CUSTODY AGREEMENT
THIS IS A CUSTODY AGREEMENT, dated this 22nd day of November, 2000,
between The Chase Manhattan Bank (herein called the "Custodian"), a New York
banking corporation, having its principal place of business in New York, New
York and State Farm Mutual Fund Trust (the "Trust"), a Delaware business trust
and an investment company registered under the Investment Company Act of 1940,
having its principal place of business at Bloomington, Illinois. The Trust has
established separate series of shares, each corresponding to a separate
investment portfolio having its own investment objective, and may establish
additional series of shares in the future. This agreement shall apply to the
funds listed in Exhibit A.
In consideration of the mutual premises and agreements herein
contained, the parties hereto agree as follows:
SECTION 1 DEFINITIONS.
"Agreement" means this Custody Agreement.
"Authorization Letter" or "Letter" means a writing from the Fund substantially
in the form of Exhibit B(1) or B(2) hereto, in respect of Financial Assets,
signed by any of two (2) persons of the Fund authorized to execute such
authorization pursuant to certain corporate resolutions of the Fund, and
instructing the Custodian to take action in respect of the Custody Account and
the Cash Account and such other action incidental thereto and to the Agreement.
Custodian may rely upon a Letter received by facsimile transmission or Letter in
the form of an Electronic Instruction as hereinafter defined.
"Cash Account" means the cash ledger of the Custody Account to which debits and
credits are made in respect of security transactions and other deposits to said
account and against which no withdrawal may be made by check or draft.
"Custodian" means The Chase Manhattan Bank, a New York banking corporation and
member of the Federal Reserve System.
"Custody Account" means a securities account in the name of the Fund on
Custodian's records to which a Financial Asset is or may be credited pursuant to
this Agreement.
"Depository" means DTC, PTC, and FRBNY and any other depository acceptable to
the Fund.
"DTC" means The Depository Trust Company, a New York limited purpose trust
company.
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"Electronic Instruction" means an electronic instruction received by the
Custodian (i) through DTC's Institutional Delivery System ("IDS") or (ii)
through such other electronic delivery system accessed by password or other
security device and acceptable to the Fund and Custodian for the delivery of
instructions. Fund shall safeguard any testkeys, identification codes or other
security device made available by Custodian to Fund and Custodian may rely upon
any electronic instructions as being authorized by the Fund which is received
using the proper security device.
"Entitlement holder" means the person on the records of a securities
intermediary as the person having a security entitlement against the securities
intermediary.
"Financial Assets" means securities or other investments owned by the Fund. As
the context requires, a Financial Asset means either the interest itself or the
means by which a person's claim to it is evidenced, including a certificated or
uncertificated security, a security certificate, or a securities entitlement.
"FRBNY" means the Federal Reserve Bank of New York.
"Fund" means the Trust or each series of the Trust to which this agreement
applies.
"Instructions" includes, without limitation, any instructions to sell, assign,
transfer, deliver, purchase or receive for the Custody Account, Financial Assets
or to transfer funds from the Custody Account or a Cash Account.
"PTC" means Participants Trust Company, a New York limited purpose trust
company.
"Securities" means stocks, bonds, rights, warrants and other negotiable and
non-negotiable paper issued in certificated ("certificated securities") or book
entry form ("uncertificated securities") and commonly traded or dealt in on
securities exchanges or financial markets, and other obligations of an issuer,
or shares, participations and interests in an issuer recognized in an area in
which it is issued or dealt in as a medium for investment and any other property
as shall be acceptable to Custodian for the Custody Account.
"Security entitlement" means the rights and property interest of an entitlement
holder with respect to a financial asset as specified in Part 5 of Article 8 of
the Uniform Commercial Code.
"Securities intermediary" means, Custodian, DTC, PTC, the FRBNY, and any other
Depository or financial institution acceptable to the Fund which in the ordinary
course of business maintains securities accounts for others and acts in that
capacity.
"Uniform Commercial Code" means the Uniform Commercial Code of the State of New
York.
SECTION 2 TERMS OF THE CUSTODY.
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SECTION 2.1 CUSTODY ACCOUNT. The parties agree that there shall be a
Custody Account maintained in the name of the Fund with the Custodian, at an
office in New York. The Custody Account shall be entitled as described on
Exhibit C.
SECTION 2.2 APPOINTMENT. The Fund authorizes The Chase Manhattan Bank
to serve as custodian for the Fund, and to act on its behalf solely to the
extent expressly provided herein, or in any Authorization Letter and to take
such other action as may be reasonably incidental thereto. Custodian shall not
use any securities intermediaries other than DTC, PTC and the FRBNY without
Fund's prior written consent.
SECTION 2.3 DUTIES OF THE CUSTODIAN. It is the expressed understanding
of the parties that:
SECTION 2.3.1 ACCEPT, DELIVER AND EXCHANGE SECURITIES. Upon receipt of
and pursuant to an Authorization Letter, oral notice (hereinafter "Notice,")
from the Fund (such Notice to be followed by written confirmation in the form of
an Authorization Letter), or Electronic Instructions, the Custodian shall accept
and deliver Financial Assets for the Fund. From time to time, pursuant to a
Letter, Notice, such Notice to be followed by the Fund's written confirmation
thereof, or Electronic Instructions, the Custodian shall exercise or dispose of
subscriptions, rights and warrants of any Financial Assets held in the Custody
Account or to be received by the Custodian for deposit to the Custody Account.
