CUSTODIAN AGREEMENT
AGREEMENT made as of this first day of November 1997 between U.S.
GLOBAL ACCOLADE FUNDS (the "Fund") on behalf of each of the portfolios listed on
Appendix C hereto as the same may be amended from time to time (each a "Fund"
and collectively the "Funds"), and XXXXX BROTHERS XXXXXXXX & CO. (the
"Custodian").
WITNESSETH
WHEREAS the Fund is organized as a Massachusetts Business Trust with
one or more series of shares, and is an open-end management investment company
registered with the Securities and Exchange Commission.
WHEREAS each Fund represents an interest in a separate portfolio of
cash, securities and other assets (all references to a "Fund" or the "Funds"
shall be deemed to include each portfolio within the Fund as the context may
make appropriate).
WHEREAS the Fund wishes to employ the Custodian and the Custodian has
agreed to provide custodial, banking and related services to the Fund in
accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Fund and the Custodian agree as follows:
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1. APPOINTMENT OF CUSTODIAN. Upon the terms and conditions set forth in this
Agreement, the Fund hereby appoints the Custodian as a custodian, and the
Custodian hereby accepts such appointment. The Fund shall deliver or shall cause
to be delivered to the Custodian cash, securities and other property
("Property") owned by the Fund from time to time during the term of this
Agreement. The Custodian shall be under no obligation to request or to require
that any or all Property of the Fund be delivered to it, and the Custodian shall
have no responsibility with respect to any Property not delivered to it.
The Fund may in the future authorize the establishment of separate accounts
which hold Property of the Fund and with respect to which a certain investment
adviser or manager will be authorized to act and give instructions to the
Custodian (an "Investment Adviser"). The Fund shall notify the Custodian in
writing by a Proper Instruction (as defined in Section 2(xvii) of this Agreement
of such authorization, whereupon the Custodian may accept and act on Proper
Instructions it reasonably believes to be sent by such Investment Adviser.
2. DEFINITIONS.
In this Agreement, the following words shall, unless the context otherwise
requires, have the following meanings:
(i) "1940 Act" - the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder.
(ii) "Advances" - shall have the meaning ascribed to it in Section 11
hereof.
(iii)"Agency Accounts" - shall have the meaning ascribed to it in Section 5
hereof.
(iv) "Agent" - shall have the meaning ascribed to it in Section 7 hereof.
(v) "BBH Accounts" - shall have the meaning ascribed to it in Section 5
hereof.
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(vi) "Book-Entry Agent" - shall have the meaning ascribed to it in Section
4.1(b) hereof.
(vii)"Derivative Instruments and Commodities" - any form of risk transfer
contract in which a gain or loss is recognized from fluctuations in
market price levels or rates, indexes or benchmarks, and which
includes without limitation futures, forwards, options, swaps, forward
rate and forward exchange contracts, leverage- or commodity-related
similar contracts and any other risk transfer contract whether traded
on or off an exchange.
(viii) "Electronic Instructions" - shall have the meaning ascribed to it in
Section 8.3 hereof.
(ix) "Electronic Reports" - shall have the meaning ascribed to it in
Section 8.3 hereof.
(x) "Force Majeure" - shall have the meaning ascribed to it in Section
10.4 hereof.
(xi) "Investments" - assets of the Fund, other than Property held by the
Custodian, a Subcustodian or a Securities Depository, but which the
Custodian may note on its records as being assets of the Fund
including without limitation Derivative Instruments and Commodities.
(xii)"Investment Adviser" - shall have the meaning ascribed to it in
Section 1 hereof.
(xiii) "Liability" - shall have the meaning ascribed to it in Section 11
hereof.
(xiv)"Margin Account" - shall have the meaning ascribed to it in Section
4.2(d) hereof.
(xv) "Margin Agreement" - shall have the meaning ascribed to it in Section
4.2(d) hereof.
(xvi)"Omnibus Accounts" - accounts established in the name of the Custodian
on behalf of its customers in which assets on deposit with the
Custodian by one or several customers may be deposited. Omnibus
Accounts may be established for the purpose of holding cash or
securities.
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(xvii) "Proper Instructions" - any direction to take or not to take action
in respect of Property (including cash) or Investments which the
Custodian reasonably believes to be sent by an authorized person and
to be genuine. Proper Instructions may be sent via the media set forth
in Section 6 hereof or as otherwise agreed between the Custodian and
the Fund.
(xviii) "Property" - shall have the meaning ascribed to it in Section 1
hereof.
(xix)"Securities Accounts" - shall have the meaning ascribed to it in
Section 4 hereof.
(xx) "Securities Depository" - a generally recognized book-entry system or
a clearing agency which acts as a securities depository in any country
in which securities are maintained under this Agreement and with which
the Custodian or a Subcustodian may maintain securities or other
Property owned by or held on behalf of the Fund, pursuant to the
provisions hereof, including Euroclear and Cedel.
(xxi)"Segregated Accounts" - shall have the meaning ascribed to it in
Section 4.2(d) hereof.
(xxii) "Subcustodian" - shall mean any subcustodian appointed pursuant to
Section 7 of this Agreement.
(xxiii) "Voluntary Corporate Actions" - corporate actions (as further
described in Section 4.3) in respect of portfolio securities of the
Fund which require an investment decision.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE FUND. The Fund represents
and warrants that the execution, delivery and performance by the Fund of this
Agreement are within the Fund's corporate, trust or other constitutive powers,
have been duly authorized by all necessary corporate, trust or other appropriate
action under its constitutive documents, and do not contravene or constitute a
default under any provision
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of applicable law or regulation or of the constitutive documents of the Fund or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Fund. The Fund agrees to inform the Custodian reasonably
promptly if any statement set forth in this Section 3 or elsewhere made by the
Fund in this Agreement ceases to be true and correct. The Fund shall safeguard
and shall solely be responsible for the safekeeping of any testkeys,
identification codes, other security devices or statements of account with which
the Custodian provides it. If and when applicable, the Fund shall execute any
reasonably requisite license agreement or sublicense agreement governing its use
of any electronic instruction system proprietary to the Custodian or an
affiliate of the Custodian or proprietary to a third party which has licensed
such system to the Custodian or an affiliate of the Custodian.
4. SECURITIES ACCOUNT. The Fund hereby authorizes the Custodian to open and
maintain, with itself or with Subcustodians, securities accounts (the
"Securities Account") and authorizes the Custodian to deposit or record, as the
case may be, in such Securities Account the Fund's Property delivered to and
accepted by the Custodian, or such other Investments as the Fund requests the
Custodian to record by notation only. The Custodian shall keep safely all
Property delivered to it. In the event of a loss of a security for which the
Custodian would be liable under the provisions of this Agreement, the Custodian
shall be responsible for either replacing the security or for reimbursing the
Fund the value of the security as of the date that a claim is made by the Fund
upon the Custodian for such reimbursement. The Securities Account shall be
maintained in the manner and on the terms set forth below. (All references in
this Section to the Custodian shall include a Subcustodian, Securities
Depository or any agent of the Custodian.)
4.1 MANNER OF HOLDING OR RECORDING SECURITIES AND OTHER INVESTMENTS
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(a) SECURITIES REPRESENTED BY PHYSICAL CERTIFICATES - Securities
represented by share certificates or other instruments may be held in
registered or bearer form (i) in the Custodian's vault, (ii) in the vault
of a Subcustodian or other Agent (as defined in Section 7 of the Agreement)
of the Custodian, (iii) in an account maintained by the Custodian or a
Subcustodian at a Securities Depository, or (iv) in accordance with
customary market practice (x) in the country in which settlement is to
occur or (y) for the particular security in respect of which settlement is
instructed.
Securities held at a Subcustodian will be held subject to the terms of
the Subcustodian Agreement in effect between the Custodian and the
Subcustodian and may be held in Omnibus Accounts.
Securities held in a Securities Depository will be held subject to the
agreement, rules, statement of terms and conditions or other document or
conditions effective between the Securities Depository and the Custodian or
the Subcustodian. Such securities shall be held (i) in an account which
contains only assets of the Custodian held as custodian or otherwise on
behalf of others if such account is maintained by the Custodian with a
Securities Depository (unless market practice or Securities Depository
rules and regulations require the Custodian also to hold its own assets in
such account), or (ii) in an account which contains only assets of the
Subcustodian or other Agent held as custodian or otherwise on behalf of
others if such account is maintained by the Subcustodian or other Agent
with a Securities Depository (unless market practice or Securities
Depository rules and regulations require a Subcustodian also to hold its
own assets in such account).
Registered securities of the Fund may be registered in the name of the
Custodian, the Fund or a nominee of either of them and may be held in any
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manner set forth above, with or without any indication of fiduciary
capacity, provided that securities are held in an account of the Custodian
or a Subcustodian containing only assets of the Fund or only assets held by
the Custodian or a Subcustodian as custodian for its customers or are
otherwise held on behalf of others.
