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CUSTODIAN CONTRACT
Between
WARBURG, XXXXXX JAPAN OTC FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
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TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to Be Held by It . . . . . . . . 1
2. Duties of the Custodian with Respect to Property of the Fund Held by
the Custodian in the United States . . . . . . . . . . . . . . . . . . 2
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . . . . . . . . . . . 3
2.3 Registration of Securities . . . . . . . . . . . . . . . . . . . 8
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Availability of Federal Funds . . . . . . . . . . . . . . . . . 10
2.6 Collection of Income . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Payment of Fund Monies . . . . . . . . . . . . . . . . . . . . . 11
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.9 Appointment of Agents . . . . . . . . . . . . . . . . . . . . . 15
2.10 Deposit of Securities in Securities Systems . . . . . . . . . . 15
2.10A Fund Assets Held in the Custodian's Direct Paper System . . . . 19
2.11 Segregated Account . . . . . . . . . . . . . . . . . . . . . . . 20
2.12 Ownership Certificates for Tax Purposes . . . . . . . . . . . . 22
2.13 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.14 Communications Relating to Fund Portfolio Securities . . . . . . 22
2.15 Reports to Fund by Independent Public Accountants . . . . . . . 23
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States . . . . . . . . . . . . . . . . . . . . . 24
3.1 Appointment of Foreign Sub-Custodians . . . . . . . . . . . . . 24
3.2 Assets to Be Held . . . . . . . . . . . . . . . . . . . . . . . 25
3.3 Foreign Securities Depositories . . . . . . . . . . . . . . . . 25
3.4 Agreements with Foreign Banking Institutions . . . . . . . . . . 25
3.5 Access of Independent Accountants of the Fund . . . . . . . . . 26
3.6 Reports by Custodian . . . . . . . . . . . . . . . . . . . . . . 27
3.7 Transactions in Foreign Custody Account . . . . . . . . . . . . 27
3.8 Liability of Foreign Sub-Custodians . . . . . . . . . . . . . . 28
3.9 Liability of Custodian . . . . . . . . . . . . . . . . . . . . . 29
3.10 Reimbursement for Advances . . . . . . . . . . . . . . . . . . . 30
3.11 Monitoring Responsibilities . . . . . . . . . . . . . . . . . . 31
3.12 Branches of U.S. Banks . . . . . . . . . . . . . . . . . . . . . 32
3.13 Tax Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4. Payments for Repurchases or Redemptions and Sales of Shares of the
Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . . . 34
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6. Actions Permitted Without Express Authority . . . . . . . . . . . . . 35
7. Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . . . 36
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income . . . . . . . . . . . . 36
9. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10. Opinion of Fund's Independent Accountant . . . . . . . . . . . . . . . 38
11. Reports to Fund by Independent Public Accountants . . . . . . . . . . 38
12. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . . . 38
13. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . . . 39
14. Effective Period, Termination and Amendment . . . . . . . . . . . . . 40
15. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . . . 42
16. Interpretive and Additional Provisions . . . . . . . . . . . . . . . . 44
17. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
18. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . . . 44
19. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
20. Shareholder Communications Election . . . . . . . . . . . . . . . . . 45
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CUSTODIAN CONTRACT
This Contract between Warburg, Xxxxxx Japan OTC Fund, Inc., a
corporation organized and existing under the laws of Maryland, having its
principal place of business at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-
3147, hereinafter called the "Fund", and State Street Bank and Trust Company,
a Massachusetts trust company, having its principal place of business at 000
Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, hereinafter called the
"Custodian",
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to Be Held by It
The Fund hereby employs the Custodian as the custodian of the Fund's
assets, including securities the Fund desires to be held in places within the
United States ("domestic securities") and securities it desires to be held
outside the United States ("foreign securities") pursuant to the provisions of
the Articles of Incorporation. The Fund agrees to deliver to the Custodian
all securities and cash owned by it, and all payments of income, payments of
principal or capital distributions received by it with respect to all
securities owned by the Fund from time to time, and the cash consideration
received by it for such new or treasury shares of capital stock, $.001 par
value ("Shares"), of the Fund as may be issued or sold from time to time. The
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Custodian shall not be responsible for any property of the Fund held or
received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall from time to time employ one or more sub-custodians
located in the United States, but only in accordance with an applicable vote
by the Board of Directors of the Fund, and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such sub-
custodian has to the Custodian. The Custodian may employ as sub-custodians
for the Fund's foreign securities and other assets the foreign banking
institutions and foreign securities depositories designated in Schedule "A"
hereto but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held by
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of the Fund all noncash property, to be
held by it in the United States, including all domestic securities
owned by the Fund, other than (a) securities which are maintained
pursuant to Section 2.10 in a clearing agency which acts as a
securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury, collectively referred to herein as
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"Securities System" and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the Direct
Paper System of the Custodian pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book-entry system account ("Direct Paper System
Account") only upon receipt of Proper Instructions from the Fund,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Fund;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section
2.10 hereof;
4) To the depository agent in connection with tender or
other similar offers for portfolio securities of the
Fund;
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5) To the issuer thereof or its agent when such securities
are called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or
nominees of the Custodian or into the name or nominee name
of any agent appointed pursuant to Section 2.9 or into the
name or nominee name of any subcustodian appointed
pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities
are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Fund, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no
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responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities;
provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian;
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10) For delivery in connection with any loans of securities
made by the Fund, but only against receipt of adequate
collateral as agreed upon from time to time by the
Custodian and the Fund, which may be in the form of cash
or obligations issued by the United States government, its
agencies or instru-mentalities, except that in connection
with any loans for which collateral is to be credited to
the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Fund prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowings
by the Fund requiring a pledge of assets by the Fund, but
only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-
dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers,
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Inc. ("NASD"), relating to compliance with the rules of
The Options Clearing Corporation and of any registered
national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations,
regarding account deposits in connection with transactions
by the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, as may be described from time
to time in the Fund's currently effective prospectus and
statement of additional information ("prospectus"), in
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satisfaction of requests by holders of Shares for
repurchase or redemption; and
15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions from the
Fund, a certified copy of a resolution of the Board of
Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of the Fund
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons
to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the
name of the Fund or in the name of any nominee of the Fund or of any
nominee of the Custodian which nominee shall be assigned exclusively
to the Fund, unless the Fund has authorized in writing the
appointment of a nominee to be used in common with other registered
investment companies having the same investment adviser as the Fund,
or in the name or
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nominee name of any agent appointed pursuant to Section 2.9 or in
the name or nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on behalf of
the Fund under the terms of this Contract shall be in "street name"
or other good delivery form. If, however, the Fund directs the
Custodian to maintain securities in "street name", the Custodian
shall utilize its best efforts only to timely collect income due the
Fund on such securities and to notify the Fund on a best efforts
basis only of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the United States in the name of the
Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such
account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Fund, other than cash
maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940.
