(1) of the 1940 Act,
and (ii) for each year following such approval the Board has reviewed and
approved the arrangement and has not delivered an Officer's Certificate to
the Bank indicating that the Board has withdrawn its approval, the Bank shall
enter into such immobilization program with such bank acting as a subcustodian
hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities which are Eurodollar
CDs may be physically held by the European branch of the U.S. banking
institution that is the issuer of such Eurodollar CD (a "European Branch"),
provided that such Portfolio Securities are identified on the books of the
Bank as belonging to the Fund and that the books of the Bank identify the
European Branch holding such Portfolio Securities. Notwithstanding any other
provision of this Agreement to the contrary, except as stated in the first
sentence of this subsection 6.8, the Bank shall be under no other duty with
respect to such Eurodollar CDs belonging to the Fund.
6.9 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or Over-the-
Counter.
(i) The Bank shall take action as to put options ("puts")
and call options ("calls") purchased or sold (written) by the Fund regarding
escrow or other arrangements (i) in accordance with the provisions of any
agreement entered into upon receipt of Proper Instructions among the Bank,
any broker-dealer registered with the National Association of Securities
Dealers, Inc. (the "NASD"), and, if necessary, the Fund, relating to the
compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations.
(ii) Unless another agreement requires it to do so, the
Bank shall be under no duty or obligation to see that the Fund has deposited
or is maintaining adequate margin, if required, with any broker in connection
with any option, nor shall the Bank be under duty or obligation to present
such option to the broker for exercise unless it receives Proper Instructions
from the Fund. The Bank shall have no responsibility for the legality of any
put or call purchased or sold on behalf of the Fund, the propriety of any
such purchase or sale, or the adequacy of any collateral delivered to a
broker in connection with an option or deposited to or withdrawn from a
Segregated Account (as defined in subsection 6.10 below). The Bank
specifically, but not by way of limitation, shall not be under any duty or
obligation to: (i) periodically check or notify the Fund that the amount of
such collateral held by a broker or held in a Segregated Account is
sufficient to protect such broker or the Fund against any loss; (ii) effect
the return of any collateral delivered to a broker; or (iii) advise the Fund
that any option it holds, has or is about to expire. Such duties or
obligations shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and
futures contracts ("Futures") purchased or sold by the Fund in accordance
with the provisions of any agreement entered into upon the receipt of Proper
Instructions among the Fund, the Bank 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.
(ii) The responsibilities of the Bank as to futures, puts
and calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in
subparagraph (a)(2) of this Section 6.8 as if such subparagraph referred to
Futures Commission Merchants rather than brokers, and Futures and puts and
calls thereon instead of options.
6.10 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and
on behalf of the Fund.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) in accordance with the provisions of any agreement
among the Fund, the Bank 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 organizations regarding escrow or other
arrangements in connection with transactions by the Fund;
(ii) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity futures
purchased or written by the Fund;
(iii) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less
than the aggregate purchase price due on the settlement dates of all the
Fund's then outstanding forward commitment or "when-issued" agreements
relating to the purchase of Portfolio Securities and all the Fund's then
outstanding commitments under reverse repurchase agreements entered into with
broker-dealer firms;
(iv) 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;
(v) for other proper corporate purposes, but only, in the
case of this clause (e), upon receipt of, in addition to Proper Instructions,
a certified copy of a resolution of the Board, or of the executive committee
of the Board 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.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance with
the provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii)
or (a)(iv) above, for sale or delivery to meet the Fund's obligations under
outstanding forward commitment or when-issued agreements for the purchase of
Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or
greater value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward
commitment or when-issued agreements for the purchase of portfolio securities
or reverse repurchase agreements are sold to other parties or the Fund's
obligations thereunder are met from assets of the Fund other than those in
the Segregated Account;
(v) for delivery upon settlement of a forward commitment
or when-issued agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (e)
above, in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect
to the assets of the Fund appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the
"Deposit Bank"), and shall retain such forms of advice or receipt evidencing
the deposit, if any, as may be forwarded to the Bank by the Deposit Bank.
