EXHIBIT 7(a)
AMENDED AND RESTATED CUSTODIAN AGREEMENT
This Agreement between USAA MUTUAL FUND, INC. a corporation organized and
existing under the laws of the State of Maryland (the "FUND"), and STATE STREET
BANK and TRUST COMPANY, a Massachusetts trust company (the "CUSTODIAN").
WITNESSETH:
WHEREAS, the Fund and the Custodian entered into a Custodian Agreement
dated as of November 3, 1992 (as amended and in effect from time to time, the
"Contract");
WHEREAS, the Fund and the Custodian desire to replace such existing
Custodian Agreement with this Amended and Restated Custodian Agreement;
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends that this Agreement be applicable to fifteen
(15) series, USAA FEDERAL SECURITIES MONEY MARKET FUND, USAA GROWTH FUND, USAA
INCOME FUND, USAA MONEY MARKET FUND, USAA AGGRESSIVE GROWTH FUND, USAA SHORT
TERM BOND FUND, USAA GROWTH AND INCOME FUND, USAA SCIENCE & TECHNOLOGY FUND,
USAA FIRST START GROWTH FUND, USAA INTERMEDIATE-TERM BOND FUND, USAA HIGH-YIELD
OPPORTUNITIES FUND, USAA SMALL CAP STOCK FUND, USAA CAPITAL GROWTH FUND, USAA
GLOBAL TITANS INDEX FUND AND NASDAQ-100 INDEX FUND, (such series together with
all other series subsequently established by the Fund and made subject to this
Agreement in accordance with Section 18, be referred to herein as the
"PORTFOLIO(S)").
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as a custodian of certain assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("DOMESTIC SECURITIES") and securities it desires to be held outside the United
States ("FOREIGN SECURITIES"). The Fund on behalf of the Portfolio(s) shall
deliver to the Custodian certain securities and cash of the Portfolios, and
certain payments of income, payments of principal or capital distributions
received by it with respect to certain securities owned by the Portfolio(s)
from time to time, and certain cash consideration received by it for such new
or treasury shares of beneficial interest of the Fund representing interests in
the Portfolios ("SHARES") as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Portfolio and not delivered to the Custodian.
Upon receipt of "PROPER INSTRUCTIONS" (as such term is defined in Section 6
hereof), the Custodian shall on behalf of the applicable Portfolio(s) from time
to time employ one or more sub-custodians located in the United States, but
only in accordance with an applicable vote by the Board of Directors of the
Fund (the "BOARD") on behalf of the applicable Portfolio(s). The
Custodian may employ as sub-custodian for the Fund's foreign securities on
behalf of the applicable Portfolio(s) the foreign banking institutions and
foreign securities depositories designated in Schedules A and B hereto but only
in accordance with the applicable provisions of Sections 3 and 4. The Custodian
shall have no more or less responsibility or liability to the Fund on account
of any actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
BY THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held
by it in the United States, including all domestic securities owned by such
Portfolio other than securities which are maintained pursuant to Section 2.8 in
a clearing agency which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury (each, a "U.S.
SECURITIES SYSTEM").
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian only upon receipt of Proper
Instructions on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and only in the following
cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.8 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
the Portfolio or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.7 or into the name or nominee name of any
sub-custodian appointed pursuant to Section 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
PROVIDED that, in any such case, the new securities are to be
delivered to the Custodian;
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7) Upon the sale of such securities for the account of the Portfolio, to
the broker or its clearing agent, against a receipt, for examination
in accordance with "street delivery" custom; provided that in any
such case, the Custodian shall have no responsibility or liability
for any loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from the
Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, BUT ONLY against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Fund on behalf of the
Portfolio, which may be in the form of cash or obligations issued by
the United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is to
be credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the Custodian will
not be held liable or responsible for the delivery of securities
owned by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowing by the Fund
on behalf of the Portfolio requiring a pledge of assets by the Fund
on behalf of the Portfolio, BUT ONLY against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of 1934
(the "EXCHANGE ACT") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian, and a futures
commission merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures
Trading Commission ("CFTC") and/or any contract market, or any
similar organization or organizations, regarding account deposits in
connection with transactions by the Portfolio of the Fund;
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14) Upon receipt of instructions from the transfer agent for the Fund
(the "TRANSFER AGENT") for delivery to such Transfer Agent or to the
holders of Shares in connection with distributions in kind, as may be
described from time to time in the currently effective prospectus and
statement of additional information of the Fund related to the
Portfolio (the "PROSPECTUS"), in satisfaction of requests by holders
of Shares for repurchase or redemption; and
15) For any other proper purpose, BUT ONLY upon receipt of Special
Instructions from the Fund on behalf of the applicable Portfolio
specifying the securities of the Portfolio to be delivered, setting
forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person
or persons to whom delivery of such securities shall be made.
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, UNLESS the Fund has authorized in writing the appointment of
a nominee to be used in common with other registered investment companies
having the same investment adviser as the Portfolio, or in the name or nominee
name of any agent appointed pursuant to Section 2.7 or in the name or nominee
name of any sub-custodian appointed pursuant to Section 1. All securities
accepted by the Custodian on behalf of the Portfolio under the terms of this
Agreement shall be in "street name" or other good delivery form. [If, however,
the Fund directs the Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely collect income due the
Fund on such securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.]
