Exhibit (g.2)
FORM OF CUSTODIAN AGREEMENT
THIS AGREEMENT, dated as of ______________________, 2001 between [NAME
OF REGISTRANT], an open-end management investment company organized under the
laws of the State of [State] and registered with the Securities and Exchange
Commission under the 1940 Act (the FUND) on behalf of each of the portfolios
listed on the attached Appendix "C" as the same may be amended from time to time
(each a PORTFOLIO and collectively the PORTFOLIOS), and XXXXX BROTHERS XXXXXXXX
& CO., a limited partnership formed under the laws of the State of New York
(BBH&CO. or the CUSTODIAN),
W I T N E S S E T H:
WHEREAS, the Fund wishes to employ BBH&Co. to act as custodian for the
Fund and to provide related services, all as provided herein, and BBH&Co. is
willing to accept such employment, subject to the terms and conditions herein
set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Fund and BBH&Co. hereby agree, as follows:
1. APPOINTMENT OF CUSTODIAN. The Fund hereby appoints BBH&Co. as the Fund's
custodian, and BBH&Co. hereby accepts such appointment. All Investments of the
Fund delivered to the Custodian or its agents or Subcustodians shall be dealt
with as provided in this Agreement. The duties of the Custodian with respect to
the Fund's Investments shall be only as set forth expressly in this Agreement
which duties are generally comprised of safekeeping and various administrative
duties that will be performed in
accordance with Instructions and as reasonably required to effect Instructions.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE FUND. The Fund hereby
represents, warrants and covenants each of the following:
2.1 This Agreement has been, and at the time of delivery of
each Instruction such Instruction will have been, duly authorized,
executed and delivered by the Fund. This Agreement does not violate any
Applicable Law or conflict with or constitute a default under the
Fund's prospectus or other organic document, agreement, judgment, order
or decree to which the Fund is a party or by which it or its
Investments is bound.
2.2 By providing an Instruction with respect to the first
acquisition of an Investment in a jurisdiction other than the United
States of America, the Fund shall be deemed to have confirmed to the
Custodian that the Fund has (a) assessed and accepted all material
Country or Sovereign Risks and accepted responsibility for their
occurrence, (b) made all determinations required to be made by the Fund
under the 1940 Act, and (iii) appropriately and adequately disclosed to
its shareholders, all material investment risks, including those
relating to the custody and settlement infrastructure or the servicing
of securities in such jurisdictions.
2.3 The Fund shall safeguard and shall solely be responsible
for the safekeeping of any testkeys, identification codes, passwords,
other security devices or statements of account with which the
Custodian provides it. In furtherance and not limitation of the
foregoing, in the event the Fund utilizes any on-line service offered
by the Custodian, the Fund and the Custodian shall be fully responsible
for the security of its respective connecting terminal, access thereto
and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards in respect thereof.
3. REPRESENTATION AND WARRANTY OF BBH&CO. BBH&Co. hereby represents and warrants
that this Agreement has been duly authorized, executed and delivered by BBH&Co.
and does not and will not violate any Applicable Law or conflict with or
constitute a default under BBH&Co.'s limited partnership agreement or any
agreement, instrument, judgment, order or decree to which BBH&Co. is a party or
by which it is bound.
BBH&Co. hereby further warrants to the Fund that as of the date of this
Agreement it is maintaining a sufficient bankers blanket bond and hereby agrees
to notify
2
the Fund in the event its bankers blanket bond is canceled or otherwise lapses.
4. INSTRUCTIONS. Unless otherwise explicitly indicated herein, the Custodian
shall perform its duties pursuant to Instructions. As used herein, the term
INSTRUCTION shall mean a directive initiated by the Fund, acting directly or
through its board of directors, officers or other Authorized Persons, which
directive shall conform to the requirements of this Section 4.
4.1 AUTHORIZED PERSONS. For purposes hereof, an AUTHORIZED PERSON shall
be a person or entity authorized to give Instructions for or on behalf of the
Fund by written notices to the Custodian or otherwise in accordance with
procedures delivered to and acknowledged by the Custodian, including without
limitation the Fund's Investment Adviser or Foreign Custody Manager. The
Custodian may treat any Authorized Person as having full authority of the Fund
to issue Instructions hereunder unless the notice of authorization contains
explicit limitations as to said authority. The Custodian shall be entitled to
rely upon the authority of Authorized Persons until it receives appropriate
written notice from the Fund to the contrary.
4.2 FORM OF INSTRUCTION. Each Instruction shall be transmitted by such
secured or authenticated electro-mechanical means as the Custodian shall make
available to the Fund from time to time unless the Fund shall elect to transmit
such Instruction in accordance with Subsections 4.2.1 through 4.2.3 of this
Section.
4.2.1 FUND DESIGNATED SECURED-TRANSMISSION METHOD. Instructions
may be transmitted through a secured or tested electro-mechanical means
3
identified by the Fund or by an Authorized Person entitled to give
Instruction and acknowledged and accepted by the Custodian; it being
understood that such acknowledgment shall authorize the Custodian to
receive and process instructions received by such means of delivery but
shall not represent a judgment by the Custodian as to the
reasonableness or security of the method determined by the Authorized
Person.
4.2.2 WRITTEN INSTRUCTIONS. Instructions may be transmitted in
a writing that bears the manual signature of Authorized Persons.
4.2.3 OTHER FORMS OF INSTRUCTION. Instructions may also be
transmitted by another means determined by the Fund or Authorized
Persons and acknowledged and accepted by the Custodian (subject to the
same limits as to acknowledgements as is contained in Subsection 4.2.1,
above) including Instructions given orally or by SWIFT, telex or
telefax (whether tested or untested).
When an Instruction is given by means established under this Subsection 4.2, it
shall be the responsibility of the Custodian to use reasonable care to adhere to
any security or other procedures established in writing between the Custodian
and the Authorized Person with respect to such means of Instruction. When an
Instruction is given by means established under Subsections 4.2.1 through 4.2.3,
it shall be the responsibility of such Authorized Person for determining that
the particular means chosen is reasonable under the circumstances. Oral
Instructions shall be binding upon the Custodian only if and when the Custodian
takes action with respect thereto. With respect to telefax instructions, the
parties agree and acknowledge that receipt of legible Instructions cannot be
assured, that the Custodian cannot verify that authorized signatures on telefax
Instructions are original or properly affixed, and that the Custodian shall not
be liable for losses or expenses incurred through actions taken in reliance on
inaccurately stated, illegible or unauthorized telefax Instructions. The
provisions of Section 4A of the Uniform Commercial Code shall apply to funds
transfers performed in accordance with
4
Instructions. The Funds Transfer Services Schedule to this Agreement shall
comprise a designation of form of a means of delivering Instructions for
purposes of this Section 4.2.
4.3 COMPLETENESS AND CONTENTS OF INSTRUCTIONS. The Authorized Person
shall be responsible for assuring the adequacy and accuracy of Instructions.
Particularly, upon any acquisition or disposition or other dealing in the Fund's
Investments and upon any delivery and transfer of any Investment or moneys, the
person initiating such Instruction shall give the Custodian an Instruction with
appropriate detail, including, without limitation:
4.3.1 The transaction date and the date and location of
settlement;
4.3.2 The specification of the type of transaction;
4.3.4 A description of the Investments or moneys in question,
including, as appropriate, quantity, price per unit, amount of money to
be received or delivered and currency information. Where an Instruction
is communicated by electronic means, or otherwise where an Instruction
contains an identifying number such as a CUSIP, SEDOL or ISIN number,
the Custodian shall be entitled to rely on such number as controlling
notwithstanding any inconsistency contained in such Instruction,
particularly with respect to Investment description;
4.3.5 The name of the broker or similar entity concerned with
execution of the transaction.
If the Custodian shall determine that an Instruction is either unclear or
incomplete, the Custodian may give prompt notice of such determination to the
Fund, and the Fund shall thereupon amend or otherwise reform such Instruction.
In such event, the Custodian shall have no obligation to take any action in
response to the Instruction initially delivered until the redelivery of an
amended or reformed Instruction.
4.4 TIMELINESS OF INSTRUCTIONS. In giving an Instruction, the Fund
shall take into
5
consideration delays which may occur due to the involvement of a Subcustodian or
agent, differences in time zones, and other factors particular to a given
market, exchange or issuer. When the Custodian has established specific timing
requirements or deadlines with respect to particular classes of Instruction, or
when an Instruction is received by the Custodian at such a time that it could
not reasonably be expected to have acted on such Instruction due to time zone
differences or other factors beyond its reasonable control, the execution of any
Instruction received by the Custodian after such deadline or at such time
(including any modification or revocation of a previous Instruction) shall be at
the risk of the Fund.
5. SAFEKEEPING OF FUND ASSETS. The Custodian shall hold Investments delivered to
it or Subcustodians for the Fund in accordance with the provisions of this
Section. The Custodian shall not be responsible for (a) the safekeeping of
Investments not delivered or that are not caused to be issued to it or its
Subcustodians; or (b) pre-existing faults or defects in Investments that are
delivered to the Custodian, or its Subcustodians. The Custodian is hereby
authorized to hold with itself or a Subcustodian, and to record in one or more
accounts, all Investments delivered to and accepted by the Custodian, any
Subcustodian or their respective agents pursuant to an Instruction or in
consequence of any corporate action. The Custodian shall hold Investments for
the account of the Fund and shall segregate Investments from assets belonging to
the Custodian and shall cause its Subcustodians to segregate Investments from
assets belonging to the Subcustodian in
6
an account held for the Fund or in an account maintained by the Subcustodian
generally for non-proprietary assets of the Custodian. The Custodian's
responsibility for safekeeping equity securities of Russian issuers ("Russian
Equities") hereunder shall be limited to the safekeeping of relevant share
extracts from the share registration books maintained by the entities providing
share registration services to issuers of Russian Equities (each a "Registrar")
indicating an investor's ownership of such securities (each a "Share Extract").
5.1 USE OF SECURITIES DEPOSITORIES. The Custodian may deposit and
maintain Investments in any Securities Depository, either directly or through
one or more Subcustodians appointed by the Custodian. Investments held in a
Securities Depository shall be held (a) subject to the agreement, rules,
statement of terms and conditions or other document or conditions effective
between the Securities Depository and the Custodian or the Subcustodian, as the
case may be, and (b) in an account for the Fund or in bulk segregation in an
account maintained for the non-proprietary assets of the entity holding such
Investments in the Depository. If market practice or the rules and regulations
of the Securities Depository prevent the Custodian, the Subcustodian or (any
agent of either) from holding its client assets in such a separate account, the
Custodian, the Subcustodian or other agent shall as appropriate segregate such
Investments for benefit of the Fund or for benefit of clients of the Custodian
generally on its own books.