Such deposits shall be deemed Portfolio Securities of the Fund and the
responsibility of the Bank therefore shall be the same as and no greater than
the Bank's responsibility in respect of other Portfolio Securities of the
Fund.
6.12 Transfer of Securities. The Bank will transfer, exchange,
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section only upon receipt
of Proper Instructions. The Proper Instructions shall state that such
transfer, exchange or delivery is for a purpose permitted under the terms of
this Section 6.11, and shall specify the applicable subsection, or describe
the purpose of the transaction with sufficient particularity to permit the
Bank to ascertain the applicable subsection. After receipt of such Proper
Instructions, the Bank will transfer, exchange, deliver or release Portfolio
Securities only in the following circumstances:
(a) Upon sales of Portfolio Securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment therefor in
full, or against payment to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, each such payment to be in the amount of the sale price
shown in a broker's confirmation of sale received by the Bank before such
payment is made, as confirmed in the Proper Instructions received by the Bank
before such payment is made;
(b) In exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided, however, that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for
failure to so tender in a timely manner unless such Proper Instructions are
received by the Bank at least two business days prior to the date required
for tender, and unless the Bank (or its agent or subcustodian hereunder) has
actual possession of such Security at least two business days prior to the
date of tender;
(c) Upon conversion of Portfolio Securities pursuant to their terms
into other securities;
(d) For the purpose of redeeming in-kind shares of the Fund upon
authorization from the Fund;
(e) In the case of option contracts owned by the Fund, for presentation
to the endorsing broker;
(f) When such Portfolio Securities are called, redeemed or retired or
otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund
by any bank, including the Bank; provided, however, that such Portfolio
Securities will be released only upon payment to the Bank for the account of
the Fund of the moneys borrowed, provided further, however, that in cases
where additional collateral is required to secure a borrowing already made,
and such fact is made to appear in the Proper Instructions, Portfolio
Securities may be released for that purpose without any such payment. In the
event that any pledged Portfolio Securities are held by the Bank, they will
be so held for the account of the lender, and after notice to the Fund from
the lender in accordance with the normal procedures of the lender and any
loan agreement between the fund and the lender that an event of deficiency or
default on the loan has occurred, the Bank may deliver such pledged Portfolio
Securities to or for the account of the lender;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions
received by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Fund
to a bank or broker dealer, but only against receipt in accordance with
street delivery custom except as otherwise provided herein, of adequate
collateral as agreed upon from time to time by the Fund and the Bank, and
upon receipt of payment in connection with any repurchase agreement relating
to such securities entered into by the Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the
Bank will also receive a certified copy of resolutions of the Board, signed
by an authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to
be an authorized transaction of the Fund or such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery of such
securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. Redemptions. In the case of payment of assets of the Fund held by
the Bank in connection with redemptions and repurchases by the Fund of
outstanding common shares, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment
shall be made in accordance with the Articles of Incorporation or Declaration
of Trust and By-laws of the Fund (the "Articles"), from assets available for
said purpose.
8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of
the Fund into or the consolidation of the Fund with another investment
company, the sale by the Fund of all, or substantially all, of its assets to
another investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities
held by it under this Agreement and disburse cash only upon the order of the
Fund set forth in an Officers' Certificate, accompanied by a certified copy
of a resolution of the Board authorizing any of the foregoing transactions.
Upon completion of such delivery and disbursement and the payment of the
fees, disbursements and expenses of the Bank, this Agreement will terminate
and the Bank shall be released from any and all obligations hereunder.