Funds held by the Custodian for the Fund may be deposited by it to
its credit as Custodian in the Banking Department of the
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Custodian or in such other banks or trust companies as it may in
its discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and that each
such bank or trust company and the funds to be deposited with each
such bank or trust company shall be approved by vote of a majority
of the Board of Directors of the Fund. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall
be withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the
Fund and the Custodian, the Custodian shall, upon the receipt of
Proper Instructions from the Fund, make federal funds available as
of specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of
the Fund which are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to United States registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and
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shall collect on a timely basis all income and other payments
with respect to United States bearer securities if, on the date of
payment by the issuer, such securities are held by the Custodian or
its agent thereof and shall credit such income, as collected, to the
Fund's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and when
they become due and shall collect interest when due on securities
held hereunder. Income due the Fund on United States securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the
Fund with such information or data as may be necessary to assist the
Fund in arranging for the timely delivery to the Custodian of the
income to which the Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from
the Fund, which may be continuing instructions when deemed
appropriate by the parties, the Custodian shall pay out monies of
the Fund in the following cases only:
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1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account
of the Fund but only (a) against the delivery of such
securities, or evidence of title to such options, futures
contracts or options on futures contracts, to the
Custodian (or any bank, banking firm or trust company
doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered in
the name of the Fund or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in proper
form for transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in the
case of a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section 2.10A;
(d) in the case of repurchase agreements entered into
between the Fund and the Custodian, or another bank, or a
broker-dealer which is a
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member of NASD, (i) against delivery of the securities
either in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt
evidencing purchase by the Fund of securities owned by the
Custodian along with written evidence of the agreement by
the Custodian to repurchase such securities from the Fund
or (e) for transfer to a time deposit account of the Fund
in any bank, whether domestic or foreign; such transfer
may be effected prior to receipt of a confirmation from a
broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Fund as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by
the Fund, including but not
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limited to the following payments for the account of the
Fund: interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect
of securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund, a certified
copy of a resolution of the Board of Directors or of the
Executive Committee of the Fund signed by an officer of
the Fund and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting
forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming
the person or persons to whom such payment is to be made.
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2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of the Fund is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank
or trust company which is itself qualified under the Investment
Company Act of 1940, as amended, to act as a custodian, as its agent
to carry out such of the provisions of this Article 2 as the
Custodian may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.10 Deposit of Securities in Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by the Fund in a
clearing agency registered with the Securities and Exchange
Commission
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under Section 17A of the Securities Exchange Act of 1934, which acts
as a securities depository, or in the book-entry system authorized
by the U.S. Department of the Treasury and certain federal
agencies, collectively referred to herein as "Securities System" in
accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to
the following provisions:
1) The Custodian may keep domestic securities of the Fund in
a Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets
of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to domestic
securities of the Fund which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Fund;
3) The Custodian shall pay for domestic securities purchased
for the account of the Fund upon (i) receipt of advice
from the Securities System that such securities have
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been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
payment and transfer for the account of the Fund. The
Custodian shall transfer domestic securities sold for the
account of the Fund upon (i) receipt of advice from the
Securities System that payment for such securities has
been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
transfer and payment for the account of the Fund. Copies
of all advices from the Securities System of transfers of
domestic securities for the account of the Fund shall
identify the Fund, be maintained for the Fund by the
Custodian and be provided to the Fund at its request.
Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of
the Fund in the form of a written advice or notice and
shall furnish to the Fund copies of daily transaction
sheets reflecting each day's transactions in the
Securities System for the account of the Fund.