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended (the "1940 ACT"). Funds held by the
Custodian for a Portfolio may be deposited by it to its credit as Custodian in
the banking department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable; PROVIDED,
however, that every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act and that each such bank or trust company and the
funds to be deposited with each such bank or trust company shall on behalf of
each applicable Portfolio be approved by vote of a majority of the Board. Such
funds shall be deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. [Subject to the provisions of Section
2.3,] the Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
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other payments with respect to bearer domestic securities if, on the date of
payment by the issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to such Portfolio's
custodian account. Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due each Portfolio on
securities loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or responsibility
in connection therewith, other than to provide the Fund with such information
or data as may be necessary to assist the Fund in arranging for the timely
delivery to the Custodian of the income to which the Portfolio is properly
entitled.
SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions on
behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of title
to such options, futures contracts or options on futures contracts to
the Custodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under the
1940 Act to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name of
the Portfolio or in the name of a nominee of the Custodian referred
to in Section 2.3 hereof or in proper form for transfer; (b) in the
case of a purchase effected through a U.S. Securities System, in
accordance with the conditions set forth in Section 2.8 hereof; (c)
in the case of repurchase agreements entered into between the Fund on
behalf of the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery of the
securities either in certificate form or through an entry crediting
the Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the Custodian along
with written evidence of the agreement by the Custodian to repurchase
such securities from the Portfolio; or (d) for transfer to a time
deposit account of the Fund in any bank, whether domestic or foreign;
such transfer may be effected prior to receipt of a confirmation from
a broker and/or the applicable bank pursuant to Proper Instructions
from the Fund as defined herein;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued as set forth in
Section 5 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments for
the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses of
the Fund whether or not such expenses are to be in whole
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or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short; and
7) For any other proper purpose, BUT ONLY upon receipt of Special
Instructions from the Fund on behalf of the Portfolio specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such
payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or times
in its discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the 1940 Act to act as a custodian, as
its agent to carry out such of the provisions of this Section 2 as the
Custodian may from time to time direct; PROVIDED, however, that the appointment
of any agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S.
Securities System subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented in an
account of the Custodian in the U.S. Securities System (the "U.S.
SECURITIES SYSTEM ACCOUNT") which account shall not include any
assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. Securities
System that such securities have been transferred to the U.S.
Securities System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon (i) receipt of advice from
the U.S. Securities System that payment for such securities has been
transferred to the U.S. Securities System Account, and (ii) the
making of an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Portfolio. Copies of all
advices from the U.S. Securities System of transfers of securities
for the account of the Portfolio shall identify the Portfolio, be
maintained for the Portfolio by the
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Custodian and be provided to the Fund at its request. Upon request,
the Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio
in the form of a written advice or notice and shall furnish to the
Fund on behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities System for
the account of the Portfolio;
4) The Custodian shall provide the Fund with any report obtained by the
Custodian on the U.S. Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from use
of the U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or of
any of its or their employees or from failure of the Custodian or any
such agent to enforce effectively such rights as it may have against
the U.S. Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claim against the U.S. Securities System or any other person
which the Custodian may have as a consequence of any such loss or
damage if and to the extent that the Portfolio has not been made
whole for any such loss or damage.
SECTION 2.9 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions on behalf of each applicable Portfolio establish and maintain a
segregated account or accounts for and on behalf of each such Portfolio, into
which account or accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to Section 2.8
hereof, (i) in accordance with the provisions of any agreement among the Fund
on behalf of the Portfolio, the Custodian and a broker-dealer registered under
the Exchange Act and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered national
securities exchange (or the CFTC or any registered contract market), or of any
similar organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Portfolio, (ii) for purposes of
segregating cash or government securities in connection with options purchased,
sold or written by the Portfolio or commodity futures contracts or options
thereon purchased or sold by the Portfolio, (iii) for the purposes of
compliance by the Portfolio with the procedures required by Investment Company
Act Release No. 10666, or any subsequent release of the SEC, or interpretative
opinion of the staff of the SEC, relating to the maintenance of segregated
accounts by registered investment companies, and (iv) for other proper
corporate purposes, BUT ONLY, in the case of clause (iv), upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio,
setting forth the purpose or purposes of such segregated account and declaring
such purpose(s) to be a proper corporate purpose.
SECTION 2.10 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall
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execute ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in connection
with transfers of securities.
SECTION 2.11 PROXIES. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting materials
and all notices relating to such securities.
SECTION 2.12 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. [Subject to
the provisions of Section 2.3,] the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or its agents) making
the tender or exchange offer. If the Portfolio desires to take action with
respect to any tender offer, exchange offer or any other similar transaction,
the Portfolio shall notify the Custodian at least three business days prior to
the date on which the Custodian is to take such action.
SECTION 3. PROVISIONS RELATING TO RULES 17F-5 AND 17F-7
SECTION 3.1. DEFINITIONS. Capitalized terms in this Section 3 shall have
the following meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment, economic and financial infrastructure
(including any Eligible Securities Depository operating in the country),
prevailing or developing custody and settlement practices, and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held
in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of
Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank
(as defined in Rule 17f-5), a bank holding company meeting the requirements of
an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other
appropriate action of the U.S. Securities and Exchange Commission (the "SEC")),
or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 0000 Xxx)
meeting the requirements of a custodian under Section 17(f) of the 1940 Act;
the term does not include any Eligible Securities Depository.
"Eligible Securities Depository" has the meaning set forth in section (b)(1) of
Rule 17f-7. "Foreign Assets" means any of the Portfolios' investments
(including foreign currencies) for
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which the primary market is outside the United States and such cash and cash
equivalents as are reasonably necessary to effect the Portfolios' transactions
in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule
17f-5.
"Rule 17f-5" means Rule 17f-5 promulgated under the 1940 Act.
"Rule 17f-7" means Rule 17f-7 promulgated under the 1940 Act.