9. Actions of Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an
Officers' Certificate to the contrary, the Bank will take the following
actions without prior authorization or instruction of the Fund or the
transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name
of the Fund all checks, drafts, or other negotiable or transferable
instruments or other orders for the payment of money received by it for the
account of the Fund and hold for the account of the Fund all income,
dividends, interest and other payments or distributions of cash with respect
to the Portfolio Securities held thereunder;
9.2 Present for payment all coupons and other income items held by
it for the account of the Fund which call for payment upon presentation and
hold the cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership
and other certificates and affidavits required by the Internal Revenue Code
or the regulations of the Treasury Department issued thereunder, or by the
laws of any state, now or hereafter in effect, inserting the Fund's name on
such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so and as may be required to obtain payment in
respect thereof. The Bank will execute and deliver such certificates in
connection with Portfolio Securities delivered to it or by it under this
Agreement as may be required under the provisions of the Internal Revenue
Code and any Regulations of the Treasury Department issued thereunder, or
under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it
upon payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for
definitive securities.
10. Collections and Defaults. The Bank will use reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for
redemption, offer of exchange, right of subscription, reorganization or other
proceedings affecting such Securities. If Portfolio Securities upon which
such income is payable are in default or payment is refused after due demand
or presentation, the Bank will notify the Fund in writing of any default or
refusal to pay within two business days from the day on which it receives
knowledge of such default or refusal.
11. Maintenance of Records and Accounting Services. The Bank will
maintain records with respect to transactions for which the Bank is
responsible pursuant to the terms and conditions of this Agreement, and in
compliance with the applicable rules and regulations of the 1940 Act. The
Bank will furnish to the Fund such reports at such times as are set forth on
Appendix E hereto. The books and records of the Bank pertaining to its
actions under this Agreement and reports by the Bank or its independent
accountants concerning its accounting system, procedures for safeguarding
securities and internal accounting controls will be open to inspection and
audit at reasonable times by officers of or auditors employed by the Fund and
will be preserved by the Bank in the manner and in accordance with the
applicable rules and regulations under the 1940 Act.
The Bank shall perform fund accounting and shall keep the books of
account and render statements or copies from time to time as reasonably
requested by the Treasurer or any executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. Fund Evaluation and Yield Calculation
12.1 Fund Evaluation. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of regular trading on the
New York Stock Exchange on each day on which said Exchange is open for
unrestricted trading and as of such other days, or hours, if any, as may be
authorized by the Board, the net asset value and the public offering price
of a share of capital stock of the Fund, such determination to be made in
accordance with the provisions of the Articles and By-laws of the Fund and
Prospectus and Statement of Additional Information relating to the Fund, as
they may from time to time be amended, and any applicable resolutions of the
Board at the time in force and applicable; and promptly to notify the Fund,
the proper exchange and the NASD or such other persons as the Fund may
request of the results of such computation and determination. In computing
the net asset value hereunder, the Bank may rely in good faith upon
information furnished to it by any Authorized Person in respect of (i) the
manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of account kept by the
Bank, (ii) reserves, if any, authorized by the Board or that no such reserves
have been authorized, (iii) the source of the quotations to be used in
computing the net asset value, (iv) the value to be assigned to any security
for which no price quotations are available, and (v) the method of
computation of the public offering price on the basis of the net asset value
of the shares, and the Bank shall not be responsible for any loss occasioned
by such reliance or for any good faith reliance on any quotations received
from a source pursuant to (iii) above.
12.2. Yield Calculation. The Bank will compute the performance
results of the Fund (the "Yield Calculation") in accordance with the
provisions of Release No. 33-6753 and Release No. IC-16245 (February 2, 1988)
(the "Releases") promulgated by the Securities and Exchange Commission, and
any subsequent amendments to, published interpretations of or general
conventions accepted by the staff of the Securities and Exchange Commission
with respect to such releases or the subject matter thereof ("Subsequent
Staff Positions"), subject to the terms set forth below:
(a) The Bank shall compute the Yield Calculation for the Fund
for the stated periods of time as shall be mutually agreed upon, and
communicate in a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will derive
the items of data necessary for the computation from the records it generates
and maintains for the Fund pursuant Section 11 hereof. The Bank shall have
no responsibility to review, confirm, or otherwise assume any duty or
liability with respect to the accuracy or correctness of any such data
supplied to it by the Fund, any of the Fund's designated agents or any of the
Fund's designated third party providers.