(b) SECURITIES REPRESENTED BY BOOK-ENTRY - Securities represented by
book-entry on the books of the issuer, a registrar, a clearing agency or
other agent of the issuer (a "Book-Entry Agent") may be so held in an
account of the Custodian or a Subcustodian or other Agent maintained with
such Book- Entry Agent provided such account contains only assets of the
Fund or only assets held as custodian for customers or are otherwise held
on behalf of others.
(c) OTHER INVESTMENTS - At the specific request of the Fund, the
Custodian may note on its records investments owned by the Fund that are
not represented by physical securities or by book-entry, including without
limitation derivative instruments and commodities. The Fund acknowledges
that such notation is for recordkeeping purposes only, that the Custodian
may not be able to exercise control over such investments and that such
investments may represent contractual rights of the Fund which the
Custodian cannot enforce. The Fund shall be responsible for requesting that
any statements applicable to such investments, including brokerage
statements, be sent to the Custodian.
4.2 POWERS AND DUTIES OF THE CUSTODIAN WITH RESPECT TO THE SECURITIES
ACCOUNT - The Custodian shall have the following powers and duties with respect
to the Securities Account:
(a) PURCHASES - Upon receipt of Proper Instructions, insofar as funds
are available or as funds are otherwise provided by the Custodian at its
discretion
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pursuant to Section 11 hereof for the purpose, to pay for and receive
securities purchased for the account of the Fund, payment being made upon
receipt of the securities by the Custodian or a Subcustodian, either
directly or through a Securities Depository or clearing corporation of a
securities exchange of which the Custodian or a Subcustodian is a member
(and in accordance with the rules of such Securities Depositories or other
U.S. or foreign clearing agencies), or if such settlement is not
practicable or prevalent in the applicable market, otherwise in accordance
with Applicable Law or regulation or generally accepted trade practice in
the applicable local market. Notwithstanding this section, the Custodian
may use any settlement mechanisms required by the terms of the instrument
representing the security or the terms of Proper Instructions.
(b) SALES - Upon receipt of Proper Instructions, to make delivery of
securities which have been sold for the account of the Fund against payment
therefor in cash, by check or by bank wire transfer or by other credit to
the account of the Custodian or Subcustodian, either directly or through a
Securities Depository or clearing corporation of a securities exchange of
which the Custodian or a Subcustodian is a member (and in accordance with
the rules of such Securities Depositories or other U.S. or foreign clearing
agencies), or if such settlement is not practicable or prevalent in the
applicable market, otherwise in accordance with Applicable Law or
regulation or generally accepted trade practice in the applicable local
market. Notwithstanding this section, the Custodian may use any settlement
mechanisms required by the terms of the instrument representing the
security, or the terms of Proper Instructions.
(c) OTHER TRANSFERS - To deliver Property of the Fund to a
Subcustodian, another custodian or another third party as necessary to
effect transactions authorized by Proper Instructions, and upon receipt of
Proper
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Instructions, to make such other disposition of Property of the Fund in a
manner other than or for purposes other than as enumerated elsewhere in
this Agreement, provided that the instructions relating to such disposition
shall state the amount of Property to be delivered and the name of the
person or persons to whom delivery is to be made.
(d) FUTURES; OPTIONS; SEGREGATED ACCOUNTS - Upon the receipt of Proper
Instructions and the execution of any agreements relating to margin in
respect of a Derivative Instrument or Commodity ("Margin Agreements"), to
establish and maintain on its books a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities of the Fund in accordance with the terms
of such Margin Agreements and any Proper Instructions ("Segregated
Accounts").
Upon receipt of Proper Instructions or upon receipt of instructions
given pursuant to any Margin Agreement, or pursuant to the terms of such
Agreement, the Custodian shall (i) receive and retain, to the extent the
same are provided to the Custodian, confirmations or other documents
evidencing the purchase or sale of such Derivative Instruments or
Commodities by the Fund; (ii) deposit and maintain, pursuant to a Margin
Agreement, and segregate, either physically or by book-entry on the
Custodian's books or in a Securities Depository, for the benefit of any
futures commission merchant ("Margin Account"), or pay pursuant to Proper
Instructions to such broker, dealer or futures commission merchant, such
securities, cash or other assets as are designated by the Fund as initial,
maintenance or variation "margin" deposits or other collateral intended to
secure the Fund's performance of its obligations under the terms of any
Derivative Instrument or Commodity, in accordance with the provisions of
any Margin Agreement relating thereto; (iii) to deliver, in accordance with
Proper Instructions
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to a broker dealer appointed by the Fund for purposes of margin
requirements in conformity with Rule 17f-6; and (iv) otherwise pay, release
and/or transfer securities, cash or other assets into or out of such Margin
Accounts only in accordance with the provisions of any such Margin
Agreement. The Custodian shall not be responsible for the any broker to
whom assets are delivered pursuant to this Section, sufficiency of assets
held in any segregated account established in compliance with applicable
margin maintenance requirements or for the performance of the other terms
of any agreement relating to a Derivative Instrument or Commodity.
Notwithstanding anything in this Agreement to the contrary, the Fund
agrees that the Custodian's responsibility for any Derivative Instruments
and Commodities shall be limited to the exercise of reasonable care with
respect to any confirmations or other documents evidencing the purchase or
sale of such Derivative Instrument by the Fund which the Custodian
receives.
(e) STOCK LENDING - Upon receipt of Proper Instructions, to deliver
securities of the Fund, in connection with loans of securities by the Fund,
to the borrower thereof, including (if specifically indicated by Proper
Instruction, which may be a standing instructions) delivery prior to
receipt of the collateral, if any, for such borrowing.
(f) NON-DISCRETIONARY DETAILS - Without the necessity of express
authorization from the Fund, (1) to attend to all nondiscretionary details
in connection with the sale, exchange, substitution, purchase, transfer or
other dealings with securities, cash or other Property of the Fund held by
the Custodian except as otherwise directed from time to time by the
Directors or Trustees of the Fund, and (2) to make payments to itself or
others for minor expenses of handling
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securities or other similar items relating to the Custodian's duties under
this Agreement, provided that all such payments shall be accounted for to
the Fund.
4.3 CORPORATE ACTIONS - Unless the Custodian receives timely Proper
Instructions to the contrary, the Custodian will perform or will cause the
Subcustodian to perform the following:
(i) exchange securities held by it for the account of the Fund for
other securities in connection with any reorganization, recapitalization,
split-up of shares, change of par value, conversion or other event relating
to the securities or the issuer of such securities, and shall deposit any
such securities in accordance with the terms of any reorganization or
protective plan;
(ii) surrender securities in temporary form for definitive securities;
surrender securities for transfer into the name of the Custodian, the Fund
or a nominee of either of them, as permitted by Section 4.1(a); and
surrender securities for a different number of certificates or instruments
representing the same number of shares or same principal amount of
indebtedness;
(iii) deliver warrants, puts, calls, rights or similar securities to
the issuer or trustee thereof, or to the agent of such issuer or trustee,
for the purpose of exercise or sale, and deposit securities upon
invitations for tenders thereof;
(iv) take all necessary action to comply with the terms of all
mandatory or compulsory exchanges, calls, tenders, redemptions, or similar
rights of security ownership, and promptly notify the Fund of such action,
and collect all stock dividends, rights and other items of like nature;
(v) collect amounts due and payable to the Fund with respect to
portfolio securities of the Fund, and promptly credit to the account of the
Fund all income and other payments relating to portfolio securities and
other assets held by
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the Custodian hereunder upon Custodian's receipt of such income or payments
or as otherwise agreed in writing by the Custodian and the Fund, provided
that the Custodian shall not be responsible for the collection of amounts
due and payable with respect to portfolio securities that are in default;
(vi) endorse and deliver any instruments required to effect collection
of any amount due and payable to the Fund with respect to securities;
execute ownership and other certificates and affidavits on the Fund's
behalf for all federal, state and foreign tax purposes in connection with
receipt of income, capital gains or other payments with respect to
portfolio securities and other assets of the Fund, or in connection with
the purchase, sale or transfer of such securities or other assets; and file
any certificates or other affidavits for the refund or reclaim of foreign
taxes paid;
(vii) deliver to the Fund all forms of proxies, all notices of
meetings, and any other notices or announcements affecting or relating to
securities owned by the Fund that are received by the Custodian, any
Subcustodian, or any nominee of either of them, and, upon receipt of Proper
Instructions, the Custodian shall execute and deliver, or cause such
Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Proper
Instructions, neither the Custodian nor any Subcustodian or nominee shall
vote upon any such securities, or execute any proxy to vote thereon, or
give any consent or take any other action with respect thereto.
In fulfilling the duties set forth above, the Custodian shall be
responsible for promptly sending to the Fund all information pertaining to the
relevant terms of a corporate action which it in fact receives, provided that
the Custodian shall not be
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responsible for incorrect information it receives, or information it has not
received but should have received, from industry-accepted third-party securities
information vendors.