SECTION 3.2. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
3.2.1 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The
Fund, by resolution adopted by its Board, hereby delegates to the Custodian,
subject to Section (b) of Rule 17f-5, the responsibilities set forth in this
Section 3.2 with respect to Foreign Assets of the Portfolios held outside the
United States, and the Custodian hereby accepts such delegation as Foreign
Custody Manager with respect to the Portfolios.
3.2.2 COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A to this Contract, which list of countries may be amended
from time to time by the Fund with the agreement of the Foreign Custody
Manager. The Foreign Custody Manager shall list on Schedule A the Eligible
Foreign Custodians selected by the Foreign Custody Manager to maintain the
assets of the Portfolios, which list of Eligible Foreign Custodians may be
amended from time to time in the sole discretion of the Foreign Custody
Manager. The Foreign Custody Manager will provide amended versions of Schedule
A in accordance with Section 3.2.5 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund, on behalf of the Portfolios, of
the applicable account opening requirements for such country, the Foreign
Custody Manager shall be deemed to have been delegated by the Board on behalf
of the Portfolios responsibility as Foreign Custody Manager with respect to
that country and to have accepted such delegation. Execution of this Amendment
by the Fund shall be deemed to be a Proper Instruction to open an account, or
to place or maintain Foreign Assets, in each country listed on Schedule A in
which the Custodian has previously placed or currently maintains Foreign Assets
pursuant to the terms of the Contract. Following the receipt of Proper
Instructions directing the Foreign Custody Manager to close the account of a
Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody
Manager in a designated country, the delegation by the Board on behalf of the
Portfolios to the Custodian as Foreign Custody Manager for that country shall
be deemed to have been withdrawn and the Custodian shall immediately cease to
be the Foreign Custody Manager of the Portfolios with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to
the Fund. Thirty (30) days (or such longer period to which the parties agree in
writing) after receipt of any such notice by the Fund, the
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Custodian shall have no further responsibility as Foreign Custody Manager to
the Fund with respect to the country as to which the Custodian's acceptance of
delegation is withdrawn.
3.2.3 SCOPE OF DELEGATED RESPONSIBILITIES:
(a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions of
this Section 3.2, the Foreign Custody Manager may place and maintain the
Foreign Assets in the care of the Eligible Foreign Custodian selected by the
Foreign Custody Manager in each country listed on Schedule A, as amended from
time to time. In performing its delegated responsibilities as Foreign Custody
Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian,
the Foreign Custody Manager shall determine that the Foreign Assets will be
subject to reasonable care, based on the standards applicable to custodians in
the country in which the Foreign Assets will be held by that Eligible Foreign
Custodian, after considering all factors relevant to the safekeeping of such
assets, including, without limitation the factors specified in Rule
17f-5(c)(1).
(b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody
Manager shall determine that the contract governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
(c) MONITORING. In each case in which the Foreign Custody Manager
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system
to monitor, in accordance with Rule 17f-5(c)(3), (i) the appropriateness of
maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii)
the contract governing the custody arrangements established by the Foreign
Custody Manager with the Eligible Foreign Custodian. In the event the Foreign
Custody Manager determines that the custody arrangements with an Eligible
Foreign Custodian it has selected are no longer appropriate, the Foreign
Custody Manager shall notify the Board in accordance with Section 3.2.5
hereunder.
3.2.4 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3.2, the Foreign Custody Manager shall not be
responsible for such Country Risk as is incurred by placing and maintaining the
Foreign Assets in each country for which the Custodian is serving as Foreign
Custody Manager of the Portfolios.
3.2.5 REPORTING REQUIREMENTS. The Foreign Custody Manager shall
report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian
and the placement of such Foreign Assets with another Eligible Foreign
Custodian by providing to the Board an amended Schedule A at the end of the
calendar quarter in which an amendment to such Schedule has occurred. The
Foreign Custody Manager shall make written reports notifying the Board of any
other material change in the foreign custody arrangements of the Portfolios
described in this Section 3.2 after the occurrence of the material change.
3.2.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A PORTFOLIO. In
performing the responsibilities delegated to it, the Foreign Custody Manager
agrees to exercise
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reasonable care, prudence and diligence such as a person having responsibility
for the safekeeping of assets of management investment companies registered
under the 1940 Act would exercise.
3.2.7 REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The Foreign Custody
Manager represents to the Fund that (i) it is a U.S. Bank as defined in section
(a)(7) of Rule 17f-5 (ii) that each institution listed on Schedule A is an
Eligible Foreign Custodian and (iii) each institution listed in Schedule B is
an Eligible Securities Depository. The Fund represents to the Custodian that
the Board has determined that it is reasonable for the Board to rely on the
Custodian to perform the responsibilities delegated pursuant to this Contract
to the Custodian as the Foreign Custody Manager of the Portfolios.
3.2.8 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN
CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign Custody
Manager of the Portfolios shall be effective as of the date hereof and shall
remain in effect until terminated at any time, without penalty, by written
notice from the terminating party to the non-terminating party. Termination
will become effective thirty (30) days after receipt by the non-terminating
party of such notice. The provisions of Section 3.2.2 hereof shall govern the
delegation to and termination of the Custodian as Foreign Custody Manager of
the Portfolios with respect to designated countries.
SECTION 3.3 ELIGIBLE SECURITIES DEPOSITORIES.