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4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding domestic securities deposited
in the Securities System;
5) The Custodian shall have received from the Fund the
initial or annual certificate, as the case may be,
required by Article 13 hereof;
6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian
or any such agent to enforce effectively such rights as it
may have against the Securities System; at the election of
the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against
the Securities System or any other person which the
Custodian may have as a
22
consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such
loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by the Fund
in the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper
Instructions from the Fund;
2) The Custodian may keep securities of the Fund in the
Direct Paper System only if such securities are
represented in an account ("Account") of the Custodian in
the Direct Paper System which shall not include any assets
of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of
the Fund which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to
the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon
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the making of an entry on the records of the Custodian to
reflect such payment and transfer of securities to the
account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to
reflect such transfer and receipt of payment for the
account of the Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form
of a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to
the Fund copies of daily transaction sheets reflecting
each day's transaction in the Securities System for the
account of the Fund;
6) The Custodian shall provide the Fund with any report on
its system of internal accounting control as the Fund may
reasonably request from time to time;
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund establish and maintain a segregated
account or accounts for and on
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behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to Section 2.10
hereof, (i) in accordance with the provisions of any agreement among
the Fund, the Custodian and a broker-dealer registered under the
Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for
purposes of segregating cash or government securities in connection
with options purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold by the Fund,
(iii) for the purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only,
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in the case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board of
Directors or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of income
or other payments with respect to domestic securities of the Fund
held by it and in connection with transfers of such securities.
2.13 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.14 Communications Relating to Fund Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian
26
shall transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities of
domestic securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by
the Fund and the maturity of futures contracts purchased or sold by
the Fund) received by the Custodian from issuers of the domestic
securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund
all written information received by the Custodian from issuers of
the domestic securities whose tender or exchange is sought and from
the party (or his agents) making the tender or exchange offer. If
the Fund desires to take action with respect to any tender offer,
exchange offer or any other similar transaction, the Fund shall
notify the Custodian at least three business days prior to the date
on which the Custodian is to take such action.
2.15 Reports to Fund by Independent Public Accountants.
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants
on the accounting system, internal accounting control and procedures
for safeguarding securities, futures contracts and options
27
on futures contracts, including domestic securities deposited and/or
maintained in a Securities System, relating to the services provided
by the Custodian under this Contract; such reports shall be of
sufficient scope and in sufficient detail, as may reasonably be
required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and,
if there are no such inadequacies, the reports shall so state.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians
The Fund hereby authorizes and instructs the Custodian to employ as
sub-custodians for the Fund's securities and other assets maintained
outside the United States the foreign banking institutions and
foreign securities depositories designated on Schedule A hereto
("foreign sub-custodians"). Upon receipt of "Proper Instructions",
as defined in Section 5 of this Contract, together with a certified
resolution of the Fund's Board of Directors, the Custodian and the
Fund may agree to amend Schedule A hereto from time to time to
designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of
Proper Instructions, the
28
Fund may instruct the Custodian to cease the employment of any one
or more such sub-custodians for maintaining custody of the Fund's
assets.
3.2 Assets to Be Held. The Custodian shall limit the securities and
other assets maintained in the custody of the foreign sub-custodians
to: (a) "foreign securities", as defined in paragraph (c)(1) of Rule
17f-5 under the Investment Company Act of 1940, and (b) cash and
cash equivalents in such amounts as the Custodian or the Fund may
determine to be reasonably necessary to effect the Fund's foreign
securities transactions. The Custodian shall identify on its books
as belonging to the Fund, the foreign securities of the Fund held by
each foreign sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by the Custodian and the Fund, assets of the Fund
shall be maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving
as sub-custodians pursuant to the terms hereof. Such arrangements
shall include entry into agreements containing the provisions set
forth in Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be
29
substantially in the form set forth in Exhibit 1 hereto and shall
provide that: (a) the Fund will be adequately indemnified and its
assets adequately insured in the event of loss; (b) the Fund's
assets will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking
institution or its creditors or agents, except a claim of payment
for their safe custody or administration; (c) beneficial ownership
of the Fund's assets will be freely transferable without the payment
of money or value other than for safe custody or administration; (d)
adequate records will be maintained identifying the assets as
belonging to the Fund; (e) officers of or auditors employed by, or
other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants
for the Fund, will be given access to the books and records of the
foreign banking institution relating to its actions under its
agreement with the Custodian; and (e) assets of the Fund held by the
foreign sub-custodian will be subject only to the instructions of
the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of
30
the Fund to be afforded access to the books and records of any
foreign banking institution employed as a foreign sub-custodian
insofar as such books and records relate to the performance of such
foreign banking institution under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by foreign sub-
custodians, including but not limited to an identification of
entities having possession of the Fund's securities and other assets
and advices or notifications of any transfers of securities to or
from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of the Fund indicating, as
to securities acquired for the Fund, the identity of the entity
having physical possession of such securities.
3.7 Transactions in Foreign Custody Account
(a) Except as otherwise provided in paragraph (b) of this Section
3.7, the provision of Sections 2.2, 2.3, 2.6 and 2.7 of this
Contract shall apply, mutatis mutandis to the foreign
securities of the Fund held outside the United States by
foreign sub-custodians.
