EXHIBIT 23(G)(3)
FORM OF
MASTER SUBCUSTODY AGREEMENT
AGREEMENT dated as of ______________, between Bankers Trust Company
(the "Bank") and Forum Trust, LLC ("Forum" or the "Forum").
WHEREAS, Forum provides custodial services to certain open-end,
management investment companies registered under the Investment Company Act of
1940 (the "1940 Act") pursuant to custodian agreements entered into between
Forum and such companies (each a "Registrant"); and
WHEREAS, such investment companies may offer one or more series of
shares, each of which shall represent an interest in a separate portfolio of
Securities and Cash (each as hereinafter defined)(all such existing and
additional series now or hereafter listed on Exhibit A being hereafter referred
to individually as a "Portfolio" and collectively, as the "Portfolios"); and
WHEREAS, Forum wishes to retain the Bank to provide certain
sub-custodian services to Forum for the benefit of the Portfolios, and the Bank
is willing to provide such services;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment of the Bank. Forum, on behalf of each Portfolio, hereby
employs the Bank as custodian of all Securities and Cash of each Portfolio that
are delivered to and accepted by the Bank or any Subcustodian (as that term is
defined in Section 4) (the "Property") pursuant to the terms and conditions set
forth herein. For purposes of this Agreement, "delivery" of Property shall
include the acquisition by Forum of a security entitlement (as that term is
defined in the New York Uniform Commercial Code ("UCC")) . Without limitation,
such Property shall include stocks and other equity interests of every type,
evidences of indebtedness, other instruments representing same or rights or
obligations to receive, purchase, deliver or sell same and other non-cash
investment property of a Portfolio ("Securities") and cash from any source and
in any currency ("Cash"), provided that the Bank shall have the right, in its
sole discretion, to refuse to accept as Property any property of a Portfolio
that the Bank considers not to be appropriate or in proper form for deposit for
any reason. The Bank shall not be responsible for any property of a Portfolio
held or received by Forum or others and not delivered to the Bank or any
Subcustodian.
2. Maintenance of Securities and Cash at the Bank and Subcustodian
Locations. Pursuant to Instructions (as hereinafter defined in Section 15),
Forum shall direct the Bank to (a) settle Securities transactions and maintain
Cash in the country or other jurisdiction in which the principal trading market
for such Securities is located, where such Securities are to be presented for
payment or where such Securities are acquired and (b) maintain Cash in such
countries in amounts reasonably necessary to effect Forum's transactions in such
Securities. Instructions to settle Securities transactions in any country shall
be deemed to authorize the holding of such Securities and Cash in that country.
3. Custody Account. The Bank agrees to establish and maintain one or
more custody accounts on its books each in the name of a Portfolio or in the
name of Forum on behalf of a Portfolio (each, an "Account") for any and all
Property from time to time received and accepted by the Bank or any Subcustodian
for the account of such Portfolio. Upon delivery by Forum to the Bank of any
acceptable Property belonging to a Portfolio, Forum shall, by Instructions,
specifically indicate in which Portfolio such Property belongs or if such
Property belongs to more than one Portfolio shall allocate such Property to the
appropriate Portfolios, and the Bank shall allocate such Property to the
Accounts in accordance with the Instructions. Forum, on behalf of each
Portfolio, acknowledges (i) its responsibility as a principal for all of its
obligations to the Bank arising under or in connection with this Agreement,
notwithstanding that it may be acting on behalf of other persons, and (ii)
warrants its authority to deposit in the appropriate Account any Property
received therefor by the Bank or a Subcustodian and to give, and authorize
others to give, instructions relative thereto. The Bank may deliver securities
of the same class in place of those deposited in the Account.
The Bank shall hold, keep safe and protect as custodian for each
Account all Property in such Account and, to the extent such Property
constitutes "financial assets" as defined in the UCC, shall maintain those
financial assets in such Account as security entitlements in favor of the
Portfolio in whose name the Account is maintained. All transactions, including,
but not limited to, foreign exchange transactions, involving the Property shall
be executed or settled solely in accordance with Instructions (which shall
specifically reference the Account for which such transaction is being settled),
except that until the Bank receives Instructions to the contrary, the Bank will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property, as
the same become payable and credit the same to the appropriate
Account;
(b) present for payment all Securities held in an Account that are
called, redeemed or retired or otherwise become payable and
all coupons and other income items that call for payment upon
presentation to the extent that the Bank or Subcustodian is
actually aware of such opportunities and hold the cash
received in such Account pursuant to this Agreement;
(c) (i) exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than
ministerial exchanges described in (i) above) is received for
an Account, endeavor to receive Instructions, provided that if
such Instructions are not received in time for the Bank to
take timely action, no action shall be taken with respect
thereto;
(d) whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or
stock split is received for an Account and such rights
entitlement or fractional interest bears an expiration date,
if after endeavoring to obtain Instructions such Instructions
are not received in time for the Bank to take timely action or
if actual notice of such actions was received too late to seek
Instructions, sell in the discretion of the Bank (which sale
the Bank hereby authorizes the Bank to make) such rights
entitlement or fractional interest and credit the Account with
the net proceeds of such sale;
(e) execute in Forum's name for an Account, whenever the Bank
deems it appropriate, such ownership and other certificates as
may be required to obtain the payment of income from the
Property in such Account;
(f) pay for each Account, any and all taxes and levies in the
nature of taxes imposed on interest, dividends or other
similar income on the Property in such Account by any
governmental authority. In the event there is insufficient
Cash available in such Account to pay such taxes and levies,
the Bank shall notify Forum of the amount of the shortfall and
Forum may, or may cause the Portfolio to, at its option,
deposit additional Cash in such Account or take steps to have
sufficient Cash available. Forum, on behalf of the Portfolios
agrees, when and if requested by the Bank and required in
connection with the payment of any such taxes, to cooperate
with the Bank in furnishing information, executing documents
or otherwise; and
(g) appoint brokers and agents for any of the ministerial
transactions involving the Securities described in (a) - (f),
including, without limitation, affiliates of the Bank or any
Subcustodian.
Custodian shall provide cash management services to Forum as provided
for in Exhibit E hereto.