In respect of a Notice, in the event that the written confirmation has not been
received prior to the time requested action must take place, the Custodian may
rely upon the Notice provided that, the Custodian has been able to orally
confirm such instruction with such other persons as the Fund shall designate
from time to time in writing to the Custodian as authorized to make such
confirmations. Except as otherwise advised in a Letter, Notice, or by Electronic
Instructions, in delivering Financial Assets, the Custodian shall do so only
against payment, or upon the receipt of other Financial Assets .
SECTION 2.3.2 PURCHASE OF SECURITIES. Upon receipt of a Letter, Notice
from the Fund (such Notice to be followed by written confirmation in the form of
an Authorization Letter), or Electronic Instruction, the Custodian shall
purchase for the Fund such Financial Assets in the amounts and maturing on the
dates therein described and charge the payment for such purchases to the Cash
Account. In the event that the written confirmation has not been received prior
to the time requested action must take place, the Custodian may rely upon the
Notice, provided that the Custodian has been able to orally confirm such
instruction with such other persons as the Fund shall designate from time to
time in writing to the Custodian as authorized to make such confirmations.
Unless and until otherwise instructed by the Fund pursuant to the terms herein
contained, the Custodian shall deposit any and all Financial Assets purchased
hereunder into the Fund's Custody Account as soon as reasonably feasible
following its receipt thereof. Except as otherwise advised in a Letter, Notice,
or by Electronic Instructions, the Custodian shall make payment for Financial
Assets purchased only at the time of delivery of such Financial Assets to the
Custodian.
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SECTION 2.3.3 PAYMENT OF MONIES. From time to time, the Custodian shall
upon its receipt of a Letter or Notice, such Notice to be followed by written
confirmation in the form of a Transfer Letter (as used herein the term "Transfer
Letter" shall mean the Fund's transfer letter, substantially in the form of
Exhibit D attached hereto) or Electronic Instruction, transfer monies from the
Custody Account; PROVIDED THAT: the Custodian complies with the requirements of
The Chase Manhattan Bank Funds Transfer Service Security Procedure Agreement
(Exhibit E).
From time to time, the Fund shall notify Custodian of deposits for its
accounts. Upon receipt of funds identifying the Fund by account number as
beneficiary, the Custodian shall credit such funds to the account identified and
notify the Fund.
SECTION 2.3.4 SALE OF SECURITIES. Upon the receipt of a Letter, Notice
(such Notice to be followed by written confirmation in the form of a Letter), or
Electronic Instruction, the Custodian shall use its reasonable best efforts,
subject to the terms and conditions herein contained, to present for sale in the
amount and on the dates therein stated such Financial Assets of the Fund as
therein described, and held in the Custody Account and cause the proceeds
generated by such sale(s), to be deposited into the Cash Account. In the event
that the written confirmation has not been received prior to the time the
requested action must take place, the Custodian may rely upon the Notice,
provided that the Custodian has been able to orally confirm such instruction
with such other persons as the Fund shall designate from time to time in writing
to the Custodian as authorized to make such confirmations.
In the event that it shall be impracticable for the Custodian, in
accordance with such Letter, Notice, or Electronic Instruction, to present for
sale Financial Assets on the dates specified, the Custodian shall as soon as it
learns of any such impracticability, notify the Fund via telephone.
Unless the Custodian shall have received from the Fund a Letter,
Notice, or Electronic Instruction to the contrary, the Custodian shall deliver
the Financial Assets to a broker, a dealer or other purchaser identified in the
instruction against payment. It is understood by the Fund that delivery against
payment in the securities markets means delivery against a receipt or other
evidence that a payment is due later but before the end of the same business
day. The Custodian shall have no liability with respect to the non-receipt of
payment arising from:
i) Any insolvency of any broker, dealer or other purchaser which occurs
after delivery of the Financial Assets by Custodian but before payment
is received by Custodian; or
ii) Insolvency of any issuer of the Financial Assets ; or
iii) Any act or omission of any broker, attorney, custodian, escrowee, or
similar agent designated by Fund to perform any act with respect to the
Financial Assets.
This Section shall not be interpreted to relieve or to lessen the standard of
care the Custodian is required to use by other terms of this Agreement.
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SECTION 2.3.5 REGISTERED SECURITIES. Except as otherwise set forth in
this Section 2.3.5, the Custodian shall register any registerable Financial
Assets held and maintained in a Custody Account in Custodian's nominee name or
that of an affiliate or Depository. Private placements and other types of
Financial Assets which the Fund from time to time identifies shall be registered
in the name of the Fund. All taxes or other expenses incidental to any transfer
to or from the name of a nominee shall be borne by the Fund.