3.3.1 ANALYSIS AND MONITORING. The Custodian shall (a) provide the
Fund (or its duly-authorized investment manager or investment adviser or
sub-adviser, as identified in Proper Instructions by the Board) with an
analysis of the custody risks associated with maintaining assets with the
Eligible Securities Depositories set forth on Schedule B hereto in accordance
with Rule 17f-7(a)(1)(i)(A), and (b) monitor such risks on a continuing basis,
and promptly notify the Fund (or its duly-authorized investment manager or
investment adviser) of any material change in such risks, in accordance with
Rule 17f-7(a)(1)(i)(B).
3.3.2 STANDARD OF CARE. The Custodian agrees to exercise reasonable
care, prudence and diligence in performing the duties set forth in Section
3.3.1.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS
HELD OUTSIDE THE UNITED STATES
SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4 shall have
the following meanings:
"Foreign Securities System" means an Eligible Securities Depository listed on
Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.
11
SECTION 4.2. HOLDING SECURITIES. The Custodian shall identify on its books
as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian
for the benefit of its customers, provided however, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in
which the account is maintained, the Custodian shall require that securities so
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country through
arrangements implemented by the Custodian or a Foreign Sub-Custodian, as
applicable, in such country.
SECTION 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities
System account, only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:
(i) upon the sale of such foreign securities for the Portfolio in
accordance with commercially reasonable market practice in the
country where such foreign securities are held or traded, including,
without limitation: (A) delivery against expectation of receiving
later payment; or (B) in the case of a sale effected through a
Foreign Securities System, in accordance with the rules governing the
operation of the Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other similar
offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign securities are
called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of
the Custodian (or the name of the respective Foreign Sub-Custodian or
of any nominee of the Custodian or such Foreign Sub-Custodian) or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units;
(vi) to brokers, clearing banks or other clearing agents for examination
or trade execution in accordance with market custom; provided that in
any such case the
12
Foreign Sub-Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from the
Foreign Sub-Custodian's own negligence or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement;
(viii)in the case of warrants, rights or similar foreign securities, the
surrender thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by the
Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts, including
delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other purpose, but only upon receipt of Proper Instructions
specifying the foreign securities to be delivered and naming the
person or persons to whom delivery of such securities shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out, or direct the respective Foreign
Sub-Custodian or the respective Foreign Securities System to pay out, monies of
a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio, unless
otherwise directed by Proper Instructions, by (A) delivering money to
the seller thereof or to a dealer therefor (or an agent for such
seller or dealer) against expectation of receiving later delivery of
such foreign securities; or (B) in the case of a purchase effected
through a Foreign Securities System, in accordance with the rules
governing the operation of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of foreign
securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest, taxes,
investment advisory fees, transfer agency fees, fees under this
Contract, legal fees, accounting fees, and other operating expenses;
13
(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Portfolio, including transactions executed with or
through the Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts, including
delivery as original margin and variation margin;
(vi) for payment of part or all of the dividends received in respect of
securities sold short;
(vii) in connection with the borrowing or lending of foreign securities; and
(viii)for any other purpose, but only upon receipt of Proper Instructions
specifying the amount of such payment and naming the person or persons
to whom such payment is to be made.
4.4.3. MARKET CONDITIONS. Notwithstanding any provision of this
Contract to the contrary, settlement and payment for Foreign Assets received
for the account of the Portfolios and delivery of Foreign Assets maintained for
the account of the Portfolios may be effected in accordance with the customary
established securities trading or processing practices and procedures in the
country or market in which the transaction occurs, including, without
limitation, delivering Foreign Assets to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) with the expectation of
receiving later payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to each Portfolio's adviser (an sub-adviser, where
applicable), as identified in Proper Instructions by the Board, the information
with respect to custody and settlement practices in countries in which the
Custodian employs a Foreign Sub-Custodian, including without limitation
information relating to Foreign Securities Systems, described on Schedule C
hereto at the time or times set forth on such Schedule. The Custodian may
revise Schedule C from time to time, provided that no such revision shall
result in the Board being provided with substantively less information than had
been previously provided hereunder.
SECTION 4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Sub-Custodian (other than bearer
securities) shall be registered in the name of the applicable Portfolio or in
the name of the Custodian or in the name of any Foreign Sub-Custodian or in the
name of any nominee of the foregoing, and the Fund on behalf of such Portfolio
agrees to hold any such nominee harmless from any liability as a holder of
record of such foreign securities. The Custodian or a Foreign Sub-Custodian
shall not be obligated to accept securities on behalf of a Portfolio under the
terms of this Contract unless the form of such securities and the manner in
which they are delivered are in accordance with reasonable market practice.
SECTION 4.6 BANK ACCOUNTS. The Custodian shall identify on its books as
belonging to the Fund cash (including cash denominated in foreign currencies)
deposited with the Custodian. Where the Custodian is unable to maintain, or
market practice does not facilitate the
14
maintenance of, cash on the books of the Custodian, a bank account or bank
accounts shall be opened and maintained outside the United States on behalf of
a Portfolio with a Foreign Sub-Custodian. All accounts referred to in this
Section shall be subject only to draft or order by the Custodian (or, if
applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this
Agreement to hold cash received by or from or for the account of the Portfolio.
Cash maintained on the books of the Custodian (including its branches,
subsidiaries and affiliates), regardless of currency denomination, is
maintained in bank accounts established under, and subject to the laws of, The
Commonwealth of Massachusetts.
SECTION 4.7. COLLECTION OF INCOME. The Custodian shall use reasonable
commercial efforts to collect all income and other payments with respect to the
Foreign Assets held hereunder to which the Portfolios shall be entitled and
shall credit such income, as collected, to the applicable Portfolio In the
event that extraordinary measures are required to collect such income, the Fund
and the Custodian shall consult as to such measures and as to the compensation
and expenses of the Custodian relating to such measures.
SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities
held pursuant to this Section 4, the Custodian will use reasonable commercial
efforts to facilitate the exercise of voting and other shareholder rights,
subject always to the laws, regulations and practical constraints that may
exist in the country where such securities are issued. The Fund acknowledges
that local conditions, including lack of regulation, onerous procedural
obligations, lack of notice and other factors may have the effect of severely
limiting the ability of the Fund to exercise shareholder rights.
SECTION 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian
shall transmit promptly to the Fund written information with respect to
materials received by the Custodian via the Foreign Sub-Custodians from issuers
of the foreign securities being held for the account of the Portfolios
(including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith). With respect to
tender or exchange offers, the Custodian shall transmit promptly to the Fund
written information with respect to materials so received by the Custodian from
issuers of the foreign securities whose tender or exchange is sought or from
the party (or its agents) making the tender or exchange offer. The Custodian
shall not be liable for any untimely exercise of any tender, exchange or other
right or power in connection with foreign securities or other property of the
Portfolios at any time held by it unless (i) the Custodian or the respective
Foreign Sub-Custodian is in actual possession of such foreign securities or
property and (ii) the Custodian receives Proper Instructions with regard to the
exercise of any such right or power, and both (i) and (ii) occur at least three
business days prior to the date on which the Custodian is to take action to
exercise such right or power.
SECTION 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant
to which the Custodian employs a Foreign Sub-Custodian shall, to the extent
possible, require the Foreign Sub-Custodian to exercise reasonable care in the
performance of its duties, and to indemnify, and hold harmless, the Custodian
from and against any loss, damage, cost, expense, liability or claim arising
out of or in connection with the Foreign Sub-Custodian's performance of such
obligations. At the Fund's election, the Portfolios shall be entitled to be
subrogated to the
15
rights of the Custodian with respect to any claims against a Foreign
Sub-Custodian as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Portfolios have not been made
whole for any such loss, damage, cost, expense, liability or claim.
SECTION 4.11 TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund, the
Portfolios or the Custodian as custodian of the Portfolios by the tax law of
the United States or of any state or political subdivision thereof. Except for
taxes attributable to the domicile of the Custodian in Massachusetts, of which
the Custodian will notify the Fund, it shall be the responsibility of the Fund
to notify the Custodian of the obligations imposed on the Fund with respect to
the Portfolios or the Custodian as custodian of the Portfolios by the tax law
of countries other than those mentioned in the above sentence, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption
or refund under the tax law of countries for which the Fund has provided such
information.
SECTION 4.12. LIABILITY OF CUSTODIAN. Except as may arise from the
Custodian's own negligence or willful misconduct or the negligence or willful
misconduct of a Foreign Sub-Custodian, the Custodian shall be without liability
to the Fund for any loss, liability, claim or expense resulting from or caused
by anything which is part of Country Risk.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian to the same extent as set forth with respect to sub-custodians
generally in the Contract and, regardless of whether assets are maintained in
the custody of a Foreign Sub-Custodian or a Foreign Securities System, the
Custodian shall not be liable for any loss, damage, cost, expense, liability or
claim resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism, or any other loss where the Sub-Custodian has
otherwise acted with reasonable care.
SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent and deposit into the account of the appropriate Portfolio such
payments as are received for Shares thereof issued or sold from time to time by
the Fund. The Custodian will provide timely notification to the Fund on behalf
of each such Portfolio and the Transfer Agent of any receipt by it of payments
for Shares of such Portfolio.
From such funds as may be available for the purpose, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the
16
Custodian in accordance with such procedures and controls as are mutually
agreed upon from time to time between the Fund and the Custodian.
SECTION 6. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Agreement means a writing signed or
initialed by one or more person or persons as the Board shall have from time to
time authorized. Each such writing shall set forth the specific transaction or
type of transaction involved, including a specific statement of the purpose for
which such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in
writing. Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Fund and the
Custodian agree to security procedures, including but not limited to, the
security procedures selected by the Fund in the Funds Transfer Addendum
attached hereto. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in accordance with Section
2.10.
Special Instructions as used throughout this Agreement means Proper
Instructions executed by at least two officers of the Fund holding the office
of Vice President or higher.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the Fund on
behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Agreement, PROVIDED that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board.
SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Fund ("CERTIFIED
17
RESOLUTION") as conclusive evidence (a) of the authority of any person to act
in accordance with such resolution or (b) of any determination or of any action
by the Board as described in such resolution, and such resolution may be
considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board to keep the books of account of each
Portfolio and/or compute the net asset value per Share of the outstanding
Shares or, if directed in writing to do so by the Fund on behalf of the
Portfolio, shall itself keep such books of account and/or compute such net
asset value per Share. If so directed, the Custodian shall also calculate daily
the net income of the Portfolio as described in the Prospectus and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per Share and the
daily income of each Portfolio shall be made at the time or times described
from time to time in the Prospectus.
SECTION 10. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Agreement in such
manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder. All such records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian be open for inspection
by duly authorized officers, employees or agents of the Fund and employees and
agents of the SEC. The Custodian shall, at the Fund's request, supply the Fund
with a tabulation of securities owned by each Portfolio 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.
SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of each
applicable Portfolio may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with respect to its
activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the SEC and with respect to any
other requirements thereof.
SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the Portfolios at
such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on
futures contracts, including securities deposited and/or maintained in a U.S.
18
Securities System or a Foreign Securities System, relating to the services
provided by the Custodian 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.