4. Subcustodians and Securities Systems. Forum authorizes and
instructs the Bank to maintain the Property in each Account directly in one of
its United States ("U.S.") branches or indirectly through custody accounts that
have been established by the Bank with the following other securities
intermediaries: (a) another U.S. bank or trust company or branch thereof located
in the U.S. that is itself qualified under the 1940 Act, to act as custodian, or
a non-U.S. branch of the Bank or of any U.S. Subcustodian, or a U.S. securities
depository or clearing agency or system in which the Bank or a U.S. Subcustodian
participates (individually, a "U.S. Securities System") or (b) one of
Custodian's majority-owned non-U.S. subsidiaries, a majority-owned subsidiary of
a U.S. Subcustodian or a non-U.S. bank or trust company, acting as custodian
(individually, a "non-U.S. Subcustodian"; U.S. Subcustodians and non-U.S.
Subcustodians, collectively, "Subcustodians"), or a non-U.S. depository or
clearing agency or system in which the Bank or any Subcustodian participates
(individually, a "non-U.S. Securities System"; U.S. Securities System and
non-U.S. Securities System, collectively, "Securities System"), provided that in
each case in which a U.S. Subcustodian or U.S. Securities System is employed,
each such Subcustodian or Securities System shall have been approved by
Instructions; provided further that in each case in which a non-U.S.
Subcustodian or non-U.S. Securities System is employed, (a) such Subcustodian or
Securities System either is (i) a "qualified U.S. bank" as defined by Rule 17f-5
under the 1940 Act ("Rule 17f-5") or (ii) an "eligible foreign custodian" within
the meaning of Rule 17f-5 or such Subcustodian or Securities System is the
subject of an order granted by the U.S. Securities and Exchange Commission
("SEC") exempting such agent or the subcustody arrangements thereto from all or
part of the provisions of Rule 17f-5 and (b) the identity of the non-U.S.
Subcustodian and the agreement between the Bank and such non-U.S. Subcustodian
has been approved by Instructions; it being understood that the Bank shall have
no liability or responsibility for determining whether the approval of any
Subcustodian or Securities System by Instructions is proper under the 1940 Act
or any rule or regulation thereunder. Exhibit D attached hereto and incorporated
herein by reference lists all Subcustodians and Securities Systems that have
been approved by Instructions with respect to each Portfolio. Notwithstanding
Section 20 hereof or any other provision hereof to the contrary, Exhibit D may
be amended solely by the delivery to the Bank of Instructions pursuant to
Section 15 hereof.
Upon receipt of Instructions, the Bank agrees to cease the employment
of any Subcustodian or Securities System with respect to Forum, and if desirable
and practicable, appoint a replacement Subcustodian or securities system in
accordance with the provisions of this Section. In addition, the Bank may, at
any time in its discretion, upon written notification to Forum, terminate the
employment of any Subcustodian or Securities System.
The Bank shall deliver to Forum annually a certificate stating: (a) the
identity of each non-U.S. Subcustodian and non-U.S. Securities System then
acting on behalf of the Bank and the name and address of the governmental agency
or other regulatory authority that supervises or regulates such non-U.S
Subcustodian and non-U.S. Securities System; (b) the countries in which each
non-U.S. Subcustodian or non-U.S. Securities System is located; and (c) if
Forum's Board of Directors, or the Board of Trustees responsible for any
Portfolio covered by this Agreement, directly approves its foreign custody
arrangements, such other information relating to such non-U.S. Subcustodians and
non-U.S. Securities Systems as may reasonably be requested by Forum to ensure
compliance with Rule 17f-5. If Forum's Board of Directors or the Board of
Trustees responsible for any Portfolio directly approves its foreign custody
arrangements, the Bank also shall furnish annually to the Bank information
concerning such non-U.S. Subcustodians and non-U.S. Securities Systems similar
in kind and scope as that furnished to Forum in connection with the initial
approval of this Agreement. Custodian agrees to promptly notify Forum if, in the
normal course of its custodial activities, the Bank learns of a material adverse
change in the financial condition of a non-U.S. Subcustodian or a non-U.S.
Securities System suffers a material loss of Property, or the Bank has reason to
believe that any non-U.S. Subcustodian or non-U.S. Securities System has ceased
to be a qualified U.S. bank or an eligible foreign custodian each within the
meaning of Rule 17f-5 or has ceased to be subject to an exemptive order from the
SEC.
5. Use of Subcustodian. With respect to Property in an Account that
is maintained by the Bank through a Subcustodian employed pursuant to
Section 4:
(a) The Bank will identify on its books as belonging to Forum on
behalf of a Portfolio, any Property maintained through such
Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be
subject only to the instructions of the Bank or its agents.
(c) Property deposited with a Subcustodian will be maintained in an
account holding only assets for Forums of the Custodian.
(d) Any agreement the Bank shall enter into with a non-U.S.
Subcustodian with respect to maintaining Property shall require
that (i) the Account will be adequately indemnified or its losses
adequately insured; (ii) the Securities so maintained are not
subject to any right, charge, security interest, lien or claim of
any kind in favor of such Subcustodian or its creditors except a
claim for payment in accordance with such agreement for their
safe custody or administration; (iii) beneficial ownership of
such Securities be freely transferable without the payment of
money or value other than for safe custody or administration;
(iv) adequate records will be maintained identifying the Property
maintained pursuant to such Agreement as belonging to the
Custodian, on behalf of its Forums; (v) to the extent permitted
by applicable law, officers of or auditors employed by, or other
representatives of or designated by, the Bank including the
independent public accountants of or designated by, Forum be
given access to the books and records of such Subcustodian
relating to Property or confirmation of the contents of those
records; and (vi) the Bank on behalf of Forum will receive
periodic reports with respect to the safekeeping of the Property,
including but not limited to notification of any transfer of
Property into or out of an Account.
6. Use of Securities System. With respect to Property in the Account(s)
that is maintained by the Bank or any Subcustodian through a Securities System
employed pursuant to Section 4:
(a) The Bank shall, and the Subcustodian will be required by its
agreement with the Bank to, identify on its books such
Property as being maintained for the account of the Bank or
Subcustodian for its Forums.
(b) Any Property maintained through a Securities System for the
account of the Bank or a Subcustodian will be subject only to
the instructions of the Bank or such Subcustodian, as the case
may be.
(c) Property deposited with a Securities System will be maintained
in an account holding only assets for Forums of the Bank or
Subcustodian, as the case may be, unless precluded by
applicable law, rule, or regulation.