31
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account
of the Fund and delivery of securities maintained for the
account of the Fund may be effected in accordance with the
customary established securities trading or securities
processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or
to a dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later
payment for such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign subcustodian
may be maintained in the name of such entity's nominee to the
same extent as set forth in Section 2.3 of this Contract, and
the Fund agrees to hold any such nominee harmless from any
liability as a holder of record of such securities unless such
liability is the result of the nominee's negligence.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to
which the Custodian employs a foreign banking institution as a
foreign sub-custodian shall
32
require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and each Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of
the Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund has
not been made whole for any such loss, damage, cost, expense,
liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts
or omissions of a foreign banking institution to the same extent as
set forth with respect to sub-custodians generally in this Contract
and, regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph 3.12 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where
the sub-
33
custodian has otherwise exercised reasonable care. Notwithstanding
the foregoing provisions of this paragraph 3.9, in delegating
custody duties to State Street London Ltd., the Custodian shall not
be relieved of any responsibility to the Fund for any loss due to
such delegation, except such loss as may result from (a) political
risk (including, but not limited to, exchange control restrictions,
confiscation, expropriation, nationalization, insurrection, civil
strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or other losses
under circumstances where the Custodian and State Street London Ltd.
have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose including the purchase or
sale of foreign exchange or of contracts for foreign exchange, or in
the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property
at any time
34
held for the account of the Fund shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the
Fund's assets to the extent necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually
to the Fund, during the month of June, information concerning the
foreign sub-custodians employed by the Custodian. Such information
shall be similar in kind and scope to that furnished to the Fund in
connection with the initial approval of this Contract. In addition,
the Custodian will promptly inform the Fund in the event that the
Custodian learns of a material adverse change in the financial
condition of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-custodian not
the subject of an exemptive order from the Securities and Exchange
Commission is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the equivalent
thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted
U.S. accounting principles).
35
3.12 Branches of U.S. Banks
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of the Fund's assets
are maintained in a foreign branch of a banking institution
which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set
forth in Section 26(a) of said Act. The appointment of any
such branch as a sub-custodian shall be governed by paragraph 1
of this Contract.
(b) Cash held for the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the
Fund with the Custodian's London branch, which account shall be
subject to the direction of the Custodian, State Street London
Ltd. or both.
3.13 Tax Law
The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America
or any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as
36
custodian of the Fund by the tax law of jurisdictions other than
those mentioned in the above sentence, including responsibility for
withholding and other taxes, assessments or other governmental
charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be
to use reasonable efforts to assist the Fund with respect to any
claim for exemption or refund under the tax law of jurisdictions for
which the Fund has provided such information.
4. Payments for Repurchases or Redemptions and Sales of Shares of the Fund
From such funds as may be available for the purpose but subject to
the limitations of the Articles of Incorporation and any applicable votes of
the Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian is authorized
upon receipt of instructions from the Transfer Agent to wire funds to or
through a commercial bank designated by the redeeming shareholders. In
connection with the redemption or repurchase of Shares of the Fund, the
Custodian shall honor checks drawn on the Custodian by a holder
37
of Shares, which checks have been furnished by the Fund to the holder of
Shares, when presented to the Custodian in accordance with such procedures and
controls as are mutually agreed upon from time to time between the Fund and
the Custodian.
The Custodian shall receive from the distributor for the Fund's
Shares or from the Transfer Agent of the Fund and deposit into the Fund's
account such payments as are received for Shares of the Fund issued or sold
from time to time by the Fund. The Custodian will provide timely notification
to the Fund and the Transfer Agent of any receipt by it of payments for Shares
of the Fund.
5. Proper Instructions
Proper Instructions as used herein means a writing signed or
initialled by one or more person or persons as the Board of Directors shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the Custodian
reasonably believes them to have been given by a person authorized to give
such instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Directors of the Fund accompanied by a detailed
38
description of procedures approved by the Board of Directors, Proper
Instructions may include communications effected directly between
electromechanical or electronic devices provided that the Board of Directors
and the Custodian are satisfied that such procedures afford adequate
safeguards for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.11.
6. Actions Permitted Without Express Authority
The Custodian may in its discretion, without express authority from
the Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection checks, drafts and other negotiable
instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Fund except as otherwise
directed by the Board of Directors of the Fund.
39
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of a vote of the
Board of Directors of the Fund as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any determination or
of any action by the Board of Directors pursuant to the Articles of
Incorporation as described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written notice to the
contrary.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information
to the entity or entities appointed by the Board of Directors of the Fund to
keep the books of account of the Fund and/or compute the net asset value per
share of the outstanding shares of the Fund or, if directed in writing to do
so by the Fund, shall itself keep such books of account and/or compute such
net asset value per share. If so directed, the Custodian shall also calculate
daily the net income of the Fund as described in the Fund's currently
effective prospectus and shall advise the Fund and the Transfer Agent daily of
the total amounts of such net income and, if instructed in writing by an
officer of the
40
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net
asset value per share and the daily income of the Fund shall be made at the
time or times described from time to time in the Fund's currently effective
prospectus.
9. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 3la-1 and 3la-2
thereunder. All such records shall be the property of the Fund and shall at
all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by the Fund and held by the Custodian and shall, when requested to do so
by the Fund and for such compensation as shall be agreed upon between the Fund
and the Custodian, include certificate numbers in such tabulations.
41
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or
other annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund and the Custodian.
42
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto received
by it or delivered by it pursuant to this Contract and shall be held harmless
in acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper party
or parties, including any futures commission merchant acting pursuant to the
terms of a three-party futures or options agreement. The Custodian shall be
held to the exercise of reasonable care in carrying out the provisions of this
Contract, but shall be kept indemnified by and shall be without liability to
the Fund for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Fund) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.9).