With respect to Russia, the Fund hereby expressly acknowledges that a
Subcustodian for Russian securities may from time to time delegate any of its
duties and
7
responsibilities to any securities depository, clearing agency, share
registration agent or sub-subcustodian (collectively, "Russian Agent") in
Russia, including without limitation Roscneshtorbank (also called Vneshtorgbank
RF) ("VTB"). The Fund acknowledges that the rights of the Subcustodian against
any such Russian Agent may consist only of a contractual claim against the
Russian Agent. Notwithstanding any provision of this Agreement to the contrary,
neither the Custodian nor the Subcustodian shall be responsible or liable to the
Fund or its shareholders for the acts or omissions of any such Russian Agent. In
the event of a loss of securities or cash held on behalf of a Portfolio through
any Russian Agent, the Custodian shall not be responsible to the Fund or its
shareholders unless and to the extent it in fact recovers from the Subcustodian.
5.2 CERTIFICATED ASSETS. Investments which are certificated may be held
in registered or bearer form: (a) in the Custodian's vault; (b) in the vault of
a Subcustodian or agent of the Custodian or a Subcustodian; or (c) in an account
maintained by the Custodian, Subcustodian or agent at a Securities Depository;
all in accordance with customary market practice in the jurisdiction in which
any Investments are held.
5.3 REGISTERED ASSETS. Investments which are registered may be
registered in the name of the Custodian, a Subcustodian, or in the name of the
Fund or a nominee for any of the foregoing, and may be held in any manner set
forth in paragraph 5.2 above with or without any identification of fiduciary
capacity in such registration.
5.4 BOOK ENTRY ASSETS. Investments which are represented by book-entry
may
8
be so held in an account maintained by the Book-Entry Agent on behalf of the
Custodian, a Subcustodian or another agent of the Custodian, or a Securities
Depository. With respect to Russian Equities, the Custodian shall instruct a
Subcustodian to endeavor to assure that registration thereof shall be reflected
on the books of the issuer's Registrar, subject to the following conditions, but
shall in no event be liable for losses or costs incurred as a result of delays
or failures in the registration process, including without limitation the
inability to obtain or enforce the relevant Share Extracts. Such registration
may be in the name of a nominee of a Subcustodian. In the event registration is
in the name of a Portfolio, the Fund hereby acknowledges that only the Custodian
or Subcustodian may give instructions to the Registrar to transfer or engage in
other transactions involving the Russian Equities so registered.
A Subcustodian may from time to time enter into contracts with
Registrars with respect to the registration of Russian Equities ("Registrar
Contracts"). Such Registrar Contracts may provide for (i) regular share
confirmations by the Subcustodian, (ii) registrations within set timeframes,
(iii) use of a Subcustodian's nominee name, (iv) direct access by auditors of
the Subcustodian or its clients to share registers, and (v) specification of the
Registrar's responsibilities and liabilities. It is hereby acknowledged and
agreed that the Custodian does not represent or warrant that such Registrar
Contracts are enforceable.
If the Fund instructs the Custodian to settle a purchase of a Russian
Equity, the Custodian will instruct a Subcustodian to endeavor on a best efforts
basis to reregister the
9
Russian Equity and obtain a Share Extract in a timely manner.
After completion of reregistration of a Russian Equity in respect of
which a Subcustodian has entered into a Registrar Contract, the Custodian shall
instruct the Subcustodian to monitor such registrar on a best efforts basis and
to notify the Custodian upon the Subcustodian's obtaining knowledge of the
occurrence of any of the following events ("Registrar Events"): (i) a Registrar
has eliminated a shareholder from the register or has altered registration
records; (ii) a Registrar has refused to register securities in the name of a
particular purchaser and the purchaser or seller has alleged that the
registrar's refusal to so register was unlawful; (iii) a Registrar holds for its
own account shares of an issuer for which it serves as registrar, (iv) if a
Registrar Contract is in effect with a Registrar, the Registrar notifies the
Subcustodian that it will no longer be able materially to comply with the terms
of the Registrar Contract; or (v) if a Registrar Contract is in effect with a
Registrar, the Registrar has materially breached such contract. The Custodian
shall inform the Fund of the occurrence of a Registrar Event provided the
Custodian has in fact received actual notice thereof from the Subcustodian.
It shall be the sole responsibility of the Fund to contact the
Custodian prior to executing any transaction in a Russian Equity to determine
whether a Registrar Contract exists in respect of such issuer.
If the Fund instructs the Custodian by Proper Instruction to settle a
purchase of a Russian Equity in respect of which the Subcustodian has not
entered into a Registrar Contract, then the Custodian shall instruct the
Subcustodian to endeavor to settle such
10
transaction in accordance with the Proper Instruction and with the provisions of
Section 6.1 of this Agreement, notwithstanding the absence of any such Registrar
Contract and without the Custodian being required to notify the Fund that no
such Registrar Contract is then in effect, and it being understood that neither
the Custodian nor the Subcustodian shall be required to follow the procedure set
forth in the second preceding paragraph.
5.5 REPLACEMENT OF LOST INVESTMENTS. In the event of a loss of
Investments for which the Custodian is responsible under the terms of this
Agreement, the Custodian shall replace such Investment, or in the event that
such replacement cannot be effected, the Custodian shall pay to the Fund the
fair market value of such Investment based on the last available price as of the
close of business in the relevant market on the date that a claim was first made
to the Custodian with respect to such loss, or, if less, such other amount as
shall be agreed by the parties as the date for settlement.
6. ADMINISTRATIVE DUTIES OF THE CUSTODIAN. The Custodian shall perform the
following administrative duties with respect to Investments of the Fund.
6.1 PURCHASE OF INVESTMENTS. Pursuant to Instruction, Investments
purchased for the account of the Fund shall be paid for (a) against delivery
thereof to the Custodian or a Subcustodian, as the case may be, either directly
or through a Clearing Corporation or a Securities Depository (in accordance with
the rules of such Securities Depository or such Clearing Corporation), or (b)
otherwise in accordance with an Instruction, Applicable Law, generally accepted
trade practices, or the terms of the instrument
11
representing such Investment.
Without limiting the generality of the foregoing, the following
provisions shall apply with respect to settlement of purchases of securities in
Russia. Unless otherwise instructed by Proper Instructions acceptable to the
Custodian, the Custodian shall only authorize a Subcustodian to make payment for
purchases of Russian Equities upon receipt of the relevant Share Extract in
respect of the Portfolio's purchases. With respect to securities other than
Russian Equities, settlement of purchases shall be made in accordance with
securities processing or settlement practices which the Custodian in its
discretion determines to be a market practice. The Custodian shall only be
responsible for securities purchased upon actual receipt of such securities at
the premises of its Subcustodian, provided that the Custodian's responsibility
for securities represented by Share Extracts shall be limited to the safekeeping
of the relevant Share Extract upon actual receipt of such Share Extract at the
premises of the Subcustodian.
6.2 SALE OF INVESTMENTS. Pursuant to Instruction, Investments sold for
the account of the Fund shall be delivered (a) against payment therefor in cash,
by check or by bank wire transfer, (b) by credit to the account of the Custodian
or the applicable Subcustodian, as the case may be, with a Clearing Corporation
or a Securities Depository (in accordance with the rules of such Securities
Depository or such Clearing Corporation), or (c) otherwise in accordance with an
Instruction, Applicable Law, generally accepted trade practices, or the terms of
the instrument representing such Investment.
Without limiting the generality of the foregoing, the following
provisions shall apply with respect to the settlement of sales of securities in
Russia. Unless otherwise
12
expressly instructed by Proper Instructions acceptable to the Custodian,
settlement of sales of securities shall be made in accordance with securities
processing or settlement practices which the Custodian in its discretion
determines to be the market practice. The Fund hereby expressly acknowledges
that such market practice might require delivery of securities prior to receipt
of payment and that the Fund bears the risk of payment in instances where
delivery of securities is made prior to receipt of payment therefor in
accordance with Proper Instructions received by the Custodian or pursuant to the
Custodian's determination in its discretion that such delivery is in accordance
with market practice. The Custodian shall not be responsible for any securities
delivered from the premises of the Subcustodian from the time they leave such
premises.
6.3 DELIVERY IN CONNECTION WITH BORROWINGS OF THE FUND OR OTHER
COLLATERAL AND MARGIN REQUIREMENTS. Pursuant to Instruction, the Custodian may
deliver Investments or cash of the Fund in connection with borrowings and other
collateral and margin requirements.
6.4 FUTURES AND OPTIONS. If, pursuant to an Instruction, the Custodian
shall become a party to an agreement with the Fund and a futures commission
merchant regarding margin (TRI-PARTY AGREEMENT), the Custodian shall (a) receive
and retain, to the extent the same are provided to the Custodian, confirmations
or other documents evidencing the purchase or sale by the Fund of
exchange-traded futures contracts and commodity options, (b) when required by
such Tri-Party Agreement, deposit and maintain in an account opened pursuant to
such Agreement (MARGIN ACCOUNT), segregated either physically or by book-entry
in a Securities Depository for the benefit of any futures commission merchant,
such Investments as the Fund shall have designated as
13
initial, maintenance or variation "margin" deposits or other collateral intended
to secure the Fund's performance of its obligations under the terms of any
exchange-traded futures contracts and commodity options; and (c) thereafter pay,
release or transfer Investments into or out of the margin account in accordance
with the provisions of the such Agreement. Alternatively, the Custodian may
deliver Investments, in accordance with an Instruction, to a futures commission
merchant for purposes of margin requirements in accordance with Rule 17f-6 under
the 1940 Act. The Custodian shall in no event be responsible for the acts and
omissions of any futures commission merchant to whom Investments are delivered
pursuant to this Section; for the sufficiency of Investments held in any Margin
Account; or, for the performance of any terms of any exchange-traded futures
contracts and commodity options.