(c) At the request of the Bank, the Fund shall provide, and the
Bank shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods set
forth in the Releases or any Subsequent Staff Positions as they specifically
apply to the Fund. In the event that the computation methods in the Releases
or the Subsequent Staff Positions or the application to the Fund of a
standard or guideline is not free from doubt or in the event there is any
question of interpretation as to the characterization of a particular
security or any aspect of a security or a payment with respect thereto (e.g.,
original issue discount, participating debt security, income or return of
capital, etc.) or otherwise or as to any other element of the computation
which is pertinent to the Fund, the Fund or its designated agent shall have
the full responsibility for making the determination of how the security or
payment is to be treated for purposes of the computation and how the
computation is to be made and shall inform the Bank thereof on a timely
basis. The Bank shall have no responsibility to make independent
determinations with respect to any item which is covered by this Section, and
shall not be responsible for its computations made in accordance with such
determinations so long as such computations are mathematically correct.
(d) The Fund shall keep the Bank informed of all publicly
available information and of any non-public advice, or information obtained
by the Fund from its independent auditors or by its personnel or the
personnel of its investment adviser, or Subsequent Staff Positions related to
the computations to be undertaken by the Bank pursuant to this Agreement and
the Bank shall not be deemed to have knowledge of such information (except as
contained in the Releases) unless it has been furnished to the Bank in
writing.
13. Additional Services. The Bank shall perform the additional
services for the Fund as are set forth on Appendix C hereto. Appendix C may
be amended from time to time upon agreement of the parties to include further
additional services to be provided by the Bank to the Fund, at which time the
fees set forth in Appendix A shall be appropriately increased.
14. Duties of the Bank.
14.1 Performance of Duties and Standard of Care. In performing its
duties hereunder and any other duties listed on any Schedule hereto, if any,
the Bank will be entitled to receive and act upon the advice of independent
counsel of its own selection, which may be counsel for the Fund, and will be
without liability for any action taken or thing done or omitted to be done in
accordance with this Agreement in good faith in conformity with such advice.
The Bank will be under no duty or obligation to inquire into and will
not be liable for:
(a) the validity of the issue of any Portfolio Securities purchased
by or for the Fund, the legality of the purchases thereof or the propriety
of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or
for the Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of
the Fund or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the
Fund or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Fund
or the legality of the distribution of any Portfolio Securities as payment in
kind of such dividend; and
(f) any property or moneys of the Fund unless and until
received by it, and any such property or moneys delivered or paid by it
pursuant to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or held
by it for the account of the Fund are such as may properly be held by the
Fund under the provisions of its Articles, By-laws, any federal or state
statutes or any rule or regulation of any governmental agency.
14.2 Agents and Subcustodians with Respect to Property of the Fund
Held in the United States. The Bank may employ agents in the performance of
its duties hereunder and shall be responsible for the acts and omissions of
such agents as if performed by the Bank hereunder. Without limiting the
foregoing, certain duties of the Bank hereunder may be performed by one or
more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ
subcustodians, provided that any such subcustodian meets at least the minimum
qualifications required by Section 17(f)(1) of the 1940 Act to act as a
custodian of the Fund's assets with respect to property of the Fund held in
the United States. The Bank shall have no liability to the Fund or any other
person by reason of any act or omission of any subcustodian and the Fund
shall indemnify the Bank and hold it harmless from and against any and all
actions, suits and claims, arising directly or indirectly out of the
performance of any subcustodian. Upon request of the Bank, the Fund shall
assume the entire defense of any action, suit, or claim subject to the
foregoing indemnity. The Fund shall pay all fees and expenses of any
subcustodian.
14.3 Duties of the Bank with Respect to Property of the Fund Held
Outside of the United States.
(a) Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Bank to employ as sub-custodians for the Fund's
Portfolio Securities and other assets maintained outside the United States
the foreign banking institutions and foreign securities depositories
designated on the Schedule attached hereto (each, a "Selected Foreign Sub-
Custodian"). Upon receipt of Proper Instructions, together with a certified
resolution of the Fund's Board of Trustees, the Bank and the Fund may agree
to designate additional foreign banking institutions and foreign securities
depositories to act as Selected Foreign Sub-Custodians hereunder. Upon
receipt of Proper Instructions, the Fund may instruct the Bank to cease the
employment of any one or more such Selected Foreign Sub-Custodians for
maintaining custody of the Fund's assets, and the Bank shall so cease to
employ such sub-custodian as soon as alternate custodial arrangements have
been implemented.