SECTION 2.3.6 CALLS FOR PAYMENT. The Custodian shall use its reasonable
best efforts to determine from financial information services to which it
subscribes, or such other financial services as agreed to by the parties, when
Financial Assets held in the Custody Account are called for payment and
surrender for payment any Financial Assets or notes which have matured or with
respect to which it received or knows of a notice to call.
SECTION 2.3.7 NOTICES, ADVICE, ETC. The Custodian shall use its
reasonable best efforts to:
(a) promptly notify the Fund of any unpaid principal amounts, or
any unpaid amounts of interest accrued and owing, or payable
on any Financial Assets held or maintained in a Custody
Account of which Custodian is aware;
(b) forward to the Fund as of the close of business each business
day (electronically or by mail) advices of the Financial
Assets and cash transactions in a Custody Account;
(c) deliver to the Fund, promptly upon receipt of the Fund's
request, a schedule of the Financial Assets held and
maintained in a Custody Account;
(d) promptly notify the Fund of any legal action of which the
Custodian's corporate actions unit becomes aware with respect
to any Financial Assets held and maintained in a Custody
Account;
(e) promptly notify the Fund of any subscriptions, warrants or
like rights it may have of which the Custodian's corporate
action unit becomes aware;
(f) promptly notify the Fund of any invitations to tender a
Financial Asset, held and maintained in a Custody Account of
which the Custodian's corporate action unit becomes aware; and
(g) deliver to the Fund all printed material received by the
Custodian's corporate actions unit and requiring some action
by the Fund pertaining to any Financial Assets held or
maintained in a Custody Account.
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SECTION 2.3.8 STOCK DIVIDENDS, ETC. Financial Assets delivered to the
Custodian as stock dividends, stock splits or as a result of the exercise of
rights, shall be deposited into and held and maintained in the Custody Account
of the Fund and treated in like manner as all other Financial Assets therein
held and maintained.
SECTION 2.3.9 FRACTIONAL SHARES. In the event that an issuer of a
Financial Asset held by the Custodian in the Custody Account shall declare a
dividend payable in stock, and such dividend results in a fractional share of
stock being issued, the Custodian, without prior notice to or from the Fund,
shall sell such fractional share(s) and deposit the proceeds received from such
sale into the Custody Account. The Custodian shall notify the Fund of such sale
thereafter.
SECTION 2.3.10 COLLECTION OF INCOME AND PRINCIPAL. The Custodian shall
from time to time take necessary action(s) to collect dividends, interest
payments, payments made on account of called and matured Financial Assets, and
any other payments with respect to such Financial Assets deposited into or held
or maintained in the Custody Account, when such payments shall become owing;
provided that so long as Custodian's actions are in compliance with the standard
of care set forth in Section 7.17, Custodian shall not be responsible for
failure to receive payment of (or late payment of) distributions with respect to
Financial Assets or other property held in the Custody Account. Upon receipt of
such funds collected hereunder, Custodian will use its best efforts to deposit
such collected funds into the Custody Account on the same business day upon
which such collected funds are received by the Custodian. Accordingly, in making
collections of income or principal hereunder, the Custodian may to the extent
necessary or required by any applicable law of any sovereign body, including the
United States, or a State, and solely to such extent, execute on behalf of the
Fund certificates or other like documents. All cash shall be held and maintained
in the Custody Account subject to further instruction from the Fund. In the
event the Custody Account is credited by the Custodian in anticipation of the
Custodian's collection of monies, and the Custodian is unable to collect such
monies, the Fund agrees that it shall promptly upon telephonic notice from the
Custodian, return an amount equal to the amount so credited and not collected to
the Custodian in immediately available funds.
SECTION 2.3.11 EXCHANGE CERTIFICATES. The Custodian shall exchange
temporary for definitive certificates or effect mandatory exchanges of
certificates.
SECTION 2.3.12 BOOKS AND RECORDS. Custodian shall at all times maintain
proper books and records that shall identify the Fund as the entitlement holder
of such Financial Assets and the location of the Financial Assets.
The Custodian shall with respect to the Fund create and maintain all
records relating to its activities and obligations under this Contract. All such
records shall upon reasonable notice and during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund, including the Fund's independent public accountant, and
employees and agents of the United States Securities and Exchange Commission.
The Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by
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the Fund and held by the Custodian and shall, when requested to do so by the
Fund and for such compensation as shall be agreed upon between the Fund and the
Custodian, include certificate numbers in such tabulations.
The Custodian shall cooperate with and supply reasonable and customary
information regarding the Custody Account to the entity or entities appointed by
the Board of Directors of the Fund to keep the books of account of the Fund.
Unless Fund shall send to Custodian a written exception or objection to
any statement of account within 90 days of its receipt of such statement from
Custodian, Fund shall be deemed to have approved such statement.