If the Fund requires the Custodian to take any action with respect
to securities, which action involves the payment of
43
money or which action may, in the opinion of the Custodian, result in the
Custodian or its nominee assigned to the Fund being liable for the payment of
money or incurring liability of some other form, the Fund, as a prerequisite
to requiring the Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, the purchase or sale of foreign exchange or
of contracts for foreign exchange and assumed settlement) or in the event that
the Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of
the Fund's assets to the extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided,
may be amended at any time by
44
mutual agreement of the parties hereto and may be terminated by either party
by an instrument in writing delivered or mailed, postage prepaid to the other
party, such termination to take effect not sooner than thirty (30) days after
the date of such delivery or mailing; provided, however that the Custodian
shall not act under Section 2.10 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the Board
of Directors of the Fund has approved the initial use of a particular
Securities System and the receipt of an annual certificate of the Secretary or
an Assistant Secretary that the Board of Directors has reviewed the use by the
Fund of such Securities System, as required in each case by Rule 17f-4 under
the Investment Company Act of 1940, as amended and that the Custodian shall
not act under Section 2.10A hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Directors has approved the initial use of the Direct Paper System and the
receipt of an annual certificate of the Secretary or an Assistant Secretary
that the Board of Directors has reviewed the use by the Fund of the Direct
Paper System; provided further, however, that the Fund shall not amend or
terminate this Contract in contravention of any applicable federal or state
regulations, or any provision of the Articles of Incorporation, and further
provided, that the Fund may at any time by action of its Board of Directors
(i) substitute another bank or trust company for the Custodian by
45
giving notice as described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a conservator or
receiver for the Custodian by the Comptroller of the Currency or upon the
happening of a like event at the direction of an appropriate regulatory agency
or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the
Custodian such compensation as may be due as of the date of such termination
and shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
15. Successor Custodian
If a successor custodian shall be appointed by the Board of
Directors of the Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities then held by it hereunder and shall transfer
to an account of the successor custodian all of the Fund's securities held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Directors of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of
46
Directors shall have been delivered to the Custodian on or before the date
when such termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as defined
in the Investment Company Act of 1940, doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the Custodian
and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract and to transfer to an account of such
successor custodian all of the Fund's securities held in any Securities
System. Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or
of the Board of Directors to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services during such period as
the Custodian retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force and effect.
47
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall
be annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision
of the Articles of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
17. Additional Funds
In the event that the Fund establishes one or more series of Shares
with respect to which it desires to have the Custodian render services as
custodian under the terms hereof, it shall so notify the Custodian in writing,
and if the Custodian agrees in writing to provide such services, such series
of Shares shall be serviced under the terms hereof.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of the Commonwealth of
Massachusetts.
48
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.
20. Shareholder Communications Election
Securities and Exchange Commission Rule 14b-2 requires banks which
hold securities for the account of customers to respond to requests by issuers
of securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to
requesting companies whose securities the Fund owns. If the Fund tells the
Custodian "no", the Custodian will not provide this information to requesting
companies. If the Fund tells the Custodian "yes" or does not check either
"yes" or "no" below, the Custodian is required by the rule to treat the Fund
as consenting to disclosure of this information for all securities owned by
the Fund or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's
name and address for any purpose other than corporate communications. Please
indicate
49
below whether the Fund consents or objects by checking one of the alternatives
below.
YES [ ] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's
name, address, and share positions.
50
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed as of the day of
, 1994.
ATTEST WARBURG, XXXXXX JAPAN OTC FUND, INC.
_____________________ By____________________________
ATTEST STATE STREET BANK AND TRUST COMPANY
_____________________ By____________________________
Executive Vice President
51
Schedule A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of WARBURG, XXXXXX
JAPAN OTC FUND, INC. for use as subcustodians for the Fund's securities and
other assets:
Country Bank
Bangladesh Standard Chartered Bank
China The Hongkong and Shanghai Banking Corp. Ltd.
Cyprus Barclays Bank plc
Hong Kong Standard Chartered Bank
India The Hongkong and Shanghai Banking Corp. Ltd.
Indonesia Standard Chartered Bank
Israel Bank of Hapoalim B.M.
Japan Sumitomo Trust & Banking Co., Ltd.
Jordan The British Bank of the Middle East
Korea Bank of Seoul
Malaysia Standard Chartered Bank
Pakistan Deutsche Bank AG
Philippines Standard Chartered Bank
Singapore The Development Bank of Singapore Ltd.
Sri Lanka The Hongkong and Shanghai Banking Corp. Ltd.
Taiwan Central Trust of China
Thailand Standard Chartered Bank
Turkey Citibank, N.A.
Certified:
_______________________________
Fund's Authorized Officer
Date: September 27, 1994
00
XXXXXXX XXXXXXXXXX
Xxxxxxxxxx Xxxx
Xxxxx Shanghai Securities Central Clearing and
Registration Corporation (SSCCRC)
Cyprus None
Hong Kong The Central Clearing and Settlement System
(CCASS)
India None
Indonesia None
Israel The Clearing House of the Tel Aviv Stock
Exchange
Japan None
Jordan None
Korea Korea Securities Depository (KSD)
Malaysia None
Pakistan None
Philippines None
Singapore The Central Depository (Pte) Limited (CDP)
Sri Lanka The Central Depository System (Pvt) Limited
Taiwan The Taiwan Securities Central Depository
Company, Ltd. (TSCD)
Thailand The Share Depository Center (SDC)
Turkey Istanbul Stock Exchange Settlement and Custody
Co., Inc. (I.M.K.B. Takas ve Saklama A.S.)