6.5 CONTRACTUAL OBLIGATIONS AND SIMILAR INVESTMENTS. From time to time,
the Fund's Investments may include Investments that are not ownership interests
as may be represented by certificate (whether registered or bearer), by entry in
a Securities Depository or by book entry agent, registrar or similar agent for
recording ownership interests in the relevant Investment. If the Fund shall at
any time acquire such Investments, including without limitation deposit
obligations, loan participations, repurchase agreements and derivative
arrangements, the Custodian shall (a) receive and retain, to the extent the same
are provided to the Custodian, confirmations or other documents evidencing the
arrangement; and (b) perform on the Fund's account in accordance with the terms
of the applicable arrangement, but only to the extent directed to do so by
Instruction, or in accordance with agreed upon written procedures adopted by the
Fund and delivered to the Custodian . The Custodian shall have no responsibility
for
14
agreements running to the Fund as to which it is not a party other than to
retain, to the extent the same are provided to the Custodian, documents or
copies of documents evidencing the arrangement and, in accordance with
Instruction, to include such arrangements in reports made to the Fund.
6.6 EXCHANGE OF SECURITIES. Unless otherwise directed by Instruction,
the Custodian shall: (a) exchange securities held for the account of the Fund
for other securities in connection with any reorganization, recapitalization,
conversion, split-up, change of par value of shares or similar event, and (b)
deposit any such securities in accordance with the terms of any reorganization
or protective plan.
6.7 SURRENDER OF SECURITIES. Unless otherwise directed by Instruction,
the Custodian may surrender securities: (a) in temporary form for definitive
securities; (b) for transfer into the name of an entity allowable under Section
5.3; and (c) for a different number of certificates or instruments representing
the same number of shares or the same principal amount of indebtedness.
6.8 RIGHTS, WARRANTS, ETC. Pursuant to Instruction, the Custodian shall
(a) deliver warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to any agent of such issuer or trustee, for purposes of
exercising such rights or selling such securities, and (b) deposit securities in
response to any invitation for the tender thereof.
6.9 MANDATORY CORPORATE ACTIONS. Unless otherwise directed by
Instruction, the Custodian shall: (a) comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions or similar rights of
securities ownership affecting securities held on the Fund's account and
promptly notify the Fund of such action, and
15
(b) collect all stock dividends, rights and other items of like nature with
respect to such securities.
6.10 INCOME COLLECTION. Unless otherwise directed by Instruction, the
Custodian shall collect any amount due and payable to the Fund with respect to
Investments and promptly credit the amount collected to a Principal or Agency
Account; provided, however, that the Custodian shall not be responsible for: (a)
the collection of amounts due and payable with respect to Investments on which
the issuer fails to make a payment , or (b) the collection of cash or share
entitlements with respect to Investments that are not registered in the name of
the Custodian or its Subcustodians. The Custodian is hereby authorized to
endorse and deliver any instrument required to be so endorsed and delivered to
effect collection of any amount due and payable to the Fund with respect to
Investments.
6.11 OWNERSHIP CERTIFICATES AND DISCLOSURE OF THE FUND'S INTEREST. The
Custodian is hereby authorized to execute on behalf of the Fund ownership
certificates, affidavits or other disclosure required under Applicable Law or
established market practice in connection with the receipt of income, capital
gains or other payments by the Fund with respect to Investments, or in
connection with the sale, purchase or ownership of Investments.
6.12 PROXY MATERIALS. The Custodian shall deliver, or cause to be
delivered, to the Fund proxy forms, notices of meeting, and any other notices or
announcements materially affecting or relating to Investments received by the
Custodian or any nominee.
6.13. TAXES. The Custodian shall, where applicable, assist the Fund in
the reclamation of taxes withheld on dividends and interest payments received by
the Fund.
16
In the performance of its duties with respect to tax withholding and
reclamation, the Custodian shall be entitled to rely on the advice of counsel
and upon information and advice regarding the Fund's tax status that is received
from or on behalf of the Fund without duty of separate inquiry.
It is agreed that the Fund shall be responsible for preparation and
filing of tax returns, reports and other documents on any activities it
undertakes in Russia which are to be filed with any relevant governmental or
other authority and for the payment of any taxes, levies, duties or similar
liability the Fund incurs in respect of property held or sold in Russia or of
payments or distributions received in respect thereof in Russia. Accordingly,
the Fund hereby agrees to indemnify and hold harmless the Custodian from any
loss, cost or expense resulting from the imposition or assessment of any such
tax, duty, levy or liability or any expenses related thereto.
6.14 OTHER DEALINGS. The Custodian shall otherwise act as directed by
Instruction, including without limitation effecting the free payments of moneys
or the free delivery of securities, provided that such Instruction shall
indicate the purpose of such payment or delivery and that the Custodian shall
record the party to whom such payment or delivery is made.
The Custodian shall attend to all nondiscretionary details in
connection with the sale or purchase or other administration of Investments,
except as otherwise directed by an Instruction, and may make payments to itself
or others for minor expenses of administering Investments under this Agreement;
provided that the Fund shall have the right to request an accounting with
17
respect to such expenses.
In fulfilling the duties set forth in Sections 6.6 through 6.10 above,
the Custodian shall provide to the Fund all material information pertaining to a
corporate action which the Custodian actually receives; provided that the
Custodian shall not be responsible for the completeness or accuracy of such
information. Any advance credit of cash or shares expected to be received as a
result of any corporate action shall be subject to actual collection and may,
when the Custodian deems collection unlikely, be reversed by the Custodian.
The Custodian may at any time or times in its discretion appoint (and
may at any time remove) agents (other than Subcustodians) to carry out some or
all of the administrative provisions of this Agreement (AGENTS), provided,
however, that the appointment of such agent shall not relieve the Custodian of
its administrative obligations under this Agreement.
7. CASH ACCOUNTS, DEPOSITS AND MONEY MOVEMENTS. Subject to the terms and
conditions set forth in this Section 7, the Fund hereby authorizes the Custodian
to open and maintain, with itself or with Subcustodians, cash accounts in United
States Dollars, in such other currencies as are the currencies of the countries
in which the Fund maintains Investments or in such other currencies as the Fund
shall from time to time request by Instruction.
7.1 TYPES OF CASH ACCOUNTS. Cash accounts opened on the books of the
Custodian (PRINCIPAL ACCOUNTS) shall be opened in the name of the Fund. Such
accounts
18
collectively shall be a deposit obligation of the Custodian and shall be subject
to the terms of this Section 7 and the general liability provisions contained in
Section 9. Cash accounts opened on the books of a Subcustodian may be opened in
the name of the Fund or the Custodian or in the name of the Custodian for its
customers generally (AGENCY ACCOUNTS). Such deposits shall be obligations of the
Subcustodian and shall be treated as an Investment of the Fund. Accordingly, the
Custodian shall be responsible for exercising reasonable care in the
administration of such accounts but shall not otherwise be liable for their
repayment in the event such Subcustodian, by reason of its bankruptcy,
insolvency or otherwise, fails to make repayment.
7.2 PAYMENTS AND CREDITS WITH RESPECT TO THE CASH ACCOUNTS. The
Custodian shall make payments from or deposits to any of said accounts in the
course of carrying out its administrative duties, including but not limited to
income collection with respect to the Fund's Investments, and otherwise in
accordance with Instructions. The Custodian and its Subcustodians shall be
required to credit amounts to the cash accounts only when moneys are actually
received in cleared funds in accordance with banking practice in the country and
currency of deposit. Any credit made to any Principal or Agency Account before
actual receipt of cleared funds shall be provisional and may be reversed by the
Custodian in the event such payment is not actually collected. Repayment of a
deposit shall be subject to the terms of Section 7.3 below.
7.3 CURRENCY AND RELATED RISKS. The Fund bears risks of holding or
transacting in any currency. The Custodian shall not be liable for any loss or
damage
19
arising from the applicability of any law or regulation now or hereafter
in effect, or from the occurrence of any event, which may delay or affect the
transferability, convertibility or availability of any currency in the country
(a) in which such Principal or Agency Accounts are maintained or (b) in which
such currency is issued, and in no event shall the Custodian be obligated to
make payment of a deposit denominated in a currency during the period during
which its transferability, convertibility or availability has been affected by
any such law, regulation or event. Without limiting the generality of the
foregoing, neither the Custodian nor any Subcustodian shall be required to repay
any deposit made at a foreign branch of either the Custodian or Subcustodian if
such branch cannot repay the deposit due to a cause for which the Custodian
would not be responsible in accordance with the terms of Section 9 of this
Agreement unless the Custodian or such Subcustodian expressly agrees in writing
to repay the deposit under such circumstances. All currency transactions in any
account opened pursuant to this Agreement are subject to exchange control
regulations of the United States and of the country where such currency is the
lawful currency or where the account is maintained. Any taxes, costs, charges or
fees imposed on the convertibility of a currency held by the Fund shall be for
the account of the Fund.
7.4 FOREIGN EXCHANGE TRANSACTIONS. The Custodian shall, subject to the
terms of this Section, settle foreign exchange transactions (including
contracts, futures, options and options on futures) on behalf and for the
account of the Fund with such currency brokers or banking institutions,
including Subcustodians, as the Fund may direct pursuant
20
to Instructions. The Custodian may act as principal in any foreign exchange
transaction with the Fund in accordance with Section 7.4.2 of this Agreement.
The obligations of the Custodian in respect of all foreign exchange transactions
(whether or not the Custodian shall act as principal in such transaction) shall
be contingent on the free, unencumbered transferability of the currency
transacted on the actual settlement date of the transaction.
7.4.1 THIRD PARTY FOREIGN EXCHANGE TRANSACTIONS. The
Custodian shall process foreign exchange transactions
(including without limitation contracts, futures, options, and
options on futures), where any third party acts as principal
counterparty to the Fund on the same basis it performs duties
as agent for the Fund with respect to any other of the Fund's
Investments. Accordingly the Custodian shall only be
responsible for delivering or receiving currency on behalf of
the Fund in respect of such contracts pursuant to
Instructions. The Custodian shall not be responsible for the
failure of any counterparty (including any Subcustodian) in
such agency transaction to perform its obligations thereunder.