SECTION 2.3.13 CERTIFICATE OF THE BANK. The Custodian shall:
(a) deliver to the Fund on or before January 31st of each calendar
year, a certified schedule, dated December 31, of the
preceding calendar year, executed by two duly elected and
authorized officers of Custodian setting forth a full
description of the Financial Assets held and maintained in
each Custody Account, including, but not limited to, among
other things, the par value of each bond and the number of
shares for each stock or the equivalent, as the case may be,
as of the close of business on December 31st, of each calendar
year;
(b) use its best efforts to deliver to the Fund, within five (5)
business days after the receipt of the written request of the
Fund a certified schedule, dated the date of its issue,
executed by two duly elected and authorized officers of
Custodian, setting forth a full description of the Financial
Assets held and maintained in the Custody Accounts, including
among other things, the par value of each bond and the number
of shares for each stock or the equivalent, as the case may
be; and
(c) deliver, following a request by the Fund, to any governmental
agency certified by the Fund to the Custodian and, in a timely
manner, a certified schedule, which schedule, to the extent
possible, shall be substantially in the form of the certified
schedule to be delivered pursuant to the preceding clause (b)
of this subsection.
In the event the Custodian is unable to deliver, pursuant to clause (c)
above, the certified schedule therein described, the Custodian shall,
immediately upon learning of such inability, notify the Fund by telephone and
promptly confirm such notice to the Fund in writing. Such written notice to the
Fund shall set forth (i) an explanation as to the Custodian's inability to
deliver such certified schedule and (ii) the date upon which such certified
schedule shall be delivered.
SECTION 2.3.14 OTHER SECURITIES. Upon receipt of an Authorization
Letter or Electronic Instruction, the Custodian is authorized to take any and
all actions necessary to settle
September 2000 7 of 17
transactions in futures and/or options contracts.
SECTION 2.4 LOTTERY. In the event Financial Assets held in the Custody
Account at a Securities Depository are called for partial redemption by the
issuer, the Custodian will, in its reasonable discretion, allocate the called
portion to the respective holders in a manner which is fair, equitable, and in
accordance with its established procedures.
SECTION 2.5 CONVERSION. The Custodian shall, except where instructed
otherwise by the Fund, convert monies received by the Custodian with respect to
Financial Assets maintained in the Custody Account of foreign issue into United
States dollars at prevailing rates. In effecting such conversion, the Custodian
may use any commercially reasonable method or agency available to it, including
the facilities of its own divisions or affiliates. The Fund agrees that it shall
bear all risk and reasonable expense of such conversion, including without
limitation, losses arising from fluctuations in the exchange rate provided that
the Custodian has acted in good faith and in accordance with the commercial
standard of care for Money Center banks which offer custodial services.
SECTION 2.6 MAINTAIN DUPLICATE RECORDS. The Custodian shall store
"off-premises" tapes of daily transactions with respect to the Custody Account.
Such tapes shall be maintained in accordance with the Custodian's practice in
effect from time to time .
SECTION 2.7 SETTLEMENT. The Fund intends to have sufficient immediately
available funds each day in the Custody Account to pay for the settlement of all
Financial Assets delivered against payment to Custodian or its agents and
credited to the Custody Account. Should Fund fail to have sufficient immediately
available funds in a Custody Account to settle deliveries of Financial Assets
pursuant to Section 2.3.2 (a "Deficit"), Custodian may elect (i) to reject the
settlement of any or all of the Financial Assets delivered to it that day to a
Custody Account but only after notice to Fund, (ii) to settle the deliveries on
the Fund's behalf and debit the Custody Account of the Fund for the amount of
such Deficit , or (iii) to reverse the posting of the Financial Assets credited
to the Custody Account, but only after notice to the Fund.
No prior action or course of dealing on the part of Custodian with
respect to the settlement of Financial Assets transactions on Fund's behalf
shall be used by or give rise to any claim or action by Fund against Custodian
for its refusal to pay or settle for a securities transaction that has not been
timely funded as required herein.
SECTION 2.8 SECURITY INTEREST. To the extent Custodian has advanced
funds on Fund's behalf in connection with the settlement of purchases and sales
of Financial Assets for the Custody Account, Custodian shall have a security
interest in the Financial Assets which are the subject of such purchases and
sales until Fund shall have repaid the amount of such advance to Custodian, and
Custodian's security interest in such Financial Assets shall be released upon
Fund's repayment of such advance to Custodian.
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SECTION 3 SAFEKEEPING OF FINANCIAL ASSETS.
SECTION 3.1 SAFEKEEPING. The Custodian shall hold all Financial Assets
held in the Custody Account in its vault and physically segregate for the
account of the Fund all Financial Assets held by it, except those Financial
Assets which are book-entry securities maintained on the Federal Reserve
Book-Entry Account System or which are eligible for deposit with a Depository.