(d) The Bank shall provide the Bank with any report obtained by
the Bank or Subcustodian on the Securities System's accounting
system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System.
7. Agents. The Bank may at any time or times in its sole discretion
appoint (or remove) as its agent to carry out such of the provisions of this
Agreement as the Bank may from time to time direct any other U.S. bank or trust
company which is itself qualified under the 1940 Act to act as custodian;
provided, however, that the appointment of any agent shall not relieve the Bank
of its responsibilities or liabilities hereunder. Custodian shall provide
reasonable notice to Forum of the appointment or removal of any agent.
8. Records, Ownership of Property, Statements, Opinions of Independent
Certified Public Accountants.
(a) The ownership of the Property, whether maintained directly by the
Bank or indirectly through a Subcustodian or a Securities System as authorized
herein, shall be clearly recorded on the Bank's books as belonging to the
appropriate Account and not to the Custodian. The Bank shall keep accurate and
detailed accounts of all investments, receipts, disbursements and other
transactions for each Account. All accounts, books and records of the Bank
relating thereto shall be open to inspection and audit at all reasonable times
during normal business hours by any person designated by Forum. All such
accounts shall be maintained and preserved in the form reasonably requested by
Forum. The Bank will supply to Forum from time to time, as mutually agreed upon,
a statement in respect to any Property in an Account maintained by the Bank or
by a Subcustodian. In the absence of the filing in writing with the Bank by
Forum of exceptions or objections to any such statement within sixty (60) days
of the mailing thereof, Forum shall be deemed to have approved such statement
and in such case or upon written approval of Forum of any such statement, such
statement shall be presumed to be for all purposes correct with respect to all
information set forth therein.
(b) The Bank shall take all reasonable action as Forum may request to
obtain from year to year favorable opinions from each Portfolio's independent
certified public accountants with respect to the Bank's activities hereunder in
connection with the preparation of the applicable Registrant's registration
statement on Form N-1A and the Portfolio's Form N-SAR or other periodic reports
to the SEC and with respect to any other requirements of the SEC.
(c) At the request of Forum, the Bank shall deliver to Forum a written
report prepared by the Bank's independent certified public accountants with
respect to the services provided by the Bank under this Agreement, including,
without limitation, the Custodian's accounting system, internal accounting
control and procedures for safeguarding Cash and Securities, including Cash and
Securities deposited and/or maintained in a securities system or with a
Subcustodian. Such report shall be of sufficient scope and in sufficient detail
as may reasonably be required by Forum and as may reasonably be obtained by the
Bank. The bank authorizes Forum to deliver copies of such reports to the
applicable Registrants.
(d) Forum may elect to participate in any of the electronic on-line
service and communications systems offered by the Bank that can provide Forum,
on a daily basis, with the ability to view on-line or to print on hard copy
various reports of Account activity and of Securities and/or Cash being held in
any Account. To the extent that such service shall include market values of
Securities in an Account, Forum hereby acknowledges that the Bank now obtains
and may in the future obtain information on such values from outside sources
that the Bank considers to be reliable and Forum agree that the Bank (i) does
not verify or represent or warrant either the reliability of such service nor
the accuracy or completeness of any such information furnished or obtained by or
through such service and (ii) shall be without liability in selecting and
utilizing such service or furnishing any information derived therefrom.
9. Holding of Securities, Nominees, etc. Securities in an Account that
are maintained by the Bank or any Subcustodian may be held directly by such
entity in the name of Forum or in bearer form or maintained, on behalf of a
Portfolio, in the Custodian's or Subcustodian's name or in the name of the
Custodian's or Subcustodian's nominee. Securities that are maintained through a
Subcustodian or which are eligible for deposit in a Securities System as
provided above may be maintained with the Subcustodian or the Securities System
in an account for the Bank's or Subcustodian's Forums, unless prohibited by law,
rule, or regulation. The Bank or Subcustodian, as the case may be, may combine
certificates representing Securities held in an Account with certificates of the
same issue held by Custodian or Subcustodian as fiduciary or as a custodian. In
the event that any Securities in the name of the Bank or its nominee or held by
a Subcustodian and registered in the name of such Subcustodian or its nominee
are called for partial redemption by the issuer of such Security, the Bank may,
subject to the rules or regulations pertaining to allocation of any Securities
System in which such Securities have been deposited, allot, or cause to be
allotted, the called portion of the respective beneficial holders of such class
of security in any manner the Bank deems to be fair and equitable. Securities
maintained with a Securities System shall be maintained subject to the rules of
that Securities System governing the rights and obligations among the Securities
System and its participants.
10. Proxies, etc. With respect to any proxies, notices, reports or
other communications pertaining to any of the Securities in any Account, the
Bank shall perform such services and only such services as are (i) set forth in
Section 3 of this Agreement, (ii) described in the applicable Service Standards
(the "Proxy Service") and (iii) as may otherwise be agreed upon between the Bank
and Forum. The liability and responsibility of the Bank in connection with the
Proxy Service referred to in (ii) of the immediately preceding sentence and in
connection with any additional services which the Bank and Forum may agree upon
as provided in (iii) of the immediately preceding sentence shall be as set forth
in the description of the Proxy Service and as may be agreed upon by the Bank
and Forum in connection with the furnishing of any such additional service and
shall not be affected by any other term of this Agreement. Neither the Bank nor
its nominees or agents shall vote upon or in respect of any of the Securities in
an Account, execute any form of proxy to vote thereon, or give any consent or
take any action (except as provided in Section 3) with respect thereto except
upon the receipt of Instructions.
11. Segregated Account. To assist Forum in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the Bank
shall, upon receipt of Instructions, establish and maintain a segregated account
or accounts on its books for and on behalf of a Portfolio.
12. Settlement Procedures. Securities will be transferred, exchanged or
delivered by the Bank or a Subcustodian upon receipt by the Bank of Instructions
that include all information required by the Custodian. Settlement and payment
for Securities received for an Account and delivery of Securities out of such
Account may be effected in accordance with the customary or 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, as such practices and procedures may be modified or supplemented in
accordance with the standard operating procedures of the Bank in effect from
time to time for that jurisdiction or market. The Bank shall not be liable for
any loss which results from effecting transactions in accordance with the
customary or established securities trading or securities processing practices
and procedures in the applicable jurisdiction or market.