The Custodian (a) shall transmit cash and Instructions to and
from the currency broker or banking institution with which a
foreign exchange contract or option has been executed pursuant
hereto, (b) may make free outgoing payments of cash in the
form of United States Dollars or foreign currency without
receiving confirmation of a foreign exchange contract or
option or confirmation that the countervalue currency
completing the foreign exchange contract has been delivered or
received or that the option has been delivered or received,
and (c) shall hold all confirmations, certificates and other
documents and agreements received by the Custodian and
evidencing or relating to such foreign exchange transactions
in safekeeping. The Fund accepts full responsibility for its
use of third-party foreign exchange dealers and for
performance under said foreign exchange contracts and options
and understands that the Fund shall be responsible for any and
all costs and interest charges which may be incurred by the
Fund or the Custodian as a result of the failure or delay of
third parties to deliver foreign exchange.
7.4.2 FOREIGN EXCHANGE WITH THE CUSTODIAN AS
PRINCIPAL. The Custodian may undertake foreign exchange
transactions with the Fund as principal as the Custodian and
the Fund may agree from time to time. In such event, the
foreign exchange transaction will be performed in accordance
with the particular agreement of the parties, or in the event
a principal foreign exchange transaction is initiated by
Instruction in the absence of specific agreement, such
transaction will be performed in accordance with the usual
commercial terms of the Custodian.
21
7.5 DELAYS. If no event of Force Majeure shall have occurred and be
continuing and in the event that a delay shall have been caused by the
negligence or willful misconduct of the Custodian in carrying out an Instruction
to credit or transfer cash, the Custodian shall be liable to the Fund: (a) with
respect to Principal Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Custodian on overnight
deposits at the time the delay occurs for the period from the day when the
transfer should have been effected until the day it is in fact effected; and,
(b) with respect to Agency Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Subcustodian on overnight
deposits at the time the delay occurs for the period from the day when the
transfer should have been effected until the day it is in fact effected. Except
is set forth in Section 8.3, the Custodian shall not be liable for delays in
carrying out such Instructions to transfer cash which are not due to the
Custodian's own negligence or willful misconduct.
7.6 ADVANCES. If, for any reason in the conduct of its safekeeping
duties pursuant to Section 5 hereof or its administration of the Fund's assets
pursuant to Section 6 hereof, the Custodian or any Subcustodian advances monies
to facilitate settlement or otherwise for benefit of the Fund (whether or not
any Principal or Agency Account shall be overdrawn either during, or at the end
of, any Business Day), the Fund hereby does:
7.6.1 acknowledge that the Fund shall have no right or title to any
Investments purchased with such Advance save a right to receive such
Investments upon: (a) the debit of the Principal or Agency Account; or,
(b) if such debit would produce an overdraft in such account, other
reimbursement of the associated Advance;
7.6.2 grant to the Custodian a security interest in Investments to the
extent of such Advance; and,
22
7.6.3 agree that the Custodian may secure the resulting Advance by
perfecting a security interest in all Investments under Applicable Law.
Neither the Custodian nor any Subcustodian shall be obligated to advance monies
to the Fund, and in the event that such Advance occurs, any transaction giving
rise to an Advance shall be for the account and risk of the Fund and shall not
be deemed to be a transaction undertaken by the Custodian for its own account
and risk. If such Advance shall have been made by a Subcustodian or any other
person, the Custodian may assign the security interest and any other rights
granted to the Custodian hereunder to such Subcustodian or other person. If the
Fund shall fail to repay when due or within 24 hours of receipt of a demand
notice requesting payment of the principal balance of an Advance and accrued and
unpaid interest thereon, the Custodian or its assignee, as the case may be,
shall be entitled to utilize, upon prior notice to the Fund, the available cash
balance in any Agency or Principal Account and to dispose of any Property to the
extent necessary to recover payment of all principal of, and interest on, such
Advance in full. The Custodian may assign any rights it has hereunder to a
Subcustodian or third party. Any security interest in Investments taken
hereunder shall be treated as financial assets credited to securities accounts
under Articles 8 and 9 of the Uniform Commercial Code as adopted in New York.
Accordingly, the Custodian shall have the rights and benefits of a secured
creditor that is a securities intermediary under such Articles 8 and 9.
7.7 INTEGRATED ACCOUNT. Subject to Section 16 hereof, for purposes
hereof, deposits maintained in all Principal Accounts (whether or not
denominated in United
23
States Dollars) shall collectively constitute a single and indivisible current
account with respect to the Fund's obligations to the Custodian, or its
assignee, and balances in such Principal Accounts shall be available for
satisfaction of the Fund's obligations under this Section 7. The Custodian shall
further have a right of offset against the balances in any Agency Account
maintained hereunder to the extent that the aggregate of all Principal Accounts
is overdrawn.
8. SUBCUSTODIANS AND SECURITIES DEPOSITORIES. Subject to the provisions
hereinafter set forth in this Section 8, the Fund hereby authorizes the
Custodian to utilize Securities Depositories to act on behalf of the Fund and to
appoint from time to time and to utilize Subcustodians. With respect to
securities and funds held by a Subcustodian, either directly or indirectly
(including by a Securities Depository or Clearing Corporation), notwithstanding
any provisions of this Agreement to the contrary, payment for securities
purchased and delivery of securities sold may be made prior to receipt of
securities or payment, respectively, and securities or payment may be received
in a form, in accordance with (a) governmental regulations, (b) rules of
Securities Depositories and clearing agencies, (c) generally accepted trade
practice in the applicable local market, (d) the terms and characteristics of
the particular Investment, or (e) the terms of Instructions.
8.1 DOMESTIC SUBCUSTODIANS AND SECURITIES DEPOSITORIES. The Custodian
may deposit and/or maintain, either directly or through one or more agents
appointed by the Custodian, Investments of the Fund in any Securities Depository
in the Xxxxxx Xxxxxx,
00
including The Depository Trust Company, The Participants Trust Company and the
Federal Reserve Book-Entry System provided such Depository meets applicable
requirements of the Federal Reserve Bank or of the Securities and Exchange
Commission. With the prior approval of the Fund which shall not be unreasonably
withheld, the Custodian may, appoint any bank as defined in Section 2(a)(5) of
the 1940 Act meeting the requirements of a custodian under Section 17(f) of the
1940 Act and the rules and regulations thereunder, to act on behalf of the Fund
as a Subcustodian for purposes of holding Investments of the Fund in the United
States.
8.2 FOREIGN SECURITIES DEPOSITORIES AND SUBCUSTODIANS. Unless
instructed otherwise by the Fund, the Custodian may deposit and/or maintain
non-U.S. Investments of the Fund in any non-U.S. Securities Depository provided
such Securities Depository meets the requirements of an "eligible securities
depository" under Rule 17f-7 promulgated under the 1940 Act, or any successor
rule or regulation ("Rule 17f-7") or which by order of the Securities and
Exchange Commission is exempted therefrom. Prior to the time that securities are
placed with such depository, but subject to the provisions of Section 8.2.4
below, the Custodian shall have prepared an assessment of the custody risks
associated with maintaining assets with the Securities Depository and shall have
established a system to monitor such risks on a continuing basis in accordance
with subsection 8.2.3 of this Section.
Additionally, the Custodian may, at any time and from time to time,
appoint (a) any bank, trust company or other entity meeting the requirements of
an "eligible foreign
25
custodian" under Rule 17f-5 or which by order of the Securities and Exchange
Commission is exempted therefrom, or (b) any bank as defined in Section 2(a)(5)
of the 1940 Act meeting the requirements of a custodian under Section 17(f) of
the 1940 Act and the rules and regulations thereunder, to act on behalf of the
Fund as a Subcustodian for purposes of holding Investments of the Fund outside
the United States. Such appointment of foreign Subcustodians shall be subject to
approval of the Fund in accordance with Subsections 8.2.1 and 8.2.2 hereof, and
use of non-U.S. Securities Depositories shall be subject to the terms of
Subsections 8.2.3 and 8.2.4 hereof. An Instruction to open an account in a given
country shall comprise authorization of the Custodian to hold assets in such
country in accordance with the terms of this Agreement. The Custodian shall not
be required to make independent inquiry as to the authorization of the Fund to
invest in such country.
8.2.1 BOARD APPROVAL OF FOREIGN SUBCUSTODIANS. Unless and
except to the extent that the Board has delegated to and the Custodian
has accepted delegation of review of certain matters concerning the
appointment of Subcustodians pursuant to Subsection 8.2.2, the
Custodian shall, prior to the appointment of any Subcustodian for
purposes of holding Investments of the Fund outside the United States,
obtain written confirmation of the approval of the Board of Trustees or
Directors of the Fund with respect to (a) the identity of a
Subcustodian, and (b) the Subcustodian agreement which shall govern
such appointment, such approval to be signed by an Authorized Person.
8.2.2 DELEGATION OF BOARD REVIEW OF SUBCUSTODIANS. From time
to time, the Custodian may agree to perform certain reviews of
Subcustodians and of Subcustodian Contracts as delegate of the Fund's
Board. In such event, the Custodian's duties and obligations with
respect to this delegated review will be performed in accordance with
the terms of the attached 17f-5 Delegation Schedule to this Agreement.
8.2.3 MONITORING AND RISK ASSESSMENT OF SECURITIES
DEPOSITORIES. Prior to the placement of any assets of the Fund with a
non-U.S. Securities Depository, the Custodian: (a) shall provide to the
Fund or its authorized representative an assessment of the custody
risks associated with maintaining assets within such Securities
Depository; and (b) shall have established a system
26
to monitor the custody risks associated with maintaining assets with
such Securities Depository on a continuing basis and to promptly notify
the Fund or its Investment Adviser of any material changes in such
risk. In performing its duties under this subsection, the Custodian
shall use reasonable care, prudence and diligence and may rely on such
reasonable sources of information as may be available including but not
limited to: (i) published ratings; (ii) information supplied by a
Subcustodian that is a participant in such Securities Depository; (iii)
industry surveys or publications; (iv) information supplied by the
depository itself, by its auditors (internal or external) or by the
relevant Foreign Financial Regulatory Authority. It is acknowledged
that information procured through some or all of these sources may not
be independently verifiable by the Custodian and that direct access to
Securities Depositories is limited under most circumstances.
Accordingly, the Custodian shall not be responsible for errors or
omissions in its duties hereunder provided that it has performed its
monitoring and assessment duties with reasonable care, prudence and
diligence. The risk assessment shall be provided to the Fund or its
Investment Advisor by such means as the Custodian shall reasonably
establish. Advices of material change in such assessment may be
provided by the Custodian in the manner established as customary
between the Fund and the Custodian for transmission of material market
information. To the extent that a custody arrangement with an Eligible
Securities Depository no longer meets the requirements described
herein, the Fund's assets must be withdrawn from the depository as soon
as reasonably practicable. If withdrawal is not possible, the Fund and
the Custodian will confer to discuss appropriate steps to ensure
compliance with 17f-7.