Unless specified in the Authorization Letter to the contrary, it is understood
that, eligible Financial Assets will be maintained with a Depository. The
Custodian shall be responsible for all Financial Assets deposited into and held
and maintained in the Custody Account whether the Financial Assets be in the
physical custody of the Custodian or held by the Custodian through a Depository;
PROVIDED that the Custodian shall not be responsible for loss or destruction of
Securities held and maintained in the Custody Account, where such loss or
destruction is caused by earthquake, volcanic eruptions or such like
disturbances of nature, by reason of war, whether declared or undeclared; or
caused by the lawful act of any executive, legislative, judicial, administrative
or other governmental or military body or officer. Custodian shall be obligated
to indemnify Fund for any loss of Financial Assets received for, and credited to
the Custody Account resulting from (i) the negligence or willful misconduct of
Custodian or its officers, employees or agents (excluding any Depository
retained for such Financial Assets) or (ii) the burglary, robbery, hold-up,
theft or mysterious disappearance, including loss by damage or destruction. In
the event of a loss of Financial Assets for which it is required to indemnify
Fund pursuant to the immediately preceding sentence, Custodian shall promptly
replace such Financial Assets (by among other means posting appropriate security
or bond with the issuer(s) of such Financial Assets and obtaining their reissue)
or if agreed to by Fund and Custodian, Custodian shall replace the value thereof
(determined based upon the market value of the Financial Assets which are the
subject of such loss as of the date of the discovery of such loss or as of the
date of replacement) and the value of any loss of rights or privileges resulting
from the loss of such Financial Assets. The foregoing indemnity shall be the
exclusive liability of Custodian to Fund for its loss of Financial Assets held
for the Custody Account.
Custodian shall be responsible for only those duties expressly stated
in this Agreement or expressly contained in instructions to perform the services
described herein given to Custodian pursuant to the provisions of this Agreement
and accepted by Custodian but, without limiting the foregoing, Custodian and its
agents shall have no duty or responsibility;
(a) to supervise the investment of, or make recommendations
with respect to the purchase, retention or sale of, Financial Assets
relating to the Custody Account, or to maintain any insurance on
Financial Assets in the Custody Account for Fund's benefit;
(b) with regard to any Financial Assets in the Custody Account
as to which a default in the payment of principal or interest has
occurred, to take any action other than giving of notice with respect
to such default; except, in each instance, where Custodian has been
requested by Fund and Custodian has agreed in writing to do so;
September 2000 9 of 17
(c) to evaluate, or report to Fund regarding, the financial
condition of any person, firm or corporation to which Custodian is
instructed to deliver Financial Assets or funds pursuant to this
Agreement;
(d) for any loss occasioned by delay in the actual receipt of
notice by Custodian of any payment, redemption or other transaction in
respect to which Custodian is authorized to take some action pursuant
to this Agreement; or
(e) for any errors or omissions made by any securities pricing
services used by Custodian to value Financial Assets credited to the
Custody Account as part of any service subscribed to by Fund from
Custodian.
SECTION 3.2 USE OF A DEPOSITORY. The Custodian shall:
(a) upon the delivery or transfer, by book-entry or otherwise, of
any of the Fund's Financial Assets to a Securities Depository
Account as provided herein, identify in its records the
Financial Assets as held for the Fund in the Custody
Agreement;
(b) at all times retain against the Depository any and all rights
provided the Custodian, whether such rights be provided by
applicable law, governmental rules or regulations, rules and
regulations of the Depository, or otherwise, including but not
limited to, the right to recover from the Depository (for the
benefit of the Fund) for any loss or losses on the part of the
Depository;
(c) from time to time, as the need may arise, to enforce, for the
benefit of the Fund, any and all rights provided the
Custodian, whether such rights be provided by applicable law,
governmental rules or regulations or otherwise, against the
Depository pertaining to any Financial Assets which are the
property of the Custody Account and are deposited by the
Custodian with the Depository;
(d) within ten (10) business days after its receipt of a request
from the Fund, deliver to the Fund the most current report
issued by the Depository pertaining to its system of internal
accounting control; and
(e) make payment for securities purchased and sold through the
clearing medium employed by such Depository for transactions
of participants acting through it. Upon any purchase of
securities, payment will be made only upon delivery of the
securities to or for the account of the Fund; and upon any
sale of securities, delivery of the securities will be made
only against payment therefor.
SECTION 3.3 THE DEPOSITORY ACCOUNT. The Depository account maintained
by the Custodian and receiving Financial Assets which have been recorded by the
Custodian as held for the Custody Account, shall hold only Financial Assets in
which the Custodian has interest only in a fiduciary or agency capacity for
clients and the Financial Assets in such account will not be
September 2000 10 of 17
commingled with the Custodian's own Financial Assets.
SECTION 3.4 CERTAIN CONDITIONS. Any Financial Assets held by the
Custodian for the benefit of the Fund pursuant hereto (including those Financial
Assets held in a Depository) shall be considered by the parties hereto, and
shall be at all times, the sole, absolute property of the Fund, and for purposes
of this Agreement, shall be considered part of the Financial Assets held and
maintained in the Custody Account.
SECTION 3.5 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Instructions from the Fund establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities (including securities maintained in an
account by the Custodian pursuant to Section 3.2. hereof):
(a) in accordance with the provisions of any agreement among the
Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the NASD (or
any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the
Fund,
(b) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund
or commodity futures contracts or options thereon purchased or
sold by the Fund,
(c) for the purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts
by registered investment companies, and
(d) for other proper corporate purposes.