SECTION 13. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services and
expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
SECTION 14. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care, the
Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon any
notice, request, consent, certificate or other instrument reasonably believed
by it to be genuine and to be signed by the proper party or parties, including
any futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled
to rely on and may act upon advice of counsel (who may be counsel for the Fund)
on all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. The Custodian shall be without liability to
the Fund and the Portfolios for any loss, liability, claim or expense resulting
from or caused by anything which is (A) part of Country Risk (as defined in
Section 3 hereof), including without limitation nationalization, expropriation,
currency restrictions, or acts of war, revolution, riots or terrorism, or (B)
part of the "prevailing country risk" of the Portfolios, as such term is used
in SEC Release Nos. IC-22658; IS-1080 (May 12, 1997) or as such term or other
similar terms are now or in the future interpreted by the SEC or by the staff
of the Division of Investment Management thereof.
Except as may arise from the Custodian's own negligence or willful misconduct
or the negligence or willful misconduct of a sub-custodian or agent, the
Custodian shall be without liability to the Fund for any loss, liability, claim
or expense resulting from or caused by; (i) events or circumstances beyond the
reasonable control of the Custodian or any sub-custodian or Securities System
or any agent or nominee of any of the foregoing, including, without limitation,
the interruption, suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological failures or
interruptions, computer viruses or communications disruptions, work stoppages,
natural disasters, or other similar events or acts; (ii) errors by the Fund or
the Investment Advisor in their instructions to the Custodian provided such
instructions have been in accordance with this Agreement; (iii) the insolvency
of or acts or omissions by a Securities System; (iv) any delay or failure of
any broker, agent or intermediary, central bank or other commercially prevalent
payment or clearing system to deliver to the Custodian's sub-custodian or agent
securities purchased or in the remittance or payment made in
19
connection with securities sold; (v) any delay or failure of any company,
corporation, or other body in charge of registering or transferring securities
in the name of the Custodian, the Fund, the Custodian's sub-custodians,
nominees or agents or any consequential losses arising out of such delay or
failure to transfer such securities including non-receipt of bonus, dividends
and rights and other accretions or benefits; (vi) delays or inability to
perform its duties due to any disorder in market infrastructure with respect to
any particular security or Securities System; and (vii) any provision of any
present or future law or regulation or order of the United States of America,
or any state thereof, or any other country, or political subdivision thereof or
of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth
with respect to sub-custodians generally in this Agreement.
If the Fund on behalf of a Portfolio requires the Custodian to take any action
with respect to securities, which action involves the payment of money or which
action may, in the opinion of the Custodian, result in the Custodian or its
nominee assigned to the Fund or the Portfolio being liable for the payment of
money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to
advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of
such Portfolio's assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian or the Fund be liable to the other for
indirect, special or consequential damages.
SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid
to the other party, such termination to take effect not sooner than sixty (60)
days after the date of such delivery or mailing; PROVIDED, however, that the
Fund shall not amend or terminate this Agreement in contravention of any
applicable federal or state regulations, or any provision of the Fund's
Articles of Incorporation and By-Laws, and further provided, that the Fund on
behalf of one or more of the Portfolios may at any time by action of its Board
(i) substitute another bank or trust company for the Custodian by giving notice
as described above to the Custodian, or (ii) immediately terminate this
Agreement in the event of
20
the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Agreement, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
SECTION 16. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be appointed by the
Board, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities of each applicable Portfolio then held by it hereunder
and shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in like
manner, upon receipt of a Certified Resolution, deliver at the office of the
Custodian and transfer such securities, funds and other properties in
accordance with such resolution.
In the event that no written order designating a successor custodian or
Certified Resolution shall have been delivered to the Custodian on or before
the date when such termination shall become effective, then the Custodian shall
have the right to deliver to a bank or trust company, which is a "bank" as
defined in the 1940 Act, doing business in Boston, Massachusetts, or New York,
New York, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the Custodian
on behalf of each applicable Portfolio and all instruments held by the
Custodian relative thereto and all other property held by it under this
Agreement on behalf of each applicable Portfolio, and to transfer to an account
of such successor custodian all of the securities of each such Portfolio held
in any Securities System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its
services during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this Agreement
relating to the duties and obligations of the Custodian shall remain in full
force and effect.
SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and the Fund
on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Agreement
as may in their joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable federal
or state regulations or any provision
21
of the Fund's Articles of Incorporation or By-Laws. No interpretive or
additional provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Agreement.
SECTION 18. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in addition
to USAA FEDERAL SECURITIES MONEY MARKET FUND, USAA GROWTH FUND, USAA INCOME
FUND, USAA MONEY MARKET FUND, USAA AGGRESSIVE GROWTH FUND, USAA SHORT TERM BOND
FUND, USAA GROWTH AND INCOME FUND, USAA SCIENCE & TECHNOLOGY FUND, USAA FIRST
START GROWTH FUND, USAA INTERMEDIATE-TERM BOND FUND, USAA HIGH-YIELD
OPPORTUNITIES FUND, USAA SMALL CAP STOCK FUND, USAA CAPITAL GROWTH FUND, USAA
GLOBAL TITANS INDEX FUND AND NASDAQ-100 INDEX FUND with respect to which it
desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian
agrees in writing to provide such services, such series of Shares shall become
a Portfolio hereunder.
SECTION 19. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with laws of The Commonwealth of Massachusetts.
SECTION 20. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all prior
Agreements between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
SECTION 21. NOTICES.
Any notice, instruction or other instrument required to be given hereunder may
be delivered in person to the offices of the parties as set forth herein during
normal business hours or delivered prepaid registered mail or by telex, cable
or telecopy to the parties at the following addresses or such other addresses
as may be notified by any party from time to time.