53
EXHIBIT I
SUBCUSTODIAN AGREEMENT
AGREEMENT made this day of , 19 , between State Street
Bank and Trust Company, a Massachusetts trust company (hereinafter referred to
as the "Custodian"), having its principal place of business at 000 Xxxxxxxx
Xxxxxx, Xxxxxx, XX, and (hereinafter referred to as the
"Subcustodian"), a organized under the laws of
and having an office at .
WHEREAS, Custodian has been appointed to act as Trustee, Custodian or
Subcustodian of securities and monies on behalf of certain of its customers
including, without limitation, collective investment undertakings, investment
companies subject to the U.S. Investment Company Act of 1940, as amended, and
employee benefit plans subject to the U.S. Employee Retirement Income Security
Act of 1974, as amended;
WHEREAS, Custodian wishes to establish Account (the "Account") with the
Subcustodian to hold and maintain certain property for which Custodian is
responsible as custodian; and
WHEREAS, Subcustodian agrees to establish the Account and to hold and
maintain all Property in the Account in accordance with the terms and
conditions herein set forth.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the Custodian and the Subcustodian agree as follows:
I. The Account
A. Establishment of the Account. Custodian hereby requests that
Subcustodian establish for each client of the Custodian an Account which shall
be composed of:
1. A Custody Account for any and all Securities (as hereinafter
defined) from time to time received by Subcustodian therefor, and
2. A Deposit Account for any and all Cash (as hereinafter defined)
from time to time received by Subcustodian therefore.
B. Use of the Account. The Account shall be used exclusively to hold,
acquire, transfer or otherwise care for, on behalf of Custodian as custodian
and the customers of Custodian and
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not for Custodian's own interest, Securities and such Cash or cash equivalents
as are transferred to Subcustodian or as are received in payment of any
transfer of, or as payment on, or interest on, or dividend from, any such
Securities (herein collectively called "Cash").
C. Transfer of Property in the Account. Beneficial ownership of the
Securities and Cash in the Account shall be freely transferable without
payment of money or value other than for safe custody and administration.
D. Ownership and Segregation of Property in the Account. The ownership
of the property in the Account, whether Securities, Cash or both, and whether
any such property is held by Subcustodian in an Eligible Depository, shall be
clearly recorded on Subcustodian's books as belonging to Custodian on behalf
of Custodian's customers, and not for Custodian's own interest and, to the
extent that Securities are physically held in the Account, such Securities
shall also be physically segregated from the general assets of Subcustodian,
the assets of Custodian in its individual capacity and the assets of
Subcustodian's other customers. In addition, Subcustodian shall maintain such
other records as may be necessary to identify the property hereunder as
belonging to each Account.
E. Registration of Securities in the Account. Securities which are
eligible for deposit in a depository as provided for in Paragraph III may be
maintained with the depository in an account for Subcustodian's customers.
Securities which are not held in a depository and that are ordinarily held in
registered form will be registered in the name of Subcustodian or in the name
of Subcustodian's nominee, unless alternate Instructions are furnished by
Custodian.
II. Services to Be Provided By the Subcustodian
The services Subcustodian will provide to Custodian and the manner in which
such services will be performed will be as set forth below in this Agreement.
A. Services Performed Pursuant to Instructions. All transactions
involving the Securities and Cash in the Account shall be executed solely in
accordance with Custodian's Instructions as that term is defined in Paragraph
IV hereof, except those described in paragraph B below.
B. Services to Be Performed Without Instructions. Subcustodian will,
unless it receives Instructions from Custodian to the contrary:
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1. Collect Cash. Promptly collect and receive all dividends,
income, principal, proceeds from transfer and other payments with respect to
property held in the Account, and present for payment all Securities held in
the Account which are called, redeemed or retired or otherwise become payable
and all coupons and other income items which call for payment upon
presentation, and credit Cash receipts therefrom to the Deposit Account.
2. Exchange Securities. Promptly 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.
3. Sale of Rights and Fractional Interests. Whenever notification
of a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend or stock split is received for the Account and such
rights entitlement or fractional interest bears an expiration date,
Subcustodian will promptly endeavor to obtain Custodian's Instructions, but
should these not be received in time for Subcustodian to take timely action,
Subcustodian is authorized to sell such rights entitlement or fractional
interest and to credit the Account.
4. Execute Certificates. Execute in Custodian's name for the
Account, whenever Subcustodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of income from the
Securities held in the account.
5. Pay Taxes and Receive Refunds. To pay or cause to be paid from
the Account any and all taxes and levies in the nature of taxes imposed on the
property in the Account by any governmental authority, and to take all steps
necessary to obtain all tax exemptions, privileges or other benefits,
including reclaiming and recovering any foreign withholding tax, relating to
the Account and to execute any declaration, affidavits, or certificates of
ownership which may be necessary in connection therewith.
6. Prevent Losses. Take such steps as may be reasonably necessary
to secure or otherwise prevent the loss of, entitlements attached to or
otherwise relating to property held in the Account.
C. Additional Services.
1. Transmission of Notices of Corporate Action. By such means as
will permit Custodian to take timely action with respect thereto, Subcustodian
will promptly notify Custodian upon receiving notices or reports, or otherwise
becoming aware, of
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corporate action affecting Securities held in the Account (including, but not
limited to, calls for redemption, mergers, consolidations, reorganizations,
recapitalizations, tender offers, rights offerings, exchanges, subscriptions
and other offerings) and dividend, interest and other income payments relating
to such Securities.