SECTION 4 PUT OPTIONS. Notwithstanding any provision hereunder to the
contrary, with respect to Financial Assets which possess so-called put options
or similar characteristics which grant the Fund the option to redeem such
Financial Assets prior to their maturity date ("Put Options Securities")
including, but not limited to so-called put bonds, the following shall apply:
(a) with respect to put options which are exercisable
semi-annually, or less frequently than semi-annually, and
where such Put Option Financial Assets is actually delivered
to the Custodian not less than fifteen (15) business days
prior to the put option exercise date, the Custodian shall use
its reasonable best efforts to notify the Fund of such put
option, where correct and timely notification is published in
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the publications or services ("Notification Sources") the
Custodian routinely uses for this purpose, or as to which the
Custodian receives timely notice from the Fund;
(b) once notified, the Fund must direct the exercise or
non-exercise of such put option by Letter delivered to the
Custodian not less than five (5) business days prior to the
put option exercise date, and if the Fund fails to make such
direction, the Custodian shall not exercise such put option;
and
(c) for purposes of this Section 3: a "business day" is a day on
which the Custodian is open for business under the laws of the
State of New York; the notification sources include, but are
not limited to, X.X. Xxxxxx, THE WALL STREET JOURNAL and/or
DTC, and the Custodian reserves the right to utilize
commercially acceptable other notification sources or
discontinue any of the aforementioned notification sources at
any time and without notice; and
(d) the Custodian shall not notify the Fund of put options
exercisable more frequently than semi-annually.
SECTION 5 BULK HOLDING. The Custodian may hold the Financial Assets of
the Fund in its own vault, separate from its own Financial Assets in bulk with
Financial Assets of the same class and the same issue of other of its own
fiduciary and agency customers; PROVIDED THAT: the Financial Assets in such bulk
shall be adequately identified as belonging to the Fund on the records of the
Custodian.
SECTION 6 THE CUSTODIAN. The Fund and the Custodian agree that the
Custodian in carrying out the provisions of this Agreement, including but not
limited to the purchase of any Financial Assets for deposit into, or the selling
or delivering of any Financial Assets held and maintained in, the Custody
Account, is acting solely as the agent of the Fund. Unless the Custodian shall
otherwise agree in writing, the Custodian shall not have the duty to take any
action other than those actions expressly set forth herein or those actions
necessary and advisable to accomplish such expressly set forth actions. The
Custodian is hereby expressly authorized to execute in the name of the Fund such
certificates as may be necessary to obtain payment with respect to, or to effect
the sale, transfer or other disposition of any Financial Assets held in the
Custody Account in accordance with the Fund's instructions. In carrying out the
purchase or sale of any Financial Assets hereunder, the Custodian may, upon
receipt of the Fund's instructions, purchase from or sell to the Custodian's
bond department or an affiliate of the Custodian.
SECTION 7 GENERAL.
SECTION 7.1 WAIVER; AMENDMENTS. Except as otherwise provided in Section
2.3.12, no delay on the part of the Fund or the Custodian in the exercise of any
right, power or remedy shall operate as a waiver thereof, nor shall any single
or partial exercise by the Fund or the Custodian of any right, power or remedy
preclude other or further exercise thereof, or the
September 2000 12 of 17
exercise of any other right, power or remedy. No amendment, modification or
waiver of, or consent with respect to, any provision of this Agreement, shall in
any event be effective unless the same shall be in writing and signed and
delivered by each of the Custodian and the Fund.
SECTION 7 .2 NOTICE. Notices with respect to termination, any disputes
hereunder, specification of authorized officers and employees, and terms and
conditions for instructions required hereunder, shall be in writing, and shall
be deemed to have been duly given if delivered personally, by courier service or
by mail, postage prepaid, to the following addresses (or to such other address
as either party hereto may from time to time designate by notice duly given in
accordance with this paragraph):
To the Fund at:
State Farm Mutual Fund Trust
Three Xxxxx Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
To Custodian, to the attention of the individual designated by
Custodian as the safekeeping account administrator for Fund's account, at:
The Chase Manhattan Bank
North American Insurance Securities Services
3 Chase XxxxxXxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
SECTION 7.3 COMPUTATIONS. Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable, be made in accordance with generally accepted accounting
principles.
SECTION 7.4 HEADINGS. Section headings used in this Agreement are for
convenience only, and shall not effect the construction of this Agreement.
SECTION 7.5 GOVERNING LAW. This Agreement shall be a contract made
under and governed by the internal laws of the State of New York including the
Uniform Commercial Code.
SECTION 7.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Fund and the Custodian individually and each of their respective
successors and assigns, and shall inure to the benefit of the Fund and the
Custodian and the respective successors and assigns of the Fund and the
Custodian; PROVIDED that, the Custodian may not assign or transfer this
Agreement or delegate any of its duties hereunder except as permitted herein,
without the prior
September 2000 13 of 17
written consent of the Fund.
SECTION 7.7 INTEGRATION; COURSE OF DEALING. This Agreement constitutes
the sole agreement of the parties with respect to the subject matter hereof and
supersedes all oral negotiations and prior writings with respect to the subject
matter hereof.
SECTION 7.8 TERMINATION. This Agreement shall terminate 90 days after
the receipt by the Custodian or the Fund, or such mutually agreed date as the
case may be, of written notice from the Custodian or the Fund terminating this
Agreement.