To the Fund: USAA MUTUAL FUND, INC.
0000 Xxxxxxxxxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
Attention: [contact]
Telephone: *
Telecopy: *
22
To the Custodian: STATE STREET BANK AND TRUST COMPANY
000 Xxxxxxx Xxxxxx, XXX/0
Xxxxx Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxxxx, Unit Head
Telephone: (000) 000-0000
Telecopy: (617)
Such notice, instruction or other instrument shall be deemed to have been
served in the case of a registered letter at the expiration of five business
days after posting, in the case of cable twenty-four hours after dispatch and,
in the case of telex, immediately on dispatch and if delivered outside normal
business hours it shall be deemed to have been received at the next time after
delivery when normal business hours commence and in the case of cable, telex or
telecopy on the business day after the receipt thereof. Evidence that the
notice was properly addressed, stamped and put into the post shall be
conclusive evidence of posting.
SECTION 22. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, addenda, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding, whether or
not the original is in existence and whether or not such reproduction was made
by a party in the regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
SECTION 23. REMOTE ACCESS SERVICES ADDENDUM
The Custodian and the Fund agree to be bound by the terms of the Remote Access
Services Addendum attached hereto.
SECTION 24. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held
by the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the
Fund to indicate whether it authorizes the Custodian to provide the Fund's
name, address, and share position to requesting companies whose securities the
Fund owns. If the Fund tells the Custodian "no", the Custodian will not provide
this information to requesting companies. If the Fund tells the Custodian "yes"
or does not check either "yes" or "no" below, the Custodian is required by the
rule to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate
communications. Please indicate below whether the Fund consents or objects by
checking one of the alternatives below.
23
YES [ ] The Custodian is authorized to release the Fund's name, address, and
share positions.
NO [X] The Custodian is not authorized to release the Fund's name, address, and
share positions.
24
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of July 1, 2001.
USAA MUTUAL FUND, INC. FUND SIGNATURE ATTESTED TO BY:
By: /S/ XXXXX X. XXXXXXX By: /S/ XXXX X. XXXXXX
---------------------- -------------------
Name: XXXXX X. XXXXXXX Name: XXXX X. XXXXXX
Assistant Secretary
Title: VICE PRESIDENT Title: *[secretary/ass't secretary]
STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY:
By: /S/ XXXXXX X. XXXXX By: /S/XXXXXXX X. XXXXXXXX
----------------------- --------------------------
Name: XXXXXX X. XXXXX Name: XXXXXXX X. XXXXXXXX
Title: VICE CHAIRMAN Title: VICE PRESIDENT
25
REMOTE ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
ADDENDUM to that certain Custodian Agreement] dated as of July 1, 2001
(the "Custodian Agreement") between USAA Mutual Fund, Inc. (the "Customer") and
State Street Bank and Trust Company.
State Street Bank and Trust Company, its subsidiaries and affiliates
(collectively, "State Street") has developed and utilized proprietary
accounting and other systems in conjunction with the custodian services which
State Street provides to the Customer. In this regard, State Street maintains
certain information in databases under its control and ownership which it makes
available to its customers (the "Remote Access Services").
THE SERVICES
State Street agrees to provide the Customer, and its designated investment
advisors, consultants or other third parties authorized by State Street who
agree to abide by the terms of this Addendum ("Authorized Designees") with
access to In~SightSM as described in Exhibit A or such other systems as may be
offered from time to time (the "System") on a remote basis.
SECURITY PROCEDURES
The Customer agrees to comply, and to cause its Authorized Designees to comply,
with remote access operating standards and procedures and with user
identification or other password control requirements and other security
procedures as may be issued from time to time by State Street for use of the
System and access to the Remote Access Services. The Customer agrees to advise
State Street immediately in the event that it learns or has reason to believe
that any person to whom it has given access to the System or the Remote Access
Services has violated or intends to violate the terms of this Addendum and the
Customer will cooperate with State Street in seeking injunctive or other
equitable relief. The Customer agrees to discontinue use of the System and
Remote Access Services, if requested, for any security reasons cited by State
Street.
FEES
Fees and charges for the use of the System and the Remote Access Services and
related payment terms shall be as set forth in the custody fee schedule in
effect from time to time between the parties (the "Fee Schedule"). The Customer
shall be responsible for any tariffs, duties or taxes imposed or levied by any
government or governmental agency by reason of the transactions contemplated by
this Addendum, including, without limitation, federal, state and local taxes,
use, value added and personal property taxes (other than income, franchise or
similar taxes which may be imposed or assessed against State Street). Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
PROPRIETARY INFORMATION/INJUNCTIVE RELIEF
The System and Remote Access Services described herein and the databases,
computer programs, screen formats, report formats, interactive design
techniques, formulae, processes, systems, software, know-how, algorithms,
programs, training aids, printed materials, methods, books, records, files,
documentation and other information made available to the Customer by State
Street as part of the Remote Access Services and through the use of the System,
except to the extent provided by you, and all copyrights, patents, trade
secrets and other proprietary rights of State Street related thereto are the
exclusive, valuable and confidential property of State Street and its relevant
licensors (the "Proprietary Information"). The Customer agrees on behalf of
itself and its Authorized Designees to keep the Proprietary Information
confidential and to limit access to its
i
employees and Authorized Designees (under a similar duty of confidentiality)
who require access to the System for the purposes intended. The foregoing shall
not apply to Proprietary Information in the public domain or required by law to
be made public.