Notwithstanding any provision of this Agreement to the contrary, with
respect to portfolio securities registered in so-called street name, the
Custodian shall use reasonable efforts to collect cash or share entitlements due
and payable to the Fund but shall not be responsible for its inability to
collect such cash or share entitlements.
The Custodian shall only be responsible for acting on the Proper
Instructions of the Fund in respect of any corporate action that includes the
requirement of an election between two or more substantive alternatives (a
"Voluntary Corporate Action") provided the Custodian has received a Proper
Instruction requesting such action a reasonable time prior to expiration of the
time within which action in respect of such Voluntary Corporate Action may be
taken, in order to ensure that Custodian has sufficient time to take such
action. The deadline for the acceptance of such instruction may be set forth by
the Custodian in its communication of the terms of such action to the Fund and
shall take into consideration delays which occur due to (i) the involvement of a
Subcustodian, Securities Depository or other intermediary; (ii) differences in
time zones; or (iii) other factors particular to a given market, exchange or
issuer.
Any advance credit of cash or shares by the Custodian or a Subcustodian
expected to be received as a result of any corporate event shall be subject to
actual collection and may, when the Custodian deems such collection unlikely, be
reversed by the Custodian upon written notice to the Fund. As used herein, an
"advance credit of cash or shares" shall mean any credit of cash or shares to
any account maintained hereunder prior to actual receipt and collection of such
cash or shares in anticipation of a distribution expected to be received in the
future.
5. CASH ACCOUNTS.
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5.1 OPENING AND MAINTAINING CASH ACCOUNTS - Subject to the terms and
conditions set forth in this Section 5, the Fund hereby authorizes the Custodian
to open and maintain, with itself or with Subcustodians, cash accounts in United
States Dollars and in such other currencies as the Fund shall from time to time
request or as are in the Custodian's discretion required in order for the
Custodian to carry out the terms of this Agreement. The Custodian shall make
payments from or deposits to any of said accounts upon its receipt of Proper
Instructions from the Fund providing sufficient details to effect such
transaction.
Cash accounts opened on the books of the Custodian ("BBH Accounts") shall
be opened in the name of the Fund. Subject always to the provisions of Section
10 hereof, the Custodian shall be liable for repayment of any and all deposits
carried on its books as principal, whether denominated in United States Dollars
or in other currencies.
Cash accounts opened on the books of Subcustodians appointed pursuant to
Section 7 hereof may be opened in the name of the Fund or the Custodian or in
the name of the Custodian for its customers generally ("Agency Accounts"). Such
deposits shall be treated as portfolio securities, and accordingly the Custodian
shall be responsible for the exercise of reasonable care in respect of the
administration of such Agency Accounts but shall not be liable for their
repayment in the event the Subcustodian fails to make repayment (including in
the event of the Subcustodian's bankruptcy or insolvency). Both BBH Accounts and
Agency Accounts shall be subject to the provisions of Sections 9 and 10 of this
Agreement.
The Fund bears all risks of holding or transacting in any currency. Any
credit made to any Agency or BBH Account shall be provisional and may be
reversed by the Custodian in the event such payment is not actually collected.
The Custodian shall not be liable for any loss or damage arising from the
applicability of any law or regulation now or hereafter in effect, or from the
occurrence of
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any event, which may delay or affect the transferability, convertibility or
availability of any currency in the country (i) in which such BBH or Agency
Accounts are maintained or (ii) in which such currency is issued, and in no
event shall the Custodian be obligated to make payment of a deposit denominated
in a currency during the period during which its transferability, convertibility
or availability has been affected by any such law, regulation or event. Without
limiting the generality of the foregoing, neither the Custodian nor any
Subcustodian shall be required to repay any deposit made at a foreign branch of
either the Custodian or Subcustodian if such branch cannot repay the deposit due
to (i) an act of war, insurrection or civil strife; or (ii) an action by a
foreign government or instrumentality, whether de jure or de facto, in the
country in which the branch is located preventing such repayment, unless the
Custodian or such Subcustodian expressly agrees in writing to repay the deposit
under such circumstances.
All currency transactions in any account opened pursuant to this Agreement
are subject to exchange control regulations of the United States and of the
country where such currency is the lawful currency or where the account is
maintained. Any taxes, costs, charges or fees imposed on the convertibility of a
currency held by the Fund shall be for the account of the Fund.
5.2 FOREIGN EXCHANGE TRANSACTIONS The Custodian shall, pursuant to Proper
Instructions, settle foreign exchange transactions (including contracts,
futures, options and options on futures) on behalf and for the account of the
Fund with such currency brokers or banking institutions, including
Subcustodians, as the Fund may direct pursuant to Proper Instructions. The
Custodian shall be responsible for the transmission of cash and instructions to
and from the currency broker or banking institution with which the contract or
option is made and the safekeeping of all certificates and other documents and
agreements evidencing or relating to such foreign exchange transactions as the
Custodian
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may receive. In connection with such transactions, the Custodian is authorized
to make free outgoing payments of cash in the form of U. S. Dollars or foreign
currency without receiving confirmation of a foreign exchange contract or option
or confirmation that the countervalue currency completing the foreign exchange
contract has been delivered or received or that the option has been delivered or
received. The Fund accepts full responsibility for its use of third-party
foreign exchange dealers and for execution of said foreign exchange contracts
and options and understands that the Fund shall be responsible for any and all
costs and interest charges which may be incurred by the Fund or the Custodian as
a result of the failure or delay of third parties to deliver foreign exchange.
Foreign exchange transactions (including without limitation contracts,
futures, options, and options on futures), other than those executed with the
Custodian as principal, but including those executed with Subcustodians, shall
be deemed to be portfolio securities of the Fund and accordingly the Custodian
shall only be responsible for delivering or receiving currency on behalf of the
Fund in respect of such contracts pursuant to Proper Instructions subject to the
fourth paragraph of this Section 5.2.. The Custodian shall not be responsible
for the failure of any counterparty in such agency transaction to perform its
obligations thereunder.
Alternatively, such transactions may be undertaken by the Custodian as
principal, if instructed by the Fund and accepted by the Custodian by Proper
Instruction, which may be a standing instruction.
The obligations of the Custodian in respect of all foreign exchange
transactions shall be contingent on the free, unencumbered transferability of
the currency transacted on the actual settlement date of the transaction.
5.3 DELAYS - In the event a delay is caused by the negligence or willful
misconduct of the Custodian in carrying out a Proper Instruction to transfer
cash in connection with any transaction referred to in Section 5.1 or 5.2 above,
the Custodian
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shall be liable to the Fund for interest to be calculated at the rate
customarily paid by the Custodian on overnight deposits at the time the delay
occurs for the period from the day when the transfer should have been effected
until the day it is in fact effected and any other direct damages (if any). The
Custodian shall not be liable for delays in carrying out such instructions to
transfer cash which are not due to the Custodian's own negligence or willful
misconduct.
6. PROPER INSTRUCTIONS. Proper Instructions shall include, in the following
order of the preferred method of giving such instructions, authenticated
electromechanical communications including direct electronic transmissions,
authenticated SWIFT and tested telex, including Electronic Instructions as
described in Section 8.3,; a written request signed by two or more authorized
persons as set forth below; telefax transmissions; and oral instructions,
including telephone instructions. Proper Instructions may also include such
other methods of communicating Proper Instructions as the parties hereto may
from time to time agree. Each of the first four methods of communicating Proper
Instructions is described and defined below and may from time to time be
described and defined in written operating memoranda between the Custodian and
the Fund. The Custodian is hereby authorized to act on instructions sent via any
of the foregoing methods from any director, employee or officer of the Fund or
from the Investment Adviser or other agent of the Fund as the Fund shall from
time to time instruct.
Authenticated electro-mechanical communications shall include
communications effected directly between electromechanical or electronic devices
or
17
systems, including authenticated SWIFT and tested telex transmissions, and other
forms of communications involving or between such electro-mechanical or
electronic devices or systems as the parties may from time to time agree upon in
writing. In the event media other than tested telex transmissions are agreed
upon, the Custodian may in its discretion require that the Fund, its Investment
Adviser or other agent and the Custodian enter into certain operating memoranda
which shall set forth the media through which such Proper Instructions shall be
transmitted and the data which must be included in such Proper Instructions in
order for such instructions to be complete. Once such operating memoranda shall
have been instituted, the Fund, its Investment Adviser or other Agent shall be
responsible for sending instructions which meet the requirements set forth in
such operating memoranda and the Custodian shall only be responsible for acting
on instructions which meet such requirements. The Custodian shall not be liable
for damages of any kind, including direct or consequential losses resulting from
technological or equipment failures or communications system failures of any
kind in respect of instructions sent or attempted to be sent via
electromechanical communications provided that such failure is not caused by the
Custodian through negligence with respect to the operation of its proprietary
systems.