2. Communications Regarding the Exercise of Entitlements. Upon
request by Custodian, Subcustodian will promptly deliver, or cause any
Eligible Depository authorized and acting hereunder to deliver, to Custodian
all notices, proxies, proxy soliciting materials and other communications that
call for voting or the exercise of rights or other specific action (including
material relative to legal proceedings intended to be transmitted to security
holders) relating to Securities held in the Account to the extent received by
Subcustodian or said Eligible Depository, such proxies or any voting
instruments to be executed by the registered holder of the Securities, but
without indicating the manner in which such Securities are to be voted.
3. Monitor Financial Service. In furtherance of its obligations
under this Agreement, Subcustodian will monitor a leading financial service
with respect to announcements and other information respecting property held
in the Account, including announcements and other information with respect to
corporate actions and dividend, interest and other income payments.
III. Use of Securities Depository
Subcustodian may, with the prior written approval of Custodian, maintain all
or any part of the Securities in the Account with a securities depository or
clearing agency which is incorporated or organized under the laws of a country
other than the United States of America and is supervised or regulated by a
government agency or regulatory authority in the foreign jurisdiction having
authority over such depositories or agencies, and which operates (a) the
central system for handling of designated securities or equivalent book
entries in
, or (b) a transnational system for the central handling of
securities or equivalent book entries (herein called "Eligible Depository"),
provided however, that, while so maintained, such Securities shall be subject
only to the directions of Subcustodian, and that Subcustodian duties,
obligations and responsibilities with regard to such Securities shall be the
same as if such Securities were held by Subcustodian on its premises.
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IV. Claims Against Property in the Account
The property in the account shall not be subject to any right, charge,
security interest, lien or claim of any kind (collectively "Charges") in favor
of Subcustodian or any Eligible Depository or any creditor of Subcustodian or
of any Eligible Depository except a claim for payment for such property's safe
custody or administration in accordance with the terms of this Agreement.
Subcustodian will immediately notify Custodian of any attempt by any party to
assert any Charge against the property held in the Account and shall take all
lawful actions to protect such property from such Charges until Custodian has
had a reasonable time to respond to such notice.
V. Subcustodian's Warranty
Subcustodian represents and warrants that:
(A) It is a branch of a "qualified U.S. bank" or an "eligible foreign
custodian" as those terms are defined in Rule 17f-5 of the Investment Company
Act of 1940, a copy of which is attached hereto as Attachment A (the "Rule"),
and Subcustodian shall immediately notify Custodian, in writing or by other
authorized means, in the event that there appears to be a substantial
likelihood that Subcustodian will cease to qualify under the Rule as currently
in effect or as hereafter amended, or
(B) It is the subject of an exemptive order issued by the United States
Securities and Exchange Commission which order permits Custodian to employ
Subcustodian notwithstanding the fact that Subcustodian fails to qualify under
the terms of the Rule, and Subcustodian shall immediately notify Custodian, in
writing or by other authorized means, if for any reason it is no longer
covered by such exemptive order.
Upon receipt of any such notification required under (A) or (B) of this
section, Custodian may terminate this Agreement immediately without prior
notice to Subcustodian.
VI. Definitions
A. Instructions. The term "Instructions" means:
1. instructions in writing signed by authorized individuals
designated as such by Custodian;
2. telex or tested telex instructions of Custodian;
58
3. other forms of instructions in computer readable form as shall
customarily be used for the transmission of like information, and
4. such other forms of communication as from time to time may be
agreed upon by Custodian and Subcustodian, which Subcustodian believes in good
faith to have been given by Custodian or which are transmitted with proper
testing or authentication pursuant to terms and conditions which Custodian may
specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded. Subcustodian shall act in
accordance with Instructions and shall not be liable for any act or omission
in respect of any Instruction except in the case of willful default,
negligence, fraud, bad faith, willful misconduct, or reckless disregard of
duties on the part of Subcustodian. Subcustodian in executing all
Instructions will take relevant action in accordance with accepted industry
practice and local settlement practice.
B. Account. The term "Account" means collectively the Custody Account,
and the Deposit Account.
C. Securities. The term "Securities" includes, without limitation,
stocks, shares, bonds, debentures, debt securities (convertible or non-
convertible), notes, or other obligations or securities and any certificates,
receipts, futures contracts, foreign exchange contracts, options, warrants,
scrip, or other instruments representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
VII. Miscellaneous Provisions
A. Statements Regarding the Account. Subcustodian will supply
Custodian with such statements regarding the Account as Custodian may request,
including the identity and location of any Eligible Depository authorized and
acting hereunder. In addition, Subcustodian will supply Custodian an advice
or notification of any transfers of Securities to or from the Account
indicating, as to Securities acquired for the Account, if applicable, the
Eligible Depository having physical possession of such Securities.
B. Examination of Books and Records. Subcustodian agrees that its
books and records relating to the Account and Subcustodian's actions under
this Agreement shall be open to the physical, on-premises inspection and audit
at reasonable times by officers of, auditors employed by or other
representatives of Custodian including (to the extent permitted under the law
59
of ) the independent public accountants for any customer of Custodian
whose property is being held hereunder and such books and records shall be
retained for such period as shall be agreed upon by Custodian and
Subcustodian.
As Custodian may reasonably request from time to time, Subcustodian will
furnish its auditor's reports an its system of internal controls, and
Subcustodian will use its best efforts to obtain and furnish similar reports
of any Eligible Depository authorized and acting hereunder.