8.3 RESPONSIBILITY FOR SUBCUSTODIANS. With respect to those
Subcustodians listed on Appendix "A" hereto, the Custodian shall be liable to
the Fund for any loss or damage to the Fund caused by or resulting from the acts
omissions of any Subcustodian to the extent that such acts or omissions would be
deemed to be negligence, gross negligence or willful misconduct in accordance
with the terms of the relevant subcustodian agreement under the laws,
circumstances and practices prevailing in the place where the act or omission
occurred. In the countries indicated in Appendix "B" to this Agreement, the
liability of the Custodian shall be subject to the additional condition that the
Custodian actually recovers such loss or damage from the Subcustodian.
8.4 NEW COUNTRIES. The Fund shall be responsible for informing the
Custodian sufficiently in advance of a proposed Investment which is to be held
in a country in
27
which no Subcustodian is authorized to act in order that the
Custodian shall, if it deems appropriate to do so, have sufficient time to
establish a subcustodial arrangement in accordance herewith. In the event,
however, the Custodian is unable to establish such arrangements prior to the
time such Investment is to be acquired, the Custodian is authorized to designate
at its discretion a local safekeeping agent, and the use of such local
safekeeping agent with respect to such Investment shall be at the sole risk of
the Fund, and accordingly the Custodian shall be responsible to the Fund for the
actions of such agent if and only to the extent the Custodian shall have
recovered from such agent for any damages caused the Fund by such agent.
9. RESPONSIBILITY OF THE CUSTODIAN. In performing its duties and obligations
hereunder, the Custodian shall comply with all requirements of applicable law
and shall use reasonable care under the facts and circumstances prevailing in
the market where performance is effected. Subject to the specific provisions of
this Section, the Custodian shall be liable for any direct damage incurred by
the Fund in consequence of the Custodian's negligence, bad faith or willful
misconduct. In no event shall the Custodian be liable hereunder for any special,
indirect, punitive or consequential damages arising out of, pursuant to or in
connection with this Agreement even if the Custodian has been advised of the
possibility of such damages. It is agreed that the Custodian shall have no duty
to assess the risks inherent in the Fund's Investments or to provide investment
advice with respect to such Investments and that the Fund as principal shall
bear any risks attendant to particular Investments such as failure of
counterparty or issuer.
28
9.1 LIMITATIONS OF PERFORMANCE. The Custodian shall not be responsible
under this Agreement for any failure to perform its duties, and shall not liable
hereunder for any loss or damage in association with such failure to perform,
for or in consequence of the following causes:
9.1.1 FORCE MAJEURE. FORCE MAJEURE shall mean any circumstance
or event which is beyond the reasonable control of the Custodian, a
Subcustodian or any agent of the Custodian or a Subcustodian and which
adversely affects the performance by the Custodian of its obligations
hereunder, by the Subcustodian of its obligations under its Subcustody
Agreement or by any other agent of the Custodian or the Subcustodian,
including any event caused by, arising out of or involving (a) an act
of God, (b) accident, fire, water damage or explosion, (c) any
computer, system or other equipment failure or malfunction, outside the
Custodian's control, caused by any computer virus or the malfunction or
failure of any communications medium, (d) any interruption of the power
supply or other utility service, (e) any strike or other work stoppage,
whether partial or total, (f) any delay or disruption resulting from or
reflecting the occurrence of any Sovereign Risk, (g) any disruption of,
or suspension of trading in, the securities, commodities or foreign
exchange markets, whether or not resulting from or reflecting the
occurrence of any Sovereign Risk, (h) any encumbrance on the
transferability of a currency or a currency position on the actual
settlement date of a foreign exchange transaction, whether or not
resulting from or reflecting the occurrence of any Sovereign Risk, or
(i) any other cause similarly beyond the reasonable control of the
Custodian.
9.1.2 COUNTRY RISK. COUNTRY RISK shall mean, with respect to
the acquisition, ownership, settlement or custody of Investments in a
jurisdiction, all risks relating to, or arising in consequence of,
systemic and market factors affecting the acquisition, payment for or
ownership of Investments including (a) the prevalence of crime and
corruption, (b) the inaccuracy or unreliability of business and
financial information, (c) the instability or volatility of banking and
financial systems, or the absence or inadequacy of an infrastructure to
support such systems, (d) custody and settlement infrastructure of the
market in which such Investments are held and transactions in such
Investment take place, (e) the acts, omissions and operation of any
Securities Depository, (f) the risk of the bankruptcy or insolvency of
banking agents, counterparties to cash and securities transactions,
registrars or transfer agents, and (g) the existence of market
conditions which prevent the orderly execution or settlement of
transactions or which affect the value of assets.
9.1.3 SOVEREIGN RISK. SOVEREIGN RISK shall mean, in respect of
any jurisdiction, including the United States of America, where
Investments are acquired or held hereunder or under a Subcustody
Agreement, (a) any act of war, terrorism, riot, insurrection or civil
commotion, (b) the imposition of any investment, repatriation or
exchange control restrictions by any Governmental Authority, (c) the
confiscation, expropriation or nationalization of any Investment by any
Governmental Authority, whether de facto or de jure, (iv) any
devaluation
29
or revaluation of the currency, (d) the imposition of taxes, levies or
other charges affecting Investments, (vi) any change in the Applicable
Law, or (e) any other economic or political risk incurred or
experienced.
9.2. LIMITATIONS ON LIABILITY. The Custodian shall not be
liable for any loss, claim, damage or other liability arising from the
following causes:
9.2.1 FAILURE OF THIRD PARTIES. The failure of any third party
excluding subcustodians, but including: (a) any issuer of Investments
or book-entry or other agent of any issuer; (b) any counterparty with
respect to any Investment, including any issuer of exchange-traded or
other futures, option, derivative or commodities contract; (c) failure
of an Investment Advisor, third-party Foreign Custody Manager or other
agent of the Fund; or (d) failure of other third parties similarly
beyond the control or choice of the Custodian.
9.2.2 INFORMATION SOURCES. The Custodian may rely upon
information received from issuers of Investments or agents of such
issuers, information received from Subcustodians and from other
commercially reasonable sources such as commercial data bases and the
like, but shall not be responsible for specific inaccuracies in such
information, provided that the Custodian has relied upon such
information in good faith, or for the failure of any commercially
reasonable information provider.
9.2.3 RELIANCE ON INSTRUCTION. Action by the Custodian or the
Subcustodian in accordance with an Instruction, even when such action
conflicts with, or is contrary to any provision of, the Fund's
declaration of trust or by-laws, Applicable Law, or actions by the
trustees, or shareholders of the Fund.
9.2.4 RESTRICTED SECURITIES. The limitations inherent in the
rights, transferability or similar investment characteristics of a
given Investment of the Fund.
10. INDEMNIFICATION. The Fund hereby indemnifies the Custodian and each
Subcustodian, and their respective agents, nominees and their partners,
employees, officers and directors, and agrees to hold each of them harmless from
and against all claims and liabilities, including counsel fees and taxes,
incurred or assessed against any of them in connection with the performance of
this Agreement and any Instruction, provided that such performance was without
negligence, bad faith or willful misconduct
30
on the part of the Custodian or Subcustodian. If a Subcustodian or any other
person indemnified under the preceding sentence, gives written notice of claim
to the Custodian, the Custodian shall promptly give written notice to the Fund.
11. REPORTS AND RECORDS. The Custodian shall:
11.1 create and maintain records relating to the
performance of its obligations under this Agreement;
11.2 make available to the Fund, its auditors, agents
and employees, during regular business hours of the Custodian, upon
reasonable request, all records maintained by the Custodian pursuant to
Subsection 11.1 above, subject, however, to all reasonable security
requirements of the Custodian then applicable to the records of its
custody customers generally; and
11.3 make available to the Fund all electronic
reports; it being understood that the Custodian shall not be liable
hereunder for the inaccuracy or incompleteness thereof or for errors in
any information included therein.
The Fund shall examine all records, howsoever produced or transmitted,
promptly upon receipt thereof and notify the Custodian promptly of any
discrepancy or error therein. Unless the Fund delivers written notice of any
such discrepancy or error within 60 days after its receipt thereof, such records
shall be deemed to be true and accurate. It is understood that the Custodian now
obtains and will in the future obtain information on the value of assets from
outside sources which may be utilized in certain reports made available to the
Fund. The Custodian deems such sources to be reliable but it is acknowledged and
agreed that the Custodian does not verify nor represent nor warrant as to the
accuracy or completeness of such information and accordingly shall be without
liability in selecting and using such sources and furnishing such information,
provided such sources are selected and information is utilized with reasonable
care.
31
The books and records pertaining to the Fund and each designated series
or portfolio of the Fund, which are in the possession of the Custodian shall be
the property of the Fund. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities laws,
rules and regulations. The Custodian shall send copies of statements of
custodial activity to the Fund and to its recordkeeping agent. Such statements
shall include: statements of cash account(s) including transfers to and from
such account(s), statements regarding receipt and delivery of securities and
statements reflecting month end activity. Such statements may also be available
through BBH&Co.'s BIDS system.
The Custodian shall enter into and shall maintain in effect, at no
additional expense to the Fund, with appropriate parties one or more agreements
making reasonable provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available. In the event of
unforeseeable third-party equipment failures, the Custodian shall, at no
additional expense to the Fund, take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
12. MISCELLANEOUS.
12.1 PROXIES, ETC. The Fund will promptly execute and deliver,
upon request, such proxies, powers of attorney or other instruments as may be
reasonably necessary or desirable for the Custodian to provide, or to cause any
Subcustodian to
32
provide, custody services to the Fund hereunder.
12.2 ENTIRE AGREEMENT. Except as specifically provided herein,
this Agreement constitutes the entire agreement between the Fund and the
Custodian with respect to the subject matter hereof. Accordingly, this Agreement
supersedes any custody agreement or other oral or written agreements heretofore
in effect between the Fund and the Custodian with respect to the custody of the
Fund's Investments.