A written request signed by two or more authorized persons shall include a
written request, direction, instruction or certification signed or initialed on
behalf of the Fund by two or more persons as the Directors or Trustees of the
Fund shall have from time to time authorized, or by such other written procedure
as the Custodian and the Fund shall from time to time agree in writing. Those
persons authorized to give Proper Instructions may be identified by the
Directors or Trustees by name, title or position (including any of its
directors, employees or agents or any investment manager or adviser or person or
entity with similar responsibilities which is authorized to give Proper
Instructions on behalf of the Fund to the Custodian) and will include at least
one officer empowered by the Directors or Trustees to name other individuals or
entities who are authorized to give Proper Instructions on behalf of the Fund.
18
Telephonic or other oral instructions or instructions given by telefax
transmission may be given by any one of the persons referred to in the preceding
paragraph and 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.
With respect to telefax transmissions, the Fund and the Custodian hereby
acknowledge that receipt of legible instructions cannot be assured, and that the
Custodian cannot verify that authorized signatures on telefax instructions are
original or properly affixed. The Custodian shall take reasonable steps to
clarify instructions if it becomes aware of inaccuracies, incompleteness or
similar difficulties, but otherwise it shall not be responsible for losses or
expenses incurred through actions taken in reasonable reliance on inaccurately
stated, illegible or unauthorized telefax instructions.
Oral instructions will be confirmed by authenticated electro-mechanical
communications or written instructions in the manner set forth above, but the
lack of such confirmation shall in no way affect any action taken by the
Custodian in reliance upon such oral instructionsprior to receipt of written
confirmation. The Fund hereby authorizes the Custodian to tape record any and
all telephonic or other oral instructions given to the Custodian by or on behalf
of the Fund (including any of its Directors, Trustees, employees or agents or
any Investment Adviser or person or entity with similar responsibilities which
is authorized to give Proper Instructions on behalf of the Fund to the
Custodian).
Proper Instructions may relate to specific transactions or to types or
classes of transactions, and may be in the form of standing instructions which
are Proper Instructions.
Provided that the Custodian gives the Fund prompt notice of its intention
not to act where it would be reasonable not to act, the Custodian shall not be
responsible for its
19
failure to act on any instruction received from the Fund which the Custodian
reasonably and in good faith believes does not meet the requirements set forth
herein.
7. AUTHORITY TO APPOINT SUBCUSTODIANS AND AGENTS AND TO UTILIZE SECURITIES
DEPOSITORIES. Subject to the provisions hereinafter set forth in this Section 7,
the Fund hereby authorizes the Custodian to utilize Securities Depositories to
act on behalf of the Fund and to appoint from time to time and to utilize
Subcustodians.
The Custodian may deposit and/or maintain Property of the Fund in any non-
U.S. Securities Depository provided such Securities Depository meets the
requirements of an "eligible foreign custodian" under Rule 17f-5 promulgated
under the 1940 Act, or any successor rule or regulation ("Rule 17f-5") or which
by order of the Securities and Exchange Commission is exempted therefrom. The
Custodian may deposit and/or maintain, either directly or through one or more
agents appointed by the Custodian, Property of the Fund in any Securities
Depository in the United States, including The Depository Trust Company,
provided such Depository meets applicable requirements of the Federal Reserve
Bank or of the Securities and Exchange Commission. Notwithstanding anything in
this Agreement to the contrary, any Property held in a Securities Depository,
whether or not the Custodian is a direct participant or member, will be held
subject to the rules, regulations, operating memoranda or other conditions of
participation in such Securities Depository.
The Custodian may, at any time and from time to time, appoint any bank as
defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a
custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder, to act on behalf of the Fund as a subcustodian for purposes of
holding Property of the Fund in the United States. Additionally, the Custodian
may, at any time and from time to time, appoint (i)
20
any bank, trust company or other entity meeting the requirements of an "eligible
foreign custodian" under Rule 17f-5 or which by order of the Securities and
Exchange Commission is exempted therefrom, or (ii) any bank as defined in
Section 2(a)(5) of the 1940 Act meeting the requirements of a custodian under
Section 17(f) of the 1940 Act and the rules and regulations thereunder, to act
on behalf of the Fund as a subcustodian for purposes of holding Property of the
Fund outside the United States. Any bank, trust company or other entity
appointed pursuant to the foregoing provisions shall be a Subcustodian.Unless
and except to the extent that review of certain matters concerning the
appointment of Subcustodians shall have been delegated to the Custodian pursuant
to the succeeding paragraph, the Custodian shall, prior to the appointment of
any Subcustodian for purposes of holding Property of the Fund outside the United
States, to obtain written confirmation of the approval of the Board of Trustees
or Directors of the Fund with respect to: (a) the identity of a Subcustodian,
(b) the country or countries in which, and the Securities Depositories, if any,
through which, any proposed Subcustodian is authorized to hold Investments of
the Fund, and (c) the Subcustodian agreement which shall govern such
appointment. Each such duly approved country, Subcustodian and Securities
Depository shall be listed on Appendix A attached hereto as the same may from
time to time be amended. The Custodian may, at any time in its discretion,
remove any Subcustodian that has been appointed as such but will promptly notify
the Fund of any such action.
From time to time, the Custodian may offer and the Fund may accept, that
the Custodian perform certain reviews of Subcustodians and of Subcustodian
Contracts as delegate of the Fund's Board. In such event, the Custodian's duties
and obligations with respect to
21
this delegated review will be performed in accordance with the terms of the
separate delegation agreement between the Fund and the Custodian.
The Fund shall be responsible for informing the Custodian sufficiently in
advance of a proposed investment which is to be held in a country in which no
Subcustodian is authorized to act in order that the Custodian shall have
sufficient time to establish a subcustodial arrangement in accordance herewith.
In the event that the Fund shall invest in a Security or other asset to be held
in a country in which no Subcustodian is authorized to act, the Custodian shall
promptly notify the Fund in writing by such means as the Custodian and the Fund
have regularly established for such communication, that no Subcustodian is
approved or available with respect to such Security or other asset. Upon receipt
of Proper instructions, the Custodian is authorized to appoint any person
designated by the Fund in such instruction to hold such security or other asset.
In the absence of such Proper Instruction, the Security may be left at its
settlement location or moved to another agent for purposes of safekeeping,
provided that the Custodian shall only be responsible for the safekeeping agent
under such circumstances to the extent that it can recover from such agent.
With respect to securities and funds held by a Subcustodian, either
directly or indirectly (including by a Securities Depository or clearing
agency), notwithstanding any provisions of this Agreement to the contrary,
payment for securities purchased and delivery of securities sold may be made
prior to receipt of securities or payment, respectively, and securities or
payment may be received in a form, in accordance with (i) governmental
regulations, (ii) rules of Securities Depositories and clearing agencies, (iii)
generally accepted trade practice in the applicable local market, (iv) the terms
of the instrument representing the security, or (v) the terms of Proper
Instructions.
22
In the event the Custodian receives a claim from a Subcustodian under the
indemnification provisions of any subcustodian agreement, the Custodian shall
promptly give written notice to the Fund of such claim. No more than thirty days
after written notice to the Fund of the Custodian's intention to make such
payment, the Fund will reimburse the Custodian the amount of such payment except
in respect of any negligence or misconduct of the Custodian or any Subcustodian.
The Custodian may at any time or times in its discretion appoint (and may
at any time remove) any other bank or trust company as its agent (an "Agent") to
carry out such of the provisions of this Agreement as the Custodian may from
time to time direct, provided, however, that the appointment of such Agent shall
not relieve the Custodian of any of its responsibilities under this Agreement.
The Custodian shall be responsible for the actions of any Agent other than a
Subcustodian as if it performed such action itself. The responsibility of the
Custodian for any Subcustodian shall be determined in accordance with the
provisions of Section 9.
8. REPORTING; RECORDS. The Custodian shall have and perform the following duties
with respect to recordkeeping. Any records prepared and maintained for the Fund
hereunder shall be the property of the Fund
8.1 REPORTS AND RECORDS8. - The Custodian shall create, maintain and retain
such records relating to its activities and obligations under this Agreement as
will enable the Custodian to comply with its obligations hereunder and as are
customarily maintained by a professional custodian to assist the Fund in
compliance with the 1940 Act and rules and regulations promulgated thereunder.
The Custodian shall also prepare such periodic reports as the parties may agree
from time to time.
23
8.2 ACCESS TO RECORDS8. - The books and records maintained by the Custodian
pursuant to this Agreement and information relative to insurance coverage and
fidelity bonds maintained by the Custodian in connection with this Agreement
shall at reasonable times during the Custodian's regular business hours be open
to inspections and audit by the auditors and by employees and agents of the Fund
provided that all such individuals shall observe all security requirements of
the Custodian applicable to its own employees having access to similar records
and such rules as may be reasonably imposed by the Custodian.
8.3 ELECTRONIC RECORDS AND COMMUNICATIONS8. - The Custodian may make any of
its records available to the Fund or its Investment Adviser via electronic
reporting which may include without limitation on-line software systems
("Electronic Reports"). The Fund understands that such Electronic Reports may
include data provided to the Custodian by outside sources which may not have
been independently verified by the Custodian and is subject to change.