(b) Foreign Securities Depositories. Except as may otherwise
be agreed upon in writing by the Bank and the Fund, assets of the Fund shall
be maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Selected Foreign
Sub-Custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the provisions
set forth in subparagraph (d) hereof. Notwithstanding the foregoing, except
as may otherwise be agreed upon in writing by the Bank and the Fund, the Fund
authorizes the deposit in Euro-clear, the securities clearance and depository
facilities operated by Xxxxxx Guaranty Trust Company of New York in Brussels,
Belgium, of Foreign Portfolio Securities eligible for deposit therein and the
use of Euro-clear in connection with settlements of purchases and sales of
securities and deliveries and returns of securities, until notified to the
contrary pursuant to subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify on its
books as belonging to the Fund the Foreign Portfolio Securities held by each
Selected Foreign Sub-Custodian. Each agreement pursuant to which the Bank
employs a foreign banking institution shall require that such institution
establish a custody account for the Bank and hold in that account Foreign
Portfolio Securities and other assets of the Fund, and, in the event that
such institution deposits Foreign Portfolio Securities in a foreign
securities depository, that it shall identify on its books as belonging to
the Bank the securities so deposited.
(d) Agreements with Foreign Banking Institutions. Each of the
agreements pursuant to which a foreign banking institution holds assets of
the Fund (each, a "Foreign Sub-Custodian Agreement") shall be substantially
in the form attached as Appendix D hereto and shall provide that: (a) the
Fund's assets will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration (including, without limitation, any fees or taxes payable upon
transfers or reregistration of securities); (b) beneficial ownership of the
Fund's assets will be freely transferable without the payment of money or
value other than for custody or administration (including, without
limitation, any fees or taxes payable upon transfers or reregistration of
securities); (c) adequate records will be maintained identifying the assets
as belonging to the Bank; (d) officers of or auditors employed by, or other
representatives of the Bank, including to the extent permitted under
applicable law, the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Bank; and (e) assets of
the Fund held by the Selected Foreign Sub-Custodian will be subject only to
the instructions of the Bank or its agents.
(e) Access of Independent Accountants of the Fund. Upon
request of the Fund, the Bank will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books and
records of any foreign banking institution employed as a Selected Foreign
Sub-Custodian insofar as such books and records relate to the performance of
such foreign banking institution under its Foreign Sub-Custodian Agreement.
(f) Reports by Bank. The Bank will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by Selected Foreign Sub-
Custodians, including but not limited to an identification of entities having
possession of the Foreign Portfolio Securities and other assets of the Fund.
(g) Transactions in Foreign Custody Account. Transactions with
respect to the assets of the Fund held by a Selected Foreign Sub-Custodian
shall be effected pursuant to Proper Instructions from the Fund to the Bank
and shall be effected in accordance with the applicable Foreign Sub-Custodian
Agreement. If at any time any Foreign Portfolio Securities shall be
registered in the name of the nominee of the Selected Foreign Sub-Custodian,
the Fund agrees to hold any such nominee harmless from any liability by
reason of the registration of such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for Foreign Portfolio Securities received
for the account of the Fund and delivery of Foreign Portfolio Securities
maintained for the account of the Fund may be effected in accordance with the
customary established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser thereof
or to a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such securities
from such purchaser or dealer.