Notwithstanding that the Bank may settle purchases and sales against,
or credit income to, an Account, on a contractual basis, as outlined in the
applicable Service Standards as defined below and provided to Forum by the
Custodian, the Bank may, at its sole option, reverse such credits or debits to
the appropriate Account in the event that the transaction does not settle, or
the income is not received in a timely manner, and Forum agrees to hold the Bank
harmless from any losses that may result therefrom.
The applicable Service Standards shall be defined as the Global Guide,
the Policies and Standards Manual, and any other documents issued by the Bank
from time to time specifying the procedures for communicating with Forum, the
terms of any additional services to be provided to Forum, and such other matters
as may be agreed between Forum and the Bank from time to time. Copies of the
current term standards have been delivered to the Custodian.
13. Conditional Credits.
(a) Notwithstanding any other provision of this Agreement, the Bank
shall not be required to comply with any Instructions to settle the purchase of
any securities for the Account unless there are sufficient immediately available
funds in the relevant currency in the Account, provided that, if, after all
expenses, debits and withdrawals of Cash in the relevant currency ("Debits")
applicable to the Account have been made and if after all Conditional Credits,
as defined below, applicable to the Account have become final entries as set
forth in (c) below, the amount of immediately available funds of the relevant
currency in such Account is at least equal to the aggregate purchase price of
all securities for which the Bank has received Instructions to settle on that
date ("Settlement Date"), the Custodian, upon settlement, shall credit the
Securities to the Account by making a final entry on its books and records.
(b) Notwithstanding the foregoing, if after all Debits applicable to
the Account have been made, the amount of immediately available funds in a given
currency in such Account are less than the aggregate purchase price in such
currency of all securities for which the Bank has received Instructions to
settle on the Settlement Date, the Custodian, upon settlement, may credit the
securities to the Account by making a conditional entry on its books and records
("Conditional Credit"), pending receipt of sufficient immediately available
funds in the relevant currency in the Account.
(c) If, within a reasonable time from the posting of a Conditional
Credit and after all Debits applicable to the Account have been made,
immediately available funds in the relevant currency at least equal to the
aggregate purchase price in such currency of all securities subject to a
Conditional Credit on a Settlement Date are deposited into the Account, the Bank
shall make the Conditional Credit a final entry on its books and records. In
such case, Forum shall be liable to the Bank only for late charges at a rate
that the Bank customarily charges for similar extensions of credit.
(d) If (i) within a reasonable time from the posting of a Conditional
Credit, immediately available funds at least equal to the resultant Debit on a
Settlement Date are not deposited in the Account, or (ii) any Proceeding (as
defined below) shall occur, the Bank may sell such of the Securities subject to
the Conditional Credit as it selects in its sole discretion and shall apply the
net proceeds of such sale to cover such Debit, including related late charges,
and any remaining proceeds shall be credited to the Account. If such proceeds
are insufficient to satisfy such Debit in full, Forum shall continue to be
liable to the Bank for any shortfall. The Bank shall make the Conditional Credit
a final entry on its books as to the Securities not required to be sold to
satisfy such Debit. Pending payment in full by Forum of the purchase price for
Securities subject to a Conditional Credit, and the Custodian's making a
Conditional Credit a final entry on its books, and, unless consented to by the
Custodian, Forum shall have no right to give further Instructions in respect of
Securities subject to a Conditional Credit. The Bank shall have the sole
discretion to determine which Securities shall be deemed to have been paid for
by Forum out of funds available in the Account. Any such Conditional Credit may
be reversed (and any corresponding Debit shall be canceled) by the Bank unless
and until the Bank makes a final entry on its books crediting such Securities to
the Account. The term "Proceeding" shall mean any insolvency, bankruptcy,
receivership, reorganization or similar proceeding relating to Forum, whether
voluntary or involuntary.
(e) Forum agrees that it will not use the Account to facilitate the
purchase of securities without sufficient funds in the Account (which funds
shall not include the expected proceeds of the sale of the purchased
securities).
14. Permitted Transactions. Forum agrees that it will cause
transactions to be made pursuant to this Agreement only upon Instructions in
accordance with Section 15 (but subject to Section 3) and only for the purposes
listed below.
(a) In connection with the purchase or sale of Securities at prices
as confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise
become payable.
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger,
consolidation, reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory
fees, distributions or operating expenses.
(g) In connection with any borrowings by Forum requiring a pledge of
Securities, but only against receipt of amounts borrowed or in
order to satisfy requirements for additional or substitute
collateral.
(h) In connection with any loans, but only against receipt of
collateral as specified in Instructions which shall reflect any
restrictions applicable to Forum.
(i) For the purpose of redeeming shares of the capital stock of Forum
against delivery of the shares to be redeemed to the Custodian, a
Subcustodian or Forum's transfer agent.
(j) For the purpose of redeeming in kind shares of Forum against
delivery of the shares to be redeemed to the Custodian, a
Subcustodian or Forum's transfer agent.
(k) For delivery in accordance with the provisions of any agreement
among Forum, on behalf of a Portfolio, the Portfolio's investment
adviser and a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc., relating to compliance with the rules
of The Options Clearing Corporation, the Commodities Futures
Trading Commission or of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by Forum.
(l) For release of Securities to designated brokers under covered
call options, provided, however, that such Securities shall be
released only upon payment to the Bank of monies for the premium
due and a receipt for the Securities which are to be held in
escrow. Upon exercise of the option, or at expiration, the Bank
will receive the Securities previously deposited from broker. The
Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no
responsibility or liability for any such Securities which are not
returned promptly when due other than to make proper request for
such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading or receipt of income from Securities related
transactions.
(n) Upon the termination of this Agreement as set forth in Section
21.
(o) For other proper purposes.
Forum agrees that the Bank shall have no obligation to verify the
purpose for which a transaction is being effected.