Accordingly, the Custodian shall not be liable for inaccuracies, errors or
incomplete information furnished by such sources.
The Custodian may also make available to the Fund or its Investment Adviser
certain software to be used to initiate payment and securities transfer
instructions, affirm brokerage transactions reported through the Institutional
Delivery System or initiate other transaction instructions for the Custodian's
processing ("Electronic Instructions").
The Fund agrees that it shall be responsible for protecting and maintaining
the confidentiality and security of any codes assigned in respect of the Fund's
or its Investment Adviser's access to such Electronic Reports or Electronic
Instructions and that any instructions received through such system using the
client code assigned to the Fund shall be deemed to have originated from or on
behalf of the Fund and to be Proper Instructions.
24
The Custodian shall not be responsible for information added to, changed or
omitted by electronic programming malfunction, unauthorized access or other
failure of such systems unless such actions are the direct result of the
Custodian's negligence, bad faith or willful malfeasance. In the event of any
such malfunction, unauthorized access or other failure, the Custodian shall, at
no additional expense to the Fund, take reasonable steps to minimize service
interruptions.
8.4 REVIEW OF RECORDS8. - The Fund agrees to examine all records as to the
execution of Proper Instructions and as to the Fund's assets and to promptly
upon receipt thereof and to notify the Custodian promptly of any discrepancy or
error therein. The Fund acknowledges that its failure to perform such
examination and notification promptly may materially contribute to losses of the
Fund arising from an act or omission of the Custodian and may materially affect
the Custodian's ability to mitigate the impacts thereof.
8.5 APPOINTMENT AS RECORDKEEPING AND NET ASSET VALUE CALCULATION AGENT The
Custodian is hereby appointed recordkeeping and net asset value calculation
agent responsible for creating, maintaining and retaining such records relating
to its obligations under this Agreement as are required under the 1940 Act
(including Section 31 thereof and Rules 31a-1 and 31a-2 thereunder). All such
records will be the property of the FundThe Custodian shall compute and
determine the net asset value per share of the Fund as of the close of regular
business on the New York Stock Exchange on each day on which such Exchange is
open, unless otherwise directed by Proper Instructions. Such computation and
determination shall be made in accordance with (1) the provisions of the Fund's
Declaration of Trust or Certificate of Incorporation and ByLaws (or comparable
documents), as they may from time to time be amended and delivered to the
Custodian, (2) the votes of the Board of Trustees or Directors of the Fund at
the time in force and
25
applicable, as they may from time to time be delivered to the Custodian, (3) the
Fund's current prospectus and statement of additional information, and (4)
Proper Instructions. On each day that the Custodian shall compute the net asset
value per share of the Fund, the Custodian shall provide the Investment Adviser
with written reports which the Investment Adviser will use to verify that
portfolio transactions have been recorded in accordance with the Fund's
instructions and are reconciled with the Fund's trading records.
In computing the net asset value, the Custodian may rely upon any
information furnished by Proper Instructions, including without limitation any
information (1) as to accrual of liabilities of the Fund and as to liabilities
of the Fund not appearing on the books of account kept by the Custodian, (2) as
to the existence, status and proper treatment of reserves, if any, authorized by
the Fund, (3) as to the sources of quotations to be used in computing the net
asset value, including those listed in Appendix B, (4) as to the fair value to
be assigned to any securities or other property for which price quotations are
not readily available, and (5) as to the sources of information with respect to
"corporate actions" affecting portfolio securities of the Fund, including (but
not limited to) those listed in Appendix B. (Information as to "corporate
actions" shall include information as to dividends, distributions, stock splits,
stock dividends, rights offerings, conversions, exchanges, recapitalizations,
mergers, redemptions, calls, maturity dates and similar transactions, including
the ex- and record dates and the amounts or other terms thereof.) The Fund may
instruct the Custodian to utilize a particular source for the valuation of a
specific Security or other Property and the Custodian shall be protected in
utilizing the valuation provided by such source without further inquiry (save
for its usual and customary automated review of price disparities) in order to
effect calculation of the Fund's net asset value. Notwithstanding anything in
this Agreement to the contrary, provided the Custodian shall perform its duties
under Section 8.6(3) with reasonable care
26
and diligence, the Custodian shall not be responsible for the failure of the
Fund or the Investment Adviser to provide the Custodian with Proper Instructions
regarding liabilities which ought to be included in the calculation of the
Fund's net asset value.
In like manner, the Custodian shall compute and determine the net asset
value as of such other times as the Board of Trustees or Directors of the Fund
from time to time may reasonably request.
The Custodian shall be held to the exercise of reasonable care and
diligence in computing and determining net asset value as provided in this
Section 8.5. The parties hereto acknowledge, however, that the Custodian's
causing an error or delay in the determination of net asset value may, but does
not in and of itself, constitute negligence, gross negligence or willful
misconduct, for which causes, but not for others, the Custodian would be
responsible hereunder. The Fund acknowledges that the accounts and records of
the Fund will be subject to periodic audit in accordance with the requirements
of the 1940 Act and generally accepted auditing standards. The Fund acknowledges
that it will promptly inform the Custodian as to any exceptions reported in such
audit and further acknowledges that the failure to procure reasonable audit may
affect the ability of the Custodian to mitigate any loss to the Fund or may
result in further loss or damage to the Fund. The Custodian's liability for any
such negligence or reckless or willful misconduct which results in an error in
determination of such net asset value shall be limited exclusively to the
direct, out-of-pocket loss the Fund or anyshareholder or former shareholder
shall actually incur (measured generally by application of the difference
between the actual and erroneous computed price to the particular circumstances
surrounding the alleged loss and any expenses the Fund shall incur in connection
with correcting the records of the Fund affected by such error (including
charges made by the Fund's registrar and transfer agent for making such
corrections) or communicating with shareholders or former shareholders of the
Fund affected by such error or reasonable
27
costs of responding to or defending against any inquiry or proceeding with
respect to such error initiated by the Securities Exchange Commission or other
regulatory or self-regulatory body.
Without limiting the foregoing, the Custodian shall not be held accountable
or liable to the Fund, any shareholder or former shareholder thereof or any
other person for any delays or losses, damages or expenses any of them may
suffer or incur resulting from (1) the Custodian's failure to receive timely and
suitable notification concerning quotations or corporate actions relating to or
affecting portfolio securities of the Fund or (2) any errors in the computation
of the net asset value based upon or arising out of quotations or information as
to corporate actions if received by the Custodian either (i) from a source which
the Custodian was authorized pursuant to the third paragraph of this Section 8.5
to rely upon, (ii) from a source which in the Custodian's reasonable judgment
was as reliable a source for such quotations or information as the sources
authorized pursuant to that third paragraph, or (iii) relevant information known
to the Fund or the Investment Adviser which would impact the calculation of net
asset value but which is not communicated by the Fund or the Investment Adviser
to the Custodian.
In the event of any error or delay in the determination of such net asset
value for which the Custodian may be liable, the Fund and the Custodian will
consult and make good faith efforts to reach agreement on what actions should be
taken in order to mitigate any loss suffered by the Fund or its present or
former shareholders, in order that the Custodian's exposure to liability shall
be reduced to the extent possible after taking into account all relevant factors
and alternatives. Subject to due consideration for the magnitude of the loss,
the distribution of benefits among shareholders and the nature of such
shareholders such actions might include the Fund or the Custodian taking
reasonable steps to collect from any shareholder or former shareholder who has
received any overpayment upon redemption of shares such overpaid amount or to
collect from any
28
shareholder who has underpaid upon a purchase of shares the amount of such
underpayment or to reduce the number of shares issued to such shareholder. It is
understood that in attempting to reach agreement on the actions to be taken or
the amount of the loss which should appropriately be borne by the Custodian, the
Fund and the Custodian will consider such relevant factors as the amount of the
loss involved, the Fund's desire to avoid loss of shareholder good will, the
fact that other persons or entities could have been reasonably expected to have
detected the error sooner than the time it was actually discovered, the
appropriateness of limiting or eliminating the benefit which shareholders or
former shareholders might have obtained by reason of the error, and the
possibility that other parties providing services to the Fund might be induced
to absorb a portion of the loss incurred.
8.6 APPOINTMENT AS ADMINISTRATOR - The Custodian is hereby appointed
administrator of the Fund with responsibility for performing the services set
forth in this Section 8.6 subject to the supervision and direction of the
Trustees of the Fund. In performing its duties and obligations hereunder, the
Custodian will act in accordance with the Fund's Articles of Incorporation or
Declaration of Trust, By-laws (or comparable documents) and Prospectus and
Statement of Additional Information and with the Proper Instructions of its
Trustees, Treasurer and any other person reasonably believed by the Custodian to
be authorized to act on behalf of the Fund. It is agreed and understood,
however, that the Custodian shall not be responsible for compliance of a Fund's
investments with any applicable documents, laws or regulations, or for losses,
costs or expenses arising out of the Fund's failure to comply with said
documents, laws or regulations or the Fund's failure or inability to correct any
non-compliance therewith and shall be protected in acting on any direction from
the Fund's Investment Adviser, Trustees, Treasurer and any other person
reasonably believed by the Custodian to be authorized to act on behalf of the
Fund.