12.3 WAIVER AND AMENDMENT. No provision of this Agreement may
be waived, amended or modified, and no addendum to this Agreement shall be or
become effective, or be waived, amended or modified, except by an instrument in
writing executed by the party against which enforcement of such waiver,
amendment or modification is sought; provided, however, that an Instruction,
whether or not such Instruction shall constitute a waiver, amendment or
modification for purposes hereof, shall be deemed to have been accepted by the
Custodian when it commences actions pursuant thereto or in accordance therewith.
12.4 GOVERNING LAW AND JURISDICTION. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND BE GOVERNED BY THE LAWS OF, THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO THE LAWS OF CONFLICTS OF LAW OF SUCH STATE. THE
PARTIES HERETO IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURTS
OF THE STATE OF NEW YORK AND THE FEDERAL COURTS LOCATED IN NEW YORK CITY IN THE
BOROUGH OF
33
MANHATTAN WITH RESPECT TO MATTERS RESULTING FROM THIS AGREEMENT.
12.5 NOTICES. Notices and other writings contemplated by this
Agreement, other than Instructions, shall be delivered (a) by hand, (b) by first
class registered or certified mail, postage prepaid, return receipt requested,
(c) by a nationally recognized overnight courier or (d) by facsimile
transmission, provided that any notice or other writing sent by facsimile
transmission shall also be mailed, postage prepaid, to the party to whom such
notice is addressed. All such notices shall be addressed, as follows:
If to the Fund:
[name of Registrant]
0000 Xxxx Xxxxxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
If to the Custodian:
Xxxxx Brothers Xxxxxxxx & Co.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Manager, Securities Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000,
or such other address as the Fund or the Custodian may from time to
time designate in writing to the other.
12.6 HEADINGS. Paragraph headings included herein are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
34
12.7 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original. This
Agreement shall become effective when one or more counterparts have been signed
and delivered by the Fund and the Custodian.
12.8 CONFIDENTIALITY. The parties hereto agree that each shall
treat confidentially the terms and conditions of this Agreement and all
information provided by each party to the other regarding its business and
operations. All confidential information provided by a party hereto shall be
used by any other party hereto solely for the purpose of rendering or obtaining
services pursuant to this Agreement and, except as may be required in carrying
out this Agreement, shall not be disclosed to any third party without the prior
consent of such providing party. The foregoing shall not be applicable to any
information that is publicly available when provided or thereafter becomes
publicly available other than through a breach of this Agreement, or that is
required to be disclosed by or to any bank examiner of the Custodian or any
Subcustodian, any regulatory authority, any auditor of the parties hereto, or by
judicial or administrative process or otherwise by Applicable Law.
13. DEFINITIONS. For the purpose of this Agreement, the following defined terms
will have the respective meanings set forth below.
13.1 ADVANCE shall mean any extension of credit by or through the
Custodian or by or through any Subcustodian and shall include amounts paid to
third parties for account of the Fund or in discharge of any expense, tax or
other item payable by the Fund.
35
13.2 AGENCY ACCOUNT shall mean any deposit account opened on the books
of a Subcustodian or other banking institution in accordance with Section 7.1.
13.3 AGENT shall have the meaning set forth in the last system of
Section 6.
13.4 APPLICABLE LAW shall mean with respect to each jurisdiction, all
(a) laws, statutes, treaties, regulations, guidelines (or their equivalents);
(b) orders, interpretations licenses and permits; and (c) judgments, decrees,
injunctions writs, orders and similar actions by a court of competent
jurisdiction; compliance with which is required or customarily observed in such
jurisdiction.
13.5 AUTHORIZED PERSON shall mean any person or entity authorized to
give Instructions on behalf of the Fund in accordance with Section 4.1.
13.6 BOOK-ENTRY AGENT shall mean an entity acting as agent for the
issuer of Investments for purposes of recording ownership or similar entitlement
to Investments, including without limitation a transfer agent or registrar.
13.7 CLEARING CORPORATION shall mean any entity or system established
for purposes of providing securities settlement and movement and associated
functions for a given market.
13.8 DELEGATION AGREEMENT shall mean any separate agreement entered
into between the Custodian and the Fund or its authorized representative with
respect to certain matters concerning the appointment and administration of
Subcustodians delegated to the Custodian pursuant to Rule 17f-5.
13.9 FOREIGN CUSTODY MANAGER shall mean the Fund's foreign custody
manager appointed pursuant to Rule 17f-5.
13.10 FOREIGN FINANCIAL REGULATORY AUTHORITY shall have the meaning
given by Section 2(a)(50) of the 0000 Xxx.
13.11 FUNDS TRANSFER SERVICES AGREEMENT shall mean any separate
agreement entered into between the Custodian and the Fund or its authorized
representative with respect to certain matters concerning the processing of
payment orders from Principal Accounts of the Fund.
13.12 INSTRUCTION(S) shall have the meaning assigned in Section 4.
13.13 INVESTMENT ADVISOR shall mean any person or entity who is an
Authorized Person to give Instructions with respect to the investment and
reinvestment of the Fund's Investments.
13.14 INVESTMENTS shall mean any investment asset of the Fund,
including without limitation securities, bonds, notes, and debentures as well as
receivables, derivatives, contractual rights or entitlements and other
intangible assets.
13.15 MARGIN ACCOUNT shall have the meaning set forth in Section 6.4
hereof.
13.16 PRINCIPAL ACCOUNT shall mean deposit accounts of the Fund carried
on the books of BBH&Co. as principal in accordance with Section 7.
36
13.17 SAFEKEEPING ACCOUNT shall mean an account established on the
books of the Custodian or any Subcustodian for purposes of segregating the
interests of the Fund (or clients of the Custodian or Subcustodian) from the
assets of the Custodian or any Subcustodian.
13.18 SECURITIES DEPOSITORY shall mean a central or book entry system
or agency established under Applicable Law for purposes of recording the
ownership and/or entitlement to investment securities for a given market that,
if a foreign Securities Depository, meets the definitional requirements of Rule
17f-7 under the 1940 Act.
13.19 SUBCUSTODIAN shall mean each foreign bank appointed by the
Custodian pursuant to Section 8, but shall not include Securities Depositories.
13.20 TRI-PARTY AGREEMENT shall have the meaning set forth in Section
6.4 hereof.
13.21 1940 ACT shall mean the Investment Company Act of 1940, as
amended.
14. COMPENSATION. The Fund agrees to pay to the Custodian (a) a fee in an amount
set forth in the fee letter between the Fund and the Custodian in effect on the
date hereof or as amended from time to time, and (b) all reasonable
out-of-pocket expenses incurred by the Custodian, including the fees and
expenses of all Subcustodians, and payable from time to time. Amounts payable by
the Fund under and pursuant to this Section 14 shall be payable by wire transfer
to the Custodian at BBH&Co. in New York, New York.
15. TERMINATION. This Agreement may be terminated by either party in accordance
with the provisions of this Section. The provisions of this Agreement and any
other rights or obligations incurred or accrued by any party hereto prior to
termination of this Agreement shall survive any termination of this Agreement.
15.1 NOTICE AND EFFECT. This Agreement may be terminated by
either party by written notice effective no sooner than seventy-five
days following the date that notice to such effect shall be delivered
to other party at its address set forth in paragraph 12.5 hereof.
15.2 SUCCESSOR CUSTODIAN. In the event of the appointment of a
37
successor custodian, it is agreed that the Investments of the Fund held
by the Custodian or any Subcustodian shall be delivered to the
successor custodian in accordance with reasonable Instructions. The
Custodian agrees to cooperate with the Fund in the execution of
documents and performance of other actions necessary or desirable in
order to facilitate the succession of the new custodian. If no
successor custodian shall be appointed, the Custodian shall in like
manner transfer the Fund's Investments in accordance with Instructions.
15.3 DELAYED SUCCESSION. If no Instruction has been given as
of the effective date of termination, the Custodian may at any time on
or after such termination date and upon ten days written notice to the
Fund either (a) deliver the Investments of the Fund held hereunder to
the Fund at the address designated for receipt of notices hereunder; or
(b) deliver any investments held hereunder to a bank or trust company
having a capitalization of $2 million United States Dollars or
equivalent and operating under the Applicable law of the jurisdiction
where such Investments are located and qualified to act as a Custodian
or Subcustodian of the Funds' Investments under the 1940 Act, such
delivery to be at the risk of the Fund. In the event that Investments
or moneys of the Fund remain in the custody of the Custodian or its
Subcustodians after the date of termination owing to the failure of the
Fund to issue Instructions with respect to their disposition or owing
to the fact that such disposition could not be accomplished in
accordance with such Instructions despite diligent efforts of the
Custodian, the Custodian shall be entitled to compensation for its
services with respect to such Investments and moneys during such period
as the Custodian or its Subcustodians retain possession of such items
and the provisions of this Agreement shall remain in full force and
effect until disposition in accordance with this Section is
accomplished.
15.4 RISK DISCLOSURE AND ACKNOWLEDGEMENT. The Fund hereby
acknowledges that it has received, has read and has understood the
Custodian's Risk Disclosure Statement, a copy of which is attached
hereto and is incorporated herein by reference. The Fund further
acknowledges that the Risk Disclosure Statement is not comprehensive,
and warrants and represents to the Custodian that it has undertaken its
own review of the risks associated with investment in Russia and has
concluded that such investment is appropriate for the Fund and in no
way conflicts with the Fund's constitutive documents, investment
objective, duties to its shareholders or with any regulatory
requirements applicable to the Fund. The Fund hereby acknowledges that
it has received, has read and has understood the Custodian's Risk
Disclosure Statement, a copy of which is attached hereto and is
incorporated herein by reference. The Fund further acknowledges that
the Risk Disclosure Statement is not comprehensive, and warrants and
represents to the Custodian that it has undertaken its own review of
the risks associated with investment in Russia and has concluded that
such investment is appropriate for the Fund and in no way conflicts
with the Fund's constitutive documents, investment objective, duties to
its shareholders or with any regulatory requirements applicable to the
Fund.