The Customer agrees to use the Remote Access Services only in connection with
the proper purposes of this Addendum. The Customer will not, and will cause its
employees and Authorized Designees not to, (i) permit any third party to use
the System or the Remote Access Services, (ii) sell, rent, license or otherwise
use the System or the Remote Access Services in the operation of a service
bureau or for any purpose other than as expressly authorized under this
Addendum, (iii) use the System or the Remote Access Services for any fund,
trust or other investment vehicle without the prior written consent of State
Street, or (iv) allow or cause any information transmitted from State Street's
databases, including data from third party sources, available through use of
the System or the Remote Access Services, to be redistributed or retransmitted
for other than use for or on behalf of the Customer, as State Street's
customer.
The Customer agrees that neither it nor its Authorized Designees will modify
the System in any way, enhance or otherwise create derivative works based upon
the System, nor will the Customer or its Authorized Designees reverse engineer,
decompile or otherwise attempt to secure the source code for all or any part of
the System.
The Customer acknowledges that the disclosure of any Proprietary Information,
or of any information which at law or equity ought to remain confidential, will
immediately give rise to continuing irreparable injury to State Street
inadequately compensable in damages at law and that State Street shall be
entitled to obtain immediate injunctive relief against the breach or threatened
breach of any of the foregoing undertakings, in addition to any other legal
remedies which may be available.
LIMITED WARRANTIES
State Street represents and warrants that it is the owner of and has the right
to grant access to the System and to provide the Remote Access Services
contemplated herein. Because of the nature of computer information technology
and the necessity of relying upon third party sources, and data and pricing
information obtained from third parties, the System and Remote Access Services
are provided "AS IS", and the Customer and its Authorized Designees shall be
solely responsible for the investment decisions, regulatory reports and
statements produced using the Remote Access Services. State Street and its
relevant licensors will not be liable to the Customer or its Authorized
Designees for any direct or indirect, special, incidental, punitive or
consequential damages arising out of or in any way connected with the System or
the Remote Access Services, nor shall either party be responsible for delays or
nonperformance under this Addendum arising out of any cause or event beyond
such party's control.
State Street will take reasonable steps to ensure that its products (and those
of its third-party suppliers) reflect the available state of the art technology
to offer products that are Year 2000 compliant, including, but not limited to,
century recognition of dates, calculations that correctly compute same century
and multi century formulas and date values, and interface values that reflect
the date issues arising between now and the next one-hundred years, and if any
changes are required, State Street will make the changes to its products at no
cost to you and in a commercially reasonable time frame and will require
third-party suppliers to do likewise. The Customer will do likewise for its
systems.
EXCEPT AS EXPRESSLY SET FORTH IN THIS ADDENDUM, STATE STREET FOR ITSELF AND ITS
RELEVANT LICENSORS EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES CONCERNING THE
SYSTEM AND THE SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
ii
INFRINGEMENT
State Street will defend or, at our option, settle any claim or action brought
against the Customer to the extent that it is based upon an assertion that
access to the System or use of the Remote Access Services by the Customer under
this Addendum constitutes direct infringement of any United States patent or
copyright or misappropriation of a trade secret, provided that the Customer
notifies State Street promptly in writing of any such claim or proceeding and
cooperates with State Street in the defense of such claim or proceeding. Should
the System or the Remote Access Services or any part thereof become, or in
State Street's opinion be likely to become, the subject of a claim of
infringement or the like under the patent or copyright or trade secret laws of
the United States, State Street shall have the right, at State Street's sole
option, to (i) procure for the Customer the right to continue using the System
or the Remote Access Services, (ii) replace or modify the System or the Remote
Access Services so that the System or the Remote Access Services becomes
noninfringing, or (iii) terminate this Addendum without further obligation.
TERMINATION
Either party to the Custodian Agreement may terminate this Addendum (i) for any
reason by giving the other party at least one-hundred and eighty (180) days'
prior written notice in the case of notice of termination by State Street to
the Customer or thirty (30) days' notice in the case of notice from the
Customer to State Street of termination, or (ii) immediately for failure of the
other party to comply with any material term and condition of the Addendum by
giving the other party written notice of termination. This Addendum shall in
any event terminate within ninety (90) days after the termination of the
Custodian Agreement. In the event of termination, the Customer will return to
State Street all copies of documentation and other confidential information in
its possession or in the possession of its Authorized Designees. The foregoing
provisions with respect to confidentiality and infringement will survive
termination for a period of three (3) years.
MISCELLANEOUS
This Addendum and the exhibit hereto constitutes the entire understanding of
the parties to the Custodian Agreement with respect to access to the System and
the Remote Access Services. This Addendum cannot be modified or altered except
in a writing duly executed by each of State Street and the Customer and shall
be governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts.
By its execution of the Custodian Agreement, the Customer, for itself and its
Authorized Designees, accepts the terms of this Addendum.
iii
EXHIBIT A
TO
REMOTE ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
IN~SIGHTSM
System Product Description
In~SightSM provides information delivery and on-line access to State Street.
In~SightSM allows users a single point of entry into the many views of data
created by the diverse systems and applications. Reports and data from systems
such as Investment Policy MonitorSM, Multicurrency HorizonSM, Securities
Lending, Performance & Analytics can be accessed through In~SightSM. This
Internet-enabled application is designed to run from a Web browser and perform
across low-speed data line or corporate high-speed backbones. In~SightSM also
offers users a flexible toolset, including an ad-hoc query function, a custom
graphics package, a report designer, and a scheduling capability. Data and
reports offered through In~SightSM will continue to increase in direct
proportion with the customer roll out, as it is viewed as the information
delivery system will grow with State Street's customers.
iv
