AMENDMENT TO GLOBAL CUSTODY AGREEMENT BETWEEN THE CHASE
MANHATTAN BANK AND THE RESERVE FUNDS
AMENDMENT, dated July 2, 2001 to the January 6, 1998 custody agreement
("Agreement"), between The Reserve Funds ("Customer"), having a place of
business at 0000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000-0000, and The Chase
Manhattan Bank ("Bank"), having a place of business at 000 Xxxx Xxx., Xxx Xxxx,
X.X. 00000-0000.
It is hereby agreed as follows:
Except as modified hereby, the Agreement is confirmed in all respects.
Capitalized terms used herein without definition shall have the meanings
ascribed to them in the Agreement.
I. Add the following after the first sentence of Section 3 of the Agreement:
At the request of Customer, Bank may, but need not, add to Schedule A an
Eligible Foreign Custodian where Bank has not acted as Foreign Custody
Manager with respect to the selection thereof. Bank shall notify Customer
in the event that it elects to add any such entity.
II. Add the following language to the end of Section 3 of the Agreement:
(i) The term Subcustodian as used herein shall mean the following:
(a) a "U.S. Bank," which shall mean a U.S. bank as defined in rule
17f-5(a)(7); and
(b) an "Eligible Foreign Custodian," which, as defined in rule 17f-5(a)(1)
and (5), shall mean (i) a banking institution or trust company,
incorporated or organized under the laws of a country other than the United
States, that is regulated as such by that country's government or an agency
thereof, and (ii) a majority-owned direct or indirect subsidiary of a U.S.
Bank or bank holding company which subsidiary is incorporated or organized
under the laws of a country other than the United States. In addition, an
Eligible Foreign Custodian shall also mean any other entity that shall have
been so qualified by exemptive order, rule or other appropriate action of
the SEC.
(ii) The term "securities depository" as used herein shall mean the
following when referring to a securities depository located:
(a) outside the U.S,. an "Eligible Securities Depository" which, in turn,
shall have the same meaning as in rule 17f-7(b)(1)(i)-(vi) as the same may
be amended from time to time, or that has otherwise been made exempt by an
SEC exemptive order, rule other appropriate SEC action, except that prior
to the compliance date with rule 17f-7 for a particular securities
depository the term "securities depository" shall be as defined in
(a)(1)(ii)-(iii) of the 1997 amendments to rule 17f-5.
(b) in the U.S., a "securities depository" as defined in SEC rule 17f-4(a).
(iii) For purposes of clarity, it is understood and agreed that the term
Subcustodian shall not include any securities depository. For purposes of the
provisions of the Agreement imposing liability on Bank, the term Subcustodian
shall not include any Eligible Foreign Custodian as to which Bank has not acted
as Foreign Custody Manager.
III. Replace Section 15 to the Investment Company Rider of the Agreement as
follows:
15. COMPLIANCE WITH SECURITIES AND EXCHANGE COMMISSION RULE 17f-5 ("RULE
17f-5").
(a) Customer's board of directors (or equivalent body) (hereinafter
"Board") hereby delegates to Bank, and Bank hereby accepts the delegation to
it of, the obligation to perform as Customer's "Foreign Custody Manager" (as
that term is defined in rule 17f-5(a)(3)), including for the purposes of: (i)
selecting Eligible Foreign Custodians (as that term is defined in rule
17f-5(a)(1), as the same may be amended from time to time, or that have
otherwise been exempted by SEC exemptive order, rule other appropriate SEC
action) to hold Customer's Foreign Assets, and (ii) evaluating the
contractual arrangements with such Eligible Foreign Custodians (as set forth
in rule 17f-5(c)(2)), and (iii) monitoring such foreign custody arrangements
(as set forth in rule 17f-5(c)(3)).
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Customer's Board of the placement of
Foreign Assets with particular Eligible Foreign Custodians and of any
material change in the arrangements with such Eligible Foreign Custodians,
with such reports to be provided to Customer's Board at such times as the
Board deems reasonable and appropriate based on the circumstances of
Customer's foreign custody arrangements but until further notice from
Customer requesting a different schedule, such reports shall be provided
not less than quarterly in summary form, with a more detailed report
annually.
(ii) exercise such reasonable care, prudence and diligence in performing as
Customer's Foreign Custody Manager as a person having responsibility for
the safekeeping of Foreign Assets would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have determined
that Foreign Assets placed and maintained in the safekeeping of such
Eligible Foreign Custodian shall be subject to reasonable care, based on
the standards applicable to custodians in the relevant market, after having
considered all factors relevant to the safekeeping of such Assets,
including, without limitation, those factors set forth in rule
17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign
Custodian requires that the Eligible Foreign Custodian will provide
reasonable care for Foreign Assets based on the standards applicable to
custodians in the relevant market as provided in rule 17f-5(c)(2); and
(v) have established a system to monitor the continued appropriateness of
maintaining Foreign Assets with particular Eligible Foreign Custodians and
performance of the governing contractual arrangements; it being understood,
however, that in the event that Bank shall have determined that the
existing Eligible Foreign Custodian in a given country would no longer
afford Foreign Assets reasonable care and that no other Eligible Foreign
Custodian in that country would afford reasonable care, Bank shall promptly
so advise Customer and shall then act in accordance with the Instructions
of Customer with respect to the disposition of the affected Foreign Assets.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Foreign Assets on behalf of Customer with Eligible Foreign Custodians pursuant
to a written contract deemed appropriate by Bank.