16. LIMITATIONS ON LIABILITY. Pursuant to the Fund's Declaration of Trust, no
trustee, officer, employee or agent of the Fund shall be subject to any personal
liability whatsoever, in his or her official or individual capacity, to any
person, including the
38
Custodian or any Subcustodian, other than to the Fund or its shareholders, in
connection with Fund property or the affairs of the Fund,; and all persons shall
look solely to the Fund property for satisfaction of claims of any nature
against a trustee, officer, employee or agent of the Fund arising in connection
with the affairs of the Fund. Moreover, notwithstanding any other provision of
this Agreement to the contrary, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a designated
series or Portfolio of the Fund shall be enforceable against the assets and
property of such series or Portfolio only, and not against the assets and
property of any other series or Portfolio.
39
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed as of the date first above written.
[Name of Registrant]
on behalf of each of the portfolios listed on the attached Appendix "C"
By:_______________________________
By: XXXXX BROTHERS XXXXXXXX & CO.
By: ________________________________
40
FUNDS TRANSFER SERVICES SCHEDULE
1. Execution of Payment Orders. The Custodian is hereby instructed by the
Fund to execute each payment order, whether denominated in United
States dollars or other applicable currencies, received by the
Custodian in the Fund's name as sender and authorized and confirmed by
an Authorized Person as defined in the body of this Agreement ,
provided that the Fund has sufficient available funds on deposit in a
Principal Account as defined in the Agreement and provided that the
order (i) is received by the Custodian in the manner specified in this
Funds Transfer Services Schedule or any amendment hereafter; (ii)
complies with any written instructions and restrictions of the Fund as
set forth in this Funds Transfer Services Schedule or any amendment
hereafter; (iii) is authorized by the Fund or is verified by the
Custodian in compliance with a security procedure set forth in
Paragraph 2 below for verifying the authenticity of a funds transfer
communication sent to the Custodian in the name of the Fund or for the
detection of errors set forth in any such communication; and (iv)
contains sufficient data to enable the Custodian to process such
transfer.
2. Security Procedure. The Fund hereby elects to use the procedure
selected below as its security procedure (the Security Procedure). The
Security Procedure will be used by the Custodian to verify the
authenticity of a payment order or a communication amending or
canceling a payment order. The Custodian will act on instructions
received provided the instruction is authenticated by the Security
Procedure. The Fund agrees and acknowledges in connection with (i) the
size, type and frequency of payment orders normally issued or expected
to be issued by the Fund to the Custodian, (ii) all of the security
procedures offered to the Fund by the Custodian, and (iii) the usual
security procedures used by customers and receiving banks similarly
situated, that authentication through the Security Procedure shall be
deemed commercially reasonable for the authentication of all payment
orders submitted to the Custodian. The Fund hereby elects (PLEASE
CHOOSE ONE) the following Security Procedure as described below:
[ ] BIDS and BIDS Worldview Payment Products. BIDS and BIDS
Worldview Payment Products, are on-line payment order
authorization facilities with built-in authentication procedures.
The Custodian and the Fund shall each be responsible for
maintaining the confidentiality of passwords or other codes to be
used by them in connection with BIDS. The Custodian will act on
instructions received through BIDS without duty of further
confirmation unless the Fund notifies the Custodian that its
password is not secure.
[ ] SWIFT. The Custodian and the Fund shall comply with SWIFT's
authentication procedures. The Custodian will act on
instructions received via SWIFT provided the instruction is
authenticated by the SWIFT system.
41
[ ] Tested Telex. The Custodian will accept payment orders sent by
tested telex, provided the test key matches the algorithmic key
the Custodian and Fund have agreed to use.
[ ] Computer Transmission. The Custodian is able to accept
transmissions sent from the Fund's computer facilities to the
Custodian's computer facilities provided such transmissions are
encrypted and digitally certified or are otherwise authenticated
in a reasonable manner based on available technology. Such
procedures shall be established in an operating protocol between
the Custodian and the Fund.
[ ] Telefax Instructions. A payment order transmitted to the
Custodian by telefax transmission shall transmitted by the
Customer to a telephone number specified from time to time by the
Custodian for such purposes. If it detects no discrepancies, the
Custodian will then either:
1. If the telefax requests a repetitive payment order,
the Custodian will take no further action to confirm
the order's authenticity unless the transaction is
incomplete or the repetitive payment order is not
clearly identified; or
2. If the telefax requests a non-repetitive order, the
Custodian will call the Fund at its last known
telephone number, request to speak to the Fund or
Authorized Person, and confirm the authorization of
the payment order (a "Callbank").
All faxes must be accompanied by a fax cover sheet which indicates the
sender's name, Fund name, telephone number, fax number, number of
pages, and number of transactions or instructions attached.
[ ] Telephonic. A telephonic payment order shall be called into the
Custodian at the telephone number designated from time to time by the
Custodian for that purpose. The caller shall identify herself/himself
as an Authorized Person. The Custodian shall obtain the payment order
data from the caller. The Custodian shall then:
1. If a telephonic repetitive payment order and the
Custodian reasonably believes the caller to be
authorized, the Custodian will take no further action
to confirm the order's authenticity; or
2. If a telephonic non-repetitive payment order, the
Custodian will perform a Callback.
3. Rejection of Payment Orders. The Custodian shall give the Fund timely notice
of the Custodian's rejection of a payment order. Such notice may be given in
writing or orally by telephone, each of which is hereby deemed commercially
reasonable. In the event the
42
Custodian fails to execute a properly executable payment order and fails to give
the Fund timely notice of the Custodian's non-execution, the Custodian shall be
liable only for the Fund's actual damages and only to the extent that such
damages are recoverable under UCC 4A (as defined in Paragraph 7 below).
Notwithstanding anything in this Funds Transfer Services Schedule and the
Agreement to the contrary, the Custodian shall in no event be liable for any
consequential or special damages under this Agreement and Funds Transfer
Services Schedule, whether or not such damages relate to services covered by UCC
4A, even if the Custodian has been advised of the possibility of such damages.
Whenever compensation in the form of interest is payable by the Custodian to the
Fund pursuant to this Agreement and Funds Transfer Services Schedule, such
compensation will be payable at the rate specified in UCC 4A.
4. Cancellation of Payment Orders. The Fund may cancel a payment order but the
Custodian shall have no liability for the Custodian's failure to act on a
cancellation instruction unless the Custodian has received such cancellation
instruction at a time and in a manner affording the Custodian reasonable
opportunity to act prior to the Custodian's execution of the order. Any
cancellation shall be sent and confirmed in the manner set forth in Paragraph 2
above.
5. Responsibility for the Detection of Errors and Unauthorized Payment Orders.
Except as may be provided, the Custodian is not responsible for detecting any
Fund error contained in any payment order sent by the Fund to the Custodian. In
the event that the Fund's payment order to the Custodian either (i) identifies
the beneficiary by both a name and an identifying or bank account number and the
name and number identify different persons or entities, or (ii) identifies any
bank by both a name and an identifying number and the number identifies a person
or entity different from the bank identified by name, execution of the payment
order, payment to the beneficiary, cancellation of the payment order or actions
taken by any bank in respect of such payment order may be made solely on the
basis of the number. The Custodian shall not be liable for interest on the
amount of any payment order that was not authorized or was erroneously executed
unless the Fund so notifies the Custodian within thirty (30) business days
following the Fund's receipt of notice that such payment order had been
processed. If a payment order in the name of the Fund accepted by the Custodian
was not authorized by the Fund, the liability of the parties will be governed by
the applicable provisions of UCC 4A.
6. Laws and Regulations. The rights and obligations of the Custodian and the
Fund with respect to any payment order executed pursuant to this Funds Transfer
Services Schedule will be governed by any applicable laws, regulations,
circulars and funds transfer system rules, the laws and regulations of the
United States of America and of other relevant countries including exchange
control regulations and limitations on dealings or other sanctions, and
including without limitation those sanctions imposed under the law of the United
States of America by the Office of Foreign Assets Control. Any taxes, fines,
costs, charges or fees imposed by relevant authorities on such transactions
shall be for the account of the Fund.
43
7. Miscellaneous. All accounts opened by the Fund or its authorized agents at
the Custodian subsequent to the date hereof shall be governed by this Funds
Transfer Schedule. All terms used in this Funds Transfer Services Schedule shall
have the meaning set forth in Article 4A of the Uniform Commercial Code as
currently in effect in the State of New York (UCC 4A) unless otherwise set forth
herein. The terms and conditions of this Funds Transfer Services Schedule are in
addition to, and do not modify or otherwise affect, the terms and conditions of
the Agreement and any other agreement or arrangement between the parties hereto.
Accepted and agreed:
XXXXX BROTHERS XXXXXXXX & CO. [NAME OF REGISTRANT]
on behalf of each of the portfolios
listed on the attached Appendix "C"
By: __________________________________ By: ________________________________
Name: Name:
Title: Title:
Date: Date:
44
17f-5 DELEGATION SCHEDULE
By its execution of this Delegation Schedule, [name of Registrant], a
management investment company registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended, (the "1940 Act"), acting through its Board of Directors/Trustees or its
duly appointed representative, hereby appoints XXXXX BROTHERS XXXXXXXX & CO., a
New York limited partnership with an office in Boston, Massachusetts (the
"Delegate") as its delegate to perform certain functions with respect to the
custody of Fund's Assets outside the United States.
1. Maintenance of Fund's Assets Abroad. The Fund, acting through its Board or
its duly authorized representative, hereby instructs Delegate pursuant to the
terms of the Custodian Agreement, and specifically Sections 8.2, 8.3 and 8.4, to
place and maintain the Fund's Assets in countries outside the United States in
accordance with Instructions received from the Fund's investment advisor. Such
instruction shall represent a Proper Instruction under the terms of the
Custodian Agreement which Custodian acknowledges it has properly received. The
Fund acknowledges that - (a) the Delegate shall perform services hereunder only
with respect to the countries where it provides custodial services to the Fund
under the Custodian Agreement; (b) depending on conditions in the particular
country, advance notice, upon the request of the Delegate, may be required
before the Delegate shall be able to perform its duties hereunder in or with
respect to such country (such advance notice to be reasonable in light of the
specific facts and circumstances attendant to performance of duties in such
country); and (c) nothing in this Delegation Schedule shall require the Delegate
to provide delegated or custodial services in any country, and there may from
time to time be countries as to which the Delegate determines it will not
provide delegation services.