C. Standard of Care. In holding, maintaining, servicing and disposing
of Property under this Agreement, and in fulfilling any other obligations
hereunder, Subcustodian shall exercise the same standard of care that it
exercises over its own assets, provided that Subcustodian shall exercise at
least the degree of care and maintain adequate insurance as expected of a
prudent professional Subcustodian for hire and shall assume the burden of
proving that it has exercised such care in its maintenance of Property held by
Subcustodian in its Account. The maintenance of the Property in an Eligible
Depository shall not affect Subcustodian's standard of care, and Subcustodian
will remain as fully responsible for any loss or damage to such securities as
if it had itself retained physical possession of them. Subcustodian shall
also indemnify and hold harmless Custodian and each of Custodian's customers
from and against any loss, damage, cost, expense, liability or claim
(including reasonable attorney's fees) arising out of or in connection with
the improper or negligent performance or the nonperformance of the duties of
Subcustodian.
Subcustodian shall be responsible for complying with all provisions of the law
of , or any other law, applicable to Subcustodian
in connection with its duties hereunder, including (but not limited to) the
payment of all transfer taxes or other taxes and compliance with any currency
restrictions and securities laws in connection with its duties as
Subcustodian.
D. Loss of Cash or Securities. Subcustodian agrees that, in the event
of any loss of Securities or Cash in the Account, Subcustodian will use its
best efforts to ascertain the circumstances relating to such loss and will
promptly report the same to Custodian and shall use every legal means
available to it to effect the quickest possible recovery.
E. Compensation of Subcustodian. Custodian agrees to pay to
Subcustodian from time to time such compensation for its services and such
out-of-pocket or incidental expenses of Subcustodian pursuant to this
Agreement as may be mutually agreed upon in writing from time to time.
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F. Operating Requirements. The Subcustodian agrees to follow such
Operating Requirements as the Custodian may establish from time to time. A
copy of the current Operating Requirements is attached as Attachment B to this
Agreement.
G. Termination. This Agreement may be terminated by Subcustodian or
Custodian on 60 days' written notice to the other party, sent by registered
mail, provided that any such notice, whether given by Subcustodian or
Custodian, shall be followed within 60 days by Instructions specifying the
names of the persons to whom Subcustodian shall deliver the Securities in the
Account and to whom the Cash in the account shall be paid. If within 60 days
following the giving of such notice of termination, Subcustodian does not
receive such Instructions, Subcustodian shall continue to hold such Securities
and Cash subject to this Agreement until such Instructions are given. The
obligations of the parties under this Agreement shall survive the termination
of this Agreement.
H. Notices. Unless otherwise specified in this Agreement, all notices
and communications with respect to matters contemplated by this Agreement
shall be in writing, and delivered by mail, postage prepaid, telex, SWIFT, or
other mutually agreed telecommunication methods to the following addresses (or
to such other address as either party hereto may from time to time designate
by notice duly given in accordance with this paragraph):
To Subcustodian:
To Custodian: State Street Bank and Trust Company
Securities Operations/
Network Administration
X.X. Xxx 0000
Xxxxxx, XX 00000
I. Confidentiality. Subcustodian and Custodian shall each use its best
efforts to maintain the confidentiality of the property in the Account and the
beneficial owners thereof, subject, however, to the provisions of any laws,
requiring disclosure. In addition, Subcustodian shall safeguard any test
keys, identification codes or other security devices which Custodian shall
make available to it. The Subcustodian further agrees it will not disclose
the existence of this Agreement or any current business relationship unless
compelled by applicable law or regulation or unless it has secured the
Custodian's written consent.
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J. Assignment. This Agreement shall not be assignable by either party
but shall bind any successor in interest of Custodian and Subcustodian
respectively.
K. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of . To the extent
inconsistent with this Agreement or Custodian's Operating Requirements as
attached hereto, Subcustodian's rules and conditions regarding accounts
generally or custody accounts specifically shall not apply.
CUSTODIAN: STATE STREET BANK AND TRUST COMPANY
By:___________________________
Date:_________________________
AGREED TO BY SUBCUSTODIAN
______________________________
By:___________________________
Date:_________________________
1
AMENDMENT TO CUSTODIAN CONTRACTS
This Amendment is made as of _____________, 1995 by and between STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company ("State Street"),
and each of WARBURG, XXXXXX JAPAN OTC FUND, INC. and WARBURG, XXXXXX EMERGING
MARKETS FUND, INC. (together the "Funds" and each a "Fund") to amend the
Custodian Contract between State Street and each Fund dated September 27, 1994
and December 30, 1994, respectively (each a "Custodian Contract").
WITNESSETH:
WHEREAS, each Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and
WHEREAS, State Street serves as custodian of each Fund's assets pursuant
to a Custodian Contract;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. The first sentence of Section 5 of each Custodian Contract is hereby
replaced with the following:
Proper Instructions as used herein means a writing signed or
initialled by two or more persons as the Board of Directors shall have
from time to time authorized.
2. Except as specifically modified herein, the terms of each Custodian
Contract remain in full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to be executed in its name and on its behalf by its duly authorized
representative as of the date first above written.
WARBURG, XXXXXX JAPAN OTC
FUND, INC.
WARBURG, XXXXXX EMERGING MARKETS
FUND, INC.
By:
Name:
Title:
0
XXXXX XXXXXX BANK AND TRUST
COMPANY
By:
Name:
Title:
