EXHIBIT j.1
CUSTODIAN AGREEMENT
THIS AGREEMENT, dated as of ____________, 2003, between
XXXXXXXX-XXXXXXXXX CONVERTIBLE & INCOME FUND II, a closed-end management
investment company organized under the laws of the Commonwealth of Massachusetts
and registered with the Securities and Exchange Commission (the Commission)
under the 1940 Act (the Fund), and XXXXX BROTHERS XXXXXXXX & CO., a limited
partnership formed under the laws of the State of New York (BBH&Co. or the
Custodian),
W I T N E S S E T H:
WHEREAS, the Fund wishes to employ BBH&Co. to act as custodian for the
Fund and to provide related services, all as provided herein, and BBH&Co. is
willing to accept such employment, subject to the terms and conditions herein
set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Fund and BBH&Co. hereby agree, as follows:
1. Appointment of Custodian. The Fund hereby appoints BBH&Co. as the Fund's
custodian, and BBH&Co. hereby accepts such appointment. All Investments
delivered to the Custodian or its agents or Subcustodians shall be dealt with as
provided in this Agreement. The duties of the Custodian with respect to the
Investments shall be only as set forth expressly in this Agreement which duties
are generally comprised of safekeeping and various administrative duties that
will be performed in accordance with Instructions and as reasonably required to
effect Instructions.
2. Representations, Warranties and Covenants of the Fund. The Fund hereby
represents, warrants and covenants each of the following:
2.1 This Agreement has been, and at the time of delivery of
each Instruction such Instruction will have been, duly authorized,
executed and delivered by the Fund. This Agreement does not violate any
1
Applicable Law or conflict with or constitute a default under the
Fund's prospectus or other organic document, agreement, judgment, order
or decree to which the Fund is a party or by which it or its
Investments is bound.
2.2 By providing an Instruction with respect to the first
acquisition of an Investment in a jurisdiction other than the United
States of America, the Fund shall be deemed to have confirmed to the
Custodian that the Fund has (a) assessed and accepted all material
country or sovereign risks and accepted responsibility for their
occurrence, (b) made all determinations required to be made by the Fund
under the 1940 Act, and (iii) appropriately and adequately disclosed to
its shareholders, other investors and all persons who have rights in or
to such Investments, all material investment risks, including those
relating to the custody and settlement infrastructure or the servicing
of securities in such jurisdiction.
2.3 The Fund shall safeguard and shall solely be responsible
for the safekeeping of any testkeys, identification codes, passwords,
other security devices or statements of account with which the
Custodian provides it. In furtherance and not limitation of the
foregoing, in the event the Fund utilizes any on-line service offered
by the Custodian, the Fund and the Custodian shall be fully responsible
for the security of each party's connecting terminal, access thereto
and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards in respect thereof.
Additionally, if the Fund uses any on-line or similar communications
service made available by the Custodian, the Fund shall be solely
responsible for ensuring the security of its access to the service and
for the use of the service, and shall only attempt to access the
service and the Custodian's computer systems as directed by the
Custodian. If the Custodian provides any computer software to the Fund
relating to the services described in this Agreement, the Fund will
only use the software for the purposes for which the Custodian provided
the software to the Fund, and will abide by the license agreement
accompanying the software and any other security policies which the
Custodian provides to the Fund.
3. Representation and Warranty of BBH&Co. BBH&Co. hereby represents and warrants
that this Agreement has been duly authorized, executed and delivered by BBH&Co.
does not and will not violate any Applicable Law or conflict with or constitute
a default under BBH&Co.'s limited partnership agreement or any agreement,
instrument, judgment, order or decree to which BBH&Co. is a party or by which it
is bound and that BBH&Co. is eligible to serve as a custodian for a management
investment company registered with the Commission under the 1940 Act.
4. Instructions. Unless otherwise explicitly indicated herein, the Custodian
shall perform its duties pursuant to Instructions. As used herein, the term
Instruction shall mean a directive initiated by the Fund, acting directly or
through its Board of Trustees, officers or other Authorized Persons, which
directive shall conform to the requirements of this Section 4.
4.1 Authorized Persons. For purposes hereof, an Authorized Person shall
be a person or entity authorized to give Instructions for or on behalf of the
Fund by written notices to the Custodian or otherwise in accordance with
procedures delivered to and acknowledged by the Custodian, including without
limitation the Investment Advisor or Foreign Custody Manager. The Custodian may
treat any Authorized Person as having full authority of the Fund to issue
Instructions hereunder unless the notice of authorization contains explicit
limitations as to said authority. The Custodian shall be entitled to rely upon
the authority of Authorized Persons until it receives appropriate written notice
from the Fund to the contrary.
2
4.2 Form of Instruction. Each Instruction shall be transmitted by such
secured or authenticated electro-mechanical means as the Custodian shall make
available to the Fund from time to time unless the Fund shall elect to transmit
such Instruction in accordance with Subsections 4.2.1 through 4.2.3 of this
Section.
4.2.1 Fund Designated Secured-Transmission Method.
Instructions may be transmitted through a secured or tested
electro-mechanical means identified by the Fund or by an Authorized
Person entitled to give Instruction and acknowledged and accepted by
the Custodian; it being understood that such acknowledgment shall
authorize the Custodian to receive and process such means of delivery
but shall not represent a judgment by the Custodian as to the
reasonableness or security of the method determined by the Authorized
Person.
4.2.2 Written Instructions. Instructions may be transmitted in
a writing that bears the manual signature of Authorized Persons.
4.2.3 Other Forms of Instruction. Instructions may also be
transmitted by another means determined by the Fund or Authorized
Persons and acknowledged and accepted by the Custodian (subject to the
same limits as to acknowledgements as is contained in Subsection 4.2.1,
above) including Instructions given orally or by SWIFT, telex or
telefax (whether tested or untested).
When an Instruction is given by means established under Subsections
4.2.1 through 4.2.3 above, it shall be the responsibility of the Custodian to
use reasonable care to adhere to any security or other procedures established in
writing between the Custodian and the Authorized Person with respect to such
means of Instruction, but such Authorized Person shall be solely responsible for
determining that the particular means chosen is reasonable under the
circumstances. Oral Instructions shall be binding upon the Custodian only if and
when the Custodian takes action with respect thereto. With respect to telefax
instructions, the parties agree and acknowledge that receipt of legible
instructions cannot be assured, that the Custodian cannot verify that authorized
signatures on telefax instructions are original or properly affixed, and that
the Custodian shall not be liable for losses or expenses incurred through
actions taken in reliance on inaccurately stated telefax instructions or telefax
instructions on which authorized signatures are illegible, not original or not
properly affixed. In no event will the Custodian act upon the receipt of
illegible telefax instructions. The provisions of Section 4A of the Uniform
Commercial Code shall apply to Funds Transfers (as defined in the Uniform
Commercial Code) performed in accordance with Instructions. The Funds Transfer
Services Schedule and the Electronic and Online Services Schedule to this
Agreement shall each comprise a designation of form of a means of delivering
Instructions for purposes of this Section 4.2.
4.3 Completeness and Contents of Instructions. The Authorized Person
shall be responsible for assuring the adequacy and accuracy of Instructions.
Particularly, upon any acquisition or disposition or other dealing in
Investments and upon any delivery and transfer of any Investment or moneys, the
person initiating such Instruction shall give the Custodian an Instruction with
appropriate detail, including, without limitation:
4.3.1 The transaction date and the date and location of
settlement;
4.3.2 The specification of the type of transaction;
3
4.3.3 A description of the Investments or moneys in question,
including, as appropriate, quantity, price per unit, amount of money to
be received or delivered and currency information. Where an Instruction
is communicated by electronic means, or otherwise where an Instruction
contains an identifying number such as a CUSIP, SEDOL or ISIN number,
the Custodian shall be entitled to rely on such number as controlling
notwithstanding any inconsistency contained in such Instruction,
particularly with respect to the description of the Investment; and
4.3.4 The name of the broker or similar entity concerned with
execution of the transaction.
If the Custodian shall determine that an Instruction is either unclear
or incomplete, the Custodian shall give prompt notice of such determination to
the Fund, and the Fund shall thereupon amend or otherwise reform such
Instruction. In such event, the Custodian shall have no obligation to take any
action in response to the Instruction initially delivered until the redelivery
of an amended or reformed Instruction.
4.4 Timeliness of Instructions. When the Custodian has established
specific timing requirements or deadlines with respect to particular classes of
Instruction (and notified the Fund of such requirements or deadlines), or when
an Instruction is received by the Custodian at such a time that it could not
reasonably be expected to have acted on such instruction due to time zone
differences or other factors beyond its reasonable control, the execution of any
Instruction received by the Custodian after such deadline or at such time
(including any modification or revocation of a previous Instruction) shall be at
the risk of the Fund.
5. Safekeeping of Fund Assets. The Custodian shall hold Investments delivered to
it or Subcustodians for the Fund in accordance with the provisions of this
Section. The Custodian shall not be responsible for (a) the safekeeping of
Investments not delivered or that are not caused to be issued to it or its
Subcustodians; or (b) pre-existing faults or defects in Investments that are
delivered to the Custodian, or its Subcustodians. The Custodian is hereby
authorized to hold with itself or a Subcustodian, and to record in one or more
accounts, all Investments delivered to and accepted by the Custodian, any
Subcustodian or their respective agents pursuant to an Instruction or in
consequence of any corporate action. The Custodian shall hold Investments for
the account of the Fund and shall segregate Investments from assets belonging to
the Custodian and shall cause its Subcustodians to segregate Investments from
assets belonging to the Subcustodian in an account held for the Fund or in an
account maintained by the Subcustodian generally for non-proprietary assets of
the Custodian.
4
5.1 Use of Securities Depositories. Investments held in a Securities
Depository shall be held (a) subject to the agreement, rules, statement of terms
and conditions or other document or conditions effective between the Securities
Depository and the Custodian or the Subcustodian, as the case may be, and (b) in
an account for the Fund or in bulk segregation in an account maintained for the
non-proprietary assets of the entity holding such Investments in the Depository.
If market practice or the rules and regulations of the Securities Depository
prevent the Custodian, the Subcustodian or any agent of either from holding its
client assets in such a separate account, the Custodian, the Subcustodian or
other agent shall as appropriate segregate such Investments for benefit of the
Fund or for benefit of clients of the Custodian generally on its own books.
5.2 Certificated Assets. Investments which are certificated may be held
in registered or bearer form: (a) in the Custodian's vault; (b) in the vault of
a Subcustodian or agent of the Custodian or a Subcustodian; or (c) in an account
maintained by the Custodian, Subcustodian or agent at a Securities Depository;
all in accordance with customary market practice in the jurisdiction in which
any Investments are held.
5.3 Registered Assets. Investments which are registered may be
registered in the name of the Custodian, a Subcustodian, or in the name of the
Fund or a nominee for any of the foregoing, and may be held in any manner set
forth in Section 5.2 above with or without any identification of fiduciary
capacity in such registration.
5.4 Book Entry Assets. Investments which are represented by book-entry
may be so held in an account maintained by the Book-entry Agent on behalf of the
Custodian, a Subcustodian or another agent of the Custodian, or a Securities
Depository.
5.5 Replacement of Lost Investments. In the event of a loss of
Investments for which the Custodian is responsible under the terms of this
Agreement, the Custodian shall replace such Investment, or in the event that
such replacement cannot be effected, the Custodian shall pay to the Fund the
fair market value of such Investment based on the last available price as of the
close of business in the relevant market on the date that a claim was first made
to the Custodian with respect to such loss, or, if less, such other amount as
shall be agreed by the parties as the date for settlement.
5.6 Reports to Fund by Independent Public Accountants. Xxxxx Brothers
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 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 BBH&Co. under this
Agreement; 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.
6. Administrative Duties of the Custodian. The Custodian shall perform the
following administrative duties with respect to Investments of the Fund.
5
6.1 Purchase of Investments. Pursuant to Instruction, Investments
purchased for the account of the Fund shall be paid for (a) against delivery
thereof to the Custodian or a Subcustodian, as the case may be, either directly
or through a Clearing Corporation or a Securities Depository (in accordance with
the rules of such Securities Depository or such Clearing Corporation), or (b)
otherwise in accordance with an Instruction, Applicable Law, generally accepted
trade practices, or the terms of the instrument representing such Investment.
6.2 Sale of Investments. Pursuant to Instruction, Investments sold for
the account of the Fund shall be delivered (a) against payment therefor in cash,
by check or by bank wire transfer, (b) by credit to the account of the Custodian
or the applicable Subcustodian, as the case may be, with a Clearing Corporation
or a Securities Depository (in accordance with the rules of such Securities
Depository or such Clearing Corporation), or (c) otherwise in accordance with an
Instruction, Applicable Law, generally accepted trade practices, or the terms of
the instrument representing such Investment.
6.3 Delivery and Receipt in Connection with Borrowings of the Fund or
other Collateral and Margin Requirements. Pursuant to Instruction, the Custodian
may deliver or receive Investments or cash of the Fund in connection with
borrowings or loans by the Fund and other collateral and margin requirements.
6.4 Futures and Options. If, pursuant to an Instruction, the Custodian
shall become a party to an agreement with the Fund and a futures commission
merchant regarding margin (Tri-Party Agreement), the Custodian shall (a) receive
and retain, to the extent the same are provided to the Custodian, confirmations
or other documents evidencing the purchase or sale by the Fund of
exchange-traded futures contracts and commodity options, (b) when required by
such Tri-Party Agreement, deposit and maintain in an account opened pursuant to
such Agreement (Margin Account), segregated either physically or by book-entry
in a Securities Depository for the benefit of any futures commission merchant,
such Investments as the Fund shall have designated as initial, maintenance or
variation "margin" deposits or other collateral intended to secure the Fund's
performance of its obligations under the terms of any exchange-traded futures
contracts and commodity options; and (c) thereafter pay, release or transfer
Investments into or out of the margin account in accordance with the provisions
of such Agreement. Alternatively, the Custodian may deliver Investments, in
accordance with an Instruction, to a futures commission merchant for purposes of
margin requirements in accordance with Rule 17f-6. The Custodian shall in no
event be responsible for the acts and omissions of any futures commission
merchant to whom Investments are delivered pursuant to this Section; for the
sufficiency of Investments held in any Margin Account; or, for the performance
of any terms of any exchange-traded futures contracts and commodity options.
6.5 Contractual Obligations and Similar Investments. From time to time,
the Fund's Investments may
6
include Investments that are not ownership interests as may be represented by
certificate (whether registered or bearer), by entry in a Securities Depository
or by book entry agent, registrar or similar agent for recording ownership
interests in the relevant Investment. If the Fund shall at any time acquire such
Investments, including without limitation deposit obligations, loan
participations, repurchase agreements and derivative arrangements, the Custodian
shall (a) receive and retain, to the extent the same are provided to the
Custodian, confirmations or other documents evidencing the arrangement; and (b)
perform on the Fund's account in accordance with the terms of the applicable
arrangement, but only to the extent directed to do so by Instruction. The
Custodian shall have no responsibility for agreements running to the Fund as to
which it is not a party other than to retain, to the extent the same are
provided to the Custodian, documents or copies of documents evidencing the
arrangement and, in accordance with Instruction, to include such arrangements in
reports made to the Fund.
6.6 Exchange of Securities. Unless otherwise directed by Instruction,
the Custodian shall: (a) exchange securities held for the account of the Fund
for other securities in connection with any reorganization, recapitalization,
conversion, split-up, change of par value of shares or similar event, and (b)
deposit any such securities in accordance with the terms of any reorganization
or protective plan.
6.7 Surrender of Securities. Unless otherwise directed by Instruction,
the Custodian may surrender securities: (a) in temporary form for definitive
securities; (b) for transfer into the name of an entity allowable under Section
5.3 above; and (c) for a different number of certificates or instruments
representing the same number of shares or the same principal amount of
indebtedness, provided the securities to be issued are to be delivered to the
Custodian.
6.8 Rights, Warrants, Etc. Pursuant to Instruction, the Custodian shall
(a) deliver warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to any agent of such issuer or trustee, for purposes of
exercising such rights or selling such securities, provided that the new
securities and cash, if any, acquired by such action are to be delivered to the
Custodian, and (b) deposit securities in response to any invitation for the
tender thereof, provided that the consideration is to be paid or delivered or
the tendered securities are to be returned to the Custodian.
6.9 Mandatory Corporate Actions. Unless otherwise directed by
Instruction, the Custodian shall: (a) comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions or similar rights of
securities ownership affecting securities held on the Fund's account and
promptly notify the Fund of such action; and (b) collect all stock dividends,
rights and other items of like nature with respect to such securities.
6.10 Income Collection. Unless otherwise directed by Instruction, the
Custodian shall collect any amount due and payable to the Fund with respect to
Investments and promptly credit the amount collected to a Principal or Agency
Account; provided, however, that the Custodian shall not be responsible for: (a)
the collection of amounts due and payable with respect to Investments that are
in default; or (b) the collection of cash or share entitlements with
7
respect to Investments that are not registered in the name of the Custodian or
its Subcustodians. The Custodian is hereby authorized to endorse and deliver any
instrument required to be so endorsed and delivered to effect collection of any
amount due and payable to the Fund with respect to Investments.
6.11 Ownership Certificates and Disclosure of the Fund's Interest. The
Custodian is hereby authorized to execute on behalf of the Fund ownership
certificates, affidavits or other disclosure required under Applicable Law or
established market practice in connection with the receipt of income, capital
gains or other payments by the Fund with respect to Investments, or in
connection with the sale, purchase or ownership of Investments.
With respect to securities issued in the United States of America, the
Custodian [ ] may [ ] may not release the identity of the Fund to an
issuer which requests such information pursuant to the Shareholder
Communications Act of 1985 for the specific purpose of direct
communications between such issuer and the Fund. IF NO BOX IS CHECKED,
THE CUSTODIAN SHALL RELEASE SUCH INFORMATION UNTIL IT RECEIVES CONTRARY
INSTRUCTIONS FROM THE FUND. With respect to securities issued outside
of the United States of America, information shall be released in
accordance with law or custom of the particular country in which such
security is located.
6.12 Proxy Materials. The Custodian shall promptly deliver, or cause to
be delivered promptly, to the Fund proxy forms, notices of meeting, and any
other notices or announcements materially affecting or relating to Investments
received by the Custodian or any nominee, and upon receipt of proper
Instructions, shall execute and deliver or cause its nominee to execute and
deliver such proxies or other authorizations as may be required.
6.13. Taxes. The Custodian shall, where applicable, assist the Fund in
the reclamation of taxes withheld on dividends and interest payments received by
the Fund. In the performance of its duties with respect to tax withholding and
reclamation, the Custodian shall be entitled to rely on the advice of counsel
and upon information and advice regarding the Fund's tax status that is received
from or on behalf of the Fund without duty of separate inquiry.
6.14 Other Dealings. The Custodian shall otherwise act as directed by
Instruction, including without limitation effecting the free payments of moneys
or the free delivery of securities, provided that such Instruction shall
indicate the purpose of such payment or delivery and that the Custodian shall
record the party to whom such payment or delivery is made.
The Custodian shall attend to all nondiscretionary details in
connection with the sale or purchase or other administration of Investments,
except as otherwise directed by an Instruction, and may make payments to itself
or others for minor expenses of administering Investments under this Agreement;
provided that all such payments shall be accounted for to the Fund.
In fulfilling the duties set forth in Sections 6.6 through 6.10 above,
the Custodian shall provide promptly to the Fund
8
all material information pertaining to a corporate action which the Custodian
actually receives; provided that the Custodian shall not be responsible for the
completeness or accuracy of such information. Information relative to any
pending corporate action made available to the Fund via any of the services
described in the Electronic and Online Services Schedule shall constitute the
delivery of such information by the Custodian hereunder. Any advance credit of
cash or shares expected to be received as a result of any corporate action shall
be subject to actual collection and may, when the Custodian deems collection
unlikely and with notice to the Fund, be reversed by the Custodian.
The Custodian may at any time or times in its discretion appoint (and
may at any time remove) agents (other than Subcustodians) to carry out some or
all of the administrative provisions of this Agreement (Agents), provided,
however, that the appointment of such Agent shall not relieve the Custodian of
its obligations under this Agreement, and provided, further, that the Custodian
shall be liable for any direct damage incurred by the Fund as a result of such
Agent's negligence, bad faith, misfeasance or willful misconduct.
7. Cash Accounts, Deposits and Money Movements. Subject to the terms and
conditions set forth in this Section 7, the Fund hereby authorizes the Custodian
to open and maintain, with itself or with Subcustodians, cash accounts in United
States Dollars, in such other currencies as are the currencies of the countries
in which the Fund maintains Investments or in such other currencies as the Fund
shall from time to time request by Instruction, subject only to draft or order
by the Custodian.
7.1 Types of Cash Accounts. Cash accounts opened on the books of the
Custodian (Principal Accounts) shall be opened in the name of the Fund. Such
accounts collectively shall be a deposit obligation of the Custodian and shall
be subject to the terms of this Section 7 and the general liability provisions
contained in Section 9. Cash accounts opened on the books of a Subcustodian may
be opened in the name of the Fund or the Custodian or in the name of the
Custodian for its customers generally (Agency Accounts). Such deposits shall be
obligations of the Subcustodian and shall be treated as an Investment of the
Fund. Accordingly, the Custodian shall be responsible for exercising reasonable
care in the administration of such accounts but shall not be liable for their
repayment in the event such Subcustodian, by reason of its bankruptcy,
insolvency or otherwise, fails to make repayment.
7.2 Payments and Credits with Respect to the Cash Accounts. The
Custodian shall make payments from or deposits to any of said accounts in the
course of carrying out its administrative duties, including but not limited to
income collection with respect to Investments, and otherwise in accordance with
Instructions. The Custodian and its Subcustodians shall be required to credit
amounts to the cash accounts only when moneys are actually received in cleared
funds in accordance with banking practice in the country and currency of
deposit. Any credit made to any
9
Principal or Agency Account before actual receipt of cleared funds shall be
provisional and may be reversed by the Custodian in the event such payment is
not actually collected. Unless otherwise specifically agreed in writing by the
Custodian or any Subcustodian, all deposits shall be payable only at the branch
of the Custodian or Subcustodian where the deposit is made or carried.
7.3 Currency and Related Risks. The Fund bears risks of holding or
transacting in any currency. The Custodian shall not be liable for any loss or
damage arising from the applicability of any law or regulation now or hereafter
in effect, or from the occurrence of any event, which may delay or affect the
transferability, convertibility or availability of any currency in the country
(a) in which such Principal or Agency Accounts are maintained or (b) in which
such currency is issued, and in no event shall the Custodian be obligated to
make payment of a deposit denominated in a currency during the period during
which its transferability, convertibility or availability has been affected by
any such law, regulation or event. Without limiting the generality of the
foregoing, neither the Custodian nor any Subcustodian shall be required to repay
any deposit made at a foreign branch of either the Custodian or Subcustodian if
such branch cannot repay the deposit due to a cause for which the Custodian
would not be responsible in accordance with the terms of Section 9.1 of this
Agreement unless the Custodian or such Subcustodian expressly agrees in writing
to repay the deposit under such circumstances. All currency transactions in any
account opened pursuant to this Agreement are subject to exchange control
regulations of the United States and of the country where such currency is the
lawful currency or where the account is maintained. Any taxes, costs, charges or
fees imposed on the convertibility of a currency held by the Fund shall be for
the account of the Fund.
7.4 Foreign Exchange Transactions. The Custodian shall, subject to the
terms of this Section, settle foreign exchange transactions (including
contracts, futures, options and options on futures) on behalf and for the
account of the Fund with such currency brokers or banking institutions,
including Subcustodians, as the Fund may direct pursuant to Instructions. The
Custodian may act as principal in any foreign exchange transaction with the Fund
in accordance with Section 7.4.2 of this Agreement. The obligations of the
Custodian in respect of all foreign exchange transactions (whether or not the
Custodian shall act as principal in such transaction) shall be contingent on the
free, unencumbered transferability of the currency transacted on the actual
settlement date of the transaction.
7.4.1 Third Party Foreign Exchange Transactions. The
Custodian shall process foreign exchange transactions
(including without limitation contracts, futures, options, and
options on futures), where any third party acts as principal
counterparty to the Fund on the same basis it performs duties
as agent for the Fund with respect to any other of the
Investments. Accordingly the Custodian shall only be
responsible for delivering or receiving currency on behalf of
the Fund in respect of such contracts pursuant to
Instructions. The Custodian shall not be responsible for the
failure of any counterparty (including any Subcustodian) in
such agency transaction to perform its
10
obligations thereunder. The Custodian (a) shall transmit cash
and Instructions to and from the currency broker or banking
institution with which a foreign exchange contract or option
has been executed pursuant hereto, (b) may make free outgoing
payments of cash in the form of United States Dollars or
foreign currency without receiving confirmation of a foreign
exchange contract or option or confirmation that the
countervalue currency completing the foreign exchange contract
has been delivered or received or that the option has been
delivered or received, and (c) shall hold all confirmations,
certificates and other documents and agreements received by
the Custodian and evidencing or relating to such foreign
exchange transactions in safekeeping. The Fund accepts full
responsibility for its use of third-party foreign exchange
dealers and for execution of said foreign exchange contracts
and options and understands that the Fund shall be responsible
for any and all costs and interest charges which may be
incurred by the Fund or the Custodian as a result of the
failure or delay of third parties to deliver foreign exchange.
7.4.2 Foreign Exchange with the Custodian as
Principal. The Custodian may undertake foreign exchange
transactions with the Fund as principal as the Custodian and
the Fund may agree from time to time. In such event, the
foreign exchange transaction will be performed in accordance
with the particular agreement of the parties, or in the event
a principal foreign exchange transaction is initiated by
Instruction in the absence of specific agreement, such
transaction will be performed in accordance with the usual
commercial terms of the Custodian.
7.5 Delays. If no event of Force Majeure shall have occurred and be
continuing and in the event that a delay shall have been caused by the
negligence or misconduct of the Custodian in carrying out an Instruction to
credit or transfer cash, the Custodian shall be liable to the Fund: (a) with
respect to Principal Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Custodian on overnight
deposits at the time the delay occurs for the period from the day when the
transfer should have been effected until the day it is in fact effected; and,
(b) with respect to Agency Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Subcustodian on overnight
deposits at the time the delay occurs for the period from the day when the
transfer should have been effected until the day it is in fact effected. The
Custodian shall not be liable for delays in carrying out such Instructions to
transfer cash which are not due to the Custodian's own negligence or misconduct.
7.6 Advances. If, for any reason in the conduct of its safekeeping
duties pursuant to Section 5 hereof or its administration of the Fund's assets
pursuant to Section 6 hereof, the Custodian or any Subcustodian advances moneys
to facilitate settlement or otherwise for benefit of the Fund (whether or not
any Principal or Agency Account shall be overdrawn either during, or at the end
of, any Business Day), the Fund hereby does grant to the Custodian a security
interest in and pledges to the Custodian the Investments held by the Custodian
or on its behalf in an amount not to exceed the value of the Advance, the
specific Investments to be designated in writing from time to time by the Fund,
provided that (A) if from time to time the Fund has not designated in writing
specific Investments in an amount at least equal to the value of the Advance,
taken at market value, or (B) if as a result of the delivery by the Custodian
out of its custody, pursuant to proper Instructions, of any Investments
previously so designated, the remaining amount of Investments so designated
shall be less than the value of the Advance, taken at market value, then the
Custodian shall have a security interest in Investments of the Fund designated
by the Custodian, in an amount that, taken together with amounts of Investments
from time to time designated in writing by the Fund that have not been delivered
out of the custody of the Custodian pursuant to proper Instructions, does not
exceed the value of the Advance, taken at market value.
11
Neither the Custodian nor any Subcustodian shall be obligated to
advance moneys to the Fund, and in the event that such Advance occurs, any
transaction giving rise to an Advance shall be for the account and risk of the
Fund and shall not be deemed to be a transaction undertaken by the Custodian for
its own account and risk. If such Advance shall have been made by a Subcustodian
or any other person, the Custodian may assign the security interest and any
other rights granted to the Custodian hereunder to such Subcustodian or other
person. If the Fund shall fail to repay when due the principal balance of an
Advance and accrued and unpaid interest thereon, the Custodian or its assignee,
as the case may be, shall be entitled to utilize the available cash balance in
any Agency or Principal Account and to dispose of any Investments designated
pursuant to this Section 7.6 to the extent necessary to recover payment of all
principal of, and interest on, such Advance in full. The Custodian may assign
any rights it has hereunder to a Subcustodian or third party. Any security
interest in Investments taken hereunder shall be treated as financial assets
credited to securities accounts under Articles 8 and 9 of the Uniform Commercial
Code (1997). Accordingly, the Custodian shall have the rights and benefits of a
secured creditor that is a securities intermediary under such Articles 8 and 9.
7.7 Integrated Account. In the event that the Fund fails to promptly
repay any Advances made pursuant to Section 7.6, deposits maintained in all
Principal Accounts (whether or not denominated in United States Dollars) shall
collectively constitute a single and indivisible current account with respect to
the Fund's obligations to the Custodian, or its assignee, and balances in such
Principal Accounts shall be available for satisfaction of the Fund's obligations
under this Section 7. The Custodian shall further have a right of offset against
the balances in any Agency Account maintained hereunder to the extent that the
aggregate of all Principal Accounts is overdrawn.
8. Subcustodians and Securities Depositories. Subject to the provisions
hereinafter set forth in this Section 8, the Fund hereby authorizes the
Custodian to utilize Securities Depositories to act on behalf of the Fund and to
appoint from time to time and to utilize Subcustodians. With respect to
securities and funds held by a Subcustodian, either
12
directly or indirectly (including by a Securities Depository or Clearing
Corporation), notwithstanding any provisions of this Agreement to the contrary,
payment for securities purchased and delivery of securities sold may be made
prior to receipt of securities or payment, respectively, and securities or
payment may be received in a form, in accordance with (a) governmental
regulations, (b) rules of Securities Depositories and clearing agencies, (c)
generally accepted trade practice in the applicable local market, (d) the terms
and characteristics of the particular Investment, or (e) the terms of
Instructions.
8.1 Domestic Subcustodians and Securities Depositories. The Custodian
may deposit and/or maintain, either directly or through one or more agents
appointed by the Custodian, Investments in any Securities Depository in the
United States, including The Depository Trust Company, provided such Depository
meets applicable requirements of the Federal Reserve Bank or of the Securities
and Exchange Commission. The Custodian shall be obligated to exercise due care
in accordance with reasonable commercial standards when placing and maintaining
financial assets corresponding to a Fund's securities entitlements with a
Securities Depository pursuant to this section. Custodian may, at any time and
from time to time, appoint any bank as defined in Section 2(a)(5) of the 1940
Act meeting the requirements of a custodian under Section 17(f) of the 1940 Act
and the rules and regulations thereunder, to act on behalf of the Fund as a
Subcustodian for purposes of holding Investments in the United States; provided,
however, that such Subcustodian shall be obligated, in its agreement or other
arrangement with the Custodian, to exercise due care in accordance with
reasonable commercial standards in discharging its duty as a securities
intermediary to obtain and thereafter maintain financial assets, corresponding
to the security entitlements of its customers, including those of the Fund.
8.2 Foreign Subcustodians and Securities Depositories. Unless
instructed otherwise by the Fund, the Custodian may deposit and/or maintain
non-U.S. Investments in any non-U.S. Securities Depository provided such
Securities Depository meets the requirements of an "eligible securities
depository" under Rule 17f-7 promulgated under the 1940 Act, or any successor
rule or regulation ("Rule 17f-7") or which by order of the Commission is
exempted therefrom. Prior to the time that securities are placed with such
depository, but subject to the provisions of Section 8.2.4 below, the Custodian
shall have prepared an assessment of the custody risks associated with
maintaining assets with the Securities Depository and shall have established a
system to monitor such risks on a continuing basis in accordance with subsection
8.2.3 of this Section. Additionally, the Custodian may, at any time and from
time to time, appoint (a) any bank, trust company or other entity meeting the
requirements of an "eligible foreign custodian" under Rule 17f-5 or which by
order of the Securities and Exchange Commission is exempted therefrom, or (b)
any bank as defined in Section 2(a)(5) of the 1940 Act meeting the requirements
of a custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder, to act on behalf of the Fund as a Subcustodian for purposes of
holding Investments outside the United States. Such appointment of foreign
Subcustodians shall be subject to approval of the Fund in accordance with
Subsections 8.2.1 and 8.2.2 hereof, and use of non-U.S.
13
Securities Depositories shall be subject to the terms of Subsections 8.2.3 and
8.2.4 hereof. An Instruction to open an account in a given country shall
comprise authorization of the Custodian to hold assets in such country in
accordance with the terms of this Agreement. The Custodian shall not be required
to make independent inquiry as to the authorization of the Fund to invest in
such country.
8.2.1 Board Approval of Foreign Subcustodians. Unless
and except to the extent that the Board of Trustees has
delegated to and the Custodian has accepted delegation of
review of certain matters concerning the appointment of
Subcustodians pursuant to Subsection 8.2.2, the Custodian
shall, prior to the appointment of any Subcustodian for
purposes of holding Investments outside the United States,
obtain written confirmation of the approval of the Fund's
Board of Trustees with respect to (a) the identity of a
Subcustodian, and (b) the Subcustodian agreement which shall
govern such appointment, such approval to be signed by an
Authorized Person.
8.2.2 Delegation of Board Review of Subcustodians. As
of the date hereof, the Custodian has agreed to perform
certain reviews of Subcustodians and of Subcustodian Contracts
as delegate of the Fund's Board of Trustees. The Custodian's
duties and obligations with respect to this delegated review
will be performed in accordance with the terms of the attached
17f-5 Delegation Schedule to this Agreement, which is hereby
incorporated by reference into and made a part of this
Agreement.
8.2.3 Monitoring and Risk Assessment of Securities
Depositories. Prior to the placement of any assets of the Fund
with a non-U.S. Securities Depository, the Custodian: (a)
shall provide to the Fund or its authorized representative an
assessment of the custody risks associated with maintaining
assets within such Securities Depository in accordance with
Rule 17f-7(a)(1)(I)(A); and (b) shall have established a
system to monitor the custody risks associated with
maintaining assets with such Securities Depository on a
continuing basis and to promptly notify the Fund or its
Investment Advisor of any material changes in such risk in
accordance with Rule 17f-7(a)(1)(I)(B). In performing its
duties under this subsection, the Custodian shall use
reasonable care, prudence and diligence and may rely on such
reasonable sources of information as may be available
including but not limited to: (i) published ratings; (ii)
information supplied by a Subcustodian that is a participant
in such Securities Depository; (iii) industry surveys or
publications; and (iv) information supplied by the depository
itself, by its auditors (internal or external) or by the
relevant Foreign Financial Regulatory Authority. It is
acknowledged that information procured through some or all of
these sources may not be independently verifiable by the
Custodian and that direct access to Securities Depositories is
limited under most circumstances. Accordingly, the Custodian
shall not be responsible for errors or omissions in its duties
hereunder provided that it has performed its monitoring and
assessment duties with reasonable care, prudence and
diligence. The risk assessment shall be provided to the Fund
or its Investment Advisor by such means as the Custodian shall
reasonably establish. Advices of material change in such
assessment may be provided by the Custodian in the manner
established as customary between the Fund and the Custodian
for transmission of material market information. If the
Custodian determines that an arrangement with a Securities
Depository no longer meets the requirements of Rule
17f-7(B)(1), the Custodian shall promptly notify the Fund or
its Investment Advisor.
8.3 Responsibility for Subcustodians. Except as provided in the second
sentence of this Section 8.3, the Custodian shall be liable to the Fund for any
loss or damage to the Fund caused by or resulting from the acts or omissions of
any Subcustodian to the extent that such acts or omissions would be deemed to be
negligence, gross negligence or willful misconduct in accordance with the terms
of the relevant Subcustodian agreement under the laws, circumstances and
practices prevailing in the place where the act or omission occurred. The
liability of the Custodian in respect of the countries and Subcustodians so
designated by the Custodian, from time to time, on the Global Custody
14
Network Listing, shall be subject to the additional condition that the Custodian
actually recovers such loss or damage from the Subcustodian. At the Fund's
election, the Fund's portfolio shall be entitled to be subrogated to the rights
of the Custodian with respect to any claims against a Subcustodian as a
consequence of any loss, damage, cost, expense, liability or claim if and to the
extent that the Fund and any applicable portfolios have not been made whole for
any such loss, damage, cost, expense, liability or claim.
8.4 New Countries. The Fund shall be responsible for informing the
Custodian sufficiently in advance of a proposed investment which is to be held
in a country in which no Subcustodian is authorized to act in order that the
Custodian shall, if it deems appropriate to do so, have sufficient time to
establish a subcustodial arrangement in accordance herewith. In the event,
however, the Custodian is unable to establish such arrangements prior to the
time such investment is to be acquired, upon written notice to the Fund, the
Custodian is authorized to designate at its discretion a local safekeeping
agent, and the use of such local safekeeping agent shall be at the sole risk of
the Fund, and accordingly the Custodian shall be responsible to the Fund for the
actions of such agent if and only to the extent the Custodian shall have
recovered from such agent for any damages caused the Fund by such agent. The
Custodian agrees to remove promptly any Investments held on behalf of a Fund by
such agent to an approved Subcustodian.
9. Responsibility of the Custodian. In performing its duties and obligations
hereunder, the Custodian shall use reasonable care and diligence under the facts
and circumstances prevailing in the market where performance is effected.
Subject to the specific provisions of this Section, the Custodian shall be
liable for any direct damage incurred by the Fund in consequence of the
Custodian's negligence, bad faith, willful misfeasance or misconduct. In no
event shall the Custodian be liable hereunder for any special, indirect,
punitive or consequential damages arising out of, pursuant to or in connection
with this Agreement even if the Custodian has been advised of the possibility of
such damages. It is agreed that the Custodian shall have no duty to assess the
risks inherent in the Investments or to provide investment advice with respect
to the Investments and that the Fund as principal shall bear any risks attendant
to particular Investments such as the failure of a counterparty or issuer to
perform its obligations with respect to a particular Investment.
9.1 Limitations of Performance. The Custodian shall not be responsible
under this Agreement for any failure to perform its duties, and shall not liable
hereunder for any loss or damage in association with such failure to perform,
for or in consequence of the following causes:
9.1.1 Force Majeure. Force Majeure shall mean any
circumstance or event which is beyond the control of the
Custodian, a Subcustodian or any agent of the Custodian or a
Subcustodian and which adversely affects the performance by
the Custodian of its obligations hereunder, by the
Subcustodian of its obligations under its subcustody agreement
or by any other
15
agent of the Custodian or the Subcustodian, including any
event caused by, arising out of or involving (a) an act of
God, (b) accident, fire, water damage or explosion, (c) any
computer, system or other equipment failure or malfunction
caused by any computer virus or the malfunction or failure of
any communications medium, (d) any interruption of the power
supply or other utility service, (e) any strike or other work
stoppage, whether partial or total, (f) any delay or
disruption resulting from or reflecting the occurrence of any
Sovereign Risk, (g) any disruption of, or suspension of
trading in, the securities, commodities or foreign exchange
markets, whether or not resulting from or reflecting the
occurrence of any Sovereign Risk, (h) any encumbrance on the
transferability of a currency or a currency position on the
actual settlement date of a foreign exchange transaction,
whether or not resulting from or reflecting the occurrence of
any Sovereign Risk, or (i) any other cause similarly beyond
the control of the Custodian.
9.1.2 Country Risk. Country Risk shall mean, with
respect to the acquisition, ownership, settlement or custody
of Investments in a jurisdiction, all risks relating to, or
arising in consequence of, systemic and markets factors
affecting the acquisition, payment for or ownership of
Investments including (a) the prevalence of crime and
corruption, (b) the inaccuracy or unreliability of business
and financial information, (c) the instability or volatility
of banking and financial systems, or the absence or inadequacy
of an infrastructure to support such systems, (d) custody and
settlement infrastructure of the market in which such
Investments are transacted and held, (e) the acts, omissions
and operation of any Securities Depository, (f) the risk of
the bankruptcy or insolvency of banking agents, counterparties
to cash and securities transactions, registrars or transfer
agents, and (g) the existence of market conditions which
prevent the orderly execution or settlement of transactions or
which affect the value of assets.
9.1.3 Sovereign Risk. Sovereign Risk shall mean, in
respect of any jurisdiction, including the United States of
America, where Investments are acquired or held hereunder or
under a Subcustody Agreement, (a) any act of war, terrorism,
riot, insurrection or civil commotion, (b) the imposition of
any investment, repatriation or exchange control restrictions
by any governmental authority, (c) the confiscation,
expropriation or nationalization of any Investments by any
governmental authority, whether de facto or de jure, (d) any
devaluation or revaluation of the currency, (e) the imposition
of taxes, levies or other charges affecting Investments, (f)
any change in the Applicable Law, or (g) any other economic or
political risk incurred or experienced.
9.2. Limitations on Liability of Custodian. The Custodian shall not be
liable for any loss, claim, damage or other liability arising from the following
causes:
9.2.1 Failure of Third Parties. The failure of any
third party including: (a) any issuer of Investments or
book-entry or other agent of any issuer; (b) any counterparty
with respect to any Investment, including any issuer of any
exchange-traded or other futures, option, derivative or
commodities contract; (c) failure of an Investment Advisor,
Foreign Custody Manager or other agent of the Fund (other than
the Custodian or its agents); or (d) failure of other third
parties similarly beyond the control or choice of the
Custodian.
9.2.2 Information Sources. The Custodian may rely
upon information received from issuers of Investments or
agents of such issuers, information received from
Subcustodians and from other commercially reasonable sources
such as commercial data bases and the like, but shall not be
responsible for specific inaccuracies in such information,
provided that the Custodian has relied upon such information
in good faith, or for the failure of any commercially
reasonable information provider.
9.2.3 Reliance on Instruction. Action by the
Custodian or the Subcustodian in accordance with an
Instruction, even when such action conflicts with, or is
contrary to any provision of, the Fund's declaration of trust
or by-laws, Applicable Law, or actions by the Board of
Trustees or shareholders of the Fund.
9.2.4 Restricted Securities. The limitations inherent
in the rights, transferability or similar
16
investment characteristics of a given Investment of the Fund.
10. Indemnification. The Fund hereby indemnifies the Custodian and each
Subcustodian, and their respective agents, nominees, partners, employees,
officers and directors, and agrees to hold each of them harmless from and
against all claims and liabilities, including counsel fees and taxes, incurred
or assessed against any of them in connection with the performance of this
Agreement and any Instruction, except such that may arise from their breach of
the relevant standards of conduct set forth herein. If a Subcustodian or any
other person indemnified under the preceding sentence gives written notice of
claim to the Custodian, the Custodian shall promptly give written notice to the
Fund.
11. Reports and Records. The Custodian shall:
11.1 create and maintain records relating to the performance
of its obligations under this Agreement, its internal accounting
controls and financial strength, and as are required of a custodian
under the Investment Company Act of 1940 and the rules and regulations
thereunder (including Section 31 thereof and Rules 31a-1 and 31a-2
thereunder) and under applicable Federal and State tax laws;
11.2 make available to the Fund, its auditors, agents and
employees, during regular business hours of the Custodian, upon
reasonable request all records maintained by the Custodian pursuant to
Section 11.1 above, subject, however, to all reasonable security
requirements of the Custodian then applicable to the records of its
custody customers generally;
11.3 make available to the Fund all Electronic Reports;
11.4 shall provide, promptly upon request by the Fund, such
reports as are customary and available regarding its internal
accounting controls and financial strength. All such records and
reports are the property of the Fund and in the event of termination of
this Agreement shall be delivered promptly to the successor custodian.
The Fund or its delegate shall examine all records, howsoever produced
or transmitted, promptly upon receipt thereof and notify the Custodian promptly
of any discrepancy or error therein. Unless the Fund delivers written notice of
any such discrepancy or error within six (6) consecutive calendar months after
an audit of such records performed by certified public accountants employed by
the Fund, such records shall be deemed to be true and accurate. It is understood
that the Custodian now obtains and will in the future obtain information on the
value of assets from outside sources which may be utilized in certain reports
made available to the Fund. The Custodian deems such sources to be reliable but
it is acknowledged and agreed that the Custodian does not verify nor represent
nor
17
warrant as to the accuracy or completeness of such information and accordingly
shall be without liability in selecting and using such sources and furnishing
such information, provided that the Custodian has exercised reasonable care and
diligence in selecting such sources and has complied with its obligations herein
or under the Accounting Agency Agreement between the Custodian and the Fund.
12. Miscellaneous.
12.1 Proxies, etc. The Fund will promptly execute and deliver, upon
request, such proxies, powers of attorney or other instruments as may be
reasonable and necessary for the Custodian to provide, or to cause any
Subcustodian to provide, custody services.
12.2 Entire Agreement. Except as specifically provided herein, this
Agreement (together with any schedules and exhibits hereto) constitutes the
entire agreement between the Fund and the Custodian with respect to the subject
matter hereof. Accordingly, this Agreement supersedes any custody agreement or
other oral or written agreements heretofore in effect between the Fund and the
Custodian with respect to the custody of the Investments.
12.3 Waiver and Amendment. No provision of this Agreement may be
waived, amended or modified, and no addendum to this Agreement shall be or
become effective, or be waived, amended or modified, except by an instrument in
writing executed by the party against which enforcement of such waiver,
amendment or modification is sought; provided, however, that an Instruction,
whether or not such Instruction shall constitute a waiver, amendment or
modification for purposes hereof, shall be deemed to have been accepted by the
Custodian when it commences actions pursuant thereto or in accordance therewith.
12.4 GOVERNING LAW AND JURISDICTION. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH, AND BE GOVERNED BY THE LAWS OF, THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW OF SUCH STATE. THE PARTIES HERETO
IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK AND THE FEDERAL COURTS LOCATED IN NEW YORK CITY IN THE BOROUGH OF
MANHATTAN.
12.5 Notices. Notices and other writings contemplated by this
Agreement, other than Instructions, shall be delivered (a) by hand, (b) by first
class registered or certified mail, postage prepaid, return receipt requested,
(c) by a nationally recognized overnight courier, or (d) by facsimile
transmission, provided that any notice or other writing sent by facsimile
transmission shall also be mailed, postage prepaid, to the party to whom such
notice is addressed. All such notices shall be addressed, as follows:
18
If to the Fund:
Xxxxxxxx-Xxxxxxxxx Convertible & Income Fund II
c/o PIMCO Advisors Fund Management LLC
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile (000) 000-0000
If to the Custodian:
Xxxxx Brothers Xxxxxxxx & Co.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Manager, Securities Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or such other address as the Fund or the Custodian may have designated
in writing to the other.
12.6 Headings. Paragraph headings included herein are for convenience
of reference only and shall not modify, define, expand or limit any of the terms
or provisions hereof.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
the Fund and the Custodian.
12.8 Confidentiality. The parties hereto agree that each shall treat
confidentially all information provided by each party to the other regarding its
business and operations. All confidential information provided by a party hereto
shall be used by any other party hereto solely for the purpose of rendering or
obtaining services pursuant to this Agreement and, except as may be required in
carrying out this Agreement, shall not be disclosed to any third party without
the prior consent of such providing party. The foregoing shall not be applicable
to any information that is publicly available when provided or thereafter
becomes publicly available other than through a breach of this Agreement, or
that is required to be disclosed by or to any bank examiner of the Custodian or
any Subcustodian, any regulatory authority, any auditor of the parties hereto,
or by judicial or administrative process or otherwise by Applicable Law.
19
12.9 Counsel. In fulfilling its duties hereunder, the Custodian shall
be entitled to receive and act upon the advice of (i) counsel regularly retained
by the Custodian in respect of such matters, (ii) counsel for the Fund or (iii)
such counsel as the Fund and the Custodian may agree upon, with respect to all
matters, and the Custodian shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
12.10 Conflict. Nothing contained in this Agreement shall prevent the
Custodian and its associates from (i) dealing as a principal or an intermediary
in the sale, purchase or loan of the Fund's Investments to, or from the
Custodian or its associates; (ii) acting as a custodian, a subcustodian, a
trustee, an agent, securities dealer, an investment manager or in any other
capacity for any other client whose interests may be adverse to the interest of
the Fund; or (iii) buying, holding, lending, and dealing in any way in any
assets for the benefit of its own account, or for the account of any other
client whose interests may be adverse to the Fund notwithstanding that the same
or similar assets may be held or dealt in by, or for the account of the Fund by
the Custodian. The Fund hereby voluntarily consents to, and waives any potential
conflict of interest between the Custodian and/or its associates and the Fund,
and agrees that:
(a) the Custodian's and/or its associates' engagement in
any such transaction shall not disqualify the
Custodian from continuing to perform as the custodian
of the Fund under this Agreement;
(b) except as required by applicable law, the Custodian
and/or its associates shall not be under any duty to
disclose any information in connection with any such
transaction to the Fund; and
(c) the Custodian and/or its associates shall not be
liable to account to the Fund for any profits or
benefits made or derived by or in connection with any
such transaction.
13. Definitions. The following defined terms will have the respective
meanings set forth below.
13.1 1940 Act shall mean the Investment Company Act of 1940 and the
rules and regulations thereunder, as amended from time to time.
13.2 Advance(s) shall mean any extension of credit by or through the
Custodian or by or through any Subcustodian and shall include amounts paid to
third parties for account of the Fund or in discharge of any expense, tax or
other item payable by the Fund.
13.3 Agency Account(s) shall mean any deposit account opened on the
books of a Subcustodian or other banking institution in accordance with Section
7.1 hereof.
13.4 Agent(s) shall have the meaning set forth in the last sentence of
Section 6 hereof.
13.5 Applicable Law shall mean with respect to each jurisdiction, all
(a) laws, statutes, treaties, regulations,
20
guidelines (or their equivalents); (b) orders, interpretations licenses and
permits; and (c) judgments, decrees, injunctions writs, orders and similar
actions by a court of competent jurisdiction; compliance with which is required
or customarily observed in such jurisdiction.
13.6 Authorized Person(s) shall mean any person or entity authorized to
give Instructions on behalf of the Fund in accordance with Section 4.1 hereof.
13.7 Book-entry Agent(s) shall mean an entity acting as agent for the
issuer of Investments for purposes of recording ownership or similar entitlement
to Investments, including without limitation a transfer agent or registrar.
13.8 Clearing Corporation shall mean any entity or system established
for purposes of providing securities settlement and movement and associated
functions for a given market.
13.9 Commission shall have the meaning assigned in the preamble hereof.
13.10 Country Risk shall have the meaning assigned in Subsection 9.1.2
hereof.
13.11 Delegation Schedule shall mean any separate schedule the terms of
which are agreed to between the Custodian and the Fund or its authorized
representative with respect to certain matters concerning the appointment and
administration of Subcustodians delegated to the Custodian pursuant to Rule
17f-5.
13.12 Electronic and Online Services Schedule shall mean any separate
agreement entered into between the Custodian and the Company or its authorized
representative with respect to certain matters concerning certain electronic and
online services as described therein and as may be made available from time to
time by the Custodian to the Company.
13.13 Electronic Reports shall mean any reports prepared by the
Custodian and remitted to the Fund or its authorized representative via the
Internet or electronic mail.
13.14 Force Majeure shall have the meaning assigned in Section 9.1
hereof.
13.15 Foreign Custody Manager shall mean the Fund's foreign custody
manager appointed pursuant to Rule 17f-5 of the 1940 Act.
13.16 Foreign Financial Regulatory Authority shall have the meaning
given by Section 2(a)(50) of the 0000 Xxx.
13.17 Funds Transfer Services Schedule shall mean any separate schedule
entered into between the Custodian and the Fund or its authorized representative
with respect to certain matters concerning the processing of payment orders from
Principal Accounts of the Fund.
13.18 Global Custody Network Listing shall mean the Countries and
Subcustodians approved for Investments in non-U.S. markets.
13.19 Instruction(s) shall have the meaning assigned in Section 4
hereof.
21
13.20 Investment(s) shall mean any investment asset of the Fund,
including without limitation securities, bonds, notes, and debentures as well as
receivables, derivatives, contractual rights or entitlements and other
intangible assets.
13.21 Investment Advisor shall mean any person or entity who is an
Authorized Person to give Instructions with respect to the investment and
reinvestment of the Investments.
13.22 Margin Account shall have the meaning set forth in Section 6.4
hereof.
13.23 Principal Account(s) shall mean deposit accounts of the Fund
carried on the books of BBH&Co. as principal in accordance with Section 7
hereof.
13.24 Safekeeping Account shall mean an account established on the
books of the Custodian or any Subcustodian for purposes of segregating the
interests of the Fund (or clients of the Custodian or Subcustodian) from the
assets of the Custodian or any Subcustodian.
13.25 Securities Depository shall mean a central or book entry system
or agency established under Applicable Law for purposes of recording the
ownership and/or entitlement to investment securities for a given market that,
if a foreign Securities Depository, meets the definitional requirements of an
"eligible securities depository" under Rule 17f-7 under the 1940 Act.
13.26 Sovereign Risk has the meaning assigned in Subsection 9.1.3
hereof.
13.27 Subcustodian(s) shall mean each foreign bank appointed by the
Custodian pursuant to Section 8 hereof, but shall not include Securities
Depositories.
13.28 Tri-Party Agreement shall have the meaning set forth in Section
6.4 hereof.
14. Compensation. The Fund agrees to pay to the Custodian (a) a fee in an amount
set forth in the fee letter between the Fund and the Custodian in effect on the
date hereof or as amended from time to time, and (b) all reasonable
out-of-pocket expenses incurred by the Custodian under this Agreement, including
the fees and expenses of all Subcustodians, and payable from time to time.
Amounts payable by the Fund under and pursuant to this Section 14 shall be
payable by wire transfer to the Custodian at BBH&Co. in New York, New York.
15. Termination. This Agreement may be terminated by either party in accordance
with the provisions of this Section. The provisions of this Agreement and any
other rights or obligations incurred or accrued by any party hereto
22
prior to termination of this Agreement shall survive any termination of this
Agreement.
15.1 Notice and Effect. This Agreement may be terminated by either
party by written notice effective no sooner than seventy-five (75) consecutive
calendar days following the date that notice to such effect shall be delivered
to the other party at its address set forth in Section 12.5 hereof.
15.2 Successor Custodian. In the event of the appointment of a
successor custodian, it is agreed that the Investments held by the Custodian or
any Subcustodian shall be delivered to the successor custodian in accordance
with reasonable Instructions. The Custodian agrees to cooperate with the Fund in
the execution of documents and performance of other actions necessary or
desirable in order to facilitate the succession of the new custodian. If no
successor custodian shall be appointed, the Custodian shall in like manner
transfer the Investments in accordance with Instructions.
15.3 Delayed Succession. If no Instruction has been given as of the
effective date of termination, Custodian may at any time on or after such
termination date and upon ten (10) calendar days written notice to the Fund
deliver the Investments of the Fund held hereunder to the Fund at the address
designated for receipt of notices hereunder. In the event that Investments or
moneys of the Fund remain in the custody of the Custodian or its Subcustodians
after the date of termination owing to the failure of the Fund to issue
Instructions with respect to their disposition or owing to the fact that such
disposition could not be accomplished in accordance with such Instructions
despite diligent efforts of the Custodian, the Custodian shall be entitled to
compensation for its services with respect to such Investments and moneys during
such period as the Custodian or its Subcustodians retain possession of such
items and the provisions of this Agreement shall remain in full force and effect
until disposition in accordance with this Section is accomplished.
23
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed as of the date first above written.
XXXXX BROTHERS XXXXXXXX & CO. XXXXXXXX-XXXXXXXXX CONVERTIBLE &
INCOME FUND II
By: __________________________________ By: ____________________________
Name: Name:
Title: Title:
Date: Date:
24
FUNDS TRANSFER SERVICES SCHEDULE TO CUSTODIAN AGREEMENT
1. Execution of Payment Orders. Xxxxx Brothers Xxxxxxxx & Co. (the Custodian) is
hereby instructed by XXXXXXXX-XXXXXXXXX CONVERTIBLE & INCOME FUND II (the
Company) to execute each payment order, whether denominated in United States
dollars or other applicable currencies, received by the Custodian in the
Company's name as sender and authorized and confirmed by an Authorized Person as
defined in a Custodian Agreement dated as of __________, 2003 by and between the
Custodian and the Company, as amended or restated from time thereafter (the
Agreement), provided that the Company has sufficient available funds on deposit
in a Principal Account as defined in the Agreement and provided that the order
(i) is received by the Custodian in the manner specified in this Funds Transfer
Services Schedule or any amendment hereafter; (ii) complies with any written
instructions and restrictions of the Company as set forth in this Funds Transfer
Services Schedule or any amendment hereafter; (iii) is authorized by the Company
or is verified by the Custodian in compliance with a security procedure set
forth in Paragraph 2 below for verifying the authenticity of a funds transfer
communication sent to the Custodian in the name of the Company or for the
detection of errors set forth in any such communication; and (iv) contains
sufficient data to enable the Custodian to process such transfer.
2. Security Procedure. The Company hereby elects to use the procedure selected
below as its security procedure (the Security Procedure). The Security Procedure
will be used by the Custodian to verify the authenticity of a payment order or a
communication amending or canceling a payment order. The Custodian will act on
instructions received provided the instruction is authenticated by the Security
Procedure. The Company agrees and acknowledges in connection with (i) the size,
type and frequency of payment orders normally issued or expected to be issued by
the Company to the Custodian, (ii) all of the security procedures offered to the
Company by the Custodian, and (iii) the usual security procedures used by
customers and receiving banks similarly situated, that authentication through
the Security Procedure shall be deemed commercially reasonable for the
authentication of all payment orders submitted to the Custodian. The Company
hereby elects (please choose one) the following Security Procedure as described
below:
[ ] BIDS and BIDS Worldview Payment Products. BIDS and BIDS Worldview
Payment Products, are on-line payment order authorization facilities
with built-in authentication procedures. The Custodian and the Company
shall each be responsible for maintaining the confidentiality of
passwords or other codes to be used by them in connection with BIDS.
The Custodian will act on instructions received through BIDS without
duty of further confirmation unless the Company notifies the Custodian
that its password is not secure.
[ ] SWIFT. The Custodian and the Company shall comply with SWIFT's
authentication procedures. The Custodian will act on instructions
received via SWIFT provided the instruction is authenticated by the
SWIFT system.
[ ] Tested Telex. The Custodian will accept payment orders sent by tested
telex, provided the test key matches the algorithmic key the Custodian
and Company have agreed to use.
[ ] Computer Transmission. The Custodian is able to accept transmissions
sent from the Company's computer facilities to the Custodian's
computer facilities provided such transmissions are encrypted and
digitally certified or are otherwise authenticated in a reasonable
manner based on available technology. Such procedures shall be
established in an operating protocol between the Custodian and the
Company.
[ ] Telefax Instructions. A payment order transmitted to the Custodian by
telefax transmission shall be transmitted by the Company to a
telephone number specified from time to time by the Custodian for such
purposes. If the Custodian detects no discrepancies,
1. If the telefax requests a repetitive payment order, the
Custodian may call the Company at its last known telephone
number, request to speak to the Company or Authorized
Person, and confirm the authorization and the details of the
payment order (a Callback); or
2. If the telefax requests a non-repetitive order, the
Custodian will perform a Callback.
All faxes must be accompanied by a fax cover sheet which indicates the
sender's name, company name, telephone number, fax number, number of
pages, and number of transactions or instructions attached.
25
[ ] Telephonic. A telephonic payment order shall be called into the
Custodian at the telephone number designated from time to time by the
Custodian for that purpose. The caller shall identify herself/himself
as an Authorized Person. The Custodian shall obtain the payment order
data from the caller. Then:
1. If a telephonic repetitive payment order, the Custodian may
perform a Callback; or
2. If a telephonic non-repetitive payment order, the Custodian
will perform a Callback.
In the event the Company chooses a procedure which is not a Security Procedure
as described above, the Company agrees to be bound by any payment order (whether
or not authorized) issued in its name and accepted by the Custodian in
compliance with the procedure selected by the Company.
3. Rejection of Payment Orders. The Custodian shall give the Company timely
notice of the Custodian's rejection of a payment order. Such notice may be given
in writing or orally by telephone, each of which is hereby deemed commercially
reasonable. In the event the Custodian fails to execute a properly executable
payment order and fails to give the Company notice of the Custodian's
non-execution, the Custodian shall be liable only for the Company's actual
damages and only to the extent that such damages are recoverable under UCC 4A
(as defined in Paragraph 7 below). Whenever compensation in the form of interest
is payable by the Custodian to the Company pursuant to this Funds Transfer
Services Schedule, such compensation will be payable as specified in UCC 4A.
4. Cancellation of Payment Orders. The Company may cancel a payment order but
the Custodian shall have no liability for the Custodian's failure to act on a
cancellation instruction unless the Custodian has received such cancellation
instruction at a time and in a manner affording the Custodian reasonable
opportunity to act prior to the Custodian's execution of the order. Any
cancellation shall be sent and confirmed in the manner set forth in Paragraph 2
above.
5. Responsibility for the Detection of Errors and Unauthorized Payment Orders.
Except as otherwise provided herein or under the Custodian Agreement, the
Custodian is not responsible for detecting any Company error contained in any
payment order sent by the Company to the Custodian. In the event that the
Company's payment order to the Custodian either (i) identifies the beneficiary
by both a name and an identifying or bank account number and the name and number
identify different persons or entities, or (ii) identifies any bank by both a
name and an identifying number and the number identifies a person or entity
different from the bank identified by name, execution of the payment order,
payment to the beneficiary, cancellation of the payment order or actions taken
by any bank in respect of such payment order may be made solely on the basis of
the number. The Custodian shall not be liable for interest on the amount of any
payment order that was not authorized or was erroneously executed unless the
Company so notifies the Custodian within thirty (30) business days following the
Company's receipt of notice that such payment order had been processed. If a
payment order in the name of the Company and accepted by the Custodian was not
authorized by the Company, the liability of the parties will be governed by the
applicable provisions of UCC 4A.
6. Laws and Regulations. The rights and obligations of the Custodian and the
Company with respect to any payment order executed pursuant to this Funds
Transfer Services Schedule will be governed by any applicable laws, regulations,
circulars and funds transfer system rules, the laws and regulations of the
United States of America and of other relevant countries including exchange
control regulations and limitations on dealings or other sanctions, and
including without limitation those sanctions imposed under the law of the United
States of America by the Office of Foreign Assets Control. Any taxes, fines,
costs, charges or fees imposed by relevant authorities on such transactions
shall be for the account of the Company.
7. Miscellaneous. All accounts opened by the Company or its authorized agents at
the Custodian subsequent to the date hereof shall be governed by this Funds
Transfer Schedule. All terms used in this Funds Transfer Services Schedule shall
have the meaning set forth in Article 4A of the Uniform Commercial Code as
currently in effect in the State of New York (UCC 4A) unless otherwise set forth
herein. The terms and conditions of this Funds Transfer Services Schedule are in
addition to, and do not modify or otherwise affect, the terms and conditions of
the Agreement and any other agreement or arrangement between the parties hereto.
26
8. Indemnification. The Custodian does not recommend the sending of instructions
by telefax or telephonic means as provided in Paragraph 2. BY ELECTING TO SEND
INSTRUCTIONS BY TELEFAX OR TELEPHONIC MEANS, THE COMPANY AGREES TO INDEMNIFY THE
CUSTODIAN AND ITS PARTNERS, OFFICERS AND EMPLOYEES FOR ALL LOSSES THEREFROM.
---------------------------------------------
OPTIONAL: The Custodian will perform a Callback if instructions are
sent by telefax or telephonic means as provided in Paragraph 2 above. THE
COMPANY MAY, AT ITS OWN RISK AND BY HEREBY AGREEING TO INDEMNIFY THE
CUSTODIAN AND ITS PARTNERS, OFFICERS AND EMPLOYEES FOR ALL LOSSES
THEREFROM, ELECT TO WAIVE A CALLBACK BY THE CUSTODIAN BY INITIALLING
HERE:____
---------------------------------------------
Accepted and agreed:
XXXXX BROTHERS XXXXXXXX & CO. XXXXXXXX-XXXXXXXXX CONVERTIBLE &
INCOME FUND II
By: __________________________________ By: ________________________________
Name: Name:
Title: Title:
Date: Date:
27
ELECTRONIC AND ON-LINE SERVICES
SCHEDULE
This Electronic and On-Line Services Schedule (this Schedule) to a Custodian
Agreement dated as of _________, 2003 (as amended from time to time hereafter,
the Agreement) by and between Xxxxx Brothers Xxxxxxxx & Co. (we, us, our) and
XXXXXXXX-XXXXXXXXX CONVERTIBLE & INCOME FUND II (you, your), provides general
provisions governing your use of and access to the Services (as hereinafter
defined) provided to you by us via the Internet (at xxx.xxxxx.xxx or such other
URL as we may instruct you to use to access our products) and via a direct
dial-up connection between your computer and our computers, as of
________________, _____, 2003 (the Effective Date). Use of the Services
constitutes acceptance of the terms and conditions of this Schedule, any
Appendices hereto, the Terms and Conditions posted on our web site, and any
terms and conditions specifically governing a particular Service or our other
products, which may be set forth in the Agreement or in a separate related
agreement (collectively, the Related Agreements).
1. General Terms.
You will be granted access to our suite of online products, which may
include, but shall not be limited to the following services via the
Internet or dial-up connection (each separate service is a Service;
collectively referred to as the Services):
1.1. BIDS(R) and BIDS WorldView, a system for effectuating securities and
fund trade instruction and execution, processing and handling
instructions, and for the input and retrieval of other information;
1.2. F/X WorldView, a system for executing foreign exchange trades;
1.3. Fund WorldView, a system for receiving fund and prospectus
information;
1.4. BBHCOnnect, a system for placing securities trade instructions and
following the status and detail of trades;
1.5. ActionView/SM/, a system for receiving certain corporate action
information;
1.6. Risk View, an interactive portfolio risk analysis tool; and
1.7. Such other services as we shall from time to time offer.
2. Security / Passwords.
2.1. A digital certificate and/or an encryption key may be required to
access certain Services. You may apply for a digital certificate
and/or an encryption key by following the procedures set forth at
xxxx://xxx.xxx.xxx/xxxxx/. You also will need an identification code
(ID) and password(s) (Password) to access the Services.
2.2. You agree to safeguard your digital certificate and/or encryption key,
ID, and Password and not to give or make available, intentionally or
otherwise, your digital certificate, ID, and/or Password to any
unauthorized person. You must immediately notify us in writing if you
believe that your digital certificate and/or encryption key, Password,
or ID has been compromised or if you suspect unauthorized access to
your account by means of the Services or otherwise, or when a person
to whom a digital certificate and/or an encryption key, Password, or
ID has been assigned leaves or is no longer permitted to access the
Services.
2.3. We will not be responsible for any breach of security, or for any
unauthorized trading or theft by any third party, caused by your
failure (be it intentional, unintentional, or negligent) to maintain
the confidentiality of your ID and/or Password and/or the security of
your digital certificate and/or encryption key.
3. Instructions.
3.1. Proper instructions under this Schedule shall be provided as
designated in the Related Agreements (Instructions).
28
3.2. The following additional provisions apply to Instructions provided via
the Services:
a. Instructions sent by electronic mail will not be accepted or
acted upon.
b. You authorize us to act upon Instructions received through the
Services utilizing your digital certificate, ID, and/or Password
as though they were duly authorized written instructions, without
any duty of verification or inquiry on our part, and agree to
hold us harmless for any losses you experience as a result.
c. From time to time, the temporary unavailability of third party
telecommunications or computer systems required by the Services
may result in a delay in processing Instructions. In such an
event, we shall not be liable to you or any third party for any
liabilities, losses, claims, costs, damages, penalties, fines,
obligations, or expenses of any kind (including without
limitation, reasonable attorneys', accountants', consultants', or
experts' fees and disbursements) that you experience due solely
to such a delay.
4. Electronic Documents.
We may make periodic statements, disclosures, notices, and other documents
available to you electronically, and, subject to any delivery and receipt
verification procedures required by law, you agree to receive such
documents electronically and to check the statements for accuracy. If you
believe any such statement contains incorrect information, you must follow
the procedures set forth in the Related Agreement(s).
5. Malicious Code.
You understand and agree that you will be responsible for the introduction
(by you, your employees, agents, or representatives) into the Services,
whether intentional or unintentional, of (i) any virus or other code,
program, or sub-program that damages or interferes with the operation of
the computer system containing the code, program or sub-program, or halts,
disables, or interferes with the operation of the Services themselves; or
(ii) any device, method, or token whose knowing or intended purpose is to
permit any person to circumvent the normal security of the Services or the
system containing the software code for the Services (Malicious Code). You
agree to take all necessary actions and precautions to prevent the
introduction and proliferation of any Malicious Code into those systems
that interact with the Services.
6. Indemnification.
For avoidance of doubt, you hereby agree that the provisions in the Related
Agreement(s) related to your indemnification of us and any limitations on
our liability and responsibilities to you shall be applicable to this
Agreement, and are hereby expressly incorporated herein. You agree that the
Services are comprised of telecommunications and computer systems, and that
it is possible that Instructions, information, transactions, or account
reports might be added to, changed, or omitted by electronic or programming
malfunction, unauthorized access, or other failure of the systems which
comprise the Services, despite the security features that have been
designed into the Services. You agree that we will not be liable for any
action taken or not taken in complying with the terms of this Schedule,
except for our misconduct or negligence. The provisions of this paragraph
shall survive the termination of this Schedule and the Related Agreements.
7. Payment.
You may be charged for services hereunder as set forth in a fee schedule
from time to time agreed by us.
8. Term/Termination.
8.1. This Schedule is effective as of the date you sign it or first use the
Services, whichever is first, and continues in effect until such time
as either you or we terminate the Schedule in accordance with this
Section 8 and/or until your off-line use of the Services is
terminated.
8.2. We may terminate your access to the Services at any time, for any
reason, with five (5) business days prior notice; provided that we may
terminate your access to the Services with no prior notice (i) if your
account with us is closed, (ii) if you fail to comply with any of the
terms of this Agreement, (iii) if we believe that
29
your continued access to the Services poses a security risk, or (iv)
if we believe that you are violating or have violated applicable
laws. You may terminate your access to the Services at any time by
giving us ten (10) business days notice. Upon termination, we will
cancel all your Passwords and IDs and any in-process or pending
Instructions will be carried out or cancelled, at our sole
discretion.
9. Miscellaneous.
9.1. Notices. All notices, requests, and demands (other than routine
operational communications, such as Instructions) shall be in such
form and effect as provided in the Related Agreement(s).
9.2. Inconsistent Provisions. Each Service may be governed by separate
terms and conditions in addition to this Schedule and the Related
Agreement(s). Except where specifically provided to the contrary in
this Schedule, in the event that such separate terms and conditions
conflict with this Schedule and the Related Agreement(s), the
provisions of this Schedule shall prevail to the extent this Schedule
applies to the transaction in question.
9.3. Binding Effect; Assignment; Severability. This Schedule shall be
binding on you and your employees, officers and agents. We may assign
or delegate our rights and duties under this Schedule only with your
prior written consent. Your rights under this Schedule may not be
assigned without our prior written consent. In the event that any
provision of this Schedule conflicts with the law under which this
Schedule is to be construed or if any such provision is held invalid
or unenforceable by a court with jurisdiction over you and us, such
provision shall be deemed to be restated to effectuate as nearly as
possible the purposes of the Schedule in accordance with applicable
law. The remaining provisions of this Schedule and the application of
the challenged provision to persons or circumstances other than those
as to which it is invalid or unenforceable shall not be affected
thereby, and each such provision shall be valid and enforceable to the
full extent permitted by law.
9.4. Choice of Law; Jury Trial. This Schedule shall be governed by and
construed, and the legal relations between the parties shall be
determined, in accordance with the laws of the State of New York,
without giving effect to the principles of conflicts of laws. Each
party agrees to waive its right to trial by jury in any action or
proceeding based upon or related to this Agreement. The parties agree
that all actions and proceedings based upon or relating to this
Schedule shall be litigated exclusively in the federal and state
courts located within New York City, New York.
XXXXXXXX-XXXXXXXXX CONVERTIBLE & INCOME FUND II
By:
----------------------------------------
Title:
----------------------------------------
Date:
----------------------------------------
30
17F-5 DELEGATION SCHEDULE
By their execution of this Delegation Schedule dated as of
___________________, 2003, XXXXXXXX-XXXXXXXXX CONVERTIBLE & INCOME FUND II, a
management investment company registered with the Securities and Exchange
Commission (the Commission) under the Investment Company Act of 1940, as amended
(the 1940 Act), acting through its Board of Trustees (the Board) or its duly
appointed representative (the Fund), hereby appoints XXXXX BROTHERS XXXXXXXX &
CO., a New York limited partnership with an office in Boston, Massachusetts (the
Delegate), as its delegate to perform certain functions with respect to the
custody of the Fund's Assets outside the United States, and the Delegate hereby
accepts such delegation and agrees to perform the responsibilities set forth
herein.
1. Maintenance of Fund's Assets Abroad. The Fund, acting through its Board or
its duly authorized representative, hereby instructs Delegate pursuant to the
terms of the Custodian Agreement dated as of the date hereof executed by and
between the Fund and the Delegate (the Custodian Agreement) to place and
maintain the Fund's Assets in countries outside the United States in accordance
with Instructions received from the Fund's Investment Advisor. Such instruction
shall represent an Instruction under the terms of the Custodian Agreement. The
Fund acknowledges that (a) the Delegate shall perform services hereunder only
with respect to the countries where it accepts delegation as Foreign Custody
Manager as indicated on your Global Custody Network Listing; (b) depending on
conditions in the particular country, advance notice may be required before the
Delegate shall be able to perform its duties hereunder in or with respect to
such country (such advance notice to be reasonable in light of the specific
facts and circumstances attendant to performance of duties in such country); and
(c) nothing in this Delegation Schedule shall require the Delegate to provide
delegated or custodial services in any country, and there may from time to time
be countries as to which the Delegate determines it will not provide delegation
services.
2. Delegation. Pursuant to the provisions of Rule 17f-5, as amended, under the
1940 Act, the Board hereby delegates to the Delegate, and the Delegate hereby
accepts such delegation and agrees to perform, only those duties set forth in
this Delegation Schedule concerning the safekeeping of the Fund's Assets in each
of the countries as to which it acts as the Board's delegate. The Delegate is
hereby authorized to
1
take such actions on behalf of or in the name of the Fund as are reasonably
required to discharge its duties under this Delegation Schedule, including,
without limitation, to cause the Fund's Assets to be placed with a particular
Eligible Foreign Custodian in accordance herewith. The Fund confirms to the
Delegate that the Fund or its investment advisor has considered the Sovereign
Risk and prevailing Country Risk as part of its continuing investment decision
process, including such factors as may be reasonably related to the systemic
risk of maintaining the Fund's Assets in a particular country, including, but
not limited to, financial infrastructure, prevailing custody and settlement
systems and practices (including the use of any Securities Depository in the
context of information provided by the Custodian in the performance of its
duties as required under Rule 17f-7 and the terms of the Custodian Agreement
governing such duties), and the laws relating to the safekeeping and recovery of
the Fund's Assets held in custody pursuant to the terms of the Custodian
Agreement.
3. Selection of Eligible Foreign Custodian and Contract Administration. The
Delegate shall perform the following duties with respect to the selection of
Eligible Foreign Custodians and administration of certain contracts governing
the Fund's foreign custodial arrangements:
(a) Selection of Eligible Foreign Custodian. The Delegate shall
place and maintain the Fund's Assets with an Eligible Foreign Custodian;
provided that the Delegate shall have determined that the Fund's Assets will be
subject to reasonable care based on the standards applicable to custodians in
the relevant market after considering all factors relevant to the safekeeping of
such assets including without limitation:
(i) The Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical
protections available for certificated securities (if applicable), the
controls and procedures for dealing with any Securities Depository, the
method of keeping custodial records, and the security and data
protection practices;
(ii) Whether the Eligible Foreign Custodian has the requisite
financial strength to provide reasonable care for the Fund's Assets;
(iii) The Eligible Foreign Custodian's general reputation and
standing; and
(iv) Whether the Fund will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such as by
virtue of the existence of any offices of such Eligible Foreign
Custodian in the United States or such Eligible Foreign Custodian's
appointment of an agent for service of process in the United States or
consent to jurisdiction in the United States.
2
(b) Contract Administration. The Delegate shall cause that the foreign
custody arrangements with an Eligible Foreign Custodian shall be governed by a
written contract that the Delegate has determined will provide reasonable care
for Fund assets based on the standards applicable to custodians in the relevant
market. Each such contract shall, except as set forth in the last paragraph of
this subsection (b), include provisions that provide:
(i) For indemnification or insurance arrangements (or any combination
of the foregoing) such that the Fund will be adequately protected against
the risk of loss of assets held in accordance with such contract;
(ii) That the Fund's Assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the Eligible
Foreign Custodian or its creditors except a claim of payment for their safe
custody or administration or, in the case of cash deposits, liens or rights
in favor of creditors of such Custodian arising under bankruptcy,
insolvency or similar laws;
(iii) That 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;
(iv) That adequate records will be maintained identifying the Fund's
Assets as belonging to the Fund or as being held by a third party for the
benefit of the Fund;
(v) That the Fund's independent public accountants will be given
access to those records described in (iv) above or confirmation of the
contents of such records; and
(vi) That the Delegate will receive sufficient and timely periodic
reports with respect to the safekeeping of the Fund's Assets, including,
but not limited to, notification of any transfer to or from the Fund's
account or a third party account containing the Fund's Assets.
Such contract may contain, in lieu of any or all of the provisions
specified in this Section 3(b), such other provisions that the Delegate
determines will provide, in their entirety, the same or a greater level of
care and protection for the Fund's Assets as the specified provisions, in
their entirety.
(c) Limitation to Delegated Selection. Notwithstanding anything in this
Delegation Schedule to the contrary, the duties under this Section 3 shall apply
only to Eligible Foreign Custodians selected by the Delegate and shall not apply
to Securities Depositories or to any Eligible Foreign Custodian that the
Delegate is directed to use pursuant to Section 7 of this Delegation Schedule.
3
4. Monitoring. The Delegate shall establish a system to monitor at reasonable
intervals (but at least annually) the appropriateness of maintaining the Fund's
Assets with each Eligible Foreign Custodian that has been selected by the
Delegate pursuant to Section 3 of this Delegation Schedule. The Delegate shall
monitor the continuing appropriateness of placement of the Fund's Assets in
accordance with the criteria established under Section 3(a) of this Delegation
Schedule. The Delegate shall monitor the continuing appropriateness of the
contract governing the Fund's arrangements in accordance with the criteria
established under Section 3(b) of this Delegation Schedule.
5. Reporting. At least quarterly and more frequently as mutually agreed between
the parties, the Delegate shall provide to the Board written reports specifying
placement of the Fund's Assets with each Eligible Foreign Custodian selected by
the Delegate pursuant to Section 3 of this Delegation Schedule and shall
promptly report as to any material changes to such foreign custody arrangements.
6. Withdrawal of Fund's Assets. If the Delegate determines that an arrangement
with a specific Eligible Foreign Custodian selected by the Delegate under
Section 3 of this Delegation Schedule no longer meets the requirements of said
Section, Delegate shall withdraw the Fund's Assets from the non-complying
arrangement as soon as reasonably practicable; provided, however, that if in the
reasonable judgment of the Delegate, such withdrawal would require liquidation
of any of the Fund's Assets or would materially impair the liquidity, value or
other investment characteristics of the Fund's Assets, it shall be the duty of
the Delegate to provide information regarding the particular circumstances and
to act only in accordance with Instructions of the Fund or its Investment
Advisor with respect to such liquidation or other withdrawal.
7. Direction as to Eligible Foreign Custodian. Notwithstanding this Delegation
Schedule, the Fund, acting through the Board, the Investment Advisor or its
other authorized representative, may direct the Delegate to place and maintain
the Fund's Assets with a particular Eligible Foreign Custodian, including
without limitation with respect to investment in countries as to which the
Custodian will not provide delegation
4
services. In such event, the Delegate shall be entitled to rely on any such
instruction as an Instruction under the terms of the Custodian Agreement and
shall have no duties under this Delegation Schedule with respect to such
arrangement save those that it may undertake specifically in writing with
respect to each particular instance.
8. Standard of Care. In carrying out its duties under this Delegation Schedule,
the Delegate agrees to exercise reasonable care, prudence and diligence such as
a person having responsibility for safekeeping the Fund's Assets would exercise.
9. Representations. The Delegate hereby represents and warrants that it is a
U.S. Bank and that this Delegation Schedule has been duly authorized, executed
and delivered by the Delegate and is a legal, valid and binding agreement of the
Delegate.
The Fund hereby represents and warrants that the Board has determined
that it is reasonable to rely on the Delegate to perform the delegated
responsibilities provided for herein and that this Delegation Schedule has been
duly authorized, executed and delivered by the Fund and is a legal, valid and
binding agreement of the Fund.
10. Effectiveness; termination. This Delegation Schedule shall be effective as
of the date on which this Delegation Schedule shall have been accepted by the
Delegate, as indicated by the date set forth below the Delegate's signature.
This Delegation Schedule may be terminated at any time, without penalty, by
written notice from the terminating party to the non-terminating party. Such
termination shall be effective on the 30th calendar day following the date on
which the non-terminating party shall receive the foregoing notice. The
foregoing to the contrary notwithstanding, this Delegation Schedule shall be
deemed to have been terminated concurrently with the termination of the
Custodian Agreement.
11. Notices. Notices and other communications under this Delegation Schedule are
to be made in accordance with the arrangements designated for such purpose under
the Custodian Agreement unless otherwise indicated in a writing referencing this
Delegation Schedule and executed by both parties.
12. Definitions. Capitalized terms in this Delegation Schedule have the
following meanings:
a. Country Risk - shall have the meaning set forth in the Custodian
Agreement.
b. Eligible Foreign Custodian - shall have the meaning set forth in Rule
17f-5(a)(1) and shall also include a U.S. Bank.
5
c. Fund's Assets - shall mean any of the Fund's investments (including
foreign currencies) for which the primary market is outside the United
States, and such cash and cash equivalents as are reasonably necessary to
effect the Fund's transactions in such investments.
d. Instructions - shall have the meaning set forth in the Custodian
Agreement.
e. Investment Advisor - shall have the meaning set forth in Section 13.21
of the Custodian Agreement.
f. Securities Depository - shall mean a central or book entry system or
agency established under applicable law for purposes of recording the
ownership and/or entitlement to investment securities for a given market
that, if a foreign Securities Depository, meets the definitional
requirements of Rule 17f-7 under the 1940 Act.
g. Sovereign Risk - shall have the meaning set forth in Section 9.1.3 of
the Custodian Agreement.
h. U.S. Bank - shall mean a bank which qualifies to serve as a custodian
of assets of investment companies under Section 17(f) of the Act.
13. Governing Law and Jurisdiction. This Delegation Schedule shall be construed
in accordance with the laws of the State of New York. The parties hereby submit
to the exclusive jurisdiction of the Federal courts sitting in the State of New
York or the Commonwealth of Massachusetts or of the state courts of either such
State or such Commonwealth.
14. Fees. Delegate shall perform its functions under this Delegation Schedule
for the compensation determined under the Custodian Agreement.
15. Integration. This Delegation Schedule sets forth all of the Delegate's
duties with respect to the selection and monitoring of Eligible Foreign
Custodians, the administration of contracts with Eligible Foreign Custodians,
the withdrawal of assets from Eligible Foreign Custodians and the issuance of
reports in connection with such duties. The terms of the Custodian Agreement
shall apply generally as to matters not expressly covered in this Delegation
Schedule, including dealings with the Eligible Foreign Custodians in the course
of discharge of the Delegate's obligations under the Custodian Agreement.
6
IN WITNESS WHEREOF, each of the parties hereto has caused this Delegation
Schedule to be duly executed as of the date first above written.
XXXXX BROTHERS XXXXXXXX & CO. XXXXXXXX-XXXXXXXXX CONVERTIBLE &
INCOME FUND II
By: __________________________________ By: ____________________________
Name: Name:
Title: Title:
7
[GRAPHIC APPEARS HERE]
PIMCO ADVISORS FUND MANAGEMENT, LLC
XXXXXXXX-XXXXXXXXX CONVERTIBLE & INCOME FUND II
FEE SCHEDULE
JULY 2003
I. SAFEKEEPING
U.S. Asset Charges*: 1.0 basis point per annum on first $500 million
0.5 basis points per annum on assets over $500
million
$12,000 minimum per annum
* Includes preferred shares outstanding
II. TRANSACTIONS
U.S. Transactions (buys/sells) $5
Derivatives Transactions (including options,
futures, and forwards) $35
USD Wires, Checks, and Transfer Processing $5
Tax Reclaims and Proxy Announcements/Reporting $100
Third Party Foreign Exchange $35
Trade Corrections and Cancellations $10
Non-Automated Trade Instructions $10
III. FUND ACCOUNTING
Asset Charges*: 0.75 basis point per annum $20,000 minimum
per annum
IV. APS TESTING
One rating agency: $1,250 per month
Two rating agencies: $1,500 per month
page 1 of 2 Xxxx Xxxxxxx, 000-000-0000
[GRAPHIC APPEARS HERE]
V. OUT-OF-POCKET EXPENSES
Out-of-pocket expenses including but not limited to locally mandated
charges, subcustodian communications expenses, telex, audit reporting,
legal, telephone, postage including overnight and other courier
services, duplication, forms and supplies would be additional. Direct
expenses including but not limited to stamp duties, foreign investor
registration, commissions, dividend and income collection charges,
proxy charges, taxes, certificate fees, special handling, transfer,
withdrawal, Euroclear deposit and withdrawal charges, holdings charges
and registration fees, market quotation costs, and record retention
retrieval and destruction costs would be additional. Customized
computer programming would be additional.
VI. BILLING
Annual fees are payable monthly in USD and will be directly withdrawn
from the fund by BBH. BBH will provide 10 business days notice prior to
charging the account/fund these fees.
VII. TERM
This schedule will be in effect not less than 3 years.
Agreed by:
Xxxxxxxx-Xxxxxxxxx Convertible
& Income Fund II Xxxxx Brothers Xxxxxxxx & Co.
Proposed Proposed
---------------------------------- --------------------------------------
Xxxxx X. Xxxxxxxx, President Xxxxxxx X. Xxxxxxxx, Partner
July _____, 2003 July ______, 2003