29
(1) SHAREHOLDER REPORTS. The Custodian shall accumulate information for
and, subject to approval by the Fund's Treasurer, prepare reports to the Fund's
shareholders of record as set forth in Rule 30d-1 of the 1940 Act or as agreed
upon in writing from time to time between the parties hereto.
(2) REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION. The Custodian shall
prepare and submit for the Fund's review the Securities and Exchange
Commission's Form N-SAR and Rule 24f-2 Notice. Upon acceptance of these reports
by the Fund, the Custodian shall file such reports with the Securities and
Exchange Commission.
(3) EXPENSE ADMINISTRATION. The Custodian shall consult with the Fund's
Treasurer on financial matters relating to the Fund including without limitation
dividend distributions, ____ administration of Fund expenses, ____ including
reconciliations, accruals and payment of expenses, as shall from time to time be
agreed upon by the parties.
(4) COMPLIANCE SUPPORT. The Custodian shall assist the Investment Adviser
for the Fund , at the Adviser's request, in monitoring and developing compliance
procedures for the Fund which will include, among other matters, procedures to
assist the Adviser in monitoring compliance with the Fund's investment
objectives, policies and restrictions, tax matters and applicable laws and
regulations and performing certain monthly compliance tests, to the extent
relevant information is available to the Custodian in the performance of its
functions as the Fund's net asset value calculation agent.
(5) TRUSTEE REPORTS. The Custodian shall assist the Fund's Treasurer in the
preparation of quarterly reporting to the Fund's Trustees as required by
applicable Rules under the 1940 Act and as agreed between the Custodian and the
Fund from time to time.
(6) FIDELITY BOND COVERAGE. The Custodian shall report monthly to the
Fund's Treasurer on compliance of the Fund's fidelity bond coverage with Rule
17g-1 of the 1940 Act.
30
(7) PERFORMANCE INFORMATION. At the Fund's request, the Custodian shall
assist the Trustees in preparing the Fund's performance analysis reports
(including yield and total return information) calculated in accordance with
applicable U.S. securities laws and in reporting to external databases such
information as may reasonably be requested;
(8) TAX REPORTING. In consultation with the Trustees and independent
accountants, the Custodian shall prepare for review and signature by the Fund,
and after such review and signature, file in a timely manner with appropriate
federal, state and local tax authorities, such federal, state and local tax
returns as shall be required of the Fund, and shall prepare and mail to each
Fund shareholder appearing on its records, a Form 1099 for each tax year of the
Fund. In preparing such returns and schedules, the Custodian shall be entitled
to rely in good faith upon information furnished to it by the Fund and upon the
advice of independent accountants, which may be auditors for the Fund, as to any
matter, including, without limitation, the determination of those states in
which filings are required, the determination of which filings are required and
the correct timing thereof, and the characterization of any assets of the Fund,
or any income or loss by the Fund, availability of any credits, including any
credits for foreign taxes paid, and notwithstanding any provision in this
Agreement to the contrary, the Custodian shall be without liability to the Fund
for any such good faith reliance.
(9) BLUE SKY COMPLIANCE. The Custodian shall select and monitor an
independent service supplier to provide for reasonable and necessary monitoring
of compliance with the securities regulations of the fifty states of the United
States on such terms as the Fund may direct, or in the absence of such
direction, as the Custodian shall reasonably deem appropriate, provided however,
that such arrangement shall require that such service supplier act with
reasonable care in the discharge of its duties. The Custodian shall deliver to
the Fund, or cause to be delivered to the Fund, regular reports and advices with
respect to blue sky compliance and shall be responsible to use reasonable
efforts to enforce the terms of the contract with the service provider on the
31
Fund's behalf. The Fund shall be responsible to provide copies of its prospectus
and other relevant documents and information relating to the Fund as may be
reasonably required for the performance of state securities law compliance.
(10) OTHER ASSISTANCE. The Custodian shall consult with and assist the
Fund's Treasurer, officers and Investment Adviser in such other matters as the
Fund and the Custodian shall from time to time agree.
Notwithstanding any other provision of this Agreement, the Custodian shall
in no event be liable or responsible to the Fund, any present or former
shareholder of the Fund or any other person for any error or delay which
continued after the issue date of an audit performed by the certified public
accountants employed by the Fund (or other date of written notice of such error
made by such auditor to the Fund) if the Fund or its auditors fail to promptly
inform the Custodian of such error or delay. It is also agreed that, in the
event of an act, omission, error or delay which leads to losses, costs or
expenses for which the Custodian may be liable, the Fund and the Custodian will
consult and make good faith efforts to reach agreement on what actions should be
taken in order to mitigate any loss suffered by the Fund or its present or
former shareholders, in order that the Custodian's exposure to liability shall
be reduced to the extent possible after taking into account all relevant factors
and alternatives. It is understood that in attempting to reach agreement on the
actions to be taken or the amount of the loss which should appropriately be
borne by the Custodian, the Fund and the Custodian will consider such relevant
factors as the amount of the loss involved, the Fund's desire to avoid loss of
shareholder good will, the fact that other persons or entities could have been
reasonably expected to have detected the error sooner than the time it was
actually discovered (with due consideration of the number and nature of affected
shareholders) the appropriateness of limiting or eliminating the benefit which
shareholders or former shareholders might have obtained
32
by reason of the error, and the possibility that other parties providing
services to the Fund might be induced to absorb a portion of the loss incurred.
9. RESPONSIBILITY OF CUSTODIAN. In carrying out the provisions of this
Agreement, the Custodian shall be held to the exercise of reasonable care,
provided that the Custodian shall not thereby be required to take any action
which is in contravention of any law, rule or regulation or any order of any
court of competent jurisdiction. As used in this Agreement, "reasonable care"
shall mean the level of care which a professional custodian providing custody
services to institutional investors would provide in light of the circumstances
and events which reasonably influence its performance in the market where the
securities are held or the transaction is effected, including without limitation
local market practices relating to securities settlement and safekeeping, and
"negligence" shall mean the failure to exercise reasonable care as herein
defined. The Custodian shall, subject to the provisions set forth in Sections 9
and 10 hereof, be responsible to the Fund for any direct loss or damage which
the Fund incurs by reason of the Custodian's negligence, bad faith or willful
malfeasance.
With respect to securities and funds held by a Subcustodian, either
directly or indirectly (including by a Securities Depository or foreign clearing
agency), including demand deposits, currencies or other deposits and foreign
exchange contracts as referred to herein, the Custodian shall be liable to the
Fund as if it performed the act or omission of the Subcustodian itself, but
subject to the terms of the subcustodian agreement and to the local practices
and conditions prevailing in the market where the act or omission occurred.
With respect to the securities, cash and other Property of the Fund held by
a Securities Depository utilized by the Custodian or any Subcustodian or any
agent of the Custodian, the Custodian shall not be liable for the acts and
omissions of such Securities
33
Depository unless and only to the extent that such Securities Depository is
liable to the Custodian and the Custodian recovers from such Securities
Depository, provided always that the Custodian shall be liable to the Fund only
for any direct loss or damage to the Fund resulting from use of the Securities
Depository if caused by the negligence, bad faith or willful malfeasance of the
Custodian.
The Fund agrees to indemnify and hold harmless the Custodian and its
nominees from all claims and liabilities (including counsel fees) incurred or
assessed against it or its nominees in connection with the performance of this
Agreement, except such as may arise from its or its nominees negligent or bad
faith.. Without limiting the foregoing indemnification obligation of the Fund,
the Fund agrees to indemnify the Custodian and any nominee in whose name
portfolio securities or other property of the Fund is registered against any
liability the Custodian or such nominee may incur by reason of taxes assessed to
the Custodian or such nominee or other costs, liability or expense incurred by
the Custodian or such nominee resulting directly or indirectly from the fact
that portfolio securities or other property of the Fund is registered in the
name of the Custodian or such nominee; provided that in no such event shall such
indemnity apply to income, franchise or similar tax imposed upon the business of
such persons conducted in the performance of the terms of this Agreement.
10. LIMITATIONS TO CUSTODIAN'S RESPONSIBILITY.
10.1 LIABILITY IN GENERAL - Except as otherwise provided in this Agreement,
the Custodian shall be responsible for loss or damage which the Fund may incur
by reason of the Custodian's negligence, bad faith or willful malfeasance,
PROVIDED ALWAYS that such loss or damage shall be limited to direct damages
incurred by the Fund, and PROVIDED FURTHER that the Custodian shall in no event
be liable for indirect or consequential damages
34
or for loss of goodwill, even if the Custodian has been advised of the
likelihood of such loss or damage and regardless of the form of action. Upon the
occurrence of any event that causes or may cause any loss to the Fund, the
Custodian shall, upon becoming aware of such event use its reasonable efforts
consistent with the applicable subcustodian agreement to cause any Subcustodian
to use all commercially reasonable efforts and to take any reasonably available
steps under the circumstances to mitigate the effects of such event and to avoid
continuing harm to the Fund.
10.2 LIABILITY OF THE CUSTODIAN WITH RESPECT TO PROPER INSTRUCTIONS;
EVIDENCE OF AUTHORITY; ETC. - The Custodian shall not be liable for, and shall
be indemnified by the Fund for losses or damages incurred or assessed against
the Custodian as a result of, any action taken or omitted in reliance upon
Proper Instructions or upon any other written notice, request, direction,
instruction, certificate or other instrument believed by it to be genuine.
The Custodian shall be entitled, at the expense of the Fund, to receive and
act upon advice of (a) counsel for the Fund or (b) such other counsel as the
Fund and the Custodian may agree upon, with respect to all matters and shall be
entitled to reasonable reliance on advice of other counsel. The Custodian shall
be without liability for any action taken or omitted in good faith pursuant to
such advice; provided however, the Custodian shall exercise reasonable care in
the conduct of actions or omissions taken pursuant to such advice.
10.3 TITLE TO SECURITIES, FRAUDULENT SECURITIES10.3 TITLE TO SECURITIES,
FRAUDULENT SECURITIES - 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 Agreement.
10.4 FORCE MAJEURE - Notwithstanding any other provision contained herein,
the Custodian shall not be liable for any action taken, or for any failure to
take any action
35
required to be taken hereunder, or otherwise for its failure to fulfill its
obligations hereunder (including without limitation the failure to receive or
deliver securities or the failure to receive or make any payment) in the event
and to the extent that the taking of such action or such failure arises out of
or is caused by civil commotion, act of God, accident, fire, water damage,
explosion, mechanical breakdown, (provided that the Custodian shall use
reasonable care with respect to the selection, operation and backup of computer
systems under its control) computer or system failure or other equipment
failure, malfunction or failure caused by computer virus, failure or
malfunctioning of any communications medium for whatever reason, interruption
(whether partial or total) of power supplies or other utility service, strike or
other stoppage (whether partial or total) of labor, market conditions which
prevent the orderly execution of securities transactions or affect the value of
Property, any law, decree, regulation or order of any government or governmental
body, de facto or de jure (including any court or tribunal), rules or
regulations of any Securities Depository or clearing agency or any other cause
whatsoever (whether similar or dissimilar to the foregoing) beyond its control
or the control of its Subcustodian or other agent (collectively, "Force
Majeure").
10.5 SOVEREIGN RISK10.5 SOVEREIGN RISK - Without limiting the generality of
the foregoing Section 10.4, the Custodian shall not be liable for any losses
resulting from a Sovereign Risk. As used herein, a Sovereign Risk shall mean any
act of war, terrorism, riot, insurrection or civil commotion; the imposition of
exchange control restrictions; confiscation, expropriation or nationalization of
any property including without limitation cash, cash equivalents, securities or
the assets of any issuer of securities by any governmental or quasi-governmental
authority (including without limitation those authorities which are judicial,
legislative, executive, military or religious in nature), whether de facto or de
jure; currency devaluation or revaluation; the imposition of taxes, levies or
other charges affecting the Fund's property, or any other political risk
(whether similar or dissimilar to
36
the foregoing) incurred in respect of the country in which the issuer of such
securities is organized or in which such securities are held or such payments
are held or effected.
10.6 CURRENCY RISKS10. - The Fund bears all risks of holding or transacting
in any currency. Without limiting the generality of the foregoing, the Fund
bears all risks that rules or procedures imposed by Securities Depositories,
exchange controls, asset freezes or other laws or regulations shall prohibit or
impose burdens on or costs relating to the transfer by or for the account of the
Fund of securities, cash or currency held outside the United States or
denominated in a currency other than U. S. dollars or on the conversion of any
currency so held. The Custodian shall in no event be obligated to substitute
another currency (including U.S. dollars) for a currency whose transferability,
convertibility or availability has been affected by any such law, regulation,
rule or procedure.
10.7 INVESTMENT RISKS NOT ASSUMED BY CUSTODIAN10. - The Custodian shall
have no liability in respect of any loss or damage suffered by the Fund, insofar
as such loss or damage arises from commercial or other investment risks inherent
in investing in capital markets or in holding securities in a particular
jurisdiction or country including without limitation: (i) political, legal,
economic, settlement and custody infrastructure, exchange rate and currency
risks; (ii) investment and repatriation restrictions; (iii) the Fund's or
Custodian's inability to protect and enforce any local legal rights including
rights of title and beneficial ownership; (iv) corruption and crime in the local
market; (v) unreliable information which emanates from the local market; (vi)
volatility of banking and financial systems and infrastructure; (vii) bankruptcy
and insolvency risks of any and all local banking agents, counterparties to cash
and securities transactions or registrars or transfer agents; (viii) risk of
issuer insolvency or default; and (ix) market conditions which prevent the
orderly execution of transactions or the value of assets.
37
10.8 INVESTMENT LIMITATIONS - In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of securities
made by or for the Fund, the Custodian may assume unless and until notified in
writing to the contrary that Proper Instructions received by it are not in
conflict with or in any way contrary to any provisions of the Fund's Declaration
of Trust or Certificate of Incorporation or By-Laws (or comparable documents) or
votes or proceedings of the shareholders or Trustees or Directors of the Fund.
The Custodian shall in no event be liable to the Fund and shall be indemnified
by the Fund for any violation which occurs in the course of carrying out
instructions given by the Fund or any Investment Adviser of any investment
limitations to which the Fund is subject or other limitations with respect to
the Fund's powers to make expenditures, encumber securities, borrow or take
similar actions affecting the Fund.
10.9 FOREIGN OWNERSHIP LIMITATIONS - The Fund shall be responsible for
monitoring foreign ownership limitations in any markets in which it invests.
10.10 RESTRICTED SECURITIES - The Custodian shall only be responsible for
notifying the Fund of any restrictions on the transfer of securities held in the
Securities Account of which the Custodian is in fact aware, provided that the
Custodian has not negligently dealt with information that should have made it
aware of such restrictions. In no event shall the Custodian be responsible for
the inability of a Fund to sell or transfer restricted securities or for delays
incurred in the sale or transfer of restricted securities if such inability or
delay is the result of the terms of the security itself, actions of the issuer,
its counsel or other representative (including without limitation its
registrar), or limitations due to laws, regulations or other applicable rules.
The Custodian shall only be responsible for transmitting information to the Fund
as to those corporate actions in respect of restricted securities which it in
fact receives.
38
10.11 MARKET INFORMATION - The Custodian may in its discretion make market
information available to the Fund. This service is for informational purposes
only and is not to be construed as a recommendation to buy or sell a particular
security, to invest or not to invest in a particular country, or to take any
action whatsoever. Although information reported therein is believed to be
accurate, the Custodian does not represent or warrant its accuracy or
completeness. The Fund accordingly acknowledges that the Custodian provides
market information on a best efforts basis and recognizes its responsibility to
consult with its own independent sources before making any investment or other
decisions.
11. ADVANCES AND SECURITY FOR ADVANCES. 11. ADVANCES AND SECURITY FOR ADVANCES.
If, for any reason in the conduct of its safekeeping duties pursuant to Section
5 or its administration of the Fund's assets pursuant to Section 6, the
Custodian or any Subcustodian advances moneys to facilitate settlement or
otherwise for benefit of the Fund (whether or not any Principal or Agency
Account shall be overdrawn either during, or at the end of, any Business Day),
the Fund hereby does: (a) acknowledge that the Fund shall have no right or title
to any Investments purchased with such Advance save a right to receive such
Investments upon: (i) the debit of the Principal or Agency Account; or, (ii) if
such debit would produce an overdraft in such account, other reimbursement of
the associated Advance; (b) grant to the Custodian a security interest in all
Investments; and, (c) agree that the Custodian may secure the resulting Advance
by perfecting a security interest in all Investments, in each case under
Applicable Law. Neither the Custodian nor any Subcustodian shall be obligated to
advance moneys to the Fund, and in the event that such Advance occurs, any
39
transaction giving rise to an Advance shall be for the account and risk of the
Fund and shall not be deemed to be a transaction undertaken by the Custodian for
its own account and risk. If such Advance shall have been made by a Subcustodian
or any other person, the Custodian may assign the security interest granted
hereby to such Subcustodian or other person. If the Fund shall fail to repay the
principal balance of an Advance, and accrued and unpaid interest thereon, when
due, the Custodian or its assignee, as the case may be, shall be entitled to
utilize the available cash balance in any Agency or Principal Account and to
dispose of any Property to the extent necessary to recover payment of all
principal of, and interest on, such Advance in full. In the event that the
Custodian shall determine to dispose of Property in accordance with the terms of
this Section, it shall first give 48 hours notice of such disposition to the
Fund. Any such notice shall indicate the Property proposed to be disposed. The
Fund may in the interim designate other Property of equal value and similar
liquidity for disposition. Any security interest in Property taken hereunder
shall be treated as financial assets credited to securities accounts under
Articles 8 and 9 of the Uniform Commercial Code (1997). Accordingly, the
Custodian shall have the rights and benefits of a secured creditor that is a
securities intermediary under such Articles 8 and 9. In the event that any
separate financing agreement shall be entered into between the Custodian and the
Fund, the terms of such separate agreement shall control the security for
borrowings of the Fund.