45
2. Delegation. Pursuant to the provisions of Rule 17f-5 under the 1940 Act as
amended, the Board hereby delegates to the Delegate, and the Delegate hereby
accepts such delegation and agrees to perform, only those duties set forth in
this Delegation Schedule concerning the safekeeping of the Fund's Assets in each
of the countries as to which it acts as the Board's delegate. The Delegate is
hereby authorized to take such actions on behalf of or in the name of the Fund
as are reasonably required to discharge its duties under this Delegation
Schedule, including, without limitation, to cause the Fund's Assets to be placed
with a particular Eligible Foreign Custodian in accordance herewith. The Fund
confirms to the Delegate that the investment adviser to the Fund has considered,
or shall consider, the Sovereign Risk and prevailing country risk as part of its
continuing investment decision process, including such factors as may be
reasonably related to the systemic risk of maintaining the Fund's Assets in a
particular country, including, but not limited to, financial infrastructure,
prevailing custody and settlement systems and practices (including the use of
any Securities Depository in the context of information provided by the
Custodian in the performance of its duties as required under Rule 17f-7 and the
terms of the Custodian Agreement governing such duties).
3. Selection of Eligible Foreign Custodian and Contract Administration. The
Delegate shall perform the following duties exercising reasonable care, prudence
and diligence with respect to the selection of Eligible Foreign Custodians and
administration of certain contracts governing the Fund's foreign custodial
arrangements:
(a) Selection of Eligible Foreign Custodian. The Delegate shall
place and maintain the Fund's Assets with an Eligible Foreign Custodian;
provided that the Delegate shall have determined that the Fund's Assets will be
subject to reasonable care based on the standards applicable to custodians in
the relevant market after considering all factors relevant to the safekeeping of
such assets including without limitation:
(i) The Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical
protections available for certificated securities (if applicable), the
controls and procedures for dealing with any Securities Depository, the
method of keeping custodial records, and the security and data
protection practices;
46
(ii) Whether the Eligible Foreign Custodian has the requisite
financial strength to provide reasonable care for the Fund's Assets;
(iii) The Eligible Foreign Custodian's general reputation and
standing; and
(iv) Whether the Fund will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such as by
virtue of the existence of any offices of such Eligible Foreign
Custodian in the United States or such Eligible Foreign Custodian's
appointment of an agent for service of process in the United States or
consent to jurisdiction in the United States.
The Delegate shall be required to make the foregoing determination to the best
of its knowledge and belief based on information reasonably available to it
after diligent efforts.
(b) Contract Administration. The Delegate shall cause the foreign
custody arrangements with an Eligible Foreign Custodian to be governed by a
written contract that the Delegate has determined will provide reasonable care
for Fund assets based on the standards applicable to custodians in the relevant
market. Each such contract shall, except as set forth in the last paragraph of
this subsection (b), include provisions that provide:
(i) For indemnification or insurance arrangements (or any
combination of the foregoing) such that the Fund will be adequately
protected against the risk of loss of assets held in accordance with
such contract;
(ii) That the Fund's Assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the
Eligible Foreign Custodian or its creditors except a claim of payment
for their safe custody or administration or, in the case of cash
deposits, liens or rights in favor of creditors of such Custodian
arising under bankruptcy, insolvency or similar laws;
(iii) That beneficial ownership of the Fund's Assets will be
freely transferable without the payment of money or value other than
for safe custody or administration;
(iv) That adequate records will be maintained identifying the
Fund's Assets
47
as belonging to the Fund or as being held by a third party for the
benefit of the Fund;
(v) That the Fund's independent public accountants will be given
access to those records described in (iv) above or confirmation of the
contents of such records; and
(vi) That the Delegate will receive sufficient and timely periodic
reports with respect to the safekeeping of the Fund's Assets,
including, but not limited to, notification of any transfer to or from
the Fund's account or a third party account containing the Fund's
Assets.
Such contract may contain, in lieu of any or all of the provisions
specified in this Section 3 (b), such other provisions that the
Delegate determines will provide, in their entirety, the same or a
greater level of care and protection for the Fund's Assets as the
specified provisions, in their entirety.
(c) Limitation to Delegated Selection. Notwithstanding anything in this
Delegation Schedule to the contrary, the duties under this Section 3 shall apply
only to Eligible Foreign Custodians selected by the Delegate and shall not apply
to Securities Depositories or to any Eligible Foreign Custodian that the
Delegate is directed to use pursuant to Section 7.
4. Monitoring. The Delegate shall establish a system to monitor the
appropriateness of maintaining the Fund's Assets with each Eligible Foreign
Custodian that has been selected by the Delegate pursuant to Section 3 of this
Delegation Schedule. The Delegate shall monitor the continuing appropriateness
of placement of the Fund's Assets in accordance with the criteria established
under Section 3(a) of this Delegation Schedule. The Delegate shall monitor the
continuing appropriateness of the contract governing the Fund's arrangements in
accordance with the criteria established under Section 3(b) of this Delegation
Schedule.
5. Reporting. At least annually and more frequently as reasonably requested by
the Fund, the Delegate shall provide to the Board written reports specifying
placement
48
of the Fund's Assets with each Eligible Foreign Custodian selected by the
Delegate pursuant to Section 3 of this Delegation Schedule and shall promptly
report any material changes to such foreign custody arrangements. Delegate will
prepare such a report with respect to any Eligible Foreign Custodian that the
Delegate has been instructed to use pursuant to Section 7 only to the extent
specifically agreed with respect to the particular situation.
6. Withdrawal of Fund's Assets. If the Delegate determines that an arrangement
with a specific Eligible Foreign Custodian selected by the Delegate under
Section 3 of this Delegation Schedule no longer meets the requirements of said
Section, Delegate shall withdraw the Fund's Assets from the non-complying
arrangement as soon as reasonably practicable; provided, however, that if in the
reasonable judgment of the Delegate, such withdrawal would require liquidation
of any of the Fund's Assets or would materially impair the liquidity, value or
other investment characteristics of the Fund's Assets, it shall be the duty of
the Delegate promptly to provide information regarding the particular
circumstances and to act only in accordance with Proper Instructions of the Fund
or its Investment Advisor with respect to such liquidation or other withdrawal.
7. Direction as to Eligible Foreign Custodian. Notwithstanding this Delegation
Schedule, the Fund, acting through its Board, its Investment Adviser or its
other authorized representative, may direct the Delegate to place and maintain
the Fund's Assets with a particular Eligible Foreign Custodian, including
without limitation with respect to investment in countries as to which the
Custodian will not provide delegation services. In such event, the Delegate
shall be entitled to rely on any such instruction as a Proper Instruction under
the terms of the Custodian Agreement and shall have no duties under this
Delegation Schedule with respect to such arrangement save those that it may
undertake specifically in writing with respect to each particular instance.
8. Standard of Care. In carrying out its duties under this Delegation Schedule,
the Delegate agrees to exercise reasonable care, prudence and diligence such as
a person having responsibility for safekeeping and maintaining the Fund's Assets
would exercise.
49
9. Representations. The Delegate hereby represents and warrants that it is a
U.S. Bank and that this Delegation Schedule has been duly authorized, executed
and delivered by the Delegate and is a legal, valid and binding agreement of the
Delegate.
The Fund hereby represents and warrants that its Board of
Directors/Trustees has determined that it is reasonable to rely on the Delegate
to perform the delegated responsibilities provided for herein and that this
Delegation Schedule has been duly authorized, executed and delivered by the Fund
and is a legal, valid and binding agreement of the Fund.
10. Effectiveness; termination. This Delegation Schedule shall be effective as
of the date on which this Delegation Schedule shall have been accepted by the
Delegate, as indicated by the date set forth below the Delegate's signature.
This Delegation Schedule may be terminated at any time, without penalty, by
written notice from the terminating party to the non-terminating party. Such
termination shall be effective on the 30th day following the date on which the
non-terminating party shall receive the foregoing notice. The foregoing to the
contrary notwithstanding, this Delegation Schedule shall be deemed to have been
terminated concurrently with the termination of the Custodian Agreement.
11. Notices. Notices and other communications under this Delegation Schedule are
to be made in accordance with the arrangements designated for such purpose under
the Custodian Agreement unless otherwise indicated in a writing referencing this
Delegation Schedule and executed by both parties.
12. Definitions. Capitalized terms in this Delegation Schedule have the
following meanings:
a. Eligible Foreign Custodian - shall have the meaning set forth
in Rule 17f-5(a)(1) and shall also include a U.S. Bank.
b. Fund's Assets - shall mean any of the Fund's investments
(including foreign currencies) for which the primary market is
outside the United States,
50
and such cash and cash equivalents as are reasonably necessary
to effect the Fund's transactions in such investments.
c. Proper Instructions - shall have the meaning set forth in the
Custodian Agreement.
d. Securities Depository - shall have the meaning set forth in
Rule 17f-7.
e. Sovereign Risk - shall have the meaning set forth in Section
9.1.3 of the Custodian Agreement.
f . U.S. Bank - shall mean a bank which qualifies to serve as a
custodian of assets of investment companies under Section 17(f) of
the Act.
13. Governing Law and Jurisdiction. This Delegation Schedule shall be construed
in accordance with the laws of the State of New York. The parties hereby submit
to the exclusive jurisdiction of the Federal courts sitting in the State of New
York or of the state courts of such State.
14. Fees. Delegate shall perform its functions under this Delegation Schedule
for the compensation determined under the Custodian Agreement.
15. Integration. This Delegation Schedule sets forth all of the Delegate's
duties with respect to the selection and monitoring of Eligible Foreign
Custodians, the administration of contracts with Eligible Foreign Custodians,
the withdrawal of assets from Eligible Foreign Custodians and the issuance of
reports in connection with such duties. The terms of the Custodian Agreement
shall apply generally as to matters not expressly covered in this Delegation
Schedule, including dealings with the Eligible Foreign Custodians in the course
of discharge of the Delegate's obligations under the Custodian Agreement.
51
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed as of the date first above written.
XXXXX BROTHERS XXXXXXXX & CO. [NAME OF REGISTRANT]
on behalf of each of the portfolios listed
on the attached Appendix "C"
By: _______________________________ By: ________________________________
Name: Name:
Title: Title:
Date: Date:
52
APPENDIX C
TO
THE CUSTODIAN AGREEMENT
BETWEEN
[NAME OF REGISTRANT]
AND
XXXXX BROTHERS XXXXXXXX & CO.
The following is a list of Funds for which the Custodian shall serve under a
Custodian Agreement dated as of _______________________ to provide custodial
services to the Funds. (the "Agreement"):
[Name of Fund]
53