SECTION 7.9 CERTAIN NOTICES BY THE FUND AND THE CUSTODIAN. The Fund
agrees to promptly notify the Custodian of any material change in its
organization or any reorganization by it. The Custodian shall notify the Fund of
any changes in its organization which affect its ability to do business as a
banking corporation.
SECTION 7.10 CERTAIN REPRESENTATIONS BY THE FUND AND THE CUSTODIAN. (a)
The Fund herewith promises to the Custodian that (i) all instructions and
confirmations given hereunder shall be given and are given pursuant to
authorizations contained or to be contained in resolutions of its Board of
Directors and by persons authorized by such resolutions to give the same, and
(ii) it shall from time to time furnish the Custodian with certified copies of
such resolutions upon which it may rely for the authorizations contained therein
until otherwise notified in writing of a change thereto. (b) The Custodian
herewith promises to the Fund that (i) it has the full power and authority to
perform its obligations hereunder, (ii) this Agreement constitutes its legal,
valid and binding obligation enforceable in accordance with its terms and (iii)
it has taken all necessary action to authorize the execution and delivery
hereof.
SECTION 7.11 TAXPAYER IDENTIFICATION NUMBER. The taxpayer
identification numbers of the Funds are listed in Exhibit A. Unless Fund has
already done so, as a U.S. citizen or resident, it shall deliver promptly to
Custodian with respect to the Custody Account established under this Agreement,
two duly completed and executed copies of United States Internal Revenue Service
form W-9 for the Fund. Fund shall provide duly executed and completed updates of
such form after the occurrence of an event requiring a change in the form
previously delivered by Fund to Custodian. The Fund shall be responsible for the
payment of all taxes relating to the Financial Assets in the Custody Account.
SECTION 7.12 EXPENSES AND TAXES. The Fund agrees to pay, and to save
the Custodian harmless from all liability, for any taxes which may be payable in
connection with the Financial Assets and any proceeds generated by Financial
Assets and any other property of the Fund purchased or held and maintained
hereunder. All obligations provided for in this subsection 7.12, and in
subsection 7.13 hereof, shall survive any termination of this Agreement.
SECTION 7.13 FEES. For and in consideration of the Custodian acting as
the custodian and the agent of the Fund pursuant to the terms herein contained,
the Fund agrees to pay to the
September 2000 14 of 17
Custodian fees for such services as mutually agreed upon by the parties hereto
and as set forth in Exhibit F hereto. Such agreed upon fees may from time to
time be modified by the Custodian pursuant to its notice to the Fund effective
no less than 90 days following the Fund's receipt of such notice. To the extent
that Custodian advances funds to the Custody Account for disbursements or to
effect the settlement of purchase transactions, the Custodian shall be entitled
to collect from the Custody Account an amount equal to The Chase Manhattan
Bank's Prime Rate in effect as announced by it from time to time, unless the
Fund and Custodian have agreed in writing to another interest rate.
SECTION 7.14 HOLD HARMLESS. The Fund agrees to indemnify and hold the
Custodian harmless from and against all claims, losses, liabilities and
expenses, including without limitation, reasonable legal fees and expenses,
arising from any claim of any party arising or resulting from actions the
Custodian takes that are required by this Agreement; provided that the Custodian
shall have acted in good faith and in accordance with the commercial standard of
care for Money Center banks which offer custodial services.
SECTION 7.15 FORCE MAJEURE. Neither the Custodian nor the Fund shall be
responsible for its failure to carry out its responsibilities hereunder where
such failure is caused by circumstances reasonably beyond the control of the
parties so affected including but not limited to, acts of God, war, internal
strife and acts of government.
SECTION 7.16 DISCLAIMER OF LIABILITY. UNDER NO CIRCUMSTANCES WHATSOEVER
SHALL EITHER PARTY BE RESPONSIBLE TO THE OTHER PARTY FOR ANY INCIDENTAL,
SPECIAL, CONSEQUENTIAL, OR INDIRECT DAMAGES OF ANY KIND WHATSOEVER, PROVIDED THE
PARTY AGAINST WHOM THE DAMAGES ARE CLAIMED HAS NOT ACTED IN BAD FAITH OR ENGAGED
IN WILLFUL MISCONDUCT; AND, PROVIDED FURTHER, THAT ANY INDEMNITY CLAIM BY THE
CUSTODIAN UNDER SECTION 7.14 SHALL CONSTITUTE A DIRECT DAMAGES CLAIM AND SHALL
NOT BE SUBJECT TO THE LIMITATION SET FORTH HEREIN.
SECTION 7.17 STANDARD OF CARE. The Custodian expressly agrees that in
carrying out its responsibilities hereunder it shall be responsible for damages,
except as limited by Section 3.1, the Fund suffers as a result of Custodian's,
its employees' and agents' negligence, willful misconduct or failure to act in
good faith and in accordance with the commercial standard of care for Money
Center banks which offer custodial services. The Custodian shall not be
responsible for the title, validity or genuineness of any property or evidence
of title thereto received by it or delivered by it pursuant to this Agreement.
The Custodian shall be held harmless in acting upon any Letter, Notice, request,
direction, instruction, consent, certification or other instrument believed by
it, acting in good faith, to be genuine and delivered by an authorized officer
of Fund.