15. Instructions. The term "Instructions" means instructions from Forum
in respect of any of the Bank's duties hereunder that have been received by the
Bank at its address set forth in Section 22 below (i) in writing (including,
without limitation, facsimile transmission) or by tested telex signed or given
by such one or more person or persons as Forum shall have from time to time
authorized in writing to give the particular class of Instructions in question
and whose name and (if applicable) signature and office address have been filed
with the Custodian, or (ii) which have been transmitted electronically through
an electronic on-line service and communications system offered by the Bank or
other electronic instruction system acceptable to the Custodian, or (iii) a
telephonic or oral communication by one or more persons as Forum shall have from
time to time authorized to give the particular class of Instructions in question
and whose name has been filed with the Custodian; or (iv) upon receipt of such
other form of instructions as Forum may from time to time authorize in writing
and which the Bank has agreed in writing to accept. Instructions in the form of
oral communications shall be confirmed by Forum by tested telex or writing in
the manner set forth in clause (i) above, but the lack of such confirmation
shall in no way affect any action taken by the Bank in reliance upon such oral
instructions prior to the Bank's receipt of such confirmation. Instructions may
relate to specific transactions or to types or classes of transactions, and may
be in the form of standing instructions.
The Bank shall have the right to assume in the absence of notice to the
contrary from Forum that any person whose name is on file with the Bank pursuant
to this Section has been authorized by Forum to give the Instructions in
question and that such authorization has not been revoked. The Bank may act upon
and conclusively rely on, without any liability to Forum or any other person or
entity for any losses resulting therefrom, any Instructions reasonably believed
by it to be furnished by the proper person or persons as provided above.
16. Standard of Care. The Bank shall be responsible for the performance
of only such duties as are set forth herein or contained in Instructions given
to the Bank that are not contrary to the provisions of this Agreement. The Bank
will use reasonable care and diligence with respect to the safekeeping of
Property in each Account and, except as otherwise expressly provided herein, in
carrying out its obligations under this Agreement. So long as and to the extent
that it has exercised reasonable care and diligence, the Bank shall not be
responsible for the title, validity or genuineness of any Property or other
property or evidence of title thereto received by it or delivered by it pursuant
to this Agreement and shall be held harmless in acting upon, and may
conclusively rely on, without liability for any loss resulting therefrom, any
notice, request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed or furnished by the proper party or parties,
including, without limitation, Instructions, and shall be indemnified by Forum
for any losses, damages, costs and expenses (including, without limitation,
reasonable fees and expenses of counsel) incurred by the Bank and arising out of
action taken or omitted with reasonable care by the Bank hereunder or under any
Instructions. The Bank shall be liable to Forum for any act or omission to act
of any Subcustodian to the same extent as if the Bank committed such act itself.
With respect to a Securities System, the Bank shall only be responsible or
liable for losses arising from employment of such Securities System caused by
the Bank's own failure to exercise reasonable care; provided that in the event
of any such loss, Custodian shall take all reasonable steps to enforce such
claims as it may have against the Securities System to protect the interests of
Forum.
In the event of any loss to Forum by reason of the failure of the Bank
or a Subcustodian to utilize reasonable care, the Bank shall be liable to Forum
to the extent of Forum's actual damages at the time such loss was discovered
without reference to any special conditions or circumstances (including, without
limitation, reasonable fees and expenses of counsel). In no event shall the Bank
be liable for any consequential or special damages.
The Bank shall be entitled to rely, and may act, on advice of counsel
(who may be counsel for the Bank or Forum) on all matters and shall be without
liability for any action reasonably taken or omitted in good faith pursuant to
such advice, provided that with respect to the performance of any action or
omission of any action upon such advice, the Custodian shall be required to
conform to the standard of care set forth in this Section 16.
In the event Forum subscribes to an electronic on-line service and
communications system offered by the Custodian, Forum shall be fully responsible
for the security of its connecting terminal, access thereto and the proper and
authorized use thereof and the initiation and application of continuing
effective safeguards with respect thereto and agrees to defend and indemnify the
Bank and hold the Bank harmless from and against any and all losses, damages,
costs and expenses (including the fees and expenses of counsel) incurred by the
Bank as a result of any improper or unauthorized use of such terminal by Forum
or by any others.
All collections of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of Forum.
Subject to the exercise of reasonable care, the Bank shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Bank or by a Subcustodian of any payment, redemption or other transaction
regarding Securities in each Account in respect of which the Bank has agreed to
take action as provided in Section 3 hereof. The Bank shall not be liable for
any loss resulting from, or caused by, or resulting from acts of governmental
authorities (whether de jure or de facto), including, without limitation,
nationalization, expropriation, and the imposition of currency restrictions;
devaluations of or fluctuations in the value of currencies; changes in laws and
regulations applicable to the banking or securities industry; market conditions
that prevent the orderly execution of securities transactions or affect the
value of Property; acts of war, terrorism, insurrection or revolution; strikes
or work stoppages; the inability of a local clearing and settlement system to
settle transactions for reasons beyond the control of the Custodian; hurricane,
cyclone, earthquake, volcanic eruption, nuclear fusion, fission or
radioactivity, or other acts of God.
The Bank shall have no liability in respect of any loss, damage or
expense suffered by Forum, insofar as such loss, damage or expense arises from
the performance of the Custodian's duties hereunder by reason of the Bank's
reliance upon records that were maintained for Forum by entities other than the
Bank prior to the Custodian's employment under this Agreement.
17. Investment Limitations and Legal or Contractual Restrictions or
Regulations. The Bank shall not be liable to Forum, a Registrant or a Portfolio
for any loss, damage or expense suffered or incurred by the Bank or its nominees
arising out of any violation of any investment restriction or other restriction
or limitation applicable to a Registrant or any Portfolio pursuant to any
contract or any law or regulation.
18. Fees and Expenses. Forum agrees to pay to the Bank such
compensation for its services pursuant to this Agreement as may be mutually
agreed upon in writing from time to time and the Bank s reasonable out-of-pocket
or incidental expenses in connection with the performance of this Agreement,
including (but without limitation) reasonable legal fees as described herein
and/or deemed necessary in the judgment of the Bank to keep safe or protect the
Property in the Account. The initial fee schedule is attached hereto as Exhibit
B. Such fees will not be abated by, nor shall the Bank be required to account
for, any profits or commissions received by the Bank in connection with its
provision of custody services under this agreement. Forum hereby agrees to hold
the Bank harmless from any liability or loss resulting from any taxes or other
governmental charges, and any expense related thereto, which may be imposed, or
assessed with respect to any Property in an Account and also agree to hold the
Custodian, its Subcustodians, and their respective nominees harmless from any
liability as a record holder of Property in such Account. The Bank is authorized
to charge the applicable Account for such items, and the Bank shall have a lien
on the Property in the applicable Account for any amount payable to the Bank
under this Agreement, including but not limited to amounts payable pursuant to
Section 13 and pursuant to indemnities granted by Forum under this Agreement.