In connection with any action to be taken with respect to
the Foreign Portfolio Securities held hereunder, including, without
limitation, the exercise of any voting rights, subscription rights,
redemption rights, exchange rights, conversion rights or tender rights, or
any other action in connection with any other right, interest or privilege
with respect to such Securities (collectively, the "Rights"), the Bank shall
promptly transmit to the Fund such information in connection therewith as is
made available to the Bank by the Foreign Sub-Custodian, and shall promptly
forward to the applicable Foreign Sub-Custodian any instructions, forms or
certifications with respect to such Rights, and any instructions relating to
the actions to be taken in connection therewith, as the Bank shall receive
from the Fund pursuant to Proper Instructions. Notwithstanding the
foregoing, the Bank shall have no further duty or obligation with respect to
such Rights, including, without limitation, the determination of whether the
Fund is entitled to participate in such Rights under applicable U.S. and
foreign laws, or the determination of whether any action proposed to be taken
with respect to such Rights by the Fund or by the applicable Foreign Sub-
Custodian will comply with all applicable terms and conditions of any such
Rights or any applicable laws or regulations, or market practices within the
market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each Foreign
Sub-Custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and
to indemnify, and hold harmless, the Bank and each Fund from and against
certain losses, damages, costs, expenses, liabilities or claims arising out
of or in connection with the institution's performance of such obligations,
all as set forth in the applicable Foreign Sub-Custodian Agreement. The Fund
acknowledges that the Bank, as a participant in Euro-clear, is subject to the
Terms and Conditions Governing the Euro-Clear System, a copy of which has
been made available to the Fund. The Fund acknowledges that pursuant to such
Terms and Conditions, Xxxxxx Guaranty Brussels shall have the sole right to
exercise or assert any and all rights or claims in respect of actions or
omissions of, or the bankruptcy or insolvency of, any other depository,
clearance system or custodian utilized by Euro-clear in connection with the
Fund's securities and other assets.
(i) Monitoring Responsibilities. The Bank shall furnish
annually to the Fund information concerning the Selected Foreign Sub-
Custodians employed hereunder for use by the Fund in evaluating such Selected
Foreign Sub-Custodians to ensure compliance with the requirements of Rule
17f-5 of the Act. In addition, the Bank will promptly inform the Fund in the
event that the Bank is notified by a Selected Foreign Sub-Custodian that
there appears to be a substantial likelihood that its shareholders' equity
will decline below US$200 million (or the equivalent thereof) or that its
shareholders' equity has declined below US$200 million (in each case computed
in accordance with generally accepted U.S. accounting principles) or any
other capital adequacy test applicable to it by exemptive order, or if the
Bank has actual knowledge of any material loss of the assets of the Fund held
by a Foreign Sub-Custodian.
(j) Tax Law. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the
Bank as custodian of the Fund by the tax laws of any jurisdiction, and it
shall be the responsibility of the Fund to notify the Bank of the obligations
imposed on the Fund or the Bank as the custodian of the Fund by the tax law
of any non-U.S. jurisdiction, including responsibility for withholding and
other taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Selected Foreign Sub-
custodian with regard to such tax law shall be to use reasonable efforts to
assist the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such information.
14.4 Insurance. The Bank shall use the same care with respect to
the safekeeping of Portfolio Securities and cash of the Fund held by it as it
uses in respect of its own similar property but it need not maintain any
special insurance for the benefit of the Fund.
14.5. Fees and Expenses of the Bank. The Fund will pay or
reimburse the Bank from time to time for any transfer taxes payable upon
transfer of Portfolio Securities made hereunder, and for all necessary proper
disbursements, expenses and charges made or incurred by the Bank in the
performance of this Agreement (including any duties listed on any Schedule
hereto, if any) including any indemnities for any loss, liabilities or
expense to the Bank as provided above. For the services rendered by the Bank
hereunder, the Fund will pay to the Bank such compensation or fees at such
rate and at such times as shall be agreed upon in writing by the parties from
time to time. The Bank will also be entitled to reimbursement by the Fund for
all reasonable expenses incurred in conjunction with termination of this
Agreement.