(c) Except as expressly provided herein and in Section 17 hereof, Customer
shall be solely responsible to assure that the maintenance of Foreign Assets
hereunder complies with the rules, regulations, interpretations and exemptive
orders promulgated by or under the authority of the SEC.
(d) Bank represents to Customer that it is a U.S. Bank as defined in rule
17f-5(a)(7). Customer represents to Bank that: (1) the Assets being placed and
maintained in Bank's custody are subject to the Investment Company Act of 1940,
as amended (the "1940 Act") as the same may be amended from time to time; (2)
its Board (or other governing body) has determined that it is reasonable to rely
on Bank to perform as Customer's Foreign Custody Manager; and (3) its Board (or
other governing body) or its investment adviser shall have determined that
Customer may maintain Foreign Assets in each country in which Customer's Foreign
Assets shall be held hereunder and determined to accept the risks arising
therefrom (including, but not limited to, a country's financial infrastructure,
prevailing custody and settlement practices, laws applicable to the safekeeping
and recovery of Foreign Assets
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held in custody, and the likelihood of nationalization, currency controls and
the like) (collectively ("Country Risk")). Nothing contained herein shall
require Bank to make any selection on behalf of Customer that would entail
consideration of Country Risk and, except as may be provided in (e) below, to
engage in any monitoring of Country Risk.
(e) Bank shall provide to Customer such information relating to Country
Risk as is specified in Appendix 1-A hereto. Customer hereby acknowledges that:
(i) such information is solely designed to inform Customer of market conditions
and procedures and is not intended as a recommendation to invest or not invest
in particular markets; and (ii) Bank has gathered the information from sources
it considers reliable, but that Bank shall have no responsibility for
inaccuracies or incomplete information.
IV. Add Section 16 to the Investment Company Rider of the Agreement as follows:
16. COMPLIANCE WITH SECURITIES AND EXCHANGE COMMISSION RULE 17f-7 ("RULE
17f-7").
(a) Bank shall, for consideration by Customer, provide an analysis in
accordance with rule 17f-7(a)(1)(i)(A) of the custody risks associated with
maintaining Customer's Foreign Assets with each Eligible Securities Depository
used by Bank as of the date hereof (or, in the case of an Eligible Securities
Depository not used by Bank as of the date hereof, prior to the initial
placement of Customer's Foreign Assets at such Depository) and at which any
Foreign Assets of Customer are held or are expected to be held. The foregoing
analysis will be provided to Customer at Bank's Web site. In connection with the
foregoing, Customer shall notify Bank of any Eligible Securities Depositories at
which it does not choose to have its Foreign Assets held. Bank shall monitor the
custody risks associated with maintaining Customer's Foreign Assets at each such
Eligible Securities Depository on a continuing basis and shall promptly notify
Customer or its adviser of any material changes in such risks.
(b) Bank shall exercise reasonable care, prudence and diligence in
performing the requirements set forth in Section 17(a) above.
(c) Based on the information available to it in the exercise of diligence,
Bank shall determine the eligibility under rule 17f-7 of each depository before
including it on Appendix 1-B hereto and shall promptly advise Customer in
writing if any Eligible Securities Depository ceases to be eligible. (Eligible
Securities Depositories used by Bank as of the date hereof are set forth in
Appendix 1-B hereto, and as the same may be amended on notice to Customer from
time to time.)
(d) Bank need not commence performing any of the duties set forth in this
Section 17 prior to March 31, 2001, but Bank shall advise Customer if it is
prepared to commence such duties prior to such date as to particular
depositories.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
THE RESERVE FUNDS THE CHASE MANHATTAN BANK
By: By:
---------------------- --------------------
Name: Xxxxx X. Xxxx Name:
Title: Chairman/CEO Title:
Date: Date:
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APPENDIX 1-A
INFORMATION REGARDING COUNTRY RISK
1. To aid Customer in its determinations regarding Country Risk, Bank shall
furnish annually and upon the initial placing of Foreign Assets into a country
the following information :
A Opinions of local counsel concerning:
i. Whether applicable foreign law would restrict the access afforded
Customer's independent public accountants to books and records kept by
an Eligible Foreign Custodian located in that country.
ii. Whether applicable foreign law would restrict the Customer's ability
to recover its assets in the event of the bankruptcy of an Eligible
Foreign Custodian located in that country.
iii. Whether applicable foreign law would restrict the Customer's ability
to recover assets that are lost while under the control of an Eligible
Foreign Custodian located in the country.
B. Written information concerning:
i. The likelihood of expropriation, nationalization, freezes, or
confiscation of Customer's assets.
ii. Whether difficulties in converting Customer's cash and cash
equivalents to U.S. dollars are reasonably foreseeable.
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership restrictions,
(iii) foreign exchange, (iv) securities settlement and registration, (v)
taxation, (vi) market settlement risk, (vii) Eligible Securities
Depositories (including Depository evaluation), if any.
2. Bank shall furnish the following additional information:
Market flashes, including with respect to changes in the information
in market reports.
APPENDIX 1-B
ELIGIBLE SECURITIES DEPOSITORIES