19. Tax Reclaims. With respect to withholding taxes deducted and which
may be deducted from any income received from any Property in an Account, the
Bank shall perform such services with respect thereto as are described in the
applicable Service Standards and shall in connection therewith be subject to the
standard of care set forth in such Service Standards. Such standard of care
shall not be affected by any other term of this Agreement.
20. Amendment, Modifications, etc. No provision of this Agreement may
be amended, modified or waived except in a writing signed by the parties hereto
(except that Exhibit D may be amended as provided in Section 4 hereof and
Exhibit B may be amended as provided for therein). No waiver of any provision
hereto shall be deemed a continuing waiver unless it is so designated. No
failure or delay on the part of either party in exercising any power or right
under this Agreement operates as a waiver, nor does any single or partial
exercise of any power or right preclude any other or further exercise thereof or
the exercise of any other power or right.
21. Termination.
(a) This Agreement may be terminated by Forum or the Bank by ninety
(90) days' written notice to the other; provided that notice by Forum shall
specify the names of the persons to whom the Bank shall deliver the Securities
in each Account and to whom the Cash in such Account shall be paid. If notice of
termination is given by the Custodian, Forum shall, within ninety (90) days
following the giving of such notice, deliver to the Bank a written notice
specifying the names of the persons to whom the Bank shall deliver the
Securities in each Account and to whom the Cash in such Account shall be paid.
In either case, the Bank will deliver such Property to the persons so specified,
after deducting therefrom any amounts that the Bank determines to be owed to it
hereunder. In addition, the Bank may in its discretion withhold from such
delivery such Property as may be necessary to settle transactions pending at the
time of such delivery. Forum grants to the Bank a lien and right of setoff
against the Account and all Property held therein from time to time in the full
amount of the foregoing obligations. If within ninety (90) days following the
giving of a notice of termination by the Custodian, the Bank does not receive
the aforementioned written notice specifying the names of the persons to whom
the Bank shall deliver the Securities in each Account and to whom the Cash in
such Account shall be paid, the Custodian, at its election, may deliver such
Securities and pay such Cash to a bank or trust company doing business in the
State of New York to be held and disposed of pursuant to the provisions of this
Agreement, or may continue to hold such Securities and Cash until a written
notice as aforesaid is delivered to the Custodian, provided that from and after
the ninetieth day the Bank's obligations shall be limited to safekeeping.
(b) This Agreement may be terminated by Forum or the Bank as to one or
more Portfolios (but less than all of the Portfolios) by delivery of an amended
Exhibit A deleting such Portfolios, in which case termination as to such deleted
Portfolios shall take effect ninety (90) days after the date of such delivery,
or such earlier time as mutually agreed. The execution and delivery of an
amended Exhibit A that deletes one or more Portfolios shall constitute a
termination of this Agreement only with respect to such deleted Portfolio(s),
shall be governed by the preceding provisions of Section 21 as to the
identification of a successor custodian and the delivery of Cash and Securities
of the Portfolio(s) so deleted to such successor custodian, and shall not affect
the obligations of the Bank and Forum hereunder with respect to the other
Portfolios set forth in Exhibit A, as amended from time to time.
(c) Sections 16, 17, 18, 27 and 30 shall survive the termination of
this Agreement as to one or more or all Portfolios.
22. Notices. Except as otherwise provided in this Agreement, all
requests, demands or other communications between the parties or notices in
connection herewith (a) shall be in writing, hand delivered or sent by
registered mail, telex or facsimile addressed to such other address as shall
have been furnished by the receiving party pursuant to the provisions hereof and
(b) shall be deemed effective when received, or, in the case of a telex, when
sent to the proper number and acknowledged by a proper answerback.
23. Several Obligations of the Portfolios. With respect to any
obligations of Forum on behalf of each Portfolio and each of its related
Accounts arising out of this Agreement, the Bank shall look for payment or
satisfaction of any obligation solely to the assets and property of the
Portfolio and such Accounts to which such obligation relates as though Forum had
separately contracted with the Bank by separate written instrument with respect
to each Portfolio and its related Accounts. Forum represents and warrants to the
Bank that it has entered into an agreement with each Portfolio which obligates
each Portfolio to pay to the Bank any obligations arising out of the Property
custodied hereunder.
24. Security for Payment. To secure payment of all obligations due
hereunder, Forum hereby grants to the Bank a continuing security interest in and
right of setoff against each Account and all Property held therein from time to
time in the full amount of such obligations; provided that, if there is more
than one Account and the obligations secured pursuant to this Section can be
allocated to a specific Account or the Portfolio related to such Account, such
security interest and right of setoff will be limited to Property held for that
Account only and its related Portfolio. Should Forum fail to pay promptly any
amounts owed hereunder, the Bank shall be entitled to use available Cash in the
Account or applicable Account, as the case may be, and to dispose of Securities
in the Account or such applicable Account as is necessary. In any such case and
without limiting the foregoing, the Bank shall be entitled to take such other
actions or exercise such other options, powers and rights as the Bank now or
hereafter has as a secured creditor under the UCC or any other applicable law.
25. Representations and Warranties.
(a) Forum hereby represents and warrants to the Bank in its own
capacity as Custodian and on behalf of each Registrant that:
(i) the employment of the Bank and the allocation of
fees, expenses and other charges to any Account as
herein provided, is not prohibited by law or any
governing documents or contracts to which it is
subject;
(ii) the terms of this Agreement do not violate any
obligation by which Forum is bound, whether arising
by contract, operation of law or otherwise;
(iii) this Agreement has been duly authorized by
appropriate action and when executed and delivered
will be binding upon Forum and each Portfolio in
accordance with its terms; and
(iv) it will deliver to the Bank such evidence of such
authorization as the Bank may reasonably require,
whether by way of a certified resolution or
otherwise;
(v) it has delivered to Custodian a true and correct copy
of each custodian agreement between it and each
Registrant and each amendment to each such agreement;
(vi) the Bank may rely, as fully as if it were a party
thereto, on the representations, warranties,
covenants and indemnities of each Registrant, on
behalf of the applicable Portfolios, set forth in
Sections 8(d), 16, 17, 24 and 28 of each agreement
referred to in the foregoing representation;
(vii) it will deliver to the Bank a duly executed
Secretary's Certificate in the form provided for in
each custody agreement between Forum and each
Registrant or such other evidence of such
authorization as the Bank may reasonably require,
whether by way of a certified resolution or
otherwise; and
(viii) it is qualified as a custodian under Section 26(a) of
the 1940 Act and warrants that it will remain so
qualified or upon ceasing to be so qualified shall
promptly notify the Bank in writing.