Deposits for each separate Fund respectively maintained in Agency Accounts
and BBH Accounts (including all accounts denominated in any currency) shall
collectively
40
constitute a single and indivisible current account with respect to the Fund's
obligations to the Custodian or any Subcustodian hereunder. Accordingly,
balances in all such Agency and BBH Accounts shall at all times be available for
satisfaction of the Fund's obligations under this Agreement to the Custodian or
any of its Subcustodians or agents including without limitation any Advances
incurred pursuant to this Section.
12. COMPENSATION. The Fund shall pay the Custodian a custody fee based on such
fee schedule as may from time to time be agreed upon in writing by the Custodian
and the Fund. Such fee, together with all out-of-pocket expenses for which the
Custodian is to be reimbursed, shall be billed to the Fund and be paid by cash
or wire transfer to the Custodian.
13. TERMINATION. This Agreement shall continue in full force and effect until
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 ninety (90) days after the date of such delivery or mailing. In the event
of termination the Custodian shall be entitled to receive, prior to delivery of
the securities, cash and other Property held by it, payment of all accrued fees
and unreimbursed expenses and all Advances and Liabilities, upon receipt by the
Fund of a statement setting forth such fees, expenses, Advances and Liabilities.
Notwithstanding the foregoing, the parties agree that neither party shall
terminate this Agreement with effective date of termination before October 31,
2000 except in the case of: (1) breach of this Agreement by the other party; (2)
material and identifiable change in the business situation or policy of the Fund
or of the
41
Custodian; or, (3) Regulatory or other legal process being initiated against the
other party that would be prejudicial to the continuance of the Agreement.
In the event of the appointment of a successor custodian, it is agreed that
the cash, securities and other Property owned by the Fund and held by the
Custodian or any Subcustodian shall be delivered to the successor custodian, and
the Custodian agrees to cooperate with the Fund in execution of documents and
performance of other actions necessary or desirable in order to substitute the
successor custodian for the Custodian under this Agreement.
14. MISCELLANEOUS. The following miscellaneous provisions shall govern the
relationship between the parties --
14. 1. EXECUTION OF DOCUMENTS, ETC. - (a) Actions by the Trustee. Upon
request, the Fund shall execute and deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary
or desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations to the Fund under this
Agreement or any applicable subcustodian agreement with respect to the
Fund.
14.2. ENTIRE AGREEMENT - This Agreement constitutes the entire
understanding and agreement of the Fund, on the one hand, and the
Custodian, on the other, with respect to the subject matter hereof and
accordingly, supersedes as of the effective date of this Agreement any
custodian agreement or other oral or written agreements heretofore in
effect between the Fund and the Custodian with respect to custody of the
Fund's Property.
14.3. WAIVERS AND AMENDMENTS. - No provision of this Agreement may be
waived, amended or terminated except by a statement in writing signed by
the party
42
against which enforcement of such waiver, amendment or termination is
sought; PROVIDED HOWEVER any appendix or addendum to this Agreement may be
added or amended from time to time by the Fund's execution and delivery to
the Custodian of such additional or amended appendix or addendum, in which
case the terms thereof shall take effect immediately upon execution by the
Custodian or otherwise as set forth in this Agreement.
14.4. INTERPRETATION. - In connection with the operation of this
Agreement, the Custodian and the Fund may agree in writing from time to
time on such provisions interpretative of or in addition to the provisions
of this Agreement with respect to the Fund as may be consistent with the
general tenor of this Agreement. No interpretative or additional provisions
made as provided in the preceding sentence shall be deemed to be an
amendment of this Agreement.
14.5. CAPTIONS. - Headings contained in this Agreement, which are
included as convenient references only, shall have no bearing upon the
interpretation of the terms of the Agreement or the obligations of the
parties hereto.
14.6. GOVERNING LAW. - The provisions of this Agreement shall be
construed in accordance with and governed by the laws of the Commonwealth
of Massachusetts without giving effect to principles of conflicts of law.
The parties hereto irrevocably consent to the exclusive jurisdiction of the
federal district court sitting in Boston in the Commonwealth of
Massachusetts.
14.7 NOTICES. - Except in the case of Proper Instructions, notices and
other writings contemplated by this Agreement shall be delivered by hand or
by facsimile transmission (provided that in the case of delivery by
facsimile transmission, such notice or other writing shall also be mailed
postage prepaid) to the parties at the following addresses:
(a) If to the Fund:
U.S. Global Investors, Inc.
0000 Xxxxxxxxx Xxxx
X.X. Xxx 00000
Xxx Xxxxxxx, Xxxxx 00000-0000
43
Attn: Xxxxxx X. Xxxx
Vice President and Special Counsel
Telephone: 000-000-0000
Fax: 000-000-0000
(b) If to the Custodian:
Xxxxx Brothers Xxxxxxxx & Co.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Manager, Securities Department
Telephone: (000) 000-0000
Telefax: (000) 000-0000
or to such other address as the Fund or the Custodian may have designated
in writing to the other.
14.8. ASSIGNMENT. - This Agreement shall be binding on and shall inure
to the benefit of the Fund and the Custodian and their respective
successors and assigns, provided that neither the Custodian nor the Fund
may assign this Agreement or any of its rights or obligations hereunder
without the prior written consent of the other party.
14.9. COUNTERPARTS. - This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement
shall become effective when one or more counterparts have been signed and
delivered by the Fund and the Custodian.
14.10. CONFIDENTIALITY; SURVIVAL OF OBLIGATIONS. - Except as required
by applicable law or regulation, he parties hereto agree that each shall
treat confidentially the terms
44
and conditions of this Agreement and all information provided by each party
to the other regarding its business and operations. All confidential
information provided by a party hereto shall be used by any other party
hereto solely for the purpose of rendering or obtaining services pursuant
to this Agreement and, except as may be required in carrying out this
Agreement, shall not be disclosed to any third party without the prior
consent of such providing party. The foregoing shall not be applicable to
any information that is publicly available when provided or thereafter
becomes publicly available other than through a breach of this Agreement,
or that is required to be disclosed by or to any bank examiner of the
Custodian or any Subcustodian, any regulatory authority, any auditor of the
parties hereto, or by judicial or administrative process or otherwise by
applicable law or regulation. The provisions of this Agreement and any
other rights or obligations incurred or accrued by any party hereto prior
to termination of this Agreement shall survive any termination of this
Agreement.
14.11 The Custodian agrees that claims made against each Fund
respectively under this Agreement shall be satisfied only from assets of
such Fund, and not from the assets of any separate Fund held hereunder;
that any person executing this Agreement has executed it on behalf of the
Fund and not individually, and that the obligations of the Fund arising out
of this Agreement are not binding upon such person or the Fund's
shareholders individually, but binding upon the Property and other assets
of the Fund; that no shareholders, trustees directors or officers of the
Fund may be held personally liable or responsible for any obligations of
the Fund arising out of this Agreement.
45
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
U.S. GLOBAL ACCOLADE FUNDS XXXXX BROTHERS
XXXXXXXX & CO.
By /s/ Xxxxx X. XxXxx By /s/ Xxxxxxx X. Xxxxxxx
------------------------- ----------------------
Name: Xxxxx X. XxXxx Name: Xxxxxxx X. Xxxxxxx
Title: Executive Vice President Title: Partner
46
APPENDIX B
U.S. GLOBAL ACCOLADE FUNDS
AGREEMENT DATED AS OF 11/1/1997
PRICING SOURCES
THE FOLLOWING AUTHORIZED SOURCES MAY BE UTILIZED BY THE CUSTODIAN FOR PRICING
AND FOREIGN EXCHANGE QUOTATIONS, CORPORATE ACTION, DIVIDENDS AND RIGHTS
OFFERINGS:
AUTHORIZED SOURCES
BLOOMBERG
EXTEL (LONDON)
FUND MANAGERS
INTERACTIVE DATA CORPORATION
REPUTABLE BROKERS
REUTERS
SUBCUSTODIAN BANKS
THE CUSTODIAN
TELEKURS
VALORINFORM (GENEVA)
REPUTABLE FINANCIAL PUBLICATIONS
STOCK EXCHANGES
FINANCIAL INFORMATION INC. CARD
XX XXXXX
FRI CORPORATION
47
SCHEDULE C
U.S. GLOBAL ACCOLADE FUNDS AGREEMENT
DATED AS OF 11/1/97
BONNEL GROWTH FUND
MEGATRENDS FUND
XXXXXX XXX GLOBAL OPPORTUNITY FUND
REGENT EASTERN EUROPEAN FUND
48