SECTION 7.18 EXHIBITS. The parties agree that any exhibits attached
hereto may be modified effective upon written notice from the Fund to the
Custodian. Any such modified
September 2000 15 of 17
exhibit shall be and is hereby deemed to be the exhibit (indicated in such
written notice) to this Agreement.
SECTION 7.19 NONDISCLOSURE, CONFIDENTIALITY. The Custodian expressly
agrees that it shall not use the name of, nor identify, the Fund or any of its
subsidiaries in any of the Custodian's media or other advertising distributed by
the Custodian to its customers or potential customers.
The Custodian shall maintain the confidentiality of the Fund's Custody
Account information and not disclose any such information except as permitted by
this Agreement or as required by laws, rules, regulations or orders having the
force of law, but only after notice to Fund.
The Shareholders Communications Act of 1985 and subsequent amendments
to the act authorize Custodian to release to issuers of Securities and to other
security holders of an issue, Fund name, address and Securities position if Fund
Custody Account was opened after December 28, 1985, unless Fund states its
objection. Custodian hereby acknowledges Fund's objection.
SECTION 7.20 "FREE RIDING" PROHIBITION. Fund hereby acknowledges that
the act of placing a buy order and sale order for the same securities which are
to settle on the same date in instances where Fund does not have in the Custody
Account sufficient funds independent of the sale of such securities to satisfy
fifty percent (50%) or more of the purchase price (or such other percentage as
may be required by applicable law and regulation) constitutes the practice
commonly known as "free riding" and is prohibited under both Regulation T and
Regulation U of the Board of Governors of the Federal Reserve System (12 C.F.R.
Parts 220 and 221).
SECTION 7.21 FUND RESPONSIBILITY. Fund agrees that it shall be
responsible to Custodian as a principal for all of its obligations to Custodian
arising under or in connection with this Agreement, and Fund warrants its
authority to deposit in the Custody Account any Financial Assets and funds which
Custodian receives therefor and to give instructions relative thereto. Fund
further agrees that Custodian shall not be subject to, nor shall its right and
obligations with respect to this Agreement and the Custody Account be affected
by, any agreement between Fund and any such person.
SECTION 7.22 BINDING OBLIGATION AND LIMITATION OF LIABILITY. It is
expressly understood that the obligations of the Fund under this Agreement will
not be binding on any of the Directors, shareholders, nominees, officers, agents
or employees of the Fund personally, but bind only the assets and property of
the Fund.
Custodian agrees that no Director, shareholder, nominee, officer, agent
or employee of the Fund may be held personally liable or responsible for any
obligations of the Fund arising out of this Agreement.
September 2000 16 of 17
SECTION 7.23 RESERVATION OF RIGHT. Custodian shall have the right not
to accept for deposit to the Custody Account any Financial Assets which are in a
form or condition which Custodian, in its sole discretion, determines not to be
suitable for the services Custodian provides under this Agreement.
Custodian's and Fund's rights and remedies under this Agreement are in
addition to, and not in limitation of, any other rights and remedies available
to Custodian and Fund under applicable law.
SECTION 7.24 CUSTODIAN'S ANNUAL REPORT. Upon the Fund's request,
Custodian will send the annual report (SAS 70 Report) prepared by its external
auditors on its systems of internal accounting control of custodied Financial
Assets. In addition, the Custodian shall allow the Fund's independent public
accountant reasonable access to the records of the Custodian relating to the
Financial Assets as is required in connection with their examination of books
and records pertaining to the Fund's affairs.
SECTION 7.25 . SEVERAL OBLIGATIONS OF THE PORTFOLIOS. This Agreement is an
agreement entered into between the Custodian and the Trust with respect to each
portfolio listed in Exhibit A. With respect to any obligation of the Trust on
behalf of any portfolio arising out of this Agreement, the Custodian shall look
for payment or satisfaction of such obligation solely to the assets of the
portfolio to which such obligation relates as though the Custodian had
separately contracted with the Trust by separate written instrument with respect
to each portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers effective as of the day
and year first written above.
State Farm Mutual Fund Trust
By: /s/ Xxxxxx X. Xxxx, Xx.
-----------------------
Name: Xxxxxx X. Xxxx, Xx.
Title: President
The Chase Manhattan Bank
By: /s/ Xxxxx X. Xxxxxx
-------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
September 2000 17 of 17
Exhibit A
Trust Portfolios Included in this Agreement and
Corresponding Taxpayer Identification Number
State Farm Equity Fund 00-0000000
State Farm Small Cap Equity Fund 00-0000000
State Farm Equity and Bond Fund 00-0000000
State Farm Tax Advantaged Bond Fund 00-0000000
State Farm Bond Fund 00-0000000
State Farm Money Market Fund 00-0000000
September 2000 18 of 17
Exhibit C
State Farm Mutual Fund Trust
Custody Accounts at Chase Manhattan Bank
Account
Number
-------
State Farm Equity Fund
State Farm Small Cap Equity Fund
State Farm Equity and Bond Fund
State Farm Tax Advantaged Bond Fund
State Farm Bond Fund
State Farm Money Market Fund
September 2000 19 of 17