(b) The Bank hereby represents and warrants to Forum that:
(i) the terms of this Agreement do not violate any
obligation by which Bank is bound, whether arising by
contract, operation of law or otherwise;
(ii) this Agreement has been duly authorized by
appropriate action and when executed and delivered
will be binding upon Bank in accordance with its
terms;
(iii) it will deliver to Forum such evidence of such
authorization as Forum may reasonably require,
whether by way of a certified resolution or
otherwise; and
(iv) it is qualified as a custodian under Section 26(a)
of the 1940 Act and warrants that it will remain so
qualified or upon ceasing to be so qualified shall
promptly notify Forum in writing.
26. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of Forum and the
Custodian.
27. Publicity. Forum shall furnish to Custodian prior to any
distribution thereof, copies of any material prepared by each Registrant for
distribution to any persons other than Registrant, Registrant's service
providers, Forum and Custodian that refer in any way to the Custodian. Forum
shall not distribute or permit the distribution of such materials if Custodian
reasonably objects in writing within five (5) business days of receipt thereof
(or such other time as may be mutually agreed) after receipt thereof; provided,
however, that Forum shall be permitted to include the name of Custodian and its
position as subcustodian to each Portfolio in each Registrant's registration
statement and other filings with the SEC.
28. Submission to Jurisdiction. Any suit, action or proceeding arising
out of this Agreement may be instituted in any State or Federal court sitting in
the City of Xxx Xxxx, Xxxxx xx Xxx Xxxx, Xxxxxx Xxxxxx of America, and the Bank
and Forum each irrevocably submits to the non-exclusive jurisdiction of any such
court in any such suit, action or proceeding and waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding brought in such a court and any
claim that such suit, action or proceeding was brought in an inconvenient forum.
29. Confidentiality. The parties hereto agree that each shall treat
confidentially the terms 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 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 or requested to be
disclosed by any bank or other regulatory examiner of the Custodian, Forum, or
any Subcustodian, any auditor of the parties hereto, by judicial or
administrative process or otherwise by applicable law or regulation.
30. Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
31. Entire Agreement. This Agreement together with any Exhibits
attached hereto, contains the entire agreement between the parties relating to
the subject matter hereof and supersedes any oral statements and prior writings
with respect thereto.
32. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
33. 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
each of the parties hereto.
IN WITNESS WHEREOF, each of the parties has caused its duly authorized
signatories to execute this Agreement as of the date first written above.
BANKERS TRUST COMPANY
By:___________________________________
Name:_________________________________
Title:________________________________
FORUM TRUST, LLC for itself and as agent
for Forum Funds
By:___________________________________
Name:_________________________________
Title:________________________________
MASTER SUBCUSTODY AGREEMENT
EXHIBIT A
LIST OF PORTFOLIOS
Forum Funds
Austin Global Equity Fund
BIA Small-Cap Growth Fund
BIA Growth Equity Fund
Emerging Markets Fund
Equity Index Fund
International Equity Fund
Investors Equity Fund
Investors High Grade Bond Fund
Maine Municipal Bond Fund
New Hampshire Bond Fund
Oak Hall Small Cap Contrarian Fund
Payson Balanced Fund
Payson Value Fund
Polaris Global Value Fund
Quadra Growth Fund
Small Company Opportunities Fund
TaxSaver Bond Fund
Investor, Institutional, and Institutional
Service Shares of:
Daily Assets Treasury Obligations Fund
Daily Assets Government Fund
Daily Assets Government Obligations Fund
Daily Assets Cash Fund
Daily Assets Municipal Fund
BANKERS TRUST COMPANY
By:________________________________
Name:______________________________
Title:_____________________________
FORUM TRUST, LLC
By:________________________________
Name:______________________________
Title:_____________________________
MASTER SUBCUSTODY AGREEMENT
EXHIBIT B
FEE SCHEDULE
This Exhibit B shall be amended upon delivery by Custodian of a new Exhibit B to
Forum and acceptance thereof by Forum and shall be effective as of the date of
acceptance by Forum or a date agreed upon between Custodian and Forum.
MASTER SUBCUSTODY AGREEMENT
EXHIBIT C
INTENTIONALLY LEFT BLANK
MASTER SUBCUSTODY AGREEMENT
EXHIBIT D
APPROVED SUBCUSTODIANS AND SECURITIES SYSTEMS
MASTER SUBCUSTODY AGREEMENT
EXHIBIT E
CASH MANAGEMENT
1. Until the Bank receives Instructions to the contrary, the Bank will
(a) hold with Subcustodians, in deposit accounts maintained for the benefit of
Forum's clients, all Cash received for the Account, (b) credit such interest, if
any, on Cash in the Account as the Bank shall from time to time determine and
(c) receive compensation out of any amounts paid by Subcustodians in respect of
Cash in the Account.
2. The bank may (on an overnight or other short-term basis) move
certain, or all, currencies of Cash in the Account from any Subcustodian and
place it, as deposits or otherwise, with one or more other Subcustodians
(including branches and affiliates of the Bank). The Bank will notify Forum of
any placement procedures it implements and will move Cash in accordance with
such procedures until it notifies Forum otherwise or receives Instructions to
the contrary. The Bank may credit interest and receive compensation as described
in 1 above with respect to any Cash moved. If any Cash is held in an investment
fund managed by the Bank, it will notify the fund (as opposed to Forum) as
provided herein with respect to such Cash.
3. Forum acknowledges that it has received and reviewed the current
policies of the Bank regarding cash management services, which are part of
this Exhibit.
GLOBAL CUSTODY CASH MANAGEMENT PROGRAM
In the Global Custody cash management program, currencies on which
Bankers Trust pays interest are divided into two categories: (1) currencies on
which we pay interest based on a market benchmark rate for overnight deposits,
and (2) currencies on which we pay interest based on a rate paid by the London
branch of Bankers Trust Company or the local subcustodian.