14.6 Advances by the Bank. The Bank may, in its sole discretion,
advance funds on behalf of the Fund to make any payment permitted by this
Agreement upon receipt of any proper authorization required by this Agreement
for such payments by the Fund. Should such a payment or payments, with
advanced funds, result in an overdraft (due to insufficiencies of the Fund's
account with the Bank, or for any other reason) this Agreement deems any such
overdraft or related indebtedness a loan made by the Bank to the Fund payable
on demand. Such overdraft shall bear interest at the current rate charged by
the Bank for such loans unless the Fund shall provide the Bank with agreed
upon compensating balances. The Fund agrees that the Bank shall have a
continuing lien and security interest to the extent of any overdraft or
indebtedness, in and to any property at any time held by it for the Fund's
benefit or in which the Fund has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Fund authorizes the Bank, in the Bank's
sole discretion, at any time to charge any overdraft or indebtedness,
together with interest due thereon, against any balance of account standing
to the credit of the Fund on the Bank's books.
15. Limitation of Liability.
15.1 Notwithstanding anything in this Agreement to the contrary, in
no event shall the Bank or any of its officers, directors, employees or
agents (collectively, the "Indemnified Parties") be liable to the Fund or any
third party, and the Fund shall indemnify and hold the Bank and the
Indemnified Parties harmless from and against any and all loss, damage,
liability, actions, suits, claims, costs and expenses, including legal fees,
(a "Claim") arising as a result of any act or omission of the Bank or any
Indemnified Party under this Agreement, except for any Claim resulting solely
from the gross negligence, willful misfeasance or bad faith of the Bank or
any Indemnified Party. Without limiting the foregoing, neither the Bank nor
the Indemnified Parties shall be liable for, and the Bank and the Indemnified
Parties shall be indemnified against, any Claim arising as a result of:
(a) Any act or omission by the Bank or any Indemnified Party in good faith
reliance upon the terms of this Agreement, any Officer's Certificate, Proper
Instructions, resolution of the Board, telegram, telecopier, notice, request,
certificate or other instrument reasonably believed by the Bank to genuine;
(b) Any act or omission of any subcustodian selected by or at the
direction of the Fund;
(c) Any act or omission of a Selected Foreign Sub-Custodian for
to the extent which such Selected Foreign Sub-Custodian is not liable to the
Bank;
(d) Any Corporate Action requiring a Response for which the
Bank has not received Proper Instructions or obtained actual possession of
all necessary Securities, consents or other materials by 5:00 p.m. on the
date specified as the Response Deadline;
(e) Any act or omission of any European Branch of a U.S.
banking institution that is the issuer of Eurodollar CDs in connection with
any Eurodollar CDs held by such European Branch;
(f) Information relied on in good faith by the Bank and supplied
by any Authorized Person in connection with the calculation of (i)
the net asset value and public offering price of the shares of capital stock
of the Fund or (ii) the Yield Calculation; or
(g) Any acts of God, earthquakes, fires, floods, storms or
other disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss or
malfunction of utilities, transportation or computers (hardware or software)
and computer facilities, the unavailability of energy sources and other
similar happenings or events.
15.2 Notwithstanding anything to the contrary in this Agreement, in
no event shall the total liability of the Bank and the Indemnified Parties
under this Agreement exceed in general money damages a total cumulative
maximum amount of one hundred percent of the amounts actually paid by the
Fund to the Bank under this Agreement. The existence of more than one Claim
will not enlarge or extend this limit.
15.3 Notwithstanding anything to the contrary in this Agreement,
in no event shall the Bank or the Indemnified Parties be liable to the Fund
or any third party for lost profits or lost revenues or any special,
consequential, punitive or incidental damages of any kind whatsoever in
connection with this Agreement or any activities hereunder.
16. Termination.
16.1 The term of this Agreement shall be three years commencing
upon the effective date of the Fund's registration statement] (the "Initial
Term"), unless earlier terminated as provided herein. After the expiration
of the Initial Term, the term of this Agreement shall automatically renew for
successive one-year terms (each a "Renewal Term") unless notice of non-
renewal is delivered by the non-renewing party to the other party no later
than sixty days prior to the expiration of the Initial Term or any Renewal
Term, as the case may be.
(a) Either party hereto may terminate this Agreement prior to
the expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the non-violating party
gives written notice of such violation to the violating party and the
violating party does not cure such violation within 90 days of receipt of
such notice.