CURRENCIES ON WHICH WE PAY INTEREST BASED ON A MARKET BENCHMARK RATE FOR
OVERNIGHT DEPOSITS (WHICH WE CALL "BENCHMARK RATE CURRENCIES"):
o For each of these currencies, the interest rate we pay is
based on a specific market benchmark (such as Effective Fed
Funds) and is calculated by taking an average of the benchmark
rate and subtracting a spread. (See Schedule A)
o Currently, the only Benchmark Rate Currency is the U.S.
Dollar. Over time we will be considering additional currencies
to include in this category.
o Operationally, most balances in Benchmark Rate Currencies are
swept overnight into deposits at the London branch of Bankers
Trust Company. Where you have selected a short-term investment
fund, your U.S. Dollar balances in the U.S. will be swept
overnight in accordance with your instructions.
CURRENCIES ON WHICH WE PAY INTEREST BASED ON A RATE PAID BY THE LONDON
BRANCH OF BANKERS TRUST COMPANY OR THE LOCAL SUBCUSTODIAN (WHICH WE CALL "BASE
RATE CURRENCIES"):
o For each of these currencies, the interest rate we pay is
based on the rate paid by the London branch or the local
subcustodian on overnight deposits in the currency. In either
case, interest is calculated by using the overnight rate
(which will be the actual overnight, a weekly average, or
monthly average rate, depending on the currency) and
subtracting a spread. (See Schedule A)
o Currencies that are part of the sweep program will earn
interest based on the base rate, which will be the higher of
the rate offered by the London branch of Bankers Trust Company
or the local subcustodian.
o Currencies that are not part of the sweep program will
generally earn interest based on the rate paid by the local
subcustodian. We may at times be able to sweep certain
currency balances into deposits of Bankers Trust Company's
London branch in order to be able to earn a higher rate for
you. On those days, any such currency will be treated as part
of the sweep program, and you will earn interest on all of
your balances in that currency at the higher rate for that
day.
o Currently, there are 2 Base Rate Currencies, 10 of which are
included in our sweep program to the London branch.
o Operationally, most balances in Base Rate Currencies that are
part of our sweep program are swept overnight into deposits at
the London branch, while balances in Base Rate Currencies that
are not part of our sweep program remain with the local
subcustodian.
FOR EACH CURRENCY ON WHICH WE PAY INTEREST:
o We will notify you periodically in writing of changes in
spreads and updates to the cash management program. These
program updates also will be available through Global Custody
Flash Notices.
o For markets where we maintain one or more omnibus cash
accounts, you earn interest at the calculated rate on your
entire contractual balance without any action on your part and
without any minimum balance requirements. This is the case
regardless of whether we are able to invest your balances at
or near the applicable benchmark or base rate and regardless
of whether your contractual balance may exceed your actual
balance.
o For markets where we maintain one or more omnibus cash
accounts, the minimum rate paid is 0.50%, except for the
Japanese Yen (for which the minimum rate of 0.05% has been
suspended for the time being due to market conditions) and the
Singapore Dollar (for which the minimum rate is 0.25%). Please
note that this is also subject to change as appropriate for
any currency. Notwithstanding the foregoing, in no event will
interest be negative.
o For the currencies of "client specific markets," those markets
where for regulatory or other reasons we do not maintain
omnibus accounts for client cash, on which we pay credit
interest (which at this time are the Hungarian Forint, Israeli
Shekel, Polish Zloty, Korean Won and Taiwanese Dollar), we
will no longer be taking a spread for providing interest on
cash balances. The credit interest you earn on overnight
balances will be based on actual balances, as opposed to
contractual balances, and the minimum credit interest rate
will no longer be applied.
o You will have continuous access through Globe*View, BTWorld,
or Globe*Link or other agreed electronic on-line system to the
interest rate earned during the previous "rate averaging
period". Because we may use weekly or monthly average rates to
calculate the interest you earn, we do not know the actual
interest rate until the weekly or monthly period is completed.
o Our program generally requires that overnight balances in each
currency remain with (or are swept to) a subcustodian we
designate for that currency. Nevertheless, we pay our stated
rate of interest on any balances that, because of transactions
in your account, are held overnight with an alternate
subcustodian if we receive interest on that currency from that
subcustodian. If the alternate subcustodian does not pay
interest, however, these balances are excluded from our
program.
o For swept currencies, from time to time we may not be able to
sweep the full amount of your balances to the London branch
because of operational constraints or because your balance on
a contractual basis temporarily exceeds your actual balance.
You will, however, always receive credit for interest based on
your entire contractual balance. To the extent you would have
earned a lower rate on balances not swept, we will make up the
difference. To the extent that actual balances are higher than
contractually posted balances due to purchase fails or
otherwise, we will retain the interest earned as compensation.
o The effective rate we pay on overnight balances will generally
differ from the effective rate we receive (whether from the
London branch or the local subcustodian). Any difference
between the effective rate we receive and the effective rate
we pay (which may be positive or negative, but is generally
positive) is kept by us and covers our fee for running the
cash management program and the related costs we absorb.
Obviously, there will be currencies on which we will not pay interest
because of local regulations, insufficient scale, or other reasons. However, we
hope to identify additional currencies where we can begin paying interest and we
will announce those to you as soon as practical.
Currently most cash balances in our overnight sweep program are swept
into deposits at the London branch of Bankers Trust Company. We reserve the
right to utilize other branches or affiliates for the overnight sweep program.
In the event of such change, we will notify you in writing, which may be through
Global Custody Flash Notice.
As you know, overdrafts are not permitted in the normal course of
business in any currency. Should they occur in any currency, your account will
be charged a fee to settle transactions in advance of receipt of funds. If the
overdraft is not promptly cured (and in any event upon the expiration of 30
days) after the investment manager has been notified of the outstanding
overdraft, the account's home currency will be used to cure the overdraft and
the associated foreign exchange will be done by Bankers Trust at market rates.
(Other currencies may be utilized to the extent the home currency is
insufficient.) Investment managers that have not cured overdrafts within such
period will be deemed to have directed such foreign exchange transaction.
Accounts subject to ERISA will be deemed to have engaged in the transaction
under the authority of the class exemptions available to qualified professional
asset managers and in-house investment managers. To the extent that the
overdraft is less than the U.S. dollar equivalent of $50,000, Bankers Trust's
foreign exchange desk will bundle the transaction with other small amounts for
other clients.