(b) Either party may terminate this Agreement during any
Renewal Term upon sixty days written notice to the other party. Any
termination pursuant to this paragraph 16.1(b) shall be effective upon
expiration of such sixty days, provided, however, that the effective date of
such termination may be postponed to a date not more than ninety days after
delivery of the written notice: (i) at the request of the Bank, in order to
prepare for the transfer by the Bank of all of the assets of the Fund held
hereunder; or (ii) at the request of the Fund, in order to give the Fund an
opportunity to make suitable arrangements for a successor custodian.
16.2 In the event of the termination of this Agreement, the Bank
will immediately upon receipt or transmittal, as the case may be, of notice
of termination, commence and prosecute diligently to completion the transfer
of all cash and the delivery of all Portfolio Securities duly endorsed and
all records maintained under Section 11 to the successor custodian when
appointed by the Fund. The obligation of the Bank to deliver and transfer
over the assets of the Fund held by it directly to such successor custodian
will commence as soon as such successor is appointed and will continue until
completed as aforesaid. If the Fund does not select a successor custodian
within ninety (90) days from the date of delivery of notice of termination
the Bank may, subject to the provisions of subsection (16.3), deliver the
Portfolio Securities and cash of the Fund held by the Bank to a bank or trust
company of the Bank's own selection which meets the requirements of Section
17(f)(1) of the 1940 Act and has a reported capital, surplus and undivided
profits aggregating not less than $2,000,000, to be held as the property of
the Fund under terms similar to those on which they were held by the Bank,
whereupon such bank or trust company so selected by the Bank will become the
successor custodian of such assets of the Fund with the same effect as though
selected by the Board. Thereafter, the Bank shall be released from any and
all obligations under this Agreement.
16.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of
the Fund advising that a successor custodian cannot be found willing and able
to act upon reasonable and customary terms and that there has been submitted
to the shareholders of the Fund the question of whether the Fund will be
liquidated or will function without a custodian for the assets of the Fund
held by the Bank. In that event the Bank will deliver the Portfolio
Securities and cash of the Fund held by it, subject as aforesaid, in
accordance with one of such alternatives which may be approved by the
requisite vote of shareholders, upon receipt by the Bank of a copy of the
minutes of the meeting of shareholders at which action was taken, certified
by the Fund's Secretary and an opinion of counsel to the Fund in form and
content satisfactory to the Bank. Thereafter, the Bank shall be released
from any and all obligations under this Agreement.
16.4 The Fund shall reimburse the Bank for any reasonable expenses
incurred by the Bank in connection with the termination of this Agreement.
16.5 At any time after the termination of this Agreement, the Fund
may, upon written request, have reasonable access to the records of the Bank
relating to its performance of its duties as custodian.
17. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably
damage the other party and accordingly agree that each of them is entitled,
in addition to all other remedies at low or in equal to an injunction or
injunctions without bond or other security to prevent breaches of this
provision.
18. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (I) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) had delivery with signature to such party at its office
at the address set forth below, namely:
(a) In the case of notices sent to the Fund to:
[ ]
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: [ ]
or at such other place as such party may from time to time
designate in writing.
19. Amendments. This Agreement may not be altered or amended, except
by an instrument in writing, executed by both parties.
20. Parties. This Agreement will be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement will not be assignable by the
Fund without the written consent of the Bank or by the Bank without the
written consent of the Fund, authorized and approved by its Board; and
provided further that termination proceedings pursuant to Section 16 hereof
will not be deemed to be an assignment within the meaning of this provision.
21. Governing Law. This Agreement and all performance hereunder will
be governed by the laws of the Commonwealth of Massachusetts, without regard
to conflict of laws provisions.
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
23. Entire Agreement. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any
conflicting terms or provisions of any other instrument and terminates and
supersedes any and all prior agreements and undertakings between the parties
relating to the subject matter herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
[ ]
By:_________________________
Name:
Title:
Investors Bank & Trust Company
By:__________________________
Name:
Title: